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Bank of America, N.A. v. Gritz

March 26, 2010

BANK OF AMERICA, N.A. SUCCESSOR BY MERGER TO PROGRESS BANK, PLAINTIFF,
v.
STEWART GRITZ, DEFENDANT.



The opinion of the court was delivered by: Gene E. K. Pratter Unitedstatesdistrictjudge

GENE E.K. PRATTER, District Judge

MEMORANDUM

I. INTRODUCTION

The Court previously entered Confessed Judgment in favor of Bank of America ("BOA") against Stewart Gritz for defaulting on a $2,899,629.03 Promissory Note he entered into with BOA on behalf of himself individually and his two companies, Oxford Bookbinding Company and Oxford Property Management. Currently pending before the Court is Mr. Gritz's Petition to Open Judgment by Confession and for Stay of Execution. Mr. Gritz contends that two Limited Guaranty agreements he entered into with BOA subsequent to the Promissory Note limit his total liability for default to $500,000. Because the Limited Guaranty agreements, by their express terms, only apply to Mr. Gritz's liability for the debts of his two companies, and not to his personal liability, his Petition will be denied.

II. BACKGROUND*fn1

In 1998, Mr. Gritz purchased a publishing company, Oxford Bookbinding Company, for $4,800,000. He financed this purchase by obtaining a personal loan for $4,500,000.

Several years later, on March 27, 2003, Mr. Gritz obtained a $2,899,629.03 loan from BOA's predecessor, Progress Bank, to refinance the balance due on the $4,500,000 loan. Mr. Gritz, in his individual capacity, along with Oxford Bookbinding Company, and Oxford Property Management are all co-borrowers, jointly and severally, on the $2,899,629.03 loan. (Def.'s Appendix at A22.) Mr. Gritz signed the Promissory Note for this loan in his individual capacity, and on behalf of his two companies. (Def.'s Appendix at A24.) In addition to the $2,899,629.03 loan, BOA made approximately eight other loans in various amounts to Oxford Bookbinding and Oxford Property, totaling in the aggregate approximately $900,000. (See Pl.'s Ex. E, BOA's Demand Letter to Mr. Gritz; Pl.'s Ex. 5, Deposition of Stewart Gritz at 75-6; Oral Argument Tr. at 35, 36.)

Mr. Gritz subsequently entered into two Limited Guaranty agreements with BOA on December 2, 2005 and December 2, 2006, respectively. The Limited Guaranty agreements, which contain essentially identical language, provide that "the liability of Guarantor under this Guaranty for the Indebtedness shall not exceed in the aggregate FIVE HUNDRED THOUSAND U.S. Dollars ($500,000.00) maximum for borrowings by Oxford Bookbinding and/or Oxford Property Management, LLC." (Def.'s Appendix at A25, December 2, 2005 Limited Guaranty; Def.'s Appendix at A33, December 2, 2006 Limited Guaranty.)

Oxford Bookbinding Company and Oxford Property Management have since filed for bankruptcy, and Mr. Gritz has defaulted on his payments under the Promissory Note, leading BOA to file a Complaint in Confession of Judgment in this Court, as authorized by a provision in the Promissory Note.

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 60 provides the procedure for attacking a federal judgment entered on a confession of judgment. Minnesota Corn Processors, Inc. v. McCormick, No. 99-5932, 2000 WL 948659, at *4 (E.D. Pa. July 7, 2000). Rule 60(b) states, in pertinent part, that "[o]n motion and upon such terms as are just, the court may relieve a party . . . from a final judgment . . . ." Fed. R. Civ. P. 60(b). State law governs the substantive aspects of Rule 60(b) motions to open confessed judgments. F.D.I.C. v. Deglau, 207 F.3d 153, 166-67 (3d Cir. 2000).

Under Pennsylvania law, a motion to open is to be granted "[i]f evidence is produced which in a jury trial would require the issues to be submitted to the jury." Pa. R. Civ. P. 2959(e). Thus, the standard of sufficiency is that of a directed verdict. Deglau, 207 F.3d at 168 (citing Suburban Mechanical Contractors, Inc. v. Leo, 502 A.2d 230, 232 (Pa. Super. Ct. 1985)). In ruling on a petition to open confessed judgment, the court must view all the evidence in the light most favorable to the movant and accept as true all evidence and proper inferences from it which support the defense while rejecting adverse allegations of the party obtaining the judgment. Id. However, in making a motion to open, a petitioner (in this case, Mr. Gritz) may not rest on mere assertions, but must offer "clear, direct, precise and 'believeable' evidence of his meritorious defenses." Id. (internal citation and quotations omitted).

IV. DISCUSSION

Mr. Gritz's sole contention is that his personal liability as a joint and several co-borrower with his two companies under the Promissory Note was superseded by the Limited Guaranty agreements limiting his personal liability to $500,000. Mr. Gritz argues that any contrary construction of the loan documents would lead to the absurd ...


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