Lerner v. Ammerman

LISS, Judge. This is an appeal by Theodore N. Lerner, appellant, from a summary judgment entered against him in the Circuit Court for Montgomery County in favor of H. Max Ammerman, Homer Gudelsky and Simon Sherman, the appellees herein. The case also includes a cross-appeal by the appellees from a determination by the trial court that the partnership and voting status of Homer Gudelsky, one of the parties to the case, was not an appropriate matter for determination by summary judgment in this proceeding. The case began when appellant, on April 13, 1982, filed a bill of complaint in the Montgomery County Circuit Court against the appellees.

Lerner and appellees are all partners in the Wheaton Plaza Regional Shopping Center Partnership (the Partnership), which owns and operates the shopping center located in Montgomery County known as “Wheaton Plaza.” In addition to his interest in Wheaton Plaza. Lerner owns and operates White Flint Mall (“White Flint”), a large shopping complex located less than three miles from Wheaton Plaza, in which the Wheaton Plaza partners do not have an inter ¹³⁸ est. Lerner also owns and controls the Lerner Corporation, which manages White Flint and managed Wheaton Plaza from October 1, 1974 to June 22, 1982. Lerner Corporation had maintained its principal office at Wheaton Plaza until sometime early in 1982 when Lerner made known to the partners his intention to move the principal office of Lerner Corporation to White Flint.

In May of 1959 the partners adopted an amendment to the original partnership agreement entered into by the partners on January 6, 1955. The amendment concerned the voting rights of the partners and provided as follows: All decisions in the management and policies of the partnership business and any disputes and differences pertaining to the partnership business which may arise among the partners shall be decided, unless otherwise expressly provided in this Agreement, by vote of the majority in interest of the original partners. By the term “majority in interest” is meant such group of partners, the total combined partnership interests of which exceeds fifty per cent (50%). The term “original partners”, as used in this Agreement, shall mean the partners who are parties hereto and their survivors in the partnership, but shall not include partners who succeed to shares in the partnership as legatees or distributees of a deceased partner as hereinafter provided.

(Paragraph 9 of partnership agreement as amended) The Partnership, on March T7, 1976, entered into an agreement with Lerner Corporation by the terms of which it agreed to employ Lerner Corporation as the manager of the Wheaton Plaza Shopping Center for a five-year period accounting retroactively from October 1,1974. At the expiration of the five-year period no new written agreement was entered into between the parties but Lerner Corporation continued to perform identical services as required by the written contract and to receive the identical compensation. In recognition of the possible conflict of interest inherent between and among Wheaton Plaza, White Flint and Lerner ¹³⁹ Corporation, one of the provisions of the management agreement provided: This Memorandum shall continue for a period of five (5) years from the effective date hereof except that either Lerner Corporation or the Owners (other than the affiliates of Lerner Corporation; it being agreed that such Owners (i.e., the affiliates of Lerner Corporation) shall have no vote with respect to such right to terminate) may terminate this Agreement upon at least one (1) year’s prior written notice to the other party. Nine (9) months’ prior written notice shall be sufficient if Lerner Corporation shall remove its principal business office from Wheaton Plaza Shopping Center during the term before.

When Lerner advised Wheaton Plaza of his intention to move the office of the Lerner Corporation to White Flint, a meeting of the voting partners was called for March 10, 1982. The partners who attended and their interests in the Partnership on that date were: 27% — Estate of Isadore Gudelsky 27% — Estate of Harry Gudelsky 27% — Homer Gudelsky or Gudelsky Brothers, a partnership 11% — Theodore N. Lerner 5% — Simon Sherman 3% — H. Max Ammerman At the meeting of the partners a motion was made to terminate the services of Lerner Corporation as manager of Wheaton Plaza Shopping Center as of June 22, 1982. Am-merman, Sherman and Gudelsky voted in the affirmative and Lerner voted in the negative. 1 The motion was declared ¹⁴⁰ carried. This case resulted from this alleged illegal action of the Partnership.

In his complaint Lerner alleged: (1) that the appellees’ termination of the management agency with his personally controlled Lerner Corporation was a breach of their fiduciary duty to him; and (2) that the termination vote was improperly tallied because appellee Homer Gudelsky was not entitled to vote as a partner, his partnership share having been allegedly transferred to another partnership, Gudelsky Bros. The partners responded with a motion for summary judgment pursuant to Rule 610 of the Maryland Rules, contending that there was no genuine dispute as to any material fact and that, as a matter of law, they were entitled to judgment on three grounds: (1) that no fiduciary duty was breached in terminating the management agency; (2) that Gudelsky’s entitlement to vote as a partner was irrelevant because Lerner himself, by the terms of the agreement between the parties, was barred from voting on termination and that the votes of Sherman and Ammerman constituted a majority in favor of termination; and (3) that Lerner’s dispute as to Homer Gudelsky’s status as a partner was not a genuine dispute of a material fact. The lower court, on October 11, 1982, granted appellees’ motion for summary judgment, holding that there was no breach of fiduciary duty in terminating the management agency, that Lerner was disqualified from voting on the termination of the management agency, and that the votes of Sherman and Ammerman constituted a majority for termination. The court found that summary judgment was inappropriate on the question of whether Homer Gudelsky continues to be a partner in the Partnership.

On November 4, 1982, Lerner moved for reconsideration and to vacate the court’s October 11 order. This motion was denied on November 8, 1982. Timely appeals were noted from the original summary judgment and the denial of the motion for reconsideration. A timely cross-appeal was filed by the appellees from the trial court’s refusal to grant ¹⁴¹ summary judgment on the partnership status of Homer Gudelsky.

We shall initially consider the issues raised by the appellant in this controversy. They are: I. Was the trial court correct in holding as a matter of law that there was no genuine dispute as to valid termination of the employment of the Lerner-controlled management corporation?

II

Was the trial court correct in holding as a matter of law that any fiduciary duty owed to Lerner by the Partnership was not breached by termination of the management corporation’s employment? We shall then consider the issue raised by H. Max Ammerman in his cross-appeal: III. Did the trial court err in refusing to grant summary judgment as to the right of Homer Gudelsky to vote to terminate Lerner’s management contract? I. There is no dispute between the parties as to the facts of this case.

We have stated them as both parties have essentially agreed they existed at the time of the termination of Lerner Corporation’s management of Wheaton Plaza Shopping Center. We agree with appellees that the legal presumption mandated by these undisputed facts is that the terms and conditions of the agreement, including the provision prohibiting Lerner from voting on the question of termination continued beyond the formal expiration of the agreement. See Brandenburg v. S.F. & G. Co., 207 Md. 413 , 114 A.2d 604 (1955); Lister’s Agricultural Chemical Works v. Pender, 74 Md. 15 , 21 A. 686 (1891); McCullough Iron Co. v. Carpenter, 67 Md. 554 , 11 A. 176 (1887). All terms of the agreement were presumed to continue unless their nature made them inapplicable to the period beyond the original term.

Art Wire and Stamping Co. v. Johnson, 141 N.J.Eq. 101, 56 A.2d 11 (1947), aff’d, 142 N.J.Eq. 723, 61 A.2d 240 (1948). The presumption of continuance could be overcome only by a contrary provision in the agreement itself or an ¹⁴² affirmative showing that the parties intended to change the terms of the continuing agreement. McCullough Iron Co., supra 67 Md. at 560 , 11 A. 176 ; Empire Box, Inc. v. Moore, 87 Ga.App. 57 , 73 S.E.2d 63 (1952). Judge John McAuliffe, the trial judge, in granting appellees’ summary judgment, said: It is undisputed that Lerner Corporation continued to provide management services after the expiration of the five-year term, and the partnership continued to reimburse Lerner Corporation at the rate fixed by the contract.

Under these circumstances, there was an employment terminable at will and there arises a presumption that the terms and conditions of the original contract continue except as they may be inconsistent with an employment terminable at will.... This presumption may be rebutted, but there is no suggestion in any affidavit filed by or on behalf of the Plaintiff that the parties ever agreed to delete or modify the voting disqualification provision. This is not a case where additional evidence on this point favorable to Lerner might be uncovered through discovery or at trial. Rather, if there had been speech or conduct which could have the effect of modifying the disqualification provision, Lerner would know of it and