Farnam Street Financial, Inc. v. Safe & Green Holdings Corp.

Background

Farnam Street Financial, Inc. entered into a lease agreement and lease schedule with SG Environmental Solutions Corp., formerly known as SG Blocks, Inc., in October 2021. SG Environmental Solutions accepted and installed equipment valued at $1,556,163.00.

Farnam Street and the defendants later entered into a settlement agreement in July 2024. Under that agreement, SG Environmental Solutions was required to pay Farnam Street a $167,056.00 security deposit by August 1, 2024, and monthly lease payments of $65,880.95 plus applicable taxes beginning August 1, 2024. Safe & Green Holdings Corp. and SG Echo, LLC guaranteed SG Environmental Solutions’ obligations.

The defendants signed a confession of judgment to secure those obligations. A confession of judgment is an agreement allowing a creditor to obtain a judgment for a specified amount if the debtor defaults. Here, the defendants agreed that, upon a missed deposit or monthly payment, Farnam Street could seek a judgment against them jointly and severally for $2,000,000, reduced by any payments made after the settlement agreement was signed. The defendants also agreed to Minnesota personal jurisdiction and venue and waived advance notice, a hearing, and an opportunity to object before entry of judgment.

Default and Motion

The court found that the defendants made no payments after the settlement agreement, including the deposit and the monthly payments due by August 1 and September 1, 2024. Farnam Street sent written notice of default for failure to pay the deposit and the payment due by August 1, 2024. The court found that the amount due under the confession remained $2,000,000.00.

Farnam Street moved for entry of judgment under the confession. The defendants filed no response and did not appear at the October 28, 2024 hearing. Based on counsel’s representations and the service documents, the court found that the defendants knew about the motion and hearing and chose not to take a position. The opinion states that the defendants were represented by legal counsel when negotiating and signing the settlement agreement and confession of judgment.

Court’s Analysis

The court held that Minnesota law permits confessions of judgment when they are shown in a written statement signed and verified by the person obligated to pay, and the statement shows that the amount confessed is justly due and owing. The court also held that a federal court may enter a judgment based on a confession of judgment when it has subject-matter jurisdiction and the confession was made knowingly, voluntarily, and intelligently.

The court found subject-matter jurisdiction based on diversity of citizenship and an amount in controversy exceeding $75,000.00. It found personal jurisdiction over the defendants under the terms of the confession and found venue proper in the District of Minnesota. It further found that the confession was signed and verified, showed that the amount was justly due and owing, and was entered knowingly, voluntarily, and intelligently while the defendants had legal representation.

Disposition

The court granted Farnam Street Financial, Inc.’s Motion for Entry of Judgment Pursuant to Confession of Judgment. Judge Katherine Menendez ordered the clerk to enter a money judgment in Farnam Street’s favor and against Safe & Green Holdings Corp., SG Environmental Solutions Corp., and SG Echo, LLC, jointly and severally, in the amount of $2,000,000.00.