Taylor v. Gorman

Thomas, J., delivered the opinion of the Court. On the 20th of June, 1922, a judgment by confession was entered in the Superior Court of Baltimore City in favor of Carrie M. Gorman against Walter L. Taylor for $16,-166.28, with interest from date and cost of suit, on the following promissory notes of the Flax Products Corporation in favor of the plaintiff and endorsed by Herbert B. Stimpson and the said Walter L. Taylor: one dated December 10th, 1920, for $6,250, payable on demand with interest; one dated December 21st, 1920, for $2,200, payable sixty days after date with interest; one dated January 28th, 1921, for $1,813.34, payable on demand with interest, and one dated ²⁰⁹ December 29th, 1920, for $1,600, payable sixty days after date witli interest. Eaeb of said notes contained an authority to any attorney to' appear and confess judgment for the amount of the note, costs of suit “and attorney’s commission of 25 per cent, for collection,” and each bore the following endorsement: “It is hereby agreed that all the terms and conditions regarding the power of attorney .and confession of judgment appearing on the face of this note shall apply to me as endorser in any suit on said note against me, and I also waive all necessity or notice of protest if note be not paid at maturity. Herbert B. Stimpson (Seal), Walter L. Taylor (Seal).” On March 22nd, 1923, the defendant filed a motion to strike out said judgment for the following reasons: 1.

That he signed the notes upon which the judgment was obtained upon the express condition that Allen B. Gorman and George M. Zingsheim would also sign them as endorsers; that Allen B. Gorman was authorized by the plaintiff to act as hex agent in procuring his endorsement, and that the notes were delivered to him as the agent of the plaintiff “in escrow upon the condition aforesaid”; that the said Allen B. Gorman and George M. Zingsheim did not sign the notes as endorsers, and that Allen B. Gorman delivered them to the plaintiff in violation of said condition, “and that the plaintiff, with due notice through him as her agent, accepted them.” 2. That before' the notes were signed by the defendant said Allen B. Gorman, agent for the plaintiff, advised him that the .Flax Products Corporation “would receive immediately from other sources $3,500” to be used by it in liquidation of certain indebtedness, and that he signed the notes upon condition “that $3,500 be received” by said corporation for the purpose mentioned, and that the notes were given to the plaintiff by said Gorman before the $3,500 was received, and that as to -the defendant the delivery of said notes was unauthorized. 3. That at the time the notes were signed by him it was understood and agreed that the blank form printed in the ²¹⁰ notes “should not be filled in to authorize the collection of attorneys’ fees or commissions in any amount whatever,” but that after he signed the notes, and without his consent a provision was inserted allowing the payee’s attorney a collection fee of 25 per cent., “of all of which the plaintiff, through her duly authorized agent, Allen B. Gorman, had due notice.” 4. “That as a reason for the delay in filing this motion the defendant says that he resides in West Virginia and was advised that the defenses set forth herein could be presented when suit on said judgment was instituted against him in West Virginia; that a suit at law was so instituted and was not decided until January 26th, 1923, when the District Court for Southern District of West Virginia held therein that the merits of the case upon which the judgment of this Court was based could not be raised in that Court. In her answer to the motion the plaintiff alleged that the statement of the defendant that he endorsed the notes upon condition that said Gorman and Zingsheim would also become endorsers was not true, and it was not until some time after her demand for payment that she first heard that the defendant intended to set up such a claim; that when she accepted the notes she had no reason to suppose that the endorsement of the defendant was not unconditional; that Allen B. Gor-man was not her agent in procuring said notes, and they were not delivered to him as her agent; that in all transactions relating to the loans made by her fox which the notes were given, Allen B. Gorman, who was the vice-president of the Flax Products Corporation, was acting solely as the officer and agent, and in the interest of said corporation, and was never authorized to act as her agent-; that the notes sued on bearing the endorsement of the defendant and Herbert B. Stimpson were given to her as an inducement for an extension of the time of the loans made to the corporation, and that the defendant, knowing that she granted such extension in consideration of said endorsements, left the plaintiff under the impression that his endorsement was valid until after ²¹¹ she demanded payment of the notes.

In answer to the second paragraph of the motion, she further denied that Allen B. Gorman acted as her agent in the transaction mentioned, and averred that she had no knowledge of his representing to the defendant that the corporation would receive $3,500, and that if such statement was made by him she was in no way responsible therefor. Answering the fourth paragraph of the motion, she alleged that promptly after the entry of said judgment a transcript of the record was sent to attorneys in West Virginia with instructions to enforce payment as soon as possible; that said attorneys promptly notified the defendant that they had received the judgment and of the instructions given them, and that in less than thirty days from the date of the judgment the defendant replied to said attorneys that he had already instituted proceedings in Baltimore to have the judgment annulled, and that the defendant, therefore, knew that if he had any grounds upon which to attack the judgment, such attack would have to be made promptly in the court in which the judgment was entered. Further -answering said motion, the plaintiff alleged that, at the time the notes were delivered to her, Taylor and Stimp-son were extensively interested in and were officers of said corporation, which controlled a patent which they hoped to dispose of in a short time and in such manner as would yield them a very large profit; that in February, 1921, she demanded payment of her loans, and that, on March 1st, 1921, Stimpson, Mr. Slingluff, her attorney, and Mr. Goldsmith, attorney for 'Charlotte J. Gorman, held a conference for the purpose of ascertaining if payment of her notes and the note of Charlotte J. Gorman could not be secured without litigation; that at said conference Stiinpsou asked that she and Charlotte J. Gorman refrain from litigation, as he was confident that the corporation would be able to pay their notes in full within a short time, and stated "that if suits were instituted his and Taylor’s efforts to dispose of the ’patent would be frustrated; that at said conference Stimpson also stated that if suits were instituted against him or Taylor ²¹² they would make tbe defense stated in the defendant’s motion; that prior to said statement the plaintiff had received no intimation of such a contention by either Stimpson or Taylor; that at another conference of the same parties, on March 2nd, Stimpson was informed that the- threat to set up such defenses made it necessary, in the judgment of said attorneys, to institute suit against the endorsers without further delay, so that .all doubts .as to their liability could be promptly “set ait rest,” and that Stimpson then stated that Taylor would be in Baltimore soon, and that he would arrange a conference with said attorneys; that on the 15th of March, 1921, a conference was held .at which said, attorneys, Stimpson, Taylor, Allen B. Gorman and E. Arthur Gorman were present, ,and that after an extensive discussion the -attorneys proposed on behalf of the plaintiff and Charlotte J. Gorman that they would agree not to institute suit against either of said endorsers within one year from that date if, in consideration thereof, said endorsers would waive every possible defense they might have and hold themselves “un-qualifiedly liable as endorsers on said notes”; that Stimpson and Taylor agreed to said proposal provided Allen B. Gor-man would become co-endorser with them, and that Allen B. Gorman agreed to do so; that Stimpson and Taylor then said that George M. Zingsheim was interested with them in said corporation and should also be an endorser, and that they would undertake to secure his endorsement of the notes; that it was agreed that said -attorneys should prepare such p-apers as they thought necessary to constitute the evidence of said agreement; that as the notes held by the plaintiff and Charlotte J. Gorman had been dishonored and protested, new notes and an agreement were prepared by said attorneys and sent to Stimpson for his signature, and to be sent by him to Taylor; that thereafter Stimps-on repeatedly stated to said attorneys that he had forwarded -said papers to Taylor urging him to° sign and return them to him, and that he h-ad also forwarded to Taylor letters from said attorneys protesting against delay in the execution of said papers, but that Tay ²¹³ lor, without giving any reason therefor, had not complied with his request; that at no time after said conference did either Stimpson or Taylor suggest that the papers were not prepared in accordance with their said agreement, or that they would not sign them, but by the inaction of Taylor and the repeated promises of Stimpson they= secured more than the promised period of delay of litigation; that some timo after the 15th of March, 1922, demand was made upon. Stimpson, secretary of said corporation, for payment of said notes, and after numerous conferences with him a letter was-written by one of said attorneys, on behalf of the plaintiff and Charlotte J. Gorman, to Taylor on April 15th, 1922,. in which, after referring to the agreement of March 15th, 1921, and the repeated efforts to. secure execution of said papers, he was advised that as the time had expired, suit would be delayed only .a few days if payment was not made;. that Taylor never replied to said letter, and suit was not instituted in the Superior Court of Baltimore City until more than two months after the date of said letter.

The evidence produced by the defendant and the plaintiff' at the hearing of the motion is embraced in a bill of exceptions and is set out in the record. On the 27th of July, 1923, the court below passed an order that the motion to- strike out the judgment be granted, “provided the defendant within forty-five days from the 22nd of June, 1923 (being the day on which the decision of the court on said