Carter v. Abramo

Delaplaine, J., delivered the opinion of the Court. This suit was brought in the Circuit Court for Baltimore County by Charles A. Abramo, Elwood C. Hewitt and Charles E. Wingo, of Cockeysville, to impress a constructive trust upon 3,250 shares of the capital stock of Molded Products, Inc., held by Wilfred S. Carter, an attorney, of Chevy Chase. In November, 1947, complainants, defendant and Rees D. Stephens, of Washington, an agent for manufacturers, formed a Maryland corporation under the name of Ply-mold Corporation of America, later changed to Molded Products, Inc., for the purpose of manufacturing plywood products. It was mutually understood that complainants were to work in the factory at Cockeysville, while defendant and Stephens were to act as promoters.

The corporation issued 10,000 shares of capital stock with par value of $1 each. Defendant and Stephens each subscribed to 3,250 shares, each paying $3,250 in cash. Hewitt subscribed to 1,500 shares, paying $750 in cash and consenting to deductions from his wages for the remaining $750. Abramo subscribed to 1,500 shares, and Wingo to 500 shares, each consenting to ³⁴¹ deductions from their wages.

Stephens was elected president of the corporation. In February, 1948, Stephens, becoming disgusted with defendant, resigned as president and offered his stock for sale. Shortly afterwards defendant expressed the opinion that Stephens would find difficulty in selling his stock, as no investor would want to become a minority stockholder in a small business with which he was not familiar. Stephens, getting no satisfactory reply from complainants, offered his stock to O. H. Williamson, the company’s landlord and supplier of materials.

Abramo and Hewitt had no objection to the sale of the stock to Williamson, but defendant suggested that he and the complainants ought to buy the stock and divide it into four parts. Complainants accordingly delegated him to confer with Stephens to ascertain his price. Abramo, in explaining why defendant was chosen to negotiate with Stephens, testified as follows: “Mr. Carter was closer to Mr. Stephens. * * * He was the legal man. He knew how to handle those matters.

He was a lawyer. So he was elected to do that job.” Defendant conferred with Stephens in Washington without delay, and on the following day returned to Cockeysville with a report that Stephens was willing to sell his 3,250 shares of stock at $1.20 per share, totaling $3,900. Hewitt said he could make a partial payment of $500, and Abramo and Wingo said they could make their payments later. Complainants testified that they entered into an agreement with defendant that he would make settlement for the stock, and when they reimbursed him, the stock would be split into four parts.

They testified that defendant returned to Washington and talked with Stephens again, and several days later he informed them that he had purchased the stock for $3,900. Hewitt testified that, after he had finished paying for the stock issued to him in 1947, he saved enough money to pay for his share of the stock bought from Stephens. He asserted that he as well as Abramo and ³⁴² Wingo were ready to pay for their respective shares about January 1, 1949, but that defendant always gave an evasive answer when he was asked to divide the stock. In November, 1950, when defendant was president of the corporation, Hewitt called a directors’ meeting, mentioning in the notice that one of the subjects to be considered would be the demand of Abramo and Wingo for their stock.

According to complainants, defendant asserted at the meeting that he would not divide the stock until he was repaid certain money which the company owed him. In August, 1951, defendant called a meeting of stockholders. Shortly before the meeting he asked Stephens to give him a proxy for the 3,250 shares, which Stephens had sold but which defendant had not yet transferred. Stephens informed him that he had already given a proxy authorizing all four men to vote the shares.

At the stockholders’ meeting Abramo, Wingo and Hewitt were elected directors. Immediately afterwards they held a meeting of the board of directors, at which defendant was removed as president. Abramo was elected president, Wingo vice president, and Hewitt secretary and treasurer. The next step was a peremptory demand upon defendant to divide the stock in compliance with the agreement.

As he refused to do so, complainants filed this suit. The chancellor believed complainants were telling the truth, and found that the evidence was sufficiently clear and convincing to warrant the imposition of a constructive trust. He accordingly entered a decree declaring the certificate for 3,250 shares of capital stock of Molded Products, Inc., in the name of Stephens to be the property of complainants and defendant; and that when complainants make pro rata reimbursement to defendant at the rate of $1.20 per share, defendant shall surrender the stock certificate, and the corporation shall issue four certificates of stock, each for 812^ shares, to complainants and defendant. Defendant appealed from that decree. ³⁴³ A constructive trust is imposed where a person