Levin v. Levin

Thompson, J., delivered the opinion of the Court. Joel A. Levin (Joel), The Phoenicia Corporation (Phoenicia), and Allen Corporation (Allen), appellants, three of the five defendants below, appeal from a decree of the Circuit Court for Anne Arundel County, Turk, J., declaring that Joel’s former wife, Marilyn S. Levin (Marilyn), the appellee, was entitled to equal ownership with Joel in certain assets and ordering that the appropriate interests be transferred to her. 1 The appellants contend that the chancellor erred (1) in decreeing that Marilyn owned a fifty per cent interest in Phoenicia; (2) in declaring that Marilyn owned a twenty-five per cent interest in Allen; (3) in declaring that Marilyn owned ³⁸² a one-half interest in the yacht “Phoenicia” and in requiring Joel to account for all assets acquired by him through the funds of Phoenicia; (4) in admitting an accountant’s testimony; (5) in permitting a special auditor to present evidence to the court from outside the record; and (6) in ruling that venue was in Anne Arundel County. Joel and Marilyn were married May 19,1946; they had two daughters, Karen and Robin, and a son, Eric. They separated on September 13, 1975 and were divorced on November 29, 1976 by a decree of the Circuit Court No. 2 of Baltimore City.

For many years prior to 1970 Joel had been engaged in the home improvement business, working in and having a one-fourth ownership interest in a corporation called Seaview Construction Company. In the latter part of 1970 Joel was separated from that enterprise. Thereafter he underwent a period of unemployment. Marilyn worked part time in a cosmetic boutique during this interval earning about $65.00 per week.

In late 1970 a liquor store, known as Peoples Liquors, came to Joel’s attention as a business that was for sale and which he might be able to acquire. After a period of negotiation (in some of which Marilyn participated) a contract was entered into for purchase of the business in June of 1971. Both spouses signed the contract which recited a purchase price of $55,000.00 plus the value of the inventory of the business, estimated to be $130,000.00. The contract required the buyer to pay the total sum of $65,000.00 into two escrow accounts simultaneously with execution of the agreement.

Money to finance the acquisition was obtained, in part, by mortgaging the family residence which was owned by Joel and Marilyn as tenants by the entireties, which produced $20,000.00 or $30,000.00, by selling the family sailboat, which was also titled in both names and produced $12,500.00, and by borrowing from a lender called M & R Holding Company which produced $20,000.00. Notes given to M & R Holding Company in the loan transaction were signed by both Joel and Marilyn. Joel testified that other monies, including about $17,500.00, which came to him alone as a result of his separation from Seaview went into the liquor store transaction. Marilyn testified that Joel borrowed $5,000.00 ³⁸³ from his mother “when he went to purchase Phoenicia Corporation.” Joel said he borrowed it earlier.

Marilyn testified that the decision to mortgage the house, sell the boat and borrow money to purchase the liquor store business was a joint decision, made after frequent discussions between her and her then husband in which the matter was considered a joint venture. She testified: “The two of us were doing it together. We were in it together from the beginning, it was a joint and equal effort.” A corporation, Phoenicia, was formed to acquire and operate the liquor store business. Phoenicia’s charter was filed with the Maryland Department of Assessments and Taxation on July 26, 1971.

The incorporators named in the charter were Joel and Marilyn. The directors named therein were Joel, Marilyn and their daughter, Robin. Phoenicia’s principal office was located at Joel and Marilyn’s then residence in Baltimore. A security agreement and financing statement incident to the transaction were signed by Phoenicia, Joel and Marilyn, as were Articles of Sale of the assets of The Peoples Liquor Company to Phoenicia, filed with the Department of Assessments and Taxation on April 13, 1972.

The three persons whose names appeared on the liquor license obtained for Phoenicia were Joel, Marilyn and Robin. The same three acted as officers of Phoenicia, although no organization meeting of Phoenicia’s incorporators was ever held and no stock was issued. The original lease for the liquor store premises was initially taken in the names of Joel and Marilyn as lessees. Upon its expiration a renewal lease was taken in Joel’s name alone.

Joel, Marilyn, Robin, Karen and Eric all worked in the liquor store for a period of time. Marilyn waited on customers and handled the wine trade. Joel was in charge of buying and the financial aspects of the operation. Marilyn stopped working in June, 1975.

Eric eventually became the manager of the store as Joel devoted time to other interests, but Joel continued to set policy and ran the business, which was very successful for a period of time. Joel borrowed substantial sums of money from Phoenicia and made investments, apparently for his own account, in real estate. He paid ³⁸⁴ interest to Phoenicia on the loans. He acknowledged his indebtedness to Phoenicia, in the amount of the balance of the loans to him shown on its books, when he testified below.

Joel also loaned $30,000.00 to Phoenicia at its inception and received interest payments from the corporation. On June 25,1974, Joel and Edward H. Legum entered into a contract to acquire from Charles H. Steffey, Incorporated an apartment property in Annapolis known as Allen Apartments and consisting of 98 units. The purchase price was $650,000.00, including existing mortgage indebtedness. Joel was obliged to produce $50,000.00 as his contribution to funding the acquisition.

He obtained most of that money by borrowing from M & R Holding Company. Marilyn cosigned on the note involved. Marilyn was not a party to the contract under which the apartments were acquired or the negotiations leading to the purchase but she testified that the decision to borrow money jointly to invest in the acquisition of the Allen Apartments was a joint decision made after discussions between her and her then husband in which they talked about their owning a one-half interest in the apartments together; the other fifty per cent was to be owned by Mr. Legum and his wife. A corporation, Allen, was formed to acquire and operate the apartment property.

Its charter was filed with the State Department of Assessments and Taxation on August 13, 1974. The incorporators named therein were Joel and Edward Legum. The directors were Joel, Legum and his wife, Miriam Legum. The same three acted as officers.

Allen’s principal office was located at Legum’s address in Annapolis. No organization meeting of Allen’s incorporators was held and no stock was issued. At settlement for the apartment property on August 29, 1974, the property was conveyed by Steffey to Allen which executed a second mortgage to Steffey to secure the unpaid balance of the purchase price. The only cash involved in this transaction was the $100,000.00 raised by the Levins and the Legums.

The corporation alone assumed responsibility for the payment of the balance due. Joel signed the documents for Allen as its vice-president. Legum and Joel, but chiefly Legum, conducted Allen’s day to day business. ³⁸⁵ Joel testified that in the summer of 1975 he purchased a boat, which he named “Phoenicia” and titled it in his name alone. He testified that he had no agreement with Marilyn to title the boat in both names.

The purchase price was $46,500.00. He paid $25,000.00 as a down payment, which funds came from Phoenicia. The balance was borrowed under a joint obligation of Joel and Marilyn from Equitable Trust Company. He has been making the payments on the loan.

Marilyn said that the decision to purchase a boat was initially her idea and that she encouraged Joel to go to Florida to look for a boat. She authorized the broker to purchase the boat when he called one Sunday and told her that the boat could be purchased for several thousand dollars more than Joel was willing to spend when he was in Florida. Marilyn said that she and Joel constantly discussed the acquisition of the yacht and that they “were doing it together from the beginning, as a joint venture.” She acknowledged on her cross-examination that these discussions “were part of the normal husband-wife relationship.” Joel testified that he had never agreed to issuance of stock in Phoenicia to Marilyn, or to anyone but him, or that she should be part owner of the liquor store business. He said it was not his idea, but the seller’s, to put Marilyn on the agreement for sale of that business.

He also denied any agreement with Marilyn to take title to the yacht “Phoenicia” in any way which would include Marilyn. Joel also testified that he was living with Marilyn, on ordinary terms, when the Phoenicia and Allen deals were being negotiated and she did not then indicate to him that she wanted an ownership interest in either enterprise; that the first time he heard that was after they were separated. I Phoenicia Corporation Appellant contends the chancellor erred in declaring that Marilyn was entitled to a fifty per cent interest in Phoenicia and in ordering that Phoenicia’s stock certificates be issued accordingly. His arguments are almost totally factual insisting that we should accept his testimony instead of ³⁸⁶ Marilyn’s.

Under Md. Rule 1086 we must accept the chancellor’s findings of fact unless they are clearly erroneous. The credibility of the witnesses was for him to determine and on appeal we must view the evidence in the light most favorable to the appellee. Moon v. Weeks, 25 Md. App. 322 , 333 A.2d 635 (1975). Viewed in this light there was strong evidence to support the findings of the chancellor.

Most, if not all, of the money used to purchase the business came from joint assets and from a loan made to the parties jointly. The lease for the business premises was in joint names and the business was purchased by Joel and Marilyn jointly. Thereafter both parties devoted full time to the business until Marilyn was required to discontinue working because of ill health. The auditor’s report revealed that the applications for liquor licenses for the business from 1972 through 1976 stated that Marilyn and Joel each owned fifty per cent of Phoenicia’s stock.

While not determinative in themselves these documents corroborate the testimony that the liquor store enterprise was a joint venture. Compare Smith v. Smith, 189 Md. 1 , 53 A.2d 15 (1947) with Beard v. Beard, 185 Md. 178 , 44 A.2d 469 (1945); Collier v. Collier, 182 Md. 82 , 32 A.2d 469 (1943); and Gosman v. Gosman, 19 Md. App. 66 , 309 A.2d 34 (1973), reversed in part and affirmed in part, 271 Md. 514 , 318 A.2d 821 (1974). Even though Joel may have contributed slightly more funds to the joint venture than Marilyn, the papers indicated the parties intended that their interests be equal. At least the evidence was sufficient for the chancellor to so find.

II Allen Corporation Appellant contends the chancellor erred in declaring that Marilyn was entitled to a twenty-five per cent interest in Allen and ordering that its stock certificates be issued accordingly. The basis for this declaration was the chancellor’s conclusion that a resulting trust had been established for the benefit of Marilyn over one-half of Joel's holdings. Once again Joel’s argument is primarily factual and we are required to accept the testimony most favorable to the appellee. ³⁸⁷ A resulting trust is an implied trust which rests upon the presumed intention of the parties. It may arise when the consideration given for a property is furnished by one party while the legal title is taken by another, provided the circumstances surrounding the transaction do not demonstrate a contrary intention by the parties.

Taylor v. Mercantile-Safe Deposit & Trust Co., 269 Md. 531 , 307 A.2d 670 (1973); Fitch v. Double “U” Sales Corp., 212 Md. 324 , 129 A.2d 93 (1957); Fasman v. Pottashnick, 188 Md. 105 , 51 A.2d 664 (1947). Where only a portion of the consideration is so paid a resulting trust may arise in favor of the payor “in such proportion as the part paid by him bears to the total purchase price, unless he manifests an intention that no resulting trust should arise or that a resulting trust to that extent should not arise.” Fasman v. Pottashnick, supra, at 109. The party seeking to establish a resulting trust has the burden of doing so by clear, unequivocal, and convincing evidence. Siemiesz v. Amend, 237 Md. 438 , 206 A.2d 723 (1965); Fitch v. Double “U” Sales Corp., supra.

Payment of the purchase price by the party claiming the benefit of the trust must have occurred either before or at the time of the purchase and “the transaction is to be judged as of its date, and not upon the basis of facts occurring subsequent to that date.” Lacey v. Van Royen, 259 Md. 80, 89 , 267 A.2d 91 (1970). In the present case, the evidence showed that Joel, together with Edward Legum, determined to purchase the Allen Apartments. Allen Corporation was formed to make this acquisition. Joel and Legum agreed that they would each contribute $50,000.00 in order to make the purchase and that they would share equally in the enterprise.

The remainder of the purchase price was to be paid by the corporation and it does not appear that any personal liability for that balance was incurred by any other party. Joel’s portion of the required funds was raised through a loan from M & R Holding ³⁸⁸ Company to Joel and Marilyn. It is undisputed that Marilyn cosigned the note evidencing that loan. Repayment of the debt was