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December 6, 1999


The opinion of the court was delivered by: Katz, Senior District Judge.


The defendants have submitted a motion to dismiss, a motion for partial summary judgment, and a motion for a stay of remaining proceedings. The plaintiff, in turn, requests summary judgment in its favor.

I. Background

Plaintiff Stornawaye Properties, Inc., brought two complaints stemming from defendants' obligations under a guaranty agreement. The first complaint attempted to collect the interest owing on a promissory note that defendants Jack and Louise Moses guaranteed in the event that the primary obligors, Andrew and Deborah Kerstein, did not pay.*fn1 At the time the guaranty was executed, Robert Allen Fox, the third named defendant, was serving as trustee for property located at 1472 Hunter Road in Rydal, Pennsylvania. In that capacity, Mr. Fox executed a collateral first mortgage on the property to secure the guaranty. The second complaint thus seeks to foreclose on the mortgaged property.*fn2

Before the court now are three motions submitted by the defendants and one submitted by the plaintiff. Defendants first seek to dismiss Robert Allen Fox from this lawsuit, as he was sued only in his capacity as trustee, an office that he no longer holds. Defendants also request the entry of partial summary judgment with respect to the interpretation of the guaranty documents. Finally, defendants move to stay the proceedings in this case pending the outcome of litigation against the primary debtors. Plaintiff, in turn, requests summary judgment on all substantive issues pertaining to the guaranty documents, the counterclaims and affirmative defenses, and the right to foreclose on the mortgage.

II. The Motion to Dismiss Fox

Mr. Fox became trustee of the Hunter road property pursuant to a deed of trust executed on December 19, 1990. See Def. Mot. Ex. 6. Although he terminated this trust and conveyed the property back to Jack and Louise Moses, see Def. Mot. Ex. 7, the defendants have not met their burden of showing that there is "no set of facts that would entitle [plaintiff] to relief" against Mr. Fox. Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996).

III. The Motions for Partial Summary Judgment and Summary
     Judgment on the Guaranty Documents

The defendants seek a declaratory judgment to resolve the extent to which Jack and Louise Moses must pay interest prior to plaintiff's exhaustion of remedies against the Kersteins, the appropriate rate of interest, and the maximum limit of defendants' liability. Plaintiff's motion challenges the defendants' interpretation and requests summary judgment in favor of its own reading of the contract.

A. The Agreements

The present conflict begins with a promissory note for $350,000, dated September 25, 1992, issued to Andrew and Deborah Kerstein but guaranteed by Jack and Louise Moses. See Def. Mot. Ex. 4. This note provides for an initial interest rate of 7.5 percent with subsequent rates subject to change based on the Wall Street Journal Index.*fn3

  The interest rate to be applied to the unpaid principal
  balance of this Note will be at a rate of 1.000
  percentage point over the Index, subject however to the
  following minimum and maximum rates, resulting in an
  initial rate of 7.500% per annum. Notwithstanding the
  foregoing, the variable interest rate or rates provided
  for in this Note will be subject to the following
  minimum and maximum rates. NOTICE: Under no
  circumstances will the interest rate on this Note be
  less than 7.500% per annum or more than (except for any
  higher default rate shown below) the lesser of 11.500%
  per annum or the maximum rate allowed by applicable law.

Id. The default interest rate is 24 percent. See id.

The guaranty agreement states that Jack and Louise Moses guaranteed loans of $350,000 (Loan A) and $100,000 (Loan B) made to the Kersteins. See Def. Mot. Ex. 1 (Guaranty Agmt.). As Stornawaye did not purchase Loan B, only Loan A is at issue in this case. The guaranty is explicitly limited by Exhibit A to the agreement, hereinafter referred to as the letter agreement. See Def. Mot. Ex. 1 art. 1 ¶ 1.01 (stating that guaranty is limited by Exhibit A). That letter agreement explains that the Moses defendants' liability is capped at $292,500, rather than the full $450,000 borrowed by the Kersteins. See Def. Mot. Ex. 2 ¶ 1 (Letter Agmt.). The most relevant provisions of the letter agreement state:

    4. Should any interest payment for Loan A or Loan B
  become sixty (60) days past due, you agree to keep
  interest payments current on both Loan A and Loan B
  unless and until [Kerstein] resumes payment of
    5. If Loan A or Loan B is in default, Metrobank*fn4
  will first exercise and exhaust all of its rights and
  remedies under the loan documents against Andrew M.
  Kerstein, Deborah J. Kerstein and Andy K's Dairy and
  Deli, Inc. and against the collateral provided by
  them which secures Loan A and Loan B, before
      a) requires payment from you, except as to the
    interest payments due Metrobank in Paragraph 4
    above, under each of your Guarantees for Loan A
    and Loan B;
      b) or exercises any of Metrobank's rights which
    Metrobank has pertaining to any collateral from
    you, except as to the interest payments due
    Metrobank in Paragraph 4 above, which secures Loan
    A, Loan B or any of your Guarantees that you have
    granted to Metrobank or which may be obtained by
    Metrobank under your Guaranty or other mortgage
    and loan documents.

Id. ¶¶ 4-5.

The document mortgaging the property in Rydal, Pennsylvania also explains that the maximum amount guaranteed was $292,500 and that the guaranty and letter agreement limit recovery. See Def. Mot. Ex. 5. The mortgage document also states,

  [I]f at any time default shall be made in the payment of
  interest as aforesaid, for the space of sixty (60) days
  after notice from Mortgagee that any such payment hereof
  has fallen due, then, and in such case the whole unpaid
  principal debt aforesaid shall, at the option of the
  said Mortgagee its Successors or Assigns and subject to
  the limitations of Exhibits "A" and "B"*fn5, become
  due and payable immediately; and payment of said
  principal debt, ...

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