Venners v. Goldberg

BYRNES, Judge. John P. Venners, appellant, challenges the grant of summary judgment by the Circuit Court for Montgomery County, in favor of Henry H. Goldberg, appellee, on Goldberg’s action for monies due on a sealed promissory note. He poses two questions for review, which we have combined and rephrased: Did the lower court err in determining that there was no genuine dispute of material fact as to whether there was a failure of consideration? FACTS Venners executed a promissory note (“Note”) in which, over a three month period, he agreed to' pay Goldberg $150,000 plus interest.

The Note was dated “as of April 10, 1990,” and ⁴³¹ was signed by Venners under seal. It reads, in pertinent part: FOR MONEY RECEIVED, the undersigned JOHN P. VENNERS, ... (Maker), promises to pay to the order of HENRY H. GOLDBERG, ... (Payee), the principal sum of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00), together with interest ... until the principal amount is paid in full____ Payment Terms : A first payment of $50,000.00 shall be due and payable on May 10, 1990.

A second payment of $50,000.00 shall be due and payable on June 11, 1990. The entire outstanding principal balance and interest accrued thereon shall be due and payable on July 10,1990. On May 10,1990, Venners paid Goldberg $25,000. He made no further payments.

More than six years later, on November 20, 1996, Goldberg sued Venners for monies due on the Note, in the Circuit Court for Montgomery County. Op January 6, 1997, after Venners had filed an answer, Goldberg moved for summary judgment. He asserted that, on the undisputed facts, the terms of the Note were unambiguous, Venners was in default, and he (Goldberg) was entitled to judgment in the amount of the monies due and owing, as a matter of law. Venners opposed the motion for summary judgment.

He argued that there was a genuine dispute of material fact with respect to whether there had been a failure of consideration. He submitted an affidavit acknowledging that he had signed the Note, but stating that the consideration for the Note was to have been the assignment or transfer to him of Goldberg’s interest in a particular limited partnership, which had not been given or received. He also attested that the Note had been signed by him on June 12, 1990, not on April 10, 1990, and that the May 10,1990 payment had been made on another debt. On May 13, 1997, the lower court heard oral argument on the motion for summary judgment.

At the conclusion of the hearing, the court granted the motion, explaining: ⁴³² Mr. Venners acknowledges that he signed the note, but says that he did not receive any consideration for it and he executed the same only on the basis of relations of friendship and good will---- It is a note under seal which states ‘For monies received’; and the allegations are that $25,000.00 was received a month later pursuant to that. I don’t think there is a material dispute ... [A]s to the terms and conditions of this note, I think Mr. Goldberg is entitled to summary judgment, and I will grant the plaintiffs motion for summary judgment on the promissory note in the amount of $125,000.00 plus interest and reasonable attorneys’ fees as specified in the note. The court issued a memorandum order granting the motion for summary judgment. The order, which was docketed on May 23, 1997, provided that judgment was granted for the principal sum of $125,000, and for interest and fees.

It did not specify those amounts, however. On June 2,1997, Venners filed a motion for reconsideration. On June 20, 1997, Goldberg filed a motion for entry of monetary judgment, requesting entry of a judgment specifying the amounts of interest and fees awarded. On July 21, 1997, the court denied Venners’ motion for reconsideration.

On August 20,1997, Venners filed his notice of appeal. The circuit court did not rule on Goldberg’s motion for entry of monetary judgment before Venners noted his appeal. On May 8, 1998, the parties filed a joint motion to correct and supplement the record and to remand the case to the circuit court with a stay of appeal pending that court’s decision on the motion for entry of monetary judgment. This Court dismissed the appeal and remanded the case to the Circuit Court for Montgomery County.

Thereafter, on October 21,1998, the circuit court entered judgment in favor of Goldberg and against Venners for $248,010.99. This appeal followed. ⁴³³ STANDARD OF REVIEW In reviewing a trial court’s ruling granting summary judgment, our task is to decide whether there is a genuine dispute of material fact and, if not, whether the lower court’s ruling is legally correct. Lynx, Inc. v. Ordnance Prod., Inc., 273 Md. 1, 8 , 327 A.2d 502 (1974); McKinney Drilling Co. v. Mach I Ltd. Partnership, 32 Md.App. 205, 209 , 359 A.2d 100 (1976). To defeat a motion for summary judgment, the party opposing the motion must present admissible evidence of a genuine dispute of material fact.

Tennant v. Shoppers Food Warehouse Md. Corp., 115 Md.App. 381, 386 , 693 A.2d 370 (1997); Bagwell v. Peninsula Regional Med. Ctr., 106 Md.App. 470, 488 , 665 A.2d 297 (1995), cert. denied, 341 Md. 172 , 669 A.2d 1360 (1996); Commercial Union Ins. Co. v. Porter Hayden Co., 97 Md.App. 442, 451 , 630 A.2d 261 (1993), vacated on other grounds, 339 Md. 150 , 661 A.2d 691 (1995). A material fact is one that will somehow affect the outcome of the case.

Goodwich v. Sinai Hosp. of Baltimore, Inc., 343 Md. 185, 206 , 680 A.2d 1067 (1996); King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985). A party may not establish the existence of a dispute of material fact through general allegations or formal denials. Bagwell, 106 Md.App. at 488 , 665 A.2d 297 ; Seaboard Surety Co. v. Richard F. Kline, Inc., 91 Md.App. 236, 243 , 603 A.2d 1357 (1992). Rather, the facts must be presented “in detail and with precision ...,” Goodwich, 343 Md. at 207 , 680 A.2d 1067 , in order to enable the trial court to rule on their materiality.

Beatty v. Trailmaster Products, Inc., 330 Md. 726, 738 , 625 A.2d 1005 (1993); Bagwell, 106 Md.App. at 489 , 665 A.2d 297 . DISCUSSION Venners contends that the lower court erred in granting summary judgment because there was a genuine dispute of material fact over whether he had received consideration that had been promised in exchange for his promise to pay under the Note. He argues that, contrary to the reasoning of the lower court, the defense of failure of consideration was not ⁴³⁴ precluded by the presence of a seal on the Note or by the language of the Note. Goldberg responds that the presence of a seal on the Note and the words, “For money received”, each established that consideration had been given; that Venners was precluded from introducing parol evidence to prove the contrary; and, therefore, the lower court correctly determined that there was no genuine dispute of material fact on the issue of consideration and that he (Goldberg) was entitled to judgment as a matter of law.

The Note in this case is a negotiable instrument under the Uniform Commercial Code (“UCC”), as codified in Md.Code (1975,1997 ReplVol.), § 3-104 of the Commercial Law Article (“C.L.”). It is signed by the maker, in this case Venners, contains an “unconditional promise ... to pay a fixed amount of money,” is “payable ... at a definite time,” and is “payable ... to order.” Id. 1 . C.L. § 3-305(a)(2) preserves to the obligor, except as against a holder in due course, any defense that would be available to him “if the person were enforcing a right to payment under a simple contract.” As between the parties, a promissory note is a contract, see Jenkins v. Karlton, 329 Md. 510, 525 , 620 A.2d 894 (1993), and its enforcement is subject to the defenses of lack or failure of consideration, which, under the UCC, are preserved. Indeed, C.L. § 3-303(b), which defines “consideration” as “any consideration sufficient to support a simple contract,” explains: The drawer or maker of an instrument has a defense if the instrument is issued without consideration.

If an instrument is issued for a promise of performance, the issuer has ⁴³⁵ a defense to the extent performance of the promise is due and the promise has not been performed. Goldberg takes the position, however, as did the lower court, that under Twining v. National Mortgage Corp., 268 Md. 549 , 302 A.2d 604 (1973), the presence of a seal on the Note established consideration and, moreover, the acknowledgment in the Note of receipt of consideration precluded Venners from introducing evidence of a failure of consideration, as such evidence would violate the parol evidence rule. We disagree. In order to explain our analysis, we must give a brief review of the state of the common and statutory law pertaining to sealed negotiable instruments prior to the adoption of the UCC.

At common law, a contract signed under seal was a formal obligation that became operative and enforceable upon delivery. (Hence the expression “signed, sealed, and delivered.”) Consideration was not an essential element of such a contract, and the contract was valid notwithstanding the absence of consideration. 3 Corbin on Contracts, § 10.14, at 397 (1996)(“Corbin”); 1 Williston, A Treatise on Contracts, § 2:14, at 125-26 (4th Ed.1990); Citizens’’s National Bank v. Custis, 153 Md. 235, 238 , 138 A. 261 (1927). Unless changed by statute, it remains the case that consideration is not necessary for a sealed promise. See Twining v. National Mortgage Corp., 268 Md. 549, 558 , 302 A.2d 604 (1973); Brewer v. Sowers, 118 Md. 681, 687 , 86 A. 228 (1912).

In the past, the concept that consideration is not required to support a contract under seal has been expressed as the seal “importing consideration” or in terms of the seal establishing a conclusive presumption of consideration. See, e.g., Selby v. Case, 87 Md. 459, 462, 39 A. 1041 (1898)(observing that “[a] seal imports consideration; that is to say, it supplies its place and makes a contract as valid as if value had been actually paid and received”). Those phrases are somewhat misleading, however, because, in fact, consideration is irrelevant to the validity of such a contract. The seal did not really “import” consideration, because there was no need for consideration, ⁴³⁶ and consideration was not truly presumed, because its existence was not necessary for the contract to be effective.

Corbin, supra, § 10.14, at 399. As explained in Corbin, supra, the fact that a contract under seal does not require consideration does not mean that such a contract might nevertheless have been entered into upon an agreement that consideration pass, and does not preclude proof that consideration was promised but was not given. Moreover, the significance of an acknowledgment clause (stating that consideration has been received) in a sealed contract is that the promisor’s obligation, which otherr wise need not be supported by consideration, is to be so supported: Often, a contract under seal contains an express acknowledgment that a stated consideration has been received; and the obligor is said to be “estopped” by his acknowledgment to deny its truth. Since the sealed promise is a binding contract at common law even though no consideration was given for it, the express acknowledgment is unnecessary to enforcement; and proof of its untruth would not establish invalidity.

There is no estoppel preventing the promisor from showing that the acknowledgment is untrue, that a consideration was expressly or impliedly promised, and that it has not been received. If the promised consideration has not been given, the appropriate actions are maintainable to enforce performance or to get damages for its nonperformance. For such a purpose, the sealed acknowledgment does not prevent proof of payment. Furthermore, the fact that a promise is under seal does not prevent it from being expressly or constructively conditional.

It may be conditional upon performance of the agreed consideration. The