NEW RULES - CONFESSION OF JUDGMENT

Governor Andrew M. Cuomo on August 30 signed legislation (S.6395/A.7500A) closing the legal loophole that allows creditors to use New York courts to secure confessions of judgment and seize the assets of borrowers for cases where the borrower has no connection to New York. Prior to this new law, creditors were able to exploit New York laws to freeze and seize a borrower's assets by obtaining a judgment entered in a court far from where the contested agreement was executed, making it difficult for a borrower to legally contest the unfair penalty.

Section 3218 of the civil practice law and rules, paragraph 1 of subdivision (a) is now amended

AN IMPROPER CONFESSION OF JUDGMENT

In some cases, a confession of judgment might be included as part of a contract as a form of personal guarantee. This would establish the document as a provision to be enacted if the borrower does not fulfill his or her obligations during the agreed upon time frame. But certain rules must be strictly followed and they were not in this case.

Parker Waichman, LLP v Getreu, 2019 NY Slip Op 01783, Decided on March 13, 2019, Appellate Division, Second Department:

"In early February 2013, the defendant executed a blank affidavit of confession of judgment in favor of the plaintiff for "unpaid attorney's fees and expenses due on cases plaintiff referred to the defendant for continued prosecution as co-counsel to plaintiff's law firm and in accordance with the terms of the letter agreement entered into between plaintiff and defendant dated January 24, 2013." It is undisputed that at the time the affidavit was executed, neither the plaintiff nor the defendant knew the exact amount owed by the defendant to the plaintiff under the January 24, 2013, letter agreement.

Approximately one year later, still unable to secure the defendant's cooperation in calculating the exact amount owed, the plaintiff unilaterally estimated the amount to be $207,474.92, filled in the previously executed affidavit of confession of judgment accordingly, and used that affidavit, as so modified, as the basis for obtaining a judgment by confession against the defendant in that amount, which was filed in the Nassau County Clerk's Office on April 8, 2014.

In September 2016, nonparty Elena M. Perez, a junior judgment creditor of the defendant, moved to vacate the judgment by confession on the ground that the affidavit of confession of judgment failed to comply with the strict requirements of CPLR 3218. In an affidavit filed in support of the motion, the defendant averred that the affidavit of confession of judgment was executed in blank, and the sum confessed was inserted at a later time without his knowledge or consent. The plaintiff opposed the motion. The Supreme Court denied the motion, and Perez appeals.

An affidavit of confession of judgment must "stat[e] the sum for which judgment may be entered" (CPLR 3218[a][1]), and, if the judgment to be confessed is for money due or to become due, the affidavit must also "stat[e] concisely the facts out of which the debt arose and showing that the sum confessed is justly due or to become due" (CPLR 3218[a][2]).

Here, it is undisputed that the affidavit of confession of judgment, at the time it was executed by the defendant, failed to state the sum for which judgment could be entered. It is also undisputed that the sum was unilaterally filled in months later by the plaintiff, based on calculations that are neither fully explained nor ascertainable from the evidence contained in the record. Under the circumstances, the affidavit did not meet the requirements of CPLR 3218(a) (see Katlowitz v Halberstam, 284 AD2d 306, 307; see also County Natl. Bank v Vogt, 21 NY2d 800, 801-802; Rubashkin v Rubashkin, 98 AD3d 1018)."

EXPEDITE A CONFESSION OF JUDGMENT IN NEW YORK COUNTY?

I just discovered it is not that easy.

In New York County, confession of judgments are subject to mandatory e-filing. However, once you e file, an index number will not be assigned until your papers are reviewed by a clerk. But the backlog is several months.

The clerks will allow you to expedite the filing by coming in person with your e filed payment notice and confirmation notice together with original papers. However, there is a six week waiting period - you can come down in person six weeks after the date you e filed to attempt to expedite.