JOHN T. NICHOLAS AND BRETT STROTHERS, T/A NICHOLAS AND STROTHERS, A PARTNERSHIP Appellants
DREW M. HOFMANN, INDIVIDUALLY; THE ESTATE OF CONRAD J. HOFMANN, DREW M. HOFMANN, EXECUTOR; CONRAD G. HOFMANN, JR., INDIVIDUALLY AND KEEHOF BAR, INC.
from the Judgment Entered October 6, 2015 In the Court of
Common Pleas of Philadelphia County Civil Division at No(s):
September Term, 2013 No. 02154
BEFORE: BOWES, J., OTT, J., and SOLANO, J.
Nicholas and Strothers ("N&S"), a Pennsylvania
partnership formed by John T. Nicholas (deceased) and Brett
Strothers, appeals from a judgment, following a bench trial,
that was entered in favor of the defendants in its mortgage
foreclosure action and that voided a deed that transferred
real estate to N&S. After careful review, we vacate the
judgment and remand for further proceedings.
case presents a complex set of facts that has been made more
complex by a series of factual and legal errors made by the
parties prior to and throughout these proceedings. Adding to
the confusion is the fact that principals to the underlying
transaction, Mr. Nicholas and Conrad J. Hofmann, are
deceased, and those available to testify at trial displayed a
woeful lack of personal knowledge about the facts. The
evidence left the trial judge to conclude that there is such
a lack of agreement about the facts that there is no viable
mortgage contract to enforce. We conclude that, because of
errors in the trial court's analysis, it is necessary for
the trial court to reexamine the validity and enforceability
of the mortgage. We also conclude that our rules of procedure
did not permit the trial court to entertain an action to void
J. Hofmann owned the real property at issue, which is located
at 551 East Cambria Street in Philadelphia. He also owned all
of the stock of Keehof Bar, Inc., a Pennsylvania corporation
which operated a bar and restaurant on that property. Trial
Ct. Op., 1/4/16, at 3.
J. Hofmann had two sons: Drew M. Hofmann and Conrad G.
Hofmann. Tr. Ct. Op. at 3. In the trial court, the parties
referred to Conrad J. Hofmann as "Conrad J. Hofmann,
Sr." and to Conrad G. Hofmann as "Conrad G.
Hofmann, Jr." For ease of reference, this opinion refers
to that father and son as "Conrad Sr." and
10, 2010, Drew Hofmann, acting as agent for his father,
executed a first mortgage on the Cambria Street property to
secure a $32, 000 loan from John H. Marg. Trial Ct. Op. at 3.
26, 2010, Conrad Sr. died. Trial Ct. Op. at 3. In his Last
Will and Testament, he bequeathed the Cambria Street property
and all shares of Keehof Bar to his sons, giving Drew 51% of
the real estate and stock and giving Conrad Jr. 49%.
Id. at 3-4; Last Will and Testament
("Will"), Ex. P-2, § IV. The Will named Drew
as Executor of the estate and gave him and any successor
executors broad general fiduciary powers, including the power
to compromise claims and, "[s]ubject to the other
provisions of this [W]ill, to alter, repair, improve, sell,
mortgage, lease, exchange, or otherwise develop, operate, or
dispose of any real or personal property at any time for such
prices and on such terms and in private or public
transactions as they deem appropriate, without any liability
on the purchasers to see to the application of the purchase
money." Will § VI(C), (D). The Will listed some
outstanding debts of the decedent, id. § I,
contained a protective provision regarding claims against the
estate, id. § VII. 
November 8, 2010, Drew executed a promissory note and
mortgage on the Cambria Street property, and this note and
mortgage are the principal sources of the issues in this
action. The promissory note documented a debt owed to
N&S. It stated that "the Estate of Conrad J.
Hofmann, Drew M. Hofmann, executor" promised to pay
N&S $195, 000 plus interest. Mortgage Note, Ex. P-5. In
capital letters, the note added:
THIS IS A COMMERCIAL LOAN FOR COMMERCIAL PURPOSES. THE LOAN
IS A FIRST LIEN ON THE PROPERTY. THE SUM OF $140, 000 WAS
ADVANCED DURING THE LIFETIME OF CONRAD HOFMANN MAINLY TO
FINANCE CON HOF MUSIC, LLC, ROSELANE MUSIC, LLC WHICH
OPERATED OUT OF WILDWOOD, NEW JERSEY. SOME OF THE MONEY WAS
USED TO MAKE MORTGAGE PAYMENTS ON THE HOUSE OWNED BY CONRAD
HOFMANN AT 6210 SEAVIEW AVENUE WILDWOOD, NEW JERSEY, AND ALSO
TO PAY OBLIGATIONS FOR KEEHOF BAR, INC., IN PHILADELPHIA. THE
PARTIES AGREE THAT JOHN T. NICHOLAS ADVANCED $140, 000.00 ON
THE DATE OF THIS NOTE INCLUDING ACCRUED INTEREST, IF ANY.
BRETT STROTHERS ADVANCED $55, 000.
Id. The note was due and payable on December 1,
2012, and interest was due in monthly installments during the
term of the note. The note stated it was "JOINED BY
KEEHOF BAR, INC. . . . as a guarantor, " and it
authorized N&S to file a financing statement against the
stock of the bar. Id. The signature block on the
to be legally bound, the party hereto has affixed her
[sic] hand and seal the day and year first above
Estate of Conrad Hofmann, deceased
Drew M. Hofmann, Executor
Drew M. Hofmann
KEEHOF BAR, INC., a
Pennsylvania business Corporation
Drew M. Hofmann President and sole shareholder
the note, the mortgage also was between the "Estate of
Conrad J. Hofmann, Drew M. Hofmann, executor" and
N&S. Mortgage, Ex. P-4. It provided:
Whereas, mortgagor has executed and delivered to mortgagee a
certain mortgage note of even date herewith, payable to the
order of mortgagee in the principal sum of One hundred,
Ninety Five Thousand Dollars ($195, 000.00[)] and has
provided therein for payment of any additional moneys loaned
or advanced thereunder by mortgagee, together with interest
thereon at the rate provided in the note, in the manner and
at the times therein set forth, and containing certain other
terms and conditions all of which are specifically
incorporated herein by reference; THIS MORTGAGE SHALL BE DUE
AND PAYABLE IN FULL WITHOUT FURTHER DEMAND FOR PAYMENT OF
SAME ON DECEMBER 1ST, 2012. Interest only shall be
due on this mortgage until the due date of December
Now therefore, mortgagor, in consideration of the debt or
principal sum and as security for the payment of the same and
interest as aforesaid, together with all other sums payable
hereunder or under the terms of the note, grants and conveys
to mortgagee, its successors and assigns all the lots or
pieces of ground situated in Carbon County [sic],
Pennsylvania, more specifically described as follows:
Id. The mortgage then proceeded to describe the
Cambria Street property in Philadelphia, including an
address, metes and bounds description, tax assessment number,
and title history. See id. The mortgage was signed by
Drew M. Hofmann as Executor for the Estate of Conrad Hofmann,
and, unlike the note, it provided for Drew to sign the
document only once. Id. The mortgage contained an
acceleration clause and a clause permitting N&S to
confess judgment against the estate. Id. At the same
time as the parties entered into this mortgage, N&S fully
satisfied the earlier mortgage on the property with a payment
to John Marg. Trial Ct. Op. at 4, ¶ 8; N.T. at 38,
addition to the mortgage, Drew, again as executor of his
father's estate, signed an "Irrevocable Stock
Power" which transferred to N&S 100 shares of Keehof
Bar stock. The bar had issued a certificate for those shares
a few weeks earlier. See Trial Ct. Op. at 4-5;
Certificate, Ex. P-8.
tried to use the N&S loan proceeds to reopen Keehof Bar
and make it profitable, but was unsuccessful. After a few
months, the Hofmann Estate failed to make the monthly
interest payments required by the note, and on September 27,
2011, N&S confessed judgment against Drew Hofmann in the
Court of Common Pleas of Carbon County. Trial Ct. Op. at 6.
The court struck the confessed judgment in July of 2012.
January 25, 2012, Conrad Jr., "as heir of the Estate of
Conrad J. Hofmann, deceased, " executed a deed conveying
"ONE HALF INTEREST" in the Cambria Street property
to N&S for $5, 000. Trial Ct. Op. at 6; Deed, Ex.
The deed explained that Conrad Sr. had died and left a Will
providing that his residuary estate would be divided equally
between Drew and Conrad Jr., so that "both have been
vested with a 50% interest in the real estate described
herein by operation of law." Trial Ct. Op. at 6; Deed,
Ex. P-3 (quoting Will § V). In citing the Will's
provision for an equal disposition of the estate's
residue to Drew and Conrad, the deed overlooked the fact that
a different provision of Conrad Sr.'s Will, Section IV,
stated that Conrad Sr. gave Conrad Jr. only 49% of the
Cambria Street property.
filed a complaint to foreclose on the mortgage on September
19, 2013. Trial Ct. Op. at 6. As amended, the complaint named
as defendants: Drew M. Hofmann, individually; Drew M.
Hofmann, as Executor of the Estate of Conrad J. Hofmann,
deceased; Conrad G. Hofmann, Jr., individually; and Keehof
Bar, Inc. Trial Ct. Op. at 1; see Am. Compl.,
November 6, 2014, a default judgment was entered in favor of
N&S and against Conrad Jr. for failure to file an answer
within the required time. Trial Ct. Op. at 1-2. Three days
later, Nicholas died, and on November 20, 2014, N&S filed
a Suggestion of Death to alert the court that Strothers would
be continuing the action on behalf of the partnership.
Suggestion of Death at 1-2.
December 26, 2014, the remaining defendants filed an Answer
and Counterclaim to Quiet Title, citing Pa.R.C.P. 1061(b)(3).
Trial Ct. Op. at 2; Answer to Second Amended Compl. with
Countercl. to Quiet Title and Affirmative Defenses, 12/26/14.
The defendants claimed that the mortgage was procured by
fraudulent inducement and was void and invalid because Drew
never registered as an executor in Pennsylvania and therefore
lacked authority to enter into it. Id. at ¶ 33.
In addition to alleging fraud, the counterclaim averred that
N&S was dissolved as a partnership by operation of law
upon Nicholas' death and therefore could not maintain the
mortgage foreclosure action, and that Conrad Jr.'s deed
of one-half of the property was "defective and
invalid." Id. at ¶¶ 32, 33, 41. In an
answer to the counterclaim, N&S averred that the
counterclaim was invalid under Rule 1148 of the Rules of
Civil Procedure "as [the] claim does not relate to the
origination of the mortgage." Pl.'s Ans. To
Def.'s New Matter and Affirmative Defenses, 1/14/15, at
13, 2015, the trial court held a non-jury trial. Trial Ct.
Op. at 3. A major focus of the trial was on the meaning of
the terms of the note and mortgage, including, in particular,
the $195, 000 amount of the loan and the capitalized
paragraph in the note regarding the $140, 000 portion of the
loan that was an advance. In this respect, each side
presented conflicting evidence, including extrinsic evidence,
regarding the documents. N&S presented the testimony of
Attorney Anthony Roberti, Esquire, and Brett Strothers.
Id. at 2. Defendants presented the testimony of Drew
who had previously represented Nicholas in other matters,
testified that he drafted the note and mortgage on November
8, 2010, at a meeting in his office where Nicholas, Drew
Hofmann, and William Gaffney were present. Tr. Ct. Op. at 4;
N.T., 7/13/15, at 9-11. Roberti testified that Drew was not
represented by counsel, but that in the middle of the meeting
Drew called and spoke with his attorney for fifteen minutes.
Id. at 11, 47.
testified that $140, 000 had been loaned by Nicholas to
either Conrad Sr. or to Drew Hofmann while Conrad Sr. was
alive. N.T., 7/13/15, at 32-26, 41, 43-44. Roberti did not
know how that money was used. Roberti said some of the $140,
000 was used to pay residential mortgages, but believed it
was a small amount. Id. at 32-36, 42. He was not
sure whether the money was used to make payments on a house
owned by Conrad Sr. or Conrad Jr. Id. at 33. Roberti
believed that all or most of the $140, 000 had been given
directly to Drew. Id. at 36, 43-44. He could not
provide evidence substantiating the $140, 000 debt, and he
testified he was never given a detailed itemization of it.
Id. at 32-37, 44-45, 48.
to Roberti, the remaining $55, 000 of the $195, 000 loan
amount was advanced by Strothers and distributed on the date
of the note's execution, November 8, 2010. N.T. at 35. He
claimed that some of that money went to paying off the $29,
500 balance due on the first mortgage, as well as gas bills,
water bills, and real estate taxes on the property.
Id. at 35, 38-39, 53-54. Roberti testified that he
distributed $34, 754 on the day of the mortgage, but also
said it was "more than that. Something like $50,
000." Id. at 38, 48. He did not bring to court
the records of the checks he issued that day. Id. at
stated that he included in the note whatever language the
parties instructed him to include, in order to make the note
as detailed as possible. N.T. at 31, 34. Roberti testified
that he read both the mortgage and note aloud in Drew's
presence. Id. at 46; see also id. at 33.
Strothers testified that -
Nicholas brought the matter to me, the opportunity that he
had a family friend that he had advanced money to previously,
and he had just passed away, and there was a looming
foreclosure coming over a business asset that the
family had, and he had some outstanding debt, and to prevent
trying - to kill two birds with one stone, to prevent a
foreclosure on the bar and also secure his debt, I came on
board by buying out a previous mortgage that was about to
foreclose and also provided additional funds to get the bar
up and running again that had previously been closed so he
could provide income for Mr. Hofmann, Drew.
The purpose of the mortgage [for $195, 000] was that most of
this money was advanced to Drew and his businesses with the
credit history of Drew's father who was still alive at
the time. Once he passed away, John Nicholas was worried he
would not be able to collect based on history and wanted to
secure his debt in some form or another.
Id. at 69-74.
testified that the $140, 000 was comprised entirely of loans
to Drew based on his father's credit backing. N.T. at
73-74, 76, 88-89, 91. He had seen checks written from Drew
and Drew's businesses to Nicholas in repayment for loans,
but Strothers said that Nicholas would not cash the checks
because they would bounce. Id. at 77, 89-90. The
parties to the mortgage finally agreed on the amount of $140,
000 following days of negotiations. Id. at 73, 79.
Strothers testified that part of the $55, 000 that he
provided was used to pay off the first mortgage, but he did
not specify how the rest of the $55, 000 was allocated.
Id. at 80, 86-87.
Drew Hofmann testified that the intention behind the mortgage
at issue was to obtain funds to reopen the bar and then pay
back the mortgage loan with the bar profits. N.T. at 152-53,
156. When asked about the $140, 000 debt, Drew said that
"there really wasn't an understanding."
Id. at 153-54. He said he never received the $140,
000 loan and that in the past Nicholas had lent him $30, 000
at most. Id. at 166.
the $55, 000, Drew admitted that he "signed" for
it, and that the $55, 000 "given to him" was
"a loan to open the bar." N.T. at 153. He said that
of the $55, 000, approximately $17, 000 was "given
towards the builders" and "given to other people to
open the bar, get the bar open, and the difference to John
Marg." Id. at 156. At the same time, Drew
testified that he personally received $5, 000, and that he
believed that was all he was "signing for."
Id. at 153-54, 156.
testified that he read and signed the mortgage, and that he
understood that if he failed to make payments he would be in
default. N.T. at 175-78. He admitted that he made only two
payments under the mortgage. Id. at 176-78. He also
testified that N&S promised him additional funds to help
open the bar, but that agreements regarding the additional
funds were not included in the written mortgage documents.
Id. at 156-59; 175-76. The additional funds were
never provided, which was why Drew was unsuccessful at
reopening the bar and turning a profit early enough to repay
the mortgage as planned. Id.
conclusion of N&S' case, the defendants moved for a
directed verdict on behalf of Defendants Keehof Bar and Drew
Hofmann, individually. Trial Ct. Op. at 2. The Court granted
the motion with respect to Keehof Bar only. Id.
following the trial, the trial court issued an order which
struck both the mortgage and deed as void, quieted title on
the property in favor of Defendants, and barred N&S from
making any future claims on the property. Order, 7/14/15. The
full text of the trial court's order reads:
AND NOW, this 14th day of July, 2015, upon consideration of
the pleadings and after a non-jury trial in this Foreclosure
action, it is hereby ORDERED and DECREED as follows:
1) Judgment is entered in favor of Defendants, Drew M.
Hofmann, Conrad G. Hofmann, Jr., and [Keehof] Bar, Inc., and
against Plaintiffs, John T. Nicholas, Brett Strothers, t/a
Nicholas and Strothers, a Pennsylvania partnership;
2) The Mortgage dated November 8, 2010, executed by Drew M.
Hofmann, Executor of the Estate of Conrad J. Hofmann, Sr.,
and recorded on November 16, 2010 in the Department of
Records of Philadelphia County under Document No. 52282705,
and assigned to John T. Nicholas and Brett Strothers, a
Pennsylvania partnership known as Nicholas and Strothers by
Assignment recorded November 16, 2010 in the Department of
Records of Philadelphia under Assignment No. 36N6-105, for
the Property 551 East Cambria Street, Philadelphia,
Pennsylvania 19134, described more fully in Exhibit
"A" attached hereto ("Property") is
unenforceable and is hereby marked VOID and
3) Plaintiffs, John T. Nicholas, Brett Strothers, and the
partnership known as Nicholas and Strothers, his/its
successors and assigns, and/or anyone claiming under, by or
through him/it, are forever barred from asserting any right,
lien, mortgage, title or interest in the Property 551 East
Cambria Street, Philadelphia, Pennsylvania 19134;
4) The Commissioner of the Department of Records of
Philadelphia County is directed to record a certified copy of
this Order and to void the Mortgage to properly acknowledge
that the Mortgage dated November 8, 2010, and recorded in
Philadelphia, Pennsylvania under Document No. 52282705, and
assigned to John T. Nicholas and Brett Strothers, a
Pennsylvania partnership known as Nicholas and Strothers by
Assignment recorded November 16, 2010 in the Department of
Records of Philadelphia under Assignment No. 36N6-105, is
removed from record;
5) The Deed dated January 25, 2012, purporting to transfer
title of the Property located at 551 East Cambria Street,
Philadelphia, Pennsylvania 19134, from Conrad G. Hofmann, as
heir of the Estate of Conrad J. Hofmann, to John T. Nicholas
and Brett Strothers, a Pennsylvania partnership known as
Nicholas and Strothers recorded in Philadelphia Recorder of
Deeds on January 27, 2012 under Document No. 52439964,
described more fully in Exhibit "B" attached hereto
("Deed"), is declared VOID and CANCELLED as of
6) Plaintiffs, John T. Nicholas, Brett Strothers, and the
partnership known as Nicholas and Strothers, and all persons
claiming under him and/or it, are forever barred from
asserting any right, lien, title or interest in the Property
identified as 551 East Cambria Street, Philadelphia,
Pennsylvania 19134, and title to the Property is hereby
QUIETED in favor of Defendants, Drew M. Hofmann and Conrad G.
Hofmann, Jr., as Tenants in Common (Fifty-One percent ...