First Citizens v. Forksville Lumber (memorandum)
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J-S77031-13 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 FIRST CITIZENS NATIONAL BANK, Appellee v. FORKSVILLE LUMBER & VENEER, LLC, Appellant : : : : : : : : : IN THE SUPERIOR COURT OF PENNSYLVANIA No. 1128 MDA 2013 Appeal from the Judgment entered on May 6, 2013 in the Court of Common Pleas of Sullivan County, Civil Division, No. 2011-CV-203 BEFORE: BENDER, P.J., PANELLA and MUSMANNO, JJ. MEMORANDUM BY MUSMANNO, J.: FILED APRIL 25, 2014 In this mortgage foreclosure action, Forksville Lumber & Veneer, LLC We affirm. The trial court set forth the relevant facts underlying this appeal as follows: [O]n or about February 17, 2009[,] Plaintiff extended a hundred ninety[-]five thousand dollars ($1,795,000.00)[,] which Defendant agreed to repay, with interest at a variable rate, adjusted not more often than every sixty (60) months, over a term of twelve (12) years and six (6) months, until August 17, 2021[,] when the entire remaining unpaid principal balance, plus accrued interest, would be due and payable. In consideration for said loan and as security for the performance of the obligations of Defendant under the terms of the Promissory Note, Defendant J-S77031-13 granted to Plaintiff a mortgage against its real estate.[1] The Mortgage is recorded in the proper office in Sullivan County, Pennsylvania. Plaintiff asserts that on or about October 17, 2010, Defendant defaulted in its obligations under the [Promissory] Note and Mortgage by failing to pay the monthly payment due and by failing to make timely payment of the monthly installments of principal and interest due thereafter. As a result, Plaintiff [] instituted the instant mortgage foreclosure action. [In response, Defendant filed an Answer, New Matter and Counterclaim.] ribe [Forksville as] a family specialized in the production and sale of veneer lumber. Defendant had financing in place for years in the form of an open-ended line of credit[FN 1] [FN 1] Defendant borrowed money to pay for up-front costs of logging projects and would pay off the line [of credit] when the lumber was eventually sold. In or around May of 2008, the Tanfields signed a contract with located] in Forksville, Sullivan County, Pennsylvania, in an effort to compete in the veneer market. Because the Baumunk graphic area, the Tanfields sought a new lender. Originally, the Tanfields chose Ag 1 s comprised of five separate written Letter, Mortgage Agreement, Business Loan Agreement, and a Promissory Note. Forksville was represented by legal counsel during the execution of the loan documents, and, at the closing on February 17, 2009, representatives of Forksville signed the Promissory Note, Mortgage Agreement, and Business Loan Agreement. Importantly, the Business Loan Agreement contains an integration clause, providing that the loan agreement. -2- J-S77031-13 [FN 2] the Tanfields declined the loan. [FN 2] A borrowing base is comprised of assets, generally inventory and/or accounts receivable, which are available to use as collateral to secure a revolving line of credit. The size of the borrowing base varies with changes in amounts of the [their] business[, they] could not finance through a credit facility that required a borrowing base, i.e.[,] existing accounts ¶ 54. As a result, the Tanfields then negotiated with Plaintiff.[2] officers were aware that Defendant [was] seeking a loan with Id. at] ¶ 58. Defendant further alleges Tanfields had not closed with Ag Choice for the sole reason that the financing was on an unacceptable borrowing base. [Id. at] ¶ 60. that Plaintiff would make available funding to Defendant[] on lender[, i.e., Pennstar], that is, funding timber project costs up front. Because the Commitment Letter, Promissory Note and the Business Loan Agreement all have language regarding borrowing base certificates, argues Defendant, Plaintiff breached its agreement to lend, breached its fiduciary duty, made fraudulent 2 Although the Tanfields rejected the Ag Choice contract because of the the Commitment Letter, Business Loan Agreement, and Promissory Note each contained express language requiring that Defendant provide Plaintiff -3- J-S77031-13 and negligent misrepresentations and breached its duty of good faith and fair dealing. Trial Court Opinion, 6/13/12, at 3-4 (some footnotes added; footnotes in original). In April 2012, First Citizens filed a Motion for Partial Judgment on the Pleadings. On June 13, 2012, the trial court entered an Order granting First Citizens with prejudice. Forksville filed a Notice of Appeal from the June 13, 2012 Order. In response, this Court entered an Order quashing the appeal, stating that the In April 2013, the parties entered into a Stipulation, agreeing that all of the issues raised in the pleadings had been ruled upon by the trial court, the matter was ripe for appeal, and requesting that the trial court enter judgment against Forksville. Pursuant to the Stipulation, the trial court filed an Order on May 6, 2013, entering Judgment in favor of First Citizens in the amount of $1,862,883.25. Forksville timely filed a Notice of Appeal. On appeal, Forksville presents the following issues for our review: 1. Whether the lower court erred by failing to address whether the parol evidence rule barred extrinsic evidence without having first determined whether the loan documents were fully integrated? 2. Whether Forksville ple[]d fraud in the execution, as Forksville alleged that the loan documents did not contain the terms, -4- J-S77031-13 represented the loan documents would contain? 3. Whether the lower court erred in failing to consider the relative sophistication of Forksville as a borrower in applying the parol evidence rule and in further concluding that 4. Whether the lower court committed error in granting [First y despite the fact that the [C]ounterclaims are directed to workout of the loans, during which time [First Citizens] had complete Brief for Appellant at 5-6 (footnote, emphasis and capitalization omitted). In its first issue, Forksville argues that the trial court erred by determining that the parol evidence rule applied to this case and barred Forksville from introducing extrinsic evidence to alter or supplement the Id. at 15. According to Forksville, prior to the execution of the loan documents, the parties agreed that their loan agreement would i.e., in that First Citizens purportedly would not require Forksville to provide a borrowing base as part of the loan agreement, but this term was omitted from the loan documents. Id. at 14, 20. Pennsylvania law defines the parol evidence rule as follows: Where the parties, without any fraud or mistake, have deliberately put their engagements in writing, the law declares the writing to be not only the best, but the only, evidence of their agreement. All preliminary negotiations, conversations and verbal agreements are merged in and superseded by the subsequent written contract and unless fraud, accident or -5- J-S77031-13 mistake be averred, the writing constitutes the agreement between the parties, and its terms and agreements cannot be added to nor subtracted from by parol evidence. DeArmitt v. New York Life Ins. Co., 73 A.3d 578, 589 (Pa. Super. 2013) (ellipses omitted) (quoting Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 436 (Pa. 2004)). The parol evidence rule seeks to preserve the integrity of a written agreement by barring the contracting parties from trying to alter the meaning of their agreement through use of contemporaneous oral declarations. For the parol evidence rule to apply, there must be a writing that represents the entire contract between the parties. An integration clause stating the parties intend the writing to represent their entire agreement is conversations and agreements made prior to its execution. DeArmitt, 73 A.3d at 589-90 (emphasis added; citations, quotation marks and brackets omitted). conclusion that they that the Business Loan Agreement contains an integration clause. 3 Id. at 16, 17. The integration clause in the Business Loan Agreement provides as follows: This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No 3 -6- J-S77031-13 alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Business Loan Agreement, 2/17/09, at 4; see also id. at 5 (defining the agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter Furthermore, although Forksville argues that the integration clause was in boilerplate form and in the provisions of this Business Loan Agreement and [that Forksville] Id. at 5 (capitalization omitted). Accordingly, there . See DeArmitt, supra (stating providing that the parties intend the writing to represent their entire execution). Forksville next contends that -7- even if the trial court properly J-S77031-13 relief because it pled an exception to the application of the parol evidence rule. Brief for Appellant at 20. Specifically, Forksville argues that it pled in the contract by omitting from the loan documents provisions providing that not require a borrowing base from Forksville). Id. Our Pennsylvania Supreme Court has stated as follows regarding the fraud in the execution exception: the parol evidence rule applies and evidence of any previous oral or written negotiations or agreements involving the same subject matter as the contract is almost always inadmissible to explain or vary the terms of the contract. One exception to this general rule is that parol evidence may be introduced to vary a writing a term was omitted from the contract because of fraud, accident, or mistake. Notably, while parol evidence may be introduced of the contract, i.e., that a term was fraudulently omitted from the contract, parol evidence may not be admitted based on a claim that there was fraud in the inducement of the contract, i.e., that an opposing party made false representations that induced the complaining party to agree to the contract. Yocca, 854 A.2d at 436-37 (citations and footnote omitted). As stated above, Forksville was represented by legal counsel during acknowledged that they had read and agreed to all of the language in the loan documents, none of which contained any language referring to Pennstar -8- J-S77031-13 documents contained express language requiring that Forksville provide First Citizens with a borrowing base and monthly borrowing base certificates as its Opinion: [Prior to executing the loan documents with First Citizens, Forksville] refused to enter into a contract with Ag Choice because of [the] borrowing base language [contained in the Ag Choice contract]. As such, [Forksville] certainly should have that said agreement contained similar language reflecting that the loan would be upon a borrowing base. [Forksville argues of loan documents believing they contained terms agreed upon may be true, the Tanfields, on behalf of [Forksville], declined the To now argue that [Forksville] did not know to avoid similar language with its agreement with [First Citizens] is disingenuous. Trial Court Opinion, 6/13/12, at 7-8 (citation omitted). We agree with the the execution exception to the parol evidence rule.4 failed to adequately consider that the Tanfields were laypersons and not sophisticated in legal or banking matters. Brief for Appellant at 21-22. This 4 To the extent that Forksville pled fraud in its Counterclaim, such claim actually averred that First Citizens had committed fraud by inducing Forksville to enter into the contract, which is not an exception to the parol evidence rule. See Yocca, 854 A.2d at 437; see also Brief for Appellant at -9- J-S77031-13 claim lacks merit. Not only were the Tanfields represented by legal counsel during the execution of the loan documents, but it is also well-established without regard to whether the terms thereof were read and fully understood and irrespective of whether the agreements embodied reasonable or good De Lage Landen Fin. Servs. v. M.B. Mgmt. Co., 888 A.2d 895, 899 (Pa. Super. 2005) (citation omitted). Finally, Forksville argues that the trial court erred by dismissing all of See Brief for Appellant at 21-29. We disagree. scant relevant argument, and, where it does, it fails to cite to any evidence 5 Accordingly, we could deem that Forksville waived this claim. See Pa.R.A.P. 2119(c) (mandating that an appellant develop an argument with citation to the record if reference is made to the evidence, pleadings or any other matter appearing in the record). Nevertheless, there is no merit to ave already determined that the contract between 5 have already addressed above, that First Citizens had promised that the was in a disproportionate position of power and sophistication as compared to Forksville. See Brief for Appellant at 21-29. - 10 - J-S77031-13 the parties was enforceable and a complete and final expression of the on behalf of First Citizens, see Trial Court Opinion, 6/13/12, at 7-8, and this finding is amply supported by the record. Judgment affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 4/25/2014 - 11 -
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