Maryland Credit Finance Corp. v. Hagerty

• Decision Date: 05 March 1958
• Docket Number: No. 162,162
• Citation: 139 A.2d 230,216 Md. 83
• Parties: MARYLAND CREDIT FINANCE CORPORATION v. Edward J. HAGERTY.
• Court: Maryland Court of Appeals

Page 83

216 Md. 83

139 A.2d 230

MARYLAND CREDIT FINANCE CORPORATION v. Edward J. HAGERTY.

No. 162.

Court of Appeals of Maryland.

March 5, 1958.

T. Hughlett Henry, Jr. (Henry, Henry & Adkins, Easton, and Thomas J. Keating, Jr., Centreville, on the brief), for appellant.

No appearance for appellee.

Before BRUNE, C. J., and HENDERSON, HAMMOND, and PRESCOTT, JJ.

HAMMOND, Judge.

We must decide whether a branch manager of an automobile finance company, whose employment terminated during the year, forfeited his right to a bonus payable after the end of the year because he breached his duties and obligations to his employer.

Maryland Credit Finance Corporation is engaged in financing automobile sales, both wholesale and retail, through various branch offices in Pennsylvania, New Jersey, Delaware and Maryland. In the retail financing, Maryland purchases conditional sales contracts between the dealer and the customer, wherein title to the vehicle is reserved to the dealer, and assigned to Maryland. In the wholesale financing or 'floor planning', the dealer delivers notes in the amounts advanced by Maryland towards the price paid to the manufacturer by the dealer and retains the car on the showroom floor under trust receipts. A maximum is established as to the amount that may be advanced to each dealer. The dealer must pay off Maryland's note when the car is delivered to the customer.

In 1949, Hagerty, the appellee, was promoted to manager of Maryland's Wilmington, Delaware, branch where he dealt with some twenty automobile dealers in parts of Pennsylvania, New Jersey, Delaware, and Cecil County, Maryland. Hagerty had full charge of the branch, with the power to hire and fire subordinates. He had direct responsibility for the purchase of conditional sales contracts in the retail financing operations and the duty of approving the terms and amounts of each contract, after taking into account the credit standing of the dealer and the customer and the amount of the down payment. When he approved a contract, he purchased it from the dealer and forwarded it, with the title certificate for the automobile, to the home office. Thereafter, he was called on to collect, or attempt to collect, the monthly installments due by the customer and, if necessary, to repossess the automobiles.

Hagerty's duties, in regard to the wholesale financing, included regular and periodic checks of the dealers to see that none exceeded the maximum limitation on advances, and determining whether any automobile was 'out of trust', that is, to make sure that a car was not delivered to a customer until the dealer had paid Maryland its advance against the car, and a continual survey of the financial status of the dealers.

Through wholly-owned subsidiary corporations, Maryland engaged in the insurance business. The branch managers sold this insurance and were required to collect all premiums. If the premium was not collected within thirty days, they could, and were supposed to, cancel the policy. If cancellation were made late, Maryland was required to pay the premium even if it had not been collected from the customer.

Hagerty was employed under a customary oral contract terminable at will by both the employer and the employee. The agreement was for a fixed monthly salary, paid twice a month, plus an annual bonus payable in January of each year in an amount equivalent to 20% of the Wilmington branch's annual net profit for the preceding year. It was testified that as was generally so in the finance business, such bonuses were payable only to those in the employ of Maryland at the end of the year. It was shown that if a manager left the employ of one company to go to another, it was customary for the new employer to agree to pay the bonus that the employee would have gotten from his old employer had he remained.

Between May, 1951, and November 16, 1951, when Hagerty's employment was terminated, Maryland advanced him eleven payments of $50 each and one of $100, totalling $650, because he complained of the increased cost of living. These payments were to be credited against any bonus to which he might have been entitled for 1951.

During the late spring or early summer of 1951, Maryland's officers began to notice that delinquencies and repossessions were running abnormally high at the Wilmington branch, that contracts and automobile titles were not being forwarded within the proper time, and that Hagerty was not filing reports or answering home office correspondence. Maryland made unsuccessful efforts to have Hagerty correct these deficiencies. Finally, in October 1951, Maryland's executive vice-president assumed general supervision of the Wilmington branch. On November 16, 1951, Maryland's president and its executive vicepresident met with Hagerty and told him that they must insist on correction of unsatisfactory conditions. One requirement was that Hagerty dismiss his wife as office manager and another was that a home officer crew be placed in the branch until its operations were back on a sound footing. After some discussion, Hagerty agreed to dismiss his wife but he refused to accept the home office crew, since this, in effect, would take the responsibility for the management of the branch from him. Hagerty asked if he would receive his bonus if he resigned, and the president promised him that when the bonus was payable the company would pay him 'any commission or bonus to which he was then entitled.' Hagerty then resigned. Although he testified that he did not know he would have to be in the employ of the company when the bonus was payable, to be entitled to receive it, three days later he called to ask if he could be reemployed because, he said, he was fearful in his own mind of not receiving his bonus if he was not Maryland's employee at the end of the year. Maryland would not reemploy him and he secured employment with another finance company, where he was working at the time of the trial.

After Hagerty's resignation, but before the end of 1951, Maryland learned for the first time that earlier in that year he had entered into partnership with J. Ewing Lort (who did business as Elkton Motor Sales), from whom Maryland's Wilmington branch purchased conditional sales contracts and whom it financed under a floor plan. Hagerty had agreed to supervise the automobile business and to oversee the activities of one Lennon, whom he had produced to operate the partnership while Lort was ill. Hagerty, Lort and Lennon were each to receive one-third of the monthly profits. Hagerty devoted several days a week to supervising Elkton Motor Sales during the months of July and August, 1951, and perhaps in June and September also. He received several hundred dollars and an undated promissory note for $400 as his share of the profits. During the time that Hagerty was in partnership with Lort, the Wilmington branch's purchases of contracts from Lort rose sharply, although such an increase in business was abnormal for that time of year, and Lort was allowed to exceed his floor plan wholesale financing limitation. In the fall of 1951, Hagerty severed his connection with Lort because he felt Lort and Lennon were adopting unwise practices and that the business was financially unsound. Maryland knew nothing of Hagerty's relations with Lort until after November 1951. The trial court found that Maryland has lost some $1,000 on Elkton Motor Sales contracts and that Hagerty was directly responsible for 25% of this loss.

After November 16, 1951, Maryland made another discovery. It found out that in the summer of that year Hagerty had borrowed $1,500 from Franklin T. Williams, Jr. (who traded as Williams Motor Company, of Elkton), an automobile dealer from whom Maryland was purchasing conditional contracts of sales and who had purchased insurance from Maryland's subsidiaries. The loan was payable on demand, with interest.

During the summer and fall of 1951, Elkton Motor Sales and the...