J-A24005-15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

NOTE ACQUISITION, LLC IN THE SUPERIOR COURT OF

PENNSYLVANIA

v.

SCOTT MORRISON,

Appellant No. 3430 EDA 2014

Appeal from the Order Entered November 26, 2014

In the Court of Common Pleas of Delaware County

Civil Division at No(s): No. 2014-00817

BEFORE: PANELLA, J., WECHT, J., and STRASSBURGER, J.*

MEMORANDUM BY PANELLA, J. FILED NOVEMBER 06, 2015

Appellant, Scott Morrison, appeals from the order denying his petition 

to open or strike the confessed judgment on a note entered against him by 

Appellee, Note Acquisition, LLC. Morrison contends that the trial court erred 

when it failed to treat Note Acquisition as an alter ego of its sole member, 

Michael Wei, who happens to be a co-debtor on the note and therefore 

jointly and severally liable on the note with Morrison. We conclude that 

Morrison has failed to establish that Note Acquisition’s involvement as a 

party in this matter has increased Morrison’s financial exposure under the 

note. We therefore affirm.

____________________________________________

* Retired Senior Judge assigned to the Superior Court.
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The relevant factual background of this case is largely undisputed. 

The questions before the trial court and those on appeal are primarily legal 

in nature, and concern the legal consequences that flow from the actions 

taken by Wei and Note Acquisition.

Morrison and Wei were partners in a venture to create a high-end 

restaurant. To this end, Morrison and Wei were members and co-managers 

of several business entities, including 789 Lancaster Associates, LLC (“the 

Borrower”). In May 2007, the Borrower borrowed $1,500,000 from 

Wilmington Trust of Pennsylvania (“Wilmington”). Morrison, his wife, and 

Wei all executed guaranties of repayment of the loan in their personal 

capacities. Later that year, Wilmington assigned the loan and guaranties to 

TriState Capital Bank (“TriState”). Morrison and Wei expressly consented to 

the assignments.

After the Borrower defaulted on the loan, the parties entered into a 

forbearance agreement in June 2009. Under the forbearance agreement, 

TriState agreed to refrain from pursuing its remedies for default under the 

note upon two conditions. First, that the Morrisons and Wei personally 

reduce the outstanding balance on the note to $1,000,000. After this, the 

Morrisons and Wei would execute a new note (“New Note”) under which 

they, in their personal capacities, and not the Borrower, would be the 

primary obligors for the $1,000,000 balance. Shortly thereafter, the parties 

executed an allonge that modified the repayment terms, but preserved all 
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other aspects of the New Note. The subject restaurant failed later that same 

year.

In 2013, Wei formed Note Acquisition as its sole owner and managing 

member. Wei then transferred personal funds to Note Acquisition, which the 

company then used to purchase the New Note from TriState. On January 

28, 2014, Note Acquisition confessed judgment on the New Note against 

Morrison. Morrison subsequently filed petitions to open or strike the 

confessed judgment. Discovery ensued, and a hearing was held on 

November 3, 2014. Shortly thereafter, the trial court entered an order 

denying the petitions. This timely appeal followed.

On appeal, Morrison raises three issues for our review.

1. Did the trial court commit legal error in refusing to open 

the judgment confessed against Morrison by Note Acquisition, a 

single purpose entity wholly owned and controlled by Wei 

(Morrison’s business partner and a co-maker on the note), where 

Note Acquisition purchased the note by paying the bank in full, 

thus extinguishing the debt owed on the note by both Morrison 

and Wei as co-makers, and leaving Wei (and his entity) with only 

a common law claim for equitable contribution to recover 

Morrison’s proportional share?

2. Did the trial court commit legal error in refusing to strike 

off the judgment because the parties modified the promissory 

note after executing the original version containing the warrant 

of attorney, but failed to restate the warrant of attorney in the 

loan modification documents?

3. Did the trial court commit legal error in refusing to open 

the judgment because the assignment of the promissory note 

from the bank to the single purpose entity wholly owned by 

Morrison’s co-maker Wei materially changed the nature of the 

Morrison’s obligations as between himself and Wei, rendering the 

assignment invalid?
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Appellant’s Brief, at 3.

Morrison’s first and third issues are challenges to the trial court’s 

refusal to open the judgment. His second issue, in contrast, is a challenge 

to the trial court’s refusal to strike the judgment. Striking a judgment and 

opening a judgment are distinct remedies, and have distinct standards of 

review on appeal. Regarding Morrison’s second issue premised upon his 

petition to strike, our standard of review is set forth in Knickerbocker 

Russell Co., Inc. v. Crawford, 936 A.2d 1145 (Pa. Super. 2007). There, 

we explained that 

[a] petition to strike a judgment is a common law proceeding 

which operates as a demurrer to the record. A petition to strike a 

judgment may be granted only for a fatal defect or irregularity 

appearing on the face of the record.... An order of the court 

striking a judgment annuls the original judgment and the parties 

are left as if no judgment had been entered. 

In determining whether fatal defects exist on the face of the 

record for the purpose of striking a judgment, a court may look 

only at what was in the record when the judgment was entered. 

We review a trial court’s refusal to strike a judgment for an 

abuse of discretion or an error of law. 

Id., at 1146-1147 (citations omitted). 

Similarly, Morrison’s first and third issues, challenging the order 

denying his petition to open the confessed judgment, are reviewed for an 

abuse of discretion. See PNC Bank, Nat. Ass’n v. Bluestream 

Technology, Inc., 14 A.3d 831, 835 (Pa. Super. 2010). A petition to open 

judgment is an appeal to the equitable powers of the court. See PNC Bank 
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v. Kerr, 802 A.2d 634, 638 (Pa. Super.2002). As such, it is committed to 

the sound discretion of the hearing court and will not be disturbed absent a 

manifest abuse of discretion. See Bluestream Technology, Inc., 14 A.3d

at 835. A “petition to open rests within the discretion of the trial court, and 

may be granted if the petitioner (1) acts promptly, (2) alleges a meritorious 

defense, and (3) can produce sufficient evidence to require submission of 

the case to a jury.” Id., at 836 (citation omitted). 

In his first issue on appeal, Morrison argues that the trial court erred in 

refusing to open the judgment, as Morrison asserts that Note Acquisition was 

merely a façade that should be disregarded. Morrison contends that as a 

result, Note Acquisition’s purchase of the New Note should be treated as Wei 

satisfying the new note, leaving Wei only with the right to pursue a common 

law contribution action against Morrison.

While there is a dearth of recent, relevant, Pennsylvania case law on 

the issue, we agree with Morrison that had Wei purchased the note from 

TriState in his personal capacity, the obligations and rights under the note 

would have been discharged. See 13 Pa.C.S.A. § 3602(a) (“[A]n instrument 

is paid to the extent payment is made by or on behalf of a party obliged to 

pay the instrument and to a person entitled to enforce the instrument.”); 

see also Hess v. Gower, 11 A.2d 787, 789-90 (Pa. Super. 1940) (opining 

that under the since repealed Uniform Negotiable Instruments Act a maker 

who acquired a note from his creditor discharged the note). Thus, under 
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this scenario, Wei would not have the right to enforce the confessed 

judgment provisions of the New Note, but would only have right of 

contribution against Morrison. See id., at 790.

However, Wei apparently understood this consequence as well, since 

he did not purchase the New Note from TriState in his personal capacity. 

Rather, Wei formed an LLC, Note Acquisition, which purchased the New Note 

from TriState in its own, separate capacity. Morrison concedes that, at first 

impression, Pennsylvania law treats Note Acquisition as a separate and 

distinct legal entity from Wei. See Appellant’s Brief, at 16. Morrison argues, 

however, that this facial treatment can be “disregarded whenever justice or 

public policy demand.” Id. (quoting Ashley v. Ashley, 393 A.2d 637, 641 

(Pa. 1978)). Obviously, Morrison believes, and argues forcefully, that justice 

demands that Note Acquisition’s separate legal identity should be 

disregarded in this case.

Morrison argues that Wei utilized Note Acquisition to subvert legal 

processes to provide Wei with greater rights than those to which he was 

entitled. Specifically, Morrison contends that Wei’s use of the right to a 

confessed judgment under the New Note constitutes a perversion of justice 

that the court system should not countenance. In support, Morrison draws 

our attention to Good v. Holstein, 787 A.2d 426 (Pa. Super. 2001). 

In Good, the defendants, the Holsteins, had taken out a first mortgage 

on their property, and personally guaranteed the first mortgage. The 
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Holsteins subsequently took out a second mortgage from Good Transport 

Ltd., the plaintiff, Ethan Good’s, corporation, but they did not personally 

guarantee the second mortgage. The Holsteins ultimately defaulted under 

both mortgages.

Good Transport obtained a judgment on the second mortgage. Ethan 

Good then purchased, in his personal capacity, the first mortgage from the 

original mortgagee, Eggo. Ethan Good then filed a confessed judgment 

against the defendants, in their personal capacity, on the surety agreement 

for the first mortgage. Thereafter, Good Transport purchased the property 

for approximately $2,000 at a sheriff’s sale on the judgment for the second 

mortgage, and subsequently transferred title to Ethan Good. After 

determining a fair market value for the property, the court found a 

deficiency of approximately $325,000 on the second mortgage.

Ethan Good then proceeded to trial against the Holsteins on their 

suretyship of the first mortgage. For reasons unclear from the opinion, the 

trial court calculated the Holsteins’ liability under the first mortgage by 

subtracting the deficiency on the second mortgage from the fair market 

value on the property, and applied the result as a credit against the 

outstanding balance of the first mortgage. Thus, the trial court found the 

Holsteins personally liable to the Ethan Good in the amount of approximately 

$315,000. The Holsteins appealed from this judgment. 
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On appeal, this Court reversed the trial court’s decision, first by 

determining that the separate corporate identity of Good Transport should 

be disregarded under the facts of the case.1 As a result, the panel concluded 

that Ethan Good was, in fact, the holder of both mortgages at the time he 

obtained a deficiency judgment on the second mortgage. Therefore,

[o]nce [Ethan Good] purchased the property at the sheriff’s sale, 

he had a duty to [the Holsteins], as sureties on the senior lien, 

to satisfy the senior mortgage first. However, by suing on the 

junior lien first, [Ethan Good] impaired the sureties[’] collateral, 

exposing them to greater liability than they could have 

reasonably anticipated. [Ethan Good] cannot subordinate the 

senior lien by virtue of his possession of both liens. Thus, the 

surety on the first mortgage was satisfied when the property was 

attributed a fair market value sufficient to cover the entire 

amount of the surety agreement. The fact that [Ethan Good] 

proceeded against the junior lien before he obtained the senior 

lien does not absolve his duty to the surety of the senior lien to 

discharge the liens in order of their priority.

787 A.2d at 432 (citations omitted) (emphasis supplied).

Thus, the panel based their decision on two circumstances. First, that 

the Holsteins, in signing the surety agreement, could not have reasonably 

anticipated that they would not have the benefit of the fair market value of 

the property as a credit to reduce their liability under the suretyship. 

Second, the panel found that Ethan Good, as holder of the first mortgage, 

____________________________________________

1 The opinion does not explicitly address the nature of the suretyship. Thus, 

it is unclear from the opinion whether this was necessary, considering Eggo’s 

and Good Transport’s failure to preserve their security interest for the 

benefit of the Holsteins as sureties. See, e.g., First National Consumer 

Discount Company v. McCrossan, 486 A.2d 396, 399-400 (Pa. Super. 

1984).
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had violated a duty he owed to Holsteins as sureties on the first mortgage. 

Based upon these two circumstances, the panel reversed the judgment.

Here, Morrison argues that Wei has similarly perverted the legal 

process by using Note Acquisition to preserve the remedy of confessed 

judgment where it should have been extinguished. Morrison contends that 

he could not have reasonably foreseen that Wei would be able to exercise 

the right to confessed judgment, and therefore Good provides that the 

courts should ignore the separate corporate identity of Note Acquisition.

While Morrison has provided thorough advocacy and argument on this 

theory, we disagree. First, it was not that the Holsteins could not reasonably 

foresee who would sue them under the suretyship, but rather that they 

could not foresee the amount of the financial exposure they faced given 

Ethan Good’s legal maneuvering. This is a significant distinction. It is clear 

that the note and mortgage in Good were assignable, just as they are in the 

present case. Thus, in both cases, the debtors were aware that it could be 

an assignee that sought to enforce the note. What is different is that 

Morrison cannot cogently argue that his financial exposure has been 

increased through Wei’s maneuverings.

Morrison does argue that his exposure was increased from half of the

balance to the entirety. However, this is not true. He was always on notice 

that he could be held accountable for the entirety of the debt, as he and Wei 

were jointly and severally liable on the note. Furthermore, Morrison retained
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a right to contribution from Wei under the UCC or the common law. See 13 

Pa.C.S.A. § 3116; Goldberg v. Altman, 154 A.2d 279, 282 (Pa. Super. 

1959).

Second, as noted above, the Good court also premised its decision on 

the existence of a duty from Ethan Good to the Holsteins by dint of their 

status of sureties on a mortgage he held. In the present matter, Wei holds 

no such duty to Morrison. Thus, Morrison has failed to establish that Wei 

accomplished anything improper through the use of Note Acquisition, and 

Morrison’s first argument on appeal merits no relief.

In his second argument on appeal, Morrison asserts that the confessed 

judgment should be stricken, as the confession of judgment clause was not 

explicitly restated in the first allonge, which modified the New Note. The 

first allonge2to the New Note modified the payment terms and maturity date 

contained the New Note. Initially, section 2(a) of the New Note provided 

that Wei and Morrison would make 60 monthly payments in the amount of 

approximately $19,000 on their arrears, with a final maturity date of May 

____________________________________________

2 We use the nomenclature used by the parties when they executed the 

document. However, the document does not appear to qualify as an allonge 

under a strict definition of the term. An allonge is “[a] slip of paper 

sometimes attached to a negotiable instrument for the purpose of receiving 

further indorsements when the original paper is filled with indorsements.” 

JP Morgan Chase Bank, NA v. Murray, 63 A.3d 1258, 1259 n.2 (Pa. 

Super. 2013) (citation omitted). Both parties to this appeal concede that 

the first allonge effected a modification of the New Note. See Appellant’s 

Brief, at 24; Appellee’s Brief, at 46.
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31, 2014. In contrast, the first allonge modified section 2(a) to provide for 

58 consecutive monthly payments of approximately $17,000, with a final 

maturity date of May 31, 2014.

Due to the drastic loss of due process rights inherent in confessed 

judgments, Pennsylvania courts require that such clauses be explicit and be 

strictly construed. See, e.g., Ferrick v. Bianchini, 69 A.3d 642, 651 (Pa. 

Super. 2013). Furthermore, we have long held that the law will not presume 

an intent to preserve a confessed judgment clause when the parties modify 

a contract. See Egyptian Sands Real Estate, Inc. v. Polony, 294 A.2d 

799, 803 (Pa. Super. 1972).

[A] warrant of attorney to confess judgment must be selfsustaining; the warrant must be in writing and signed by the 

person to be bound by it; and the requisite signature must bear 

a direct relation to the warrant and may not be implied 

extrinsically nor imputed from assignment of the instrument 

containing the warrant.

Ferrick, 69 A.3d at 651. The mere general reference to the effect of 

preserving all other provisions in an agreement, contained in a modification 

to the agreement, is not sufficient to preserve the confessed judgment 

clause pursuant to the modified agreement. See Scott v. 1523 Walnut 

Corp., 447 A.2d 951, 956-957 (Pa. Super. 1982).

Here, the first allonge contains only a mere general reference to the 

other provisions of the new note: “All other terms of the Note remain the 

same except those affected by the decrease in the Principal amount.” Thus, 
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it would appear, as Morrison urges, that the confessed judgment clause was 

not preserved. 

However, “[a]n immaterial change in the wording of a judgment note 

does not prevent the entry of judgment by confession.” Duque v. 

D’Angelis, 568 A.2d 231, 232 (Pa. Super. 1990) (citation omitted). In 

Duque, the creditor struck the signature of one co-debtor from the note 

after the defendant, D’Angelis, had signed it. After the creditor entered a 

confessed judgment on the note, D’Angelis petitioned to open the judgment, 

on the grounds that the modification defeated the entry of confessed 

judgment. The trial court denied the petition, and this Court affirmed. The 

panel noted that even under the note as it existed when D’Angelis signed it, 

D’Angelis was jointly and severally liable to the creditor. As such, the 

creditor was entitled to hold D’Angelis liable for the entire amount of the 

debt with or without the other co-debtor’s signature. “Consequently, the 

deletion of Allison’s name does not affect appellant’s liability to appellee or 

the amount of judgment.” Id., at 233.

In the present matter, as shown above, the first allonge reflected an 

acknowledgment that Morrison’s and Wei’s first two payments on arrearages 

were significantly more than what was required under the New Note. Thus, 

the remaining 58 monthly payments were reduced in amount, while the 

maturity date stayed the same. We conclude that this modification was 

merely an explicit acknowledgment of the decreased balance, and did not 
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affect Morrison’s liability under the note or the amount of judgment. Thus, 

we conclude that Morrison’s second issue on appeal merits no relief.

In his third and final issue on appeal, Morrison argues that the 

assignment of the New Note to Note Acquisition materially altered his 

obligations under the New Note, and therefore was invalid. As discussed 

above however, Morrison was always jointly and severally liable under the 

New Note. Thus, it was always within reason to foresee that he might be 

called upon to satisfy the entirety of the obligation under the New Note, and 

be forced to pursue a contribution action against Wei. The assignment of

the New Note to Note Acquisition did not modify Morrison’s potential 

exposure under the New Note. Morrison still had the right to pursue a 

contribution action against Wei once Note Acquisition sought to hold 

Morrison liable for the entirety of the debt. Therefore, Morrison’s final 

argument merits no relief.

Judgment affirmed. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 11/6/2015