The powerful confessed judgment remedy is alive and well in Pennsylvania. When a debtor challenges the validity of a confessed judgment entered by a creditor, Pennsylvania Courts are required to apply a strict standard in which the benefit of any doubt is given to the debtor. Despite this difficult standard, two recent decisions by the Pennsylvania Superior Court (the middle level appellate court which reviews the decisions of trial judges) confirm that a well drafted and properly executed confessed judgment will be enforced.
The two court cases are Ferrick v. Bianchini (opinion issued May 14, 2013 upholding the entry of a confessed judgment against a commercial lessee in default) and Graystone Bank v. Grove Estates (opinion issued December 13, 2012 upholding a confessed judgment against a borrower in default of a bank loan). In each case, the confessed judgment was upheld after the debtor filed a petition to strike/open the confessed judgment.
The Pennsylvania Superior Court both reinforced and clarified common issues concerning confessed judgments. The highlights include the following: (1) a confessed judgment clause must be conspicuous (should be all in capital letters) and the debtor's signature should immediately follow the confessed judgment language; (2) while restating the confessed judgment language in a loan or lease amendment is the most prudent course of action, the confessed judgment will be enforceable if the amendment documentation specifically references the original confessed judgment language; (3) creditors can confess judgment against the same debtor more than one time against separate parts of the debt, but there must be explicit language in the confessed judgment clause authorizing this; and (4) creditors can add their reasonable attorneys' fees and out-of-pocket costs to the confessed judgment balance if the confessed judgment language authorizes this.