United States District Court, D. Maryland, Southern Division
CHOICE HOTELS INTERNATIONAL, INC. Plaintiff,
WALOON PROPERTIES, INC, et al. Defendants.
J. HAZEL United States District Judge
Waloon Properties, Inc., William Wang, and Cindy Zhao
("Defendants'") move to vacate a judgment by
confession entered in favor of Plaintiff Choice Hotels
International, Inc. ECF No. 8. Through the judgment by
confession, Plaintiff sought to enforce the terms of a
promissory note and recover liquidated damages resulting from
Defendants' failure to comply with the terms of the
parties' Settlement and Release Agreement. See
ECF No. 1. Plaintiff filed an Opposition to Defendants'
Motion, ECF No. 10. but Defendants have not filed a reply.
No. hearing is necessary. See Loc. R. 105.6 (D. Md.
2016). For the following reasons. Defendants' Motion to
Vacate is denied.
about December 11, 2014, Defendants entered into a Settlement
and Release Agreement for liquidated damages owed to
Plaintiff from Defendants' failure to open and commence
operation of a Choice-brand hotel pursuant to a June 30, 2009
Franchise Agreement executed by both parties. ECF No. 1-1. As
required by the Settlement and Release Agreement. Defendants
executed a Promissory Note in the amount of $192, 500. ECF
No. 1-2. However, under the terms of the Promissory Note,
Plaintiff agreed to waive the amount due if Defendants paid
Plaintiff $10, 000, executed two new franchise agreements,
and opened each of the hotels in accordance with the schedule
set forth in the Settlement and Release Agreement. Pursuant
to the terms of the Promissory Note, "[u]pon default,
the undersigned hereby irrevocably authorizes any attorney at
law to appear for them in any court of record at any time
after the Agreement Amount remains unpaid and to confess a
judgment against Makers, without process, in favor of the
holder of this Note." 1-2 at l.
5, 2017, Plaintiff filed a Complaint for Confessed Judgment,
alleging that Defendants paid Plaintiff $10, 000, executed
two new franchise agreements, but failed to timely open the
hotels. See ECF No. 1 Â¶ 9. Plaintiff sued for the
remaining balance due on the Promissory Note ($182, 500), as
well as interest and attorneys' fees ($37, 868.75).
Id. ¶ 13. On May 12, 2017, the Court entered
Judgment by Confession against Defendants in the amount
requested, ECF No. 7, and the Clerk of the Court executed the
corresponding Notices of Judgment by Confession for each
individual defendant. See ECF Nos. 4-6. Pursuant to
the Notices of Judgment by Confession, Defendants had thirty
days after service "to file a written motion to open,
modify or vacate the Judgment." Id. Plaintiff
personally served Wang and Zhao, individually, on July 26,
2017. See ECF Nos. 9-1, 9-2 (Affidavits of Service).
Thereafter, on August 24 2017, Zhao filed a Motion to Vacate
the Judgment, ECF No. 8, apparently on behalf of all
state that they initially disputed the amount of damage, if
any, caused by their failure to obtain a franchise in 2009
but consented to the Settlement and Release Agreement because
Plaintiff informed them that "it was not as big of a
deal as it sounds, just a formality" and that Plaintiff
"verbally promised that we would have no problem to open
according to our current conditions and we had no need to
worry." ECF No. 8 at 1. Defendants allege that after
execution of the Settlement and Release Agreement, they
attempted to open the hotels in conformance with the
franchise agreement and "paid all the affiliation fee
$25, 000 plus $10, 000, $15, 000 fees for signs, $15, 500 for
reservation computer system" at the request of Plaintiff
but that no fees have been returned and no equipment was ever
received. Id. at 2. Ultimately, Defendants'
Motion suggests that Plaintiff impeded their ability to
satisfy the terms of the Settlement and Release Agreement
and, as a result, Plaintiff should refund the
"affiliation fee and other payments" to Defendants.
Rule 108.1 sets forth the process for entry of, and relief
from, a judgment by confession. See Loc. R. 108.1
(D. Md. 2016). Within thirty days of receipt of such
judgment, a defendant may move to vacate, open, or modify the
judgment "on the ground that the defendant has a
meritorious defense to the cause of action."
Id. at 108.1(d). "If the evidence presented
establishes that there are substantial and sufficient grounds
for an actual controversy as to the merits of the case, the
Court shall order the judgment by confession vacated, ...
with leave to the defendant to file a pleading, and the case
shall stand for trial." Id. at 108.1(e). Local
Rule 108.1 is analogous to the procedural requirements
applied in Maryland courts through Maryland Rule 2-611.
See Soger v. Housing Commission of Anne Arundel
County, 855 F.Supp.2d 524, 553 n. 37(D.Md. 2012).
confession judgments may allow a debt holder to enforce its
promissory note, or other debt instrument, without the time,
expense, and uncertainty of trial, this Court has recognized
"'[judgments by confession are not favored in
Maryland, because Maryland courts have long recognized that
the practice of including in a promissory note a provision
authorizing confession of judgment lends itself far too
readily to fraud and abuse.'" Gambo v. Bank of
Md, 648 A.2d 1105, 1114 (Md. 1994) (citation omitted).
Therefore, the Maryland Court of Appeals "has made clear
that judgments by confession are to be 'freely stricken
out on motion to let in defenses."' Schlossberg
v. Citizens Bank, 672 A.2d 625, 627 (Md. 1996) (citation
and some internal quotation marks omitted). The disfavored
status of confessed judgments is also made plain by the many
provisions of Maryland law, including the provisions relied
upon by plaintiff, that prohibit the use of confessed
judgment clauses in a wide variety of contractual contexts.
Sager, 855 F.Supp.2d at 553.
Motion sets forth a number of allegations that, if proven
true, may establish that Plaintiff either misrepresented the
terms of the Settlement and Release Agreement or failed to
act in good faith as Defendants attempted to execute the
franchise agreements. However, unlike a motion to dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(6), the
Court may not simply rely on, and assume true,
Defendants' allegations as set forth in their motion;
rather, Defendants must present evidence in support
of its meritorious defense. As provided by the Fourth
the [defendant] must present evidence '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.' This
evidentiary standard has been restated with some frequency by
the Maryland Court of Appeals and other law making bodies,
and is not in dispute.
Signet Bank/Maryland v. Wellington,
968 F.2d 1212
(Table), 1992 WL 157429, at * 1, (4th Cir. 1992) (citing
Stankovich v. Lehman,187 A.2d 309 (Md. 1963));
see also Atlantic Leasing &Financial Inc.
v. IPMTechnology, Inc.,885 F.2d 188, 194 (4th Cir.
1989) ("the mere assertion of a defense is insufficient
to satisfy the burden of proof necessary to vacate a
confessed judgment. Rather, the defendant must raise a
genuine issue of ...