Edenbaum v. Schwarcz-Osztreicherne10/28/2005
Kenney, Krauser, Bloom, Theodore G., (Retired, specially assigned) JJ.
Appellant Jonathan Edenbaum and appellee Klara Schwarcz-Osztreicherne ("Schwarcz") comprise the officers, directors and shareholders of Liberty Assisted Living, Inc. ("Liberty"), a closely held Maryland corporation, which owns and operates an eight-bed assisted living facility. When Edenbaum, as President of Liberty, relieved Schwarcz of her duties as the facility's Director of Operations and discontinued her salary, Schwarcz filed a complaint in the Circuit Court for Montgomery County, claiming that Edenbaum and Liberty had breached their shareholders' agreement. Having received neither salary nor profits since her termination, she requested damages and the dissolution of the corporation.
Although the circuit court found that Edenbaum had rightfully removed Schwarcz as Director of Operations, it ruled that Schwarcz was, as a shareholder and director, entitled to post-termination salary and profits. Holding both Edenbaum and Liberty liable for those unpaid sums, it entered a judgment in favor of Schwarcz and against Liberty and Edenbaum, in the amount of $89,880.00. But, as for Schwarcz's request that Liberty be dissolved, it found that Edenbaum's conduct was not so "oppressive" as to justify Liberty's dissolution and, therefore, denied Schwarcz's request. Cross-appeals followed, in which Edenbaum and Liberty questioned the court's award of salary and profits to Schwarcz, and Schwarcz challenged the denial of her dissolution demand.
For our review, Edenbaum and Liberty present four issues. Reordered, they are:
I. Whether Schwarcz was entitled to continue receiving her salary after her employment was terminated.
II. Whether the circuit court erred in awarding Schwarcz corporate profits for years in which, appellants claim, there were no such no profits.
III. Whether the circuit court erred in holding Edenbaum personally liable for profits and salary allegedly owed Schwarcz.
IV. Whether the circuit court erred in refusing to apply the "avoidable consequences rule."
On cross-appeal, Schwarcz presents one question. Reworded, it is:
V. Whether the circuit court abused its discretion in declining to dissolve Liberty.
For the reasons that follow, we shall vacate the judgments of the circuit court awarding Schwarcz salary and profits, vacate the denial of Schwarcz's request for dissolution, and remand this case to the circuit court for it to clarify its findings as to Liberty's profits in 2002 and 2003 and to consider dissolution or other less drastic remedies under Md. Code (1975, 1999 Repl. Vol.), ยง 3-413(b)(2) of the Corporations and Associations Article ("Corps. & Ass'ns"). Having so held, we need not and, therefore, shall not reach the question of whether the circuit court erred in refusing to apply the "avoidable consequences rule."
Background
In June 1999, Schwarcz, a geriatric nurse, and Susan Fehr-Smith, a Maryland businesswoman, formed Liberty Assisted Living, Inc., for the purpose of owning and operating an assisted living facility in Maryland. Fehr-Smith owned two-thirds of the corporation's stock, while Schwarcz owned one-third. To implement their plans, they converted a house they had purchased into an assisted living facility. But, before the first patient had moved into that facility, Fehr-Smith informed Schwarcz that she wished to sell her interest in the corporation.
Jonathan Edenbaum, who had experience in managing assisted living facilities, emerged as a potential purchaser of Fehr-Smith's shares. Between December 2000 and early January 2001, Edenbau
Page 1 2 3 4 5 6 7 8 9 10 11 12 13 Maryland Employee Leasing Services
Employee Leasing Services
|