Keiner v. Commerce Trust Co.

On motion for modification of order. Inasmuch as this case was remanded for further proceedings, it is within the power of the trial court to impose such terms or conditions upon its act in striking out the judgment as may be proper and necessary to protect the rights of the parties, and it is therefore unnecessary to modify the order in this case. Filed February 17th, 1928 . *Page 378 On or about November 13th, 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 3rd, 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 payroll.

On that day Thomas L. Cardwell, president of the corporation, approached Walter B. Bahn, vice-president of *Page 368 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 endorsement 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 it 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 thirty 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 *Page 369 by it in some minor capacity, for which he received forty dollars 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 that 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 endorsement 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% collection fee." Demand was made, but the note was not paid, and thereafter, on December 22d 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 21st, 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 appellant's contention, we will refer to the position which she has taken *Page 370 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. Ibid . 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 to let in defenses." Phillips v. Taylor, 148 Md. 162 .

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 ), 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 judgment" International Harvester Co. v. Neuhauser, 128 Md. 181 . 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 surprise 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 *Page 371 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 defence.

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; International Harvester 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 reasons, namely duress and failure of consideration, may be briefly disposed of. There is not the slightest evidence that any duress was practiced upon Mrs. Keiner. Bahn and Cardwell did go to her home to induce her to sign the $10,000 note, but they treated her courteously, they used no threats, and, although they asked her to sign it, Bahn voluntarily suggested that she consider the matter alone with her husband, and during that conference they withdrew from the room, and did not return until she called them. The only compulsion affecting Mrs. Keiner was that exercised by the condition of the company in which her money and that of her husband *Page 372 was invested, and surely Bahn was not responsible for that.

Nor is there any merit in the contention that there was no consideration for her execution of the note. The fixture company owed its employees over $1,600, and it had no funds with which to pay them. She believed, and it appears to have been true, that unless she did sign the note the trust company would advance no "new" money. She signed the note and the trust company advanced money for the pay roll.

She was an accommodation maker, and the money advanced by the payee was advanced in part at least upon her credit (Code, art. 13, sec. 48), which afforded an adequate consideration for her act. So that the case finally turns on whether the appellant showed, in accordance with the rule stated above, that her signature to the note was procured by fraudulent misrepresentations of material facts made to her by Bahn, which were false and known by him to be false, but which she believed to be true, and upon which she relied. She testified that Cardwell first brought the note to her on Friday evening, but that she failed to sign it then, and that the next day he