Wegefarth v. Wiessner

Burke, J., delivered the opinion of the Court. This case has been twice argued in this Court. A motion to dismiss the appeal was- denied for the reasons stated in the opinion filed April 25, 1918, in the case of Wegefarth v. Wiessner and others, 132 Md. 595 , and a reargument of the case was ordered on July 10, 1918. In view of the length of the record, which is very voluminous, we shall confine our consideration -to what appears to us to be the essential and facts in the case.

The declaration contains four counts and, in addition to the general issue pleas, the defendants set up pleas of accord and satisfaction, evidenced by releases under seal and other written documents by which it was intended that a compromise and settlement in full discharge of all mutual matters and litigation between the parties should be made. The pleas setting up the settlement were traversed by the plaintiff, and issue was joined upon the traverse. Both tbe declaration and special pleas are lengthy, and we do not find it necessary to quote from them to any great extent in this opinion. The ground of the action is an alleged conspiracy upon the part of the defendants to obtain, and by which it is alleged they did obtain, from the plaintiff at a greatly reduced price,- by means of fraud, threats and coercion, twenty-five shares of the capital stock of the John F. Wiessner & Sons Brewing Company, a corporation of Baltimore City, hereinafter referred to as the Brewing Company.

At the conclusion of the plaintiff’s case the Court granted the following prayers: “No evidence has been offered legally sufficient to entitle the plaintiff to recover in this case, and the verdict of the jury must, therefore, be for the defendants.” ⁵⁵⁷ ‘Tinder the pleadings in this case, no evidence has been offered legally sufficient to entitle the plaintiff to recover; and the verdict of the jury must, therefore, be for the defendants.” The jury rendered a verdict for the defendants, and from the judgment entered thereon in favor of the defendants the plaintiff has brought this appeal. The record shows that the Brewing Company was founded by John E. Wiessner, who died leaving surviving him the following children, viz, Frederick Wiessner, George E. Wiessner, Henry E. Wiessner, Elizabeth Aim Wiessner, who married Frederick W. Lipps, and Margaret Wiessner, who married the plaintiff in 1901. The capital stock of the Brewing Company consisted of one hundred shares, and each of the above mentioned children of John E. Wiessner owned twenty shares. The brewery, which was a highly successful and profitable business, paying large dividends, was managed exclusively by the sons.

It was regarded strictly as a family institution in which the children of its founder took a great deal of pride. Frederick Wiessner died intestate in 1907, and his twenty shores of stock were distributed in equal proportions among his two brothers and two sisters, thus making the holding of each twenty-five shares. At the time of the marriage of the plaintiff to Margaret Wiessner she owned stocks and bonds in her own right in excess of one hundred thousand dollars, in addition to her twenty shares of stock in the Brewing Company. This stock was very valuable, and her fortune was subsequently increased by the death of her brother Frederick.

The plaintiff was a practicing physician at the time of his marriage, but about the year 1905 he abandoned the practice of medicine and engaged in real estate development on quite a large and expensive scale. We here quote from his testimony as to the extent of his real estate operations.: “In 1905 he organized the Evergreen Lawn Land & Improvement. Company, a company which was developing twenty-five acres at the corner of Hamilton avenue and Harford road, in Hamilton. The stockhold ⁵⁵⁸ ers in the Evergreen Lawn Land & Improvement Company were Frederick W. Lipps and his wife and witness’s wife and .himself; each owned one-fourth interest in the tract, in the company.

That company engaged in very active real estate operations; the first year, I think, they put up’ buildings to the extent of one hundred thousand dollars or more, dwellings and stores and business property. It was a suburban development at Hamilton, on the Harford road and Hamilton avenue. That is about one mile outside of the city limits.. Witness was president of the Evergreen Lawn Land & Imp-ovement Company, Mr. Frederick W. Lipps was treasurer, and Mr. C. R. Wattenscheidt was secretary.

Mr. Wattenscheidt is a nephew of Mr. Frederick W. Lipps. “Witness then organized the City & Suburban Realty Company, which was composed of his wife and himself. We each held half-interest. That company purchased 218 acres adjoining the Evergreen Lawn Land & Improvement Company at Hamilton, and also 104 acres at Mount Washington, and we were also engaged in the development of city property; we built two-story houses as well as suburban cottages. That the great expense of the City & Suburban Realty Company in the first year of its existence was the overhead charge.

We had these large tracts of land, which had to be purchased a number of years before the time of development in order to get the land at a low enough figure to justify carrying it until the opportune time of development. Our expenses in that company were very heavy. The company was not very active for the first five or six years. Overhead charges were the interest charges, the taxes, the office expenses, the maintenance of the property and carrying it, and a eeafain amount of help required to keep it in order.

In this case we had to build our own water plant, drill artesian wells and extend water mains and gas mains and all those details which are preliminary in the development of property. The money was gotten by the sale of the stock which my wife had, which stock was turned into money to pay for this property and for the carrying along of'the overheads. The company did borrow ⁵⁵⁹ money from banks. Wo borrowed from the Merchants Rational Bank; the principal loan was from the Merchants Rational Bank.

The time we began borrowing was the time onr dividends were cut from the brewery. In purchasing these large tracts of land we calculated on having this large income and we would have a surplus as the result of it, and our idea was to take that surplus and pay off on these tracts of land which we had purchased, and carry them along until the time came to market them to advantage. Instead of receiving the usual amount of dividends, we were cut off. My wife had twenty shares of the J. F. Wiessnor Brewing Co. in 1905.

In 1905 she received twenty thousand dollars’ dividend. The year before that she received about nineteen thousand dollars. She had been receiving dividends all along on this stock after our marriage, so far as I knew.” Airs. Wegefarth died in May, 1912.

The dividends on the stock were regularly paid to her during her life, and after her death to the plaintiff as her executor, until June, 1914,, when the dividends were withheld under the circumstances hereinafter stated. Mrs. Wegefarth left a last will and testament, dated June 4, 1909, which was admitted to probate by the Orphans’ Court of Baltimore City. By this will, after bequests of $33,000.00 to certain persons and charitable institutions, she devised and bequeathed all the rest and residue of her estate to her husband, and appointed him executor, and letters testamentary were duly issued to him by the Orphans’ Court. At the date of Mrs. Wegefarth’s death, the City & Suburban Realty Company, which as we have seen was composed of the plaintiff and his wife, each holding a one-half interest, was indebted to the Merchants-Mechanics Rational Bank— which will he referred to hereafter in this opinion as the Bank—in the sum of $86,000.

This indebtedness was evidenced by the note of the company, endorsed by the plaintiff and his wife and secured by the hypothecation of stock of the company and the 25 shares of the brewery stock owned by Airs. Wegefarth. This stock then stood in her name upon the ⁵⁶⁰ books of the Brewing Company and was deposited by her as collateral' security for the note. ■ After the death of Mrs. Wegefarth the plaintiff borrowed $34,500.00 additional from the Bank upon the understanding and agreement that the brewery stock should likewise be held as collateral for this as well as for the prior loan. So that at the time this controversy arose, the plaintiff was indebted to the Bank in the sum of $120,500.00 for the payment of which the brewery stock was pledged.

Doctor Wegefarth settled the estate in the Orphans’ Court, and distributed this stock to himself as residuary legatee under his wife^s will, and by an order of the "Orphans’ Oourt dated the 10th day of Tune, 1914, he was ordered as executor to cause to be transferred said twenty-, five-shares of stock to himself individually. Frederick Wiessner had caused to be prepared a will by which his twenty shares of stock should pass upon his death to his brothers, George F. and Henry F. Wiessner, but- had died without executing the will. The will was prepared in pursuance of an understanding between himself and his brothers that each should make a will bequeathing his stock to the survivors in order that they might have control of the affairs of the- brewery; Both Henry and George made wills carrying out this arrangement-. The death of Frederick intestate left his two brothers without owning a majority of the stock.

They were evidently much disappointed, although they made no complaint or claim during Mrs. Wegefarth’s life for the five shares which passed to her upon Frederick’s death. They regarded the concern as an exclusively family business to be managed and controlled by the family, and when they found that under the will of their sister’ the five shares had passed to Doctor Wegefarth, they took the position that, in view of the understanding between themselves and their deceased brother, these five shares should be given to them, and thereby they - would secure control of the business. There was, of course, no legal basis for'this claim, but they seemed to think that under the circumstances they had some kind of a moral claim upon the stock. They asked Doctor Wegefarth to give ⁵⁶¹ them the five shares which his wife had gotten from the estate of her brother Frederick.

This, he refused to do. The twenty-five shares of stock owned by Mrs. Wegefarth were appraised at $75,000.00, and the final account of .the plaintiff as executor appears to have been passed.on March 13, 1914. In February, 1914, George and Henry Wiessner employed counsel with a view of filing a caveat to Mrs. Wegefarth’s will. In April, 1914, at- a meeting at the Hotel Eennert between the plaintiff and Henry F. Wiessner, the latter told the plaintiff that he was authorized by his brother George to offer him $75,000.00 for the 25 shares of stock.

We quote from the plaintiff’s evidence as to what was said when this, offer was made: “I said, ‘What is the stock worth ?’ He said he didn’t know. I said, ‘How much money have you got in bank?’ Ho said, ‘I don’t know.’ I said, ‘What is the net profits of the business each year ?’ He said he didn’t know. I said, ‘It doesn’t look very fair for me to sell you this stock for seventy-five thousand dollars and not have an idea of what it is worth.’ I said, ‘I will tell you what I will do-.’ I said, ‘Suppose you go back to your brother and tell him that I have no objection to his buying the stock if they do not want me in the business; I am not anxious to stay in, but I will not. lay anything in the way of remaining in it. You appoint a representative or an auditor and I will appoint one and we will take the third one for a referee, and whatever they say goes with me.’ He said-- “Q. Wait a minute; I do not quite understand'that.

You suggested to him that they should appoint an auditor? A. Yes. “Q. For what purpose? A. To examine the books. “Q. The books of the J. F. Wiessner Brewing Company ? A. Yes; to find out what the stock was worth. “Q. And that you should appoint one and he appoint one, and those two should select a third?

A. Yes; to go over the books and to find out what the stock was worth. ⁵⁶² “Q. What them? A. He says, 'There is no use in going back; my brother is sore with you, anyhow; he said you were out to the place most every day and you should have brought that stock out instead of sending it out by the lawyer.’ I said, 'I have nothing to do with that.’ I said, 'That is the way I will sell the stock.’ I said, 'Furthermore, you know that I am obligated more than that to the Merchants National Bank,, and even if I wanted to sell it for seventy-five thousand dollars I couldn’t do it.’ 'Well,’ he said, ‘he told me to give you until 12 o’clock Monday to accept that offer, or,’ he said, 'it is fight.’ ” The plaintiff testified that Henry Wiessner knew at that time he had borrowed money from the bank upon the stock, and further that the Wiessners had refused to transfer the stock to him and was talking of contesting the will of his wife unless he would give up the five shares, and that he so informed the bank. Mr. Vernon Cook, the counsel for the plaintiff, wrote to the Wiessners asking that arrangements be made for the transfer of the stock. After sending that letter Mr. Eequardt, representing the Wiessners, called upon him and said his clients disputed the validity of the will of Mrs. Wegefarth, and, therefore, they declined to transfer the stock.

He also "stated that 5 shares of the 25 which stood in the name of Margaret Wegefarth had come from the estate of her deceased brother, Fred. Wiessner, I believe, was his name, and Mr. Eequardt claimed that there had always been some family understanding about that stock to the effect that it was to go to the boys, as I recall, was his claim. He also, at the same interview, made a proposition of settlement. Do>you want me to go into that ?

"Q. Yes. A. Well, he suggested, as I recall it, that the matter could be settled if Doctor Wegefarth would give up these five shares and if he would also give up¡ any claim that he might have to a certain dwelling house where, I think, the Wiessners lived; that they would be willing to settle and compromise the matter in that way. ⁵⁶³ “Q. Do you mean they would abandon the idea of attacking the will? A. Yes.” On June 1, 1914, George E. and Henry E. Wiessner filed the caveat to the will of Mrs. Wegefarth, and an answer was filed by the plaintiff as executor, and on August 21, 1914, issues, involving due execution, mental incapacity, fraud and undue influence were transmitted to the Court of Campion Pleas for trial. On August 19, 1914, the Brewing Company brought suit against the plaintiff on a promissory note for $8,288.00 and interest.

On June 5, 1914, the plaintiff demanded for the first time a statement of the affairs of the corporation, which it refused to furnish pending the caveat. Thereupon, the plaintiff filed a petition for a mandamus to compel a statement and inspection of the books of the corporation. The defendants, whilst denying the plaintiff’s right to a statement, did, however, on June 18th and June 20th, send two statements, and asked to have the petition “for mandamus dismissed, according to onr understanding.” In response to the letter of June 20th, transmitting the second statement, the counsel for the appellees received from Gans & Hainan a letter dated June 22, 1914-, in which they said: “'On going over with our client the figures which the company has submitted to us in reference to the matter, we find they differ so widely from what Doctor Wegefarth had reason to expect that he has determined to insist on his right as a stockholder to have an accountant make an examination of the books of the company. Opportunity to make such an examination was asked in our petition for mandamus.

Will you let us know whether the company will consent to the making of such an examination? If not, we shall have to ask you to file your demurrer or answer in the mandamus ease as promptly as possible, so that the rights of the respective parties may he determined by the Court.” Thereafter the appellees filed their answer to the petition for mandamus. On the 12th of August, 1914, Doctor Wegefarth authorized the bank to sell the stock for $150,000.00, and the bank offered the stock to the Wiessners at that price. At that ⁵⁶⁴