Williams v. Messick

• Decision Date: 05 March 1940
• Docket Number: 19.
• Citation: 11 A.2d 472,177 Md. 605
• Parties: WILLIAMS v. MESSICK et al.
• Court: Maryland Court of Appeals

11 A.2d 472

177 Md. 605

WILLIAMS v. MESSICK et al.

No. 19.

Court of Appeals of Maryland

March 5, 1940

Appeal from Circuit Court, Wicomico County, in Equity; Benj. A Johnson, T. Sangston Insley, and James M. Crockett, Judges.

Suit by Elmer C. Williams, a minority stockholder in the Salisbury Ice Company, against William F. Messick and others for an accounting and other relief. The answer set up a defense of estoppel by decree in a former suit. From a judgment overruling complainant's demurrer to the answer complainant appeals.

Affirmed.

F. W C. Webb, of Salisbury, and George H. Myers, of Princess Anne (Woodcock, Webb, Bounds & Travers, and E. Dale Adkins, Jr., all of Salisbury, on the brief), for appellant.

L. Claude Bailey, of Salisbury, and William B. Rafferty, of Baltimore (Miles, Bailey & Williams, of Salisbury, and Miles & O'Brien, of Baltimore, on the brief), for appellees.

Argued before BOND, C.J., and OFFUTT, PARKE, MITCHELL, and DELAPLAINE, JJ.

BOND Chief, Judge.

In Williams v. Salisbury Ice Company, 176 Md. 13, 3 A.2d 507, the appellant, a minority stockholder in that company, complained of acts of waste and spoliation of its assets by Messick, a controlling stockholder and officer of the company, for the advantage of the Messick Company, a competitor, all the stock in which, except for qualifying shares held within his family, was owned by Messick. The bill of complaint prayed the appointment of a receiver for the Salisbury Company and other relief, but upon testimony taken it was finally dismissed. Now the complainant has brought a second suit to redress the same grievances, against Messick and the Messick Company as well as against the Salisbury Company, and in an answer the respondents have set up a defense of estoppel by the decree in the former suit. The complainant's demurrer to the answer has been overruled, and he has appealed from that action. The respondents demurred to the bill of complaint, but their demurrer was overruled, and is not to be considered.

The answer to which the demurrer has been filed avers that the amended bill on which the first case proceeded, brought against the Salisbury Ice Company alone, prayed the appointment of the receiver of its assets and business until such time as the rights of its creditors and stockholders might be permanently preserved, and such other and further relief as the complainant's case might require; that the grounds alleged for that action were identically the same as those now alleged; that evidence was adduced to establish those grounds; and that the suit resulted in a decree against the complainant's contentions. The grounds referred to are sufficiently set forth in the report of the former suit. 176 Md. 13, 3 A.2d 507. By stipulation of the parties the record of all proceedings in that former suit was made part of those in the present one, for the consideration of the court in ruling on the demurrer. Only one averment, one concerning the value of the book accounts of the Salisbury Company, appears added in the present bill of complaint.

Differentiation of the two suits is founded by the complainant on a difference in his position in them, in legal theory, in the addition of Messick and the Messick Company as respondents, and in a difference in the nature of the rights and duties asserted. Whereas Williams in the first suit sued in representation of himself alone, now he sues on behalf of the Salisbury Company, after having requested that company's officers to take action, and having been refused. Davis v. Gemmell, 70 Md. 356, 376, 17 A. 259; Booth v. Robinson, 55 Md. 419, 439. And the suit is directed against Messick and his company to require an accounting and readjustment from one who, as the controlling stockholder and officer, and at the same time owner of the competing company, was in a fiduciary position with relation to the Salisbury Company and its minority stockholders, and by violation of the duties of that position has been guilty of constructive fraud. Cumberland Coal & Iron Co. v. Parish, 42 Md. 598, 605; Burkhart v. Smith, 161 Md. 398, 157 A. 299; Hoffman Steam Coal Co. v. Cumberland Coal & Iron Co., 16 Md. 456, 77 Am.Dec. 311. While complaining of the same grievances, Williams first sought the receivership of the Salisbury Company as an instrument of relief; now he seeks the relief without the interposition of a receiver, but acting himself, on behalf of the company. Pomeroy, Equity Jurisprudence, 5th Ed., § 1095. In the opinion of the court the differences are, for the purposes of this case, immaterial.

It is true that Williams' second suit is on behalf of the corporation and all its stockholders, but it is none the less his suit, for his own benefit as one of the stockholders Except for the protection of an interest as stockholder he would not be entitled to sue however strong his proof of the waste and spoliation. Compare Booth v. Robinson 55 Md. 419, 439; Davis v. Gemmell, 70 Md. 356, 376, 17 A. 259. And viewing the receivership as a means to redress the grievances, that too would have been relief on behalf of the corporation and all its stockholders, including this complainant, as well as on behalf of creditors if there were any. There is no substantial difference in the complainant's character in the two suits, none sufficient to render him a new and different party in the second.

In his argument, however, he does not view the receivership as a means to the recovery of the relief now prayed, but as a distinct relief in itself, and this conception is at the base of a contention that the issues in the two cases have not been the same. But an ordinary chancery receivership would be only an instrument of the court for the securing of the ultimate relief. It would not be an independent remedy, but one merely ancillary to the main cause of action. 'He, (the receiver,) is an officer of the court, and the fund or property entrusted to his care is regarded as being in custodia legis, to await the ultimate disposal thereof by the court, according to the rights and priorities of the parties concerned.' Gaither v. Stockbridge, 67 Md. 222, 224, 9 A. 632, 10 A. 309; Praeger v. Emerson-Brantingham Implement Company, 122 Md. 303, 310, 89 A. 501, Ann.Cas.1916A, 1255; Note, 4 Ann.Cas. 67. Even though in the first suit the complainant, after having averred in detail the acts of spoliation, stopped with the prayer for the receivership and that for further relief, his bill could not reasonably be construed as seeking merely to have custody of the assets taken without action toward redress of the grievances which had brought him into court. The prayer for general relief empowered the court to grant whatever the facts complained of might be found to require. Townshend v. Duncan, 2 Bland, 45, 48; Powell v. Young, 45 Md. 494, 496; Sloan v. Safe-Deposit & Trust Co., 73 Md. 239, 245, 20 A. 922; Miller, Equity Procedure, § 100. The correction of the alleged spoliation was plainly the object of the first suit, as well as of the second, and appropriate action looking to that end would undoubtedly have followed the appointment of a receiver.

The decision in Polish-American Building & Loan Assoc. v. Dembowczyk, 167 Md. 259, 173 A. 254, is cited as opposed to this analysis of the suit for a receivership, and as viewing the prayer for an appointment as one for a distinct remedy. Dembowczyk, a woman, owner of savings accounts in the association, had in a former suit sought a receivership for its assets because of insolvency and mismanagement endangering repayment of her funds; and she prayed only the receivership. Her bill in that suit was dismissed, and she then filed a second suit praying that she be paid the amounts due her as a savings depositor before stockholders or free shareholders should be paid. The court found that the two suits were distinct, and that the adjudication in the first did not preclude the relief prayed in the second. Denial of the relief by receivership for the benefit of all interested in the assets was not an adjudication of the complainant's position with relation to stockholders and free shareholders. The court did not decide that a receivership could ever be had as an independent remedy in itself.

Of course, an application for a receivership might be denied on either of two grounds; either because it was considered improper to grant it, whatever the complainant's rights on the merits of the case averred (Johnson v Stockham, 89 Md. 368, 378, 43 A. 943; Williams v. Jones, 38 Md. 555), or because the rights were not established. And only an adjudication on the second ground would give rise to an estoppel by the decree against asserting those rights again in another action. Royston v. Horner, 75 Md. 557, 24 A. 25. ...