Norman Understein as Trustee of the Jill S. Parreco Revocable Trust et al v. McKiver

Filing 49

MEMORANDUM OPINION (c/m to Thomas McKiver, Wendy Bond, and Simon Bond 12/11/14 sat). Signed by Judge Deborah K. Chasanow on 12/11/2014. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
NORMAN UNDERSTEIN AS TRUSTEE
OF THE JILL S. PARRECO
REVOCABLE TRUST, et al.

:
:

v.

:

Civil Action No. DKC 14-1452

:
THOMAS McKIVER
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this action
for confessed judgment are the following motions: (1) motion to
vacate

confessed

judgment

filed

by

Defendant

Thomas

McKiver

(“Defendant” or “Mr. McKiver”) (ECF No. 20); (2) motion for
summary

judgment

filed

Trustee

of

Jill

the

by
S.

Plaintiffs
Parreco

Norman

Revocable

Understein
Trust,

as

Norman

Understein as Trustee of the Norman Understein Revocable Trust,
and

Norman

Understein

as

Agent

for

Purchasers

(collectively,

“Plaintiffs”) (ECF No. 28); (3) motion to dismiss counterclaim
filed by Plaintiffs (ECF No. 37); and (4) motion to withdraw
four prior filings filed by Defendant (ECF No. 44).
now rules, no hearing being deemed necessary.

The court

Local Rule 105.6.

For the following reasons, Defendant’s motion to dismiss his
previously
counterclaim,

filed

motion

opposition

to

to

vacate

motion

for

confessed
summary

judgment,

judgment,

and

third-party complaint will be granted.

Plaintiffs’ motions for

summary judgment and to dismiss the counterclaim will be denied
as moot.
I.

Background
A.

Factual Background

Norman Understein is a Trustee of the Jill S. Parreco Trust
and the Norman Understein Trust and is agent for Purchasers
under two Secured Debentures.

(ECF No. 27, at 1).

Defendant is

a borrower and guarantor on loans that have been fully advanced
and are now in default, payable to Plaintiffs.

(Id. ¶ 3).

Wendy and Simon (Oscar) Bond joined Defendant in two business
ventures located in Bloomfield, New Jersey.

(Id.).1

The two

businesses owned by Defendant with the Bonds operate under the
following corporate entities: 554 Bloomfield, LLC (“554 LLC”),
which owns and operates a commercial building; and BND Salon
Corporation

(“BND”),

which

owns

and

school located in that same building.

operated

a

cosmetology

(Id. ¶ 5).

In 2012, 554 LLC and BND encountered financial difficulties
and Mr. Understein was asked to provide financial assistance in
the form of a loan.

(Id. ¶ 6).

Mr. Understein arranged loans

to keep the businesses in operation.

According to Plaintiffs’

amended complaint, “to guard against the risk of non-payment,

1

Wendy Bond is Norman Understein’s sister-in-law.
27 ¶ 4).
2

(ECF No.

the loans were secured and guaranteed personally by the three
business

owners,

[Mr.

McKiver

and

the

Bonds].”

(Id.

¶

6).

Defendant, Wendy Bond, and Simon Bond (aka Oscar Bond) signed a
Demand Promissory and Line of Credit Note, dated April 23, 2012,
for

$100,000,

“Borrower.”

each

individually

(ECF No. 27-1).

and

all

jointly

together

as

Defendant and the Bonds promised

to repay the $100,000 to Norman Understein and Jill Parreco.
(Id. at 1).
Line

of

The principal amount of the Demand Promissory and

Credit

Note

was

advanced

pursuant

to

three

requests, all of which are signed by Mr. McKiver.
1, at 5-7).

advance

(ECF No. 27-

Paragraph 6(B) of the Note states:

If I do not pay the full amount of
payment on the date it is due, or if I
default under any other promissory
(either as an individual borrower,
borrow[er], or guarantor), then I will
default under this Note.
(Id. at 2).

each
am in
note
joint
be in

The Note provides for late charges on overdue

payments, and for attorney’s fees and costs if enforcement is
required.

(Id. at 2-3).

The Note also authorizes judgment by

confession in the event of default.

(Id. at 4).2

Paragraph 8

governs obligations of persons under the Note:

2

In the amended complaint, Plaintiffs stated that no
payments of any principal or interest have been made under the
Note. (ECF No. 27 ¶ 11). In their motion for summary judgment,
Plaintiffs advise that on May 21, 2012, they “received an
interest payment of $2,104.10 on the debentures.
This payment
was short by $251.46.
On or about August 13, 2012, Plaintiffs
received an interest payment of the Note in the amount of
3

If more than one person signs this Note,
each
person
is
fully
and
personally
obligated to keep all of the promises made
in this Note, including the promise to pay
the full amount owed.
Any person who is a
guarantor, surety or endorser of this Note
is also obligated to do these things.
Any
person who takes over these obligations,
including the obligations of a guarantor,
surety or endorser of this Note, is also
obligated to keep all of the promises made
in this Note.
The Note Holder may enforce
its rights under this Note against each
person individually or against all of us
together.
This means that any one of us
[Wendy Bond, Oscar Bond, or Thomas McKiver]
may be required to pay all of the amounts
owed under this Note.
(Id. at 3) (emphasis added).
Additionally, Defendant and the Bonds signed two Secured
Debentures as Guarantors.

(ECF Nos. 27-2 & 27-3).

Each Secured

Debenture, dated February 12, 2012, provides for a $50,000 loan
to be repaid to Jill S. Parreco Revocable Trust (ECF No. 27-2)
and Norman Understein Revocable Trust (ECF No. 27-3).

Each

trust is designated as a “Purchaser” of each Secured Debenture,
and Norman Understein is designated as “Purchaser’s Agent.”
In

February

2012,

554

LLC

and

BND

signed

a

Loan

and

Security Agreement as borrowers, creating a security interest in
all of their assets for the benefit of the Purchasers of the
Secured Debentures identified above.

(ECF No. 27-4).

$580.13, having been due on July 1, 2012. []
received no other payments under the Note
Debentures.” (ECF No. 28-1, at 5).
4

Norman

Plaintiffs have
or the Secured

Understein

signed

the

Purchasers’ Agent.

Loan

and

(Id. at 10).

Loan and Security Agreement.

Security

Agreement

as

the

Mr. McKiver did not sign the

On January 30, 2012, however, Mr.

McKiver and the Bonds signed a document entitled “Action of
Directors in lieu of Meeting,” authorizing BND to join in the
Loan and Security Agreement, acknowledging that 554 LLC “will
borrow

an

aggregate

of

up

to

$500,000

from

certain

lenders

pursuant to debentures [] to be issued by the LLC to the payees
named therein [] and a loan and security agreement with the
lenders.”

(ECF No. 27-6).

This document also stated that BND

“is authorized to become a party to the Loan Agreement, pursuant
to which, among other things, it will grant to the Lenders a
security interest in all of the assets of BND.”

(Id.).

On February 15, 2012, Mr. McKiver and the Bonds signed a
Guaranty.3

(ECF No. 27-5).

The Guaranty states in relevant

part:
Each
Guarantor
jointly
and
severally
guaranties (a) payment of any and all sums
now or hereafter due and owing to each
Purchaser by the Borrower as a result of or
in connection with the Debentures, and any
and all existing or future indebtedness,
3

The Guaranty identifies 554 LLC as a borrower, Defendant,
the Bonds, and BND as Guarantors, and the following entities as
purchasers: (1) $50,000, Norman Understein or Jill Parreco,
Trustees for the Norman Understein Revocable Trust dated
December 19, 2010; (2) $50,000, Jill Parreco or Norman
Understein, Trustees for the Jill S. Parreco Revocable Trust
dated December 19, 2010; and (3) $200,000, Theodore Parreco,
trustee of the James Parreco Estate. (ECF No. 27-5, at 10).
5

liability, or obligation of every kind,
nature, type, and variety owed by the
Borrower to each Purchaser arising out of or
related to (i) the Debentures, including,
but
not
limited
to,
all
amounts
of
principal,
interest,
penalties,
reimbursements, advancements, escrows, and
fees
or
(ii)
any
of
the
other
Loan
Documents.
(Id. at 1).

The Guaranty enables the Purchasers to pursue their

rights against any guarantor.

(Id. at 2).

Plaintiffs contend

that they are entitled to pursue Defendant alone as a borrower
and need not pursue the Bonds.

(ECF No. 27 ¶ 21).

Additionally, 554 LLC, Defendant, and the Bonds had outside
loans which were senior to the Understein Loans.

(Id. at 2-3).

Plaintiffs assert that in order to prevent default on the more
senior loans and risking foreclosure, Plaintiffs continued to
advance funds to 554 LLC and the Bonds invested their own money
to continue the operation of 554 LLC.
Plaintiffs
providing

contend
services

that
to

Defendant

the

(Id. at 3).
stopped

business

at

Meanwhile,

paying

some

funds

point

in

or

2013.

(Id.).
In 2013, Defendant and the Bonds defaulted on paying the
Note

and

two

Secured

Debentures.

notices to the respective borrowers.

Plaintiffs
(Id. ¶ 8).

sent

default

Again, seeking

to ensure that the business did not default on the more senior
loans,

Plaintiffs

Forbearance

aver

Agreement

that

with

they

attempted

Defendant
6

and

the

to

work

Bonds.

out

a

(Id.).

Plaintiffs

contend

Agreement,

but

initiate

the

confession

that

Defendant

instant

for

the

Bonds

refused,

action.

$200,000

as

agreed

prompting

Plaintiffs
the

to

combined

a

Forbearance

Plaintiffs

sought

judgment

original

to
by

principal

amount, plus interest, late fees, costs and attorney’s fees.
(Id.).
B.

Procedural History

The procedural posture of this case is somewhat unusual.
Plaintiffs originally filed a complaint in the Circuit Court for
Montgomery

County,

Maryland

on

December

judgment by confession against Defendant.4

20,

2013,

seeking

(ECF No. 3).

On

February 11, 2014, the Circuit Court issued an order directing
the Clerk to enter judgment in favor of Plaintiffs and against
Defendant in the amount of $229,481.18 in principal and interest
calculated as of December 31, 2013, plus post judgment interest
and costs.

(ECF No. 10).

On February 11, 2013, the Clerk of

the Circuit Court certified that the judgment was entered and
sent notice to Defendant informing him of his right to file a
written motion to open, modify, or vacate judgment within sixty
(60) days.

(ECF Nos. 12 & 13); Sager v. Housing Com’n of Anne

Arundel County, 855 F.Supp.2d 524, 552 (D.Md. 2012) (noting that
4

“In Maryland circuit courts, confessed judgments are
governed by Maryland Rule 2-611 (or, in the District Court, by
Maryland Rule 3-611, which is substantively identical to its
circuit court counterpart).”
Sager v. Housing Com’n of Anne
Arundel County, 855 F.Supp.2d 524, 552 (D.Md. 2012).
7

“unlike a conventional judicial proceeding, in the case of a
confessed judgment . . . the defendant’s first notice is of the
entry of judgment by confession, which means that the defendant
has no opportunity, prior to entry of judgment, to raise any
defense or file any pleadings or papers.” (internal quotation
marks omitted)).
On April 30, 2014, Defendant removed the action to this
court, citing diversity jurisdiction, and provided Plaintiffs’
complaint for confessed judgment.
1).

(ECF No. 1).

(See ECF No.

On April 30, 2014, Defendant moved to vacate the confessed

judgment.
vacate

(See ECF No. 20).

(ECF

No.

23)

and

Plaintiffs opposed the motion to
Defendant

replied

(ECF

No.

24).

Plaintiffs then filed an amended complaint on June 20, 2014,
adding three additional counts for breach of contract on the
Note and the two Secured Debentures.
also

moved

for

summary

judgment

(ECF No. 27).
(ECF

No.

28).

Plaintiffs
Defendant

initially opposed summary judgment (ECF No. 31) and answered the
amended complaint (ECF No. 29).

Defendant also counterclaimed

against Plaintiffs (ECF No. 30).

Plaintiffs subsequently filed

a motion to dismiss the counterclaim.

(ECF No. 37).

On July 24, 2014, Defendant filed a third-party complaint,
naming Wendy and Simon (Oscar) Bond as additional defendants to

8

the suit.

(ECF No. 32).5

a two-page answer.

On September 24, 2014, the Bonds filed

(ECF No. 40).

On October 14, 2014, the

Bonds filed a document entitled “notice of limited admission of
liability,” in which they state:
Third Party Plaintiff, Thomas McKiver []
shall be entitled to judgment against the
Bonds for: (a) Two-Thirds (2/3) of any
amount McKiver pays the Plaintiffs on the
claims asserted by Plaintiffs in the latest
amended complaint; reduced by (b) one-third
(1/3) of the operating expenses of 554 LLC
and BND, so that McKiver, Wendy Bond and
Oscar Bond shall have equally shared in the
payment of the operating expenses of 554 LLC
and BND.
(ECF No. 42).
One day later, on October 15, 2014, counsel for Defendant
filed a motion to withdraw as counsel.

(ECF No. 43).

That same

day, Defendant’s attorney filed a motion to dismiss, in which he
indicated

that

Mr.

McKiver

wished

to

withdraw

the

following

filings: (1) the motion to vacate confessed judgment; (2) the
counterclaim;

(3)

his

opposition

to

Plaintiffs’

motion

summary judgment; and (4) the third-party complaint.

for

(ECF No.

44).
On

October

16,

2014,

the

court

issued

granting the motion to withdraw as counsel.
5

a

letter

(ECF No. 45).

order
The

On August 15, 2014, the parties filed a joint stipulation
requesting a stay of the proceedings through September 12, 2014
in an attempt to resolve the dispute. (ECF No. 38). The court
issued a paperless order approving the stipulation.
(ECF No.
39).
9

letter order informed Defendant that the other parties to the
action

have

an

opportunity

to

provide

the

court

with

their

position on his motion to withdraw the four filings and should
Defendant wish to respond, he should mail a copy to the parties
in this action.

(Id. at 1).

separate responses.

Plaintiffs and the Bonds filed

(ECF Nos. 46 & 47).6

Defendant did not file

a reply.
II.

Analysis
A.
In

Defendant’s Motion to Withdraw Four Previous Filings
the

motion

to

withdraw

as

counsel

for

Defendant,

Defendant’s now former attorney informs that “Mr. McKiver has
authorized [him] to file contemporaneously herewith a motion to
dismiss the following pleadings or motions that are pending in
this

action:”

(1)

motion

to

vacate

confessed

judgment;

(2)

counterclaim; (3) opposition to Plaintiffs’ motion for summary
judgment; and (4) third-party complaint.

(ECF No. 43, at 2).

Defendant’s counsel then filed a motion to withdraw these four
previous filings.

(ECF No. 44).

The motion states:

Mr. McKiver so moves [to withdraw the four
filings] having full knowledge that []
dismissal of such motions and pleadings are
against his own interest and with full
knowledge that the most likely result will
be an entry of a judgment against him,
subject
to
the
limited
admission
of

6

On November 26, 2014, Plaintiffs filed a letter requesting
a status conference. (ECF No. 48). The request is now moot.
10

liability
Bonds].
(Id. ¶ 4).

by

Third-Party

Defendants

[the

Defendant does not provide a reason for requesting

the withdrawal of the four filings.

Plaintiffs and the Bonds

filed separate responses, acquiescing to Defendant’s request to
(ECF Nos. 46 & 47).7

withdraw the four filings.

Under Local Rule 105.2(a), “all memoranda in opposition to
a motion shall be filed within fourteen (14) days of the service
of the motion and any reply memoranda within fourteen (14) days
after service of the opposition memoranda.”

Defendant has not

filed a reply in connection with his motion to withdraw the
filings

and

Accordingly,
will

be

the

time

for

Defendant’s

granted.

him

motion

Thus,

to
to

do

so

has

withdraw

Plaintiffs’

motion

the
to

long

passed.

four

filings

dismiss

the

counterclaim will be denied as moot.
B.

Remaining Motion

Plaintiffs previously moved for summary judgment, stating
in relevant part:
Here, the specific “statute” on which the
original complaint was filed is Maryland
Rule 2-661.
The equivalent Local Rule in
this Court on confessed judgments is L.R.
108.
However, since Defendant has moved to
vacate the confessed judgment and to assert
a defense, even though we contend that the
showing of a defense on the merits is
inadequate, Plaintiff[s] pursue[] summary
7

In their response, Plaintiffs request that the court issue
a ruling on the motion for summary judgment.
11

judgment
remedy.
(ECF

No.

28-1,

[]

at

as

9)

a

possibly

(emphasis

more

added).

complete

Defendant

has

now

withdrawn his motion to vacate the confessed judgment, however,
obviating

the

judgment.

need

to

adjudicate

the

553

for

summary

The entry of judgment by confession is governed by

District of Maryland Local Rule 108.1.
at

motion

n.37

(noting

that

the

Rules

See Sager, 855 F.Supp.2d
of

Procedure

governing

confessed judgments in Maryland state courts “are analogous to
this Court’s procedures with respect to confessed judgments.”).
Rule

108.1(d)

states

that

“[a]pplication

to

vacate,

open

or

modify the judgment must be made by motion within thirty (30)
days after service of the notice, or such other time as may be
required by statute or rule.”

Importantly, “[i]f no application

is made within the time allowed, the judgment shall be final.”
Id.

Defendant has withdrawn the motion to vacate, thus the

judgment initially entered by the Circuit Court for Montgomery
County – and filed in this court after removal – stands, less
payments made by Defendant on the judgment.
Judgment

was

entered

in

favor

of

(See ECF No. 10).

Plaintiffs

and

against

Defendant in the amount of $229,481.18 in principal and interest
calculated as of December 31, 2013, plus post judgment interest
and costs.

See, e.g., NILS, LLC v. Antezana, 171 Md.App. 717,

729 (2006) (“When unchallenged or not successfully challenged,

12

[a

confessed

trouble,

the

trial.”).

judgment]
time,
The

permits

the

the

expense

judgment

holder

to

by-pass

and

the

uncertainty

encompasses

all

relief

Plaintiffs in the amended complaint.

the
of

sought

a
by

(See ECF No. 27, at 6-7).

Plaintiffs also request leave to file an application for
attorneys’

fees

and

costs.8

Paragraph

6(E)

of

the

Demand

Promissory and Line of Credit Note signed by Defendant states
that the “Note Holder will have the right to be paid back [] for
all of its costs and expenses in enforcing this Note to the
extent

not

prohibited

by

applicable

law.

Those

expenses

include, for example, reasonable attorneys’ fees, court costs
and other collection costs.”

(ECF No. 27-1, at 3).

Paragraph 8

of the Secured Debentures states: “[s]hould this Debenture be
referred to an attorney for collection, whether or not judgment
has been confessed or suit has been filed, the Borrower shall
pay

all

including

the

holder’s

reasonable

reasonable
attorneys’

8

costs,
fees

fees

and

resulting

expenses,
from

such

The February 11, 2014 order from the Circuit Court further
stated that “the issue of attorneys’ fees shall be set for
hearing by the Assignment Office in accordance with Rule 1.5 of
the Maryland Rules of Professional Conduct and SunTrust v.
Goldman, 201 Md.App. 390 (2011).” (ECF No. 10, at 1). On March
18, 2014, prior to removal, Plaintiffs’ counsel submitted an
affidavit in support of his claim for attorneys’ fees in the
Circuit Court.
(ECF No. 14).
The hearing on attorneys’ fees
was scheduled for May 7, 2014.
(ECF Nos. 17 & 18).
The case
was removed to this court on April 30, 2014, and it does not
appear that the issue of attorneys’ fees was resolved in the
Circuit Court.
13

referral.”
Rule

109.2

(ECF No. 27-2, at 3 & ECF No. 27-3, at 3).
requires

“any

motion

requesting

the

Local

award

of

attorneys’ fees [to] be filed within fourteen (14) days of the
entry of judgment.”

Accordingly, Plaintiffs will have fourteen

(14) days to move for attorneys’ fees in accordance with Local
Rule 109 and Appendix B.
III. Conclusion
For the foregoing reasons, Defendant’s motion to withdraw
his previous filings will be granted.

Plaintiffs’ motions for

summary judgment and to dismiss the counterclaim will be denied
as moot.

A separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

14