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Graystone Bank v. Grove Estates

December 13, 2012

GRAYSTONE BANK,
APPELLEE
v.
GROVE ESTATES, LP., APPELLANT
GRAYSTONE BANK, APPELLEE
v.
TIMOTHY F. PASCH, APPELLANT
GRAYSTONE BANK,
APPELLEE
v.
MAXIMUS FUGACIOUS,LLC, APPELLANT
GRAYSTONE BANK,
APPELLEE
v.
TIMOTHY F. PASCH INC., APPELLANT
IN THE SUPERIOR COURT OF PENNSYLVANIA GRAYSTONE BANK,
APPELLEE
v.
GROVE ESTATES, LP., APPELLANT
GRAYSTONE BANK, APPELLANT
v.
GROVE ESTATES, LP., APPELLEE GRAYSTONE BANK,
APPELLEE
v.
TIMOTHY F. PASCH, APPELLANT
GRAYSTONE BANK,
APPELLEE
v.
MAXIMUS FUGACIOUS, LLC, APPELLANT
GRAYSTONE BANK,
APPELLEE
v.
TIMOTHY F. PASCH INC., APPELLANT



Appeal from the Order Entered December 19, 2011 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1047-40 Appeal from the Order December 29, 2011 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1049-40 Appeal from the Order Entered December 29, 2011 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1050-40 Appeal from the Order Entered December 29, 2011 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1048-40 Appeal from the Order Entered December 29, 2011 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1047-40 Appeal from the Order Entered January 6, 2012 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1047-40 Appeal from the Order January 6, 2012 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1049-40 Appeal from the Order Entered January 6, 2012 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1050-40 Appeal from the Order Entered January 6, 2012 In the Court of Common Pleas of York County Civil Division at No(s): 2011-SU-1048-40

The opinion of the court was delivered by: Stevens, P.J.

J-A23009-12

BEFORE: STEVENS, P.J., BENDER, J., and GANTMAN, J.

OPINION BY STEVENS, P.J.

Appellants appeal from the order entered by the Court of Common Pleas of York County denying their petition to strike and/or open a confessed judgment against them and in favor of Appellee Graystone Bank. We affirm in all respects except on the issue regarding application of the attorney's fee-shifting provision, which we remand to the lower court for its determination as to whether the provision worked a reasonable result under the circumstances.

The trial court has aptly provided all pertinent facts and procedural history, as follows:

On August 29, 2008, Grove Estates LP [] executed a Promissory Note in favor of Graystone Bank [] for the principal amount of $9,500,000 in order to re-finance [] Grove Estate's building project. The Promissory Note was an "interest only" obligation requiring [Grove Estates] to [make only] monthly interest payments and providing that the principal of the loan would come due upon the maturity date of the Note, September 1, 2010. On September 30, 2010, the Parties entered a Change in Terms Agreement extending the maturity date of the loan to November 5, 2010.

[For purposes of background, we note that] [b]eginning in 2008, [Grove Estates] was struggling to make the monthly interest payments on the loan. [Grove Estates] traces these difficulties to a dispute with PNC Bank regarding a construction loan agreement related to another building project, the Seasons. As a result, Graystone Bank required [Grove Estates] to establish an interest reserve to ensure the monthly payments would be made. To meet this interest reserve Graystone required [Grove Estates] to pledge additional real estate as collateral first in September of 2009 and again in March of 2010. In conjunction with the Change in Terms Agreement, Graystone Bank required [Grove Estates] to pledge additional real property and establish another interest reserve.

Beginning on or around August of 2010, [Grove Estates],

through its principal Timothy F. Pausch, and Graystone Bank, primarily through its then employee [and bank Vice President] Nathan Lightner, began discussing the possibility of Graystone re-financing the Grove Estates and Seasons Projects into one loan package. [Grove Estates] alleges that representations were made by Graystone that the bank was negotiating with PNC concerning the buy out of the Seasons loan and that, on the eve of the November 5, 2010 maturity date, the re-finance deal was imminent. No deal with PNC[, however,] was executed.

[Grove Estates] failed to pay the balance of the principal and accrued interest on November 5, 2010 in violation of the loan agreement. As a result of the default, [Graystone Bank] confessed judgment against [Grove Estates] on February 14, 2011 in the amount of $10,650,027.74, comprising the $9,500,000.00 principal balance, interest, late charges and attorney's fees.

[Grove Estates] filed a Petition to Open and/or Strike the Confessed Judgment and Request for Stay on March 14, 2011. [The lower court] determined that the Petition stated prima facie grounds for relief and issued a rule to show cause on [Graystone Bank]. . . [Graystone Bank] filed answers to the Petition and written discovery was exchanged. Defendant Timothy F. Pasch was deposed on June 28, 2011. [The lower court] heard oral arguments on the Petition on September 12, 2011. Pa.R.A.P. 1921(a) Opinion, dated 12/19/11, at 1-3.

In denying the Petition to Open/Strike, the lower court disagreed with Appellants' assertion that a fatal defect or irregularity attended the record of the confessed judgment. Specifically, Appellants focused attention on the warrant of attorney (cognovit), which appeared neither on the signature page of the August 29, 2008 Promissory Note nor on any part of the September 30, 2010 Change in Terms Agreement. First, the court rejected Appellants' interpretation of Frantz Tractor Co. v. Wyoming Valley Nursery, 384 Pa. 213, 216, 120 A.2d 303, 305 (1956) and its progeny to require that the signature of a party to be bound by the warrant must appear on the same page as the warrant. While this precedent clearly stands for the proposition that the signature "directly relate" to the warrant, the lower court noted, there was no indication in those holdings of a "same page" requirement. Here, the "direct relation" test was met where the warrant immediately preceded the signature page and was typed in conspicuous, all-capital letters, the court held.

Nor was the complete absence of the cognovit from the Change of Terms Agreement fatal, the court continued, deeming the agreement nothing more than an extension of the original Promissory Note's maturity date and not, as Appellants argued, a new, comprehensive agreement setting new burdens and benefits upon the parties. As such, the Change of Terms Agreement was distinguishable from a lease renewal, which must contain its own warrant of attorney under our jurisprudence given its status as a novation expressing all rights and responsibilities between the parties from a new start date to end date. In contrast, the Change of Terms Agreement changed only the maturity date and, given the limits of its scope, did not purport to relieve Appellants from the ...


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