Anthony Watts v. R.E. Michel Co., LLC and State of WV v. Honorable James W. Courier, Jr. ( 2019 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Anthony Watts,
Defendant Below, Petitioner FILED
May 20, 2019
vs) No. 18-0407 (Mineral County 17-C-78) EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
R.E. Michel Company, LLC,
Plaintiff Below, Respondent
and
State of West Virginia ex rel. Anthony Watts,
Petitioner
vs) 19-0024 (Mineral County 16-C-78)
Honorable James W. Courier Jr.,
Judge of the Circuit Court of Mineral County,
Respondent
MEMORANDUM DECISION
Petitioner Anthony Watts, by counsel Lawrence E. Sherman Jr., appeals the Circuit Court
of Mineral County’s March 2, 2018, order denying his Rule 60(b) motion “to set aside any prior
Orders entered by t[he c]ircuit [c]ourt . . . in both 16-C-78 and 17-C-78 . . . .” In addition,
petitioner filed a petition for a writ of mandamus requesting that he be allowed to present
evidence from a handwriting expert as to the authenticity of petitioner’s signature on a certain
agreement. Respondent R.E. Michel Company, LLC, by counsel David Collins, submitted
responses to both the petition for appeal and the petition for a writ of mandamus. Respondent
Judge James W. Courrier Jr. submitted a response to the petition for a writ of mandamus.
This Court has considered the parties’ briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision affirming the order of the circuit court in Case No. 18-0407 is
appropriate under Rule 21 of the Rules of Appellate Procedure. In addition, upon consideration
whereof, the Court is of the opinion that a rule should not be awarded in Case No. 19-0024, and
the writ prayed for by petitioner is hereby refused.
Petitioner’s signature appears on an undated guaranty that specifically provides that he,
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as the customer/guarantor, guaranteed payment to Respondent R.E. Michel Company, LLC, of
all amounts due from Customer, including purchases, service charges, interest,
collection fees, court costs, and attorney fees. In the event of default, Guarantor(s)
authorizes any attorney of a Court of Record to appear for me/us, and to confess
judgment against me/us for the full amount due to Creditor. In the event of
litigation, unless otherwise determined by Creditor in its sole discretion, personal
jurisdiction and venue shall be in the State of Maryland.
Respondent filed a complaint for confessed judgment against petitioner in the Circuit
Court of Baltimore County, Maryland, in 2016. Respondent attached a copy of the guaranty to
that complaint, asserting that petitioner personally guaranteed the obligations of Anthony Watts
HVACR LLC owing to respondent. In that complaint, respondent claimed that “the principal
balance represents goods and equipment purchased by Anthony Watts HVACR LLC” from
respondent pursuant to the terms of the credit application and sales agreement, plus collection
fees of $14,516.77. Under the credit application, Anthony Watts HVACR LLC agreed to pay
collection fees calculated at a rate of 25%. Therefore, the total balance owing at that time was
$72,583.83.1 On June 15, 2016, the Maryland court entered an “Order Directing Clerk to Enter
Judgment by Confession,” finding that, pursuant to Maryland Rule 2-611(b), respondent’s
complaint complied with the requirements of Rule 2-611(a) and respondent had demonstrated a
factual and legal basis for entitlement to confess judgment. The judgment against petitioner was
for $72,583.83, plus the cost of suit of $185. Post-judgment interest was to accrue at a rate of
10% per year after the date the judgment was entered.
On or about July 2, 2016, petitioner filed a motion in the Maryland court to vacate the
judgment by confession, but that motion was denied. The Maryland court found, in relevant part,
that “[w]ith no facts submitted under affidavit as is required by Rule 2-611(d) & (e), there is no
basis for the motion to be granted. No substantial and sufficient basis for an actual controversy as
to the merits of the action has been stated.” Petitioner sought to appeal to the Maryland Court of
Appeals seeking to overturn the denial of his motion to vacate the judgment by confession.
However, because he failed to file the documents necessary to perfect that appeal, it was
dismissed.
After the Maryland judgment was registered in Mineral County, West Virginia, in Civil
Action No. 16-C-78, petitioner moved the circuit court to vacate the judgment by confession.
The circuit court later denied that motion. Respondent filed its August 11, 2017, complaint to
enforce the judgment lien, initiating Civil Action No. 17-C-78 in the Circuit Court of Mineral
County. On January 18, 2018, respondent filed its “Documentation for the Court’s Review and
Request to Uphold Order Appointing Special Commissioner to Sell Real Property.” By order
entered March 2, 2018, the circuit court found that, based on such documentation, the underlying
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Included in the record is a statement from respondent that refers to R.E. Michel
Company, LLC, as a wholesale distributor. The statement appears to show charges made by
Anthony Watts HVACR LLC of Fort Ashby, West Virginia, between December 1, 2015, and
May 17, 2016, with a balance due in the amount of $58,067.06.
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foreign judgment at issue is valid, was properly registered in accordance with West Virginia
Code § 55-14-2, and is entitled to full faith and credit in West Virginia. The circuit court further
found that respondent is entitled to proceed with the sale of petitioner’s real property, “as
previously ordered by [the circuit c]ourt.” In its March 2, 2018, order, the circuit court also
denied petitioner’s Rule 60(b) motion and upheld its “Order Appointing Special Commissioner
to Sell Real Property.”2 Petitioner appeals from that order.3
This Court has previously recognized that “[a]n appeal of the denial of
a Rule 60(b) motion brings to consideration for review only the order of denial itself and not the
substance supporting the underlying judgment nor the final judgment order.” Syl. Pt.
3, Toler v. Shelton, 157 W. Va. 778, 204 S.E.2d 85 (1974). Further, we have stated:
4. In reviewing an order denying a motion under Rule 60(b), W.Va.R.C.P.,
the function of the appellate court is limited to deciding whether the trial court
abused its discretion in ruling that sufficient grounds for disturbing the finality of
the judgment were not shown in a timely manner.
5. A motion to vacate a judgment made pursuant to Rule 60(b),
W.Va.R.C.P., is addressed to the sound discretion of the court and the court’s
ruling on such motion will not be disturbed on appeal unless there is a showing of
an abuse of such discretion.
Syl. Pts. 4 and 5, Toler at 778, 204 S.E.2d at 86.
On appeal, petitioner asserts four assignments of error. At the outset, he argues that the
circuit court erred in finding that the Maryland judgment by confession is valid because he did
not sign the guaranty containing the confessed judgment; he now asserts that the signature on the
guaranty is a forgery. He contends that the Maryland judgment is not entitled to full faith and
credit because it is invalid under West Virginia law. Petitioner admits that guaranty contracts are
governed by the law of the state where the last act necessary to make them binding takes place;
therefore, Maryland law governs the agreement. See Gen. Electric Co. v. Keyser, 166 W. Va.
456, 275 S.E.2d 289 (1981). Petitioner asserts that, under Maryland law, a trial on the merits is
required because the allegation that the signature is a forgery is a defense to the claim under the
rule allowing for a motion to open, modify, or vacate a confessed judgment.
Respondent points out that petitioner failed to argue that his signature was a forgery until
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On March 9, 2018, the circuit court entered an order granting petitioner’s motion to stay
the sale of his property “until such time as the Supreme Court renders a decision and ruling in
regard to [petitioner’s] appeal” of the circuit court’s March 2, 2018, order.
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The parties were involved in two actions in Mineral County. Civil Action No. 16-C-78,
before Judge Courrier, was filed to register the Maryland judgment, while 17-C-78, before Judge
Nelson, was filed to enforce Judge Courrier’s order to sell petitioner’s residence in order to
satisfy the judgment.
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he filed his amended Rule 60 motion in the Circuit Court of Mineral County – nearly two years
after the Maryland judgment was entered against petitioner. Petitioner set that matter for hearing
on June 19, 2018, before the circuit court in 16-C-78, which was the underlying registration of
the foreign judgment case. As a result, respondent asserts that petitioner seeks to re-litigate issues
that could have been raised in the Maryland proceeding. Respondent also argues that because
petitioner’s forgery claim could have been asserted in that Maryland action, he is barred by the
doctrine of res judicata from raising that issue now.
In addressing res judicata, this Court has held as follows:
Before the prosecution of a lawsuit may be barred on the basis of res
judicata, three elements must be satisfied. First, there must have been a final
adjudication on the merits in the prior action by a court having jurisdiction of the
proceedings. Second, the two actions must involve either the same parties or
persons in privity with those same parties. Third, the cause of action identified for
resolution in the subsequent proceeding either must be identical to the cause of
action determined in the prior action or must be such that it could have been
resolved, had it been presented, in the prior action.
Syl. Pt. 4, Blake v. Charleston Area Med. Ctr., Inc., 201 W. Va. 469, 498 S.E.2d 41 (1997). It is
clear that elements one and two of Blake have been satisfied, in part because petitioner failed to
file the documents necessary to perfect his appeal in Maryland in 2016. With regard to the third
element, the Maryland action was a confessed judgment based upon the guaranty at issue.
Respondent sought repayment of the principal balance for goods and equipment purchased by
Anthony Watts HVACR LLC, as personally guaranteed by petitioner. At no point during the
Maryland action did petitioner assert that the signature on that guaranty was a forgery. Based
upon the entry of that judgment, respondent filed Civil Action No. 16-C-78 to register that
Maryland judgment in West Virginia, and the Circuit Court of Mineral County did just that. In
17-C-78, respondent sought to enforce the judgment registered in 16-C-78. Only after judgment
had been entered against petitioner in all three cases did he assert that his signature was a
forgery. Under the facts of this case, the third element of Blake has been satisfied. Therefore, we
find no merit to petitioner’s first assignment of error.
Petitioner next argues that the circuit court erred by finding that the Maryland judgment
is valid when the guaranty containing the confessed judgment is invalid under Maryland law; this
argument is based on his contention that the guaranty fails to refer to the principal obligation
guaranteed and is written so that petitioner is impermissibly guaranteeing his own debt.
Petitioner correctly argues that, under Maryland law, a promise of guaranty cannot exist without
reference to the obligation it secures. See McGinley v. Massey, 525 A.2d 1076 (Md. App. 1987).
As set forth above, the guaranty guaranteed payment for “all amounts due from Customer,
including purchases, service charges, interest, collection fees, court costs, and attorney fees. . . .”
The guaranty provides that credit is extended to “Anthony Watts (‘Customer’), the undersigned
(‘Guarantor’) . . . .” As part of that agreement, Anthony Watts agreed to guarantee payment to
respondent for “all amounts due from Customer, including purchases, service charges, interest,
collection fees, court costs and attorney fees. . . .” The credit application provided that Anthony
Watts HVACR LLC would pay collection fees calculated at a rate of 25% of the amount placed.
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Respondent presented invoices that were sent to petitioner’s business and placed those
documents before the Maryland court in order to obtain the underlying judgment against
petitioner. Those invoices include dates, reference numbers, and past due amounts.
Under Maryland law, “the true test of what is meant is not what the parties to the contract
intended it to mean, but what a reasonable person in the position of the parties would have
thought it meant. . . .” Spacesaver Sys., Inc. v. Adam, 98 A.3d 264, 268-69 (Md. 2014) (quoting
Gen. Motors Acceptance Corp. v. Daniels, 492 A.2d 1306, 1310 (Md. 1985)). Further, in
Maryland, when determining whether a contract is ambiguous, a court may consider “the
character of the contract, its purpose, and the facts and circumstances of the parties at the time of
execution[.]” Calomiris v. Woods, 727 A.2d 358, 363 (Md. 1999) (quoting Pac. Indem. v.
Interstate Fire & Cas., 488 A.2d 486, 488 (Md. 1985)) (internal quotation marks omitted). While
the guaranty did not set forth a sum certain, the Maryland court impliedly found the guaranty
sufficient to support judgment against petitioner. Based upon the plain language of the guaranty,
we do not find error in the circuit court’s findings upholding the Maryland judgment or the
circuit court’s enforcement of the properly registered judgment in West Virginia.
In his third assignment of error, petitioner asserts that the circuit court erred in finding
that the Maryland judgment by confession is valid when the confessed judgment provision is
invalid under Maryland law because (1) it was prohibited by several Maryland statutes and (2) it
was part of the guaranty contract that expressly tied the confession of judgment to a default
under the guaranty agreement. Petitioner asserts that judgments by confession are not favored in
Maryland because Maryland courts have long-recognized that the practice of including a
provision authorizing confession of judgment in a written obligation lends itself to fraud and
abuse. See Sager v. Hous. Comm’n of Anne Arundel Cty., 855 F. Supp. 2d 524 (D.Md. 2012). In
support of this argument, petitioner also cites to several Maryland statutes that he claims prohibit
the use of confessed judgments.
Petitioner’s arguments ignore numerous holdings from Maryland courts entering and
upholding confessed judgments. As the Maryland Appellate Court explained in NILS, LLC v.
Antezana, 912 A.2d 45, 50 (Md.App. 2006),
[i]n Schlossberg v. Citizens Bank, 341 Md. 650, 655, 672 A.2d 625 (1996), Judge
Chasanow well stated the function of a judgment by confession.
A confession of judgment clause in a debt instrument is a device
designed to facilitate collection of a debt. It is a provision by which
debtors agree to the entry of judgment against them without the
benefit of a trial in the event of default on the debt
instrument. PAUL V. NIEMEYER AND LINDA M. SCHUETT,
MARYLAND RULES COMMENTARY, at 464 (2d ed.1992). As
a general rule, a judgment by confession is “entitled to the same
faith and credit, as any other judgment.”
(Emphasis supplied).
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The courts, however, have been liberal in considering attacks on confessed
judgments by aggrieved creditors.
Because the widespread practice of including a provision
authorizing a confessed judgment in promissory notes lends itself
to fraud and abuse, however, this Court has made clear
that judgments by confession are to be “‘freely stricken out on
motion to let in defenses.’”
Id. (emphasis supplied).
The Schlossberg opinion also laid out the procedures to be followed when a
motion to vacate a confessed judgment is filed.
Rule 2–611 governs the procedure for confessed judgments in
Maryland. Judgment by confession may be entered by the circuit
court clerk upon the filing of a complaint accompanied by the
original or a copy of the instrument authorizing the confessed
judgment and an affidavit specifying the amount due and stating
the address of the defendant. Md. Rule 2–611(a). Upon entry of a
judgment by confession, the clerk is required to notify the
defendant of the entry of judgment and of the deadline for filing a
motion to “open, modify or vacate” the judgment. Md. Rule 2–
611(b).
If the defendant so moves, the circuit court must determine whether
there is a “substantial and sufficient basis for an actual
controversy as to the merits of the action.” Md. Rule 2–611(d). In
other words, the court must determine whether the defendant has a
potentially meritorious defense to the confessed judgment
complaint. The court does not, however, decide the merits of the
controversy at this stage. MARYLAND RULES
COMMENTARY, at 466. If the court finds that a basis for a
defense exists, the rule requires the court to order that the
confessed judgment be opened, modified, or vacated so that the
defendant can file a responsive pleading to the plaintiff’s
complaint and the merits can be determined. Md. Rule 2–611(d).
Id. at 655–56, 672 A.2d 625 (emphasis supplied).
In petitioner’s underlying Maryland action, he had the opportunity to challenge the
guaranty and the confessed judgment by following the procedures set forth above. However, he
failed to perfect his appeal. For these reasons, we find no merit to petitioner’s third assignment of
error.
Finally, petitioner asserts that the circuit court erred in finding the Maryland judgment by
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confession to be valid because the confessed judgment violates West Virginia public policy. He
argues that West Virginia may decline to enforce an out-of-state judgment if the substantive
rights under another state’s laws sought to be enforced are against the public policy of the forum
state. He contends that West Virginia public policy and law evidence an overarching hostility
toward confessions of judgment. In his brief, he asserts that “[s]ince the power granted to
attorneys to confess judgment in a note is not recognized in West Virginia courts, West Virginia
courts strictly construe such powers when judgments by confession obtained in other states are
sought to be enforced in West Virginia. . . .” While certain West Virginia statutes prohibit a
consumer from authorizing a person to confess judgment on a claim arising out of specified
consumer credit transactions in West Virginia, there is no prohibition on West Virginia courts
giving full faith and credit to confessed judgments entered in other states. As set forth above, the
parties agreed that the guaranty would be governed by Maryland law, and confessed judgments,
while not favored, are permissible under Maryland law. Petitioner also failed to perfect his
appeal in Maryland, which would have allowed him to challenge the confessed judgment.
Further, he has not argued that the charges at issue were fraudulent or that his business did not
incur the charges as set forth in the invoices. For these reasons, under the specific facts of this
case, we also find no merit in petitioner’s fourth assignment of error.
The circuit court order in Case No. 18-0407 is hereby affirmed,
and the writ prayed for in Case No. 19-0024 is hereby refused.
ISSUED: May 20, 2019
CONCURRED IN BY:
Chief Justice Elizabeth D. Walker
Justice Margaret L. Workman
Justice Tim Armstead
Justice Evan H. Jenkins
Justice John A. Hutchison
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