Fiore v. Oakwood Plaza Shopping Center, Inc. , 78 N.Y.2d 572 (1991)
A cognovit judgment from another state is enforceable in New York if the judgment debtor voluntarily, knowingly, and intelligently waived their due process rights to notice and a hearing.
Summary
This case addresses whether a Pennsylvania cognovit judgment should be given full faith and credit in New York. The plaintiffs sold land in Pennsylvania to the defendants, who executed a bond and warrant containing a cognovit clause allowing confession of judgment. After the defendants defaulted, the plaintiffs obtained a judgment in Pennsylvania and then sought to enforce it in New York. The New York Court of Appeals held that the Pennsylvania judgment was enforceable because the defendants, as sophisticated parties represented by counsel, had voluntarily, knowingly, and intelligently waived their due process rights.
Facts
Plaintiffs contracted to sell land to defendants in Pennsylvania. The defendants, Oakwood Plaza Shopping Center, and its principals, Aronow and Galioto, executed a “bond and warrant” that included a cognovit clause authorizing the plaintiffs’ attorney to confess judgment against them if they defaulted on their payment obligations. After defendants failed to make the required payments, plaintiffs obtained a judgment by confession in Pennsylvania.
Procedural History
Plaintiffs obtained a judgment in Pennsylvania Court of Common Pleas. Defendants’ petition to open or strike the judgment was denied. Plaintiffs then commenced an action in New York seeking to enforce the Pennsylvania judgment. Supreme Court granted summary judgment to plaintiffs, and the Appellate Division affirmed. This appeal followed.
Issue(s)
Whether a Pennsylvania cognovit judgment is entitled to full faith and credit in New York, where the defendants claim they did not knowingly waive their due process rights.
Holding
Yes, because the defendants, as sophisticated commercial parties represented by counsel, voluntarily, knowingly, and intelligently waived their rights to notice and a hearing by agreeing to the cognovit clause.
Court’s Reasoning
The court reasoned that while cognovit judgments are viewed with disfavor, the U.S. Supreme Court in Overmyer Co. v. Frick Co., 405 U.S. 174 (1972), established that they are not per se unconstitutional. Instead, the enforceability of such judgments depends on whether the debtor made a voluntary, knowing, and intelligent waiver of their due process rights. The court distinguished its prior holding in Atlas Credit Corp. v. Ezrine, 25 N.Y.2d 219 (1969), noting that subsequent Supreme Court decisions clarified the issue. The court emphasized that the defendants were sophisticated commercial parties, represented by counsel, and that the cognovit clause was part of a bargained-for exchange. The court noted, “where the contract is one of adhesion, where there is great disparity in bargaining power, and where the debtor receives nothing for the cognovit provision, other legal consequences may ensue.”(Overmyer Co. v. Frick Co., 405 U.S. at 188). The court found that the defendants understood they were giving the plaintiff a significant advantage should default occur, and upheld the Pennsylvania judgment. The court also noted that the Pennsylvania cognovit procedure had been amended since Atlas to provide more judicial oversight and better notice to the debtor.