Graystone Bank v. Grove Estates, LP.
58 A.3d 1277
| Pa. Super. Ct. | 2012Background
- Grove Estates LP signed a Promissory Note on Aug 29, 2008 for $9,500,000 with Graystone Bank to refinance a building project; it was an interest-only loan with principal due at maturity (Sept 1, 2010).
- A Change in Terms Agreement on Sept 30, 2010 extended the loan’s maturity to Nov 5, 2010.
- Beginning in 2008 Grove Estates struggled to pay interest; Graystone required an interest reserve and additional collateral, leading to pledge of real property in Sept 2009 and Mar 2010; another reserve was established under the Change in Terms.
- Around Aug 2010 negotiations contemplated refinancing Grove Estates and Seasons into a single package; Grove alleges Graystone represented that buyout talks with PNC were imminent, but no deal with PNC was actually executed.
- Grove Estates defaulted on Nov 5, 2010 by failing to pay principal and accrued interest;Graystone confessed judgment on Feb 14, 2011 in the amount of $10,650,027.74.
- Grove Estates filed a Petition to Open/Strike the Confessed Judgment on Mar 14, 2011; the lower court denied, and this appeal followed, with the court affirming in most respects but remanding on attorney-fee-shifting issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the warrant of attorney defeats the confessed judgments | Grove Estates argues no valid warrant of attorney because it was not on the signature page. | Graystone Bank argues the warrant appeared in the body and directly related to the signature. | No fatal defect; warrant valid and signed; judgments not struck. |
| Whether lack of proximity of the warrant to the signature requires striking | Proximate signature on same page required. | Warrant located near signature on following page suffices. | Proximity requirement not violated; warrant valid. |
| Whether the 10% fee-shifting attorney’s fees are reasonable | 10% fee is excessive for four boilerplate confessions; not a reasonable result. | Contract allows 10% but reasonable under circumstances; no adjustment of fee addressed. | Remand to assess reasonableness under the circumstances and modify if necessary. |
| Whether misrepresentation and reliance justify opening the confessed judgments | Defendants misled about refinancing becoming a mere formality, inducing reliance. | Record shows Pasch understood conditions remained unmet and beyond Graystone’s control. | Lower court did not err; denial affirmed on this issue. |
Key Cases Cited
- Frantz Tractor Co. v. Wyoming Valley Nursery, 384 Pa. 213 (1956) (strict formalities for warrants of attorney; direct relation required)
- Egyptian Sands Real Estate, Inc. v. Polony, 222 Pa. Super. 315 (1972) (warrant must bear direct relation to the signer; not implied)
- L.B. Foster Co. v. Tri-W Const. Co., 409 Pa. 318 (1962) (signature must bear direct relation to the warrant; signed and on body of document)
- Hazer v. Zabala, 26 A.3d 1166 (Pa. Super. 2011) (cognovit invalid when located outside or merely incorporated by reference)
- Dollar Bank, Fed. Sav. Bank v. Northwood Cheese Co., 431 Pa. Super. 541 (1994) (court may modify confession or reduce fees if excessive)
- McMullen v. Kutz, 603 Pa. 602 (2009) (fee-shifting provisions must be reasonable under circumstances)
- Osprey Portfolio, LLC v. Izett, 32 A.3d 793 (Pa. Super. 2011) (standard for reviewing petitions to strike/open confessions of judgment)