Fulton Bank, N.A., v. Behney Corp., formerly Behney Fabrication and Welding, Inc. No. 2016-01121

Civil Action-Law-Promissory Note-Confession of Judgment-Attorney’s Fees-Excessiveness-Reasonableness
Defendant executed and delivered to Plaintiff a promissory note secured by a mortgage on property it owned containing language allowing Plaintiff to confess judgment upon default of the terms of the note including attorney’s fees of fifteen percent (15%) for lien priority purposes, with the note further requiring that the actual amount to be collected in attorney’s fees shall include a reasonable fee.  Upon alleged default of the terms of the note, Plaintiff filed a Complaint for Confession of Judgment.  Defendant filed a Petition to Stay, Strike and/or Open Confessed Judgment, asserting that the attorney’s fees claimed are excessive and unreasonable.
1.  In Dollar Bank, Fed. Sav. Bank v. Northwood Cheese Co., 637 A.2d 309 (Pa.Super. 1994), the Pennsylvania Superior Court held that attorney’s fees of fifteen percent (15%) of the amount of the judgment are not excessive when such amount is authorized by the warrant of attorney.
2.  Since the fifteen percent (15%) attorney’s fees claimed expressly was stated in the warrant of attorney and the Pennsylvania Superior Court has held that fifteen percent (15%) attorney’s fee is not excessive, the attorney’s fees sought are not excessive so as to support striking, opening or modifying the confessed judgment.
3.  Pursuant to the express language of the note, the Court retains the authority to determine the reasonableness of attorney’s fees sought.
4.  A hearing is necessary to determine the reasonableness of the attorney’s fees claimed unless the parties are able to agree on a reasonable amount.
L.C.C.C.P. No. 2016-01121, Opinion by Charles T. Jones, Jr., Judge, February 8, 2017.
IN THE COURT OF COMMON PLEAS
OF LEBANON COUNTY, PENNSYLVANIA

CIVIL DIVISION No. 2016-01121

Fulton Bank, N.A., formerly, Fulton Bank, Plaintiff
v.
Behney Corporation, formerly, Behney Fabrication and Welding, Inc., Defendant
ORDER
AND NOW, this 8th day of February, 2017, after careful consideration of the record and oral arguments set forth by parties at oral argument on November 25, 2016, Defendant’s Petition to Stay Execution, Strike and/or Open Confessed Judgment is hereby DENIED.  After the attorney’s fees have been adjusted to reflect a final amount, this Court will hold a hearing on the reasonableness of those attorney’s fee unless the parties can agree upon a reasonable amount.

BY THE COURT:

CHARLES T. JONES, JR., J.

APPEARANCES:
John Whitmoyer, Esquire     For Plaintiff
Sara Myirski, Esquire      For Defendant

OPINION BY JONES, JR., J.:
Before the Court is Behney’s Petition to Stay Execution, Strike and/or Open Confessed Judgment.  After careful review of the record as well as oral arguments presented by the parties, Behney’s Petition is hereby denied.
FACTUAL/PROCEDURAL HISTORY
Jay Behney, acting as President of Defendant Behney Corporation (hereinafter “Behney”), executed and delivered to Fulton Bank (hereinafter “Fulton”) a Promissory Note on March 14, 2008.  Behney made, executed and delivered to Fulton a real estate mortgage dated March 14, 2008, conveying to Fulton a security interest in the real estate located at 517 King Street, Lebanon Pennsylvania 17042.  The Promissory Note contains language allowing Fulton to confess judgment after the occurrence of default. Note, p.4.  The warrant of attorney also provides language stating that attorney’s fees included in the confessed judgment are for lien priority purposes, and the exact amount of attorney’s fees can be adjusted with a modification subsequent to the entry of the original confessed judgment. Note, p.5.
Fulton asserts that Behney defaulted in April of 2016.  Fulton filed a Complaint for Confession of Judgment on July 25, 2016.  Behney filed a Petition to Stay, Strike and/or Open Confessed Judgment on August 24, 2016. Behney filed an Answer on September 14, 2016.  On September 19, the Court directed briefs be filed by both parties.  Both parties have submitted briefs regarding this matter.  Argument Court was held for this matter on November 25, 2016.  The matter is now ripe for disposition.
DISCUSSION
Behney argues that Pennsylvania law does not favor confession of judgment.  Beckett v. Laux, 577 A.2d 1341(Pa. Super. 1990).  Behney states that a court should grant a petition to strike a confessed judgment where a fatal defect appears on the face of the record.  PNC Bank v. Bolus, 655 A.2d 997 (Pa. Super. 1995).  Behney argues that if a confessed judgment includes an item not authorized by the warrant, the judgment is void in its entirely and must be stricken.  Dollar Bank, Fed. Sav. Bank v. Northwood Cheese Co., 637 A.2d 309 (Pa. Super. 1994).  Behney further argues that a confessed judgment must also be stricken in its entirety if it was entered for an amount which was grossly excessive. Id.
Behney argues that in the present case, the Note provides that Fulton may confess judgment in an amount of 15%; however, the Note also provides that the actual amount to be collected shall include a reasonable fee.  Note, p.4-5.  Fulton is demanding $372,375.15, 15% of the judgment, for attorney’s fees, which Behney argues is unreasonable, and therefore, the confession of judgment is defective on its face.  For the reasons mentioned above, Behney argues that the Court should strike the confessed judgment.
In the alternative, Behney argues that the Court should open the confessed judgment. Behney states that a court should open a confessed judgment when the petitioner “act promptly, alleges a meritorious defense and presents sufficient evidence of that defense to require submission of the issues to the jury.” PNC Bank v. Kerr, 802 A.2d 634 (Pa. Super. 2002).  Behney states that the Pennsylvania Superior Court has held that where a confession of judgment contains a provision limiting the permissible collection of attorney’s fees, a judgment cannot be entered without assessment of the fee claimed.  PNC Bank, Nat. Ass’n v. Willis, No. 235 EDA 2014, 2014 WL 10558260 (Pa. Super. 2014).
Behney argues that in the instant case, the confession of judgment clause that is at issue expressly provides that Fulton will collect a reasonable fee.  Note, p. 4.  Behney argues that pursuant to the terms of the Note, the Court must evaluate the reasonableness of the attorney’s fees being sought by Fulton before the confession of judgment can be answered.  For the reasons mentioned above, Behney argues that discovery should be conducted and a subsequent hearing should be held for the purpose of evaluating the reasonableness of the attorney’s fees.
Finally, Behney argues that the Court should reduce the attorney’s fees claimed by Fulton.  Behney argues that if a confession of judgment is entered for items clearly within the judgment note, but excessive in amount, the court has the ability to modify the judgment accordingly.  Dollar Bank, 637 A.2d 309 (Pa. Super. 1994).  Behney argues that it is absurd that Fulton is asserting that $372,375.15 in attorney’s fees were incurred for this matter.  For the reasons mentioned above, Behney argues that the Court should reduce the fees claimed by Fulton.
Fulton avers that a petition to strike a judgment may be granted only for fatal defect or irregularity appearing on the face of the record.  Franklin Interiors v. Wall of Fame Management Company, Inc., 459 A.2d 720 (Pa. Super. 1983).  Further, in considering a petition to strike, Fulton argues that the court is limited to a review of the record as filed by the party in whose favor the warrant is given.  Resolution Trust Corp. v. Copley Qu-Wayne Associates, 683 A.2d 269 (Pa. Super. 1996).  Fulton argues that a petition to open a confessed judgment can only be entered if evidence is produced which in a jury trial would require the issues to be submitted to the jury.  Pa.R.C.P. 2959(e).  Fulton argues that Behney has not alleged a fatal defect or irregularity appearing on the face of the record.  Fulton also argues that Behney has not provided evidence which in a jury trial would require the issues to be submitted to the jury.
Further, Fulton argues that in Dollar Bank v. Northwood Cheese Company, 637 A.2d 309 (Pa. Super. 1994), the court held that an attorney’s fee of 15% is not excessive when it is authorized by the warrant of attorney. Id.  Fulton argues that in PNC Bank v. Bolus, 655 A.2d 997 (Pa. Super. 1995), the court only found that the judgment should be stricken because the confessed judgment included charges that were outside of the warrant of attorney contained in the promissory note. Id.   In this case, Fulton argues, the attorney’s fees of 15% are openly stated in the warrant of attorney.  For the reasons mentioned above, Fulton argues Behney’s Petition to Strike Confessed Judgment should be denied.
Additionally, Fulton argues that a party is only entitled to have a judgment entered by confession opened if evidence is produced which in a jury trial would require the issues to be submitted by the jury.  Pa.R.C.P. 2959.  Fulton avers that the Pennsylvania Superior Court has upheld a 15% attorney’s fee in multiple cases.  Dollar Bank v. Northwood Cheese Company, 637 A.2d 309 (Pa. Super. 1994). Fulton further argues that case law does not support Behney’s claim that the judgment should be opened under these circumstances; therefore, Behney’s Petition should be dismissed.
Finally, Fulton argues that the warrant of attorney states that the judgment confessed shall include interest on any judgment obtained by Fulton from and after the date of any Sheriff’s or judicial sale until the actual payment is made to Fulton together with all other charges, taxes and liens paid by Fulton, and that a 15% attorney’s fee is for lien priority purposes.  The warrant of attorney specifically states: “the actual amount of attorney’s fees and costs to be determined in accordance with the next paragraph of this Note relating to the payment of costs and attorney’s fees.” Note, p. 4.  Fulton states that the subsequent paragraph of the Note goes on to state that Behney shall be responsible for all attorney’s fees.
Fulton argues that Fulton is entitled to interest on its judgment until an actual payment occurs.  When the initial complaint of judgment was filed, it only included interest up until July 7, 2016.  Fulton states that before execution, it will be necessary for Fulton to file a motion with the Court for additional interest, damages and costs.  At that time, in accordance with the warrant of attorney, attorney’s fees will be reduced in accordance to the actual amount owed.   Fulton argues that it is clear from the terms of the warrant of attorney that Fulton’s intent has always been to collect the actual amount of attorney’s fees and costs incurred; therefore, the Court should not modify the confessed judgment.
This Court finds that the original Note stated that Fulton would be entitled to a 15% attorney’s fee, and the Superior Court of Pennsylvania has held that a 15% attorney’s fee is not excessive; therefore, the fee’s being sought by Fulton are not excessive.  Further, this Court finds that Pennsylvania case law does not support striking, opening or modifying a confession of judgment due to the amount of attorney’s fees when the amount was expressly stated within the warrant of attorney.  The Court would like to point out that the actual costs of attorney’s fees will be decided and adjusted accordingly before execution, and the amount of attorney’s fee’s currently being sought by Fulton are for lien priority purposes pursuant to the warrant of attorney.
This Court further finds that it retains the authority to determine the reasonableness of the attorney’s fees being sought, McMullen v. Kutz, 985 A.2d 769 (Pa. 2009); therefore, after the attorney’s fees have been adjusted to reflect a final amount, this Court will hold a hearing on the reasonableness of those attorney’s fee unless the parties can agree upon a reasonable amount. For the reasons mentioned above, this Court finds that Behney’s petition to Stay Execution, Strike and/or Open Confessed Judgment is hereby denied.
CONCLUSION
For the reasons set forth above, Behney’s Petition to Stay Execution, Strike and/or Open Confessed Judgment is hereby denied.