Appeal from Order of the Court of Common Pleas, Civil Division, of Centre County, No. 87-1055.
Nora A. Hackett, Pittsburgh, for appellants.
Anthony J. Gerace, Jr., State College, for Mid-State Bank, appellee.
Wieand, Olszewski and Tamilia, JJ. Tamilia, J., files a concurring statement.
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The issue in this appeal is whether a borrower has stated a legally cognizable cause of action against a lending institution which, although it has not violated the terms of its loan agreement, has allegedly failed to deal with its borrower in good faith. The trial court held that the averments of the complaint were insufficient to state a cause of action and sustained preliminary objections in the nature of a demurrer. We agree and affirm.
A preliminary objection in the nature of a demurrer admits every well-pleaded fact and all inferences reasonably deducible therefrom. McGaha v. Matter, 365 Pa. Super. 6, 8, 528 A.2d 988, 989 (1987); Pike County Hotels, Corp. v. Kiefer, 262 Pa. Super. 126, 133, 396 A.2d 677, 681 (1978). It tests the legal sufficiency of the challenged complaint and will be sustained only in cases where the pleader has clearly
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failed to state a claim for which relief may be granted. Mudd v. Hoffman Homes For Youths, Inc., 374 Pa. Super. 522, 524, 543 A.2d 1092, 1093 (1988). If there is any doubt as to whether a claim for relief has been stated, the trial court should resolve it in favor of overruling the demurrer. Mull v. Kerstetter, 373 Pa. Super. 228, 229-230, 540 A.2d 951, 951 (1988).
The complaint in this case discloses that in 1983 Creeger Brick and Building Supply Inc. (Creeger, Inc.) purchased the Mt. Savage Refractories plant in Winburne, Centre County, intending to rehabilitate the facility and reopen a brick manufacturing plant. The principal financing was obtained in the form of a Small Business Administration loan from Mid-State Bank and Trust Company (Mid-State Bank) in the amount of two hundred and fifty thousand ($250,000.00) dollars. The Small Business Administration guaranteed ninety (90%) percent of this loan, which was also secured by a mortgage on the plant and on three residential properties owned by Donald Creeger, the president and sole shareholder of Creeger, Inc., and his wife, Marjorie Creeger. The Creegers contributed two hundred and forty thousand ($240,000.00) dollars of their own money to the venture and borrowed additional funds from the Centre County Commissioners/Department of Community Affairs, SEDA -- Council of Governments, Moshannon Valley Development Fund, and the Phillipsburg Association of Commerce. All such loans were subordinated to the principal loan made by Mid-State Bank.
The plant did not become operational until October 1, 1984 and, being seasonal in nature, closed for the winter months on November 22, 1984. It did not begin producing bricks again until February 15, 1985. Because of the delay in attaining full production, Creeger, Inc. suffered a cash shortage. In March, 1985, the business applied for a line of credit from Mid-State Bank in order to obtain needed working capital. The Bank refused to advance further funds. Donald and Marjorie Creeger then requested that one of their residences be released from the lien of the
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mortgage so that it could be sold. The Bank initially refused, but ultimately agreed to do so upon conditions which the Creegers could not meet. When Creeger, Inc. found a new lender who was willing to purchase ninety (90%) percent of Mid-State Bank's loan and make additional advances, Mid-State Bank refused to assign such an interest. On July 8, 1986, the Small Business Administration notified Creeger, Inc. that Mid-State Bank had demanded, and it had made, payment under its loan guarantee. Thereafter, Creeger, Inc. suffered financial collapse.
Creeger, Inc., as well as Donald and Marjorie Creeger, instituted suit against the lenders who had provided the funds with which they had rehabilitated the plant and started production. In Counts I and II of the Complaint, the plaintiffs alleged that Mid-State Bank was liable to them because, although it had not breached any specific provision of the loan agreement, it had failed to deal with the borrowers in good faith. More ...