Johnson & Higgins, Inc. v. Simpson

Offutt, J., delivered the opinion of the Court. On October 8th, 1924, John M. Braun was employed by Johnson & Higgins, Inc., a Maryland corporation, to act as its president and manage its insurance business in Baltimore, ⁵⁷⁸ Maryland. The contract of employment, which was in writing, provided that Braun should devote all his time, energy, and shill to developing the business of the corporation; that he should serve it “faithfully and diligently”; that he should observe instructions given him by the authorized officers of the principal stockholders or the directors of his employer, and should “do nothing whatever in his public or private conduct to prejudice the interests of the party of the first part”; that he should conduct the business as far as legally possible in the name of his employer; that all bank accounts should be kept in its name; that Braun would “maintain and keep a full and complete accounting record of all business transacted by him, whether in the name of the party of the first part or in his own name, open at all times to the inspection and examination of the principal stockholders of the party of the first part or their duly authorized representative, and to make such periodical written reports to the principal stockholders of the business tranacted as may be requested by them”; that he would, at the termination of the contract, turn over to the employer the office and all records, accounting and otherwise, maintained by him in the conduct of the business, “whether in the name of the party of the first part or his own name”; and that he would not, without the employer’s consent, engage in any business outside the scope of the agreement. It also provided on the part of the employer that it would pay Braun a salary at the rate of $4,680 per annum as full compensation for his services, and “in the event of the death of the party of the second part whilst in the service of the party of the first part undertakes to pay and will pay to the executors and administrators of the estate of the party of the second part a full year’s salary, at the rate being paid to him at the time of his death, less a sum equivalent to the total of payments made said party of the second part during the period of incapacity, if any, preceding his death.” It further provided that, should Braun “become incapacitated for the performance of his duty for a period of more than six months,” the, employer might cancel the contract, but that in ⁵⁷⁹ that event it would pay him a full year’s salary at the rate “being paid him” at the beginning of such incapacity, and that either party might terminate the agreement upon thirty days’ notice.

Braun entered the service of Johnson & Higgins, Inc., under that agreement, and remained in its employment until he was killed in an automobile accident in the City of Washington on December 1st, 1930. He left to survive him an infant daughter, and letters of administration ad colligendum, on his estate were issued to Mary A. Braun Simpson, from whom he had been divorced and who had since remarried, the mother of that daughter. She thereupon demanded of his employer $5,200, being one year’s salary at the rate paid him at his death, and, upon its refusal to pay that sum, she brought this action. The declaration contains the six common counts and a special count on the contract.

In that count the pleader alleged the appointment of the plaintiff as administratrix, the execution of the contract, the death of Braun while employed by the defendant, the rate of his compensation at that time, that his death occurred without prior incapacity, and that the defendant had refused her demand that it pay to her under the contract $5,200. The declaration was supported by affidavit, and a copy of the contract was filed with it. To that declaration the defendant filed four pleas, those numbered one and two being the usual forms of the general issue, and plea number four, while not technically a plea of set off, was apparently intended to serve the purposes of such a plea. Its third plea was in this form: “And for a third plea the defendant says that by the provisions of the agreement of October 8th, 1924, attached to the declaration in this case, the decedent, John M. Braun, undertook, as part of his contract of employment by this defendant, Johnson and Higgins (Maryland), Inc., fio serve it faithfully and diligently,’ but that said John M. Braun failed to serve the defendant faith-, fully and diligently, but upon the contrary, during the period of his employment, embezzled a considerable sum of money from his employer, and that by reason of said dishonesty, ⁵⁸⁰ discovered shortly after the death of the said John M. Braun, this defendant elects to treat said contract as rescinded and denies any obligation to the plaintiff for the payment of a full year’s salary at the rate of pay in force at the time of said John M. Braun’s death, as claimed by the plaintiff in the declaration filed herein.” The usual affidavit and certificate of counsel were filed with the pleas.

The plaintiff joined issue on the first and second pleas, demurred to the third, demanded the particulars of the fourth, and, when the particulars were furnished, filed by way of replication what would amount to general issue pleas in an action of assumpsit, and a third replication that the plaintiff “has not, and never had assets sufficient to pay the alleged claim of defendant.” The demurrer to the third plea was sustained, and the case went to trial on those pleadings, except that the declaration was amended to show that Mrs. Simpson had been appointed administratrix of the estate of John M. Braun, instead of administratrix ad collige'ndvmv. The trial resulted in a verdict for the plaintiff, which, upon a motion for a new trial, was set aside. Hollowing that the defendant filed a motion to have the case removed to the Circuit Court of Baltimore City, and, when that motion was refused, it filed by way of rejoinder to the plaintiff’s third replication to its fourth plea what is described as a “plea on equitable grounds.” A demurrer' to that rejoinder was also sustained, the case again went to trial, and again a verdict for the plaintiff was returned. It is from the judgment on that verdict that this appeal has been taken.

In the course of the trial the defendant, the appellant here, reserved fourteen exceptions, thirteen to the court’s rulings on evidence and one to its action on the prayers. Those rulings on the pleadings, the evidence, and the prayers are submitted by the record to this court for review, and will be considered in their order. There was no demurrer to the seventh count of the declaration, but the appellant contends, and properly, that the plaintiff’s. demurrer to its third plea mounted up to the first error ⁵⁸¹ in pleading, and that, therefore, the sufficiency of the seventh count of the declaration may be considered by this court. The specific objection to the count is that it fails to directly allege performance, and unless there is something in its language from which performance may be inferred, or, unless the contract imposed an obligation upon appellant to pay the appellee $5,200 whether Braun performed what the contract required him to do or not, the objection is good.

For it appears to be a general rule that one who sues for the breach of a contract which requires him to perform certain acts before he becomes, entitled to demand that for which he sues, must allege and prove performance on his part. 1 Chitty, Pleading (5th Amer. Ed.), ²⁸¹; 1 Poe, Pl. & Pr., sec. 565; 13 C. J. 725. The only allegation in the count from which an inference of performance may be drawn is that, when Braun died, he was in appellant’s employ and that at that time the contract, was in full force and effect. The contract fixed no definite term for its operation but ran until terminated by death, dissolution, or the act of the parties.

If therefore it was in full force and effect at the death of Braun, he had been in the employ of the appellant under it since 1924, and it could be inferred from that fact that he had performed his promises to appellant’s satisfaction. And, while such averments fall short of the certainty required by good pleading, and for that reason the count was insufficient in law, the error will not be treated as reversible, first, because, instead of calling the attention of the trial court to the defect at a time when it could have been readily corrected, appellant elected to withhold any direct objection to it until the parties had been subjected to the expense of a trial, and the case had reached this court, and, second, because it was not injured by the ruling. In view of that conclusion, the alternative proposition, that appellee is entitled to recover in this case whether Braun performed liis contract or not, will not be discussed at this time. The second point to be considered in connection with the ⁵⁸² rulings of the trial court on the pleadings is whether its refusal to remove the case to a court of equity may be reviewed in this court.

That it may not be so reviewed needs no further argument than a reference to the statute itself (Code, art. 75, sec. 124), and the two cases which deal with that question. Summerson v. Schilling, 94 Md. 607 , 51 A. 612 ; Safe Deposit Co. v. Cahn, 102 Md. 542 , 62 A. 819 . The third question raised by the pleadings is whether the defendant’s rejoinder to the plaintiff’s third replication to its fourth plea is bad in law, but as the point was not argued in this court the objection will be treated as abandoned. The demurrer to the defendant’s third plea was properly sustained since all its allegations of material fact were provable under the general issue pleas.

The significance of the exceptions to the rulings of the trial court on questions of evidence and on the prayers will become more readily apparent by some preliminary reference to the contentions of the respective parties to this appeal, as to the issues in the case. It appears to be the theory of the plaintiff that the obligation imposed by the contract upon the defendant to pay Braun’s personal representatives a full year’s salary in the event that he died while in its service under the contract was collateral to and independent of so much of it as related to the discharge of his duties under it, and that to recover it was only necessary to prove the contract, to' show that at the time of Braun’s death it was in full force and effect, and that he died whilst in the service of the defendant. That is the theory submitted by the seventh count of the declaration, and that is the theory upon which the plaintiff’s case was tried. The defendant on the other hand contends that that promise on .the part of the defendant was as much a part of the consideration moving from it to Braun as was his salary, and that to entitle him either to his salary or to the benefit of that promise, he was obliged to perform the promises he had made in the contract, and that, if he failed to show, or, if it appeared from the evidence, that he had not per ⁵⁸³ formed what he had undertaken, he was. not entitled to recover.

And as a corollary of the proposition it contends (a) that there is in the case no evidence legally sufficient to show that he did perform what he promised, and (b) that the uncontradicted evidence shows that he did not perform what he promised, and that in either event the court should have directed a verdict for the defendant. The controlling question arising from those conflicting views is whether to entitle Braun’s administratrix to enforce the defendant’s promise to pay to his personal representative $5,200 in the event of his death while in its service, and while the contract was still in force, it must first appear that Braun had done those things which in the contract he had agreed to do. And since that question affects all the rulings which we are asked to review, it will be. first considered. Appellee’s contention amounts to no more than this, that appellant’s promise to pay Braun a year’s salary, if during the life of the contract and while in its service, Braun (a) became incapacitated for the performance of his duty for a period of more than six months, or (b) died, ripened into an irrevocable, fixed and vested right as soon as Braun entered its employment under the contract, and that nothing that he did or failed to do after that could affect the right of his personal representatives to enforce the promise.

Or, stated in another way, that appellant promised as an inducement to- him to make the contract at all that it would insure him against death or disability while in its service, and that such undertaking was as independent of the contract as though, instead of insuring him itself, it had procured for him from a third person a policy of insurance covering those contingencies. Such a construction, however, appears to be forced, unreasonable, and inconsistent with common knowledge of the motives and impulses which ordinarily influence the acts of men, and inconsistent as well with the purpose and terms of the contract itself. The most likely and probable reasons for the promise were (1) to induce Braun to remain in appellant’s employment, for only so long as he did that would ⁵⁸⁴ lie be protected by the promise, and (2) to add that protection as additional compensation for the effcient performance of his duties under the contract. The contract was revocable upon thirty days’ notice by either party, and it was obviously intended for the benefit of both parties to it.

It may be assumed that appellant would not have permitted it to continue, if to its knowledge Braun proved to be inefficient, faithless, or dishonest, but it cannot be supposed that it intended to' pay Braun’s personal representatives a year’s salary in the event of his death in its service while the contract was in force, if it appeared after his death that Braun’s default in the performance of his duties would have justified a rescission of the contract, when, because of his own fraud, knowledge of that default was concealed from the appellant during Braun’s lifetime. In other words, it is improbable that the employer intended to' perform those things which it promised for the benefit of the employee unless he did those things which he promised to do for the employer. The promises were mutual and concurrent, and those on the one part made in consideration of those on the other part, and it would go farther than anything in the language of the contract permits, to assume that the employer intended to> bind itself to reward the employee, if, instead of promoting its interests by the honest and efficient performance of his duties, he damaged its business by faithless and fraudulent practices. The employer’s promise as to salary, and its promise as to insurance, while independent of each other, were .nevertheless integrated as component parts of the entire consideration moving from the employer, and each alike depended for value upon the promises of the employee.

The very subject-matter of the contract indicates the same conclusion. The appellant was attempting to employ Braun to act as its president, and to operate and develop its insurance business, and whatever it promised him, it naturally promised as a consideration for that service. There was no< other service contemplated by the contract, nor is it possible to discover any consideration for the employer’s insurance promise except the promise of Braun to serve it faithfully ⁵⁸⁵ and diligently as its president and manager in the manner stipulated in the contract. In the agreement Braun promised to serve the appellant “faithfully and diligently,” and to “maintain and keep a full and complete accounting record of all business transacted by him, whether in the name of the party of the first part or on his own name,” and by way of defense to the appellee’s demand, appellant, to show a default in those promises, offered evidence intended to prove that Braun had embezzled appellant’s funds and that to conceal such embezzlement he had falsified its accounting records, and the several exceptions presented by the record relate to rulings as to the admissibility and the effect of that evidence.

Worden L. Castle, president of the appellant corporation, called by the plaintiff, testified that Braun had been employed by it prior to December 1st, 1930, but that he himself was not at the Baltimore office of the company prior to January, 1931. He was then asked on cross-examination what knowledge he had of the “way” Braun had “carried out his contract of employment.” An objection to the quesrtion was sustained, and that ruling, which is the subject of the first, exception, was undoubtedly correct (1) because the question was not proper cross-examination, (2) because it called for hearsay, and (3) because it called for opinion instead of fact. The second, seventh, eighth and thirteenth exceptions were abandoned. Castle was later called by the appellant and identified certain account and check stub books, and was then examined as to certain checks and bank deposit slips.

On cross-examination he was taken over much the same ground, but on redirect he was shown a certain check and asked “where else in the book of the company” it would appear. He answered that it would be in the cash disbursements ledger and journal and go “through the usual procedure.” Counsel for appellant then offered to show him the “books concerning this particular check,” and asked him whether they did not refresh his recollection as to it. An objection to that question was sustained, and that ruling is ⁵⁸⁶ the subject of the third exception. The exception appears to be quite without point.

The books to which it referred had neither been proved nor offered in evidence, the witness had no personal knowledge of the check, it did not appear that he had any memory of it to be refreshed, and, if he had, appellant had no right -to refresh it in that way. Por like reasons the ruling involved in the fourth exception is also free from error. As stated above, the appellant was in the insurance business, and, in the course of it, issued policies in all classes of insurance except life. One of its customers was the Davison Chemical Company, and the appellant called John P. Donnelly, the auditor of that company, apparently to prove that checks which it gave to1 the appellant to cover certain premium charges incurred in 1930 had not been credited against those charges, but had been applied to an indebtedness incurred in 1929, and that checks covering thóse 1929 charges had been similarly diverted, so that, while the Davison Chemical Company in fact owed' appellant nothing, its books showed that Davison Chemical Company owed the 1930 charges which it had paid.

Donnelly testified to the 1930 charges, and to the fact that they had been paid by checks issued by the Davison Chemical Company. Appellant then attempted to prove by him the amounts charged against the Davison Chemical Company for premiums on insurance policies issued by the appellant prior to 1930 and that cheeks had been issued covering those charges. An objection to that offer was made, and appellant then asked the specific question, “Have you a check issued to Johnson & Higgins of .September 5th, 1929; - and if so for what amount?” An objection to that question was sustained, and appellant then offered to prove the entire account between the two' corporations beginning in 1928. An objection to the offer was sustained, and that ruling is the subject of the fifth exception.

The evidence was offered for the dual purpose of showing an indebtedness from Braun to the appellant, and of showing that Braun had fraudulently falsified appellant’s records. Appellant did not undertake in its offer to' show that Braun ⁵⁸⁷ had actually appropriated to his own use any of the payments made to him by the Davison Chemical Company, so that the evidence would not have been admissible under the set off, but it was admissible to show that the records of the company had been falsified, and for that reason