Queen City Enterprises, Inc. v. Independent Theatres, Inc.

• Decision Date: 16 January 1963
• Docket Number: No. 161,161
• Parties: QUEEN CITY ENTERPRISES, INC. v. INDEPENDENT THEATRES, INC.
• Court: Maryland Court of Appeals

Page 387

230 Md. 387

187 A.2d 459

QUEEN CITY ENTERPRISES, INC. v. INDEPENDENT THEATRES, INC.

No. 161.

Court of Appeals of Maryland.

Jan. 16, 1963.

Philip J. LaMacchia, Berwyn Heights, for appellant.

James H. Heller, Washington, D. C. (Sher, Oppenheimer & Harris, and Lee M. Hydeman, Washington, D. C., on the brief), for appellee.

Before HENDERSON, HAMMOND, PRESCOTT, HORNEY and MARBURY, JJ.

HORNEY, Judge.

This action ex contractu to recover money due and owing under a film-booking contract presents multiple questions arising out of the 'sale in bulk' of the business of operating drive-in motion picture theatre.

The plaintiff is Independent Theatres, Inc. (Independent or creditor). The defendants are Queen City Enterprises, Inc. (Queen City or purchaser) and Baland Corporation (Baland or seller). Independent is a motion picture booking agent. Queen City is the present owner of the Potomac Drive-In Theatre in Cumberland. And Baland was the former owner of the business.

Under contract between Independent and Baland, the former undertook to book films for the latter for a fee of $50 per week payable in advance. The contract further provided for cancellation of the agreement by either party on 120 days notice, and that in the event of a sale of the theatre, Baland should pay for all fees accruing within the cancellation period whether services were rendered or not.

In February of 1961, Queen City notified Independent, pursuant to the notice requirements of the bulk sales statute, that it was about to purchase the drive-in theatre as a going business and that it would assume payment of Baland's account in the sum of $1900 (or such sum as might be due if that be incorrect) and pay it direct to the creditor. The following day Independent advised Queen City that it was due $1900 for services, plus a penalty of $800 computed under the cancellation clause, but would accept 50% of the penalty, or a total of $2300. Accordingly, in the list of creditors attached to the bill of sale for the theatre business the amount listed as due Independent was increased from $1900 to $2300.

In the final settlement statement covering the sale and transfer of the theatre business to it, Queen City, as a part of the consideration, covenanted and agreed with Baland that it would pay all of its accounts payable (aggregating $8557.09 and including the account due Independent) and save the seller harmless from the payment of any of such claims. But the purchaser never paid any part of the amount due under the film-booking contract.

In the suit (brought by Independent against both Queen City and Baland about a month after final settlement), the plaintiff claimed that the defendants were jointly and severally liable to it in the sum of $2700 for fees and penalties. Although Baland was summoned, it failed to plead or otherwise defend the action, and a default judgment was entered against it for $1985.50. Queen City filed a general issue plea and when Independent subsequently moved for summary judgment, opposed the motion primarily on the ground that it was not a party to the booking contract and was without knowledge as to whether the claim was lawfully due and owing.

In due course, the court granted the motion and entered a summary judgment for $2700, and, although it was temporarily set aside on a motion of Queen City raising similar questions to those before us on appeal, the judgment was promptly reinstated for the same amount. After the appeal had been entered (and within the time limited by Maryland Rule 18c), the purchaser-appellant filed a motion seeking the preparation and filing of a 'statement of the grounds for its decision and the method of determining the damages,' but the lower court denied the motion.

The questions presented on appeal are: (i) whether the lower court erred when it denied the motion for a memorandum of grounds for decision; (ii) whether the provisions of the Sales in Bulk Act (Code 1957, Art. 83, §§ 97-101) permit a creditor of the seller to proceed personally against the purchaser; (iii) whether the assumption by a purchaser in a bulk sale transaction of the debt of a seller and promise to pay it directly to the creditor created an independent undertaking which was enforceable by the creditor against the purchaser; (iv) whether the purchaser and seller may be treated as jointly liable within the meaning of the provisions of Code (1957), Art. 50, § 6; (v) whether the entry of the default judgment was res judicata to the entry of a summary judgment in excess of the amount of the default judgment; and (vi) whether the entry of the default judgment was a bar under the doctrine of res judicata) to the relitigation of the same claim in the summary judgment proceeding.

(i)

Since the summary judgment proceeding was not heard ex parte, the purchaser-appellant had a right to move for the filing of a memorandum (see Alvey v. Alvey, 225 Md. 386, 171 A.2d 92), and the lower court should have complied with the requirements of Rule 18 c. In this instance, however, we shall decide the case without remanding it for the preparation and filing of the requested statement of the grounds for decision and the method of determining damages.

(ii)

Nor do we deem it necessary, since the case is decidable on other questions posed by the appeal, to consider whether the provisions of the Sales in Bulk Act permit a creditor of the seller to proceed personally against the purchaser. As we see it, the purchaser was bound to pay the debt of the seller to the creditor (or at least so much thereof as it covenanted and agreed to pay) because it not only assumed payment of the debt but also undertook in writing to pay it as a part of the purchase price and actually received credit on account thereof in the final settlement.

(iii)

On this third point the contention is that there was no consideration to support an undertaking which was enforceable by the creditor against the purchaser, but such is not the case. In fact it appears that two forms of consideration were present in the transaction: one, the benefit accruing to a third person (the seller); the other, the forbearance of the creditor to exercise its rights under the bulk sales statute.

A benefit to a third person is a sufficient consideration for an agreement or promise. It is well established that the consideration supporting a promise 'may be given to a promisor or to some other person' and it 'may be given by the promisee or by some other person.' Humbird v. Humbird, 162 Md. 582, 586, 160 A. 623, 624 (1932); Swift v. Allen, 211 Md. 588, 128 A.2d 260 (1957); Westpark, Inc. v. Seaton Land Co., 225 Md. 433, 171 A.2d 736 (1961); General Builders v. MacArthur, 228 Md. 320, 179 A.2d 868 (1962). See also Restatement, Contracts, § 75. And see Corbin on Contracts, §§ 124 and 779, where it is said that a promisee has a right against the promisor even though no consideration moved from the promisee to the promisor.

Forbearance to institute a legitimate legal proceeding is also good consideration for a promise by a third party to pay the debt of another. O'Neill v. Frederick Trading Co., 223 Md. 301, 164 A.2d 537 (1960). For cases relating to both principles--benefit to third person and forbearance to sue--see Wolf v. Maryland Trust Co., 179 Md. 577, 20 A.2d 153 (1941), and Kolker v. Gorn, 202 Md. 322, 96 A.2d 475 (1953).

Other than this, it appears that Independent was also a creditor-beneficiary under the agreement between the purchaser and the seller for the payment of the outstanding debts of the latter. The rules governing the exercise of the rights of creditors under third par...