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KEY SAVINGS AND LOAN ASSOCIATION v. LOUIS JOHN (10/31/88)

filed: October 31, 1988.

KEY SAVINGS AND LOAN ASSOCIATION, APPELLEE,
v.
LOUIS JOHN, INC., LOUIS ARGYRIS AND LOUIS J. CUTILLO. APPEAL OF LOUIS J. CUTILLO



Appeal from the Order entered March 11, 1987 in the Court of Common Pleas of Montgomery County, Civil Division, No. 81-02680.

COUNSEL

Steven J. Proctor, Pottstown, for appellants.

Walter R. Milbourne, Philadelphia, for appellee.

Wieand, Kelly and Hester, JJ. Hester, J., files a dissenting opinion.

Author: Kelly

[ 379 Pa. Super. Page 228]

The appellant, Louis Cutillo ("Cutillo") appeals an order denying his request for liquidated damages under 42 Pa.C.S.A. § 8104(b). We affirm.

The facts may be stated as follows. Prior to September 1979, the appellant Cutillo and one Louis Argyris were involved in several business ventures, including a construction business entitled Louis John, Inc. In September 1978, appellee Key Savings and Loan Association ("the Bank") issued a construction loan to Louis John, Inc.; the loan was secured by a mortgage in the principal sum of $1,980,000.00 and the penal sum of $3,960,000.00. Argyris and appellant Cutillo signed the bond and warrant accompanying the mortgage both as individuals and as officers of the corporation;

[ 379 Pa. Super. Page 229]

    a clause in the bond and warrant provided that liability under the mortgage was joint and several.

On September 13, 1979, the Bank sent notice of default and its intent to foreclose under the mortgage. Shortly thereafter, difficulties arose between Cutillo and Argyris. To resolve these difficulties, Argyris proposed buying out Cutillo's interest in the corporation. The Bank was amenable to Cutillo's withdrawal and Argyris' assumption of control over the corporation, since the arrangement would allow the construction project to continue. An exchange of releases between the Bank and Cutillo followed. First, Cutillo executed a release in favor of the Bank; the Bank was released from all liability arising from its notice of default and the exercise of its rights under a collateral pledge agreement. Second, the Bank executed a release in favor of Cutillo, releasing Cutillo from any claims arising from his signing the bond and warrant. This second release was executed on the same day Argyris purchased all of Cutillo's stock in the corporation.

On February 17, 1981, despite the release of Cutillo, the Bank confessed judgment on the bond and warrant against Cutillo, Argyris, and Louis John, Inc. in the amount of $362,204.50. Counsel for the Bank believed since the bond and warrant stated that the liability of the signators was joint and several, judgment must be obtained against all three of the debtors named in the bond and warrant.

On November 13, 1981, after informal oral and written attempts to have the Bank relieve him from the judgment failed, Cutillo filed a petition to have the judgment satisfied as to him. The petition alleged that the judgment had become a lien against real estate held by Cutillo, that title insurance companies had therefore refused to insure the title to the property, and that the judgment had damaged Cutillo's business activities. Cutillo therefore requested that, in accordance with the release, the court issue an order marking the judgment satisfied as against Cutillo. The Bank responded by denying the propriety of the relief requested by Cutillo, alleging that satisfaction of the judgment

[ 379 Pa. Super. Page 230]

    as to one joint and several obligor would satisfy the judgment as to all joint obligors. On June 11, 1982, the court granted Cutillo's petition and directed the prothonotary to mark the judgment satisfied as to Cutillo. The Bank did not appeal this order.

On September 14, 1982, Cutillo filed a petition for liquidated damages in the amount of $1,980,000.00 under 42 Pa.C.S.A. § 8104(b), which allows recovery of liquidated damages for the failure to mark a judgment as satisfied. The Bank responded by arguing that the underlying debt remained unpaid and that liquidated damages under Section 8104(b) are only available when a judgment creditor has received full payment of the underlying debt. The Bank further maintained that its refusal to mark the judgment against Cutillo satisfied was not wrongful because it arose from a bona fide dispute over the effect of the Bank's release of Cutillo. Depositions were taken on disputed factual issues, and the case was submitted to the trial court on depositions, exhibits, and argument of counsel. By order dated March 10, 1987, the court denied Cutillo's petition for liquidated damages. This appeal followed.

I.

The first issue which we must consider is whether, as a prerequisite to an award of liquidated damages under 42 Pa.C.S.A. § 8104, the debtor must prove that the creditor acted in a willful and wanton fashion in failing to mark the judgment satisfied. The trial court found that the Bank had failed to mark the judgment as satisfied because of its "good faith belief that such action was necessary to protect its interests against each of the remaining co-obligors on the unpaid loan";*fn1 the trial court then held that absent a wanton and willful refusal to mark the judgment satisfied,

[ 379 Pa. Super. Page 231]

Cutillo was not entitled to liquidated damages. We cannot agree.

A.

In finding that Section 8104 required a willful and wanton failure to mark the judgment satisfied, without good cause, the trial court in the instant case relied upon Werner v. Automobile Finance Co., 347 Pa. 217, 31 A.2d 898 (1943) and Miller v. Linwood Building Association, 40 Del.Co. 25 (1952). These cases are inapposite, as they interpreted predecessors*fn2 to the current statute which employed materially different language from that which exists in the current statute. The statute construed in those cases vested in the jury discretionary authority to assess a penalty. In Werner and Miller, the courts indicated that implicit in this discretionary authority was the prerogative to consider the reason or motive for the creditor's failure to mark the mortgage judgment satisfied. Section 8104, however, provides for liquidated damages calculated by an objective application of a statutory formula; it does not vest in the fact finder any discretionary authority to determine the amount of the award. Because there is no discretionary authority within which to imply a prerogative to consider the reason or motive for the failure to mark the judgment satisfied, the reasoning of the courts in Werner and Miller is plainly inapposite.

B.

In construing the enactments of the legislature, appellate courts must refer to the provisions of the Statutory Construction Act. 1 Pa.C.S.A. § 1901 et seq. The legislature has directed that, "In the construction of the statutes of the Commonwealth, the rules set forth in this chapter shall be observed, unless the application of such rules would result in ...


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