Amicus Curiae Brief — Nellie Swarb v. William M. Lennox

Supreme Court brief1972

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SUPRE To ot WS am |

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le tains | October Tecm, 1970.

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mgt rk 7 No. 63607" |

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NELLIE SWARB, et al,.- si

pig eae Appellants,

a : “3 . f : 3 ‘ - . ) ‘ ; } . v. Ne: ¥ ‘

+ WILLIAM M. LENNOX, et al, Aapeek

pee oF nS NS ee ae ay Benianion ag

n Appeal From the United States District Court for the

a District of: a

5 ee _ BRIEF OF AMIOUS CURIAE LP aes 7

fae PENNSYLVANIA SAVINGS AND LOAN LEAGUE.

oe Sh RRM S eg oe Himamey Base, | :

‘ : | . .» , MacCoy, Evans & Lewis,

ae ate 2010 Two Penn Center ‘Plaza,

“Philadelphia, Pennsylvania. 19102’ :

wae Wits L. Marz, | : ?.

: Ges » Loon. & Marz,

Ree 1400 Western Saving Fund Building, :

Broad and Chestnut Streets, ,

- Philadelphia, Pennsylvania, 19107 euch,

; ' Attorneys for Amicus Curiae. -

_ ©. International, 711 So, 50th St., Phila., Pa. 19143—Tel. SA 78711 Area Code 215

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INTEREST OF Auitens Curiae, PENNSYLVANIA ‘SAVINGS AND

Loan LEAGUE ....... Renew is sanes eh esbsnns odbacaaes

I. The Notice Requirements Imposed by the Siank: |

vania Rules of Civil Procedure in a Confession of

Judgment Proceeding Against a Mortgagor Satisfy

the Due Process. Requirements of the Fourteenth

Pm using wicks thx ba ge onesie uesedine.: |

II. The Pennsylvania Confession of Judgment Procedure

as Applied to Mortgagors Satisfies the Require-

ments of gs Process Because the er Is

IV. Even if the Pecieeaiil hnssaitiglin Guarantees Rights

Not Provided by the Confession of Judgment Pro-

cedure, Such Rights—Like, Other Constitutional

; Rights—May Be Waived ........2..........0..

ConcLission +ush sh ONGs<atane tn ete le. eeeeeeeeeeeeeees Les

a ' TABLE OF CITATIONS.

Page

Surety Co. v. Baldwin, 287 U. S. 156 (1932) ....13,29

mg v. Manzo, 380 U. S. 545 (1965) ............000. 13°

Balthazar v, Mari, 301 F. Supp. 103 (N, D. IL) afd, 396 |

U. S. 114 (1969) 22.2.0... iewawbatawsesy fs oxes wee 16

Budd v. Coyer, 273 Pa. 309, 117 A. 449 (1922) ....0:..0... oD

Cafeteria Workers v. McElroy, 367,U. S. 886 (1961) ....... 12

Chaffee v. Johinson, 229 F. Supp. 445 (S. D. Miss.), aff'd, 5th

Cir., 352 F. 2d 514, cert. denied, 384 U.S. spe ...27, 28

Chavis v. Whitcomb, 305 F. Supp. 1359 (D. C. Ind. 1969) . 27.

Coe v. Armour Fertilizer Works, 237 U.S. 413'(1915) ....: "13, 30

Coffin Bros. v. Bennett, 277 U. S. 29 (1928) ...:........ 505 13,14.

_ Communications Comm. v. W. J: R., 337 U.S. 265 (1949) . 12

‘Den ex dem. Murray v. Hoboken Land & a Co, |

18 How. 272 (1856) 2... cece cece cece ec Seceeee ences 12

Epps, et al. v. Cortese, et al., Civil No. 70-2592 (E. D. Pa,

Mar. 31, 1971) °...... lexn anal esses bebeyesetncacscn’ 22

Ewing v. Mytinger & Casselberry, Inc., 339 U. S. 594 (1950) 15

Fahey v. Mallonee, 332 U. S. 245 (1947) ......... eekenees 14

Fay v. Noia, 372 U. S. 391 (1963) ........ seenees Lineehens’-. 20

Goldberg v. Kelly, 397 U. S. 254 (1970) ......20....04 e000 17

‘ _ Goodrich v. Ferris, 214 U.S. 71 (1909) ............0ce ees . 8

Grannis v. Ordean, 234 U. S.'38§ (1914) .......... wevedese 8

Hansberry v. Lee, 311 U. S. 32 (1940) .............. 2.2 eee 27°

Harris v. Harris, 32 D. & Co. Rep. 2d.14, 51 Del. Co. Rep.

EE ~) ae een on Se Lesyeneesis ll.

Jamerson ¥. Lenhox, 321 F. Supp. 656 (E. D. Pa., 1970) . 28

Jenkintown Nationat Bapk’s Appeal, 124 Pa: 337,” 17 A 2 |

(1889) ..... ere a aac eee enn ee ae | |

Johnson v. Zerbst, 304 U. S. 458 (1938) ...... Sesweecnetes,.

Joint Anti-Fascist Committee v. McGrath, 341 U. S. 123 .

Nas calc sce hys tes eencnvenicdeetancicials 12, 24

a Ce

TABLE OF OITATIONS (Continued).

Yank v. Eisenberg, 408 Pa. 36, 182 A. 2d 505 (1962) ........ 11

Cases (Continued): L Page

Koen v. Long, 302 F. Supp. 1383 (E. D. Mo), aff'd, 428 |

<2 VBE BG Oth Gr 1970): ocarewrcresy an sente coe 27

- Milliken v. Meyer, Jf1 U. S. 457, (1940) °.........¢eee eens 8.

Mullane v. Central Hanover Bank & Trust Co., 339 U. S.

506 C198D): sick vecaitensty cance eeet a. uae bets 7,8

National’ Equipment Rental Ltd. v. _Szukkert, 375 U. §. SIL

(1904) es views aeueun Vecarmeuei nel eieaceareeataens “29 .

O'Neill v. Metropolitan Life Ins. Co., 345 Pa. 232, 26 A. 2d

BOB. (IMA): 6 saci casisnceusied tin eaeraatebocs ou me | |

Pélelas v. Caterpillar a 113 F 2d 629, cert. denied

S11 U.S, 700: (1900) 25 Miwctcrcccwenstccrpesstad: 27

Pennsylvania Co. for Insurances on Lives and Granting An- —

_ nuities v. Watt, 151 F. 2d 697 (5th Cir. 1945) {..2..6. a a

Philips v. Commissioner, 283 U. S. 589 (1931) nt Ane 13

Pierce v. Somerset R. Co., 171 U. S. 641 (1898) .........:. - 8

Sam Fox Pub. Co. v. United States, 366 U. S. 683 (1961) .... 27

. Schroeder v. New York, 371 U. S. 208 (1962) .........65.0 7220

‘Sniadach v. ekaety Finance Corporation; 395 U. S. 337 (1969) _

_ 15, 16,17

Steamship Co. v. Emigration Commissioner, 113 U. S, 38

URES 55 intenaes su kews eae eS gS tose eda. Sedesieanae 27

United States v. Illinois Central R. Co., 291 U. S. 457 (1934) il

United States v. Shimer, 367 U. S. 374 (1961) ............. 19

Wall v. Parrot Silver & Copper Co., 244 U. S. 407 (1917) . 30

Weeks v. Bareco Oil Co., 125 F. 2d 84 (7th Cir. 1941) oer,

TABLE oF. CITATIONS eae

. eatinias aca Raia: ~ | | ~

Federal Tax Lien Act of 1966 Pub. L. 89-719, 80 Stat. 1125.

Fed. R. C. P. 23(c) MG NO) cssccccics ein valeeas bees 7 ee

Philadelphia Court of Common Plas Rule 3129() (1) and (2) 6. i

12 Pad: Sit: Ago: BG. PO eck 97 od

12 Purd. Stat. App. R. C. P. 1030 .......... Gees Sel

12 Purd. Stat. App. R. C. P. 2621.1 paskvesc teen teestackat ie

12 Purd, Stat. App. R. C. P. 2958 ...... Ee ey Pere une ees,

12 Purd. Stat. App. R. C. P. 2959(e) ........0. | ae

12 Purd. Stat. App. R. C. P. 2960 ...,..... ions Ae

12 Purd. Stat. App. R. C. P. 3129(a) ......... peeewees ae

12 Purd. Stat. App.-R. C. P.3129(b) ..........ccccceeees 7

12A Purd. Stat. §3-307(1) and (2) ........ hehesvedeseans 11

‘15 U.S. C. A. §1635(a) (Supp. 1971) ........... ssaeettae. 2S

21 U.S. C. § 304(a) 2... e ei cnc ee cece cceeecccceeues . 15

26 U. S.C. A. § 7425 (1967) oo eee ceeteccceccececcccceecs 19,20 -

28 U.S. C. A. § 2410 (1965), as amended (Supp. 1971)..... 20

SS SinwdeseenesuGeeseaduce 21.

Miscellaneous: | | a

' 38 Pa. Bar Assn. Quarterly 92, 93-4 (Oct. 1967) .......... 20

- Philadelphia Bar Aumaiation, Minimum Fee Schedule, March

RS, TPR, oF ois voncenevdensconcvenecgesecaceecccocces 10

7 Standard Pennsylvania Practice 138 (1961) sitiwsereevese 9

SI eR neo parecer SUERTE stoner ots canner

a ee aie i ee eel

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INTEREST OF AMICUS CURIAE, PENNSYLVANIA.

‘SAVINGS AND LOAN LEAGUE.

The Pennsylvania Savings.and Loan League is an asso- :

: ciation of savings and loan institutions located throughout

Pennsylvania. All parties have consented to the filing of

.this brief and the written forms of consent have been filed —

with the Clerk of the Supreme Court. In the court below-an :—

association known as The-Insured Savings and Loan Asso-

ciations of Philadelphia and Suburbs filed a brief as amicus '

curiae but, since the case has state-wide implications, the

se Pennsylvania Savings and Loan League was considered to so

- be a more representative &micus..

The nature of the business of savings and loan associa-. -

tions is lending money for the purchase and development of.

real estate. In this connection, the common practice of the

| ‘institutions represented by Amicus is to use a document

called a ‘‘bond’? or ‘‘bond and warrant’? which evidences

the debtor’s promise to. repay the loan, together

- another document known as the mortgage ‘which, upon -

recordation, constitutes a lien on nr real estate providing

security for the repayment of the

to confess judgment against the debtor and, upon default, -

this authorization is used to obtain the judgment upon which .

" execution will issue against the mortgaged real estate.

_ It should be noted here that savings and loan associa-

’ tions require that the mortgage be insured as a first lien

upon the real estate securing repayment of the debt.. Thus, 3

‘there is always a ‘‘closing’’, or ‘‘settlement”’ of the loan

_eonducted by a representative of the title insurance com- _ -

pany insuring the lien of*the mortgage. Typically, an at- =

torney or real estate broker represents. the buyer, who is

_ borrowing money either: to purchase real estate or improve

it.. Thus, professionals who have training: and experience

; ~ in the field are intimately involved i iti the bond ‘and mort-

ebt. The “‘bond’” or *

‘‘bond and warrant’’ customarily contains an authorization

9° °°. |" “Brief of Amicis Curise

gage transaction and provide any explanations or assistance

needed by the debtor in order to understand fully the terms

of the documents he is asked to sign. . e

The constitutionality of all types of confession of fale

ment was challenged by appellants in the lower. court and,

although the attack on confession was successful as to

certain types of transactions, the court was persuaded that _

there is no constitutional infirmity when the practice is used *

in bond and mortgage transactions. Accordingly, the. court

ya sustained the practice of confession as applied to bond and |

mortgage transactions. The court was persuaded that these

transactions are materially different from many other types

of consumer credit transactions. Moreover, the court con-

cluded that the evidence submitted by appellants did not

prove the existence of a class of persons which is being de-

-prived. of: constitutional rights. The various safeguards —

surrounding bond and mortgage transactions prevent the.

abuses—real or imaginary—that appellants claim are

present i in other types of Pennsylvania credit transactions.

‘On this appeal, the Pennsylvania Savings. and Loan .

League is izg to sustain the practice of using confession -

of judgment ofauses in bond and mortgage transactions. As -

of December 31, 1969, insured savings and loan associations

in Philadelphia, Chester, Delaware, Bucks and Montgomery

Counties had invested $2,666,728,000 in first mortgages

on real estate. In Philadelphia alone, the figure is |

‘ $1,622,029,000. Obviously, this is a critically important |

industry which is essential to the commerce and economic -

health.of Pennsylvania. Also of significant interest is the

’ fact that Philadelphia has the lowest mortgage interest rate ©

of all major cities in the United States—a eae benefit to-

the mortgage borrower. :

Confessions of judgment are used in various types of

‘instruments, e.g., leases,’installment sales contracts, judg-

ment notes, and bonds and warrants. Savings and loan

a Brief of Amicus Curiae = 8

". associations use. confessions of judgment only in bonds and

, warrants accompanying mortgages, where the loan is used *

for the purchase or improvement of real estate, and the .

mortgage is given as security for repayment of the debt at

- the time the loan is made. The situation of these savings \\.

_ and loan associations is quite different from that of other

creditors using confession of judgment. : a

Pa)

4 _ | Brief of Amicus Curiae

SUMMARY OF ARGUMENT.

The Pennsylvania rules governing confession of judg- :

ment and execution give a mortgagor adequate notice and

_a fair opportunity to be heard on the merits of the under- |

- lying debt, by way of a petition to open the judgment, before

he may be bas iy of the use and enjoyment of his prop-

erty. ~ The pe :

duly burdensome for the mortgage debtor; it is no more

expensive than an ordinary complaint proceeding and the

. . burden of proof is unchanged.

tion to open judgment procedure is not un- -

The Pennsylvania procedure comports with funda- .

mental principles of fairness, as have been heretofore estab-

lished by the -decisions of this’ Court and by common ex-:

‘perience. This is not a case where a person is deprived of —

_. his'sole means of support before’ having an opportunity to

challenge in court the validity of the grounds alleged for so-

depriving him. In fact, nothing tangible is taken from the

debtor before he is notified of the actions being taken

against him and given a full and timely opportunity to have’

his ‘‘day in court’’. Pennsylvania has established a |

—_thorough procedure to guarantee that a debtor will not be

~. deprived of his property without first having a minimum

of ‘twenty days’ notice and an unrestricted opportunity - to

litigate his defenses in court. Thus, prior to losing posses-

sion of'the property and prior to sale, the debtor is afforded.

_ ‘@ meaningful period of time within which to exercise his

. right to a judicial hearing. - | |

-. Where propérty rights only are, at stake, it has never

os been the law—except in unusual-circumstances—that due

process requires a hearing before judgment so long as a

fair opportunity to be heard is provided at some meaningful .

stage of the proceedings. In the case of confession of:

usual circumstances justifying

exception to the general |

judgment on bonds sccompanying mortgages, no such un- .

Brief of Amicus Curiae i, 2 | 5

pit are present; on the. contrary, in: are valid and con-.

stitutionally sound reasons for affording mortgage creditors

summary procedures for collecting delinquent debts. Fur-

-hermore, none of appellants’ evidence on this point was

“edirected to the circumstances presented when a debtor signs.

a bond and warrant accompanying a mortgage. Accord-. ©

ingly, the court below was correct in limiting the relief

. granted to the class of persons to which the evidence was. .

:. addressed. The Pennsylvania confession of judgment pro- _

_ cedure. is not substantially different from the confession of. =

judgment procedure in many other states. and it is as fair

as other forms of creditors’ remedies. found both in Penn- |

' sylvania and in other states. _

_ ».. Even if the Court finds that the Paisyivaaes con-

. fession of judgment procedure infringes certain rights and.

thereby violates due process, such rights—like other con-

stitutional rights—may be waived. But we submit that the

‘confession of judgment procedure does not violate the

. Fourteenth. “Amendment, With or Nc rae & waiver. — Ean ;

. ‘

Te : ‘ :

os ; = Bay

EP LTE RA OI EP TENt >

| judgment proceeding, the m

. and the time and place of the

ae oe be . Brief of Amicus Curiae

1 $s es ea Tk oe me ci

Rules of Civil Procedure in a Confession of Judgment

Proceeding Against a Mortgagor Satisfy the Due

Process Requirements of the Fourteenth Amendment.

_ The Pennsylvania Rules of Civil Procedure provide the

mortgagor with many opportunities to be informed of the

actions being taken: against him before he may be deprived *

of his property in a confession- of judgment. proceeding.

- The mortgage debtor is given notice of the mortgagee’s

right to confess judgment, | notice of the entry of* judgment,

. notice of thé issuance of a writ of execution and notice of -

the proposed sale. sag *.

In order to foreclose on\a mortgage i in a cdiibenilin of

) must give the follow-

ing notices to the mortgage debtor of. the entry of judgment

eriff’s Sale: ,

. -{1) Philadelphia Court of Common Pleas Rule.

3129(f)(1) provides that no execution shall issue to ©

sell the mortgaged property upon a judgment aeied

on a bond unless. the: plaintiff has first notified the

mortgage debtor and the owner of the property by '

' certified mail of the date of the entry of judgment,

with the court, term and number thereof. The Pénn-

| \ _ sylvania Rules of Civil Procedure provide that within

__ twenty days of the date of entry of, judgment the plain-~

tiff must notify the debtor by ordinary mail of the same »

- . facts as those contained in the 3129(f)(1) letter ‘plus

the amount of the judgment. 12 Purd. Stat. App.

_ B.C, P. 2958(a). The plaintiff must file of: record an

affidavit that such notices have been sent. he

(2) In aceérdance with Philadelphia Court of Com-

mon Pleéas-Bule 3129(f ) (2), the plaintiff must notify the

"Brief eS, oe : E We

‘ sslnctgngs \dichidehey piesa aitcs AMMA aL fe

at least ten days before the date of the Sheriff’s Sale |

of the place, date and hour of the sale, Bule 2958 pro- ©

vides that no sale may be held ‘unless. the debtor has

been given at least twenty days’ notice by ordinary .

mail of the Sheriff’s Sale. 12 Rurd. Stat. App. RB. C. P...

2958. An affidavit that such notice has been sent AS

also- be filed of record. Lee gee

(3) Pennsylvania rules require that notion of tlie

Sheriff’s Sale must be given by the Sheriff by handbill

posted in the Sheriff’s’ Office and by posting of the

property to be sold at least. ten days prior to the sale.

The notice must describe the property’ to be sold, its jp

location, the improvements, if any, and must identify

the’ judgment of the court giving rise to the sale, the .

name of the owner and the time and bce of sale. 12

Purd. Stat. App. R, C. P. 3129(a). a

.; &@& Notice containing the facts ‘outlined i in para- .

graph 3 must be given by publication by the Sheriff -

‘once a week for three successive weeks in a: newspaper -

of general circulation and in the. legal newspaper ' ee

the county where the real estate is located. The first.

advertisement must be at least twenty-one days before

_ the date of the/sale. 12 ee Stat. App. ete 2. .

=e 3129 (Db). :

. The rules outlined ies with respect. to notice are

resinenistbl «alculated, under all the circumstances, to ap-

prise interested parties (debtors as well as record

ownérs of the mortgaged property) of*the pendency of an :

action and to afford them an opportunity to present. their

_ defenses prior to the Sheriff’s ‘Sale. This, of course, con- .

stitutes compliance with the requirements set forth in —

_.* Mullane v. Central Hanover Bank & Trust Co., 339 U. 8.

306 (1950) and Schroeder-v. New York, 371 U.S. 208 (1962) ;" :

s “aN ie | Brief of Amicus Curiag

’ eras also Milliken v. Maan, 3i1 U. S. 457 (1940), alee wv.

aay Ordegn, 234: U. 8. 385 (1914). Not only i is the martgage

co debtor aerved with notice by ordinary/as well as certified —

ye -mail—a procedure approved as constitutional in “Mullane v.

Vow ‘Central Hanover Bank & Trust Co., ‘supra—but the real

estate (which i is normally the-residence of the’ mortgage

“~* > debtor). is also posted with a handbill and. the same in-

formation i is published for three. successive weeks in the’

- county’s legal néwspaper . and a. j- powapapet of eet

} sireulation..

The facts. set forth. in aa notices convey to all in- .

| terested parties the relevant information. When provided }

with such notice, the mortgage debtor can easily determine

‘the course of action he wishes to pursue. Furthermore, the . .

| amount of time: afforded such debtors between the date of.

the entry of. judgment and the final disposition of. the case,

‘ * which i is approximately four or five weeks (and never less

than .twenty. days) .is clearly a reasonable and sufficient .

amount of time to take whatever steps are necessary to pro- °

-tecttheir property.. . See Goodrich v. es 214 ws S. 71.

ee (1909).

While it i is true that the nation given to the asbtor hin "

not advise. him of his legal tights, we know of no authority ate

-which would require that such advice be given in a civil

case in order to satisfy the notiee requirements :of the

‘ Fourteenth Amendment. Of course, the-deWtor is given

a complete: notice concerning the entry of judgment and the

* intentiozi of the creditor to. sell the real estate secured by ~

. | the mortgage, and, this notice is given within ample time .

Rs (at least twenty days and-usually longer) for the debtor to

request a. hearing. For this Court to go further and hold:

~such notice to be insufficient on the ground that due process

- Tequires | that. parties to. all proceedings, civil as well as

. criminal, have to be given notice of their legal rights would :

ee" create havoo:i in our judicial — estes

Brief of Amicus Curiae. 2. Se

The notice requirements imposed the Pennsylvania os

Bules of Civil Procedure are clearly sufficient to inform

‘mortgage debtors of all relevant information before their ~.

property may be sold to satisfy the judgment. ‘As a ‘result,

the debtor is given a full opportunity to request a hearing.

Thus, the requirements of «due process are satisfied and’ |

_ there i is no violation of ‘the Federal ‘Constitution.

_ IL. The Pennsylvania Conféssion of Judgment Procedure Ce a

_ Applied to Mortgagors Satisfies the Requirements of :

Due Process Because the Mortgagor‘Is Afforded a Fair

Opportunity to Be Heard Deteee Ho Lepetens 6¢ i

Property... a \

Besides affording - the iiietaeabaie abund: t notice of

the proceedings being taken against him, the Pennsylvania

rules governing the confession of judgment method of fore-

closure also give the debtor a fair opportunity to be heard

not only as to the mortgagee’s ‘compliance with relevant

procedural rules but also as to. all of the merits. of: the

controversy, including any issués presented which relate to

the validity of the underlying debt. The niortgagor has this

right to a hearing by virtue of the Pennsylvania common

law and the Pennsylvania Rules of Civil Procedure, which:

give him the right to petition to strike the judgment : and to

petition to open the judgment. ‘The right to.be heard on

the petition is an absolute right; the hearing is not granted

as a matter of favor or courtesy but is guaranteed to*the

debtor by. the Pennsylvania: Rules of Civil Procedure and:

may not be waived. 12 Purd. Stat. App. R. C. P. 209; 7

Standard Pennsylvania Practice 138 .( 1961).

Appellant alleges that confession of jitgnnent places an

ubfair burden on the debtor because it forces him to file a

petition’ to strike or to open’ the judgment i in order to set.

forth his defenses. We challenge the soundness of appel-

lants’ a a —_—— of judgment — an

i | ae - Brief of Amicus Curiae

unfair burden on the mortgagor. We submit that it is no —

- more difficult or expensive fora mortgagor to file a petition

to open judginent than it is to file an answer to a complaint.

Contrary to appellants’ allegation, the debtor is not re-

quireal by law to pay the Sheriff’s costs when filing a peti- —

_ tion to open judgment, and the attorney’s fees in each type

of case would be approximately the same. See generally,

_ Philadelphia Bar pn, te Fee. Schedule,

March 23, 1971. 3

Appellants are also in error in asserting that a. hearing

on a petition to open judgment is more costly for the mort--

gagor than a hearing on a complaint. Appellants contend

_ that the evidencé presented in the hearing to open the judg-

‘ment is limited to ‘*expensive’’ depositions ; however, this

contention is unsupported and untrue. While the judge to

whom the application is made acts as a chancellor in: equity,

he will consider and weigh evidence presented i in the form

of interrogatories, affidavits, exhibits and witnesses as well

as depositions. 12 Purd. Stat. App. R. C. P.: 2959(e). Once _

the mortgagor has succeeded in opening the judgment, the -

case may then be settled by the parties so as to obviate the |

need for a subsequent judicial proceeding. | Even if subse-

quent proceedin$s are necessary, the. legal expenses and

court costs incurred in opening the judgment will generate

‘savings in the following proceedings because no further

pleadings are required in such circumstances—12 Purd.

Stat. App. R. C. P. 2960—and because any depositions,

_ interrogatories, affidavits or other evidence collected for the = .

. hearing on the, petition to open can be used either as evi-

dence in the subsequent proceedings or in lieu of pre-trial.

: dincowagy. ;

: . Farthermore, appellants’ contention that the mort-

gagor has a more. difficult burden: of' proof on the issues

presented when he petitions to open the judgment than he

’ has in an ordinary complaint proceeding is unfounded. In

Brief of Amicus Curiae = -—s dM

an orditfary complaint proceeding, the creditor makes out —

a prima facie case upon presentation of the debt instrument

and the debtor has the burden of proving all affirmative de-

fenses.. O’Neill v. Metropolitan Life Ins. Co., 345 Pa. 232, .

"239, 26 A. 2d 898 (1942) ; 12A Purd. Stat. § 3-307(1) and {2)-

‘Such defenses include (but are not limited to) accord and

_ satisfaction, arbitration and award, discharge in bank-

ruptcy, duress, estoppel, failure of considération, fraud,

illegality, immunity from suit, impossibility of performance,

laches, license, payment, release, res judicata, statute of

. frauds, statute; of limitations and waiver. 12 Purd. Stat. -

App. R. C. P. 1030. ‘The burden of proving these affirma-

_ tive defenses remains with the debtor in a petition to open

the judgment. The only change, in fact, favors the debtor:

the burden of pavof on the question of whether the'signature _

to the bond or mortgage is‘genuine rests with the creditor.

Yank v. Eisenberg, 408 Pa. 36 (1962). Furthermore, to

' place some of the burden of proof on the mortgagor is not ©

- . in and of itself unconstitutional ; this Court has held that to

plaee the burden of proof upon the party who may even-.

tually be deprived of property’ as a result of the outcome

of a judicial hearing is not inconsistent with the dictates.

of due process. United States v. Illinois Central R. nie 291

U.S. 457. (1934). | -

The standard of proof to be met : by the mmnictgnies debtor

in order to open a judgment is laid down by the common.

law of Pennsylvania. It is evident from a reading of the

cases that this standard of proof is not burdensome; a peti-

tion will be denied only when the weight of the evidence is

so against the petitioner that a trial court would have been .

~ obliged to reverse a jury verdict in his favor. Jenkintown

National Bank’s Appeal, 124 Pa. 337, 17, A. 2 (1889); Budd -

‘v. Coyer, 973 Pa.- 309, 117 A. 449 (1922) ; Harris v. Harris, |

32 D. & Co. Rep. 2d 14, 51 Del: Co. Rep. 10 (1963). Even

| if the Court finds that the standard of proof required of

eet \

12° Brief of Amicus Curiae

the petitioner is unduly burdensome and, therefore, an un-

- ° constitutional encumbrance on his right to a fair hearing, —

. it does not follow that confession of judgment is also un-

constitutional. In that event, it will be sufficient for the

- Court to rule that the burden must be lightened. In other

words, the thrust of appellants’ attack should be against the

standard adopted by common law rather than againat the

statute. itself.

Thus, ‘a mortgagor i in Pennsylvania has—as a matter of ©

right—a full opportunity to present at a judicial hearing

all his defenses with respect to any judgment entered by |

confession. It should also be kept in mind that during the

‘pendency of these judicial proceedings the mortgagor con-

tinues to have the unrestricted beneficial use of the real

estate securing the debt. -

- IT. Confession of feiss. as Applied to ‘Mortgsgors

. Satisfies Fundamental —e of Fairness and,

_ Therefore, Accords Due Process.

"What kind of notice . and opportunity for a hearing

_ constitutes ‘‘due process of law’’ is a question that can be

- answered only by weighing and balancing the various in-

terests involved, but the State’s determination of which ©

interests are to prevail as manifested by the procedure it.

has adopted should be upheld unless it violates fundamental

principles of fairness. Joint Anti-Fascist Committee v.

_ McGrath, 341 U. S. 123, 162 (1951) (Frankfurter, J.con-

curring) ; Cafeteria Warkers v. McElroy, 367 U.S. 886

(1961) ; Communications Comm. v. W. J. R., 337 U.S. 265,

273 (1949); Den ex dem. Murray v. ‘Ribeken Land &

Improvement Co., 18 How. -272 (1856).- Due process does .

not require a pre-judgment ‘hearing in all cases, but only

that there be a reasonable opportunity to be heard and to

préserit all defenses at some meaningful time and. i in’ some

| Brief of Amicus Curiae =, 13

meaningful manner. American Surety Co. v. Baldwin, 287 —

U. 8.156, 168 (1932) ; Coffin Bros. %. Bennett, 277 U. 8. 29, |

31 (1928) ; Philips v. Commissioner, 283 U: ‘8. 589, 596-97

* (1931) ; Armstrong v. Manzo, 380 U. 8. 545, 552 (1965).

Coe v. Armour Fertilizer Works, 237 U. 8. 413 (1915),

relied on by ‘appellants, does not support their position. In

‘contrast to the rights of notice and an opportunity to be

heard guaranteed to debtors under Pennsylvania law, no

such rights were guaranteed by the Florida statute in Coe.

That: case involved an execution ursuant.to a Florida stat-

ute upon the personal assets of a stockholder of an insolvent

corporation. The stockholder had no right to official notice

of the proceedings against him And. was given no oppor-

tunity at any time to raise all of his procedural «and sub-

‘stantive defenses. He was afforded a hearing only on the .

question of whether he was, in fact, the owner of stock upon.

which there was an unpaid subscription and on whether the’

amount of the execution upon his personal assets ae

the — subscription. Under the Florida statute:

a ie the person against whom the ecneitled 3 is

issued i is not in fact a holder of stock upon which there

* Is an unpaid subscription, or if the amount of the ex-

~ ecution exceeds the unpaid subscription, he may have

_. relief... and. . . in the absence of such objection

on his me the exdtation is enforced, although there

may have been only- a formal levy, without even such .

“notice to the owner of the. property as might be implied

from a forcible seizure or an’ ae with his

' possession. 9 237 U; 8. at 422. 3

‘This Court held that Florida’ 8 providur was a denial of

due — stating :

. [B]efore a third party’s aves may be taken to

ar y feat. - . indebtedness upon the ground that he

1440 Brief of Amicus Curiae

| _is a stockholder and indebted to the corporation for an

unpaid subscription, he is entitled, upon the most ©

fundamental principles, to'a day in court and a hearing

upon such questions as whether the judgment is void

| or voidable for want of jurisdiction or fraud, whether |

: he is a:stockholder and indebted, and other defenses

personal to Kimeelf:”” 237 U. & at 423.

Sines the only aa ce available to the stockholder excluded |

all evidence except that concerning his status as a stock-

‘holder, toe render judgment against him amounts-to ad-

‘=. judicating matters not within the pleadings and not in fact

litigated.

‘To do this without his wcaaneiie ona the’record shows —

no consent—is contrary to fundamental Lamas of

— 237 U. S. at 426.. wo

“In the case at bar, there has been no failure to panei,

mortgage: debtors with notice and an opportunjty to be

heard. In contrast to the Florida statute, the Pennsylvania

m Rules of Civil Procedure provide for official notice and for

*. a fall hearing at which the mortgagor can raise all his .

defenses to the underlying debt. __

_Insofar.as property rights are concerned, as long as

due process rights are assured to the parties at some mean-

ingful stage of the proceedings; there is no constitutional

violation ; ‘‘The 14th Amendment is not concerned with the F

. form.” Coffin Bros. v. Bennett, 277 U. S. 29, 31 (1928).

For example, in /'ghey v. Mallonee, 332. U.S. 245 (1947), the

Court found that th placing of a savings and, loan asso-

ciation in the he a conservator prior to a hearing— |

pursuant to the regula ons governing the Federal savings —

and loan system and in orcas with established =

—— a

Brief of Amicus Curiae = 5

eustom—was not unconstitutional. In Ewing v..Mytinger .

& Casselberry, Inc., 339:-U. S. 594 (1950), the Court held ;

that the Administrator enforcing Section 304(a): of the

| Federal Food, Drug and Cosmetic Act, 21 U. 8. C. § 304(a),

could find probable cause of misbranding of articles without

_ ahearing. Such a finding of probable cause permitted the

removal. from the market of the misbranded. rticle and

authorized the commencement of private actions for dam-

. ages based on the finding of misbranding. In spite of the

. hardship and the deprivation of property involved, Justice

Douglas, writing for the majority, concluded that there was _

no violation of the due process clause of the Fourteenth -

Amefdment, saying: |

- “Tt is sufficient, where only property rights are con- °

cerned, that there is at some stage an opportunity for —

a hearing and a judicial determination. ” 339 U.S. at

' §99. ( anna added.)

On the other hand, in ‘Sniadach v. Family Finance Cor-

| poration, 395 U. S. 337. (1969), where the Court was ‘con: -

fronted with an attack on a Wisconsin statute whieh au-

thorized, pre-judgment garnishment of wages. before any

judicial determination of the rights of the parties, the pro-~

cedure was found to violate due process. We agree that

* such a ‘freezing of Wages is fundamentally unfair. But,. as

this Court observed, wages are a very special type of prop- |

erty and the decision was made with specific reference ‘to

" wages. The problems and deprivations tnyolved in freezing ;

- @ man’s wages are totally different from those involved in

providing an expeditious procedure for the foreclosure of |

-Mmortgages-where the property is already subject: to the Ken...

' of the mortgage and where there is no. actual taking of

property before the debtor has an opportunity to be heard,

_ While we endorse the decision in Sniadach, we say that-it

«.* : - . : nee

16 . | - Brief of Amicus Curiae

does not aa te this case because of the rational under- °

lying it. |

‘‘The result is that a pre-judgment Parone ete of the

Wisconsin type may.as_a practical matter drive a wage-.

earning family to the wall . . . [and hence] violates .

7s the fundamental principles of ane process. *? 395.U.S.

: at 341-342. ; :

Pennsylvania does not even senninit post-judgment garnish-

ment of wages, and for very sound reasons, for the. concept

of attaching wages in the hands of an employer i is indeed’

an oppressive means of collecting a debt. !

. + In reaching its decision i in Sniadach, the Court: empha-

sized that the garnishment of wages is a unique procedure |

and constitutes a significant taking of property, since it im- .

” poses a tremendous liardship upon the.wage earner living

- hear the subsistence level, to whom even the temporary loss _

of a few dollars may be catastrophic. Farther, the Court

was concerned that a worker might lose his job because the

employer: finds it troublesome to administer the garnishment.

It is significant -that in Balthazar v. Mari, 301 F. Supp.

103 (N. D. Il.), aff’d. 396 U. S. 114 (1969), the Court re-.

jected a contention based on Sniadach that the summary

sale of property on a tax lien constituted a deprivation

without due process. In pointing out that wages are unique, —

- the Court reiterated the. ig of the majority-opinion

in Sniadach :

The Sinsianlins Court’s recent garnishment decision,

Sriadach v. Family Finance Corp. ., 395 U. 8. 337, 89

S. Ct. 1820, 23 L.: Ed. 2d 349, is inapplicable. ‘We deal

here with wages—a” specialized. type of property pre-

senting distinct problems in our economic system.’ 37

L. W. 4520.” ne — 301 F. sate at

/ 106, n. 5.

Brief of Amicus Curiae . eee

peers also rely on Goldberg v. Kelly,-397 U. 8. 254

(1970) which, following the logic of Sniadach, required a

hearing before welfare payments could be terminated. But

Goldberg is essentially the same casé as Sniadach. In both

cases the primary concern of this Court was to protect

against the possibility. of summarily cutting off income

needed to provide basic living conditions. If anything, the

decision in Goldberg is narrower than the decision. in

Smadach because—by definition—welfare payments are _ ~ Ee

sole means of support of the recipient.

The entry of judgment by confession pursuant c au-

thority contained i in a bond accompanying a mortgage on :.

- real estate simply does not work the kind of hardship or”

deprivation on any. class, rich or poor—especially mort-

. gagors—which caused the Court to strike down pre-judg-

ment garnishment i in Sniadach. .For in Pennsylvania ‘the

‘debtor: retains the beneficial use and enjoyment of the ‘real |

estate upon which the savings and loan association executes

until final disposition of the proceedings, Before such final- |

disposition can occur, the debtor is given notice -of the:

proceedings and a fair opportunity (a minimum of twenty

days and usually longer) to obtain a hearing on the merits

by simply filing a petition to open the judgment. |

‘The State has an interest, not only in conserving finan-

cial resources by providing summary remewies, but als@in ©

making available adequate remedies to creditors so gpat .

credit transactions, upon which the economic welfare of the ©

State. depends, are made available on a low-cost basis to..

_ the broadest range of consumers. It is riotable that Phila-*

delphia has the lowest mortgage interest rate of all major

‘cities in the United States. Attached to the brief filed: by

The Insured Savings and Loan Associations of Philadelphia

and Suburbs in the court below is a copy ‘of a report ‘dig

tributed by the Federal Home Loan Bank Board on Januar}

29,1970. The last two pages of this report show the interest fe Bs

18 | a : ‘Brief of Amicus Curiae

rates dearest in varjous cities Pa So the country. For

December, 1969, Philadelphia’s interest rate was_ 7.06% ;

this is the lowest rate in the nation. The rates range from

Philadelpliia’s low of 7.06% to a high in Denver of 8. 78%.

One of the factors which affects the mortgage interdst rate

in Philadelphia is the long established and-relativély. simple

method of foreclosure, made possibl™y the ability to con-

Pi,

fess jud nt against a delinquent mortgagor. To abolish |

this effective means of .foreclosure, will undoubtedly start

~ to channel mortgage money out of Pennsylvania and this, in

turn, will cause thé eens rate of interest in Pennsyl-

. Vania to increase.

“4 The ‘Pennsylvania confession of salen procedure

- can be. accomplished: i in approximately four weeks. If a

_ petition to open the judgment is filed, it can be adjudicated,

~-in the County of Philadelphia, within a ‘few months. If

confessions of judgment are held to‘be illegal, the alterna-

- tive procedure ‘will be a complaint in mortgage foreclosurd.

This complaint must be served on the mortgagor by the

Sheriff and, once service has been made, the defendant has

twenty days to file an answer. ‘In his answer, the mortgagor ~

- can demand a jury trial and; if he does, it will take as long .

as five years (in the County of Philadélphia) before the

matter goes to trial. Daring all of this time, the savings

and loan association can take no action, even if the mort-

7 gagor makes no payment whatsoever.

: Time is of the essence when a defaulting mortgage

| ‘borieese 4 is. the resident of the property; for he will fre-

quently vacate the property, thereby exposing it. to vandal-

ism. When the mortgage borrower abandons the property, —

- the exposure to vandalism and the absence of occupants to

maintain the property depresses the-market value and this

“ jeopardizes the. mortgage lender’s sectirity. ‘This. also ..

works to the detriment of the debtor, because it increases.

the probability that the proceeds of the sale will be insuffi-

Brief of Amicus Curiae 19

-* Gient io satisfy the creditor "s claim a that the. creditor

. will seek to establish a deficiency judgment. - AN

‘The mortgagee. will be further impeded in collecting ~

oa from the mortgage debtor if Pernsylvania’s confession oN

judgment procedure is declared unconstitutional because -™

. more than one full-dress judicial action may be necessary to

' collect the full amount of the debt. -If'the mortgagee has to

proceed by complaint in mortgage foreclosure, the judg-

ment he obtains will be an in rem judgment ; and, conse-

quently, .he will have to proceed again in ‘assumpsit to

collect any deficiency that may arise if the proceeds of the ©

execution sale do not equal the unpaid balance of the mort:

gage. In addition, after the in rem judgment is obtained

ahd execution is completed and before he may proceed ;to

bring a&@ action in assumpsit, the mortgage creditor. must,

if he ig the purchaser. at the execution sale, petition. the

court to have the fair market value of the premises ascer- |

‘tained. This value, rather than the sale proceedg, deter-

mines the amount of the deficiency. If the mortgagee fails .

to petition the court for this purpose within‘six months, he

forfeits any deficiency he might otherwise have obtained.

All interested persons must be served petition and ©

. they may file answers to the averments é petition. A

hearing must be held not sooner. than ten days after the

petition is served. 12 Purd. Stat. § 2621.1 et seq.; United |

States v. Shimer, 367 U. S. 374 (1961) ; Pennsylvania Co,

for Insurances on Lives and Granting Piasaed v. seh,

151. F. 2d 697 (5th Cir. 1945)...

Another complication which arises

proceed only by complaint in mo

consequence of the Federal Tax Lien,

‘foreclosure is a

of 1966, Pub. L.

89-719, 80 Stat. 1125. Unlike a° confession’ of judgment. —

proceeding, where the mortgagee proceeds by complaint and

_ there is a Federal tax lien on the real estate 1 to be sold, the :

8 Government minet be made a party to tha «lit 36 U. 8. C. ~ a

e - . +.

» :

) ‘ . :

3 .

‘

‘a mortgagee, can

20 3 : : Brief of Amiel Curiae Lo

- Act if plaintiff

. § 7425 (1967 ). . "After jadgméat. has been taken, : plaintiff

: proceed with execution fd. sale but the property re-

ject to. the pcr cara sight of ee. for

‘as long as a year.

mains

Appellants content that. confession of Sateinaat: ‘ats

Sin only a few states and, by liniiting_their remarks to. con-

fession of judgment, they imply th id almost all states have

: abolished summary procedures r. thie enforcement * 4

ereditor’s claims. But: this ‘is saints not

| First, confession ‘of judgment exists *in T polilactlity

: the same form as it does in ‘Pefigsylvania i in a majority of .

states. In none of the. statutes: cited below is’ the debtor

*. given more protection, more notice or opportunity to be

heard than the ‘mortgage debtor is given under the Penn- - -

sylvania procedure: Alaska, Alaska Statutes Sec. 09.30. 050

(1962) ; i. Cahfornia, West’s Ann: C. 6k. § 1132 (1955); °

— C: B.S. 1963 § 13-16-6. (1968) ; Delaware, 10 Del_— -

. §3908 (1953); Idaho, Idaho Code §10:901 (1949) ;_

nia S. H. A. ch. 110 § 50 (1966) ; Iowa, Iowa Code An-

notated 676.1 (1951) ; Maine, 9M. R. S: A. § 3724 (1964) ;°

WA’ substi preblem ariseg“under the Federal ‘Tax Lien

t utilize the complaint method rather than the -

confession of judgment method. If-a\search disclosés that a-Federal

Tien has been filed against the mortgagor, and-plaintiffis proceeding ___

:by confession of judgment, the lien ‘can .be’ discharged simply by

- giving the United States Government twenty-fivedays’ notice of the |

sale. 26 U. S. C. A. §7425(b) and (%) (1967). On’ the other

-hand, if plaintiff is proceeding by complaint in mortgage foreclosure,

the Government ‘must be named. as a party and must: be served with

~a.copy of the eotnplaint. The Government then has sixty days in

‘. which te file an ‘answer. .28 U. S. C. A. § 2410 (1965) ; as, amended

(Supp. °1971) ; 38 Pa. Bar Assn. ‘Quarterly 92, 93-4.(Oct. 1967).

me Ae Federal tax lien is involved, the Govertiment has 120

days ‘after the sale in which to redeem the property, but if another

type of lien is involved, the Government has one year in which to ~

redeem. 28 U. S. C. A. §2410(c) (1965), as amended (Supp...

1971). - Under the confession of | gp sete procedure, the Govern-

ment has only 120 days to redeem regardless of the type of lien .:

holds: 26 U. S.C. A § 7425(4) (1 67).

. > . Se . SPO

ere a . et ae

Brief of Amicus Curiae o ~ aes “ol =

Mishigen, 0: 0. Ti A. § 6008906 (1 (1967) Minnesato, M.S.A..

-§ 548.22 (1964); Missouri, V. A. M. S..§511.870 (1969) ;

__ Nebraska, R. BR. S. 1943 4 25-1309. (1970); New Jersey,

N: J. S. A: 2A; 13. (1968); New York, C. P. L. B. § 3201, ©

§ 3218 (1963) ; North Carolina, General Statutes of North

Carolina § 14-1, Rule 68.1 (1964); North Dakota,’ North

Dakota Century oda: Rules of. Civil Procedure, Rule 68(e),

North Dakota Century Code, 51-13-02 (1960) ; Ohio, Page’s

Ohio Revised Code Annotated § 2323.12 (1968) ; Oklahoma,

12 Okl. St. Ann; § 689 (1958) ; Oregon, O. B.S. § 26.119.

(1969) ; South Carolina, Code of Laws of South Carolina

"1962 § 10-1535. (1962) ; South Dakota, S. D. C. L. 1967 See.

21-26 (1969) ; Utah, Utah Code: Annotated 1953, Rules of .

Civil, Procedure, Rule 58A(e)- (1953) ; Virginia, Cede of

: Virginia 1958 §.8-356 (1966); Washington, R. ©\W..A.

4.60.050. (1962); West Virginia, West Virginia Code

"- § 56-448 (1966); Wisconsin, W. S.- A. 270.69 (1966);

Wyoming, Wyoming Statutes: 1957 § 1-309, § 1-312 ( 1959).

_ If the: Pennsylvania procedure i is unconstitutional) so must

all the other ‘states’ confession . judgment procedures be»

oe unconstitutional. °

Second, other summary sella for the piotadiian:

-of creditor’s interests—which afford no,more. notice \or-

- opportunity to be heard than -the Pennsylvania confession

. of judgment procedure—are quite common. For example,

under the Uniform Commercial*Code, Sec. 9-503; a securéd

creditor’may take. possession of -his collateral upon the

debtor’s default without judicial action provided only that

no breach of the peace ogurs. If a secured creditor chooses.

_.. to proceed instead with the aid of the courts, lie is entitled

to replevy the property. In either case, the debtor is. de-

prived of possession of his property before there has been’

_ any opportunity for a judicial determination of his rights '

under the security agreement. This procedure gives léss —

protection: to the debtor than the Pennsylvania confession

* Brief 0 o Amiq SC

= of judgment procedure: in the one cum he loses his prop- |

_ erty before being heard and in the other he retains his

property and merely’ suffers an encumbrance before being

heard. If Penngylvania’ 8 confession of judgment procedure

~ violates due process, so must many of these other creditor’s

remedies. We note that several suits: have already been. .

brpught challenging the constitutionality’ of replevin ac-

tions, e.g., Epps, et al. v. Cortese, et al., , Civil No. 70-2592:

_(E. D. Pa., Mar. 31, it ge:

Similarly, in the case of loans secured by mortgages on: iF,

real estate, it is common practice in a great number of

states to.use deeds of trust., Under the deed of trust pro-

cedure, the debtor places title to the mortgaged ; real estate

- in a trustee who is authorized, upon default, to advertise ~

~~ the real’ estate for sale, hold an. auction sale and transfer

"title to.the successful bidder upon payment of the bid price. ..

The proceeds of the sale are applied—in accordance with °

the terms of the deed of trust—first on account. of the’

creditor’s claim and then to the equitable.owner: The deed

of trust précedure, with only: minor variations from state —

to state, is used-in-thefollowing states: Alabama, Alaska,

Arkansas, California, District of Columbia, Georgia,

_ Hawaii, Idaho, Maine, Michigan, Minnesota, ‘Mississippi, ~

‘Missouri, Montana, Nebraska, Nevada, New Hampshire,

New York, North Carolina,. Oklahoma, Oregon, Rhode

Island, South. Dakota, Tennessee, Texas, Virginia, Wash-

ingtongW est Virginia, Wisconsin, Wyoming.* Sa

3. Alabama, Code of Ala. Tit. 47 §§ 164-171 (1960) ; Alaska,

~ Alaska -Statu es § 34.2090 1962) ; ‘Arkansas, Arkansas. Statutes

1947 § 51- i112 § 51-1113 (1 ; California, West’s Ann. C. C. P.

-§ 692 (1955).; District of Columbia, D. C. C. E. § 45-615 (1966);

Georgia, Ga. Code Ann. § 37-607, § 37-608 (1935) ; Hawaii, H.R. S.

Ree 1968) ; Idaho, Idaho Code Aarheag (1949) ; Maine, 14

rh R. g A. eg 6201-6204 (1964) ; age pcg at F A. §§ 3201-3280,

1964, No. 102; Minnesota, M. 380-01 (1964) ; i ssh

Mississippi ‘Code 1942 Ann. § 888 “a ); Missouri VLA.

er sai — sgiascuscre Codes of “Montana 1047,

Brief of Amicus Curia a ss s

| if senha judgment’ in : Pebmaytvania is is undon-

- Stitutional, the deed of trust procedure is also unconsti-

tutional, “for \the Pennsylvania. Procedure. is considerably

‘ more solicitous of the interests of the debtor then the deed - :

of trust procedure that prevails in at. least twenty-nine

states. For example, in Pennsylvania, the auction sale is

conducted ‘pursuant toe the Rules of Civil Procedure 1 ider |

the supervision of the Court of Common Pléas. Obviously,

this provides ‘protection to debtors that is not available in.

‘the case of a/ sale made by. a private trustee —— .to . ":

the terms of a deed of trust.

Appellants submitted evidence i in the wwe court to the.

effect that the Pennsylvania confession of judgment pro-

cedure was fundamentally unfair and therefore a violation,

of: due process, but we wish to point out that none of this

? evidence concerned situations where the debtor -had signed.

‘* a bond and warrant accompanying a mortgage. Whether

or not the Pennsylvania confession of. judgment ptocedure

is fair depends upon the nature of the document signed “es

the circumstances waabibrer a its signing. oe

‘« Whether the .. ~ Ptoeedure . duly observe[s]

the rudiments of fair play,’ :.. somniit, therefore, be

22 ag F a Vernon’s Ann. Civ. St. Art. 381

appealing. The precise nature of. the interest that a

3 (cont'd). ; :

+. 70.616 (1957); Nebraska, RR Sx1943 8 76-1001 + to 76-1018.

(1970); Nevada, N. R..S.° §§ 107.010. to 107.080 (1963) ; New

Hampshire, R. S. A. c. 479 §§ 25-27 (1955) ;.New York, Real

erty Actions and Proceedings Law §§ 1401- 1403 (1963) ; North

. Carolina; Gerieral:-Statutes of North °45-2A ( 1964) ;

\ Oklahoma, 46 Oki: St. Ann. § 31-9 (1958).; Oregon, O. R. S. 86.710

(1969); Rhode Island, General Laws _of Rhode Island —34.27.1,-

. 34244, 34.11.22 (1957) ; South Dakota, S. D. C. L. 1967 2148-1.

(1969); Tennessee, Tennessee Code aainied $8 §.35-501 to 35-511 : .

(1964) ; Virginia,

ibaa), Woes § 55-59 (1966); Washington, R. CW. A.

est

61 24.030 (1862) Virginia, West Virginia Code, c. 38, art. 1

- $3.84 (1966); Wisconsin W..5. A. co 27 (1966); W.

yoming,

— Statutes 1957, — 34-63, 34-64, Sec. 34-68:70 (1959). »

teed Sad mere generalities or sentiments abstractly (..

e Meree ‘Brief of Atvicus Curiae

. been adversely affected, the manner in which this was,

done, the reasons for doing it, the available alternatives.

' to the procedure that was followed, . . , the balance

of hurt eomplained of and good accémplished—these

are some of the considerations that must enter into the

judicial judgment. »” Joint Anti-Fascist Comm. v.

McGrath, 341 uv: ss 123, 163 =) eepitar=. J,

concurring). :

8 ees evidence parinined- only to cases Mf Stnecine ?

~ Installment loams and. consumer installment sales ——

not. one of the n ed appellants i in this case is.a mortg

_ gage transactions were not included m the Caplovitz survey

or in the testimony of any witness except for Miss Mims: and *

_ Mr. Casnoff and the destimony they. gave pertaining to

mortgages was favorable to our position. Miss Mims testi-

‘fied that when she obtained a purchase money mortgage on

- her home, she was pe lange ted by counsel at the settlement

(N. T. 62, May 14, 1970). Mr. Casnoff testified that in ‘all

. the settlements he attendel

after- his admission.to the Bar, .

: : complaining about 4 savings and loan association. aie oO

the mortgagor was represented by an on ‘atone ie veel ————

~ estate broker (N. T. 105-110, May 14, 1970). Whether or.

not the attorney or real estate broker explained to. the.

mortgagor the meaning of the: confession. of judgment

clause, their knowledge and understanding of its significance

is: imputable to -the mortgagor. - The Opinion ‘of the lower

‘ court notes the absence of evidence relating to mortgage :

_ -transactions at page 12, 314 F. Supp. 1091, 1098-1099 wa D..:

Pa. 1970). lS ses : :

to bond and mortgage transactions is clearly shown by its discussion

- with counsel.on May 14, 1970; see N: F. 24-25, May 14, 1970, where

-the court ‘referred to the distinction made by Mr, ‘Caplovitz and

oon bares mortgage transaction and other types of confessed

tae See also,.on the same point, N. T, 6-7, 30-31, June

“x ee RR gtr er Cra Er ey em oy

We also colar thé-Court to the Stipulation of mall .

_ dated January. 29, 1970—regarding what, certain witnesses -

Bewer say if called to. testify—which’ contains” generaliza- |

_ ‘tions that are inaccurate when applied to savings and loan _

- “ assdviations :- (1) The usual attorney's fee’ contgined in a

bond and warrant is 5% rather.than the figure of 15% to

20% mentioned in the Stipulation. The higher percentage

: ‘Brisfo of Amicus Cugiae = ae 25. Si

may appear in the confessions utilized by other creditors,

but not in ‘the bond and. warrant utilized by. savings and

~ loan associations ; (2) The statement that the debtors were

‘not aware of or did not understand. the confession clause :

‘does not apply to qmortgagors since they are represented at

settlement by an attorney or real. estate broker, who has

the duty of explaining to the mortgage: borrower the terms .

_ Of the documents he.is signing ; (3) The statement that the

; contract was forced upon ‘the debtots,- that judgment was

entered prior to default, that the first notice was that a

‘Sheriffs Sale had been scheduled and that the debtors have

.. defensgs such as forgery, failure of cénsideration, .non-

+ defauft, delivery of defective goods, breach of warranty,

—-ete:, is sins tiajpplicable to bond and mortgage transactions.

' First of all, there is no evidence of. any. high pressure

tacties having: been used on a mortgagor in an attempt to |

‘ob his signature. , In addition, ‘the Federal Truth-in-.

a Lendi Act, 15 U. S.C. A’ §1635(a) (Supp. 1971), gives

the mortgagor a three day right of recision after he has _

- " signed the documents in any case where an existing loan

_ $e’ r-real estate has been refimanced (e. g., where the.

_ terms of the loan have been changed at the borrower’ 8

request) or where the loan is made 'to a borrower who al : |

ready owns his home but wishes to. borrow on the security

of it, The Court can readily see that there is ample time

not only for the mortgagbr’ s attorney or broker’ to explain Bee

_ the confession of judgment procedure, but also tithe ee

"the ‘mortgagor to i oo a document ‘‘forced -— him.” ates,

- out of a dispute | concerning 5

26 . __ Brief of ‘Amicits Curiae

Secondly, the defenses that could be raised by ‘the’ in

of installment loans or installment sales contracts (such as

breach of warranty, failure of delivery; etc.) are not avail-

able where savings and loan associations lend for the pur--

pose of financing the acquisition ef real estate. The mort- ~:

gagee neither sells the property securing the loan nor. buys .

consumers’ notes from sellers of property. On the contrary,

the mortgagor -purchasés the preperty from an unrelated

third party. Consequently, the range of possible defenses ‘ =

is substantially eircimscribed. and their natifre _ vastly.

simplified. The normal mortgage foreclosure-does not arise

ality or performance of

the item sold; i

ge ‘debtor simply has failed to make his payments.5 *

, eae _. Appellants’ argument that Pennsylvania’s confession

of judgment procedure is fundamentally unfair failed to —

address. itself to the unique circumstances presented when

_ ‘a borrower signs a bond and warrant accompanying a mort-".

gage. No évidence_was ‘presented to.the court below that —

would indicate a need to abolish confession of judgment as

applied to mortgage debtors. ‘Even assuming ‘arguendo ~

\ that some of. appellants’ evidence did relate to bond and

NO ao transactions, appellants failed to: présent any

idence of unfairness or overreaching suffiétently per-~ “@

e to justify this Court in overturning a determination

. made bythe Pennsylvania Legislature as to how.the in-

rests of the mortgage lender, the mortgage borrower and:

1e State are to be accommodated.

Appellants’ allegation that, since the (deciticn of the :

‘lower court was announced, bonds: and warrants accompany-

- ing mortgages are being used in ordinary consumer install-

S. Any defeilsen that, the: mortgage boriower could reisé with

respect to his purchase are an independent matter and are not

coe — ;

_— ee

creditor forecloses because the .

fe aie

< ‘

: «. oe eee Brief of Amicus Curiae

validity cannot be tested without a jehearing “Wo compet: oe

~~ fully submit that it should be Ciaegar tet The lower court ae

is-iot to be formulated “broader than is vaained by

16 precise facts to which it i is. to be applied.’’ Steamship

——~" Go. v. Emigration Commissioners, 113 Ue"S. 33, 39 (1885).

‘It 'is chear that the trial court had-legal authority ‘to re-. .

defing the class ; such authority is ‘expressly gyanted in Fed.

_ +... : Practor.Co.,113 ¥, 24.629, cert. denied, 311 U. 8. 700 (1940) ;

A. Sam Fox Pub. Co. v. United States, 366 U. 8. 683, 691

@. (1961); Hansberry v. Lee, 311 U. S. 32 (1940). “Whether

~”. -* @ class action will fairly insure adequate representation of

* all members of the class, as required by the Federal Rules,

se is a question of fact for the trial court and its determination

ye should not be disturbed unless clearly erroneous. -Pelelas -

ee ‘v:; Caterpillar Tractor Co., supra; Weeks v. Bareco Ou Ce,

eae: 125 F.2d 84,-93-4 (7th. Cir. 1941).° 5.

.. If the distinctions between the oe ae created by’

the lower court are not clear cut, the reason may- be that

the class sought to bé represented by the appellants is *

‘simply: tod broad and heterogeneous and has too great a — : , .

disparity of interests for a court. to recognize this suit as

jaclass action. Chavis v. Whitcomb, 305 F’. Supp. 1359, 1363

“ (D.-C; Ind. 1969). Courts have held that a class action is’

‘ class depends upon the state of mind of a particular indi-

7 vidual, rendering it difficult, if not impossible, to determine.

whether any given individual is within or without the |

: alleged class.’’ Chaffee v. Johnson, 229 F. Supp. 445, 44>

(8. D. Miss.), aff’d, 5th Cir., 352 F. 9d 514, cert, dented, 384

+, U.8. 956 (1966) ; accord Kies v. Long, 302 F., Supp. 1383,

= 1388" (E. D. Mo. ), aff'd, 428 F. 2d 876 (8th Cir. 1970). Many

8 : oe Brief of Amicus Curiae

of the allegations made by appellants a as ‘aieinas for relig@

in the case at bar, such as duress, lack of understanding,

overreaching, etc., go to the state of mind of the:individuals ~

‘Involved and defy categorization by classes in such a way:

ethat: the members of the class are “capable of definite

‘identification: as. being either in or out of it.’’ ‘Miah ee v. oe

Johnson, 229 F. Supp. at 448." — f

” Appellants’ attempt to broaden the classi is sities ‘

- unfair because ‘they failed to join as parties to this action

‘mortgagees and other creditors who would be affected by

°9 Ssane,.*

the judgment. Nevertheless, they sought a decree that .

-- wauld prevent: mortgagees from using the confession of

'., judgment method of féreclosure. . Amicus represents such

gnortgagees, but this is no substitute for being a party to

the case. -Not only does such exclusion prevent adequate

notice of the course of the proceedings and of the arguments |

of the parties apd of: 46 various amici, but it also’ {prevents

™

- such mortgagees from presenting: evidence and. testimony ;

ini support of. their position. Consequently, several factual

misstatements in the record and in appellants’ brief could

not be refuted except by unsupported allegations, that were

$8: clearly dehors the record and, therefore, improper. We ° =

. note that the attorneys for appellants have already filed —

another .action in the Eastern District of Pennsylyania

: ‘which specifically seeks to have the Pennsylvania practice _

of confession of judgment ‘declared unconstitutional as -

applied to debtors. who ‘sign’ bonds and warrants accom-

_ panying mortgages and fhey again "proceeded by suing fo

. enjoin the Sheriff and the Prothonotary, who are‘not inter- —

ested in the outcome of-the suit, leaving it to the real,parties

- . in interest to intervene as parties or as amici at the dis--

cretion of the court, if and when they obtain notice of such -

a suit. Jamerson v. Lennoz, 321 ‘F’. Supp. 656 (E. 'D. Pa.,

1970). In Jamerson appellants joined a few real parties

SS vit of Amicus Curiae

= refu éd to hear 4ité case unless they did 80. |

' eB

"May Be Waived.

3 In Pennsylvania the creditor is hot permitted to confess —

'.. judgment unless the debtor has authorized him fo do so ee

writing. The authority to conféss judgment is contained jn

the warrant accompanying or. made part of the bond that’.

the debtor signs at the 4ime of closing the loan. This Court

I¥g Even If the Fourteenth Amendment Guarantees Rights

. Sedure, Such Rights—Like Other Constitutional'Rights

has held that a debtor, may consent: to the entry of judg. |

. In American )

_ (19327, the Court f@nd that the confession. of ju

_ pursuant‘ to ‘a power of attorney in a supersedeas -

_. without any prior hearing was ‘effective because:. |”.

@ . x

in interest as additional defendants only after’ the court

‘

ment without pfior notice and without a prior hearing, for -

a person® may effectively waive his: cofstitutional ig ts.

Surety Co. v. Baldwin, 287 U.‘8, 156, | 168

Pi aS ars [T]he surety company consented to the entry of. -

judgment against it without notice for his ‘failure to

~pay.”’ 287 U. 8. at 168. (Emphasis added.)-- -

Ina more récent case the Court again,held that consent -

Will operate to waive the benefit of a-gonstitutional right,

National Equipment Rental Ltd. v. Seukkert, 375° U. ae

(1964). In this case the defendants; ‘who resided in Michi- . .

. San, signed a contract authorizing plaintiff ‘to serve them -

- In New York. Defendants ‘later contendéd that service in

_. New York was citieffective’ unde the Fourteenth Amend-

. ,ment, but the Court rejected this argument, saying?

“¢«

/- +++» [[}tis settled as'the courts below recognized, that is

pérties to a contract may agree in advance to submit

to the jurisdiction of a given court to permit notice to

+~@

‘

= ie = _ Brief of Amious Curiae

= served ‘a the opposing party, or even to watve notice ar

1° altogether.” ”? 375 U.S. at ‘B15:316. (Bimphasis added.) \ :

This Couirt i in both cases ‘enforced the waivers in + ite

_ of the fact that the Fourteenth Amendment, in the absence ~

_ of awaiver, would have justified the opposite result. “See.

also, Pierce v. Somerset R. Co., 171 U. 8. 641 (1898) ; Walt

_v: Parrot Silver.é Copper Co., 244 U, S. 407 (1917).

~* The mortgage’ debtor in Pennsylvania is invariably .

* represented by an attorney or a real estate broker and ‘he

is ‘advised at settlement of the creditor’s rights. Attorneys _

-‘ and. realtors are quite fgniiliar with the standard forms.of —

‘bonds and mortgages and; of course, they have no difficulty .

- . in explaining the terms to the borrower. All Penngylvania

borrowers sign contracts from time to time that.“eontain

confession of judgment clauses. The lawyers in this case -

have no doubt signed such contracts on nuthérous: occasions.

“. In the cases discussed abové—which were civil proceed-

abe ‘ings—this Court held that a persgn may waive rights -

granted to him by the Fourteenth Ameniiment. Of course,

the same principle applies in criminal proceedings, where. ~

. .even the general public is ‘aware of: the-fact that persons

accused of crimes may waive their rights (e.g., the right to

Yemain silent and the right to have a lawyer) even. though

these rights ape guaranteed by the Federal Constitution. °

Johnson v. Zerbst, 304 U. S. 458 (1938) ; Fay v.-Noia, 372-

U, S$. 39] (1963). inal: proceedings—where the stakes «

: — much — e — courts enforce. waivers i

day. “oe

A person may waive constitutional rights either in

” writing or by his conduet,. fn civil proceedings as-well as

eriminal proceedings. Coe v. Armour Fertilizer Works, 237

. . U8. 413 (1915), mistakenly relied on i ae cake .

uppers? eur ponition: ws _

‘hee

oe a » Brief of Amicus Curiae ¢: . a

_ [Tyhe eonrt 3 in effect cohdiead jena agihiat

him upon a matter that was not within the pleadings age

"and was not in fact litigated. To do'this without his oe

oonsent—and the record shows no consent—is contrary . *

_ to fundamental principles mada ne 251 U. S.at 426. f=, :

_ (Emphasis added.) : eae Pot ghee ae

= |. Even if the Fourteenth Amendment’ ganraniane’: ghts

to ae not provided under ‘Pennsylvania law, thesé rights—fike

_ ‘other constitutional rights—may-be waived. But we submit ‘

~ that the confession of judgment procedure does not Violate.

- the Fourteenth Aniendment—with or without a waiver. ; me

pore

: For-the reasons stated above, We Ae Oe request . -

that the Court affirm the judgment pe th the lower court...

lids Respectfully submitted, | *

os HERBERT Basa, _ : . f

oy ~ Wiiriam L. Marz, | ; .

a cae _ Attorneys for Pennsylvania on

Savings and Loan — ae ort

. ¢ . : . . . , os a

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