Johnson v. Phillips

• Decision Date: 15 March 1923
• Docket Number: 11.
• Parties: JOHNSON v. PHILLIPS.
• Court: Maryland Court of Appeals

122 A. 7

143 Md. 16

JOHNSON v. PHILLIPS.

No. 11.

Court of Appeals of Maryland

March 15, 1923

Appeal from Circuit Court, Wicomico County; Joseph L. Bailey, Judge.

Action by Henry L. Johnson against William S. Phillips and another. From judgment granting motion of defendant Phillips to strike judgment by confession against him, plaintiff appeals. Reversed, and cause remanded.

Frederick H. Fletcher, of Cambridge (Fletcher & Jones and Henry L Johnson, all of Cambridge, on the brief), for appellant.

Frederick W. C. Webb, of Salisbury (Woodcock & Webb, of Salisbury, on the brief), for appellee.

BOYD C.J.

On March 28, 1921, Leon E. Venable gave Henry L. Johnson (appellant) a promissory note for $6,000 with interest from date, payable 12 months after date. Amongst other provisions in it, was the following:

"And I/we hereby authorize and empower any justice of the peace of the state of Maryland, in and for Dorchester county, or the clerk of the circuit court for Dorchester county, or any other county, at any time, to enter judgment on this note for the amount thereof, including debt, interest and costs and attorney's fees for collection, without summons or process; or if, in order to collect this note, it should become necessary to place it in the hands of an attorney I/we hereby agree to pay the attorney's fees for the collection thereof, even though judgment should not be obtained. The makers and indorsers of this obligation waive protest and notice of protest thereon."

Just below the signature of Leon E. Venable is, "Up as collateral to discounted notes--any and all notes." On the back of the note there is this indorsement:

"For value received, we, the indorsers named below waive presentment, protest demand of payment and notice of nonpayment, and guarantee the payment of the within note, and agree that all of its provisions shall apply to and bind us as though we were makers.

[Signed] W. S. Phillips."

On July 8, 1921, in recess of the court, a judgment by confession was entered by the clerk of the circuit court for Wicomico county in favor of the plaintiff (appellant) against Leon E. Venable and William S. Phillips for the sum of $6,100, with interest from date and costs, $7.75; collection fee $203.33, exemption waived, with stay of execution until March 28, 1922. On November 26, 1921, a motion to strike out the judgment was made by William S. Phillips, appellee, and an order nisi was passed by the court. The plaintiff (Johnson) answered under oath on December 19, 1921, and also filed an affidavit of Leon E. Venable. The same day the motion was heard and held sub curia. On May 24, 1922, an order of court was filed striking out the judgment against Phillips, and from that order this appeal was taken.

The reasons assigned for striking out the judgment were: (1) Because the note was indorsed by said Phillips on the understanding that it was to be held solely as collateral security for any notes which Venable might receive in payment of premiums on policies of insurance, which he then held, or might receive with their respective maturities on or before March 28, 1922, and which might be discounted by the plaintiff for said Venable; that in pursuance of said agreement the words "Up as collateral to discounted notes" were written upon the face of the note, and after the indorsement by this defendant the note was "fraudulently, wrongfully, and unlawfully altered without the knowledge of this defendant" by adding the words, "any and all notes"; that Venable borrowed large sums of money from the plaintiff upon his individual note or notes, and fraudulently, wrongfully, and unlawfully pledged the said note, indorsed as aforesaid by the defendant, to the plaintiff as collateral security therefor; that the alteration was a great surprise to this defendant, and he first learned of it on the 25th of November, 1921, and of the pledging thereof in violation of the agreement on the 23d of November, 1921. (2) Because the note was not due and could not be sued upon, or judgment entered thereon until its maturity. (3) Because the defendant Leon E. Venable is the maker of said note and the defendant Phillips is the indorser thereon, in spite of which facts judgment was entered jointly against them, contrary to law requiring the separation of the alleged rights of action against them.

The plaintiff filed an answer denying any knowledge of such an agreement or understanding between Phillips and Venable, and also denying any knowledge of any change in the contract which he says was the same as it was when he received the note, and he filed an affidavit made by Venable as part of his answer. For answer to the second paragraph of the motion, he set out the consent and agreement on the note, and he then stated the indorsement above quoted, and said that Phillips constituted himself, in terms and effect, a maker of the note, and subjected himself to all the liabilities in law and in fact which attach to a maker, and there existed in this respect no distinction between the maker and the indorser. The affidavit of Venable contradicts Phillips as to the alteration and as to the understanding between them.

We have had some difficulty in determining, from what is before us, what ground the lower court based its action upon in striking out the judgment. No testimony was taken, and if the court acted on the motion filed by the defendant Phillips (appellee), supported alone by his affidavit, on the one side, and the answer of the plaintiff (appellant) supported by his affidavit and that of Leon E. Venable, on the other side, it would seem to be impossible to sustain its action, as Phillips is contradicted in most material respects, and he unquestionably failed to show any knowledge on the part of the appellant of the alleged alteration on the note by the addition of the words "any and all notes." after the words "up as collateral to discounted notes," or that the appellant had any reason to suspect such alteration, when he received the note. In 2 Poe, § 394, it is said that when the reasons assigned for striking out a judgment depend upon extrinsic facts or matters not apparent from the record, the motion should be verified by the affidavit of the party making it, or some one on his behalf, and the affidavits of other parties may also be filed; that due notice must be given and the motion set down for hearing and that in the meantime counter affidavits may be filed by the opposite party, or testimony taken before a commissioner of the court, or one agreed upon, or in open court, if the court so determines. So, although this court has said that a judgment ought not to be stricken out on the mere ex parte affidavit of the defendant (Foran v. Johnson, 58 Md. 144; Huntington v. Emery, 74 Md. 67, 21 A. 495; Geesey v. Stouch, 94 Md. 75, 50 A. 422), under our practice it can decide the question on affidavits or testimony, as the court may order, although the latter is preferable.

But there is nothing to show how the court determined to hear the motion, or whether it considered the affidavits. In the brief of the appellee it is contended that the declaration ignored the statement on the note--"up as collateral to discounted notes," etc.--and it is said "the court below evidently took the view, that such omission was a fatal defect and variance and invalidated the entire proceeding." Inasmuch as we cannot understand how the court could have struck out the judgment on the facts as presented in the record, we assume that it must have been on the theory, as suggested in the appellee's brief, or on the one that a joint judgment could not have been entered on the note; in other words, on the face of the papers and not on extrinsic matters.

The appellee also suggested that the note was negotiable, and hence the judgment could not have been entered before maturity, relying apparently on Edelen v. First Nat. Bank, 139 Md. 422, 115 A. 602, but Judge Urner very clearly pointed out why the negotiability of that note was not affected by the terms used. He said, "If the provision was simply that the judgment might be obtained 'at any time,' the contention would have to be sustained," but as the language "for such sum as may be due" came after "at any time," we held that the two together meant "that the entry of the judgment can only occur after the note has matured," and hence the negotiability of the note was not impaired. In this case, as seen above, the note did not contain such a provision, and hence the judgment could be entered at any time; its negotiability being thereby destroyed.

We do not deem it necessary to enter upon a discussion as to whether Phillips was a guarantor or simply an indorser, as it seems to us that the form of the indorsement made him liable to be sued as a maker. The case of Emerson v. Aultman & Co., 69 Md. 125, 14 A. 671, while differing from this in some respects, is so analogous to it that we will quote from it at some length. On the back of the note of George S. Powell, in that case, was this indorsement:

"For value received I hereby guarantee the payment of the within note at maturity, and any renewal of the same, and hereby waive protest, demand, and notice of demand and nonpayment, and suit against the maker, and consent that the payment of this note may be extended from time to time, without affecting my liability thereon."

Judge Miller, who delivered the opinion of this court, said that--

"In case of an ordinary and usual guaranty, as where one contracts in writing, to be answerable for goods sold to a third party, or where in like manner one engages to pay a note in case the maker fails to pay the same, the contract of guaranty must be declared on specially, and it cannot be given in evidence under the common counts in

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