Atlantic Nat. v. Stivala Investments

• Decision Date: 09 April 2007
• Docket Number: No. 509 MDA 2006.,509 MDA 2006.
• Citation: 922 A.2d 919
• Parties: ATLANTIC NATIONAL TRUST, LLC, by assignment of Pennstar Bank, a division of NBT Bank, successor by merger of Pioneer American Bank, N.A., Appellee v. STIVALA INVESTMENTS, INC., Appellant.
• Court: Pennsylvania Superior Court

922 A.2d 919

ATLANTIC NATIONAL TRUST, LLC, by assignment of Pennstar Bank, a division of NBT Bank, successor by merger of Pioneer American Bank, N.A., Appellee v. STIVALA INVESTMENTS, INC., Appellant.

No. 509 MDA 2006.

Superior Court of Pennsylvania.

Argued November 29, 2006.

Filed April 9, 2007.

Thomas M. Caffrey, Allentown, for appellant.

John M. Murphy, Scranton, for appellee.

BEFORE: FORD ELLIOTT, P.J., LALLY-GREEN, and JOHNSON, JJ.

OPINION BY JOHNSON, J.:

¶ 1 Stivala Investments, Inc. ("Stivala") appeals the trial court's Order denying Stivala's Petition to Strike or Open Confession of Judgment. Stivala argues that the trial court erred in failing to strike the judgment because Atlantic National Trust, LLC, by assignment of Pennstar Bank, a division of NBT Bank, successor by merger of Pioneer American Bank, N.A. ("Atlantic") failed to include certain allegations as required by the Pennsylvania Rules of Civil Procedure to confess judgment. Stivala also argues that the trial court erred in failing to open the judgment because Atlantic improperly confessed judgment pursuant to a warrant of attorney that had previously been exhausted. After review and study, we find that the trial court did not err in denying the motion to strike the judgment or denying the motion to open the judgment. Consequently, we affirm the trial court's Order.

¶ 2 The relevant procedural facts are set forth as follows. Atlantic extended a loan in the amount of $550,000.00 to Stivala in October of 1994, which is evidenced in part by a promissory note. The promissory note contains a warrant of attorney authorizing the confession of judgment against Stivala in the event of Stivala's default.

¶ 3 On January 22, 2003, Atlantic filed a complaint in confession of judgment, alleging that Stivala defaulted under the loan. Atlantic alleged that Stivala failed to make the payments required under the note and sought $561,950.17, which included the principal due on the note, the accrued interest, late fees, and attorneys' commission. The judgment was entered on behalf of Atlantic on January 22, 2003. Stivala then filed a timely petition to open or strike the judgment, alleging inter alia, that notice of default was insufficient. Stivala did not allege any substantive defenses to its default on the loan in any of its petitions to open the judgment. On June 30, 2004, the Honorable Trish Corbett denied the petition to strike, but granted the petition to open, noting that although "it seems blatantly obvious that Defendants were aware of the default and the confession of judgment before it was filed[,]" the notice given was not proper. Opinion, 06/30/04, at 9-10.

¶ 4 Following over two years of relative inactivity in the case, Atlantic tried to enforce the confessed judgment by obtaining a writ of execution that resulted in the scheduling of a sheriff's sale of real estate owned by Stivala. On April 25, 2005, Stivala filed a petition to strike and set aside the execution and the sheriff's sale. The Honorable Terrence Nealon dismissed the petition as moot and scheduled the case for trial.

¶ 5 Ultimately, however, the parties elected to avoid trial and entered into a stipulation which Judge Nealon entered as an Order ("the Stipulated Order"). The Stipulated Order contained the following language:

It is further ORDERED and DECREED that the herein striking and setting aside of the confession of judgment entered on January 22, 2003 shall not preclude Plaintiff from entering a second confession of judgment against Defendants in accordance with the warrant of attorney contained in the Promissory Note and the warrant of attorney contained in the Guaranty and Suretyship Agreement, but shall also not preclude the Defendants from attacking and raising any defenses to the second confession of judgment by way of a petition to strike or open by other permissible means, including, without limitation, the defense that the warrant of attorney in the Promissory Note and the warrant of attorney in the Guaranty and Suretyship Agreement do not permit the entry of a second or subsequent confession of judgment.

Order, 07/13/05, at 2 (unnumbered).

¶ 6 Consistent with the Stipulated Order, on August 17, 2005, Atlantic filed a second complaint in confession of judgment against Stivala. A confessed judgment was thus entered against Stivala in the amount of $550,048.11. On September 13, 2005, Stivala filed a petition to strike or open the confessed judgment, arguing that Atlantic impermissibly confessed judgment twice on the same warrant and that Atlantic failed to allege in its complaint that judgment had already been confessed pursuant to the warrant, as required by Pa R.C.P. 2952(a)(5). Atlantic filed a timely Answer. Following oral arguments, Judge Nealon denied the petition to strike and the petition to open, but allowed Atlantic to file an amended complaint so that they could comply with Pa.R.C.P. 2952(a)(5). Stivala filed its notice of appeal on March 17, 2006 and based upon our review of the docket, it appears that Atlantic filed an amended complaint on March 21, 2006.

¶ 7 Stivala presents the following questions for our review:

1. Whether the lower court committed an error of law by failing to strike the confessed judgment, where the creditor's failure to include in the complaint the allegations required by Pa.R.C.P. 2952(a)(5) is a substantive defect that undermines the validity of the confessed judgment?

2. Whether the lower court committed an error of law by failing to open the confessed judgment, where the debtor raised a meritorious defense by establishing that judgment was confessed upon the same warrant of attorney upon which a prior judgment had been confessed, so that the creditor impermissibly confessed judgment twice on the debt due under the promissory note?

Brief for Appellant at 4.

¶ 8 In support of its first question, Stivala argues that the trial court erred by failing to strike the confessed judgment because Atlantic's failure to set forth the fact that that judgment was already confessed upon the warrant of attorney "is a substantive defect that undermines the validity of the confessed judgment." Brief for Appellant at 10. Pursuant to Pa.R.C.P. 2952(a)(5), a complaint seeking a confession of judgment must contain, "either a statement that judgment has not been entered on the instrument in any jurisdiction or if it has been entered an identification of the proceedings[.]" "On appeal from the denial of a petition to strike an order or judgment, a trial court will be reversed only if there is a manifest abuse of discretion or error of law." Crum v. F.L. Shaffer Co., 693 A.2d 984, 986 (Pa.Super.1997). We further note that,

A petition to strike a judgment may be granted only for a fatal defect or irregularity appearing on the face of the record. In considering the merits of a petition to strike, the court will be limited to a review of only the record as filed by the party in whose favor the warrant is given, i.e., the complaint and the documents which contain confession of judgment clauses. Matters dehors the record filed by the party in whose favor the warrant is given will not be considered. If the record is self-sustaining, the judgment will not be stricken.

Resolution Trust Corp. v. Copley QuWayne Assocs., 546 Pa. 98, 683 A.2d 269, 273 (1996) (emphasis in original, internal citations omitted)

¶ 9 Stivala claims that there is no precedent on this issue and that this Court should follow the reasoning of the Philadelphia Court of Common Pleas, in Harbor Hosp. Servs., Inc. v. Gem Laundry Servs., L.L.C., 2000 WL 33711057 (Phila.County 2000). See Brief for Appellant at 10. Stivala argues that because judgment cannot be confessed for the same warrant of attorney twice, a party must set forth whether they have previously confessed judgment in the complaint. See Brief for Appellant at 13. In Harbor, the court of common pleas held that the failure to state whether judgment had been entered on the warrant constitutes a substantive defect and struck the judgment. See 2000 WL 33711057 at *13. Harbor is not binding precedent on this Court, as it is a common pleas decision. Further, we are not persuaded by the court's reasoning in Harbor and we note that Harbor has not been relied upon or even cited in a single decision by any other court in the seven years since it was decided. Specifically, Harbor fails to engage in an analysis of whether the party seeking the order to strike was prejudiced by the error, despite the fact that the court specifically states that this Court has engaged in precisely that inquiry in similar situations. See id. at *10.

¶ 10 According to this Court, in George H. Althof, Inc. v. Spartan Inns of America, Inc., 295 Pa.Super. 287, 441 A.2d 1236, 1237 (1982), a motion to strike may not be granted "[i]f the defect is one that can be remedied by an amendment of the record or other action[.]" Further, it is well-established that courts "should not be astute in enforcing technicalities to defeat apparently meritorious claims; if defendant has any real or substantive defense to the confessed judgment the way lies open to it to present it." Id. at 1238 (quoting West Penn Sand & Gravel Co. v. Shippingport Sand Co., 367 Pa. 218, 80 A.2d 84, 86-87 (1951)). A court, therefore, must determine if an error is technical or prejudicial. See George H. Althof, 441 A.2d at 1238. "It has always been held that formal defects, mistakes and omissions in confessions of judgment may be corrected by amendment where the cause of action is not changed, where ends of justice require the allowance of such amendment, and where the substantive rights of defendant . . . will not be prejudiced thereby." West Penn Sand & Gravel Co., 80 A.2d at 86.

¶ 11 In this case, Stivala has failed to show that it was prejudiced by Atlantic's omission in its complaint. Indeed, there is no doubt that Stivala was aware that Atlantic had previously filed a...