Foland v. Hoffman

• Decision Date: 15 May 1946
• Docket Number: 111.
• Citation: Foland v. Hoffman, 186 Md. 423, 47 A.2d 62 (Md. 1946)
• Parties: FOLAND et ux. v. HOFFMAN.
• Court: Maryland Court of Appeals

47 A.2d 62

186 Md. 423

FOLAND et ux. v. HOFFMAN.

No. 111.

Court of Appeals of Maryland

May 15, 1946

Appeal from Baltimore City Court; W. Conwell Smith, Chief Judge.

Suit by Hollen B. Hoffman, trustee in the matter of the estate of Frederick C. Castle, against Louis Foland, also known as Louis L. Foland, and Reba Foland, his wife, on a note. From an order refusing to vacate, open, or modify a judgment by confession theretofore entered, defendants appeal.

Affirmed.

Irving B. Grandberg, of Baltimore (Sidney M. Jacobs, of Baltimore on the brief), for appellants.

Hollen B. Hoffman, of Baltimore, in pro. per., for appellee.

Before MARBURY, C.J., and DELAPLAINE, COLLINS, GRASON, and HENDERSON, JJ.

GRASON Judge.

Frederick C. Castle was a wholesale dealer in butter, eggs and produce. Louis L. Foland was a retail dealer in those products and was extended credit by Castle. He was indebted to Castle, on open account, in the sum of $3200. Castle apparently was anxious about this account and evidently wanted the same secured. Foland and his wife, Reba, owned a property, subject to a ground rent, situate in Baltimore City. On May 18, 1934 Louis Foland and his wife signed a note, under seal, to the order of Frederick C. Castle, for $3200. The note was a printed form and, among other provisions, authorized and empowered any attorney of any court of record within the United States or elsewhere to appear and confess judgment. At the foot of the note, in large script, is written: 'This note interest payable weekly--and twenty dollars a month--on princip le.' On May 12, 1936, Castle executed a deed of trust for the benefit of his creditors, to appellee, as trustee. Nothing has been paid on account of the above note, on principal or interest.

On September 16, 1944, appellee, under provision of Rule 1, subd. II, pt. 3, Rules of Practice and Procedure, Judgments by Confession, of the General Rules of Practice and Procedure adopted by this court, caused a judgment on this note to be entered in the Baltimore City Court against the appellants, for $4860. April 8, 1938, Foland was adjudicated a bankrupt, and on October 11, 1944, he received a discharge in bankruptcy in the United States District Court of Maryland. On October 16, 1944, Foland filed in this case a plea of discharge in bankruptcy. His wife, Reba Foland, filed a general issue plea, and a special plea setting up want of consideration moving to her when she signed the note in question. There are pleadings and rulings thereon by the lower court, which we need not dwell on, except to say that under Discovery Rule No. 6 Reba Foland admitted that her sole defense to the action was want of consideration. After full hearing, when the cause was submitted to the court it passed an order that sufficient cause had not been shown to vacate, open or modify the judgment theretofore entered, and on the 19th day of December, 1945, 'ordered and adjudged * * * that the said judgment and lien thereunder against the defendant herein is, in its application limited to property held by the defendants as tenants by the entireties prior to the discharge in bankruptcy on October 11, 1944, and to property held by the defendant, Reba Foland. The judgment shall not supply to individual property of the defendant, Louis Foland, also known as Louis L. Foland.' From this order an appeal was taken to this court.

The first point made by appellants is, the note in non-negotiable and is not covered by the provisions of the Negotiable Instrument Act. Code 1939, art. 13, § 13 et seq. However this may be, it seems to us that it is of no consequence, because the note never was negotiated. It came into the hands of appellee by the deed from Castle, and it was a part of the assets that appellee was to reduce to cash and distribute to the creditors of Castle. The appellee stands in the place and stead of Castle, and the legal situation of the parties to this case with regards to the note is the same as if Castle had entered the judgment thereon against the defendants.

The second point raised is, that there was no consideration moving to Reba Foland when she signed the note in question. Foland was indebted to Castle on open account.

Mrs. Foland received no direct consideration for signing the note, but she loaned her credit for the benefit and accommodation of her husband, who was expected to pay the note. Castle was the holder for value of the note, which extended the time of payment of the preexisting indebtedness, and Mrs. Foland's signature on the note is supported by a consideration moving to her husband, the accommodated party. A full discussion of the point here raised will be found in Crothers v. National Bank, 158 Md. 587, at pages 591, 592, 593, 149 A. 270, 273. In that case Steele overdrew his account with the bank and Crothers gave his note to Steele, which was transferred to the bank. He received no consideration for the note, as it was given by him for the purpose of accommodating Steele. This court said: 'A signature for accommodation is supported by a consideration moving to the accommodated party.' We can see no distinction between the case at bar and the case cited. We hold that Reba Foland was responsible as a maker of the note in question.

Foland contends that his indebtedness evidenced by the note was extinguished by his discharge in bankruptcy and that, therefore, no judgment against him under the note in question could be entered. He also contends that in order to prevent such a result appellee should have obtained from the bankruptcy court a stay of his discharge in bankruptcy, in order to enable appellee to enter up the judgment against Foland under the note, and that his failure to obtain the stay is fatal.

There can be no question that the trustee in bankruptcy took no interest in property held by the bankrupt husband and his wife as tenants by the entireties, for in this State no interest therein could have been transferred by the bankrupt to the trustee, or could have been levied upon or sold under judicial process in satisfaction of his individual debt. Cullom v. Kearns, 4 Cir., 8 F.2d 437.

Dioguardi v. Curran, 4 Cir., 35 F.2d 431, 432:

'The estate by entireties in Maryland has all of its common law incidents. It is based upon the fiction of the unity of husband and wife, who take the estate, not as joint tenants, or as tenants in common, but by the entirety, per tout, et non per my.'

See Dioguardi v. Curran, supra, and Maryland authorities therein cited.

The bankruptcy law relieves the bankrupt of all personal claims existing at the time of his bankruptcy. As to future action based on such claims, the decree of discharge in the bankruptcy court, when pleaded, is res judicata. The note sued on in this case was listed in the schedule of debts filed by Foland in the bankruptcy proceeding. It was not filed as a claim, nor was a dividend thereon received by appellee. If it was included amongst the debts of the bankrupt from which he was relieved and released by his discharge in bankruptcy, the effect upon the note sued on would be (during the life of the wife) the same as if he had never executed the note. It would, therefore, be impossible after the discharge of the debt evidenced by the note against the husband, to have procured a joint judgment against the husband and wife on the note in question. If the note was lawfully reduced to judgment before the discharge in bankruptcy of Foland, the judgment so entered would be a lien on real and leasehold property held by Foland and his wife as tenants by the entireties. A discharge in bankruptcy discharges the bankrupt from all claims against him existing at the date of bankruptcy, but does not affect the lien of a judgment on entireties property, lawfully entered.

The judgment in this case was entered on September 16, 1944, and on the same day a nisi order was passed requiring the defendants to show cause within thirty days after service of notice why the judgment by confession so entered should be vacated, opened, or modified. This nisi order was served on both defendants by the sheriff on September 21, 1944. On October 16, 1944, the defendants appeared. The husband set up his discharge in bankruptcy on the 11th day of October, 1944 his wife set up want...