Emala v. Walter G. Coale, Inc.

Hammond, C. J., delivered the opinion of the Court. Walter G. Coale, Inc. (Coale) took a judgment by confession against Emala Associates, Inc. (Associates) and “Frank J. Emala, pres.” on June 1, 1959, on a promissory note for $3,412.76. Frank J. Emala, denying that he was individually liable, refused to pay the judgment. Associates has gone out of business and has had no assets.

In August 1963 Coale filed a petition seeking a declaration that the judgment entered against “Frank J. Emala, pres.” “binds Frank J. Emala individually and personally.” After a hearing at which there was received the testimony of Coale’s witnesses as to the background of the giving of the note and the manner and purpose of its endorsement, Judge Jenifer ruled in a careful and thorough opinion, first, that declaratory relief under the Uniform Declaratory Judgments Act of Maryland, Code (1957), Art. 31A, was permissible and appropriate and, second, that Emala was personally liable for the amount of the debt represented by the promissory note on which judgment was entered. Emala appealed and here urges as he did below that declaratory relief is not appropriate “to reform the judgment by confession,” and that he was not personally liable for the promissory note sued on and is not individually bound by the judgment. We find no need to decide the first question since, assuming declaratory relief to have been proper and appropriate under ¹⁶¹ the circumstances, we think that Emala was not personally liable on the note and not bound individually by the judgment. The testimony shows that Coale began selling farm implements and equipment to Associates in 1956.

On March 26, 1958, Associates owed Coale $2,527.23. Mr. P. Mitchell Coale, president of Coale, felt there was need for more security than Associates’ present or potential ability to pay offered and dispatched the salesman who handled the Associates account to procure a thirty-day promissory note for the balance due signed by Associates and endorsed by Emala individually. The salesman accomplished his mission. The two corporations continued to do business and each month a note for the balance due Coale by Associates—the amount of the original note plus interest and new charges, less payments made on account—was given and the preceding note was returned to Associates.

For a while Fmala endorsed each note personally. Beginning with the note of February 25, 1959, or perhaps even before that, he did not endorse as “Frank J. Emala,” as he had done previously, but as “Frank J. Emala, pres.” which was the way he had always signed the notes under the name of the corporation of which he was president, Emala Associates, Inc. The notes were deposited with a bank as collateral for Coale’s debt to the bank and each was endorsed by Coale under Emala’s endorsement, in whatever form it appeared. Apparently when the March 1959 renewal note was received from Associates and the February note came back from the bank, Mitchell Coale noticed the addition of the letters “pres.” to Emala’s signature. He and another of his salesmen, named Niblett, went to see Emala in an effort to have him give them a new note endorsed without the letters “pres.” Both testified candidly that Emala bluntly and emphatically told them he had been advised