Second Department Rejects Challenge to Confession of Judgment
Print Article- Posted on: Aug 16 2021
By Jeffrey M. Haber
A confession of judgment is an agreement whereby a defendant or debtor agrees to the entry of judgment against him/her in an amount certain. It is a procedural device whereby the plaintiff or creditor can bypass the commencement of a lawsuit to obtain the amount “confessed.”
Confessions of judgment are used in a variety of circumstances. For example, parties to a litigation may use a confession of judgment as part of a settlement whereby the defendant agrees to pay the plaintiff money. In that situation, the defendant agrees to the confession of judgment until he/she satisfies the payment obligations under the settlement agreement. If the defendant fails to make the agreed-upon payment(s), then the plaintiff, who typically holds the confession of judgment in escrow, can file the confession of judgment with a county clerk without having to commence an action for breach of the settlement agreement.
Sometimes, parties to a dispute who wish to avoid the costs and burdens of litigation, will use a confession of judgment to ensure the payment(s) required by their out-of-court settlement.
In New York, confessions of judgment are governed by Section 3218 of the Civil Practice Law and Rules (“CPLR”). Under CPLR § 3218(a),
a judgment by confession may be entered, without an action, either for money due or to become due, or to secure the plaintiff against a contingent liability in behalf of the defendant, or both, upon an affidavit executed by the defendant;
1. stating the sum for which judgment may be entered, authorizing the entry of judgment, and stating the county where the defendant resides;
2. if the judgment to be confessed is for money due or to become due, stating concisely the facts out of which the debt arose and showing that the sum confessed is justly due or to become due; and
3. if the judgment to be confessed is for the purpose of securing the plaintiff against a contingent liability, stating concisely the facts constituting the liability and showing that the sum confessed does not exceed the amount of the liability.
However, the plaintiff or creditor cannot enter judgment against the defendant or debtor if (1) more than three years has elapsed since the defendant or the debtor signed the confession, or (2) the defendant or debtor is deceased.1
[Ed. Note: The New York State Legislature amended CPLR § 3218, which Governor Cuomo signed into law on August 30, 2019. By the amendment, the Legislature eliminated the ability of plaintiffs to file confessions of judgment against non-New York residents. Prior to the amendment, a plaintiff or creditor could file a confession of judgment and obtain judgment in either the county where the plaintiff or debtor resided or, if the debtor was a nonresident of the State, in the county in which entry of judgment was authorized in the affidavit from the defendant or debtor. When the defendant or debtor is a business entity, residency is considered to be the entity’s “place of business.” “Notably, the amendment to CPLR 3218 uses the term ‘residence’ rather than ‘domicile’ in defining the debtors that may confess judgments under the statute. A party may have multiple residences, but only one fixed domicile to which the party always returns. Where a New York debtor has multiple residences within the state, the affidavit confessing the judgment may still be filed in any designated county where a residence exists.” Practice Commentaries, C3218:1. Judgment by Confession, Generally (2019).]
When an amount certain is confessed, the affidavit required under CPLR § 3218(a) must state the facts from which the debt arose as to demonstrate that the confessed amount is just.2 In doing so, the statute requires the affiant to “concisely” state “the facts out of which the debt arose and showing that the sum confessed is justly due or to become due.”3 This means that “there must be sufficient genuine detail to enable other creditors to investigate the claim and ascertain its validity ….”4 As the courts have noted, CPLR § 3218 “is designed for the protection of third persons who might be prejudiced in the event that a collusively confessed judgment is entered ….”5 It is “not for the protection of the defendant.”6
Notwithstanding, defendants and debtors have tried to vacate confessions of judgment on the grounds that the specificity requirements of CPLR § 3218(a)(2) were not satisfied. Such was the case in Balahtsis v. Shakola, 2021 N.Y. Slip Op. 04653 (2d Dept. Aug. 11, 2021) (here).
Balahtsis involved a money judgment that was entered in August 2018 in favor of the plaintiff and against the defendant. The judgment was entered pursuant to a confession of judgment, which was supported by an affidavit dated in March 2018. According to the plaintiff, the defendant signed the confession of judgment in connection with the legal fees that the defendant owed to the plaintiff.
In July 2019, defendant moved to, among other things, vacate the judgment. In an order dated November 15, 2019, Supreme Court denied the motion. Defendant appealed, claiming the affidavit on which the confession of judgment was based did not satisfy the specificity requirements of CPLR § 3218(a)(2).
The Appellate Division, Second Department, affirmed.
In a pithy decision, the Court ruled that defendant “was foreclosed” from challenging the confession of judgment on specificity grounds.7 The Court explained that defendant was foreclosed from challenging the confession of judgment because CPLR § 3218(a)(2) “is designed to protect innocent third parties who might be prejudiced in the event that a collusively confessed judgment is entered, not the party who signed the confession of judgment.”8
Takeaway
Like anything in life, there are advantages and disadvantages with the confession of judgment.
From the plaintiff’s perspective, the confession of judgment provides certainty that he/she will (a) receive the monies owed by the defendant or debtor, or (b) have the means to enforce a judgment against the defendant or debtor without delay.
From the defendant’s perspective, a confession of judgment can streamline a costly legal process in which the inevitable is virtually certain – i.e., that the defendant owes (or will owe) the plaintiff or creditor the amount sought – thereby saving the defendant or debtor legal fees, costs and expenses. Of course, the downside to a confession of judgment for the defendant or debtor is the admission that the debt is due and owing. And, in giving a confession of judgment, the defendant or debtor is handing the plaintiff or creditor a powerful tool to collect the monies owed.
In the end, regardless of the side in which one finds himself/herself, it is important to remember that a confession of judgment is binding and absent certain circumstances, not present in Balahtsis, it is difficult to vacate a “confessed” judgment.
Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be and should not be taken as legal advice.
Footnotes
- CPLR § 3218(b).
2. CPLR § 3218(a)(2).
3. Id.
4. Princeton Bank & Trust Co. v. Berley, 57 A.D.2d 348, 354 (2d Dep. 1977) (citations omitted).
5. Mall Commercial Corp. v. Chrisa Rest., 85 Misc. 2d 613, 614 (Sup. Ct., App. Term, 1st Dept. 1976).
6. Id.
7. Slip Op. at *1.
8. Id.
