Swarb v. Lennox

• Decision Date: 16 June 1970
• Docket Number: Civ. A. No. 69-2981.
• Citation: 314 F. Supp. 1091
• Parties: Nellie SWARB et al. v. William M. LENNOX et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

314 F. Supp. 1091

Nellie SWARB et al. v. William M. LENNOX et al.

Civ. A. No. 69-2981.

United States District Court, E. D. Pennsylvania.

June 1, 1970.

As Amended June 11, 1970 and June 15, 1970.

Final Order June 16, 1970.

COPYRIGHT MATERIAL OMITTED

Charles H. Baron, Joel Weisberg, Philadelphia, Pa., for plaintiffs.

Blank, Rome, Klaus & Comisky, by Marvin Comisky, Philadelphia, Pa., for The Middle Atlantic Finance Assn., and others.

Theodore H. Lunine, Asst. City Solicitor, Philadelphia, Pa., for William M. Lennox and D. Barlow Burke.

Herbert Monheit, Deputy Atty. Gen., Philadelphia, Pa., for the Commonwealth.

Before VAN DUSEN, Circuit Judge, and WEINER and HANNUM, District Judges.

PER CURIAM:

SUR PLEADINGS AND PROOF

This action, requesting that the court declare the Acts of April 14, 1834, P.L. 333, § 77, 17 P.S. § 1482 (III); February 24, 1806, P.L. 334, 4 Sm.L. 270, § 28, 12 P.S. § 739; and March 21, 1806, P.L. 558, 4 Sm.L. 326, § 8, 12 P.S. § 738, and Pennsylvania Rules of Civil Procedure 2950 to 2976 and any operations thereunder to be unconstitutional and invalid, is now before the court after final hearing on application for a permanent injunction¹ restraining the defendant Sheriff of Philadelphia County and the defendant Prothonotary of the courts of that County from recording and executing upon any judgments by confession. On December 23, 1969, the assigned District Judge entered a temporary restraining order, staying the execution of judgments against the named plaintiffs (Document 4). This order was extended and amplified after the convening of the three-judge court by order dated January 12, 1970 (Document 6).² Amendments were made to the complaint and additional parties were added as intervenors as follows:³

A. Octavius Green was dismissed as plaintiff (Document 35).

B. The Middle Atlantic Finance Corporation, Oxford Finance Companies, Inc., Valiant Finance Company, Friendly Consumer Discount Company, Fidelity Consumer Discount Company, Major Acceptance Corp., Carver Loan & Investment Co., Inc., Abbott Finance Company, Cardinal Consumer Discount Co., Western Finance Company, Peoples Consumer Discount Co., Scott Consumer Discount Co., Central Consumer Discount Co., Nu Way Finance Co., and Mid-Penn Consumer Discount Co. were allowed to intervene as parties defendant (order of February 3, 1970—Document 41).

The Pennsylvania procedure challenged in this suit permits a debtor to sign an agreement containing a clause authorizing the Prothonotary, court clerk, or any attorney to appear in any court, at any time, to confess judgment against the debtor for any unpaid portion of the debt along with various fees and charges. (See footnote 14 below.) The burdens of establishing a defense imposed upon a defaulting debtor who has signed a contract containing a confession of judgment clause and against whom judgment has been entered are greater than those faced by the typical debtor. The judgment entered as a result of a confession clause has the same force and effect as any other judgment,⁴i. e., it acts as a lien upon the debtor's presently owned property and on after acquired property if the judgment is revived in the case of real property or is executed upon in the case of personal property. After learning that a judgment has been entered against him, the debtor has two modes of relief. The first available remedy is a petition to strike the judgment. This petition is available only in those cases where irregularities constituting fatal defects are apparent on the face of the record.⁵ The other available remedy is the petition to open judgment.⁶ The most striking feature of this latter petition is that the burden of proof is placed upon the debtor who is considered the proponent of a claim and who must convince the court of the need for equitable relief.⁷ See Ahrens v. Goldstein, 376 Pa. 114, 102 A.2d 164 (1954); Lukac v. Morris, 108 Pa.Super. 453, 164 A. 834 (1933). The placing of this burden upon the debtor is in direct contrast to the burdens in a normal or pre-judgment creditor-debtor action. In those cases instituted by a creditor against a debtor, the creditor is considered the proponent of a claim and the burdens are his.

In seeking to open a judgment, the debtor must proceed on depositions. Pa. R.Civ.P. 209. See Kine v. Forman, 404 Pa. 301, 172 A.2d 164 (1961). These depositions provide the only basis upon which the assigned judge decides the case. Besides the burden and expense necessitated by the preparation of these transcripts, the debtor will also require the services of an attorney. Another item of expense necessitated by this petition is the Sheriff's costs incurred for the staying of the Sheriff's sale.

The Pennsylvania Supreme Court has described this procedure as follows in Cutler Corp. v. Latshaw, 374 Pa. 1, 97 A.2d 234, 236 (1953):⁸

"A warrant of attorney authorizing judgment is perhaps the most powerful and drastic document known to civil law. The signer deprives himself of every defense and every delay of execution, he waives exemption of personal property from levy and sale under the exemption laws, he places his cause in the hands of a hostile defender. * * * For that reason the law jealously insists on proof that this helplessness and impoverishment was voluntarily accepted and consciously assumed."⁹

Judgments and executions entered in accordance with the above procedure comply with the due process of law clause of the Fourteenth Amendment provided that there has been an understanding and voluntary consent of the debtor in signing the document containing the confession of judgment clause. See National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 316, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964); American Surety Co. v. Baldwin, 287 U.S. 156, 168-169, 53 S.Ct. 98, 77 L.Ed. 231 (1932). However, if there has not been such an understanding consent, the above-described Pennsylvania procedure violates the due process requirements of notice and an opportunity to be heard prior to the entry of judgment. Sniadach v. Family Finance Corp., 395 U.S. 337, 339-340, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969);¹⁰ Armstrong v. Manzo, 380 U.S. 545, 550, 85 S.Ct. 1187, 14 L.Ed.2d 62 (1965); Mullane v. Central Hanover Tr. Co., 339 U.S. 306, 313-315 and 318, 70 S.Ct. 652, 94 L.Ed. 865 (1950); Coe v. Armour Fertilizer Works, 237 U.S. 413, 422-426, 35 S.Ct. 625, 59 L.Ed. 1027 (1915); cf. Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287. The evidence must be examined to determine whether understanding consent to this Pennsylvania procedure is present in the execution of the documents containing such clauses by members of the class on whose behalf this suit is brought.

The record made at the hearing in February 1970¹¹ included a stipulation specifying that the named plaintiffs would testify to one or more of the following facts if called:

(1) That the first notice which they received of any action being taken against them on a judgment entered before January 1, 1970, was the notice that a Sheriff's sale was being scheduled upon their real or personal property.

(2) That when they contacted the judgment plaintiff or his counsel to try to arrange to prevent the scheduled execution of a writ upon the confessed judgment, they were told that the original debt had become enlarged by penalties, execution costs, and fees for the judgment plaintiff's attorneys in the liquidated amount of fifteen to twenty per cent. of the alleged debt remaining.

This stipulation contains approximately 2½ legal-size pages of confessed judgments entered against 47 named plaintiffs.¹² These judgments vary in amount from $249.23 to $25,800.00. The stipulation also recites that writs have been delivered to the Philadelphia Sheriff upon many of these judgments for the purpose of having execution on such judgments and that "notices received by Plaintiff debtors after judgment has been entered contain no explanation of the procedures to be followed in order to stay a sale or set aside judgment." The stipulation also recites:

"E. That debtors who wish to attack the validity or correctness of a judgment confessed against them are able to do so only by filing a petition to open or strike.

"F. That debtors who must stay a sheriff's sale during the pendency of their petitions must pay whatever sheriff's costs have accrued before the stay will be made effective.

"G. The Philadelphia Bar Association Minimum Fee Schedule provides for attorney's fees of $150 for the filing of a petition to open.

"H. That where transcripts of depositions must be prepared for the Court, they must be transcribed at a cost to the petitioner of $1.00 per page.

"I. That the remaining unpaid portion of debtors' obligations are increased by a 15-20% attorney's fee in those cases in which execution is filed.¹³

* * * * * *

"K. That in 1968, Defendant Burke, Prothonotary of the Court of Common Pleas of Philadelphia recorded 52,601 judgments by confession, which number was over 50% of all actions docketed by his office during the year.

* * * * * *

"M. That the lien created by the entry of a judgment by confession is not divested by the granting of a petition to open judgment but only after the petitioner has been successful in defending on the merits."

The evidence in the record indicating that the named plaintiffs did not knowingly consent to the entry of the judgments against them or to the execution of such judgments consists of the following:

A. The testimony of Doris Mims, who lived in a home held in her name as trustee for her son and earned approximately $6100. per year, after reading a confession of judgment clause contained in a note which she had signed previously (N.T. 47-48),¹⁴ that she could not understand its meaning and could not explain it to the court (N.T. 48).

B. The testimony of Mr. Thomas Veney, a detective with the Consumers Fraud Division of the District Attorney's office, that 95% of the notes brought to him by those complaining of

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