Taub v. Merriam

• Decision Date: 02 December 1977
• Citation: 251 Pa.Super. 572,380 A.2d 1245
• Parties: Merrill TAUB and Anthony H. Harwood, Trustees for Institutional Investors Trust, Appellants, v. John W. MERRIAM and Thomas Wynne, Incorporated, Joint Venturers t/a CedarbrookJoint Venture, Cedarbrook Realty, Inc., Witchwood, Inc., John W. Merriam andthe Fidelity Bank. John W. MERRIAM v. CEDARBROOK REALTY, INC., Witchwood, Inc., and Cedarbrook Joint Venture,Merrill Taub and Anthony H. Harwood, Trustees for Institutional InvestorsTrust, Appellants.
• Court: Pennsylvania Superior Court

Page 1245

380 A.2d 1245

251 Pa.Super. 572

Merrill TAUB and Anthony H. Harwood, Trustees for

Institutional Investors Trust, Appellants, v. John W. MERRIAM and Thomas Wynne, Incorporated, Joint

Venturers t/a CedarbrookJoint Venture, Cedarbrook

Realty, Inc., Witchwood, Inc., John W.

Merriam andthe Fidelity Bank.

John W. MERRIAM v. CEDARBROOK REALTY, INC., Witchwood, Inc., and Cedarbrook

Joint Venture,Merrill Taub and Anthony H. Harwood,

Trustees for Institutional

InvestorsTrust, Appellants.

Superior Court of Pennsylvania.

Argued March 24, 1977.

Decided Dec. 2, 1977.

Henry W. Sawyer, III, Philadelphia, with him David P. Bruton, Philadelphia, for appellants.

Jeffrey A. Less, Philadelphia, with him Morris Gerber, Norristown, for appellees, Merriam & Wynne, Inc., Joint Ventures t/a, and John W. Merriam.

Alfred H. Wilcox, Philadelphia, with him John D. Dunmire, Norristown, for appellee, The Fidelity Bank.

Before WATKINS, President Judge, and JACOBS, HOFFMAN, CERCONE, PRICE and VAN der VOORT, JJ.

JACOBS, Judge:

This appeal arises from the denial of appellant Institutional Investors Trust's (hereinafter IIT) petition seeking to intervene in execution proceedings against four tracts of land and to stay execution. The order appealed from also denied appellant's request for a preliminary injunction against the sheriff's sale proceeding. Both petitions for relief were denied by the court below on the basis that the issues raised were res judicata; the preliminary injunction was refused for the additional reason that appellant has an adequate remedy at law. The first issue for our determination is whether appellant was properly precluded from the relief it sought by principles of res judicata. For the reasons that follow, we hold that it was not, and therefore reverse the order of the lower court.

On December 14, 1973, IIT loaned $16,800,000 on a non-recourse basis to Cedarbrook Joint Venture, Cedarbrook Realty, Inc., and Witchwood, Inc. (hereinafter the Cedarbrook Companies). Four separate notes and mortgages evidencing the aggregate loan amount were executed, and each mortgage encumbered all four tracts of land owned by the Cedarbrook Companies. ¹ As additional security for the loans, the Cedarbrook Companies provided a $5,000,000 letter of credit from The Fidelity Bank (hereinafter Fidelity), for which a second mortgage on other realty in Philadelphia could be substituted.

The foregoing loan structure was subsequently altered in November, 1974. IIT had pledged its interest in the loans as well as the $5,000,000 letter of credit to Chemical Realty Corporation (hereinafter CRC) as collateral for loan advances from CRC to IIT. When CRC expressed doubts about the letter of credit, CRC, Fidelity and IIT executed a Participation Agreement providing that the $5,000,000 letter of credit would be replaced by a commitment from Fidelity to purchase, in the event of default, a $5,000,000 junior share of the $9,000,000 Apartment House loan. The Participation Agreement also provided that if Fidelity were required to purchase this $5,000,000 share, it could also purchase the $4,000,000 senior share of the loan, and thereby become sole owner of the $9,000,000 loan. Additionally, this $9,000,000 lien was made senior to the other three notes and mortgages by the terms of a Subordination and Lien Modification Agreement executed with the Participation Agreement.

Within the next twelve months, the four loans fell into default, and Fidelity honored its obligation to purchase the $5,000,000 share of the Apartment House Loan. At the same time, Fidelity exercised its option to purchase the remaining $4,000,000 share of that note, and assigned the senior $9,000,000 note and mortgage to Merriam. ²

On May 28, 1976, IIT confessed judgments against the Cedarbrook Companies on the three mortgage notes it had retained, and one month later, Merriam entered judgment by confession on the senior $9,000,000 note. ³ This action by Merriam thereupon initiated the procedural posturing leading to the present appeal.

Merriam filed a writ of execution directing the sheriff to sell all four tracts of land encumbered by the $9,000,000 mortgage, and scheduled the sale for August 18, 1976. On August 6, 1976, IIT petitioned to intervene in the Merriam confession of judgment under Pa.R.C.P. 2327(4), seeking to strike or open the judgment or alternatively to amend the writ of execution. IIT essentially argued that 1) assignment of the senior $9,000,000 note and mortgage from Fidelity to Merriam extinguished the note and mortgage, and 2) Merriam was prohibited from executing on two of the four tracts scheduled for sheriff's sale by virtue of paragraph 19 of the Participation Agreement. ⁴ After briefs and argument, the lower court, on November 9, 1976, denied IIT's petition to intervene and permitted execution to proceed. The four tracts of land were relisted for sheriff's sale to be held January 19, 1977.

However, on December 29, 1976, IIT filed a second petition for leave to intervene to seek a stay of execution pursuant to Pa.R.C.P. 3121(b). At the same time, IIT filed an equity complaint against Merriam, the Cedarbrook Companies, and Fidelity, seeking, among other things, a preliminary injunction against the sheriff's sale of two of the tracts of land. Once again the lower court received briefs and heard argument, and once again the lower court denied intervention. Holding that res judicata barred IIT from relief, the court issued orders on January 17, 1977, denying intervention, the stay of execution, and the preliminary injunction.

IIT immediately appealed to this Court, and on January 19, 1977, Judge SPAETH stayed the sheriff's sale of the two tracts of land until February 16, 1977, conditioned upon the posting of a $250,000 supersedeas bond by IIT. IIT filed the bond, as well as a petition for extension of the stay pending disposition of these appeals, and on February 15, 1977, Judge HOFFMAN ordered extension of the stay of execution subject to continuation of the $250,000 bond. Merriam appealed this stay order to our Supreme Court, and on February 16, 1977, Justice NIX entered an order denying relief.

I

We are thus initially presented with the question of whether the lower court's denial of appellant's first petition for leave to intervene was res judicata as to the second petition. It is essential to note at this juncture that this case does not involve the usual res judicata situation, i. e., the termination of litigation with a final judgment and the subsequent initiation of litigation on the same cause of action. Rather, the situation presented by the facts of this case is the process of one on-going cause of action, the Merriam confession of judgment, interrupted by two motions for intervention before final determination. The standard for our initial analysis is therefore the legal principle that the doctrine of res judicata does not apply to a decision on a motion with the same strictness as to a judgment, and accordingly, that an order made in a pending action on a motion involving merely a question of practice, or appealing to the discretion of the trial court, is not an adjudication barring a subsequent motion or application on the same ground. ⁵ By this standard, the second petition for intervention was not barred, because the question of intervention is a matter within the sound discretion of the trial court. Darlington v. Reilly, 363 Pa. 72, 76, 69 A.2d 84 (1949).

Another statement of the test appears in In Re Walton Hotel Co., 116 F.2d 110 (7th Cir. 1940). There the court said:

(D)ecisions on motions do not necessarily have the force of res adjudicata. Courts possess discretion to permit a second application. Whether such renewal shall be entertained depends upon the circumstances of the case; for courts have the power to prevent vexatious and repeated pleadings upon the same point and ordinarily exercise their discretion to preclude reagitation of the same question on the same state of facts. These rules have their origin in the necessity of orderly conduct of business.

116 F.2d at 112. ⁶

In Walton, the court denied a second application to set aside an order approving a lease in reorganization proceedings because the petitioners failed to show new facts or new question of law in their second application for relief. In the present case, however, IIT sought intervention on different grounds in its second petition for leave to intervene, ⁷ and therefore made a sufficient showing to allow a determination of its second petition on its merits.

Apart from these general statements of the law of res judicata as applied to motions, we are persuaded that the crucial determinative factor in our analysis is the appealability of the lower court's original order denying intervention.

(F)inal orders, or orders affecting substantial rights, fully litigated, and from which an appeal lies, are conclusive of the matter adjudged and, under the doctrine of res judicata, binding on the parties in all subsequent proceedings unless reversed or modified by an appellate court.

On the other hand, orders which are not final, or which are made on motions affecting matters which are only incidental or collateral to the determination of the main controversy, are not generally considered conclusive, or res judicata . . . .

60 C.J.S. Motions & Orders § 65g, pp. 115-116 (footnotes omitted).

This rule that res judicata does not apply to interlocutory determinations appears to be the law of our Commonwealth. See, e. g., Creighan v. City of Pittsburgh, 389 Pa. 569, 132 A.2d 867 (1957); Ahrens v. Goldstein, 376 Pa. 114, 102 A.2d 164 (1954).

In Keyes v. Continental Casualty Co., 121 Pa.Super. 359, 183 A. 672 (1936), plaintiff procured an automobile liability insurance policy from defendant while living in Ohio. After plaintiff moved to Massachusetts, she procured a similar policy as required by state law. While both policies were in effect, plaintiff was...