Notice Requirements for Confessions of Judgment

By Brett A. Solomon

A recent decision of the Superior Court of Pennsylvania in First Union National Bank, et al. v. Portside Refrigerated Services, Inc., et al., 2003 Pa. Super 244 (2003) ("Portside"), has significant implications regarding what notices and procedures are necessary to ensure the validity of a judgment entered by confession. In Portside, the Court struck the bank’s confessed judgment and held that the bank’s failure to provide the defendant with the requisite "written instructions" regarding the procedure to follow to strike the judgment as set forth in 42 Pa.C.S.A. §2737.1 was a fatal defect apparent on the face of the record.

Unfortunately, the Superior Court has not provided a roadmap of the "requisite" written instructions. However, it is clear that merely sending a defendant a "2958 Notice" upon or after entry of judgment is insufficient. (Pennsylvania Rule of Civil Procedure 2958.1 et seq.)

Section 2737.1, which was enacted on December 20, 2000, and became effective in February 2001, provides that:

At the time that a creditor files for a judgment by confession under Section 2737(3) (relating to powers and duties of the office of the Prothonotary), the creditor filing the judgment shall provide the Debtor with the written instructions regarding the procedure to follow to strike the judgment. A Debtor who has been incorrectly identified and had a confession or judgment entered against him shall be entitled to costs and reasonable attorneys’ fees as determined by the Court. The instructions provided to the Debtor shall explain to the Debtor that under this Section he is entitled to costs and reasonable attorneys’ fees as determined by the Court if he was incorrectly identified. 42 Pa. C.S.A. §2737.1.

Following the entry of a judgment by confession and prior to execution, a creditor is required to serve notice as set forth in Rule 2958. This notice advises a defendant that it

may have a right to defeat the judgment or to prevent execution upon its property in a specified period of time following the date on which the notice was served.

Following the enactment of 42 Pa. C.S.A. §2737.1, a defendant must also be provided with written instructions regarding the procedure to follow to strike the judgment, and an explanation that a defendant that was incorrectly identified and had a confession or judgment entered against it, is entitled to costs and reasonable attorneys’ fees as determined by the Court.

The Superior Court in the Portside case makes it clear that a creditor entering judgment, at a minimum, must advise a defendant with the procedure for striking off or opening a judgment per Rule 2959. Therefore, it must advise the defendant that "he is entitled to costs and reasonable attorneys’ fees as determined by the Court if he was incorrectly identified" 42 Pa. C.S.A. §2737.1.

Additionally, to comply with the dictates of Portside, the "2737" notice should be filed and served upon a defendant with each confession of judgment. It also should include the full text of Rule 2959 and a reminder that a debtor may be entitled to costs and reasonable attorneys’ fees as determined by the court if the debtor was incorrectly identified in the complaint. By including this information, a complaint should comport with the dictates of the Superior Court in the Portside case. In addition, it is recommended that the full text of Pennsylvania Rule 440 (regarding service of legal papers other than original process) be included in the 2737 Notice. Given the lack of clear direction in the Portside opinion, this appears to be the best mechanism for compliance with §2737 as interpreted by the Superior Court. Finally, following entry of the judgment, a party entering a judgment by confession must still serve the appropriate 2958 notices on the defendant.

If you have any questions or concerns about this case or the procedure with respect to judgments entered by confession, please contact an attorney in the Insolvency and Creditors Rights’ Department of Tucker Arensberg, P.C.

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