Kline v. Lightman

• Decision Date: 20 July 1966
• Docket Number: No. 386,386
• Parties: Joel KLINE v. William R. LIGHTMAN.
• Court: Maryland Court of Appeals

Page 460

243 Md. 460

221 A.2d 675

Joel KLINE v. William R. LIGHTMAN.

No. 386.

Court of Appeals of Maryland.

July 20, 1966.

James F. FitzGerald, Silver Spring, for appellant.

Charles A. Dukes, Jr., Hyattsville, for appellee.

Before PRESCOTT, C.J., and HAMMOND, MARBURY, OPPENHEIMER and BARNES, JJ.

BARNES, Judge.

The principal question presented by the appeal is the application of Section IV (2) of the Statute of Frauds, 29 Chas. 2, Cap. 3 (1676), 2 Alexander's British Statutes (Coe's Ed.) pages 689-690, requiring a written memorandum in order to enforce a contract to answer for the debt, default or miscarriages of another person, to an oral contract between the appellant and defendant below, Joel Kline (Kline) and the appellee and plaintiff below, William R. Lightman (Lightman). The action was originally instituted in the Circuit Court for Montgomery County, but was later removed for trial to the Circuit Court for Prince George's County where it was tried before Judge Bowie and a jury. The jury rendered a verdict in favor of Lightman for $18,500. Upon the verdict final judgment was duly entered after the trial court had deniel Kline's motion for a judgment n. o. v. or in the alternative, for a new trial. Kline filed a timely appeal from that judgment.

The facts are somewhat bizarre. Lightman, who had been a farmer engaged principally in raising hogs, sold his farming business and in July 1963 was desirous of entering into the business of lending money on mortgages. He was referred to Raymond Towsend (Towsend) by Crane Brothers (apparently some business acquaintances) who in turn introduced Lightman to Harold Rothman (Rothman), a person who was familiar with the mortgage lending business in and around Washington D. C., and who also decided to go into that business. The three met at Towsend's office and agreed to go into the mortgage lending business together. A corporation was to be formed in which Rothman would have a 40% interest and Lightman and Towsend would each have a 30% interest. Lightman and Towsend were each to put $4,000 into the venture and Rothman was to contribute his experience and knowledge of the business. Towsend was to be inactive in the operation of the business but Lightman and Rothman were to be active and were ultimately to receive salaries. Because of Rothman's financial difficulties, it was arranged that Towsend would advance his $4,000 to Rothman, who would repay it to the new business from his prospective earnings from the business. Within a day or two, Towsend telephoned Lightman that he could not raise his $4,000 immediately, but could have it the following Tuesday. He requested Lightman to advance his $4,000 for which he would give Lightman his promissory note for that amount and would 'get it back to you Tuesday.' Lightman agreed to do this, drew his check to Rothman for $4,000, which Rothman endorsed and thereafter Lightman cashed and gave Rothman the $4,000 in cash. Lightman also put up his $4,000, so that at the beginning of the venture Lightman had put up $8,000.

Robert S. Zelko, a member of the Maryland Bar with offices at Silver Spring, Maryland, was employed to form a Maryland corporation known as the Public Mortgage Corporation (Public Mortgage) for which Lightman gave him his check for $100 as an advance to the business. The Articles of Incorporation were signed on August 1, 1963 by the three incorporators used by Mr. Zelko for the incorporation and were filed with and approved by the Department of Assessments and Taxation on August 13, 1963. The Articles of Incorporation provided that the total number of shares which the corporation had authority to issue was 1000 shares without par value, all of one class. There were, however, no shares issued.

Because of his financial difficulties Rothman had caused the Montgomery Acceptance Corporation (Montgomery Acceptance) to be incorporated on January 21, 1963 to hold title to Rothman's home which was its only asset and its only activity. The house had been sold so that when the new business was started that corporation was available for any use it might have. Lightman became president and treasurer of both Public Mortgage and Montgomery Acceptance. His wife, Marie Lightman, became secretary and his brother Gene Lightman became vice president of both corporations. Apparently there were no formal meetings of boards of directors and no formal election of officers. A bank account for Public Mortgage was opened with withdrawals upon the signature of Lightman as president and treasurer.

An office at 5101 Baltimore Boulevard, Hyattsville, Maryland was rented, new furniture was purchased, and the business began to operate with Rothman as general manager. Lightman advanced from time to time a total of approximately $20,500 for the business (including the original $8,000) and performed services of the estimated value of $2,000. He shortly became quite disenchanted with the whole arrangement and after two months decided that he would no longer continue to be associated with Rothman because of Rothman's reputation and associations. The situation became so difficult that Lightman finally on September 12 or 13 gave Rothman an alternative either to 'get a partner to buy me out or he would have to leave, one or the other.' Lightman gave Rothman two weeks to comply and at the end of the period, on September 27, at 6:00 P.M., he asked Rothman whether he had a purchaser to buy him out, to which Rothman replied 'yes; but he is not here as yet. He is on his way.' Lightman then had the locks changed on the office door so that Rothman no longer had access to the office.

At approximately 7:00 P.M. on September 27, Kline telephoned Rothman and a meeting was set up at the Hot Shoppe in Silver Spring for 9:00 P.M. for Kline and Zelko, who came as Kline's attorney, Rothman, Lightman and Peterson, a friend of Lightman. The meeting was both protracted and stormy. It finally was transferred from the Hot Shoppe to Zelko's office at approximately 1:00 A.M. the morning of September 28th. Lightman testified that as a result of this meeting there was an oral agreement reached on the terms of the agreement and by '3:00 o'clock in the morning everything was put down on paper which I agreed to, Mr. Kline agreed to and Mr. Rothman agreed to, and Mr. Zelko, acting at the time for Mr. Kline.' The agreement was to be retyped as Mr. Zelko was not a good typist but Mr. Zelko 'knew what it was he typed it all, and we all agreed on it.' After this Rothman asked 'Now, is it all right if I take over the business now' to which Lightman replied 'Predicated upon what is put down on the paper I am satisfied.' The original writing typed by Zelko provided that Kline was to purchase Public Mortgage and Montgomery Acceptance for $22,500 of which $4,000 was to be paid down, a negotiable note for $3,500 dated November 9, 1963 was to be given to be discounted only with the approval of Kline at a bank of his choosing; there were to be 31 weekly payments of $350 each and one weekly payment of $150, making total weekly payments of $11,000 and there was to be a $4,000 final payment due 6 months from the contract date. Lightman was to turn over to Zelko, Kline's attorney, as trustee the Towsend $4,000 note and Lightman and his wife and broker were to resign as officers of Public Mortgage and Montgomery Acceptance. Lightman was also to give a release to Towsend.

By agreement, Kline's name was stricken out from the original draft and Public Mortgage and Montgomery Acceptance substituted in his place and one George Resta, an employee of Rothman, was added as a party to the contract. Rothman testified that Resta had been requested by Rothman 'to be president of the company after I had concluded my deal with Mr. Lightman, and Mr. Resta agreed, and he was a complete straw. He gave his resignation as President at the time he was nominated as President. Strictly a straw party.' Lightman testified that he did not know Resta but as Mr. Zelko had stated that Kline did not want his name associated with Rothman or directly with Public Mortgage 'there was nothing for me to worry about as long as Joel Kline paid the money and guaranteed * * *. I knew Kline was substantial, and he checked out the funds he had, and as long as he guaranteed it' Lightman didn't care who 'took it over. * * * Mr. Kline was a party to the whole agreement. He was the one. * * * He was satisfied and I was satisfied by him guaranteeing.' He later testified 'As far as I was concerned he made the contract his way, not my way, his way. His attorney stated how he wanted it so his name would not show with Public Mortgage or Rothman's name as I wanted to get away from Rothman.'

The next meeting was scheduled for October 2, 1963 at the office of Public Mortgage. At this meeting Lightman, Kline, Zelko and Rothman were present as well as Henry L. Nemore, Lightman's accountant who came down from Philadelphia for the meeting. Nemore had calculated and verified Lightman's advances to Public Mortgage from the corporation's books and other records. He testified that the October 2 meeting 'was to formalize the final settlement on the sale of the business by Mr. Lightman', and that 'there was an agreement at that time.' At that time Zelko gave his check to Lightman for $4,000. On this check appears the notation 'Loan by Joel Kline to Public Mortgage Corporation and Montgomery Acceptance Corporation for payment to William Lightman.' Lightman signed and delivered his releases and resignations and took the forms of releases and resignations of his wife and brother for execution by them. There were minor changes to be made in the draft of the written agreement. The guaranty form for execution by Kline recited that Lightman had sold to Public Mortgage and Montgomery Acceptance 'all of the right, title and interest' of Lightman in those corporations 'by an agreement dated October 2, 1963'; that part of the consideration was $4,000...