Standard Founders, Inc. v. Oliver

• Court: Maryland Supreme Court
• Citation: Standard Founders, Inc. v. Oliver, 168 Md. 317, 178 A. 223 (Md. 1935)
• Decision Date: 03 April 1935
• Docket Number: 32-41.
• Parties: STANDARD FOUNDERS, INC., ET AL. v. OLIVER, AND NINE OTHER CASES.

178 A. 223

168 Md. 317

STANDARD FOUNDERS, INC., ET AL. v. OLIVER, AND NINE OTHER CASES.

Nos. 32-41.

Court of Appeals of Maryland

April 3, 1935

Appeals from Circuit Court of Baltimore City; Rowland K. Adams Judge.

Bill by Joseph Oliver, receiver of the Great National Insurance Company, against Standard Founders, Inc., and others against the Berhenid Building & Loan Association of Baltimore City Inc., and another, against Henry L. Sinskey, against Samuel Feitelberg, against Maurice Eisenberg, against Raymond A Sinskey, against Standard Founders, Inc., against Maurice Company, Inc., against the State Founders, Inc., and against the Tri-State Investment Corporation. From an order or decree overruling demurrers to the bill, from an order impounding assets in hands of certain defendants, and from orders overruling motions to rescind order overruling demurrers defendants appeal. All appeals being argued together.

Order or decree overruling demurrers affirmed and appeals in remaining cases dismissed.

Argued before BOND, C.J., and OFFUTT, PARKE, SLOAN, and SHEHAN, JJ.

Edward L. Ward and Eldridge Hood Young, both of Baltimore (Louis J. Sagner and Young & Crothers, all of Baltimore, on the brief), for appellants.

Theodore C. Waters and William L. Rawls, both of Baltimore (John H. Hessey, of Baltimore, on the brief), for appellee.

BOND Chief Judge.

This appeal brings up, at a second stage, the litigation before the court on the appeals reported in State Founders v. Oliver, 165 Md. 360, 169 A. 59. The former appeals arose from an ex parte appointment of receivers by the Maryland court, impounding of assets and books, and other relief, on a bill seeking a remedy of an alleged despoiling of the Great National Insurance Company by the defendants named; and this court, concluding on the main one of those appeals that the averments in the bill of complaint on which the court below acted were in important respects insufficient to support the granting of the relief, ex parte, reversed the order. The second of those appeals, from an order staying as to some defendants the appointment of the receiver and possession of property by him, was dismissed, and it has no bearing on the present appeals.

These present appeals have been entered by ten defendants, or groups of defendants, from actions by the court below after the filing of an amended bill. The first is from an order or decree of September 13, 1934, overruling demurrers to the bill, filed by eight defendants; the second, from an order of September 19, 1934, impounding assets in the hands of the appellants, two building and loan associations; and the remaining eight appeals are from the overruling of motions by defendants to rescind the order of September 13 in so far as it overruled the demurrers.

The amended bill differs from the original bill in that it omits some of the claims made in the original, and differs in the degree of particularization of its averments. To a large extent these averments are now supported by exhibits of documents of the transactions complained of, and are, besides, explained in detail and at length, so that the questions are of the sufficiency of fully exhibited transactions rather than of characterizations of them. The question of the effect of the transactions as outlined in the original bill was expressly left undecided on the previous appeals.

As was explained in the opinion on those previous appeals, the complaint in sum and substance is that two men, Henry L. Sinskey and Raymond A. Sinskey, his brother, and their associates, in the years 1930 and 1931 wrongly diverted funds from corporations in their control consolidated under the name of the Great National Company and now in the receiver's hands, and by shifting those assets under various forms through the agency of corporations and individuals which they were able to control and use for the purpose, appropriated the assets to themselves. The bill charges also an effort to build up by the process a false appearance of ownership of assets in the consolidated company for business advantages. And like the original bill, the amended bill of the receiver, filed in pursuance of an order of the Maryland court, seeks an undoing of the transactions and a return to the receiver of the assets of the despoiled corporation. It seeks more specifically (1) discovery of amounts received as a result of the alleged transactions, (2) a declaration of indebtedness to the complainant for them, (3) that the sums be impressed with trusts for the receivership, (4) that there be a discovery and an accounting for them, (5) that a receiver be appointed to take possession of all the property, books, and effects of the corporate defendants, and to preserve them, (6) that the officers, agents, and employees be required to deliver them up, (7) that the individual defendants be restrained from withholding or intermeddling with any debts or obligations of those corporations, or (8) from selling any stock or obligations of the corporations, and (9) be required to deliver to the receiver any and all the corporate assets, (10) that withdrawal by the defendants from any deposits by them be restrained, and (11) that custody of such of all these things as were then in the hands of the receiver be continued by him.

The order of court on the demurrers sustained those of the two building and loan associations, the Berhenid and the Merchants, to the entire bill, thus releasing them as defendants to the bill and the complainant receiver has not appealed from that action or from any other action of the court. The demurrers of the remaining eight defendants, the Standard Founders, Inc., the State Founders, Inc., the Maurice Company, Inc., the Tri-State Investment Company, Henry L. Sinskey, Raymond A. Sinskey, Maurice Eisenberg, and Samuel Feitelberg, were sustained in part and overruled in part, sustained, that is, as to a twenty-seventh paragraph of the bill which attacked payments of $5,000 found made to each of Maurice Eisenberg and Samuel Feitelberg, for arrears in salary payments, and as to the prayers in the bill numbered above 5, 6, 7, 9, and 10; and to all other parts of the bill of complaint the demurrers were overruled.

After the action on the demurrers by which, as stated, the two building and loan associations were released as defendants to the bill, the court, upon petition of the receiver, by an order of September 19, 1934, six days after the signing of the order on the demurrers impounded in their hands any funds on deposit with them for the accounts of defendants alleged to have been participants in the shifting and wrongful appropriation of assets. And that order forms the subject of the second appeal, by the two associations.

Later in the same year, 1934, the remaining eight defendants, whose demurrers had been overruled, filed each a separate motion for rescission of the order of September 13 on the demurrers, and for dismissal of the bill of complaint, and from the overruling of each motion another appeal was entered. The motions attack the right of the receiver to maintain the bill, setting up additional facts in opposition to its maintenance.

In testing the sufficiency of the averments the court is not, of course, to look for proof of them, but so far as they are clear and definite to take them as sufficient if, supposing them to be established by proof or by admission, they would show the remediable wrongs contended for. Upman v. Thomey, 145 Md. 347, 355, 125 A. 860. The averments and exhibits do include evidentiary material with the natural effect of extending the argument into questions of probative force. Safe Deposit Co. v. Coyle, 133 Md. 343, 351, 105 A. 308.

The Sinskey brothers are alleged to have maintained offices at 213 East Fayette street, in Baltimore, and to have had a number of employees there, and to have organized and maintained at the same place a number of corporations in their control and management. And these individuals and corporations are alleged to have served as channels for the diversion and appropriation of assets as stated. These persons are named and described in the bill as having been in the Fayette street offices, and to have been used directly or indirectly through corporations as officers and otherwise Howard C. Bregel, an attorney; his secretary, Helen K. Rigdon; Sigmund Sinskey, an employee of the Sinskey brothers and of some of the corporations; Samuel Feitelberg, a cashier and bookkeeper employed to some extent for all the corporations; Maurice Eisenberg, a solicitor and appraiser of properties; Barbara F. Woodward, an employee; Marie A. Flick, a stenographer; Marie A. Segrist, a telephone operator; Mary M. Kellam, a bookkeeper; Ethel M. Bird, personal secretary of Raymond A. Sinskey; and Joseph Horacek, an examiner of titles to real estate. Others whose names were used, but whose places of business are not stated, were Clayton W. Bordley, an examiner of titles to real estate; Morton P. Wolman, M. B. Levin, Arthur I. Klein, and B. W. Gatch, who are not described except as aids in the passing of the assets without any interest of their own in them, and in some instances without their knowledge. Descriptions of the defendant corporations, and explanations of the control of each one respectively are given in the bill and they may be recited further in connection with the averments of particular diversions and appropriations of funds, except for the preliminary statements that all those corporations were located at the same Fayette street offices and that the records of all were kept chiefly by Feitelberg as clerk, the cash receipts for all having been entered by him on one sheet and subsequently segregated in books of the separate corporations. Because of...