Webster v. People's Loan, Sav. & Deposit Bank of Cambridge

• Decision Date: 08 January 1931
• Docket Number: No. 12.,12.
• Citation: 152 A. 815
• Parties: WEBSTER et al. v. PEOPLE'S LOAN, SAVINGS & DEPOSIT BANK OFCAMBRIDGE.
• Court: Maryland Court of Appeals

152 A. 815

WEBSTER et al.

v. PEOPLE'S LOAN, SAVINGS & DEPOSIT BANK OFCAMBRIDGE.

No. 12.

Court of Appeals of Maryland.

Jan. 8, 1931

Appeal from Circuit Court, Dorchester County; Robt. F. Duer, Judge.

Action by the People's Loan Savings & Deposit Bank of Cambridge, against Thomas S. Webster, individually and trading as the Thomas S. Webster Company, and others. Judgment by confession for plaintiff, and defendants appeal.

Affirmed.

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

V. Calvin Trice, of Cambridge, for appellants.

T. Sangston Insley, of Cambridge, for appellee.

SLOAN, J.

On November 18, 1929, a judgment by confession was entered by the clerk of the circuit court for Dorchester county on the order of the court, in favor of the People's Loan, Savings & Deposit Bank of Cambridge, Md., appellee, against Thomas S. Webster Company and Noah Webster and Maude Webster, his wife, appellants, for the sum of $13,245.69, with interest from date until paid and costs, $7.50, and $1,324.57, attorney's fee. On December 14, and within the term, the appellants filed a motion to strike out the judgment, to which the appellee demurred, and, the demurrer having been sustained, the defendants appealed. The note upon which judgment was entered was made by "Thomas S. Webster Co. by Thomas S. Webster," to the appellee, for $19,700, dated January 1, 1929, payable on demand. It was indorsed by Noah Webster and Maud Webster as guarantors and makers. Johnson v. Phillips, 143 Md. 16, 22, 122 A. 7. The note was collateral in form, and stated that there was deposited with it as security eight mortgages aggregating the sum of $19,475, with the authority to sell any or all of the collateral at public or private sale without notice, and "should there be any deficiency I/we further promise to pay such deficiency with all interest to date, to the holder of this note on demand, hereby consenting that judgment may be entered in favor of the holder hereof against me/us by any Justice of the peace of this or any other state, or by the Clerk of any Court having jurisdiction for the amount of any such deficiency, including all interest and costs and 10% attorney's fees for collection, with waiver of the benefit of all exemption laws of this or any other state, without summons, notice or process. 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, at any time after maturity, to enter judgment thereon for the amount of this note, including debt, interest, costs and 10 per cent attorney's fees, without summons or process." One of the mortgages ($5,000) was paid in full, $1,000 on account of another, and $750 by the defendants, reducing the amount of the principal of the note to $12,950, which, with the interest due, makes up the amount of the judgment, $13,245.69.

While the appellants assign several reasons for striking out the judgment, they are to the effect that the mortgages assigned to the appellee, and held by it as collateral, constitute the primary obligation, and that the right of the appellee to have a confessed judgment entered in its favor by the clerk applies only to such deficiency as there may be after it has exhausted its remedies against the collateral. It has long been settled in this state that, in the absence of an agreement to the contrary, the holder of a note is not obligated to collect on collateral before proceeding to judgment on the principal obligation (Gwynn v. Lee, 9 Gill, 138; Brewster v. Frazier, 32 Md. 302; Brengle v. Bushey, 40 Md. 141, 17 Am. Rep. 586; Rees v. Logsdon, 68 Md. 93, 11 A. 708), even though the collateral be of a higher nature than the principal or original obligation the payment of which is thus secured.

The same objection was made to the attorney's fee as to the principal debt, and that is that no such fee was payable until the collateral had been exhausted. According to the terms of the note, no judgment or lien for an attorney's fee could be entered and no charge made until the entry of judgment for the principal debt or deficiency; the only authority to charge the fees having been included in the provision for judgment, and then at the rate of 10 per cent. on the amount then owing. The authority of the clerk to enter the judgment by confession is derived from the statute (article 26, § 6, of the Code) and in accordance with the terms of the consent. Tyrrell v. Hilton, 92 Md. 176, 48 A. 55. "When the clerk is authorized to enter judgment without the agency of an attorney, he 'may exercise the power only when the amount due appears on the instrument or can be rendered certain by calculation from its face.'" Johnson v. Phillips, 143 Md. 16, 27, 122 A. 7, 12.

That the parties to a contract have the right to agree for the payment of an attorney's fee in the event of default in payment by the promisor has long been recognized in the decisions of this court. "Parties have the right to make their contracts in what form they please, provided they consist with the law of the land; and it is the duty of the courts so to construe them, if possible, as to maintain them in their integrity and entirety." Bowie v. Hall, 69 Md. 433, 435, 16 A. 64, 1 L. R. A. 546, 9 Am. St. Rep. 433; Heller v. Marine Bank, 89 Md. 602, 617, 43 A. 800, 45 L. R. A. 438, 73 Am. St. Rep. 212. In a few of the courts of the country such provisions have been characterized as a cover to usury and declared void as against public policy. See Raleigh County Bank v. Poteet, 74 W. Va. 511, 82 S. E. 332, and the notes in L. R. A. 1915B, 928, Ann. Cas. 1917D, 359; 5 Uniform Laws, Ann. 38-48. In the great majority of the states such provisions have been upheld, in some as a penalty for failure to pay promptly as agreed, but in most cases as a contract of indemnity to reimburse the plaintiff for the expense of enforcing his contract incurred by the defendant's default. L. R. A. 1915B, 938. In Bowie v. Hall, 69 Md. 433, 435, 436, 16 A. 64, 65, 1 L. R. A. 546, 9 Am....