Schnader Achieves Appellate Victory

Schnader Harrison Segal & Lewis LLP achieved another victory recently when the Superior Court of Pennsylvania vacated confessed judgments entered against our client. In the case of Citizens Bank v. Cambridge Warren LLC, Citizens Bank entered judgments by confession against our client following an alleged default of a commercial loan extended by the bank. Schnader was retained to strike the judgments and handled the petition to strike hearing in March 2011 and argued that, although the original loan document and guaranty included warrants of attorney, subsequent modifications failed to expressly repeat, reaffirm or resurrect the original warrants of attorney. The Warren County Court of Common Pleas rejected Schnader’s argument under the theories that the subsequent modifications sufficiently referenced the original warrants of attorney and that sophisticated borrowers are held to a higher standard when petitioning to strike judgments entered by confession.

Schnader appealed the decision in July 2011 and Bruce P. Merenstein argued the appeal in January 2012. At argument, Mr. Merenstein explained that (1) mere references in amended agreements that purport to incorporate earlier warrants of attorney are not sufficient to perpetuate a plaintiff’s right to confess judgment against defendants, and (2) even when loan modifications are contained in forbearance agreements and not amended loan agreements, confession of judgment clauses must be expressly restated to be effective. The Superior Court agreed with both arguments (with one judge dissenting) and reversed and remanded the lower court’s decision with instructions to grant the petition to strike and vacate the judgments.