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FIRST NATIONAL BANK PENNSYLVANIA v. CALVIN W. COLE (10/16/81)

SUPERIOR COURT OF PENNSYLVANIA


filed: October 16, 1981.

FIRST NATIONAL BANK OF PENNSYLVANIA,
v.
CALVIN W. COLE, APPELLANT. FIRST NATIONAL BANK OF PENNSYLVANIA, V. PROFESSIONAL TIRE CORPORATION, APPELLANT

No. 366 Pittsburgh, 1980, No. 368 Pittsburgh, 1980, Appeals from the Orders of the Court of Common Pleas of Crawford County, Civil Division, at No. 711 May Term, 1978, and at No. DSB 1980-139

COUNSEL

Walter A. Dart, Jr., Erie, for Cole, appellant.

R. Perrin Baker, Erie, for Professional Tire Corp., appellant.

Norman H. Stark and Charles D. Marlett, Erie, for appellee.

Price, Cavanaugh, and Hoffman, JJ. Price, J., did not participate in the consideration or decision of this case.

Author: Hoffman

[ 291 Pa. Super. Page 392]

Appellants contend that they presented sufficient evidence that appellee had impliedly elected to retain collateral in satisfaction of appellants' obligations to appellee to warrant opening of judgments confessed against them. We disagree and, accordingly, affirm the orders of the lower court.

In July, 1977, appellee, The First National Bank of Pennsylvania, sold a tire recapping business to appellant Professional Tire Corporation (PTC), which granted appellee a security interest in all of its personal property and the proceeds thereof. As further security, appellant Calvin W. Cole and several others personally guaranteed the loan. PTC and the individual guarantors executed notes containing confession of judgment clauses. Subsequently, appellee advanced PTC additional sums secured by the assets of PTC. On February 13, 1979, appellee notified appellants that the

[ 291 Pa. Super. Page 393]

    loans, then aggregating $1,800,000, were in default, and proposed to take possession of the collateral and sell it in a commercially reasonable manner. Appellee promptly took possession of the collateral, sold the inventory of finished tires and two trucks, and attempted to collect the accounts receivable. Appellee then engaged Cole to operate the plant pending its eventual sale as a going concern. On May 3, 1979, appellee notified appellants that it anticipated a substantial deficiency as a result of its efforts to dispose of the collateral and requested Cole and the other guarantors to arrange for payment pursuant to their respective personal guarantees of the PTC corporate debt. Appellee was unable to sell the plant and, in September, 1979, labelled each piece of plant equipment as "PROPERTY OF FIRST NATIONAL BANK OF PA." On February 7, 1980, appellee confessed judgment against PTC in the amount of $1,962,133.35, and caused writs of execution to issue on that judgment and on one in the amount of $58,333 which it had earlier confessed against Cole. On February 25, 1980, appellants filed petitions to open the respective judgments, alleging that appellee had impliedly elected to retain the collateral in satisfaction of their obligations to appellee. The lower court denied the petitions. This appeal followed.

The party seeking to open a confessed judgment must act promptly, allege a meritorious defense, and present sufficient evidence of that defense to require submission of the issues to a jury. Kardos v. Morris, 470 Pa. 337, 341-42, 368 A.2d 657, 659 (1977). See also Fidelity Bank v. Act of America, Inc., 258 Pa. Super. 261, 263, 392 A.2d 784, 785 (1978); Pa.R.Civ.P. 2959(e).

Appellants allege as their defense that appellee had impliedly elected to retain the collateral in satisfaction of their debts according to section 9-505(2) of the Uniform Commercial Code, 13 Pa.C.S.A. § 9505(b),*fn1 when it seized the

[ 291 Pa. Super. Page 394]

    collateral and failed to dispose of all of it for approximately one year before attempting to execute upon judgments entered against them. Upon default by a debtor, a secured party may, pursuant to Article Nine of the Uniform Commercial Code: (1) obtain a judgment on the debt, 13 Pa.C.S.A. § 9501(a); (2) repossess and sell or otherwise dispose of the collateral, id. § 9504(a); or (3) repossess and retain the collateral in satisfaction of the debt, id. § 9505(b). See J. White & R. Sommers, Uniform Commercial Code, § 26-4 (2d ed. 1980). See also Alliance Discount Corp. v. Shaw, 195 Pa. Super. 601, 605, 171 A.2d 548, (1961) (when plaintiff entered judgment on note, it could have used the judgment as a means of recovering the debt or it could repossess and sell collateral and use judgment to recover any deficiency); U.C.C. § 9-505, Official Comment 1. Assuming, arguendo, that an implied election to retain the collateral in satisfaction of the debts is a meritorious defense to an action to collect a deficiency, we conclude that appellants have failed to present sufficient evidence to require submission of the issues to a jury. Appellants have not alleged, nor have they presented any evidence, that appellee manifested an intention to retain the collateral in satisfaction of their obligations to appellee. See Nelson v. Armstrong, 99 Idaho 422, 582 P.2d 1100 (1978); Jones v. Morgan, 58 Mich.App. 455, 228 N.W.2d 419, (1975); S. M. Flickinger Co. v. 18 Genesee Corp., 71 App.Div.2d 382, 423 N.Y.S.2d 73 (1979). On the contrary, the record amply shows that it had elected to repossess and sell the collateral and hold appellants liable for any deficiency. See 13 Pa.C.S.A. § 9504(a); Alliance Discount Corp. v. Page 395} Shaw, supra. Consequently, the lower court properly denied appellants' petitions.*fn2

Orders affirmed.


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