On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 88-4158)
Mansmann, Scirica and Seitz, Circuit Judges.
This is an appeal from the denial of a motion under Fed.R.Civ.P. 60(b) to open a confessed judgment entered in favor of the Small Business Administration against appellant Louis Richardson. We hold that Richardson did not waive his right to assert the defense of the applicable statute of limitations to the confession of judgment. Therefore, we will reverse the order of the district court and remand for proceedings consistent with this opinion.
In 1975, Louis Richardson and his wife, Loretta Massey, founded and were principal owners of a court reporting service known as Rapid Reporting, Inc. On September 14, 1977, Rapid Reporting obtained a business loan from Girard Trust Bank for $32,500.00. Richardson signed a note for the loan, which contained a confession of judgment clause providing:
The undersigned hereby authorizes and empowers any attorney or clerk of any Court of record in the United States or elsewhere to appear for and, with or without declaration filed, confess judgment against the undersigned in favor of the holder assignee or successor of holder of the Note, at any term, for the full or total amount of this Note, together with all indebtedness provided for therein, with costs of suit and attorney's commission of fifteen (15) percent for collection; and the Undersigned expressly releases all errors, waives all stay of execution, rights of inquisition and extension upon any levy upon real estate and all exemption of property from levy and sale upon any execution hereon; and the Undersigned expressly agrees to condemnation and expressly relinquishes all rights to benefits or exemptions under any and all exemption laws now in force or which hereafter may be enacted.
The Small Business Association (SBA) guaranteed ninety percent of the loan. Richardson also guaranteed the loan under a "Small Business Association Guaranty." In the guaranty, Richardson signed a confession of judgment clause, similar to that above, providing:
The undersigned hereby authorizes and empowers any Attorney of any court of record in the United States or elsewhere to appear for and, with or without declaration filed, to confess judgment against the undersigned in favor of the Lender stated in the Guaranty on the reverse hereof, or any assignee or successor of the Lender, with interest, at any time for the principal amount of the loan as set forth in the Guaranty, with interest, as of any term, past, present or future, with cost of suit and Attorney's commission of 15% for collection. The undersigned expressly releases all errors, and expressly waives all stays of execution, all rights of inquisition, any extension upon any levy upon real estate and all exemption of property from levy and sale upon any execution hereon; and the undersigned expressly agrees to condemnation and expressly relinquishes any and all benefit from any and all appraisement, stay or exemption laws now in force or hereafter enacted.
Richardson made monthly payments on the loan from October 1977 through March 1980. After Richardson failed to make further payments, Girard Bank demanded payment of the remaining principal and interest. Subsequently, Girard Bank assigned its interest in the note and guaranty to the SBA. By letter dated August 12, 1980, the SBA demanded from Richardson immediate payment of the loan balance, $18,950.00, plus accrued interest. Although Richardson paid nothing, the SBA was able to recover part of the debt over the next few years from the sale of business equipment and real estate pledged as collateral for the loan.*fn1
By letter dated November 19, 1987, the SBA again contacted Richardson and demanded payment for the outstanding balance, $19,960.40, plus accrued interest. Failing to receive a response, the SBA filed a suit on May 24, 1988 in the United States District Court to enter a confession of judgment in the amount of $38,315.44. The clerk of the court entered judgment for the SBA for that amount plus interest.
On July 19, 1988, Richardson filed with the district court a motion to open the confessed judgment, pursuant to Fed.R.Civ.P. 60(b). He also filed a motion under Fed.R.Civ.P. 62(b) requesting that the Icourt stay execution of the confessed judgment pending disposition of the concurrent Rule 60(b) motion. The district court granted the stay, and ordered that the SBA provide Richardson with a complete accounting to determine if assets sufficient to satisfy the debt were made available to the SBA after the loan default. After the SBA provided the accounting, the district court lifted the stay on execution of the judgment.*fn2 In a later order clarifying that there were no defects in the confession of judgment procedure, the district court ...