Fuller v. Horvath

Lowe, J., delivered the opinion of the Court. Appellants (Richard D. Fuller and wife) filed suit in the Circuit Court for Montgomery County against Midami Corporation and several named defendants (who were officers and directors or shareholders of Midami — and are appellees herein), individually, for breach of contract and fraud. They alleged that two of the individuals, on behalf of the remaining defendants (including Midami), promised to pay the appellants a fee for procuring a buyer for Midami’s subsidiary, Mid Atlantic Corporation. This fee was to be in the form of forgiveness of the appellants’ promissory note, held originally by Mid Atlantic and transferred to Midami.

At the close of appellants’ case below, the trial court directed a verdict for all defendants. The court assumed and conceded establishment of appellants’ causes of action but found that individual officers or directors of a corporation, as a matter of law, cannot be held personally liable for acts performed in the scope of their authority. The court further found that no agent of Midami Corporation was a party to the breached contract. The first contention of appellants, who were plaintiffs below, provides a considerable dilemma.

While the thrust of the appeal is that the judge erred in directing a verdict, the trial record is deficient in that regard. The only entry relevant thereto is the comment of counsel for appellees that he would "... like to make a short motion.” This was on the last page of the trial transcript prior to jury withdrawal and a short recess. It is followed by a concluding reporter’s note: “Whereupon, motion for directed verdict was denied.” (emphasis added). The record indicates that appellants moved this Court to correct the omission in the record pursuant to Md. Rule 1027 b.

In denying that motion, we learned that that which intervened between the request “to make a short motion” and ⁶⁷³ the reporter’s concluding note was unavailable through no fault of either party. See Md. Rule 1025 c. The post trial record reveals that the original stenographic notes of the entire proceeding following the recess, which related to the motion for a directed verdict, have been lost. Our review further indicates that the reporter’s entry in the record that the motion for directed verdict had been “denied” was in error.

The docket entries and all of the post trial proceedings conducted before the judge who had decided the directed verdict motion, indicate that the motion was “granted.” Indeed, this entire appeal is predicated upon that presumption. In Shade v. State, 18 Md. App. 407, 410-411 (1973) , we stated that “[t]he transcript of the trial, unless shown to be in error, takes precedence over the docket entries, see Williams v. State, 7 Md. App. 241 , 254 A. 2d 376 (1969), which are presumably made at a later point in time than the taking of a simultaneous transcript.” (footnote omitted and emphasis added). The cases dealing with a variance between a transcript and a docket entry have involved clearly erroneous docket entries, see Williams v. State, supra; Crowe v. Houseworth, 19 Md. App. 688, 693 (1974) , rev’d on other grounds, 272 Md. 481, 483 (1974) (following 19 Md. App. at 693 on variance question); or an ambiguous transcript and a docket entry, see Shade v. State, supra. In Coleman v. State, 231 Md. 220 (1963), the clerk entered a sentence in the docket that varied from that clearly given at trial, as verified by the transcript.

The Court of Appeals stated: “[TJhis Court has held that a docket entry must be taken as true until corrected, and the proper court to correct an erroneous docket entry is the court in which the error occurred.” Id. at 222-223 (citations omitted). In the present case, the trial judge noted at the post trial proceeding that he had granted the motion for a directed verdict; his comments show that the stenographer’s notation at the prior proceeding was clearly in error. The docket entries stand as correct; the judge granted the defendants’ directed verdict motion. ⁶⁷⁴ Appellants filed, and personally argued, four post trial motions for new trial at a single hearing. The last filed, but first argued, concerned the lost record of the directed verdict motion, argument and opinion.

The trial judge indicated that the unavailability of the record was not a ground for a new trial because an appeal court is concerned only with facts and testimony: “What I have to say no one pays much attention to anyway.” To this observation, Mr. Fuller hastily dissented, stating precipitately, “I do.” Well so do we, Mr. Fuller! Appellant points up his own attention to the judge by attacking upon appeal both the legal premise and the factual foundation of the reasons supplied by the trial judge whose succeeding colloquy with appellant fulfilled his promise to the court reporter, that if the stenographic notes were not found, his honor would put his reasons “back into the record” at the time of the hearing on motion for new trial, “or file a memorandum or opinion for the purposes of appeal.” The last two options were not taken. We must look then to his reasons as expressed for denying the motion for a new trial. The post trial hearing record indicates that the judge’s reason for having granted the motion for directed verdict in favor of Midami and the individual defendants had been a release by Mr. Fuller of the individual directors of Mid Atlantic, and that the evidence did not indicate that an officer or director of Midami had agreed to the mortgage release as compensation for the sale. “The question is what was the basis for the directed verdict, and the basis for my directed verdict at the conclusion of all of the testimony on behalf of the plaintiff was that in the plaintiff’s case in chief there was the agreement filed, a release of Mid-Atlantic and all its directors, stockholders, heirs, ⁶⁷⁵ and assigns reserving, however, any right of action against Midami Corporation.

And then as all of the testimony came in as to which one of the individuals that you had any contact or relations with and that were called to testify as to who may have been an officer or director of Midami Corporation so as to represent them, there wasn’t any testimony that any of the officers or directors of Midami Corporation ever made any of the representations or agreements that you had alleged.” The release upon which the court relied to relieve the individuals who had been officers or directors of Mid Atlantic was not a blanket release, however, and expressly applied only to what transpired after the settlement date of the purchase of Mid Atlantic by the Old Republic Insurance Company from Midami. 1 Presumably, realizing this oversight at trial, the judge set forth alternate reasons. He held that: 1. Mid Atlantic had been released “Consequently, my decision in granting the directed verdict was based upon the fact that all of your evidence taken in the light most favorable to you disclosed an agreement between the officers of Mid-Atlantic Corporation and that you had released Mid-Atlantic Corporation.”, and that Midami was uncommitted by anyone. “Therefore, the suit against Midami Corporation — there was no evidence whatsoever that any of their officers, directors, or anyone in authority to bind Midami Corporation had, in fact, in any way authorized the release of that indebtedness; that, in fact, the indebtedness was to Mid-Atlantic Corporation even though the note subsequently became transferred to Midami Corporation and ⁶⁷⁶ assuming Midami Corporation is the one to bring suit on, or will proceed on it. Finding that there had been no representations made by anybody, that the plaintiff established, that was authorized to act on behalf of Midami Corporation, there was no basis for the suit against Midami Corporation, and since that is a matter that can be done on the record based on the evidence, the fact that my specific statements or. holdings or any colloquy between counsel are not preserved for the record would be no different if then had I, after argument of counsel, taken the matter under advisement and then merely filed an opinion in the first place.

The result would have been the same.” 2. The individuals named were shielded from liability as corporate directors and officers of Mid Atlantic. “No. The question is Mid-Atlantic. I granted the motion for a directed verdict as to each of the individuals because the evidence established that at all times they were acting on behalf of the corporation. Therefore they’re not personally liable which I seem to have some difficulty getting you to understand that that’s the purpose of corporations.

The purpose of corporations, Mr. Fuller, the reason people incorporate is so they won’t have any personal liability.” 3. Finally, the court again found that there was no evidence that Midami was committed by any “officers, directors or agents of Midami Corporation,” and the judge therefore had granted the directed verdict. “But in December when you released Mid-Atlantic you therefore released the only entity still left upon which you can sue. So, Mid-Atlantic is no longer — was never a party to this suit. It was released.

I directed the verdict against the individuals. It leaves only Midami and then we get as the reasons I’ve ⁶⁷⁷ already stated that all of the actions were by officers and directors of Mid-Atlantic Corporation. There was no testimony that any of the individuals that discussed with you or authorized allegedly the payment of the fee were at any time officers, directors or agents of Midami Corporation, but only Mid-Atlantic. Therefore, Midami Corporation must also be let out even though they weren’t released.

So it makes no difference at all for what period of time your release to any of the individuals runs, you prove no case against them as individuals, and you’ve released Mid-Atlantic.” The judge’s prior observation that upon review it is the facts and testimony we look to was correct; however, we do attend his own views in so doing, and find them of utmost assistance when seeking to review the legal and factual propriety of the directed verdict. Factually, for purposes of a directed verdict, we view the evidence in a light most favorable to the appellants, observing any and all legitimate inferences therefrom in their favor, unless there is but one inference permissible, Impala Platinum v. Impala Sales, 283 Md. 296, 327 (1978), and that unfavorable to them. Evidence, “however slight,” from which the facts in issue may be rationally inferred will require a jury determination, and all conflicts in the evidence must be resolved, if legitimately deducible, as supportive of appellants’ contention. Impala Platinum v. Impala Sales, 283 Md. at 328-329 ; Gleason v. Jack Alan Enterprises, 36 Md. App. 562, 565 (1977).

When our review discloses an evidentiary insufficiency that supports a directed verdict, our opinion can be factually brief. We need but point to the omitted evidentiary prerequisite in light of authority requiring such proof. When our review differs with a lower court’s verdict, directed upon motion, then rather than simply so state, it has been our custom to review that evidence from which we believe sufficient inferences may have been drawn to warrant a factfinder’s determination. The relevant evidence, synopsized in a light most favorable to appellants, was as follows: ⁶⁷⁸ Midami Corporation was a shell corporation holding, as its only asset, all of the outstanding stock of Mid Atlantic Corporation.

The individual defendants served varying roles as officers, directors and shareholders of both Midami and Mid Atlantic Corporations. For purposes here, the two in the foreground were David Herndon who was counsel for both Midami and Mid Atlantic and had served as secretary at meetings of both corporations, and Daniel Donohoe, a director and shareholder of Mid Atlantic and a Midami shareholder. Others included Alexander Horvath, a director of Mid Atlantic Corporation and a shareholder of Midami; Gerald Cassidy, a director of Midami and a director and officer of Mid Atlantic; William Farris, a director and shareholder of Mid Atlantic and a director and shareholder of Midami Corporation; Francis A. Murray, Sr., at one time chairman of the board of Mid Atlantic and on the board of Midami Corporation; F. Alden Murray, Jr., chairman of the board of directors and president of Midami and Mid Atlantic; E. Kendall Lorenz, a shareholder of Midami and a director and shareholder of Mid Atlantic; and Guy T. Steuart, a director of Midami and a director of Mid Atlantic. The testimony of some of the above individuals evinced general confusion as to their exact capacities relative to the two corporations.

We set their position forth based on our gleanings from the record extract as a whole. Appellant, Richard D. Fuller, was first hired by Mid Atlantic Corporation as a consultant and became executive vice president and chief operating officer of Mid Atlantic in June of 1974. After ascending to the presidency, he eventually left its employ on December 30,1975. During his tenure there, Mid Atlantic had provided him and his wife with a mortgage loan on their home in return for their $25,000 promissory note.

While appellant was still president of Mid Atlantic, an executive sales committee was formed with him as a member for the purpose of effecting a sale of the corporation. After his . termination from Mid Atlantic in December of 1975, appellant was contacted by Messrs. Herndon, Horvath, and Cassidy. Appellant advised Mr. Herndon (who was attorney for, and had acted as secretary of, both Midami and ⁶⁷⁹ Mid Atlantic) that he might be able to effect a sale of Mid Atlantic to a group of investors in New York or the Old Republic Ins.

Co. Appellant advised Mr. Herndon that he would do so for a five percent commission. Herndon rejected this offer, but contacted appellant again in March of 1976. as did Alden Murray, Jr., Midami’s board chairman (who incidentally subsequently supplied financial data to Fuller for the prospective buyer). Herndon inquired whether Mr. Fuller would approach Old Republic and see if they were still interested. Herndon advised him that if he could effect a sale, his note, still held by the Corporation, would be forgiven.

Herndon said they wanted a “cash for cash” deal plus a cash bonus. He reiterated that appellants’ note would be forgiven as his fee for procuring Old Republic as purchaser. Appellant immediately undertook efforts to effect such a sale, but the sale fell through in April of 1976. Appellant continued, through May, June and August of 1976, to have “continuous” contact with Herndon, sometimes twice a week, discussing the sale of Mid Atlantic and related problems.

Appellant concluded a feasibility study for Old Republic in May of 1976. During this period, Mr. Fuller entered into a ten week consultant contract with Old Republic. After his contract expired, he continued being paid on a week-to-week basis as a consultant, until June of 1976, and remained in contact with representatives of Mid Atlantic with regard to sale of the corporation. At this time, Donohoe was one of the “trustees” of the Fuller note.

Donohoe advised Fuller that he had discussed the matter with the other individual defendants and that the “same deal” applied, that is, if Fuller could procure a purchaser for Mid Atlantic’s assets, his note would be forgiven. Fuller again contacted Old Republic concerning the sale and prepared several memoranda addressed to Old Republic personnel specifically outlining the advantages of the sale. Fuller continued to believe that his note would be forgiven. Old Republic again contacted appellant and requested a complete financial picture of Mid Atlantic.

Appellant contacted Donohoe, advising him of this request. Donohoe ⁶⁸⁰ and Lorenz provided appellant with all the financial figures needed. These figures formed the basis of a second memorandum from appellant to Old Republic regarding the sale. Fuller was