Complete Business Solutions Group v. Royal Metals ( 2018 )

J-A18004-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
COMPLETE BUSINESS SOLUTIONS IN THE SUPERIOR COURT
GROUP, INC. OF PENNSYLVANIA
Appellant
v.
ROYAL METALS GROUP, INC. AND
CHELSEA GLESS AND JOHN T. CLARK
Appellees No. 462 EDA 2018
Appeal from the Order Entered January 16, 2018
In the Court of Common Pleas of Philadelphia County
Civil Division at No: 03318 September Term, 2017
BEFORE: STABILE, J., STEVENS, P.J.E.,* and STRASSBURGER, J.**
MEMORANDUM BY STABILE, J.: FILED NOVEMBER 15, 2018
Appellant, Complete Business Solutions Group, Inc. (“CBSG”), appeals
from the January 16, 2018 order entered in the Court of Common Pleas of
Philadelphia County, granting the petition to strike its confession of judgment
entered against Appellees, Royal Metals Group, LLC (“RMG”), Chelsea Gless
(“Gless”), and John T. Clark (“Clark”) (collectively “Appellees”). Upon review,
we affirm.
____________________________________________
* Former Justice specially assigned to the Superior Court.
** Retired Senior Judge assigned to the Superior Court.
J-A18004-18
By way of background, the parties entered into two Factoring
Agreements in 2017, with CBSG purchasing RMG’s receivables. Gless and
Clark acted as guarantors for the agreements. The agreements included
confession of judgment clauses and provided that Pennsylvania law applied.
On September 27, 2017, CBSG filed and served a complaint requesting
entry of judgment by confession in the amount of $403,599.86 plus interest
and costs. Judgment was entered and, on October 31, 2017, CBSG filed a
writ seeking garnishment of Appellees’ bank accounts. On December 5, 2017,
Appellees filed a motion to strike, or alternatively, open, the confession of
judgment and stay execution proceedings. The trial court issued a rule to
show cause why the judgment should not be stricken or opened. CBSG filed
a response contending, inter alia, that Appellees’ petition should be denied
because it was filed outside the 30-day time limit for filing a petition
unsupported by compelling reasons for delay.
By order entered on January 16, 2017, the trial court granted Appellees’
petition to strike and directed that the judgment entered by confession be
stricken. This timely appeal followed. The trial court did not direct CBSG to
file a Pa.R.A.P. 1925(b) statement of errors complained of on appeal. The
trial court did issue an opinion in conjunction with its order and subsequently
issued a Rule 1925(a) opinion indicating that the reasons for granting the
petition were set forth in the January 16, 2018 memorandum opinion, which
it incorporated by reference.
-2-
J-A18004-18
In its brief filed with this Court, CBSG lists five issues for our
consideration:
A. Did the trial court abuse its discretion in striking this judgment
in claiming that the judgment was void or voidable?
B. Did the trial court commit a legal error in striking this judgment
in claiming that the judgment was void or voidable?
C. Does failure to include a statement outlined in Pa.R.Civ.P.
2952(a)(5) constitute a fatal flaw in a confession of judgment
where the petition to strike does not allege prejudice due to
the failure to include said statement?
D. Did the court abuse its discretion or commit a legal error in
completely ignoring the 30-day time limitation placed by
Pa.R.Civ.P. 2959 for the filing of a petition to open/strike,
where the filing party only did so after it was subject to bank
account garnishments and it had the benefit of legal counsel
well before the 30[-]day time limit?
E. Given the court’s finding of the specified errors statement in
the trial judge’s opinions, would opening the judgment have
been the proper legal option[?]
Appellant’s Brief at 5 (some capitalization omitted).
Although CBSG identified five issues in its Statement of Questions
Involved, its Argument section is divided into only two sections as follows:
I. The court erred striking a judgment served upon Appellees
three months prior to their filing a motion to strike[.]
II. The court erred finding that there was a “fatal error” in the
complaint in confession of judgment making it a void
judgment[.]
-3-
J-A18004-18
Appellant’s Brief at 9, 12.1
We review a trial court’s ruling on a motion to strike or open a confessed
judgment for an abuse of discretion or error of law. See, e.g., Ferrick v.
Bianchini, 69 A.3d 642, 647 (Pa. Super. 2013). As this Court explained in
Neducsin v. Caplan, 121 A.3d 498 (Pa. Super. 2015):
“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.
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
____________________________________________
1We remind counsel for CBSG that “[t]he argument shall be divided into as
many parts as there are questions to be argued[.]” Pa.R.A.P. 2119(a).
-4-
J-A18004-18
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.
Id. at 504.
In its first issue, CBSG complains that the trial court erred by striking a
judgment that was served on Appellees three months before they filed the
motion to strike. CBSG relies on the language of Pa.R.C.P. 2959 (Striking Off
or Opening Judgment), and in particular Rule 2959(a)(3), which provides: “(3)
If written notice is served upon the petitioner pursuant to Rule 2956.1(c)(2)
or Rule 2973.1(c), the petition shall be filed within thirty days after such
service. Unless the defendant can demonstrate that there were compelling
reasons for the delay, a petition not timely filed shall be denied.”
Here, service was effected on September 27, 2017 and the petition to
strike was filed on December 5, 2017. Therefore, the petition clearly was not
filed within the 30-day period.
Appellees argued in their petition to strike that CBSG failed to comply
with the requirements for confession of judgment set forth in Pa.R.C.P.
2952(a)(5); therefore, the judgment was void. In accordance with Rule
2952(a), a complaint for confession of judgment “shall contain the following:
. . . (5) either a statement that judgment has not been entered on the
-5-
J-A18004-18
instrument in any jurisdiction or if it has been entered an identification of the
proceedings.”
As the trial court recognized, “A review of the record shows no evidence
that [CBSG] filed such a statement. In the response in opposition to the
petition to strike, [CBSG] generally denies [Appellees’] averment, yet
attempts to rectify the afore-mentioned omission by stating that ‘this is the
only filing related to the Agreements between the parties.’” Trial Court
Opinion, 1/16/18, at 2 (quoting CBSG’s response in opposition to strike at
¶ 28.)
The trial court continued, quoting US Bank N.A. v. Mallory, 982 A.2d
986 (Pa. Super. 2009), in which this Court explained:
[In Pennsylvania,] when deciding if there are fatal defects on the
face of the record for the purposes of a petition to strike a
judgment, a court may only look at what was in the record when
the judgment was entered. . . . [W]here a fatal defect or
irregularity is apparent from the face of the record, the
prothonotary will be held to have lacked the authority to enter
default judgment and the default judgment will be considered
void.
Trial Court Opinion, 1/16/18, at 2 (quoting Mallory, 982 A.2d at 991).
Further, “[t]he validity of a confession of judgment requires strict
compliance with the Rules of Civil Procedure as well as rigid adherence to the
provisions of the warrant of attorney. Absent such compliance a confession
of judgment cannot stand.” Id. at 3 (ellipses omitted) (quoting First Union
Nat. Bank v. Portside Refrigerated Services., Inc., 827 A.2d 1224, 1231
(Pa. Super. 2003)).
-6-
J-A18004-18
CBSG notes that Rule 2959 was amended in 1996. Prior to that time,
under the common law, confessed judgments could be stricken or opened if
the application was filed within “a reasonable time,” based on the doctrine of
laches. Appellant’s Brief at 10. However, following the 1996 amendment,
setting a 30-day time limit for filing the petition, our courts have made it clear
that an untimely petition to strike must be dismissed. Id. at 10-11 (citations
omitted).
In support of this proposition, CBSG cites, inter alia, M & P
Management, L.P. v. Williams, 937 A.2d 398 (Pa. 2007). Appellant’s Brief
at 11. M & P Management does not support CBSG’s position and, in fact,
defeats it. In that case, our Supreme Court recognized that “a void judgment
is a mere blur on the record, and which it is the duty of the court of its own
motion to strike off, whenever its attention is called to it.” Id. at 401 (quoting
Romberger v. Romberger, 139 A. 159, 160 (Pa. 1927)). The Court noted
that both amended Rule 2959 and the comments to the rule are “silent as to
any intent to overturn the common law rule” and that the “silence could be
interpreted to mean that the new time limitation is applicable to all confessed
judgments, whether void, voidable, or valid. However, there are good
reasons to believe that it cannot apply to void judgments.” Id. at 401
(emphasis added). As the Court explained:
[A] void judgment is one that the court does not have the power
to enter. It cannot become valid through the lapse of time.
Comm. ex rel. Penland v. Ashe, 341 Pa. 337, 341, 19 A.2d 464,
466 (1941) (“It is certainly true that a void judgment may be
-7-
J-A18004-18
regarded as no judgment at all; and every judgment is void, which
clearly appears on its own face to have been pronounced by a
court having no jurisdiction or authority in the subject matter.”).
While the instant case raises this question in a context where there
is serious question as to the status of the confessed judgment,
i.e., whether it is void, voidable or valid, a different example
makes this clear. If a confessed judgment is mistakenly entered
against a person who never had any relationship with the
judgment holder, it would be absurd to believe that that
judgment, with no basis in law or fact, becomes valid merely
because notice was given and thirty days elapsed. Although M & P
is correct in asserting that providing finality to judgments is a
worthy goal, one that we agree is achieved for valid and voidable
judgments through the 1996 amendments to Pa.R.C.P. 2959, we
cannot provide finality to a judgment when a court lacked subject
matter jurisdiction over the underlying dispute. Void judgments
are to be treated in the same way that they were treated at
common law, i.e., at any time that a void judgment is brought to
the attention of the court, it must be stricken.
Id. at 401-02 (citations omitted).
The trial court concluded that CBSG’s judgment was void. “In brief, the
record of [CBSG’s] confession of judgment is fatally flawed because [CBSG]
failed to file a statement that judgment has not been previously entered as
required under Pa.R.C.P. No. 2952(a)(5). [CBSG] never suppled this
statement even though [CBSG] supplemented its record to address other
defects.” Rule 1925(a) Opinion, 3/12/18, at 1-2. We agree. Because the
judgment entered on September 27, 2017 was void, Appellees’ petition filed
on December 5, 2017 was not subject to Rule 2952(a)(5)’s 30-day time
limitation and the trial court neither committed error of law nor abused its
discretion by striking the judgment. CBSG’s first issue fails.
-8-
J-A18004-18
CBSG next argues that the trial court erred in finding a “fatal error” in
the complaint for confession of judgment. CBSG maintains the error could
have been cured by amendment. Appellant’s Brief at 12 (citing George H.
Althof, Inc. v. Spartan Inns of America, Inc., 441 A.2d 1236, 1237-38
(Pa. Super. 1982)). However, Althof involved a technical defect, i.e., the lack
of a verification. By contrast, the complaint filed in the instant case lacked a
representation that was required to be included in a complaint for judgment
by confession, “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.” Pa.R.C.P. 2952(a)(5).
The trial court’s finding of a fatal error in the complaint is supported by
this Court’s similar holding in Dime Bank v. Andrews, 115 A.3d 358 (Pa.
Super. 2015), which involved a complaint that failed to include an averment
required by Pa.R.C.P. 2952(a)(6). This Court determined:
Rule of Civil Procedure 2952 provides, in relevant part, that a
complaint in confession of judgment based upon an agreement
that subjects confession of judgment proceedings to a condition
precedent must include “an averment of the default or of the
occurrence of the condition precedent.” Pa.R.C.P. 2952(a)(6). At
a minimum, our case law suggests strongly that a failure to aver
the occurrence of a condition precedent, when, as here, the
agreement under which judgment is confessed establishes such a
condition, is an irremediable defect, obviating any obligation of
the party against whom judgment has been entered to establish
prejudice.
Id. at 365-66 (citations omitted). See also ESB Bank v. McDade, 2 A.3d at
1244 (trial court erred in failing to strike confessed judgment for a fatal defect
-9-
J-A18004-18
appearing on the face of the record where complaint, in contravention of Rule
2952(a), failed to identify residential mortgages, attach documentation, or
state that McDade was in default of those loans).
We conclude the trial court did not err in finding a fatal error in CBSG’s
complaint. CBSG’s second issue fails for lack of merit.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/15/18
- 10 -