Opinion
B298136 B298176 B298158 B298162 B298192
02-17-2021
ACCEL CAPITAL, INC., Plaintiff and Appellant, v. NAMR 2617, LLC, et al., Defendants and Respondents. ACCEL CAPITAL FUNDING, LLC, Plaintiff and Appellant, v. NAMR 2617, LLC, et al., Defendants and Respondents. ACCEL CAPITAL, INC., Plaintiff and Appellant, v. JUVINX, INC., et al., Defendants and Respondents. ACCEL CAPITAL, INC., Plaintiff and Appellant, v. N&R VANOWEN, LLC, et al., Defendants and Respondents.
Salvato Boufadel, Gregory M. Salvato and Joseph Boufadel for Plaintiffs and Appellants. Papazian Law and Armen F. Papazian for Defendants and Respondents Nazaret Chakrian and Alice Chakrian.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. Nos. BS174886, BS174888) (Los Angeles County Super. Ct. No. BS174887) (Los Angeles County Super. Ct. No. BS174810) (Los Angeles County Super. Ct. No. BS174882) APPEAL from an order of the Superior Court of Los Angeles County, Edward B. Moreton, Jr., Judge. Affirmed. Salvato Boufadel, Gregory M. Salvato and Joseph Boufadel for Plaintiffs and Appellants. Papazian Law and Armen F. Papazian for Defendants and Respondents Nazaret Chakrian and Alice Chakrian.
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Accel Capital, Inc., appeals from orders vacating five judgments entered based on sister state judgments obtained in New York under New York's confession of judgment procedure. The superior court vacated the California judgments based on its finding Nazaret Chakrian, Alice Chakrian, NAMR 2617, LLC (NAMR), N & C Vanowen, LLC, and Juvinx, Inc. (collectively the Chakrian defendants) had not provided a voluntary, knowing, and intelligent waiver of their right to prejudgment notice and a hearing. Although California courts are required to give full faith and credit to sister state judgments, where, as here, entry of the judgments does not comport with constitutional due process protections, vacatur of the judgments is proper. We affirm.
According to former counsel for NAMR, N&C Vanowen, LLC, and Juvinx, Inc., the companies have been suspended. Counsel has since withdrawn as counsel and filed the respondents' briefs on behalf of only Nazaret Chakrian and his wife Alice Chakrian. To avoid confusion, we refer to Nazaret Chakrian as Chakrian and his wife as Alice Chakrian.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Purchase Agreements, Guaranties, and Affidavits of Confession of Judgment
On April 30, 2018 NAMR entered into an agreement with Accel for the "purchase and sale of future receipts" (Agreement), in which Accel agreed to purchase a percentage of the future receivables of NAMR valued at approximately $2.2 million (the "[p]urchase [p]rice") for an up-front cash payment of $1.5 million (the "[p]urchased [a]mount"). Under the Agreement, NAMR agreed to deposit a specified "daily amount" of its receipts into a bank account, which would be adjusted to reflect NAMR's actual receipts. Upon a default, NAMR would be required to deposit 100 percent of its future receipts into the account. A default by NAMR under the Agreement includes (a) interference with Accel's right to collect the daily amount; (b) violation of any term of the Agreement; (c) use of multiple bank accounts without Accel's approval; (d) change in NAMR's account or credit card processor without Accel's approval; and (e) failure to provide timely notice to Accel that four or more transactions attempted by Accel in a 30-day period (or four or more consecutive transactions) were rejected by NAMR's bank. The Agreement provides that NAMR "warrants and agrees that it is a sophisticated business entity familiar with the kind of transaction covered by the Agreement; [and] it was represented by counsel or had full opportunity to consult with counsel." Paragraph 22 of the Agreement (titled "Interpretation") provides, "All Parties hereto have reviewed this Agreement with an attorney of their own choosing and have relied only on their own attorney's guidance and advice."
All dollar amounts are rounded.
For simplicity, we discuss the facts involving the NAMR purchase agreement, guaranty, and confession of judgment in detail. The four purchase agreements and guaranties at issue in the consolidated cases have identical provisions except for the dollar amounts involved. On March 30, 2018 NAMR entered into a purchase agreement with Accel guaranteed by Chakrian containing a purchase price of $2 million and a purchased amount of $2.8 million. On April 17, 2018 Juvinx, Inc., and NAMR entered into a purchase agreement with Accel guaranteed by Alice Chakrian containing a purchase price of $200,000 and a purchased amount of $300,000, which was later modified by a "purchased amount addendum" to reflect a purchased amount of $290,000. On May 11, 2018 N&R Vanowen LLC, N&R Vanowen, NAMR, and NAMR 2617 dba N&R Vanowen LLC entered into a purchase agreement with Accel guaranteed by Chakrian and Alice Chakrian containing a purchase price of $175,000 and a purchased amount of $250,000. On June 13, 2018 NAMR entered into a purchase agreement with Accel guaranteed by Chakrian containing a purchase price of $750,000 and a purchased amount of $1 million.
The Chakrian defendants assert the purchase agreements were disguised loans that were usurious because they required the principal be repaid within 141 days. However, the agreements do not set a specific payment date, instead providing, "Seller is selling a portion of a future revenue stream to Buyer at a discount, not borrowing money from Buyer. There is no interest rate or payment schedule and no time period during which the Purchased Amount must be collected by Buyer." Likewise, the agreements do not provide for default upon the Chakrian defendants' failure to generate a future revenue stream. The Agreement provides to the contrary, "If Future Receipts are remitted more slowly than Buyer may have anticipated or projected because Seller's business has slowed down, or if the full Purchased Amount is never remitted because Seller's business went bankrupt or otherwise ceased operations in the ordinary course of business, and Seller has not breached this Agreement, Seller would not owe anything to Buyer and would not be in breach of or default under this Agreement. Buyer is buying the Purchased Amount of Future Receipts knowing the risks that Seller's business may slow down or fail, and Buyer assumes these risks based on Seller's representations, warranties and covenants in this Agreement that are designed to give Buyer a reasonable and fair opportunity to receive the benefit of its bargain." We do not reach whether the purchase agreements were usurious.
At the time of execution of the Agreement, Chakrian (NAMR's owner) executed a personal guaranty of NAMR's performance under the Agreement (Guaranty). Under the Guaranty, Chakrian "irrevocably, absolutely and unconditionally guarantees to [Accel] prompt and complete performance of all of [NAMR's] obligations under the Purchase Agreement." Further, "[i]n the event that [NAMR] fails to perform any obligation under the Purchase Agreement, [Accel] may enforce its rights under this Guaranty without first seeking to obtain performance for such default from [NAMR] or any other guarantor."
The Agreement and Guaranty provide that the parties waived their right to a jury trial, the agreements would be governed by New York law, and any lawsuit arising from the agreements would be instituted in a New York court. The Agreement and Guaranty state as to the jury waiver that "[t]he parties acknowledge that each makes this waiver knowingly, willingly and voluntarily and without duress, and only after extensive consideration of the ramifications of this waiver with their attorneys." The Guaranty provides further in a section entitled "Opportunity for Attorney Review" that "[t]he Guarantor represents that it has carefully read this Guaranty and has, or had a reasonable opportunity to, consult with its attorney. Guarantor understands the contents of this Guaranty, and signs this Guaranty as its free act and deed."
On April 30, 2018 Chakrian and NAMR executed an "affidavit of confession of judgment" (Affidavit) under which they "confess[ed] judgment" and authorized entry of judgment against them in the sum of (a) $2,2 million, less any delivered receivables; (b) 16 percent interest from the date of default to the date of the judgment; (c) costs and disbursements from the Agreement; and (d) legal fees to Accel calculated at 25 percent of (a) through (c). Chakrian signed the Affidavit individually and on behalf of NAMR, and his signatures are notarized. The Affidavit provides that Chakrian and NAMR "authorize entry of Judgment against each and every one of them in any and all Counties in the State of New York, as well as in each and every state, county, and foreign country where they reside and/or do business at any time hereafter, if outside New York State." Further, "[t]his Affidavit may be filed ex-parte by [Accel], without further notice." The Affidavit also provides, "By execution and delivery of the underlying Agreement, and the Affidavit of Confession of Judgment, Defendant(s) generally and unconditionally: (a) consents to personal jurisdiction in the county in which the Affidavit of Confession of Judgment is filed; (b) waives any objection as to jurisdiction or venue; (c) agrees not to assert any defense, claim, or cause of action based on lack of jurisdiction, inconvenient forum, improper venue; and (d) that this Affidavit of Confession of Judgment may be enforced by any of the courts in any and all Counties in New York State." B. Entry of the New York Judgments
The Chakrian defendants executed similar affidavits of confession of judgment as to each of the other purchase agreements and guaranties.
On July 11, 2018 the Supreme Court of the State of New York, County of Kings, entered a judgment by confession on the Agreement and Guaranty in Case No. 1647-18 in the amount of $2 million, comprised of $2.2 million (the "[a]mount [c]onfessed"), less $600,000 in payments made, plus 16 percent interest from July 10, 2018 in the amount of $700, plus $400,000 in legal fees, plus $225 in court fees. The judgment was entered by the clerk based on an affirmation by Accel's attorney that the amount in default was true and accurate. Judgments were similarly entered on the four other purchase agreements based on affirmations by Accel's attorney that the defaulted amounts were true and accurate. Judgments were entered on July 11, 2018 in the total amounts of $1.2 million; $2 million; and $200,000; and on August 2, 2018 in the amount of $190,000. C. Entry of the California Judgments and Motions To Vacate Judgments
On August 22, 2018 Accel filed an "application for entry of judgment on sister-state judgment" in the Los Angeles County Superior Court seeking entry of judgment for $2 million. On the same date the clerk entered a judgment (lead case judgment) in favor of Accel against NAMR and Chakrian in the requested amount, plus additional interest and filing fees. The court on that date issued a notice of entry of judgment. Accel served the application, judgment, and notice of entry of judgment by mailing copies to Chakrian and leaving a copy with an adult at Chakrian's home address. Accel followed the same procedure as to the four other purchase agreements and guaranties and obtained judgments in favor of Accel against the signatory defendants.
On October 25, 2018 NAMR and Chakrian filed separate motions to vacate the lead case judgment pursuant to Code of Civil Procedure section 1710.40 in which they argued the judgment should be vacated because it provided for 16 percent interest, which exceeded the 9 percent allowed under New York law. NAMR and Chakrian also asserted there was no showing that NAMR and Chakrian had made voluntary, knowing, and intelligent waivers of their due process rights or there was a prejudgment process for determining there had been a waiver. NAMR and Chakrian supported their motion with a declaration attaching the application for entry of sister state judgment, including the New York judgment by confession.
Further undesignated statutory references are to the Code of Civil Procedure.
The Chakrian defendants filed similar motions to vacate the four other judgments. The pleadings with respect to those cases mirrored those in the lead case.
In its consolidated opposition, Accel argued NAMR and Chakrian had failed to meet their burden to show they were entitled to relief from the judgment because the Agreement was a valid purchase agreement; Chakrian authorized the entry of judgment against him and NAMR with 16 percent interest; Chakrian agreed judgment could be entered in every state and county in which he and NAMR resided or did business; and Chakrian and NAMR knowingly agreed to entry of judgment pursuant to the Agreement upon a default. Accel also argued the entry of judgment by confession for money due based on an affidavit is lawful under New York law and in compliance with N.Y.C.P.L.R. section 3218, and therefore a judgment was properly entered in California.
In their joint reply brief NAMR and Chakrian reiterated that the New York judgment was not entitled to full faith and credit because there was no opportunity for prejudgment notice or a hearing in violation of their due process rights. Further, the affidavit of confession on judgment did not contain a waiver of NAMR's and Chakrian's rights to a trial or to be represented to counsel, nor did it show that NAMR and Chakrian had waived their rights. NAMR and Chakrian also argued the Agreement was a usurious loan requiring payment of 45 percent interest.
The superior court held hearings on the motions to vacate in March and April 2014. Accel's attorney argued at the March 26 hearing that the Chakrian defendants were sophisticated parties entering into contracts worth millions of dollars, and they waived their right to notice and a trial in the purchase agreement and other documents they signed. But Accel's attorney conceded that although the agreements stated the Chakrian defendants had an opportunity to consult with their attorneys, there was no evidence they actually consulted with an attorney before executing the agreements. The Chakrian defendants' attorney responded that the purchase agreements and guaranties did not provide a waiver of the defendants' rights, and the affidavits of confession of judgment did not show that any waiver of their due process rights was voluntary, knowing, and intelligent. He also argued it was an appropriate role of California in reviewing a sister state's judgment to determine whether the defendants' due process rights were violated. When the superior court inquired of the Chakrian defendants' attorney whether the defendants were sophisticated, their attorney acknowledged the transactions involved millions of dollars, but he argued the defendants were desperate for the money, the purchase agreements were on forms prepared by Accel, and the nature of the agreements (that they were identical other than the amounts) showed the terms were not negotiated. He added that even if the Chakrian defendants were sophisticated, they still were entitled to due process.
The record contains the transcripts of only the March 26 and April 4, 2014 hearings.
The court granted all the motions to vacate and entered identical judgments in favor of the Chakrian defendants stating, "The motions are granted pursuant to Code of Civil Procedure Sections 1132, subdivision (b), and 1710.40 because there is insufficient evidence that the New York judgment was based on a knowing and voluntary confession of judgment obtained consistently with the requirements of due process. (Cf. Capital Trust v. Tri-National Dev. Corp. (2002) 103 Cal.App.4th 824, 831 (Capital Trust) (sister state judgment based on New York confession of judgment upheld because 'defendants' affidavit acknowledging consultation with counsel [was] sufficient to allow the conclusion that Tri-National voluntarily waived its rights to due process')." Accel timely appealed.
DISCUSSION
A. Enforcement of Sister State Judgments and Standard of Review
Accel contends the superior court erred in vacating the judgments because in doing so it imposed California's requirement for an attorney affidavit under section 1132 that reflects the debtor was represented by counsel and advised as to its waiver of rights, although New York law does not require an attorney affidavit or representation by counsel. The Chakrian defendants argue that although an attorney affidavit may not be required to enforce a New York judgment, due process requires that the debtors make a voluntary, knowing, and intelligent waiver of their right to prejudgment notice and a hearing. The Chakrian defendants have the better argument.
Section 1132 provides, "(a) A judgment by confession may be entered without action either for money due or to become due, or to secure any person against contingent liability on behalf of the defendant, or both, in the manner prescribed by this chapter. Such judgment may be entered in any superior court. [¶] (b) A judgment by confession shall be entered only if an attorney independently representing the defendant signs a certificate that the attorney has examined the proposed judgment and has advised the defendant with respect to the waiver of rights and defenses under the confession of judgment procedure and has advised the defendant to utilize the confession of judgment procedure. The certificate shall be filed with the filing of the statement required by Section 1133."
New York law provides for entry of a judgment by confession where the parties to a contract for money agree in advance that upon a default by the debtor, judgment may be entered based on an affidavit of the debtor stating the amount of the judgment to be entered, the debtor's county of residence, and the facts from which the debt arose. (N.Y.C.P.L.R. § 3218, subds. (a)-(b).) The clerk shall enter a judgment in the amount confessed upon the filing of the affidavit. (Id. at subd. (b).)
Under California law, a judgment by confession for money due may be entered, but "only if an attorney independently representing the defendant signs a certificate that the attorney has examined the proposed judgment and has advised the defendant with respect to the waiver of rights and defenses under the confession of judgment procedure and has advised the defendant to utilize the confession of judgment procedure." (§ 1132, subd. (b).)
"The United States Constitution requires that the judgments of sister states be given full faith and credit if the rendering state had fundamental jurisdiction of the matter and all parties were provided reasonable notice and opportunity to be heard." (Capital Trust, supra, 103 Cal.App.4th at p. 826; accord, Conseco Marketing, LLC v. IFA & Ins. Services, Inc. (2013) 221 Cal.App.4th 831, 837 (Conseco Marketing); see V.L. v. E.L. (2016) 136 S.Ct. 1017, 1020 ["'A final judgment in one State, if rendered by a court with adjudicatory authority over the subject matter and persons governed by the judgment, qualifies for recognition throughout the land.'"].)
The Sister State Money Judgments Act (the Act; § 1710.10 et seq.) provides for entry of a judgment in California based on a sister state judgment upon the filing of an application for entry of judgment pursuant to section 1710.15 without the necessity of bringing an independent action in California. (Conseco Marketing, supra, 221 Cal.App.4th at p. 837; Washoe Development Co. v. Guaranty Federal Bank (1996) 47 Cal.App.4th 1518, 1522 (Washoe).) Upon the filing of an application, the clerk "shall" enter a judgment for the unpaid balance under the sister state judgment, plus interest and filing fees. (§ 1710.25, subd. (a); see Conseco Marketing, at p. 838 ["the entry of a sister state judgment by the clerk is a ministerial, not a judicial, act"].) Section 1710.30 requires notice of entry of judgment be served "promptly" by the judgment creditor on the debtor. Further, with limited exceptions, "a judgment entered pursuant to this chapter shall have the same effect as an original money judgment of the court and may be enforced or satisfied in like manner." (§ 1710.35.)
The Act also provides for the debtor, not later than 30 days after service of notice of entry of judgment, to file a motion to vacate the judgment "on any ground which would be a defense to an action in this state on the sister state judgment, including the ground that the amount of interest accrued on the sister state judgment and included in the judgment entered pursuant to this chapter is incorrect." (§ 1710.40, subd. (a).) The party moving to set aside a sister state judgment under section 1710.40 has the burden to show by a preponderance of the evidence why it is entitled to relief. (Conseco Marketing, supra, 221 Cal.App.4th at p. 841; Tsakos Shipping & Trading, S.A. v. Juniper Garden Town Homes, Ltd. (1993) 12 Cal.App.4th 74, 88.)
We generally review the superior court's ruling on a motion to vacate a judgment under section 1710.40, subdivision (a), for an abuse of discretion. (Blizzard Energy, Inc. v. Schaefers (2020) 44 Cal.App.5th 295, 297; Conseco Marketing, supra, 221 Cal.App.4th at p. 841.) However, where there is no conflict in the evidence, as here, we review the superior court's ruling de novo. (Conseco Marketing, at p. 841; see Wells Fargo Bank, NA v. Baker (2012) 204 Cal.App.4th 1063, 1068 [reviewing de novo superior court's order vacating sister state judgment where debtors asserted lack of jurisdiction of Iowa court to enter judgment and facts were undisputed].) B. Due Process Requirements for Confessions of Judgment
In D.H. Overmyer Co., Inc. of Ohio v. Frick Co. (1972) 405 U.S. 174, 175-176 (Overmyer) the United States Supreme Court addressed the constitutionality of Ohio's cognovit note procedure under which the debtor consents in advance to a note holder obtaining a judgment without notice or a hearing and the potential appearance of an attorney designated by the holder on behalf of the debtor. The Overmyer court held a cognovit provision satisfies due process if the debtor voluntarily, intelligently, and knowingly waives its rights to prejudgment notice and hearing with full awareness of the legal consequences. (Id. at p. 187.)
The debtor in Overmyer (D.H. Overmyer Co.) was part of "a warehousing enterprise" that operated 180 warehouses in 30 states. (Overmyer, supra, 405 U.S. at pp. 178-179.) Overmyer negotiated a contract with the Frick Co. of a refrigeration system costing $220,000. (Id. at p. 179.) Overmyer fell behind in its payments, and in the course of negotiations in which it was represented by counsel, Overmyer made a partial payment and issued an installment note for the balance without a confession-of-judgment clause. (Id. at p. 183.) After the work was complete, Overmyer again requested relief from its payment schedule, and it issued a new note, this time containing a confession of judgment provision. (Ibid.) In exchange for this provision, Overmyer received as consideration release of three mechanic's liens; reduction in its monthly payments; additional time to make the payments; and reduction in the interest rate. (Ibid.) In upholding enforcement of the cognovit note, the Supreme Court explained, "Obviously and undeniably, Overmyer's execution and delivery of the second note were for an adequate consideration and were the product of negotiations carried on by corporate parties with the advice of competent counsel." (Ibid.) The court also noted negotiation of the contract did not involve unequal bargaining power, overreaching, or a contract of adhesion. (Id. at p. 186.) Moreover, Overmyer did not contend it or its attorney was unaware of the significance of the cognovit provision. (Ibid.) The court was careful to emphasize that its holding was "not controlling precedent for other facts of other cases. For example, 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." (Id. at p. 188.)
In Isbell v. County of Sonoma (1978) 21 Cal.3d 61, 68 (Isbell), the California Supreme Court addressed the constitutionality of California's former confession of judgment law (former §§ 1132-1134). In Isbell, the plaintiff welfare recipients who had been charged with receiving overpayments executed confessions of judgment for the alleged overpayments, which were later filed in the superior court, and the clerks entered judgments on the confessed sum. (Isbell, at pp. 65-66.) The Isbell court held the statutory scheme violated the due process clause of the Fourteenth Amendment because it allowed sister state judgments to be entered without a showing of the debtor's "knowing and intelligent waiver of constitutional rights." (Id. at p. 70; accord, Capital Trust, supra, 103 Cal.App.4th at pp. 829-830 ["[T]he due process clause of the Fourteenth Amendment requires that to be valid, a confession of judgment must either itself demonstrate or be accompanied by documentation demonstrating that the defendant has made a voluntary, knowing and intelligent waiver of due process rights or there must exist a prejudgment judicial process for determining such waiver."].)
The Supreme Court in Isbell rejected the argument the debtor's assent to the confession of judgment clause presented by the creditor constituted a valid waiver of the debtor's constitutional rights, explaining, "[T]he debtor's assent to a contract of adhesion with a cognovit clause, or to a confession of judgment form presented by the creditor, cannot operate as a valid waiver of constitutional rights. But even if the terms of the confession are not dictated by the creditor, the drastic nature of the device—the debtor's advance waiver of all possible defenses and even the right to be notified of the existence of the proceeding—strongly suggests a substantial disparity in bargaining position and implies overreaching on the part of the creditor. Thus, except in the rare case in which the cognovit agreement itself shows that it was a negotiated agreement between equal bargainers, . . . a court presented only with the verified confession of judgment cannot assume the voluntariness of any waiver of due process rights implicit in that confession." (Isbell, supra, 21 Cal.3d at pp. 69-70.)
In response to the holding in Isbell, in 1979 the Legislature amended section 1132 to allow the entry of judgment by confession only if the creditor files an attorney certificate indicating the attorney has examined the proposed judgment, advised the debtor concerning its waiver of rights and defenses, and recommended use of the procedure. (Capital Trust, supra, 103 Cal.App.4th at p. 829; see Stats.1979, ch. 568, § 1, p. 1795; § 1132, subd. (b).) In Capital Trust, the Court of Appeal considered whether a confession of judgment entered in New York satisfied due process under Isbell where the judgment had been entered in California under the amended version of section 1132. In concluding the confession of judgment satisfied due process, the court observed the case involved negotiation of a complex loan by sophisticated parties and the debtors executed affidavits stating they had "consulted with . . . counsel regarding the entry of this Confession of Judgment, the enforceability of this Confession of Judgment and this form of the Confession of Judgment." (Capital Trust, at p. 831.) On these facts, the Court of Appeal concluded, "While the defendants' affidavit acknowledging consultation with counsel does not strictly satisfy the attorney affidavit requirements of section 1132, we conclude that given the context of the case it is sufficient to allow the conclusion that [the debtor] voluntarily waived its rights to due process." (Ibid.) C. The Superior Court Did Not Err in Finding Entry of the Judgments Violated the Chakrian Defendants' Due Process Rights
Accel contends the Chakrian defendants were sophisticated parties who negotiated agreements worth millions of dollars, the confession of judgments complied with New York law, and the Chakrian defendants in the purchase agreements, guaranties, and confessions of judgment made voluntary, knowing, and intelligent waivers of their right to prejudgment notice and a hearing. The Chakrian defendants argue they met their burden in the superior court to show their due process rights were violated because they were not given prejudgment notice and an opportunity to be heard, and they had not made a voluntary, knowing, and intelligent waiver of their rights. On the record before us, the Chakrian defendants did not provide voluntary, knowing, and intelligent waivers of their rights.
Accel argues the facts here are "substantively identical" to those the Court of Appeal in Capital Trust and Overmyer found satisfied due process. They are not. Although Capital Trust, as here, involved enforcement of judgments entered based on affidavits for confessions of judgment under New York law, the similarity stops there. As discussed, in Capital Trust the attorney affidavits represented that the debtors had been represented by an attorney, and the debtors had consulted the attorney regarding entry of the confession of judgment, its enforceability, and the form of the confession of judgment. (Capital Trust, supra, 103 Cal.App.4th at pp. 830-831.) In addition, the debtors were "sophisticated parties, negotiating a complex loan" for "a considerable amount of money." (Id. at pp. 826, 830.) Similarly, in Overmyer, the record reflected the debtor was sophisticated (operating 180 warehouses in 30 states); the note was for a significant amount of money ($220,000 in the 1970's); the debtor was represented by counsel during negotiations over the cognovit note; the confession-of-judgment clause was only included in the note after Overmyer had defaulted on a prior note; and Overmyer received consideration for inclusion of the clause. (Overmyer, supra, 405 U.S. at pp. 178-179, 183, 186.)
Unlike in Capital Trust and Overmyer, there is no evidence the Chakrian defendants consulted with an attorney or an attorney advised them on the nature and enforceability of a confession of judgment. The agreements were executed only by the Chakrian defendants, not by an attorney on their behalf. The purchase agreements provided that each debtor "was represented by counsel or had full opportunity to consult with counsel," but Accel conceded at the hearing there was no evidence the Chakrian defendants actually consulted with an attorney. The guaranties similarly provided only that the guarantor "has, or had a reasonable opportunity to, consult with its attorney." Further, the affidavits of confession of judgment do not contain any representation Chakrian and Alice Chakrian had an opportunity to consult with an attorney before executing the documents. The judgments by confession likewise contain only an affirmation by the attorney for Accel that the Chakrian defendants had defaulted and the amounts stated in the judgment were true and correct.
Although paragraph 22 of the purchase agreements stated all parties had "reviewed this Agreement with an attorney of their own choosing and have relied only on their own attorney's guidance and advice," Accel does not argue this actually occurred.
Although the purchase agreements involved significant amounts of money (in the millions of dollars), and the agreements provided that each debtor "warrants and agrees that it is a sophisticated business entity familiar with the kind of transaction covered by the Agreement," there was no other evidence the Chakrian defendants were sophisticated parties or that the confession of judgment clauses were negotiated by parties with equivalent bargaining power. Notably, all the purchase agreements are on forms prepared by Accel, with only the names of the contracting parties, dates, and dollar amounts differing among the agreements. As the Isbell court cautioned, unless the cognovit agreement shows it was a negotiated agreement between equal bargainers, "a court presented only with the verified confession of judgment cannot assume the voluntariness of any waiver of due process rights implicit in that confession." (Isbell, supra, 21 Cal.3d at p. 70.) And unlike Overmyer, there is no evidence the Chakrian defendants received anything for the confession of judgment provision other than the purchase agreements themselves.
Accel argues the Chakrian defendants failed to meet their burden of proof because they did not present evidence showing their waivers were not voluntary, knowing and intelligent. Accel misconstrues the burden of proof. The Chakrian defendants in moving to vacate the judgments had the burden to prove the judgments were entered without prior notice or a hearing and without any showing the defendants had waived their rights. They met this burden by attaching to each motion the application for entry of judgment on sister state judgment and judgment by confession. Neither document shows the Chakrian defendants waived their right to prejudgment notice and a hearing. As the Isbell court explained with respect to entry of a judgment of confession, "waiver of constitutional rights is not presumed." (Isbell, supra, 21 Cal.3d at p. 68.) Therefore, it was Accel's burden to show the Chakrian defendants had made a valid waiver of their due process rights. (Id. at p. 75, fn. 8 ["'where a creditor relies upon waiver of due process rights, he should be charged with proving that the waiver was valid'"]; see Commercial Nat. Bank of Peoria v. Kermeen (1990) 225 Cal.App.3d 396, 398, fn. omitted ["We hold that a California judgment may not be based solely on a sister state judgment obtained pursuant to a cognovit clause in a preprinted bank promissory note, where the debtor received no notice or opportunity to be heard in the foreign action and there is nothing in the record to show these rights were voluntarily and knowingly waived."].) Accel did not meet its burden to present evidence the Chakrian defendants provided voluntary, knowing, and intelligent waivers of their due process rights.
Silbrico Corp. v. Raanan (1985) 170 Cal.App.3d 202 and Traci & Marx Co. v. Legal Options, Inc. (2005) 126 Cal.App.4th 155, relied on by Accel, are distinguishable. In contrast to here, the debtors in Silbrico had been given notice of their defaults and a reasonable opportunity to be heard, and they did not challenge the jurisdiction of the Wisconsin court. (Silbrico, at p. 208.) As the Silbrico court concluded, "[T]he judgment of a sister state must be recognized in a California court if that sister state had jurisdiction over the parties and the subject matter and all interested parties were given reasonable notice and opportunity to be heard." (Ibid.) In Traci & Marx Co., the trial court had vacated a judgment based on an Ohio default judgment because the judgment did not comply with the requirement under California law that a default judgment be limited to the amount of damages alleged in the complaint. (Traci & Marx Co., at p. 158.) The Court of Appeal reversed, concluding the lack of compliance with the California requirement did not show the Ohio court acted in excess of its jurisdiction or the judgment was not enforceable in Ohio. (Id. at p. 160.) Because the defendants had failed to answer the complaint, the defendants' due process rights were not at issue on appeal.
DISPOSITION
The orders vacating the judgments are affirmed. The Chakrian defendants are awarded their costs on appeal.
FEUER , J. We concur:
PERLUSS, P. J.
SEGAL, J.