Johnson v. Phillips

Born, C. J., delivered the opinion of the Court On March 28, 1921, Leon E. Venable gave Henry L. Johnson (appellant) a promissory note for $6,000 with interest from date, payable twelve 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 endorsers of this obligation waive protest and notice of protest thereon.” Just below the signature of Leon E Venable is “lip as collateral to discounted notes — any and all notes.” On the back of the note there is this endorsement: “For value received, we, the endorsers named below, waive presentment, protest, demand of payment and notice of non-payment, 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 ¹⁹ Wicomico County in favor of the plaintiff (appellant) against Leon E. Venable and William S. Phillips for the snm 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 endorsed 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, ox 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 endorsement, 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, endorsed 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 23rd 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 endorser ²⁰ thereon, in spite of which facts, judgment was1 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. Por answer to the second paragraph of the motion, he set out the consent and agreement on the note, and he then stated the endorsement above quoted and said that Phillips constituted himself, in terms and effect, a maker of the note, and sub jected 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 endorser.

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 tbe defendant, Phillips (appellee), supported alone by bis affidavit, on the one side, and the answer of the plaintiff (appellant) supported by bis affidavit and tbat of Leon E. Venable, on tbe other side, it would seem to be impossible to sustain its action, as Phillips is contradicted in most material respects, and be unquestionably failed to show any knowledge on tbe part of the appellant of tbe alleged alteration on tbe note by tbe 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, PI. & Pr., sec. 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 he verified by the affidavit of the party making it, or some one on his behalf, and the affidavits of other par ²¹ ties may also- he filed; that due notice must he given, and the motion set down for hearing, and that in the meantime counter-affidavits may he 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 ; Gesey v. Stouch, 94 Md. 75 ), under our practice it can decide the question on affidavits or testimony, as the court, may order, although tie 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 tbe appellee it is contended that the declaration ignored the statement on the note — “Up as collateral to disr counted 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 tbe 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 . But Judge Uewee, very clearly pointed out why the negotiability of tbat 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 tbe language “for such sum as may he 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 wias not impaired. In this case, as seen ²² above, tbe note did not contain such, a provision, and hence the judgment could be entered at any tíme — 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 endorser, as it seems to us that the form of the endorsement made him liable to be sued as a maker. Tbe case of Emerson v. Aultman & Co., 69 Md. 125 , 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 tbe note of George S. Powell, in that case, was this endorsement: “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 non-payment, 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 Milleb, 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 giiven in evidence under tbe common counts in assumpsit.” Then he said, on page 135 : “We do not see what else he could have waived or agreed to-, in order to make his obligation to the plaintiff just as absolute and unconditional as if he had signed the note as joint maker with Powell, when it was executed. 'Such, in our opinion, is the true construction and effect of this instrument, and it is conceded that if this be so, it would be admissible in evidence under the common counts of this declaration.” He went on to say that the obligation tben before tbe court w:as a peculiar one and differed widely from that of an ordinary guaranty, and referred to what we have quoted above.

So, in. this case, when Phillips, after waiving all that he did waive, and guaranteeing the payment of the note, agreed that all the provi ²³ sions of the note should apply to and bind him as though he was the maker, it would he difficult to distinguish the principle of the Emerson ease from this. It is true that it is uot said in the endorsement, in so many words, that there can he a joint confession of judgment entered against Phillips and Venable, but if the provisions in the note as to entering judgment “shall apply to and hind us as though we were makers,” as Phillips agreed they should, did he mean that separate judgments should he entered against him and Venable, and not a joint judgment? It was a very unwise thing for anyone to agree to, when he made himself responsible under the tea-ms of that note, but it would he even more so for him to provide that a judgment could he entered against him, and not against Venable. It is; true that this.

Court, as. well as many others, has said that the maker and endorser of a promissory note cannot ordinarily be joined in one; action (Harvard Pub. Co. v. Benjamin, 84 Md. 333 ), hut we know of no reason why they cannot, enter into an agreement