Citizens Bank National v. Acuite Consulting

• Court: Superior Court of Pennsylvania
• Decided: May 19, 2021
• Docket: 454 WDA 2020
• Status: Unpublished

Opinion

J-A02031-21

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

CITIZENS BANK NATIONAL : IN THE SUPERIOR COURT OF ASSOCIATION, SUCCESSOR BY : PENNSYLVANIA MERGER TO CITIZENS BANK OF : PENNSYLVANIA : : : v. : : : No. 454 WDA 2020 ACUITE CONSULTING SOLUTIONS, : LLC., AND CHRISTOPHER FUSCO : : Appellants :

Appeal from the Order Entered March 5, 2020 In the Court of Common Pleas of Washington County Civil Division at No(s): No. 2019-2231

BEFORE: BOWES, J., NICHOLS, J., and McLAUGHLIN, J.

MEMORANDUM BY McLAUGHLIN, J.: FILED: MAY 19, 2021

Acuite Consulting Solutions, LLC and Christopher Fusco (“Acuite” and

“Fusco,” respectively) appeal from the order entered on March 5, 2020

denying their petition to strike and/or open a confessed judgment. We affirm.

On July 2, 2010, Acuite entered into a loan agreement with Citizens

Bank, N.A. (“Citizens Bank”) in the original principal amount of $250,000.00,

evidenced by a “Revolving Demand Note” (the “Note”). On that same date,

Fusco executed and delivered to Citizens Bank a guaranty agreement (the

“Guaranty”), wherein he agreed to act as a guarantor for all of Acuite’s

obligations to Citizens Bank in connection with the Note and any other

obligation of Acuite to Citizens Bank. J-A02031-21

The Note contained a confession of judgment clause, which provided, in

pertinent part, as follows:

BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ATTORNEYS OR THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR IN ANY OTHER JURISDICTION, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, TO APPEAR FOR BORROWER IN ANY SUCH COURT, WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM OR TIME THERE OR ELSEWHERE TO BE HELD, AND THEREIN TO CONFESS OR ENTER JUDGMENT AGAINST BORROWER IN FAVOR OF THE BANK FOR ALL SUMS DUE OR TO BECOME DUE BY BORROWER TO THE BANK UNDER THIS NOTE, WITH COSTS OF SUIT AND RELEASE OF ERRORS AND WITH THE GREATER OF FIVE PERCENT (5%) OF SUCH SUMS OR $10,000 ADDED AS A REASONABLE ATTORNEY’S FEE AND FOR DOING SO THIS NOTE OR A COPY VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT.

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THE TERMS OF THIS NOTE INCLUDE A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AND HAVE BEEN NEGOTIATED AND AGREED UPON IN A COMMERCIAL CONTEXT. BORROWER HAS FULLY REVIEWED THE WARRANT OF ATTORNEY TO CONFESS JUDGMENT WITH ITS OWN COUNSEL AND IS KNOWINGLY AND VOLUNTARILY WAIVING CERTAIN RIGHTS IT WOULD OTHERWISE POSSESS, INCLUDING, BUT NOT LIMITED TO, THE RIGHT TO ANY NOTICE OF A HEARING PRIOR TO THE ENTRY OF JUDGMENT BY THE BANK PURSUANT TO THE FOREGOING WARRANT

Citizens Bank’s Complaint in Confession of Judgment, 5/3/19, Exhibit A, at 2,

5.

The Note also included a provision that any delay by Citizens Bank in

exercising any of its rights under the Note did not constitute waiver. Id. at 3.

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Acuite and Fusco also agreed in the Note to Citizens Bank’s granting “any

extension or postponement of the time of payment or any other indulgence. .

. .” Id.

On May 3, 2019, Citizens Bank filed a complaint in confession of

judgment alleging that Acuite defaulted for failing to pay the money due to

Citizens Bank under the Note, and Fusco defaulted on the Guaranty by failing

to cure Acuite’s default. Thereafter, judgment was confessed against Acuite

and Fusco in the amount of $263,590.11.

On May 20, 2019, Acuite and Fusco filed a petition to strike and/or open

the confessed judgment. The trial court granted the parties a period of 90

days for discovery and held a hearing on the petition to strike and/or open on

October 7, 2019. On March 5, 2020, the trial court denied the petition. This

timely appeal followed.

Acuite and Fusco raise the following issues:

I. Whether the contract at issue in this matter is one of adhesion, and therefore illegal, when: 1. [Acuite and Fusco] did not have equal bargaining power with [Citizens Bank]; 2. [Acuite and Fusco] did not prepare the standard form that comprised the entirety of the contract; [and] 3. [Acuite and Fusco] had little to no opportunity for negotiation.

II. Whether the terms of the contract at issue were changed as a novation by [Citizens Bank] when it continuously accepted payments o[f] interest upon notification by [Acuite and Fusco] of the same.

Acuite and Fusco’s Br. at 11 (suggested answers omitted).

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We review an order denying a petition to strike a confessed judgment

to determine whether the record in existence at the time of the entry of the

judgment is sufficient to sustain the judgment. First Union Nat. Bank v.

Portside Refrigerated Servs., Inc., 827 A.2d 1224, 1227 (Pa.Super. 2003).

The denial of a petition to open a confessed judgment is subject to abuse of

discretion review. Neducsin v. Caplan, 121 A.3d 498, 506 (Pa.Super. 2015).

Our scope of review is “very narrow” and we will overturn the trial court

decision only if the trial court has abused its discretion or committed manifest

error. Atl. Nat. Trust, LLC v. Stivala Invs., Inc., 922 A.2d 919, 925

(Pa.Super. 2007).

Opening and striking a judgment are different remedies subject to

different standards. “A petition to strike a judgment is a common law

proceeding which operates as a demurrer to the record.” Resolution Trust

Corp. v. Copley Qu-Wayne Associates, 683 A.2d 269, 273 (Pa. 1996) . “A

petition to strike a judgment may be granted only for a fatal defect or

irregularity appearing on the face of the record.” Id. . The “record” for this

purpose is the court record behind the confessed judgment: the complaint in

confession of judgment and any exhibits the petitioner attached to it. Ferrick

v. Bianchini, 69 A.3d 642, 647 (Pa.Super. 2013)

“A petition to open a confessed judgment is an appeal to the equitable

powers of the court.” Neducsin, 121 A.3d at 504. The court may open a

confessed judgment “if the petitioner (1) acts promptly, (2) alleges a

meritorious defense, and (3) can produce sufficient evidence to require

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submission of the case to a jury.” Id. at 506 (citation and emphasis omitted).

“[I]f 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 504 (internal

quotation marks, citation, and brackets omitted).

Here, although Acuite and Fusco styled their petition as a “petition to

strike and/or open,” they failed to identify any fatal defect on the face of the

record in support of their petition to strike. As such, the trial court did not err

in refusing to strike the confessed judgment.

Acuite and Fusco’s issues on appeal instead suggest that the trial court

should have opened the judgment. Acuite and Fusco first argue that the Note

was an adhesion contract, and therefore was unenforceable. Fusco asserts

that he “was seeking funds for his business and had no choice but to accept

the terms as put forth by [Citizens Bank] in its standardized and form contract

which contained unfair and draconian provisions involving confession of

judgment.” Acuite and Fusco’s Br. at 13-14. Acuite and Fusco argue that they

“had little to no negotiating power and it was truly a ‘take it or leave it’

situation.” Id. at 25. Fusco asserts that he “was presented with very

complicated forms with much fine print” and he “did not draft the forms and

. . . [t]here was no bargaining over any of the terms of the contract[.]” Id.

Acuite and Fusco did not raise the defense that the Note was an

adhesion contract in their petition to open. Pursuant to Pennsylvania Rule of

Civil Procedure 2959, “all grounds for relief whether to strike off the judgment

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or to open it must be asserted in a single petition” and “[a] party waives all

defenses and objections which are not included in the petition or answer.”

Pa.R.C.P. 2959(a)(1), (c). Since Acuite and Fusco failed to include the defense

of an adhesion contract in their petition to open, it is waived.

Even if they had not waived the defense, it is without merit. “An

adhesion contract is a standard-form contract prepared by one party, to be

signed by the party in a weaker position, usually a consumer, who adheres to

the contract with little choice about the terms.” Chepkevich v. Hidden

Valley Resort, L.P., 2 A.3d 1174, 1190 (Pa. 2010) (citation, internal

quotation marks and brackets omitted). However, “merely because a contract

is one of adhesion does not render it unconscionable and unenforceable as a

matter of law.” Salley v. Option One Mortg. Corp., 925 A.2d 115, 127 (Pa.

2007). A “contract or term is unconscionable, and therefore avoidable, where

there was a lack of meaningful choice in the acceptance of the challenged

provision and the provision unreasonably favors the party asserting it.” Id. at

119. The burden of proof to establish unconscionability “has been allocated to

the party challenging the agreement, and the ultimate determination of

unconscionability is for the courts.” Id. at 119-120. Further, where “a contract

provision affects commercial entities with meaningful choices at their disposal,

the clause in question will rarely be deemed unconscionable.” Vasilis v. Bell

of Pennsylvania, 598 A.2d 52, 54 (Pa.Super. 1991).

Acuite and Fusco failed to meet their burden of producing evidence that,

as the parties signing the contract, they lacked a meaningful choice in

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accepting the terms of the contract, including the confession of judgment

provision. Acuite and Fusco’s conclusory assertions do not establish that the

contract was unconscionable. Despite having a 90-day period for discovery,

Acuite and Fusco failed to produce any evidence that they lacked meaningful

choice in entering into the contract. There is no indication in the record that

Acuite and Fusco were prevented from negotiating the terms of the contract

or were forced to enter into the contract. The contract at issue was for a

commercial loan between two business entities. Acuite and Fusco presented

no evidence that they could not have sought financing from another lending

institution. Accordingly, Acuite and Fusco’s argument fails.

Next, Acuite and Fusco argue that Citizens Bank’s acceptance of

interest-only payments by Acuite and Fusco on the Note for a period of months

constituted a novation. Acuite and Fusco’s Br. at 31. Acuite and Fusco assert

“the actions of [Citizens Bank] in accepting the interest payments [] for a long

period of time . . . show that the parties intended to change the terms of the

agreement” such that “the parties were actually operating under a new

contract.” Id. Acuite and Fusco argue that “[w]ithout warning, [Citizens Bank]

called in the entire loan and sought the confession of judgment[.]” Id.

“The doctrine of novation, or substituted contract, applies where: (i) a

prior contract has been displaced, (ii) a new valid contract has been

substituted in its place, (iii) there exists sufficient legal consideration for the

new contract, and (iv) the parties consented to the extinction of the old and

replacement of the new.” First Lehigh Bank v. Haviland Grille, Inc., 704

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A.2d 135, 138 (Pa.Super. 1997) (citing Buttonwood Farms, Inc. v. Carson,

478 A.2d 484, 486 (Pa.Super. 1984)). Since a novation is accepted as

satisfaction of a pre-existing duty, it “bars the revival of the pre-existing duty

following a breach of the substituted contract.” Id. (quoting Nernberg &

Laffey v. Patterson, 601 A.2d 1237, 1239 (Pa.Super. 1991)). “[W]hether a

contract has the effect of a novation primarily depends upon the parties’

intent.” Id. (citation omitted). The party asserting a novation has the burden

of proving that the parties had a meeting of the minds and intended to

discharge the earlier contract. Id.

Acuite and Fusco have again failed to present sufficient evidence to

support their claim that the parties agreed to a novation. There is no evidence

in the record that the parties had a “meeting of the minds” to enter into a new

contract and discharge the original contract. To the extent Acuite and Fusco

contend that Citizens Bank’s acceptance of interest-only payments in and of

itself was evidence of a novation, that argument fails. The Note expressly

states that any delay or omission by Citizens Bank in imposing its right to

payment would not constitute waiver of that right nor excuse Acuite and

Fusco’s obligations under the Note and Guaranty. See Citizens Bank’s

Complaint in Confession of Judgment, 5/3/19, Exhibit A, at 3. In effect, the

Note allowed the bank to give Acuite and Fusco time to catch up, without

effecting a waiver of its rights under the Note, and there is no evidence that

Citizens Bank intended a novation of the “no waiver” clause.

Order affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 5/19/2021

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