WHAT is confession of judgment? Does this mean that you go to a Catholic church, go in the confessional box and confess to a priest that the plaintiff suing you is correct and ask for absolution of your sin? Let’s say you owe American Express $20,000 for money that you used to gamble in Pechanga. You fail to pay it back. AX sues you for $20,000 plus costs, alleging you gambled the money away. When you are served with the lawsuit, you call the lawyer of AX and tell him that you admit that you owe the debt. The lawyer prepares a stipulation for you to sign that says you admit you owe AX the amount of $20,000. The stipulation does not mention that you had no intent to repay because you gambled the money. It also does not say that you intended to cause injury to AX by your irresponsible conduct.
You sign the stipulation. The Judge approves the stipulation and makes that the judgment in the lawsuit. What you have done is a confession of judgment. So it has nothing to do with confessing to a priest.
The next question is, if you file for bankruptcy relief, is your confession of judgment in the AX lawsuit not dischargeable because of your voluntary admission to liability? Let’s say you decide to file for Chapter 7 bankruptcy to get a fresh start. AX files an adversarial complaint alleging that you signed a confession of judgment for $20,000 therefore the amount you owe AX is excepted from discharge.
Who will win?
In Re Flynn, the debtor was half owner of a restaurant. In 2007, the restaurant borrowed $25,000 from First Central State Bank, which received a security interest in all of the restaurant’s assets. The debtor executed an unconditional guaranty related to this obligation. Debtor and his business partner did not get along well. Debtor was “Yin”, and partner was “yang”, no relation to me. Going up the yin-yang together was almost an impossible task for the partners. One night, after a particularly heated dispute about changes to the menu, the debtor removed money and alcohol from the restaurant.
The next day, his partner called the police to report that numerous items were removed from the business including televisions, a cash register, a security system, satellite system devices, tables, chairs and food inventory. Because it appeared that the debtor removed these items, the police did not pursue the matter. Since a partner owns the business, debtor cannot steal from himself. Legally there is no crime. However, the bank sued the debtor for conversion. Conversion is a tort. A tort is not something you eat, its intentional conduct that causes injury to another without being a crime. Conversion is similar to theft. When you marry someone else’s fiancée you can be sued for conversion. Although the debtor insisted that he did not take anything other than the money and the alcohol, he signed a Confession of Judgment for $10,500. He then filed for bankruptcy.
After debtor filed for bankruptcy, the bank filed an adversary complaint alleging that its claim was non-dischargeable pursuant to Section 523(a)(6). This section excepts from discharge injury to person or property caused by willful and malicious conduct. The bank said that the confessed judgment established the debtor’s guilt. The court disagreed saying that “Although the Confession of Judgment states that the defendant conveyed, transferred and/or assigned certain items in which the bank had a security interest, it does not state that he did so to intentionally injure the bank,”. The court added that “the elements of conversion that are the subject of the Confession of Judgment do not require a finding or admission that the defendant acted willfully or maliciously.” The court also found that the bank failed to prove that the debtor acted maliciously. “Drooling saliva when debtor testified at trial does not prove malice, when medical expert testimony has been presented to show that debtor suffered from mild cerebral palsy,” the court said.
source: asianjournal.com
