Alger Petroleum, Inc. v. Spedalere

• Decision Date: 01 September 1989
• Docket Number: No. 1363,1363
• Citation: Alger Petroleum, Inc. v. Spedalere, 573 A.2d 423, 83 Md.App. 66 (Md. App. 1989)
• Parties: ALGER PETROLEUM, INC., et al. v. Margaret SPEDALERE, Personal Representative of the Estate of Leonard E. Carnes, Jr., et al. ,
• Court: Maryland Court of Appeals

Page 66

83 Md.App. 66

573 A.2d 423

ALGER PETROLEUM, INC., et al. v. Margaret SPEDALERE, Personal Representative of the Estate of Leonard E. Carnes, Jr., et al.

No. 1363, Sept. Term, 1989.

Court of Special Appeals of Maryland.

May 14, 1990.

John H. Zink, III and Mary Dulany James (Venable, Baetjer and Howard, on the brief), Towson, for appellants.

Timothy J. Martin (Beach, Cadigan & Martin, on the brief), Towson, for appellees.

Argued before BISHOP, GARRITY and WENNER, JJ.

BISHOP, Judge.

On February 24, 1989 a Confessed Judgment was entered by the Circuit Court for Baltimore County pursuant to the complaint of Margaret Spedalere, appellee, as the Personal Representative of the estate of Leonard E. Carnes. Alger Petroleum, Inc., Leola C. Brooks and Emmett H. Brooks, appellants, filed an Answer to the appellee's complaint. Appellee filed a Motion to Strike the Answer which prompted appellants to file immediately a Motion to Vacate the Confessed Judgment. After a hearing the Circuit Court for Baltimore County found that the Motion to Vacate was untimely and the Answer was insufficient to open the Confessed Judgment. The following is the chronology of the proceedings:

February 24: Plaintiff files her Complaint for a Confessed Judgment against the Defendants.

March 20: Defendants are served with a "Notice of Entry of Judgment by Confession" and with notice that a response must be filed within 30 days.

April 6: Defendants file a timely Answer to the Complaint asserting defenses of fraud, illegality, and a general denial of liability.

April 18: The thirtieth day after service on the Defendant.

April 27: Plaintiff files a Motion to Strike the Answer as not being in compliance with the form required by Maryland Rule 2-611.

April 28: Defendants file a Motion to Vacate the Confessed Judgment in the form required by Maryland Rule 2-611.

August 28: Hearing on Defendants' Motion to Vacate Confessed Judgment.

This timely appeal followed.

ISSUE

The sole issue in this case is whether the trial court committed error by refusing to open the Confessed Judgment pursuant to the appellants' Answer and Motion to Vacate.

FACTS

On November 24, 1987 Alger Petroleum, Inc. executed two promissory notes, each obligating it to pay the sum of $50,000.00 to Leonard E. Carnes, Jr. Pursuant to the first note, payments were to be made in equal semi-annual installments of $5,000.00, on January 1 and July 1 of each year, for a period of five years expiring on January 1, 1993. ¹ The second note required payment of the semi-annual $5,000.00 installments on April 1 and October 1 for a five year period expiring on April 1, 1993. ² Both notes contained the same "Confession of Judgment" clause:

7. Confession of Judgment. Upon any default hereunder the Borrower authorizes any attorney admitted to practice before any court of record in the United States to appear on behalf of the Borrower in any such court in one or more proceedings, or before any clerk thereof and to confess judgment against the Borrower, without prior notice or opportunity for prior hearing, in favor of the holder of this Note in the full amount due on this Note (including principal and interest, and any and all penalties, fees and costs) plus attorney's fees equal to five percent (5%) of the amount due. The Borrower consents to the jurisdiction of and agrees that venue shall be proper in the Circuit Court of [sic] Baltimore City, Maryland. The Borrower waives the benefit of any and every statute, ordinance or rule of court which may be lawfully waived, conferring upon the Borrower any right or privilege of exemption, stay of execution or supplementary proceedings, or other relief from the enforcement or immediate enforcement of a judgment or related proceedings on a judgment. The authority and power to appear for and enter judgment against the Borrower shall not be exhausted by one or more exercises thereof, or by any imperfect exercise thereof, and shall not be extinguished by any judgment entered pursuant thereto. Such authority and power may be exercised on one or more occasions from time to time, in the same or different jurisdiction, as often as the holder shall deem necessary or advisable until all sums due under this Promissory Note have been paid in full.

In addition to these notes, appellants Leola C. Brooks and Emmett H. Brooks, Jr. executed an Unconditional Joint Guaranty Agreement whereby they agreed to be jointly liable for the above notes in the event that appellant Alger Petroleum, Inc. failed to make the agreed payments. This agreement contained a confessed judgment clause similar to those in the Notes except that in place of the 5% attorney's fee this clause provided for 15%.

Because appellants failed to make payments as promised and guaranteed, appellee ³ filed a Complaint, accompanied by the written instruments and affidavits. Judgment by Confession was entered against appellants in the then aggregate amount of $115,367.00. On March 20, 1989 appellants were served with the Complaint and the supporting documents along with a Notice of Entry of Judgment by Confession which notified them that they had thirty (30) days within which to file a written motion to open, modify or vacate the judgment.

On April 6, 1989 appellants filed the following pleading entitled "Answer of Alger Petroleum, Inc., Leola C. Brooks and Emmett H. Brooks, Jr."

Alger Petroleum, Inc., Leola C. Brooks and Emmett H. Brooks, Jr., Defendants, answer the Plaintiff's "Nar" and say:

I

The "Nar" fails to state a claim upon which relief can be granted.

II

Defendants generally deny liability under Counts One and Two.

III

Defendants assert that Margaret Spedalere is not fully authorized to sue in a representative capacity.

IV

1. Defendants assert the affirmative defense of collateral estoppel.

2. Defendants assert the affirmative defense of fraud.

3. Defendants assert the affirmative defense of illegality.

4. Defendants assert the affirmative defense of payment.

Appellants then requested a jury trial. On the same day appellants sent a letter to appellee's counsel which specified the details of the facts supporting the affirmative defense alleged in the Answer.

Appellee waited for the thirty (30) days to expire and on April 27, 1989 filed a Motion to Strike the Answer for noncompliance with the Rules. ⁴ On April 28, 1989 appellants responded by filing a Motion to Vacate Confessed Judgment, pursuant to Md.Rule 2-611, to which was attached a copy of the letter of April 6, 1989. Appellants requested a hearing on the motion.

At the hearing, appellants argued that the Answer ought to be treated as a Motion to Vacate, that the court had discretion to consider appellants' motion to vacate filed after the thirty (30) day period expired and that the court may exercise its revisory power to open the Confessed Judgment and order a trial. The court determined that the Answer "certainly doesn't qualitatively rise to the level of a motion to vacate" and denied the motion. The trial court also refused to consider appellants' untimely motion to vacate and the letter attached to it as an exhibit and chose not to exercise its discretion to revise the judgment.

DISCUSSION

Appellants argue that the trial court erred by refusing to vacate the Confessed Judgment and that the case should be remanded for a trial on the merits. In support of this argument they aver that Md.Rule 1-201(a) ⁵ requires the trial judge to view the Answer under the totality of the circumstances, but, in this case the trial judge did not inquire beyond matters of form. Further, appellants contend that because the facts in this case are evidence of substantial compliance with Md.Rule 2-611, and because the appellee was not prejudiced by the alleged noncompliance, the court should have stricken the judgment and permitted trial on the merits; especially since there was the proffer of a meritorious defense.

Appellee responds that the Rule mandates a thirty (30) day period within which to file a motion to vacate. She asserts that nothing is relevant if filed after that period expires. Next, appellee contends that the Answer is insufficient in form and substance to open or vacate a Confessed Judgment. Finally, appellee posits that prejudice is not a relevant inquiry pursuant to Maryland law.

The pertinent provisions of Md.Rule 2-611 are as follows:

Rule 2-611. CONFESSED JUDGMENT

(a) Entry of Judgment.--Judgment by confession shall be entered by the clerk upon the filing of a complaint, the original or a photocopy of the written instrument authorizing the confession of judgment for a liquidated amount, and an affidavit specifying the amount due and stating the address of the defendant or that the whereabouts of the defendant are unknown to the plaintiff.

* * * * * * (c) Motion by Defendant.--The defendant may move to open, modify, or vacate the judgment within the time prescribed for answering by sections (a) and (b) of Rule 2-321. The motion shall state the legal and factual basis for the defense to the claim.

(d) Disposition of Motion.--If the court finds that there is a substantial and sufficient basis for an actual controversy as to the merits of the action, the court shall order the judgment by confession opened, modified, or vacated and permit the defendant to file a responsive pleading.

(Emphasis supplied.)

The history of confessed judgments is easily tracked in the cases of the Court of Appeals. In Tyrrell v. Hilton, 92 Md. 176, 186-87, 48 A. 55 (1901) the Court stated:

under the provisions of sec. 6, Art. 26 of the Code, ⁶ ...: "The clerk of any Court in this State may, during the recess of said Court, enter a judgment by confession, with the assent of the parties or attorneys, in writing, which shall be filed with the titling, narr., cause of action, and other papers, in the case in which said judgment was entered; and a judgment so entered shall, from the date of the entry of the same by the clerk, have...