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Customers Bank v. Zimmerman

Superior Court of Delaware

November 20, 2013

CUSTOMERS BANK, formerly known at New Century Bank, Plaintiff,
v.
MICHAEL A. ZIMMERMAN, CONNIE JO ZIMMERMAN, BBC PROPERTIES, INC. and GOVERNORS CLUB PROFESSIONAL CENTER, LLC., Defendants.

Submitted: September 27, 2013

Upon Hearing Held on Confession of Judgment.

Richard M. Beck, Esquire of Klehr Harrison Harvey Branzburg LLP, Wilmington, Delaware; attorney for Plaintiff.

Peter K. Schaeffer, Jr., Esquire of Avenue Law, Dover, Delaware; attorney for Defendants.

ORDER

William L. Witham, Jr. Resident Judge

INTRODUCTION

Plaintiff has filed a complaint with this Court seeking to confess judgment against Defendants. Defendants have objected. Pursuant to Superior Court Civil Rule 58.1(g)(3), this Court held a hearing on the issue of whether Defendants effectively waived their due process rights to notice and a hearing. The Court's factual findings from the hearing and holding on the issue of waiver follows. For the reasons discussed herein, confession of judgment is ENTERED against Defendants.

FACTS AND PROCEDURE

The Defendants in this matter are Michael A. Zimmerman (hereinafter "Michael"); Michael's wife, Connie Jo Zimmerman (hereinafter "Connie") (collectively "the Zimmermans"); BBC Properties, Inc. (hereinafter "BBC"); and Governors Club Professional Center, LLC (hereinafter "Governors Club") (collectively "Defendants"). Plaintiff is Customers Bank (hereinafter "Plaintiff"), formerly known as New Century Bank at times relevant to the instant proceeding.

Plaintiff filed a complaint with this Court on June 21, 2013 seeking to confess judgment against Defendants on two separate commercial loans totaling $602, 163.30 and $1, 558, 792.95, respectively, not including interest that has accrued since June 20, 2013. Defendants executed a series of promissory notes and other related instruments from 2006 through 2011. The instrument under which Plaintiff is seeking to confess judgment against Defendants is a forbearance agreement executed in 2011 (hereinafter "the Forbearance Agreement"), as it is the most recently executed agreement to include a confession of judgment provision. Defendants objected to the entry of confessed judgment, and on September 27, 2013 the Court held a hearing on whether Defendants voluntarily, knowingly and intelligently waived their rights to notice and a hearing. Plaintiff presented testimony from only one witness, Robert DeYoung (hereinafter "DeYoung"), Vice President of Customers Bank and previously a loan processor employed by the bank since 2007. Both parties also submitted exhibits in support of their respective positions.

The Zimmermans are commercial real estate developers. Both Michael and Connie are members of the Governors Club LLC. Michael is the President of BBC. Defendants entered into loan transactions with Plaintiff to refinance mortgages that encumbered the Governors Club property in Dover. Defendants defaulted on their loan obligations to Plaintiff, and in 2011 executed the Forbearance Agreement, under which Plaintiff agreed to forbear from exercising its rights and remedies on the notes underlying the loans. It is the Forbearance Agreement that contains notice and authorization under which Plaintiff seeks to confess judgment against Defendants.

DeYoung testified that he was involved in the negotiations surrounding the Forbearance Agreement, and had personal knowledge that both parties were represented by counsel throughout negotiations. DeYoung also testified that the attorneys for both parties carefully negotiated the terms of the Forbearance Agreement. DeYoung testified that all of the parties agreed to the provisions of the Forbearance Agreement, and that both Michael and Connie personally executed the agreement.[1] DeYoung testified that multiple defaults occurred under the terms of the Forbearance Agreement, which led Plaintiff to file the instant complaint.

The Forbearance Agreement includes a "Warrant of Attorney to Confess Judgment" provision. The provision is typed in all capital letters, and "Warrant of Attorney to Confess Judgment" is in capital letters, bold-faced type, and underlined. Further, any time the words "confessed judgment" or "confess judgment" appear in the provision, the words are in bold-faced type. Documents executed by Defendants prior to the Forbearance Agreement included nearly identical confession of judgment provisions. These include: three promissory notes executed in 2006, 2007 and 2008, respectively; a commercial guaranty executed in 2007; a forbearance agreement executed in 2009; and a guaranty and suretyship agreement executed in 2011.

During Defendants' cross-examination, DeYoung testified that he did not personally meet or interact with Connie during any of the loan transactions or negotiation of the 2011 Forbearance Agreement. However, DeYoung stated that he had knowledge via memoranda related to the Governors Club loan ...


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