FIRST COMMONWEALTH BANK v. FRESH HARVEST RIVER, LLC.
Filing
53
MEMORANDUM OPINION & ORDER - it is hereby Ordered that Fresh Harvest River, LLC's petition to open judgment is DENIED. It is further Ordered that Fresh Harvest River, LLC's motion to strike judgment is DENIED. It is further Ordered that Fresh Harvest River, LLC's motion to stay enforcement of judgment is DENIED. And finally, the Clerk is Ordered to close this case, and as more fully stated in said Memorandum Opinion & Order. Signed by Judge Kim R. Gibson on 3/3/2014. (dlg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
FIRST COMMONWEALTH BANK,
Plaintiff,
v.
FRESH HARVEST RIVER, LLC,
Defendant.
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CIVIL ACTION NO. 3:10-231
JUDGE KIM R. GIBSON
MEMORANDUM AND ORDER
I.
SYNOPSIS
Pending before the Court are two nearly identical petitions to open or strike
confessions of judgment (“Petitions”) in two related cases.1 The Court of Common Pleas
of Clearfield County, Pennsylvania, entered two separate judgments by confession in favor
of Plaintiff First Commonwealth Bank (“the Bank”) and against Defendant Fresh Harvest
River, LLC (“FHR”) on August 10, 2010, in connection with two credit line loan
agreements. (ECF No. 31-1 at 21). FHR now asks this Court to open or strike those
judgments, claiming that “it was [un]lawful for First Commonwealth Bank to confess
judgment against Fresh Harvest.” (ECF No. 1 ¶ 8). The parties have fully briefed the
Court, and this matter is now ripe for adjudication. For the reasons explained below, the
Court will DENY FHR’s Petitions.2
1
The only difference between the two cases is the type of loan involved and the amount of the confessed
judgment. The instant case, No. 3:10-cv-231, involves a revolving line of credit and a confession of
judgment in the amount of $95,567.78, while the companion case, No. 3:10-cv-232, involves a non-revolving
line of credit and a confession of judgment in the amount of $3,082,146.24. Because the underlying facts
and issues in both cases are the same, the Court will address both Petitions in this memorandum and order. A
similar memorandum and order will be docketed in the companion case at No. 3:10-cv-232.
2
Both of FHR’s Petitions also include a motion to stay enforcement of the confessed judgments. Because
the Court denies FHR’s Petitions to open or strike, FHR’s motions to stay enforcement are also denied.
II.
JURISDICTION AND VENUE
The Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Venue is proper
under 28 U.S.C. §§ 1332 and 1441(a).
III.
BACKGROUND
This matter—which is one of several cases resulting from the underlying
dispute3—arises from a series of negotiations and agreements between the Bank and FHR
related to a food manufacturing plant in Dubois, Pennsylvania. Specifically, the instant
dispute involves FHR’s default on two credit lines: (1) a revolving line of credit, and (2) a
non-revolving line of credit. After FHR defaulted on these two loans, the Bank obtained a
confession of judgment in the state court against FHR on each line of credit. The crux of
this dispute is whether it was lawful for the Bank to confess judgment against FHR in light
of FHR’s asserted defenses.
A.
Factual Background
The parties have extensively recited the facts of this case in their various briefs,
exhibits, and other relevant filings. Below is a brief summary of the most salient facts
contained in the record before the Court.4
The Plant
In March 2009, the Bank acquired ownership of a food manufacturing plant in
Dubois, Pennsylvania (the “Plant”), through a mortgage foreclosure. (ECF No. 41 ¶ 6).
3
In addition to the two cases currently pending before this Court (No. 3:10-cv-231 and No. 3:10-cv-232), the
underlying dispute has spawned three other cases docketed in the Western District: No. 2:10-cv-1140, No.
2:11-cv-583, and No. 2:13-cv-212; as well as a Bankruptcy Court case in the Southern District of New York,
No. 10-14814, and numerous Pennsylvania state court actions.
4
Judge McVerry excellently explained in detail the factual background to the events giving rise to this case
in a memorandum opinion and order in a related case. See Catahama, LLC v. First Commonwealth Bank,
No. 2:10-cv-1140, 2011 WL 2533018, at *1-4 (W.D. Pa. June 24, 2011).
2
The Plant included both (1) the land and the buildings (the “real estate”) and (2) the food
manufacturing equipment (the “equipment”). (Id. ¶¶ 4, 5). After repossessing the Plant,
the Bank began to search for a buyer.
The Bank contacted Jack Gray to solicit his help in finding a buyer. (ECF No. 431, ¶ 3). Gray became interested in purchasing the Plant and approached his business
partners, Paul Grillo and Edmund Abramson, to pursue this business venture. (Id. ¶ 7).
Together, they formed FHR to acquire the Plant. (Id. ¶ 8). Subsequently, the Bank and
FHR entered negotiations for the sale of the Plant’s real estate and equipment. During the
negotiations, FHR operated the Plant under a real estate lease and an equipment lease, as
described below. (ECF No. 41, ¶ 7).
The Real Estate Lease
In a lease agreement dated April 1, 2009, the Bank agreed to lease the Plant real
estate to FHR. (ECF No. 41, ¶ 8). This real estate lease was extended several times in the
following months, during which the Bank and FHR attempted to negotiate the sale of the
Plant real estate. (Id. ¶¶ 9-10). On August 1, 2009, the parties executed a first amendment
to the lease, and on August 31, 2009, the parties executed a second amendment to the
lease, establishing a lease expiration date of October 30, 2009. (Id. ¶¶ 11-12).
The Equipment Lease
In a separate lease agreement between the Bank and FHR dated June 23, 2009, the
Bank agreed to lease the Plant equipment to FHR. (ECF No. 41 ¶ 13). The equipment
lease required FHR to pay the Bank $80,000 per month beginning on January 1, 2010, and
extending through June 1, 2012. (Id. ¶ 14). The equipment lease included an option for
FHR to purchase the equipment for $16,000,000 during the term of the lease. (Id. ¶ 15).
3
The Credit Lines
On June 23, 2009, FHR obtained two loans (the “credit lines”) from the Bank to
provide operating capital for the Plant: (1) a revolving line of credit with a maximum
principal amount of $3,000,000, and (2) a non-revolving line of credit with a maximum
principal amount of $3,000,000. (ECF No. 31-1, Compl. ¶ 3; No. 41 ¶ 17). Each loan was
evidenced by a separate promissory note (the “Notes”). (ECF No. 31-1 at 6-13, Ex. A).
Each Note contained a warrant of attorney clause, authorizing the Bank to confess
judgment against FHR in the event of default. (Id. at 11).
Additionally, FHR entered into a separate credit line security agreement with the
Bank for each line of credit, in which FHR assigned and pledged to the Bank first lien
position security interests in FHR’s business assets including all present and future
accounts and inventory. (ECF No. 41 ¶ 20; ECF No. 39-12).
Also, FHR signed a disclosure for confession of judgment for each line of credit.
(ECF No. 31-1 at 15, Ex. B). In the disclosures, FHR acknowledged that the Notes
contained a confession of judgment provision that would permit the Bank to enter
judgment against FHR upon a default on the Note without affording FHR an opportunity to
defend against the entry of judgment. (Id.). In the disclosures, FHR acknowledged that
FHR was represented by its own independent legal counsel. (Id.).
The Sales Agreement
On August 31, 2009, the Bank and FHR entered into a sales agreement (“Sales
Agreement”), in which FHR agreed to purchase the Plant real estate for $10,000,000.
(ECF No. 39-10). The Sales Agreement specifically excluded the Plant equipment. (Id. at
6). Among other things, the Sales Agreement required FHR to tender a $2,500,000 cash
4
payment on the purchase price at the time of closing. (Id. at 9). The Sales Agreement set a
closing date of October 30, 2009. (Id. at 10).
The Defaults and Termination of the Agreements
The closing on the sale of the Plant did not occur by October 30, 2009, as required
in the Sales Agreement, and the sale was never consummated. (ECF No. 41 ¶¶ 27-28). On
May 6, 2010, the Bank sent a letter notifying FHR that the Bank was terminating the Sales
Agreement. (ECF No. 30 ¶ 44). The termination letter stated that, because the “closing
did not occur on October 30th due to the inability of FHR to pay the cash portion of the
purchase price as required” by the Sales Agreement, the Bank was exercising its rights
under the Sales Agreement by declaring FHR to be in default and electing to terminate the
Sales Agreement. (ECF 39-16 at 2-3).
Despite FHR’s inability to furnish the $2,500,000 required to close the Sales
Agreement, FHR continued to borrow on the credit lines. (ECF No. 30 ¶¶ 20, 29). By
January 2010, FHR had borrowed the full $3,000,000 available under the non-revolving
line of credit and the maximum amount available under the revolving line of credit. 5 (ECF
No. 30 ¶ 30; ECF No. 41 ¶ 32). Thereafter, FHR failed to make certain required payments
on the credit lines. (ECF No. 41 ¶¶ 21-24). On May 6, 2010, the Bank sent a notice of
default to FHR for each line of credit, advising FHR that it was in default on the loans.
(ECF No. 31-1 at 16-17, Ex. C). The Bank advised FHR that, if FHR did not cure the
defaults by 5:00 p.m. on May 17, 2010, then the Bank would exercise its remedies under
the loan agreements, the Notes, and other related documents. (Id.). After FHR failed to
5
Apparently, the revolving line of credit was subject to a borrowing formula set forth in the revolving line of
credit loan agreement, thus limiting FHR’s ability to borrow the full $3,000,000 amount available on that line
of credit. (See ECF No. 41 ¶ 32).
5
cure the default, the Bank sent FHR a notice of acceleration on each credit line on May 18,
2010. (ECF No. 30 ¶ 45). Thereafter, as explained below, the Bank obtained a confession
of judgment on each credit line.
B.
Procedural Background
On August 10, 2010, the Bank filed a separate complaint in confession of judgment
on each line of credit in the Court of Common Pleas of Clearfield County, Pennsylvania.
The complaint on the revolving line of credit was docketed at case number 2010-1409-CD,
and the complaint on the non-revolving line of credit was docketed at case number 20101410-CD. (See ECF No. 31-1, Ex. A). That same day, the state court Prothonotary entered
judgment in favor of the Bank against FHR in the amount of $95,567.78 on the revolving
line of credit and $3,082,146.24 on the non-revolving line of credit. (See ECF No. 31-1 at
21). On September 10, 2010, FHR filed a Petition to open or strike the confession of
judgment in each case and removed both cases to this Court (ECF No. 1).
On February 4, 2013, the Bank filed a brief in opposition (ECF No. 19) to each
Petition along with a number of exhibits (see ECF No. 19-1); and on March 11, 2013, FHR
filed a brief in support (ECF No. 27) of each Petition. After denying Bank’s motion for
remand (see ECF No. 11), the Court permitted a limited discovery period—restricted to
discovering information relevant to whether FHR’s Petitions should be granted (see ECF
No. 29)—and requested that the parties more fully brief the Court (see ECF No. 36).
The Court also directed the parties to review and clarify the record in each case by
filing amended documents due to certain discrepancies in the parties’ filings. (See ECF
No. 29). Pursuant to the Court’s order, FHR refiled both Petitions on April 24, 2013, (ECF
No. 30), and an amended notice of removal in each case (ECF No. 31).
6
On October 1, 2013, the Bank filed a reply brief in opposition (ECF No. 37) to each
Petition, along with a concise statement of material facts (ECF No. 38) and an appendix of
exhibits (ECF No. 39). On November 5, 2013, FHR filed a brief in support (ECF No. 40)
of each Petition, along with a concise statement of material facts (ECF No. 42) and an
appendix of exhibits (ECF No. 43). FHR also filed a response (ECF No. 41) to Bank’s
concise statement of material facts. Thereafter, with leave from the Court (see ECF No.
46), the Bank filed a reply brief (ECF No. 47) in response to FHR’s brief in support. This
Court held oral argument on January 15, 2014. (See ECF No. 52).
IV.
LEGAL STANDARD
FHR has moved to open or strike the confession of judgment obtained by the Bank
on each line of credit. Even though “[j]udgment by confession is an unusual creation of
Pennsylvania law and has been the subject of much federal court criticism,” the legal
standard is nevertheless well settled.
Mobile Transp. Technologies, Inc. v. S.I.
ScooterWorks LLC, 176 F. Supp. 2d 340, 341 (E.D. Pa. 2001). The Third Circuit has made
the following observations concerning motions to open or strike a judgment by confession
in Pennsylvania:
Judgment by confession is a product of state law, having no analog in the
federal rules. In Pennsylvania, the state’s Rules of Civil Procedure
prescribe the procedures and filing prerequisites for obtaining confessed
judgments and, in effect, affirm the validity of contractual waivers of
prejudgment procedures in Pennsylvania.
Pennsylvania’s rules of
procedure also prescribe how a confessed judgment may be successfully
attacked. By motion to open the judgment, a defendant may assert
defenses going to the merits of the alleged default. If the defendant
presents evidence in support of a meritorious defense sufficient to create a
triable issue of fact, the judgment will be opened. Execution on the
judgment will then be stayed until the court can resolve the disputed
claims, but the judgment remains in effect as a judicial lien.
7
A motion to strike, on the other hand, tests the sufficiency of the record
upon which the confessed judgment was entered. The court takes all the
plaintiff’s allegations as true and will grant the motion only to remedy a
“fatal defect or irregularity appear[ing] on the face of the record or
judgment.”
*
*
*
A petition to strike and a petition to open are two forms of relief with
separate remedies; each is intended to relieve a different type of defect in
the confession of judgment proceedings. A petition to strike off the
judgment reaches defects apparent on the face of the record, while a
petition to open the judgment offers to show that the defendant can prove
a defense to all or part of the plaintiff’s claim.
F.D.I.C. v. Deglau, 207 F.3d 153, 159, 167 (3d Cir. 2000) (citations omitted).
Thus, while Rule 60 of the Federal Rules of Civil Procedure governs the procedural
aspects of a request to open or strike a confession of judgment, Pennsylvania law governs
the substantive issues regarding whether to open or strike the judgment. Deglau, 207 F.3d
at 161, 166; see also Mobile Transp. Technologies, 176 F. Supp. 2d at 341. Furthermore, as
noted above, a motion to open and a motion to strike are two distinct forms of relief and
require two separate avenues of analysis, as set forth below. See Textron Fin. Corp. v.
Vacation Charters, Ltd., No. 3:11-cv-1957, 2012 WL 760602, *2 (M.D. Pa. Mar. 8, 2012).
A.
Motion to Open Judgment
Pursuant to Rule 2959 of the Pennsylvania Rules of Civil Procedure, “a defendant
may challenge a confessed judgment by filing a petition to open.”
Mobile Transp.
Technologies, 176 F. Supp. at 341. The Court may open a confessed judgment only where
a party presents evidence “which in a jury trial would require that the issues be submitted
to the jury.” Germantown Sav. Bank v. Talacki, 657 A.2d 1285, 1288-89 (Pa. Super. Ct.
1995) (quoting Pa. R. Civ. P. 2959(e)). Such relief is to be granted only in “a limited
number of circumstances,” and specifically where the moving party “acts promptly, alleges
8
a meritorious defense and presents sufficient evidence of that defense to require submission
of the issues to the jury.” First Seneca Bank & Trust Co. v. Laurel Mountain Dev. Corp.,
485 A.2d 1086, 1088 (Pa. 1984). To determine whether a triable issue exists, the directed
verdict standard is used.
Deglau, 207 F.3d at 168 (citing Suburban Mechanical
Contractors, Inc. v. Leo, 502 A.2d 230, 232 (Pa. Super. Ct. 1985). Accordingly, the Court
must view the evidence in the light most favorable to the petitioner and accept as true all
evidence and proper inferences, which support the defense, while rejecting adverse
allegations of the party obtaining the judgment. Deglau, 207 F.3d at 168.
For evidence to be sufficient to raise a jury question, it must be “clear, direct,
precise and believable.” Germantown Sav. Bank, 657 A.2d at 1289. The opening of a
confessed judgment is equitable in nature, Mobile Transp. Technologies, 176 F. Supp. 2d at
342, and is within the Court’s sound discretion. Liazis v. Kosta, Inc., 421 Pa.Super. 502,
506, 618 A.2d 450, 452 (Pa. Super. Ct. 1992).
B.
Motion to Strike Judgment
A court should grant a motion to strike a judgment only if a fatal defect or
irregularity appears on the face of the judgment, and the defect is alleged in the motion to
strike. Deglau, 207 F.3d at 167 (citing Manor Bldg. Corp. v. Manor Complex Associates,
645 A.2d 843, 846 (Pa. Super. Ct. 1994)). The court must review both the confession of
judgment clause and the complaint itself to determine whether there is a defect. Id. The
facts averred in the complaint must be taken as true. Id.
V.
DISCUSSION
As Judge McVerry opined, this protracted litigation is the result of a failed business
venture. Catahama, LLC v. First Commonwealth Bank, No. 2:10-cv-1140, 2011 WL
9
2533018, at *1 (W.D. Pa. June 24, 2011). The sole issue now pending before this Court is
whether the Court should open or strike the confessed judgments previously entered in
favor of the Bank on the two credit lines and permit FHR to litigate its defenses before a
jury. The crux of FHR’s argument is that, in the course of ongoing negotiations between
FHR and the Bank, the Bank made certain assurances, promises, waivers, and oral
modifications—related to the various agreements, notes, and contracts—upon which FHR
detrimentally relied and which now form the basis for FHR’s defenses. FHR argues that
the Bank’s allegedly unlawful actions related to the negotiations should rescue FHR from
its default on the credit lines and save FHR from the confessions of judgment. The Court
will separately decide whether to open the judgments and whether to strike the judgments,
and will address each of FHR’s six defenses below.
A.
FHR’s Petitions to Open the Judgments
FHR seeks to open the confessed judgments entered in connection with the two
credit lines. (ECF No. 30, ¶ 8). FHR raises six separate but related defenses. FHR asserts:
(1) The Bank is in material breach of the agreements relating to the Plant real estate
and equipment and the credit lines. (Id. ¶ 80).
(2) The Bank failed to negotiate the agreements with FHR in good faith. (Id. ¶ 81).
(3) The Bank and FHR orally modified the various agreements, including the credit
line Notes, reducing the amount owed to the Bank. (Id. ¶ 82).
(4) The Bank is estopped from exercising its rights under the agreements. (Id. ¶
83).
(5) FHR detrimentally relied on the Bank’s promises. (Id. ¶ 84).
10
(6) The agreements contain certain clauses under which FHR is deprived of its due
process rights. (Id. ¶ 85).
FHR consolidates its argument on the defenses into “essentially two separate sets of
reasons why the Bank’s entry of judgment was improper.” (ECF No. 40 at 6). First, FHR
claims that the Bank breached the “interrelated” agreements, and that the confessed
judgments on the credit lines were therefore unlawful because the Sales Agreement was
improperly terminated. Second, FHR claims that the Bank orally assured FHR that the
default letters were a formality and that FHR need not make the demanded payments, and
orally agreed to reduce the amount owed by FHR under the credit lines.
In response, the Bank argues that FHR’s defenses are meritless. Like FHR, the
Bank consolidates its argument on the defenses, treating the first five of FHR’s defenses as
one group of “contract based defenses,” and separately addressing FHR’s due process
defense. (See ECF No. 37 at 9). The Bank also argues that FHR is precluded from raising
its defenses before this Court based on the doctrine of collateral estoppel.
In light of the structure of the parties’ arguments, the Court will address FHR’s
defenses under four general categories: (1) the Defective Notices and Bank’s Breach of the
Agreements, (2) FHR’s Estoppel Arguments, (3) the Oral Modification of the Credit Line
Payment Obligations, and (4) FHR’s Due Process Argument. However, before evaluating
FHR’s defenses, the Court will first consider the Bank’s collateral estoppel argument.
1.
Collateral Estoppel Argument
The Bank contends that the defenses in FHR’s petition have already been litigated
and decided against FHR in favor of the Bank in related cases in both state and federal
court. (ECF No. 37 at 17). Thus, the Bank argues, FHR is precluded from raising those
11
same issues before this Court. Specifically, the Bank argues (1) Judge Cherry, in a
Pennsylvania court of common pleas opinion and order, decided that the Bank had
properly terminated the Sales Agreement and that the parties could not have entered an
enforceable oral modification of the Sales Agreement under the Statute of Frauds; and (2)
Judge McVerry, in a federal court opinion and order, decided that FHR’s allegations failed
to state a claim against the Bank for promissory estoppel. (ECF No. 37 at 17).
In response, FHR contends that collateral estoppel does not bar the defenses raised
in the Petitions for two reasons. (ECF No. 27 at 6). First, FHR argues that, because the
Pennsylvania Superior Court dismissed FHR’s appeal of Judge Cherry’s order on grounds
of mootness rather than on the merits, Judge Cherry’s order was not subject to appellate
review and the decision therefore has no preclusive effect. (Id.). Second, FHR argues that
the Bank has taken inconsistent positions and is judicially estopped from changing its
position yet again before this Court. (Id.).
a.
Legal Standard for Collateral Estoppel
Under the doctrine of collateral estoppel, “once a court has decided an issue of fact
or law necessary to its judgment, that decision may preclude relitigation of the issue in a
suit on a different cause of action involving a party to the first case.” Bailey v. Ness, 733
F.2d 279, 281 (3d Cir. 1984) (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)).
Where a party seeks to rely on the preclusive effect of a state court judgment, the
federal court must look to state law—here, Pennsylvania law—and its assessment of the
collateral estoppel doctrine to determine the extent to which the state would give its own
judgment collateral estoppel effect. Bailey, 733 F.2d at 281; see also Ranger Ins. Co. v.
Gen. Acc. Fire & Life Assur. Corp., Ltd., 800 F.2d 329, 330 (3d Cir. 1986).
12
In
Pennsylvania, the doctrine of collateral estoppel applies when the following four elements
are met: (1) the issue decided in the prior action is identical to the one presented in the
later action; (2) the prior action resulted in a final judgment on the merits; (3) the party
against whom collateral estoppel is asserted was a party to the prior action, or is in privity
with a party to the prior action; and (4) the party against whom collateral estoppel is
asserted had a full and fair opportunity to litigate the issue in the prior action. See Rue v.
K–Mart Corporation, 713 A.2d 82, 84 (Pa. 1998); Public Service Mut. Ins. Co. v. Cohen,
616 F.2d 704, 707 (3d Cir. 1980).
Similarly, where the prior judgment was rendered by a federal court, the Court
applies federal principles of collateral estoppel, which requires the following elements to
be present: (1) the issue sought to be precluded must be the same as the one involved in
the prior action; (2) the issue must have been actually litigated; (3) the issue must have
been determined by a valid and final judgment; and (4) the determination must have been
essential to the prior judgment. In re Docteroff, 133 F.3d 210, 214 (3d Cir. 1997); see also
Albanese v. Emerson Elec. Co., 552 F. Supp. 694, 700 (D. Del. 1982).
b.
Judge Cherry’s Opinion
On September 3, 2010, Judge Cherry in the Court of Common Pleas of Clearfield
County, Pennsylvania, entered an opinion and order in First Commonwealth Bank v. Fresh
Harvest River, at No. 2010-1302-CD (“Cherry Opinion”).6 Among other things, Judge
Cherry ordered:
Having failed to state any prima facie meritorious defenses to Plaintiff’s
Complaint, the Court DENIES Defendant’s Petition to Open and/or Strike
Judgment Obtained by Confession of Judgment.
6
Judge Cherry’s opinion is docketed in the instant case at ECF No. 39-21.
13
(Cherry Opinion, ECF No. 39-21 at 15). The Bank now asserts that the analysis and
holding in Judge Cherry’s Opinion is binding on the issues before this Court and precludes
FHR from re-litigating those issues.
The Court will address Pennsylvania’s four-pronged test, stated above, to determine
whether collateral estoppel applies. Prongs one, three, and four of the test are not in
dispute. Regarding the first prong, the issues decided in the action before Judge Cherry are
identical to the issues before this Court. The case before Judge Cherry was based on the
Bank’s complaint in confession of judgment in ejectment regarding the Plant. While the
instant case involves the Bank’s complaints in confession of judgment on the credit lines
rather than an action in ejectment, the judgments on the credit lines were executed
simultaneously with the judgment in ejectment and arise from the same set of facts and
agreements between the parties. More importantly, the asserted defenses in the case before
Judge Cherry are identical to those asserted by FHR in the instant case.
FHR concedes that the issues are the same. FHR argues to this Court that Judge
Cherry “refus[ed] to open another judgment by confession in a related dispute between the
Bank and FHR.”7 (ECF No. 27 at 6). FHR maintains, “[T]he Bank attempts to separate
the judgments by confession at issue here from the separate judgment by confession
(relating to the real estate) at issue in [Judge Cherry’s Opinion], suggesting one has nothing
to do with the other. This is wholly disingenuous. . . . [A]ll of the agreements between
the parties were interrelated.” (ECF No. 27 at 19). Accordingly, the first prong is satisfied.
7
FHR asserts that Judge Cherry’s “analysis was simply wrong as a matter of law and . . . does not preclude
this Court from getting the law right.” (ECF No. 27 at 20). This Court does not conduct appellate review of
the state trial court. The four-part test set forth above governs the application of collateral estoppel. The
litigants’ agreement or disagreement with the state court’s analysis is not an appropriate factor for
consideration.
14
Regarding the third prong, FHR, which is the party against whom collateral
estoppel is being asserted, was the Defendant in the action before Judge Cherry. Likewise,
regarding the fourth prong, FHR had a full and fair opportunity to litigate the issues before
Judge Cherry. In his Opinion, Judge Cherry noted that “a hearing was held on the Petition,
at which time both parties were ordered to submit briefs on the issue . . .” (Cherry
Opinion, ECF No. 39-21 at 2).
Further, Judge Cherry’s Opinion provides thorough
analysis of FHR’s asserted defenses and the various issues in dispute, demonstrating that
FHR was afforded a full and fair opportunity to litigate the issues, satisfying the fourth
prong. (See Cherry Opinion, ECF No. 39-21 at 10-14).
FHR bases its argument—that collateral estoppel should not apply—on the second
prong: determining whether the action before Judge Cherry resulted in a final judgment on
the merits. Under Pennsylvania law, a confession of judgment is a final judgment and may
bar a collateral challenge to the judgment. Klecha v. Bear, 712 F. Supp. 44, 46 (M.D. Pa.
1989); Zhang v. Southeastern Fin. Group., Inc., 980 F. Supp. 787, 792 (E.D. Pa. 1997).
Nevertheless, citing Peach Bottom Twp. V. Peach Bottom Twp. Zoning Hearing Bd.,
526 A.2d 837, 839 (Pa. Commw. Ct. 1987), FHR contends that, because the Pennsylvania
Superior Court dismissed FHR’s appeal on grounds of mootness, Judge Cherry’s Opinion
was not subjected to appellate review and is not a final judgment on the merits.8 FHR
asserts that because the Bank moved to “dismiss the appeal as moot rather than arguing on
8
In Peach Bottom, the Court reiterated the long standing rule announced in Allegheny County v. Maryland
Casualty Co., 146 F.2d 633 (3rd Cir. 1944), that, “under Pennsylvania law, where a party to a judgment
cannot obtain appellate review because the matter becomes moot, the judgment against him is not conclusive
in a subsequent action on a different cause of action.” Peach Bottom Twp., 526 A.2d at 839. The Court finds
the rule inapplicable here, where FHR’s appeal was rendered moot because FHR failed to post a bond in
order to keep the confession of judgment in ejectment a live controversy. The Court finds that, while FHR’s
appeal technically was dismissed as moot, the issue is more analogous to a failure to appeal—which does not
prevent preclusion—because FHR failed to comply with appellate procedure by posting the requisite bond.
FHR could have obtained appellate review, but failed to do so by its own conduct. See Harris v. Martin, 834
F.2d 361, 365 (3d Cir. 1984).
15
the merits that Judge Cherry should be affirmed,” the Bank deprived FHR of appellate
review on the merits, “thereby render[ing] the Common Pleas Opinion useless for any
future collateral estoppel purposes.” (ECF No. 27 at 10-11).
The Court finds FHR’s argument unavailing and the rule expressed in Peach
Bottom distinguishable. Here, FHR failed to post a $20,000,000 bond required by the
Supersedeas Order of Judge Cherry pursuant to Pa. R. App. P. 1733 (see ECF No. 39-22),
resulting in dismissal by the Superior Court (see ECF No. 39-23). The state court case
became moot because of FHR’s own decision not to post bond. As such, “collateral
estoppel still attaches when the party against whom the defense is raised is the party who
causes the case to become moot.” Campbell v. Lake Hallowell Homeowners Ass’n, 852
A.2d 1029, 1041 (Md. Ct. Spec. App. 2004) (citing Gelpi v. Tugwell, 123 F.2d 377, 379
(1st Cir. 1941)); United States v. Munsingwear, Inc., 178 F.2d 204, 208 (8th Cir. 1949)
aff’d, 340 U.S. 36 (1950).
The Superior Court dismissed FHR’s appeal because FHR failed to exhaust its
remedies by posting a bond. Accordingly, FHR’s argument—that collateral estoppel does
not attach because the appellate court did not reach a final judgment on the merits—is
without merit because FHR caused the appeal to be dismissed by failing to comply with
the procedural requirements for an appeal. See, e.g., In re Docteroff, 133 F.3d 210, 215 (3d
Cir. 1997). Additionally, the Court notes that FHR appealed the order of the Pennsylvania
Superior Court and the Pennsylvania Supreme Court denied review. See First Com. Bank
v. Fresh Harvest River, LLC, 47 A.3d 848 (Pa. 2012); accord, Sicalides v. Hartford Cas.
Ins. Co., 94 F. App’x 882, 884 (3d Cir. 2004); Robbins v. Buck, 827 A.2d 1213, 1214 (Pa.
Super. Ct. 2003).
Having resolved FHR’s mootness argument, the Court finds that,
16
because Judge Cherry’s Opinion constitutes a final judgment on the merits, the second
prong of the test is satisfied. Thus, Judge Cherry’s Opinion is entitled to preclusive effect.
As will be explained in more detail below, Judge Cherry’s findings (see Cherry
Opinion, ECF No. 39-21 at 11-12) are fatal to FHR’s defenses regarding the confessions of
judgment on the credit lines. FHR contends that the Bank breached the Sales Agreement,
that the Bank wrongfully terminated the Sales Agreement, and that, as a result, the Bank’s
confessions of judgment were unlawful. However, because Judge Cherry concluded—and
this Court agrees9—that the Bank did not breach the Sales Agreement, but legally
terminated the Sales Agreement, FHR’s defenses are without merit.
c.
Judge McVerry’s Opinion
Like Judge Cherry’s Opinion, Judge McVerry’s Opinion has a preclusive effect on
issues before this Court. Because Judge McVerry’s Opinion is a federal court decision,10
the Court applies federal principles of collateral estoppel, rather than the Pennsylvania test
applied above. See Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 145 (3d Cir. 1999);
In re Masdea, 307 B.R. 466, 472 (Bankr. W.D. Pa. 2004).
Regarding the first prong, the issues raised before Judge McVerry concerning the
Bank’s failure to negotiate in good faith and promissory estoppel are identical to those
same defenses raised before this Court. FHR concedes that the defenses raised in this case
9
FHR urges this Court, “The Common Pleas Opinion . . . analysis was simply wrong as a matter of law and .
. . does not preclude this Court from getting the law right.” (ECF No. 27 at 20). Even if this Court were to
conclude that Judge Cherry’s opinion is not entitled to preclusive effect, the Court would nevertheless reach
the same conclusion as Judge Cherry, and for the same reasons.
10
In its brief, the Bank cited the Pennsylvania test applied above in arguing that collateral estoppel applied to
Judge McVerry’s Opinion. See, e.g., Clunie-Haskins v. State Farm Fire & Cas. Co., 855 F. Supp. 2d 380,
386-87 (E.D. Pa. 2012) (“The preclusive effect of a prior district court judgment is determined based on
federal common law, which, in diversity cases, ‘incorporates the rules of preclusion applied by the State in
which the rendering court sits.’” (quoting Taylor v. Sturgell, 553 U.S. 880, 891 n. 4 (2008))). Regardless of
which test is used, the result is the same—Judge McVerry’s Opinion is entitled to preclusive effect in the
instant case.
17
are identical to those “already raised in a prior pending proceeding before [Judge
McVerry].” (ECF No. 30 ¶ 7).
Regarding the second and third prongs, the action before Judge McVerry resulted in
valid and final judgment on the merits in which the issue was actually litigated. See Case
No. 2:10-cv-1140, ECF No. 176. Reviewing the docket at case number 2:10-cv-1140, it is
evident that FHR had a full and fair opportunity to litigate the issues in the action before
Judge McVerry. Finally, the determination was essential to the prior judgment in that the
issue formed the basis for the dismissal of the Bank from that action.
The Court also notes that the elements from the Pennsylvania test which are not
specifically referenced in the federal test are also met. Specifically, Catahama, as assignee
of FHR and thus in privity with FHR, litigated the claims against the Bank, satisfying the
same party requirement.11 See Rhode Island Hosp. Trust Nat. Bank v. Ohio Cas. Ins. Co.,
789 F.2d 74, 82 (1st Cir. 1986); Tycom Corp. v. Redactron Corp., 380 F. Supp. 1183, 1189
(D. Del. 1974). Accordingly, collateral estoppel applies to the issues in the instant case
that were previously litigated before Judge McVerry.
d.
FHR’s Judicial Estoppel Argument
FHR argues that the Bank has taken inconsistent positions in the prior actions and
should be estopped from changing its position yet again before this Court under the
doctrine of judicial estoppel.
(ECF No. 27 at 11).
According to FHR, the Bank
represented to the Superior Court during the appeal of Judge Cherry’s opinion that the
issues raised in that case could be addressed in a separate action without the preclusive
11
The Court further notes that FHR filed the Complaint in the case, but that in December 2010, FHR
assigned to Catahama all claims and causes of action that FHR had against the Bank, after which Catahama
filed an Amended Complaint (see No. 2:10-cv-1140, ECF No. 48) and terminated FHR as a party to the
action.
18
effect of collateral estoppel, but the Bank is now asserting collateral estoppel on those very
issues. (Id. at 12-13).
FHR’s argument is misplaced. The case before Judge Cherry, and the subsequent
appeal to the Superior Court, involved a confession of judgment in ejectment. The Bank
moved to dismiss the appeal in that case on grounds of mootness, due to FHR’s failure to
post bond and its subsequent surrender of the premises. FHR correctly notes that the Bank
explained to the Superior Court that if FHR wished to further litigate the issues in that
case, it could do so by initiating its own action in ejectment. But, FHR has not done so.
Instead, the instant case arises from the confessions of judgment on the credit lines, which
have nothing to do with the ownership of the Plant real estate or equipment. Contrary to
FHR’s allegations that the Bank is “playing fast and loose” with the Court, the Bank has
not asserted inconsistent positions. Accordingly, FHR has not satisfied the elements for
judicial estoppel. See Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp.,
337 F.3d 314, 319-20 (3d Cir. 2003); Scarano v. Cent. R. Co. of N. J., 203 F.2d 510, 512
(3d Cir. 1953).
e.
Conclusion
Inasmuch as the opinions by Judge Cherry and Judge McVerry address the same
issues raised by FHR in the instant case, those opinions have a preclusive effect and bar
FHR from re-litigating those same issues before this Court. However, even though the
doctrine of collateral estoppel alone might be sufficient to deny FHR’s Petitions, the Court
will nevertheless evaluate FHR’s asserted defenses to determine whether FHR has
presented sufficient evidence to submit its defenses to a jury.
19
2.
Defective Notices
FHR’s first defense is that the Bank breached the “interrelated agreements,” which
include the Sales Agreement, the lease agreements, and the credit line agreements. (ECF
No. 30 ¶ 80). According to FHR, the Bank’s breach of those agreements “releases and/or
suspends FHR’s respective performance obligations under the agreements, including [the
credit line Notes], and precludes the Bank’s reliance on provisions providing for the
confession[s] of judgment.” (Id.). More specifically, FHR asserts that the Bank’s notices
of default were defective.
According to FHR, the validity of the Bank’s confessed judgments depends on the
validity of the Bank’s termination of the Sales Agreement. (ECF No. 40 at 11-12; see also,
ECF No. 27 at 19-22). FHR contends that the notices of acceleration dated May 18, 2010,
the notices of default dated May 6, 2010, and the notice terminating the Sales Agreement
dated May 6, 2010, are all interrelated and inseparable for the purpose of determining the
validity of the confessed judgments. (ECF No. 40 at 12). FHR asserts that the Bank
issued all of the notices based solely on its belief that FHR had defaulted under the Sales
Agreement. (Id.). Accordingly, the argument goes, if FHR was not in default under the
Sales Agreement, then the notices of default and acceleration were invalid, and therefore
the Bank had no basis to confess judgment on the credit lines. (Id.). FHR completes its
argument by asserting that it did not default on the Sales Agreement. (Id.).
FHR asserts that the Bank’s sole basis for terminating the Sales Agreement was that
FHR failed to close the transaction prior to October 30, 2009, as contemplated in the
original Sales Agreement. (Id. at 13). However, according to FHR, the parties entered an
oral agreement to indefinitely adjourn the closing date. (Id.). FHR argues that this binding
20
oral agreement to adjourn the closing date eliminates the Bank’s sole basis for holding
FHR in default under the Sales Agreement. (Id.). Therefore, FHR concludes, “[s]ince the
Sales Agreement Termination was thus invalid, the Notices of Default were likewise
invalid . . . making the subsequent Notices of Acceleration improper under the terms of the
governing documents and the entry of judgment by confession equally improper.” (Id. at
15).
FHR’s argument—which is nothing more than a confusing attempt at mental
gymnastics—is unconvincing for a number of reasons.
a.
The Agreements are Independent
First, the contractual obligations of the credit line Notes are independent from the
Sales Agreement. FHR asserts that they are “interrelated.” (ECF No. 30 ¶ 80). It is
undisputed that the credit line agreements were part of a series of agreements between
FHR and the Bank in an effort by the Bank to sell the Plant real estate and equipment to
FHR. However, while the agreements might be “interrelated,” inasmuch as the credit lines
were executed within the larger context of the Bank selling the Plant to FHR, the credit
line agreements contain contractual obligations independent from the other agreements and
contemplate distinct remedies. Thus, for the purpose of an event of default and related
remedies, the credit lines are governed by the credit line Notes and related documents.
Nothing in the credit line agreements condition enforcement of the Notes on the
successful sale of the Plant to FHR. The credit lines were simply loans that FHR used as
working capital during its failed attempt to acquire the Plant. While the parties may have
discussed altering FHR’s payment obligations on the credit lines during the negotiations
related to the sale of the Plant, those negotiations failed, as explained below. Thus, FHR
remains contractually liable under the terms of the credit line agreements and Notes. The
21
Bank confessed judgment on the credit lines because FHR failed to make payments on the
credit lines, not because FHR defaulted on the Sales Agreement, which was the underlying
basis for the Bank’s confession of judgment in ejectment.
b.
The Bank’s Termination of the Sales Agreement
Next, even assuming the agreements are “interrelated,” FHR’s argument fails
because its essential premise is flawed.
FHR contends the notices of default and
acceleration on the credit lines were premised on the Bank’s improper termination of the
Sales Agreement.
Contrary to FHR’s assertion, the Bank’s termination of the Sales
Agreement was not improper.
FHR’s assertion that it “never breached or defaulted on the Agreement of Sale”
(ECF No. 27 at 22) is simply not supported by the record. FHR failed to close the sale by
the October 30, 2009, contract deadline. Also, FHR failed to tender the purchase price.
FHR advised the Bank that it had been unable to secure the financing required to close the
deal and then attempted to renegotiate the purchase price with the Bank. (See ECF No. 3915). These undisputed facts conclusively demonstrate that FHR was in breach of the Sales
Agreement and that the Bank’s entry of default was proper under the governing
documents.
FHR’s argument that the parties indefinitely adjourned the closing date, requiring
the Bank to set a new closing date and to give FHR a reasonable time to close on the
transaction before entering default (see ECF No. 40 at 7), is without merit. On this issue,
the Court finds Judge Cherry’s Opinion directly on point:
On August 31, 2009, Bank and FHR entered into an Agreement for
the Sale of Real Estate (hereinafter “Sales Agreement”). The Sales
Agreement called for the sale of property, which is the subject of this suit,
for a sum of $10 million. Sales Agreement, p. 7, Section 3(a). One22
quarter of the sale price, or $2.5 million, was to be payable to [the Bank]
at the time of closing. Id. at 8, Section 3(c). Closing was scheduled for no
later than October 30, 2009. Id. at 9, Section 5(b). Closing could be
modified by written agreement of the parties. Id. The Sales Agreement,
likewise, could be modified by written agreement of all parties. Id. at 16,
Section 18.
No closing occurred on October 30, 2009. There is no evidence
indicating that the closing date was modified in writing. It is not contested
that FHR never made the $2.5 million due under the Sales Agreement.
Additionally, there is no indication that any other term of the Sales
Agreement was modified in writing by all parties. Therefore, Section 20
of the Sales Agreement discussing default by the buyer remains in full
force:
In the event that Closing does not occur on or before the
Closing Date due to Buyer’s default in the performance of
the provisions thereof, Seller may either (a) disregard such
default and perform this Agreement by tendering title and
the premises in return for the Purchase Price, or (b)
terminate this Agreement. . . . In the event Seller elects
option (b), there shall be no further liability or obligations
on either of the parties hereto and this Agreement shall
become null and void.
As discussed above, closing did not occur on or before October 30,
2009, and no written agreement was reached between Bank and FHR
which would have modified this deadline. Because a contract for the sale
of real property must be in writing to satisfy the Statute of Frauds, 33 P.S.
§ 1; 13 Pa. C.S. § 2201, even if the Court accepts as true the allegation that
there was an oral agreement between the parties, it is unenforceable.
Because the conditions set forth in the Sales Agreement did not
occur and were not modified in writing, FHR was in default of its
obligations. Pursuant to Section 16 of the Agreement, Bank was free to
terminate the agreement by written notice, which it did when it sent FHR a
letter dated May 6, 2010. The letter clearly states that it constituted formal
written notice to FHR that Bank was considering it in default and
terminating the Sales Agreement. Bank followed the procedures set forth
in the Sales Agreement to have it declared null and void.
*
*
*
[T]he Sales Agreement called for $2.5 million to be tendered at the
time of closing, which was scheduled for October 30, 2009. Neither the
$2.5 million was tendered nor did closing occur on that date. The sale was
23
never consummated. Because of the default, Bank was free to exercise its
termination rights under the contract, which [the Bank] effectively did.
(Cherry Opinion, ECF No. 39-21 at 11-12).
FHR has failed to support its assertion—that the Bank orally agreed to adjourn the
closing date indefinitely—with any evidence. Instead, the record evidence shows that
when it became clear to the Bank that FHR was unable to secure sufficient financing for
the purchase price and when FHR and the Bank were subsequently unable to renegotiate
the terms of the Sales Agreement, the Bank terminated the Sales Agreement. There is
simply no evidence in the record that the Bank’s termination of the Sales Agreement was
somehow defective or unlawful.
To the contrary, the Bank properly exercised its rights under the Sales Agreement
because FHR failed to comply with the terms of the Sales Agreement and was unable to
negotiate a new deal with the Bank. See New Eastwick Corp. v. Philadelphia Builders
Eastwick Corp., 241 A.2d 766 (Pa. 1968) (holding a party who merely remains silent and
allows a termination date to pass without comment is not estopped from exercising its
termination option); Nat’l Data Payment Sys., Inc. v. Meridian Bank, 212 F.3d 849, 856
(3d Cir. 2000). Accordingly, because the Bank’s termination of the Sales Agreement was
legally justified and not improper, FHR’s argument fails, and its first defense is without
merit.
3.
Good Faith Negotiation, Estoppel, and Detrimental Reliance
The next three defenses are based on FHR’s allegations that the Bank promised to
renegotiate the various agreements between the parties. FHR contends that the Bank,
despite its promises, failed to negotiate the agreements with FHR in good faith (ECF No.
30 ¶ 81), that FHR detrimentally relied on the Bank’s various promises (ECF No. 30 ¶ 84),
24
and that the Bank should thus be estopped from exercising its rights with respect to the
credit line Notes (ECF No. 30 ¶ 83). These three defenses are without merit. FHR’s
arguments involve two related promises. First is the alleged promise that the Bank would
renegotiate the “interrelated” agreements to sell the Plant real estate and equipment to FHR
for a new, reduced price. Second is the alleged promise that the Bank would reduce FHR’s
payment obligations on the credit lines. While there is significant overlap in the two
arguments, the Court will nevertheless address each under a separate heading.
a.
The Bank’s Promise to Renegotiate the Sales Agreement
FHR asserts that the Bank orally agreed to modify the Sales Agreement, but then
failed to negotiate in good faith or consummate the new agreement. (ECF No. 30 ¶ 81).
Specifically, FHR claims that the Bank agreed to indefinitely adjourn the closing date
pending further negotiations and agreed to “restructure the price of the purchase of the
Premises and equipment.” (ECF No. 30 ¶ 28). The Court finds Judge McVerry’s analysis
on this issue controlling:
Plaintiff alleges that after entering into the Agreement of Sale and
related documents in the summer of 2009, the Bank and FHR agreed to
restructure their relationship in light of changed economic circumstances.
Plaintiff avers that the parties agreed to adjourn the closing date sine die
(i.e., indefinitely) and “to negotiate in good faith to restructure the terms
of the interrelated transactions. . . .” Paragraph 108. Plaintiff further avers
that over the next nine months FHR was permitted to remain in possession
of the Facility and to make further borrowings from the Bank and other
sources and to expend resources to develop its business. Paragraph 110
alleges that the Bank and FHR, in fact, “engaged in ongoing discussions
and negotiations for the acquisition of the Premises. . . .”
In Luther v. Kia Motors America, Inc., 676 F.Supp.2d 408 (W.D.
Pa. 2009), the Court provided a concise summary of the legal principles
which govern promissory estoppel claims:
To establish a promissory estoppel claim under Pennsylvania
law, the plaintiff must show that
25
1) the promisor made a promise that he should have
reasonably expected to induce action or forbearance on the
part of the promisee;
2) the promisee actually took action or refrained from taking
action in reliance on the promise; and
3) injustice can be avoided only by enforcing the promise.
Promissory estoppel is “an equitable remedy to be implemented
only when there is no contract; it is not designed to protect parties who do
not adequately memorialize their contracts in writing.”
The elements of promissory estoppel are “(1) misleading words,
conduct or silence by the party against whom the estoppel is asserted; (2)
unambiguous proof of reasonable reliance on the misrepresentation by the
party seeking to assert the estoppel; and (3) no duty of inquiry on the party
seeking to assert estoppel.” These elements must be established by “clear
and convincing evidence.”
To succeed on a promissory estoppel claim, the plaintiff must
further establish that the action he took “amounted to a substantial change
of position.” A claim for estoppel cannot survive when the plaintiff’s
actions were based on “his own will and judgment” rather than the
defendant’s representations.
*
*
*
In essence, Plaintiff contends that the Bank promised continually
to renegotiate based on the original Agreement of Sale and finally agreed
on a restructured transaction price in April 2010. The Bank contends that
a promise “to negotiate in good faith” is not sufficiently definite to support
a promissory estoppel claim and that FHR could not reasonably rely on
such a promise.
The Court agrees with the Bank. The facts[ . . . ]do not support a
valid promissory estoppel claim. The Bank’s alleged promise to negotiate
in good faith is not sufficiently concrete to be enforceable or to induce
reasonable reliance on the part of a sophisticated party such as FHR. See
B & P Holdings I, LLC v. Grand Sasso, Inc., 114 Fed. Appx. 461, 466 (3d
Cir. 2004) (non-precential) (“An agreement to negotiate in good faith does
not guarantee the ultimate execution of a final contract. There is nothing
to indicate that, had the parties negotiated in good faith, a final agreement
necessarily would have been reached.”) On the face of the Amended
Complaint, essential terms (such as timing, price and Abramson’s personal
liability for the unpaid $2,500,000) remained unresolved for many months.
26
Thus, in continuing to invest in the business FHR assumed the risk
that acceptable terms would not be reached. Moreover, the Amended
Complaint avers that the Bank did, in fact, engage in extensive and
lengthy negotiations with FHR in an effort to reach acceptable terms. The
discussion in GMH Associates, Inc. v. Prudential Realty Group, 752 A.2d
889, 904-05 (Pa. Super. 2000), is analogous and instructive:
It is clear, in our view, that the negotiations for the sale of
the Property did not go as expected by the parties due, in
part, to GMH's request for a $3 million reduction in the
LOI purchase price and its inability to secure the Allegheny
transaction in a timely fashion. We will not conclude that
Prudential’s “promise” to keep the Property off the market
was enforceable in the face of the apparent difficulties the
parties encountered in closing the transaction. Since
Prudential kept the Property off the market for three
months during which time the proposed transaction was not
consummated, we do not find the doctrine of promissory
estoppel available to bind it to continue to keep the
Property off the market seemingly indefinitely.
See also Josephs v. Pizza Hut of America, Inc., 733 F.Supp. 222
(W.D. Pa. 1989) (statement that corporate approval of lease was a “mere
formality” was not sufficient to support promissory estoppel claim).
*
*
*
In this case, the Bank permitted FHR to remain in possession of
the Facility for over nine months while the parties engaged in extended
negotiations. As in GMH Associates, the Bank was not required to allow
FHR to remain in possession of the Facility indefinitely and a promissory
estoppel claim cannot be based on the Bank’s alleged breach of a promise
to negotiate in good faith.
Catahama, LLC v. First Commonwealth Bank, No. 2:10-cv-1140, 2011 WL 2533018 (W.D.
Pa. June 24, 2011) (Judge McVerry) (dismissing FHR’s complaint against the Bank); see
also B&P Holdings I, LLC. v. Grand Sasso, Inc., 114 F. App’x 461, 465-66 (3d Cir. 2004).
The Court finds Judge McVerry’s analysis equally applicable to FHR’s defense that the
Bank failed to negotiate in good faith with respect to new payment obligations on the credit
line Notes.
27
b.
The Bank’s Assurances Regarding the Notices of Default
FHR also asserts that the Bank should be estopped from relying on the notices of
default because the Bank assured FHR that it would not act on them and that they were not
intended “to be taken seriously or responded to.” (ECF No. 40 at 15, 17). According to
FHR, the Bank orally assured FHR “that the Bank did not intend to follow up on the
Notices of Default, but was simply filing them ‘for the record’ so the Bank could obtain
leverage over Mr. Abramson.” (Id. at 16). FHR claims that a representative of the Bank,
David Hepler, told Jack Gray of FHR during a phone conversation that the notices were
merely a formality. (ECF No. 30 ¶¶ 43-44; ECF No. 40 at 16). Hepler allegedly told Gray
to disregard the notices and not to make any of the payments demanded in the notices.
(Id.). FHR asserts that it detrimentally relied on the Bank’s promises and assurances and
that the Bank should now be estopped from enforcing the credit line Notes. (ECF No. 40
at 17-18). Even assuming FHR’s allegations are true, FHR’s argument is without merit.
The notices of default and notices of acceleration were sent in compliance with the
default provisions of the credit line Notes after FHR failed to make the required payments.
FHR concedes that it was delinquent on its payments under the credit lines Notes. (ECF
No. 47-1 at 1, 3, 5). Because of the delinquent payments, on May 6, 2010, the Bank sent a
notice of default for each credit line to FHR. (ECF No. 39-17 at 2, 6). The Notices stated
FHR is in default under the terms of the Loan Agreement and Note for
failing to make the required payments of interest on the Note for April 1,
2010, and May 1, 2010. FHR shall have ten (10) days from and after the
date of this letter to cure the default by payment of [$7,568.29 on the
revolving line of credit and $35,688.59 on the non-revolving line of
credit].
In the event that the total amount necessary to cure the default [$7,568.29
and $35,688.59 respectively] is not received by the Bank by 5:00 pm
(EST) on May 17, 2010, the Bank intends to exercise its remedies under
28
the Loan Agreement, Note, any other document or agreements executed in
connection with [the lines of credit].
(Id. at 6). Each notice also cross-referenced the default on the other line of credit and
explained that it was necessary to cure that default as well. (ECF No. 39-17 at 3, 7).
After FHR failed to cure the defaults as directed in the notices, the Bank sent a
notice of acceleration for each credit line to FHR, which explained,
[A]s a result of the failure of FHR to cure the defaults, the Bank has
elected to accelerate the maturity of the Note and hereby declares the
outstanding balance of the Obligations (as defined in the Note) to be
immediately due and payable in full.
(ECF No. 39-18 at 2, 4). The notices also stated that payment was due immediately and
that if FHR failed to pay its obligations in full, the Bank would exercise its remedies under
the credit line Notes and related documents. (Id. at 3, 5). On August 10, 2010, the Bank
filed a complaint in confession of judgment on each line of credit. (ECF No. 39-1 at 2).
In sum, the evidence in the record demonstrates FHR was in default on both lines
of credit; the Bank notified FHR of the default and of its intent to exercise its remedies
under the Notes; FHR failed to cure the default; and, the Bank exercised its remedies by
accelerating FHR’s obligations and executing the confessions of judgment. Apart from
alleging that a representative of the Bank told FHR in a phone conversation that FHR
could disregard the notices of default, FHR has provided no evidence demonstrating that it
was unlawful for the Bank to exercise its rights under the Notes.
In fact, the record clearly shows that FHR knew it was in default on its payments
and that FHR knew the Bank had demanded the delinquent payments. For example, Jack
Gray of FHR testified that David Hepler asked FHR to make payments on the delinquent
29
credit lines. (See ECF No. 39-14 at 6). Gray also testified the reason FHR stopped making
payments on the credit lines was because FHR “didn’t have the money.” (Id. at 7-8).
As noted above, to establish a promissory estoppel claim, FHR must show that (1)
the Bank made a promise that it should have reasonably expected to induce action or
forbearance on the part of the FHR; (2) FHR actually took action or refrained from taking
action in reliance on the promise; and (3) injustice can be avoided only by enforcing the
promise. Luther v. Kia Motors America, Inc., 676 F.Supp.2d 408, 421 (W.D. Pa. 2009).
As evidenced in the record before the Court, the Bank’s efforts to keep the Plant
operating and to complete the deal with FHR proceeded over several months, but without
clear documentation. Even assuming that Hepler made promises on behalf of the Bank and
that FHR relied on those promises, FHR has failed to demonstrate that the Court should act
to avoid injustice by enforcing the alleged oral promise because FHR, a sophisticated
corporate entity, failed to protect itself in writing, despite the fact that numerous written
agreements between the parties existed that contemplated very different terms from the
alleged oral agreement.
In Thatcher’s Drug Store, the Pennsylvania Supreme Court rejected a promissory
estoppel claim where “the terms of the agreement were vague and at risk of being
misunderstood” and the parties had failed to exercise “the caution demanded by a situation
in which each had significant rights at stake.” Thatcher’s Drug Store of West Goshen, Inc.
v. Consolidated Supermarkets, Inc., 636 A.2d 156, 161 (Pa. 1994). In Thatcher’s Drug
Store, “[T]he Court observed that the commercial setting and witness credibility disputes
actually weighed against estoppel—because such considerations illustrated the need to
formalize any agreement. The same reasoning applies under the facts and circumstances of
30
this case, even when viewed in the light most favorable to [FHR].” Catahama, LLC v.
First Commonwealth Bank, No. 2:11-cv-583, 2013 WL 5874578, *6-7 (W.D. Pa. Oct. 31,
2013).
Here, the only formalized agreements between FHR and the Bank are the very
agreements that the Bank relied on in its confessions of judgment, and which FHR now
seeks to repudiate. The mere fact that the Bank did not exercise its rights for a period of
time after FHR’s default does not mean that the Bank was forever barred from acting. The
Bank had a pre-existing, perfected security interest in all of FHR’s assets, as well as the
right to terminate the Sales Agreement and the right to confess judgment on the credit
lines. FHR acted at its own risk by failing to make required payments on the credit lines.
Even accepting FHR’s allegations concerning Hepler’s promise as true, the
allegations do not indicate how long the Bank was willing to forgo payment to cure the
default, or how the parties were to resolve the issue. FHR could have cured the default or
could have requested that the agreement be memorialized in writing. However, FHR—a
sophisticated business entity—failed to do either. Accordingly, FHR’s promissory estoppel
and detrimental reliance defenses are without merit. See Luther v. Kia Motors Am., Inc.,
676 F. Supp. 2d 408, 421-23 (W.D. Pa. 2009); Selzer v. Dunkin’ Donuts, Inc., No. 09-cv5484, 2013 WL 4547812, *4-5 (E.D. Pa. Aug. 28, 2013).
In sum, FHR has failed to demonstrate with clear, direct, and believable evidence
any meritorious defenses under theories of promissory estoppel, detrimental reliance, and
failure to negotiate in good faith.
31
4.
Oral Modification of the Payment Obligations
Next, FHR asserts that the Bank orally modified FHR’s payment obligations on the
credit lines Notes. (ECF No. 30 ¶ 82). According to FHR, the Bank entered a binding oral
agreement that modified the credit line agreements, in which “the Bank would accept $2.1
million in full satisfaction of its claims under both lines of credit” rather than the combined
$3.7 million demanded in the complaints for judgment by confession. (ECF No. 27 at 23;
ECF No. 30 ¶ 65-68).
In response, the Bank argues that any negotiations concerning FHR’s payment
obligations were made within the context of renegotiating the Sales Agreement for the
Plant real estate, and that the Statute of Frauds therefore applies. The Bank also argues
that Judge McVerry already decided this issue12 and that FHR has failed to allege the
requisite elements for a contract. (ECF No. 19 at 25).
a.
Statute of Frauds
The Bank contends that FHR’s oral modification defense fails under the Statute of
Frauds. According to the Bank, the discussion concerning the payment obligations on the
credit lines was simply part of an attempt by the parties to renegotiate the terms of the
Sales Agreement, a negotiation that ultimately failed to produce any formal contract. The
Bank asserts that, because the parties failed to reach a written agreement concerning the
Sale of the Plant, the discussion between the parties related to a new payment option on the
credit lines is not enforceable. The Court agrees.
12
The Court agrees, see the excerpt from Judge McVerry’s Opinion included above, but will nevertheless
evaluate the parties’ arguments.
32
FHR argues that the Statute of Frauds does not apply to oral contracts related to
credit loans and asserts that the Bank improperly conflates the modification of the Sales
Agreement and the oral modification of the credit line payment obligations. FHR’s claim
is disingenuous.13 Throughout its Petitions, FHR claims that the Bank orally agreed to
modify the Sales Agreement, and attempts to tie the new oral agreement concerning the
credit lines to the new sales arrangement, claiming all of the agreements are “interrelated”
and “inseparable.” FHR’s own allegations demonstrate that the negotiations that took
place after the original closing date were clearly an attempt by the parties to salvage the
failed sale of the Plant real estate and equipment. Discussions concerning new payment
obligations on the credit lines were merely a part of the renewed negotiations for the sale
of the Plant. FHR alleges in its Petitions:
28. . . . Bank[ ] promise[d] to restructure the price of the
purchase of the Premises and equipment and . . . to defer payment
obligations under the lines of credit . . .
40. The Bank advised FHR that the Bank would modify the
Agreements, so as to sell the Premises, the Equipment and satisfy the
outstanding amounts due on the credit lines for cash payment of
$18,600,000.
41. . . . [FHR] was in a position to fully consummate its
renegotiated transaction with the Bank, and could . . . finalize
acquisition of the Property and Equipment from the Bank . . .
42. . . . the Bank continued to negotiate the modification of the
financial terms of the agreements so that the closing of all the sale of
the Premises and the equipment could occur.
65. The Bank agreed to close the transaction for the sale of the
Property for $16.5 million and stated that it would send a simple contract
13
An important distinction is noted here. The Court previously concluded that the Sales Agreement and
credit line agreements were independent and not “interrelated.” The Court now finds that the negotiations—
not the actual, existing agreements, as before—concerning the purchase price for the sale of the Plant and the
payment obligations on the credit lines were inseparably linked. The purpose for the continued negotiations
during 2010 was an attempt by the parties to complete the sale of the Plant.
33
of sale the next business day. The Bank also agreed to continue to
negotiate the resolution of the issues involving the credit lines.
80. By reason of the foregoing, the Bank and FHR, through their
conduct, orally modified the agreements . . .
(ECF No. 30 ¶¶ 28, 40, 41, 42, 65, 80) (emphasis added). Thus, FHR’s own allegations
demonstrate that the purpose of the parties’ negotiations was an attempt to finalize the sale
of the Plant real estate. Because the purported agreement involved the sale of real estate,
the Statute of Frauds applies.
Under Pennsylvania’s Statute of Frauds, an agreement for the sale of real estate
may not be enforced unless it is in writing and signed by the seller. 33 P.S. § 1; Hostetter v.
Hoover, 547 A.2d 1247, 1250 (Pa. Super. Ct. 1988); Gerlock v. Gable, 112 A.2d 78, 81 (Pa.
1955) (explaining the Statute of Frauds requires contracts for the sale of real estate to be in
writing). The Statute of Frauds requires “a memorandum in writing signed by the parties
to be charged which sufficiently indicates the terms of the contract and the property to be
conveyed.” Brown v. Hahn, 213 A.2d 342, 347 (Pa. 1965). The purpose of the Statute of
Frauds is to prevent perjury and fraudulent claims, and its effect is to render oral contracts
for the sale of real estate unenforceable. In re Scheffler, 471 B.R. 464, 492 (Bankr. E.D.
Pa. 2012); Fannin v. Cratty, 480 A.2d 1056, 1058-59 (Pa. Super. Ct. 1984). Its aim “is the
prevention of successful fraud by inducing the enforcement of contracts that were never in
fact made.” In re Estate of Beeruk, 241 A.2d 755, 758 (Pa. 1968). “It eschews exalting
‘informality in the memorandum or its incompleteness in detail [which] neither promotes
justice nor lends respect to the statute.’” In re 400 Walnut Associates, L.P., 454 B.R. 60, 67
(Bankr. E.D. Pa. 2011) (quoting Axler v. First Newport Realty Investors, 420 A.2d 720, 722
(Pa. Super. Ct. 1980)).
34
Nevertheless, Pennsylvania courts will uphold an oral agreement to convey real
estate, despite the Statute of Frauds, if certain requirements are met. See Firetree, Ltd. v.
Department of General Services, 978 A.2d 1067, 1074-75 (Pa. Commw. Ct. 2009). “[A]
buyer advancing an oral agreement for the sale of real property must prove four elements:
(1) The terms of the agreement are full and complete and are satisfactorily set forth; (2) the
amount of the consideration to be paid is well-established; (3) the buyer possesses the
property pursuant to the terms of the agreement, openly and notoriously; and (4) buyer’s
obligations have been partially or fully performed, thereby making rescission inequitable
and unjust.” In re Scheffler, 471 B.R. 464, 492 (Bankr. E.D. Pa. 2012). These elements
must be established “beyond a doubt.” Firetree, 978 A.2d at 1075 (citing Kurland v.
Stolker, 533 A.2d 1370, 1373 (Pa. 1987)). FHR has not satisfied any of these elements.
Accordingly, because the purported oral agreement involves the sale of the Plant
real estate, the Statute of Frauds applies. However, FHR has not alleged or produced any
written agreements modifying the “interrelated agreements,” including the Agreement of
Sale, credit line agreements, Plant equipment lease, or any of the other agreements between
the parties. In fact, FHR concedes that the alleged new agreement was never reduced to
writing. (ECF No. 39-14 at 10). Thus, even assuming that the Bank entered some kind of
oral agreement with FHR, the new agreement is unenforceable under the Statute of Frauds.
Because the agreement was never memorialized in writing, FHR’s defense is without
merit.
b.
Insufficient Evidence of Contract Terms
Even if the Statute of Frauds did not apply, FHR has nevertheless failed to
demonstrate that the parties entered an oral contract. Both of the credit line Notes contain
35
the following clause: “No amendment to or modification of this Note shall be effective
unless set forth in writing and signed by Borrower and Lender.” (See ECF No. 39-1 at 16).
FHR has not provided any evidence that the parties entered a written modification.
Instead, FHR alleges the Bank orally agreed to a modification.
However, this contract provision alone will not defeat FHR’s argument, for “it is
well settled under Pennsylvania law that a written agreement can be modified or amended
by a subsequent [oral] agreement,” notwithstanding language in the contract to the
contrary. Crown Coal & Coke Co. v. Powhatan Mid-Vol Coal Sales, L.L.C., 929 F. Supp.
2d 460, 467-68 (W.D. Pa. 2013). Concerning the issue of oral modifications, Pennsylvania
law is clear:
An oral contract changing the terms of a written contract must be of such
specificity and directness as to leave no doubt of the intention of the
parties to change what they had previously solemnized by a formal
document. The oral evidence must be of such a persuasive character that
it moves like an ink eradicator across the written paper, leaving it blank so
that the parties in effect start afresh in their . . . mutual commitments.
Hamilton Bank v. Rulnick, 475 A.2d 134, 137 (Pa. Super. Ct. 1984) (quoting Gloeckner v.
Sch. Dist. of Baldwin Twp., 175 A.2d 73, 75 (Pa. 1961)). Thus, “where the writing contains
an express provision that it constituted the entire contract between the parties and should
not be modified except in writing, the party seeking to show subsequent oral modification
in the agreement must prove it by clear, precise, and convincing evidence.”
Empire
Properties, Inc. v. Equireal, Inc., 674 A.2d 297, 304 (Pa. Super. Ct. 1996) (quoting
Nicolella v. Palmer, 248 A.2d 20, 23 (Pa. 1968)); see also Pellegrene v. Luther, 169 A.2d
298, 300 (Pa. 1961) (“[An] oral contract which modifies or changes or cancels a prior
written contract must be proved by evidence which is clear, precise and convincing.”).
36
“The elements of an enforceable contract under Pennsylvania law are:
(1) a
manifestation of an intent to be bound by the terms of the agreement, (2) sufficiently
definite terms, and (3) an agreement supported by adequate consideration.” Legendary
Art, LLC v. Godard, 888 F. Supp. 2d 577, 585 (E.D. Pa. 2012). Regarding the second
element, sufficiently definite terms, Pennsylvania has adopted the Restatement (Second) of
Contracts, which requires that the terms of the contract be reasonably certain. Id. at 586
(citing Reed v. Pittsburgh Bd. of Pub. Educ., 862 A.2d 131, 135 (Pa. Commw. Ct. 2004)).
For the terms of the contract to be reasonably certain, they must “provide a basis for
determining the existence of a breach and for giving an appropriate remedy.” Id. (quoting
Restatement (Second) of Contracts § 33 (1981)). Likewise, open terms of a proposed
agreement may show that a manifestation of intention is not intended to be understood as
an offer or acceptance, for “[i]ncompleteness of terms is one of the primary reasons
statements of preliminary negotiations are not deemed offers.” Id. (quoting Reed, 862
A.2d at 135).
Regarding the credit lines, FHR’s Petitions allege that “the Bank insisted upon
payment of $2.1 million . . . [and] agreed to FHR’s proposal that the $2.1 could be paid by
FHR’s payment of a $.50 per case fee, provided that FHR agree to a balloon payment
which was guaranteed.” (ECF No. 30 ¶¶ 66-68; see also ECF No. 40 at 7, 10-13). Despite
this assertion, FHR has not proffered any allegations or evidence concerning the essential
terms of the oral contract. In fact, the evidence in the record demonstrates that the Bank’s
alleged offer to restructure the agreement and reduce the amount due on the credit lines
was simply part of the parties’ unsuccessful attempt to finally consummate the sale of the
Plant real estate and equipment. However, the Bank found FHR’s offer unacceptable and
37
the parties never finalized any agreement.
Furthermore, FHR has failed to identify
additional consideration to support the contractual modification as required by
Pennsylvania law. See Barnhart v. Dollar Rent-A-Car Sys., Inc., 595 F.2d 914, 919 (3d
Cir. 1979); Nicolella v. Palmer, 248 A.2d 20, 23 (Pa. 1968).
Accordingly, because FHR has failed to demonstrate with clear, precise, and
convincing evidence that the parties established the essential terms of an oral contract
modifying the credit line agreements, FHR’s defense is without merit. See Morilus v.
Countrywide Home Loans, Inc., 651 F. Supp. 2d 292, 309 (E.D. Pa. 2008) (citing
Corestates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999)).
5.
Deprivation of Due Process Defense
Finally, FHR asserts that the agreements contain certain clauses “under which FHR
would be deprived of any rights of due process, including the right to assert defenses
against it by the Bank.” (ECF No. 30 ¶ 85). FHR further avers, “Basic due process
considerations require that FHR be granted the opportunity to demonstrate that it has bona
fide defenses to the claims on which the confessed judgments are based.” (Id. ¶ 7).
Undoubtedly, a “[c]onfession of judgment is a powerful tool, . . . which implicates
important due process concerns.” Ohio Casualty Ins. Co. v. LRS Construction, Inc., No.
2:07-mc-331, 2008 WL 4533677, *6 (W.D. Pa. Oct. 3, 2008). Nevertheless, the law is
clear that “Pennsylvania’s practice in allowing the entry of judgments by confession is not
unconstitutional.” Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1270 (3d
Cir. 1994). Further, the Third Circuit has confirmed that “a judgment against a reasonably
sophisticated, corporate debtor who has signed an instrument containing a document
permitting judgment by confession as part of a commercial transaction is enforceable in the
38
same manner as any other judgment.” Id. at 1272. When faced with a due process
challenge to a confessed judgment, a court must inquire whether execution of a document
permitting judgment by confession was a valid waiver of the judgment debtor’s
constitutional right to pre-deprivation notice and hearing. Id.; see also F.D.I.C. v. Deglau,
207 F.3d 153, 168-69 (3d Cir. 2000).
Here, the evidence demonstrates that FHR, a sophisticated corporate entity, with the
advice of counsel, knowingly, intelligently, and voluntarily signed a Promissory Note
containing a confession of judgment clause. The confession of judgment clause is clear
and conspicuous. See Provco Leasing Corp. v. Safin, 402 A.2d 510, 513 (Pa. Super. Ct.
1979) (holding a confession of judgment clause that was “clear, understandable and
obvious” was enforceable). The clause is contained in the Promissory Note and is set apart
in a paragraph with bold text distinguishing it from the rest of the Note, with the words
“CONFESS JUDGMENT” in all capital letters. (See ECF No. 39-1, at 15). Likewise, the
Promissory Note contains a waiver of trial by jury clause, which is similarly set apart in a
paragraph with bold text, in which FHR “knowingly, voluntarily and intentionally waives
the right it may have to a trial by jury in respect of any litigation.”
(Id. at 16).
Additionally, FHR signed a separate “Disclosure for Confession of Judgment,” in which
FHR acknowledged, while represented by FHR’s “own independent legal counsel in
connection with the Note,” that the confession of judgment provision contained in the note
would permit [the Bank] to enter judgment against [FHR] in Court, after a
default on the Note, without offering [FHR] an opportunity to defend
against the entry of judgment. In executing the Note, being fully aware of
[FHR’s] rights to advance notice and to a hearing to contest the validity of
any judgment or other claims . . . [FHR] is knowingly, intelligently and
voluntarily waiving these rights . . .
(Id. at 18).
39
Apart from its bald assertion that certain clauses in the agreements would deprive
FHR of its due process rights, FHR has not presented any specific violations of due
process. To the contrary, FHR has been afforded ample opportunity—before this Court,
before Judge McVerry, and before Judge Cherry—to assert its defenses. Accordingly, in
light of all the foregoing, FHR’s due process argument is without merit.
6.
Conclusion
In alleging a meritorious defense to support the opening of a confessed judgment,
“a petitioner must ‘provide enough evidence to support the defense to the extent of creating
a jury issue.’” Textron Fin. Corp. v. Vacation Charters, Ltd., No. 3:11-cv-1957, 2012 WL
760602, *6 (M.D. Pa. Mar. 8, 2012) (quoting Liazis, 618 A.2d at 452). Here, FHR has
simply failed to present evidence that, if established at trial, would constitute a meritorious
defense. See Sovereign Bank v. Catterton, No. 03-cv-4954, 2003 WL 23162405, *6 (E.D.
Pa. Dec. 3, 2003). Accordingly, the Court will decline to open the confessed judgments.
B.
FHR’s Petitions to Strike the Judgments
As an alternative to its Petition to open, FHR has moved to strike the confessed
judgments. As explained above, a court may strike a confessed judgment only “where
there is an apparent defect on the face of the record on which the judgment was entered.”
Germantown Sav. Bank v. Talacki, 657 A.2d 1285, 1288 (Pa. Super. Ct. 1995).
In
determining whether there is a fatal defect on the record’s face, a court may only review
the confession of judgment clause and the complaint itself and must accept the facts
alleged in the complaint as true. Deglau, 207 F.3d at 167. The burden of proof rests with
the party against whom judgment was confessed, who must disprove the facts contained in
the complaint. Davis v. Woxall hotel, Inc., 577 A.2d 636, 638 (Pa. Super. Ct. 1990).
40
Initially, the Court notes that FHR has not asserted any specific defects in the
judgment. Instead, while FHR captioned its motion as a “Petition to Open and/or Strike
Judgment,” the allegations asserted in the Petitions and the arguments presented in the
supporting briefs and at oral argument focus exclusively on the defenses related to the
Petitions to open the judgment. Accordingly, because FHR has presented no argument that
the judgments were facially invalid, the Court will deny the motions to strike. See Textron
Fin. Corp. v. Vacation Charters, Ltd., No. 3:11-cv-1957, 2012 WL 760602, *2 (M.D. Pa.
Mar. 8, 2012). Furthermore, the Court has carefully reviewed the confession of judgment
clauses and the complaints and can find no apparent defect on the face of the record.
VI.
CONCLUSION
In sum, FHR failed to make required payments on the two credit lines that it held
with the Bank. Upon FHR’s default and pursuant to the governing loan documents, the
Bank executed a judgment by confession in state court on each line of credit. The matter
having come before this Court, FHR has failed to produce evidence to support its asserted
defenses such that the judgments should be opened and the defenses submitted to a jury.
Having considered each of FHR’s defenses and for the reasons stated above, the Court will
decline to open or strike the confessed judgments. Accordingly, FHR’s Petitions are
DENIED. An appropriate order follows.
41
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
FIRST COMMONWEALTH BANK,
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
FRESH HARVEST RIVER, LLC,
Defendant.
AND NOW, this
3
n.)..
CIVIL ACTION NO. 3:10-231
JUDGE KIM R. GIBSON
ORDER
day of March, 2014, upon consideration ofFresh Harvest
River, LLC's petition to open and/or motion to strike confession of judgment and motion to
stay enforcement of judgment (ECF No. 30), and upon further consideration of the parties'
briefs and supporting exhibits, and the oral argument presented to the Court, and for the
reasons set forth in the foregoing memorandum,
(1) IT IS HEREBY ORDERED that Fresh Harvest River, LLC's petition to open
judgment is DENIED;
(2) IT IS FURTHER ORDERED that Fresh Harvest River, LLC's motion to strike
judgment is DENIED;
(3) IT IS FURTHER ORDERED that Fresh Harvest River, LLC's motion to stay
enforcement of judgment is DENIED;
(4) AND FINALLY, the Clerk is ORDERED to close this case.
KIM R. GIBSON
UNITED STATES DISTRICT JUDGE
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