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REPORTED

IN THE COURT OF SPECIAL APPEALS OF MARYLAND No.21 September Term, 2004

SALISBURY BUILDING SUPPLY COMPANY INC. v. KRAUSE MARINE TOWING CORPORATION

Adkins, Meredith, Wenner, William W., (Retired, Specially Assigned) JJ.

Opinion by Meredith, J.

Filed: May 2, 2005

The issue to be decided in this case is whether a memorandum sufficient to satisfy the statute of frauds can consist of a document signed by the defendant prior to the formation of the alleged contract. The plaintiff below, Krause Marine Towing

Corporation ("Towing Corp."), appellee, sued Salisbury Building Supply Company, Inc. ("Supply Co."), appellant, in the circuit court for Baltimore County, alleging breach of a contract that was to be performed over a five year term. Prior to the point in time

that Towing Corp. had filed its articles of incorporation with the State Department of Assessments and Taxation, Supply Co. and the principal for Towing Corp. signed a document that purported to reflect an agreement for Towing Corp. to haul building materials for Supply Co. over a five year period. At trial, Towing Corp. argued that, after it was incorporated, the parties entered into a subsequent oral contract upon the same terms as the written contract signed by Supply Co. before Towing Corp. was in existence. The trial judge ruled that the writing

executed prior to the plaintiff's incorporation could satisfy the applicable statute of frauds. Upon the jury's finding that Towing

Corp. and Supply Co. had entered into an oral contract by adopting the terms of the previously executed written agreement, the court entered judgment for the plaintiff. After the circuit court denied the defendant's motion for judgment notwithstanding the verdict, Supply Co. appealed. court. We shall affirm the judgment of the circuit

Background Since 1971, Joseph Krause has been a tugboat captain. In May He

of 1989, he began to explore opening his own towing company.

approached Ronald Alessi, the President of Supply Co., about the possibility of hauling quarry stone for that company from quarries in Havre De Grace and Goose Bay to Supply Co.'s Salisbury plant.1 On May 12, 1989, Krause and Alessi signed a document that purported to be an agreement between Towing Corp. and Supply Co. Alessi signed the agreement the as President that Krause of had Supply not yet Co., and, a

notwithstanding

fact

formed

corporation, Krause signed the agreement as President of Towing Corp. After signing the document dated May 12, 1989, Krause prepared and filed articles of incorporation for Towing Corp. The articles Krause

were accepted by the State Department on July 11, 1989.

also arranged for financing and for Towing Corp. to purchase the tugboat and barge that were needed to perform the agreed hauling services for Supply Co. In August of 1989, Towing Corp. began transporting stone materials by barge from various quarries to Supply Co.'s Salisbury plant. For approximately two years, both companies conducted

In 1989, the appellant's corporate name was Pocohantas, Inc. By articles of amendment filed May 1, 1991, the appellant's name was changed to Salisbury Building Supply Co., Inc. Because the name change is not material to the issues on appeal, we shall refer to the appellant as Supply Co. throughout. 2

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business with each other in accordance with the terms of the document signed on May 12, 1989. In May of 1991, Supply Co.

transferred substantially all of its assets to a company named Pocohantas Concrete, Inc. Soon after the change in ownership of

the Salisbury plant, the new owners declined to continue to utilize the services of Towing Corp. upon the terms reflected in the May 12, 1989, document, and Supply Co. made no further use of Towing Corp.'s services. utilize Towing As a consequence of Supply Co.'s failure to Corp.'s services for the full five years

contemplated by the 1989 agreement, Towing Corp. suffered lost profits in the amount of $165,965, according to the unchallenged testimony of an accountant who testified as an expert witness for the plaintiff. At the close of the plaintiff's case, Supply Co. moved for judgment in its favor, arguing that the written agreement in evidence could not be enforced because it was executed at a time when the plaintiff corporation was not yet in existence. When the

trial judge pointed out that the jury might be able to conclude from the evidence that the parties had orally entered into a contract on the same terms as the May 12, 1989, document, Supply Co. objected that the enforcement of such an oral agreement would be barred by the statute of frauds. The trial judge reserved

ruling on the defendant's motion for judgment, and the defense rested without offering any further evidence.

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The trial judge instructed the jury as follows with regard to the alleged contract: Now, the next thing I need to tell you is when this contract in May of 1989 was entered between Krause Marine Towing Corporation, that corporation's charter had not been accepted by the Department of Assessments and Taxation. For you and I, until we go to the hospital and we are born, we are not alive. Until a corporation receives a piece of paper once they file it with the Department of Assessments and Taxation, they are not alive. So that corporation wasn't born .... So this written contract is meaningless. It was executed by somebody that was not yet born. The Plaintiff's contention in this case is that ... the parties by their conduct ratified and accepted the contract because [Towing Corp.] was born July 11, 1989[,] and after that, you have heard the Plaintiff's testimony, that they dealt together. So the Plaintiff says, ["]look, I understand it wasn't a written contract, but ... we were born July 11th and the testimony in this case will show that from July 11th, at least for two and a half years, we both operated verbally under an oral contract and accepted it.["] I'm going to tell you if you believe that is what happened, you can say, ["]yeah, there was a contract.["] The Defendant has a few things he wants to say about that and you may not find there is a contract. The case was submitted to the jury on issues pursuant to Maryland Rule 2-522(c). Issue No. 1 asked the jury: "Did the

Plaintiff and Defendant contract by adopting the terms of the May, 1989 written agreement between [Towing Corp.] and [Supply Co.]? ______ No. ______ Yes." The jury answered in the affirmative.

Issue No. 2 asked the jury: "If you determine there was an agreement between the parties, did the Defendant breach that agreement? No. Yes." 4 The jury again answered in

the affirmative.

Finally, Issue No. 3 asked the jury: "If you

determine the Defendant breached the contract, what damages, if any, do you award the Plaintiff to be paid by the Defendant?" The jury responded: "165,965.00." In accordance with the jury's

responses, the court directed that judgment be entered in favor of Towing Corp. against Supply Co. in the amount of $165,965.00. The defendant promptly filed a motion for judgment In

notwithstanding the verdict, pursuant to Maryland Rule 2-532.

that motion, Supply Co. again asserted that enforcement of the alleged oral contract for five years of services was barred by the statute of frauds, more specifically, Md. Code (2001, 2002 Repl. Vol.), Courts & Judicial Proceedings Article ("C.J."),

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