Many commercial credit agreements contain Confession of Judgment or “Warrant of Attorney Clauses.” In general terms, a Warrant of Attorney permits a creditor to enter judgment against a debtor without first giving notice and an opportunity to defend the case against him. Usually, the debtor will first become aware that judgment has already been entered against him by receipt of a notice.
A recently reported opinion of the Pennsylvania Superior Court interpreting a standard Warrant of Attorney Clause in a commercial credit transaction has held that proceedings to confess judgment are not subject to the venue rules applicable to most other actions. See Midwest Financial Acceptance Corporation v. Lopez, 2013 Pa.Super. 239 (2013). In practice, what this means is that a creditor can enter a judgment by confession against a debtor in a venue convenient to the creditor and with which the debtor has had no contact, and then move the judgment to the debtor’s home County to execute upon the judgment.
A standard Warrant of Attorney will often state that the debtor “authorizes and empowers any attorney or the Prothonotary or Clerk of any court in the Commonwealth of Pennsylvania, or elsewhere . . .” to enter judgment against him after a default under the instrument. The Superior Court found that the Warrant is, itself, as enforceable as any forum selection clause between commercial parties with which authorization under a Warrant of Attorney to confess judgment in “any Court of the Commonwealth of Pennsylvania” is clear and unambiguous. Therefore, the entry of judgment by confession in any Court in Pennsylvania, where an action would be permitted by an otherwise enforceable forum selection clause between the parties, should not be disturbed on the grounds that it does not comply with the general Rules as to Venue.
The practical effect of this holding will be that debtors may have a judgment by confession entered against them in a remote County – perhaps several hours away from where they are resident and conduct business – and will be forced to assert whatever grounds the debtor has to strike off, or open the judgment in that remote Court. This could lead to increased burden and expense to debtors that they may not be contemplating when executing commercial credit instruments. For lenders with defaulted commercial debtors, this holding will grant them great flexibility in making a strategic choice as to where to confess judgment prior to moving the judgment for execution against the debtor.