Court Won’t Consolidate Separate Judgments Against Spouses

Written by: Alan Nochumson

In Pennsylvania and with most states, assets owned by married couples have their own recognized form of ownership; namely, tenancy by the entireties.

Under this form of ownership, one spouse cannot encumber any portion of the property without the permission of the other spouse. This legal characteristic causes particular grief to judgment creditors who have a judgment against one spouse but not the other one. If, for instance, the judgment is only against one spouse but not the other, and the married couple maintains all of their assets in their names jointly, the judgment creditor has no recourse in executing upon the judgment.

Most times, however, when the judgment is in the name of both spouses, the judgment creditor can rest assured that, if the married couple has unencumbered assets, the judgment creditor will be able to attach these assets in execution proceedings.

In a ruling handed down last month, the Superior Court of Pennsylvania in Customers Bank v. Rajaratnam, 2013 Pa. Super. 304 (Nov. 25, 2013), in a case of first impression, refused to consolidate separate judgments entered against a husband and wife so that assets held as tenants by the entireties may be executed upon to satisfy joint indebtedness.

In 2005, Customers Bank’s predecessor-in-interest made a construction loan of almost $7 million to finance a condominium conversion in Philadelphia, the opinion said. As part of the construction loan, the principal of the entity that owned the property agreed to guaranty the indebtedness of the loan obligations, the opinion said.

According to the opinion, the term of the loan expired in 2007. Prior to the loan maturing, the parties modified the loan so that the term of the loan was extended. As part of this loan modification, both the entity’s principal and his wife jointly entered into a new guaranty agreement with Customers Bank’s predecessor-in-interest, the opinion said.

When the loan went into default, in 2009, Customers Bank’s predecessor-in-interest sought and obtained a confession of judgment in its favor and against the husband only under the guaranty agreement entered into by him in 2005.

The following year, Customers Bank’s predecessor-in-interest filed a complaint against the wife only based upon her obligation under the guaranty agreement she entered into in 2007.

In 2012, the trial court conducted a bench trial in the action against the principal’s wife, after which it found that she was bound by the terms of the guaranty agreement and judgment was subsequently entered against her and in favor of Customers Bank, according to the opinion.

Customers Bank then moved to consolidate the judgments obtained against the husband under the guaranty agreement entered into by him in 2005 and against the wife based upon the guaranty agreement she entered into with her husband in 2007.

When the trial court denied Customers Bank’s motion to consolidate the judgments, Customers Bank then appealed the trial court’s ruling to the Superior Court.

At the outset, the Superior Court pointed out that, while Rule 3025.1 of the Pennsylvania Rules of Civil Procedure authorizes the consolidation of multiple judgments entered against the same person, there is no procedural mechanism to consolidate judgments against different people.

The Superior Court then quickly rejected the notion that the trial court had the ability to consolidate the two judgments in Rajaratnam based upon the inherent power of trial courts to modify their own judgments.

Regardless, the Superior Court believed that “even if a procedural mechanism did exist for consolidating judgments against different people, Pennsylvania substantive law would not permit consolidation in this case.”

The Superior Court first analyzed the state Supreme Court’s ruling in Beihl v. Martin, 84 A. 953 (1912).

In Beihl, a married couple sought to sell a property they owned as tenants by the entireties to a third party even though the husband (but not his wife) had been declared bankrupt and had unpaid judgments outstanding against him.

The Supreme Court in Beihl “observed that any disposition of property held as tenants by the entireties must be based upon a ‘joint act’ of husband and wife together.” Since the judgments against the husband in Beihl were not the products of “joint acts” by the married couple, the Supreme Court ruled that the liens against him individually had no effect on the married couple’s ability to sell their marital property to a third party free and clear from the judgments obtained against the husband only.

The Superior Court in Rajaratnam noted that, while the Supreme Court in Beihl established the requirement of “joint action” by a married couple to permit execution on property held as a tenancy by the entireties, it did not address what type of “joint action” is required to create a joint debt to permit an encumbrance. In other words, according to the Superior Court, “Beihl does not resolve the question of whether the ‘joint action’ requirement must be satisfied by the performance of a single act performed by husband and wife together, or if instead separate acts resulting in the same indebtedness will suffice.”

While, according to the Superior Court, no Pennsylvania appellate court has addressed this issue, the U.S. Court of Appeals for the Third Circuit in A. Hupfel’s Sons v. Getty, 299 F. 939 (3d Cir. 1924), applying Pennsylvania law, considered whether separate acts by spouses resulting in a joint indebtedness may result in the encumbrance of marital property under the principles set forth in Beihl.

In A. Hupfel’s Sons, the husband, a saloonkeeper, borrowed money to, among other things, purchase beer, and provided a bond and a chattel mortgage to secure his debt. After he defaulted on the loan, a judgment was obtained in favor of the lender and against him. The wife then entered into an agreement with the lender, whereby she agreed to take over her husband’s indebtedness if money was advanced to permit her to purchase a liquor license. The wife then defaulted upon her loan obligation and the lender obtained a judgment against her.

With these two judgments unsatisfied, the married couple sold their marital property to a third party. When the lender issued writs of execution against the marital property to satisfy its judgments, a quiet title action was commenced as to what effect the judgments had against the marital property.

The Third Circuit in A. Hupfel’s Sons “failed to find joint action in any sense.” In so finding, the Third Circuit pointed out that the husband first gave security to the lender based upon a consideration of existing indebtedness, which was one transaction, and that the wife, desiring money with which to obtain a liquor tax certificate and embark in business for herself, assumed her husband’s indebtedness, which was another transaction. As such, the Third Circuit concluded that the obligations arising from these separate transactions were, therefore, not joint, but rather separate, both in point of time and purpose.

The Superior Court cited the following passage of the Third Circuit’s ruling: The married couple “w[as] without doubt mutually interested in the transactions which resulted in the two judgments. But mutuality of interest in separate transactions out of which have grown separate obligations based upon different considerations does not amount to joint action within our understanding of the law of Beihl.”

Relying upon the rationale employed by the Third Circuit in A. Hupfel’s Sons, the Superior Court agreed that separate actions by spouses resulting in separate judgments are not sufficient to encumber marital property. The Superior Court held that “to establish a joint debt that may serve as the basis for a lien on entireties property, the two spouses must act together in the same transaction and in so doing incur a joint liability,” and “only by acting together will the spouses satisfy Beihl’s ‘joint action’ requirement, as their mutual decision to incur a joint debt demonstrates a willingness to ‘strip the estate of its attributes and create a wholly different estate in themselves.’”

In refusing to consolidate the judgments in Rajaratnam, the Superior Court emphasized that the judgments were entered pursuant to separate documents, in separate transactions, and for separate considerations.

As noted by the Superior Court, the judgment against the husband resulted from his execution of a guaranty agreement entered into by the parties in 2005, which he signed to secure the initial loan for his business, while the judgment against his wife resulted from her execution of a guaranty agreement she signed in 2007 in part to obtain a change in terms of the loan, including an extension of the maturity date.

The Superior Court rejected the argument made by Customers Bank that, although it has two separate judgments based upon liability under two different agreements, the facts nevertheless satisfy the “joint action” requirement because the married couple both signed the guaranty agreement in 2007 and, thus, jointly agreed to be liable for the construction loan.

Rather, the Superior Court stated that the judgment against the husband is not based upon any obligations under that guaranty agreement and there has never been any judicial determination that he has any liability arising from that document.

The Superior Court, in a strongly worded passage of its ruling, played Monday morning quarterback. In doing so, the Superior Court reiterated that, at the time judgment was confessed against the husband, Customers Bank’s predecessor-in-interest could have simply filed suit against the husband and wife in an effort to obtain a joint judgment for liability under the guaranty agreement entered into by the parties in 2007. Since no attempt was made to establish his potential liability under that guaranty agreement, the Superior Court bluntly concluded that this “doomed any future attempt to execute against property held by the” married couple.


The Superior Court’s ruling in Rajaratnam will send a chill down the spine of attorneys representing financial institutions throughout the state. It is clear that the wife was added as an additional guarantor to the construction loan because Customers Bank’s predecessor-in-interest required additional security should a loan default occur. Because how the judgments against the husband and wife were obtained, Customers Bank, unless the Superior Court’s ruling is overturned by our Supreme Court, will now be precluded from liquidating marital assets that could further satisfy these judgments.

Reprinted with permission from the December 17, 2013 edition of The Legal Intelligencer © 2013 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, or visit

Alan Nochumson