Loading...
HomeMy WebLinkAbout2017-4542S&T BANK, SUCCESSOR BY : IN THE COURT OF COMMON PLEAS OF MERGER TO INTEGRITY : CUMBERLAND COUNTY, PENNSYLVANIA BANK, Plaintiff : CIVIL ACTION (CONFESSION OF JUDGMENT) V. ROBERT M. MUMMA, H, Defendant : NO. 2017-04542 CIVIL TERM IN RE: DEFENDANT'S PETITION TO STRIKE OR OPEN JUDGMENT BEFORE OLER, S.J. ORDER OF COURT AND NOW, this 4h day of August, 2017, upon consideration of Defendant's Petition To Strike, or in the Alternative, To Open Plaintiffs Confessed Judgment, following oral argument held on July 5, 2017, and for the reasons stated in the accompanying opinion, the petition is granted insofar as it seeks to strike the judgment confessed against him on April 12, 2017, and the judgment is stricken. NOTHING IN THIS ORDER is intended to rule upon the issue of whether Plaintiff may re -exercise the power of attorney pursuant to the confession of judgment clause at issue to collect the debt. BY THE COURT, C esley Ol r., S.J. Brian M. Kile, Esq. Grenen & Birsic, P.C. 9th Floor One Gateway Center Pittsburgh, PA 15222 Attorney for Plaintiff Craig A. Diehl, Esq. 3464 Trindle Road Camp Hill, PA 17011 Attorney for Defendant S&T BAW, SUCCESSOR BY IN THE COURT OF COMMON PLEAS OF MERGER TO INTEGRITY CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff CIVIL ACTION (CONFESSION OF JUDGMENT) 9M MOBERT M. MUMMA, H, Defendant NO. 2017-04542 CIVIL TERA Wljxfli�$ �� •RGERMB-17-MUMN I 1 1- r I I I VVIt WE I= the petition, the court issued a rule to show cause upon Plaintiff,' deferred ftuther action 2 on the request to open pending disposition of the request to strike, and held oral T!111111ii STATEMENT OF FACTS ON FACE OF RECORD The factual record in this case, on its face, may be summarized as follows: I s —1-6-aifik, successor by merger to Integrity Bank, a commercial bank haviny offices in Indiana County, Pennsylvania? Defendant is Robert M. Mumma, H, an adult individual4 who executed a 20 -year $2,000,000.00 promissory note in 2009 on behalf of 'See Pa. R.C.P. 2959(b). 2 See Pa, R.C.P. 2959(c). 3 Plaintiffs Complaint in Confession of Judgment, 11, filed April. 12, 2017. 4 Plaintiff' s Complaint in Confession of Judgment, 12, filed April 12, 2017. 1 Mann Realty Associates, Inc., in favor of Plaintiff's predecessor in interest,5 and secured the corporate obligation by a personal guaranty.6 The personal guaranty executed by Defendant contained a confession of judgment clause reading as follows: CONFESSION OF JUDGMENT. GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME FOR GUARANTOR AFTER THE AMOUNTS HEREUNDER BECOME DUE* AND WITH OR WITHOUT COMPLAINT FILED, CONFESS OR ENTER JUDGMENT AGAINST GUARANTOR FOR THE ENTIRE PRINCIPAL BALANCE OF THIS GUARANTY AND ALL ACCRUED INTEREST, LATE CHARGES AND ANY AND ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER RELATING TO ANY COLLATERAL SECURING THE INDEBTEDNESS, TOGETHER WITH COSTS OF SUIT, AND AN ATTORNEY'S COMMISSION OF TEN PERCENT (10%) OF THE UNPAID PRINCIPAL BALANCE AND ACCRUED INTEREST FOR COLLECTION, BUT IN ANY EVENT NOT LESS THAN FIVE HUNDRED DOLLARS ($500) ON WHICH JUDGMENT OR JUDGMENTS ONE OR MORE EXECUTIONS MAY ISSUE IMMEDIATELY; AND FOR SO DOING, THIS GUARANTY OR A COPY OF THIS GUARANTY VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS GUARANTY TO CONFESS JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BYANY EXERCISE OF THAT AUTHORITY, BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS GUARANTY. GUARANTOR HEREBY WANES ANY RIGHT GUARANTOR MAY HAVE TO NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF JUDGMENT AND STATES THAT EITHER A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THIS CONFESSION OF JUDGMENT PROVISION TO GUARANTOR'S ATTENTION OR GUARANTOR HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL. *and after written notice to Guarantor by mail given at least thirty (30) days prior to entry of judgment and the failure of Guarantor or Borrower to cure any default or pay the amount duel A Disclosure for Confession of Judgment accompanying the personal guaranty noted that the authority to confess judgment was conditioned upon "advance notice to" the guarantor.$ s Plaintiffs Complaint in Confession of Judgment, Ex. "B" (Promissory Note), filed April 12, 2017. 6 Plaintiff's Complaint in Confession of Judgment, Ex. "A" (Commercial Guaranty), filed April 12, 2017. 7 Plaintiffs Complaint in Confession of Judgment, Ex. "A" (Commercial Guaranty) (emphases added), filed April 12, 2017. 2 It is alleged in Plaintiffs Complaint in Confession of Judgment that the corporate borrower had defaulted upon the secured debt by, inter alfa, "failure to make payments when due, its bankruptcy filing and its insolvency."Q The borrower's default, according to the complaint, produced a default on the part of Defendant under the guaranty agreement.10 The complaint did not, however, specifically allege that the condition precedent for exercise of the warrant of attorney in the form of advance notice had been provided to Defendant. On this basis, judgment was confessed against Defendant in his capacity as guarantor in the total amount of $1,655,649.25, of which $1,518,550.88 was attributed to principal, $89,962.73 was attributed to interest as of January 25, 2017, and $47,135.64 was attributed to late and other charges—plus interest and late charges from January 26, 2017, and "reasonable and actually incurred attorney's fees."11 PETITION TO STRIKE A defect appearing on the face of the record, which Defendant's petition asserts requires that the confessed judgment be stricken, is the absence of an averment indicating performance of the guaranty's condition precedent for exercise of the warrant of attorney, in the form of advance notice to Defendant. 12 In an answer to the petition, Plaintiff averred that it had, in fact, provided a 30 -day notice to both Defendant and the borrower, 13 and in its brief suggests that any defect of pleading in this regard would be s Plaintiffs Complaint in Confession of Judgment, Ex. "A" (Disclosure for Confession of Judgment), filed April 12, 2017. 9 Plaintiff's Complaint in Confession of Judgment, ¶9, filed April 12, 2017. 1° Plaintiff's Complaint in Confession of Judgment, ¶9, filed April 12, 2017. 11 Confession of Judgment, filed April 12, 2017; Plaintiff's Complaint in Confession of Judgment, 110, filed April 12, 2017. 12 Defendant's Petition To Strike, or in the Alternative, To Open Plaintiffs Confessed Judgment, 4-7, filed May 26, 2017. 13 Plaintiff's Answer to Defendant's Petition To Strike, or in the Alternative, To Open Plaintiff's Confessed Judgment, 114-5, filed June 16, 2016. 3 remediable by amendment in the absence of prejudice to Defendant and thus not a basis to strike the j udgment.14 STATEMENT OF LAW A general statement of Pennsylvania law as it relates to confessions of judgment has been provided as follows: Confessions of judgment are disfavored in Pennsylvania and are to be strictly construed. The validity of a confession of judgment requires strict compliance with the Rules of Civil Procedure as well as "rigid adherence to the provisions of the warrant of attorney." A confessed judgment will be stricken if there is a fatal defect on the face of the record. A petition to strike a judgment entered by confession operates as a demurrer to the record and must be granted when a fatal defect appears.15 On the other hand, "courts have not wiped out the use of confessions of judgment entirely," and they serve a legitimate purpose in promoting the free flow of credit for the particular benefit of persons and entities utilizing the device. United States Fidelity & Guaranty Co. v. Quinn, 223 Pa. Super. 285, 289, 299 A.2d 33 8, 340 (1972). In determining whether "there are fatal defects on the face of the record ... , a court may only look at what was in the record when the judgment was entered." Green Acres Rehabilitation and Nursing Center v. Sullivan, 215 PA Super 73, 113 A.3d 1261, 1267-68. "When a proceeding to confess judgment is instituted by complaint, the complaint and confession of judgment clause must be read together to determine whether there are defects on the face of the record." Manor Bldg. Corp. v. Manor Complex Assocs., Ltd., 435 Pa. Super. 246, 252, 645 A.2d 843, 846 (1994). Pennsylvania Rule of Civil Procedure 2952(a)(6) provides that, "if the judgment may be entered only after a default or the occurrence of a condition precedent, an averment of the default or of the occurrence of the condition precedent" must be pled in the complaint. in this context, it has been held that failure to plead compliance with a guaranty's condition precedent, in the form of notice, to the exercise of a warrant of 14 Plaintiff's Brief in Opposition to Defendant's Petition To Strike and/or Open Judgment by Confession at 5-7, submitted June 28, 2017. is First Commonwealth Bank v Federated Home & Mortg. Co., 10 Pa. D. & C.5th 37, 39-40 (Centre Co. 2010) (citations omitted). 4 attorney is a fatal, and irremediable by amendment, defect on the face of the record, mandating that the judgment be stricken. Dime Bank v. Andrews, 2015 PA Super 114, 115 A.3d 358. Thus, in Dime, the Pennsylvania Superior Court reversed a lower court's refusal to strike a confessed judgment against a guarantor, where plaintiff's complaint failed to aver compliance with a condition precedent to exercise of the warrant of attorney in the form of a 10 -day notice requirement and where the lower court, while acknowledging the pleading omission to be a fatal defect or irregularity appearing on the face of the record, had held the deficiency to be remediable by amendment and therefore not a ground to strike. Id. at , 115 A.3d at 363, 369. Left open in Dime was the question of whether the party secured by the guaranty could obtain relief by a further exercise of the warrant of attorney pursuant to an express authorization of its repetitive use. Id. at 115 A.3d at 369.16 APPLICATION OF LAW TO FACTS In this case, a substantial issue is presented with respect to the absence in Plaintiff's complaint of an averment of compliance with the guaranty's condition precedent to exercise of the cognovit provision in the form of notice. In this regard, the present case, in the court's view, is not distinguishable from Dime Bank v. Andrews, 2015 PA Super 114, 115 A.3d 358, in terms of the pleading issue presented and, accordingly, the judgment entered by confession must be stricken. AND NOW, this 40' day of August, 2017, upon consideration of Defendant's Petition To Strike, or in the Alternative, To Open Plaintiff's Confessed Judgment, following oral argument held on July 5, 2017, and for the reasons stated in the 16 In Dime, on the issue of whether the defect should have been deemed remediable by amendment, particularly where the record contained "some evidence of due notice," President Judge Gantman dissented. Dime Bank v. Andrews, 2015 PA Super 114, _, 115 A.3d 358, 370-72 (Gantman, P.J., dissenting). 5 accompanying opinion, the petition is granted insofar as it seeks to strike the judgment confessed against him on April 12, 2017, and the judgment is stricken. NOTHING IN THIS ORDER is intended to rule upon the issue of whether Plaintiff may re -exercise the power of attorney pursuant to the confession of judgment clause at issue to collect the debt. Brian M. Kile, Esq. Grenen & Birsic, P.C. Wh Floor One Gateway Center Pittsburgh, PA 15222 Attorney for Plaintiff Craig A. Diehl, Esq. 3464 Trindle Road Camp Hill, PA 17011 Attorney for Defendant 0 BY THE COURT, J�Wesley Oler, ., S.J.