Lipscomb v. Hess, 376

• Decision Date: 08 October 1969
• Docket Number: No. 376,376
• Citation: 255 Md. 109,257 A.2d 178
• Parties: Lisle T. LIPSCOMB et al. v. Walter HESS.
• Court: Maryland Court of Appeals

Page 109

255 Md. 109

257 A.2d 178

Lisle T. LIPSCOMB et al. v. Walter HESS.

No. 376.

Court of Appeals of Maryland.

Oct. 8, 1969.

Jo V. Morgan, Jr., Bethesda (Andrew A. Lipscomb, Washington, D. C., on the brief), for appellants.

Robert W. Beall, Bethesda, for appellee.

Before HAMMOND, C. J., and MARBURY, BARNES, McWILLIAMS, FINAN, SINGLEY and SMITH, JJ.

SINGLEY, Judge.

Lisle T. Lipscomb and Dorothy C. Lipscomb, co-partners trading as Adgate A. Lipscomb and Son (the Partnership) brought suit in the Circuit Court for Montgomery County against Walter Hess. The Partnership's declaration contained the common counts and two special counts for breach of contract, one of which relied on an oral contract, the other on a written contract. The Partnership sought damages in the amount of $200,000. Hess demanded particulars; then filed a general issue plea and a counterclaim, to which the Partnership countered with a general issue plea. After the pretrial depositions of Hess and Lisle T. Lipscomb had been taken, Hess filed interrogatories. When these had been answered, Hess moved for the entry of a summary judgment. From an order granting the motion as to the major portion of the Partnership's claim, this appeal was taken. The remainder of the claim, which related to other transactions between Hess and the Partnership, is not at issue here.

At the time summary judgment was entered, the lower court had before it certain facts alleged in the pleadings or developed by answers to the interrogatories and in the depositions.

In 1964, the Partnership, which then consisted of Lisle T. Lipscomb and his father, Adgate A. Lipscomb, conducted an insurance brokerage business, with offices at 1000 Vermont Avenue, N.W., in the District of Columbia and at 4641 Montomery Avenue, in Bethesda, Maryland. Hess had been an employee of the Partnership since 1953 and since 1958, had been in charge of the Bethesda office. For the year 1964, Hess' compensation was fixed at one-half of the net income of the Bethesda office, with a guaranteed minimum of $15,000. On 12 February 1964, Hess estimated that Bethesda would gross between $38,000 and $40,000 for the year. There was testimony that gross income for the year 1965 was about $50,000.

According to Lisle Lipscomb, Hess, sometime in March or April of 1964, indicated that he was interested in purchasing a one-half interest in the Bethesda office. At a meeting at Kenwood Country Club in November or early December, Lipscomb and Hess agreed '* * * that it probably made a lot more sense for (Hess) to buy the whole business.' Hess had no recollection of the meeting at Kenwood but agreed with Lipscomb that there had been a discussion at a Partnership Christmas party in December. According to Hess' version:

'We discussed the purchase of accounts of the Bethesda office and the amount I was willing to pay for those accounts. And we also discussed my hiring Mr. Lipscomb to assist me with the business subsequent to January 1, 1965.'

Lipscomb remembers the Kenwood conversation as involving a sale of the Bethesda business for two and one-half times gross commission income of $50,000, or about $120,000, and 'we shook hands on it.' Lipscomb said that Hess' principal concern was in making a portion of the purchase price deductible for tax purposes and that the possibility of a fee arrangement was discussed. Liscomb explained, 'This consultant fee approach would, in my opinion have resulted in much more like $150,000. Which I told Walter in Kenwood prior to December 31, 1964. He said he didn't care, as long as he made $25,000 a year he was happy.' The Lipscomb version finds some support in a letter written by Hess' accountant to Hess on 5 December 1964, identified by Hess at the time of his deposition:

'Dear Walter:

'So that we might be in agreement as to the essence of your conversation with Mr. Lisle T. Lipscomb regarding the purchase by you of the insurance brokerage business operated from the Bethesda Office of, and owned by Adgate A. Lipscomb & Son, I feel it best to outline the major conclusions which you have indicated were reached;

'1. Walter Hess will purchase the accounts presently handled by the Bethesda Office of Adgate A. Lipscomb & Son, and listed on the attached Exhibit A, for the sum of $_ _.

'2. Hess will assist in the collection of all outstanding receivables as of the date of transfer, which are the property of Lipscomb.

'3. Lipscomb will pay all liabilities due as of the transfer date on accounts of the Bethesda Office.

'4. Lipscomb will assist in any way possible with the transferring of the accounts listed on Exhibit A to the new entity.

'5. Hess agrees not to solicit accounts presently served by the downtown office of Lipscomb, a list of which will be furnished, for a period of _ _ years, without the express permission of Lipscomb.

'6. Lipscomb agrees not (to) solicit the accounts now werviced by the Bethesda Office and listed in Exhibit A attached, for a period of _ _ years, without the expression (sic) permission of Hess.

'7. Hess will establish a proprietorship to be known as Walter Hess, T/A Hess and Lipscomb, for the operation of this business.

'8. Hess will retain Lipscomb to render such technical assistance and advice as he shall require for a period of _ _ years. Hess will compensate Lipscomb for this service at the greater of $_ _ per year, or _ _% of the annual net taxable income of the insurance brokerage business, computed before inclusion of any deductions for these services.

'I have omitted any reference to specific dollars or percentages, since these are perhaps not finally determined.

'Please let me know if the above differs in any major respect with your understanding.

Very truly yours,

/s/ Paul

Paul Lambert, Jr.'

In any event, on 31 December 1964, Hess wrote Lipscomb as follows:

'Dear Lisle:

'I am setting forth below an outline of the basic essentials of our verbal agreement concerning the purchase of the insurance brokerage business operated from the Bethesda office, so that your brother will be able to work from this in order to draw up the written agreement. I am also enclosing my check in the amount of $10,000,00 to purchase the accounts.

'1. Walter Hess will purchase the accounts presently handled by the Bethesda Office of Adgate A. Lipscomb & Son, and listed on the attached Exhibit A, for the sum of $10,000.00.

'2. Hess will assist in the collection of all outstanding receivables as of the date of transfer, which are the property of Lipscomb.

'3. Lipscomb will pay all liabilities due on the accounts purchased under Exhibit A.

'4. Lipscomb will assist in any way possible with the transferring of the accounts listed on Exhibit A to the new entity.

'5. Hess agrees not to solicit accounts presently served by the downtown office of Lipscomb, a list of which will be furnished, for a period of _ _ years, without the express permission of .lipscomb.

'6. Lipscomb agrees not to solicit the accounts now service(d) by the Bethesda Office and listed as Exhibit A attached, for a period of _ _ years, without the express permission of Hess.

'7. Hess will establish a proprietorship to be known a Walter Hess, T/A Hess and Lipscomb, for the operation of this business.

'8. Hess will retain Lipscomb to render such technical assistance and advice as he shall require for a period of eleven years. Hess will compensate Lipscomb for this service at the rate of ten thousand dollars each year plus 30% of the taxable income above the first $50,000.00 of this taxable income derived out of the income from the insurance brokerage business, each year.

'I believe this includes the major items which we agreed on. If Andy has any further questions when he starts to draw up the contract I will be available to meet at his convenience.

/s/ Walter Hess'

The court below found that Exhibit A was never prepared, but there was evidence that at a later date, Hess prepared a schedule of the accounts he was retaining. Hess took over the operation of the Bethesda office on 1 January 1965. On 13 January R. H. L'Hommedieu, an employee of the Partnership, wrote Hess a letter outlining certain of the housekeeping details of the transfer, which is quoted in part 'This will confirm our conversation wherein we agreed as to the method for handling wage statements, audits, return premiums, additional premiums, cancellations, etc. The following is my understanding of the agreement and if it is acceptable to you please sign the copy of this letter which is enclosed and return it to us.

'Walter, I think this is a complete understanding of what we have discussed and if agreeable to you please sign the enclosed copy of this letter and return it to me. It there are any discrepancies, please give me a call and we will discuss them.'

Hess never signed and returned the copy of the letter, but testified. '* * * I frankly don't think there are any substantial discrepancies in that because I continued my 1965 operations in accordance with the information in that letter, up until such times as I could.'

In February of 1965, there were a number of developments, the precise chronology of which cannot be fixed from the depositions: Hess gave Lipscomb a list of the accounts which were to be included in the sale; Lipscomb's counsel prepared and sent to Hess a draft of a formal agreement; on 19 February, Lipscomb took the agreement to Florida, to show it to his father; and on or about 23 February, the $10,000 check, enclosed in Hess' letter of 31 December, was presented for payment.

In March or April, a certain amount of disenchantment began to creep in. Lipscomb described it this way:

'Q. Well, would it be fair to say that certain dissensions and differences developed between you? A. Yes.

'Q. Over what you had agreed on? I mean, wouldn't that be a fair statement? A. Yes. When he didn't pay, I thought that it was ground for dissension.

'Q. Well, when was the first time that you knew that Hess and you were having a...