Rolling Inn, Inc. v. Iula

Collins, J., delivered the opinion of the Court. This is an appeal from a judgment in the amount of $2,500.00, with interest at the rate of five per centum, and costs, entered by the trial judge, sitting without a jury, in favor of the appellee against the appellant. The facts in this paragraph are not disputed. The plaintiff, appellee, Frank J. lula, on December 19, 1949, personally borrowed from the Catonsville National Bank $2,500.00 on a note, and the check of the bank for that amount was duly endorsed and deposited to the account of the appellant, defendant, Rolling Inn, Inc., (the corporation).

This was a personal loan to the plaintiff. The defendant is a corporation of the State of Maryland, incorporated on December 1, 1949. The plaintiff became president at its formation. There were three principals in the formation of the corporation, Messrs, lula, Lucian W. Moree and Wesley Bowen.

These three, on November 25, 1949, bought a parcel of real estate located near Ingleside Avenue in Baltimore County. The supper club business conducted thereon was bought from a Maryland corporation known as Villa Donna, Inc. The agreement of purchase was signed November 25, 1949, by these three persons individually and as “Rolling Inn, Inc., a corporation to be formed”. The corporation was formed on December 1, 1949, the three vendees being the stockholders and directors. Mr. Moree originally put $1,500.00 in the corporation.

About one month later he became dissatisfied and wanted to get out. The appellee testified that this was agreeable to him and to Mr. Bowen. However, they lacked the necessary cash to pay Mr. Moree the $1,500.00. The corporation had very little cash at that time and had borrowed to the full extent of its assets and had no further credit.

However, Mr. lula had individual credit and the loan of $2,500.00 was made to him personally. Mr. lula and Mr. Moree testified that $1,500.00 of this $2,500.00 was paid to Mr. Moree to reimburse him for the amount he originally put in the corporation. No ⁵⁹⁹ stock had been issued to him. He had also agreed to advance $1,000-00 additional to the corporation which he never did.

He was relieved of this obligation by Messrs. lula and Bowen. Mr. lula testified that this $2,500.00 note was to be retired as soon as possible and the corporation paid the interest on the note each month as it was renewed. On December 28, 1949, the corporation, by Frank J. lula, President, executed a mortgage for the term of one year to Frank J. lula personally for $15,000.00. He acknowledged the mortgage as president and made oath as to the consideration personally.

This mortgage was drawn by attorney Eugene M. Carozza who was named as defendant’s attorney therein. Mr. Carozza testified that he represented both the corporation and Mr. lula personally. This mortgage contained, among other provisions, the following: “* * * being the aggregate agreed upon amount due by said mortgagor unto said mortgagee for advances made from time to time heretofore by said mortgagee to said mortgagor.” It was recorded on June 27, 1950. On January 15, 1950, the corporation, by Frank J. lula, President, executed a chattel mortgage to Frank J. lula, personally, in the amount of $3,500.00, which mortgage was recorded on July 5, 1950.

It was also acknowledged for the corporation by Mr. lula as President and oath as to the consideration was made by him personally. This mortgage included the above quoted clause which was in the former mortgage. When asked the dates and exact amounts of his advances to the corporation, Mr. lula testified that just before the corporation purchased the real estate he advanced $4,500.00. On November 25, 1949, when the real estate was bought he advanced $10,500.00.

He also gave the corporation a note of $4,000.00 for stock which he paid two months later. About sixty days later he advanced an aggregate of $3,500.00 to the corporation for the purpose of paying bills and making improvements. He further said that neither of the mortgages included the $2,500.00 note which he had given personally to the bank. Mr. lula got out of the corporation about July 19, 1950, and sold his stock to Mr. Wesley Bowen.

On January 31, 1951, Mr. Frank Armetta, Mr. Carroll F. Kelly, who became ⁶⁰⁰ president of the corporation, and Mr. James S. D’Agostino executed an agreement by which Mr. Armetta and Mr. Kelly agreed to sell Mr. D’Agostino fifty shares of the common stock of Rolling Inn, which represented fifty percent of the outstanding common stock of that corporation, for the sum of $6,000.00. This agreement