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MERCEDE CENTER v. EQUIBANK (12/18/86)

filed: December 18, 1986.

MERCEDE CENTER, INC.
v.
EQUIBANK, DAVID F. COOK AND CARIBANK. APPEAL OF MERCEDE CENTER, INC. AND CARIBANK



Appeal from the May 8, 1985 and February 19, 1986 Orders of the Court of Common Pleas of Allegheny County, Civil No. GD 84-22029.

COUNSEL

James A. Ashton, Pittsburgh, for appellants.

John R. O'Keefe, Jr., Pittsburgh, appellees.

Del Sole, Montemuro and Popovich, JJ.

Author: Del Sole

[ 359 Pa. Super. Page 390]

Mercede Center Inc. (Mercede), a Florida corporation engaged in real estate development, sought a construction and permanent mortgage loan from Equibank in the amount of $12,500,000. Equibank issued a commitment letter subject to numerous terms and conditions including a request for various items of collateral security. One item of security to

[ 359 Pa. Super. Page 391]

    be an unconditional, irrevocable letter of credit issued by a financial institution naming Equibank as beneficiary in the amount of $1,000,000. Mercede obtained a letter of credit from Caribank which was delivered to Equibank when the construction loan agreement was closed. The agreement provided inter alia that upon the occurrence of specified events of default and after notice and opportunity to cure, Equibank could declare Mercede to be in default and exercise remedies including but not limited to an immediate draw under the letter of credit.

Equibank subsequently declared Mercede to be in default. Thereafter, Mercede initiated an action requesting: a) Equibank and Caribank be temporarily enjoined from drawing down or accepting any draft on the letter of credit, b) the court declare null and void any attempted default unreasonably created by Equibank and c) that the court enjoin Equibank to keep its mortgage loan agreement. In addition, Mercede filed a petition for a rule to show cause why a preliminary injunction should not issue. After several continuances of the date for hearing on the petition, the court entered an order stating that upon motion of Mercede, the motion for preliminary injunction was withdrawn. Thereafter, Equibank sought to draw on the letter of credit resulting in Equibank's filing a cross-claim against Caribank for wrongful dishonor of its draft. Caribank, in response, filed a petition for interpleader. The trial court opinion in the case sub judice indicates that no disposition has been made of the interpleader petition but by order of court, $919,485.02 was deposited by Caribank with the Prothonotary of Allegheny County to be placed in an escrow account. Equibank then filed a Motion for Summary Judgment against Caribank on its cross-claim for wrongful dishonor and on May 8, 1985 the court entered an order granting Equibank's Motion and further ordered the Prothonotary to pay the funds held in escrow to Equibank in satisfaction of the judgment. The joint Motion of Mercede and Caribank to reconsider the entry of Summary Judgment and vacate the order was denied and an appeal from the May 8, 1985 order was filed by Mercede and Caribank.

[ 359 Pa. Super. Page 392]

Thereafter, on July 9, 1985, the trial court granted the petition of Equibank for leave to amend its answer and reply to new matter in the nature of a cross-claim and new matter in the nature of a cross-claim and counterclaim. The amended pleadings asserted inter alia claims for wrongful dishonor by Caribank of subsequent drafts on the letter of credit on February 25, 1985, April 2, 1985 and May 20, 1985 totaling $67,755.27. Caribank filed its answer which was followed by Equibank filing a Motion for Summary Judgment on the amended pleadings. The Motion asserted Equibank was entitled to judgment against Caribank for wrongful dishonor of the subsequent drafts as a matter of law based on the May 8, 1985 Order of Court. The trial court on February 19, 1986 entered an Order granting the Motion and a notice of appeal was subsequently filed on March 18, 1986.

We have consolidated for disposition the appeals of Mercede and Caribank from the two Orders of the Court of Common Pleas of Allegheny County granting Equibank's Motions for Summary Judgment.*fn1

In the pleadings and affidavits Mercede and Caribank have contended "that the credit contract between Equibank and Caribank was expressly conditional upon Equibank's good faith performance of its obligations under the loan agreement, and that the credit could only be drawn on in the event of a default by Mercede Center after completion of the construction phase of the project by reason of rents being insufficient to meet permanent mortgage payments." (Trial Court Opinion at 4 in support of the May 8, 1985 Order). Because Equibank has attempted to draw on the letter of credit prior to completion of the construction phase, Mercede and Caribank have raised the issue of

[ 359 Pa. Super. Page 393]

Equibank's alleged fraud in the inducement. Whether the letter of credit was fraudulently procured is said to raise an issue of fact, and therefore, the court is said to have erred in granting Equibank's Motion for Summary Judgment.

Pa.R.C.P. 1035(b) provides that summary judgment may be entered: 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law'. In considering a motion for summary judgment the court must view the evidence in the light most favorable to the non-moving party and enter judgment only if the case is clear and free from doubt.

Lucera v. Johns-Manville Corp., 354 Pa. Super. 520, 528, 512 A.2d 661, 665 (1986).

The letter of credit in this matter reads as follows:

[b]y order of Mercede Center, Inc. of Plantation, Florida, and for account of the same, we hereby establish our Irrevocable Letter of Credit and authorize you to draw on us up to One Million Dollars ...


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