author: Thompson, J.,

text:
    SIMKINS INDUSTRIES, INC. v. LEXINGTON INSURANCE COMPANY et al.
    [No. 735,
    September Term, 1978.]

      Decided May 9, 1979.

      The cause was argued before Morton, Thompson and Lowe, JJ.

      David F. Albright and Benjamin R. Goertemiller, with whom were Christopher R. West and Semmes, Bowen & Semmes on the brief, for appellant.

      Nevett Steele, Jr., with whom were WilburD. Preston, Jr., Ward B. Coe, III, Gerson B. Mehlman and White ford, Taylor, Preston, Trimble & Johnston on the brief, for appellee Lexington Insurance Company. Douglas G. Worrall, with whom were William B. Somerville and Smith, Somerville & Case on the brief, for appellee Continental Casualty Company. Richard H. Lerch, with whom were Lerch & Huesman on the brief, for appellee Hartford Steam Boiler Insurance and Inspection Company.
   Thompson, J.,

delivered the opinion of the Court.

Simkins Industries, Inc. filed suit against Lexington Insurance Company, Continental Casualty Company, and Hartford Steam Boiler Insurance and Inspection Company to recover from those companies certain damages alleged to have been caused by a flood of its properties and allegedly covered by separate insurance policies issued by each of the companies. At the conclusion of the plaintiffs case in the Circuit Court for Baltimore County, the trial judge granted each of the insurance companies’ motions for directed verdicts. Simkins appeals alleging that it proved damages which were covered by the policies. We shall affirm as to Lexington and Continental but reverse as to Hartford.

In order to appreciate the arguments it is necessary that we make a brief statement of facts. In June 1972 a tropical storm named Agnes occurred within the Patapsco River basin with precipitation measuring up to fourteen inches. As a result of this rain, the Patapsco River flooded much beyond prior floods. The flood caused substantial damage to Simkins’ plants; which consisted of a power plant on the Howard County side of the river containing a boiler, generator, turbine, and other electrical equipment and a large manufacturing complex on the Baltimore County side of the river containing two large papermaking machines and many motors, generators, pulpers, and other related equipment. Prior to Agnes, all of the equipment in the plant was in good condition.

The primary function of the power plant was to generate steam which was used first to run the turbine; it was then piped across the Patapsco River to the manufacturing plant where it was used to operate the papermaking machines and to heat the plant facilities. The steam crossed above the river on a steel truss bridge in a 12" steel pipe. Also crossing the river on the bridge was a 4" steel condensate pipe which returned the steam and condensate to the boiler. On either side of the river, these pipes entered the buildings through holes in the walls.

The plant was shut down and ¿11 electric power extinguished around midnight, June 21 and 22,1972, the night of the flood. David Garrity, the plant manager, and several other workmen remained on the upper levels of the plant throughout the night. Armed with flashlights, they periodically inspected the water height and checked to ensure that no fires broke out. During the period following 1:00 a.m., Garrity was stationed at an upper level door on the river side of the manufacturing plant from which he could observe the river directly outside and the pipe bridge about 100 feet away. Garrity saw two large trees bearing down on the bridge. By this time, the river level had risen to the bottom of the pipes. When these trees hit the bridge and the pipes he saw the building wall near him, through which the pipes entered the building, start to collapse, and he quickly retreated into the building. Fifteen minutes later, he returned to his observation post and observed the destruction. The pipes and conduit crossing the river had disappeared along with the bridge. The wall through which the steel pipes had entered the manufacturing plant had been completely torn away. In addition, the river side wall of the power plant had been ripped away. Flooding at the plant site was so common that a “flood drill” had been organized and had been utilized on a number of occasions. The plant had suffered flood damage prior to Agnes and was shut down for a six-week period in 1975 as a result of another flood associated with a hurricane. The evidence is clear, however, that the flood caused by Agnes was the worst to hit that area since records have been kept.

There were in effect at the time of the flood three separate policies of insurance issued by Lexington, Continental, and Hartford. As we have stated, the trial judge granted the motions of Lexington and Continental for directed verdicts on the grounds that the policies did not insure against the loss sustained. The court directed a verdict in favor of Hartford on the ground that the proof was insufficient to show that Simkins’ losses were “solely due to” the peril insured against.

I Lexington and Continental

Lexington and Continental issued named peril policies, as opposed to all risk policies, to the appellant. On the first page it was provided:

“INSURANCE IS PROVIDED AGAINST ONLY THOSE PERILS ... INDICATED BELOW BY A PREMIUM CHARGE AND AGAINST OTHER PERILS ... ONLY WHEN ENDORSED HEREON OR ADDED HERETO.”

Below that language, the following table appears:

PREPAID TERM ANNUAL PAYMENT PERIL(s)
PREMIUM DUE DUE UNDER Insured Against
“AMOUNT RATE • AT INCEPTION PREM. PAY. PLAN & Coverage(s) Provided (Insert
$2,500,000.00 Name of Each)
.225 $41,978.00 $ Fire & Lightning
$Incl. $ Extended Coverage
$Incl. $ VMM
Total(s) $Incl. $41,978.00 $ $ Sprinkler Leakage

All of the covered perils are enumerated in Section II of the policy. They are:

1) Fire; 2) Lightning; 3) Wind or Hail; 4) Sprinkler Leakage; 5) Explosion; 6) Riot, Civil Commotion, Vandalism, Malicious Mischief; 7) Acts of the civil authority to prevent the spread of fire; 8) Impact of vehicles; 9) Impact of aircraft; 10) Sonic Boom; 11) Smoke; 12) Molten Materials.

Section I contains exclusions as follows:

“This Policy does not cover loss or damage: * * * *
Resulting from flood or the release of water from natural or man-made bodies of water, whether or not caused by or contributed to by an insured peril. However, liability is specifically assumed for loss or damage by fire, sprinkler leakage, explosion, or accident, all as defined and limited elsewhere in this Policy, resulting from flood or the release of water from natural or man-made bodies of water. For the purpose of this Policy, flood includes but is not limited to tidal wave, wave wash, high water, or overflow, surface or rising water, all whether or not driven by wind.”

To support its contention that the policies provided coverage for the losses incurred during the flood here in question, appellant relies upon a weak reed, that is, the language of the exclusionary clause quoted above which, after excluding loss or damage from flood, said, “liability is specifically assumed for loss or damage by fire, sprinkler leakage, explosion, or accident, all as defined and limited elsewhere in this Policy, resulting from flood....”

It is settled in Maryland law that absent ambiguity the construction of an insurance contract is a matter of law for the court. Government Employees Insurance Company v. DeJames, 256 Md. 717, 720, 261 A. 2d 747 (1970). See also, Winterwerp v. Allstate Insurance Co., 277 Md. 714, 717, 357 A. 2d 350 (1976) and Keyworth v. Industrial Sales, 241 Md. 453, 456, 217 A. 2d 253 (1966). The standard for interpretation in Maryland is somewhat different from that of many other states. The Court of Appeals set it out in Government Employees Insurance Company v. DeJames, supra:

“It is well settled that in interpreting insurance contracts, words are to be given their customary and normal meaning. State Farm Mut. Auto Ins. Co. v. Treas, 254 Md. 615, 255 A. 2d 296 (1969); American Home Assurance Co. v. Erie Ins. Exchange, 252 Md. 116, 248 A. 2d 887 (1969); Offutt v. Liberty Mut. Ins. Co., 251 Md. 262, 247 A. 2d 272 (1968); Harleysville Mut. Cas. Co. v. Harris & Brooks, Inc., 248 Md. 148, 151, 235 A. 2d 556 (1967), and cases there cited. Absent ambiguity the construction of the contract remains within the province of the court and Maryland has not adopted the rule, followed in many jurisdictions, that an insurance policy is to be most strongly construed against the insurer, American Cas. Co. v. Aetna Cas. & Surety Co., 251 Md. 677, 248 A. 2d 487 (1968); Mateer v. Reliance Ins. Co., 247 Md. 643, 233 A. 2d 797 (1967); Ebert v. Millers Mut. Fire Ins. Co., 220 Md. 602, 155 A. 2d 484 (1959). If the language of an insurance contract is ambiguous, however, construction is for the jury, Ebert v. Millers Mut. Fire Ins. Co., supra, 220 Md. at 610; Eagle Star & British Dominions Ins. Co. v. Fleischman, 175 Md. 433, 2 A. 2d 424 (1938); 22 Appleman, Insurance Law and Practice § 12853 (1947) at 7, and the ambiguity is to be resolved against the company which prepared the policy and in favor of the insured, American Cas. Co. v. Aetna Cas. & Surety Co., supra, 251 Md. at 684; Allstate Ins. Co. v. Humphrey, 246 Md. 492, 496, 229 A. 2d 70 (1967).” 256 Md. at 720.

We see no ambiguity in the present case within the meaning of the rule that an ambiguous contract must be submitted to the jury for determination.

Appellant argues that the policy does not define the word accident and, therefore, the word should be given its customary and normal meaning, citing Harleysville Mutual Casualty Co. v. Harris & Brooks, Inc., 248 Md. 148, 235 A. 2d 556 (1967). In that case, the Court of Appeals quoted the definition of accident found in Webster’s Twentieth Century Dictionary (1950), as follows;

“A happening; an event that takes place without one’s foresight or expectation; an event which proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected____” Harleysville, supra at 151.

From that premise appellant concludes that the unprecedented destruction of its property resulting from the largest flood to occur in that area, at least since records have been kept, constituted.an “accident” resulting from a flood and was therefore within the coverage of the policy.

Appellant cites several cases for. the proposition that damage caused by unexpected weather conditions is covered by an insurance policy providing for “accident's.” City of Aurora, Colorado v. Trinity Universal Insurance Co., 326 F. 2d 905 (10th Cir. 1964); Baker v. American Insurance Co. of Newark, New Jersey, 324 F. 2d 748 (4th Cir. 1963); Albuquerque Gravel Products Co. v. American Employers Insurance Co., 282 F. 2d 218 (10th Cir. 1960); Cornell Wood Products Co. v. Hartford Steam Boiler Inspection and Insurance Co., 62 F. Supp. 303 (N.D. Ill. 1945); Arthur A. Johnson Corp. v. Indemnity Insurance Co. of North America, 7 N.Y.2d 222, 196 NYS 2d 678, 164 N.E.2d 704 (1959); Hey v. Guarantors' Liability Indemnity Co. of Pennsylvania, 181 Pa. 220, 37 A. 402 (1897). What appellant overlooks is that in every one of those cases the insurance policy clearly and specifically covered accidents in general and there was no exclusion of coverage for flood damage.

More appropriate to the resolution of the present case is the view expressed in 12 Couch on Insurance, § 44:416:

“When a policy exception itself contains an ‘exception’ clause, the effect of the latter is to restrict the sphere of operation of the exception and thus make the exception inapplicable and allow recovery if the harm sustained is otherwise within the coverage of the policy.
For example, an exception in an elevator accident insurance policy of accidents to persons making additions, alterations, or extraordinary repairs, except ‘ordinary repairs,’ means that anyone making ordinary repairs is covered by the policy the same as any person, but his injuries are not covered, unless they occurred in a manner which would bring them within the risk insured against as outlined in other provisions of the policy. " (Emphasis added.)

Applying this principle to the case at bar we see that the language upon which appellant relies is no more than an exception to the broad exclusion of flood damage from coverage under the policy. The “harm sustained,” flood damage, was clearly not “otherwise within the coverage of the policy.”

Appellant correctly points out that in interpreting a contract a court will try to give effect to all of the agreement’s provisions. Sagner v. Glenangus Farms, Inc., 234 Md. 156, 157, 198 A. 2d 277 (1964); Jeffrey Sneider-Maryland, Inc. v. LaVay, 28 Md. App. 229, 240, 345 A. 2d 79, cert. denied, 276 Md. 746 (1975). The same authorities also hold that particular provisions of a contract are not to be read in isolation but rather the document is to be read as a whole to discover its true import. A further maxim of the law of contracts is that courts will attempt to reconcile apparently conflicting provisions in construing an agreement. Chew v. DeVries, 240 Md. 216, 213 A. 2d 742 (1965); Mattingly Lumber Co. v. Equitable Building & Saving Ass'n., 176 Md. 403, 5 A. 2d 458 (1939). These principles, applied to the present case, dictate affirmance of the lower court’s ruling with respect to Lexington and Continental.

To give the words “accident... resulting from flood” the effect urged upon us by appellant would contradict not only the specific exclusion within which the phrase appears but also the entire tenor of the policy. It is true that the magnitude of the flood occurring in this case was unexpected, but appellant in its reply brief specifically disclaims any argument that the flood itself was the accident and the phrase “accident ... resulting from flood” does not mean that coverage is provided if the flood itself can somehow be characterized as an accident. Rather, the accident would have to have been an unforeseeable unexpected event, given the magnitude of the flood. As there was no evidence here that the damage done to appellant’s plant was other than the expected result of a flood of that dimension, that damage was excluded from coverage under the policy.

Appellant next argues that the policy shows a premium was paid for “extended coverage” which it says includes an accident resulting from floods. We note that in the policy provisions all of the covered losses are specifically listed in Section II of the policy. An accident is not included therein but appellant argues that as extended coverage is not defined in the policy, under the Maryland cases the contract is ambiguous and thus its construction is for the jury. Mateer v. Reliance Insurance Co., Inc., 247 Md. 643, 233 A. 2d 797 (1967); Government Employees Insurance Company v. DeJames, supra and Aetna Casualty & Surety Co. v. Brethren Mutual Insurance Co., 38 Md. App. 197, 379 A. 2d 1234 (1977). Citing C & H Plumbing and Heating, Inc. v. Employers Mutual Casualty Co., 264 Md. 510, 287 A. 2d 238 (1972), it says that in determining whether the terms are ambiguous we must consider how the words would be understood by a reasonably prudent person applying for insurance, rather than from the view of a lawyer. Appellant then cites Allstate Insurance Co. v. Humphrey, 246 Md. 492, 229 A. 2d 70 (1967) for the proposition that inasmuch as insurance policies are prepared by insurance companies ambiguities should be construed against the company. We do not think that a layman would consider the policy ambiguous when the coverages for which the company paid a premium are specifically set out and do not include, other than in an exclusion clause, any language which would sustain the appellant’s argument. In other words, it is only the strained legalistic argument of the appellant that gives any suggestion of ambiguity.

Neither are we impressed by the appellant’s argument that the location of the alleged conferral of coverage within an exclusionary clause is immaterial. We agree entirely with the appellees that the cases cited by appellant to support this portion of the argument simply fail to do so. In McEvoy v. Security Fire Insurance Co., 110 Md. 275, 73 A. 157 (1909), an exclusion in a fire insurance policy excluded coverage for loss by earthquake. The exclusion was itself limited in that coverage would be provided for fire caused by earthquake. This exception within an exclusion in no way extended coverage beyond that originally provided. In Koser v. American Casualty Co., 162 Pa. Super. 63, 56 A. 2d 301 (1948) the policy provided coverage for accidental injuries incurred in the operation of an automobile. The policy excluded motorcycles and airplanes from the definition of automobile. The Court held that the exclusionary clause showed clearly that the term automobile was used in its generic sense as meaning any self-propelled vehicle and that a tractor was intended to be covered. We do not think the exclusion in definition is in any way apposite to an exclusion from loss.

In addition, appellant directs our attention to the following language appearing on the face page of the policy, providing insurance not only-for

“ ‘those coverages indicated below by a premium charge’ but in addition ‘other perils and ... other coverages ... when endorsed hereon or added hereto’, (emphasis added)”.

It then argues that the “explicit assumption of liability for ‘accident ... resulting from flood’ ” constitutes coverage added thereto. Once again appellant is trying to use an exclusion to extend coverage when the policy plainly on its face shows which perils were covered and which were not. We do not think language found only in an exclusionary clause can be reasonably construed as adding additional coverage pursuant to the provision just quoted.

In summary, we hold that the Lexington and Continental policies insured against damage resulting from certain named perils. Flood damage was absent from the list of those named perils and, indeed, was specifically excluded from coverage by the exclusionary clause of Section I of the policy. A limitation was placed on the operation of that exclusionary clause so that damage “by fire, sprinkler leakage, explosion, or accident... resulting from flood,” would be covered. This clause did not operate to extend coverage to perils not otherwise within .the purview of the policy. In light of the specific exclusion of flood damage the flood itself, although unexpected and unprecedented, cannot be considered an accident for which coverage was in any way provided. Nor can the damage resulting from such flood be considered as caused by an “accident ... resulting from flood.” This conclusion is inescapable because even though the damage was shown to be unprecedented there was no evidence to show that it was unexpected or surprising given the dimensions of the flood in question. That is, the damage was to be expected considering the magnitude of the flood.

II Hartford Steam Boiler Inspection and Insurance Company

The policy issued to Simkins by Hartford provided $2,000,000 of coverage (with a $25,000 deductible) for loss “from an Accident ... to an Object” and for “loss on the property of the Insured directly damaged by such Accident.” The policy defined Accident” as “a sudden and accidental breakdown of the Object” and defined “Object” as steam and hot water boilers and any piping on the premises or between parts of the premises which contained steam, condensate, or feedwater.

The pertinent provisions of Hartford’s policy are as follows:

“In consideration of the Premium, the Company agrees with the Insured named in the Declarations made a part hereof respecting loss from an Accident, as defined herein, occurring during the Policy Period, to an Object, as defined herein, while the Object is in use or connected ready for use at the Location specified for it in the Schedule, subject to the Declarations, to the Exclusions, to the Conditions, to other terms of this policy and to the Schedules and Endorsements issued to form a part thereof, as follows:
SECTION I LOSS ON PROPERTY OF INSURED To PAY for loss on the property of the Insured directly damaged by such Accident (or, if the Company so elects, to repair or replace such damaged property);
SECTION II EXPEDITING EXPENSES To PAY for the reasonable extra cost of temporary repair and of expediting the repair of such damaged property of the Insured, including overtime and the extra cost of express or other rapid means of transportation;
SECTION III PROPERTY DAMAGE LIABILITY
SECTION IV BODILY INJURY LIABILITY
This policy does not apply:
(3) under Sections I and II to loss
(d) from flood unless an Accident ensues and the Company shall then be liable only for loss from such ensuing Accident.
(g) from any other indirect result of an Accident;
SECTION A — BOILERS, FIRED VESSELS AND ELECTRIC STEAM GENERATORS — BROAD COVERAGE
As respects any Object designated and described in the Schedule, opposite the description of which, the word ‘BROAD’ is inserted in the column headed ‘COVERAGE’:
DEFINITION OF OBJECT.
‘Object’ shall mean any complete vessel designated and described in the Schedule and shall also include ... 4. any piping on the premises of the Insured, or between parts of said premises, with valves, fittings, traps and separators thereon, which contains steam or condensate thereof, generated in whole or in part in such vessel, and any feedwater piping between such vessel and its feed pump or injector; but Object shall not include (a) any part of such vessel which does not contain steam or water; (b) any piping which does not contain steam or condensate thereof; (c) any piping not on the premises of the Insured, used to supply any premises not owned by, leased by or operated under the control of the Insured; (d) any other piping, radiator, convector, coil, vessel or apparatus except as included in sections 1, 2, 3 and 4 above; (e) any reciprocating or rotating machine; nor (f) any electrical apparatus.
DEFINITION OF ACCIDENT.
‘Accident’ shall mean a sudden and accidental breakdown of the Object, or a part thereof, which manifests itself at the time of its occurrence by physical damage to the Object that necessitates repair or replacement of the Object or part thereof; but Accident shall not mean (a) depletion, deterioration, corrosion, or erosion of material; (b) wear and tear; (c) leakage at any valve, fitting, shaft seal, gland packing, joint or connection; (d) the breakdown of any vacuum tube, gas tube or brush; (e) the breakdown of any electronic computer or electronic data processing equipment; (f) the breakdown of any structure of foundation supporting the Object or any part thereof; nor (g) the functioning of any safety device or protective device.
BOILER AND MACHINERY ENDORSEMENT H [I]n consideration of the policy premium and subject to the Exclusions and Conditions of this Endorsement, with respect to Business on the said Premises,
1. To pay the Insured the amount of DAILY INDEMNITY specified therefor for each Day of Total Prevention of Business;
2. To pay the Insured a part of the DAILY INDEMNITY for each Day of Partial Prevention of Business;...
provided the Total Prevention of Business or the Partial Prevention of Business is caused solely by an Accident,
EXCLUSIONS
The Company shall not be liable for payment for any Prevention of Business
b. For any time during which Business would not or could not have been carried on if the Accident had not occurred;...”

Hartford concedes that the debris striking the bridge and breaking the steam pipes and condensate pipes crossing the river from the electrical plant to the manufacturing plant was an accident within the meaning of its policy. It contends, however, that Simkins never established in the evidence that the cost of replacing those pipes exceeded $25,000 (the amount of the deductible) and therefore it is not responsible for any damage to the appellant’s property. The trial judge agreed and so found. We will discuss each item claimed separately.

A. Proof of $110,361.97 in Damages to Objects

Roland Rutherford, the foreman of the crew from the J. W. Marchant Company that made all the repairs to the steam piping system, testified that he had reviewed five folders of Marchant invoices and had segregated the invoices relating to work he did on the steam pipes. The parties stipulated that all of the invoices were genuine and authentic and reflected fair and reasonable charges for what they purported to charge. Mr. Rutherford further testified that all of the material and labor listed on these invoices was used at the Simkins plant following the Agnes flood. He then identified a document summarizing the steam pipe repair costs as totaling $110,361.97.

Mr. Rutherford stated the steam piping across the Patapsco River was missing after the flood. Ten or fifteen feet of steam piping inside Building #4 was also missing. The steam piping inside Building #15 had been torn out in part; the remainder was bent, broken and cracked. Similarly, the steam piping in Buildings *5 and #6 had been “kicked” from its hangers and bent in all directions. Finally, the steam piping remaining in Building *4 had been twisted, bent, and cracked as a result of the tearing out of the bridge piping and the piping just inside Building ^4, to which it had been attached.

The only substantial attackr that Hartford makes as to the sufficiency of Mr. Rutherford’s testimony to raise a jury question as to damages, is based on the witness’s statement that some of his work was repair of steam pipes inside of heaters and included small fittings. The record shows, however, that the heaters were steam heaters and steam pipes ran into and through them. There is no indication that Mr. Rutherford spent any time, or used any materials working on the heaters other than on their steam pipes. We are unable to follow Hartford’s argument that the damages covered by the policy were limited to the replacement of the pipe which ran across the river. There was evidence from which the jury could have found that the accident also broke the pipes inside the buildings and indeed inside the heaters. The policy clearly covered all steam pipes in the plants and between the plants.

B. Damages to Other Property of the Insured Totaling $77,885.06

In addition to providing coverage for damage to the plant’s steam piping system, the Hartford policy also covered loss on the property of the insured directly damaged by the covered accident.

John Zacarías testified respecting the damage done to the power plant. Mr. Zacarías was the superintendent of the power plant and was in charge of the repair work in that plant following the storm Agnes. He stated that he carefully reviewed the applicable invoices and determined that $48,620.94 was spent to repair the power plant turbine. This turbine had been sealed watertight before Agnes. Following the storm, Mr. Zacarías discovered that the steam line running from the turbine across the river to the mill had been broken off, allowing sand and silt to pour through the broken pipe into the turbine. This broken steam pipe was, according to Zacarías, the only access the sand and silt had to the turbine. The $48,620.94 figure represented the cost of opening up the turbine, taking it apart, cleaning it, and reassembling it.

Mr. Zacarías further testified that the two smaller turbines in the paper mill were also sealed, and the only explanation for the presence of sand and silt inside them was that the pipe which fed steam to them had been broken off, permitting the foreign matter to gain entrance. The cost of repairing these two turbines was $7,565.28. We think this testimony is sufficient to present a jury question as to the amount of damage to the insured’s other property by reason of the admitted accident.

Hartford argues there was no affirmative evidence to show that the sand could have gotten into the turbine only through the broken pipes. We disagree. It further argues, however, that the damage to the turbines was indirect and therefore not covered by its policy. We think its argument is without foundation on the basis of the very case it cites to support its argument. In Hartford Steam Boiler Inspection and Insurance Co. v. Sonneborn & Co., 96 Md. 616, 54 A. 610 (1903) an insurance policy limited recovery to “immediate” damage to property caused by the explosion of certain steam boilers. The Court held that this meant that the damage must be direct or proximate, as distinguished from remote, and therefore water damage from a sprinkler system which was set off by a boiler explosion was held to be proximately caused by that explosion. It seems to us that in the instant case there was sufficient evidence from which the jury could find that the damage to the turbines was the direct result of the accident which broke the steam pipes and permitted mud or debris to enter therein.

William Gruber, an employee of McCormick Asbestos Company, testified as to the cost of replacing the insulation around the pipes. A memorandum was introduced after his testimony in which he broke down the cost of insulating the steam pipes. Ignoring this, the appellee argues that there was no evidence that the damage to the steam pipe insulation was the result of the “alleged” breaking of the steam pipes. In addition, appellee argues that the policy does not cover the insulation specifically. We think it very clear that if the policy covered the pipes it would also cover the insulation which Mr. Rutherford testified was a necessary part of the pipes. Mr. Gruber’s testimony, including the memorandum, was alone sufficient to raise a jury question as to the amount of the damages.

C. Business Interruption Insurance

Appellant claims here, as it did below, that it is entitled to recover under Endorsement H of the policy for its business interruption losses over the entire period the plant was closed following the flood. It states as grounds for this position that “had the ‘Accident’ never occurred here, the business could have continued to operate normally, and therefore Exclusion b. of the Hartford policy [Endorsement H] is inapplicable.” The Endorsement and Exclusion have been set out above. If, by the term “Accident” appellant is referring to the flood itself the argument is clearly without merit simply because the policy definition of that term cannot be so construed. If the term “Accident” refers to the destruction of the steam pipes the argument is equally unmeritorious because it is obvious from the evidence that flood damage entirely apart from the destruction of the steam pipes prevented business from being carried on for some time after the storm. The appellant’s arguments on other points, however, require more attention.

Endorsement H provided for business interruption coverage in the fixed amount of $3,000 for each day of total prevention of business “caused solely by an Accident ... to any Object” excluding the first ten days of the interruption. It also provided for coverage in lesser amounts for each day of partial prevention of business.

Simkins introduced the testimony of Vincent ZuWallaek, the factory’s plant engineer, that if he had had steam power, he could have returned to producing paper by October 15, 1972 at the latest. All the motor repairs and other necessary repairs to the machines had been completed by the end of September and the last job, the regrinding of the calendar stacks; had Been completed By early October.

The new bridge superstructure, which was not covered by Hartford’s policy, and which would carry the replacement steam pipes across the Patapsco River had not, however, been erected by October 15,1972. There was testimony from Roger Barnes, the supervisor of the Colborn Construction Company workmen, from which the jury could have concluded that the fixed price contracts for erecting the bridge were completed before Barnes left the Simkins site on November 25, 1972 to go to a different job in Bel Air.

After November 25, 1972, the only remaining work to be done to make the plant operable was the replacement of the steam piping system from the power plant across the river to the manufacturing plant. From November 25, 1972 until the factory was back to full production, the total (and later partial) prevention of business was “solely” due to the breakdown of the steam pipes across the river.

Albert Schneider, an adjuster specializing in business interruption losses testified that his study of the Simkins records indicated that the plant resumed operation on January 17, 1973 on a limited basis and resumed full operations on March 1, 1973. Based on a total prevention of business from November 25, 1972 until January 17, 1973, a 50% suspension of business from January 17 to January 31, 1973 and a 25% suspension of business from February 1 to February 28, 1973, the total business interruption damages which the jury could have found due and owing to Simkins were at least $193,500.

We think Mr. ZuWallack’s testimony was sufficient to raise a jury question as to the extent of the business interruption which was solely due to- the accident of the breaking pipes.

Judgment in favor of Lexington Insurance Company and Continental Casualty Company affirmed.

Judgment in favor of Hartford Steam Boiler and Inspection Company reversed.

Case remanded for new trial in accordance with this opinion.

Appellant to pay % of the costs and Hartford Steam Boiler and Inspection Company to pay V:i of the costs.

      . The essential terms of the Lexington and Continental policies were, for purposes of this case, identical. For convenience we shall refer to specific provisions from the Lexington policy but our discussion applies with equal force to the Continental contract.

      . Couch cites Lookaway Farm v. Caldwell Port Elevator, Inc., 260 La. 552, 256 So. 2d 623 and Dolph v. Maryland Casualty Co., 303 Mo. 534, 261 S.W.2d 330 (1924) to support his statements.

      . On the other hand, for example, had an explosion somehow occurred as the result of the flood, the damage caused by that explosion would be covered by virtue of the exception to the exclusion. We note that damage caused by explosion is “otherwise within the coverage of the policy.”

      . On cross-examination, Mr. Rutherford stated that the only nonsteam work performed by his crew was the laying of a 4-inch domestic water pipe across the Patapsco River. The length of the run across the Patapsco River was 90-100 feet. Mr. Rutherford calculated the extra cost to lay this pipe to be the labor cost of two men working for four hours each plus the materials cost for 100 feet of 4 inch pipe. All of the Marchant invoices, time-sheets, labor and materials records were introduced into evidence, thus enabling the jurors to compute for themselves the relatively small dollar amount attributable to this nonsteam piping work.

      . Hartford also argues that because Mr. Rutherford sometimes used expressions such as “or whatever” and “so forth” in describing the damage to the pipes his testimony was too general to furnish a basis for recovery. This argument is totally without merit.


source: Caselaw Access Project

license: Public Domain

text:
    TIDEWATER INSURANCE ASSOCIATES, INC. et al. v. DRYDEN OIL COMPANY, INC. et al.
    [No. 979,
    September Term, 1978.]

      Decided May 9, 1979.

      The cause was argued before Thompson, Melvin and Mason, JJ.

      Andrew McGill Whelan, with whom were George M. Radcliffe and Niles, Barton & Wilmer on the brief, for appellants.

      William F. Mosner, with whom were Power & Mosner on the brief, for appellees.
   Thompson, J.,

delivered the opinion of the Court.

Tidewater Insurance Associates, Inc. and its subsidiary, International Underwriters, Ltd., both of which are hereinafter referred to as Tidewater, appeal from a judgment entered against them in the Circuit Court for Baltimore County, (Raine, J.) at the suit of Dryden Oil Company, Inc., appellee, hereinafter called Dryden.

On November 30', 1976, Dryden commenced proceedings against Tidewater to recover damages which Dryden suffered as a result of a fire on its premises which Tidewater, acting as Dryden’s insurance broker, had failed to insure. On April 3,1978, Tidewater obtained an order permitting it to file a third-party claim against a London insurance brokerage house (Gallagher, Hinton and Vereker, Ltd.) on the basis that Tidewater had placed an order with the London broker to cover the Dryden premises with fire insurance, but the London broker negligently failed to process the order. The trial court permitted the filing of the third-party claim “without prejudice as to rights of Dryden to proceed without delay against original Defendant.”

Trial in the original case proceeded as scheduled and resulted in a monetary judgment in favor of Dryden. The judgment was entered on May 3, 1978, after a motion for a new trial was denied. Tidewater filed an appeal to this Court on May 21, but thereafter dismissed its appeal, stating that Rule 605 a prevented the verdict of April 12, 1978, from being a final judgment as there had been no disposition of the third-party claim.

While the appeal was pending Dryden filed garnishment proceedings against Tidewater’s bank to collect its judgment; Tidewater moved to quash the attachment. At the hearing on the motion the trial judge, recognizing that there had been no service on the third-party defendant prior to the time that the original case was decided, nevertheless quashed the attachment stating the judgment of May 3 was not final. At the same time the court made an express determination that there was no just reason for delay and directed entry of a final judgment on the merits as of August 21, 1978.

Subsequently, Tidewater instituted a new appeal from the judgment of August 21, 1978. Dryden has appealed from the order quashing the attachment contending its judgment was final on May 3, 1978, when the trial court had disposed of the only claim over which it had jurisdiction. We agree that the judgment on May 3, was final and thus under Clinton Petroleum Services, Inc. v. Norris, 271 Md. 665, 319 A. 2d 304 (1974) we must dismiss Tidewater’s appeal sua sponte. On the other hand, we do have jurisdiction to hear the appeal of Dryden from the judgment quashing its attachment which was entered on August 21, 1978.

Tidewater argues that under Rule 605 a a claim is presented when it is filed and the lack of service is not controlling. The only Maryland authority shedding any light on this issue is Hardy v. Metis, 282 Md. 1, 381 A. 2d 683 (1978), which held that a judgment was final and appealable when it was entered against the only defendant who had been served with process. There, a wrongful death claim was asserted against both the driver and the owner of an automobile. Only the driver was served with process. A' default judgment was eventually entered against that defendant and in determining when the judgment became final and appealable, the Court of Appeals said:

“[I]t is clear under our prior decisions that when the judgment by default was entered on January 20, 1977, against the only defendant (Larry Metts) over whom the trial court had obtained jurisdiction, all claims were finally adjudicated so as to start the running of both the appeal and the preenrollment revisory power periods.” 282 Md. at 5 (Emphasis added.)

It is clearly the holding of this case that where a final judgment has been entered against all those within the jurisdiction of the court, the time for filing an appeal begins to run. It does not matter that a claim has been asserted against a party who is not before the court.

Tidewater seeks to distinguish this case on two grounds. First, that Hardy did not involve a third-party claim but rather only a claim against two co-defendants. Appellant does not elaborate upon this alleged distinction and we see no merit in it. The Court of Appeals has held on several occasions that the term “multiple claims” as used in Rule 605 a includes multiple parties. Moritz v. Church of Jesus Christ of the Latter Day Saints, 266 Md. 220, 292 A. 2d 84 (1972); Picking v. State Finance Corp., 257 Md. 554, 263 A. 2d 572 (1970). We think the holding in Hardy requires the conclusion that when a party against whom a claim has been asserted has not been brought within the jurisdiction of the court, the claim against that party has not been presented to the court for purposes of Rule 605 a.

The second alleged distinction between Hardy and this case is that the claim against the unserved party in Hardy had somehow lost its vitality through the lapse of time, whereas the third-party claim filed in the instant case was still “viable” when the judgment was entered against Tidewater. Again we see no substance in the alleged distinction. The holding in Hardy was not related to the length of time the claim had been filed. It was based instead on whether the parties were, or were not, properly before the court. Appellants’ argument in this respect is nebulous and cannot form a sound basis for determining the applicability of the rule.

Support for our holding may also be found in certain federal cases construing Federal Rule of Civil Procedure 54 (b). In Diener Enterprises, Inc. v. Miller, 266 Md. 551, 554, 295 A. 2d 470 (1972), the Court said:

“This rule [Md. Rule 605 a] was modeled after Rule 54 (b) of the Federal Rules of Civil Procedure and uses substantially the same language. This renders interpretations of the federal rule especially persuasive as to the meaning of the Maryland rule.”

Both United States v. Studivant, 529 F. 2d 673 (3d. Cir. 1976) and Ferguson v. Bartels Brewing Company, 284 F. 2d 855 (2d. Cir. 1960) hold that Federal Rule 54 (b) will not deprive an appellate court of jurisdiction where a judgment has been rendered but claims remain against defendants who have not been served. We think the purposes of the rule apply equally whether or not the unserved persons are original or third-party defendants. See also, Siegmund v. General Commodities Corp., 175 F. 2d 952 (9th Cir. 1949).

Whatever solace it may be to Tidewater’s counsel, we will state that had its appeal been before us on the merits we would have affirmed the judgment of the trial court.

Inasmuch as the judgment of May 3, was final, it follows that the attachment on the judgment should not have been quashed.

Appeal of Tidewater Insurance Associates, Inc. and International Underwriters, Ltd. dismissed.

Order of August 21, 1978, quashing the attachment reversed.

Costs to be' paid by Tidewater Insurance Associates, Inc. and International Underwriters, Ltd.

      . Rule 605 a states:
      “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.”


author: Couch, J.,

text:
    DOMINIC J. COLANDREA v. CARMEN J. COLANDREA et al.
    [No. 985,
    September Term, 1978.]

      Decided May 9, 1979.

      The cause was argued before Thompson, Lowe and Couch, JJ.

      Thomas A. Pavlinic for appellant.

      Donald F. Chiarello for appellees.
   Couch, J.,

delivered the opinion of the Court.

On August 21, 1967 Dominic J. Colandrea and Carmen J. Colandrea, husband and wife, incorporated Cortland Realty, Ltd. The corporation’s business of real estate sales and property management prospered until Mr. and Mrs. Colandrea encountered marital difficulties. On September 22, 1972 the Colandreas severed both marital and business ties; on that day a separation and property settlement agreement and a stock redemption agreement* were executed.

Enforcement of the stock redemption agreement is the subject of this appeal and cross-appeal. By its terms Mr. Colandrea agreed to sell to Cortland Realty, Ltd. all of his capital stock in the corporation, numbering fifteen shares, for $100,000. Cortland Realty, Ltd. met its obligation to the extent of $29,000 by making a down payment of $26,060, which was collected at settlement, and by a credit of $2,940 from the corporation to Mr. Colandrea. The balance of the purchase price, $71,000, was to be paid by Cortland Realty, Ltd. in yearly installments set forth in the agreement and evidenced by seven promissory notes attached to it. The first note, due on October 15, 1973, called for payment of $11,000. The remaining six notes, due on October 15 of the succeeding years, have a face value of $10,000 apiece. Each of the notes provides for interest at the rate of six per cent per annum.

When the first note matured over a year after the execution of the stock redemption, Cortland Realty, Ltd.’s financial condition was so precarious that it was unable to meet its obligation to Mr. Colandrea. Cortland Realty, Ltd.’s earnings for the years immediately preceding and following the 1972 stock redemption agreement were as follows:

Oct. 1971 — Sept. 1972 $572,635
Oct. 1972 — Sept. 1973 328,873
Oct. 1973 — Sept. 1974 64,367
Oct. 1974 — Sept. 1975 5,566
Oct. 1975 — Sept. 1976 4,952

By the time Mr. Colandrea filed his bill of complaint, five of the promissory notes totaling $51,000, with interest of $10,500, were in default. Left a creditor of a barren corporation, Mr. Colandrea found it necessary to look elsewhere for payment of the promissory notes.

Within three months of the execution of the stock redemption agreement Mrs. Colandrea incorporated Cortland, Ltd. which assumed Cortland Realty, Ltd.’s real estate sales operation. According to Mrs. Colandrea real estate sales comprised the far greater portion of Cortland Realty, Ltd.’s business. The corporate name of Cortland Realty, Ltd. was changed to Carmen Management Company, Inc. thirteen months after the stock redemption agreement was signed. Carmen Management continued the management of rental properties in which Cortland Realty, Ltd. was previously engaged. Bearing in mind the date of the stock redemption agreement, September 22, 1972, we shall review the history of Cortland Realty, Ltd., Cortland, Ltd., and Carmen Management Company, Inc.

From the date of its incorporation on August 21,1967 until December 29,1972, Cortland Realty, Ltd. functioned as a real estate sales corporation, realizing the greater portion of its income from the sale of commercial and residential properties. On December 29, 1972, Cortland, Ltd. was incorporated. Thereafter, Cortland Realty, Ltd.’s income was derived primarily from leasing and management commissions. Although no real estate listings were transferred from Cortland Realty, Ltd. to Cortland, Ltd., all new listings were taken under the brokerage Cortland, Ltd. Cortland, Ltd. operated in all locations that were formerly offices of Cortland Realty, Ltd. Cortland, Ltd. used the same furniture, phone number, and corporate logo as Cortland Realty, Ltd. All real estate agents associated with Cortland Realty, Ltd. transferred their licenses to Cortland, Ltd. The only real distinction between the business of Cortland, Ltd. and that of Cortland Realty, Ltd. was that Cortland, Ltd. did not solicit rental management accounts. This last remaining function of Cortland Realty, Ltd., however, was not long-lived. On October 18,1973 Mrs. Colandrea, her son, and her attorney changed the name of Cortland Realty, Ltd. to Carmen Management Company, Inc. This renamed corporation continued the property management segment of Cortland Realty, Ltd.’s business as a consequence of the corporate name change. On the same date Cortland Realty, Ltd. was reincorporated, but its existence continued only on paper. The State Department of Assessments and Taxation annulled Cortland Realty, Ltd.’s charter on January 21,1976.

The evidence adduced at trial reveals that Mrs. Colandrea became the sole shareholder in Cortland Realty, Ltd. after the stock redemption agreement. She was also a director and president of that first corporation. The same situation prevails with respect to the two later corporations, Cortland, Ltd. and Carmen Management Company, Inc. Cortland, Ltd. became the chief beneficiary of the demise of Cortland Realty, Ltd. Its earnings for the fiscal years following its incorporation are listed below:

Fiscal Year Gross Commissions
May 1973 — April 1974 $ 870,504
May 1974 — April 1975 535,609
May 1975 — April 1976 645,373

Carmen Management Company, Inc., having assumed the less lucrative management operation, had earnings of $5,566 for fiscal year 1974 and $4,952 for 1975. The effect of all these corporate machinations is obvious. By it Mrs. Colandrea was able to continue the profitable business of Cortland Realty, Ltd. without its attendant obligations to Mr. Colandrea.

In order to recover payment of the promissory notes, Mr. Colandrea filed a Bill of Complaint in Equity against Cortland Realty, Ltd., Cortland, Ltd., Carmen Management Company, Inc., and Mrs. Colandrea, individually and in her capacity as president, officer and director of Cortland Realty, Ltd., Cortland, Ltd., and Carmen Management Company, Inc. The ultimate purpose of Mr. Colandrea’s complaint was to impose liability for the payment of the notes upon Cortland, Ltd., Carmen Management Company, Inc., and Mrs. Colandrea, personally. The above named corporations and Mrs. Colandrea then filed a counterclaim against Dominic J. Colandrea, Richard C. Adams, Irene Adams, Joan Bounds and El Toro Realty, Inc., charging, inter alia, breach of the stock redemption agreement by conducting a competing real estate business and injuring Cortland Realty, Ltd. by soliciting its clients and customers and divulging confidential information, and tortious interference with the contract rights of Cortland Realty, Ltd. and Mrs. Colandrea. The chancellor dismissed the counterclaim as to all counterdefendants, stating specifically that “there isn’t any evidence that would be sufficient to show that he carried on any activities that were adverse to Cortland [Realty, Ltd.]. He may have, but there certainly isn’t any evidence to say he did.”

The chancellor filed his written opinion on June 21,1978 and passed on order dated August 22, 1978 entering judgment against the corporate defendants Cortland, Ltd. and Carmen Management Company, Inc. in the amount of $61,500 plus interest. The order further stated that no liability existed on the part of Mrs. Colandrea, individually, upon the notes.

The chancellor, in his written opinion, elaborated upon his decision to spare Mrs. Colandrea liability on the notes. His conclusion was based upon the rationale that there was no fraud or paramount equity present as a result of her actions; Mrs. Colandrea’s manipulations of the corporations were based, according to the chancellor, upon “sound corporate reasons”. There was, therefore, no intent to defraud on Mrs. Colandrea’s part and thus no justification for piercing the corporate veil. Upon examination of the record we are persuaded that, sound corporate reasons or not, there is clear and convincing proof that Mrs. Colandrea’s transfer of the business of Cortland Realty, Ltd. to Cortland, Ltd. and Carmen Management Company, Inc. constitutes fraud. The testimony of Mrs. Colandrea, coupled with the patent misrepresentation of the stock redemption agreement and promissory notes that the debt would be paid, compel us to conclude that the chancellor’s judgment on the evidence relative to fraud was clearly erroneous. Md. R. 1086. Our reasons will be set forth in detail.

The chancellor did, however, find liability on the part of Cortland, Ltd. and Carmen Management Company, Inc. based upon his conclusion that the two corporations were the results of corporate reorganizations and, hence, were mere continuations of Cortland Realty, Ltd. See generally, Fletcher Cyclopedia Corporation, §§ 7205, 7329 (1973); 19 C.J.S., Corporations, §§ 1578, 1593 (1940); 19 Am. Jur. 2d, Corporations, §§ 1550, 1559 (1965). We shall affirm the judgments against Cortland, Ltd. and Carmen Management Company, Inc. but for a different reason.

On appeal Mr. Colandrea raises the following issues:

1. Did the trial court err in refusing to impose liability on the individual defendant, Carmen J. Colandrea, by failing to enforce a paramount equity?
2. Did the trial court err in refusing to impose liability on the individual defendant, Carmen J. Colandrea, by failing to make a finding of fraud?
3. Did the trial court err in refusing to impose liability on the individual defendant, Carmen J. Colandrea, by failing to make a finding of fraudulent conveyance?

Additional issues are raised by cross-appellants, Cortland Realty, Ltd., Carmen Management Company, Inc., Cortland, Ltd., and Carmen J. Colandrea:

4. Did the trial court err in imposing liability upon Cortland, Ltd. and Carmen Management Company, Inc. for the debts and obligations of Cortland Realty, Ltd. since cross-appellee failed to provide clear and convincing evidence of fraud or a paramount equity?
5. Did the trial court err in holding Cortland, Ltd. and Carmen Management Company, Inc. liable as the successors of Cortland Realty, Ltd.?

In an effort to avoid confusion we shall address the issues raised by the parties by considering the liability of first Mrs. Colandrea and then Cortland, Ltd. and Carmen Management Company, Inc.

A. The Liability of Mrs. Colandrea

Mr. Colandrea contends, and we agree, that Mrs. Colandrea has committed a fraud and thus cannot be shielded against individual liability upon the promissory notes by the corporate fiction of Cortland Realty, Ltd. This Court and the Court of Appeals have repeatedly stated that we will, in an appropriate case:

“disregard the corporate entity and deal with substance rather than form, as though a corporation does not exist, * * * shareholders generally are not held liable'for debts or obligations of a corporation except where it is necessary to prevent fraud or enforce a paramount equity.” (Citation omitted.) Bart Arconti & Sons, Inc. v. Ames-Ennis, Inc., 275 Md. 295, 310-11, 340 A. 2d 225, 234 (1975).

See Dixon v. The Process Corp., 38 Md. App. 644, 654, 382 A. 2d 893 (1978), cert. den., 282 Md. 731. We shall disregard the corporate entity of Cortland Realty, Ltd. and impose liability upon its sole shareholder because Mrs. Colandrea’s dealings, through the corporation, with Mr. Colandrea, can be termed nothing short of fraudulent.

In order to establish fraud on the part of Mrs. Colandrea it was necessary that appellant provide clear and convincing proof, see Garris v. Dickey, 22 Md. App. 618, 630, 325 A. 2d 156 (1974), cert. den., 273 Md. 720 (constructive fraud), Loyola Fed. S. & L. Ass’n. v. Trenchcraft, Inc., 17 Md. App. 646, 656, 303 A. 2d 432 (1973), of each of the following five elements: (1) a material representation of a party was false, (2) falsity was known to that party or the misrepresentation was made with such reckless indifference to the truth as to impute knowledge to him, (3) the misrepresentation was made with the purpose to defraud (scienter), (4) the person justifiably relied on the misrepresentation, and (5) the person suffered damage directly resulting from the misrepresentation. Suburban Properties Management, Inc. v. Johnson, 236 Md. 455, 460, 204 A. 2d 326 (1964); accord Walsh v. Edwards, 233 Md. 552, 558, 197 A. 2d 424 (1964); Lustine Chevrolet v. Cadeaux, 19 Md. App. 30, 34-5, 308 A. 2d 747 (1973).

The trial court, in refusing to pierce the corporate veil in this instance, stated that the evidence revealed that “any decision made by Mrs. Colandrea in regard to the corporations was made because of sound corporate reasons”, thus negating the element of scienter. The “sound corporate reasons” for the creation of Cortland, Ltd. and Carmen Management Company, Inc. cited by the trial court included (1) Mrs. Colandrea’s suspicions that Mr. Colandrea was raiding Cortland Realty, Ltd. of its sales personnel, and (2) the filing of a race discrimination suit against Cortland Realty, Ltd. several weeks prior to the execution of the stock redemption agreement. The chancellor’s ruling that there was no fraud or paramount equity was based upon the credibility of Mrs. Colandrea’s testimony. Normally, under the authority of Md. R. 1086, we would not interfere with the trial court’s judgment in this regard, see Carling Brewing Co. v. Belzner, 15 Md. App. 406, 411-12, 291 A. 2d 175 (1972), but the reasons given by Mrs. Colandrea are so devoid of merit that we must conclude the chancellor was clearly erroneous in his judgment on the evidence. Cf. Dixon v. The Process Corp., supra at 655.

As to the first of the reasons relied upon by the chancellor, we are at a loss to understand his acceptance of Mrs. Colandrea’s suspicions that appellant was raiding Cortland Realty, Ltd. as “sound corporate reasons” when he had earlier dismissed the counterclaim embodying those suspicions for lack of sufficient evidence.

The other reason given by Mrs. Colandrea and relied upon by the chancellor is similarly without basis. According to Mrs. Colandrea’s testimony the incorporation of Cortland, Ltd. was prompted by a racial discrimination suit directed at Cortland Realty, Ltd.’s activities in the management of rental properties. As a result Mrs. Colandrea thought it best to separate the real estate sales and management functions of the original corporations. The chancellor’s reliance on Mrs. Colandrea’s rationale overlooks the fact that the presence of the pending litigation constituted a direct violation of a representation and warranty contained in the stock redemption agreement, which is as follows:

“... no judgment, lien, suit, claim or proceeding ■pending or threatened against the Corporation anywhere; no condition, act or event which would constitute a breach or default by the Corporation; no other basis for the assertion against the Corporation of any claim or liability not fully reflected or reserved against in the books of the Corporation.”

The discrimination suit was filed on August 31, 1972, less than a month before execution of the stock redemption agreement. This statement in and of itself constitutes actionable fraud, assuming the presence of clear and convincing proof of the other elements. Indeed, that theory is urged upon us by Mr. Colandrea. But we need not go into this aspect, for there is far more convincing evidence of fraud which was neglected by the trial court.

Regardless of whether there were sound corporate reasons for the creation of the new corporations which deprived Cortland, Realty, Ltd. of its ability to pay the notes, we think the trial court clearly erred in failing to consider Mrs. Colandrea’s admission in a deposition, read into the record, that at the time she signed the agreement on behalf of the corporation, she had no intention of paying the notes. The relevant portion of her deposition follows:

“Q. I see. Based on what you testified to, am I correct in assuming that part of your reason for incorporating Cortland, Ltd. was to start a fresh corporation free of any liabilities?
Objection. You may answer.
A. That was one of the reasons, that’s correct.
Q. You previously gave other reasons.
A. That’s correct.
Q. Was it .your position, at the time, as officer and/or director of Cortland Realty, Ltd. and also Cortland, Ltd., that there would not have to be any pay back of those notes from the original corporation..
A. I’m sorry. What was the first part of your question?
Q. In your capacity as officer and/or director of either of those corporations, once the new corporation was formed, was it your intention, at that time, to circumvent your payments of those notes back to Mr. Colandrea?
A. No sir.
Q. Did you have the intention, at that time, to pay these notes back to Mr. Colandrea?
A. No, I did not.
Q. To the corporation?
A. I did not.
Q. You had no intention at that time?
A. No, because I thought it was unfair.
Q. What did you think was unfair?
A. I thought it was unfair that: number one, he would expect payment when the money was not there or would seriously jeopardize the health of the corporation which was the support of his children. Number two, it was unfair due to the fact of the fraud, that the corporation should have to pay him.
Q. So that when the new corporation was formed, then, you had no intention, the corporate defendant, Cortland Realty Ltd., had no intention of making any pay back on those notes.
A. The new corporation had nothing to do with it.”

In Tufts v. Poore, 219 Md. 1, 147 A. 2d 717 (1959), the Court of Appeals stated:

“Maryland has adopted the overwhelming majority rule of the American courts in holding that fraud may be predicated on promises made with a present intention not to perform.... The gist of the fraud in such cases is not the failure to perform the agreement, but the fraudulent intent of the promisor, the false representation of an existing intention to perform where such intent is in fact non-existent, and the deception of the promisee by such false promise.” Id. at 11-12.

Cortland Realty, Ltd., through its president, Mrs. Colandrea, entered into the stock redemption agreement with the deliberate intention and purpose of cheating and defrauding Mr. Colandrea, the other party to the contract. The Court of Appeals has given fair warning as to the repercussions of such fraudulent acts of an agent:

“In such a case not only is the corporation liable for such action, but the agents who engage in the conspiracy are personally liable for damages resulting from such a transaction. Agents of a corporation ... cannot hide behind the corporate shield and say they were acting solely as the agents of the corporation.” Ace Development Co. v. Harrison, 196 Md. 357, 367, 76 A. 2d 566 (1950).

Mrs. Colandrea obviously had no intention of permitting payment of the promissory notes by Cortland Realty, Ltd. But by entering into the agreement she was able to relieve Mr. Colandrea of his stock in the corporation. “... [W]here one person induces another to part with his money or property by means of a promise which he makes with the intention of not performing it, he is guilty of actionable fraud.” Appel v. Hupfield, 198 Md. 374, 382, 84 A. 2d 94 (1951).

The evidence presented by Mr. Colandrea meets all of the elements of fraud in accordance with the applicable burden of proof. The corporation’s promise to pay Mr. Colandrea the full purchase price of the stock was a sham in light of Mrs. Colandrea’s admission; the falsity of this representation was known to Mrs. Colandrea when she signed the agreement on behalf of the corporation. Her statement constitutes clear and convincing evidence of an intention to defraud and, although there is no direct evidence on the point, a fair inference can be drawn that Mr. Colandrea justifiably relied on the corporation’s promise to pay the notes in turning over his fifteen shares to the corporation. There can be little doubt that the corporation’s failure to meet its obligations to Mr. Colandrea has caused damage, at a minimum $71,000 worth, directly resulting from the fact that there was no intention to pay the promissory notes.

Mrs. Colandrea cannot now hide behind the facades of the corporations which she has created. The principles enunciated by the Court of Appeals in Crocker v. Pitti, 179 Md. 52, 16 A. 2d 875 (1940), are fully applicable to Mrs. Colandrea’s attempt to avoid the obligations contained in the stock redemption agreement and promissory notes.

“Nor may it be successfully urged that the perpetration of fraud shall endure because accomplished through the medium of a corporate fiction. The alleged chief actor in the fraud is asserted to have dominated and controlled the intervening corporate entities and, through that domination and control, to have accomplished his personal ends and enterprises. It is appropriate that equity should deal with him according to the verities and not to his simulations. Where fraud exists, equity is equal to the occasion no matter how fair and regular the disguise it may assume.” Id. at 58.

See generally, Danzer & Co. v. Western Maryland Railway Co., 164 Md. 448, 457, 165 A. 463 (1933); Dixon v. The Process Corp., supra at 651. Given the pervasive presence of fraud in this case, we conclude that the chancellor erred in refusing to disregard the corporate entity of Cortland Realty, Ltd. and impose personal liability on the promissory notes upon the perpetrator of the fraud, Mrs. Colandrea.

B. Liability of Cortland, Ltd. and Carmen Management Company, Inc.

(1) Reorganization

We approve of the chancellor’s imposition of liability for the promissory notes upon Cortland, Ltd. but we disagree as to his method in reaching that conclusion. The chancellor, in his written opinion, determined the liability of the two later corporations upon the following basis:

“These notes which were the liabilities of Cortland Realty, Ltd. became the liabilities of Cortland Ltd. and Carmen Management Company, Inc. Cortland Realty, Ltd. by reorganization became Cortland Ltd. and Carmen Management Company, Inc. Cortland Ltd. was incorporated on December 29, 1972 and it assumed the real estate functions of Cortland Realty, Ltd. After the incorporation Cortland Realty, Ltd. ceased for all effective purposes to be a corporation involved in the sale of real estate. On October 18, 1973 Cortland Realty, Ltd. changed its name to Carmen Management Company, Inc. and Cortland Realty, Ltd.’s charter was annulled in 1976. The assets of Cortland Ltd. and Carmen Management Company, Inc. were largely the assets of Cortland Realty, Ltd.”

The chancellor relied upon the authority of Fletcher Cyclopedia Corporation, § 7205 at 395, which posits that where a corporation is reorganized without a foreclosure the reorganized company is liable for the debts of the old corporation. See also Fletcher, supra, § 7329; 19 C.J.S., Corporations, §§ 1578, 1593; 19 Am. Jur. 2d, Corporations, §§ 1550,1559. In Bart Arconti & Sons v. Ames-Ennis, supra, the Court of Appeals analyzed, according to the theory relied upon by the chancellor, a situation quite similar to the one presented here. In Bart Arconti a general contractor sued for breach of contract a subcontractor engaged in the business of ceramic tile masonry construction, its principals and two corporations controlled by it; one corporation solely conducted ceramic tile work while the other company exclusively performed masonry construction. All corporations operated at the same place of business, shared the same equipment and employed the same personnel. Stock in all corporations was owned by the same people. The subcontractor, previously a profitable concern, was permitted to become dormant pursuant to a Board of Directors’ resolution “that the Company would cease to operate and [would] lie dormant until the litigation ... can be completed.”

The Court of Appeals reversed the judgment entered against the two controlled corporations, stating:

“The recovery against G & L and Atlas rests upon an even more tenuous reed. Appellee seems to recognize that to prevail in this regard, it must do so upon the premise that two corporations are successors in interest to Arconti. It urges upon us the principle, relying heavily on Stanford Hotel Co. v. Schwind Co., 180 Cal. 348, 181 P. 780 (1919) that ‘where a new corporation reorganizes under a new name, but with practically the same stockholders and directors, and continues to carry on the same business, a court of equity will regard the new corporation as a continuation of the former corporation, and will hold it liable for the debts of the former corporation.’ 181 P. at 783. The short answer here is that neither of the two corporations are shown by the evidence to be successors of Arconti.” 275 Md. at 313.

The evidence produced in the present case revealed that Cortland, Ltd. operated in all locations previously occupied by Cortland Realty, Ltd.; the same furniture was used; the phone number remained the same; most agents associated with Cortland Realty, Ltd. transferred their licenses to Cortland, Ltd.; and finally, the same corporate logo was used in conjunction with the new corporation, Cortland, Ltd. Between December 29, 1972 and October 18, 1973, Cortland Realty, Ltd. functioned as a property management corporation, but as of the latter date all those functions were taken over by Carmen Management Company, Inc. The only factor which distinguishes the instant case from Arconti is the close similarity in the names of Cortland Realty, Ltd. and Cortland, Ltd. We do not, however, think this sufficient to take this case out of the purview of Arconti and, of course, with respect to Carmen Management Company, Inc., this factor is nonexistent.

Appellant has proffered nothing which would distinguish the evidence presented here from that which formed the basis of the Court of Appeals’ decision in Arconti. Thus, Cortland, Ltd. and Carmen Management Company, Inc. cannot properly be held liable for the obligations of Cortland Realty, Ltd. on the theory that they are successors to Cortland Realty, Ltd. (2) Participation in the fraudulent activities of Mrs. Colandrea

Mrs. Colandrea was and is a director, officer, and sole stockholder of all three of the named corporate defendants. Mrs. Colandrea’s acts as an officer of the two corporations constitute the acts of the corporations themselves where those acts are in furtherance of the corporations’ business. Silver Spring Development v. Guertler, 257 Md. 291, 297, 262 A. 2d 749 (1970). It was only through the incorporation of Cortland, Ltd. and Carmen Management Company, Inc. that she was able to evade payment of the promissory notes without damaging the profitable real estate business which she controlled. Moreover, the new corporations were the chief beneficiaries of the fraud, insofar as they continued the business of Cortland Realty, Ltd., without its attendant responsibilities. Although neither Cortland, Ltd. nor Carmen Management Company, Inc. were in existence at the time the misrepresentation was made, there is authority for the proposition that they may be held liable for their participation, especially since their creation was part and parcel of Mrs. Colandrea’s scheme to avoid payment of the notes. Support for this view that Cortland, Ltd. and Carmen Management Company, Inc. are jointly liable with Mrs. Colandrea can be found in Etgen v. Washington County Bldg. & Loan Ass’n., 184 Md. 412, 41 A. 2d 290 (1945):

“.. .[WJhere two or more persons conspire to carry out a fraud to cheat another, each of them is liable to the defrauded party irrespective of the degree of his activity in the fraudulent transaction or whether he shared in the profits of the scheme. In order to establish liability of a participant in a fraud, it is not necessary to show that he was a party to its contrivance at its inception. If it is shown that he knew of the fraudulent scheme and willfully aided in its execution, he is chargeable with the consequences. All persons who participate in such a transaction are jointly liable for the ensuing injury regardless of the degree of culpability. Lomita Land & Water Co. v. Robinson, 154 Cal. 36, 97 P. 10, 14.” Id. at 418.

Moreover, the fraud was not complete until the actual damage occurred on October 15, 1973 when the first note came due and Cortland Realty, Ltd. was unable to pay it because Cortland, Ltd. was conducting its real estate sales business and receiving the profits from it. On October 18, 1973, three days after the first note matured, Cortland Realty, Ltd. changed its name to Carmen Management Company, Inc.

Cortland, Ltd. and Carmen Management Company, Inc. became participants in the commission of fraud through the actions of their officer and agent, Mrs. Colandrea. It is well settled in Maryland that a corporation will be held liable for the fraudulent conduct of its agent:

“Strictly speaking, corporations while acting within the scope of the powers delegated to them, cannot be guilty of wilful fraud; yet it is settled ... that corporations, carrying on trade or business of any kind, are equally, and to the same extent, liable for the frauds and wrongs of their agents, perpetrated in the course of their employment, as individual principals would be under like circumstances.” Western Maryland R. R. Co. v. Franklin Bank, 60 Md. 36, 43 (1883).

See also Ace Development Co. v. Harrison, supra; see generally, 19 C.J.S., Corporations, § 1278 (1940); 37 Am. Jur. 2d, Fraud & Deceit, § 305 (1968). Without question, the two later corporations were essential participants; without them Mrs. Colandrea could not have realized her intention to avoid payment of the promissory notes.

(3) Fraudulent conveyance of the assets of Cortland Realty, Ltd. to Cortland, Ltd.

Appellant raises an alternative route upon which he urges us to impose liability on Mrs. Colandrea. According to appellant the evidence demonstrates that there was a fraudulent conveyance, see Comm. Law Art., § 15-201, et seq., of the assets of Cortland Realty, Ltd. to the new corporation, Cortland, Ltd. This issue was presented by appellant below but was not decided by the trial court. Under Md. R. 1085 we would ordinarily not review the question, but we may do so where we deem it desirable, as we do in this case, to avoid the expense and delay of another appeal. See e.g., Aetna Cas. & Sur. Co. v. Brethren Mut. Ins. Co., 38 Md. App. 197, 379 A. 2d 1234 (1977); Davidson v. State, 18 Md. App. 61, 305 A. 2d 474 (1973), cert. den., 269 Md. 757.

Appellant would have us reverse the chancellor and enter judgment against Mrs. Colandrea, individually, for the alleged fraudulent conveyance of Cortland Realty, Ltd.’s assets. Having already determined Mrs. Colandrea’s liability upon the fraud issue, we believe it is unnecessary to address this issue in the context of Mrs. Colandrea’s personal liability. This does not mean, however, that Mr. Colandrea is without relief under the Uniform Fraudulent Conveyance Act. Md. Code, Comm. Law Art., § 15-201, et seq. (1975).

The Court of Appeals in Bart Arconti, and earlier in Damazo v. Wahby, supra at 635, indicated that an acceptable method by which Mr. Colandrea could secure payment of the notes by Cortland, Ltd. and Carmen Management Company, Inc. would be to pursue any assets which may have been transferred from Cortland Realty, Ltd. to the two later corporations by fraudulent conveyance.

Cortland, Ltd., after its incorporation on December 29, 1972, operated in the former business locations of Cortland Realty, Ltd. with the same sales agents, phone number, furniture and corporate logo.

One specifically identifiable transfer of an asset can be found in the source of the salary paid to Nan Casciaro. Ms. Casciaro testified that she began working for Cortland Realty, Ltd. in late 1969. She was then employed by Cortland, Ltd. in “early 1973”, as a sales manager. According to her testimony Ms. Casciaro’s 1973 W-2 form indicated that she was paid a salary of $16,794 by Cortland Realty, Ltd. for her work as a sales manager for Cortland, Ltd. Additionally, Cortland Realty, Ltd.’s U.S. corporate income tax return for the fiscal year October, 1972 through September, 1973 showed expenses of $329,362, largely comprised of compensation to the officers of Cortland Realty, Ltd. salary, wages, and rent. Essentially, Cortland Realty, Ltd. picked up the tab for Cortland, Ltd.’s first year of business. This conclusion is facilitated by Mrs. Colandrea’s testimony that Cortland Realty, Ltd. ceased functioning as a viable sales entity as of December 29,1972. For fiscal year 1974, the year in which Cortland Realty, Ltd. operated solely as a management business, it incurred expenses of $25,170. The expenses for the management side of the business included rents and secretarial services and office help and are obviously minimal in comparison to the overhead involved in real estate sales.

It is evident that the chief asset of Cortland Realty, Ltd., the operating capital from its gross income for fiscal year 1973, was expended on behalf of Cortland, Ltd. Section 15-207 of Md. Code, Comm. Law Art. (1975), provides that “every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud present or future creditors, is fraudulent as to both present and future creditors.” The lack of consideration for Cortland Realty, Ltd.’s payment of the operating expenses, an “obligation incurred”, of Cortland, Ltd. is itself sufficient indicia of fraud, Berger v. Hi-Gear Tire & Auto, 257 Md. 470, 476-77, 263 A. 2d 507 (1970), when coupled with the actual intent of Mrs. Colandrea, as an officer of the corporations, previously discussed, to defraud a creditor of Cortland Realty, Ltd., to lead us to conclude that there was a fraudulent conveyance of the assets of Cortland Realty, Ltd. to Cortland, Ltd. There is no evidence in the record which indicates that any consideration passed between Cortland, Ltd. and Cortland Realty, Ltd. for the payment of the second Cortland’s debts.

Appellant also argues the good will of Cortland Realty, Ltd. was transferred to Cortland, Ltd. This presents us with something of a novel question; may good will be considered an “asset”, Md. Code, Comm. Law Art., § 15-201 (b), which can be fraudulently conveyed. There is some authority to the effect that the good will of a business, in and of itself, is not an asset available to creditors and therefore cannot be the subject of a fraudulent conveyance. See generally, 37 Am. Jur. 2d, Fraudulent Conveyances, § 100 (1968). The premise upon which this view is based is that good will alone is not a proper subject of attachment. National Surety Co. v. Fowler, 217 Ala. 25, 27, 114 So. 408 (1927); Maitland v. Slutsky, 281 Mich. 669, 675, 275 N. W. 726 (1937).

We think this interpretation is too narrow for several reasons. Chief among them is appellant’s requested remedy. Mr. Colandrea seeks an in personam judgment against Cortland, Ltd., not an attachment of that ethereal concept “good will”. The Court of Appeals in Damazo v. Wahby, 269 Md. 252, 305 A. 2d 138 (1973) (Damazo II), indicated that if the subject of the fraudulent conveyance cannot be reached, the person defrauded should be able to recover from the person to whom the transfer was wrongfully made, and through whose hands it passed. Id. at 256. Good will, by its very nature, is not such property, that if fraudulently conveyed, is suitable to the ordinary remedies listed in Comm. Law Art., §§ 15-209 and 210. Specifically, those remedies include setting aside the conveyance, annulling the obligation, or disregarding the conveyance and attaching or levying execution on the property.

Furthermore, we do not believe that the good will of a corporation should be considered separate and apart from the business it generates. Good will has been defined by the Court of Appeals as:

“The advantage or benefit which is acquired by an establishment beyond the mere value of the capital stock, funds, or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers on account of its local position, or from celebrity or reputation for skill, orafñuence or punctuality, or from other accidental circumstances or necessities, or even from ancient penalties or prejudices.” (Emphasis in original) (Citations omitted.) Brown v. Benzinger, 118 Md. 29, 35, 84 A. 79 (1912).

Thus, under the commonly recognized definition of good will, id. at 35, good will should be considered as an incident to the business which it benefits. Furthermore, under Md. Code, Corps. & Ass’ns., § 1-101 (d) (1975), good will is considered to be an asset of a corporation.

In a business such as real estate sales, good will constitutes an integral and necessary ingredient for success. A fully successful real estate sales corporation simply does not spring up overnight. The retention of the name “Cortland”, in and of itself, given the years of experience behind it and its reputation in the community, is sufficient proof of a transfer of good will. Good will, in this context, cannot be considered in a vacuum. The new listings acquired by Cortland, Ltd. are attributable in large part to the previous success of Cortland Realty, Ltd. The tangible expressions of good will in this instance are the commissions received from the listings by Cortland, Ltd. Accordingly, we see no difficulty in concluding that good will is an asset capable of being fraudulently conveyed. In reality the good will transferred from Cortland Realty, Ltd. to Cortland, Ltd. has been placed beyond the reach of the court by the transferee, Cortland, Ltd. In this situation “equity will not allow itself to be frustrated but will adapt its relief to the exigencies of the case and will enter a money judgment if this will achieve an equitable result.” Damazo II, supra at 257.

Judgment reversed as to Carmen J. Colandrea, individually; case remanded for entry of an order consistent with this opinion.

Judgments affirmed as to Cortland, Ltd. and Carmen Management Company, Inc.

Judgment in favor of Dominic J. Colandrea on counterclaims affirmed.

Costs to be paid by appellees/cross-appellants, one-half by Carmen J. Colandrea, individually, one-half by Cortland, Ltd. and Carmen Management Company, Inc.

      . The stock redemption agreement was signed by Mrs. Colandrea in her capacity as president of the corporation.

      . The corporation operated on an October to September fiscal year.

      . This issue is misstated since the chancellor held none of the cross-appellants liable upon the ground of fraud or paramount equity.

      . There was a third reason mentioned by the trial court but it was not specifically relied upon by the chancellor. According to Mrs. Colandrea’s testimony the decision to change Cortland Realty, Ltd.’s name to Carmen Management Company, Inc. was made to identify non-residential sales functions with a non-residential sales corporate name and to comply with a national real estate campaign to use “realtor” only in the corporate name of a residential sales entity.

      . It was also during this year that its name was changed to Carmen Management Company, Inc.


author: Liss, J.,

text:
    CALVIN WATKINS a/k/a VINCENT WATKINS v. STATE OF MARYLAND
    [No. 995,
    September Term, 1978.]
    Decided May 10, 1979.
    The cause was argued before Lowe, Liss and Wilner, JJ.

      Gerald A. Kroop for appellant.

      Michael A. Anselmi, Assistant Attorney General, with whom were Stephen H. Sachs, Attorney General, William A. Swisher, State’s Attorney for Baltimore City, and Dale

      Kelberman, Assistant State’s Attorney for Baltimore City, on the brief, for appellee.
   Liss, J.,

delivered the opinion of the Court.

Calvin Watkins, appellant, was convicted in the Criminal Court of Baltimore City of possession of heroin in sufficient quantity to indicate an intention to distribute. Before the trial on the merits began, appellant filed a pre-trial motion to suppress and exclude evidence on the ground that the evidence was seized as a result of an illegal, warrantless arrest. That motion was denied by the trial judge. After conviction, the judge imposed a six-year sentence. It is from this judgment that the instant appeal has been filed.

The sole issue raised by the appellant is:
Did the trial court err in refusing to exclude the evidence seized from the appellant during the course of an illegal, warrantless search?

The evidence indicated that on February 12, 1978 at approximately 4:40 p.m. Officer McEntree of the Baltimore City Police responded to a call over his police radio to assist an unidentified officer who was in pursuit of two suspects who were armed with an unknown weapon. The officer stated that while cruising in the identified area he saw the defendant in the company of another man on the west side of the 2000 block of Barclay Street. McEntree stated that the man standing next to the appellant, upon observing the officer, yelled, “Run, police,” at which time the appellant started to run. Officer McEntree chased and attempted to grab the appellant for approximately three blocks. In order to avoid apprehension, the appellant swung at the officer and struck him in the face. The officer finally caught the appellant and wrestled him to the ground. While in this position, the appellant reached toward his right foot. The officer grabbed the appellant’s hand and touched what seemed to be a soft, flexible object concealed in the right foot area of the appellant’s clothing. It was clear that the object was not a dangerous weapon. The officer removed the object, a brown paper bag, which contained glassine bags of a white powder afterward found to be heroin.

At the outset, appellant, in contending that the trial court erred in denying his motion to suppress and exclude the evidence seized because of an unlawful arrest, argues that the Constitution of the United States provides that a warrantless search of a person is per se unreasonable and in violation of the Fourth Amendment subject to a few well delineated exceptions. Katz v. United States, 389 U. S. 347, 88 S. Ct. 507 (1972). The trial court held that the evidence was admissible under the exception known as a search incident to a lawful arrest. Chimel v. California, 395 U. S. 752, 763, 89 S. Ct. 2034 (1969). See also Johnson v. State, 8 Md. App. 187, 259 A. 2d 97 (1969).

It is clear the warrantless arrest in this case could not be justified on the basis that the officer had probable cause to believe at the time of the arrest that a felony had been committed, and that the individual he arrested had committed the offense. There is, however, a distinction to be made between an arrest of a suspect and the act of accosting an individual for the purpose of making lawful inquiry.

In McChan v. State, 238 Md. 149, 157, 207 A. 2d 632 (1965), the Court of Appeals distinguished between an arrest which it said was “the detention of a known or suspected offender for the purpose of prosecuting him for a crime” and the approach of an individual by a police officer who questions the individual as to his identity and actions. The statement of facts agreed to by both parties in this case clearly indicates that when the officer approached the appellant he did not make an effort to arrest him and that the appellant fled before any contact occurred between the appellant and the officer. See Kauffman, The Law of Arrest in Maryland, 5 Md. L. Rev. 125, 131; 5 Am. Jur. 2d Arrest, Sec. 1.

Terry v. Ohio, 392 U. S. 1, 88 S. Ct. 1868 (1967) first stated the distinction between an arrest and the “stop and frisk” right of a police officer. The two actions of a stop and frisk were found not inseparable. The Supreme Court, in addressing the question of when a “stop” was permissible in the context of a “stop and frisk,” said:

One general interest is of course that of effective crime prevention and detection; it is this interest which underlies the recognition that a police officer may in appropriate circumstances and in an appropriate manner approach a person for purposes of investigating possibly criminal behavior even though there is no probable cause to make an arrest. 392 U. S. at 22.

To accomplish this purpose a policeman may act upon less than probable cause but must be able “to point to specific and articulate facts which, taken together, with rational inferences from those facts, reasonably warrant that intrusion.” Id. at 21.

In Gibbs v. State, 18 Md. App. 230, 306 A. 2d 587 (1973), this Court, speaking through Judge Moylan, made a thorough analysis of the holding of the Supreme Court in Terry v. Ohio, supra. We recognized that the Supreme Court was “attempting to strike a delicate balance between the necessity for some flexibility in permitted police behavior in the investigation and prevention of crime on the one hand, and the rights of citizens to be free from unreasonable government intrusion on the other hand.” 18 Md. App. at 235 n. 1.

We stated in Gibbs, supra, that

because the “stop” is more limited in scope than an arrest and because the “frisk” is more limited in scope than the full-blown search, such actions, though not to be undertaken arbitrarily, may be reasonable within the contemplation of the Fourth Amendment upon a predicate less substantial than “probable cause.” Terry made it clear that “stop and frisk” rationale was to be judged not by the Warrant Clause of the Fourth Amendment, but rather by the Reasonableness Clause. 18 Md. App. at 237.

The measure of reasonableness has been labeled as “suspicion,” “reasonable suspicion,” “reason to believe,” but the officer is not entitled to act on his inchoate and unparticularized “hunch” but only on the specific reasonable inference which he is entitled to draw from the facts in the light of his experience. Terry, supra, at 27.

Our examination of the agreed statement of facts and the testimony at the suppression hearing discloses that the “specific and articulable facts” which provided the predicate for the stop in this case were: that Officer McEntree had information that a fellow officer had been pursuing two armed men in the vicinity of the 2100 block of Barclay Street; that the officer then heard over the radio that the pursuing patrolman had lost sight of the suspects in the area of the 2100 block of Barclay Street; that Officer McEntree observed the appellant standing with another man in the middle of the 2000 block of Barclay Street approximately one-half block from the point where the other officer lost sight of the suspects; and that when Officer McEntree approached the other man yelled, “Run, police,” and the appellant than fled, failing to heed repeated requests to halt. These facts, as articulated by the police officer, were sufficient to raise a rational inference that the appellant may have been “connected with criminal activity” which would justify a stop. Williams v. State, 19 Md. App. 204, 310 A. 2d 593 (1977). Compare Anderson v. State, 282 Md. 701, 387 A. 2d 281 (1978).

Concluding as we do, that there was legal justification for the stop, there remains the question of whether a policeman may forcibly effectuate a stop in the event an individual either ignores his request to stop or physically resists the stop.

The majority opinion in Terry v. Ohio, supra, did not address that question, but Mr. Justice Harlan, in his concurring opinion, observed that by the very nature of the governmental intrusion permitted by Terry, the possibility of a forcible stop is necessarily contemplated. He said:

I am constrained to fill in a few gaps, as I see them in ... [the] opinion.
In the first place, if the frisk is justified in order to protect the officer during an encounter with a citizen, the officer must first have constitutional grounds to insist on an encounter, to make a forcible stop .... [A] policeman ... must first have a right not to avoid him [a citizen suspect] but to be at his presence. That right must be more than the liberty ... to address questions to other persons, for ordinarily the person addressed has an equal right to ignore his interrogator and walk away; .... I would make it perfectly clear that the right to frisk in this case depends upon the reasonableness of a forcible stop to investigate suspected crime. 392 U. S. at 31-33.

Similarly, Mr. Justice White, in his concurring opinion in Terry, supra, at 34, observed that “... given the proper circumstances, such as those in this case, it seems to me the person may be briefly detained against his will while pertinent questions are directed to him.” In Adams v. Williams, 407 U. S. 143, 145, 92 S. Ct. 1921 (1972), Mr. Justice Rehnquist said: “The Fourth Amendment does not require a policeman who lacks the precise level of information necessary for probable cause to arrest to simply shrug his shoulders and allow a crime to occur or a criminal to escape.”

Given then the factual reasonableness of the officer’s effort to interrogate the appellant, the attempted stop by force was reasonable. Thus, the appellant’s theory that he had the right to resist an illegal detention must fail. Under the facts of this case, Cornish v. State, 215 Md. 64, 137 A. 2d 170 (1957) and Sugarman v. State, 173 Md. 52, 195 A. 324 (1937), are simply inapplicable.

The action of the appellant in striking the officer while attempting to escape, in view of the circumstances, amounted to an assault which was thereby the commission of a misdemeanor in the presence of that officer. The subsequent arrest of the appellant without a warrant was, therefore, a valid arrest, and the search of the appellant’s pants leg area after his arrest which followed conduct that indicated the concealment of contraband in the leg area was within the permissible scope of search incident to arrest. Chimel v. California, supra. See also Johnson v. State, supra.

Judgment affirmed.

Costs to be paid by appellant.