submitted: February 10, 1986.
ELMER H. DRUM, APPELLEE,
WILLIAM J. LETA, APPELLANT
Appeal From Judgment Entered September 9, 1985 Court of Common Pleas, Civil Division, Lycoming County No. 84-01014
Ann S. Pepperman, Williamsport, for appellant.
W. David Marcello, Williamsport, for appellee.
Cavanaugh, Watkins and Lipez, JJ.
[ 354 Pa. Super. Page 449]
This is an appeal from an order of the Court of Common Pleas of Lycoming County granting appellant's petition to strike a confessed judgment entered against him, but denying appellant's request for attorney's fees. Appellant raises one issue on appeal. He contends that the lower court erred in ruling that he was not entitled to collect reasonable attorney's fees. We agree, finding that an award of reasonable attorney's fees is mandatory in this instance, where appellant has prevailed in causing a judgment by confession
[ 354 Pa. Super. Page 450]
against him to be stricken, under 41 P.S. § 407(b). Accordingly, we reverse the portion of the order denying appellant attorney's fees, and remand the matter to the lower court for a determination of reasonable fees to be awarded.
This action arose from appellant's default on a loan agreement made between appellant as debtor and Powy's Park Inn, Inc. as creditor. Two instruments were executed on February 15, 1983 pursuant to the loan, a security agreement and a bond. The security agreement granted appellee an interest in certain inventory and equipment of appellant. The loan was also evidenced by the $396,000.00 bond, which contained a confession of judgment clause, and secured by a mortgage on certain property of the appellant. Powy's Park assigned all of its interest in the security agreement and bond to appellee, Elmer Drum.
Appellant stopped making scheduled loan payments in October of 1983. In late November, 1983, appellee instituted mortgage foreclosure proceedings on the mortgage securing the loan. He obtained a judgment against appellant, and bought the property at a sheriff's sale. Appellee also brought a cause of action in replevin, while the mortgage foreclosure proceedings were pending, to obtain possession of the inventory and equipment in which he had a perfected security interest. Although an order for writ of seizure was issued by the lower court, no further action was taken because appellee failed to post the requisite bond. However, appellant did agree to a voluntary repossession of the collateral by appellee.
Meanwhile, appellee confessed judgment against appellant pursuant to the clause in the bond. He filed a judgment by confession with the prothonotary of Lycoming County on May 18, 1984, in the replevin action. Appellee then sought to enforce the judgment entered by confession by a writ of execution, and attempted to levy upon appellant's residence. At that point, appellant filed a petition to strike or open the confessed judgment. Appellant asserted that the judgment by confession was entered improperly, as a result of appellee's failure to comply with Pa.R.C.P. 2951, governing procedures to be followed in confessing judgment.*fn1
[ 354 Pa. Super. Page 451]
For example, the original instrument upon which judgment was confessed was not filed, as required by Pa.R.C.P. 2951(c); no certificate of residence was filed, as required in Rule 2951(a); and no notice was given to appellant of the judgment by confession, until he was served with a sheriff's levy on his residence [Pa.R.C.P. Nos. 236 and 2958(f)].
In response to appellant's petition, the lower court granted a rule to show cause why the judgment entered by confession should not be stricken or opened. Appellee did not file a response and the court granted appellant's petition, ordering that the judgment be stricken, but denying attorney fees to appellant.
Appellant contends that he is entitled to attorney's fees under 41 P.S. § 407(b). This statute states:
(b) Any debtor who prevails in any action to remove, suspend or enforce a judgment entered by confession
[ 354 Pa. Super. Page 452]
debtor will be able to collect attorney's fees and costs when he succeeds in removing a judgment executed by confession. Appellant asserts that, in consideration of the language used in Section 407(b), the recovery of attorney's fees by the successful debtor is mandatory. However, the lower court interprets this language as making such an award discretionary with the court. We agree with appellant. The clear wording of the statute indicates that, when a debtor prevails in removing a judgment by confession, he shall be entitled to recover such fees and costs as determined by the court. This wording does not give the court discretion as to whether or not such fees and costs are recoverable, but only as to the amount, which must be reasonable. We believe that if the legislature intended this provision to make the awarding of fees discretionary with the court, it would have used the word may instead of shall. Thus we find that, in consideration of the legislature's intent to protect residential real estate owners, Section 407(b) makes the recovery of attorney's fees and costs by appellant mandatory.
While the lower court did not give its reasons for striking the judgment entered by confession, in its opinion the court alluded to the suggestion that appellee followed the wrong procedures in confessing judgment against appellant. For whatever reason, however, it is evident that appellant indeed prevailed in causing the judgment to be stricken; i.e. removed. Therefore, we find that appellant is entitled to the recovery of reasonable attorney's fees in this instance.
Although there is a dearth of caselaw regarding the question of whether Section 407(b) is to be construed as mandatory, a recent decision by a panel of this court provides us with some guidance. In Gardner v. Clark, 349 Pa. Super. 297, 503 A.2d 8 (1986), Judge Wieand writing for the majority, held that the lower court properly awarded counsel fees to debtors who had prevailed under Section 407(b). In Gardner, the issues raised by appellant focused on whether or not the debtor had "prevailed" in removing or suspending a judgment by confession. The court noted
[ 354 Pa. Super. Page 454]
that, in circumstances similar to the present matter, the legislature provides for an award of counsel fees under both section 407(b) and, 41 P.S. § 503; a more general section of the Act providing for mandatory recovery of such fees. Gardner, Id. 349 Pa. Super. at 301, 503 A.2d at 10.
For the foregoing reasons, we find that the lower court erred in denying an award of counsel fees to appellant. Accordingly, we reverse the order and remand to the lower court for a determination and award of reasonable attorney's fees.
Reversed and remanded.
ON CONSIDERATION WHEREOF, it is now hereby ordered and adjudged by this Court that the Order of the Court of Common Pleas of Lycoming County is reversed and remanded.
Reversed and remanded.