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FIRST NATIONAL BANK PENNSYLVANIA v. WILLIAM E. FLANAGAN (07/02/87)

decided: July 2, 1987.

FIRST NATIONAL BANK OF PENNSYLVANIA, APPELLEE,
v.
WILLIAM E. FLANAGAN, D/B/A BILL FLANAGAN'S SQUIRE SHOP AND WILLIAM E. FLANAGAN AND MARY W. FLANAGAN, HIS WIFE. APPEAL OF WILLIAM E. FLANAGAN AND MARY W. FLANAGAN, HIS WIFE



Appeal from Judgment Entered June 4, 1986, in the Court of Common Pleas of Erie County, Civil Division, at No. 812-A-1982.

COUNSEL

Charles D. Agresti, Erie, for appellants.

Robert W. Parker, Jr., Erie, for First Nat. Bank.

LeRoy S. Zimmerman, Atty. Gen., Harrisburg, for appellees.

Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ.

Author: Hutchinson

[ 515 Pa. Page 265]

OPINION OF THE COURT

Appellants are before us as a result of our granting their application under Pa.R.A.P. 751 to transfer here an appeal they filed in Superior Court from a decision of Erie County Common Pleas. Common Pleas held unconstitutional a legislative attempt to give an amendment to a statute retroactive effect. We have jurisdiction in such cases under 42 Pa.C.S. § 722(7).

Refusing retroactivity resulted in Common Pleas entering judgment against appellants for $35,000 plus interest on an Agreement of Guarantee both appellants had executed to secure William Flanagan's business loan. Mary Flanagan's signature subjected appellants' residence to possible levy and sale upon William's failure to pay the business loan, an event which came to pass. She gave the guarantee in an interim during which the applicable loan disclosure law did not require certain disclosures on business loans even though they could subject residential real estate to lien or levy. Both before and after this interim, the statute required disclosure in all cases where residential real estate was affected, without regard to the loan's purpose.

[ 515 Pa. Page 266]

The parties frame the issue before us as whether the legislature can retroactively impose disclosure requirements on a loan transaction without violating the clauses of the United States and Pennsylvania Constitutions prohibiting impairment of the obligations of contracts. U.S. Const. art. I, § 10; Pa. Const. art. I, § 17.*fn1 As so framed, we must hold on this record that retroactive application of the amendment restoring disclosure requirements to this interim transaction is unconstitutional.

William E. Flanagan was the sole proprietor of Bill Flanagan's Squire Shop, a men's clothing store in downtown Erie. In April, 1977, appellants, William Flanagan and his wife Mary, applied to appellee for a loan and a line of credit for the business. Both William and Mary signed the promissory notes. Collateral for the loans was a security interest in the assets of the Squire Shop. They were informed that signing the note meant a lien could be placed on their home if William defaulted.*fn2

In March, 1979, William Flanagan sought an additional $35,000 business loan. Appellee was unwilling to grant that loan solely on the security of the business assets; it wanted additional collateral. Accordingly, it required appellants to execute the Agreement of Guarantee at issue before approving the loan. This ...


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