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Court lacked jurisdiction over confessed judgment.

Byline: Virginia Lawyers Weekly

Where the amount of the confessed judgment was larger than the amount agreed to in the underlying note, the court lacked jurisdiction to accept the confessed judgment and it is void ab initio.

The parties, Forge LLC and Pearson, executed a $75,739.91 promissory note that provided for 10 percent interest, a 5 percent late fee and reasonable attorney's fees. The note also gave Turner, a CPA, the authority to confess judgment. Later, Turner filed a confession of judgment in Fairfax Circuit Court for $117,500, with interest and attorney's fees "thereon."

Pearson, the defendant in this case, was served with the confessed judgment and moved to vacate it. "The issues before the Court are whether the confessed judgment amount is incorrect, and if it is incorrect, whether it is a void judgment."

Wrong amount

The confessed judgment amount was incorrectly calculated. "To get from the agreed principal amount of $75,739.91 to the confessed judgment amount of $117,500.00, attorney's fees and interest would necessarily be included in the confessed judgment. Indeed, the inclusion of attorney's fees and interest in the calculation of the confessed judgment is admitted by Forge in the first footnote of its Opposition to Pearson's Motion to Vacate.

"However, the Court finds that language of the confessed judgment mandates that interest and attorney's fees are not included within the $117,500.00 amount but will rather be added 'thereon.' Thus, the confessed judgment improperly decrees interest upon interest, and a double recovery of attorney's fees."

Decision

The parties' promissory note "did not provide authority to confess judgment for 'interest upon interest,' or a double recovery of attorney's fees. In other words, the plain language of the Note did not authorize Pearson to recover $117,500.00, an additional award of attorney's fees, and interest at the judgment rate on the interest that previously accrued. Such an award would violate the terms of the Note.

"However, on October 2, 2017, through the attorney-in-fact, the debtor confessed a judgment of $117,500.00, with additional interest and attorney's fees. It was impossible for Pearson to owe the amount stated in the confessed judgment. Since 8.01-432 allows a debtor to confess only as much principal and interest as the creditor may accept a judgment for, the Court did not have jurisdiction to accept the confessed judgment for an amount that exceeded the parties' agreement by more than $40,000.

"Because the judgment was entered outside of the Court's jurisdiction, it is void ab initio and Pearson had the ability to move to eradicate it at any time. Since the judgment was entered for an amount greater than Pearson was able to confess under the Note, the confessed judgment was lacking jurisdiction, and was therefore void."

Forge LLC v. Pearson. Case No. CL-2017-13912, Feb. 28, 2019; Fairfax Cir. Ct. (Ortiz). Matthew Ravencraft for Plaintiff, David Bateman for Defendant. VLW 019-8-021,8 pp.

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Title Annotation:Forge LLC v. Pearson, Fairfax Circuit Court, Virginia
Publication:Virginia Lawyers Weekly
Date:Mar 17, 2019
Words:499
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