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.
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
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.
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
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.
[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, ...