World Wide Imported Car Co., Ltd. v. Savings Bank of Baltimore

• Decision Date: 16 January 1979
• Docket Number: No. 556,556
• Citation: 41 Md.App. 263,396 A.2d 547
• Parties: WORLD WIDE IMPORTED CAR COMPANY, LTD., et al. v. The SAVINGS BANK OF BALTIMORE.
• Court: Court of Special Appeals of Maryland

Page 263

41 Md.App. 263

396 A.2d 547

WORLD WIDE IMPORTED CAR COMPANY, LTD., et al. v. The SAVINGS BANK OF BALTIMORE.

No. 556.

Court of Special Appeals of Maryland.

Jan. 16, 1979.

Russell D. Karpook, Towson, with whom were Power & Mosner, Towson, on the brief, for appellants.

Dorothy A. Beatty, Baltimore, with whom were Franklin G. Allen and Francis B. Burch, Jr., Baltimore, on the brief, for appellee.

Argued before LISS, WILNER and MacDANIEL, JJ.

WILNER, Judge.

The Circuit Court for Baltimore County concluded that the claims of World Wide Imported Car Co., Ltd. (appellant) against The Savings Bank of Baltimore (appellee) were barred by the doctrine of Res judicata, and for that reason it entered summary judgment in favor of the Bank. Was it correct in doing so? Partly, we think.

World Wide, until its fiscal demise, was an automobile dealer; it was owned and operated by one Charles Ziegler. In 1972 and 1973, it entered into two financing agreements with the Bank, each of which led to a lawsuit. The issue before us arises from the relationship between these two agreements, and, thusly, from the relationship between the two lawsuits spawned by them.

The first agreement was a Dealer's Agreement signed on June 9, 1972. This agreement had to do with the purchase by the Bank of notes and other types of deferred payment obligations given to World Wide by customers who bought cars from it. In essence, then, it provided for the financing of World Wide's Sales, rather than its purchases.

The agreement recites that World Wide desires the Bank to purchase notes, conditional sales contracts, leases, and mortgages evidencing the sale of new and used motor vehicles, such agreements ordinarily being endorsed by World Wide "without recourse". In consideration of the Bank purchasing or otherwise acquiring such agreements, World Wide agreed that the Bank could tender to it for purchase any motor vehicle repossessed by the Bank by reason of any breach of an agreement purchased by the Bank. The tender would be on an "as is" basis for the balance due on the defaulted agreement; however, if, at the time of delivery, the default existed for 90 days or more, the price to be paid by World Wide would be based upon the National Automobile Dealers Association official used car guide, rather than merely the balance due on the agreement. World Wide retained the right to decline to purchase a tendered vehicle, but if it did so, the Bank could then sell the vehicle at public or private sale, and World Wide was obliged to reimburse the Bank for the difference between what it would have had to pay if it had purchased the vehicle and what the Bank recovered from its own sale.

World Wide agreed that, from the proceeds due it from any transaction, the Bank could retain, for World Wide's account, an amount to be agreed upon. This would constitute a reserve account. With respect to it, the Dealer's Agreement provided, in relevant part:

"So long as we (World Wide) are not in default hereunder Or under any other obligation to you (the Bank), you will pay to us on request on or after the first days of January, April and July of each year, the amount of such account in excess on those dates of 10% Of the original amounts of the then outstanding agreements heretofore and hereafter purchased or acquired by you. . . . We further agree that you shall have the right to apply the proceeds of this account either in part or in full, or to hold same for the purpose of security, against any liability of ours under this Or any other contract either actual or contingent, Now existing or hereafter contracted, of any nature whatsoever arising hereunder or otherwise." (Emphasis supplied.)

Charles Ziegler and his wife Barbara signed a separate agreement on the same day guaranteeing the faithful performance by World Wide of its obligations under the Dealer's Agreement.

The second agreement between the corporate parties was entitled a Continuing Dealer Floor Plan Agreement, signed on August 1, 1973. This agreement dealt with the financing of World Wide's Acquisitions rather than its sales. Under this agreement, the Bank was authorized to disburse funds directly to the manufacturer or other seller of vehicles sold to World Wide. Paragraph (c)(1) provided:

"As security for the payment of all loans now or hereafter made by Bank to Dealer hereunder and all other present or future indebtedness of Dealer to Bank, matured or unmatured, direct or contingent, Bank retains title to each unit of Merchandise for which Bank shall have paid the manufacturer or distributor until Dealer has discharged his obligations to Bank hereunder with respect to such unit, and Dealer grants Bank a continuing security interest in all and new and used Merchandise now owned or hereafter possessed by Dealer, whether inventory or equipment, together with Manufacturer's or importer's Certificates of Origin and Certificates of Title or Ownership relating thereto and all proceeds thereof including but not limited to accounts receivable and chattel paper arising from the sale of Merchandise by Dealer not otherwise assigned to Bank."

This agreement also was guaranteed by Charles and Barbara Ziegler.

On August 12, 1975, the Bank sued World Wide and the Zieglers in the Circuit Court for Baltimore County, claiming a breach of the second agreement the Continuing Dealer Floor Plan Agreement. This action was docketed as No. 91808, and will hereafter be referred to as the "first action." In Count I, the Bank asserted that World Wide had sold motor vehicles subject to the Bank's security interest without making the required payments to the Bank, and that, as a result, the Bank sustained damages of $36,797. In Count II, it was alleged that, as a result of this breach, the Bank was required to repossess and sell those vehicles, and that because of a "shrinkage in value" of the repossessed vehicles, the Bank suffered an additional loss of $14,246. Accompanying the Declaration was a motion for summary judgment and an affidavit purportedly in support of it.

World Wide, which by then was out of business, never answered either the Declaration or the motion for summary judgment. The Zieglers, however, answered both. Filing a general issue plea to the Declaration, they asserted in their answer to the motion that there was a "controversy of fact for the following reasons:

a. That the Declaration does not show how the amounts claimed in Counts 1 and 2 are arrived upon. That it does not have a computation attached thereto to show that this is a definite sum due and owing.

b. That there is a reserve for the benefit of World Wide Imported Car Co., Ltd. held by the Savings Bank of Baltimore which contains an amount in excess of the amounts claimed in Counts 1 and 2 and there is no reference in the Declaration to show that this reserve was taken into account in arriving at the amounts claimed."

A similar averment, with respect to this reserve account, was made in an affidavit of Mr. Ziegler that accompanied this answer that "there were ample funds contained therein to pay all amounts claimed" by the Bank.

Faced with this defense, obviously grounded upon the reserve account created and maintained pursuant to the Dealer's Agreement, ¹ the Bank withdrew its motion for summary judgment and substituted another such motion. There was no difference in the motions themselves, but the second motion was supported by an elaborate affidavit explaining in great detail how this reserve account operated and concluding, in the end, that rather than there being ample funds in the account, it actually had a "negative balance." Accompanying and supporting this affidavit were copies of World Wide checks returned for insufficient funds, the Dealer's Agreement, documents used in connection with that agreement, and ledger accounts showing running balances in the reserve account (the last such balance being minus $2,381.81).

On January 27, 1976, the court granted the Bank's motion for summary judgment. Judgment became final in the principal amount of $49,777.46 on February 2, 1976; no appeal was taken.

On September 30, 1977, World Wide and Ziegler filed this action. Count I, on behalf of World Wide, alleged four common counts and a special count claiming that "the Defendant agreed to purchase from the Plaintiff 'notes and/or contracts of conditional sale and/or leases and/or mortgages . . ., evidencing the sale of new and used motor vehicles' " and that the Bank breached that agreement by,

"refusing to purchase said notes and/or contracts of conditional sale and/or leases and/or mortgages from Plaintiff, And by failing and refusing to pay sums due Plaintiff from Defendant under the provisions of said 'Dealer's Agreement' ". (Emphasis supplied.)

As a result of these breaches, World Wide asserted that its business suffered irreparable injury resulting in its inability to continue to operate its automobile dealership.

In Count II, Ziegler, asserting that he was the president and sole stockholder of World Wide, claimed that as a result of the Bank's breach of the Dealer's Agreement, as alleged in Count I, he lost his employment with World Wide and also suffered other and sundry forms of injury.

The Bank, with ultimate success in the lower court, moved for summary judgment on Count I based upon Res judicata and interposed a preliminary objection under Maryland Rule 323 to Count II upon the basis that Ziegler lacked legal capacity to sue. Ziegler has not appealed from the adverse judgment against him on Count II, so all that is before us, as noted earlier, is the judgment on Count I.

The essence of appellant's argument on appeal is that the two agreements were separate and distinct from each other, dealing with entirely different matters. Thus, it contends, the first action, involving only the Continuing Dealer Floor Plan Agreement, was not the "same cause of action", did not settle any questions pertaining to the Dealer's...