J-A05009-15


                             2015 PA Super 158

DANIEL R. NEDUCSIN                             IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA
                        Appellee

                   v.

SCOTT CAPLAN

                        Appellant                   No. 1116 EDA 2014


              Appeal from the Order Entered February 25, 2014
            In the Court of Common Pleas of Philadelphia County
         Civil Division at No(s): September Term, 2012 No. 002706


BEFORE: GANTMAN, P.J., SHOGAN, J., and ALLEN, J.

OPINION BY GANTMAN, P.J.:                             FILED JULY 23, 2015

     Appellant, Scott Caplan, appeals from the order entered in the

Philadelphia County Court of Common Pleas, following denial of Appellant’s

petition to strike and/or open a confessed judgment in favor of Appellee,

Daniel R. Neducsin, in this breach of contract action. We affirm

     The relevant facts and procedural history of this case are as follows.

In 1996, Appellant founded Sweat Gyms (“Sweat”), a chain of fitness

centers. To expand the chain, on July 21, 2010, Appellant obtained a loan

and a $250,000.00 line of credit from Wells Fargo, which Appellee

guaranteed.   On December 31, 2011, Appellant and Appellee executed a

promissory note (“Bedrock Note”), which Appellant’s attorney had previously

reviewed.

     By early 2012, Sweat was nearly bankrupt and              needed debt
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restructuring and a cash infusion to keep operating.     Appellee worried he

would be held responsible if Sweat defaulted on the Wells Fargo line of

credit.   Appellee blamed Sweat’s “business practices” for the company’s

financial difficulties and offered to lend Appellant additional funds in

exchange for Appellee’s greater oversight of the business and for changes in

the corporate governance.

      On March 9, 2012, Appellant as “Maker” and other Sweat shareholders

and entities entered into a new note with Appellee in exchange for

$2,000,000.00 in additional funds.    The relevant terms of the note were

taken from the original Bedrock Note and gave Appellee the right to file a

confessed judgment in the event of a default.       The grounds for default

included: (1) failure to make payment on the note when due; or (2) “If any

certification, warranty, or representation made or hereafter made by Maker

to [Appellee] should prove to be false, incorrect, incomplete or misleading in

any material respect”; or (3) bankruptcy; insolvency proceedings against

any party liable under the note; assignment for the benefit of creditors;

appointment of a receiver, etc.; or (4) if Maker should obtain additional

financing from another source, senior or junior, secured or unsecured. (See

Promissory Note, dated 3/9/12, at 2-3; R.R. at A.25─A.26.)          Appellant

expressly represented in the 3/9/12 note that he would use the proceeds of

the note solely to pay the business’ outstanding debts, and the funds “shall

not be used for personal, family, household, or other business uses.” (See


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id. at 5; R.R. at A.28.) As in the original Bedrock Note, the last paragraph

of the 3/9/12 note also stated:

        THIS NOTE CONTAINS A WARRANT OF ATTORNEY FOR
        CONFESSION OF JUDGMENT (SECTION 18) AND A WAIVER
        OF TRIAL BY JURY AND OF THE RIGHT TO INTERPOSE
        DEFENSES, COUNTERCLAIMS OR SETOFFS (SECTION 37).
        MAKER HEREBY KNOWINGLY, INTENTIONALLY, AND
        VOLUNTARILY AND (ON THE ADVICE OF THE SEPARATE
        COUNSEL OF MAKERS) UNCONDITIONALLY WAIVES ANY
        AND ALL RIGHTS MAKER HAS OR MAY HAVE TO TRIAL BY
        JURY AND THE RIGHT TO INTERPOSE ANY DEFENSE
        (EXCEPT THOSE BASED ON PAYMENT OR ERRORS IN
        COMPUTING    THE   BALANCE   DUE),  SET-OFF   OR
        COUNTERCLAIM OF ANY NATURE OR DESCRIPTION UNDER
        THE CONSTITUTIONS AND LAWS OF THE UNITED STATES
        AND THE COMMONWEALTH OF PENNSYLVANIA AND
        EXPRESSLY   AGREES   AND   CONSENTS    TO  PAYEE
        NEDUCSIN’S ENTERING JUDGMENT AGAINST ALL MAKERS
        HERETO PURSUANT TO THE TERMS HEREOF[.]

(Id. at 8-9; R.R. at A.31−A.32).     Appellant’s signature appears directly

under this paragraph.

     On the same day, Appellant signed a revised shareholders’ agreement,

which stated no shareholder, including Appellant, could take funds from the

Corporation’s bank accounts for personal use without unanimous consent of

all shareholders. Several months after executing the 3/9/12 note, Appellant

unilaterally used the line of credit for certain undocumented transactions,

including a deposit into his personal bank account.       At two separate

shareholder meetings on July 24, 2012, and on August 21, 2012, Appellee

asked Appellant how much Appellant had drawn down on the line of credit,

and Appellant twice replied with inaccurate information, stating he had


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drawn down only $50,000.00, when in fact the amount was actually

$170,000.00.

       On September 24, 2012, Appellee filed a confession of judgment

against Appellant for $2,005,970.50, averring Appellant’s misrepresentation

regarding the draw-down on the line of credit triggered a default under the

3/9/12 note. After several agreed-upon extensions of time, on November 8,

2012, Appellant filed a petition to strike and/or open the confessed

judgment. On June 4, 2013, the court denied Appellant’s petition to strike

but ordered discovery and briefs on Appellant’s petition to open.

       On January 29, 2014, the court initially granted the petition to open

judgment, without conducting oral argument.           Appellee asked the court to

vacate its order and conduct oral argument. On January 31, 2014, the court

vacated the January 29, 2014 order and conducted oral argument on

February 6, 2014.          The court denied Appellant’s petition to open the

confessed judgment on February 25, 2014.1 Appellant timely filed a notice

of appeal on March 26, 2014.           The court did not order Appellant to file a

concise statement per Pa.R.A.P. 1925(b), and Appellant filed none.

____________________________________________


1
  Appellant filed a second petition to strike on March 10, 2014. On March
26, 2014, the court dismissed with prejudice Appellant’s March 10, 2014
petition to strike, because the issue raised in the March 10, 2014 petition to
strike was the same as the issue raised in the original petition to strike, the
new petition was untimely, it sought unavailable relief, and nothing in the
record indicated that the decision to deny the prior petition to strike should
be revisited.



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      Appellant raises the following issues on appeal:

         WHETHER THE JUDGMENT ENTERED BY CONFESSION
         SHOULD HAVE BEEN STRICKEN WHERE THE PROMISSORY
         NOTE UPON WHICH JUDGMENT WAS BASED LACKS
         CLARITY AND PRECISION AND PRESENTS AMBIGUITIES
         WHICH SHOULD HAVE BEEN RESOLVED IN FAVOR OF
         [APPELLANT].

         WHETHER [APPELLANT] WAS ENTITLED TO A FULL
         EVIDENTIARY HEARING TO DETERMINE IF THE JUDGMENT
         ENTERED BY CONFESSION SHOULD HAVE BEEN STRICKEN
         DUE TO THE INABILITY OF APPELLEE, AS CREDITOR, TO
         MEET HIS BURDEN THAT THERE WAS A KNOWING,
         VOLUNTARY AND INTELLIGENT WAIVER OF [APPELLANT’S]
         PROCEDURAL DUE PROCESS RIGHT TO A HEARING
         BEFORE THE ENTRY OF JUDGMENT.

         WHETHER     [APPELLANT] PRESENTED    SUFFICIENT
         EVIDENCE OF A MERITORIOUS DEFENSE TO THE CLAIM
         OF MISREPRESENTATION…AND, IF SO, WHETHER IT WAS
         MATERIAL, PLUS WHERE THERE WAS NO DETRIMENTAL
         RELIANCE UPON ANY STATEMENTS AND NO MONETARY
         LOSS TO WARRANT A $2 MILLION JUDGMENT UPON A
         FULLY PERFORMING LOAN.

         WHETHER, NOTWITHSTANDING THE LACK OF AN
         EVIDENTIARY HEARING, THE RECORD WAS SUFFICIENT
         TO OPEN THE JUDGMENT BASED UPON A LACK OF A
         KNOWING, VOLUNTARY AND INTELLIGENT WAIVER OF
         THE RIGHTS WHERE THE NOTE WAS CUT AND PASTED
         FROM ANOTHER TRANSACTION AND FALSELY STATED IT
         WAS EXTENSIVELY REVIEWED BY COUNSEL BUT WAS
         ONLY PRESENTED MOMENTS BEFORE SIGNATURE AND
         REFERENCED PARAGRAPHS THAT DID NOT EXIST,
         SECURITY AGREEMENTS WHICH DID NOT EXIST AND
         GUARANTIES THAT DID NOT EXIST.

(Appellant’s Brief at 4).

      In his issues combined, Appellant initially argues the 3/9/12 note lacks

the requisite precision to be enforceable and is internally inconsistent


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because it is a “cut-and-paste job” from the Bedrock Note.            Specifically,

Appellant contends the default provisions of the 3/9/12 note are unclear and

ambiguous, as strict construction of the terms suggests the default

provisions only apply to Sweat, and not to Appellant; and the sections

referred to in the last paragraph do not exist as numbered in the 3/9/12

note. Additionally, Appellant asserts he did not knowingly, voluntarily, and

intelligently waive his rights to notice and hearing regarding the confession

of judgment, because Appellee presented the 3/9/12 note to Appellant

moments before signing and without time for Appellant to obtain counsel’s

review. Appellant insists he is entitled to an evidentiary hearing under the

rules of court to determine if he knowingly, voluntarily, and intelligently

waived his due process rights under the 3/9/12 note. Appellant submits the

failure of the trial court to conduct an evidentiary hearing on Appellant’s due

process challenge constitutes an abuse of discretion.

      Alternatively, Appellant wants to open the confessed judgment,

claiming   he   has   raised   several    meritorious   defenses,   including   the

“materiality” of the amount drawn down on the line of credit, Appellant’s

attempt to cure the default, and Appellee’s decision not to confess judgment

against the other shareholders.      Appellant baldly states the record had a

number of factual discrepancies, such as whether Appellee justifiably relied

on Appellant’s misrepresentation and whether the damages are potentially a

penalty.   Appellant complains a jury should hear those issues.         Appellant


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submits the discrepancy between the actual draw-down and the amount

Appellant disclosed was insignificant in light of the overall debt. Appellant

repeats his contention that the trial court’s analysis does not reflect

adequate consideration of whether Appellant properly waived his due

process rights.

      Appellant concludes this Court should reverse the trial court’s decision

and strike the judgment entered by confession; or remand the matter for a

full evidentiary hearing to determine whether Appellant exercised a knowing,

voluntary, and intelligent waiver of his procedural due process rights; or

simply reverse the trial court’s decision and open the judgment, based on

the meritorious defenses raised in Appellant’s petition to open the confessed

judgment. We disagree.

      Initially, we observe:

         “A petition to strike a judgment is a common law
         proceeding which operates as a demurrer to the record. A
         petition to strike a judgment may be granted only for a
         fatal defect or irregularity appearing on the face of the
         record.” Resolution Trust Corp. v. Copley Qu–Wayne
         Associates, 546 Pa. 98, 106, 683 A.2d 269, 273 (1996).

            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…. An order of the court striking a judgment
            annuls the original judgment and the parties are left
            as if no judgment had been entered.

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       Hazer v. Zabala, 26 A.3d 1166, 1169 (Pa.Super. 2011)
       (quoting Resolution Trust Corp., supra).           In other
       words, the petition to strike a confessed judgment must
       focus on any defects or irregularities appearing on the face
       of the record, as filed by the party in whose favor the
       warrant was given, which affect the validity of the
       judgment and entitle the petitioner to relief as a matter of
       law.    ESB Bank v. McDade, 2 A.3d 1236, 1239
       (Pa.Super. 2010). “[T]he record must be sufficient to
       sustain the judgment.” Id. The original record that is
       subject to review in a motion to strike a confessed
       judgment consists of the complaint in confession of
       judgment and the attached exhibits. Resolution Trust
       Corp., supra at 108, 683 A.2d at 274.

       In contrast, “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. at
       106, 683 A.2d at 273. A petition to strike a confessed
       judgment and a petition to open a confessed judgment are
       distinct remedies; they are not interchangeable. Hazer,
       supra. A petition to open a confessed judgment is an
       appeal to the equitable powers of the court. PNC Bank v.
       Kerr, 802 A.2d 634, 638 (Pa.Super. 2002), appeal denied,
       572 Pa. 735, 815 A.2d 634 (2002). Factual disputes by
       definition cannot be raised or addressed in a petition to
       strike off a confession of judgment, because factual
       disputes force the court to rely on matters outside the
       relevant record to decide the merits of the petition.
       Resolution Trust Corp., supra at 109, 683 A.2d at 275.

       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. See Scott Factors, Inc. v. Hartley, 425 Pa.
       290, 228 A.2d 887 (1967). “[A] warrant of attorney is a
       contractual agreement between the parties and the parties
       are free to determine the manner in which the warrant
       may be exercised.” Atlantic Nat. Trust, LLC v. Stivala
       Investments, Inc., 922 A.2d 919, 924 (Pa.Super. 2007),
       appeal denied, 594 Pa. 702, 936 A.2d 39 (2007). Entry of
       a valid judgment by confession must be “made in rigid

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        adherence to the provisions of the warrant of attorney;
        otherwise, such judgment will be stricken.” Dollar Bank,
        Federal Sav. Bank v. Northwood Cheese Co., Inc.,
        637 A.2d 309, 311–12 ([Pa.Super.] 1994), appeal denied,
        539 Pa. 692, 653 A.2d 1231 (1994). “A warrant to confess
        judgment must be explicit and will be strictly construed,
        with any ambiguities resolved against the party in whose
        favor the warrant is given.” Id. “A warrant of attorney to
        confess judgment must be self-sustaining and to be self-
        sustaining the warrant must be in writing and signed by
        the person to be bound by it. The requisite signature must
        bear a direct relation to the warrant of attorney and may
        not be implied.” Hazer, supra at 1171; See also Ferrick
        v. Bianchini, 69 A.3d 642 [Pa.Super. 2013] (stating
        same).

Midwest Financial Acceptance Corp. v. Lopez, 78 A.3d 614, 622-23

(Pa.Super. 2013).

        Rules 2950 to 2967 of the Pennsylvania Rules of Civil
        Procedure govern confessions of judgment for money.
        See generally Pa.R.C.P. 2950–2967. A confession of
        judgment “action” under these rules is distinctly defined as
        “a proceeding to enter a judgment by confession for
        money pursuant to an instrument…authorizing such
        confession.”       Pa.R.C.P. 2950.     Rule 2952 expressly
        authorizes the practice of allowing a party to file a
        complaint in confession of judgment without either a notice
        to defend or a notice to plead, and no responsive pleading
        is required (even if the complaint has a notice to defend or
        is endorsed with a notice to plead). Pa.R.C.P. 2952(b).
        The rules requiring and establishing the form of notices to
        defend and to plead in ordinary civil complaints do not
        apply to actions for confession of judgment. See id. Note
        (stating Rule 1018.1 and Rule 1361 do not apply to
        complaint in confession of judgment).           Instead, “A
        confession of judgment clause ‘permits the creditor or its
        attorney simply to apply to the court for judgment against
        the debtor in default without requiring or permitting the
        debtor…’ to respond at that juncture.” Southwestern
        Pennsylvania Regional Council, Inc. v. Gentile, 776
        A.2d 276, 279 n. 3 (Pa.Super. 2001). Because the creditor
        is entitled to file the complaint and enter judgment against

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        the debtor without any appearance or response from the
        debtor, Pennsylvania’s initial procedure for confessing
        judgments lacks “the hallmarks of an adversary
        proceeding” until the debtor files a petition to strike off or
        open the judgment. See Newton v. First Union Nat.
        Bank, 316 F.Supp.2d 225, 233–34 (E.D.Pa. 2004).
        Nevertheless, “[t]he record of the entry of a judgment by
        the prothonotary under a power contained in the
        instrument is a record of the court, and it has all the
        qualities of a judgment on a verdict.” O’Hara v. Manley,
        12 A.2d 820, 822 ([Pa.Super.] 1940).

        Generally, notice and service of a confessed judgment to
        the debtor is contemporaneous with the entry of the
        judgment against the debtor. See Pa.R.C.P. 2956 Note
        (referring to Rule 236(a)(1)) requiring prothonotary to
        give written notice to defendants of entry of confessed
        judgment by ordinary mail together with all documents
        filed with prothonotary in support of confession of
        judgment. “The prothonotary shall note in the docket the
        giving of notice and, when a judgment by confession is
        entered, the mailing of the required notice and
        documents.” Pa.R.C.P. 236(b).

        Following a confession of judgment, the debtor can choose
        to litigate the judgment by filing a petition in compliance
        with Rule 2959. See Pa.R.C.P. 2959. The debtor must
        raise all grounds for relief (to strike off or open) in a single
        petition, which can be filed in the county where the
        judgment was originally entered or in any county where
        the judgment has been transferred. Id. A party waives all
        defenses and objections which are not included in the
        petition or answer. See Pa.R.C.P. 2959(c).

Id. at 625-26 (footnote omitted).

     “[W]e review the order denying Appellant’s petition to open the

confessed judgment for an abuse of discretion.” PNC Bank, Nat. Ass'n v.

Bluestream Technology, Inc., 14 A.3d 831, 835 (Pa.Super. 2010)

(quoting ESB Bank, supra).


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        Judicial discretion requires action in conformity with law on
        facts and circumstances before the trial court after hearing
        and consideration. Consequently, the court abuses its
        discretion if, in resolving the issue for decision, it
        misapplies the law or exercises its discretion in a manner
        lacking reason.

Miller v. Sacred Heart Hosp., 753 A.2d 829, 832 (Pa.Super. 2000)

(internal citations omitted). The trial 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 of the case to a

jury.” PNC Bank, Nat. Ass'n, supra at 836 (emphasis added). Generally,

the court will dispose of the rule on petition and answer, along with other

discovery and admissions. Pa.R.C.P. 2959(e).

     When determining if the petitioner acted promptly, “the courts are not

bound by an inflexible time frame. The crucial factor in determining whether

a petition is timely is not the specific time which has elapsed but rather the

reasonableness of the explanation given for delay.” First Seneca Bank &

Trust Co. v. Laurel Mountain Development Corp., 506 Pa. 439, 443, 485

A.2d 1086, 1088 (1984).

     “A meritorious defense is one upon which relief could be afforded if

proven at trial.” Ferrick, supra, at 647.

        Pa.R.Civ.P. 2959(e) sets forth the standard by which a
        court determines whether a moving party has properly
        averred a meritorious defense. If evidence is produced
        which in a jury trial would require the issues to be
        submitted to the jury the court shall open the judgment.
        Furthermore, the court must view the evidence presented
        in the light most favorable to the moving party, while

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         rejecting contrary evidence of the non-moving party.
         Continental Bank v. Axler, 510 A.2d 726, 728
         ([Pa.Super.] 1986); Pawco v. Bergman Knitting Mills,
         Inc., 424 A.2d 891, 897 ([Pa.Super.] 1981).            The
         petitioner need not produce evidence proving that if the
         judgment is opened, the petitioner will prevail.       Id.
         Moreover, we must accept as true the petitioner’s evidence
         and all reasonable and proper inferences flowing
         therefrom. Federman v. Pozsonyi, 529 A.2d 530, 533
         ([Pa.Super.] 1987) [(citing Hamilton Bank v. Rulnick,
         475 A.2d 134, 137 ([Pa.Super.] 1984).

Liazis v. Kosta, Inc., 618 A.2d 450, 453 (Pa.Super. 1992).            In other

words, a judgment of confession will be opened if “a petitioner seeking relief

therefrom produces evidence which in a jury trial would require issues to be

submitted to a jury.” Foerst v. Rotkis, 368 A.2d 805, 807-08 (Pa.Super.

1976).   The standard of sufficiency here is similar to the standard for a

directed verdict, in that we must view the facts most favorably to the

moving party, we must accept as true all the evidence and proper inferences

in support of the defense raised, and we must reject all adverse allegations.

Greenwood v. Kadoich, 357 A.2d 604, 606 (Pa.Super. 1976).             The trial

court can make this decision as a matter of law when the defense presented

is   without   adequate   substance,   because   contract   construction   and

interpretation is generally a question of law for the court to decide. Profit

Wize Marketing v. Wiest, 812 A.2d 1270, 1274 (Pa.Super. 2002).

      A contract’s language is unambiguous if it can be determined without

any other guide than knowledge of the simple facts on which its meaning

depends. Id. When the contract is clear and unambiguous, the meaning of


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the   contract   is   ascertained   from    the   writing   alone.   Kmart   of

Pennsylvania, L.P. v. MD Mall Associates, LLC, 959 A.2d 939, 944

(Pa.Super. 2008), appeal denied, 602 Pa. 667, 980 A.2d 609 (2009).           A

court must not distort the meaning of the language or resort to a strained

contrivance to find an ambiguity.      Mitsock v. Erie Ins. Exchange, 909

A.2d 828, 831 (Pa.Super. 2006).             Additionally, a mere disagreement

between the parties regarding the proper construction of the language does

not render the contract ambiguous.         Baney v. Eoute, 784 A.2d 132, 136

(Pa.Super. 2001).       In the context of a petition to open a confessed

judgment, “[t]he function of our [C]ourt is not to [w]eigh the evidence in

support of the defense, but merely to determine whether there was

sufficient evidence to go to the jury.” Foerst, supra.

         “Whether a judge has correctly interpreted a writing and
         properly determined the legal duties which arise therefrom
         is a question of law for the appellate court.” Riccio v.
         American Republic Ins. Co., 550 Pa. 254, 263, 705 A.2d
         422, 426 (1997). The legal effect or enforceability of a
         contract provision presents a question of law accorded full
         appellate review and is not limited to an abuse of
         discretion standard. Id. See also Patriot Commercial
         Leasing Co., Inc. v. Kremer Restaurant, 915 A.2d 647
         (Pa.Super. 2006), appeal denied, 597 Pa. 720, 951 A.2d
         1166 (2008). … Likewise, if the matter under review
         involves the interpretation of the Pennsylvania Rules of
         Civil Procedure, we have before us a question of law,
         where our standard of review is de novo and our scope of
         review is plenary. Boatin v. Miller, 955 A.2d 424, 427
         (Pa.Super. 2008).

Midwest Financial Acceptance Corp., supra at 624.

      In the present case, Appellant founded Sweat Gyms in 1996, a chain

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of fitness centers.   To expand the chain, Appellant obtained a loan and a

$250,000.00 line of credit from Wells Fargo on July 21, 2010, which Appellee

guaranteed. On December 31, 2011, Appellant and Appellee executed the

Bedrock Note, which Appellant’s attorney had reviewed.          By early 2012,

Sweat was almost bankrupt and needed debt restructuring and a cash

infusion to continue operating.    Appellee blamed the company’s “business

practices” for its financial difficulties and offered to lend additional funds in

exchange for Appellee’s greater oversight of the business and for changes in

the corporate governance.

      On March 9, 2012, Appellant as “Maker” and other Sweat shareholders

and entities entered into a new note with Appellee in exchange for

$2,000,000.00 of additional funds. The relevant terms of the 3/9/12 note

were taken from the original Bedrock Note, which gave Appellee a warrant to

confess judgment in the event of a default. The express grounds for default

included: (1) failure to make payment on the note when due; or (2) “If any

certification, warranty, or representation made or hereafter made by Maker

to [Appellee] should prove to be false, incorrect, incomplete or misleading in

any material respect”; or (3) bankruptcy; insolvency proceedings against

any party liable under the note; assignment for the benefit of creditors;

appointment of a receiver, etc.; or (4) if Maker should obtain additional

financing from another source, senior or junior, secured or unsecured. (See

Promissory Note, dated 3/9/12, at 2-3; R.R. at A.25─A.26).


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       On the same day, Appellant signed a revised shareholders’ agreement,

which stated no shareholder could take funds from the Corporation’s bank

accounts for personal use without unanimous consent of all shareholders.

Several months after executing the 3/9/12 note, Appellant unilaterally used

the line of credit for certain undocumented transactions, including a deposit

into his personal bank account.          Appellee asked Appellant twice about the

amount Appellant had drawn down on the line of credit.                    Appellant twice

replied with inaccurate information that the draw-down was in the amount of

$50,000.00.      Based on the discovery that the draw-down was actually

$170,000.00,      Appellee     asserted        Appellant’s     misstatements    and   this

discrepancy constituted a default under the 3/9/12 note.

       Appellee filed a complaint in confession of judgment against Appellant

for $2,005,970.50 on September 24, 2012.2                    Appellant filed a petition to

open or strike the confessed judgment on November 8, 2012, after several

agreed-upon extensions of time. By order of June 4, 2013, the court denied

Appellant’s petition to strike but ordered discovery and briefs on Appellant’s

petition to open. The court conducted oral argument on February 6, 2014,

and denied Appellant’s petition to open the confessed judgment on February
____________________________________________


2
  Appellant does not raise any issue in his appeal regarding compliance with
the applicable rules for confessed judgments. Nonetheless we observe that
Appellee’s complaint in confession of judgment fully complied with Pa.R.C.P.
2952 by including the required averments, a demand for judgment, a
signature and verification in accordance with the rules relating to civil
actions; and no notice to plead or defend. See Pa.R.C.P. 2952.



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25, 2014.

      We begin our analysis by recognizing that the claims Appellant raised

in his petition to strike (relating to the ambiguity and precision of the 3/9/12

note, or the absence of a knowing, voluntary, and intelligent waiver of his

rights to notice and hearing regarding the confession of judgment) were

inappropriate grounds to strike the confessed judgment. The confession of

judgment provision at issue in the 3/9/12 note was in writing and placed

within the note, prominently on its own page in all capital letters.      (See

Promissory Note, dated 3/9/12, at 4; R.R. at A.27.) The last paragraph of

the 3/9/12 note expressly states, in capital letters, that the note contains a

warrant of attorney for confession of judgment as well as a waiver of a trial

by jury and a waiver of the right to interpose defenses, counterclaims or

setoffs; this paragraph also states that the “Maker” (Appellant) knowingly,

intentionally, and voluntary waives these rights.        Appellant’s signature

appears directly below this paragraph. (See Promissory Note, dated 3/9/12,

at 8-9; R.R. at A.31─A.32.)

      By virtue of the confession of judgment/warrant of attorney provisions

in the 3/9/12 note, Appellant irrevocably authorized and empowered any

attorney or the prothonotary of any court in the United States, or elsewhere,

to appear at any time for Appellant, pursuant to the terms of the note, and

with or without complaint filed, as of any term, confess or enter judgment

against Appellant. We conclude the confession of judgment and the warrant


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of   attorney   provisions    were      valid,    self-sustaining,   explicit,   and

unambiguously without limit, except as required under the terms of the

note. See Midwest Financial Acceptance Corp., supra. Therefore, the

trial court had no reason to strike the confession of judgment or revisit the

court’s June 4, 2013 order denying the petition to strike. (See Trial Court

Opinion, filed February 25, 2014, at 2.)

      Appellant’s   complaint,   that    he      unknowingly,   involuntarily,   and

unintelligently signed the waiver, is actually an argument for opening a

confessed judgment.      In response to Appellant’s petition to open the

confessed judgment, the trial court reasoned as follows:

         [Appellant] raises a number of unpersuasive grounds for
         opening the judgment. None of them rise to the level of a
         meritorious defense. The fact that [Appellee] chose to act
         only against [Appellant] and not the other shareholders is
         not significant in light of the facts. [Appellant’s] claim that
         he tried to cure the default does not negate the default.
         [Appellant’s] claim that he…had “always” taken these loans
         in the past is not significant. It is clear that [Appellee]
         tailored the default provisions in the [3/9/12 note] to
         prevent this practice.        Claiming that [Appellee] had
         independent access to [Sweat’s] financial information does
         not negate the fact that [Appellant] misrepresented crucial
         facts on two occasions.

         Similarly, [Appellant] argues that the misstatement was
         not material because the business owed approximately
         four and a half million in total. This is not a defense. The
         question was directed to the topic of the line of credit, the
         line of credit was vital to the continued operation of the
         business, and its reduction by more than two-thirds was
         alarming and material.

         [Appellant] also argues that he was denied due process
         because he was force[d] to sign the [3/9/12 note] and

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        revised Shareholders Agreement under threat of loss of the
        monetary infusion that [Appellee] was offering. This does
        not constitute a due process violation. In any case, the
        choice between securing financing under unpleasant terms
        and insolvency is a perennial dilemma for small businesses
        that need to borrow to stay open. [Appellant] does not
        claim that he asked for time to review the agreement with
        counsel and was denied permission to do so. Nor does he
        assert that he took the agreement subsequently to counsel
        to learn of his rights and obligations.

        [Appellant’s] other position, an attempt to convert
        [Appellant] from a [M]aker (i.e. borrower) into a guarantor
        or accommodation party, is ludicrous. If [Appellant] were
        a guarantor, he would not have needed to borrow from
        [Appellee]. It was always [Appellee’s] funds which were at
        risk, and [Appellee] had to answer to Wells Fargo.

        [Appellant] either never read, or never took seriously, the
        instruments which worked a substantial limitation on his
        ability to treat the Sweat Funds as his own. While the
        [3/9/12 note] in question is not a masterpiece of clarity,
        the terms of default are clearly set out. [Appellant] is
        clearly described as a Maker, not a guarantor. The other
        documents make it crystal clear that shareholders were no
        longer allowed to take undocumented personal loans from
        the business.

        There having been no showing of a meritorious defense,
        the Petition to Open is denied, and the discovery motions
        are denied as Moot.

(Trial Court Opinion at 3-4).   We accept the court’s analysis.   As further

commentary, we recognize the relevant portions of the 3/9/12 note were

taken directly from the Bedrock Note, which Appellant’s counsel had

reviewed and Appellant had signed.    Additionally, Appellee (not Appellant)

was the guarantor of the line of credit and could be held responsible for the

money owed. The record makes clear Appellant gave Appellee the power to


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confess judgment on specified grounds of default. Appellant twice defaulted

by providing false information to Appellee about the amount of money

Appellant drew down on the line of credit. At one if not both shareholder

meetings, Appellant disclosed that he drew down only $50,000.00 on the

line of credit, which he claimed he used for the business. In fact, Appellant

had really drawn down $170,000.00 on the line of credit and utilized

$85,000.00 of it for personal use.     Appellant’s representation to Appellee

regarding the total amount of money drawn down on the credit line was

incorrect and misleading in a material respect because the $170,000.00

draw-down was a substantial portion of the $250,000.00 line of credit.

     Further, the 3/9/12 note does not include any “cure” conditions. We

observe that Appellant’s belated and incomplete attempts to replenish the

line of credit for his personal draw occurred after Appellee had declared

default and confessed judgment.       Appellant essentially admitted he took

money from the corporate line of credit for personal use, without unanimous

consent of the shareholders, and misrepresented the amount he took.       In

light of Appellant’s false statements and his admissions, Appellant was in

default of the 3/9/12 note as a matter of law. Upon Appellant’s default, the

3/9/12 note allowed Appellee to “declare the entire unpaid principal balance

together with interest accrued thereon and all other sums due or owed by

[Appellant] hereunder…to be due and payable immediately….”        (Id. at 3;

R.R. at A.26). Appellant failed to support any of the “meritorious” defenses


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he alleged. See PNC Bank, Nat. Ass’n, supra. Therefore, the court had

no need to conduct an evidentiary hearing on Appellant’s petition to open

the confessed judgment.

      Based upon the foregoing, Appellant’s claims raised no defect on the

face of the record to strike the confessed judgment.     Given Appellant’s

misstatements and admissions, he was in default of the parties’ agreements,

and without adequate meritorious defenses.    Accordingly we hold the trial

court properly denied Appellant relief on the grounds asserted, and we

affirm.

      Order affirmed.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 7/23/2015




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