Vain v. Gordon

Hammond, C. J., delivered the opinion of the Court. The payee of a note under seal made in 1965, payable one year after date, caused judgment by confession to be entered in the Circuit Court for Prince George’s County in April 1966 for the full amount of the note and interest and attorney’s fee, all as authorized by the terms of the note, when the note was not paid when due. A timely motion to vacate the judgment on the ground that there was no consideration for the note was granted (the lien being retained), and the makers were given fifteen days to file responsive pleas. The makers filed the general issue pleas in assumpsit and, in due course, the case came on for trial before a jury.

The plaintiff payee testified that the note had been signed by the defendant makers, husband and wife, and delivered to him, and that nothing had been paid thereon, whereupon the note was admitted in evidence. The court would not permit the makers to inquire into the matter of consideration for the note or to show that there was none and, when the makers offered no other defense, directed a verdict for the payee. The contest of the parties in this Court is between the makers’ theory that under Citizens National Bank v. Custis, 153 Md. 235 , lack of consideration for a negotiable instrument, whether or not under seal, may be shown under the general issue plea, 1 ¹³⁶ and the payee’s theory that under Maryland Rule 342 cl (1) a denial of consideration for a contract under seal must be specially pleaded.* 2 The parties proceeded below and here on the assumption that the note is negotiable, although the payee contends and the makers concede that if the note is not negotiable, Rule 342 c 1 (1) and Roth v. Baltimore Trust Co., 161 Md. 340 , require that the defense of lack of consideration for the non-negotiable instrument under seal must be specially pleaded, and cannot be availed of under the general issue pleas. We find the note to be non-negotiable.

It is identical in its language authorizing confession of judgment in any court “as of any term” with the note before us in Stankovich v. Lehman, 230 Md. 426 , in which we held that under the Negotiable Instruments Act the authorization to confess judgment “as of any term” permitted entry of judgment at any time prior to the maturity of the note and therefore destroyed negotiability. The Uniform Commercial Code does not appear to have changed the law on the point. Code (1964 Repl. Vob), Art. 95B, § 3-112 (1) (d), provides that “the negotiability of an in ¹³⁷ strument is not affected by * * * a term authorizing a confession of judgment on the instrument if it is not paid when due * * *.” We said in Stankovich Aat page 430) : “It would seem logical that if the statute, as it does, preserves negotiability only if the confession of judgment is at or after maturity, the warrant to confess must expressly, or by necessary