John T. NICHOLAS and Brett Strothers, t/a Nicholas and Strothers, a Partnership, Appellants v. Drew M. HOFMANN, Individually; the Estate of Conrad J. Hofmann, Drew M. Hofmann, Executor; Conrad G. Hofmann, Jr., Individually and Keehof Bar, Inc.
No. 2567 EDA 2015
Superior Court of Pennsylvania.
Argued August 31, 2016. Filed March 24, 2017
158 A.3d 675
OPINION BY SOLANO, J.
Richard L. Vanderslice, Philadelphia, for appellants. Paul A. R. Steward, Wynnwood, for appellees. BEFORE: BOWES, J., OTT, J., and SOLANO, J.
Finally, the court‘s reliance on Wright is misplaced. In Wright, the complainant suffered damage to crops and two pieces of farm equipment as a result of the defendant‘s actions. Wright, 722 A.2d at 158-59. At the time of trial, only one of the pieces of farm equipment had estimates and repair bills available for it. Id. Accordingly, the Wright jury, considering only evidence of that loss, determined damages between $1,000.00 and $5,000.00. Id. At the time of sentencing, the trial court ordered restitution in the amount of $20,745.82, as the second piece of equipment had been repaired and the complainant could now prove his damages for both pieces of equipment. Id. at 159. This Court upheld the order of restitution, finding that although the jury had made a determination for grading purposes, the sentencing court could award restitution beyond that amount where the record supported the order. Id. at 160-61.
By contrast, in the instant case, the jury had all of the necessary evidence before it at the time of trial. At the sentencing hearing, the information relied upon by the trial court in fashioning the restitution amount was 1) the trial testimony of Mr. Stuka regarding the amount paid to a contractor to “fix” Appellant‘s work, and 2) the trial testimony of the contractor regarding the amount he billed Mr. Stuka. This was not, as in Wright, a case where information was unavailable to the jury at the time of sentencing. On the contrary, the jury heard and considered this information, and either found it unconvincing or not criminal: the same jury acquitted Appellant of fraudulent business practices.
Absent circumstances such as those in Wright, the court may not go beyond the jury‘s verdict in fashioning its restitution award. Thus, the amount of restitution ordered was neither a direct result of Appellant‘s criminal conduct, nor was it supported by the record. Dohner, 725 A.2d at 824.
We note that Mr. Stuka is not without recourse. The Crimes Code specifically provides that an order of restitution does not prevent him from recovering additional funds through a civil lawsuit. See
Judgment of sentence vacated; case remanded for resentencing in accordance with this opinion; jurisdiction relinquished.
Plaintiff 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.
This 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 the deed.
Conrad 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.
Conrad 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
On May 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.
On July 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 estate1 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,2 and contained a protective provision regarding claims against the estate, id. § VII.3
On 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
Intending to be legally bound, the party hereto has affixed her [sic] hand and seal the day and year first above written.
Estate of Conrad Hofmann, deceased
BY DREW M. HOFMANN (SEAL)
Drew M. Hofmann, ExecutorDREW M. HOFMANN (seal)
Drew M. HofmannKEEHOF BAR, INC., a Pennsylvania business Corporation
BY DREW M. HOFMANN
Drew M. Hofmann
President and sole shareholder
Id.
Like 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 1st, 2012.
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.4 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, 53-54, 87.
In 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.
Drew tried to use the N & S loan proceeds to reopen Keehof Bar and make it
On 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. P-3.5 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.6
N & S 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., 6/9/14.
On 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 1-2.7
On December 26, 2014, the remaining defendants filed an Answer and Counterclaim to Quiet Title, citing
On July 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 Hofmann. Id.
Roberti, 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 Gaffney8 were present. Tr. Ct. Op. at 4; N.T., 7/13/15, at 9-11.9 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.
Roberti 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 32-36, 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, 48.10
According 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 61-62.11
Plaintiff 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 foreclosure12 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.
Strothers 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, 86-87.13
Defendant 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.
Regarding 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.
Drew 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.
The day 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:
- 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;
- 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 CANCELLED14;
- 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;
- 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;
- 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 record;
- 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 (51%) to Drew M. Hofmann and Forty-Nine percent (49%) to Conrad G. Hofmann), against all claims of the Plaintiffs;
- The Commissioner of the Department of Records of Philadelphia County is further directed to record a certified copy of this Order to properly acknowledge Defendants, Drew M. Hofmann and Conrad G. Hofmann, Jr., as the legal owners of the Property 551 East Cambria Street, Philadelphia, Pennsylvania 19134;
- Defendants are responsible for obtaining a certified copy of this Order from the Prothonotary‘s Office. Defendants are also responsible for giving certified copies of this Order to the Document [R]ecording Division of the Department of Records.
Id.
The parties did not agree upon the essential terms in the Mortgage agreement; thus, contractual formation never occurred. The lack of mutual assent was apparent from the plain language in the Mortgage Note; it stated, in part, that “the sum of $140,000 was advanced during the lifetime of Conrad Hofmann ....” In the same paragraph, it stated, “[t]he parties agree that John T. Nicholas advanced $140,000.00 on the date of this note including accrued interest, if any ....” These two clauses are clearly contradictory; both cannot be true. The parties disputed a single loan in the amount of $140,000.00; that loan could not have been distributed twice—once during the lifetime of Conrad Hofmann and once on November 8, 2010, the date of the Note. Moreover, Conrad Hofmann, Sr. was not alive on November 8, 2010.
The lack of mutual assent was also demonstrated by the conflicting testimony of Brett Strothers and Defendant Drew Hofmann at trial. These parties disagreed about the material terms of the Mortgage agreement, including who received the $140,000.00 referenced in the Note. Although the Note stated that $140,000.00 was advanced during the lifetime of Conrad Hofmann, Brett Strothers testified that the money was advanced to Defendant Drew Hofmann ....
Defendant Drew Hofmann, however, testified that he never received the $140,000.00 referenced in the Note; he only received $5,000.00 ....
Even Mr. Roberti, a licensed attorney and drafter of the Note, disagreed about the material terms of the Mortgage agreement. According to Mr. Roberti, the sum of $140,000.00 was either advanced to Conrad J. Hofmann Sr. or Conrad G. Hofmann, Jr. ...
The inconsistency and ambiguity with regard to these essential terms demonstrates the lack of mutual assent between the parties. Moreover, the testimony demonstrated that the nature and extent of the parties’ obligations was not certain. As such, this Court properly found that the mortgage was unenforceable, in part, because there was no meeting of the minds.
Id. at 8-11 (citation to record omitted).
The court also concluded that the mortgage was unenforceable because it was supported by past consideration. Citing the “general rule that past consideration is not sufficient to support a subsequent promise where the writing does not contain an express statement that the signer intends to be legally bound,” the court stated that the “past act of advancing $140,000.00, prior to the execution of the Mortgage, did not constitute consideration sufficient to create a binding contract.” Tr. Ct. Op., 1/4/16, at 11-12.15 In addition, the
The court said it voided the January 25, 2012 deed of the Cambria Street property from Conrad Jr. to N & S because the deed “purported to convey a greater share of the Subject Property than Conrad G. Hofmann Jr. owned.” Tr. Ct. Op. at 16. In addition, the court said the deed was invalid because Conrad Jr. had not yet received his interest in the estate at the time he made the deed. Id. at 17.
On July 24, 2015, N & S filed a timely Post-Trial Motion for Judgment Notwithstanding the Verdict. Trial Ct. Op. at 2. It argued that the evidence at trial supported enforcement of the mortgage, and that the trial court‘s order invalidating the January 25, 2012 deed exceeded the bounds of a foreclosure action as defined by the Rules of Civil Procedure. Post-Trial Mot. (citing
N & S filed a Notice of Appeal to this Court on August 6, 2015. It filed a Statement of Matters Complained of on Appeal with the trial court on August 31, 2015.16 On October 6, 2015, the court entered judgment, thus perfecting this appeal. See generally Johnston the Florist, Inc. v. TEDCO Const. Corp., 441 Pa.Super. 281, 657 A.2d 511, 514 (1995) (en banc).
On appeal, N & S raises the following issues:
- Did the trial court err in determining that the Mortgage securing the Note was unenforceable for a lack of consideration despite satisfying the Statute of Frauds with the language “intending to be legally bound“[?]
- Did the trial court err in relying on parol[] evidence to determine that the Mortgage securing the Note was unenforceable for the parties did not have a “meeting of the minds“[?]
- As a matter of law, the incontrovertible evidence adduced through the trial of the case was overwhelmingly in favor of enforcing the [N & S] Mortgage and Note against the Appellee, The Estate of Conrad Hofmann, Drew Hofmann, executor.
- As a matter of law, did the trial court exceed the scope of an in rem foreclosure proceeding by considering and opining on a Deed and power of attorney to assign stock in Keehof Bar[?]
Pl.‘s Br. at 6 (footnote omitted).17
When this Court reviews the findings of the trial judge, the evidence is viewed in the light most favorable to the victorious party below and all evidence and proper inferences favorable to that party must be taken as true and all unfavorable inferences rejected. The court‘s findings are especially binding on appeal, where they are based upon the credibility of the witnesses, unless it appears that the court abused its discretion or that the court‘s findings lack evidentiary support or that the court capriciously disbelieved the evidence. Hart v. Arnold, 884 A.2d 316, 330-31 (Pa. Super. 2005) (internal quotation marks and citations omitted), appeal denied, 587 Pa. 695, 897 A.2d 458 (2006). It is inappropriate for an appellate court to make factual determinations in the face of conflicting evidence. Lanard & Axilbund, Inc. v. Muscara, 394 Pa.Super. 251, 575 A.2d 615, 619 (1990).
Consideration and the Statute of Frauds
N & S first challenges the trial court‘s conclusion that the mortgage and note were unenforceable because they were supported by past consideration. See Pl.‘s Br. at 21-23. Of the $195,000 reflected by the mortgage note, $140,000 had allegedly been given by Nicholas of N & S to Defendant Conrad Sr. before Conrad Sr. died. The trial court stated that, “It is a general rule that past consideration is not sufficient to support a subsequent promise where the writing does not contain an express statement that the signer intends to be legally bound .... Th[e] past act of advancing $140,000.00, prior to the execution of the Mortgage, did not constitute consideration sufficient to create a binding contract.” Tr. Ct. Op. at 11-12.
N & S argues that because the note contains the words “intending to be legally bound,” it satisfied Pennsylvania‘s Uniform Written Obligations Act (“UWOA“),
Section 1 of the UWOA,
A written release or promise, hereafter made and signed by the person releasing or promising, shall not be invalid or unenforceable for lack of consideration, if the writing also contains an additional express statement, in any form of language, that the signer intends to be legally bound.
Under this provision, if an agreement is accompanied by an intentional, binding statement, it does not require further consideration.
Our caselaw has explained that, generally, this section provides that a written agreement will not be deemed to be void for lack of consideration if it contains an express statement that the signer intends to be legally bound, Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425, 433 (2004), and, more explicitly, has interpreted this pro-
Here, the trial court declared that because the note and mortgage were supported primarily by consideration paid in the past, they were “unenforceable” for lack of valid consideration. Tr. Ct. Op. at 11-12.22 The only authority the trial court cited to support that conclusion was the UWOA,
Intending to be legally bound, the party hereto has affixed her [sic] hand and seal the day and year first above written. [Emphasis added.]
This language satisfies the UWOA, and it made the note and the mortgage that secures the note valid and binding. See Socko, 126 A.3d at 1276. The trial court erred in overlooking this critical part of the contract and in holding the note and mortgage invalid and unenforceable as a result.
In addition to holding the mortgage invalid and unenforceable under the UWOA, the trial court also invoked an 1855 “supplement” to the Statute of Frauds of 1772, Act No. 1855-322, § 1, P.L. 308 (Apr. 26, 1855),
The trial court suggested that Drew was without power to execute the note and mortgage because the spendthrift provision in Section VII of Conrad Sr.‘s Will stated that “no interest in income or principal hereunder shall be subject or liable to” any pledge, debt, contract, or liability or “subject or liable to levy, attachment, execution, sequestration, or seizure.” The court interpreted this provision to prohibit Drew from entering into the mortgage contract. Tr. Ct. Op. at 15. Drew signed the note three times—as executor of Conrad Sr.‘s estate, in his personal capacity, and as president and sole shareholder of Keehof Bar. The trial court‘s discussion of Section VII pertained to Drew‘s authority to sign as executor, and if the trial court‘s interpretation of the Will were correct, then the validity of Drew‘s statement in the note that he intended to be legally bound by its terms might be in question—at least insofar as Drew signed as executor. Because the trial court overlooked Drew‘s statement that he intended to be bound, it will be necessary for the trial court to reconsider the question of Drew‘s authority to sign that statement in light of the terms of the Will. In this connection, we note that the trial court also appears to have overlooked Section VI.C. and D. of Conrad Sr.‘s Will, which authorized Drew, as executor, to mortgage real property and to compromise claims. See also PEF Code,
N & S also contends that the trial court erred in relying on parol evidence to determine that the note and mortgage were unenforceable because the parties did not have a “meeting of the minds.” See Pl.‘s Br. at 27-29. The trial court stated, “For a meeting of the minds to occur, the parties must mutually assent to the same contractual terms.” Trial Ct. Op., 1/4/16, at 8 (citing Mountain Props., Inc. v. Tyler Hill Realty Corp., 767 A.2d 1096, 110[1] (Pa. Super.), appeal denied, 566 Pa. 666, 782 A.2d 547 (2001)). The court explained that it examined the ambiguous language in the note surrounding the $140,000—“THE SUM OF $140,000 WAS ADVANCED DURING THE LIFETIME OF CONRAD HOFMANN ... THE PARTIES AGREE THAT JOHN T. NICHOLAS ADVANCED $140,000.00 ON THE DATE OF THIS NOTE“—and considered the conflicting testimony about it that was given at trial. Id. at 8-11.26 Based on the testimony, the trial court found that “the nature and extent of the parties’ obligations was not certain,” and “[t]he parties did not agree upon the essential terms in the Mortgage; thus, contractual formation never occurred.” Id. at 8-9, 11. N & S insists, however, that because the essential language in the mortgage contract was clear, the trial court should not have strayed from its four corners when interpreting its meaning. Pl.‘s Br. at 28 (citing, inter alia, Goldsmith v. Means, 104 Pa.Super. 571, 158 A. 596, 599 (1932) (“[W]hen the intention of the parties can be clearly ascertained from the deed and the plan, parol evidence cannot be received to alter it“)).27
We agree that the trial court erred. First, this is an action by N & S to foreclose on the mortgage securing the note. Although the trial court focused on an ambiguous term that it found in the note, it did not assert that any provision of the mortgage itself is ambiguous. Nor could it. The mortgage clearly provides that the estate executed a $195,000 note and that it “grants and conveys” the Cambria Street property as security for payment of the note. Mortgage, Ex. P-4. The obligation under the mortgage document is clear.
The trial court held, however, that there was no “meeting of the minds” regarding the mortgage debt set forth in the note itself. In doing so, the court misunderstood the role of a “meeting of the minds” in contract formation. Because a court is constrained to construe the parties’ contract based on the parties’ outward and objective actions—particularly, the plain terms of their written agreement—a subjective, or “true and actual,” meeting of the minds is not necessary for an enforceable contract to form. Long v. Brown, 399 Pa.Super. 312, 582 A.2d 359, 363 (1990); see also Krizovensky v. Krizovensky, 425 Pa.Super. 204, 624 A.2d 638, 643 (1993) (“where the parties’ agreement has been reduced to a writing, the actual intent of the parties is not relevant unless it has been expressed in the writing“), appeal denied, 536 Pa. 626, 637 A.2d 287 (1993). “Contracting parties are normally bound by their agreements, without regard to whether the terms thereof were read and fully understood and irrespective of whether the agreements embodied reasonable or good bargains.” Simeone v. Simeone, 525 Pa. 392, 581 A.2d 162, 165 (1990) (citation omitted). “Once a person enters into a written agreement[,] he builds around himself a stone wall, from which he cannot escape by merely asserting he had not understood what he was signing.” Id. at 165-66 (quoting Bollinger v. Central Pennsylvania Quarry Stripping & Construction Co., 425 Pa. 430, 229 A.2d 741, 742 (1967)). It should not “be assumed that the parties were ignorant of the meaning of the language employed.” Steuart v. McChesney, 498 Pa. 45, 444 A.2d 659, 662 (1982).
Thus, when faced with determining whether the parties mutually assented to the contract, the trial court should have heeded the following—
The principles that guide this inquiry are well-settled. The fundamental rule in contract interpretation is to ascertain the intent of the contracting parties. In cases of a written contract, the intent of the parties is the writing itself.... When the terms of a contract are clear and unambiguous, the intent of the parties is to be ascertained from the document itself. When, however, an ambiguity exists, parol evidence is admissible to explain or clarify or resolve the ambiguity, irrespective of whether the ambiguity is patent, created by the language of the instrument, or latent, created by extrinsic or collateral circumstances.
Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 588 Pa. 470, 905 A.2d 462, 468-69 (2006) (citations omitted).
Whether a contract contains ambiguous terms is a question of law. Walton v. Philadelphia Nat. Bank., 376 Pa.Super. 329, 545 A.2d 1383, 1388 (1988). “To determine whether there is an ambiguity, it is proper for a court to hear evidence from both parties and then decide whether there are objective indications that the terms of the contract are subject to differing meanings.” Krizovensky, 624 A.2d at 643. “A contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense.” Ins. Adjustment, 905 A.2d at 469. The fact that the parties do not agree upon a proper interpretation does not necessarily render a contract ambiguous. Krizovensky, 624 A.2d at 642.
Here, the trial court found that the mortgage note contains an ambiguity: the language stating “THE SUM OF $140,000 WAS ADVANCED DURING THE LIFETIME OF CONRAD HOFMANN,” clearly conflicts with the statement a few lines later that, “THE PARTIES AGREE THAT JOHN T. NICHOLAS ADVANCED $140,000.00 ON THE DATE OF THIS NOTE.” Because these provisions cannot be read as consistent with one another, we agree that they are ambiguous and that the trial court was free to use parol evidence to “resolve the ambiguity.” Ins. Adjustment, 905 A.2d at 468-69. But that is not what the trial court did. Rather, after having identified this ambiguity within the language of the note, the court surveyed testimony by various parties to the contract and its drafting (Drew, Strothers, and Roberti) to certify that the parties did not agree on what the ambiguous terms meant. See Tr. Ct. Op. at 9-11.28 And then, having failed to resolve the ambiguity, the court declared that the “[f]he inconsistency and ambiguity ... demonstrates the lack of mutual assent between the parties” and that “the nature and extent of the parties’ obligations was not certain.” Id. at 11. Thus, the court used an ambiguity in the contract that it failed to resolve as a tool to declare the mortgage unenforceable. See id.
The trial court had no license to invalidate the mortgage in this way. “While an agreement in order to be binding must be sufficiently definite to enable a court to give it an exact meaning, In re Friese‘s Estate, 336 Pa. 241, 9 A.2d 401, 403 (1939), “not every term of a contract must always be stated in complete detail.” Helpin v. Trustees of Univ. of Pennsylvania, 969 A.2d 601, 610-11 (Pa. Super. 2009), aff‘d, 608 Pa. 45, 10 A.3d 267 (2010). Where an essential term is missing or not clearly expressed, “the court may infer the parties’ intent from other evidence and impose a term consistent with it.” Id. Here, however, the ambiguity on which the trial court focused did not pertain to an essential term of the note or mortgage. Rather, it related only to whether $140,000 of the $195,000 mortgage debt was advanced prior to or at the time of execution of the mortgage. Resolution of that question was not necessary to determine that the note obligated its signers to repay the $195,000 debt recited in it,29 or that the Cambria Street property stood as security for that payment and was subject to foreclosure if the payment was not made. The amount of the debt, due date, and property description were clearly stated in the documents. Therefore, the ambiguity regarding the $140,000 did not make the note and mortgage too indefinite to be binding. See In re Berry, 11 B.R. 886, 891 (W.D. Pa. 1981) (signed mortgage has “the indications of validity” where it “clearly states that it is a mortgage and describes the real property in detail“); cf. also GMH Assocs., Inc. v. Prudential Realty Grp., 752 A.2d 889, 900 (Pa. Super. 2000) (“The essential terms that must be identified and agreed to in order to form a valid contract for the sale of real estate are the naming of the specific parties, property and consideration or purchase price“).
The trial court‘s error was two-fold. First, it failed to recognize that the parties agreed to the material, essential terms so that a contract was formed, and that the only term lacking clarity was the non-critical detail of when the $140,000 was advanced. Second, with respect to this ambiguous element, the court failed to resolve the ambiguity in such a way as to give effect to the parties’ intentions.30 For present purposes, it is the first of these errors that controls our disposition. Because the trial court held the note and mortgage invalid on the basis of this error of law, its decisions on these issues cannot stand. See Allegheny Cty. Hous. Auth., 908 A.2d at 340.
Because we hold that the trial court erred in both of its holdings regarding lack of consideration and “meeting of the minds,” we will vacate the judgment in favor of Defendants on the mortgage foreclosure issues. Because that judgment was entered after a non-jury trial, we will remand this matter to the trial court to consider its other rulings on the mortgage foreclosure afresh in light of these holdings. Due to our disposition, we will not address the other issues that N & S presents, but instead leave those issues for reconsideration on remand. See Weaver v. Martin, 440 Pa.Super. 185, 655 A.2d 180, 182 n. 1 (1995).
The Trial Court‘s Holding That the Deed Given to N & S by Conrad Jr. Is Invalid
In N & S‘s final issue, it complains that the trial court exceeded the scope of an in rem foreclosure proceeding by deciding Defendants’ counterclaim to quiet title in their favor and declaring the deed given to N & S by Conrad Jr. to be invalid and void. Pl.‘s Br. at 35-39.31 N & S claims that the rules governing mortgage foreclosure,
Defendants do not respond specifically to N & S’ challenge to the scope of the trial court‘s rulings. Instead, Defendants argue that N & S admitted at trial that the deed was void ab initio. Appellee‘s Br. at 16. Our review of the record discloses that when Defendants introduced the deed during trial to show that N & S already had title to the property under mortgage, N & S objected on grounds of relevance, stating that both parties had agreed that the deed was void ab initio. N.T. at 16-17. It is this statement on which Defendants rely. However, other than citing this statement, Defendants make no legal argument and cite no authority in opposition to N & S’ position on this issue. If Defendants’ argument is that N & S’ statement amounts to a judicial admission (and it is unclear if this is what Defendants posit), we note that judicial admissions apply only to disputed facts, and are “exclusive of legal theories and conclusions of law,” such as the validity of a legal document. John B. Conomos, Inc. v. Sun Co., Inc. (R & M), 831 A.2d 696, 713 (Pa. Super. 2003), appeal denied, 577 Pa. 697, 845 A.2d 818 (2004). In fact, our review of the record suggests to us that throughout the pleadings both parties have argued both for and against the validity of the deed. See Am. Compl., 4/11/14, ¶ 19; Am. Compl., 6/9/14, ¶¶ 10-13; Prelim. Objs., 12/23/13, ¶ 15; Answer, 12/26/14, ¶¶ 10, 34-35, 40-41. We therefore decline to resolve this issue on this basis.
The trial court‘s Rule 1925(a) opinion justifies its voiding of the deed for two reasons: (1) the deed conveyed a greater share of the property than Conrad Jr. was expecting to inherit,32 and (2) Conrad Jr.
The Rules of Civil Procedure governing foreclosure actions were drafted by our Supreme Court and adopted in 1949, but they have a statutory basis dating back to 1705. See Kenneth E. Gray, Definition; Conformity to Civil Action, in 15 West‘s Pennsylvania Practice, § 2:1 (Thomson Reuters, 3d ed., Dec. 2016 Update). Thus, despite its current embodiment in the Rules, the procedure in connection with the foreclosure of mortgages has been held to be “purely statutory,” so that its requirements must be stringently followed. Peoples Nat‘l Bank of Lebanon v. Noble, 338 Pa.Super. 177, 487 A.2d 912, 915 (1985).
Mortgage foreclosure in Pennsylvania is strictly an in rem or ”de terris” proceeding. Its purpose is solely to effect a judicial sale of the mortgaged property. U.S. Bank, N.A. v. Pautenis, 118 A.3d 386, 394 (Pa. Super. 2015). The holder of a mortgage note can decide whether to file a foreclosure action or to file an in personam assumpsit action on the note, but the actions are not usually combined. Levitt v. Patrick, 976 A.2d 581, 591 (Pa. Super. 2009); accord US Bank N.A. v. Mallory, 982 A.2d 986, 992 n. 3 (Pa. Super. 2009).34
Rule of Civil Procedure 1148, which governs which counterclaims are permissible in a mortgage foreclosure action, states:
A defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which the plaintiff‘s cause of action arose.
We have held that this rule is to be interpreted narrowly, and only counterclaims that are “part of or incident to the creation of the mortgage relationship itself” are to be permitted. Cunningham v. McWilliams, 714 A.2d 1054, 1057 (Pa. Super. 1998), appeal denied, 557 Pa. 653, 734 A.2d 861 (1999). Therefore, Rule 1148 “does not permit a counterclaim arising from a contract related to the mortgage, such as a contract for sale of real property.” Id.; accord Green Tree, 909 A.2d at 814. Nor does it permit counterclaims where the facts giving rise to the counterclaims occur after the creation of the mortgage and after the mortgagors were in default. First Wisconsin Trust Co. v. Strausser, 439 Pa.Super. 192, 653 A.2d 688, 695 (1995).
“Thus, in Pennsylvania, the scope of a foreclosure action is limited to the subject of the foreclosure, i.e., disposition of property subject to any affirmative defenses to foreclosure or counterclaims arising from the execution of the instrument(s) memorializing the debt and the security interest in the mortgaged property.” Rearick v. Elderton State Bank, 97 A.3d 374, 383 (Pa. Super. 2014). While Rule 1148 does not govern affirmative defenses listed as New Matter, such defenses
In contrast to a mortgage foreclosure action, an action to quiet title is generally brought by a possessor of land against another who has some claim or interest in the land.
Here, N & S filed to foreclose on a mortgage.35 Defendants filed a counterclaim to quiet title that raised, among other concerns, the validity of the January 25, 2012 deed. Trial Ct. Op. at 2; Answer to Second Amended Complaint with Counterclaim to Quiet Title and Affirmative Defenses. The counterclaim cited
We agree with N & S that the trial court erred in considering the validity of the deed and quieting title to the property. The trial court was tasked only with determining whether the foreclosure action would lie, and, if so, effecting a judicial sale of the foreclosed property. Pautenis, 118 A.3d at 394. Any permissible counterclaim by Defendants to quiet title must have been based upon the mortgage documents and their execution, not a subsequent deed. Rearick, 97 A.3d at 383. The January 25, 2012 deed was executed over a year after creation of the mortgage; it does not involve the same parties as the mortgage, does not mention the mortgage, and does not affect the legitimacy of the mortgage. Therefore, the deed could in no way be considered “part of or incident to the creation of the mortgage relationship itself.” Cunningham, 714 A.2d at 1057. We therefore hold that the trial court erred in opining on the validity of the January 25, 2012 deed, and in quieting title.
We recognize that the trial court‘s grounds for voiding the deed pertain to flaws in that document that may seem obvious—so much so that at one or more points in these proceedings they were acknowledged by N & S. Declining to permit the trial court to address these flaws in this proceeding under these circumstances therefore may seem wasteful and inefficient. But the Rules of Procedure are clear, and N & S properly preserved its objection under the rules throughout this case. We therefore are constrained to vacate the trial court‘s decision regarding the deed and title.
Because the trial court misconstrued the law, we vacate the judgment below, vacate the order denying N & S‘s post-trial motion, and remand for further proceedings.
Jurisdiction relinquished.
Notes
To the extent permissible by law, no interest in income or principle hereunder shall be subject or liable to anticipation, sale, assignment, pledge, debts, contracts, engagements, orders, liabilities, nor be subject or liable to levy, attachment, execution, sequestration, or seizure under any legal, equitable, or other processes. Will § VII.
I believed in the current condition with the amount of debt imposed upon [the property], that it was a beneficial situation for both ends, including us and Conrad, to come out of the situation with some sort of money in his pocket and to peaceably walk away in a gentleman‘s fashion. N.T. at 101-02.
- The Trial Court erred in finding that the Mortgage was unenforceable because the debt was not acknowledged in the decedent‘s Last Will and Testament.
- The Trial Court erred in finding that the Mortgage was unenforceable as the parties did not have a meeting of the minds.
- The Trial Court erred by finding the Mortgage was unenforceable for a lack of consideration.
- The Trial Court erred in finding that the exercise of the Irrevocable Stock Power by the Plaintiff to [ ] transfer the liquor license was improper and thereby violated the Mortgage.
- As a matter of Law, the incontrovertible evidence adduced through the trial of the case was overwhelmingly in favor of enforcing Plaintiff‘s November 8, 2010 Mortgage and Note against the Defendant, The Estate of Conrad Hofmann, Drew Hofmann, executor.
- The Trial Court erred as a matter of law in its finding that the deed dated January 25, 2012 was void.
A lack of consideration, if such existed, would not render [an] agreement a nullity, [if] the parties expressed therein their intent to be legally bound. Under the Uniform Written Obligations Act,
No action shall be brought whereby to charge any executor or administrator, upon any promise to answer damages out of his own estate, or whereby to charge the defendant, upon any special promise, to answer for the debt or default of another, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person by him authorized.