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Westmoreland Opportunity Fund, LLC v. Zappala

United States District Court, W.D. Pennsylvania

July 11, 2014




I. Introduction

At issue on cross-motions for summary judgment is the scope of Richard A. Zappala, Frank J. Zappala, and Ronald A. Rosenfeld's ("Defendants") personal liability resulting from their execution of a "Principals' Indemnification Agreement" in connection with a real estate transaction in May 2005 in Pittsburgh, Pennsylvania. Westmoreland Opportunity Fund, L.L.C., ("Plaintiff"), filed suit on March 27, 2013 asserting breach of contract claims against Defendants under the law of the Commonwealth of Pennsylvania and seeks greater than $75, 000.00 in damages. (ECF No. 19). This Court exercises subject-matter jurisdiction over Plaintiff's claims pursuant to 28 U.S.C. § 1332 (diversity).

II. Factual and Procedural Background[1]

Plaintiff is a Pennsylvania corporation located in Monroeville, Pennsylvania. (ECF No. 19 at ¶ 1, ECF No. 39 at ¶ 1). Defendants Richard A. Zappala and Frank J. Zappala are residents of Florida, and Defendant Ronald A. Rosenfeld is a resident of Virginia. (ECF No. 19 at ¶¶ 2-4, ECF No. 39 at ¶ 2). Defendants are or were the principals of a Pennsylvania limited partnership doing business as FRA Associates, L.P. ("Borrower"), with a registered address in Pittsburgh, Pennsylvania. (ECF No. 19 at ¶ 3, ECF No. 39 at ¶ 3).

In May 2005, Borrower purchased real property located in Penn Hills, Pennsylvania by executing an "Open-End Mortgage Note" (ECF No. 40 at pp. 46-61), "Open-End Mortgage and Security Agreement" (ECF No. 40 at pp. 62-109), "Principals' Indemnification Agreement" ("PIA") (ECF No. 40 at pp. 110-126), and "Environmental and Accessibility Indemnity Agreement" (ECF No. 19-4) (collectively, "Loan Documents"), with Nationwide Life Insurance Company ("Lender") in the original principal sum of $4, 200, 000.00. (ECF No. 19 at ¶ 10). Through a series of assignments, Plaintiff ultimately became the holder of the Loan Documents, and the rights and obligations contained therein, on December 11, 2012. (ECF No. 19 at ¶¶ 14-23).

Under the terms of the Loan Documents, Borrower was required to pay 119 consecutive monthly installments of $24, 536.75, beginning on July 1, 2005 and ending on June 1, 2015. (ECF No. 19 at ¶ 25, ECF No. 39 at ¶ 17). Borrower failed to make payments beyond July 2011, and was in monetary default as a result. (ECF No. 19 at ¶ 26, ECF No. 39 at ¶ 19). Complaints were subsequently filed against Borrower in the Pennsylvania state court in January and February 2013, seeking Confession of Judgment and Foreclosure. (ECF No. 19 at ¶¶ 27-29, ECF No. 39 at ¶¶ 22-24). These Complaints resulted in a Judgment in Mortgage Foreclosure being entered on April 3, 2013, and a Writ of Execution in Mortgage Foreclosure against the property was issued on June 27, 2013. (ECF No. 27 at ¶ 28, ECF No. 39 at ¶¶ 25-26).

Thereafter, the subject property was sold to Plaintiff by the Allegheny County Sheriff at a public judicial sale conducted on October 7, 2013. (ECF No. 27 at ¶ 28). Plaintiff in turn sold the property to an unrelated third party for $1, 800, 000.00 on December 2, 2013. (ECF No. 39 at ¶ 28, ECF No. 40 at p. 178, Wolper Aff. at ¶ 9). On January 24, 2014, Plaintiff filed a Petition to Fix Fair Market Value under 42 Pa.C.S. § 8103(a) in the state court action, requesting that the Court of Common Pleas set the fair market value of the property at $1, 800, 000.00. (ECF No. 40 at pp. 203-212).

While pursuing its remedies against the Borrower in state court, Plaintiff filed a Complaint (ECF No. 1) against Defendants in this Court on March 27, 2013, which was subsequently amended on August 5, 2013. (ECF No. 19). In Counts I through III of its First Amended Complaint, Plaintiff sought to hold Defendants personally liable for the Borrower's breach of certain covenants contained in the Loan Documents as a result of their execution of the PIA and the Environmental and Accessibility Indemnity Agreement. (ECF No. 19). Defendants subsequently filed a Motion to Dismiss, arguing that the language contained within all of the Loan Documents was incompatible with the finding of a guaranty, that the debt was non-recourse, and that the environmental indemnification liability had not been triggered by the facts pled by Plaintiff. (ECF No. 21 at pp. 4-12).

In a Memorandum Opinion dated October 28, 2013, this Court found that certain provisions of the PIA constituted the plausible creation of at least a partial guaranty relationship between Defendants and Plaintiff under Pennsylvania law (Count I). (ECF No. 24 at p. 6). However, the Court also found that Plaintiff had not adequately pled enough facts necessary to sustain its claims under the PIA and the Environmental and Accessibility Indemnity Agreement (Count II). Id. at pp. 11-13. Finally, the Court concluded that Plaintiff's First Amended Complaint was sufficiently pled with respect to its claim for attorneys' fees pursuant to the PIA (Count III). Id. at pp. 13-14. Accordingly, Defendants' Motion to Dismiss was granted in part and denied in part, with Count II being dismissed without prejudice. Id. at p. 15.[2]

Thereafter, the Court entered a Case Management Order directing the parties to file cross-motions for summary judgment with respect to Count I of the First Amended Complaint (ECF No. 33), and cross-motions for summary judgment followed (ECF Nos. 37, 41). The Court held oral argument on April 11, 2014.[3] Having considered the Motions, supporting Briefs, the factual record before the Court and the parties' arguments, and for the reasons set forth below, Plaintiff's Motion for Summary Judgment (ECF No. 37) will be granted in part and denied in part, and Defendant's Motion for Summary Judgment (ECF No. 41) will be denied.

III. Standard of Review

"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Pursuant to Rule 56, the Court must enter summary judgment against the party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.C.t 2548, 91 L.Ed.2d 265 (1986). A motion for summary judgment will only be denied when there is a genuine issue of material fact, i.e., if the evidence is such that a reasonable jury could return a verdict for the non-moving party. McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). The mere existence of some disputed facts is insufficient to defeat a motion for summary judgment. Anderson v. Liberty Lobby, 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). As to materiality, "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248.

In determining whether the dispute is genuine, the court's function is not to weigh the evidence, to determine the truth of the matter, or to evaluate credibility. The court is only to determine whether the evidence of record is such that a reasonable jury could return a verdict for the non-moving party. McGreevy, 413 F.3d at 363; Simpson v. Kay Jewelers, 142 F.3d 639, 643 n.3 (3d Cir. 1998) (quoting Fuentes v. Perski, 32 F.3d 759, 762 n.1 (3d Cir. 1994)). In evaluating the evidence, the court must interpret the facts in the light most ...

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