Atlas Credit Corp. v. Ezrine, 25 N.Y.2d 219, 303 N.Y.S.2d 382, 250 N.E.2d 474 (1969)
Cognovit judgments entered in a sister state pursuant to an unlimited warrant of attorney are not entitled to full faith and credit in New York, and warrants of attorney authorizing judgment anywhere in the world violate due process.
Summary
Atlas Credit Corporation sought to enforce Pennsylvania judgments obtained pro confesso under a warrant of attorney against Ivan and Sarah Ezrine in New York. The New York Supreme Court initially denied Atlas’s motion for summary judgment, but the Appellate Division reversed, holding the Pennsylvania judgments were not subject to collateral attack. The New York Court of Appeals reversed, holding that such cognovit judgments are not judicial proceedings entitled to full faith and credit, and that the unlimited warrant of attorney violated due process, depriving the Pennsylvania court of jurisdiction. Therefore, the judgments were unenforceable in New York.
Facts
Ivan and Sarah Ezrine executed an agreement guaranteeing the mortgage indebtedness of a Pennsylvania corporation, with Pennsylvania law governing the agreement. The guarantee agreement contained a warrant of attorney empowering any attorney of any court of record in the United States, or elsewhere, to confess judgment against them in favor of Atlas in the event of default. Upon alleged defaults, Atlas obtained cognovit judgments against the Ezrines in Pennsylvania courts without notice to them. Later, Atlas initiated foreclosure proceedings in Pennsylvania and purchased property at sheriff’s sales, crediting a fair market value (determined in a separate proceeding with service by publication) against the judgments.
Procedural History
Atlas Credit Corporation sued in New York to enforce the Pennsylvania judgments. The Supreme Court initially denied Atlas’s motion for summary judgment. The Appellate Division reversed. The New York Court of Appeals then reversed the Appellate Division, dismissing the complaint with leave to replead.
Issue(s)
1. Whether a cognovit judgment, entered without notice in a sister State pursuant to an unlimited warrant of attorney, is a judicial proceeding within the purview of the Full Faith and Credit Clause?
2. If so, whether such an unlimited warrant of attorney so offends due process as to deprive the rendering State of judicial power to issue a judgment cognizable under the Full Faith and Credit Clause?
Holding
1. No, because cognovit judgments are not judicial proceedings within the intendment of the Full Faith and Credit Clause.
2. Yes, because the warrant of attorney, pursuant to which the cognovit judgments were taken, violates due process because of its unlimited authority to enter a judgment anywhere in the world.
Court’s Reasoning
The Court reasoned that cognovit judgments, entered without meaningful judicial process, are not the type of “judicial proceedings” entitled to full faith and credit. The procedure lacks the essential elements of a judicial determination because it does not involve the exercise of discretion or judgment usually associated with judicial proceedings. The court emphasized New York’s long-standing policy against such judgments, noting that New York law requires personal acknowledgement by the obligor of the facts underlying the liability. The court stated, “[I]t is evident that the procedure by which these cognovit judgments were obtained is repugnant to New York’s policy as it has been expressed by statute for over 100 years.”
Even if cognovit judgments were generally entitled to full faith and credit, the Court found the specific warrant of attorney in this case violated due process. The warrant authorized “any Attorney of any Court of record within the United States of America, or elsewhere” to confess judgment. The Court held that this unlimited authority, coupled with a waiver of notice, was inconsistent with fundamental fairness. Citing Cutler Corp. v. Latshaw, 374 Pa. 1, 4, the Court acknowledged that “[a] warrant of attorney authorizing judgment is perhaps the most powerful and drastic document known to civil law.” The court found that consenting to entry of a judgment anywhere in the world, in advance of commencement of an action, and coupled with a waiver of notice, is not in accordance with fundamental principles of justice and fair play. Therefore, the warrant was ineffective to give the Pennsylvania court jurisdiction. As the court observed, “The mere fact that judgments by confession have ancient origins does not establish reasonableness under current standards.”
The Court explicitly overruled Teel v. Yost, 128 N.Y. 387, which had previously held that cognovit judgments valid in the rendering state were entitled to full faith and credit in New York. The Court concluded that enforcement of these judgments was barred both because they are not entitled to full faith and credit and because they violate due process.