Card Wellfisher Fixture Co. Inc. v. Commerce Trust Co.

• Decision Date: 08 December 1927
• Docket Number: No. 43.,43.
• Citation: 141 A. 121
• Parties: CARD WELLFISHER FIXTURE CO. Inc., et al. v. COMMERCE TRUST CO.
• Court: Maryland Court of Appeals

141 A. 121

CARD WELLFISHER FIXTURE CO. Inc., et al.

v. COMMERCE TRUST CO.

No. 43.

Court of Appeals of Maryland.

Dec. 8, 1927.

Rehearing Denied Feb. 17, 1928.

Appeal from Superior Court of Baltimore City; George A. Solter, Judge.

"To be officially reported."

Action by the Commerce Trust Company against the Cardwell-Fisher Fixture Company, Inc., and others. Judgment for plaintiff on confession. From an order denying motion of Mary E. Keiner to strike out the judgment, she appeals. Reversed and remanded, with directions.

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

W. LeRoy Ortel and John M. Lyell, both of Baltimore (T. Bayard Williams, of Baltimore, on the brief), for appellant.

Horace T. Smith, of Baltimore, for appellee.

OFFUTT, J. On or about November 13, 1926, the Cardwell-Fisher Fixture Company, a Maryland corporation, engaged in manufacturing, owed the Commerce Trust Company $12,000 on a note which had matured on November 3, 1926, and had been protested; $5,000 on an overdue demand note; $69.93 on an overdraft; and $413.20 balance on a note for $2,500. It was without cash assets, and it needed about $1,680 for its pay roll. On that day Thomas L. Cardwell, president of the corporation, approached Walter B. Bahn, vice president of the trust company, who represented it in the transaction herein referred to, and asked him if the trust company would discount a note of the Spetzler Drug Company for $3,115. Bahn appears to have declined to advise that, unless the trust company were given better security for its loans. As a result of negotiations between Bahn and Cardwell, the following plan was agreed upon between them: The trust company was to take a demand note for $5,500; a new note for $10,000; take an assignment of $4,500 of accounts receivable; discount the Spetzler note for $3,115; and credit the fixture company with $12,000 to retire the protested note, $5,000 to retire the demand note, $413.20 to pay the balance due on the $2,500 note, and cash a check for $1,680 drawn to the pay roll order. The consummation of that plan depended, however, upon the indorsement of the new $10,000 note by Conrad Keiner and Mary E. Keiner. At that time Mrs. Keiner was not on any of the overdue paper of the fixture company held by the trust company, and it may be assumed that it availed itself of the opportunity presented by the company's need for ready money to change its loans so that Mrs. Keiner would be individually liable for at least $10,000, in which event is could reasonably expect to collect at least that amount in the event that the fixture company became unable to meet its obligations.

Mr. and Mrs. Keiner together held about $15,000 of the fixture company's stock, most of which had been purchased apparently with her money. She had been for some 30 years engaged in the retail notion and dry goods business in Canton, a business which she eventually sold for $30,000. Her husband had been a letter carrier, and a few years after his wife had sold her business his health began to fail, and he felt that he would like to resign his position and invest in some business, so that he could have an "easier" place, and in some way he and his wife were induced to invest in the Cardwell-Fisher Fixture Company, which was engaged in the manufacture of store, office, and bank fixtures, show cases, etc. He was eventually made vice president and director of the company, and appears to have been employed by it in some minor capacity, for which he received $40 a week. It appears to have been fairly successful for a time, but towards the end of 1926 its business was failing, its assets were diminishing, its liabilities were increasing, and it was becoming more and more difficult for it to secure credit and meet its obligations as they became due. It had borrowed heavily from the trust company, and the company was obviously becoming uneasy about its security. It was under these circumstances that the plan referred to above was proposed by the trust company, and Mr. Cardwell, president of the fixture company, in order to carry it out undertook to secure the indorsement of Mrs. Keiner. He failed, however, and reported his failure to Bahn. After that, he and Bahn together went to see Mrs. Keiner, and at that interview she, with the fixture company, her husband, and Mr. and Mrs. Cardwell, signed a note for $10,000, payable to the trust company on demand, which contained this power of attorney:

"And the undersigned does hereby authorize any attorney of record to appear on his behalf at any time after the date hereof, in any court of record, and confess judgment against the undersigned for the face of this note with costs and 10 per cent, collection fee."

Demand was made, but the note was not paid, and thereafter, on December 22, 1926, a confessed judgment, based on the power contained in the note, was entered against the makers thereof for $10,000, the principal sum, and $1,000 counsel fees. On January 21, 1927, Mrs. Keiner filed a motion to strike that judgment out as against her, on the grounds: (1) That it was procured by fraud; (2) that it was procured by duress; and (3) that it was without consideration. The plaintiff answered the motion, it was set down for a hearing, testimony was taken, and thereafter the court appears to have overruled the motion, although the record contains no formal order to that effect. From that action the present appeal was taken.

Before reviewing the evidence relating to the appellants' contention, we will refer to the position which she has taken with reference to the powers, functions, and duties of the trial court in dealing with motions to strike out judgments in cases of this character. As we understand it, it is that the motion should have been granted, if it was supported by any evidence legally sufficient to establish the defendant's contention. In other words, that, if the evidence offered in connection with the issues of fraud, duress, or failure of consideration was conflicting, nevertheless, if it was legally sufficient to support the issue, the court was bound to strike the judgment out and submit the issues to a jury. No authority has been cited in support of that proposition, and we have been able to discover none.

A judgment by confession possesses all the incidents, is supported by the same presumptions, and is entitled to the same faith and credit, as any other judgment (Freeman on Judgments, par. 1337), and that is so whether the confession is by the defendant in person or by another with his consent (Id.). But, while that is true, the widespread and general practice of embodying in promissory notes warrants of attorney authorizing a confession of judgment for the amount thereof, together with counsel fees, lends itself too readily to fraud and abuse, and in this state, at least, such judgments "are freely stricken out on motion at law to let in defenses" (Phillips v. Taylor, 148 Md. 162, 129 A. 20), and, although such a motion "must be supported by satisfactory proof of conditions which make such action necessary to serve the ends of justice" (Wisner v. Reeside, 139 Md. 223, 114 A. 912), the court in dealing with it "should be very careful to see that no improper advantage has been taken of the maker of such note in entering the judgment" (Int. Harv. Co. v. Neuhauser, 128 Md. 181, 97 A. 375).

Necessarily, one making the motion assumes the burden of supporting the facts alleged in it, and, as to all matters not going to the merits of the controversy, such as suprise or deceit in the entry of the judgment itself, he must prove such facts by a fair preponderance of the evidence. But, as to defenses going to the merits of the claim upon which the judgment rests, a different rule prevails. In such cases, if the evidence adduced in support of the motion is sufficient to persuade the fair and reasoned judgment of an ordinary man that there are substantial and sufficient grounds for an actual controversy as to the merits of the case, the defendant should be deemed to have met the burden of showing that he has a meritorious defense. In other words, if the evidence is such that persons of ordinary judgment and prudence could honestly and fairly draw different inferences from it, one favoring the plaintiff and the other the defendant, the court should not itself decide that conflict, but should submit it to a jury. And, while the rule thus stated is not universally approved, it seems to be supported by the weight of authority, is consistent with justice and equity, and is in harmony with the decisions of this court. "Courts of law exercise an equitable jurisdiction over judgments entered by confession upon notes and warrants of attorney, and it is necessary to justice that they should liberally exercise that jurisdiction, and may therefore, on application of the defendant, vacate them and permit him to make a defense on the merits provided the proper showing of a meritorious defense is made." Freeman on Judgments, par. 1340; 34 C. J. 415 ; Wisner v. Reeside, supra ; Int. Harv. Co. v. Neuhauser, supra; Phillips v. Taylor, supra.

Having these principles in mind, we will now consider the evidence relating to the reasons upon which appellant relies in her motion to strike out the judgment. The first and third...