Walnut Street 2014-1 Issuer, LLC v. Pearlstein, M.
Walnut Street 2014-1 Issuer, LLC v. Pearlstein, M. No. 2557 EDA 2016
| Pa. Super. Ct. | Jun 22, 2017Background
- Michael S. Pearlstein was the personal guarantor of loans made to Empire Schuylkill, L.P., which owned a shopping mall; loans were originally made by The Bancorp Bank and later assigned to Walnut Street 2014-1 Issuer, LLC (Walnut).
- In 2011 Empire and the Bank executed an Amended Loan Agreement and Pearlstein executed a Personal Guaranty covering several notes; USDA issued a loan guaranty to the Bank based on information the Bank submitted.
- By 2015–2016 the Property’s value fell dramatically and Walnut confessed judgment against Empire (January 2016) and then against Pearlstein (March 2016) under the warrant of attorney and guaranty.
- Pearlstein filed a timely petition to open the confessed judgment alleging fraudulent inducement, non-occurrence of default, waiver/estoppel, and breach of contract; the trial court denied the petition and reconsideration, and Pearlstein appealed.
- The trial court concluded Pearlstein failed to plead prima facie meritorious defenses: fraud claims were conclusory and barred by the integration/parol-evidence rule; non-waiver provisions in the guaranty precluded waiver/estoppel; and Pearlstein lacked standing to assert breach of the USDA Loan Note Guarantee.
Issues
| Issue | Pearlstein's Argument | Walnut's Argument | Held |
|---|---|---|---|
| 1. Whether the trial court prematurely disposed of the petition without issuing a rule to show cause or allowing discovery | Trial court should have issued rule and allowed discovery because petition alleged some legally valid defenses | Rule 2959(b) threshold not met is procedural but court’s ultimate denial was supportable on merits | Court found a technical Rule 2959(b) error but affirmed because petition lacked prima facie grounds |
| 2. Fraudulent inducement based on Bank’s alleged misrepresentations to USDA | Bank knowingly overstated Property value to USDA and misled Pearlstein; but-for this he would not have signed guaranty | Allegations are vague/conclusory; integration clauses/parol rule bar extrinsic evidence; reliance and causation not pled | Petition’s fraud averments were speculative and parol evidence barred; defense fails |
| 3. Waiver/estoppel of defaults from Bank’s alleged long silence | Bank’s predecessor’s five-year silence waived enforcement; non-waiver clause can be waived by conduct; discovery needed | Personal Guaranty and Loan Agreement contain clear non-waiver clauses making delay irrelevant; no factual averments showing waiver of that clause | Non-waiver language was clear; no adequate factual showing of waiver by conduct; defense fails |
| 4. Breach of USDA Loan Note Guarantee (contract) | Bank breached USDA guaranty by misrepresenting values; Pearlstein and Empire were intended parties/beneficiaries | Guarantee is contract between USDA and the Bank; Pearlstein is not a party or third-party beneficiary and thus lacks standing | Pearlstein lacks standing to sue on the USDA Loan Note Guarantee; contract defense fails |
Key Cases Cited
- Crum v. F.L. Shaffer Co., 693 A.2d 984 (Pa. Super. 1997) (petition to open is equitable and committed to trial court discretion)
- Century Surety Co. v. Essington Auto Ctr., LLC, 140 A.3d 46 (Pa. Super. 2016) (standard for opening confessed judgment)
- Neducsin v. Caplan, 121 A.3d 498 (Pa. Super. 2015) (evaluation of meritorious-defense standard and Rule 2959 procedures)
- Ferrick v. Bianchini, 69 A.3d 642 (Pa. Super. 2013) (trial court must determine whether evidence would require jury submission)
- Van Arkel & Moss Props., Inc. v. Kendor, Ltd., 419 A.2d 593 (Pa. Super. 1980) (courts must view moving party’s evidence in light most favorable and not weigh conflicts)
- Youndt v. First Natl. Bank of Port Allegany, 686 A.2d 539 (Pa. Super. 1996) (parol evidence rule after full integration)