Buttenheim v. Boos
| Decision Date | 05 February 2021 |
| Docket Number | CIVIL ACTION NO. 19-CV-5226 |
| Parties | META BUTTENHEIM, d/b/a AIRMARKETING SERVICES, Plaintiff v. WILLIAM E. BOOS, Defendant |
| Court | U.S. District Court — Eastern District of Pennsylvania |
This civil action is before this Court upon the Petition of Defendant, William E. Boos to Strike or Alternatively, Open the Confession of Judgment entered against him by the Plaintiff on November 6, 2019. For the reasons which follow, the prayer of the Petition shall be denied.
This matter arises out of two documents: (1) an "Unconditional Guaranty and Surety Agreement" dated November 29, 2018 given by Defendant to Plaintiff under which he unconditionally guaranteed and became surety to Plaintiff for all of the obligations of Direct Airway. Inc., and (2) a Note bearing the same date in the original principal amount of $740,225.65 given by Direct Airway, Inc. (as "Borrower") to Plaintiff. (Pl's Complaint, paras. 6 and 7).
According to the averments set forth in Defendant's Petition to Strike or Open, Direct Airways is Defendant's business and it had a 25-year history of retaining the services of Plaintiff (doing business as Airmarketing Services, a/k/a "AMS") to book charter jet excursions for its clients. Under their long-standing business arrangement, AMS would advance its own funds to either book the trip if the retained charter jet company required pre-payment, or to pay that company's invoice shortly after the trip was concluded. Direct Airway would then reimburse AMS for those advanced monies plus a 5% commission of the total charges from the charter jet company, catering fees, and other taxes and fees. (Def's Pet., paras. 1 and 2).
Beginning sometime in 2018, "Direct Airway became unable to pay or reimburse AMS for certain advances, expenses, and loans made by AMS to or for the benefit of Direct Airway..." (Def's Pet., para. 3). "On or about November 29, 2018, Defendant Direct Airway and AMS entered into a Settlement Agreement for the repayment of the Indebtedness" pursuant to which "Direct Airway executed and delivered to AMS" the $740,225.65 Note. (Def's Pet. Paras. 4 and 5). The Settlement Agreement required Direct Airway and/or Mr. Boos to make equal monthly installment payments via wire transfer to AMS in the amount of $39,000 each, commencing on December 10, 2018 and continuing on the 10th day of each month through June 10, 2020 at which time the debt would be discharged upon receipt of a final payment in the amount of $38,700. (Settlement Agreement, para. 2, annexed to Def's Petition to Strike, as "Exhibit 1").
By their own admission, Defendants defaulted on their obligations under the Settlement Agreement, Note and Guaranty and Plaintiff filed Complaints in Confession of Judgment against Direct Airway and Mr. Boos in this Court at Civil Action Nos. 19-cv-2487 and 19-cv-2488 seeking judgment for the balance then due in the amount of $595,052.41 against Direct Airway and $686,821.38 against Mr. Boos together with interest, costs and any and all other authorized expenses. (Def's Pet., paras. 9 - 12). Following the entry of these confessed judgments on June 24, 2019, "Direct Airway agreed that it would cooperate with AMS in having its customers pay receivables directly to AMS," and "to direct its customers to make payments into an account held by AMS." (Def's Pet., paras. 14 - 15). AMS, in turn, "agreed that it would coordinate with Direct Airways when communicating with Direct Airway's clients to ensure that its client relationships were not damaged." (Def's Pet., para. 16).
Plaintiff's Complaint in Confession of Judgment in this action was filed on November 6, 2019 and alleges that "[i]n addition to the defaults in payment and performance under the Note and New Contracts that resulted in the June 2019 payment, the Borrower is in default of additional New Contracts which are Obligations guaranteed by the Guaranty Agreement." (Pl's Compl., para. 14). The instant Confession of Judgment Complaint goes on to aver that there is a principal balance of $455,887.92 on "New Contracts from June 26, 2019 through July 14, 2019, Interest at the Legal Rate as of October 2, 2019" of $6,864.61, and "Collection fees of 10% of the amount due as provided in the Guaranty Agreement" in the sum of $46,275.25. (Pl's Compl., para. 15).
By the Petition which is presently before us, Defendant first submits that the judgment should be stricken because AMS failed to allege a default by the borrower under the new contracts, the attorney was not properly authorized to confess judgment, and Plaintiff's failure to attach a copy of the new contracts to the Complaint constituted a fatal defect. Alternatively, Defendant argues that the judgment should be opened to enable him to pursue his meritorious defenses. Not surprisingly, Plaintiff opposes the grant of the relief sought by the Petition.
"Historically, Pennsylvania law has recognized and permitted entry of confessed judgments pursuant to the authority of a warrant of attorney contained in a written agreement." Neducsin v. Caplan, 2015 PA Super 158, 121 A.3d 498, 505 (Pa. Super. Ct. 2015)(citing Scott Factors v. Hartley, 425 Pa. 290, 228 A.2d 887 (Pa. 1967)). The procedures for filing, pursuing and defending against actions for confession of judgment for money are set forth in Pennsylvania Rules of Civil Procedure Nos. 2950 - 2961. Under Pa. R.C.P. Nos. 2951 and 2952, an action for confession of judgment must be commenced by filing a complaint which includes not only the names and last known addresses of the parties but also the original or copy of the instrument authorizing the entry of such a judgment showing the defendant's signature as well as:
Pa. R.C.P. 2952(a)(1) - (10). Under Pa. R.C.P. 2959(a), "[r]elief from a judgment by confession shall be sought by petition," and "all grounds for relief whether to strike off the judgment or to open it must be asserted in a single petition." Additionally, "[a] party waives all defenses and objections which are not included in the petition or answer." Pa. R.C.P. 2959(c).
"Opening and striking a judgment are different remedies subject to different standards." SDO Fund II D32, LLC v. Donahue, 2020 PA Super 144, 234 A.3d 738, 742 (Pa. Super. Ct. 2020). "'A petition to strike a judgment is a common law proceeding which operates as a demurrer to the record.'" Id,(quoting Resolution Trust Corp. v. Copley Qu-Wayne Associates, 546 Pa. 98, 683 A.2d 269, 273 (Pa. 1996). "'A petition to strike a judgment may be granted only for a fatal defect or irregularity appearing on the face of the record.'" Id. "An order of the court striking a judgment annuls the original judgment and the parties are left as if no judgment had been entered." Cintas Corp. v. Lee's Cleaning Services, Inc., 549 Pa. 84, 700 A.2d 915, 917 (Pa. 1997)(quoting Resolution Trust, supra). "When deciding if there are defects on the face of the record for the purposes of a motion to strike a judgment, a court may only look at what was in the record when the judgment was entered." Id,(citing Linett v. Linett, 434 Pa. 441, 254 A.2d 7 (Pa. 1969). And, "[w]hen 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." Dime Bank v. Andrews, 2015 PA Super 114, 115 A.3d 358, 364 (Pa. Super. Ct. 2015).
A petition to open a judgment entered by confession, on the other hand, is an appeal to the equitable powers of the court. SDO Fund, supra. The court may open a confessed judgment "if the petitioner (1) acts promptly, (2) alleges a meritorious defense, and (3) can produce sufficient evidence to require submission to a jury." Id,(quoting Neducsin, 121 A.3d at 504). "If the truth of the factual averments contained in the complaint in confession of judgment and attached exhibits are disputed, then the remedy is by proceeding to open the judgment, not to strike it." Id, (quoting Id). "The test to open a confessed judgment is conjunctive; petitioner must meet all three prongs to succeed." Dominic's Inc. v. Tony's Famous Tomato Pie Bar & Restaurant, Inc., 2019 PA Super 206, 214 A.3d 259, 268 (Pa. Super. Ct. 2019). In adjudicating a petition to open a confessed judgment, a trial court is charged with "determining whether the petitioner presented sufficient evidence of a meritorious defense to require submission of that issue to a jury," and thus, matters outside of the existing record filed by the party in whose favor the warrant is given such as testimony, depositions, admissions and other evidence, may be considered. Fleetway Capital Corp. v. SH & T Express, LLC, No. 1853 EDA 2016, 170 A.3d 1213, 2017 Pa. Super. Unpub. LEXIS 1809 at *4, 2017 WL...
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