Madison National Bank v. Newrath

275 A.2d 495, 261 Md. 321
CourtCourt of Appeals of Maryland
DecidedApril 28, 1971
Docket[No. 322, September Term, 1970.]
StatusPublished
Cited by29 cases

This text of 275 A.2d 495 (Madison National Bank v. Newrath) is published on Counsel Stack Legal Research, covering Court of Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Madison National Bank v. Newrath, 275 A.2d 495, 261 Md. 321 (Md. 1971).

Opinion

Finan, J.,

delivered the opinion of the Court.

In this appeal we are called upon to determine the nature of the interest which Robert B. Weiss, one of the defendants below, had in Pike Associates, styled as a joint venture (Pike Associates) and which owned a leasehold estate improved by the Pike Shopping Center, Montgomery County, Maryland. At various times Weiss pledged his interest in the leasehold estate and in Pike Associates as security for loans. The question now becomes important as to whether Pike Associates was a partnership or something less, and, as corollary to this issue, whether the interest used as security represented property owned by Weiss as a tenant in common or whether it was partnership property. As the facts are developed it will likewise become apparent that the determination of what type of commercial creature Pike Associates is, has a bearing on whether we must consider, in relation to other issues in the case, certain aspects of the Uniform Partnership Law and the Uniform Commercial Code. The Circuit Court for Montgomery County held that Pike Associates was not a partnership. In this we think it erred.

*324 The land on which Pike Shopping Center is located is leased on a long term basis to Messrs. Haft, Weiss and Wine, trading as “Pike Associates, a Joint Venture.” The joint venture was formed by agreement on July 9, 1965, whereby Haft, Weiss and Wine agreed “to invest, as their respective shares of the capital of the Joint Venture herein created, all of their respective rights, titles and interests in and to the aforesaid leasehold interest in the Property.” The agreement also provided for the management and operation of the shopping center for a period of 25 years during which period the parties would share equally in the profits and losses of the business. The agreement provides that if the joint venture is terminated for certain specified reasons, then “Each member [of the joint venture] shall be the owner of an individual interest in the property formerly owned by the joint venture as a tenant in common with the other surviving or remaining members of the joint venture.”

In July, 1967, Fidelity Associates, Inc. (Fidelity) made Weiss a loan in the amount of $150,000however, apparently to avoid the usury law, the maker of the note was the W. & W. Corporation, a corporation controlled by Weiss. Although the loan was for $150,000 the note was for $165,000 with interest at 7%. Weiss individually endorsed the note. Also, to secure this debt, Weiss and his wife executed a deed of trust to Walter D. Newrath and Henry S. Snyder, as trustees for the benefit of Fidelity, conveying “all of their rights, title, and interest” in the leasehold estate. This is the same interest which had previously been conveyed as Weiss’ contribution to the Pike Associates Joint Venture. The deed of trust refers to the interest as “all of the rights, titie and interest of the parties of the first part [Robert B. Weiss, Alma B. Weiss, his wife] (being an undivided one-third interest as a member of the joint venture known as Pike Associates) in the leasehold estate of the hereinafter described property * * This deed of trust was dated July 19, 1967, and recorded among the land records of Montgomery County the following day.

*325 Fidelity had previously sought to insure the validity of this deed of trust with the Capitol Title and Escrow Corporation. Capitol Title refused to insure this trust instrument (apparently because the leasehold was owned by the joint venture and not individually by the parties to the joint venture agreement). Fidelity sought to fortify its position by obtaining a security interest in Weiss’ interest in Pike Associates. It did this by obtaining an assignment in trust dated July 19, 1967, of that interest. It should be noted that the parties to this appeal agree as to the validity of this last mentioned security interest; however, it was not perfected by the filing of a financing agreement as required by the Uniform Commercial Code (U.C.C.), Maryland Code (1964 Repl. Vol.), Art. 95B, § 9-302. Prior to the closing, Fidelity was advised by the title company that this assignment in trust was not in recordable form; however, it took no steps to have a financial statement executed, and consummated the loan.

We now turn to the part played by the Madison National Bank (Madison), one of the appellants, in the rather involved financial dealings of Weiss. In 1965, Madison lent $150,000 to W. & W. Corporation. The debt was extended by several renewal notes. On March 20, 1968, the debt was again extended to March 20, 1969. In consideration of this extension, Weiss (and his associate Wine) executed security agreements giving Madison a lien on their interests in Pike Associates. Each of these liens was perfected under the Uniform Commercial Code by the filing of the financing statement.

On November 1, 1968, Weiss and Wine made an assignment in trust to trustees for the benefit of Madison of “all the rights, title and interest which each of the said assignors had in and to the Joint Venture known as Pike Associates.” This assignment of trust was also perfected by the filing of a financing statement in the office of the Clerk of the Court for Montgomery County on November 15, 1968. Accordingly, at the time of the trial Madison had two liens on Weiss’ interest in Pike Associates, one securing a debt of $151,017.11 and the second securing a *326 total debt of $806,818.31, which last figure includes the aforementioned debt of $151,017.11 as well as other debts owed by Weiss to Madison which are not relevant to. the case at bar.

Madison initiated action in the lower court by a suit to enjoin the foreclosure of the deed- of trust held by Fidelity and further sought to have the court declare its own lien superior to that of Fidelity. The chancellor summed up his findings below by stating:

“* * * The principal contention of the plaintiff is that the deed of trust [Fidelity’s security interest] is invalid because a sale of a partnership asset on behalf of the one partner without the approval of the other partners is contrary to [Art. 73A], Section 25 (2) (b) of the Uniform Partnership Act which says that ‘a partner’s right in a specific partnership property is not assignable except in connection with the assignment of the rights of all partners in the same property.’ The defendants contend that the defendants, Weiss and wife, are not partners in the property described in the deed of trust but are joint venturers. A careful reading of the agreement between Haft, Wine and Weiss satisfies the Court that they are not partners but are joint venturers. See Vol. VIII, Maryland Law Review, page 22 to 40. Since the security agreements referred to in the Bill of Complaint were used for the sole purpose of additional security and no action has been taken under the same, it will not be necessary for the Court to pass upon its validity as such. The Court is, therefore, of the opinion that the deed of trust and note secured thereby are valid and subsisting liens on the property described in the deed of trust. * *

We disagree with the lower court’s finding that Fidelity’s deed of trust was a valid and subsisting lien on the *327 leasehold property.

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Bluebook (online)
275 A.2d 495, 261 Md. 321, Counsel Stack Legal Research, https://law.counselstack.com/opinion/madison-national-bank-v-newrath-md-1971.