Merchants Mortgage Co. v. Lubow

Singley, J., delivered the opinion of the Court. On 25 November 1968, Merchants Mortgage Company (Merchants) filed in the Circuit Court of Baltimore City a ²¹⁰ bill of complaint against Ralph Lubow, at one time an employee and later an officer and director of Merchants, alleging a breach of Lubow’s duty of loyalty, and seeking discovery, an accounting and other relief. As filed, the complaint joined Sol M. Bank as a co-defendant. By a second amended bill of complaint, filed in March, 1970, Eugene J. Silverman, J. Elmer Weisheit, Jr., Title Company of Maryland, Inc. (now Columbia Title Company), and Pacy Oletsky were added as defendants, and additional claims were asserted.

LeRoy E. Hoffberger and Morton J. Hollander, partners in the law firm of Hoffberger and Hollander, which had been Silverman’s employer, were added as plaintiffs. Only Lubow, of all the defendants, filed a motion for partial summary judgment, grounded on the contention that claims based on wrongs which were alleged to have occurred prior to 25 November 1965 were barred by limitations; that certain of the claims were not supported by sufficient evidence, and that others were barred by preclusion. 1 Merchants countered the motion for partial summary judgment with an answer, and a motion for the production of documents by Lubow, which had as its purpose the examination of his financial records. The matter was referred to Harry M. Sachs, Jr., the General Equity Master of the Supreme Bench of Baltimore City, for hearing on the motions. He recommended that summary judgment be granted for Lubow on those claims which were barred by limitations, by preclusion, or were not supported by sufficient evidence, and that limited discovery ²¹¹ be granted.

Merchants filed exceptions to the recommendations of the Master; Lubow did not. From orders of the circuit court entering partial summary judgment for Lubow, and limiting discovery by Merchants, both Merchants and Lubow appealed to the Court of Special Appeals. We granted certiorari in order that we might consider the matter. It should be noted that Merchants at this stage of the proceeding could appeal only by virtue of an order entered by the chancellor.

Maryland Rule 605 a provides: “Where more than one claim for relief is presented in an action, whether as an original claim, counterclaim, cross-claim, or third-party claim, the court may direct the entry of a final judgment upon one or more but less than all of the claims only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates less than all the claims shall not terminate the action as to any of the claims, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims.” In the order granting Lubow’s motion for summary judgment on “some but less than all of the claims of the plaintiff [Merchants] against the defendant Lubow” the court specified, in pursuance of the Rule, that this was a final judgment and that there was no just reason for delay. The thrust of Lubow’s cross-appeal is that the lower court erred (i) in adopting the Master’s recommendation that estoppel was not available as a defense to four of the‘claims asserted by Merchants against Lubow; (ii) in rejecting the Master’s conclusion that the doctrine of preclusion was available to Lubow as a defense to those claims, and (iii) in ²¹² failing to hold that 10 other claims were barred by the doctrine of equitable estoppel. Merchants has moved to dismiss Lubow’s cross-appeal, a motion which we shall grant.

The point is that a denial of Lubow’s motion for summary judgment is an interlocutory order, which is not appealable and cannot be made so, Lawrence v. Department of Health, 247 Md. 367, 371-72 , 231 A. 2d 46, 48-49 (1967). It is not a final adjudication of Merchants’ claims, which can still be defended on any grounds available to Lubow. Indeed, if the claims should ultimately be adjudicated against him by entry of a final judgment, he can raise then, in an appeal, the applicability of the legal principles which he seeks to raise now. While the parties, in their briefs and in argument before us, devoted much time to an extensive consideration of the facts, a brief resume will suffice for an understanding of the questions of law presented by this appeal.

Merchants is a Delaware corporation, which since 1925, has been engaged in the interim financing of real estate transactions, primarily by making construction loans and more recently by making loans secured by mortgages on unimproved real estate. In 1960, Merchants employed Lubow as a salesman, at a salary of $100.00 per week. Later, he became a loan officer, and as Lubow’s responsibilities increased, so did the importance of his position and the amount of his compensation. In 1963, he was elected a vice president of Merchants.

In 1965, he became a director of the company. From 1964 to his resignation, his salary, bonuses and commissions on an annualized basis were in the $63,000 range. Lubow resigned in September, 1967, to enter business on his own account. A matter of days after Lubow’s resignation, suit was instituted in Prince George’s County against Merchants, its officers and directors (including Lubow) and Sol M. Bank, an associate of Merchants, by Suitland Development Corporation, R & S Development Corporation, Warbling Meadows, Inc., and Beltway-Penn Construction Company, ²¹³ Inc. through Reuben Schwartz and Beulah Schwartz, stockholders in the corporations. 2 The suit sought to enjoin the foreclosure of mortgages held by Merchants on the properties of the four corporations, and to set aside the mortgages because of fraud allegedly practiced upon the borrowers.

Merchants undertook the defense of the suit in behalf of itself, its officers and directors and Lubow, and was ultimately successful. See Suitland Development Corp. v. Merchants Mortgage Co., 254 Md. 43 , 254 A. 2d 359 (1969). 3 The trial of the Suitland Development case in the lower court was concluded in May of 1968, and during the summer of 1968, Merchants embarked on an investigation of the activities of Lubow and others in connection with the operations of Merchants. This investigation gave rise to the filing of the bill of complaint in Baltimore against Lubow and Sol M. Bank, a mortgage broker associated with, but not employed by, Merchants, later amended to include LeRoy E. Hoffberger and Morton J. Hollander (the partners of the law firm of Hoffberger and Hollander) as additional plaintiffs, and Eugene J. Silverman, an employee of Hoffberger and Hollander; Title Company of Maryland, and J. Elmer Weisheit, Jr., its president, and Pacy Oletsky, a former employee of Merchants, as additional defendants. Merchants’ second amended bill of complaint in 34 numbered paragraphs (24 through 57, both inclusive) sets forth separate instances where Merchants and the individual plaintiffs were alleged to have been defrauded by Lubow and the other defendants.

Both the Master, in his Report and Recommendation, and the circuit court, in its decree, dealt with the claims by paragraph number, as shall we. 4 (i) Limitations After a careful discussion of the defense of limitations; its ²¹⁴ availability as a defense in actions at law and its applicability to actions in equity, either by equating the defense with laches, or by applying it directly if there is a concurrent remedy at law, Desser v. Woods, 266 Md. 696, 704 , 296 A. 2d 586, 591 (1972); Miner v. Hanson, 217 Md. 298, 307 , 142 A. 2d 798, 802 (1958), the Master concluded that the defense was available, and that motion for summary judgment should be granted as to those claims which related to transactions which occurred more than three years before Merchants instituted suit. Accordingly, he recommended that summary judgment be entered in Lubow’s favor as to the claims set forth in the following paragraphs of the amended bill of complaint: 27, 29, 30, 31, 32, 34, 35, 36, 38, 39, 41, 42, 43, 44, 45, 47, 48, and 56. The circuit court adopted the Master’s recommendation and granted partial summary judgment. 5 Both the circuit court and the Master relied heavily upon Leonhart v. Atkinson, 265 Md. 219, 226-27 , 289 A. 2d 1, 5-6 (1972) for the proposition that a plaintiff must allege and prove four esséntials in an action grounded on fraud 6 if he is to avoid his action’s being barred by the statute of limitations. We do not find Leonhart apposite, however, as that case dealt with a situation where the plaintiff was allegedly kept in ignorance of the fact that he had a cause of action by the defendant’s fraud, see Maryland Code (1974), Courts and Judicial Proceedings Article § 5-203, while the instant case involves plaintiffs who claim not to be chargeable with discovery of the fraud alleged to have been perpetrated by the defendants because of the existence of a confidential relationship.

Merchants challenges the invocation of limitations, arguing that the defense of limitations is not available to a ²¹⁵ defendant who occupies a confidential relationship as regards a plaintiff, unless the defendant can show prejudice. We approach the problem somewhat differently. Lubow, an officer and director of Merchants, as a matter of law, occupied a confidential relationship as regards his company, Coffman v. Maryland Publishing Co., 167 Md. 275, 288-89 , 173 A. 248, 253-54 (1934); Acker, Merrall & Condit Co. v. McGaw, 106 Md. 536, 556 , 68 A. 17, 21 (1907); Booth v. Robinson, 55 Md. 419, 436 (1881); Cumberland Coal & Iron Co. v. Parish, 42 Md. 598, 604-05 (1875). See Rolling Inn, Inc. v. Iula, 212 Md. 596, 600 , 130 A. 2d 758, 760 (1957); and Waller v. Waller, 187 Md. 185, 190 , 49 A. 2d 449, 452 (1946).

See also R. Clapp, A Fiduciary’s Duty of Loyalty, 3 Md.L.Rev. 221 (1939). Although a party is usually required to exercise ordinary diligence to discover fraudulent conduct of the opposite party, different standards are applied where fiduciaries are involved, Desser v. Woods, supra, 266 Md. at 708-09 ; Herring v. Offutt, 266 Md. 593, 598-601 , 295 A. 2d 876, 879-81 (1972); Perkins v. First National Bank of Atlanta, 221 Ga. 82, 95-96 , 143 S.E.2d 474, 484 (1965); Tarpoff v. Karandjeff 17 Ill. 2d 462, 470-71 , 162 N.E.2d 1, 5-6 (1959); see Citizens Bank v. Leffler, 228 Md. 262, 268-69 , 179 A. 2d 686, 689-90 (1962) and 51 Am.Jur.2d Limitation of Actions § 452, at 914 (1970). The Supreme Court of Georgia, in Perkins, supra, set forth the rule as follows: “The rule that, in cases of fraud, the statute of limitations begins to run only from the time of the discovery of the fraud, will not apply where the party affected by the fraud might, with ordinary diligence, have discovered it. But the failure to use such diligence may be excused where there exists some relation of trust and confidence . . . between the party committing the fraud and the party who is affected by it, rendering it the duty of the former to disclose to the latter the true state of the transaction, and where it appears that it was through confidence in the acts of the party who ²¹⁶ committed the fraud that the other was prevented from discovering it.” We therefore conclude that the chancellor erred when he granted Lubow’s motion for partial summary judgment as regards the claims set forth in the 18 numbered paragraphs of the bill of complaint on the theory that they were barred by limitations.

(ii) Insufficiency of Evidence Lubow moved for summary judgment in his favor as regards the claims asserted in paragraphs 24, 25, 26, 31, 32, 33, 36, 40, 41, 45, 56 and 57. The Master carefully considered each of the paragraphs, and concluded that Lubow’s motion should be granted in each case, generally on the rationale that Lubow presented affirmative evidence that there had been no wrongdoing on his part, and that Merchants had no proof of the existence of the wrongdoing alleged. The court determined, because it had provided for limited discovery in its decree, to deny the motion for summary judgment pending completion of discovery as to the claims asserted in the paragraphs enumerated above excepting paragraphs 31, 32, 36, 41, 45 and 56, where summary judgment had been granted on limitations. In view of the conclusion which we have reached as regards the availability of the defense of limitations, the motion will be denied as to those paragraphs also.

(iii) Diversion of Business Opportunities Lubow’s motion for summary judgment as regards the claims asserted by paragraphs 38, 49, 50, 51, 53 and 54 was considered by the Master, who recommended denial of the motion because there was a genuine dispute as to a material fact: the nature of the business conducted by Traders Mortgage Company. The circuit court accepted the Master’s recommendation and denied the motion. The Master had reasoned that summary judgment should be denied as to transactions involving Traders Mortgage, a partnership in ²¹⁷ which Lubow allegedly had an interest, in order that Merchants might be afforded an opportunity to establish Lubow’s liability, which is disputed. While the denial of the motion is not before us it is noted in the interest of completeness.

As regards paragraphs 39 B, 42, 44, 46, 47 and 55, the Master recommended the granting of Lubow’s motion, a recommendation which the court also adopted. 7 Our decisions hold that summary judgment procedure under Rule 610 is not a substitute for trial, but rather is a determination whether there are disputed issues of fact that should be tried, Lynx, Inc. v. Ordnance Products, 273 Md. 1, 7 , 327 A. 2d 502, 508 (1974); Tellez v. Canton Railroad Co., 212 Md. 423, 430-31 , 129 A. 2d 809, 813 (1957); Frush v. Brooks, 204 Md. 315, 321 , 104 A. 2d 624, 626 (1954). The rule is that in determining whether a factual dispute exists, all inferences which may be drawn from the pleadings, from affidavits or from admissions must be resolved against the moving party, Sherman v. American Bankers Life Assur., 264 Md. 239, 241-42 , 285 A. 2d 652, 654 (1972); Brown v. Suburban Cadillac, Inc., 260 Md. 251, 254-55 , 272 A. 2d 42, 44 (1971); Rule 610. The six paragraphs, like many other paragraphs of the complaint, allege generally that Lubow received payments, fees, commissions, gifts, or business opportunities in connection with certain transactions, which amounted to a diversion of funds or advantages which properly belonged to Merchants. We have carefully reviewed the pleadings, affidavits, depositions, exhibits and memoranda of counsel and conclude that there is a disputed issue of material fact, to be determined by the trier of fact on the weight of the evidence: whether the alleged diversions did occur, and if they did, whether they were permitted under the terms of Lubow’s employment or, if not permitted, whether there was a knowing acquiescence by Merchants.

In the posture in which the case reaches us, there are evidentiary matters and ²¹⁸ material facts which are in dispute which cannot properly be disposed of by summary judgment, Mayhew, Inc. v. Fuller Co., 248 Md. 1, 5 , 234 A. 2d 599, 602 (1967); McGinnis v. Chance, 247 Md. 393, 399 , 231 A. 2d 63, 67 (1967). Remembering that this is an action in equity for discovery and accounting, and that in the language of McGinnis v. Chance, supra, there are equitable assessments to be made which make the application of summary judgment procedure inappropriate here, we shall reverse the decree and order of the lower court which granted Lubow’s motion as regards the six paragraphs. Parenthetically, we are also of the view that the entry of summary judgment would similarlyhave been inappropriate as regards the paragraphs heretofore considered in the discussion of limitations. (iv) Discovery Among its prayers for relief in its second amended bill of complaint, Merchants sought the entry of a decree: “1.

Granting the Plaintiff full discovery of all of the business transactions of Lubow with persons who have had dealings with the Plaintiff during the period when the Defendant Lubow served as a loan officer, or vice president or director of the Plaintiff. “2. Directing the Defendant Lubow fully to account to the Plaintiff for all commissions, bonuses or other payments secretly and personally received by him arising out of transactions in which the Defendant Lubow was acting as an agent, or officer or director of the Plaintiff. “3. Requiring the Defendant Lubow to make restitution to the Plaintiff for all losses resulting to the Plaintiff from breaches by the Defendant Lubow of fiduciary duties and duties of loyalty to the Plaintiff. “4. Granting the Plaintiff full discovery of all transactions of the Defendant Lubow involving fees earned in connection with the sale or exchange of real estate and the obtaining of financing in ²¹⁹ connection with real estate during the period of Lubow’s employment by the Plaintiff. “5.

Requiring the Defendant Lubow to account for (i) all profits made by him, solely or in conjunction with others, and for all losses incurred by the Plaintiff, resulting from business opportunities within the field of business activity of the Plaintiff which were secretly diverted by the Defendant, Lubow, from the Plaintiff; and for (ii) all profits made by the Defendant Lubow as a result of his acquiring interests adverse to the Plaintiff without full and thorough disclosure of said interests by the Defendant Lubow to the Plaintiff and without the express consent of the Plaintiff thereto.” It will be recalled that Merchants, in answering the motion for summary judgment, filed a motion for the production of Lubow’s financial records. The Master’s Report and Recommendation contained the following paragraphs, which were adopted by the court: “No hard and fast rule can be laid down that will apply to all of the situations alike except the general rule of fairness in discovery bearing in mind that for which the discovery rules are designed and the right of an individual to privacy. As I have proposed before, I propose now. Discovery shall in all instances be limited to a search and subsequent revelation, if indicated, of the books and records only insofar as the transactions complained of are concerned.

The examination should be made by a disinterested person, who has sufficient knowledge of accounting procedures as well as the facts of this particular case to permit a discovery limited in scope without disclosing to an adversary matters of personal interest or matters not in litigation and to which he is entitled to no information. “In addition to limiting the scope of the ²²⁰ disclosure to those matters to which specific and proper complaints have been made, there should also be a limitation based upon the time lapse involved. Thus, as to any one transaction, examination of the books should be limited to that period between the inception of the transaction and the end of the defendant’s tax year in which the matter was closed, money was to have been paid or other milestone beyond which in the normal course of affairs no money would have passed.” The following order was entered by the court: “ORDERED that the plaintiffs motion under Maryland Rule 419 be and the same is hereby granted as to all transactions described in the Bill of Complaint from which it is alleged that the defendant, Ralph Lubow, derived a profit, gratuity or ‘Pay-off for having recommended a loan or otherwise assisted in the placement of a loan with the plaintiff with the exception of any of those above transactions described, alleged, or set forth in those paragraphs of the Bill of Complaint which have been, may simultaneously herewith or which prior to the completion of discovery may be dismissed. Specifically the transactions to which this order is applicable includes those transactions described in the paragraphs of the Second Amended Bill of Complaint set forth below saving and excepting those transactions described in any of the paragraphs listed below if said paragraphs of the Bill of Complaint or the Bill of Complaint as to any such paragraphs may be dismissed: Paragraph 24 25 26 31 32 33 Transaction Simmons Simmons Associates Odenton Cape Canaveral Mayfair Mr. Real Estate ²²¹ Paragraph 36 40 41 45 56 57 Transaction Warbling Meadows Benfield Northeasterner Garden Construction Company Warbling Meadows Warbling Meadows “AND IT IS FURTHER ORDERED that discovery is limited in each instance to the books and records for that period between the inception of each transaction to the end of the defendant’s tax year in which the alleged transaction was closed or concluded, or the money was to have been paid; “AND IT IS FURTHER ORDERED that the examination of the books and records of the defendant Ralph Lubow shall be conducted by Ward B. Coe, Jr., as Special Master, who shall thereafter file in these proceedings a report of his findings in which he shall disclose only those transactions shown by the books and records of the said defendant which relate directly to the allegations of those paragraphs of the Bill of Complaint which have not as of the time of said Report been dismissed.” Merchants contends that this order was so inordinately narrow that it amounted to an abuse of discretion. Merchants maintains that the order denied discovery as to four classes of claims: Class 1.

Claims held to be barred by limitations; Class 2. Claims held to be barred either by limitations and want of evidence of liability or solely for want of evidence of liability; Class 3. Claims on which summary judgment was denied; Class 4. Other claims which exist, with particulars unknown. ²²² Quoted below is the pertinent portion of Rule 419 which is here applicable: “Rule 419.

Discovery of Documents and Property. “Any party may serve on any other party a request: “a. Production, Inspection and Copying. “To produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects, or other tangible things, not privileged, which may constitute or contain evidence relating to any of the matters within the scope of discovery permitted by section c of Rule 400 (Application and Scope) and which are in his custody, possession or control; . . .” The view we take of the defense of limitations and of want of evidence of liability disposes of the argument as to all of the Class 1 and Class 2 claims. Liberal discovery is particularly appropriate and should be granted as to Classes 3 and 4. We shall therefore reverse only those portions of the decree and order of the circuit court which granted the motion for summary judgment as regards the claims asserted in paragraphs 27, 29, 30, 31, 32, 34, 35, 36, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 55 and 56 of the bill of complaint and which limited discovery to the claims asserted in 12 numbered paragraphs of the bill.

The case will be remanded for the entry of an order permitting liberal discovery as contemplated by Rule 419, including the production of Lubow’s financial records. We do not propose to adopt the last two paragraphs of the court’s order, heretofore quoted, which, in the circumstances of this case, we regard as excessively restrictive. Instead, if Lubow conceives the scope of the discovery to be overly broad he may seek a protective order, as provided by Rule 406. Lubow argues that the discovery point is not before us ²²³ because the order which implemented the decree in this respect was not certified under Rule 605 a.

The short answer is that it was the decree which was certified, and it was the decree which adopted the recommendation that limited discovery be granted, a recommendation implemented by an order entered the same day. Merchants says that this litigation, because of its complexity and the number of issues involved, should be treated as a protracted case, which might, appropriately be assigned to a single judge, as contemplated by Supreme Bench Rule 536. We are satisfied that this suggestion will be given consideration on remand. Decree and, order of Circuit Court of Baltimore City reversed in part and affirmed in part; case remanded for further proceedings conformable to the views herein expressed; costs to abide the result, Cross-appeal dismissed; costs in that appeal (exclusive of the cost of printing the record extract) to be paid by cross-appellant.

APPENDIX Paragraphs 23 through 57 of Second Amended Bill of Complaint, filed in the Circuit Court of Baltimore City by Merchants Mortgage Company, LeRoy E. Hoffberger and Morton J. Hollander. “23. The full scope and extent of the fraud perpetrated by the Defendants is at present unknown to Plaintiff and H & H. [1] Plaintiff and H & H therefore aver the following particulars for purposes of illustration, and not by way of limitation. ²²⁴ “24. Defendant Lubow processed a Loan Application, dated November 7, 1966, made, for a corporation to be formed, by one ‘Rick’ Simmons to Plaintiff for a loan in the amount of $265,000.00. Said loan was negotiated for the Plaintiff by Lubow and was made by Plaintiff to R. E. Simmons Co., Inc., on December 20, 1966, for a term of 18 months secured by a mortgage on 22.3 acres of land near Walker Mill Road and Addison Road in Prince George’s County, Maryland.

Prior to the making of said loan by the Plaintiff, and in flagrant abuse of his duty of loyalty to Plaintiff, the Defendant Lubow corruptly demanded of, and personally received from, a principal of R. E. Simmons Company, a secret payment of $6,000.00 as a condition precedent to Lubow’s willingness to process, to recommend approval of, and to have Plaintiff consummate said loan. “25. A. Defendant Lubow processed a Loan Application, dated April 11, 1966, made by Simmons Associates, Inc. to Plaintiff for a loan in the amount of $850,000.00. On May 9, 1966, as a 50% participant with another lender in a total loan of $850,000.00, the Plaintiff made a loan in the principal amount of $425,000.00 for 18 months to Simmons Associates, Inc. The loan was secured by a mortgage on 49.1866 acres of land on the southwest side of Fordson Road at U. S. Route 1, south of Alexandria, Virginia. Said property is known as the proposed Mount Vernon Shopping Center site.

The loan was initially submitted to Defendant Lubow, as Vice President of the Plaintiff, directly by the principals of Simmons Associates, Inc. without the intervention or services of any broker. As a condition of recommending approval of, and having Plaintiff make said loan with its lending participant, the Defendants Lubow and Silverman, [2] aided by Weisheit, [3] Title Co. [4] and Bank, [5] corruptly received secret payments out of the loan proceeds. Said payments were concealed from Plaintiff Weisheit and Title Co. on the ²²⁵ settlement sheet purporting to represent the disbursement of the loan proceeds for Plaintiff by Title Co. by including said payments in a lump sum of over $600,000 purportedly disbursed to the Borrowers. A second settlement sheet was prepared by Weisheit and Title Co. for the borrowers, which was not furnished to Plaintiff by Lubow, Weisheit or Silverman, which purports to account for the disbursement to the borrowers. “B. A portion of said payment to Lubow was fraudulently concealed on the second settlement sheet as a $25,000.00 real estate broker’s commission disbursed by Title Co. for the borrower to Bank.

The principals of the borrower were referred by Lubow to Bank, as a purported broker, for the purpose of arranging the secret payment. Bank neither procured the purchase by the borrower of the property securing the loan made by Plaintiff, nor produced the borrower to the Plaintiff. A portion of said ‘brokerage fee’, which Plaintiff believes to be $15,000.00, was secretly paid by Bank to Lubow. “C. A portion of said secret payment to Lubow and the secret payment to Silverman were fraudulently concealed on the second settlement sheet as a $15,000.00 legal fee paid to Weisheit out of the loan proceeds. Weisheit paid $5,000.00 out of said fee to Lubow and paid $2,500.00 out of said fee to Silverman, in furtherance of the conspiracy to apply substantial portions of the cash proceeds of Plaintiff’s loans among the Defendants. “D. A portion of said secret payment in the amount of $9,000.00 was paid in cash for the benefit of Lubow out of funds recorded by Weisheit and Title Co. as net loan proceeds disbursed to the borrowers. “26.

Lubow processed a Loan Application, dated August 8, 1966, made by Oden ton Enterprises, Inc. and ABB Co., Inc., for a loan in the amount of $800,000.00. On August 25, 1966, Plaintiff made said loan to Odenton Enterprises, Inc. and ABB Co., Inc., for a term of 18 months, secured by a mortgage on various parcels of land in the area of Fort Meade in Anne Arundel County, Maryland. Previously, on August 13, 1965, Plaintiff had loaned the sum of $445,000 to ²²⁶ Odenton Enterprises for a period of 12 months. When the loan of August 13, 1965 was becoming due, a principal of the borrowers approached Lubow, as Vice-President of the Plaintiff, for the purpose of negotiating an extension or refinancing of said loan.

Lubow sought to have the borrowers engage Bank to represent them as their broker. Thereafter a refinancing of the existing $445,000 mortgage was effected by way of the $800,000 mortgage of August 25, 1966. Said new mortgage was secured by property additional to that included in the earlier mortgage and included land which had been rezoned since the earlier mortgage. The refinancing was effected between the Plaintiff, acting principally through Lubow, and the borrowers, acting principally through their corporate President and not through Bank.

Although the borrowers never agreed to pay any commission to Bank, the borrowers, at the loan settlement, in order to obtain disbursement of said loan, endorsed a check, payable to the borrowers, to Bank in the amount of $45,000, out of the net loan proceeds, for the recited purpose of payment of a brokerage commission. Said recital was a fraudulent disguise for the payment of a secret and corrupt commission to Lubow pursuant to the conspiracy between Bank and Lubow to obtain a secret commission for Lubow in fraud of the rights of the Plaintiff. Title Co. and Weisheit concealed said disbursement to Bank from Plaintiff on the settlement sheet purporting to represent the disbursement of the loan proceeds for Plaintiff by Title Co. by including said payments in a lump sum purportedly disbursed to borrower. In addition, and in order to obtain settlement of said loan, the borrowers endorsed in blank a second check payable to them in the amount of $35,000.00 out of the net loan proceeds and delivered the same to Title Co. The additional payment was also a secret and corrupt commission to Lubow, paid in order to obtain settlement of the loan to the borrowers. “27.

Lubow processed a Loan Application, dated January 16, 1965, made by Route One Properties, Inc., to Plaintiff for a loan of $595,000.00. On February 2, 1965, Plaintiff made said loan secured by a mortgage on land lying between the ²²⁷ northbound and southbound lanes of U. S. Route 1 in Laurel, Prince George’s County, Maryland. Said loan was a refinancing of a prior loan by Plaintiff in the principal amount of $150,000. In consideration of Lubow’s recommending that the Plaintiff make said loan of February 2, 1965, Lubow, on February 3, 1965, received and accepted a secret and corrupt commission in the amount of $17,500.00 from the borrower acting through a corporation related to the borrower.

Said loan is now in default and the Plaintiff has suffered a loss of interest and will suffer a loss of a substantial portion of the principal amount thereof, for which Lubow is liable to the Plaintiff. “28. A. Defendant Lubow processed a Loan Application, dated February 21, 1966, made by M & K Inc., to Plaintiff for a loan of $85,000.00. On March 16, 1966, the Plaintiff made said loan for a term of 18 months secured by a mortgage on Lots 2, 3, 4 and 5 of Block One, North Laurel, Prince George’s County, Maryland. In consideration of Lubow’s recommending that the Plaintiff make said loan, Lubow, on March 22, 1966, received and accepted a secret and corrupt commission of $2,000.00 from the principal of the corporate borrower.

Said loan is now in default and the Plaintiff has suffered a loss of interest and will suffer a loss of a substantial portion of the principal amount thereof, for which Lubow is liable to the Plaintiff. “29. Lubow processed a Loan Application, dated June 22, 1964, made by Parkway Industrial Park, Inc., to Plaintiff for a loan of $310,000.00. On August 28, 1964, the Blaintiff loaned to Parkway Industrial Park, Inc. the sum of $225,000.00 for 18 months secured by a mortgage on 13.42 acres of land lying on Maryland Route 17, near the Baltimore & Washington Parkway. In consideration of Lubow’s recommending that the Plaintiff make said loan, Lubow, on September 1, 1964, received and accepted a secret and corrupt commission of $10,000.00 from the principal of the corporate borrower.

Said loan is now in default and the Plaintiff has suffered and will suffer a loss of interest and a loss of a substantial portion of the principal amount thereof, for which Lubow is liable to the Plaintiff. ²²⁸ “30. On February 21, 1963, the Plaintiff made a mortgage loan to Laurel Planning and Redevelopment Corporation in the amount of $520,000.00 for a term of two years, secured by a mortgage on property located on Whiskey Bottom Road in the Sixth Election District of Howard County, Maryland. Said property consisted of a tract in excess of 100 acres. On October 22, 1963, Laurel Planning and Redevelopment Corporation entered into a contract for the sale of the property to certain individuals who later assigned the same to Whiskey Bottom Properties, Inc. Said contract provided for a purchase price of $1,000,000 of which $250,000 was to be paid in cash at settlement, the purchasers (or assigns) were to assume the $520,000 first mortgage to the Plaintiff and the purchasers were to give to the seller a second Deed of Trust for $230,000.

Said contract provided for settlement within one year from date. A condition of said contract was that the mortgage to Plaintiff, which was then due February 20, 1965, be extended to provide that the principal and interest not be due thereon until 18 months after the closing date contemplated by the contract of sale. The sale by Laurel Planning and Redevelopment Corporation to Whiskey Bottom Properties, Inc., after one or more extensions, closed on November 12, 1965. The mortgage to Plaintiff, on the recommendation of Lubow, had been extended to April 21, 1966.

Lubow materially aided the Plaintiffs borrower in negotiating and effecting the contract of sale of October 22, 1963 for which Lubow was paid, unknown to the Plaintiff, a total of $50,000 by two equal payments made in the period between contract and closing, that is, on November 7, 1963 and January 20, 1964. As part of his employment by the Plaintiff, Lubow owed a duty to Plaintiff to assist borrowers in the sale of the property securing their loans from Plaintiff (in order to aid said borrowers to pay off said loans) and to avoid any personal interest in such transactions. In violation of his duty of loyalty and duty to disclose and pay over the $50,000 payment to Plaintiff, the Defendant Lubow did not reveal said payment to Plaintiff, but instead secretly and personally retained said payment from himself, while recommending Plaintiffs cooperation in the transaction. ²²⁹ “31. A. Lubow processed a Loan Application, dated March 3, 1965, made, for a corporation to be formed, by one Jacob Martin to Plaintiff for a loan of $540,000.00.

On March 8, 1965, the Plaintiff loaned to the Canaveral Hotel Corporation, a Florida corporation, the sum of $375,000.00, advanced that day against a total land loan commitment of $540,000.00. The balance of said loan, in the amount of $165,000.00, was to be advanced at the time the borrower settled for a construction loan which it was seeking. Said mortgage was secured by 8.77 acres of land on Florida State Route No. 401 in Brevard County, Florida. In consideration of Lubow recommending that the Plaintiff make said loan, the borrower paid for the benefit of the Defendant Lubow, a secret and corrupt commission of $2,500.00. “B. In addition, Lubow secretly agreed with a principal of Canaveral Hotel Corporation that Lubow would procure, or assist in procuring, a construction mortgage for the erection of a proposed hotel on the property securing the mortgage from the Plaintiff to Canaveral Hotel Corporation, and that Lubow would assist said principal in inflating the projected construction costs of said hotel, for which Lubow would secretly and personally share with the principal of Canaveral Corporation in the excess construction mortgage funds over and above the amounts required to construct the hotel and to pay off the mortgage to the Plaintiff.

Lubow further secretly agreed with the principal of Canaveral Hotel Corporation that Lubow would assist in obtaining a permanent mortgage on the subject property, improved by a hotel, in an amount greatly in excess of the amount required to take out the construction mortgage, for which Lubow would secretly and personally share with the principal of Canaveral Hotel Corporation, and others, in the excess permanent mortgage funds. Said loan is now in default. The Plaintiff has suffered and will suffer a substantial loss on the aforesaid transaction for which Lubow is liable to the Plaintiff. “32. The Plaintiff arranged for a loan which was made on December 12, 1962, in the amount of $420,000.00 by National ²³⁰ Brewing Company [6] of Michigan, Inc. to Mayfair Terrace Apartments, Inc. secured by 19.6 acres of land zoned for apartment use in Southeast Washington, D. C. Said loan had in turn been brought to Plaintiff by a mortgage loan broker to whom the Plaintiff agreed to pay a forwarding fee of $10,000.00 for presenting the loan.

In addition, the said forwarding broker, by agreement with the borrower, was to receive a fee of $17,500.00 for procuring the loan. $8,000.00 of the fee from the borrower was to be paid to the forwarding broker at settlement and payment of the balance of $9,500.00 was to be deferred. Lubow abused his position of trust and confidence with the Plaintiff by threatening that the loan would not close if he were not paid a secret commission and thereby coerced or induced the forwarding broker to pay to the Defendant Lubow the sum of $8,000.00 in order to have the loan close. Lubow corruptly and personally received said payment of $8,000.00 from the forwarding broker following the closing of the loan and concealed said payment from the Plaintiff. “33. [A.] Lubow processed a Loan Application, dated July 20, 1966, made by Mr. Real Estate, Inc., a Virginia corporation, to Plaintiff for a loan of $147,000.00. On August 19, 1966, the Plaintiff loaned the sum of $145,000.00 to Mr. Real Estate, Inc., as a result of the fraud hereinafter described.

Said loan was secured by a first deed of trust on 14 acres of land on Griffin Drive in Fairfax County, Virginia and by a second deed of trust on 6 contiguous acres. Said loan application was brought to the Plaintiff by the Defendant, Bank. Bank conspired with Lubow, in connection with said loan, to defraud the Plaintiff and to effect the payment of secret commissions to Lubow in order to obtain said loan from the Plaintiff. In pursuance of said conspiracy and in order to support his recommendation that Plaintiff make the proposed loan to Mr. Real Estate, Inc., the Defendant Lubow prepared, or caused to be prepared and submitted to Plaintiff, a contract of sale bearing date of July 15, 1966 from A. Claiborne Leigh Development Company, a ²³¹ Virginia corporation, as seller, to Mr. Real Estate, Inc., as buyer, under which the 14 acres of land which would be the first lien security of the Plaintiff were purportedly to be purchased by the borrower at and for a price of $215,000.00, cash at settlement.

Said contract was false and fraudulent in the following particulars, all of which were known to the Defendants Lubow and Bank. Said contract did not evidence an arm’s length transaction, or, any transaction, between the purported seller and the purported buyer. The principal of A. Claiborne Leigh Development Company, the purported seller, was then and there a joint venturer with the principal of Mr. Real Estate, Inc. Each of said venturers had a 50% participation in the sums to be realized by the resale and/or development of the property. Further, A. Claiborne Leigh Development Company did not in fact or law legally or equitably own the subject property.

There was, in fact, no agreement to buy and sell between the joint venturers and the said contract was not an indicium of value. Said property was, in fact, under contract to Mr. Real Estate, Inc. as buyer, under three separate contracts of purchase from other parties, at a true purchase price for twenty acres of $177,500.00 of which $77,500.00 was to be paid by purchase money mortgages back to two of the actual sellers. “B. Bank received payments from the borrower and from