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NORTH PENN CONSUMER DISCOUNT COMPANY v. EDWIN L. SHULTZ AND JOAN D. SHULTZ (10/06/77)

decided: October 6, 1977.

NORTH PENN CONSUMER DISCOUNT COMPANY
v.
EDWIN L. SHULTZ AND JOAN D. SHULTZ, A/K/A EDWIN L. SCHULTZ AND JOAN D. SCHULTZ, H/W, APPELLANTS



763 October Term 1976, Appeal from the Order of the Bucks County Court of Common Pleas dated Dec. 10, 1975, No. 74 - 4195-03-6., Civil Action, Law.

COUNSEL

Robert A. Solomon, Doylestown, for appellants.

Martin H. Philip, Parlmerton, for appellee.

Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ.

Author: Spaeth

[ 250 Pa. Super. Page 532]

This appeal is from the denial of a petition to open a confessed judgment. The only issue raised is whether the denial amounts to a deprivation of due process.

The note in question was signed by appellants in favor of appellee on June 7, 1965. On appellants' default, appellee confessed judgment on July 8, 1969, in Montgomery County. Appellants moved to Bucks County, and on May 6, 1974, appellee transferred the judgment there, and on July 3, 1974, filed a writ of execution. On October 10, 1974, appellants filed a petition to open the judgment and obtained a stay of execution. Appellee filed an answer to the petition and depositions were taken. On December 10, 1975, the lower court denied the petition and dissolved the stay. This appeal followed.

The judgment was confessed in accordance with the procedure prescribed by Pa.R.C.P. 2950-2976. Appellants argue, however, that this procedure was a denial of due process in that "at no time have [appellants] had the opportunity to avail themselves of a hearing or to require the creditor [appellee] to prove the existence of the debt." Appellants' Brief at 6. For this proposition appellants principally rely on Swarb v. Lennox, 314 F.Supp. 1091 (1970), aff'd, 405 U.S. 191, 92 S.Ct. 767, 31 L.Ed.2d 138 (1972).

1

In Swarb, a three-judge federal court reviewed the Pennsylvania procedure for confession of judgments in the context of a class action brought by Pennsylvania residents who had signed contracts authorizing judgments to be entered

[ 250 Pa. Super. Page 533]

    against them. After receiving evidence, the court limited the class to natural persons who were Pennsylvania residents, had signed confession of judgment clauses in leases and consumer financing transactions, and had an annual income of less than $10,000. The court observed that the confession of judgment procedure entailed the waiver of the right to a hearing before judgment at which the creditor would have the burden of proving the debt. The court held, however, that this waiver was constitutional so long as it was intelligent and voluntary. The court then determined that on the evidence before it the members of the defined class had not intelligently and voluntarily waived their rights because they had not understood the judgment notes they had signed. The court therefore granted relief in the form of a permanent injunction against enforcement of judgments against members of the class if the judgments had been entered after June 1, 1970 (the date of the court's opinion.)*fn1 On direct appeal the Supreme Court affirmed. 405 U.S. 191 (1972). However, the effect of this affirmance was limited. Only the plaintiffs below had appealed; they argued that the lower court had limited the class too narrowly. In approving the lower court's limitation of the class, the Court declined to reach the merits of the lower court's holding on the constitutionality of the Pennsylvania confession of judgment procedure.

Appellants have failed to articulate precisely how the decision in Swarb relates to their case. Clearly, it does not support the argument that appellants sometimes seem to be making -- that the Pennsylvania procedure for confession of judgments is unconstitutional on its face; to the contrary, the lower court in Swarb expressly upheld the procedure's constitutionality in the abstract, discussing only how it may be unconstitutionally applied against a debtor who has not intelligently and ...


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