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Textron Financial Corp v. W. Jack Kalins

March 7, 2012

TEXTRON FINANCIAL CORP., PLAINTIFF,
v.
W. JACK KALINS, DEFENDANT.



The opinion of the court was delivered by: (judge Caputo)

MEMORANDUM

Presently before the Court is Defendant W. Jack Kalins's Motion to Strike Off And/Or Open the Judgment Entered by Confession and for Stay of Execution of the Clerk of Court's October 25, 2011 Entry of Judgment. (Doc. 23). For the reasons below, the Court will deny Defendant's Motion to the extent it seeks to strike or open the judgment, however, the Court will hold an evidentiary hearing as to attorneys' fees at a later date.

BACKGROUND

The events underlying Defendant's current Motion are not in dispute. Defendant Kalins is the Chairman and CEO of Vacation Charters, Ltd. which owns and operates a resort, time share property, water park, and related facilities in Lake Harmony, Pennsylvania. Kalins was the guarantor to a series of loan transactions between Plaintiff, Textron Financial Corporation, and Vacation Charters, Ltd., all of which contained confession of judgment provisions. In 2011, Vacation Charters defaulted on its loans as per the terms of the financing documents, and Textron issued a Default Notice on May 16, 2011. This notice advised Defendant that all of its obligations were immediately due in full. Borrower Vacation Charters acknowledged events of default and, on August 2, 2011, Textron, Vacation Charters, and Kalins executed a Forbearance Agreement (amended September 22, 2011). On November 9, 2011, the Court granted the appointment of a receiver to run the resort.

On October 25, 2011, the Clerk of Court entered a Confession of Judgment against Defendant W. Jack Kalins in the amount of $6,103,682.29. That same day, the Clerk also entered a Confession of Judgment in the same amount as against the borrower, Vacation Charters, in an accompanying matter, docketed 3:11-cv-1957. On November 18, 2011, Defendant Kalins moved the Court to Strike Off and/or Open the Judgment Entered by Confession and for Stay of Execution. (Doc. 23). While Defendant Kalins does not argue that this confessed judgment was inappropriate per se, he argues that the particulars of the confessed judgment were improper. Specifically, Kalins takes issue with the amount of credit rendered from the Uniform Commercial Code ("UCC") sale of consumer promissory note collateral.*fn1 As Textron was the only bidder at this sale, Kalins believes the net proceeds--$27,000,000--represents a fraction of their potential value, and that the outstanding debt amount is therefore open to question. Further, Kalins argues that Textron has been receiving payments on other loans before and after the Confession of Judgment, and that the Confession of Judgment also includes improper attorney fees.

This Motion has been fully briefed and oral argument was held on this Motion before the Court on February 24, 2012. The matter is now ripe for the Court's review.

DISCUSSION

I. Legal Standard

Rule 60(b)(6) states that: "On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for . . . any other reason that justifies relief." The relief afforded by this provision is only to be granted in "extraordinary circumstances." Morris v. Horn, 187 F.3d 333, 341 n.10 (3d Cir. 1999) (citation omitted). "A party seeking such relief must bear a heavy burden of showing circumstances so changed . . . that, absent such relief an 'extreme' and 'unexpected' hardship will result." Hodge v. Hodge, 621 F.2d 590, 593 (3d Cir.1980) (citations omitted). As this jurisdiction in this matter is predicated upon diversity of citizenship, the substantive aspects of the motion shall be governed by Pennsylvania law. FDIC v. Deglau, 207 F.3d 153, 167 (3d Cir. 2000).

"A petition to strike and a petition to open are two forms of relief with separate remedies; each is intended to relieve a different type of defect in the confession of judgment proceedings." Deglau, 207 F.3d at 167 (citation omitted). A Court will strike a confessed judgment "where there is an apparent defect on the face of the record on which the judgment was entered." Germantown Sav. Bank v. Talacki, 441 Pa. Super. 513, 519 (Pa. Super. Ct. 1995); Resolution Trust Corp. v. Copley Qu-Wayne Assocs., 546 Pa. 98, 106 (Pa. 1996). "The request can only be granted if a 'fatal defect or irregularity' appears on the record's face." Republic First Bank v. Jemal, 2011 WL 4087564 at *5 (E.D. Pa. Sept. 13, 2011) (quoting Mumma v. Boswell, Tintner, Piccola & Wickersham, 937 A.2d 459, 463 (Pa. Super. Ct. 2007)). The burden rests with the party against whom judgment was confessed, who must disprove the facts contained within the confession or judgment. Davis v. Woxall Hotel, Inc., 395 Pa. Super. 465, 470 (Pa. Super. Ct. 1990).

Conversely, a confessed judgment will be opened where a party presents evidence "which in a jury trial would require that the issues be submitted to the jury." Germantown Sav. Bank, 441 Pa. Super. at 520; Pa. R. Civ. P. 2959(e). Such relief is to be granted only in "a limited number of circumstances," specifically where the moving party "acts promptly, alleges a meritorious defense and presents sufficient evidence of that defense to require submission of the issues to the jury." First Seneca Bank & Trust Co. v. Laurel Mountain Dev. Corp., 506 Pa. 439, 443 (Pa. 1984). For such evidence to be sufficient, it must be "clear, direct, precise and believable." Germantown Sav. Bank, 441 Pa. Super. at 520. "A petition to open a confessed judgment is an appeal to the court's equitable powers, within the court's sound discretion, and will not be disturbed absent an error of law or clear abuse of discretion." Liazis v. Kosta, Inc., 421 Pa. Super. 502, 506 (Pa. Super. Ct. 1992).

II. Analysis

A. Motion to Strike the Judgment

In his reply brief, Kalins argues that the confessed judgment should be stricken as it is facially flawed in having "too many unknowns and disputed issues regarding the valuation of the debt at issue." (Doc. 26 at 3). In particular, Kalins requests that the judgment be stricken as: (1) the amount due is not evident on the face of the ...


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