Rabinowich v. Eliasberg

• Citation: 152 A. 437,159 Md. 655
• Decision Date: 04 December 1930
• Docket Number: 37.
• Parties: RABINOWICH v. ELIASBERG ET AL.
• Court: Maryland Court of Appeals

152 A. 437

159 Md. 655

RABINOWICH v. ELIASBERG ET AL.

No. 37.

Court of Appeals of Maryland

December 4, 1930

Appeal from Circuit Court No. 2 of Baltimore City; George A. Solter Judge.

Suit by Lena H. Rabinowich, individually and as sole legatee and executrix under the will of Samuel G. Rabinowich, deceased against Louis Eliasberg and another. From a decree dismissing the complaint and dissolving a preliminary injunction complainant appeals.

Affirmed.

Argued before BOND, C.J., and PATTISON, URNER, DIGGES, PARKE, and SLOAN, JJ.

Edward L. Ward, of Baltimore, for appellant.

Clarence A. Tucker, of Baltimore (Knapp, Tucker & Thomas, of Baltimore, on the brief), for appellees.

URNER J.

The decree under review on this appeal dismissed a bill of complaint, and dissolved a preliminary injunction, directed against the enforcement of a mortgage securing a loan which the bill alleged to be usurious. The mortgagor was a corporation, which was formed for the purpose of acquiring and mortgaging the property offered as security for the loan. It is contended that the corporate character thus impressed upon the transaction was unreal and deceptive, and was therefore not effective to enable the lender to charge and retain a commission in excess of the legal rate of interest by virtue of the statutory provision that no corporation shall interpose the defense of usury in any action at law or in equity. Code, art. 23, § 131.

The essential facts will be stated as proved by the evidence in the record. On March 2, 1927, Samuel G. Rabinowich applied to Louis Eliasberg, who was president of the Finance Company of America and of the Ætna Mortgage Corporation, for a loan to finance the purchase of a furniture business and the lots of ground on which it was conducted. The purchase price was $67,000, on account of which Mr. Rabinowich had paid $5,000 and he desired to borrow $65,000. Mr. Eliasberg declined to make any loan to be secured in part by the personal assets included in the purchase, and he refused also to lend the required amount to Mr. Rabinowich individually, but offered to arrange for loans, aggregating the sum applied for, upon the security of the real estate which the applicant had contracted to buy, and of the other fee simple and leasehold properties already in the joint ownership of himself and his wife, provided that a corporation be formed and invested with title to all of the properties, and that the loans be then made to the corporation and secured by its mortgages to the lenders. This suggestion was acceptable to Mr. Rabinowich, and he authorized the attorney for the lending corporations represented by Mr. Eliasberg to prepare the papers necessary for the creation and organization of the proposed corporate body, under the name of the Broadway Realty Company, as soon as the needed loans were definitely promised. It was agreed that the Ætna Mortgage Corporation would lend $25,000 to the new company, secured by its first mortgage on part of the real estate to which it would then hold title, and that the Finance Company of America would lend $40,000 to the borrowing corporation, $5,000 of which was to be secured by its first mortgage on property not included in the Ætna Corporation's mortgage, and the remaining $35,000 by a second mortgage on all the properties of which it was then the record owner. In addition to 6 per cent. interest, a commission of 6 per cent. was agreed to be paid on each of the two first mortgage loans, and a commission of 10 per cent. on the second.

The certificate of incorporation of the Broadway Realty Company was executed on March 14, 1927, and was received, approved, and recorded by the state tax commission on the following day. At the same time the incorporation bonus tax and the fee for recording the certificate were paid. The corporation law of the state provides that, when a certificate of incorporation has been delivered to the state tax commission with the recording fees, and any bonus tax required to be paid, "the incorporators, their successors and assigns, shall according to the purposes, conditions and provisions in such certificate of incorporation contained, become and be a body corporate by the name therein stated," and that the "recording by the State Tax Commission of the certificate of incorporation shall be conclusive evidence * * * of the existence of the corporation, except in a direct proceeding by the State." The incorporators of the Broadway Realty Company were Mr. Rabinowich and his wife and son, and they were named in the certificate as directors of the corporation to act until its first annual meeting. The authorized amount of the capital stock was $50,000, divided into 500 shares, having each a par value of $100. A subscription agreement was signed by Mr. Rabinowich and his wife and son pledging the first named incorporator to take 400 shares of the stock, and the others 50 shares each, and to pay the par value in cash when payment should be called. The first meeting of the directors was held on March 15, 1927; Mr. Rabinowich acting as chairman and his son as secretary. The principal action at that meeting, as shown by the minutes, was the adoption of by-laws. On the following day there was a meeting of the directors, at which, according to the minutes, officers were elected, and the financial and title arrangements, heretofore outlined, to be fulfilled by the corporation, were reported and approved. Six days later all of the property then owned by Mr. Rabinowich and his wife was conveyed by them to the Broadway Realty Company, the property which he had contracted to buy was conveyed by the vendor direct to the corporation, checks to its order were delivered by the Finance Company of America and the Ætna Mortgage Corporation for the amounts of their respective loans, and were applied to the various purposes, including the payment of the commissions, contemplated by the original agreement, and the debtor corporation thereupon executed the first and second mortgages by which the loans were to be secured.

After the agreement for the loans and incorporation, and before the consummation of the plan, Mr. Rabinowich stated to Mr Eliasberg that he desired to have the title to the mortgaged properties conveyed to himself and his wife after the transaction had been completed. There being no objection by the lending companies, Mr. Rabinowich had two deeds prepared to accomplish that result. Those deeds were executed immediately after the execution and delivery of the mortgages. One of the deeds reconveyed to Mr. Rabinowich and his wife the lots which they had granted to the Broadway Realty Company, while the other deed conveyed to him alone the lots which had been transferred direct to the company from the vendor with whom he had contracted. In each of the two deeds from the corporation, Mr....