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GERMANTOWN MANUFACTURING CO. v. ROBERT J. RAWLINSON (03/29/85)

filed: March 29, 1985.

GERMANTOWN MANUFACTURING CO., APPELLANT,
v.
ROBERT J. RAWLINSON, JR., AND JOAN RAWLINSON, APPELLEES



NO. 00439 Philadelphia, 1983, APPEAL FROM ORDER ENTERED JANUARY, 19, 1983 IN THE COURT OF COMMON PLEAS CIVIL DIVISION, DELAWARE COUNTY at NO. 82-10195

COUNSEL

John T. Salvucci, Norristown, for appellant.

Robert B. Surakk, Philadelphia, for appellees.

Cavanaugh, Beck and Tamilia, JJ.

Author: Cavanaugh

[ 341 Pa. Super. Page 44]

This is an appeal from the Order of January 19, 1983, by the Honorable Howard F. Reed, Jr. in the Court of Common Pleas of Delaware County, which granted appellee Joan Rawlinson's petition to Open a Confessed Judgment. We affirm.

The salient facts in this case are as follows. Robert G. Rawlinson was employed by The Germantown Manufacturing Company in Marple Township as its assistant controller. Over a period of twenty-one months, Mr. Rawlinson embezzled $327,011.22 from the company. On Friday, May 21, 1982, the company discovered the misappropriation. Mr. Rawlinson admitted his wrongdoing to the company controller, Mr. Harry Dinkel, and was fired. However, Mr. Rawlinson did not tell his wife about either the misappropriation of the company monies or the loss of his job until the following Monday, May 24, 1982. Sometime between Friday and Monday, Mrs. Joan Rawlinson, Robert's wife, answered a phone call for her husband from a Mr. Peter Kulaski who identified himself as an insurance adjuster. On Monday, May 24, 1982, she answered a second call for her husband from Mr. Kulaski. Sensing that something was amiss, she summoned her husband to the phone but stayed on an extension and overheard Mr. Kulaski say, "Have you told your wife yet?" At this, she hung up the phone, and when her husband had finished his conversation

[ 341 Pa. Super. Page 45]

    she demanded to know what was going on. Mr. Rawlinson told his wife that he had lost his job because he had taken about $20,000.00 from the company. He also asked his wife if she wanted a divorce. Mrs. Rawlinson testified that upon hearing all of this, her "whole world fell apart." She also testified that because she had suffered a miscarriage in late April, she was already tired and depressed when she learned of her husband's malefactions.

The following day, Tuesday, Mrs. Rawlinson spoke by phone with Mr. Kulaski, who was a representative of the company's insurer, and learned that he was coming to the house "to discuss documents." He did not tell her he would attempt to have her co-sign two judgment notes. Nor did he tell her the amount her husband had misappropriated. Mr. Kulaski arrived later that day and spent thirty to forty-five minutes with Mr. and Mrs. Rawlinson. Mrs. Rawlinson apparently succeeded in keeping her two young children from knowing the purpose of the meeting.

The purpose of the meeting, from Mr. Kulaski's perspective, was to have Mr. and Mrs. Rawlinson sign two judgment notes. The first note was for $160,000.00 -- the amount Mr. Rawlinson admitted having taken. The second was for "any and all amounts in excess of One hundred and sixty thousand dollars ($160,000) which are determined by Affidavit of the President of Germantown Manufacturing Company, which Affidavit, when presented with this Note, shall constitute sufficient proof of a sum certain for the purpose of the Confession of Judgment contained herein." Both notes authorized any attorney to confess judgment in favor of Germantown Manufacturing against the Rawlinsons. Mrs. Rawlinson was surprised to see her name on the documents. She asked Mr. Kulaski if she and her husband would need an attorney. Mr. Kulaski calmly stated that if the Rawlinsons dealt in good faith and continued to cooperate, there would be no need for an attorney. Kulaski also stated that his principal was not interested in a criminal prosecution as long as Mr. and Mrs. Rawlinson cooperated.

[ 341 Pa. Super. Page 46]

Mrs. Rawlinson understood this to mean that if she signed the notes her husband would not go to jail.

Mrs. Rawlinson had never before seen a judgment note, and while she read them as best she could, she was crying for part of the time that she read them and believed that she was signing only one note for a total of $160,000.00. Mr. Kulaski told the Rawlinsons that since they had readily available assets totaling $160,000.00, the judgment was, in effect, already taken care of. She signed because she knew her husband had a check for $150,000.00 and the remaining $10,000.00 could be obtained without difficulty.

In August, Mr. Vernon Smith, the President of Germantown Manufacturing, completed the affidavit as required by the second note. The total amount owed on this note according to the affidavit was $212,113.21.

The first note, (for $160,000.00) has been satisfied. Mrs. Rawlinson's obligation as to it is not at issue. The only issue before us is whether the lower court abused its discretion in opening judgment on the second note.*fn1

The opening of a confessed judgment is governed by well-settled principles:

In order to open a confessed judgment, a party must act promptly, allege a meritorious defense, and present sufficient evidence of that defense to require submission of the issues to a jury . . . . A petition to open a judgment is an appeal to the equitable powers of the court and is addressed to the sound discretion of the court; a reviewing court will not reverse the determination of the lower court absent a clear and manifest abuse of discretion . . . . The standard of sufficiency a court must employ is that of the directed verdict -- viewing all the evidence in the light most favorable to the petitioner and accepting as true all evidence and proper inferences therefrom supporting

[ 341 Pa. Super. Page 47]

    the defense while rejecting adverse allegations of the party obtaining the judgment.

Weitzman v. Ulan, 304 Pa. Super. 204, 209, 450 A.2d 173, 176 (1982).

Underlying our analysis in the instant case is the realization that "[a] warrant of attorney authorizing judgment is perhaps the most powerful and drastic document known to civil law . . . . The signing of a warrant of attorney is equivalent to a warrior of old entering a combat by discarding his shield and breaking his sword. For that reason the law jealously insists on proof that this helplessness and impoverishment was voluntarily accepted and consciously assumed." Cutler Corporation v. Latshaw, 374 Pa. 1, 4-5, 97 A.2d 234, 236 (1953). See also Scott Factors, Inc. v. Hartley, 425 Pa. 290, 228 A.2d 887 (1967). In analyzing the judgment notes in question, we are to be guided by the rules which apply to other written contracts. W.B. Rambo Building and Loan Ass'n. v. Dragone, 305 Pa. 24, 156 A. 311 (1931).

The lower court found that appellee, Joan Rawlinson, presented three meritorious defenses which permitted it to exercise its equitable discretion and open judgment. The three meritorious defenses are: 1) fraud and misrepresentation; 2) duress; and 3) the lack of accountability for the manner in which the appellant, Germantown Manufacturing, was permitted to arrive at the figure allegedly owed by the Rawlinsons. For the reasons we shall explain, we affirm the judgment of the lower court.

As one of the grounds for its decision to open judgment, the lower court found sufficient evidence of the meritorious defense of fraud and misrepresentation. In so holding, the lower court did not commit a clear and manifest abuse of discretion.

It scarcely seems necessary at this late jurisprudential hour in the day of stare decisis to cite cases to certify that fraud taints with illegality and invalidity anything its evil shadow darkens. Nor can there be any question of

[ 341 Pa. Super. Page 48]

    the right of a court to set aside any contract which is founded on fraud. This is as fundamental and solidly established as the foundations of the courthouse.

Iacoponi v. Plisko, 412 Pa. 576, 581, 195 A.2d 362, 365 (1963).

The recipient of a misrepresentation may avoid the contract by showing that the misrepresentation was either fraudulent or material. E.A. Farnsworth Contracts 242 (1982); See also DeJoseph v. Zambelli, 392 Pa. 24, 139 A.2d 644 (1958). In the instant case, we find the misrepresentation to have been both fraudulent and material. Viewing the evidence in the light most favorable to Mrs. Rawlinson, the insurance company representative told the Rawlinsons that since they had $160,000.00 readily available, the judgment was, in effect, already satisfied. This statement clearly indicated to Mrs. Rawlinson that the limit of her liability and that of her husband was $160,000.00. However, the insurance man had her sign two notes, the first for $160,000.00 which is not at issue, and the second for any amount owing in excess of the first, which is the basis of this appeal. Her alleged liability under the second note was later determined by Germantown Manufacturing to be $212,113.21. Thus, Germantown Manufacturing and its insurer would now make Mrs. Rawlinson liable for over $372,000.00 notwithstanding the initial misrepresentation that the limit of her liability would be $160,000.00. If Mrs. Rawlinson's testimony is true, it taxes credulity to assume that the insurance representative was unaware of his deceit in having the innocent wife sign the second note. Even if he was in fact unaware, he "had means of knowledge from which [he was] bound to ascertain the truth before making the representation. Misrepresentations made under such ...


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