Surrey Inn, Inc. v. Jennings

• Decision Date: 13 February 1958
• Docket Number: No. 95,95
• Citation: 138 A.2d 658,215 Md. 446
• Parties: SURREY INN, Inc. v. Bruce R. JENNINGS.
• Court: Maryland Court of Appeals

Page 446

215 Md. 446

138 A.2d 658

SURREY INN, Inc. v. Bruce R. JENNINGS.

No. 95.

Court of Appeals of Maryland.

Feb. 13, 1958.

W. Lee Harrison and Robert E. Cahill, Towson, for appellant.

Elmer L. Reese, Jr. and H. Anthony Mueller, Towson (Proctor, Royston & Mueller, Towson, and Preston A. Pairo, Sr., Baltimore, on the brief), for appellee.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT, and HORNEY, JJ.

BRUNE, Chief Judge.

Bruce R. Jennings, the plaintiff-appellee, recovered a judgment in the Circuit Court for Baltimore County in the amount of $12,442.28 against the defendant-appellant, Surrey Inn, Inc., and the latter appeals. The suit was brought on two of the common counts--money lent and accounts stated--and was particularized as being based upon amounts loaned or advanced as follows: $3,500 on March 5, 1951; $6,000 on June 1, 1951; and $264.18, on October 22, 1951. Interest at 6% was claimed in the statement of account on each of the three advances, but the claim for interest on the third item was later abandoned.

The sole question on this appeal (apart from the $264.18 item) is whether or not the appellee is barred by res judicata from maintaining this suit. The appellant bases its contention that the appellee is so barred on three prior suits in which Jennings and Surrey Inn, Inc. ('Surrey Inn') were also the parties.

The facts which underlie all of this litigation are briefly these: Three individuals, John S. Gough, C. Nelson Eby and G. William Hammond, organized Surrey Inn, Inc. and each became the owner of one-third of its stock. When the corporation was nearly ready to open its restaurant business, it was in serious financial straits, and the three stockholders appealed to Jennings for assistance. Jennings then lent the sum of $3,500. He took a confessed judgment note, dated March 5, 1951, with interest at $30 per month (a little over 10% per annum). This note had the name 'Surrey Inn, Inc.' typed at the top, and the corporate seal was impressed thereon. The body of the note, however, started out with 'On demand after date we promise to pay to the order of * * * Jennings,' and at the foot of the note appeared 'Witness our hand and seal and the signatures of the three individuals, Gough, Eby and Hammond. The name of Surrey Inn, Inc. did not appear as a maker of the note, nor did any of the individuals sign as an officer of the corporation. The $6,500 note, dated June 1, 1951, was identical in form with the first note except as to interest, which was to be at the rate of 6% per annum.

The $3,500 advanced on the first loan was paid by Jennings' check drawn to the order of the three individuals named above, and it was endorsed by them and the proceeds were deposited in the Surrey Inn's bank account. The second advance of $6,500 was also made by Jennings' check, but this check was made payable directly to Surrey Inn and was also deposited in the same account. The advance of $264.18 was made by Jennings' paying that amount to an oil burner dealer, which had installed much needed heating equipment in Surrey Inn. This had been obtained on Jennings' credit. When the bill became payable, Surrey Inn informed Jennings that it did not have the money to pay it, and Jennings paid it.

On May 1, 1953, the three individuals who had executed the notes of March 5 and June 1, 1951, executed three new confessed judgment notes payable to Jennings. These were in the same form as the earlier notes, except that they did not provide for interest thereon. One of the new notes was in the amount of $3,000 and was intended to 'settle' for interest accrued and unpaid up to May 1, 1953, and for interest which might accrue thereafter on the indebtedness to Jennings. Another was in the amount of $9,500 and represented the sum of the principal amounts of the two original notes. The third note was for $264.18 and was to cover the amount expended by Jennings for the oil burner. All of the notes (both those executed in 1951 and those executed in 1953) were prepared by Jennings.

The litigation upon which the defendant rested its defense of res judicata is outlined below.

In December, 1954, Jennings filed a bill in equity in the Circuit Court for Baltimore County (Case No. 35742) for the appointment of a receiver for Surrey Inn. He brought his suit as a creditor on a claim in the amount of $12,764.18 'evidenced' by the three promissory notes dated March 1, 1953. The defendant demurred to the bill on several grounds, one of which was that 'it affirmatively appears from the exhibits filed in this case [copies of the three confessed judgment notes of May 1, 1953] that this Respondent is not indebted to the Complainant.' The demurrer was sustained by Judge Kintner on May 9, 1955. No opinion was filed, but testimony at the trial of the present case was to the effect that his ruling was based upon the ground that the notes indicated an indebtedness of the three individual signers, and not of the corporation, Surrey Inn. The amendment to the bill in equity made by the complainant on May 14, 1955, tends to confirm this explanation, since the bill as then amended asserted a claim in the same amount as before, but omitted any reference to the notes and stated Jennings' claim to be 'for money loaned and advanced on May 1, 1953'. Surrey Inn again demurred on precisely the same grounds as before. Its demurrer to the amended bill was sustained by Judge Barrett on June 8, 1956, in an opinion in which he held, on the authority of Frigidraft, Inc. v. Michel, 198 Md. 509, 84 A.2d 695, that a creditor who had neither reduced his claim to judgment nor acquired a lien on the property of the defendant corporation, could not maintain a bill for the appointment of a receiver. Judge Barrett's opinion did not expressly either grant or deny leave to the complainant to amend his bill further.

On February 28, 1956, while the receivership suit was pending (and perhaps having a premonition as to its outcome), Jennings instituted two separate proceedings at law (Cases Nos. 36221 and 36222) in the Circuit Court for Baltimore County against Surrey Inn, and judgment by confession was entered in Jennings' favor in each case. These suits were brought, respectively, on the $3,000 and the $9,500 confessed judgment notes dated May 1, 1953, above described, and each declaration contained only one count based upon the note involved. ¹ On motion of the defendant these confessed judgments were stricken out, and the defendant then demurred to each declaration. These demurrers were heard by Judge Barrett on the same day as the demurrer to the amended bill in the receivership suit and all three were decided on the same day, June 8, 1956. Judge Barrett filed a single opinion covering both of the lawsuits, in which he sustained the demurrers on the ground that the notes, on their face, indicated that they were the obligations of the three individuals who executed them, and not of the corporation. As in the equity case, Judge Barrett did not expressly grant or deny leave to the plaintiff to amend.

Jennings made no effort to amend in either of the confessed judgment note cases or in the equity suit, nor did he appeal in any of these cases. He instituted the present suit on June 26, 1956, eighteen days after the rendition of Judge Barrett's opinions sustaining the demurrers in the earlier cases.

The appellant rests its defense of res judicata upon the proposition that this defense applies not only to matters which were decided in the former litigation, but also to grounds of recovery (or defense) which might have been, but were not, there presented. It cites Hill v. McConnell, 106 Md. 574, 68 A. 199, and Bernstein, Cohen & Co. v. Stansbury, 119 Md. 316, 86 A. 349, as Maryland authorities supporting this rule. Other and more recent cases in this State which might have been added are Moodhe v. Schenker, 176 Md. 259, 4 A.2d 453; Snodgrass v. Stubbs, 192 Md. 287, 64 A.2d 130; Sterling v. Local 438, etc., 207 Md. 132, 113 A.2d 389; Whittle v. Board of Zoning Appeals, 211 Md. 36, 125 A.2d 41. ²

To sustain the defense of res judicata the appellant offered in evidence the original records in the equity suit (No. 35742, above referred to) and in the suit at law on the $9,500 confessed judgment note (No. 36222). It also offered in evidence a copy of the $3,000 note upon which the other confessed judgment note suit (No. 36221) in the Circuit Court was based, but for some reason not clear to us, the record in that case was not offered in evidence in the present suit. Both parties seem to have treated it as being in the same situation as Case No. 36222, and Judge Barrett's opinion sustaining the defendant's demurrers was applicable to both cases and was so captioned. In these circumstances we shall treat these two suits on confessed judgment notes as the parties have done--that is, as having followed the same course. In the absence of any proof so indicating, we should not deem it proper to assume that proceedings in Case No. 36221 reached a more definitive stage than did the proceedings in Case No. 36222.

We shall first consider briefly the effect of the equity suit; and although there was no order dismissing the bill nor an order sustaining the demurrer and expressly denying leave to amend further, we shall assume (without deciding) that the order sustaining the demurrer to the amended bill amounted to a final decree. It went to the heart of the complainant's right to maintain his bill for the appointment of a receiver, and held that he, as an unsecured creditor holding no judgment and no lien, could not maintain the suit. That, we think, is all that the equity suit did determine. It did not determine whether or not Jennings was a creditor of Surrey Inn; that was admitted by the demurrer for the purpose of determining Jennings' right to maintain the suit. Nor did the ruling on the demurrer to the original bill determine whether or not Jennings was a creditor of...