Pennsylvania’s Superior Court Addresses The Format And Location Of Confession Of Judgment Clauses

The Pennsylvania Superior Court recently rejected a debtor's attempt to escape from three confessed judgments by challenging the format of the confession of judgment clauses at issue. In First National Community Bank v. The Powell Law Group, P.C., the defendant law firm guarantied the repayment of three loans, and the documents that memorialized the guaranties contained confession of judgment clauses. When the borrowers defaulted on the underlying loans, the lender confessed judgments against the law firm.

The firm petitioned the Court of Common Pleas of Luzerne County to strike the confessed judgments, arguing that: (1) the confession of judgment provisions were not in the correct format and location; and (2) the attorneys' fees added to the judgments were grossly excessive. The trial court denied the petitions to strike, but slashed the amount of the attorneys' fees included in each judgment by 50% or more.

On appeal, the firm argued that the confession of judgment provisions in the guaranties were invalid under Pennsylvania law because they: (a) did not have headings; (b) were spread over more than one page; (c) were in fine print; and/or (d) were not on the same page as the signature line. Superior Court rejected this argument and affirmed the trial court in three separate but similar opinions (which are available through these links: Opinion 1, Opinion 2 and Opinion 3). The Court held that, because the confession of judgment provisions appeared in all capital letters in documents that were not particularly lengthy (between 3 and 11 pages), the provisions were conspicuous to the debtor, regardless of the absence of a heading or the location of the...