No. 2987 October Term, 1978, Appeal from Order in the Court of Common Pleas of Montgomery County, Civil Action, Law, No. 77-12847.
Stuart H. Savett, Philadelphia, for appellant.
Norman R. Bradley, Philadelphia, for appellee.
Spaeth, Hester and Cavanaugh, JJ. Cavanaugh, J., files a dissenting opinion.
[ 293 Pa. Super. Page 191]
Presently before the court is appellant Carl Lehr's (sometimes Lehr) appeal from the order of the lower court dated November 30, 1978 wherein the court denied appellant's petition to open judgment and denied appellant's petition to strike off the judgment, excepting for interest payments made subsequent to the entry of said judgment.
On July 29, 1977, appellee, First Pennsylvania Bank, N.A. (sometimes bank) confessed judgment against the appellant in the amount of $3,782,160.00*fn1 pursuant to a warrant of attorney contained in a personal Guaranty dated April 25, 1972. On December 7, 1977, appellant filed a Petition to Strike or Open the Judgment. Depositions of the appellant and other individuals involved in this matter were taken and oral argument was heard by the court en banc on September 8 and November 8, 1978.
On November 30, 1978, appellant's petition to strike off the judgment was granted but only in regard to interest payments made subsequent to the entry of the judgment; in all other respects it was denied. Appellant's petition to open judgment was also denied. Thereafter, this timely appeal followed.
[ 293 Pa. Super. Page 192]
We reverse and open the judgment taken by confession and remand to the lower court for a trial on the merits.
Our scope of review on appeal from either the opening or the denial of opening a judgment taken by confession has been clearly delineated over numerous years. We reiterate as we have done on numerous occasions, our scope of review on appeals from the lower court's grant or denial of a petition to open judgment is very narrow. A petition to open judgment is first an appeal to the equitable and discretionary powers of the lower court and as such, the exercise of the lower court's discretion in either opening or refusing to open a judgment taken by confession, will not be disturbed on appeal unless the lower court has committed a manifest abuse of discretion or an error of law. M. H. Davis Estate Oil v. Sure Way Oil, 266 Pa. Super. 64, 403 A.2d 95 (1979); Fidelity Bank v. Act of America, Inc., 258 Pa. Super. 261, 392 A.2d 784 (1978); Christie v. Open Pantry Marts, 237 Pa. Super. 243, 352 A.2d 165 (1975).
It is well settled that "(o)ne who petitions to open a confessed judgment must act promptly and aver a meritorious defense", Wenger v. Ziegler, 424 Pa. 268, 272, 226 A.2d 653, 655 (1967). There is no question that the appellant herein acted promptly; thus the sole issue is whether he set forth a meritorious defense.
The standard to be applied by a court in determining whether a moving party has properly averred a meritorious defense so as to require that a confessed judgment be opened and the moving party let into a defense is succinctly set forth at Pa.R.C.P. 2959(e), effective December 1, 1973, which provides in relevant part:
". . . If evidence is produced which in a jury trial would require the issues to be submitted to a jury the court shall open the judgment." (Emphasis added).
In testing the sufficiency of the evidence, the facts as alleged must be viewed by the court in the exercise of its discretion in the light most favorable to the moving party (the appellant herein) and further, the lower court must
[ 293 Pa. Super. Page 193]
accept as true all evidence and reasonable and proper inferences flowing therefrom. (Emphasis added). Greenwood v. Kadoich, 239 Pa. Super. 372, 357 A.2d 604 (1976); M. H. Davis Estate Oil v. Sure Way Oil, supra. As Judge Van der Voort of our court in M. H. Davis Estate Oil v. Sure Way Oil, supra, declared:
". . . the test in evaluating the petitioners' evidence is not whether the evidence will probably win a verdict from the jury, but only whether there is sufficient evidence to allow the disputed issue to go to the jury."
Rule 2959(e) has been interpreted since its promulgation in 1973 as prohibiting a court from "weighing" the sufficiency of the evidence. See Christie v. Open Pantry Marts, supra; Joseph A. Puleo & Sons, Inc. v. Rossi et ux., 234 Pa. Super. 612, 340 A.2d 557 (1975); Wolgin v. Mickman, 233 Pa. Super. 218, 335 A.2d 824 (1975); Commonwealth ex rel. Mazza v. Sarvice, 227 Pa. Super. 38, 323 A.2d 41 (1974).
With the above statement of the law as our guide, the record reveals the following: Appellant Lehr was one of several individuals who provided capital for the construction and operation of the Pocono International Raceway, Inc., (hereinafter Raceway), when a group of investors, including Lehr, decided to expand the Pocono Racetrack into a super speedway. At divers time, Lehr was a stockholder, director of the corporation, treasurer of same and creditor, personally holding $400,000.00 in judgment notes for loans to the corporation. Additionally, Lehr held warrants to purchase additional shares of common stock. Finally, a family enterprise owned by Lehr also was a $100,000.00 creditor of the Raceway. Dr. Joseph R. Mattioli was then chief executive officer and chairman of the board at the time of the completion of the Raceway in 1971. At that time, the investors realized that additional capital was needed to meet both current and future short-term operating obligations. Following extensive negotiations, the bank, the appellee herein, was chosen to provide this financing and a complex loan agreement package was structured. In return for five million dollars, the Raceway executed a note, at 4% over prime
[ 293 Pa. Super. Page 194]
(16% at that time), which note was collateralized by a first mortgage on the Raceway's real estate. To further secure said loan, the investors, which obviously included appellant Lehr, were called upon to execute a pledge agreement with respect to their equity in the Raceway, a subordination agreement of their debt obligations in favor of the bank's loan, a joint indemnification agreement, and personal guaranty agreements (Exhibit 1 to appellee's complaint in confession of judgment).
It is this guaranty agreement, purportedly executed by appellant Lehr, which is at the heart of this litigation. Contained in said guaranty agreement at paragraph 5 is a warranty of attorney provision authorizing any attorney to appear for the guarantor and confess judgment against him for the amount for which the guarantor may be or become liable under said guaranty agreement, plus 2% thereof as attorney's fees. Further contained in said document, entitled Guaranty, appeared the following paragraphs:
1. The Guarantor hereby unconditionally guarantees to Bank, its successor and assigns, the prompt and punctual payment of $3,500,000 of the principal amount of the Note, when due by acceleration on account of default, maturity or otherwise, together with interest on the said $3,500,000 in principal amount at the rate specified in the Note. The liability of the undersigned for a $3,500,000 portion of the indebtedness evidenced by the Note, together with interest on that portion as specified above, shall not be limited or reduced by any partial recovery by Bank on account of the indebtedness evidenced by the Note from the mortgaged real estate, from any other guarantor, or otherwise. The liability of the Guarantor hereunder may be enforced by Bank or any subsequent assignee of this Guaranty.
7. The liability of any Guarantor hereunder is not conditioned upon the liability of any other Guarantor. If the Guarantor is more than one person, their liability hereunder shall be joint and several.
[ 293 Pa. Super. Page 195]
The record reflects that on Sunday, April 23, 1972, appellant Lehr, Dr. Mattioli and their wives dined together. Following their meal, Mattioli presented Lehr with a packet of papers indicating that they were the documents for the bank loan and requesting that Lehr review the same. Following a partial review of same, appellant, on April 25, 1972, dictated a memorandum to Mattioli which included the following statements:
". . . Further, if anyone of the capital guarantors would be unable to come up with his share of the $3,500,000 pool, anyone or all of us would be on the hook to take up the slack . . . ."
Near the end of the memorandum, appellant further wrote:
"But I can't let you or the track down at this time so just have to go along like a lamb to the slattering block . . . ." (signed) Carl B. Lehr.
It is at this juncture in time that Lehr's and Mattioli's recollections differ.
In his deposition, Lehr testified:
A That would be April 28th, and it was late in the day Friday afternoon, I should say about 4:30, and he appeared in a hurry, never sat down in my office. I had a private office there which had two entrances, and he came in the private entrance, knocked on the door, and I opened it, and he came in, and he told me at the time that he was in a hurry, he had a taxicab there which he left running there waiting, and he came to get my signatures on the papers that would be required to close the loan.
He explained that somebody at the bank -- and I don't recall who that was -- had agreed to wait for him until five o'clock, and he had to be sure to get this parcel of papers back to that individual by five o'clock. So he said, you know, "Carl, either you sign it, or you don't sign, but if you don't sign it, why, the Raceway goes down the tubes right now."
Q Now, had he brought with him any documentation, or did he ask you to --
[ 293 Pa. Super. Page 196]
A Well, he had a lot of papers with him, and I signed perhaps four or five different things. Now, there was no time afforded to read these things individually, and I trusted Dr. Mattioli. After all, had been working with him in the building of the Raceway for two years.
So he said, "You have to sign here, you have to sign here, and you have to sign there." And I did this simply to prevent the whole thing from collapsing at the moment, according to the way he phrased it.
Q Do you recall whether one of the documents you signed was a guaranty on that Friday, April 28?
A No, I have no recollection of any specific items that were signed. It was just a case like, you know, "Here are the papers now. You sign here." And I signed. "And here is another one," and then so I signed.
Q Now, do you recall, is it your recollection that you did sign some guaranty?
A Oh, yes. They were the -- apparently they were the documents that were required by the bank. (T. 54a-55a)
On cross examination, appellant reiterated his recollection of the April 28, 1972 meeting with Dr. Mattioli:
Q You did go along, and you did sign the documents, including the Guaranty?
A I signed whatever he brought to me that day. I didn't enumerate it. I didn't count it. I didn't read it.
Q But I think you did say in answer to Mr. Swift's direct examination earlier this morning that among those documents which you say you signed on that Friday was a guaranty of the loan.
A No, I didn't say there was a guaranty in it. I said, as I am saying now, that I signed four or five times, whatever papers Doc put in front of me, and that was it. But whether the papers included a guaranty, I didn't know. (T. 94a)
It is interesting to note that the Pledge Agreement (and probably Subordination Agreement, although the record is unclear) with Appellant's purported signatures ...