Statute allows substitute to confess judgment

A statute that provides a method for appointing a substitute attorney in fact after a confession of judgment is executed defeats defendants’ argument that a successor must be named in the original instrument. Plaintiff’s motion to affirm a confession of judgment in his favor is granted

Overview

In August 2011, defendants executed a confessed judgment note payable to plaintiff. The note stated that defendants appointed Michael T. McFarlane to appear in court to confess judgment in favor of plaintiff.

In April 2020, plaintiff executed an instrument nominating Michael J. Overson as a substitute attorney in fact. The instrument was filed in circuit court and mailed to defendants. Plaintiff states that defendants stopped paying on their note in 2018.

In June 2020, Overson entered a confessed judgment against defendants and in plaintiff’s favor for $135,415 plus interest accruing from the time the judgment was filed. Defendants moved to set aside the confessed judgment.

They make two arguments. First, they assert Overson lacked authority under Code § 8.01-435 to confess judgment against them because the confessed judgment instrument did not name him as a substitute attorney in fact. Second, defendants claim they have several defenses.

Substitutes

Defendants “contend that the language of the statute requires that the Note not only specifically name the attorney-in fact authorized to confess judgment against a defaulting debtor, but also that it must contemporaneously name any substitute attorney-in-fact. Thus, the Defendants argue, since the Note only identifies Michael McFarlane as the attorney-in-fact, Michael J. Overson’s confession of the judgment against the Defendants was without authority, rendering it void.

“In support of their argument, Defendants acknowledge that no appellate court in Virginia has interpreted Code§ 8.01-435, but they allege that the circuit court cases doing so support their position. The cases cited by Defendants, however, are distinguishable from the instant case and do not stand for the proposition claimed by Defendants.

“The Plaintiff vigorously disputes the Defendants’ interpretation of the statute as being contrary to its purpose. According to the Plaintiff, Code§ 8.01-435 was enacted to enable the obligee to appoint someone other than the person named in the note as a substitute attorney-in­ fact. He contends that Defendants’ position nullifies that ability by requiring the note to identify not only the attorney-in-fact, but all individuals who might be named as substitutes at some (conceivably undefined) point in the future.

“Such a construction of the statute, he argues is at odds with the clear purpose of the code which is obviously to create a reliable and legally sound method of substituting for an attorney in fact who may have been appointed in the past, but for a variety of reasons is no longer available to serve in such a position.

“The court agrees with the Plaintiff.”

Code § 8.01-435 “was amended in 2012 by adding the second paragraph which created a method of substitution of a new attorney in fact to confess judgment that has attendant procedures to balance the practical need of creditors to substitute attorneys in fact against the requirements of procedural due process rights belonging to a given debtor. …

“Upon adoption of the 2012 amendment, so long at the creditor causes the filing of a discreet instrument of appointment of a successor/substitute attorney in fact with the clerk’s office in the manner provided by statute and notice of same is provided to the debtors by certified mail at the last known address within the records of the creditor, the new attorney in fact may validly confess judgment against the debtor. This is precisely what the record shows happened here.

“Counsel for the Defendants claims that the language of the first sentence of the second paragraph compels the conclusion that the substitute attorney in fact must also be named in the original note. The language is set forth here as follows:

“‘The payee, obligee, or person otherwise entitled to payment under any note or bond may appoint a substitute for any attorney­in-fact authorized to confess judgment that is specifically named in such note or bond, by specifically naming the substitute attorney­in-fact in an instrument appointing the substitute attorney-in-fact.’ …

“The language could be more plainly worded, but the full context of the second paragraph clearly is referring to an event which is to take place subsequent to the execution of the note which identifies the original attorney in fact appointed at the time of the transaction.

“The portion of the first sentence which is [emphasized] above refers to the monetary judgment that is [set forth as opposed to ‘named’] in the instrument and not the attorney in fact whose identity was at the time an uncertain event yet to occur in the future. A contrary interpretation makes the second paragraph meaningless which is an unacceptable result for a statutory interpretation.”

Defenses

“As a preliminary matter, the Court notes that Defendants’ purported defenses include unclean hands. As that is an equitable defense and not a ‘defense … in an action at law’ as required by Code§ 8.01-433, that defense has no bearing on the Motion to Set Aside, and is hereby rejected.

“With respect to the remaining defenses, Defendants’ Motion to Set Aside and Supplemental Brief are entirely devoid of any facts to support its claims. With the defense of fraud in particular, such sparse pleading violates the requirement that fraud be alleged with particularity.”

Plaintiff’s motion to affirm the confession of judgment is granted.

Rolston v. Quick, et al., Case No. CL 20-3390, March 16, 2021, Loudoun County Cir. Ct. (Fisher). Michael J. Overson for plaintiff, Jessica E. McCollum for defendants. VLW 021-8-040, 9 pp.