Davis v. Corbin

Powers, J., delivered the opinion of the Court. Claiborne E. Corbin, appellee here, filed a bill of complaint in the Circuit Court for Harford County, on 29 January 1973, against two individual defendants and six corporate defendants. The suit sought to establish that Corbin was the owner of a one-half interest in Spartan Concrete Corporation, one of the corporations, and to require the other corporate defendants and the individual defendants to account to Spartan for business, money, and other assets of Spartan which Corbin alleged had been wrongfully diverted from it by the other defendants. The individual defendants were W. Lester Davis and his wife, Virginia R. Davis.

The corporate defendants in addition to Spartan Concrete Corporation were Aberdeen Sand & Gravel Co., Inc., t/a Bel Air Concrete Company, The Aberdeen Concrete Company, The Joppa Concrete Company, Davis Concrete Company, and D. and L. Products Corporation. An answer to the complaint was filed on behalf of all ³⁶⁶ defendants. The significant allegations of the bill of complaint were denied. In addition, the answer contained seven affirmative defenses.

Briefly stated, they were laches, statute of limitations, denial of partnership, denial of execution of relevant written documents, general issue plea in contract, general issue plea in tort, and an assertion that the complaint failed to state a cause of action for which equitable relief could be granted, which we take to be in the nature of a demurrer. The case was tried in the Circuit Court for Harford County before Judge Albert P. Close, on 20, 21, 22, 25 and 26 February 1974. At the conclusion of the trial the case was taken under advisement. In a memorandum opinion filed on 19 September 1974, Judge Close ruled admissible the testimony of Corbin concerning his transaction with Davis, and ruled in favor of Corbin on the substantive issues in the case.

A decree signed on 14 November, filed on 15 November 1974 granted the relief prayed in the bill of complaint. The defendants noted this appeal from that decree. In their brief here the appellants argue two points. One is the admissibility of certain testimony given by Corbin, and the other is whether laches by Corbin in bringing this suit bars him from asserting his claim.

Appellants word the questions presented in their brief in this way: “1. Was the Defendant incompetent so as to render the testimony of the Plaintiff inadmissible concerning transactions with him? “2. Did the Plaintiff -act with the required legal diligence in pursuing the claim of ownership in Spartan which he asserts in this proceeding?” In his brief, Corbin, as appellee, in effect puts the same questions, but does so in terms of the facts upon which the chancellor’s rulings were based rather than upon the rulings themselves. Corbin presents the questions: “1.

Was the Court below clearly erroneous in finding as a fact, that the Defendant, Davis, was not mentally disabled under the provisions of the Dead Man’s Statute? ³⁶⁷ “2. Was the Court below as the trier of fact clearly erroneous in finding that Corbin did not have actual knowledge prior to March of 1972 of Davis’ intention to deny his 50% ownership of Spartan; and that there were no facts or occurrences to put a person of ordinary prudence and diligence on notice of any such intention particularly where as here Davis actively concealed and disavowed any such intention by affirming their relationship and acknowledging his obligation to Corbin upon every inquiry?” In a reply brief appellants set out in full the fourteen page memorandum opinion filed by the chancellor, and then pose three questions. Two are substantially the same as those argued in their initial brief. The additional question is: “1.

Was the Court below in error in holding that the parties were joint venturers or partners?” The transcript of the trial before Judge Close covers 960 typewritten pages, recording the testimony of 23 witnesses and the introduction of some 50 exhibits. We feel, however, that the facts we summarize below will be sufficient for the purpose of the issues involved in this appeal. In 1962 Davis was engaged in rather extensive business enterprises in Harford and Cecil Counties, including the operation of plants from which he sold mixed concrete. At that time the Spartan Concrete Corporation, located in Bel Air, was owned and operated by members of the Sparr family.

Some members of the family had conversations with Corbin, looking to the possible purchase of the business by him. Corbin spoke to Davis about buying Spartan, but at that time Davis said he was not interested. Later the two discussed it again, after the Sparrs had also talked to Davis. There was evidence that Davis and Corbin agreed to acquire the Spartan Corporation on a fifty-fifty basis.

On 3 August 1962 there was a meeting, attended by Davis, Corbin, several members of the Sparr family, and an attorney whom Davis had asked to attend. At Davis’s direction the attorney had prepared an agreement between ³⁶⁸ the Sparrs and Davis for the sale. The sale was consummated on the same day. The price was $96,000, plus the assumption of obligations of Spartan.

Three notes, two for $40,000 each and one for $16,000, representing loans from a local bank, provided the funds with which the purchase was accomplished. The two $40,000 notes were signed “Spartan Concrete Co., Inc., T/A Davis & Corbin Concrete Co., W. Lester Davis, Pres.”. Under that signature was the personal signature, of Claiborne E. Corbin. On the back, as an endorser, was the signature W. Lester Davis.

The third note for $16,000 was not signed in any business name but was signed only with the individual signatures, W. Lester Davis and Claiborne E. Corbin. Each of the several members of the Sparr family who held stock in Spartan turned in his certificates with the assignment executed and received a check for his share of the agreed price. In evidence was a single sheet of paper upon which are recorded the minutes of two separate corporate meetings, both dated August 3, 1962. The first is designated as a stockholders’ meeting of Spartan.

Those minutes recorded that the stockholders elected as Directors for the ensuing year, W. Lester Davis, Virginia Davis, C. E. Corbin, and Marie Corbin. The minutes further record that the President announced that he and other present officers were disposing of the stock and that all of the present officers tendered their resignations, effective immediately. The lower half of the same sheet records the minutes of a meeting of Directors of Spartan on the same day. Those minutes state that following the adjournment of the stockholders’ meeting the new Directors, being also all of the outstanding stockholders, having purchased the outstanding stock of Leroy A. Sparr and other members of his family, organized by electing the following new officers: President, W. Lester Davis; Vice President, C. E. Corbin; Treasurer, Virginia Davis, and Secretary, Marie Corbin.

A bank account was opened and maintained by the business in the name of Davis & Corbin Concrete Co., W. Lester Davis or Claiborne Corbin. In many ways shown by the evidence the business was openly conducted as Davis & ³⁶⁹ Corbin Concrete Company, sometimes as Spartan Concrete Corporation, trading as Davis & Corbin Concrete Co. The October 1973 issue of the telephone directory carried an advertisement in the yellow pages by Spartan Concrete Corp., trading as Davis & Corbin. Corbin received a weekly paycheck from the business, by check drawn on an account carried under the name of Davis & Corbin Concrete Co. One of such payroll checks, dated 1 July 1972, was placed in evidence. There was also evidence that in September, 1963, Mr. and Mrs. Davis and the family of one William M. Lindenstruth agreed to combine all of the concrete mixing plants they owned by transferring all of the stock of the respective corporations to a holding corporation, to be chartered by the parties, in which each family was to have a 50% stock interest.

It appears that the operations were promptly combined in fact, although the new corporation, D. and L. Products Corporation, was not actually formed until 1965. Some, and perhaps all, of the securities of the other corporations were assigned to D. and L. Products in 1967, dated back to 1965. By a separate assignment dated “as of March 17, 1965” Davis assigned what he described as “all of the Capital Stock standing in my name on the books of said Corporation [Spartan]” to D. and L. Products Corporation. There was no evidence that the Spartan certificates turned in by the Sparr family in August, 1962, have ever been transferred on any corporate records maintained by Spartan.

Davis managed the combined operation of the so-called Davis companies and Lindenstruth companies from the time of the 1963 agreement until 1967, when Mr. and Mrs. Davis acquired the stock of the Lindenstruth family in D. and L. Products Corporation. The following year after The Aberdeen Sand and Gravel Co., Inc., which operated a concrete mixing plant in Bel Air under the name of Bel Air Concrete Company, came under the management of Davis, Davis moved its operation to Spartan’s location, which adjoined. Corbin from time to time complained to Davis that ³⁷⁰ business originated by Spartan was actually being diverted to and billed by Bel Air, and that Bel Air was filling its orders by using materials paid for and stockpiled by Spartan. There was evidence that on several occasions when the subject was brought up Davis agreed that he owed Corbin a lot of money, and promised that the matter would be straightened out.

Such evidence, if true, would support not only the claim that assets of Spartan had been diverted to a company in which Corbin had no interest, but would show that Davis recognized Corbin’s right, as part owner of Spartan, to raise the question. A deed in evidence shows that on 1 May 1967 Davis and Corbin, as tenants in common, acquired four acres of land in Harford County. Corbin testified that their purpose was eventually to relocate Spartan’s concrete mixing plant, and that each paid one half of the purchase price of $10,000. Another exhibit shows that an attorney working on an estate plan for Corbin wrote to Davis’s accounting firm in 1969 asking for details of Corbin’s 50% interest in Spartan Concrete Company.

Corbin testified that he talked to Davis several times about Spartan. Davis said that he would take care of it, that “one of these days we will straighten out.” Corbin knew that Davis had other problems, with payments to the Lindenstruths, and with Internal Revenue. Corbin testified: “I said, Les, don’t worry about me. I said, I am not going to put any pressure or anything like that.

You go ahead. You’ve got troubles. We will straighten it up. He said, that is fine.

We will do that. That is the way we left and I was happy and I think it was in — I know I heard several remarks saying that I called up all the time. Well, I did, I might have called up but he called me first. He said in 19, let me think now, about 1971 in about December, it was really a break of the day, he told me, called me on the phone, said, Bud, I know I owe you a lot of money, and he said, I am going to straighten up with you.

I said, well, Les, that is fine. I was hoping we could really straighten up and ³⁷¹ have no troubles. He said, well, he says, we will do that * * *.” Corbin said Davis was to let him know when, and it went on about three months. He testified: “I think it was April or March of ’72, I called Les up.

I said, Les, I said, when are we going to get straightened out? I suggested in December and it is March now. When are we — going into another season — are we going to straighten out? He said, straighten out what?

I said, the business. He said, you don’t own no business. I said, you have to be kidding. He said, no.

I’m not kidding. If you think I am kidding, send your lawyer over and find out. I said, you are serious, aren’t you? He said, you’re damn right I’m serious.

I said, okay, I will do just what you said.” In a letter dated 11 April 1972 Corbin’s attorney sent to Davis’s attorney certain financial information and copies of supporting papers. Davis’s attorney wrote to Davis on 13 April 1972, sending a copy of what he had received. He said: “This report should aid Mr. Flom in setting up a proper account, which apparently your previous auditor had not done. “You will also note that Mr. Corbin is ready to sever the relationship, which I presume is being indicated by Mr. Mittelman that you either offer to buy or sell.” On 23 May 1972 Davis’s attorney wrote Corbin’s attorney, making an offer for Corbin’s interest. The letter was objected to because it disclosed an offer to compromise.

In a further letter, 26 September 1972, Davis’s counsel confirmed a telephone conversation with Corbin’s counsel in which he had advised, “that we have now found the records in connection with Spartan Company, to show that Mr. Corbin is the vice-president of the Company and his wife is the secretary, which changes the situation as we all had thought existed prior to the search of the records.” The letter ³⁷² suggested a willingness to discuss the matter further after completion of an audit of Corbin’s records. We do not look upon any of the evidence we have referred to showing what happened in