Mericle et al v. Jackson National Life Insurance Company et al

Filing 33

MEMORANDUM (Order to follow as separate docket entry) re 16 First MOTION for Summary Judgment filed by PPM Finance, Inc., Jackson National Life Insurance Company. Signed by Honorable A. Richard Caputo on 6/27/16. (jam)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ROBERT F. MERICLE, et al.,
Plaintiffs,
v.

CIVIL ACTION NO. 3:15-CV-419
(JUDGE CAPUTO)

JACKSON NATIONAL LIFE
INSURANCE COMPANY, et al.,
Defendants.
MEMORANDUM
Presently before me is Defendants Jackson National Life Insurance Company
(“Jackson”) and PPM Finance, Incorporated’s (“PPM”) Motion for Summary Judgment. (Doc.
16) Jackson and PPM seek summary judgment on Plaintiffs Robert Mericle and Mericle
Development’s (collectively “Mericle”) claims of breach of contract, breach of the covenant
of good faith and fair dealing, unjust enrichment, and negligent misrepresentation. (Exhibit
A, Doc. 1-2, Complaint “Compl.”, 3-12.)1 Jackson and PPM’s motion for summary judgment
will be granted in part and denied in part. Because an ambiguity exists in the parties’ loan
agreements and an issue of material fact remains as to the voluntariness of Mericle’s
payment of a Prepayment Premium demanded pursuant to one of the parties’ agreements,
Jackson and PPM’s motion for summary judgment will be denied in part. However, because
Jackson and PPM are entitled to judgment as a matter of law on Mericle’s claims regarding
the parties’ other loan agreement and on Mericle’s unjust enrichment and negligent
misrepresentation claims, Jackson and PPM’s motion for summary judgment will be granted
in part.

1

Within this memorandum, page number citations are to the pagination assigned by
the electronic case filing system, without regard to the parties’ assigned page numbers.

I. Background
A.

Factual and Procedural Background

The following facts are taken from the Complaint and the parties’ statements of fact.
(Docs. 1-1;18; 26)
Mericle Commercial Real Estate Services was established in 1985 and is a full
service commercial real estate company that builds industrial offices and flex buildings in
Pennsylvania. (Doc. 18, ¶ 1 (quotations omitted).) In 1987, Mericle Development Company,
was founded by Robert Mericle, its CEO and sole shareholder, and is organized under the
parent company of Mericle Commercial Real Estate Services. (Id. at ¶¶ 2-3.) Funding is
essential to Mericle Development’s success, so Mr. Mericle devised the following specific
financing program for his companies: use conventional commercial lenders for temporary,
interim, and construction debt, and when construction is complete and the project stabilizes,
pursue a life insurance company lender for permanent debt financing. (Id. at ¶¶ 4-5
(quotations omitted).)
In 1995, Mericle engaged Carey Kramer Pettit Panichelli and Associates (“Carey
Kramer”), a Pennsylvania mortgage broker, to assist in obtaining financing from a life
insurance lender. (Id. at ¶ 6.) Mericle chose Jackson, a life insurance company, to provide
financing, and PPM, who services loans for companies like Jackson, serviced the loans
involved in this case. (Id. at ¶ 7;Compl., ¶ 7.) When agreement was reached, a
representative of PPM signed the loan documents as an authorized agent for Jackson.
(Compl. at ¶ 16.)
After Mericle selected Jackson, the parties engaged in substantial negotiations,
including negotiating over the term sheet, or loan application, that included the amount and
duration of the loan and the prepayment terms. (Doc. 18, ¶¶ 10-11.) Mericle disagrees that
the parties negotiated the terms of the prepayment provisions, but instead, that the terms

2

regarding prepayments came from Jackson’s form documents. (Doc. 26, ¶¶ 10-12.) Mericle
did, however, request and the parties agreed to a one-year “lockout period”, or the period
during which the loan could not be repaid; despite Jackson’s request for a five-year period.
(Id. at ¶ 14.) Other than the lockout period, Mericle did not request any changes to language
providing the method for calculating the Prepayment Premium in the Loan Application. (Id.
at ¶ 15.) The language included in the Loan Application is virtually identical to the
prepayment provision contained in the final versions of the loans currently at issue. (Id at
¶ 12.)
Following negotiations, Mr. Mericle conducted his own “material” review of the Loan
Application containing the major business terms and Mr. Mericle and Mericle Development
were also represented by outside counsel, Lewis Sebia, who was an experienced
commercial real estate lawyer. (Id. at ¶ 13.) Prior to entering into the Loan Agreements, the
loan documents went through serial revisions at the request of Mericle and counsel. (Id. at
¶ 16.) Mr. Sebia read the promissory note “carefully.”(Id.)
On November 5, 1996, Mr. Mericle signed a Loan Agreement with Jackson. (Compl.,
¶ 5.) Jackson issued a loan to Mericle in the amount $ 15,890,000 with an eighteen-year
(18) term, an interest rate of 8.57 %, and a maturity date of December 1, 2014 (hereinafter
“1996 Loan”).2 (Doc. 18, ¶ 20.) On November 20, 1997, the parties entered into another
agreement for a $ 10,000,000 loan with a seventeen-year (17) term and a 7.69 % interest
rate (hereinafter “1997 Loan”). (Id. at ¶ 21.) The 1997 Loan was advanced in two tranches.
(Id.) Both loan packages contained several loan documents including, among others
documents, a “Loan Agreement”, a “Promissory Note”, and a borrower’s counsel letter; and

2

The 1996 Loan was subsequently amended. On August 20, 2008, Mr. Mericle, on
behalf of himself and as President of Mericle Development, signed a “Second Allonge” and
amendment to the 1996 Loan. (Doc. 18, ¶ 51; Doc. 26, ¶ 51; Doc. 21–25.)
3

both loans were collateralized with several properties in Pennsylvania. (Id. at ¶¶ 22-23.) Mr.
Mericle signed the loan documents on behalf of himself and Mericle Development. (Id. at
¶ 24.) When executing the Promissory Note, Mr. Mericle and Mericle Development
represented that both were “knowledgeable in business matters” and, there was language,
specifically in the Confession of Judgment clause, stating that the terms of the loan were
“negotiated and agreed upon in a commercial context.” (Id. at ¶ 25.)
Pursuant to the Loan Agreement, Jackson was permitted to assign3 the 1996 Loan.
Mericle, as the borrower, had “no right to make prepayments of the Loan in whole or in part
except in accordance with the terms of the [Promissory] Note.” (Id. at ¶¶ 26, 30.) The
Prepayment Provision in the promissory notes is as follows:
9.
Prepayment. This Note may not be prepaid for one year. Thereafter,
Maker may prepay the Note in whole or in part upon payment of a
prepayment premium equal to the greater of (1) 1 % of the prepaid amount
and (ii) an amount calculated at the time of prepayment using a formula
designed to compensate the Noteholder for the loss of the performing Loan.
This yield protection payment will be calculated by (a) assuming reinvestment
of the prepaid amount in U.S. Treasury Securities with maturities as close as
practicable to the Maturity Date, (b) assuming conversion of this Note to a
bond-equivalent, interest-only note without changing its interest rate, and ( c)
determining the present value of the difference between the two assumed
interest-payment streams, using the yield of the assumed reinvestment as the
discount rate. Maker may prepay the Loan at par during the ninety-day period
preceding the Maturity Date. No prepayment premium will be charged on
amounts attributable to insurance or condemnation proceeds applied to
reduce the principal balance of the Loan. . .
(Id. at ¶ 31.)
Carey Kramer was retained by Jackson and PPM and served as the mortgage

3

6.1. Lender’s Rights to Assign. Lender shall have the right to assign, transfer,
sell, negotiate, pledge or otherwise hypothecate this Agreement and any of its
rights and security hereunder, including the Note, Mortgage, and any other
Loan Documents. Borrower hereby agrees that all of the rights and remedies
of Lender in connection with the interest so assigned shall be enforceable by
Lender but for such assignment. Borrower agrees that Lender shall have the
right to sell participations in the Loan or to include the Note in a securitized
pool of indebtedness without the consent of Borrower.
4

correspondent for the both loans. (Id. at ¶¶ 33, 35; Doc. 26, ¶ 33.)4 Carey Kramer collected
payments from Mericle, processed Mericle’s requests (including requests for prepayment),
calculated prepayment premiums, collected prepayment premiums, and served as an
overall intermediary between the Mericle and Jackson and PPM. (Doc. 18, ¶ 34; Doc. 26,
¶ 34.)
On January 30, 2001, Jackson sold the 1996 Loan to Wells Fargo Bank Minnesota,
N.A., as trustee for Morgan Stanley Dean Witter Capital I, Inc., Commercial Mortgage PassThrough Certificates, Series 2001-PPM (hereinafter the “Trust”). (Id. at ¶ 36.) The 1996
Loan was then securitized pursuant to a Pooling and Servicing Agreement. (Id. at ¶ 37.)
Despite the sale, the party who had control over the 1996 Loan following securitization is
disputed; Jackson and PPM assert the securitized loan was controlled by the Master
Servicer at the time; but, Mericle contends that PPM, as the Special Servicer, retained the
right to service the 1996 Loan after it was securitized. (Id. at ¶ 38; Doc. 26, ¶ 38.) The
parties also dispute who Carey Kramer communicated with when Mericle contemplated
paying off the 1996 Loan and whether the Master Servicer or PPM made the final
calculation. (Doc. 18 at ¶ ¶ 39, 41; Doc. 26, ¶¶ 39, 41.)
In 2005, Mericle prepaid a portion of the 1996 Loan. (Doc. 18, ¶ 40; Doc. 26, ¶ 40.)
At the time, Carey Kramer contested the calculated Prepayment Premium by
communicating with the Master Servicer, challenging the fact that the calculation did not
take amortization into account, but the Master Servicer denied the request to recalculate
the Prepayment Penalty. (Doc. 18, ¶¶ 45-46; Doc. 26, ¶¶ 45-46.) Mericle paid a Prepayment

4

Jackson states that Carey Kramer served as its intermediary on the 1996 Loan until
the loan was sold in 2001. (Doc. 18, ¶¶ 34-35.) Mericle contends that Carey Kramer
continued to deal with PPM and PPM continued to instruct Carey Kramer with respect the
1996 Loan and cites to PPM’s role as “Special Servicer” after the loan was securitized as
evidence of PPM’s continued involvement. (Doc. 26, ¶ 33; See Doc. 21-18, 52; 157-193.)
5

Premium in 2005. (Doc. 26, ¶ 46.) Mericle paid the following additional Prepayment
Premiums: in 2006, in the amount of $ 16,988.71; in 2007, in the amount of $ 147,404.12;
and, in 2008, in the amount of $ 156,270.16. (Doc. 18, ¶¶ 47-50.) Mericle paid the
premiums and did not file suit because the amount paid was not sufficiently large enough
to cause it to file suit. (Doc. 26, ¶¶ 47-50.)
In 2011, Mericle prepaid the loans in their entirety in order to use the 1996 and 1997
Loan collateral properties as substitute collateral for a multi-million dollar financing
arrangement with another life insurance lender. (Doc. 18, ¶¶ 53-54; Doc. 26, ¶¶ 53-54.)
Upon request of Mericle, Carey Kramer calculated the Prepayment Premium for the 1997
Loan and the calculation was confirmed by Karl Hildebrand, the loan administrator for PPM
Finance. (Doc. 18, ¶¶ 55; Doc. 26, ¶ 55; Doc. 20, ¶ 1, 7-8.) The Master Servicer calculated
the Prepayment Premium for the 1996 Loan. (Doc. 18, ¶ 56; Doc. 26, ¶ 56.)5 Neither
calculation took amortization into account. (Doc. 18, ¶¶ 55-56; Doc. 26, ¶¶ 55-56.) Mericle
paid the calculated Prepayment Premiums under protest. (Doc. 18, ¶ 57; Doc. 26, ¶ 57.)
On February 2, 2015, Mericle filed a complaint in the Luzerne County Court of
Common Pleas comprised of the following four (4) counts: Count I, Breach of Contract;
Count II, Breach of the Duty of Good Faith and Fair Dealing; Count III, Unjust Enrichment;
and, Count IV, Negligent Misrepresentation. (Compl., Doc. 1-2.) Mericle seeks the alleged
amount overpaid as Prepayment Premiums as well as prejudgment interest. (Doc. 18, ¶ 58;
Doc. 26, ¶ 58; Compl., Doc. 1-2.) On February 26, 2015, Jackson and PPM sought to have

5

Mericle’s response to the Jackson and PPM’s statement of fact is as follows:“Admitted
only that Jackson National and PPM have refused to take amortization into account when
calculating prepayment premiums. As set forth more fully in Mericle’s brief, they are wrong
to refuse to do so.” (Doc. 26, ¶ 56.) In its brief and supporting documents, Mericle
acknowledges that the Master Servicer at the time of the prepayments at issue, calculated
the Prepayment Premium for the 1996 Loan. (See Doc. 25-1, 20; Doc. 21-27; Doc. 25-7, 36.)
6

the case removed to this court pursuant to 28 U.S.C. 1446. (Doc. 1) On March 26, 2015,
Jackson and PPM filed an answer to Mericle’s complaint, asserting affirmative defenses.
(Doc. 8.) On November 13, 2015, Jackson and PPM filed a motion for summary judgment
(Doc. 16), a brief in support (Doc. 17), and a statement of facts (Doc. 18). On December
7, 2015, Mericle filed a brief in opposition to the motion for summary judgment (Doc. 25)
and a responsive statement of facts (Doc. 26). On December 22, 2015, Jackson and PPM
filed a reply brief. (Doc. 27) The motion for summary judgment is now ripe for disposition.
B.

Summary Judgment Standard

Summary judgment shall be granted “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “Summary judgment is appropriate when ‘the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.’” Wright v. Corning, 679 F.3d 101, 103 (3d Cir. 2012)
(quoting Orsatti v. N.J. State Police, 71 F.3d 480, 482 (3d Cir. 1995)). A fact is material if
proof of its existence or nonexistence might affect the outcome of the suit under the
applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct.
2505, 91 L. Ed. 2d 202 (1986).
Where there is no material fact in dispute, the moving party need only establish that
it is entitled to judgment as a matter of law. See Edelman v. Comm’r of Soc. Sec., 83 F.3d
68, 70 (3d Cir. 1996). Where, however, there is a disputed issue of material fact, summary
judgment is appropriate only if the factual dispute is not a genuine one. Anderson, 477 U.S.
at 248, 106 S. Ct. 2505. An issue of material fact is genuine if “a reasonable jury could
return a verdict for the nonmoving party.” Id. Where there is a material fact in dispute, the
moving party has the initial burden of proving that: (1) there is no genuine issue of material

7

fact; and (2) the moving party is entitled to judgment as a matter of law. See Howard Hess
Denal Labs., Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 251 (3d Cir. 2010). The moving party
may present its own evidence or, where the non-moving party has the burden of proof,
simply point out to the court that “the non-moving party has failed to make a sufficient
showing on an essential element of her case.” Celotex Corp. v. Catrett, 477 U.S. 317, 323,
106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
“When considering whether there exist genuine issues of material fact, the court is
required to examine the evidence of record in the light most favorable to the party opposing
summary judgment, and resolve all reasonable inferences in that party's favor.” Wishkin v.
Potter, 476 F.3d 180, 184 (3d Cir. 2007). Once the moving party has satisfied its initial
burden, the burden shifts to the non-moving party to either present affirmative evidence
supporting its version of the material facts or to refute the moving party's contention that the
facts entitle it to judgment as a matter of law. Anderson, 477 U.S. at 256-57, 106 S. Ct.
2505. The Court need not accept mere conclusory allegations, whether they are made in
the complaint or a sworn statement. Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110
S. Ct. 3177, 111 L. Ed. 2d 695 (1990).
“To prevail on a motion for summary judgment, the non-moving party must show
specific facts such that a reasonable jury could find in that party's favor, thereby establishing
a genuine issue of fact for trial.” Galli v. New Jersey Meadowlands Comm'n, 490 F.3d 265,
270 (3d Cir. 2007) (citing Fed. R. Civ. P. 56(e)). “While the evidence that the non-moving
party presents may be either direct or circumstantial, and need not be as great as a
preponderance, the evidence must be more than a scintilla.” Id. (quoting Hugh v. Butler
County Family YMCA, 418 F.3d 265, 267 (3d Cir. 2005)). In deciding a motion for summary
judgment, “the judge's function is not himself to weigh the evidence and determine the truth
of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477
U.S. at 249, 106 S. Ct. 2505.

8

This case is before me as a diversity action pursuant to 28 U.S.C. § 1332. “A federal
court sitting in diversity must apply state substantive law and federal procedural law.”
Liggon-Redding v. Estate of Sugarman, 659 F.3d 258, 262 (3d Cir. 2011) (citing Erie R.R.
v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). The parties appear to
agree that Pennsylvania substantive law is to be applied to the current case. 6
II. Discussion
The current case involves a dispute over the proper calculation of Prepayment
Premiums resulting from the parties’ differing interpretations of the calculation formula
contained in the parties’ Loan Agreements. (Doc. 18, ¶¶ 43-44; Doc. 26, ¶¶ 43-44.)
Jackson and PPM move for summary judgment on all of Mericle’s claims. (Docs. 16-17.)
A.

Breach of Contract
1.

1996 Loan

Jackson and PPM contend that neither can be liable for the amounts paid on the
1996 Loan because the 1996 Loan was assigned in 2001 and neither was a party to the
loan when the prepayments at issue were made. (Doc. 17, 28.) Mericle counters that
“[f]actual issues preclude the entry of [summary judgment]” (Doc. 25-1, 19.)
The “three elements . . . necessary to plead a cause of action for breach of contract:
[are] (1) the existence of a contract, including its essential terms[;] (2) a breach of the
contract; and, (3) resultant damages.” Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C.
v. Law Firm of Malone Middleman, P.C.,--- A. 3d ----, 2016 WL 1627551, at *9 (Pa. Apr. 25,
2016) (citing J.F. Walker Co., Inc. v. Excalibur Oil Grp. Inc., 792 A.2d 1269, 1272
(Pa.Super.2002)). It follows that “[i]f one is not a party to the contract, one cannot breach
it.” Electron Energy Corp. v. Short, 408 Pa. Super. 563, 571, 597 A.2d 175, 179 (1991),
aff'd, 533 Pa. 66, 618 A.2d 395 (1993). Under Pennsylvania law, a party may assign a
contract and “[a]n assignment is a transfer of property or a right from one person to another;

6

The parties’ agreements purportedly states that Pennsylvania law would govern.
(Compl., Doc. 1-2 ¶ 14; Doc. 1-2, 39; 80.)
9

unless qualified, it extinguishes the assignor's right to performance by the obligor and
transfers that right to the assignee.” Crawford Cent. Sch. Dist. v. Com., 585 Pa. 131, 13637, 888 A.2d 616, 619 (2005) (citing Legal Capital, LLC. v. Medical Professional Liability
Catastrophe Loss Fund, 561 Pa. 336, 750 A.2d 299, 302 (2000)). The “assignee [then]
stands in the shoes of the assignor.” Crawford, 585 Pa. at 136-37, 888 A.2d at 619 (citing
Hedlund Manufacturing Company, Inc. v. Weiser, Stapler & Spivak, 517 Pa. 522, 539 A.2d
357, 358 (1988)).
Jackson was permitted to assign the 1996 Loan pursuant to the parties’ agreement,
see supra note 3, and Mericle admits that Jackson had the right to assign the 1996 Loan.
(Doc. 18, ¶ 26; Doc. 26, ¶ 26.) Pursuant to that right, a Bill of Sale was executed between
Jackson and Morgan Stanley Dean Witter Capital I Inc. (“Morgan Stanley”) on January 30,
2001 (Doc. 19-1.). The 1996 Loan was among the mortgages securitized, meaning it was
pooled with a number of loans and sold as a loan pool. (Doc. 25-15, 12; Doc. 19-2, 27; see
also Doc. 21-18.) The accompanying “Mortgage Loan Purchase Agreement” between
Jackson and Morgan Stanley stated that “[u]pon the sale of the Mortgage Loans by the
Seller to the Purchaser pursuant to this Agreement, the ownership of each Mortgage Note,
Mortgage and other contents of the related Mortgage File shall be vested in the Purchaser
and its assigns,. . .” (Doc. 19-2, 7.)
There is no dispute that the 1996 Loan was securitized in 2001. (Doc. 18, ¶ 36;
Doc. 26, ¶ 36.) In its briefs in opposition Mericle fails to specifically address whether
Jackson is liable with regard to the 1996 Loan, however, it is clear that all Prepayment
Premiums were paid by Mericle after 2001 when Jackson was no longer a party to the 1996
Loan. Additionally, the evidence of record is that Mericle signed a Second Allonge on
August 20, 2008, that amended the 1996 Loan. (Doc. 21-25, 2-5.) This agreement was
between Mericle and Wells Fargo Bank, N.A., and executed by the Master Servicer at the
time, Capmark Finance, Inc. (Id. at 4-5.) Mericle also entered into a Third Amendment to
the 1996 Loan; which again was between Mericle and Wells Fargo Bank, N.A., and
executed by the Master Servicer. (Doc. 21-26, 2-5.) Clearly, all of Jackson’s rights were
10

extinguished upon assignment of the 1996 Loan and it could no longer be liable for breach
of contract with regard to the 1996 Loan.
Turning to PPM, the parties agree PPM was the Special Servicer to the loans in the
securitized pool (Doc. 25-1, 19; see also Doc. 21-18, 52 (“Special Servicer means PPM
Finance, Inc. or any successor Special Servicer as herein provided.”)). The parties disagree
about whether PPM’s role leads to possible liability under the 1996 Loan. Mericle contends
that Jackson and PPM can be liable for the alleged overcharge on the 1996 Loan because,
after securitization, PPM, as Special Servicer, “had the ability and authority to take any
actions that the Master Service [sic] could take with respect to all loans” and “repeatedly
exercised this power with respect to the prepayment of the 1996 loan after the loan was
securitized.” (Doc. 25-1, 19.) Mericle also contends that because PPM answered Carey
Kramer inquiries about Prepayment Premiums in 2005 and 2008, summary judgment is
inappropriate with regard to the 1996 Loan. (Id. at 19-20.) Additionally, Mericle argues that
the following facts demonstrate there is dispute that precludes summary judgment: PPM
objected to the release of tax escrow moneys, which caused Carey Kramer to hold up the
release of the escrowed funds for the securitized and unsecuritized loans; and, because
Prepayment Premiums were wired to Carey Kramer and PPM, PPM may have received a
portion of the funds. (Id. at 20.) Jackson and PPM argue in reply that PPM cannot be liable
under the 1996 Loan simply because PPM was the special servicer. (Doc. 27,12-13.)
Although neither party directly addresses the issue of whether PPM was a party to
the loans, Mericle describes the relationship between Jackson and PPM as follows:
Technically, Jackson National was the lender and PPM was the agent in
charge of making commercial real estate loans for Jackson National. See
Hildebrand dep. at 7-8; Rodes dep. at 7-8. Jackson National and PPM had
common ownership, see Rodes dep. at 7, and PPM only worked for Jackson
National and a Jackson National subsidiary. See Maraffino dep. at 22.
Jackson National was never involved in the lending decisions. See Hildebrand
dep. at 7-8; Rodes dep. at 15-17. As a result, PPM often referred to itself and
Jackson National interchangeably. See Exhibit 8; Hildebrand dep. at 59-60;
Rodes dep. at 79-81. For these reasons, there is no practical distinction
between Jackson National and PPM in this lawsuit.
(Doc. 25-1, 3 n. 7.) Failing to distinguish between Jackson and PPM does not necessarily
11

demonstrate that the companies are one entity. The Loan Documents, as attached to
Mericle’s complaint, for both the 1996 and 1997 Loans, are entitled “Loan Agreement by
and between Jackson National Life Insurance Company, as Lender, and Robert K. Mericle
and Mericle Development Corp., as Borrower.” (Doc. 1-2, 14-86; See also Compl. at ¶
5.)(Doc. 1-2, 43.) These documents further state that PPM is an authorized agent of
Jackson, and signed the documents pursuant to that agency relationship.
Pennsylvania “[a]gency principles maintain that if an agent enters into a contract on
behalf of a disclosed principal, the agent does not become a party to the contract”, and “in
the absence of circumstances showing that personal responsibility was incurred, [the agent]
is not personally liable to the other contracting party.” Poulos v. Nicolaides, 241 F. App'x 25,
27 (3d Cir. 2007) (citing Publicker Indus., Inc. v. Roman Ceramics Corp., 652 F.2d 340, 343
(3d Cir.1981); Viso v. Werner, 471 Pa. 42, 369 A.2d 1185, 1187 (1977)). Additionally, when
addressing a breach of contract claim, there is a “distinction between a ‘loan servicer”. .
.and a “lender’ and/or ‘note holder’” because ”[t]he ‘servicing’ of a mortgage, i.e. the right
to collect payments from the mortgagor, exists as a separate right that can be transferred
independently of other provisions in the mortgage or note.” Trunzo v. Citi Mortgage, 876 F.
Supp. 2d 521, 532 (W .D. Pa. 2012) on reargument in part, 43 F. Supp. 3d 517 (W.D. Pa.
2014) (citing In re Am. Mortg. Holdings, Inc., 637 F. 3d 246, 259-260 (3d Cir. 2011)).
There is no dispute of material fact with regard to whether PPM was a party to the
1996 Loan. PPM may have played a role in the discussions surrounding the calculation of
the Prepayment Premiums after the 1996 Loan was sold to Morgan Stanley, but it was not
a party to the mortgage. Jackson was the disclosed principal and there has been no
argument advanced that PPM incurred responsibility under the 1996 Loan. After 2001, PPM
was simply acting as an intermediary under the terms of the Pooling and Serving
Agreement as Special Servicer. See Ruff. v. America’s Servicing Co., 2008 WL 1830182
* 4 (W.D. Pa. Apr. 23, 2008) (defendant servicer who was not party to a mortgage cannot
be liable for breach of contract). Further, Mericle’s contention that Jackson and PPM are
one in the same logically leads to the conclusion that neither Jackson and PPM cna be
12

liable with regard to the 1996 Loan because the loan was assigned as agreed to by Mericle.
Mericle’s arguments that PPM should be liable on the 1996 Loan because Carey
Kramer decided to hold tax escrow sums based on PPM’s objection regarding the 1997
Loan7 and because PPM may have received some of portion of the Prepayment Penalty8
are unavailing.
There is no dispute of material fact regarding the existence of a contract for the 1996
Loan between Jackson and Mericle or between PPM and Mericle at the time the
Prepayment Premiums were paid. Therefore, Mericle cannot state a breach of contract
claim. Jackson and PPM are entitled to summary judgment on Mericle’s claims for breach
of contract regarding the 1996 Loan.
2.

1997 Loan9

Mericle alleges that the Loan Documents were breached when Jackson and PPM
“calculat[ed] and demand[ed] an improper and excessive Prepayment Premium.” (Compl.,
at ¶ 42.) The basis for Mericle’s claim is its contention that the Note, and more specifically,

7

The supporting evidence that Mericle cites states the contrary by demonstrating that
Carey Kramer stopped the release of tax escrow moneys on the 1996 Loan on its own
initiative. (Doc. 25-14, 28 (“And the reason that Carey Kramer had interrupted its normal
process of releasing the Berkadia [1996 Loan] tax escrow is because PPM had objected to
the release of its escrow and Carey Kramer was waiting to hear from Berkadia to see if they
would also object.”)
8

Mericle contends that because PPM witnesses were unable to state whether PPM
received any part of the prepayment premiums for the 1996 loan, a dispute of fact remains.
(Doc. 25-1, 20 n. 27.) Mericle cites to the following deposition testimony in support:
Q. Do you know who received the prepayment premium for the 1996 loan?
A. No.
Q. Was it PPM?
A. I have no idea. It’s a securitized loan. I’m assuming Berkadia received it.
(Doc. 25-19, 13.)
9

As with the 1996 Loan, no party specifically addresses whether both Jackson and
PPM are parties to the 1997 Loan.
13

the Prepayment Premium language, is ambiguous and/or inconsistent. (Id. at ¶ 28.) Mericle
alleges“trade usage, custom and practice require that amortization be taken into account
when calculating a prepayment premium,” but amortization was not taken into account when
the Prepayment Premiums at issue in this case were calculated. (Id. at ¶ 30.) Jackson and
PPM seek summary judgment and argue that Mericle’s breach of contract claim must fail
because the Prepayment Premiums were calculated in accordance with the unambiguous
language of the Note, and therefore, the contract was not breached. (Docs. 16-17.)
As noted above, under Pennsylvania law, the “three elements . . . necessary to
plead a cause of action for breach of contract: [are] (1) the existence of a contract, including
its essential terms, (2) a breach of the contract; and, (3) resultant damages.” Meyer,
Darragh, Buckler, Bebenek & Eck, P.L.L.C., 2016 WL 1627551, at *9 (citing J.F. Walker,
792 A.2d at 1272). There is no dispute that there were two contracts between the parties,
however, only the language of the 1997 Loan remains at issue. See Section A(1) supra.
The issue is whether Jackson and PPM breached the contract with regard to the 1997 Loan
when calculating the Prepayment Premium.
Under Pennsylvania contract law, it is a “firmly settled” point that “the intent of the
parties to a written contract is contained in the writing itself.” Bohler-Uddeholm Am., Inc. v.
Ellwood Grp., Inc., 247 F.3d 79, 92 (3d Cir. 2001) (citing Krizovensky v. Krizovensky, 425
Pa. Super. 204, 212, 624 A.2d 638, 642 (1993)). “[A]s a preliminary matter, courts must
determine as a matter of law which category written contract terms fall into—clear or
ambiguous.” Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 587 (3d Cir. 2009)
(citing Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 613 (3d Cir.1995)).
Unambiguous language is to be interpreted by the court, while the interpretation of
ambiguous language is to be left to the finder of fact.10 Kripp v. Kripp, 578 Pa. 82, 91, 849
A.2d 1159, 1163 (2004). The Third Circuit, has stated that, under Pennsylvania law,
10

There has not been a jury demand in this case.
14

because it is presumed that the writing conveys the intent of the parties:
[a contract] will be found ambiguous if, and only if, it is reasonably or fairly
susceptible of different constructions and is capable of being understood in
more senses than one and is obscure in meaning through indefiniteness of
expression or has a double meaning. A contract is not ambiguous if the court
can determine its meaning without any guide other than a knowledge of the
simple facts on which, from the nature of the language in general, its meaning
depends; and a contract is not rendered ambiguous by the mere fact that the
parties do not agree on the proper construction.
Bohler-Uddeholm, 247 F.3d at 93 (citations omitted). Contracts must be read to avoid
ambiguities if possible, Great Am. Ins. Co. v. Norwin Sch. Dist., 544 F.3d 229, 247 (3d Cir.
2008) (citing Masters v. Celina Mut. Ins. Co., 224 A.2d 774, 209 Pa.Super. 111, 115
(1966)), and “specific provisions ordinarily control more general provisions.” Great Am. Ins.
Co., 544 F.3d at 247 (citing In re Alloy Mfg. Co. Employees Trust, 411 Pa. 492, 192 A.2d
394, 396 (1963)).
“To determine whether ambiguity exists in a contract, the court may consider ‘the
words of the contract, the alternative meaning suggested by counsel, and the nature of the
objective evidence to be offered in support of that meaning.’” Bohler-Uddeholm, 247 F.3d
at 93 (quoting Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001, 1011 (3d
Cir.1980)). A court must then “decide whether there are objective indications that the terms
of the contract are subject to differing meanings.”Krizovensky, 425 Pa. Super. at 212, 624
A.2d at 643 (citing Z & L Lumber Co. of Atlasburg v. Nordquist, 348 Pa.Super. 580, 585-86,
502 A.2d 697, 700 (1985)).
“Ambiguity in a contract can be either patent or latent. While a patent ambiguity
appears on the face of the instrument, ‘a latent ambiguity arises from extraneous or
collateral facts which make the meaning of a written agreement uncertain although the
language thereof, on its face, appears clear and unambiguous.’” Bohler-Uddeholm, 247
F.3d at 93 (citing Duquesne Light, 66 F.3d at 614; Easton v. Washington County Ins. Co.,
391 Pa. 28, 137 A.2d 332 (1957)). Pennsylvania law permits the introduction of some
extrinsic evidence “when a court is faced with a contract containing facially unambiguous

15

language,” to prove a latent ambiguity. Bohler-Uddeholm, 247 F.3d at 94 (citations omitted).
“[A] party offers the right type of extrinsic evidence for establishing latent ambiguity if the
evidence can be used to support ‘a reasonable alternative semantic reference’ for specific
terms contained in the contract,” Id. at 94 n. 3 (citing Mellon Bank, 619 F.2d at 1012 n. 13),
or in other words, the court must ask “whether the proffered extrinsic evidence is about the
parties' objectively manifested ‘linguistic reference’ regarding the terms of the contract, or
is instead merely about their expectations.” Bohler-Uddeholm, 247 F.3d at 94 n.3 (citing
Duquesne Light, 66 F.3d at 614). The introduction of extrinsic evidence is controlled by the
following principles:
(1) mere disagreement between the parties over the meaning of a term is
insufficient to establish that term as ambiguous; (2) each party's proffered
interpretation must be reasonable, in that there must be evidence in the
contract to support the interpretation beyond the party's mere claim of
ambiguity; and (3) the proffered interpretation cannot contradict the common
understanding of the disputed term or phrase when there is another term that
the parties could easily have used to convey this contradictory meaning.
Id. at 94-95. Further, extrinsic evidence can be used “to support an alternative interpretation
of a term that sharpen[s] its meaning” but not for “an interpretation that completely
change[s] the meaning”, for example, “‘extrinsic evidence may be used to show that ‘Ten
Dollars paid on January 5, 1980,’ meant ten Canadian dollars, but it would not be allowed
to show the parties meant twenty dollars.’” Id. at 112 n. 4(citing Mellon Bank, 619 F. 2d at
1013.))
Courts “may also consider extrinsic evidence of a term's recognized trade usage,
whether or not that term is ambiguous, where the term is used in a commercial contract.”
Artesian Water Co. v. Chester Water Auth., 2012 WL 3029689, at *4 (E.D. Pa. July 24,
2012) “Trade usage has been defined to mean ‘having such regularity of observance in a
place, vocation or trade as to justify an expectation that it will be observed with respect to
[a particular agreement].’”Artesian Water Co. v. Chester Water Auth.,2012 WL 3029689,
at *4 (E.D. Pa. July 24, 2012) (citing Nationwide Life Ins. Co. v. Commonwealth Land Title
Ins. Co., 2011 WL 204619, at *8 (E.D.Pa. Jan.20, 2011); Restatement (Second) of
Contracts § 222(1); 13 Pa. Cons.Stat. § 1303( c)).
16

A “court can grant summary judgment on an issue of contract interpretation if the
contractual language being interpreted ‘is subject to only one reasonable interpretation.’”
Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159, 164 (3d Cir.2001) (quoting Arnold
M. Diamond, Inc. v. Gulf Coast Trailing Co., 180 F.3d 518, 521 (3d Cir.1999)).
A.

Ambiguity

Mericle alleges Jackson and PPM demanded an excessive Prepayment Premium
due to the use of an improper calculation that did not take into consideration that the loan
was amortizing, or that it had a declining principal balance. (Compl. at ¶¶ 12, 24-26.) In
other words, when the calculation was performed, the principal amount of the Note, instead
of the balance remaining on the Note, was used in the calculation. Mericle alleges that if the
1997 loan was paid through maturity, as originally agreed, the total amount of interest paid
would have amounted to $ 484,150.98. (Doc. 25-1, 11.) When prepayment was made and
the balance of the loan was paid in full, Mericle alleges that Jackson and PPM demanded
a Prepayment Premium amount of $ 683,400.88 leading to an overpayment of $ 208,950.03
(not taking present value into consideration). (Id.) In moving for summary judgment,
Jackson and PPM contend there is no ambiguity in the contract language and the
Prepayment Premium was calculated accordingly, because the calculation “is clear and
does not consider that the loans were amortizing.” (Doc. 17, 24, 28.)
In order to interpret the parties’ agreement to determine if the contract was breached,
I must start with the language of the agreement itself. The language at the center of the
parties’ dispute is as follows:
Maker may prepay the Note in whole or in part upon payment of a
prepayment premium equal to the greater of (i) 1 % of the prepaid amount
and (ii) an amount calculated at the time of prepayment using a formula
designed to compensate the Noteholder for the loss of the performing Loan.
This yield protection payment will be calculated by (a) assuming reinvestment
of the prepaid amount in U.S. Treasury Securities with maturities as close as
practicable to the Maturity Date, (b) assuming conversion of this Note to a
bond-equivalent, interest-only note without changing its interest rate, and ( c)
determining the present value of the difference between the two assumed
interest-payment streams, using the yield of the assumed reinvestment as the
discount rate.

17

(Compl. at ¶ 23.) (emphasis added)
The interpretation of clause (a) is not in dispute. According to Jackson and PPM,
clause (a) directs the individual doing the calculation to look to “U.S. Treasury Securities
commonly published in The Wall Street Journal” and “assume reinvestment of the
remaining balance of the loan” in U.S. Treasury securities with a maturity date as close as
possible to the maturity date of the loan. (Doc. 17, 24.) The import of clause ( c) is also not
disputed. Jackson and PPM contend clause ( c) provides the calculation for determining the
present value of the lost income stream or, “[i]n other words, how much do we need today
in order to equate the original investment rate, . . .the rate on the note at the time of
maturity, if we were to reinvest in those treasury bills.” (Doc. 17, 26 (citing Doc. 21-31, 5.).)
Mericle does not contest Jackson and PPM’s assertion. (See generally Doc. 25-1, 14-17.)
The dispute lies in the parties’ differing interpretations of clause (b), which states:
“assuming conversion of this Note to a bond-equivalent, interest-only note without changing
its interest rate.” Jackson and PPM offer that “because the loans were paid on an
amortizing basis, the Note instructs the reader to convert the Note to a note or debt that is
interest-only (i.e., not principal),” and that the term “interest-only” could only mean a
“conversion of the loan to a debt that did not consider amortization.” (Id. at 24-25.) Further,
Jackson and PPM assert that the “the bond-equivalent qualification of ‘interest-only’ note”
addresses the fact that bonds are paid on a semi-annual basis, and loans are paid monthly,
so the loan must be converted to an “interest-only” note in order to compare interest rates.
(Id. at 25-26 (citing Doc. 21-6, 5.).)
Mericle’s view differs. Mericle argues that “because the loans were amortizing, the
calculation had to take amortization into account.” (Doc. 25-1, 7.) Mericle contends Jackson
and PPM ignore the terms “equivalent,” “yield protection” and “designed to compensate
Noteholder for the loss of its performing loan”, when calculating the Prepayment Premium.
(Id. at 14-15.) According to Mericle, without taking amortization into account, the calculation
does not produce an accurate amount for “the difference between the interest the lenders

18

would have received if Mericle had made the remaining 46 payments” compared to “the
interest they [sic] would receive if they invested the prepaid amounts in U.S. Treasury
Securities.” (Id.) Mericle further argues that if the “prepayment calculation ignored
amortization . . ., it would not be ‘equivalent’” (Id. at 7.); that Mericle’s interpretation
“comports with the purpose of the prepayment premiums,” industry standards, and “avoids
the absurd and unreasonable’ result of giving the lenders a $ 1 million windfall” (Id. at 1516.); and that the “language cannot justify the lenders receiving more money than they [sic]
would have received if the remaining monthly payments had been made.”(Id. at 17.)
Alternatively, Mericle contends that the language, if nothing else, is obscure, and because
it has provided a purportedly reasonable alternative interpretation, summary judgment
should be denied. (Id.)
First, I must decide if the language is ambiguous. Mericle’s argument in opposition
to Jackson and PPM’s motion appears to assert, without specifically stating, that a latent
ambiguity exists. In determining if a latent ambiguity exists I may consider ,“[t]he objective,
extrinsic evidence proffered . . .[of] ‘the structure of the contract, the bargaining history, and
the conduct of the parties that reflects their understanding of the contract's meaning.’”
Baldwin v. Univ. of Pittsburgh Med. Ctr., 636 F.3d 69, 76 (3d Cir. 2011) (citing In re New
Valley Corp., 89 F.3d 143, 150 (3d Cir. 1996); Teamsters Indus. Emps. Welfare Fund v.
Rolls–Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir.1993)). But, I also “must consider
whether the extrinsic evidence that the proponent of the alternative interpretation seeks to
offer is the type of evidence that could support a reasonable alternative interpretation of the
contract.” Bohler-Uddeholm, 247 F.3d at 96(citations omitted). Proper “[e]xtrinsic evidence
notwithstanding, ‘the parties remain bound by the appropriate objective definition of the
words they use to express their intent.’” Baldwin, 636 F.3d at 76 (citing Mellon Bank, 619
F.2d at 1013.) And, as set forth in Bohler-Uddeholm:
a claim of latent ambiguity must be based on a “contractual hook”: the
proffered extrinsic evidence must support an alternative meaning of a specific
term or terms contained in the contract, rather than simply support a general
claim that the parties meant something other than what the contract says on
its face. In other words, the ambiguity inquiry must be about the parties'
19

“linguistic reference” rather than about their expectations.
Bohler-Uddeholm, 247 F.3d at 96 (citations omitted). Further,
a proffered alternative meaning for the contractual hook must be reasonable;
that is, it must be supported by contractual evidence that goes beyond the
party's claim that the contractual hook has a certain meaning, and the
interpretation cannot contradict the standard meaning of a term when the
parties could have easily used another term to convey this contradictory
meaning.
(Id.) “[A] court can [also] consider an alternative interpretation of a facially unambiguous
contract term when the plain meaning interpretation of the contract would lead to an absurd
and unreasonable outcome.” Bohler-Uddeholm, 247 F.3d at 96 (citations omitted)
The complaint alleges that the 1997 loan was an amortizing loan, meaning “in
addition to paying interest, each monthly loan payment reduced the outstanding principal
balance of the loan.” (Compl. at ¶ 12.) The 1997 Loan11 documents, attached to Mericle’s
complaint and brief in opposition, define the “Note” as follows: “Note: The mortgage note
described in Section 2.2 of this Agreement, as originally executed or as may be hereafter
supplemented or amended from time to time in writing.” (Doc. 1-2, 61.) The terms of the
loan further describe the “Note” as “(a) A mortgage note (“Note”) from Borrower payable
to the order of Lender in the original principal amount of Two Million Two Hundred Forty
Thousand Dollars ($ 2,240,000.00)”. (Doc. 1-2, 62.) There was, however, an Allonge that
was executed on March 2, 1998, that was attached and made a part of the November 20,
1997 Promissory Note, and advanced a second tranche, increasing the 1997 Loan principal
amount to ten million dollars ($ 10,000,000.00). (Doc. 25-4, 29.)
The word “Note” in the Prepayment Premium formula is the contractual hook in this
case. Although the term, in and of itself, seems unambiguous, in light of the parties’
presentations, a latent ambiguity exists.

11

Under Pennsylvania law, “a court should look to the contract as a whole for guidance
in interpreting a term in the contract.” Bohler-Uddeholm, 247 F.3d at 97(citing Duquesne
Light, 66 F. 3d at 615)).
20

The amount to be assigned to “Note” at the time the prepayment calculation is made
is reasonably susceptible to two alternative meanings: it can denote that the amount is the
principal amount of the Note on the date the loan was originated; or, it could be the principal
balance remaining on the Note on the date that a prepayment is made. As Mericle states,
and Jackson and PPM do not specifically challenge, the amount of money that Jackson and
PPM would have received if the 1997 Loan was paid to maturity differs from what was
demanded at the time of the prepayment. In light of the language proceeding the formula
for calculation that the Prepayment Premium was “designed to compensate the Noteholder
for the loss of the performing Loan”, and because the performing loan was an amortizing
loan, the term “Note” is ambiguous. Both parties have put forward “‘a reasonable alternative
semantic reference’ for specific term[] contained in the contract”, i.e. the term “Note”,
therefore, summary judgment is not appropriate based on contract interpretation as it is to
be left to the “fact-finder to decide . . .[the] meaning” of ambiguous language. Pac.
Employers Ins. Co. v. Glob. Reinsurance Corp. of Am., 693 F.3d 417, 426 (3d Cir. 2012)
(citations omitted).
B.

Voluntary Payment Doctrine

Notwithstanding the foregoing discussion, Jackson and PPM contend, that
regardless of any alleged ambiguous language, Mericle’s claims are barred by the voluntary
payment doctrine because Mericle freely chose to pay off the loans in 2011. (Doc. 17, 2930.) Jackson and PPM also argue that the fact that the Prepayment Premium was paid
under protest “is of no moment,” and that there is no dispute regarding Mericle’s awareness
of how the Prepayment Premiums were calculated. (Id. at 30.) In opposition, Mericle
contends that the voluntary payment doctrine is inapplicable for two reasons: first, there is
a dispute of fact regarding whether Mericle’s payment was voluntary; and, second, because
Mericle made the payment under protest. (Doc. 25-1, 18.)
Under Pennsylvania law, “the voluntary payment defense provides that ‘[w]here,
under a mistake of law, one voluntarily and without fraud or duress pays money to another
with full knowledge of the facts, the money paid cannot be recovered.’” Liss & Marion, P.C.
21

v. Recordex Acquisition Corp., 2007 PA Super 351, ¶ 24, 937 A.2d 503, 514 (2007), aff'd,
603 Pa. 198, 983 A.2d 652 (2009) (citing Acme Markets, Inc. v. Valley View Shopping
Center, Inc., 342 Pa.Super. 567, 493 A.2d 736, 737 (1985); Ochiuto v. Prudential Insurance
Co. of America, 356 Pa. 382, 384, 52 A.2d 228, 230 (1947)). Pennsylvania cases have long
recognized that:
Money voluntarily paid under a claim of right where there has been no
mistake of fact cannot be recovered back; nor does the fact that the money
is paid under protest, of itself, give a right to recover the sums so paid. The
payment must have been made under compulsion to prevent the immediate
seizure of goods or the arrest of the person.
Union Ins. Co. v. City of Allegheny, 101 Pa. 250, 250 (1882). Therefore, with regard to this
case, fraud or duress are necessary prerequisites to the inapplicability of the voluntary
payment doctrine.
“Under Pennsylvania law, duress generally is ‘that degree of restraint or danger,
either actually inflicted or threatened and impending, which is sufficient in severity or
apprehension to overcome the mind of a person of ordinary firmness.’”Abrevaya v. VW
Credit Leasing, Ltd., 2009 WL 8466868, at *2 (E.D. Pa. July 22, 2009) (citing Carrier v.
William Penn Broadcasting Co., 426 Pa. 427, 233 A.2d 519, 521 (Pa.1967)). There can also
be economic duress under Pennsylvania law. “Economic duress, i.e., business or economic
compulsion, is a form of duress” and has been defined as follows:
To constitute duress or business compulsion there must be more than a mere
threat which might possibly result in injury at some future time, such as a
threat of injury to credit in the indefinite future. It must be such a threat that, in
conjunction with other circumstances and business necessity, the party so
coerced fears a loss of business unless he does so enter into the contract as
demanded.
McDonald v. Whitewater Challengers, Inc., 2015 PA Super 104, 116 A.3d 99, 114-15 (2015)
(citing Tri–State Roofing Co. of Uniontown v. Simon, 187 Pa.Super. 17, 20-21, 142 A.2d
333, 335 (1958)). “Such coercion must be great enough to overcome the complaining party's
free will.” Abrevaya, 2009 WL 8466868, at *3 (citing Nat'l Auto Brokers Corp. v. Aleeda Dev.
Corp., 243 Pa.Super. 101, 364 A.2d 470, 476 (Pa.Super.Ct.1976).
22

Mericle argues that the voluntary payment doctrine is inapplicable because, if the
Prepayment Premiums were not paid, Jackson and PPM “refused to release liens, and . .
.the failure to release those liens would derail a multi-million dollar transaction.” (Doc. 25-1,
18.) In support Mericle contends:
Jackson National and PPM refused to release their liens until and unless
Mericle paid literally every dollar they demanded. See Exhibit 20. Indeed,
Jackson National and PPM demanded even more, and wanted Mericle to
agree that it would not challenge the amounts demanded. See Exhibit 20.
Given that Mericle needed to release the liens to complete a multi-million
dollar financing that was taking place on the same day, see Mericle dep. At
113-1612.; Sebia dep. At 77-8213, there is at minimum a factual question as to
whether the payments were voluntary.
(Doc. 25-1, 18 n. 25.)14 The potential derailment of the pending deal purportedly made the
payments involuntary.
Jackson and PPM argue it was Mericle’s choice to prepay the loans in order to take
advantage of low interest rates, therefore, the payments could not have been involuntarily
made. (Doc. 27, 13.) Jackson and PPM also challenge Mericle’s contention that the

12

Mr. Mericle’s cited testimony is:
Q: And you made this multi-hundred-million-dollar financing deal with ING on or around the
time that you paid the prepayment premium on the two loans, . . . ?
A: I’m not sure of this, but I think it was the same day. So the answer is yes, but I don’t —it’s
within days.
(Doc. 25-17, 31.)
13

Mr. Sebia’s testimony is:
Q: Was there any need to prepay these loans by a particular date that was part of the
business strategy involved here?
A: It was part — the prepayment of these loans were part of a broader transaction, so, yes.
The answer would be yes to the extent that that was a date under the broader transaction.
Q: And had the broader transaction been arranged before you asked for the prepayment
calculations on the ‘96 and ‘97 loans?
A: I don’t recall specifically, but I believe it was ongoing when we first asked.
(Doc. 25-20, 24-25.)
14

The discussions regarding the release of the liens is evidenced by an email chain
attached to the filings. (See Doc. 25-5, 30-46.)
23

payments were involuntarily made based on an alleged refusal on the part of Jackson and
PPM to release the liens. In support, Jackson and PPM cite the following time line:
1/13/2011: Mericle first requested a payoff on the 1997 Loan from PPM on
the 1997 Loan only;
2/16/2011: Mericle protests the Prepayment Premium on the 1997 Loan for
the first time;
2/16/2011 at 3:19 pm: Jackson received, by wire, the Prepayment
Premium on the 1997 Loan; and
2/16/2011 at 4:03 pm: PPM informed Carey Kramer not to mark the
mortgages satisfied until Plaintiffs signed a release as to the 1997 Loan
and until Plaintiffs acknowledged they had no dispute with the calculation
of the Prepayment Premium for that loan.
(Doc. 27, 14) (emphasis in original) (internal citations omitted). Additionally, Jackson and
PPM argue that Mericle’s claimed involuntariness is negated by the payment of Prepayment
Premiums on three occasions prior to 2011 that were calculated using the same formula
now at issue.15 (Doc. 27, 13.)
Mericle’s second basis for arguing that the voluntary payment doctrine should not
apply is that because the payment was made under protest, the right to later challenge the
calculations was reserved. (Doc. 25-1, 18.) It is undisputed that the payment was made
under protest. (Doc. 18, ¶ 57; Doc. 26, 57.) 16 The Pennsylvania Superior Court stated:
15

These Prepayment Premiums were paid in 2006, 2007, and 2008. (Doc. 27, 17.)
Mericle contends these payments were made, despite believing they were calculated
incorrectly “because the difference between the calculation proffered . . .and what Mericle
viewed as the correct calculation was not, either literally or metaphorically, sufficient to make
a federal case out of it.” (Doc. 25-1, 10.)
16

Accompanying the Prepayment Premium was a letter dated February 16, 2011 sent
by Lew Sebia, Chief Operating Officer of Mericle Commercial Real Estate Services(Doc. 2128; Doc. 25-2, 29.) to Susan Lallo, a Carey Kramer employee, indicating that Mericle was
not agreeing that the calculation was correct. The letter stated in relevant part:
As you know, we are paying today the entire amounts required to satisfy each
loan as set forth in your Paydown and Payoff Letters and require that you file
the appropriate applicable Mortgage Releases/Satisfaction Pieces. Our
payment of said amounts, however, shall not be construed that we are in
agreement with your method of calculation of each applicable Prepayment
Premium or that we agree with the amounts thereof. Accordingly, we reserve
our right to review the calculation of the Prepayment Premium for each loan
24

There must be compulsion, actual, present and potential, inducing the
payment by force of conditions which render the person or property subject to
the control of the party demanding payment, when the party so paying may
give notice of the illegality of the demand, his involuntary payment and
intention to reclaim. When the element of coercion is lacking, a mere protest
or notice will not change the character of the payment or confer of itself a right
to recover, although it may be necessary in some cases, where the element
of coercion is present, to pay under protest, that is, with notice of an intention
to reclaim, in order to repel the implication of an assent.
Lowenstein v. Bache, 41 Pa. Super. 552, 557 (1910) (citations omitted). Therefore, without
duress or coercion, a reservation of the right to challenge the payment is without effect as
there is nothing to challenge.17 The only question is whether Mericle was acting under
duress or compulsion, sufficient to make the payment involuntary.
Jackson and PPM rely on Abrevaya, 2009 WL 8466868 at *4, where the plaintiff’s
claim was barred by the voluntary payment doctrine because the plaintiff paid what was
known to be an excessive payment to avoid the possibility of a negative credit rating, while
also stating his inability to afford the costs of a legal action. Id. at * 4. The court held that
the plaintiff could not “show that he acted under economic duress because he would have
had a ready legal recourse at every stage of the process if he decided to fight [defendant]’s
demand for payment”, but instead chose to pay. Id.

following our analysis of the applicable prepayment premium calculation as
included in the applicable loan documents and seek a refund of any
overpayment thereof.
(Doc. 21-28; Doc. 25-2, 29.)
17

Mericle cites to 13 Pa. C.S. § 1207 to support the propriety of a purported reservation
of the right to contest the prepayment calculation. Section 1308, which replaced Section
1207 in 2008, allows parties’ continued performance under a contract despite a dispute
when performance is tendered under protest. See 13 Pa. C.S. § 1308. Jackson and PPM
argue that Mericle paid the Prepayment Premium to terminate the loan and not to facilitate
a continuation of the parties’ performance despite a dispute, therefore, the statute does not
apply. (Doc. 27, 15.) (Doc. 27, 15. (citing Occidental Chem. Corp. v. Envtl. Liners, Inc., 859
F. Supp. 791, 796 (E.D. Pa. 1994) (statute was intended to apply when performance is
continuing, and not to the finalizing of a disputed debt through an accord and satisfaction.).
As noted, the dispositive inquiry in this case is whether or not Mericle acted under duress
sufficient to render any payment, whether made under protest or not, involuntary.
25

Jackson and PPM also cite to Ochiuto v. Prudential Ins. Co. of Am., 356 Pa. 382, 52
A.2d 228 (1947). In Ochiuto, the court held that “in order to constitute duress there must be
a threatened seizure of a person or his property for the purpose of compelling him to pay
money for which he is not liable; moreover, the threat of issuing legal process to enforce a
demand cannot, in any event, constitute duress because the threatened party is not being
deprived of his day in court and the opportunity to be heard in opposition to the claim.” 356
Pa. at 384, 52 A.2d at 230 (emphasis in original).
In opposition, Mericle relies on Peterson v. Crown Financial Corp., 476 F. Supp. 1155
(E.D. Pa. 1979), aff'd, 661 F.2d 287 (3d Cir. 1981). In Peterson, the defendants demanded
the payment of interest that was purportedly due on a note that had been previously marked
cancelled, but, without payment, the defendants would withhold the stock pledged as
collateral on a different loan until the demanded sums were paid. Id. at 1157. The plaintiff
paid under protest and later sought to recover because, without the release of his stock, he
could not consummate another agreement to sell the stock. Id. at 1158. The court held the
plaintiff’s payment was involuntary because he “was required to pay in order to free his
collateral and consummate his sale . . .[and] [s]uch pressure [was] sufficiently coercive to
constitute duress and require restitution of an undeserved benefit.” Id. at 1161. The court
also held that the amounts demanded were improperly demanded of the plaintiff. Id.
Mericle also cites to United States v. Williams, 514 U.S. 527, 115 S.Ct. 1611 (1995).
A tax lien was levied against the plaintiff’s property, unbeknownst to her, due to the actions
of her ex-husband. 514 U.S. at 531, 115 S.Ct. at 1615. When the plaintiff sought to sell the
property, she was informed of the lien. Id. Faced with a purchaser who threatened to sue
if clean title was not presented, the plaintiff authorized that funds from the sale of the
property be set aside to resolve the lien. Id. The Supreme Court held that 28 U.S.C. §
1346(a)(1)18, which allows “one from whom taxes are erroneously or illegally collected to sue

18

(a) The district courts shall have original jurisdiction, concurrent with the United States Court
of Federal Claims, of:
26

for a refund of those taxes”, permitted the plaintiff’s suit. 514 U.S. at 536, 115 S.Ct. at
1618. The plaintiff “did not have time to bring a quiet title action [and] [s]he urgently sought
to sell the property”, while she alleged that the lien was attached to the wrong property, and,
therefore, an improper lien. 514 U.S. at 536, 540, 115 S.Ct. at 1618, 1620.
Turning to the current case, the primary reason alleged by Mericle making the
payment involuntary was that Jackson and PPM would not release the liens on the collateral
properties unless the Prepayment Premiums were paid. Mericle contends that if the liens
were not released, a multi-million dollar deal would be derailed. 19
The discussions regarding the release of the liens is evidenced by an email chain
attached to the filings. (See Doc. 25-5, 30-46.) Mr. Sebia, Mr. Sebia’s assistant, and Ms.
Lallo communicated via email regarding the Prepayment Premium on February 16, 2011.
(See Doc 25-5, 31-34.) Karl Hildebrand, a Portfolio Manager in the Loan Servicing
Department of PPM, was also involved in discussions with Ms. Lallo regarding the release
of the liens. (See Doc 25-5, 38-42.) Mr. Hildeband purportedly indicated that the liens would
not be released until Mericle “acknowledged they [sic] have no dispute with the prepayment
premium calculation.” (Id. at 18.)
Jackson and PPM argue that because the money was wired to PPM at 3:19 pm on
February 16, 2011, and the evidence shows that Mr. Hildebrand did not state until 4:03 pm
on February 16, 2011 that the liens would not be released, Mericle cannot now contend that
the payment of the Prepayment Premium was motivated by that statement. (Doc. 27, 14

(1) Any civil action against the United States for the recovery of any internal-revenue tax
alleged to have been erroneously or illegally assessed or collected, or any penalty claimed
to have been collected without authority or any sum alleged to have been excessive or in any
manner wrongfully collected under the internal-revenue laws
28 U.S.C.A. § 1346.
19

Moreover, the mortgages would not be satisfied and the liens would not be released
unless and until Mericle acknowledged agreement with the Prepayment Premiums (thereby
obviating the protect) and provided a signed release.
27

(citing Doc. 25-5, 27-38.)) However, contained within the same email chain is an email sent
at 2:56 pm on February 16, 2011, by Ms. Lallo to Mr. Sebia’s assistant. (Doc. 25-5, 40-41.)
Ms. Lallo states the following:
Hi Karen-Just a few questions/comments:
•

Lew’s letter only refers to two Berkadia Loans. Is Berkadia Loan No.
400034934 not paying off today?

•

Per the payoff letters provided, the borrower is to provide CKPP [Carey
Kramer] with the release documentation, which we will send to the
lender for execution, after which we will return it to the borrower or their
representative for filing. Instructions for the applicable signature block
were contained in the payoff letters.

•

If the borrower is going to dispute the Berkadia prepayment
calculations, then they must resubmit the request for a payoff
statement, identifying the difference in interpretation and or concerns
regarding the Payoff Instruction Letter. Berkadia will take the dispute
under advisement and it will be reviewed by management. I will need
to contact PPM concerning their procedures for a dispute of a
prepayment premium calculation. All disputes will need to be
addressed prior to payoff.

•

If you have any questions concerning this matter, please do not
hesitate to contact me at [phone]. Susan

(Id.) Mr. Sebia’s assistant forwarded the email to Mr. Sebia at 3:01 pm. (Id. at 40.)
In response, Mr. Sebia sent Ms. Lallo an email at 3:35 pm on February 16, 2011, that
stated in relevant part, “we cannot hold up our closing to our pay-offs (which have already
been sent to you in the exact amounts that the lenders have calculated) until you ‘take the
dispute under advisement’ and have it ‘reviewed by management’ as you state in your email
to me.” (Doc. 25-5, 39.)
Much like the plaintiff in Peterson, Mericle contends that the payments were
involuntarily made to allow a pending deal to go forward. It also remains to be decided
whether the amount demanded as the Prepayment Premium was the correct amount based
on the ambiguity in the parties’ agreement. Therefore, a question of material fact exists as
to whether or not Mericle acted voluntarily when the payments were made. Mr. Sebia’s
statement to Ms. Lallo in response to her email (arriving before the money was wired)
demonstrates that Mericle may not have believed it had any other choice but to pay the
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demanded sums so as to not derail the ongoing transaction and there is no evidence of
record that Mericle had other potential avenues for recourse at the time. Accordingly, there
is a question of material fact regarding whether the payments were in fact made voluntarily
on the 1997 Loan. Jackson and PPM’s motion for summary judgment on Mericle’s breach
of the contract claim will be denied with respect to the 1997 Loan.
B.

Breach of Implied Covenant of Good Faith and Fair Dealing

Mericle alleges Jackson and PPM “breached their duty of good faith and fair dealing
by calculating and demanding an improper and excessive Prepayment Premium.” (Compl.
at ¶ 47.) Mericle further alleges that “Jackson and PPM, by their own actions and through
the actions of their agents and/or representatives, breached their duty of good faith and fair
dealing . . . by demanding a release prior to releasing and/or marking their mortgages as
satisfied.” (Id. at ¶¶ 47-48.)
“[U]nder Pennsylvania law, a ‘claim for breach of the implied covenant of good faith
and fair dealing is subsumed in a breach of contract claim.’” Burton v. Teleflex Inc., 707 F.3d
417, 432 (3d Cir. 2013) (citing LSI Title Agency, Inc. v. Evaluation Servs., Inc., 951 A.2d
384, 392 (Pa.Super.Ct.2008)). “Courts have utilized the good faith duty as an interpretive
tool to determine the parties' justifiable expectations in the context of a breach of contract
action, but that duty is not divorced from the specific clauses of the contract and cannot be
used to override an express contractual term.” Northview Motors, Inc. v. Chrysler Motors
Corp., 227 F.3d 78, 91 (3d Cir. 2000) (citing Duquesne, 66 F.3d at 617–18; USX Corp. v.
Prime Leasing, Inc., 988 F.2d 433, 438 (3d Cir.1993)). Therefore, “a plaintiff must allege
facts to establish that a contract exists or existed, including its essential terms, that
defendant failed to comply with the covenant of good faith and fair dealing by breaching a
specific duty imposed by the contract other than the covenant of good faith and fair dealing,
and that resultant damages were incurred by plaintiff.” Burton, 707 F.3d at 432 (citing In re
400 Walnut Associates, L.P., 454 B.R. 60, 73 (Bankr. E.D. Pa. 2011); CRS Auto Parts, Inc.
v. Nat'l Grange Mut. Ins. Co., 645 F.Supp.2d 354, 369 (E.D.Pa.2009); Sheinman Provisions,
Inc. v. Nat'l Deli LLC, 2008 U.S. Dist. LEXIS 54357, at *3, 2008 WL 2758029, *3 (E.D.Pa.
29

July 15, 2008)).
With regard to the alleged excessive Prepayment Premium calculation, Mericle’s
claims for breach of the implied covenant of good faith and fair dealing under the 1996 Loan
are without merit as there was no contract between the parties when the Prepayment
Premiums were paid. See Section A.1. supra.
Turning to the 1997 Loan, Mericle contends it is “entitled to argue that Jackson
National and PPM acted in bad faith when they calculated the prepayment premiums . . .”
(Doc. 25-1, 21.) Mericle relies on Jackson v. Wells Fargo Bank, N.A., 2013 WL 5945732,
at *14 (W.D. Pa. Nov. 6, 2013) and the Restatement (Third) of Property (Mortgages) § 6.220
and argues that “the covenant of good faith and fair dealing is explicitly recognized as a limit
on prepayment premiums.” (Id.) In Jackson, the plaintiffs were permitted to “utilize the
covenant [of good faith and fair dealing] to advance and prove” their breach of contract
claim based on an allegation that the lender’s exercise of discretion under the agreement
was improper because the lender purportedly charged excessive fees that resulted in the
receipt of kickbacks by either the lender or an affiliated third party. 2013 WL 5945732 at
*14-15. Similarly, because Mericle’s breach of contract claim regarding the 1997 Loan

20

(a) Subject to the general requirement of good faith and fair dealing
(Restatement, Second, Contracts § 205), the power of courts to refuse
enforcement of unconscionable contract terms (Restatement, Second,
Contracts § 208), and other applicable law,(i) an agreement that prohibits
payment of the mortgage obligation prior to maturity is enforceable; and(ii)
except as provided in § 6.3, an agreement requiring the mortgagor to pay a
fee or charge as a condition of such payment is enforceable.(b)
Notwithstanding an agreement of the type described in (a), the mortgagor has
a right to the release of the mortgage on the real estate, provided that the
mortgagor gives substitute security, equal in value to the mortgage obligation
and any associated fees, that is substantially the equivalent of cash. The
mortgagor must pay all costs associated with the substitution. The parties may
agree that security other than the substantial equivalent of cash may be
substituted, but may not agree to deny to the mortgagor the right of
substitution.
Restatement (Third) of Property (Mortgages) § 6.2 (1997).
30

remains, it should be entitled to argue that Jackson and PPM breached the implied
covenant of good faith and fair dealing with regard to the calculation of the Prepayment
Premium on the 1997 Loan.
Mericle also alleges that Jackson and PPM “refused to release their liens unless [the
Prepayment Premiums] were paid,” therefore, violating the implied covenant of good faith
and fair dealing. (Doc. 25-1, 21.) However, Mericle admits “that the mortgaged properties
servicing [sic] as collateral for the 1996 Loan and the 1997 Loan were marked satisfied in
compliance with Pennsylvania law, and in any event, within seven days of Plaintiffs[‘]
complete repayment of the loans.” (Doc. 18, ¶ 60.) Mericle has not pointed to any provision
in the parties’ agreements that required Jackson or PPM to mark the mortgages satisfied
immediately and as stated by Jackson and PPM, Pennsylvania law provides that, upon
request, a mortgage must be marked satisfied within forty-five days of the request. (Doc. 27,
19 n. 6 (citing O'Donoghue v. Laurel Sav. Ass'n, 556 Pa. 349, 355, 728 A.2d 914, 917
(1999).) Mericle has also not alleged damages due to any refusal to mark the mortgages
satisfied. Therefore, with regard to the release of liens, there can be no claim for the breach
of the implied covenant of good faith and fair dealing without an allegation that the contract
was breached when the liens were not immediately released and with no alleged damages.
See Restatement (Second) of Contracts § 205 (1981)(“Every contract imposes upon each
party a duty of good faith and fair dealing in its performance and its enforcement.”) Mericle
will not be permitted to argue a breach of the implied covenant of good faith and fair dealing
based on any purported delay in marking the mortgages satisfied because the claim is not
based on the parties’ written agreement.
C.

Unjust Enrichment

Jackson and PPM contend that unjust enrichment claims arising from a contract are
not cognizable under Pennsylvania Law. Mericle counters that Jackson and PPM demanded
and were paid an amount that overcompensated Jackson National and/or PPM and put
“Jackson National and PPM in a better position than that which they would have occupied
absent Mericle’s prepayment of the Loans.” (Compl. at ¶¶ 51-52.) Further, Mericle alleges
31

it would be unjust for Jackson and PPM to retain the amount that exceeds that which was
owed by Mericle and it should have to disgorge the “portion that represents interest paid on
amounts that would have amortized had Mericle paid the loans over time as and when due.”
(Id. at ¶¶ 53-54.)
In response to the motion for summary judgment Mericle argues that “Jackson
National and PPM . . . obtained the [Prepayment Premium] by refusing to release their
liens–liens that existed independently of the loan agreements.” (Doc. 25-1, 21.)
Pennsylvania law sets forth the elements of a claim for unjust enrichment as follows:
“(1) the plaintiff conferred a benefit upon the defendant; (2) an appreciation of such benefits
by the defendant; and (3) the defendant accepted and retained such benefit under
circumstances where it would be inequitable for the defendant to retain the benefit without
payment of value.” Rahemtulla v. Hassam, 539 F. Supp. 2d 755, 780 (M.D. Pa. 2008) (citing
Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429, 447 (3d Cir.2000)). However,
“unjust enrichment is a quasi-contractual doctrine and is inapplicable if the parties'
relationship “is founded on a written agreement or express contract.” Cunningham v. M &
T Bank Corp., No. 1:12-CV-1238, 2013 WL 5876337, at *7 (M.D. Pa. Oct. 30, 2013) (citing
Hershey Foods Corp. v. Ralph Chapek, Inc., 828 F.2d 989, 999 (3d Cir.1987) (citations
omitted)).
Mericle’s attempts to argue that the Prepayment Premiums were only paid because
of the purported refusal to release the liens does not provide an avenue for recovery under
Pennsylvania law. Mericle’s claims are based on whether or not the Prepayment Premium
demanded, and paid by Mericle, was in excess of what was allowed under the parties’
written agreement. The parties’ relationship is expressly based on a written agreement and
Mericle has not alleged that the 1997 Loan was an unenforceable contract and cannot now
contend that the payment was based on a matter outside of the written agreement when the
asserted basis for liability was a breach of contractual language. Additionally, although the
parties fail to specifically address the issue of whether or not PPM was a party to the loans,
there has not been a specific allegation that PPM received any benefit from Mericle. Simply
32

speculating that PPM may have retained some of the Prepayment Premium (See Doc. 25-1,
20.), is insufficient to demonstrate that there is a genuine issue of material fact with regard
to Mericle’s unjust enrichment claim.
Mericle fails to state a cognizable unjust enrichment claim and Jackson and PPM’s
motion for summary judgment on Mericle’s unjust enrichment claim will be granted.
D.

Negligent Misrepresentation

Jackson and PPM contend that negligent misrepresentation claims are also not
cognizable under Pennsylvania Law. (Doc. 17, 27-29.) In its opposition, Mericle concedes
that the negligent misrepresentation claim is time-barred and therefore seeks to withdraw
the claim. (Doc. 25-1, 2 n. 1.) Jackson and PPM’s motion for summary judgment will be
granted and I will not further address this claim.
III. Conclusion
For the above stated reasons, Jackson and PPM’s motion for summary judgment will
be granted in part and denied in part.
An appropriate order follows.

June 27, 2016
Date

/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge

33