Geo. Bert. Cropper, Inc. v. Wisterco Investments, Inc.

Smith, J., delivered the opinion of the Court. This is yet another law suit which stems from the tremendous building expansion on Maryland’s bit of seashore ⁶⁰³ since World War II. 1 This controversy grows out of a joint venture to construct a motel in Ocean City, said to have been intended as a Holiday Inn. Before work on the foundation was completed certain of the joint venturers withdrew. Two issues are presented in the cross-appeals here before the Court: (1) whether the trial judge erred in finding that a corporation and two individuals were not liable for that part of work done on the motel foundation after it was known by the contractor that they were no longer connected with the building project; and (2) whether the trial judge erred in concluding that cross-appellant Rufus C. Johnson was a legally responsible party in the transaction.

We shall affirm on the first issue and reverse on the second. A subsidiary issue is whether the law of partnership is applicable to a joint venture. We conclude that it is. Perhaps this case may be better understood by listing the litigants and the individuals or corporations directly connected with them: Geo.

Bert. Cropper, Inc. (Cropper, Inc.) — a corporation identified on its letterhead as a registered professional engineer and land surveyor and general contractor, plaintiff below and appellant and cross-appellee here. George B. Cropper (Cropper) — the principal of Cropper, Inc. 2 ⁶⁰⁴ Wisterco Investments, Inc. (Wisterco) — a Maryland corporation which is an appellee as to Cropper, Inc.’s, appeal. Rufus C. Johnson (Dr. Johnson or Johnson) — cross-appellant and principal of Wisterco. 3 William Randolph Bloxom (Dr. Bloxom or Bloxom) — an appellee who is a Salisbury dentist and resides in Somerset County.

James B. Caine (Caine) — an Ocean City entrepreneur. See, e.g., Caine v. Cantrell, 279 Md. 392 , 369 A. 2d 56 (1977). Montego Bay Development Corporation (Montego Bay) — a Caine corporation of which he is president. Ocean Holiday Investment, Inc. (Ocean Holiday) — a corporation of which Johnson is president.

Lighthouse Sound — another Ocean City enterprise involved with Caine and Johnson. I Caine, Johnson, and Bloxom bought the Americana Motel at Ocean City in June 1973. After the end of that season some discussions took place as to the feasibility of acquiring a franchise for a Holiday Inn for that site. On October 6, 1973, Caine, Montego Bay, and Dr. Johnson entered into a long agreement.' Caine and Montego Bay were described as “parties of the first part” and Johnson, as “party of the second part.” It indicated that they had “agreed in principle to enter into some form of association” with Dr. Bloxom relative to development of three specifically mentioned tracts of land in Worcester County, one of which is the tract here involved. “One or more Holiday Inns or Hotels or Motels” were among the various possibilities mentioned for development.

Johnson said that he became concerned about the size of the project, concluding that he could not afford it. He so ⁶⁰⁵ advised Caine and Bloxom at a meeting which Johnson said was “friendly”; they offered him a refund of the money which he had put up, “and they even tacked a profit on it.” Subsequently Johnson was approached by Caine in an effort to get him back. Johnson then sought the advice of his friend and attorney, Vaughn E. Richardson, Esq., who, as Johnson put it, “was very plain and almost blunt” about the matter. Richardson told Johnson the latter was “not heavy enough to be handling that thing,” and the only way in which Richardson would approve his being in the joint venture was through a corporation.

Johnson testified further as to the advice given him: “From now on any contracts you sign, et cetera, you will have to remember to sign them in that manner,” meaning a corporation. Johnson stated he then reapproached Caine, told him of the advice he had received, and said that the only way he would be involved was through a corporation. This was accepted, according to Johnson, who proceeded accordingly. Wisterco Investments, Inc., was formed.

The first meeting of its board of directors was held on November 13, 1973. A resolution was passed at that meeting authorizing Wisterco “to enter into a partnership with Montego Bay Development Corporation and Dr. William Bloxom for general developmental purposes in the Ocean City area, and to execute any documents necessary to carry out the purposes of that partnership.” Title to some of the land for this project was in the names of Caine, Bloxom, and Johnson and some was in the names of Caine, Bloxom, and Wisterco. There were negotiations with a Memphis architectural firm. It addressed a letter to Dr. Johnson under date of February 22, 1974, outlining that which it would do by way of preparation of plans for this project and the cost thereof.

He was advised that if this were acceptable he should so indicate by executing in the appropriate space at the bottom of the letter. The acceptance was executed by Caine on behalf ⁶⁰⁶ of Montego Bay, by Dr. Johnson on behalf of Wisterco, and by Dr. Bloxom. On January 29, 1974, G.B.C. Surveys, Inc., a Cropper corporation, did a topographical survey of the area in question. In Cropper, Inc.’s, brief it is stated, “Cropper was paid for the survey by a check signed by Johnson.” A similar allegation was made at oral argument.

This was not Johnson’s personal check, but a check of “Lights House Country Club,” signed by two persons, Johnson and an individual mentioned in certain phases of the testimony as an employee of Caine. Cropper testified that Caine “was in [Cropper’s] office many times a week, most every day” because of the many jobs that Cropper’s corporation was doing for Caine. He apparently talked extensively relative to Lighthouse Sound in which, according to Cropper, Caine said Drs. Bloxom and Johnson were involved.

Cropper said Caine “went on at great lengths about how much faith he had in this Lighthouse Sound and he had two heavyweights with him, and they had about 10 million dollars to use on the Lighthouse Sound project....” According to Cropper, Caine claimed to have Holiday Inn franchises for two different locations in Ocean City, one “back of the Carousel” and one “on Block 23,” the area here in controversy. There has been no suggestion that this is in any way a part of the Lighthouse Sound, project. On this Block 23 location Cropper testified that Caine said an architectural firm in Tennessee, “who were experts on the design of Holiday Inns,” had been retained. Cropper said this conversation “was all prior to a definite date of commitment.” According to Cropper, the time came when Caine “got very serious.” Cropper said that he then reminded Caine of the “$100,000.00 or more on the last section of Montego Bay that [Cropper] fixed for [Caine]” and which was still due to Cropper or one of his corporations.

On April 22 Caine called Cropper’s office, advised him that he had “plans for the hotel and also the zoning change,” and requested Cropper to meet him. This was done. Cropper, Inc., was retained on a time and materials basis to design and construct the foundation. We shall have more to say later about the details of this ⁶⁰⁷ agreement.

Cropper, Inc., ultimately signed a subcontract with another company for the actual pouring of the concrete foundation pilings, the contract being in the amount of $285,000. The first pile was driven on June 26, 1974. Cropper testified that before he signed the foundation contract with the subcontractor he “called Caine and reaffirmed with him whether the money was okay.” Cropper said that on July 30, 1974, when he was pressing Caine for $126,000 then due on the project, “Caine told [him] that he and his two partners had had a falling out because he had found that they were two lightweights and he didn’t want any lightweights in his organization, and he had gotten rid of them,” to which Cropper is said to have replied that Caine may have gotten rid of them but Cropper had not and his agreement was with the three of them. In response to a question as to his understanding from the beginning as to how Cropper, Inc., was to be paid, Cropper said: [W]e were to be paid on a time and material basis for the work accomplished each month, with no retainage taken out or anything, until such a time that our plans were finalized.

And it was understood also that the foundation would be paid for regardless of whether the finalization of the commitment was completed before or after the foundation was put in, but at the time that the overall general contract price was reached. At that time he would then be able to get his final commitment. In the meantime I would be paid by him and his partners in full each month for the work done. A letter dated August 14 “submitting a finalized price” on the foundation “in the amount of $556,450” was introduced into evidence.

It was addressed to Holiday Inn, Inc. (a non-existent corporation) to the attention of Caine. This was followed by a minor change and a new letter dated August 21, 1974, which was similarly addressed with a similar price. It is signed, “Accepted by James B. Caine.” No other signatures appear. There is no indication for whom Caine was signing other than “Holiday Inn, Inc.” No title appears ⁶⁰⁸ relative to Caine’s signature.

The date given is August 20, notwithstanding the fact that the letter itself was dated August 21. On October 1, 1974, Montego Bay, Caine, Wisterco, Ocean Holiday, and Johnson entered into an agreement. It recited that the parties together with Dr. Bloxom had “for some period of time prior to the execution [tjhereof, been engaged in various ventures involving the acquisition of and development of real property in Worcester County,” and that the parties had “agreed that Wisterco and Johnson w[ould] withdraw from the various developmental projects contemplated or [then] in progress upon the terms, conditions and understandings [t]hereinafter set forth.” A number of projects from which Wisterco and Johnson were withdrawing were mentioned, including “55th Street Holiday Inn ....” The detailed financial arrangements set forth in the agreement specified, among other things, that Montego Bay and Caine agreed “to hold Johnson harmless with respect to a certain mortgage from Johnson and others to Gerald F. Bracken, et ux., dated June 1, 1973” involving the land acquired in connection with the original Americana Motel purchase. Reference also was made to yet other mortgages which had been executed by Johnson, apparently in connection with certain of the other projects, with provisions made as to them.

Cropper, Inc., sued Caine, Montego Bay, Wisterco, Johnson, and Bloxom in assumpsit. The narr. contained six common counts and a special count. The special count alleged that Cropper, Inc., “entered into a Contract with the Defendants dated August 21, 1974, for the design and construction of a foundation on property owned or under the control of the Defendants located in Ocean City in Block No. 23 as laid down on the Plat of the Isle of Wight Land Company, Inc.” The August 21 letter, to which we have previously referred, was attached as an exhibit. The declaration claimed “that the parties entered into an additional or supplementary contract on October 15, 1974,” a copy of which was also attached.

It was a letter from Cropper, Inc., to Holiday Inn, Inc., to the attention of Caine making a variation in the foundation plan. It also was alleged ⁶⁰⁹ that “at the request of the Defendants, while the construction of the foundation was taking place, [Cropper, Inc.] performed engineering and design work for the superstructure which was contemplated to be placed on the aforesaid foundation, and certain miscellaneous work in removing an old sign on the premises, said work being done on a time and material basis ....” The sum of $705,278.29 was claimed. At trial Cropper, Inc., introduced the deposition of Dr. Bloxom as a part of its case. Counsel for Cropper, Inc., opened the deposition by making inquiry of him as to whether “there c[a]me a time in, say, the spring of 1974, when [he] formed a business entity with Wisterco Investments and James B. Caine for a Holiday Inn project on 52nd [sic] Street....” The information elicited from Dr. Bloxom was to the effect that one-third of the project was owned by Dr. Bloxom, one-third by Caine, and one-third by either Dr. Johnson or Wisterco.

Cropper, Inc., put into evidence the transcript of the public hearing held by the Board of Zoning Appeals of Ocean City on April 4, 1974. The case is entitled: IN THE MATTER OF THE APPLICATION OF JAMES B. CAINE, FOR A SPECIAL HEIGHT EXCEPTION FOR PROPOSED 210 UNIT MOTEL, TO BE LOCATED ON LOTS 1 THROUGH 10, 12, THROUGH 21 AND 23, BLOCK 23, BEING THE EAST SIDE OF COASTAL HIGHWAY BETWEEN 55th AND 56th STREETS, IN THE TOWN OF OCEAN CITY, MARYLAND. There Mr. Caine said: I’m Jim Caine and I live at English Avenue in Ocean City, out in front of the Carousel as my legal home. I am V8 owner in this project, Dr. William Bloxom, who is here and Dr. Rufus Johnson they own both a third, in the project.

At another point he said that he, “Johnson and Dr. Bloxom ... [were] trying to ... put something in Ocean City that Ocean City w[ould] be proud of....” Cropper has placed substantial reliance on a conversation ⁶¹⁰ at a cocktail party, as did the trial judge. For that reason we shall set forth pertinent parts of the testimony as to that conversation. Cropper testified: My first contact with one of the other partners was on June 1st at a party by Mary Nock. I met Dr. Rufus Johnson and in the conversation we were talking about the project that I was doing for them, and I was talking to Dr. Johnson and telling him I was glad I was doing business with people with a lot of money, because Gardner Harrington had had me tied up for about $450,000.00 and I wasn’t in a position to carry their projects on a month-to-month basis, and he says, “Well, there is no problem about that.

We have got plenty of money.” He says, “In fact, we are lending money, and if you have got anybody that needs some money, we would like you to send them to us, because we are — we have got plenty of money.” As I understand it, he was running the Bishopville Bank. What his title was, I don’t know. But I had known Dr. Johnson for some time, but that was the first time I had had occasion to talk to Dr. Johnson about the work that I was doing for him and Caine and Bloxom. And our general conversation was along the lines of what we were doing and how we were coming along in our design and that sort of thing.

He told me that he and Bloxom and Caine were in the Lighthouse Sound project, and the Holiday Inn project, and they had a lot to do, and Caine had recommended me very highly to do their work, and because of his recommendation they were more or less going along with him. Then we got to talking about his relationship, or he was handling the Bishopville Bank stuff, and he had plenty of money, and there was no question ⁶¹¹ about the money for their project, because they already had the money for Lighthouse Sound and a commitment in hand, as I understood it, and the commitment for the Holiday Inn. I told him also that I was very happy they had plenty of money, because I could not afford to spend — invest my own money in any project for Caine any more than I already had, because I had so much out, especially for Harrington, and he assured me that that would not be the case in theirs, that they had plenty of money to pay me. BY MR.

O’MEARA: Q But, Mr. Cropper, what specifically did he tell you was his relationship to either Mr. Caine and to either Dr. Bloxom? A That they were equal partners in the whole project. On cross-examination the record reflects: Q Again, what was the nature of your conversation which you had with Dr. Johnson? A Well, it was a casual conversation.

We probably just saw each other. I had known Johnson, Dr. Johnson, not too intimately.... I knew him and I had been well informed about him and his relationship with Caine. The first thing I knew we were talking about the fact he was also in the banking business and they had plenty of money to lend ....

We got into talking about why I was not going to invest a lot of money into this hotel, because of what Harrington owed me and others, and he talked about Lighthouse Sound and more or less what they were planning on doing. It was just a general — nobody was trying to down either one. We were just having a good, general conversation, as I remember it. ⁶¹² Q And you said something to the effect — I believe you said, “I was happy to be involved in the project and working with some responsible individuals.” A I certainly did. Yes, I did.

I understood from Mr. Caine, by reputation I thought Dr. Bloxom and Dr. Johnson were well-heeled individuals and they were able to stand in back of what they were going to do. Q And are you personally involved in these contracts, Mr. Cropper? A I am the owner of George Bert Cropper, Inc. Q When you were using the first person, you were really referring to your corporation actually? A Yes, sir.

Dr. Johnson specifically denied ever representing to Cropper at any time that he individually was “a joint venturer in this project.” He likewise said that he had not told anyone that he individually was “a partner or venturer or anything else in a project known as Holiday Inn, Inc.” His version of the cocktail party conversation is: We were standing on the porch and he said something to me to the effect, “I understand you are in the project to build the Holiday Inn, and I would like your consideration when it comes time to put out for bids.” I said, “Well, we haven’t gotten that far along, but I have heard Jim Caine make some favorable comments about your work.” He said, “Well, tell me who is in the venture, who is building it?” I told him Montego, and he said, “Yes, I know. That is Caine.” And Dr. William Bloxom, whom he didn’t seem to show any recognition of, and Wisterco. He wanted to know who Wisterco was, and I ⁶¹³ simply told him it was a corporation I formed to use for that purpose. The trial judge found no question but what Caine and Montego Bay were responsible for the total amount claimed.

He said that “Bloxom and Wisterco offer[ed] what [was], in effect, no defense to the existence of a partnership,” one which Bloxom admitted. Thus, he found “such a relationship and that [Cropper, Inc.] relied on it.” He said as to Johnson: The Court feels that, based on the statement (even though it is somewhat factually in dispute) made by Johnson to the Plaintiff at the cocktail party; his in depth involvement in dealings with Plaintiff and the Holiday Inn people; the fact that a substantial part of the property involved was in his individual name (title to some of which was taken after the formation of Wisterco); Bloxom thought he (Johnson) was a partner; Caine’s statement to Plaintiff that he had two “heavy weights”; Plaintiff’s testimony that he was asked by Caine at Caine’s office to explain to Johnson why the work was not progressing faster; all this and the other factors testified to make it incumbent upon the Court to conclude that Johnson was also a partner. He further found that Cropper, Inc., had knowledge “that [the] partnership existing] between Caine, Montego, Wisterco, Johnson and Bloxom ... ceased to have existence as of July 30, 1974.” He observed, “To say that the business arrangements in this transaction were slipshod would have to be the understatement of this decade.” He found “the extent of liability of Wisterco, Johnson and Bloxom to be the amount owed as of [July 30, 1974],” $96,394.20. Judgment was entered against Caine and Montego Bay in the amount of $919,000.00 “plus interest accounting from December 31, 1977, and costs.” Of that amount judgment was entered against Caine, Montego Bay, Bloxom, Wisterco, and Johnson “jointly and severally” for the first $96,394.20 “plus interest from July 30, 1974, and costs.” Cropper, Inc., has appealed.

It contends that judgment for the full amount should have ⁶¹⁴ been entered against Wisterco, Johnson, and Bloxom. Dr. Johnson also appealed. He claims he has no liability. We granted certiorari prior to consideration of the case by the Court of Special Appeals.

II We shall apply partnership law here in our determination of the controversy since it is partnership law which is applicable to joint ventures. Madison Nat’l Bank v. Newrath, 261 Md. 321, 327 , 275 A. 2d 495 (1971). Accord, 1 J. Barrett and E. Seago, Partners and Partnerships Law and Taxation 20 (1956,1965 Cum. Supp.); A. Bromberg, Craine & Bromberg on Partnership § 35 at 192 (1968); and C. Rohrlich, Organizing Corporate and Other Business Enterprises 2-53 (5th ed. 1975).

Mechem, The Law of Joint Adventures, 15 Minn. L. Rev. 644 (1931), after fully discussing joint ventures, concludes: There is a law of partnership and that is all. The law of partnership is applied, point for point to all joint adventure controversies, and identical results are reached, under similar circumstances, no matter whether the association is regarded as a partnership or a joint adventure. [Id. at 666.] III It will be recalled that at the time Caine informed Cropper that his partners had dropped out of the partnership (July 30, 1974), Cropper, Inc., was just beginning work on constructing the foundation for the proposed motel. In completing the foundation it spent large sums of money.

Thus, the issue on Cropper, Inc.’s, appeal is how much of this sum is recoverable from the partners or joint venturers. (When we consider Dr. Johnson’s cross-appeal in IV we shall determine whether or not he was a partner.) The Uniform Partnership Act was enacted in Maryland by Chapter 175 of the Acts of 1916. Its provisions found in Maryland Code (1957) Art. 73A (now set forth without substantial change as Title 9 of Code (1975) Corporations and ⁶¹⁵ Associations Article) are