Midwest Fin. Acceptance Corp. v. Rony E.

• Decision Date: 23 August 2013
• Citation: 2013 PA Super 239,78 A.3d 614
• Parties: MIDWEST FINANCIAL ACCEPTANCE CORPORATION, Appellant v. Rony E. and Susan M. LOPEZ, Appellees.
• Court: Pennsylvania Superior Court

78 A.3d 614
2013 PA Super 239

MIDWEST FINANCIAL ACCEPTANCE CORPORATION, Appellant
v.
Rony E. and Susan M. LOPEZ, Appellees.

Superior Court of Pennsylvania.

Argued May 1, 2013.
Filed Aug. 23, 2013.

[78 A.3d 618]

John P. Liekar, Jr., Pittsburgh, for appellant.

BEFORE: GANTMAN, J., LAZARUS, J., and MUNDY, J.

OPINION BY GANTMAN, J.:

Appellant, Midwest Financial Acceptance Corporation (“MFAC”), appeals from the order entered in the Centre County Court of Common Pleas, which granted the petition of Appellees, Rony E. and Susan M. Lopez, to strike, for improper venue, the confessed judgment entered against them in Allegheny County and transferred to Centre County. Given the non-adversarial nature of a confession of judgment, as well as the limited definition of “action” in Rule 2950, we hold that, unless otherwise specified in the agreement, the general venue terms of Rule 1006 do not automatically apply to the initial filing of a judgment of confession and cannot be used to strike an otherwise lawful confession of judgment that has been entered in strict compliance with a valid warrant of attorney. Accordingly, we reverse the order striking the confession of judgment entered against Appellees and remand for reinstatement of the judgment in Centre County.

The relevant facts and procedural history of this case are as follows. Appellees are residents of Centre County. They executed a promissory note (“Note”) in exchange for a commercial loan in the amount of $131,500.00 from Mid–State Bank and Trust Company in 1998. A successor in interest, MFAC, is a Missouri corporation that eventually took over the Note in 2007, at the end of a series of assignments. A provision in the Note, called LENDER'S RIGHTS stated that the parties agreed the Note would be governed by and construed in accordance with Pennsylvania law. Significantly, the Note authorized the entry of judgment in any competent jurisdiction, upon the occurrence of a default described in the document, as follows:

CONFESSION OF JUDGMENT. BORROWER 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 BORROWER AFTER A DEFAULT UNDER THIS NOTE, AND WITH OR WITHOUT COMPLAINT FILED, AS OF ANY TERM, CONFESS OR ENTER JUDGMENT AGAINST BORROWER FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE, ALL ACCRUED INTEREST, LATE CHARGES, AND ANY AND ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER RELATING TO ANY COLLATERAL SECURING THIS NOTE TOGETHER WITH INTEREST ON SUCH AMOUNTS, TOGETHER WITH COSTS OF SUIT, AND AN ATTORNEY'S COMMISSION OF TEN

[78 A.3d 619]

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 NOTE OR A COPY OF THIS NOTE VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS NOTE TO CONFESS JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY 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 NOTE. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE TO NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF JUDGMENT, EXCEPT ANY NOTICE AND/OR HEARING REQUIRED UNDER APPLICABLE LAW WITH RESPECT TO EXECUTION OF THE JUDGMENT, AND STATES THAT EITHER A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THIS CONFESSION OF JUDGMENT PROVISION TO BORROWER'S ATTENTION OR BORROWER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL.

PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

(Promissory Note, dated 7/2/98, at 2; R.R. at 12a). The confession of judgment provision appeared prominently in bold, capital letters at the end of the Note immediately before and on the same page as the signature lines. Just beneath the provision Appellees signatures appear on the Note as signed under seal. ( Id.)

Appellees defaulted on their obligations under the Note as of February 18, 2009. By letter dated June 8, 2009, MFAC advised Appellees they were in default of the loan by reason of their failure to make payments due on April 2, 2009 and May 2, 2009, and the payment received on June 1, 2009 was returned for non-sufficient funds (“NFS”) on June 5, 2009. The letter gave Appellees an opportunity to cure the default.

Pursuant to the confession of judgment provision in the Note, MFAC filed a complaint in confession of judgment in Allegheny County Court of Common Pleas on April 14, 2010, and the court entered judgment against Appellees in the amount of $111,397.73. That same day, Appellees were given proper notice of the entry of judgment and sent a complete copy of the pleadings. MFAC immediately transferred the judgment to Centre County on April 16, 2010.

On May 11, 2010, MFAC offered a payment plan to Appellees. By virtue of the payment plan, MFAC allowed Appellees to continue to make payments and avoid further collection efforts. The payment plan called for Appellees to pay $9,000.00 on or before May 14, 2010, and monthly payments in the amount of $1,494.00 beginning on June 5, 2010, and by the fifth day of every month thereafter until February 5, 2011; the remaining balance of the judgment would become due and owing on

[78 A.3d 620]

February 20, 2011. The judgment would remain in effect and attach as a judgment lien by operation of law. The payment plan did not reinstate the loan. Appellees accepted and signed the payment plan whereby, inter alia, they also acknowledged the judgment, the amount of the judgment, its validity and enforceability, service of process, and waived their right to vacate the judgment for any reason.

Notwithstanding the parties' May 11, 2010 agreement, over fourteen months later on July 29, 2011, Appellees filed a petition to strike/set aside the transfer and entry of the judgment in Centre County, on numerous grounds, including a challenge to the original default, asserting the basis for the “alleged” default was their failure to obtain insurance. Appellees averred they had the proper insurance but “simply did not realize” they had to respond to MFAC's 2009 notice of default. Appellees also claimed (a) they were entitled to fifteen days to cure the alleged default, (b) MFAC increased Appellee's monthly payments due to the “improper default,” (c) Appellees paid MFAC “large sums of money” only to be told that the amounts were insufficient, (d) MFAC breached the loan contract by finding Appellees in default when they were abiding by the terms of the loan. Appellees further averred the Allegheny County Court of Common Pleas had no jurisdiction to enter the judgment because neither they nor MFAC had any connection to Allegheny County. Appellees likewise claimed they were not given proper notice or opportunity to defend the confession of judgment, where they “might have” filed preliminary objections based on a suggested flaw in the pleading regarding a “lost Note affidavit” of a predecessor note holder. ( See Petition to Strike Transfer of Judgment and Entry of Judgment, filed 7/29/11, at 1–3; R.R. at 34a–36a.) Appellees asked the Centre County court to enter a rule to show cause against MFAC, which the court entered.

MFAC answered Appellees' petition to strike, paragraph by paragraph, denied all the conclusions of law, and attached relevant exhibits to call into question the averments in Appellees' petition. In particular, MFAC responded, inter alia, by stating Appellees had defaulted on the loan in numerous ways, including their failure to make loan payments when due in April and May 2009, and their payment received on June 1, 2009, was returned for “NFS” on June 5, 2009. Appellees were advised by letter dated on June 8, 2009, of their default, the application of the default interest rate with late charges and “NFS” fees, and the time to cure the default to avoid acceleration of the debt and legal action. MFAC also demonstrated how Appellees had later entered into a written and signed Payment Plan with MFAC on May 11, 2010, less than one month after the confessed judgment was entered and transferred to Centre County. Significantly, the Payment Plan included an explicit term that stated as follows:

9. Acknowledgment: Debtor acknowledges that: (i) the Judgment is valid and enforceable, Debtor was duly served with all process, Debtor has no defenses to the lawsuit, and Debtor hereby waives any right to seek or vacate the Judgment for any reason; (ii) Debtor executed the loan documents underlying the Judgment; (iii) MFAC is the lawful owner and holder of the loan documents [;] and (iv) Debtor is in default under the loan documents and the balance due there under is due and payable and fully accelerate[d].

( See Payment Plan, dated 5/11/10, at 3; R.R. at 59a.) MFAC averred that in further confirmation of the judgment, Appellees had made the first payment required under the May 11, 2010 Payment Plan and

[78 A.3d 621]

continued to make payments for the next nine months. MFAC also countered that Appellees had expressly acknowledged service of the complaint in confession of judgment was proper. MFAC similarly emphasized that preliminary objections are not permitted under the applicable rules of court as a challenge to a confession of judgment. For all of these reasons, MFAC asked the court to dismiss Appellees' petition to strike with prejudice. ( See Reply to Petition to Strike, filed 9/19/11, at 1–9; R.R. at 41a–64a.)

By order entered October 4, 2011, the trial court struck the confessed judgment. Relying on the case of The Mountbatten Sur. Co., Inc. v. Williams Graphics, Inc., 2004 WL 1921110 (Pa.Com.Pl. Aug. 12, 2004), the court reasoned a confessed judgment must be entered in...