Jenks v. Clay Products Manufacturing Co.

Thomas, J., delivered the opinion of the court. In 1917 the Easton Brick and Tile Manufacturing Company owned a brick yard, consisting- of kilns and plant for the manufacture of brick and other clay products, and also certain clay deposits near Easton, Talbot County, Maryland. The capital stock of that company was owned, or was to he taken over, by tbe Clay Products Manufacturing Company, a corporation which was in possession of and operating the brick yard and plant under the supervision of Franklin A. White, the president of both of said companies, and who-, it is alleged, owned the majority of the stock of the latter company. Desiring to make certain improvements in the plant with the view and for the purpose of doubling its capacity,, the Clay Products Manufacturing Company and Franklin A. White, on the 27th of January, 1917, entered into the following contract with Harford P. Jenks, of Columbus, Ohio; who was engaged “in the business of designing; constructing and erecting dryers and brick kilns, and manufacturing and operating brick plants” under the name of tbe “Hook Patent Kiln Company of Columbus; Ohio”: ⁵⁵⁸ “This agreement covering in full the understanding between the parties hereto, is made in duplicate this 27th day of January, 1917, between Hook Patent Kiln Company, of Columbus, Ohio, as the first party, and Clay Products Manufacturing Company, Baltimore, Maryland, as the second party, witnesseth: “In consideration of the sum of one dollar and of the covenants hereinafter contained, the parties hereto do hereby mutually covenant and agree with each other as follows: “First party is to erect one dryer and one kiln at Easton, Maryland, at location indicated by second party according to specifications attached hereto and terms of this agreement. “First party may make such alterations in details as in the opinion of first party will give greater strength, more satisfactory service, better appearance, or if for any cause it is deemed better. “All cash payments and notes become due if any payment remains more than ten days past due and unpaid, or the second party fails to furnish brick or otherwise hinders or prevents first party from proceeding with the work.

Such payments by second party does not release first party from obligation to complete work within a reasonable time. The within payments and notes are guaranteed individually by second party and Frank A. White. “Second party shall deliver brick within a convenient distance of the place they are to be used. From each cash payment made there shall be deducted for payment for brick three dollars and fifty cents per thousand for all brick used in construction, where such deduction has not already been made. Second party shall furnish brick at price specified above, and clay, ashes, lumber for scaffolding, motor boxes, &c., free, and allow the free use of barrows, shovels and other tools and material about the plant.

It is understood that second party shall do all excavating, ready to start laying brick at time and as directed by first party. ⁵⁵⁹ Ao concrete foundations to be furnished or built by first party. “The roof of the dryer shall be cut in sections to make it possible to take it down and move dryer to another location if second party so desires. “The amount to be paid first party for dryer is fourteen thousand, eight hundred dollars, to be paid as follows: “$1,46 61 when dryer is one-fourth completed, and a $1,000 note due 6 months from date of agreement, bearing &c/0 interest. “$1,466-| when dryer is one-third completed, and a $3,000 note due 6 months from date of agreement, bearing 6% interest. “1,466| when dryer is one-half completed, and a $1,000 note due 6 months from date of agreement, bearing 6% interest. “The balance to be divided into three equal payments, one being due when dryer is two-thirds completed, another when three-fourths completed, and the balance when dryer is completed. “The erection of one-half of dryer and stack for six-tunnel dryer, with whatever additional construction is necessary for the construction of the first half and stack, to be started not later than Feb. 5, 1917, and work pushed with all possible rapidity, the remaining part of this dryer to be built whenever in the judgment of 2nd party additional dryer capacity is needed. “The kiln to be started one month from date of agreement, or as soon before as it is possible for both parties to get ready to do so. “First party to have a man with second party without charge to second party after completion of first half of dryer, to show and explain how the dryer is to be operated, this assuming that second party is ready to operate dryer as soon as first half is completed. “First party guarantees the first three tunnels of this dryer to have á Capacity of 20,000 brick per day of 24 hours when brick are set on double-deck cars in num ⁵⁶⁰ ber and as directed by first party and dryer is handled as directed by first party. Second party and its men to give all information and help possible to obtain this capacity. Brick delivered shall be free from visible moisture when a brick has been allowed to become cold and is broken. “In the event the first three tunnels do not have this capacity it is agreed that first party shall build the additional tunnel or tunnels required to give this capacity. First party to pay second party same price as before for brick.

Second party to furnish necessary amounts of the same kind of materials and do excavating as specified for first three tunnels. “For each additional tunnel built first party shall be paid the sum of ($2,466-|) two thousand, four hundred sixty-six and two-thirds dollars. From the total amount to be paid first party shall be deducted the fractional part required to make the capacity of dryer 20,000 brick per 24-hour day. Kiln: “The amount to be paid first party for one kiln built according to attached specifications is twenty-eight hundred and seventy-five dollars, to be paid as follows: “4 when kiln is 14 completed. “4 when kiln is y2 completed, and the remaining third when kiln is completed. “The said Frank A. White, who joins in the execution of this paper, has signed this agreement for the purpose of guaranteeing individually the performance of this contract hy the Clay Products Manufacturing Company. “In testimony whereof, the said H. P. Jenks, trading as the Hook Patent Kiln Company, has .signed his name and affixed his seals, and the Clay Products Manufacturing Company, by Frank A. "White, its.

President, has executed this contract and affixed its corporate seal, duly attested, ⁵⁶¹ and the said Frank A. White has affixed his hand and seal the day and year first above written. “H. P. Jenks, (Seal) “Trading as Hook Patent Kiln Company of Columbus, Ohio. “Olay Products Manufacturing Company, by Franklin A. White, President. “Franklin A. White. (Seal) “Test as to all signatures: “F. A. Riley. “Wm. Lewis.” Within a few days after the execution of the contract the Clay Products Manufacturing Company, hereinafter referred to as the company, made the excavation therein referred to, and on the 4-th of February, 1917, Harford P. Jenks began the construction of the dryer. On or about the 5th of March Mr. Jenks stated to Mr. White that the dryer was. “onenfourth completed” and requested payment of the first cash payment of $1,466.66 and delivery of the company’s note for $1,000 as provided in the contract.

The. company was unable1 to make the payment, but, relying upon Mr. Jenks’ statement of the extent of the work done, Mr. White delivered to him the note of the company for $1,000, dated March 5th, 1917, and payable on the 27th of July, 1917. About the 2nd of April Mr. Jenks reported to Mr. White that one-third of the dryer (or twcYhirdsi of the half that was to be erected at once) had been completed and demanded payment of the second cash payment and delivery of the second note provided for in the contract. The company was still unable to meet the cash payments, but acting upon Mr. Jenksi’ repoit of the amount of work completed, Mr. White delivered to him, the second note of the company for $1,000, dated April 2nd, 1917, and payable on the 27th of July following. As the company had failed to make either of the two cash payments due under the contract, Mr. Jenks, as. stated in his answer ⁵⁶² and in his testimony, made an investigation of the condition of the company and learned that he had been misled by misrepresentations! of Mr. White, both as to the amount of the company’s property and its financial condition, and after consulting hisi counsel, and “for the purpose of saving, if possible, what he had already spent” on the dryer, he decided, in response to- Mr. White’s urgent appeals not to abandon the erection of the dryer and kiln, to enter into- the following contract with the company: “This agreement, covering in full the understanding between the parties hereto, is made in duplicate this 3rd day of May, 1917, between Harford P. Jenks, trading as Hook Patent Kiln Company of Columbus, Ohio, as the first party, and Clay Products Manufacturing Company, Baltimore, Maryland, as the second party, witnesseth: “In consideration of the sum of one dollar and of the covenants hereinafter contained, the parties hereto do hereby mutually covenant and agree with each other as follows: “Pirst party shall take immediate possession of second party’s brick plant and equipment at Easton, Maryland, and operate the same under the following conditions: “Pirst party is to pay all expenses in connection with the operation of the business, except any repair bill that will amount to more than twenty dollars shall be paid by second party if first party so desires. “As a part of the operating expense shall be included one hundred twenty-five dollars per month, for general supervision and expenses of H. P. Jenks, it being understood that there shall not be added any traveling or personal incidental expenses to this amount and that Mr. Jenks is to devote only a part of his time to this work, and that first party may send another man to Easton under same terms and conditions instead of Mr. Jenks if first party so desires. “To the cost of operating business shall be added ⁵⁶³ two dollars per thousand brick manufactured as a profit for first party. “The total cost of running business plus above designated profits shall be deducted from the net cash received from sale of product and the difference applied to the payment of indebtedness due first party by second party under contract with said Clay Products Manufacturing Company, the second party hereto, dated January 27th, 1917. “First party shall liavo full possession and control of the business and collect all monies due or becoming due whilst operating said business hereunder until the indebtedness of second party to first party has been paid either by profits of plant to second party or by sale of capital stock. “Whenever all cash payments specified on dryer and kiln have been paid first party shall turn over to second party the entire business, all accounts receivable, the plant and all manufactured stock on hand, providing further, that these payments have been made in full on or prior to July 27th, 1917, and providing, further, that the expense of operating plant and profit to first party has been paid.

If cash payments, expenses and profits as specified have not been paid in full on or prior to July 27th, 1917, or if the amount and interest of notes specified to be given first party due July 27, 1917, are not paid on July 27, 1917, then this contract is automatically renewed and is in effect July 27th, 1917, and shall continue in effect until such time as all indebtedness of second party to first party is paid in full to that time, at which time first party shall give second party full possession of the business, plant, all accounts receivable for ware, stock on hand, etc. First party’s profit on stock in racks or dryer shall be figured at one dollar per thousand and on stocks in kilns, stored on yard, at two dollars per thousand. “When second party again takes possession of plant it shall promptly fill all unfilled orders taken by first ⁵⁶⁴ party as agreed by first party. It is agreed that first party may have 50,000 hard brick from first kiln at cost plus ($2.00) two dollars profit to first party, this total amount to be deducted from cash receipts from other ware, or paid in cash to first party. “No part of this agreement shall be construed as in any way modifying, impairing or affecting the agreement of January 27th, 1917, or the terms of payment thereof, or as curtailing the right of first party to all means to collect whatever may be due him under the samé. “It is agreed that second party shall not further mortgage or in any way encumber its property or the property of the Easton Brick and Tile Manufacturing-Company until all the terms of this contract and the contract of January 27th, 1917, have been complied with. “Second, party shall, without charge, promptly notify first party of all inquiries for brick and opportunities and prospects for sale of brick and render all possible assistance in sale of brick and furtherance of the business. “In testimony whereof the said Harford P. Jenks, trading as Hook Patent NiTn Company, has signed his name and affixed his seal, and the Clay Products Manufacturing Company, by Eranklin A. White, its President, has executed this contract and affixed its corporate seal, duly attested, the day and year first above written. “H. P. Jenks, (Seal) “Trading as Hook Patent Kiln Company of Columbus, Ohio. “Olay Products Manufacturing Company, (Seal) “By Erank A. White, “Test: President. “J. Carson Riley. “C. E. Trickle.” ⁵⁶⁵ Upon the signing of the second agreement Mr. J'enks •wag-given possession of the company’s- property and plant and entire control of its business, a-nd from the date of said agreement to the 20th of December, 1919, when the company recovered possession and control under the injunction issued in this case, he operated the plant (employing Ulwood Smith as superintendent), contracted for the sale and delivery of its products!, received the proceeds and paid the! costs and expenses of the business. After the execution of the contract of the 3rd of May, Mr. Je-nks not only abandoned the prompt completion of the dryer and erection of the kiln, but also disposed of the materia] that had been delivered at the plant for , that purpose, a-nd removed from the dryer a, part of the iron or steel work that had already been erected and, when urged by the company or by Mr. White to complete the dryer and kiln in orde-i- that the company might obtain the benefit of the desired increase in the capacity of the plant, he refused to do so until he had realized from, the operation of the plant and business', over and above the- costs and expenses, the entire contract price of the first half of the dryer and the price: of the kiln, with interest thereon. Upon discovering that.

Mr. J'enks did not intend to resume work on the dryer until he had received the amount, indicated, Mr. White', with the view of effecting a settlement with him and getting possession of the company’s property, asked him on several occasions for a statement showing the result of his operation of the plant and business', but, according to Mr. White’s testimony, he refused to give such a statement unless he was assured that the company was prepared to- settle with him. Finally Mr. White received from him a letter, dated December 1st, 1919, containing the following statement of the business to November 15th, 1919, and of the amount claimed by him: “Mr. Frank A. White, “Munsey Building, “Baltimore, Md. “Dear Sir: “As I was unpacking one of my suit cases here in the office today I recalled that you wanted a copy of ⁵⁶⁶ the recapitulation of the account. I give it below, this being complete to PTov. 15th. Adjustment can readily be figured from PTovember 15th until date of settlement, 1919: PTov. 1 to (brick sold and deliv. to Kov. 1, 1919), 1,886,-539 at $2 per M............ $3,773.08 PTov. 1, by cash rec’d acet.

(ledger) to red line abt. 11/1... . $20,145.52 PTov. 15, to $125 per Mo. salary and expense, 2 yr. 6 in. 12 da. 3.800.00 Jan. 1, 1918, to expense by Smith statement, labor, etc., T7......•................. 4,047.94 Jan. 1, 1919, to expense by Smith statement, labor, etc., T8....................... 4.671.00 PTov. 15, 1919, to expense by Smith statement, labor, etc., T9....................... 4,883.71 PTov. 15, 1919, to interest on acct. to 11/15/19.......... 1,661.13 Mar. 5th, 1917, to dryer and kiln...................... 10,275.00 Peb. 15, 1918, to expenses paid by ¥m. Reddie............ 716.35 PTov. 15, 1919, to expenses paid by H. P. Jenks............ 3,305.18 PTov. 15, 1919, by receipts of H. P. Jenks, exclusive of led. 1,451.78 PTov. 15, 1919, to 30,800 brk. from ledger report 11/1 to 11/15 at $2 per M.......... 61.60 PTov. 15, 1919, by cash reed, ledger report 11/1 to 11/15.... 3,143.02 PTov. 15, 1919, to 83,300 brk. in shed at $1 per M......... 83.30 PTov. 15, 1919, by 10,200 brk. in PTorth kiln at $2......... 204.00 ⁵⁶⁷ Aoy. 15, 1919, to 64,000 brk. in South kiln at $2......... 128.00 jSTov. 15, 1919, to 2,200 brk. in clinkers on yard at $2...... 4.40 $37,614.69 $24,740.32.” -From the above statement it appears that the total receipts of Mr. Jenks from the business amounted to $24,740.32, and that he claimed, in addition te the expenses of the business, including1 two dollars per thousand on all brick manufactured, a salary of $125 per month for the whole period of his posr session of the plant, amounting to $3,800, the entire contract price of the first half of the dryer, and the contract price of the kiln, amounting to $10,275, and interest on the same to' the amount of $1,661.13, and that the balance then due him was $12,874.37. It further appears from the evidence that, during his operation of the plant, Mr. Jenks exacted and received from the company, as further security for the price of the dryer and the ldln, certain hills of sale of its office furniture, machinery, etc. Mr. White testified that these hills of sale had been paid by the company, but had not been released by Mr. Jenks or returned to the company. As no reference is made to them in the statement submitted by Mr. Jenks, we may assume that the amounts thereof are included in one of the items of receipts.

After receiving the above statement, the Olay Products Manufacturing Company, the Easton Brick and Tile Manufacturing Company and Mr. White, on the 15th of December, 1919, filed their hill of complaint in the Circuit Court for Talbot County against Mr. Jenksi and Elwood Smith, his superintendent of the plant, setting out the facts to which we have referred and praying (1) that the defendants., their agents, etc., be enjoined from interfering’ with the plaintiffs “in the possession” of their property and “in the management and operation” of their1 said plant and business. (2) That the defendants he required to account,to the plaintiffs for all bricks manufactured during the time they had possession of ⁵⁶⁸ the plant; for all monies received and expended during that time, and for all “accounts, bills or