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(Md., 131 Atl. 332.)

authorized issue of bonds, and, pending the preparation of the permanent bonds, the Hopkins Building Corporation should prepare and deliver to the trustees for certification and delivery to the Fisher & Carozza Bros. Company temporary bonds of like tenor and form as described in the deed of trust, but different in amounts, as follows: (a) Temporary certificate for $220,000 of series A; (b) temporary certificate for $80,000 of series B; and (c) temporary certificate for $320,000 of series B.

kins Building Corporation to the Fisher & Carozza Bros. Company.

IV. And, immediately following the execution of the deed of trust, Antonio T. Carozza and Margaretta M. Carozza, his wife, would enter into a contract with the Federal Finance & Credit Company and the Baltimore Acceptance Corporation (1) to guarantee to these two corporations the payment of any deficiency between the par value ($295,000) and interest of the bonds and the amount received by the said corporations for the sale or redemption of said bonds on June 15, 1922, with a stay of the enforcement of any obligation arising under this guaranty until August 15, 1922; and (2) to promise not to dispose of or incumber any of the real estate of the guarantors, except a property in Seminole avenue in Catonsville, until the principal and interest of said bonds should be paid.

III. When the temporary bond certificates were ready for delivery, the lending corporations would pay to the Fisher & Carozza Bros. Company the sum of $220,000 as agreed, and receive therefor: (1) All of the issue of first mortgage bonds, known as series A, amounting to $220,000 in principal and $75,000 of the second mortgage bonds, being a part of series B; (2) an acknowledgment by the Fisher & Carozza Bros. Company (a) that its accept

ance of series A and B of the bonds was in full payment of all indebtedness or obligations of the Hopkins Building Corporation, and (b) that the entire amount due or to become due and owing to subcontractors for work or materials on the Hopkins Apartments does not exceed the sum of $220,000, and that the sum received by the Fisher & Carozza Bros. Company from the buyers of the bonds would be used in the liquidation of all claims of such contractors, and that such buyers would have the right to see to the application of the purchase money for the bonds; and (3) a certificate from the Hopkins Building Corporation (a) that it had no creditors and owed no debts other than the bonds known as series A and B, and such amount as might be due to the Commonwealth Finance Corporation, and (b) that the issue of the bonds to the Fisher & Carozza Bros. Company in the amount of $620,000 in series A and B liquidated in full all of the indebtedness of the Hop

The procedure so formulated was possible only through the complete co-operation of all the parties, and this was assured by the imperative exigency of the situation and the controlling ownership of Carozza in both the Hopkins Building Corporation and the Fisher & Carozza Bros.

Company. The projected plan was fidelity to all the formal requirecarried through with meticulous ments of such corporate acts. And on December 23, 1921, the Hopkins Building Corporation, Antonio T. Carozza and Margaretta M. Carozza, his wife, Duke Bond and Lee S. Meyer, trustees under the deed of trust to secure the bonds, began equity proceedings against William A. Mills and the Commonwealth Finance Corporation to have declared null and void the mortgage and mortgage note given by the Hopkins Building Corporation in the purporting loan of $1,080,000, on the repayment by the Hopkins Building Corporation of such amount should be found due and owing. This bill of complaint was met by a counter bill of complaint of the Commonwealth Finance Corporation and William A. Mills exhibited

as

against Edwin H. Brownley, Antonio T. Carozza, Duke Bond, and Lee S. Meyer, trustees, the Hopkins Building Corporation, the Fisher & Carozza Bros. Company, and Margaretta M. Carozza, on the theory that the form of the loan of $1,080,000 and of the mortgage deed securing the same was not in accordance with the agreement and intention of the parties, and praying, among other things, that the mortgage might be reformed so as to remain a lien and be in accord with the agreement as alleged by the complainants, and that the deed of trust to secure the $420,000 issue of bonds might be declared null and void in so far as it might in any wise affect the lien of the Commonwealth Finance Corporation. This crimiThis crimination and recrimination of the adverse parties went no further than the pleadings. With the money obtained from the two finance companies, the Hopkins Building Corporation was enabled to finish its apartment house, and this put it in a position permanently to finance its enterprise towards the close of April, 1922, if the conflicting lien claims could be released and the litigation dismissed.

The Metropolitan Life Insurance Company agreed to furnish $500,000 on a first mortgage lien on the Hopkins Apartments, and the Commonwealth Finance Corporation was willing to accept a second mortgage lien of $575,000 on the Hopkins Apartments, and a mortgage on the Lake Drive Apartments, subject to a prior mortgage of $250,000, in liquidation of a like amount of its claim. These two loans would provide a fund of $1,075,000 to refinance the Hopkins Building Corporation, but this amount was insufficient to the extent of approximately $50,000. It was then that Carozza and his wife agreed to procure the necessary funds by a loan from Addison T. Mullikin of $50,000, payable on August 15, 1922, without interest, and to secure the loan by a mortgage on the property

called Ingleside, which was owned by Antonio T. Carozza, and which was subject to a prior mortgage lien of $70,000 held by the Loyola Building Association. The preliminary authorization of the stockholders and directors of the Hopkins Building Corporation having been first obtained, the two equity causes were dismissed; the mortgage to the Commonwealth Finance Corporation for $1,080,000 was released, and the note for that amount of the Hopkins Building Corporation surrendered and canceled; the mortgage to Bond ard Meyer, trustees, to secure the bond issues of $640,000 was released, and the temporary bond for $220,000 of series A and the temporary bond for $80,000 of series B were surrendered by the Federal Finance & Credit Company and by the Baltimore Acceptance Corporation, and canceled; and the temporary bond for $320,000 of series B was also surrendered by the Fisher & Carozza Bros. Company and canceled. The Hopkins Building Corporation then executed a first mortgage lien on the Hopkins Apartments to secure a corporate indebtedness of $500,000 on the loan of the New York Life Insurance Company, and a second mortgage loan on the Hopkins Apartments to secure a corporate indebtedness of $575,000 to the Commonwealth Finance Company. In this second mortgage, Antonio T. Carozza and his wife united to convey the Lake Drive Apartments as a further security for the indebtedness. And then Antonio T. Carozza and his wife executed to Addison T. Mullikin their mortgage deed for an indebtedness of $50,000, payable on August 15, 1922, without interest, and conveyed as security the Ingleside property. The discount on this loan made it yield $49,090, and this amount was paid to the Title Guarantee & Trust Company, which was guaranteeing the title and supervising the settlement, ing the settlement, by the checks of the Federal Finance & Credit Company and the Baltimore Acceptance

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(— Md. —, 131 Atl. 332.)

Corporation for which Mr. Mullikin was acting as agent.

The relation of the parties and the manner of settlement will appear from the following tabulation of charges and disbursements:

Amount due the Commonwealth Finance money advanced ...

Interest thereon to May 1, 1922

Bonus agreed upon ..

Total obligation assumed ...

Credit of portion of Title Company's fee
Credit of mortgage indebtedness of Hopkins
Building Corporation

mortgage deed and the deed of trust to secure the payment of the debts of the principal debtor, and that he guaranteed the payment of both debts of the principal debtor. It is doubtlessly correct to say that the

Corporation for

Balance to Commonwealth Finance Corporation

Bonds held by the Federal Finance & Credit Company and

Baltimore Acceptance Corporation:

Series A

Series B

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....

The evidence of the records and of the paper writings are a complete denial that either the mortgage loan negotiated with the Commonwealth Finance Corporation or the one made with the Federal Finance & Credit Company and the Baltimore Acceptance Corporation was upon the basis of the personal credit or the individual property of the appellant, Antonio T. Carozza. The principal debtor was in each instance the Hopkins Building Corporation, a subsisting legal entity. It is true that Carozza conveyed his individual property by both the

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$203,745.09 $203,745.09

$220,000.00 75,000.00

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Total charges or disbursements
Amount of funds in hand:

Amount of mortgage loan of Metropolitan Life Insurance
Company

$500,000.00

Proceeds of mortgage loan of the Federal Finance & Credit
Company and of the Baltimore Acceptance Corporation ... 49,090.00 $549,090.00

43,671.57

$549,090.00

loans would not have been made if he had not pledged his individual property and property and given his personal guaranty. Nevertheless, his obligation was that of a surety or guarantor in relation to the two mortgage loans of $1,080,000 and $620,000. Nor is it unreasonable or uncommon for a stockholder, who is the substantial owner of the corporation, to lend the credit of his guaranty or his property in an effort to prevent financial distress or ruin of the corporation. If a stockholder assumes the legal relation of a guar

antor in the transactions of the corporation, he will not ordinarily be heard to deny this chosen status, and to say that a contract made in the name of the corporation, and within its competency, and as its corporate act, was not a corporate, but his own individual, act, because the corporation had ceased to exist, for the reason that he was at the time of the apparent corporate act the sole owner of all the corporate stock. While the appellants offered testimony tending to establish that the bond issue was a loan made by the appellees to Carozza individually, and that the Hopkins Building Corporation and the Fisher & Carozza Bros. Company were not functioning at the time as corporations, because Carozza had acquired all their outstanding stock with the knowledge and at the instance of the two finance corporations, yet the clear weight of even the oral testimony is to the contrary, and, when the written evidence is considered, the conclusion is irresistible that the Hopkins Building Corporation and the Fisher & Carozza Bros. Company have never ceased to function as corporate entities.

The narrative in this opinion of corporate acts need not be repeated, but it is sufficient to say that the deed of trust from the Hopkins Building Corporation to Duke Bond and Lee S. Meyer, trustees, dated December 12, 1921, shows by its recitals that the action taken was pursuant to and in the exercise of its corporate powers; that every requisite precedent authorization of stockholders and directors for the issue of the bonds had been duly given; that the bonds were to be issued as a corporate obligation over the corporate signature, sealed with its corporate seal and attested by its secretary, and to be delivered to the trustees by the Hopkins Building Corporation, which covenanted to pay the bonds on June 15, 1922. The deed of trust was signed with

Estoppelcorporationsstockholder

guarantorright to claim individual rights.

its corporate name by A. T. Carozza, president, sealed with its corporate seal, attested by J. A. Douglass, as its secretary, acknowledged by "Antonio T. Carozza, president of the Hopkins Building Corporation;" and Edwin H. Brownley, vice president of the Fisher & Carozza Bros. Company, made oath to the consideration being true. The temporary bonds were issued in the name of the corporation written by A. T. Carozza, as its president, and attested by J. A. Douglas, as its secretary. Not only was it a going concern, but it was so affirmed in a personal guaranty of Antonio T. Carozza and wife to the two purchasers of the bonds in the amount of $295,000, when it was asserted that Carozza was interested in the Hopkins Building Corporation, and would guarantee its guarantee its payment of these bonds at maturity. Again on December 23, 1921, the Hopkins Building Corporation was a party plaintiff in a cause where it was alleged to be a corporation and that "the principal stockholder in the said corporation is the plaintiff, Antonio T. Carozza," who verified the bill of complaint in his official capacity as its president. Furthermore, the Hopkins Building Corporation filed in March, 1922, its report with the state tax commission of Maryland in compliance with the statute, and this report gave A. T. Carozza, with 20 shares, Edwin H. Brownley, with 14 shares, and John A. Douglass, with one share as its three stockholders on January 1, 1922, and was signed by John A. Douglass as its secretary and treasurer, and was impressed with the corporate seal. And finally the Hopkins Building Corporation on May 1, 1922, executed a mortgage on its property known as the Hopkins Apartments to the Apartments to the Metropolitan Life Insurance Company for $500,000, and then a second mortgage to the Commonwealth Finance Corporation for $575,000 in full and complete compliance with all the prerequisites and forms of corporate action.

(— Md., 131 Atl. 332.)

2. The second question of fact is whether the issue and delivery of $220,000 in par value of the first mortgage mortgage bonds of the Hopkins Building Corporation and of $75,000 in par value of its second mortgage bonds upon payment of $221,250 was a usurious transaction or an actual sale and purchase of the bonds in good faith. The acquisition of the bonds was in form of sale and purchase, but usury is a question of intention, and in the search for that intention no shift or device is permitted to thwart the inquiry, and the real substance of the transaction will determine its nature, and not the color or form it has assumed. Tyson v. Rickard, 3 Harr. & J. 109, 5 Am. Dec. 424; Andrews v. Poe, 30 Md. 485, 488; Rouskulp v. Kershner, 49 Md. 516, 524; Montague v. Sewell, 57 Md. 407; Gaither v. Clarke, 67 Md. 18, 29, 8 Atl. 740; Bowdoin v. Hammond, 79 Md. 173, 181, 28 Atl. 769.

porate form

The equitable rule that the form of a corporate entity may be disreCorporations garded where the -when cor- ownership of all of disregarded. its corporate stock is in one person is not of general application, but is commonly limited to those instances in which it becomes necessary to disregard a formal corporate existence to prevent fraud or imposition or to enforce a paramount and superior equity. Bellona Co's Case, 3 Bland, Ch. 442, 446; Bauernschmidt v. Bauernschmidt, 101 Md. 148, 161, 162, 60 Atl. 437; Bear Creek Lumber Co. v. Second Nat. Bank, 120 Md. 566, 569-571, 87 Atl. 1084; Tompkins v. Sperry, J. & Co. 96 Md. 560, 583, 54 Atl. 254; Swift v. Smith, 65 Md. 428, 436, 57 Am. Rep. 336, 5 Atl. 534; Pott v. Schmucker, 84 Md. 535, 552, 554, 35 L.R.A. 392, 57 Am. St. Rep. 415, 36 Atl. 592; Folsom v. Detrick Fertilizer & Chemical Co. 85 Md. 52, 70, 36 Atl. 446; Matthews v. Headley Chocolate Co. 130 Md. 523, 536, 100 Atl. 645; Bethlehem Steel Co. v. Raymond Concrete Pile Co. 141 Md. 81-85, 118 Atl. 279; Cook, Corp. 7th ed. §§ 6, 663, 664; 2 Machen, Corp. §§ 1075, 1078; France, Corp. 2d ed. § 17; Morawetz, Corp. 2d ed. §§ 232, 234.

It would be an unjustifiable perversion for us to permit this equitable rule to be invoked, by way of surprise, in aid of deceit.

The status of the Hopkins Building Corporation was that of a going, functioning, corporate entity and our conclusion on the record is that, so accepting it, the appellees contracted with the corporation, qua corporation, and that the legal relation arising out of and implicit in the contractual obligation of the corporate obligors cannot now be changed to the status of a contract between an individual and a corporation. It is a consequence of this finding of fact that the principal debtor was the corporation and that Antonio T. Carozza and his wife were the guarantors of the principal debtor's obligation.

Usury-question of intention.

From the time that the Hopkins Building Corporation applied for a loan of about $220,000 to be secured by a mortgage deed, this corporation, the Fisher & Carozza Bros. Company, the appellees, and Antonio T. Carozza had notice and knowledge of every successive step until the $295,000 in bonds of the first-named corporation were delivered to the appellees on the payment of the sum of $221,250. Tiffany v. Boatman's Sav. Inst. 18 Wall. 375, 21 L. ed. 868. As stated by Mr. Addison E. Mullikin, the original plan was to borrow the money of the appellees on a mortgage of the same tenor as that held by the Commonwealth Finance Corporation. What the Hopkins Building Corporation sought was a loan and not a market for a contemplated issue of bonds. This is made quite clear by the weight of the proof, and one quotation from the testimony of Mr. Boone, the secretary and treasurer of the Baltimore Acceptance Corporation, is illustrative. Recalling his first interview, the witness declared that the presi

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