McLaughlin v. Leonhardt
| Decision Date | 22 June 1910 |
| Citation | 77 A. 647,113 Md. 261 |
| Parties | McLAUGHLIN v. LEONHARDT et al. |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court of Baltimore City, in Equity; Chas. W Heuisler, Judge.
Suit by William J. McLaughlin against William Leonhardt and others. From a decree dismissing the bill, complainant appeals. Affirmed.
Argued before BOYD, C.J., and BRISCOE, PEARCE, THOMAS, PATTISON, and URNER, JJ.
J. Kemp Bartlett and Walter C. Mylander, for appellant.
Thomas G. Hayes, for appellees.
In this case William J. McLaughlin, the appellant, filed his bill against William Leonhardt and John H. Leonhardt, the appellees, asking for the specific performance of an option agreement, in writing, by the terms of which the appellees together with one George F. Faust, gave to the appellant the right or option to purchase from each of the appellees and George F. Faust, within a given time, at a stated sum, 40 shares of the capital stock of the Leonhardt Wagon Manufacturing Company of Baltimore.
In the year 1870 William Leonhardt and John H. Leonhardt, his brother, the former a wheelwright and the latter a blacksmith, started, in the city of Baltimore, the business of manufacturing wagons, which business they, as partners conducted, with fair success, until 1887. At that time they were interested in a revolving shute coal wagon, of which they were the patentees. In order to place the wagon upon the market, they found it necessary not only to give much of their time thereto, but likewise to spend considerable money in connection therewith. At the suggestion and request of George Faust, father of George F. Faust, the son was taken into the firm and was sold a one-third interest therein, for which interest there was paid $7,500; the elder Faust agreeing in connection therewith to improve certain idle property belonging to him in a manner suitable to the business requirements of the new firm and to rent the same to it at a rental charge of 5 per cent. upon the value of the land and the cost of such improvements, and the firm to pay the taxes, fire insurance, and to make such repairs upon the property as should be needed from time to time. In the conduct and management of the business, each of the members of the new firm had his individual duties to perform in connection therewith. The Leonhardts managed and superintended the manufacture of the products, while the office work devolved upon Faust.
In 1905 the health of John H. Leonhardt became impaired, and in consequence thereof it became necessary for him to be away from his home and business much of the time during the several succeeding years. During this period his mental condition became much involved, and we are told by his family physician that at times he was absolutely incapacitated for the transaction of business and was at intervals in a sanitarium. Through Faust, the appellant was employed as salesman for the firm at a salary of $30 per week, with an understanding that he should have an interest in the business, although no definite amount of interest was agreed upon. He entered upon his duties the first of the year 1907. Faust, on several occasions, prior to the employment of McLaughlin, had suggested the formation of a corporation and the taking over by it of the real estate occupied by the firm, formerly belonging to his father, but since his death the property of Faust. This, however, was resisted by his partners; but, after the entry of McLaughlin in the services of the company, the proposition was again made and was this time accepted by the Leonhardts and the corporation formed and the property of the firm transferred to the corporation on or about August 1, 1907. At the time of the incorporation, however, nothing was said by Faust in relation to taking over the real estate.
The capital stock of the corporation was fixed at $50,000, divided into 500 shares, each of the par value of $100. One share was taken by each of the following persons: William Leonhardt, John H. Leonhardt, George F. Faust, Edward M. Leonhardt, son of William Leonhardt, E. W. Leonhardt, son of John H. Leonhardt, and William J. McLaughlin, and paid for in cash. The balance of the stock, consisting of 494 shares, was divided about equally among the two Leonhardts and Faust. It was ascertained that the value of the property transferred by the firm to the corporation was $80,000, $30,000 in excess of the capital stock of the corporation. Therefore a note for $10,000, secured by a mortgage, was given by the corporation to each of the three members of the firm. Shortly after the distribution of the stock, McLaughlin, through Faust, asked for six more shares of stock. This was sold to him; the two Leonhardts and Faust each selling him two shares at and for $100 per share. McLaughlin had neither property nor money, and in order to pay for this stock borrowed the required sum from Faust, giving him his note or notes therefor. At the time of the sale of the stock, Faust testified that William Leonhardt stated "that he hoped that would not be all that McLaughlin would have; that they intended to give him an equal holding with the balance of us." Some 10 or 12 days thereafter, Faust, on behalf of McLaughlin, again called upon the Leonhardts, asking that more stock be sold to McLaughlin. The Leonhardts testify that the quantity asked for by Faust on this occasion was 40 shares of stock. William Leonhardt asked, "You mean of the entire stock?" Faust assented, and said, "Yes." Then William Leonhardt said, "That means 13 shares apiece and one will give 14, and he who has the most will give the odd one, or if not we will draw lots who will get the 14 shares." It was then and there agreed that the three should sell unto McLaughlin 40 shares in all. Faust, however, in his testimony, stated that "the understanding was that, in order to give Mr. McLaughlin an equal holding with the balance of the principal parties concerned, we were to give him an option on 40 shares each, and that was as near as we could possibly divide it," and denied that anything was said in the conversation about the division of 40 shares into three parts, two of 13 and one of 14.
McLaughlin testified that on two separate occasions William Leonhardt told him that he (McLaughlin) should have the same interest in the company as the rest. This statement Leonhardt denied, but admitted that he said to McLaughlin that he should have fair treatment with the company, but that he did not say he should have the same interest as the rest; nor was there any wish expressed or request made by McLaughlin for additional stock. In August or in September, earlier than the 6th, William Leonhardt was in the office of the company, and when in the act of leaving Faust called him and said, "Sign this paper before you go." Leonhardt replied, "What paper is that?" Faust said, "The paper for the 40 shares we promised Mac," meaning McLaughlin. Leonhardt replied, "All right." The paper was at the time turned down ready to sign, and Mr. Faust's name was on it, when Mr. Leonhardt picked up the pen, signed it, and walked out. In his testimony he stated he never had the least suspicion that there was anything the matter with the paper, that he never read it, that he relied upon Faust, in whom he had implicit confidence, to draw the paper as verbally agreed upon, and that agreement was for an option of purchase of 40 shares in all, and not 40 shares from each of them; that he positively would not have signed the option had he known that by it he was giving an option to McLaughlin to purchase 40 shares of his stock; that at no time before signing the paper had McLaughlin made known to him the number of shares he wanted, in fact, McLaughlin, personally, had said nothing to him about wanting any additional shares.
Faust, in his testimony, in speaking of the occasion of the signing of the option agreement by William Leonhardt, said he presented the agreement to William Leonhardt; was not positive whether Mr. Leonhardt read it or inquired of him what it was, but he said to Mr. Leonhardt, "Here is the option of Mr. McLaughlin." This paper, when signed, was afterwards, by Faust, mailed to John H. Leonhardt at Atlantic City with a letter from Faust accompanying it. The sending of the paper and the letter is admitted by Faust. The record discloses that the letter was destroyed, but John H. Leonhardt, in his testimony, in stating its con tents, said: "As near as I can remember, it was distinctly an agreement inclosed in reference to the 40 shares we had promised Mr. McLaughlin and to please sign it and return it to me and a few words of good wishes for my betterment," etc. At the time it was handed to him by the carrier, he was in the exchange of the hotel in company with two of his acquaintances, one of whom, Mr. Fox, he called upon to witness the paper, saying to him, "I have a little paper sent to me here from home where three of us have agreed to allow a certain gentleman to have a few shares of stock." He did not read the paper before signing it, for the reasons: First, he was not in a condition to take in and comprehend any paper, and Mr. Faust was at that time well aware of his condition; second, that he had the utmost confidence in Mr. Faust, feeling sure that the agreement was as verbally understood between the three of them. That had he known of the contents of it he would not have signed it. He further stated that he was at the time very weak and nervous, having been reduced to this condition largely by the heat and overwork required of him while in Baltimore in connection with the formation of the corporation.
Dr William F. Gilroy, John H. Leonhardt's family physician, testified that so early as 1905 Mr. Leonhardt was suffering with the disease known as neurasthenia;...
To continue reading
Request your trial