LEGAL GUIDE
Written by attorney Stewart Andrew Sutton | Oct 20, 2011

How to Vacate a Confessed Judgment in Maryland

A. OPENING, MODIFYING, AND VACATING A

CONFESSED JUDGMENT IN MARYLAND

Upon being served with notice of the confessed judgment, the defendant may move to open, modify, or vacate the confessed judgment by offering evidence constituting a defense to the promissory note. MarylandRule 2-611(d). If “there is a substantial and sufficient basis for an actual controversy on the merits", Maryland Rule 2-611(e) provides that the court shall open, modify, or vacate the confessed judgment.

A potential meritorious defense does need to be proved with a preponderance of the evidence:

[I]f 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 defense. 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 the jury.

Remsburg v. Baker212Md.465, 469 (1957) (quotingKeiner v. Commerce Trust Co. 154 Md. 366 (1927));Garliss97 Md.App. at 104. The result is that “Marylanddebtors, to open a confessed judgment ‘are merely required to meet a standard that is a minimal obstacle’". Shafer Brothers v. Kite43 Md.App. 601, 606 (1979) (quotingBillingsley v. Lincoln National Bank271 Md. 693, 690 (1974)).

“What constitutes a meritorious defense is a question of law". Garlissat p. 104;Shaferat p. 607.

B. MERITORIOUS DEFENSES AND SET-OFFS

A meritorious defense to a confessed judgment challenges either “(1) the execution of the promissory note itself or (2) the amount of debt due on the note". Nils, LLC v Antezana171 Md.App. 717, 728 (2005), cert. denied. 397Md. 397 (2006).

The defenses that fall within the scope of the execution of the promissory note itself include: (a) the debtor’s signature was forged; (b) person who signed the promissory note was not authorized to bind the obligator; (c) the debtor lacked capacity; (d) the promissory note was not supported by consideration; (e) the note was executed under duress; (f) the terms of the agreement are unconscionable; and (g) the contract is one of adhesion. Id.at pp. 729 to 731.

A meritorious defense also exists when evidence is presented that the amount due on the note should be reduced by a set-off. Id.at 729;Garliss97 Md.App. at p. 104. A set-off can be asserted by either a potential affirmative defense in which the defendant seeks a reduction of the amount owed on the note or by a potential counterclaim in which the defendant seeks monetary relief from plaintiff arising out of the same transaction as the promissory note. Coffman v. Hayes259Md.708, 712-713 (1970)

The coercion defense applies when an attorney requests a client to execute a promissory note during his or her representation of the client. Rule 1.8(a) of the Maryland Lawyers’ Rules of Professional Conduct provides that a lawyer is prohibited from entering into a transaction with a client, unless the attorney advises the client in writing to seek the advice of independent counsel regarding the transaction. The rationale for this rule is that the “confidential and fiduciary relationship enables an attorney to exercise a very strong influence over his client and often affords him opportunities to obtain undue advantage by availing himself of the client’s necessities, credulity and liberality". Hughes v. McDaniel, 202Md.626, 633 (1953). So “when attorney and client contract during their attorney-client relationship, ‘the law makes a presumption against the attorney and in favor the client’". Atty. Griev. Comm’n v. Korotki, 318Md.646, 666 (1990) (quotingEtzel v. Duncan, 112Md.346, 350-51 (1910)).

C. MODIFYING THE CONFESSED JUDGMENT

When the defendant asserts that the judgment should be reduced by an uncredited partial payment or that plaintiff has miscalculated the amount owed, the court should modify the amount of the confessed judgment. Nils, LLC v Antezana171 Md.App. 717, 729 & 730 (2005).

Grounds for modification also exist when the confessed judgment note contains a provision that entitles the plaintiff to an award of attorney’s fees based upon a fixed percentage of the unpaid balance of the note. An attorney fee based upon a fixed percentage of a debt is unenforceable. Monmouth Meadows Homeowners Association, Inc. v. Hamilton416 Md. 325, fn.14 (2010) (“Our holding that where an attorney is entitled to reasonable fees under the terms of a contract, that attorney is not permitted to define that amount by use of a percentage of a judgment"). This is also true for a confessed judgment note. Meyer v. Gyro Transport Systems, Inc. 263Md.518, 531 (1971) (“When the provision to confess judgment provides only for a reasonable attorney’s fee, the reasonable amount of the fee must be determined by the court and counsel may not, himself, use a percentage to determine the amount of the attorney’s fee").

Even if the subject promissory note provided for reasonable attorney’s fee (as opposed to a fixed percentage), an attorney who represent herself in enforcing such a promissory note is not entitled to any attorney’s fees, because no such fees had been incurred:

[I]t seems implicit in the provisions of the note that the 15% commission shall be payable only to an attorney employed in the case or to the plaintiff in reimbursement for his expense in employing such an attorney, and that plaintiff is not entitled to collect such additional compensation when he acts in proper person.

Weiner v. Swales217Md.123, 125 (1958). More recently, the same result was reached inGreenbriar Condominium, Phase I, Council of Unit Owners, Inc. v. Brooks159 Md.App. 275, 318 (holding “there is nothing in the contract language to suggest that parties representing themselves are entitled to recovery attorney’s fees that they have not incurred");Greenbriar v. Brooks384Md.581 (2005) (affirmed in part and reversed in part on unrelated issues).

Nor is a pro se attorney entitled to an award of attorney’s fees under Maryland Rule 1-341 for litigating a confessed judgment action, because a

“A lawyer who represents himself or herself has not incurred legal fees". Frison v. Mathis188 Md.App. 97, 109 (2009)

D. VACATING THE CONFESSED JUDGMENT

When a defendant has a meritorious defense, the court must vacate the confessed judgment to protect the rights of the defendant/debtor:

It would, indeed, be a dangerous procedure to permit a confessed judgment to stand against one who has seasonably raised his claim and has a just and valid set-off against the holder of the judgment, until such time as the claim upon which the set-off is based can be reduced to judgment. The holder of the confessed judgment would be at liberty to collect his judgment, and, if, at the time the owner of the set-off obtains judgment, the former holder of the confessed judgment be financially irresponsible, the owner of the set-off might never be able to collect on his judgment.

Gelzer v. Scamoni238Md.73, 75 (1965);MarylandRule 2-611(e). Another reason why confessed judgments are “freely strickened out on motion at law to let in defenses" is to protect the debtor from the potentiality of fraud and abuse in the execution of confessed judgment notes. Keiner v. Commercial Trust, 154Md.366 (1928) (quotingPhillips v. Taylor148 Md. 157, 162 (1925)).

After the confessed judgment is vacated, the defendant will file a responsive pleading, and the controversy will proceed to be litigated on its merits. MarylandRule 2-611(e);Schlossberg v. Citizens Bank of Maryland341 Md. 650, 656 (1995);Boyce v. Plitt274Md.333, 336 (1975) (holding that defendant’s responsive pleading can be docketed only after the confessed judgment has been opened or vacated).

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