The law firm of one of the key figures in the Luzerne County "kids-for-cash" scandal, attorney and businessman Robert J. Powell, must pay back multiple business loans plus interest and attorney fees — totaling in the millions — as a result of the loans going into default, the state Superior Court has ruled.
A three-judge panel ruled unanimously in First National Community Bank v. Powell Law Group that Powell's firm had to pay the principal, accrued interest, and attorney fees related to three separate business loans made to two companies, denying the firm's motions to strike the judgments despite its contentions that excessive attorney fees and insufficient signature and initialing sections on documents entitled it to relief.
The court used similar language to dismiss Powell's firm's claims as unsubstantiated in three separate opinions by Senior Judge Robert E. Colville.
For example, Colville said of the firm's objection to the sum of attorney fees in one case, "the face of the record permitted [First National Community Bank] to confess judgment in an amount that included the $515,820 attorney fee. [Powell's firm's] poorly crafted argument fails to convince us that the trial court erred by refusing to strike the judgment due to the allegedly grossly excessive attorney fee by more than 66 percent despite the fact that [the firm] failed to seek such relief in [its] petition to open."
According to Colville, Powell's firm took out three separate business loans for two companies, Big Kahuna Realty LLC and W-CAT Inc. The amounts originally owed for the 240-month and 120-month term loans to Big Kahuna, with interest and attorney fees included, totaled nearly $1.3 million and $144,000, respectively, while the amount owed for a construction loan to W-CAT totaled more than $4.6 million including interest and attorney fees.
First National Community Bank claimed that it had entered a loan agreement with W-CAT in May 2005 in the amount of $2.5 million, also extending two $1 million lines of credit, according to Colville.
Powell's firm entered a guaranty and suretyship agreement with First National as part of a six-month forbearance agreement in February 2009, in which Powell's firm guaranteed the repayment of all loans made to W-CAT. As per the guaranty, when the loan defaulted, the firm was held liable for the total of more than $4.6 million covering the remaining and unpaid principals to the loan and lines of credit, and attorney fees (totaling $515,820), Colville said, noting that Powell's firm signed guaranties for the other loans and was held similarly liable.
In response to the addition of attorney fees to the loans, Powell's firm said they were "grossly excessive," Colville said. Colville also contended that the trial court was correct in denying the motion to strike based on attorney fees because the $515,820 figure did not exceed 15 percent of the unpaid interest, as agreed upon in the guaranty.
Despite denying the motion to strike, the trial court granted in part a petition to open judgment, modifying the attorney fees to $171,940, according to Colville.
Typically when a court grants a petition to open a judgment, it is not appealable because the parties have nothing left to litigate, Colville said, and, additionally, the court must re-enter judgment if the amount is modified or reduced, which it did not. In this case, however, Colville said the court would "regard as done that which ought to have been done."
Considering the 120-month and 240-month term loans for Big Kahuna, totaling $143,735 (including an attorney commission of $12,634) and nearly $1.3 million (including $107,288 in attorney fees), respectively, the Superior Court again ruled that the attorney fees were not "grossly excessive," according to Colville.
Powell's firm also claimed that judgments placed on it by the Luzerne County Court of Common Pleas should be stricken because the guaranty between the firm and First National lacked a signature or initial requirement on the first page that contained the confession-of-judgment clause.
Powell's firm alleged in each claim that there was no heading indicating the confession-of-judgment provision on the guaranty document and that the provision started mid-page, usually in the middle of the document, with the signature not coming up until the last page in at least one of the guaranties, according to Colville.
Powell, the former co-owner of the PA Child Care juvenile detention facility, was one of the central figures in the Luzerne County "kids-for-cash" scandal. Powell pleaded guilty in June 2009 to failing to report a felony to federal authorities and with being an accessory after the fact to a tax conspiracy. He was sentenced to 18 months in prison.
(Copies of the 26-page opinion in First National Community Bank v. Powell Law Group, PICS No. 13-2602, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •