Isbell v. County of Sonoma

*76RICHARDSON, J.

I respectfully dissent. In its praiseworthy zeal to protect the unwary victims of standardized adhesion contracts containing confession of judgment provisions, the majority unnecessarily and improperly strikes down a major portion of California’s confession of judgment statute (namely, Code Civ. Proc., §§ 1132, subd. (a), 1133, 1134). With all due deference, I suggest that in a situation calling for use of a surgeon’s scalpel the majority reaches for a meat axe. The majority’s holding of facial unconstitutionality conflicts with the latest expressions of the United States Supreme Court on the subject, and has the unfortunate (and wholly unnecessary) effect of invalidating even those confessions executed by willing and knowledgeable debtors for the purpose of avoiding unnecessary litigation over matters already in controversy. Because the confession procedure operates in an entirely proper fashion in such cases, and because the Legislature in 1975 has added adequate safeguards applicable to most adhesion-type contracts (see Code Civ. Proc., § 1132, subd. (b)), we should uphold the challenged legislation and require those debtors who may assert that their signatures were obtained improperly to raise the defense through appropriate postjudgment relief.

Initially, I stress that the case before us does not involve the typical, much-criticized, “cognovit note or agreement,” of the sort contained in many adhesion-type contracts. As described by one observer, “This type of note, incorporated in a contract or other document, attempts in advance of any legal controversy to authorize ... the entering of judgment without notice and hearing for the amount confessed.” (Note, Cognovit Revisited: Due Process and Confession of Judgment (1973) 24 Hastings L.J. 1045, 1046, italics in original, hereafter cited as Note.) It was this type of advance confession which we condemned in the case relied upon by the majority, Hulland v. State Bar (1972) 8 Cal.3d 440, 449 [105 Cal.Rptr. 152, 503 P.2d 608]. In Hulland an attorney (who, of course, owed a continuing fiduciary obligation to his client) had exacted such a confession from a new client as security for payment of future legal services. (Id., at p. 443.)

In marked contrast, we are not presented with a case bearing any factual similarity to Hulland. In the matter before us, defendant county obtained the written confessions of judgment following its discovery of what it claims was welfare fraud perpetrated on it by plaintiffs. In the case of plaintiff Isbell the claim was followed by a criminal prosecution *77under section 11482 of the Welfare and Institutions Code; Isbell pled guilty to the charged offense and was jailed. Plaintiffs Pearson were alleged to have received an overpayment of welfare benefits before they executed their confession of judgment. While plaintiffs did not have the advice of counsel when the confessions of judgment were signed, in the language of a unanimous Court of Appeal herein, “... there is not a scintilla of evidence that they did not knowingly, intelligently and voluntarily waive their due process rights.” It is significant that the confessions were not buried in the fine print of an adhesion contract. Furthermore, they were directed toward resolving an actual, existing controversy between the parties. The two confessions involved herein bear the caption “County of Sonoma, plaintiff vs. [Eva Isbell] [Omega and Clevie Pearson] defendant,” recite that each defendant confesses judgment in a specific sum, and contain a paragraph, handwritten by the respective debtors, which admits the facts of the fraud and sets forth a repayment plan. (For example, Isbell’s confession stated, in her own handwriting, that “I gave false statements to in [jzc] which to receive welfare. I plan to pay it back at $20.00 Twenty dollars a month until said debt is paid, after I am released from jail.”)

Given the fact that the plaintiffs executed the confessions shortly after the controversy with the county had arisen (rather than as part of an adhesion contract for goods or services executed in advance of default), we may reasonably presume that plaintiffs fully understood their potential liability to the county, and knowingly and voluntarily confessed judgment in order to avoid the expense and inconvenience of contested litigation. So long as a debtor has notice of the existence of the dispute with his creditor and an opportunity to contest the claim if he chooses to do so, the confession of judgment procedure “raises no significant due process problems. This method of confessing judgment without action avoids needless litigation.” (Note, supra, at p. 1046.)

As previously observed, in 1975 the Legislature acted to protect most adhesion contract debtors from the confession of judgment procedure. Under new section 1132, subdivision (b), a confession of judgment may not be entered against the debtor in an ordinary sale, service or loan transaction unless the debtor’s own independent attorney certifies that he has fully informed his client of the facts and consequences, and has advised him to use the confession of judgment procedure.

*78By reason of the enactment of section 1132, subdivision (b), the interests of the typical adhesion contract debtor have been adequately protected; indeed, the majority does not purport to invalidate that subdivision along with the rest of the statute. The majority’s principal reason for striking down the remaining provisions appears to be that “ ‘a consent obtained in such a contract of adhesion is ineffective to waive the constitutional protections ....’” (Ante, p. 69, quoting from Blair v. Pitchess (1971) 5 Cal.3d 258, 276 [96 Cal.Rptr. 42, 486 P.2d 1242, 45 A.L.R.3d 1206].) As I have previously explained, however, we are not dealing with the typical advance confession clause in an adhesion contract.

The majority, ignoring a record which discloses no evidence whatever of overreaching, concludes that confessions of judgment “most often” are executed by debtors “who have little understanding” and “little choice” (ante, pp. 64,65); the cognovit clauses appear “most commonly” in adhesion contracts; the nature of the device “suggests” a substantial disparity in bargaining power and “implies” overreaching; “historical experience” shows that “confessions” are “most frequently employed against those who are unaware” (ante, pp. 69-70, italics added). “Many courts” have observed that signators “often do not realize” they are waiving defense rights; thus the debtor’s signature creates no inference of a knowing intelligently exercised waiver. (Ibid.) “In sum, sad experience has shown that the confession of judgment procedure lends itself to overreaching, deception, and abuse,” so on its face the confession cannot be voluntary and knowing. (Ante, p. 71, italics added.) In short, ignoring the factual record before us, the majority predicates a result based on what it perceives has been the general experience with confession judgments, an area which has had, and continues to have, very active legislative interest and attention.

I am convinced that we should, much more wisely, approach this task on a case-by-case basis, invalidating the offending practice only in those situations in which due process standards are actually violated. The majority asserts that the statutes themselves “do not provide for a case by case determination” of the waiver question. (Ante, p. 71.) Yet, as the majority recognizes, judicial review is readily available, for the debtor may either move to set aside the judgment (Code Civ. Proc., § 473), or may file an independent action alleging fraud in procuring the judgment (see, e.g., Olivera v. Grace (1942) 19 Cal.2d 570, 575 [122 P.2d 564, 140 A.L.R. 1328]). As I explain below, the availability of such postjudgment relief clearly satisfies any due process objections. (D. H. Overmyer Co. v. *79Frick Co. (1972) 405 U.S. 174, 188 [31 L.Ed.2d 124, 135-136, 92 S.Ct. 775].) Although such a “case-by-case” approach may lack the simplicity of invalidating the confession of judgment procedure in its entirety, I suggest that such an approach is dictated by the fact that the confession procedure operates in an entirely proper manner in the vast majority of cases.

The majority holds that the confession of judgment procedure is unconstitutional on its face under due process principles because judgment may be entered without “a prejudgment judicial determination of the validity of the debtor’s waiver . .. .” (Ante, p. 71.) Apart from the fact that in the present case we properly may presume such a valid waiver from the face of the handwritten confessions, in 1972 the United States Supreme Court unanimously rejected a similar claim of facial unconstitutionality. Thus, in D. H. Overmyer Co. v. Frick Co., supra, 405 U.S. 174, the high court reviewed the validity of an Ohio judgment entered by the creditor without notice to the debtor, on the basis of the latter’s prior execution of a promissory note containing a confession-of-judgment clause. In affirming the judgment, the court expressly noted that “The due process rights to notice and hearing prior to a civil judgment are subject to waiver” (p. 185 [31 L.Ed.2d at p. 133]); that although such a waiver must be knowingly and voluntarily made, the debtor had not contended that it was unaware of the significance of the note’s provisions (p. 186 [31 L.Ed.2d at p. 134]); and that the facts disclosed no unequal bargaining power or overreaching by the creditor (ibid.). The court concluded in these words, which are fully dispositive of the majority’s major constitutional premise: “Our holding necessarily means that a cognovit clause is not, per se, violative of Fourteenth Amendment due process. [Debtor] could prevail here only if the clause were constitutionally invalid. The facts of this case, as we observed above, are important, and those facts amply demonstrate that a cognovit provision may well serve a proper and useful purpose in the commercial world and at the same time not be vulnerable to constitutional attack, [f] Our holding, of course, is 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.” (Pp. 187-188 [31 L.Ed.2d at p. 135].)

The majority has found that three sections of the Code of Civil Procedure violate due process principles. However, the United States Supreme Court, as I have noted, has said that due process rights may be *80waived in the cognovit situation. While the waiver must be made knowingly in this case, that fact appears from the face of the handwritten confessions. Having been formally charged with a welfare fraud, and having pled guilty and while serving a jail term therefor, Isbell should, reasonably, be held to have possessed both knowledge of the charge and full opportunity to defend. Similarly, nothing in the record suggests that the Pearsons were ignorant of the nature of the claims against them, the amount involved, and of their opportunity to resist the claim; their own confession, on its face, demonstrates this knowledge.

The high court concluded in Overmyer that the debtor was not left without remedy by entry of the confessed judgment, as he may move to vacate the judgment upon a proper showing of a valid defense. (405 U.S. at p. 188 [31 L.Ed.2d at pp. 135-136].) We should follow Overmyer and uphold the constitutionality of California’s confession of judgment procedure. Although that procedure may, in rare cases, operate unfairly, the Legislature has reformed the procedure as it applies to adhesion contracts, and in all other cases the debtor is afforded the opportunity to nullify the confessed judgment through an appropriate motion to vacate it. There is, moreover, a presumption of constitutionality of a statute. (In re Ricky H. (1970) 2 Cal.3d 513, 519 [86 Cal.Rptr. 76, 468 P.2d 204]; 5 Witkin, Summary of Cal. Law (8th ed. 1974) p. 3281.) No satisfying reason appears for invalidating the entire statutory scheme, thereby precluding legitimate use of the confession procedure in those situations where the parties desire to avoid unnecessary contested litigation.

I conclude, in accordance with the Note cited above, that “The cases considered clearly state that cognovit judgments are alive and well. They have withstood attacks under the due process clause of the Fourteenth Amendment. Even though a property interest sufficient to warrant notice and hearing is involved, the judicial policy reflected in Sniadach and Fuentes has not been extended to cognovit judgments. Due process rights can be waived and cognovit judgments can be entered if waiver is evident from the contract containing the cognovit note. [1] Overmyer indicates that the Fourteenth Amendment is almost certainly satisfied if there is an appellate procedure conforming to the requirements of due process .... [|] It can be argued that the duty of the courts is to provide an impartial, neutral forum. Their function is not to demand litigation in every dispute. Since waiver of due process rights can be made, the court’s *81function is to provide a forum for attacking the validity of waiver if, but only if, the debtor wants to challenge it.” (Note, supra, at pp. 1064-1066.)

I would affirm the judgment.

Clark, J., and Manuel, J., concurred.

Respondents’ petition for a rehearing was denied June 15, 1978, and the opinion was modified to read as printed above. Clark, J., Richardson, J., and Manuel, J., were of the opinion that the petition should be granted.