Iron Worker's Sav. and Loan Ass'n v. IWS, Inc.

• Decision Date: 24 March 1993
• Citation: 424 Pa.Super. 255,622 A.2d 367
• Parties: IRON WORKER'S SAVINGS AND LOAN ASSOCIATION v. IWS, INC. and Eagleview Construction, Inc. and Royalwood Estates. (Three Cases) Appeal of EAGLEVIEW CONSTRUCTION, INC. and Royalwood Estates. (Three Cases)
• Court: Pennsylvania Superior Court

Page 367

622 A.2d 367

424 Pa.Super. 255

IRON WORKER'S SAVINGS AND LOAN ASSOCIATION v. IWS, INC. and Eagleview Construction, Inc. and Royalwood Estates. (Three Cases) Appeal of EAGLEVIEW CONSTRUCTION, INC. and Royalwood Estates. (Three Cases)

Superior Court of Pennsylvania.

Argued Nov. 20, 1991.

Filed March 24, 1993.

Denis J. Lawler, Philadelphia, for appellants.

Bruce E. Rodger, Kennett Square, for appellee Iron Worker's Sav.

Mary D. France, Harrisburg, for participating party Com. Dept. of Banking.

Before CAVANAUGH, POPOVICH and HOFFMAN, JJ.

POPOVICH, Judge.

Herein, we address three appeals from related orders of the Court of Common Pleas of Chester County. The first order in question was entered on January 3, 1991, and denied appellants' petition to open a confessed judgment. The second order was entered on January 4, 1991, and denied appellants' motion to compel production of the joint report of examination performed on Iron Worker's Savings and Loan Association by the Pennsylvania Department of Banking and the Federal Home Loan Bank, Office of Regulatory Functions. Finally, the third order in question was entered on January 4, 1991, and denied appellants' motion to compel production of documents and reconvene the deposition of John R. Larkin. Finding no error below, we affirm all three orders.

We will first address that appeal docketed at 283 Philadelphia 1991, wherein appellants Eagleview Construction, Inc. and the joint venture trading as Royalwood Estates (hereafter "Eagleview") contend: 1) The lower court erroneously employed an incorrect standard in analyzing the evidence presented in support of the amended petition to open the confessed judgment; 2) The lower court erred in applying the parol evidence rule to this case; and 3) The evidence was sufficient to raise a jury question on whether appellee (hereafter "Iron Worker's") breached its confidential relationship with Eagleview. We find no merit to Eagleview's contentions.

When the denial of a petition to open a confessed judgment is appealed, we will not disturb the lower court's denial unless it is shown that the court committed an error of law or a manifest abuse of discretion. Fountain Hill Millwork Bldg. v. Belzel, 402 Pa.Super. 553, 555-556, 587 A.2d 757, 759 (1991); Suburban Mechanical Contractors, Inc. v. Leo, 348 Pa.Super. 324, 325, 502 A.2d 230, 231 (1985), citing Lambakis v. Exar, 340 Pa.Super. 483, 488, 490 A.2d 882, 884 (1985). Traditionally, a confessed judgment will be opened in only a limited number of circumstances, and only when the person seeking to open acts promptly, alleges a meritorious defense and presents sufficient evidence of that defense to require submission of the issues to the jury. Fountain, 587 A.2d at 759; Suburban, 502 A.2d at 231, citing First Seneca Bank v. Laurel Mt. Development Corp., 506 Pa. 439, 443, 485 A.2d 1086, 1088 (1984). In making such a determination, the court employs the same standard as that of the directed verdict--"viewing all the evidence in the light most favorable to the petitioner and accepting as true all evidence and proper inferences therefrom supporting the defense while rejecting adverse allegations of the party obtaining the judgment." Suburban, 502 A.2d at 232, quoting Germantown Manufacturing Co. v. Rawlinson, Jr., 341 Pa.Super. 42, 46-47, 491 A.2d 138, 140-141 (1985).

Rule 2959(e) of the Pennsylvania Rules of Civil Procedure provides that "in a proceeding to open a confessed judgment, if evidence is produced which, in a jury trial, would require the issues to be submitted to the jury, the court shall open the judgment." Fountain, 587 A.2d at 759. Pa.R.C.P. 2959(e) has been interpreted to require the judgment debtor to offer clear, direct, precise and "believable" evidence of its meritorious defense. Suburban, 502 A.2d at 232; First Pennsylvania Bank N.A. v. Lehr, 293 Pa.Super. 189, 201-202, 438 A.2d 600, 607 (1981). ¹

Viewing the evidence in a light most favorable to Eagleview, the lower court set forth the facts as follows:

In September or October of 1987, John R. Larkin approached Dennis Meinhart, the principal of Eagleview, regarding a formation of a joint venture between IWS, Inc. (IWS) and Meinhart (Eagleview). IWS is a wholly owned subsidiary of Iron Worker's [Savings and Loan Association]. Various meetings were held regarding this possible joint venture, and Meinhart found a suitable tract of land, later known as Royalwood Estates.

In December of 1987, Larkin, who had previously represented Meinhart [as legal counsel], told Meinhart he could no longer represent him, as he had a conflict of interest; namely, Larkin was a member of the Iron Worker's Board. Larkin referred Meinhart to the law firm of Petrikin, Wellman, Damico, Carney & Brown, a firm with which Meinhart had previously dealt. Steven Brown, Esquire, undertook representation of Meinhart (Eagleview) and another member of the firm, Dennis Dunn, later represented Meinhart at the closing on March 31, 1988. On January 4, 1988, Meinhart signed an Agreement of Sale for the tract of land for $1,500,000.00.

Additional meetings were held before the March 31, 1988 closing date and several terms were discussed with regard to the loan agreement. One of the terms discussed was the length of the loan. Various notes indicate a period of eighteen (18) months to two (2) years. On March 29, 1988, two days before settlement, Meinhart was informed that the loan period would be eighteen (18) months. Meinhart objected to this shorter time period and was obstensibly told by John Whitig, Iron Worker's President, not to worry, that the loan period would be extended.

Notwithstanding the fact that the loan documents clearly stated a loan period of eighteen (18) months, Meinhart signed the documents. It must be mentioned here that Meinhart admitted he was a sophisticated businessman; that he was represented by Mr.Brown and his firm; that he had an opportunity to read the loan documents at closing, but chose not to; that the documents were clearly readable and understandable, and finally, that he knew the repayment period was eighteen (18) months.

Trial Court Opinion, pp. 2-3.

First, Eagleview complains that the lower court applied an incorrect standard of review. Specifically, Eagleview contends that "[b]y holding that Eagleview had to present evidence that was "believable", the Lower Court not only improperly increased Eagleview's burden, but it weighed the presented evidence in violation of Pa.R.C.P. 2959(e)." Eagleview's Brief, p. 21. Requiring the petitioner to present "believable" evidence of a meritorious defense does not violate Pa.R.C.P. 2959(e). Rather, doing so insures proper application of Pa.R.C.P. 2959(e), by mandating that the decision whether to open a judgment will be based on credible evidence which, in a jury trial, would preclude the entry of a directed verdict and which, if believed by a jury, would not be reversed by the entry of judgment non obstante verdicto. See First Pennsylvania, 438 A.2d at 607; Ritchey v. Mars, 227 Pa.Super. 33, 324 A.2d 513 (1974) (judgment debtor does not have to prove his defense conclusively).

Having determined that the lower court applied the proper standard of review, we turn to Eagleview's allegation that the lower court should not have applied the parol evidence rule to this case. Eagleview contends the parol evidence rule is inapplicable presently because: 1) Ambiguities exist in the parties' "Agreement", i.e., while the mortgage note states the term of the loan is eighteen months, the joint venture agreement provides that financing shall be in the form of a two-year loan; 2) Iron Worker's induced Eagleview to execute the mortgage note by fraudulently misrepresenting that it would extend the term of the loan; 3) Iron Worker's promise to extend the term of the loan was a separate contract from the mortgage note; 4) The mortgage note was executed under duress, and 5) The parties agreed subsequent to executing the mortgage note to a new contract which extended the term of the loan.

In Myers v. McHenry, 398 Pa.Super. 100, 580 A.2d 860 (1990), we set forth the following definition of the parol evidence rule:

Where the alleged prior or contemporaneous oral representations or agreements concern a subject which is specifically dealt with in the written contract, and the written contract covers or purports to cover the entire agreement of the parties, the law is now clearly and well settled that in the absence of fraud, accident or mistake the alleged oral representations or agreements are merged in or superseded by the subsequent written contract, and parol evidence to vary, modify or supersede the written contract is inadmissible in evidence.

Myers, 580 A.2d at 863, quoting LeDonne v. Kessler, 256 Pa.Super. 280, 286-287, 389 A.2d 1123, 1126-1127 (1978), quoting Bardwell v. The Willis Co., 375 Pa. 503, 506, 100 A.2d 102, 104 (1953).

In regard to the application of the parole evidence rule, we first address Eagleview's allegation that "Agreement" between the parties is ambiguous because the mortgage note states the term of the loan is eighteen months, while the joint venture agreement provides that the loan term is two years. Eagleview and IWS, Inc. executed a joint venture agreement on March 31, 1988, wherein those parties agreed that financing for the joint venture would be obtained through loans from Iron Worker's Savings and Loan Association. The loans would have a repayment term of two years. However, on that same day, Eagleview and IWS, Inc., as mortgagors, executed, inter alia, a mortgage note, a mortgage and construction loan agreement, with Iron Worker's, as mortgagee, which specifically provided for the $3,500,000 loan to be repaid in eighteen months.

Eagleview admits that it knew at the time of signing the mortgage note that its terms specifically required the loan to be repaid in eighteen months. Since the mortgage note upon which judgment was confessed...