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FIRST SENECA BANK & TRUST COMPANY v. LAUREL MOUNTAIN DEVELOPMENT CORPORATION (12/18/84)

decided: December 18, 1984.

FIRST SENECA BANK & TRUST COMPANY, SUCCESSOR BY MERGER TO KEYSTONE BANK,
v.
LAUREL MOUNTAIN DEVELOPMENT CORPORATION, A/K/A LAUREL MTN. DEVELOPMENT CORP., APPELLANT



No. 38 W.D. Appeal Dkt. 1984, Appeal from the Order of the Superior Court of Pennsylvania entered on February 10, 1984, at No. 369 Pittsburgh 1982, affirming the Order of the Court of Common Pleas of Somerset County, Civil Division, entered February 9, 1982, at Nos. 372 Execution, 1979, and 372 Judgment, 1979, Pa. Super. , Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ.

Author: Mcdermott

[ 506 Pa. Page 441]

OPINION OF THE COURT

In this appeal review is sought from an order of the Superior Court which affirmed the order of the Court of Common Pleas of Somerset County. The court of common pleas dismissed appellant's motion to open the judgment confessed against them. The salient facts are set forth below.

Appellant, Laurel Mountain Development Corporation (Laurel Mountain) was the owner and developer of a tract of land in Somerset County. Pursuant to a mortgage agreement signed on August 25, 1975, Laurel Mountain received a $600,000 loan from Keystone Bank. Appellee, First Seneca Bank and Trust (First Seneca) is Keystone's successor by merger. According to the terms of the mortgage agreement Laurel Mountain was to receive $225,000 immediately and the balance of the funds when others joined the venture. The mortgage agreement contained a confession of judgment clause.

Laurel Mountain eventually received $244,000. In November 1976, Laurel Mountain began experiencing problems with their development plans and defaulted on the loan. The following May an arrangement was made resolving the initial default. Shortly thereafter, Laurel Mountain again fell into default and Keystone sought to confess judgment pursuant to the mortgage note. In March of 1979, judgment was confessed. Keystone attempted to execute on the judgment several times during 1980 and 1981, but execution was stayed either by consent or order of the court.

Laurel Mountain asserted that it was Keystone's failure to disburse the balance of the loan funds which caused the default. Laurel Mountain avers that it contacted Keystone on several occasions requesting distribution of the remaining funds and was assured by Keystone that the funds would be forthcoming. Therefore, according to Laurel, litigation to compel distribution was unwarranted. The

[ 506 Pa. Page 442]

    attorney who confessed judgment against Laurel Mountain also represented Laurel Mountain's president and allegedly advised him not to be alarmed about the entry of judgment.

In March of 1980, when Keystone sought to execute upon the real property of Laurel Mountain, Laurel Mountain, now represented by new counsel, sought a stay of the execution arguing that the Department of Environmental Resources was going to approve a necessary sewage treatment plan. A stay of 120 days was granted. In October of that same year Laurel Mountain sought another stay, asserting that sales during the upcoming months would satisfy current obligations. The court, persuaded that Laurel Mountain would be successful in its attempt, granted another stay until March 31, 1981. Prior to expiration of this stay, on February 11, 1981, Laurel Mountain instituted a separate action in equity against the bank seeking to compel disbursement of the remaining funds and to enjoin execution upon the confessed judgment. This occurred nearly twenty-three months after the confessed judgment was filed, and almost one year after new counsel was retained.

On March 31, 1981, the second stay expired. First Seneca, now merged with Keystone, sought to proceed with execution. Four months later, on July 30, 1981, Laurel Mountain, at this point represented by yet a third counsel, filed a petition to open or in the alternative to strike the judgment, a motion for stay of execution and a motion to consolidate that execution with the equity suit. The petition to open judgment was dismissed on February 8, 1982. The dismissal was affirmed by the Superior Court. Appellant herein petitioned this Court for review and we granted allocatur. After consideration, we affirm the decision of the Superior Court.

A petition to open judgment is an appeal to the equitable powers of the court. As such it is committed to the sound discretion of the hearing court and will not be disturbed absent a manifest abuse of discretion. Lincoln Bank v. C & H. Agency, Inc., 500 Pa. 294, 456 A.2d 136

[ 506 Pa. Page 443]

(1982). A judgment taken by confession will be opened in only a limited number of circumstances, and only when the person seeking to have it opened acts promptly, alleges a meritorious defense and presents sufficient evidence of that defense to require submission of the issues to the jury. Kardos v. Morris, 470 Pa. 337, 341-42, 368 A.2d 657, 659 (1977); West Chester Plaza v. The Chester Engineers, 319 Pa. Super. 196, 199, 465 A.2d 1297, 1298 (1983); Bell Federal Savings and ...


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