Opinion ID: 3010295
Heading Depth: 2
Heading Rank: 1

Heading: The defenses

Text: We first consider the defenses to the confessed judgment included in the petition to open the judgment. In deciding whether or not FIRREA bars jurisdiction over this part of the petition, we are guided by the Supreme Court's recent holding in O'Melveny & Myers v. FDIC, 114 S.Ct. 2048 (1994), which explained that matters left unaddressed in FIRREA are As a Result of Bell's Breach of Contract and Other Wrongful Conduct, Petitioner has Numerous Bona Fide, Good Faith Defenses to Bell's Claims, Thereby Warranting the Opening of the Subject Judgment by Confession. W.W.'s App. 54. Section II is headed: Defendant has Incurred Substantial Damages as a Direct Result of Plaintiff's Breach of Contract, Thereby Entitling it to Assert a Counterclaim in this Action. Id. at 57-59. Section III requests an order staying the execution of the confessed judgment. Id. at 59-60. 23 presumably left subject to the disposition provided by state law. Id. at 2054. We thus consider how the petition would be viewed under Pennsylvania law. In Pennsylvania, a petition to open a judgment is integral to the process of determining the debtor's and creditor's rights.0 See Davis v. Woxall Hotel, Inc., 577 A.2d 0 Pa. R. Civ. P. 2959 governs the procedure on a petition to open a judgment. While W.W. characterized its petition as a motion, inasmuch as that section refers to a petition, we have called the pleading a petition. The rule reads: Rule 2959. Striking Off or Opening Judgment; Pleadings; Procedure (a) Relief from a judgment by confession shall be sought by petition. All grounds for relief, whether to strike off the judgment or to open it, must be asserted in a single petition. The petition may be filed in the county in which the judgment was originally entered, in any county to which the judgment has been transferred or in any other county in which the sheriff has received a writ of execution directed to him to enforce the judgment. (b) If the petition states prima facie grounds for relief the court shall issue a rule to show cause and may grant a stay of proceedings. After being served with a copy of the petition the plaintiff shall file an answer on or before the return day of the rule. The return day of the rule shall be fixed by the court by local rule or special order. (c) A party waives all defenses and objections which he does not include in his petition or answer. (d) The petition and the rule to show cause and the answer shall be served as provided in Rule 440. 24 636, 638 (Pa. Super. Ct. 1990) ([A] challenge to the accuracy of such amounts should be resolved by a petition to open the judgment.). Passed as part of the same chapter as the provision governing a confession of judgment, a petition to open a judgment is the sole means by which the defendant in a confession of judgment action can assert a defense. If the party against whom judgment is confessed pleads prima facie grounds for relief, the court must open the judgment, and may grant a stay of proceedings. Pa. R. Civ. P. 2959(b). The use of the word proceedings suggests that the petition should be understood as part of the same action as the underlying confession of judgment. This interpretation is strengthened by the Pennsylvania Superior Court's discussion: A petition to strike and a petition to open are two forms of relief with separate remedies; each is intended to relieve a different type of defect in the confession of judgment proceedings. . . . [A] petition to open the judgment offers to show that the defendant can prove a defense to all or part of the plaintiff's claim. (e) The court shall dispose of the rule on petition and answer, and on any testimony, depositions, admissions and other evidence. The court for cause shown may stay proceedings on the petition insofar as it seeks to open the judgment pending disposition of the application to strike off the judgment. If evidence is produced which in a jury trial would require the issues to be submitted to the jury the court shall open the judgment. (f) The lien of the judgment or of any levy or attachment shall be preserved while the proceedings to strike off or open the judgment are pending. 25 Manor Bldg. Corp. v. Manor Complex Assocs., LTD., 645 A.2d 843, 845 n.2 (Pa. Super. Ct. 1994) (emphasis added). The court's reference to the petition to open as a defense in confession of judgment proceedings indicates that a defense to liability in a petition to open is part of an overall confession of judgment procedure and not an independent action. Moreover, the Pennsylvania courts have noted the importance of a petition to open a judgment in satisfying due process in the confession of judgment procedure. North Penn Consumer Discount Co. v. Shultz, 378 A.2d 1275, 1277-78 (Pa. Super. Ct. 1977).0 We find, therefore, that the defenses alleged in the petition to open judgment are part of a pre-receivership action and thus under sections 1821(d)(5)(F)(ii) and 1821(d)(13)(D) the district court may entertain them without regard for the jurisdictional bar in the latter section. In reaching our result, we also point out that section 1821(d)(13)(D) bars jurisdiction only over any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for 0 We note that the Pennsylvania confession of judgment procedure has raised serious due process issues in the past. See Jordan v. Fox, Rothschild, O'Brian & Frankel, 20 F.3d 1250 (3d Cir. 1994). The existence of the opportunity to present a defense provided by the petition to open judgment may well be crucial to the constitutionality of the procedure. See Girard Trust Bank v. Martin, 557 F.2d 386 (3d Cir.), cert. denied, 434 U.S. 985, 98 S.Ct. 612 (1977) (construing D.H. Overmyer Co. v. Frick Corp., 405 U.S. 174, 92 S.Ct. 775 (1972), to seem to require that there be some procedure by which debtor against whom judgment is confessed may test the validity of the judgment against him). These concerns also support construing a petition to open judgment as part of the same action as a confession of judgment. 26 which the Corporation has been appointed receiver. Id. (emphasis added). We regard the defenses offered by W.W. in the petition to open judgment as pertaining to its assets, not those of Bell, because a judgment has value only insofar as it can be the basis for a recovery from a debtor's assets. Finally, on this point we observe that at oral argument counsel for the RTC acknowledged that if a thrift filed an action before the Office of Thrift Supervision instituted proceedings to take it over under FIRREA, a defendant in that case after the initiation of the FIRREA proceedings could assert defenses without exhausting administrative procedures, so long as it did not seek affirmative relief. In view of our conclusions regarding the nature of a petition to reopen under Pennsylvania law, this concession essentially means that the RTC agrees that W.W. should be able to assert its defenses in the removed case.