Hallman v. Gross
| Decision Date | 21 May 1948 |
| Docket Number | 147. |
| Citation | 59 A.2d 304,190 Md. 563 |
| Parties | HALLMAN et al. v. GROSS et al. |
| Court | Maryland Court of Appeals |
Appeals from Circuit Court of Baltimore City; John T. Tucker, Judge.
Suit for appointment of receiver and for other relief by Stephen Frank Gross and Henry T. Dietz against Harold E. Hallman Walter A. Geiger, and Columbia Paper Products Company, Inc. From orders granting plaintiffs' petition for production and inspection of certain documents, the defendants appeal.
Appeals dismissed.
Albert F. Wheltle, of Baltimore (Joseph O. Kaiser, of Baltimore, on the brief), for appellants.
R. Samuel Jett, of Baltimore (W. Hamilton Whiteford of Baltimore, on the brief), for appellees.
Before MARBURY, C.J., and DELAPLAINE, COLLINS, GRASON, HENDERSON and MARKELL, JJ.
The defendants in this case (appellants) appeal from two orders passed by the chancellor, one dated October 1, 1947, and one the 24th day of October, 1947, which required the defendants to produce certain documents alleged and though to be in the possession of the defendants, to be used by the plaintiffs in the examination of the defendants, under Discovery Rule 4 of General Rules of Practice and Procedure, 1947 Supplement Annotated Code, page 2038.
The bill of complaint, in substance, charges: That in 1944 Stephen Frank Gross and Henry T. Dietz, plaintiffs below (appellees) together with Harold E. Hallman and Walter A Geiger, were employed by the Allied Paper Bag Corporation. The defendants were officers and directors of the corporation. Hallman and his wife owned 55 shares of the preferred and 240 shares of the common stock of this corporation; Geiger owned 10 shares of the preferred and 225 shares of the common stock. Gross was employed by the corporation as plant superintendent, and owned 25 shares of the common stock. Dietz was employed as maintenance superintendent, and owned 5 shares of the preferred stock and 5 shares of the common stock of the corporation. The defendants conceived the idea of organizing a business of their own, to carry on the same kind of business as the Allied corporation. They were executives, but needed a man capable of conducting the practical affairs of the business. They approached Gross, who had such knowledge, and told him of their plans. Hallman's wife had purchased twelve machines that would be needed in this proposed enterprise. Gross was at that time earning $7,000 a year from the Allied Paper Bag Corporation, and Hallman, acting for himself and Geiger, guaranteed him that he would actually own 25% interest in the concern to be organized. He further said to Gross that his remuneration would be on the basis of $7,000 a year, plus a 25% share of the profits in the new concern.
Thereafter Hallman and Geiger took Gross to New York City, introduced him to paper supply people as an individual thoroughly conversant with the paper products business, who was expected to start in his own business in Baltimore in the near future. They guaranteed Gross's financial and business ability, and the supply houses agreed they would supply Gross when he started in business. At a subsequent meeting between the plaintiffs and the defendant-appellees, it was agreed that Gross would act as agent for the wives of Hallman and Geiger until they severed their connection with the Allied Paper Bag Corporation, at which time the agency relationship would be abandoned and the parties would operate as partners. It was agreed the basis of the partnership arrangement was that Hallman and Geiger furnish capital to the amount of $40,000, and would own 75% of the business, and that Gross would organize the business and carry through its preliminary steps on the basis that he would own 25% of the business. Thereafter Gross, operating under the trade name of Columbia Paper Products Company, secured a lease of premises for the operation of the business, and paid the rental from proceeds of checks given him by either the wife of Hallman or the wife of Geiger. Hallman and Geiger guaranteed to underwrite any loss that Gross might suffer individually.
In May, 1944, Gross left the employ of the Allied Paper Bag Company, to begin the business known as the Columbia Paper Products Company, it being understood that he was acting as agent of the wives of Hallman and Geiger, and with a further understanding that when certain circumstances permitted, Hallman and Geiger would become actively connected with the company and it would thereafter operate as a partnership between Hallman, Geiger and Gross, with Gross having a 25% interest therein.
Thereafter Gross required assistance in conducting the partnership, and Dietz, who was then management superintendent of the Allied Paper Bag Corporation, was induced to join in the venture on the basis that Gross would share with him his 25% of the business, to the extent of one-half thereof, and Dietz severed his connection with the Allied company. He supervised the building of certain machinery necessary for the contemplated business.
In August, 1944, the Allied Paper Bag Company sued the plaintiffs and the individual defendants, doing business as Columbia Paper Products Company, alleging that they were operating as partners, trading as the Columbia Paper Products Company. They denied the partnership, and as a result of this suit, and in settlement thereof, the individual defendants severed their connection with the Allied Paper Bag Company and agreed to turn back all of their stock, common and preferred, to the Allied Paper Bag Company, the plaintiffs agreeing to do likewise. It was then agreed that the individual defendants give their full time to the business of the Columbia Paper Products Company, which Gross had been operating as agent for their respective wives; and that after December 4, 1944, the Columbia Paper Products Company would be and was operated as a partnership, with Hallman and Geiger owning 75% thereof and Gross and Dietz owning 25% thereof. Thereafter the individual defendants became the dominant characters in the business, and the plaintiffs were relegated to 'plant personnel mechanical supervisors positions'; that no articles of partnership were drawn; that plaintiffs had full confidence in the individual defendants who handled the administrative concerns of the company; that at the end of the year 1945 the individual defendants rendered the plaintiffs a financial statement, indicating that the firm had greatly prospered; that dispute arose between the plaintiffs and the individual defendants concerning distribution of the profits for the year 1945, and certain agreements between them for the year 1946 were entered into; that on or about January 1, 1947, plaintiffs asked the individual defendants for a yearly statement, which was denied, and that the said defendants, for the first time, took the position that the plaintiffs were not partners and asked for their resignations. That at that time checks were drawn to the plaintiffs on the Columbia Paper Products Company, Incorporated, and until that time plaintiffs had no knowledge that the business had been incorporated, and upon inquiry at the State Tax Commissioner's office they verified the incorporation, and that the individual defendants were two of an incorporators.
It is charged that the plaintiffs believe and therefore aver that the assets of the partnership were transferred to the corporation. They charged the individual defendants with fraud, and aver that the holdings of the said company at the end of the year 1946 were of great value. These are the substantial averments of the amended bill of complaint, and it prayed:
Your Orators may have such other and further relief as their case may require.'
A demurrer was filed to the original bill of complaint, which was sustained with leave to amend the same by certain interlineation, which was done. Thereafter a joint answer was filed by the individual defendants to the amended bill of complaint. The answer is long and in great detail. It denies the partnership alleged in the bill and, generally, most of the allegations thereof. The answer admits the following:
'1. 'That Gross was introduced to a paper manufacturer in New York, but not in the manner that the complainants alleged that Gross was so introduced.'
2.'That Gross did act as agent for the wives of Hallman and Geiger in a business owned by the said wives * * * that the agency arrangement was to continue until either Hallman or Geiger became a partner in the business and that it did so continue, but that said arrangement never did have any relationship with Gross ever becoming a partner in the business, since no such partnership was ever contemplated or agreed;'
3. 'That Gross in his own name secured a lease of the premises for the operation of the business as alleged by the complainants and that as agent for the wives of Hallman and Geiger he operated the business under the trade name of Columbia Paper Products Company and that the question of...
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