(122 A.) tract. We do not think, therefore, that the mere failure of the defendants to participate in the formation of the corporation operated per se as a forfeiture of their interests under that he would not make any effort to get mon- to aid and extend the language of the coney further to exploit said assets; and that, if the matter were referred to arbitrators, he would not abide by an adverse decision; that, in effect, he would not perform the part of said agreement to be performed by him 'upon the satisfactory demonstration under service conditions of the utility and practicability of the machine,' as provided in paragraph 5." the contract. That the complainant could, if he saw fit, have procured the incorporation of the company with or without the consent of the And in another paragraph of his bill, indefendants, does not appear to be seriously referring to the forfeiture clause, he says: disputed, and that he did not do it does not "That, without said paragraph, the plaintiff appear to have been due so much to a lack would be helpless; that he would have no ade- of power as to a fear that, if he did incorporquate remedy at law because of the specula-ate the company, his situation might possibly tive nature of the damages, nor in a court of be worse than that of which he now comequity because, even though he were entitled to the specific performance of said agreement, a decree so providing would have little, if any, real value against unwilling and reluctant as sociates." plains. as In other [3] Nor, in our opinion, for reasons given at some length below, does the contract require the defendant Taliaferro to secure money to exploit the assets of the proposed comThat is, briefly stated, he charges that the pany before or after it was actually incorpordefendants were guilty of these willful ated. The apparent intention of the parties breaches of the contract: (1) That they fail- to the agreement was that Taliaferro should ed to attend a formal meeting called by defray all such preliminary expenses Cover to incorporate the company, and that should be incurred in perfecting and demonTaliaferro would neither pay the expenses strating a practicable machine which could incident thereto nor endeavor to secure mon- be profitably manufactured and sold, and ey to exploit its prospective assets, nor would that duty he appears to have discharged in he consent to arbitration; and (2) that such good faith. It was not their intention that conduct constituted a "willful failure" to he should supply the funds for the manufaccomply with the terms of the contract. That ture and sale of the machines. contention appears to be predicated on the words, he was to finance the experiment, but theory: (1) That the defendants agreed to not to finance the product of the experiment, personally aid in the organization of the pro- and while, after the formation of the corposed corporation; and (2) that Taliaferro poration, he was bound to exercise all reaagreed to get money to exploit the assets of sonable diligence to secure the funds necesthe partnership and to proceed with the in- sary to exploit its assets, we cannot assume corporation of the company, immediately that it was intended that he should induce upon the successful demonstration of the ma-innocent investors to buy stock in a company chine upon which they were at work, regardless of whether it was likely to be a commercial success or not, and regardless of any opinion which Taliaferro may have had on that point; and (3) to supply the money for the organization of the corporation; and that his failure to do these things was willful. [2] Taking up the first proposition, we cannot accept the construction which the complainant places on the contract in respect to it. Under the literal terms of that contract no one of the parties to it is obliged to form the corporation but any of them may do so, for the agreement is "that a corporation shall be organized," not that all of the parties to the contract shall be required to organize it. It may of course be inferred from the purpose of the whole instrument that it was the intention of the parties that all should unite in the act of incorporation, but in a proceeding to enforce a forfeiture in a court of equity, we do not feel at liberty to resort to any inferences that are not compelled by the clear, direct, and unambiguous language of the contract, especially in a case such as this, where the contract was drawn by the party who relies upon the inference which he believed was doomed to failure. In regard to supplying the money needed to form the company, the contract is clear, and under its terms Taliaferro was required to pay all such expenses, and it is not denied that he refused to do that. In refusing to pay these expenses, Taliaferro said: That "he was not going ahead; that he was not going to put any more money into the proposition; that he was not going to have any one else put any money into the proposition; that he would stand damages first; that he would not arbitrate; that he would not if the company was formed; and when I asked form a company; that he would not co-operate his reason he stated it was because his family objected to his putting any more money into the proposition." When that statement was made, it is undisputed that a useful, practicable machine had been perfected and successfully demonstrated as a result of the efforts of the parties to the contract, and it appears from the evidence that it would do the work for which it was designed better than any other machines then made, nor can it be denied that the complainant fully and satisfactorily per formed every obligation imposed upon him | It is for that reason often very difficult to by the contract, and the inquiry is whether under such circumstances Taliaferro's re'fusal to proceed was such a "willful failure" to carry out the terms of the contract as 'would justify the court in decreeing that he had forfeited his interest in it. say that the exercise of such discretion in a case of this character is unreasonable or in bad faith, because so much depends upon the purely and peculiarly personal judgment of the individual. Taliaferro assigned three reasons for his refusal to go on with the enterprise: (1) That his family objected to his spending any more money on it; (2) that sterilization methods were "up in the air"; and (3) that it was uncertain whether they could protect the machine by patents. The first reason may be disregarded, and the second reason, in view of Taliaferro's unqualified and enthusiastic approval of the machine, is entitled to no greater consideration. [4] A number of cases in which the term "willful" is defined and applied are collected in Words and Phrases, First and Second Series. The judicial interpretation of the phrase, as illustrated by these cases, coincides with the meaning given it by the lexicographers, in a definition which is obviously sensible and sound. That definition, while variously phrased, always in substance implies a deliberate intention, for which no reasonable excuse can be given, to do or refrain from The third reason has more force. The valdoing some act which good faith in the per-ue of any stock which he might sell to informance of some duty required the promisor vestors would depend upon the commercial to do or not to do, as the case may be. success of the company, and that success would depend upon the number of machines it could make and sell at a profit. Taliaferro's position was that the company could not reasonably expect to sell enough machines to make its operation profitable, unless it was protected in its manufacture and sale by a patent monopoly, and that it was uncertain whether they could secure such protection. Cover's position, on the other hand, may be thus stated: (1) That the agreement did not contemplate the necessity for any such protection, and that whether it could be eventually secured was a mere moot question which did not affect the company's prospects of success; and (2) that the contention that the situation as to the patents was uncertain and unsatisfactory was not made in good faith, but was only a device to evade compliance with the contract. [5] In regard to the first of these propositions, we do not agree that the contract did not contemplate the necessity for patent pro Undoubtedly Taliaferro's refusal to proceed was deliberate and intentional, so that the only question is whether there was a reasonable excuse for his conduct. But, before considering the evidence relating to that inquiry, we should know whether his duty to proceed was absolute or whether it lay to any extent in his discretion; whether it depended upon the occurrence of an event or upon the exercise, in good faith, of his judgment. The thing which he was required to do was to secure the investment of capital in the business, possibly by strangers who would likely rely more upon their confidence in Taliaferro than upon their knowledge of the business. Soliciting such investments, he would incur an obligation, not written in the contract, but which nevertheless would be as real and binding as any to be found there and that is the duty of acting honestly and in good faith with those, who through their confidence in him, invested their money in the enterprise. The faithful and honest dis-tection. The idea that the machines would be charge of that duty cannot be considered apart from the exercise of his personal judgment and discretion; the two things are complementary and cannot be separated-the duty and the discretion. And, in fact, the contract contemplates, as indeed it was bound to do, the exercise of such a discretion. Its use of the word “willful,” the provision that he is in "good faith" to exercise every "reasonable" effort to secure investments, and the nature of the duty itself all point to the existence of such a discretion. We must assume then that whether he would solicit investments in the proposed company was a matter committed to his sound discretion. The reputation and the position of a promoter who secures such investments is a fragile and sensative thing, which reacts directly to the stimuli of success and failure, and the preservation of such influence as he may have requires the exercise of a very delicate discretion and a sound judgment. protected by a patent runs like a thread through the whole agreement. It is true that the agreement in providing that, "forthwith" upon the satisfactory demonstration of the utility and practicability of the machine referred to, a corporation should be formed, did not in so many words make that event dependent upon the existence of a patent monopoly. But, when it is considered that Taliaferro was required to try to sell the stock of that company, it was not intended that he should sell it unless it was likely to have some value, and if it was not likely to have any value, in the absence of such protection, Taliaferro could not honestly sell it to innocent purchasers as a valuable security, and his refusal to do that, if in his judgment such protection was essential to the success of the company, cannot be said to be so unreasonable as to warrant a court of equity in forfeiting his interest in the contract therefor. Nor are we able to say from the record that (122 A.) the mere fact that he expressed such an opinion is in itself evidence of bad faith. and not in any way be responsible for the failure of the other party to strictly comply with the contract before he should be permitted to assert it.". And in Baumgartner v. Haas, 68 Md. 39, 11 Atl. 588, it is said: As to the sceond proposition, it is sufficient to say that the right of the parties to the agreements to secure the desired protection is involved in uncertainty. It is claimed that the improvements are not patentable, and "But it has been further argued that a court that, if patentable, they infringe other pat-of equity while it may relieve against, yet will ents. Whether those claims are well founded never aid in the enforcement of, a penalty; presents a question which the trial court and that the postponement of the debt of the could not decide. That they exist is not and defendant to the claims of the other creditors cannot be disputed, and we cannot say that is a penalty upon him, and therefore a court Taliaferro, in asserting that the fact that of equity will not enforce it. There is no they do exist made it unlikely that the com- doubt of this law. It is laid down in the textpany could operate successfully until the un-Clenahan, 54 Md. 21. But this law applies to writers and fully sanctioned in Cross v. Mccertainty due to their existence was removed, acted willfully or unreasonably. While it may be going too far to say that a forfeiture will under no circumstances be enforced in a court of equity, it is nevertheless true that a court of equity will not lend its aid to devest an interest or an estate by enforcing a forfeiture except with extreme reluctance and only in the most extreme cases, and the general rule is that courts of equity will not aid in the enforcement of a penalty or a forfeiture. In Cross v. McClenahan, 54 Md. 21, the court, in dealing with an application to enforce a statutory penalty, said: “In invoking the aid of a court of equity to enforce the penalty given him by the statute, the appellant has gone to a tribunal that never enforces a penalty. It often relieves against a penalty (unless it be imposed by a statute, when it will not interfere), but it never aids in enforcing a penalty. 2 Story's Eq. §§ 1319, 1326. In section 1319, Story says, 'It is a universal rule in equity never to enforce either a penalty or a forfeiture.' In Livingston v. Tompkins, 4 Johns. Ch. 431, Chancellor Kent says, 'It may be laid down as a fundamental doctrine of the court, that equity does not assist the recovery of a penalty or forfeiture." " And in Brown v. Rasin Monumental Co., 98 Md. 9, 55 Atl. 394, Judge Boyd, delivering the opinion of the court, said in dealing with the forfeiture clause of a contract: cases where the aid of a court of equity is sought to enforce a penalty. Now this is not a suit to enforce a penalty, but simply a suit by a creditor to recover a just debt. Penalties in civil matters are imposed by statute or by agreement of parties, principally the latter. tioned, is an example of the former, and Mc. The case of Cross v. McClenahan, above menKim v. Mason, 3 Md. Ch. 186, an example of the latter." See, also, 10 R. C. L. p. 336; 21 C. J. 104. [6] Applying these principles to the facts before us, while there was much in the conduct of the defendant Taliaferro, in his relations with the appellant, which merited the criticism of appellant's counsel, after a very careful consideration of the arguments presented with much force and earnestness on behalf of the appellant, we cannot say that on the whole record we would be justified in departing from the rule so long established and so uniformly followed in this state, to wit, that a court of equity will not, upon such facts as are before us, enforce a forfeiture, and we will therefore affirm the decree appealed from. Decree affirmed, with costs. JOHNSON V. PHILLIPS. (No. 11.) (Court of Appeals of Maryland. March 15, 1923.) Judgment 68(5)—Whether judgment by confession should be stricken may be determined from affidavits filed, or court may order taking of testimony. Though a judgment by confession ought not to be stricken on the mere ex parte affidavit of defendant, the court may determine the question on affidavits alone, or may order the taking of testimony. "It was said by Chancellor Kent in Livings-1. ton v. Tompkins, 4 Johns. Chan, 431, that 'it may be laid down as a fundamental doctrine of the court, that equity does not assist the recovery of a penalty or a forfeiture,' and in 2 Story's Eq. Juris. § 1319, that it is a universal rule in equity, never to enforce either a penalty or a forfeiture'-both of which are cited in Cross v. McClenahan, 54 Md. 24. We are of course aware that there is a distinction between giving the active, affirmative aid of a court of equity to declare a forfeiture, and simply recognizing that a forfeiture has taken place, under a contract made between the parties which the court must recognize and be controlled by. But a court of equity can, and ought to, require a party claiming the benefit of a forfeiture such as this to do his full duty, 2. Bills and notes 155-Judgment 52Note authorizing judgment to be confessed before maturity, nonnegotiable; judgment on note providing for entry at any time may be entered before maturity. A note authorizing the entry of a judgment by confession "at any time * * for the amount thereof, including debt, interest, and For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes costs and attorney's fees for collection," held 242-Judgment Frederick H. Fletcher, of Cambridge (Fletcher & Jones and Henry L. Johnson, all 'of Cambridge, on the brief), for appellant. Frederick W. C. Webb, of Salisbury (Woodcock & Webb, of Salisbury, on the brief), for appellee. Venable gave Henry L. Johnson (appellant) BOYD, C. J. On March 28, 1921, Leon E. a promissory note for $6,000 with interest from date, payable 12 months after date. Amongst other provisions in it, was the fol An indorsement on a judgment note, "For value received, we the indorsers named below, waive presentment, protest demand of payment and notice of nonpayment, and guarantee the payment of the within note, and agree that all of its provisions shall apply to and bind us as though we were makers," held to render an in-lowing: dorser liable as a maker and sustain a joint judgment by confession against indorser and maker pursuant to the authority contained therein. 4. Judgment 67(3)-Unexplained delay in questioning validity of judgment by confession held to preclude setting it aside. Where an indorser of a note against whom and the maker a joint judgment by confession had been entered waited until after the expiration of the term at which the judgment was entered, and for more than 52 months after it was entered before questioning its validity, held, that it was incumbent upon him, as a prerequisite of relief, to explain his delay, and that, in the absence of such explanation, the judgment was erroneously set aside. 5. Judgment 68(2)-Failure of indorser to show meritorious claim held to preclude striking of judgment by confession. "And I/we hereby authorize and empower any justice of the peace of the state of Maryland, in and for Dorchester county, or the clerk of the circuit court for Dorchester county, or any other county, at any time, to enter judgment on this note for the amount thereof, including debt, interest and costs and attorney's fees for collection, without summons or process; or if, in order to collect this note, it should become necessary to place it in the hands of an attorney I/we hereby agree to pay the attorney's fees for the collection thereof, even though judgment should not be obtained. The makers and indorsers of this obligation waive protest and notice of protest thereon." Just below the signature of Leon E. Venable is, "Up as collateral to discounted notes -any and all notes." On the back of the note there is this indorsement: Where the indorser on a note against whom "For value received, we, the indorsers namand the maker a joint judgment by confession ed below, waive presentment, protest demand had been entered, alleged as grounds for hav-of payment and notice of nonpayment, and ing it set aside that it was given only as col-guarantee the payment of the within note, and lateral for a certain class of notes which might agree that all of its provisions shall apply to be discounted by the maker, and not as se- and bind us as though we were makers. curity for the maker's own notes, failed to show that he was not responsible for the whole of the judgment, or at least a part of it, held, that he was not entitled to relief. 6. Judgment 52-Judgment by confession "[Signed] W. S. Phillips." On July 8, 1921, in recess of the court, a judgment by confession was entered by the clerk of the circuit court for Wicomico counin favor of the plaintiff (appellant) against Leon E. Venable and William S. Phillips for Where a note authorized "the clerk of the the sum of $6,100, with interest from date circuit court for D. county, and any other and costs, $7.75; collection fee $203.33, excounty, at any time, to enter judgment on this emption waived, with stay of execution until note for the amount thereof including debt, March 28, 1922. On November 26, 1921, a interest, and costs and attorney's fees for col-motion to strike out the judgment was made lection," held, that a clerk entering judgment by William S. Phillips, appellee, and an orpursuant to such authority before maturity of the note was unauthorized to include therein any collection fees. der nisi was passed by the court. The plaintiff (Johnson) answered under oath on December 19, 1921, and also filed an affidavit of Leon E. Venable. The same day the motion was heard and held sub curia. On May 24, 1922, an order of court was filed striking Wil-out the judgment against Phillips, and from that order this appeal was taken. Appeal from Circuit Court, Wicomico County; Joseph L. Bailey, Judge. Action by Henry L. Johnson against liam S. Phillips and another. From judgment granting motion of defendant Phillips to strike judgment by confession against him, plaintiff appeals. Reversed, and cause manded. The reasons assigned for striking out the judgment were: (1) Because the note was re-indorsed by said Phillips on the understanding that it was to be held solely as collateral security for any notes which Venable might receive in payment of premiums on policies of insurance, which he then held, or might Argued before BOYD, C. J., and BRISCOE, THOMAS, PATTISON, URNER, STOCKBRIDGE, ADKINS, and OFFUTT, JJ. (122 A.) notes." after the words "up as collateral to discounted notes," or that the appellant had any reason to suspect such alteration, when he received the note. In 2 Poe, § 394, it is said that when the reasons assigned for striking out a judgment depend upon extrinsic facts or matters not apparent from the record, the motion should be verified by the affidavit of the party making it, or some one on his behalf, and the affidavits of other parties may also be filed; that due notice must be given and the motion set down for hearing and that in the meantime counter affidavits may be filed by the opposite party, or testimony taken before a commissioner of the court, or one agreed upon, or in open court, if the court so determines. So, although this court has said that a judgment ought not to be stricken out on the mere ex parte affidavit of the defendant (Foran v. Johnson, 58 Md. 144; Huntington v. Emery, 74 Md. 67, 21 Atl. 495; Geesey v. Stouch, 94 Md. 75, 50 Atl. 422), under our practice it can decide the question on affidavits or testimony, as the court may order, although the latter is preferable. receive with their respective maturitics on by the addition of the words "any and all or before March 28, 1922, and which might be discounted by the plaintiff for said Verable; that in pursuance of said agreement the words "Up as collateral to discounted notes" were written upon the face of the note, and after the indorsement by this defendant the note was "fraudulently, wrongfully, and unlawfully altered without the knowledge of this defendant" by adding the words, "any and all notes"; that Venable borrowed large sums of money from the plaintiff upon his individual note or notes, and fraudulently, wrongfully, and unlawfully pledged the said note, indorsed as aforesaid by the defendant, to the plaintiff as collateral security therefor; that the alteration was a great surprise to this defendant, and he first learned of it on the 25th of November, 1921, and of the pledging thereof in violation of the agreement on the 23d of November, 1921. (2) Because the note was not due and could not be sued upon, or judgment entered thereon until its maturity. (3) Because the defendant Leon E. Venable is the maker of said note and the defendant Phillips is the indorser thereon, in spite of which facts judgment was entered jointly against them, contrary to law requiring the separation of the alleged rights of action against them. The plaintiff filed an answer denying any knowledge of such an agreement or understanding between Phillips and Venable, and also denying any knowledge of any change in the contract which he says was the same as it was when he received the note, and he filed an affidavit made by Venable as part of his answer. For answer to the second paragraph of the motion, he set out the consent and agreement on the note, and he then stated the indorsement above quoted, and said that Phillips constituted himself, in terms and effect, a maker of the note, and subjected himself to all the liabilities in law and in fact which attach to a maker, and there existed in this respect no distinction between the maker and the indorser. The affidavit of Venable contradicts Phillips as to the alteration and as to the understanding between them. But there is nothing to show how the court determined to hear the motion, or whether it considered the affidavits. In the brief of the appellee it is contended that the declaration ignored the statement on the note-"up as collateral to discounted notes," etc.-and it is said "the court below evidently took the view, that such omission was a fatal defect and variance and invalidated the entire proceeding." Inasmuch as we cannot understand how the court could have struck out the judgment on the facts as presented in the record, we assume that it must have been on the theory, as suggested in the appellee's brief, or on the one that a joint judgment could not have been entered on the note; in other words, on the face of the papers and not on extrinsic matters. [2] The appellee also suggested that the note was negotiable, and hence the judgment could not have been entered before maturity, relying apparently on Edelen v. First Nat. Bank, 139 Md. 422, 115 Atl. 602, but Judge Urner very clearly pointed out why the negotiability of that note was not affected by the [1] We have had some difficulty in deter- terms used., He said, "If the provision was mining, from what is before us, what ground simply that the judgment might be obtained the lower court based its action upon in 'at any time,' the contention would have to striking out the judgment. No testimony was be sustained," but as the language "for such taken, and if the court acted on the motion sum as may be due" came after "at any filed by the defendant Phillips (appellee), time," we held that the two together meant supported alone by his affidavit, on the one "that the entry of the judgment can only ocside, and the answer of the plaintiff (appel-cur after the note has matured," and hence lant) supported by his affidavit and that of the negotiability of the note was not impaired. Leon E. Venable, on the other side, it would seem to be impossible to sustain its action, as Phillips is contradicted in most material respects, and he unquestionably failed to show any knowledge on the part of the appellant of the alleged alteration on the note In this case, as seen above, the note did not contain such a provision, and hence the judgment could be entered at any time; its negotiability being thereby destroyed. [3] We do not deem it necessary to enter upon a discussion as to whether Phillips was |