Milton Sommers, Inc. v. Equitable Bank, National Ass'n

BISHOP, Judge. In this case we are asked to determine the relative priority rights of two creditors in certain real property owned by Norman Whittington not a party either before the trial court or before this Court. 1 Milton Sommers, Inc., the holder of a confessed judgment note executed by a partnership of which Whittington is one of the ten co-partners, appeals from the judgment of the Circuit Court for Somerset County (Simpkins, J.) which granted declaratory relief to mortgagee Equitable Bank, appellee. FACTS 2 In 1978, Equitable made a “commercial loan” to “Norman T. Whittington, Jr. and Robert L. Chamberlin, Jr., Partners Trading as the Farm Company; Robert L. Chamberlin, Jr. and Norman T. Whittington, Jr., Co-Partners Trading as The Apgar Company; Norman T. Whittington, Jr. and Wanda Lou Whittington, his wife; and Robert L. Chamberlin, Jr. and Patricia M. Chamberlin, his wife”. As security for the original loan Equitable took and recorded a mortgage in certain real property, not at issue in the case sub judice, owned by the mortgagors. 3 ¹⁵ On April 28, 1982, in the Superior Court of Baltimore City (now, the Circuit Court for Baltimore City), Sommers filed a confessed judgment action 4 upon which judgment was entered in the amount of $104,466.68 plus interest and attorney’s fees against “Norman T. Whittington, Jr., and Robert L. Chamberlin, Jr., co-partners trading as Shores Company and the Cameron Company”.

Equitable and Sommers stipulated at trial that the balance due on the judgment as of July 1, 1987 wa3 $152,713.21. Whittington has partially satisfied the judgment by making cash payments totaling $56,293.22. The docket entries from the Superior Court reflect that “writs” were sent to the Somerset County Sheriff’s Department to be served on Norman Whittington and Robert Chamberlin. Nothing in the Superior Court’s record indicates that service of notice was ever effected upon Whittington or Chamberlin.

The trial court found as a fact that “Whittington, individually, was never served with the notice of the confess judgment.” On May 3, 1982, the Baltimore City confessed judgment was recorded in Somerset County. 5 On March 22, 1983, almost one year after Sommers filed the confessed judgment action, Equitable and the mortgagors under the 1978 mortgage, entered into a “Mortgage Modification Agreement”. In exchange for an additional loan, the mortgagors gave additional security to Equitable to that covered by the 1978 mortgage. This additional security included land in Somerset County known as “Long Farms”, the subject of the priority fight in the case sub ¹⁶ judice. Equitable recorded the modification agreement in Somerset County on March 29, 1983. 6 “Long Farms”, however, was owned solely by “Norman T. Whittington” at the time of its pledge under the 1983 Modification Agreement.

On January 16, 1986, Equitable filed a one count declaratory judgment action in the Circuit Court for Somerset County against Sommers. Equitable later amended its complaint, adding a second count. 7 Count I of the amended complaint sought a declaration that Sommer’s confessed judgment was not a judgment against Norman Whittington personally but against a partnership and as such it would not create a lien against “Long Farms” owned by Whittington individually. 8 Alternatively Count II sought a declaration that Sommer’s confessed judgment was not a “final judgment” that would create a lien against “Long Farms”. ¹⁷ In its “Memorandum and Order” the trial court found as a fact that Whittington was never served with notice of Sommer’s confessed judgment and ruled in favor of Equitable under Count II of its amended complaint. The trial court issued a formal “Declaration” whereby it declared: [T]he failure by Milton Sommers, Inc. to comply with old Rule 645 (new Rule 2-611), in that Norman T. Whittington, Jr. was never served with notice of the confessed judgment obtained by the defendant, precludes Milton Sommers, Inc. from obtaining a lien on the Long Farm parcel superior to Equitable’s lien on the Long Farm parcel. The issue that is dispositive of this case is whether Equitable may attack the Sommers judgment.

Sommers argues that [t]he former rules governing confession of judgment under which the judgment in this case was secured, similar to the current rules, were designed to alleviate hardships previously imposed on Defendants (debtors) which had sometimes previously resulted from lack of notice. The rules were never intended to furnish, to a subsequent mortgagee, a means of contesting priorities, (emphasis in original) Sommers cites the following passage from Newark Trust Co. v. Trimble, 215 Md. 502, 504-505 , 138 A.2d 919 (1958), in support of his argument: Our present Rule 645 with regard to the entry of a judgment by confession and its requirement for the service of summons on the defendant and its allowance of thirty days within which to move to strike out such a judgment are the outgrowth of the hardships upon defendants in such cases, which sometimes resulted previously from lack of notice and the consequent lack of an opportunity to interpose defenses before such a judgment became enrolled. This statement supports the principle that Rule 645 [Now Rule 2-611] was created for the benefit of defendant-debt ¹⁸ ors. The circumstances under which Equitable may collaterally attack the judgment in this case are limited.

The rule permitting a collateral attack upon a judgment because of the absence of jurisdiction prevails where the want of jurisdiction appears upon the face of the record, or where the record affirmatively shows absence of conditions necessary to give the court jurisdiction to affect the rights of a party. In support of this rule, it has been declared that were the rule otherwise, it would never be possible to attack collaterally the judgment of a court of general jurisdiction, that the answer to the attack would always be that notwithstanding the evidence or the averment, the necessary facts to support the judgment are presumed. A fortiori, where a lack of jurisdiction is apparent upon the face of a judgment of a court of limited jurisdiction, the judgment may be attacked collaterally for want of jurisdiction. 46 AM.JUR.2d Judgments § 665 p. 821 (1969 Vol. and 1987 Cum.Supp.). In the case sub judice, it is clear that Whittington never received service of process and Sommers has virtually conceded this point.

In Fisher v. DeMarr, 226 Md. 509, 515 , 174 A.2d 345 (1961), the Court of Appeals said, It is established that a judgment or decree of a court without jurisdiction is void and may be attacked directly by a party or a privy, if he is not estopped to do so, and collaterally by a stranger whose interests or status would be adversely affected if it were valid, and that a judgment or decree which is merely erroneous or voidable is not, with relatively rare exceptions, subject to collateral attack. (Emphasis added; citations omitted.) There can be no dispute that Equitable’s interests would be adversely affected if Sommers holds a valid lien on "Long Farms”; however, based on the record in the case ¹⁹ sub judice the court was not without jurisdiction. Also, it appears that the deficiency in the procedure in the case sub judice rendered the judgment “merely erroneous or voidable” and, therefore not subject to collateral attack. The mortgage note at issue contained the following “warrant of attorney” clause: The makers, endorsers and guarantors of this note hereby waive presentment for payment, demand for payment, notice of non-payment and dishonor, protest and notice of protest; waive trial by jury in any action or proceeding arising on, out of, under or by reason of this note; ... and the makers, endorsers and guarantors do hereby empower any attorney of any Court within the United States to appear for us, at any time after default, and confess judgment against us for the sum due with costs of suit, and attorney’s commission of 10% of the amount due, for collection, and release of all errors, and without stay of execution, and the benefit of any exemption statute now or hereafter existing is hereby waived.

The note was signed by and judgment was entered in the names of “Norman T. Whittington, Jr. and Robert L. Chamberlin Jr., Copartners trading as Shores Company and The Cameron Company.” From 47 Am.Jur.2d Judgments § 1103, p. 157 (1969 and 1987 cum supp.) we learn: Judgments by confession form no exception to the rule that a court must have jurisdiction before a judgment may be entered. However, the general principle that every reasonable presumption will be indulged in favor of the action of a court of general jurisdiction applies in cases calling in question the regularity of the action of the court in entering a judgment by confession. Under this rule, it will be presumed that the court had jurisdiction to enter the judgment by confession, that the agent performed his duty in the authorized manner, and that the proceedings were regular and according to law. ²⁰