Delaware Business Litigation Report

Superior Court Denies Motion to Vacate Confessed Judgment

PNC Bank v. Sills, 2006 WL 3587247 (Del. Super. Ct. Nov. 30, 2006)

In this opinion denying Defendants’ motion to vacate confessed judgment against them, the Superior Court examined whether the Defendants had satisfied any of the considerations relevant to whether an entry of confessed judgment should be vacated. Defendants guaranteed a loan that Plaintiff made to a Delaware limited liability company for a boat. Plaintiff recorded a mortgage on the boat, and upon the limited liability company’s default, initiated proceedings in Superior Court to confess judgment against Defendants. After Defendants failed to appear to object to the entry of judgments, the Court issued final judgments against them. The mortgaged boat was then sold at a court approved judicial sale for less than the outstanding loan balance, and Plaintiff initiated proceedings to execute upon the confessed judgment to recover the deficiency. Defendants filed an objection to execution and the motion to vacate the confession of judgment under Superior Court Rule 60(b). The Court found that Defendants had received proper notice of the confessed judgment, had no meritorious defense to the confessed judgment, and did not use reasonable diligence in filing the motion to vacate. The motion was therefore denied.

 Defendants argued that Plaintiff did not properly serve notice under Superior Court Rule 58.1 in conjunction with Rule 4. The Court, however, found that notice was proper as it was served to the address contractually agreed upon in the Guaranty and Suretyship Agreements, and the individual who signed for the notice on behalf of Defendants had “at least” apparent authority to do so.  Defendants also argued that Plaintiff was not entitled to a deficiency claim because it did not comply with the notice and “commercially reasonable” sale requirements under Article 9 of the UCC. The Court found that Defendants were legally capable of and did contractually waive the Article 9 notice requirements in the Guaranty and Suretyship Agreements, but that even under those requirements, Plaintiff had provided “reasonable notification” of the judicial sale. The Court further found that the procedure that Defendants followed in selling the boat was commercially reasonable. The Court also concluded that the record lacked evidence to support Defendants’ argument that Plaintiff was equitably estopped from seeking a deficiency judgment because it allegedly promised to seek repayment of the loan balance from another guarantor before seeking it from Defendants. Finally the Court found that Defendants did not meet the standards for relief from judgment under Rule 60 because they did not have a meritorious defense to repayment of the loan and failed to act with reasonable diligence in pursuing the present motion, given that Defendnats delayed for over one year before filing the motion. Share