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HomeMy WebLinkAbout10-1385COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION n N PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff V. WILLIAM C. KOLLAS, Defendant r- G = p DOCKET NO. CONFESSION OF JUDGMEN76 PREVIOUSLY ASSIGNED TO: N/A CONFESSION OF JUDGMENT Pursuant to the authority contained in the warrant of attorney, the original or a copy of which is attached to the Complaint filed in this action, I appear for the Defendant and confess judgment in favor of the Plaintiff and against the Defendant as follows: a. Principal b. Interest to February 18, 2010 C. Attorneys' Fees TOTAL: Date: February,, sE, 2010 $1,109,578.99 $ 3,012.82 $ 112,591.18 $1,225,182.99, plus interest, other expenses, fees and costs Respectfully submitted, McNees Wallace & Nurick LLC By: ?f re ?kfiff, Esquire Su e Court ID #24848 00 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff 57A s0 p°?°' y cff k- P'W 43r6-0yq COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff V. WILLIAM C. KOLLAS, Defendant DOCKET NO. 0 ?3 C ?/ n Q CONFESSION OF JUDGMENT t PREVIOUSLY ASSIGNED TO: NIX' COMPLAINT FOR CONFESSION OF JUDGMENT UNDER RULE 2951 1. The Plaintiff, PNC Bank, National Association, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., is a national banking association organized and existing under the laws of the United States of America with a principal office located at 4242 Carlisle Pike, Camp Hill, PA 17011 ("Plaintiff") 2. The Defendant, William C. Kollas, is an adult individual whose last known address is 850 Kiehl Drive, Lemoyne, PA 17043 ("Defendant"). 3. The Defendant executed and delivered to the Plaintiff a Commercial Guaranty dated August 7, 2007 ("Guaranty"), a true and correct photostatic reproduction of the original of which is attached hereto as Exhibit "A" and made part hereof. 4. The Defendant executed and delivered to the Plaintiff a Disclosure for Confession of Judgment, a true and correct photostatic reproduction of the original of which is attached hereto as Exhibit "B" and made part hereof. 5. Under the Guaranty, the Defendant guaranteed to the Plaintiff the payment of all amounts due to the Plaintiff by Yorktown Funding, Inc. ("Debtor") under the Promissory Note for a line of credit in the original principal amount of Four Million Dollars ($4,000,000) made available by the Plaintiff to the Debtor on or about August 7, 2009 ("Note"), a true and correct photostatic reproduction of the original of which is attached hereto as Exhibit "C" and made part hereof. 6. The Debtor is in default of the Debtor's obligations to make payment to the Plaintiff as required in the Note, and the Defendant is in default of the Defendant's obligations to make payment to the Plaintiff under the Guaranty. As a result of the Debtor's and the Defendant's defaults, all outstanding amounts as provided in the Note and the Guaranty are now due and payable in full, and payment of such amounts has been demanded by the Plaintiff. A copy of the Plaintiffs demand dated February 19, 2010, is attached hereto as Exhibit "D" and made a part hereof. 7. Judgment is not being entered by confession against a natural person in connection with a consumer credit transaction. 8. There has not been any assignment of the Guaranty or the Note. 9. Judgment has not been entered on the Guaranty in any jurisdiction. 10. An itemized computation of the amount due to the Plaintiff from the Defendant under the Guaranty as of February 18, 2010, is as follows: a. Principal $1,109,578.99 b. Interest $ 3,012.82 C. Attorneys' Fees $ 112,591.18 TOTAL: $1,225,182.99 11. Interest continues to accrue at the rate provided in the Note through the date of payment, including on and after the date of entry of judgment on this Complaint. WHEREFORE, Plaintiff, PNC Bank, National Association, demands judgment against the Defendant, William C. Kollas, in the amount of One Million Two Hundred Twenty-Five Thousand One Hundred Eighty-Two and 99/100 Dollars ($1,225,182.99), plus interest at the rate provided in the Note through the date of payment, including on and after the date of entry of judgment on this Complaint, and for other expenses, fees and costs to which the Plaintiff may be entitled. Respectfully submitted, McNees Wallace & Nurick LLC Date: February2s-, 2010 B Y: eoffrey ff, Esquire e Court ID #24848 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, DOCKET NO. successor to Pennsylvania State Bank, a division of BLC Bank, N.A., : Plaintiff V. WILLIAM C. KOLLAS, Defendant : CONFESSION OF JUDGMENT PREVIOUSLY ASSIGNED TO: N/A VERIFICATION I, Michael J. Fina, Vice President for PNC Bank, National Association, being authorized to do so on behalf of PNC Bank, National Association, hereby verify that the statements made in the foregoing Complaint are true and correct to the best of my information, knowledge and belief. I understand that false statements herein are made subject to the penalties of 18 Pa. C.S. Section 4904, relating to unworn falsification to authorities. PNC BANK, NATIONAL ASSOCIATION Date: 0/0 By: Michael J. Vice Presi s 13? o PC, COMMERCIAL GUARANTY Maturlty<tiu` ?''"a?toari;N • '" ? fi • ' i..coii • ? sky... Offic@.< lil ?...: :.:... . ia References in the shaded area are for Lenders use only and do not limit the applicabllity of this document to any particular loan or item. Any Item above containing """' has been omitted due to text length limitations. Borrower: Yorktown Funding, inc. Lender: Pennsylvania State Bank, a division of BLC Bank, N.A. 1104 Fernwood Avenue, Suite 301 Camp HIII Branch Camp Hill, PA 17011 2148 Market Street Camp Hill, PA 17011 Guarantor: William C. Koilas 850 Kiehl Drive Lemoyne, PA 17043 GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrowers obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lenders remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrowers obligations under the Note and Related Documents. INDEBTEDNESS, The word "indebtedness" as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys' fees, arising from any and all debts, liabilities and obligations that Borrower individually or collectively or interchangeably with others, owes or will owe Lender under the Note and Related Documents and any renewals, extensions, modifications, refinancings, consolidations and substitutions of the Note and Related Documents. If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender's rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantors liability will be Guarantors aggregate liability under the terms of this Guaranty and any such other unterminated guaranties. CONTINUING GUARANTY. THIS GUARANTY ENCOMPASSES A LINE OF CREDIT AND GUARANTOR UNDERSTANDS AND AGREES THAT THIS GUARANTY SHALL BE OPEN AND CONTINUOUS UNTIL THE INDEBTEDNESS IS PAID IN FULL AND THE LENDER DECLARES THAT THE LINE OF CREDIT IS FULLY SATISFIED, PERFORMED AND TERMINATED. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness shall have been fully and finally paid and satisfied and all of Guarantors other obligations under this Guaranty shall have been performed in full. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. This Guaranty covers a revolving line of credit and it is specifically anticipated that fluctuations will occur In the aggregate amount of the Indebtedness. Guarantor specifically acknowledges and agrees that fluctuations in the amount of the Indebtedness, even to zero dollars ($ 0.00), shall not constitute a termination of this Guaranty. Guarantors liability under this Guaranty shall terminate only upon (A) termination In writing by Borrower and Lender of the fine of credit, (B) payment of the Indebtedness in full In legal tender, and (C) payment in full in legal tender of all of Guarantor's other obligations under this Guaranty. GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand and without lessening Guarantors liability under this Guaranty, from time to time: (A) to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fall or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrowers sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, Including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrowers request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other Instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor;, (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantors assets, or any interest therein; (F) upon Lenders request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial Information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantors financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantors financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantors financial condition: (H) no litigation, claim, inves(fgation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (1) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower's financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantors risks under this Guaranty, and Guarantor further agrees that Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender In the course of Its relationship with Borrower. GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonection on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional COMMERCIAL GUARANTY Loan No: 7150001762 (Continued) Page 2 loans or obligations; (C) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor, (D) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code; (F) to pursue any other remedy within Lenders power, or (G) to commit any act or omission of any kind, or at any time. with respect to any matter whatsoever. Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, Including a claim for deficiency, against Guarantor, before or after Lenders commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantors subrogation rights or Guarantors rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrowers liability from any cause whatsoever, other than payment in full In legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrowers trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty. Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both. GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantors full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty 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. Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of Lenders costs and expenses, including Lenders attomeys' fees and Lenders legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court. Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the Commonwealth of Pennsylvania without regard to Its conflicts of law provisions. Integration. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantors attorney with respect to this Guaranty; the Guaranty fully reflects Guarantors intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender's attorneys' fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph. Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require: and where there Is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words "Borrower" and "Guarantor" respectively shall mean all and any one or more of them. The words "Guarantor," "Borrower," and "Lender" include the heirs, successors. assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by Itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to Inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any Indebtedness made or created in reliance upon the professed exercise of such powers shell be guaranteed under this Guaranty. Notices. Unless otherwise provided by applicable law, any notice required to be given under this Guaranty shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first Gass, certified or registered mall COMMERCIAL GUARANTY Loan No: 7150001782 (Continued) Page 3 postage prepaid, directed to the addresses shown near t(ie beginning of this Guaranty. Any party may change Its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Guarantor agrees to keep Lender Informed at all times of Guarantor's current address. Unless otherwise provided by applicable law, If there Is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right, A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lenders rights or of any of Guarantors obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Successors and Assigns. The terms of this Guaranty shall be binding upon Guarantor, and upon Guarantors heirs, personal representatives, successors, and assigns, and shall be enforceable by Lender and its successors and assigns. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used In this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used In the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code: Borrower. The word "Borrower" means Yorktown Funding, Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns, Guarantor. The word "Guarantor" means everyone signing this Guaranty, including without limitation William C. Kollas, and in each case, any signers successors and assigns. Guaranty. The word "Guaranty" means this guaranty from Guarantor to Lender. Indebtedness. The word "Indebtedness" means Borrower's Indebtedness to Lender as more particularly described in this Guaranty. Lender. The word "Lender" means Pennsylvania State Bank, a division of BLC Bank, N.A„ its successors and assigns. Note. The word "Note" means the promissory note dated -V -) m 10-7 , in the original principal amount of $4,000,000.00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan 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 existing, executed in connection with the Indebtedness. CONFESSION OF JUDGMENT. GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME FOR GUARANTOR AFTER THE AMOUNTS HEREUNDER BECOME DUE AND WITH OR WITHOUT COMPLAINT FILED, CONFESS OR ENTER JUDGMENT AGAINST GUARANTOR FOR THE ENTIRE PRINCIPAL BALANCE OF THIS GUARANTY AND ALL ACCRUED INTEREST, LATE CHARGES AND ANY AND ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER RELATING TO ANY COLLATERAL SECURING THE INDEBTEDNESS, TOGETHER WITH COSTS OF SUIT, AND AN ATTORNEY'S COMMISSION OF TEN PERCENT (10°x) OF THE UNPAID PRINCIPAL BALANCE AND ACCRUED INTEREST FOR COLLECTION, BUT IN ANY EVENT NOT LESS THAN FIVE HUNDRED DOLLARS ($500) ON WHICH JUDGMENT OR JUDGMENTS ONE OR MORE EXECUTIONS MAY ISSUE IMMEDIATELY: AND FOR $0 DOING, THIS GUARANTY OR A COPY OF THIS GUARANTY VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS GUARANTY TO CONFESS JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ANY EXERCISE OF THAT AUTHORITY, BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS GUARANTY. GUARANTOR HEREBY WAIVES ANY RIGHT GUARANTOR MAY HAVE TO NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF JUDGMENT AND STATES THAT EITHER A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THIS CONFESSION OF JUDGMENT PROVISION TO GUARANTOR'S ATTENTION OR GUARANTOR HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL. EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARA7TY" NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED 2 ( SQ 7 THIS GUARANTY IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS GUARANTY IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. GUARANTOR: X (Seal) William C. Kollas WU AO twiip. Vr, 31,.00A03 CAw 8-- - i 110A 1,. Mt. 1M.2001, N MOM ",,,,W -PA LY. Mft WSC i"4107 PRA? DISCLOSURE FOR CONFESSION OF JUDGMENT '? rd CC, Declarant: William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 DISCLOSURE FOR CONFESSION OF JUDGMENT 1 AM EXECUTING, THIS ty DAY OF 20- A GUARANTY OF A PROMISSORY NOTE FOR $4,000,000.00 OBLIGATING ME TO REPAY THAT AMOU 'T. A. I UNDERSTAND THAT THE GUARANTY CONTAINS A CONFESSION OF JUDGMENT PROVISION THAT WOULD PERMIT LENDER TO ENTER JUDGMENT AGAINST ME IN COURT, AFTER A DEFAULT ON THE GUARANTY, WITHOUT ADVANCE NOTICE TO ME AND WITHOUT OFFERING ME AN OPPORTUNITY TO DEFEND AGAINST THE ENTRY OF JUDGMENT. IN EXECUTING THE GUARANTY, BEING FULLY AWARE OF MY RIGHTS TO ADVANCE NOTICE AND TO A HEARING TO CONTEST THE VALIDITY OF ANY JUDGMENT OR OTHER CLAIMS THAT LENDER MAY ASSERT AGAINST ME UNDER THE GUARANTY, I AM KNOWINGLY, INTELLIGENTLY, AND VOLUNTARILY WAIVING THESE RIGHTS, INCLUDING ANY RIGHT TO ADVANCE NOTICE OF THE ENTRY OF JUDGMENT, AND I EXPRESSLY AGREE AND CONSENT TO LENDER'S ENTEIj1J/JUDGMENT AGAINST ME BY CONFESSION AS PROVIDED FOR IN THE CONFESSION OF JUDGMENT PROVISION, ? INITIALS: B. I FURTHER UNDERSTAND THAT IN ADDITION TO GIVING LENDER THE RIGHT TO ENTER JUDGMENT AGAINST ME WITHOUT ADVANCE NOTICE OR A HEARING, THE CONFESSION OF JUDGMENT PROVISION IN THE GUARANTY ALSO CONTAINS LANGUAGE THAT WOULD PERMIT LENDER, AFTER ENTRY OF JUDGMENT, AGAIN WITHOUT EITHER ADVANCE NOTICE OR A HEARING, TO EXECUTE ON THE JUDGMENT BY FORECLOSING UPON, ATTACHING, LEVYING ON, TAKING POSSESSION OF OR OTHERWISE SEIZING MY PROPERTY, IN FULL OR PARTIAL PAYMENT OF THE JUDGMENT. IN EXECUTING THE GUARANTY, BEING FULLY AWARE OF MY RIGHTS TO ADVANCE NOTICE AND A HEARING AFTER JUDGMENT IS ENTERED AND BEFORE EXECUTION ON THE JUDGMENT, I AM KNOWINGLY, INTELLIGENTLY AND VOLUNTARILY WAIVING THESE RIGHTS, AND I EXPRESSLY AGREE AND CONSENT TO LENDER'S IMMEDIATELY EXECUTING ON THE JUDGMENT IN ANY MANNER PERMITTED BY APPLICABLE STATE AND FEDERAL LAW, WITHOUT GIVING ME ANY ADVANCE NOTICE. INITIALS: " Vc C. AFTER HAVING READ AND DETERMINED WHICH OF THE FOLLOWING STATEMENTS ARE APPLICABLE, BY INITIALING EACH STATEMENT THAT APPLIES, I REPRESENT THAT: INITIALS 1. 1 WAS REPRESENTED BY MY OWN INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THE GUARANTY. A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THE CONFESSION OF JUDGMENT PROVISION IN THE GUARANTY TO MY ATTENTION. D. I CERTIFY THAT MY ANNUAL INCOME EXCEEDS $10,000; THAT THE BLANKS IN THIS DISCLOSURE WERE FILLED IN WHEN 1 INITIALED AND SIGNED IT; AND THAT I RECEIVED A COPY AT THE TIME OF SIGNING. THIS DISCLOSURE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS DISCLOSURE IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. DECLARANT: -?? X Seal) William -C-.K-o-11 as lAURP"Lnrq.vr.lN00.m Cali w,ws iY,rpY la?„er, wl.?NI, 100T, AI RgM?R,rrwp. -PA LYfINWOIC IRRf} PR?I Borrower: Yorktown Funding, Inc. Lender: Pennsylvania State Bank, a division of BLC Bank, N.A. 1104 Fernwood Avenue, Suite 301 Camp Hill Branch Camp Hill, PA 17011 2148 Market Street Camp Hill, PA 17011 PROMISSORY NOTE References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item Any item above containing "***" has been omitted due to text length limitations. Borrower: Yorktown Funding, Inc. Lender: Pennsylvania State Bank, a division of BLC Bank, N.A. 1104 Fernwood Avenue, Suite 301 Camp Hill Branch Camp Hill, PA 17011 2148 Market Street Camp HIII, PA 17011 Principal Amount: $4,000,000.00 Initial Rate: 8.250% Date of Note: _ -7 / t'7S PROMISE TO PAY. Yorktown Funding, Inc. ("Borrower") promises to pay to Pennsylvania State Bank, a division of BLC Bank, N.A. ("Lender"), or order, in lawful money of the United States of America, on demand, the principal amount of Four Million & 00/100 Dollars ($4,000,000.00) or so much as may be outstanding, together with Interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance, PAYMENT. Borrower will pay this loan in full immediately upon Lender's demand. Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning August 26, 2007, with all subsequent Interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late charges; and then to any unpaid collection costs. The annual interest rate for this Note Is computed on a 3651360 basis; that is, by applying the ratio of the annual Interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate In writing. VARIABLE INTEREST RATE. The interest rate on this Note Is subject to change from time to time based on changes in an independent index which is the Prime Rate as published from time to time In the "Money Rates" section of the Wei) Street Journal (the "Index"). The Index Is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each day with changes in the Prime Rate published in the "Money Rates" section of the Wall Street Journal. Borrower understands that Lender may make loans based on other rates as well. The Index currently Is 8.250% per annum. The interest rate to be applied to the unpaid principal balance during this Note will be at a rate of 1.000 percentage point over the Index, resulting in an initial rate of 9.250% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum Interest charge of $7.50. Other than Borrower's obligation to pay any minimum interest charge. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse', or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Pennsylvania State Bank, a division of BLC Bank, N.A.; Camp Hill Branch; 2148 Market Street; Camp Hill, PA 17011. LATE CHARGE. If a regularly scheduled interest payment is 10 days or more late, Borrower will be charged 10.000% of the regularly scheduled payment or $50.00, whichever Is greater. If Lender demands payment of this loan, and Borrower does not pay the loan in full within 10 days after Lender's demand, Borrower also will be charged either 10.000% of the sum of the unpaid principal plus accrued unpaid Interest or $50.00, whichever is greater. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the total sum due under this Note will continue to accrue Interest at the interest rate under this Note. If judgment is entered In connection with this Note, interest will continue to accrue after the date of judgment at the rate In effect at the time judgment is entered. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower falls to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the Indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to X b ?? PROMISSORY NOTE Loan No: 7150001782 (Continued) Page 2 assume unconditionally the obligations arising under the guaranty In a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured If Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS, Upon default, Lender may, after giving such notices as required by applicable law, declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note If Borrower does not pay. Borrower will pay Lender that amount. This Includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the Commonwealth of Pennsylvania without regard to its conflicts of law provisions. This Note has been accepted by Lender in the Commonwealth of Pennsylvania. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law. Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This Includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security Instrument listed herein: inventory, chattel paper, accounts, equippment, general intangibles. fixtures, standing timber and mineral, oil and gas described in a Commercial Security Agreement dated a 1 /fA LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested orally by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following persons currently are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender's address shown above, written notice of revocation of their authority: Gerald R. Kensinger, President of Yorktown Funding, Inc.; and William C. Kollas, Secretary/Treasurer of Yorktown Funding, Inc. Borrower agrees to be liable for all sums either. (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's intemal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is Insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantors guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender: or (E) Lender in good faith believes itself Insecure. FUTURE ADVANCES. Upon request of Borrower, Lender, at Lender's option prior to extinguishment of this Note, may make future advances to Borrower. At no time shall the principal amount of Indebtedness, not including sums advanced in accordance herewith to protect the security of the Lender, exceed the original amount of this Note. ADDITIONAL PROVISIONS. The Bank reserves the right to sell a participation or other interest in this Note without notice to Borrower of such sale. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender's right to declare payment of this Note on its demand. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcng any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated In writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or Impair, fall to realize upon or perfect Lenders security Interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lander may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. If any portion of this Note is for any reason determined to be unenforceable, it will not affect the erforceabillty of any other provisions of this Note. CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME FOR BORROWER AFTER A DEFAULT UNDER THIS NOTE AND WITH OR WITHOUT COMPLAINT FILED, CONFESS OR ENTER JUDGMENT AGAINST BORROWER FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE AND ALL ACCRUED INTEREST, LATE CHARGES AND ANY AND ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER RELATING TO ANY COLLATERAL SECURING THIS NOTE, TOGETHER WITH COSTS AND AN SUIT, CO ECT ON, BUT AN ANYEE EVENT NOT LESSANNFIVPERCENT E HUNDRED %)DOOF THE UNPAID PRINCIPAL BALANCE LLARS ($500) ON WHICH JUDGMENT DOR ACCRUED INTEREST JUDGMENTS ONE FOR MORE EXECUTIONS MAY ISSUE IMMEDIATELY; AND FOR SO DOING, THIS NOTE OR A COPY OF THIS NOTE VERIFIED BY AFFIDAVIT SHALL PROMISSORY NOTE Loan No: 7150001782 (Continued) Page 3 BE SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS NOTE TO CONFESS JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE OF THAT AUTHORITY, BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS NOTE. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE TO NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF JUDGMENT AND STATES THAT EITHER A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THIS CONFESSION OF JUDGMENT PROVISION TO BORROWER'S ATTENTION OR BORROWER HAS SEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. THIS NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. BORROWER: YORKTO FUNDIN INC. By: Sea!) G I ger, President I Yorktown Funding, Inc. By: (Seal) Fun C. as, Secretary/Tressurer of Yorktown Funding, Inc. . LENDER: PENNSYLVANI TE BANK, A DIVISION OF BLC BANK, N.A. X Authorized Signer IAHR M0 t-4. Va. S.H.00.000 CON. MrYM iwwW?6Nubb. uK. 11/1.0001, AINW.R.-.4 -PA LACMM020M TRAM PR47 February 19, 2010 C BIA BY O IGH P?lIT L -N PEK RSONAL AND CONFIDENTIAL William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 RE: Demand for Payment Dear Mr. Kollas: As you know, Yorktown Funding, Inc. ("Yorktown") is in default of its obligations to PNC Bank for, among other reasons, failure to make payments as and when due under Yorktown's Promissory Note ("Note") for a line of credit in the original principal amount of $4,000,000.00 made available by Pennsylvania State Bank, a Division of BLC Bank, N.A., on or about August 7, 2007 ("Line of Credit"), payment of which you have guaranteed pursuant to your Commercial Guaranty dated August 7, 2007 ("Guaranty"). As a result of Yorktown's default, the entire outstanding amount of the Line of Credit is immediately due and payable in full. As of February 18, 2010, the amount of principal and interest payable on the Line of Credit that is due under or in connection with the Note and the Guaranty is $1,112,591.81, which is calculated as follows: Principal $1,109,578.99 Interest 3,012.82 TOTAL $1,112,591.99 In addition, interest has continued and will continue to accrue at the rate provided in the Note after February 18, 2010, and attorneys' fees and expenses have been and will be incurred on account of the matter, for payment of which Yorktown is liable under the Note and you are liable under the Guaranty. This letter notifies you that PNC BANK MAKES DEMAND FOR IMMEDIATE PAYMENT OF THE ENTIRE AMOUNT OF THE LINE OF CREDIT OUTSTANDING UNDER OR IN CONNECTION WITH THE NOTE AND THE GUARANTY. If the Line of Credit is not repaid in full, in immediately available funds, within two (2) business days from the date of this letter, we will consider taking actions to collect the Line of Credit from Yorktown and/or you and/or any other surety, including the initiation of legal actions. Member of The PNC Financial Services Group 1097 Commercial Avenue East Petersburg Pennsylvania 17520 www.pnc.com E )e l,,b(+ ?? -?\ William C. Kollas February 19, 2010 Page 2 Please call me at 717.735.5647 to arrange for repayment of the Line of Credit. Very truly yours, PNC BANK, NATIONAL ASSOCIATION 7 By Mich xna, Vice President MJF c: Geoffrey S. Shuff, Esquire COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, DOCKET NO. successor to Pennsylvania State Bank, a division of BLC Bank, N.A., : Plaintiff CONFESSION OF JUDGMENT V. ti c WILLIAM C. KOLLAS, Defendant PREVIOUSLY ASSIGNED TD -': N/A r (,_j PRAECIPE FOR ENTRY OF APPEARANCE === ??=' -' ? -ter r TO THE PROTHONOTARY:= Please enter my appearance on behalf of Plaintiff, PNC Bank, National Association. Papers may be served at the address set forth below. Geoffrey S. Shuff, Esquire McNees Wallace & Nurick LLC 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Respectfully submitted, McNees Wallace & Nurick LLC Date: February as', 2010 By; ire Geo y S. P1?424 Supre o48 100 P ine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff V. WILLIAM C. KOLLAS, Defendant DOCKET NO. CONFESSION OF JUDGMENT c?ri -)JJ PREVIOUSLY ASSIGNED TO: N/A cs. CERTIFICATE OF ADDRESSES I hereby certify that the precise address of the Plaintiff, PNC Bank, National Association, is 4242 Carlisle Pike, Camp Hill, PA 17011; and that the last known address of the Defendant, William C. Kollas, is 850 Kiehl Drive, Lemoyne, PA 17043. Date: February as-, 2010 Respectfully submitted, McNees Wallace & Nurick LLC a GeofiKQOurt , 14 quire Supre ID/#24848 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff V. WILLIAM C. KOLLAS, Defendant c-n DOCKET NO-/d -13 ?_57 J% Cfl ` T + c , CONFESSION OF JUDGMENT - _- ` art= PREVIOUSLY ASSIGNED TO: N/A AFFIDAVIT OF NON-MILITARY SERVICE TO THE PROTHONOTARY: I do certify, to the best of my knowledge, that the Defendant in the above-captioned action, William C. Kollas, is not presently on active or nonactive military status. Respectfully submitted, McNees Wallace & Nurick LLC Date: February a , 2010 By: Su rtT*Court I17 #24848 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff V. WILLIAM C. KOLLAS, Defendant : DOCKET NO. ca CONFESSION OF JUDGMENT - cry PREVIOUSLY ASSIGNED T% -N/A -t, _ NOTICE UNDER RULE 2958.1 rv OF JUDGMENT AND EXECUTION THEREON u-r NOTICE OF DEFENDANT'S RIGHTS TO: William C. Kollas .L ;;ITt l..a f"7°i A judgment in the amount of $1,225,182.99, plus interest, other expenses, fees and costs has been entered against you and in favor of the plaintiff without any prior notice or hearing based on a confession of judgment contained in a written agreement or other paper allegedly signed by you. The sheriff may take your money or other property to pay the judgment at any time after thirty (30) days after the date on which this notice is served on you. You may have legal rights to defeat the judgment or to prevent your money or property from being taken. YOU MUST FILE A PETITION SEEKING RELIEF FROM THE JUDGMENT AND PRESENT IT TO A JUDGE WITHIN THIRTY (30) DAYS AFTER THE DATE ON WHICH THIS NOTICE IS SERVED ON YOU OR YOU MAY LOSE YOUR RIGHTS. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW. THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER. IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE. Lawyer Referral Service Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 (717) 249-3166 Respectfully submitted, McNees Wallace & Nurick LLC Date: Februarys, 2010 By: eottre . Sh f, Esquire e Co ID #24848 100 Pine St eet, PO Box 1166 Harrisburg, A 17108-1166 (717) 237-5439 Attorneys for Plaintiff COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, DOCKET NO. Q f 3 rs"c'ti , successor to Pennsylvania State Bank, a division of BLC Bank, N.A., ; Plaintiff : CONFESSION OF JUDGMENT V. WILLIAM C. KOLLAS, Defendant PREVIOUSLY ASSIGNED TO: N/A To: William C. Kollas, Defendant You are hereby notified that on Fti1 . _ , 2010, judgment by confession was entered against you in the sum of $1,225,182.99, in the above-captioned case. DATE: .t'?i ?0. Prothonotary YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Lawyer Referral Service Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 (717) 249-3166 I hereby certify that the following is the address of the Defendant stated in the certificate of residence: William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 ; Geo ey uff, ttorney for Plaintiff A, William C. Kollas, Demandado: Por este medio usted sea avisado que en el dia _ de de 2010, un juicio por admision fue registrado contra usted por la cantidad de $1,225,182.99, referente al caso mencionado arriba. FECHA: Protonotario LLEVE ESTA DEMANDA A UN ABOGADO INMEDIATAMENTE. SI USTED NO TIENE UN ABOGADO O SI NO TIENE EL DINERO PARA PAGAR TAL SERVICIO, VAYA PERSONALMENTE O LLAME POR TELEFONO A LA OFICINA CUYO TELEFONO Y DIRECCION SE ENCUENTRAN ESCRITOS ABAJO PARA AVERIGUAR DONDE USTED PODRA CONSEGUIR ASISTENCIA LEGAL. Lawyer Referral Service Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 (717) 249-3166 Por este medio certifico que la siguientes son las direcciones de los demandado, dicho en el certificado de residencia: William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 Geo ey S. ff, bogado del Demandante r` ,I COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff DOCKET NO. 10-1385 Civil CONFESSION OF JUDGMENT v. WILLIAM C. KOLLAS, Defendant PREVIOUSLY ASSIGNED TO: N/A RETURN OF SERVICE PURSUANT TO PA. R.C.P. No. 2958.1(c) Plaintiff, PNC Bank, National Association, hereby files this Return of Service and swears and affirms that the person or persons listed below was or were served pursuant to Pa. R.C.P. No. 2958.1(b) with the Notice of Judgment and Execution Required by Rule 2958.1 by certified mail, return receipt requested, as provided by Pa. R.C.P. No. 403. A copy of each receipt for certified mail is attached hereto. William C. Kollas ~ ~' o 850 Kiehl Drive a Lemoyne, PA 17043 ~ m ~i ~ ~ ~ McNecs Wallace & Nurick LLC Date: March 1, 2010 By: eo ,$: S ff, Esquire u e Co ID #24848 00 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff 716D 39D1 984b 5253 b076 ~~ William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 SENDER: Geoffi'ey Shuff REFERENCE: PNC Bank RETURN rostage RECEIPT Certified Fee SERVICE Return Receipt Fee Restricted Delivery Total Postage 8 Fees US Postal Service a Receipt for Certified Mail No Insurance Coverage Provided Do Not Use for International Mail 2. Article Number 7160 3901 9b4b 5253 b076 3. Service Type CERTIFIED MAIL F 4. Restricted Delivery? (Extra Fee) Yes 1. Article Addressed to: i William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 1~TluWRK OR D7-~'E_`, '~` i ,,: ,. .-, ~ , ,. !r A. Rec~rve by (PIea~Prin~lgayly)1 ~B.`Dat ,f D Iii ry ~,~~ ~ ~11f h f-6 ~ C. SI tun /~' ^ Ayerrt X (i ~J Addressee D. Is very address different from Item 17 ^ Yes If YES, enter delivery address below: ^ No PNC Bank Geoffrey Shuff PS Form 3811, January 2005 Domestic Return Receipt 1 COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION PNC BANK, NATIONAL ASSOCIATION, :DOCKET NO. 10-1385 Civil successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff CONFESSION OF JUDGMENT v. WILLIAM C. KOLLAS, Defendant :PREVIOUSLY ASSIGNED TO: N/A RETURN OF SERVICE PURSUANT TO PA. R.C.P. No. 2958.1(c) Plaintiff, PNC Bank, National Association, hereby files this Return of Service and swears and affirms that the person or persons listed below was or were served pursuant to Pa. R.C.P. No. 2958.1(b) with the Notice of Judgment and Execution Required by Rule 2958.1 by certified mail, return receipt requested, as provided by Pa. R.C.P. No. 403. A copy of each receipt for certified mail is attached hereto. William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 McNees Wallace & Nurick LLC Date: March 1, 2010 By: eof .B". S ff, Esquire u me Co ID #24848 00 Pine Street, PO Box 1166 Hamsburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff i 77i6~ 39D3 9848 5253 8076 ~~ William C. Kollas 850 Kiehl Drive Lemoyne, PA 17043 SENDER: Geoffrey Shuff REFERENCE: PNC Bank PS Form 3800 Janua 2005 U RETURN Postage RECEIPT Certified Fee ~ SERVICE Return Receipt Fee Restricted Delivery Total Postage 8 Fees S. ~~ ,_ US Postal Service ORK OR P :; ~ ~~ t Receipt for ; , Certified Mail ;~~! i No Insurance Coverage Provided I,~,':~` Do Not Use for International Mail __ ._ ___ m~ 2. Article Number ~ • A. Rec~ tve{1 by (PIea~Prin~ I~ayly), .~, C. SI of tuVln~l( ~IsL f!~(.[~_~~ X 7160 3901 9848 5253 8076 D. Is 'very address differentfrom item f9 If YES, enter delivery address below: 3. Service Type CERTIFIED MAIL 4. Restricted Delivery? (Extra Fee) Yes 1. Article Addressed to: f William C. Kollas ` 850 Kiehl Drive j Lemoyne, PA 17043 PNC Bank Geoffrey Shuff 3811, January 2005 Return Receipt B. Datrr of ~1~ Agerrt Addressee Yes No PNC BANK, NATIONAL ASSOCIATION, Successor to Pennsylvania State Bank, a division Of BLC Bank, N.A., PLAINTIFF IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA V. WILLIAM C. KOLLAS, DEFENDANT 10-1385 CIVIL TERM IN RE: DEFENDANT'S PETITION TO STRIKE OR OPEN CONFESSED JUDGMENT BEFORE MASLAND, J. ORDER OF COURT AND NOW, this ~~~ day of July, 2010, defendant's petition to strike or open confessed judgment, IS DENIED. By the Court, Albert H. Maslan . 'Geoffrey S. Shull, Esquire For Plaintiff r~ e / Markian R. Slobodian, Esquire ~~ ~~ ~» For Defendant ~_.. _-~_ _.~ ; ~ -~ - `.1_. ~'~ ~_. ~,~ aal _ ~;~ .r. f ~C -Ci r -; PNC BANK, NATIONAL IN THE COURT OF COMMON PLEAS OF ASSOCIATION, Successor to :CUMBERLAND COUNTY, PENNSYLVANIA Pennsylvania State Bank, a division Of BLC Bank, N.A., PLAINTIFF V. WILLIAM C. KOLLAS, DEFENDANT 10-1385 CIVIL TERM IN RE: DEFENDANT'S PETITION TO STRIKE OR OPEN CONFESSED JUDGMENT BEFORE MASLAND, J. OPINION AND ORDER OF COURT Masland, J., July 14, 2010:-- Plaintiff, PNC Bank, initiated the instant matter by filing a complaint for confession of judgment against defendant, William C. Kollas, on February 25, 2010. On March 26, 2010, defendant filed a petition to strike or open the confessed judgment. Following briefing by the parties and oral argument, the court now denies defendant's petition. Defendant's petition presents several grounds for striking or opening the confessed judgment. First, plaintiff breached contractual duties owed to defendant when it impermissibly accelerated the loan agreement at issue. Second, the confession of judgment includes an unauthorized attorney commission. Third, the confession of judgment lists inaccurate damages. Fourth, the Guaranty is identified by an erroneous date. These issues lack merit. 10-1385 CIVIL TERM I. Petition to Strike In support of his petition to strike, defendant identifies three defects on the face of the complaint for confession of judgment: (1) the confession of judgment includes an unauthorized attorney commission; (2) the confession of judgment lists inaccurate damages; and (3) the copy of the Guaranty attached to the complaint for confession of judgment contains an erroneous date. A petition to strike a confessed judgment presents a question of law and "will only be granted if a fatal defect appears on the face of the record." RAIT Partnership, LP v. E Pointe Properties 1, Ltd., 957 A.2d 1275, 1277 (Pa. Super. 2008). Where, as here, the proceeding was initiated by complaint, the complaint and the confession of judgment clause must be read together to determine whether there are defects on the face of the record. Crum v. F.L. Shaffer Co., 693 A.2d 984, 986 (Pa. Super. 1997). A review of the record reveals no such defects. Defendant's argument that the attorney commission is unauthorized lacks merit. First, our Superior Court has approved the inclusion of collection commission provisions in contracts. RAIT, 957 A.2d at 1279. Second, the confession of judgment provision of the promissory note at issue authorizes, in relevant part, AN ATTORNEY'S COMMISSION OF TEN PERCENT (10%) OF THE UNPAID BALANCE AND ACCRUED INTEREST FOR COLLECTION, BUT IN ANY EVENT NOT LESS THAN FIVE HUNDRED DOLLARS ($500). PI. Ex. D (emphasis added) (caps in original). Third, the itemized computation of defendant's debt lists principal owed in the amount of $1,109,578.99, interest in -2- 10-1385 CIVIL TERM the amount of $3,012.82, and attorneys' fees in the amount of $112,591.18. Compl. at ¶10. Basic arithmatic reveals the sum of defendant's debt on the principal and interest is $1,112,591.19, ten percent of which, is $112,591.19. Thus, plaintiff's request for attorneys' fees of $112,591.18 is clearly proper. Defendant's second alleged defect on the record relates to allegedly inaccurate damages. The entirety of defendant's argument in his petition on this issue reads: 14. Plaintiff has failed to provide any accounting of the alleged principal balance interest owed. 15. [Defendant] disputes the alleged amount owed and demands proof thereof at trial. Pet. at 3. Again, a review of the record indicates the amount listed in the exhibits attached to the complaint is identical to the amount listed in the complaint for confession of judgment itself. See Ex. D (Pl.'s demand for payment, dated February 19, 2010). Finally, defendant points to two instances where the Guaranty at issue refers to erroneous dates. A review of the record indicates these erroneous dates are errors on the face of the record. Nonetheless, they are insufficient to justify striking the confessed judgment. Where, as here, an error is technical rather than prejudicial, the court will not strike a confessed judgment. Atlantic National Trust v. Stivala Investments, 922 A.2d 919, 923 (Pa. Super. 2007). Despite two erroneously transcribed dates, the loan documents list a consistent loan number throughout. As such, defendant cannot claim the error renders him incapable of verifying the identity of the Guaranty at issue here or that it prejudices him in any way. Accordingly, the errors are de minimis flaws that do -3- 10-1385 CIVIL TERM not justify striking the confessed judgment. See One Penn Square Assocs. v. Happy Photo, Inc., 24 Phila. Co. Rptr. 360, 362 (1992), available at 1992 WL 1071412 (finding reference to erroneous date of document in complaint to be a de minimis error where copy of document was attached to complaint with correct date). Thus, there are no facial inaccuracies or defects on the record to justify striking the confessed judgment. For these reasons, the court denies defendant's petition to strike the confessed judgment. II. Petition to Open Next, defendant asks the court to open the confessed judgment on the grounds that plaintiff violated contractual duties by improperly accelerating and demanding immediate payment of the debt at issue. In support, defendant attached copies of loan documents to his petition that include the violated contract provisions. A petition to open a confessed judgment rests within the court's equitable discretion, and may be granted if the defendant: "(1) acts promptly, (2) alleges a meritorious defense, and (3) can produce sufficient evidence to require submission of the case to a jury." RAIT, 957 A.2d at 1277. Here, defendant filed the petition within the allotted 30 day period and alleges the meritorious defense that plaintiff failed to adhere to contractual requirements necessary to demanding payment under the note at issue. However, defendant failed to produce sufficient evidence to justify opening the confessed judgment. All loan documents attached to the petition and all -4- 10-1385 CIVIL TERM allegations of bad faith clearly relate to different debts not at issue in the instant proceeding. Specifically, the allegedly violated contractual provision relates to a separate $11,000,000 line of credit, not the $4,000,000 promissory note that was the subject of the confessed judgment. Defendant failed to provide any relevant evidence to rebut the properly executed confession of judgment. As such, the court denies his petition to open the confessed judgment. III. Conclusion In sum, the court concludes: (1) defendant only identified de minimis errors on the face of the record which are insufficient to justify striking the confessed judgment, and (2) defendant's references to loans other than the instant Guaranty do not persuade the court to open the confessed judgment. Defendant's petitions are denied. ORDER OF COURT AND NOW, this _1~~ day of July, 2010, defendant's petition to strike or open confessed judgment, IS DENIED. By the Court, Albert H. Masland, J. Geoffrey S. Shull, Esquire For Plaintiff Markian R. Slobodian, Esquire For Defendant sal -5- PNC BANK, NATIONAL ASSOCIATION :IN THE COURT OF COMMON PLEAS successor to Mercantile-Safe Deposit & Trust :CUMBERLAND COUNTY, PENNSYLVANIA Company, Plaintiff . ~ ~., r- ~ , v. : N0.10-1385 _ , `" ~P `'' --a J '~i ~.. WILLIAM C. KOLLAS, :CIVIL TERM , -~_- ~~ .° Defendant ~ ~'~ - -~s -° NOTICE OF APPEAL '=., ~ ~::` _~jW c<< .--f Notice is hereby given that William C. Kollas, Defendant, hereby appeals to the Superior Court of Pennsylvania from the Order entered in this matter on the 14~' day of July, 2010. This Order has been entered in the docket as evidenced by the attached copy of the docket entry. Respectfully submitted, THE LAW OFFICES OF MARKIAN R. SLOBODIAN ~~~ MARKIAN R. SLOBODIAN, ESQ. I.D. #41075 801 North Second Street Harrisburg, PA 17102 717-232-5180 Attorney for William C. Kollas Dated : ~ ~ b l " ~'f8.oo PD ATr! ~* 7~s7 Ma; fed -b ~Uper•i«- CoUt"}' Kazen Reid Bramblett, Esq. Prothonotary Milan K. Mrkobrad, Esq. Deputy Prothonotary RE: Pennsylvania Judicial Center P.O. Box 62435 601 Commonwealth Avenue, Suite 1600 Harrisburg, PA 17106-2435 (717) 772-1294 wwwsul>erioccourtstate.Pa.us PNC Bank, National Association successor to Mercantile-Safe Deposit & Trust Company William C. Kollas Appellant 1303 MDA 2010 Trial Court Docket No Dear Attorney Slobodian 10-1385 Civil Term v. Enclosed please find a copy of the docket for the above appeal that was recently filed in the Superior Court. Kindly review the information on this docket and notify this office in writing if you believe any corrections are required. Appellant's counsel is also being sent a Docketing Statement, pursuant to Pa.R.A.P. 3517, for completion and filing. Ple~se note that Superior Court Dockets are available on the Internet at the Web site address printed at the top of this page. Thank you. Respectfully, Milan K. Mrkobrad, Esq. Deputy Prothonotary /alv Enclosure cc: Buell, David D., Prothonotary Court Reporter Masland, Albert H., Judge Geoffrey S. Shull, Esq. c~~~' r~ O ; ~.vi,--- ~~~ry - G~f 4~ ~; - ~ _. c~ ` .A O ~, W ..o ~tt~erior court of ~ettn~pYban%a Middle District August 11, 2010 =,5 ___~ -.~~,, - ~T. 1:08 P.M. Appeal Docket Sheet Superior Court of Pennsylvania Docket Number: 1303 MDA 2010 Page 1 of 2 .S@CUr@ August 11, 2010 CAPTION PNC Bank, National Association successor to Mercantile-Safe Deposit & Trust Company v. William C. Kollas Appellant CASE INFORMATION Initiating Document: Notice of Appeal Case Status: Active Case Processing Status: August 11, 2010 Awaiting Original Record Journal Number: Case Category: Civil Case Type(s): Confession of Judgment CONSOLIDATED CASES RELATED CASES SCHEDULED EVENT Next Event Type: Receive Docketing Statement Next Event Due Date: August 25, 2010 Next Event Type: Original Record ReceiVred Next Event Due Date: October 5, 2010 COUNSEL INFORMATION Appellant Kol Pro Se: No IFP Status: No Attorney: Bar No: Law Firm: Address: Ilas, William C. Appoint Counsel Status: Represented Slobodian, Markian Roman 041075 Law Offices of I'4Aarkian R. Slobodian 801 N 2nd St Harrisburg, PA 17102--3213 Phone No: (717) 232-5180 Fax No: (717) 232-6528 ' Receive Mail: Yes Receive EMail: No Appellee PNC Bank, National Association successor to Mercantile-Safe Deposit 8~ Trust Company Pro Se: No Appoint Counsel Status: Represented IFP Status: No Attorney: Shull, Geoffrey S. Bar No: 024848 Law Firm: McNees, Walla e & Nurick, LLC Address: 100 Pine Stree PO Box 1166 Harrisburg, PA 17108--1166 Phone No: (717) 237-543 Fax No: (717) 260-1743 Receive Mail: Yes Receive EMail: Yes EM~iI Address: gshuff~mwn.com 1:08 P.M. Appeal Docket Sheet Docket Number: 1303 MDA 2010 Page 2 of 2 August 11, 2010 Superior Court of Pennsylvania Secure FEE IfdF~RAAATtON Fee Dt Fee Name Fee Amt Receipt Dt Receipt No Receipt Amt 08/11/2010 Notice of Appeal ' 73.50 08/11/2010 2010-SPR-M-000645 73.50 __ % AGENCYITRIAL COURT INFORMATION Court Below: Cumberland Cou~hty Court of Common Pleas County: Cumberland Division: Cumberland County Civil Division Order Appealed From: July 14, 2010 Judicial District: 09 Documents Received: August 11, 2010 Notice of Appeal Filed: August 6, 2010 Order Type: Order Entered OTN(s): Lower Ct Docket No(s):10-1385 Civil Term Lower Ct Judge(s): Masland, Albert H. Judge ORIGtNAL RECORD CONTENT Original Record Item Filed Date Content Description Date of Remand of Record: None Filed Date Docket Entry / BRIEFING SCHEDULE DOCKETfNTRY None Filed August 11, 2010 Notice of Appeal Docketed Appellant Kollas, William C. August 11, 2010 Docketing Statement Exited (Civil) Middle District Filing Office Buell, David D. Prothonotary Cumberland County Courthouse 1 Courthouse Square Carlisle, PA 17013 ------------------------ AOPC 3014 Rev.08/11 /2010 PNC BANK, NATIONAL ASSOCIATION, successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff V. :IN THE COURT OF COMMON PLEAS :CUMBERLAND COUNTY, PENNSYLVANIA :DOCKET NO. 10-1385 Civil Term (7- WILLIAM C. KOLLAS, :CONFESSION OF JUDGMENT Defendant PETITION FOR SUPERSEDEAS SUBMITTED BY APPELLANT, DEFENDANT, WILLIAM C. KOLLAS 71 N Appellant, Defendant William C. Kollas ("Kollas"), respectfully petitions this Court pursuant Ba.R.1732(a) and 1733(a) for the entry of an Order of Supersedeas. In support of his Petition for Supersedeas, Kollas states as follows: 1. On July 14, 2010, this Court entered an Order denying Defendant Kollas' Petition to Strike or Open Confessed Judgment in the above-referenced case. 2. On August 5, 2010, Kollas filed a timely Notice of Appeal from the Court's Order. 3. The Order which Kollas appealed leaves in place a certain judgment entered by PNC against Kollas in the amount of $1,225,182.99, including an attorney's commission in the amount of $112,591.19. 4. Kollas' sole assets that are subject to execution by PNC are a one-half interest in a certain mobile home park and a one-half interest in certain real property housing a law office. 5. The other one-half owner of the mobile home park and the law office building is Kollas' former law partner, William Costopoulos. C 6. Kollas submits that he will be irreparably harmed if a supersedeas is not granted because execution proceedings by PNC will deprive him of his interest in unique and irreplaceable real property. 7. Allowing PNC to proceed with partition and/or execution proceedings will force Mr. Costopoulos to incur substantial legal feels and may result in Mr. Costopoulos having to relocate his law office. 8. Kollas accordingly further submits that the interest of Mr. Costopoulos will be irreparably harmed if PNC is permitted to proceed with partition and/or execution proceedings to collect this judgment. 9. Allowing a supersedeas will maintain the status quo and promote the public good until the issues on appeal are decided by the appellate court. 10. Yorktown Funding, Inc. ("Yorktown"), the entity that borrowed the funds from PNC and is the obligor under the promissory note upon which PNC has confessed judgment against Kollas, continues to make full monthly interest payments to PNC Bank and PNC Bank continues to accept such interest payments. 11. Yorktown has secured letters of intent and expects to secure in the near future commitment letters from a consortium of local banks for the full amount of its bank debts, including, specifically, the obligation upon which PNC Bank has confessed judgment against Kollas as guarantor in this case. 12. Plaintiff, PNC Bank will not be harmed by the Court's upholding the status quo until the issues on appeal are decided by the appellate court or PNC Bank is paid in full by its actual Borrower, Yorktown Funding, Inc. 2 13. Finally, because Defendant Kollas' sole assets that are subject to execution consist of interests in real property on which PNC Bank has alien by virtue of its confessed judgment, there is no danger to PNC Bank that those assets could be transferred or encumbered pending disposition of the Appeal. 14. Counsel for Kollas has contacted counsel for Plaintiff, Geoffrey S. Shuff, seeking concurrence in this request for supersedeas and such concurrence has not been granted. WHEREFORE, Appellant/ Defendant, William C. Kollas, respectfully requests that this Court enter an Order of Supersedeas staying execution by Plaintiff PNC Bank pending the determination of Defendant Kollas' appeal. Respectfully submitted, THE LAW OFFICES OF MARKIAN R. SLOBODIAN /?LA- -A"J-4? MARKIAN R. SLOBODIAN, ESQ. 801 North Second Street Harrisburg, PA 17102 717-232-5180 Attorney for William C. Kollas Dated: 6l1111a 3 VERIFICATION Subject to the penalties of 18 U.S.C. 4904, relating to unworn falsification to authorities, I hereby certify that the facts set forth in the foregoing Petition for Supersedeas are true and correct to the best of my information and belief. WILLIAM C. KOLLAS CERTIFICATE OF SERVICE I hereby certify that I have this date served a true and correct copy of the above Petition on the following individuals via U.S. first class mail, postage paid: Geoffrey S. Shuff, Esq. 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 ax?x-)f , 4AJu JUD L. HA , Paralegal Dated: $ j % t 1 O PNC BANK, NATIONAL ASSOCIATION successor to Pennsylvania State Bank, a division of BLC Bank, N.A., Plaintiff :IN THE COURT OF COMMON PLEAS :CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW V. : NO. 10-1385 0 • 'o WILLIAM C. KOLLAS, :CONFESSION OF JUDGMENT Defendant STATEMENT IN ABSENCE OF TRANSCRIPT W NOW COMES, William C. Kollas, Defendant/Appellant, by his counsel, The Law Offices of Markian R. Slobodian, and, pursuant to Pa. R.A.P. 1923, submits this statement in absence of transcript: 1. The lower court rendered its decision after hearing oral arguments of the parties on June 2, 2010 with no recorded record of the proceedings being made. 2. In addition to the documents listed on the docket entries prepared by the Prothonotary of Cumberland County in this case, the lower court also considered the following documents in rendering its decision: a. Brief of Defendant William C. Kollas In Support of Petition to Strike or Open Confessed Judgment, including Exhibits and Affidavits attached thereto, submitted to the Court Administrator of Cumberland County, Pennsylvania on May 21, 2010, a true and correct copy of which is attached hereto as Exhibit "A". b. Brief of PNC Bank, National Association Filed In Opposition to the Petition of Defendant William C. Kollas to Strike or Open Confessed Judgment, submitted to the Court Administrator for Cumberland County, Pennsylvania on May 28, 2010, a true and correct copy of which is attached hereto as Exhibit "B". c. Letter Brief of PNC Bank, N.A. submitted to The Honorable Albert H. Masland on June 11, 2010, a true and correct copy of which is attached hereto as Exhibit "C; and d. Letter Brief of William C. Kollas dated June 1.7, 2010, submitted to The Honorable Albert H. Masland on June 18, 2010, a true and correct copy of which is attached hereto as Exhibit "D". Respectfully submitted, THE LAW OFFICES OF MARKIAN R. SLOBODIAN MARKIAN R. SLOBODIAN, ESQ. I.D. #41075 801 North Second Street Harrisburg, PA 17102 717-232-5180 Attorney for William C. Kollas *Iz??A4 MAY 21 zwo PNC BANK, NATIONAL ASSOCIATION :IN THE COURT OF COMMON PLEAS successor to Mercantile-Safe Deposit & Trust :CUMBERLAND COUNTY, PENNSYLVANIA Company, Plaintiff CIVIL ACTION - LAW V. : NO. 10-1385 WILLIAM C. KOLLAS, :CONFESSION OF JUDGMENT Defendant BRIEF OF DEFENDANT WILLIAM C. KOLLAS IN SUPPORT OF PETITION TO STRIKE OR OPEN CONFESSED JUDGMENT Defendant William C. Kollas ("Kollas"), by his counsel, The Law Offices of Markian R. Slobodian, hereby submits the following Brief in Support of Defendant's Petition to Strike or Open Judgment Confessed by PNC Bank, National Association ("PNC"), in the above- referenced case. INTRODUcTiON PNC as successor to Pennsylvania State Bank and to Mercantile-Safe Deposit &- Trust Company, has made two substantial loans to Yorktown Funding, Inc. ("Yorktown"),, a company which provides short term construction financing to individual home owners. PNC, as successor to Pennsylvania State Bank, has filed this action against Kollas as alleged Guarantor of an obligation of Yorktown evidenced by a certain Promissory Note dated August 7, 2009 (the PA State Note"). PNC seeks to collect from Kollas approximately $1,225,182.99, including a 10% attorney's conunission. A. Invalid Confession. PNC seeks to confess judgment on a Guaranty dated August T 2007 which, on its face, purports to guarantee an obligation on a corporate note dated August 7, 2007. Unfortunately, PNC, in Paragraph 5 of its Complaint, alleges that Kollas guaranteed an obligation to PNC under a Note dated August 7, 2009 and, in fact, attaches a copy of a Note dated August 7, 2009 to its Complaint. Accordingly, the Promissory Note upon which PNC seeks to collect from Kollas does not appear to have any relationship whatsoever to the Guaranty upon which PNC seeks to confess judgment. Plaintiff has either attached the incorrect Note or has made reference to the wrong documents. In either case, the confession is invalid on its face and must be stricken. B. PNC Breach of Contract. PNC, successor to Mercantile-Safe Deposit & Trust Company, has also accelerated and demanded immediate payment on a certain line of credit obligation of Yorktown in the original principal amount of $11,000,000 evidenced by a certain Third Amended and Restated Promissory Note dated March 6, 2006, as further amended (the "Mercantile Note"). By complaint filed on or about March 5, 2010 in the Court of Common Pleas of Dauphin County, Pennsylvania, PNC has sought to recover approximately $3,501,072.53 from Kollas as alleged Guarantor of that obligation. Kollas has filed an Answer and Counterclaim to PNC's Dauphin County action (the "Dauphin Answer"). A true and correct copy of the Dauphin Answer is attached hereto and made a part hereof as Exhibit "A". Kollas alleges that PNC improperly and in violation of the loan documents accelerated the Mercantile Note obligation, thereby causing Yorktown to file a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Pennsylvania and thereby causing numerous other lenders to accelerate and demand immediate payment of Yorktown loan obligations and preventing Yorktown from paying PNC the accelerated claim for which it now seeks payment from Kollas. 2 t , . v Yorktown is not in any monetary default for failure to make contractually required interest payments. In fact, even after PNC filed the two actions against Kollas, Yorktown continues to make current interest payments and PNC continues to accept them. In his Petition to Strike or Open PNC's Confessed Judgment Kollas alleges that PNC breached its duty of good faith and fair dealing by wrongfully accelerating the Mercantile Note loan, by arbitrarily accelerating the PA State Note loan and, by its own improper actions, putting both Yorktown and Kollas in a position where they could not immediately pay the accelerated loan obligations. Kollas also disputes the 10% attorney commission as being in direct conflict with other contractual provisions and questions the calculation of the alleged principal balance and interest allegedly due in this case. STATEMENT OF FACTS AND PROCEDURAL HISTORY On or about August 7, 2009, Yorktown executed a certain Promissory Note for a Line of Credit to Pennsylvania State Bank in the original principal amount of $4,000,000 (the "Promissory Note"). A copy of the Promissory Note is attached to Plaintiff's Complaint as Exhibit "C". PNC alleges that the obligation of Yorktown under the August 7, 2009 Promissory Note is covered by a Commercial Guaranty dated August 7, 2007 which, by its terms, refers to a Yorktown Note dated August 7, 2007. Neither the documents nor PNC's Complaint explain why Kollas' Guaranty allegedly secures an obligation under a Note that is dated two years later. Instead, it is clear from the face of the documents that the Guaranty does not apply to the Note that is referenced in Plaintiff's Complaint and attached to the Complaint as Exhibit "C". Yorktown's loan with PNC as successor to Mercantile-Safe Deposit & Trust Company is evidenced by a Third Amended and Restated Promissory Note dated March 6, 2006 as + J ? amended by a Second Amended to Loan Documents dated February 26, 2008 and as extended by a PNC letter dated March 30, 2008 and a PNC letter dated September 23, 2008 (previously identified as the "Mercantile Note"). True and correct copies of all of which are attached to Kollas' Petition to Open or Strike as Exhibit "A". On or about December 15, 2005, prior to the extension of the $11,000,000 Line of Credit, Mercantile issued to Yorktown and Guarantors William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger, a Line of Credit Commitment Letter (the "Commitment Letter"). A true and correct copy of the Commitment Letter is attached to the Dauphin Answer as Exhibit "A". The Commitment Letter provides in Paragraphs 10 and 11 as follows; 10. For any open mortgage assigned to the Bank two (2) years from its first advance or not having a permanent mortgage take- out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure and mark its book value to market in a mariner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. The Commitment Letter makes no reference to any expiration of Yorktown's right to exercise its ten year pay back option. Paragraphs 10 and 11 of the Commitment Letter were incorporated into the First Amendment to Amended and Restated Credit Agreement dated March 6, 2006 (the "First Amended Agreement"). A true and correct copy of the First Amended Agreement is attached to the Dauphin Answer as Exhibit "B". 4 The First Amended Agreement stated in relevant part in Paragraph 1 (a) thereof: Borrower shall repay the principal of each advance under the Credit Line (together with all accrued interest thereon) to fund a Construction Loan (all advanced under the Credit Line to fund the same Construction Loan constitute a "Borrowing Tranche") on the date of the funding of the related Permanent Loan by the Permanent Lender, provided, however, that if such Borrowing Tranche has not been repaid in full on the earlier of (i) the second anniversary of the date the first advance under such Borrowing Tranche was made by the Bank under the Credit Line as shown on the books of the Bank or (ii) the date which is three (3) months following completion of the construction funded by such Borrowing Tranche (the "Borrowing Tranche Maturity Date"), then (A) such Construction Loan shall immediately be classified as "Work Out" or "Foreclosure" and Borrower shall mark the book value of such Construction Loan to market value on Borrower's books in a manner satisfactory to Bank in Bank's discretion, and (B) Borrower shall immediately pay to Bank the amount of such Borrowing Tranche in excess of the market value for such Construction Loan and thereafter shall pay to Bank a sum equal to ten percent (10%) of the outstanding principal balance of such Construction Loan on each anniversary of the Borrowing "Tranche Maturity Date thereof until paid in full. By way of illustration, if a Borrowing Tranche is $200,000 and the Construction Loan to which such Borrowing Tranche relates is not repaid in full on the earlier of two (2) years following first advance or three (3) months following construction completion and the market value of such Construction Loan is $180,000, Borrower shall (i)classify such Construction Loan as "Workout" or "foreclosure", (ii)immediately repay $20,000, and (iii)pay ten percent (10%) of the established market value on each anniversary thereafter until the earlier of the date such Construction Loan is paid in full or is taken out by a Permanent Lender. Contrary to the expressly negotiated provisions regarding the ten year pay out of defaulted loans and contrary to the provisions of the Commitment Letter, the First Amended Agreement appears to contain contrary language that indicates that the entire principal balance of the Credit Line are due on the Credit Line expiration date. On or about February 22, 2007 Mercantile issued to Yorktown and its Guarantors a Line of Credit Commitment Renewal Letter ("Renewal Commitment Letter"). A true and correct copy of the Renewal Commitment Letter is attached to the Dauphin Answer as Exhibit "D". Paragraphs 10 and 11 of the Renewal Commitment Letter specifically provide as follows: 10. For any assigned mortgage to the Bank two (2) years from its first advance or not having a permanent mortgage take-out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure and mark its book value to market in a manner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. The Renewal Commitment Letter again, makes no reference to the principal balance being due upon the Credit Line expiration date. On or about March 19, 2007, Kenneth S. Spatz, Vice President of Mercantile sent art e- mail to Yorktown with regard to reporting and monitoring of outstanding Yorktown loans. A true and correct copy of the March 19, 2007 email is attached to the Dauphin Answer as Exhibit „E„ In his email of March 19, 2007 Vice President Kenneth Spatz restated the terms of the parties' agreements with regard to Workout and Foreclosure loans as follows: To start, I think we agree on what are "work-out and foreclosure loans." I look at it as being covered by the following three (3) situations: ? Any loan so designated by YFI [Yorktown] due to borrower(s) or builder default 6 ? And, any loan older than two (2) years from its first advance (commit letter pp#10) ? And, any loan at longer than three months from construction completion without a permanent mortgage take-out (commit letter pp#10) For the curtailment of work-out and foreclosure loans assigned to Merc [Mercantile], any loan being so designated should immediately begin the mark to market process as described in paragraphs #10 & 11 of the commitment letter, to be followed by the loan being reduced to that value and thereafter, annual ten percent (10%) curtailment payments to the Bank. Vice President Spatz, similarly, makes no mention of the principal balance being due upon the Credit Line expiration date. On or about December 15, 2008, PNC Bank, as successor in interest to Mercantile-Safe Deposit & Trust Company, sent a demand letter to William C. Kollas and Dianne L. Kollas and to Gerald R. Kensinger and Lori A. Kensinger accelerating the Mercantile Note loans and demanding irru-mediate payment of the principal balance of the loans as well as interest, and late charges. A true and correct copy of the demand letters dated December 15, 2008 are attached to the Dauphin Answer as Exhibit "F" By letter dated February 19, 2010, PNC accelerated the obligation of its Borrower under the PA State Note loan on two days notice. See Exhibit "D" to Plaintiff's Complaint. Plaintiff then entered Judgment by Confession against Kollas in this action on February 25, 2010, within six days of the date of the Acceleration Notice. Although PNC has accelerated both loans, Yorktown is current: with its monthly interest payments and PNC is accepting all such payments. ARGUMENT A. PNC's Confessed Judgment Is invalid on Its Face and Must Be Stricken. In Paragraph 3 of its Complaint for Confession of Judgment, PNC states that Kollas 7 executed and delivered to Plaintiff a Commercial Guaranty dated August 7, 2007 and attaches a copy of Guaranty dated August 7, 2007 to its Complaint as Exhibit "A". In Paragraph 5 of its Complaint, PNC alleges that Kollas guaranteed Yorktown's obligation to PNC under a Note dated August 7, 2009. PNC again attaches a copy of a Note dated August 7, 2009 to its Complaint. The August 7, 2007 Guaranty indicates that it relates to an obligation under a Note dated August 7, 2007 not August 7, 2009. Plaintiff has either attached the incorrect Note or has made reference to the wrong documents. In either case, the Confession is invalid on its face and must be stricken. B. PNC Has Violated Its Duty of Good Faith and Fair Dealing Which Is a Part of Every Contract. It is clear from the facts in this case, including the documents and Affidavits attached to the pleadings and this Brief that Yorktown, Kensinger, and Mercantile--Safe Deposit and Trust Company specifically negotiated a procedure pursuant to which in the event of default in construction loans, the loans would be classified as work-out for foreclosure and would be paid back over a ten year period. See, e.g. Kensinger Affidavit attached hereto as Exhibit "B". The contrary language which also appears only in the First Amended Agreement and the Third Amended and Restated Promissory Note would make the ten year payoff provisions absolutely meaningless. Moreover, neither the First Amended Agreement or the Third Amended and Restated Promissory Note contain any type of integration clause specifying that these two documents constitutes the entire agreement between the Parties. In view of the fact that the original Commitment Letter and Renewal Commitment Letter as well as Vice President Spatz' March 19, 2007 email describe the Parties' agreement without any reference to any limitations on Yorktown's right to a ten year payoff make any contrary provisions in the First Amended Agreement and the Third Amended and Restated Promissory Note, at the very least, ambiguous. The law regarding interpretations of ambiguities in a contract against the drafter is clear. As the court stated in Hartman v. Baker, 766 A.2d 347, (Pa. Super. 2000): "It is hornbook law that in determining the intent of the parties, ambiguities are to be construed against ...the contract drafter." Id. at 352, citing Shovel Transfer and Storage, Inc., 559 Pa. 56, 739 A.2d 133, 139 (1999). Because it is undisputed that PNC or its predecessor drafted all of the documents at issue in this case, and in view of the testimony in the attached Kensinger Affidavit that the Parties specifically negotiated an unrestricted provision for a ten year payoff, PNC's acceleration and demand for immediate payment of the entire principal balance violated the terms of the Mercantile Loan. It is also clear from the Affidavits that PNC's actions specifically prevented Yorktown and Kollas from paying the demanded accelerated amount under the Pa State obligation that is the subject of this suit. The Affidavit of Gerald R. Kensinger, President of Yorktown, makes clear that PNC's actions not only caused Yorktown to file a petition under Chapter 11 of the Bankruptcy Code, but also precipitated the acceleration of all of Yorktown's loan obligations to other lenders and precipitated demands to the loan guarantors for immediate payments. See also Counterclaim set forth in the Dauphin Answer attached hereto as Exhibit "A". The Affidavit of William C. Kollas makes clear that he had set aside the funds necessary under the Mercantile Note loan terms to make an immediate payment to Mercantile of the 9 amount that the bank advanced in excess of the ascertainable market value of the construction loan collateral and had offered to make such payment to PNC. In his Affidavit, William Kollas also states that prior to PNC's acceleration of the Mercantile loan, he also had the funds to make a loan or cash infusion to the company to satisfy PNC's payment demand on the PA State Note loan. Finally, the Affidavit of William Kollas makes clear that PNC's acceleration of the Mercantile Note loan and resulting actions of other lenders against both Yorktown and the guarantors made it impossible for Kollas to pay the accelerated liability allegedly owed to PNC under the PA State Note loan that is at issue in this case. See Kollas Affidavit attached to this Brief as Exhibit "C It is clear from the documents and Affidavits that PNC's wrongful actions and PNC's wrongful actions alone prevented Yorktown from paying the accelerated balance on the loan for which PNC now seeks accelerated payment in full. In addition, PNC's rush to acceleration upon two days notice when other provisions in the contract indicate that a ten day notice would satisfy requirements of commercial reasonableness (See, e.g. late fee provisions identified in Kollas Petition to Strike or Open Confessed Judgment) and its rush to confess judgment within six days of the acceleration notice all on a loan obligation for which required monthly interest payments were current and continue to be current further evidence PNC's breach of its duty of good faith and fair dealing in the enforcement of this contract. The legal duty of good faith imposed on every party to a contract both with regard to the execution and performance of the contract is undisputed. As the court stated in Giant Food Stores, LLC v. The Silver Springs Development, L.P., 2008 Pa. Super. 245, 959 A.2d 438 (Pa. Super. 2008) "every contract imposes a duty of good faith and fair dealing on the parties in the 10 performance and the enforcement of the contract." Id at 447-448 citing Trizechahn Gatezvay, LLC v. Titus, 930 A.2d 924, 533-534 (Pa. Super. 2007). In the case at hand, PNC seeks to benefit by its own wrongdoing in violating the terms of the Mercantile Note loan contract. Such action violates PNC duties of good faith and fair dealing under the PA State Note contract and renders PNC's attempted acceleration of the loan and Confession of judgment null and void. C. PNC's Asserted Attorney Commission Is Void. Although the confession of judgment language in the PA State Note makes reference to a ten percent attorney's commission, such language conflicts directly with the provisions of the Note contained under the heading "Attorneys' Fees; Expenses" which provides: Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees, and Lender's legal expenses, whether or not there was a lawsuit. . . " See Exhibit "C" to Plaintiff's Complaint. Because the "commission" language contradicts the "actual fees" provisions of the note, the contract must be deemed ambiguous on this point and the ambiguity must be resolved against PNC, the undisputed drafter. Kollas submits that Plaintiff's confessed judgment is incorrect because it contains an unauthorized ten percent attorney's commission, rather than actual legal fees incurred as required by the contract. D. PNC has failed to prove the principal balance and interest allegedly due under the contract. The Promissory Note dated August 7, 2009 attached to PNC's Complaint refers to a variable interest rate which is the Prime Rate as published from time to time in the "money rates" of the Wall Street journal (the "Index") plus a margin of one percentage point over the Index, which rate could change as often as each day changes in the Prime Rate. PNC has failed to provide any documentation or calculations relating to its computation of applicable interest rates to the various loan advances. PNC has also failed to provide any accounting of the numerous payments it has received from Yorktown and how such payments have been applied to any interest and principal balance due. Kollas disputes the alleged amount owed and is entitled to receive proof thereof through discovery and trial. Conclusion Because the confessed judgment is invalid on its face, it must be stricken. In the alternative, the confessed judgment must be opened to prevent PNC from benefitting by its own misdeeds relating to the Mercantile Loan, to correct the attorney's commission and calculate any reasonable attorney's fees, and to provide Defendant William C. Kollas with the opportunity to review and challenge PNC's accounting of all payment applications and interest charges. For all of the above reasons, Defendant William C. Kollas requests that this Court either strike the confessed judgment or open the judgment to allow the numerous and complicated issues in this case to be duly litigated at trial. Respectfully submitted, THE LAW OFFICES OF MARKIAN R. SLOBODIAN 4A -K" MARKIAN R. SLOBODIAN, ESQ. 801 North Second Street Harrisburg, PA 17102 717-232-5180 Attorney for William C. Kollas Dated: 6( 2 1 h J 12 r' PNC BANK, NATIONAL ASSOCIATION, :IN THE COURT OF COMMON PLEAS successor to Mercantile-Safe Deposit & Trust :DAUPHIN COUNTY, PENNSYLVANIA Company, Plaintiff CIVIL ACTION •- LAW V. GERALD R. KENSINGER and LORI A. : NO. 2010-CV-2368-CV KENSINGER, and WILLIAM C. KOLLAS and DIANE L. KOLLAS, Defendants CD G' °= a -a NOTICE TO PLEAD c-n c TO: PNC Bank National Association W c/o Geoffrey S. Shuff, Esq. ca 100 Pine Street, P. O. Box 1166 Harrisburg, PA 1.7108-1166 You are hereby notified to file a written response to the enclosed New Matter and Courterclaim within twenty (20) days from service hereof or a judgment may be entered against you. Respectfully submitted, THE LAW OFFICES OF MARKIAN R, SLOBODIAN Dated: l ! 15-1 / () -c o ? -? . tT -? c-; Z MARKIAN R. SLOBODIAN, ESQ. ID #41075 801 North Second Street Harrisburg, PA 17102 717-232-5180 Attorney for William C. Kollas, Diaiule L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger T' 6 P'NC BANK, NATIONAL ASSOCIATION, :IN THE COURT OF COMMON PLEAS successor to Mercantile-Safe Deposit & Trust :DAUPHIN COUNTY, PENNSYLVANIA Company, Plaintiff CIVIL ACTION - LAW V. ° -,C ? Paz GERALD R. KENSINGER and LORI A. : NO. 2010-CV-2368-CV a KENSINGER, and WILLIAM C. KOLLAS and DIANE L. KOLLAS, rn Defendants -° ten' ` N ANSWER NEW MATTER AND COUNTER CLAIM (.n NOW COME, Defendants, Gerald R. Kensinger, Lori A. Kensinger, William C. Kollas, and Dianne L. Kollas, by their counsel, The Law Offices of Markian R. Slobodian, and makes the following Answer and Counter Claim to Plaintiff's Complaint: ANSWER 1. Admitted. 2. Admitted in part and denied in part. Defendants admit that William C. Kollas is an adult individual whose last known address is 850 Kiehl Drive, Lemoyne, PA 17043, Defendants deny that anyone named "Diane" L. Kollas resides at that address. 3. Admitted in part and denied in part. Defendants admit that William C. Y"ollas, Gerald R. Kensinger and Lori A. Kensinger signed the documents attached to the Plaintiff's complaint as Exhibits "A" and "B". Defendants deny that the documents attached to the complaint as Fxhibits "A" and "B" were signed by a "Diane" L. Kollas. 4. Denied. The documents attached to Plaintiff's Complaint as Exhibits A, B, C, and D are legal documents which speak for themselves. Accordingly, Defendants deny any characterization or summarization of the contents or legal effect of those documents. Count I - Alleged Breach of Contract Plaintiff v. Kensinger Defendants 5. Defendants Gerald R. Kensinger and Lori A. Kensinger (the "Kensinger Defendents") incorporate by reference and restate their Answers to paragraphs 1 through 4 of the Complaint as if set forth in full below. 6. Denied. This paragraph states a conclusion of law to which no answer is required. To the extent answer may be required, the Kensinger Defendants deny the allegation that the Debtor is in default of the Debtor's obligations to make payments to the Plaintiff as allegedly required in the Credit Agreement and Note and as a result of which the entire amount of the Debtor's obligations under or in connection with the Line of Credit (collectively, "Obligations") is allegedly due and payable in full. By way of further answer and as more fully set forth in the Counterclaim below, Plaintiff's demand for payment is premature and in direct violation of the terms of the loan documents and the parties' written agreements which specifically provide that if the Debtor's Borrowing Tranche (as defined below) has not been :repaid in full on the earlier of (i)the second anniversary of the date the first advance under such Borrowing; Tranche was made by the Bank under the Credit Line as shown in the books of the Bank or (ii)the date which is three (3) months following completion of the construction funded by such Borrowing Tranche (the "Borrowing Tranche Maturity Date"), then (A) such Consti,.•uction Loan shall immediately be classified as "Work Out" or "Foreclosure" and Borrower shall mark the book value of such Construction Loan to market value on Borrower's books in a manner satisfactory to Bank in Bank's discretion, and (B) Borrower shall immediately pay to Bank the amount of such Borrowing Tranche in excess of the market value for such Construction Loan and thereafter shall pay to Bank a sum equal to ten percent (10%) of the outstanding principal 2 balance of such Construction Loan on each anniversary of the Borrowing Tranche Maturity Date thereof until paid in full. 7. Admitted in part and denied in part. The Kensinger Defendants admit that Plaintiff has demanded payment of the obligations. The Kensinger Defendants also admit that the Plaintiff's demand for payment and request dated December 15, 2008 and requested February 19, 2010 are attached to the Complaint as Exhibit "E". The Kensinger Defendants deny any inference that Plaintiff's demand for payment is proper or that Plaintiff is entitled to payment of the Obligations. By way of further answer and as more fully set forth below in the Counter Claim, Plaintiff's demand for immediate payment is premature and in violation of the parties' agreements or, in the alternative, is barred by the doctrine of promissory estoppel and/or unjust enrichment. 8. Denied. This paragraph states a conclusion of law to which no answer is required. To the extent an answer may be required, the Kensinger Defendants deny the allegation that they have breached the parties' agreement and defaulted under their Guaranty by failing and refusing to make immediate payment of the Obligation. 9. Denied. This paragraph states a conclusion of law to which no answer is required. To the extent an answer may be required, the Kensinger Defendants deny that Plaintiff is entitled to any of the relief that it requests in this paragraph. WHEREFORE, Gerald R. Kensinger and Lori A. Kensinger request that the Court enter judgment in their favor and against the Plaintiff, deny all relief requested by the Plaintiff, and, further, award the Kensinger Defendants such further relief as the Court deems equitable and just. 3 Count II - Alleged Breach of Contract Plaintiff v. Kollas Defendants 10. Defendants William C. Kollas and Dianne L. Kollas (the "Kollas Defendants") incorporate by reference and restate their Answers to paragraphs 1 through 4 of the Complaint as if set forth in full below. 11. Denied. This paragraph states a conclusion of law to which no answer is required. To the extent answer may be required, the Kollas Defendants deny the allegation that the Debtor is in default of the Debtor's obligations to make payments to the Plaintiff as allegedly required in the Credit Agreement and Note and as a result of which the entire amount: of the Debtor's obligations under or in connection with the Line of Credit (collectively, "Obligations") is allegedly due and payable in full. By way of further answer and as more fully set forth in the Counterclaim below, Plaintiff's demand for payment is premature and in direct violation of the terms of the loan documents and the parties' written agreements which specifically provide that if the Debtor's Borrowing Tranche (as defined below) has not been repaid in full on the earlier of (i)the second anniversary of the date the first advance under such Borrowing Tranche was made by the Bank under the Credit Line as shown in the books of the Bank or (ii)the date which is three (3) months following completion of the construction funded by such Borrowing Tranche (the "Borrowing Tranche Maturity Date"), then (A) such Construction Loan shall immediately be classified as "Work Out" or "Foreclosure" and Borrower shall mark the book value of such Construction Loan to market value on Borrower's books in a manner satisfactory to Bank in Bank's discretion, and (B) Borrower shall immediately pay to Bank the amount of such Borrowing Tranche in excess of the market value for such Construction Loan and thereafter shall pay to Bank a sum equal to ten percent (10%) of the outstanding principal 4 balance of such Construction Loan on each anniversary of the Borrowing Tranche Maturity Date thereof until paid in full. 12. Admitted in part and denied in part. The Kollas Defendants admit that Plaintiff has demanded payment of the obligations. The Kollas Defendants also admit that the Plaintiff's demand for payment and request dated December 15, 2008 and requested February 19, 2010 are attached to the Complaint as Exhibit "E". The Kollas Defendants deny any inference that Plaintiff's demand for payment is proper or that Plaintiff is entitled to payment of the Obligations. By way of further answer and as more fully set forth below in the Counter Claim, Plaintiff's demand for immediate payment is premature and in violation of the parties' agreements or, in the alternative, is barred by the doctrine of promissory estoppel and/or unjust enrichment. 13. Denied. This paragraph states a conclusion of law to which no answer is required. To the extent an answer may be required, the Kollas Defendants deny the allegation that they have breached the parties' agreement and defaulted under their Guaranty by failing and refusing to make immediate payment of the Obligation. 14. Denied. This paragraph states a conclusion of law to which no answer is required. To the extent an answer may be required, the Kollas Defendants deny i:hat Plaintiff is entitled to any of the relief that it requests in this paragraph. WHEREFORE, William C. Kollas and Dianne L. Kollas request that this Court enter judgment in their favor and against the Plaintiff, deny all relief requested by the Plaintiff, and, further, award the Kollas Defendants such further relief as the Court deems equitable and just. NEW MATTER 1. Plaintiff's actions are barred by the Doctrine of Equitable Estoppel. 2. Plaintiff's actions are barred by the Doctrine of Unjust Enrichment. 5 3. Plaintiffs actions are barred by the Doctrine of Accord and Satisfaction. 4. Plaintiff's actions are barred by Doctrine of Waiver. 5. Defendants are entitled to setoff against any amounts which may be due PNC Bank under the loan documents all damages which they sustained by virtue of Plaintiff's breach of contract with and breach of promises and representations to Defendants. WHEREFORE, the Kollas Defendants and the Kensinger Defendants request that this Court enter judgment in their favor and against the Plaintiff, deny all relief requested by the Plaintiff, and, further, award the Defendants such further relief as the Court deems equitable and just. COUNTER CLAIM Count I - Breach of Contract Kensinger & Kollas V. PNC Bank National Association 1. In or about November or December, 2005, in connection with a contemplated $11,000,000.00 Line. of Credit from Mercantile-Safe Deposit & Trust Company ("Mercantile.") to Yorktown Funding, Inc. ("Yorktown'), subject to a contemplated Guaranty by William C. Kollas, Gerald R. Kensinger, and their spouses in an amount not to exceed $5,000.000.00, the parties orally negotiated and agreed to a Work Out arrangement with regard to non- performing assigned mortgages pursuant to which Borrowers would immediately classify such mortgages as work-out or foreclosure and mark their book value to market, pay Mercantile all of the amount advanced in excess of the marked to market value, and at each subsequent one- year anniversary thereafter, pay the Bank an additional 10% of such assigned mortgage marked to market value. 6 2. On or about December 15, 2005, Mercantile issued to Yorktown and Guarantors William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. K.ensinger, , a Line of Credit Commitment Letter (the "Commitment Letter"). A true and correct copy of the Commitment Letter is attached hereto and made a part hereof as Exhibit "A". 3. The Corrunitment Letter provides in Paragraphs 10 and 11 as follows: 10. For any open mortgage assigned to the Bank two (2) years from its first advance or not having a permanent mortgage take- out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure and mark its book value to market in a manner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. 4. Paragrap.!is 10 and 11 of the Commitment Letter were incorporated into the First Amendment to Amended and Restated Credit Agreement dated March 6, 2006 (the "First Amended Agreement"). A true and correct copy of the First Amended Agreement is attached hereto and incorporated herein as Exhibit "B". 5. The First Amended Agreement stated in relevant part in Paragraph 1(a) thereof: Borrower shall repay the principal of each advance under the Credit Line (together with all accrued interest thereon) to fund a Construction Loan (all advanced under the Credit Line to fund the same Construction Loan constitute a "Borrowing Tranche") on the date of the funding of the related Permanent Loan by the Permanent Lender, provided, however, that if such Borrowing Tranche has not been repaid in full on the earlier of (i) the second anniversary of the date the first advance under such Borrowing Tranche was made by the Bank under the Credit Line as shown on the books of the Bank or (ii) the date which is three (3) months following completion of the construction funded by such Borrowing Tranche (the "Borrowing Tranche Maturity Date"), 7 then (A) such Construction Loan shall immediately be classified as "Work Out" or "Foreclosure" and Borrower shall mark the book value of such Construction Loan to market value on Borrower's books in a manner satisfactory to Bank in Bank's discretion, and (B) Borrower shall immediately pay to Bank the amount of such Borrowing Tranche in excess of the market value for such Construction Loan and thereafter shall pay to Bank a sum equal to ten percent (10%) of the outstanding principal balance of such Construction Loan on each anniversary of the Borrowing Tranche Maturity Date thereof until paid in full. By way of illustration, if a Borrowing Tranche is $200,000 and the Construction Loan to which such Borrowing Tranche relates is not repaid in full on the earlier of two (2) years following first advance or three (3) months following construction completion and the market value of such Construction Loan is $180,000, Borrower shall (i)classify such Construction Loan as "Workout" or "Foreclosure", (ii)immediately repay $20,000, and (iii)pay ten percent (10%) of the established market value on each anniversary thereafter until the earlier of the date such Construction Loan is paid in full or is taken out by a Permanent Lender. The ten year repayment agreement was also incorporated into a Third Amended and Restated Promissory 4ote (Line of Credit) also dated March 6, 2006 in Paragraph 1(b) thereof. A true and correct copy of the Third Amended and Restated Promissory Note is attached hereto and made a part hereof as Exhibit "C". 7. On or about February 22, 2007 Mercantile issued to Yorktown and its Guarantors a Line of Credit Commitment Renewal Letter ("Renewal Commitment Letter"). A truc and correct copy of the Renewal Commitment Letter is attached hereto and made a part hereof as Exhibit "D". 8. Paragraphs 10 and 11 of the Renewal Commitment Letter specifically provided as follows: 10. For any assigned mortgage to the Bank two (2) years from its first advance or not having a permanent mortgage take-out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure 8 and mark its book value to market in a manner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. 9. On or about March 19, 2007, Kenneth S. Spatz, Vice President of Mercantile sent an e-mail to Yorktown with regard to reporting and monitoring of outstanding Yorktown loans. A true and correct copy of the March 19, 2007 email is attached hereto and made a part hereof as Exhibit "E". 10. In his email of March 19, 2007 Vice President Kenneth Spatz restated the terms of the parties' agreements with regard to Workout and Foreclosure loans as follows: To start, I think we agree on what are "work-out and foreclosure loans." I look at it as being covered by the following three (3) situations: ? Any loan so designated by YFI [Yorktown] due to borrower(s) or builder default ? And, any loan older than two (2) years from its first advance (commit letter pp#10) O And, any loan at longer than three months from construction completion without a permanent mortgage take-out (commit letter pp#10) For the curtailment of work-out and foreclosure loans assigned to Merc [Mercantile], any loan being so designated should immediately begin the mark to market process as described in paragraphs #10 & 11 of the commitment letter, to be followed by the loan being reduced to that value and thereafter, annual ten percent (10%) curtailment payments to the Bank. 11. On or about December 15, 2008, PNC Bank, as successor in interest to Mercantile- Safe Deposit & Trust Company, sent a demand letter to William C. Kollas and Dianne L. Kollas and to Gerald R. Kensinger and Lori A. Kensinger accelerating the loans and demanding 9 immediate payment of the principal balance of the loans as well as interest, and late charges. A true and correct copy of the demand letters dated December 15, 2008 are attached hereto and made a part hereof as Exhibit "F" 12. On March 5, 2010, PNC Bank filed this action to collect the accelerated amounts allegedly due from the Guarantors on the loan obligations. 13. PNC Bank's acceleration and demand for immediate payment letter directly contradicts and violates the parties' agreement set forth in the Commitment Letter, the Renewal Commitment Letter, loan documents and Vice President Spatz' March 19, 2007 email relating to the markdown of the work-out and foreclosure loans and payment thereof over a ten year period. 14. PNC Bank's acceleration and demand for immediate payment on the loan obligations constitutes a breach of its contract with the Borrower, Yorktown Funding, Inc. and Gerald R. Kensinger, Lori A. Kensinger, William C. Kollas, and Dianne L. Kollas, Guarantors. 15. PNC Bank's acceleration and demand for immediate payn_ient of the loan obligation has caused the Borrower, Yorktown Funding, Inc., to file Chapter 11 banl.i-uptcy in the United State Bankruptcy Court for the Middle District of Permsylvania on February 9, 2010 to No. 1:10-bk-01042-MDF. 16. PNC Bank's acceleration and demand for immediate payment of the loan obligation has harmed the Kollas Defendants and the Kensinger Defendants by causing various lenders of Yorktown Funding, Inc. to demand payment from Defendants William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger, as debt guarantors, as follows: a) Mid Penn Bank -- $5,095,496.83 plus contractual rate of interest plus attorney fees (Judgments confessed 3/24/10); b) Integrity Bank - $6,862,578.00 plus contractual rate of interest plus attorney fees; 10 C) Susquehanna Bank - $1,315,877.36 plus contractual rate of interest plus attorney fees. 17. As a result of PNC Bank's breach of contract, William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger, have sustained damages of $13,273,952.19 plus interest, costs, and attorneys' fees for which they may be responsible under various lenders' loan documents. WHEREFORE, Defendants William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger request that this Court enter judgment in their favor and against PNC Bank in the amount of $13,273,952.19 plus contractual interest, costs of suit, and attorney's fees and costs accruing to various lenders, plus costs of this suit, plus such additional relief as the Court deems equitable and just. Count II - Breach of Contract William C. Kollas & Gerald R Kensinger v. PNC Bank, National Association 13. Defend -its Williarn C. Kollas and Gerald R. Kensinger incorporate by reference Paragraphs 1 through -1.7 of this Counter Claim as if set forth in full below. 19. In addition, PNC Bank's acceleration and demand for immediate payment of the loan obligation has caused lenders of Yorktown Funding, Inc. to make the following demands for payment from Defendants William C. Kollas and Gerald R. Kensinger, as debt guarantors: Centric Bank - $1,407,133.69 (Confession of judgment filed 3/30/10); Graystone Bank - $5,037,958,37 (Complaint filed 3/8/10); PNC Bank as successor in interest to Pennsylvania State Bank - $1,225,182.99 (Confession of judgment filed 2/25/10); Orrstown Bank - $8,386,793.98. 11 20. As a result of PNC Bank's breach of contract, William C. Kollas and Gerald R. Kensinger have sustained damages of $16,057,069.03 plus interest, costs, and attorney's fees for which they may be responsible under various lenders' loan documents. 21. William C. Kollas has a 75% ownership interest in Yorktown and Gerald ]Z. Kensinger has a 25% interest in Yorktown. 22. PNC Bank's acceleration and demand for immediate payment have caused Yorktown to lose business, business opportunities, and profits. 23. PNC Bank's acceleration and demand for immediate payment have caused William C. Kollas' and Gerald R. Kensinger to incur damages in excess of $1 million due to Yorktown's loss of business, business opportunities, and profits thereby reducing the value of William C. Kollas and Gerald R. Kensinger's shareholder equity in the company. WHEREFORE, Defendants William C. Kollas and Gerald R. Kensinger request that this Court enter judgment in their favor and against PNC Bank in the additional amount of 516,057,069.03 plus contractual interest, costs of suit; and attorney's fees and costs accruing to various lenders, plus lost profits, lost opportunities, and decreased shareholder equity in excess of $1 million., plus costs of this suit, plus such additional relief as the Court deems equitable and just. Count III - Promissory-Estoppel (in the alternative) William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, Lori A. Kensinger v. PNC Bank, National Association 24. Defendants William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger incorporate by referenced Paragraphs 1 through 23 of this Counterclaim as if set forth in full below. 12 25. During its negotiations with Yorktown and the potential guarantors with regard to the $11 million line of credit and guarantee, in its Commitment Letter, in the First Amended Agreement, in the Third Amended and Restated Promissory Note (Line of Credit), in the Renewal Commitment Letter, and in the March 9, 2007 email from Mercantile Vice President Kenneth S. Spatz, and in other meetings between the parties, Mercantile, PNC's predecessor in interest, expressly represented to Yorktown and to the guarantors that non-performing construction loans would be classified as work-out or foreclosure loans, that their book value would be marked to market, that Mercantile would be paid the amount advanced in excess of the marked to market value immediately and that at each subsequent one-year anniversary thereafter, Yorktown would pay Mercantile an additional ten percent as such assigned mortgage marked to market value. 26. The guarantors all reasonably relied on Mercantile's promises and representations in executing the guarantee to Mercantile and to other lenders. 27. Defendants William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger reasonably relied on Mercantile's promises and representations in ailov,,ing Yorktown to incur substantial debt to Mercantile and other lenders. 28. The Kollas and Kensinger Defendants changed their positions in reliance in Mercantile's promises and representations. 29. The Kollas and Kensinger Defendants have been harmed by their reasonable reliance on Mercantile's promises and representations. 30. PNC, successor to Mercantile, is estopped from denying the existence, of an agreement between the parties pursuant to the terms of its expressed promise and representation. 13 o , 31. PNC Bank's acceleration and demand for immediate payment are contrary to Mercantile's promises and representations. 32. PNC Bank's acceleration and demand for immediate payment have caused the Kollas and Kensinger Defendants to sustain damages of $13,273.952.19 plus interest, costs, and attorney fees for which they may be responsible under various lenders' loan documents. WHEREFORE, Defendants William C. Kollas, Dianne L. Kollas, Gerald R. Kensinger, and Lori A. Kensinger request that this Court enter judgment in their favor and against PNC Bank in the amount of $13,273,952.19 plus contractual interest, costs of suit, and attorney's fees accruing to various lenders, plus costs of this suit, plus such additional relief as the Court deems equitable and just. Count IV - Promissory Estoppel (in the alternative) William C Kollas & Gerald R. Kensinger v. PNC Bank, National Association 33. Defendants William C. Kollas and Gerald R. Kensinger incorporate by referenced Paragraphs 1 through 23 of this Counter Claim as if set forth in full below. 34. During its negotiations with Yorktown and the potential guarantors with regard to the $11 million line of credit and guarantee, in its Commitment Letter, in the First Amended Agreement, in the Third Amended and Restated Pronssory Note (Line of Credit), iri the Renewal Commitment Letter, and in the March 9, 200,7 email from Mercantile Vice President Kenneth S. Spatz, and in other meetings between the parties, Mercantile, PNC's predecessor in interest, expressly represented to Yorktown and to the guarantors that non-performing construction loans would be classified as work-out or foreclosure loans, that their book value would be marked to market, that Mercantile would be paid the amount advanced in excess of the marked to market value immediately and that at each subsequent one-year anniversary 14 thereafter, Yorktown would pay Mercantile an additional ten percent as such assigned mortgage marked to market value. 35. Defendants William C. Kollas and Gerald R. Kensinger both reasonably relied on Mercantile's promises and representations in executing the guarantee to Mercantile. 36. Defendants William C. Kollas and Gerald R. Kensinger reasonably relied on Mercantile's promises and representations in allowing Yorktown Funding, Inc. to incur substantial debt to Mercantile and other lenders. 37. Defendants William C. Kollas and Gerald R. Kensinger changed their positions in reliance on Mercantile's promises and representations. 38. Defendants William C. Kollas and Gerald R. Kensinger have been harmed by their reasonable reliance on Mercantile's promises and representations. 39. PNC, successor to Mercantile, is estopped from denying the existence of an agreement between the parties pursuant to the terms of its expressed promise and representation. 40. PNC Bank's acceleration and demand for immediate payment are contrary to Mercantile's promises and representations. 41. PNC Bank's acceleration and demand for immediate payment have caused Defendants William C. Kollas and Gerald R. Kensinger to incur damages in the additional amount of $16,057,069.03 plus contractual interest, costs of suit and attorney's fees accruing to various lenders, plus lost profits, lost opportunities and decreased shareholder equity in Yorktown in excess of $1 million. WHEREFORE, Defendants William C. Kollas and Gerald IZ. Kensinger request that this Court enter judgment in their favor and against PNC Bank in the additional amount of 15 $16,057,069.03 plus contractual interest, costs of suit, and attorney's fees and costs accruing to various lenders, plus lost profits, lost opportunities, and decreased shareholder equity in excess of $1 million, plus costs of this suit, plus such additional relief as the Court deems equitable and just Respectfully submitted, THE LAW OFFICES OF MARKIAN R. SLOBODIAN Dated: Lf` 15 hz) MARKIAN R. SLOBODIAN, ESQ. ID #41075 801 North Second Street Harrisburg, PA 17102 717-232-5180 Attorney for William C. Kollas, Dianne L. Kollas, Gerald. R. Kensinger, and Lori A. Kensinger 16 VERIFICATION Subject to the penalties of 18 U.S.C. 4904, relating to unsworn falsification to authorities, I hereby certify that the facts set forth in the foregoing Answer, New Matter and Counterclaim are true and correct to the best of my information and belief. WILLIAM C. KOLLAS 18 VERIFICATION Subject to the penalties of 18 U.S.C. 4904, relating to unswo?rn falsification to authorities, I hereby certify that the facts set forth in the foregoing Answer, New Matter and Counterclaim are true and correct to the best of my information and belief. Dianne L. KOLLAS 19 VERIFICATION Subject to the penalties of 18 U.S.C. 4904, relating to unsworn falsification to authorities, I hereby certify that the facts set forth in the foregoing Answer, New Matter and Counterclaim are true and correct to the best of my information and belief. GERALD R. NSINGER 20 VERIFICATION Subject to the penalties of 18 U.S.C. 4904, relating to unswom falsification to authorities, I hereby certify that the facts set forth in the foregoing Answer, New Matter and Counterclaim are true and correct to the best of my information and belief. LORI A. KENSING ?R 21 CERTIFICATE OF SERVICE I hereby certify that I have this date served a true and correct copy of the above Answer and Counter Claim on the following individuals via U.S. first class mail, postage paid: Geoffrey S. Shuff, Esq. 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 ?7&L?4 nA,4-44 - AR L. HA CAR LL, Legal Secretary Dated: Cie ,r yr ` i G 17 EXNIBjY rr wrr E? MERCANTILE-SAFE DEPOSIT & TRUST COMPANY Kenneth S. Spatz Vice President December 15, 2005 Gerald R. Kensinger, President William C. Kollas, Treasurer Yorktown Funding, Inc. 1104 Fernwood Avenue, Suite 101 Camp all, Pennsylvania 17011 RE: Line of Credit Commitment Dear Messers. Kensinger and Kollas: On behalf of Mercantile-Safe Deposit & Trust Company (Bank) I am pleased to advise revised terms and conditions in the reaffirmation approval of the credit line to Yorktown Funding, Inc. (Borrower). Terms Loan Purpose: Finance short-term construction mortgage loans receivable Loan Type: Secured revolving line of credit Amount: $11,000,000 maximum (increased from $8,000,000) Duration: Annual reaffirmation Interest Rate: Prime plus 0.25%, floating (reduced from Prime plus 0.5%) Collateral: Assignment (unperfected) to Bank by Borrower of the construction mortgages financed by Bank. Guarantees: Borrower principals, William C. Kollas, Gerald R. K:ensinger and their spouses (Guarantors) will jointly and severally guarantee any amounts owed, but not exceeding $5,000,000 plus enforcement costs, to the Bank which is in arrears for fifteen (15) days or more including, but not limited to, principal and interest on the line of credit. 336 Cumberland Street / Lebanon, Pennsylvania 17042 / (717) 274-0800 / Fax: (717) 273-8357 Member FDIC Page 2 December 15, 2005 Yorktown Funding, Inc. Conditions 1. Annual accountant reviewed financial statements and tax returns of Borrower submitted to Bank by April 30 of the following year. These documents must be in form and content acceptable to Bank. 2. Quarterly Borrower prepared financial statements including balance sheets and income statements submitted to Bank within thirty days of the close of such periods in satisfactory form and content. 3. Annual guarantors' financial statements on Bank forms submitted to Bank by April 30 of the following year. Copies of their tax returns will be provided to the Bank within fifteen days of filing- 4. Quarterly reports to Bank of all work-out and foreclosure portfolio mortgages. For each listed mortgage, these reports will contain the date of classification, marked to market value, loan balance and status of collectability. 5. Borrower promises to not grant preferential collateral treatment to any other party. This promise will be evidenced by a negative pledge agreement satisfactory to Bank. Further, there will be a cross-default for Bank with any other lender to Borrower. 6. Borrower will give Bank the right of first refusal on all of Borrower's additional future lines of credit and/or increases to existing lines of credit. Should Bank refuse such addition and/or increase, it may at its sole discretion terminate with notice to Borrower its commitment to make any further advances for new mortgage assignments upon which it had not previously made advances. 7. Line advances will be subject to receipt of the following in form and content satisfactory to Bank: original note instrument, copy of mortgage document (filing information when received), permanent lender take out commitment, loan advance schedule, loan assignment to Bank, a declaration to the type house (manufactured/modular or site built), and any other documents reasonably required by the Bank. Advance requests will be accompanied by inspection reports prepared by firms acceptable to Bank. 8. Borrower will maintain a construction advance deposit account with Bank into which Bank will make credit he advances and from which Borrower will issue checks for construction loan advances on loans assigned to Bank. Page 3 December 15, 2005 Yorktown Funding, Inc. 9. Borrower will permit Bank to annually examine financial records, construction loan documents and files in Borrower's offices. Borrower will pay the examination expenses of Bank. 10. For any open mortgage assigned to the Bank two (2) years from its first advance or not having a permanent mortgage take-out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure and mark its book value to market in a manner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. 12. Any funds lent to Borrower by Guarantors shall be subordLaate in payment to funds lent:. by Bank to Borrower. 13. William C. and Dianne L. Kollas, Guarantors, will personally maintain a minimum of $4,000,000 in net liquid assets comprised of cash plus listed marketable securities, less margin account total balance. 14. The prime rate as used herein refers to that interest rate set by Mercantile-Safe Deposit & Trust Company from time to time as an interest rate base for borrowings. The Prime is one of several interest rate bases used by the Bank. Mercantile lends at rates above and below the prime rate. Interest will be payable monthly. If Maker fails to pay any amount within fifteen (15) days after the date on which it is due, Maker agrees to pay a late charge of the greater of $2.00 or five percent (5.0%) of the delinquent amount. All payments shall be applied first to late charges, then to accrued interest, then to reimbursable expenses and principal. 15, This commitment letter is intended to convey the basic terms and conditions of the loan to you. Any change in the Borrower organization, ownership composition, officers and/or the guarantors of this financing commitment will require prior Bank approval and satisfactory documentation revision to reflect such change. All legal fees related to the documentation of this loan will be at the expense of the Borrower. The Bank reserves the right to add, delete or modify any and all terms and conditions expressed herein at its sole discretion. Page 4 December 15, 2005 Yorktown Funding, Inc. 16. This commitment is offered with our usual condition that we continue to be satisfied with the financial and managerial operation of the company and adherence with the terms and conditions as outlined in this commitment letter. I hope you find this commitment letter acceptable. If you do, please so indicate below and return this letter to me by December 30, 2005. Documentation reflecting the changed terms will then be prepared for execution. If not received by then, this commitment will be null and void at the close of business on that date. I look forward to continuing this banking relationship and serving your financial needs. Yret y, K Sp Vice President to a I hereby accept the above terms and conditions this _ day of 2005: Yorktown Funding, Inc. We, Guarantors, hereby accept the above terms and conditions this'la day of 2005: Willi . Kollas anne L. Kollas Ger d R. Kensinger Lori A. Kensinger EXHIBIT "B" p pa FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This First Amendment to Amended and Restated Credit Agreement dated as of. U j b 2006, by and between MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking corporation with offices at 2901 Whiteford Road, York, Pennsylvania 17402 (`Bank") and YORKTOWN FUNDING, INC., a Pennsylvania corporation with offices at 1104 Fernwood Avenue, Suite 101, Camp Hill, Pennsylvania 17011 ("Borrower") BACKGROUND A Pursuant to a certain Amended and Restated Credit Agreement ("Credit Agreement") between the parties, dated October 1, 2000, Bank has previously made available to Borrower a certain line of credit facility (the "Credit Line") evidenced by a certain Second Amended and Restated Promissory Note, dated October 1, 2000, in the maximum principal amount of up to Eleven Million ($11,000,000) Dollars (the "Credit Line Note"), B The Credit Line is secured by certain collateral described in an Amended and Restated Security Agreement between Bank and Borrower, dated October 1, 2000 C Bank and Borrower have agreed to amend the Loan Documents to (i) modify the interest rate and (ii) make other amendments as described below D Capitalized terms used herein but not defined herein shall have the meanings liven to them in the Credit Agreement 1,10W, THEREFORE, with the foregoing Background deemed incorporated hereinafter by this reference and. hereby made a pail. of this Amendment, the parties, intending to be legally bound, further covenant and agree as follows Amendment of CertainTerins of the Credit Agreement (a} Section I (c)(ti) entitled "Principal" is amended to replace such provision with the following (ii) Principal Borrower shall repay the principal of each advance under the Credit Line (together with all accrued interest thereon) to fluid a Construction Loan (all advances under the Credit Line to fund the same Construction Loan constitute a "Borrowing Tranche") on the date of the funding of the related Permanent Loan by the Permanent Lender, provided, however, that if such Borrowing Tranche has not been repaid in full on the earlier of (i) the second anniversary of the date the first advance under such Borrowing Tranche was made by the Bank under the Credit Line as shown on the books of the Bank or (ii) the date which is three (3) months following completion of the construction funded by such Borrowing Tranche (the `Borrowing Tranche Maturity Date"), then (A) such Construction Loan shall immediately be classified as "Work Out" or "Foreclosure" and Borrower shall mark the book value of such Construction Loan to market value on Borrower's books in a manner satisfactory to Bank in Bank's discretion, and (B) Borrower shall immediately pay to Bank the amount of such Borrowing Tranche in excess of the market value for such Construction Loan 1561858.1 and thereafter shall pay to Bank a sum equal to ten percent (10%) of the outstanding principal balance of such Construction Loan on each anniversary of the Borrowing Tranche Matunty Date thereof until paid in full By way of illustration, if a Borrowing Tranche is $200,000 and the Construction Loan to which such Borrowing Tranche relates is not repaid in full on the earlier of two (2) years following first advance or three (3) months following construction completion and the market value of such Construction Loan is $180,000, Borrower shall (i) classify such Construction Loan as "Workout" or "Foreclosure", (n) immediately repay $20,000, and (iii) pay ten percent (10%) of the established market value on each anniversary thereafter until the earlier of the date such Construction Loan is paid in full or is takers out by a Permanent Lender Notwithstanding the foregoing provisions, on the Credit Line Expiration Date, the entire principal balance of the Credit Line and all outstanding Borrowing Tranches, to the extent not previously repaid, shall become due and payable and, on that date, Borrower shall pay to Bank the entire outstanding principal balance of the Credit Line and all outstanding Borrowing Tranches, plus accrued interest thereon and all other unpaid costs, charges and expenses under any of the Loan Documents (hereinafter defined) (b) Section I (d) entitled "Interest Rate" is amended to replace the applicable interest rate with Prime Rate plus 25 percentage points ( 25%), such rate to adjust with and to the sar,ie extent as said Prime Rate plus applicable inn-rain (c) Section 3(b) entitled "Review of Documentation and Procedures, Other Information" is amended to replace the third sentence thereof with the following The costs of such review and audit shall be reimbursed to Bank by Borrower, provided that unless an Event of Default has occurred, Borrower shall be required to reimburse Bank for its costs for not more than one such examination per year (d) Section 3(h) entitled "Tax Returns" is hereby amended to add the words "Within fifteen (15) days of filing" at the beginning of such section (e) Section 3(i) entitled "Maintenance of Existence, No Change of Ownership" is amended to add the following or (v) permit any change in its officers (f) Section 3(q) entitled "Mortgage Agency Reports" is amended to replace such provision with the following Borrower shalt provide quarterly reports to the Bank, not later than the 15`h day following the end of the quarter to which such reports relate, of all Construction Loans which have been classified as "Work Out" or "Foreclosure" Construction Loans in accordance with Section 1(c)(ii) 1561858-1 2 hereof, containing the date of such classification, marked to market value, outstanding balance and status of collectability, in such detail, form and substance as the Bank may require (g) Section 3(r) entitled "Guarantor Liquidity" is amended to replace "$1,500,000 with $4,000,000 " The term "Net liquid assets" shall mean cash or securities publicly traded on the New York Stock Exchange or on NASDAQ, less margin account total balance (h) Section 4(h)(v) entitled "Principal Guarantees" is replaced with the following Principal Guarantees Unconditional and irrevocable guarantees of payment and performance (collectively, the "Guarantees") by the following persons (collectively, the "Guarantors"): (i) William C Kollas and Dianne L Kollas, husband and wife (the "Kollas Guarantors"); and (it) Gerald R Kensinger and Lori A Kensinger, husband and wife (the "Kensinger Guarantors"), in the nature of a surety, of all of Borrower's obligations, debts, duties, liabilities, covenants, agreements and warranties under the Loan Agreement, the Credit Line Note, the Loan Documents or otherwise relating to repayment of the indebtedness of the Borrower under the Credit Line The Guarantees will provide that (i) unless the Bank accelerates the principal balance of the Credit Line by reason of the occurrence of an Event of Default, the Bank will provide a fifteen (15) day grace pcood to the Guarantors following failure of the Borrower to make any payment when due before, the Bank will seek payrneat from the Guarantors for such, delinquent payment and (it) the Guarantors will jointly and severally agree to a tender/put right by the Bank for payment of a':l assigned Construction Loans and related Construction Loan. Dccwnentation that are not paid in full by the related Borrower Tranche Maturity Date (where such date has not been extended by the Bank in its sole discretion) Notwithstanding the foregoing, the liability of each of the Kollas Guarantors and the Kensinger Guarantors under the Guarantees shall be limited to $5,000,000 plus Expenses (as defined in the Guarantees) (1) Credit Line Expiration Date The term "Credit Line Expiration Date" in Section 1(a) shall mean June 30, 2006 2 Confirmation of Existingy Indebtedness Borrower hereby unconditionally acknowledges and confirms that (a) the aggregate unpaid pruicipal indebtedness of Borrower to Bank evidenced by the Credit Line Note is, as of March 6, 2006, $7,343,477 16 and accrued but unpaid interest is, as of March 6, 2006, $13,983 08, and (b) the foregoing indebtedness and expenses owed to Bank pursuant to the Loan Documents and continually accruing interest and related costs, fees and expenses including, without limitation, expenses owed to Bank pursuant to the Loan Documents, is owing without claim, counterclaim, right to recoupment, defense or set- off of any kind or of any nature whatsoever 156185E-1 3 M%ficcation and Confirmation Borrower hereby ratifies, confirms and reaffirms in all respects and without condition, all of the terms, covenants and conditions set forth in the Loan Documents, and hereby agrees that Borrower remains unconditionally liable to Bank in accordance with the respective terms, covenants and conditions of such instruments, agreements and documents, and that all collateral, liens, security interests and pledges created pursuant thereto and/or referred to therein continue unimpaired in full force and effect, and secure and shall continue to secure all of the debts, liabilities and obligations of Borrower to Bank 4 Representations Warranties and Covenants Borrower hereby confirms that (?) all of the representations and warranties set forth in the Loan Documents are true and correct as if made on the date hereof, (ii) Borrower is in compliance with all of the covenants set forth in the Loan Documents as of the date hereof and (iii) there exists, as of the date hereof, no Event of Default under the Loan Documents Borrower further represents and warrants to Bank as follows (a) Borrower has the power, authority and capacity to enter into and perform this Amendment, and all other documents and instruments described herein, and has taken all proper and necessary corporate action to authorize the execution, delivery and performance of this Amendment, and all other documents and instruments described herein (b) This Amendment, and all other documents and instruments described herein, when delivered, will be valid, binding and enforceable against Borrower in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and judicial decisions affecting creditors' rights generally and the availability or effect of equitable remedies (c) No consent, approval or authorization of, or filing, registration or qualification with, any person is required to be obtained by Borrower in connection with the execution and delivery of this Amendment, and all other documents and instruments described herein or the undertaking or performance of any obligation hereunder or thereunder Without limiting the generality of the foregoing, Borrower represents and warrants that the execution and delivery of this Amendment has been duly executed by its authorized officers 5 Conditions Precedent Contemporaneously herewith, and as a condition precedent to the effectiveness of the agreements herein, Borrower shall provide -to Bank (or cause to be provided to Bank) the following or evidence of the following (all instruments, agreements and documents to be in form and substance satisfactory to Bank and its counsel) (a) Amendments to Amended and Restated Guaranty and Suretyship Agreements of Guarantors, (b) The Third Amended and Restated Promissory Note (Line of Credit) between Borrower and Bank of even date, and (c) A written opinion of counsel of Kollas and Kennedy, counsel for the Borrower, directed to Bank, and 1561858-1 (d) Certified (as of the date of this Amendment) copies of resolutions of the board of directors of Borrower authorizing the execution, delivery and performance of this Amendment and each of the instrumciits, agreements and documents referred to in this Amendment, together with a certificate, dated the date of this Amendment, from the secretary of Borrower as to the incumbency and specimen signatures of officers of Borrower executing this Amendment and the instruments, agreements and documents referred to in this Amendment, and (e) Such other instruments, agreements and documents as Bank may require to confirm the representations and warranties of Borrower set forth herein and effectuate the intent and objectives of the parties to this Amendment and the instruments, agreements and documents referred to in this Amendment 6 No Defenses, etc Borrower hereby confirms and reconfirms that there are no existing defenses, claims, counterclaims or rights of recoupment or set-off against Bank in connection with the negotiation, preparation, execution, performance or any other matters relating to the Loan Documents or this Amendment 7 Expenses On demand, Borrower will pay all expenses„ including the reasonable fees and expenses of legal counsel for Bank, incurred in connection with the preparation, negotiation, administration, amendment, modification or enforcement of this Amendment and the collection or attempted collection of any of the debts, liabilities and obligations referred to to this Amendment L" G_overnm _Lam, This Amendment shall be governed by the lairs of the Commonwealth of Pennsylvania, without giving effect to principles of conflicts of laws 4 Incorporation into Loan Documents This Amendment and the documents to be executed and delivered pursuant hereto shall be deemed incorporated into and made a part of the Loan Documents All such instruments, agreements and documents, and this Amendment, shail be constnied as integrated and complementary of each other, and as augmenting and not restricting Bank's rights, remedies, benefits and security If, after applying the foregoing, an inconsistency still exists, the provisions of this Amendment shall constitute an amendment to the Loan Documents and shall control 10 Counterparts This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instmment I I No Waiver No failure by Bank to comply with any provision or provisions of this Agreement, and no waiver on the part of any party in exercising any rights hereunder, shall operate as a waiver of any rights of Bank. No waiver of an Event of Default shall affect any subsequent Event of Default or impair any nghts of Bank consequent thereon Any approval given by Bank in whole or in part to advance funds hereunder before the time or times provided herein shall not waive or impair any of the provisions hereof or any of the rights or remedies of Bank hereunder or affect the secunty hereunder given or any of the nghts or remedies of Bank as to such security, nor shall so doing be or be construed to be a vanance from this Agreement Tardiness in enforcing any provision hereof shall not be set up as a waiver by Bank of any of its rights hereunder and all covenants on the part of Borrower hereunder to be kept and performed 1561858.1 5 IN WITNESS WHEREOF, the parties have hereunto caused this Amendment to be executed as of the day and year first above written ATTEST COUNTY OF YORKTO DING, WC COMMONWEALTH OF PENNSYLVANIA By R ensinger, Preside MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY By Kenn S Satz, ce President ss On this, the (0 Fh day ofh , 2006, before me, a Notary Public in and for the Commonwealth and County aforesaid, the undersigned officer, personally appeared Gerald R Kensinger, who acknowledged himself to be the President of Yorktown Funding, Inc , a corporation, and that as such officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the Corporation by himself as President IN WITNESS F, I have ereunto set my hand and official seal .. NOTARiAl. SEAL CAROLE A ROSE LAt?.? Notarv Pobl?c TWSP OF LQwER ALLEN Notary Public CUMBERLAND COUNTY My Commisaon Exrnres Oct 21. 2007 COMMONWEALTH OF PENNSYLVANIA COUNTY OF YORK ss On this, the day of M a ?'J_ , 2006, before me, a Notary Public in and for the Commonwealth and County aforesaid, the undersigned officer, personally appeared Kenneth S Spatz, who acknowledged himself to be the Vice President of Mercantile-Safe Deposit and Trust Company, a banking corporation, and that as such officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained by signing the name of the Bank by himself as Vice President yhandand official seat IN WITNESS WHEREOF, I have hereunto set m4'? COMMONWEALTH OF PENNSYLVANIA 1 . Notanal Seat Terms Achtxehn.WWrYPublrc Notary Public Wrigett roury Twp. York County 1561858-1 My COMMWM EXAM Nov 9, 2009 Momber Pannoyiyama Ascoaation of Notanes THIRD AMENDED AND RESTATED PROMISSORY NOTE (Line of Credal r $11,000,000 00 Date 2006 FOR VALUE RECEIVED, YORKTOWN FUNDING, INC., a Pennsylvania corporation having its principal offices located at 1104 Fernwood Avenue, Suite 101, Camp Hill, PA 17011 ("Borrower"), promises to pay to the order of MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking corporation with offices located at 2401 Whiteford Road York, PA 17402 ("Bank") at such office of Bank, or at such other place as Bank may designate from time to time in witting, the principal stun of ELEVEN MILLION DOLLARS ($11,000,000 00) or such lesser sum as provided in Section 6 hereof, in lawful money of the United States of America, together with interest thereon from the date hereof, both payable as hereinafter provided Capitalized terms used herein but not defined herein shall have the meanings given such terms in the Loan Agreement referenced in Section 5 below I Scheduled Pavments a Interest The outstanding principal balance of the Credit Lane evidenced hereby shall bear interest at a per annum rate at all times equal to the Prime Rate established by the Bank as its "prime" rate of interest from time to time at its offices in York, Pennsylvania of Baltimore, Maryland (the "Prime Rate") plus 25 percentage points ( 25%), such rate to adjust with and to the same extent as said Prime Rate plus applicable margin The Prime Rate is a reference rate only, and is not necessarily the Bark's lowest late of tnteiest offered by the Bank to its commercial lending customers The Bank's use of the Prime Rate shall not in any way preclude the Bank fiom making, loans to other borrowers at a rate which is higher or lever than or different from (lie Prime Rate, or which utilizes a higher or lower maigm factor Interest shall accrue at the above stated Prime Rate plus margin notwithstanding failure of the indebtedness outstanding hereunder to be paid in full on the Credit Line Expiration Date (as defined nn the Loan Agreement) (and whether or not Bank has initiated action to col;ect amounts due), the occurrence of an Event of Default, the entry of judgment against BoiIowei respecting any Event of Default or otherwise. it being the intention of Borrower and Bank that interest accrue, at such rate until the indebtedness outstanding hereunder and under the Loan Documents is fully collected by Bavk Interest shall be calculated on the basis of a 360 day year and the actual number of days elapsed Further, in connection with the exercise by Borrower of any right to cure any monetary Event of Default available tinder any applicable Loan Document or at law or in equity, including, without limitation, any provision of the United States Bankruptcy Code, interest at the applicable contract rate hereunder shall accrue and be payable on all delinquent payments of principal, interest, late charges, attorney fees and all other amounts payable hereunder or under the Loan Agreement or any of the Loan Documents tnteiest shall be payable in arrears in monthly payments commencing on the first clay of the calendar month Immediately following the date the first advance undei the Credit Line is made by Bank tender the Loan Agreement and continuing on the same day of each successive calendar month thereafter until the indebtedness outstanding hereundei is fully collected by Bank Notwithstanding anything to the contrary contained herein or in any other document executed in connection with this Note, the effective rate of interest hereunder shall not exceed the maximtun effective rate of interest permitted by applicable law or regulation In the event 1562035.1 any interest rate herein shall be or become ustu sous, such interest rate shall be deemed to be reduced to the htghest rate permitted by law b Ptinctoal Bortower shall repay the principal of each advance under the Credit Line (together with all accrued interest thereon) to fund a Construction Loan (all advances undet the Credit Line to fund the same Construction Loan constitute a "'Borrowing Tranche'") on the date of the funding of the related Permanent Loan by the Permanent Lender, provided, however, that if such Borrowing Tranche has not been repaid in full on the earlier of (r) the second anniversary of the date the fitst advance under such Borrowing Tranche was made by the Bank under the Credit Line as shown on the books of the Bank or (u) the date which is three (3) months following completion of the construction funded by such Borrowing Tranche (the "Borowing Tranche Maturity Date"), then (A) such Construction Loan shall immediately be classified as "Work Out" of "Foreclosure" and Borrower shall mark the book value of such Construction Loan to market value on Borrowers books in a manner satisfactory to Bank in Bank's discretion, and (B) Borrower shall immediately pay to Bank the amount of such Borrowing Tranche in excess of the market value for such Construction Loan and thereafter shall pay to Bank a sum equal to ten percent (10%) of the outstanding principal balance of such Construction Loan on each anniversary of the Borrowing Tranche Maturity Date thereof until paid in full On the Credit Line Expiration Date (as defined in Section I(a) of the Loan Agreement), the entue outstanding principal balance of the Credit Line and all outstanding Borrowtno Tranches, to the extent not previously repaid, shall become dice and payable and, on that date, Borrower shall pay to Bank the entire outstanding principal balance of the Credit Line and all outstanding Borrowing Tranches, plus accrued interest thereon and all other unpaid costs, charges and expenses under any of the Loan Documents 2 Late Charge In the event that any payment hereundei or under th( Loan Agreement shall not be paid when due and shall remain unpaid in excess of fifteen (15) days after the due date, in addition to, and not in limitation of any other rights or remedies which Bank may have in respect thereof, Borrower shall pay Bank, on demand, a "late charge" computed at the rate of [tie greater of $2 00 or five cents ($ 05) for each dollar (or part: thereof) of the amount not paid The amount of any such "late charge" not paid promptly following demand therefor shall be deemed outstanding and payable pursuant hereto and secured by the Loar. Documents 3 Voluntary. Prenavments Borrower may prepay its indebtedness outstanding hereunder, in whole or to part, at any time without premium or penalty All principal prepayments shall be applied in inverse order of the maturities of the required payment thereof and will not postpone, forgive, waive or serve to reduce Borrower's obligations to make the next scheduled installment payment thereof or scheduled payment of Interest or any other payment due under the terms hereof or any of the other Loan Documents 4 CONFESSION OF JUDGMENT BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF RECORD, OR THE PROTHONOTARY OR CLERK OF ANY COURT Ni THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, TO APPEAR FOR BORROWER AT ANY TIME OR TIMES AFTER AN EVENT OF DEFAULT UNDER THE LOAN AGREEMENT OR UNDER ANY OF THE OTHER LOAN DOCUMENTS SHALL HAVE OCCURRED, IN ANY SUCH COURT IN ANY ACTION BROUGHT AGAINST BORROWER BY BANK WITH RESPECT TO THE AGGREGATE AMOUNTS PAYABLE HEREUNDER, WITH OR WITHOUT DECLARATION FILED, AND THEREIN TO CONFESS OR ENTER !MDGMENT AGAINST 15620]5.1 7 BORROWER, FOR ALL SUMS PAYABLE BY BORROWER TO BANK HEREUNDER, AS EVIDENCED BY AN AFFIDAVIT SIGNED BY A DULY AUTHORIZED DESIGNEE OR BANK SETTING FORTH SUCH AMOUNT THEN DUE FROM BORROWER TO BANK, PLUS REASONABLE ATTORNEYS' FEES, WITH COSTS OF SUIT, RELEASE OF PROCEDURAL ERRORS AND WITHOUT RIGHT OF APPEAL IF A COPY OF THIS NOTE, VERIFIED BY AN AFFIDAVIT, SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY BORROWER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN EFFECT NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER TO BRING ANY ACTION OR CONFESS JUDGMENT THEREIN SHALL BE DEEMED TO EXHAUST THE POWER, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS BANK SHALL ELECT UNTIL ALL AMOUNTS PAYABLE TO BANK HEREUNDER SHALL HAVE BEEN PAID IN FULL THE BORROWER ACKNOWLEDGES THAT BORROWER UNDERSTANDS THE MEANING AND EFFECT OF THE CONFESSION CONTAINED N THE FOREGOING PARAGRAPH SPECIFICALLY, THE BORROWER UNDERSTANDS AMONG OTHER THNGS THAT (1) BORROWER IS RELINQUISHING THE RIGHT TO HAVE NOTICE EXCEPT AS PROVIDED HEREN, AN OPPORTUNITY TO BE HEARD AND THE RIGHT TO HAVE THE BURDEN OF PROOF OF DEFAULT REST ON BANK PRIOR TO THE ENTRY OF JUDGMENT, (2) THE ENTRY OF JUDGMENT MAY RESULT IN A LIEN ON BORROWER'S PROPER'T'Y, (;) BORROWER WILL BEAR THE BURDEN AND EXPENSE OF ATTACKING THE ,rUDGME:i,JT AND CHALET-,NGING EXECUTION ON THE LIEN AND SALE OF TIJE- PR.OPEDI TY COVERED 'T'HEREBY, AND (4) ENOUGH OF BORROWER'S PROPERTY :AAY BE TAKEN TO PAY THE PRINCIPAL AMOUNT, INTEREST, COSTS AND ATTORNEYS FEES 5 Reference to Loan Agreement Restated Credit Agreement dated October 1, Amended and Restated Credit Agreement of This Note arises out o` a cetta!n Ariwnc'ed and 2000, as amended by the First Amendment to ven date herewith between: Borrowe; and Bank (including ak further amendments, restatements, modifications and extensions tnere.of arid subsututioils and replacements thereof, the "Loan .Agreement''), and to which reference, is made for a statement of the conditions for advances and readvances of the principal amount hereof, the respective rights and obligations of the parties, the collateral security herefor and the guarantees hereof, the terms and conditions therein provided under which the outstanding balance of the principal sum and the accrued interest thereon. if any, may become immediately due and payable and the Bank's rights and remedies upon occurrence of an Event of Default 6 limitation of Liabilitti, Notwithstanding the face amount of this Note, Borrower's liability hereunder shall be limited at all times to its actual aggregate outstanding indebtedness under the Credit Line and the Loan Agreement 7 Waivers Borrower hereby waives presentment demand, notice of non-payment, protest, notice of protest, or other notice of dishonor, and any and all othei notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note, except any notice requirements set forth in the Loan Agreement 15620)>J 8 Smuewors qnd Ani stns This Note inures to the benefit of Bank, and bonds Borrower, and their respective successors and assigns, and the words "Bank" and 'Borrower" whenever occurring herein shall be deemed and construed to include such respective successors and assigns 9 Captions The captions or headings in this Note have been inserted Foi convenience only, and shall not control or affect the meaning or construction of any of the terms or provisions of this Note 10 Governing Law This Note shall be governed by. and construed in accordance with, the laws of the Commonwealth of Pennsylvania i 1 Restatement of Existing Indebtedness This Note evidences the indebtedness- principal and accrued interest, which previously was evidenced by that Second Amended and Restated Promissory Note (Line of Credit) dated October 1, 2000 in the original principal amount of $ 11,000,000, (the "Predecessor Note") executed by the Borrower to favor of Bank, which Predecessor Note has been amended and restated in its entirety and replaced hereby without any discharge or release of such indebtedness. or the collateral security therefor IN WITNESS WHEREOF. Borrower has executed this Note as of the day and year first above written ATTEST YORXTO DING, INC Bye- -- ---- I P, .enstnget, Press ent !562035•( EMERCANTILE-SAFE DEPOSIT & TRUST COMPANY Kenneth S. Spatz Vice President February 22, 2007 Gerald R. Kensinger, President William C. Kollas, Treasurer Yorktown Funding, Inc. 1104 Fernwood Avenue, Suite 302 Camp Hill, Pennsylvania 17011 RE: Line of Credit Commitment Dear Messers. Kensinger and Kollas: On behalf of Mercantile-Safe Deposit & Trust Company (Bank) I am pleased to advise revised terms and conditions in the reaffirmation approval of the credit line to Yorktown Funding, Inc. (Borrower). Terms Loan Purpose: Finance short-term construction mortgage loans receivable Loan Type: Secured revolving line of credit Amount: $11,000,000 maximum Duration: Annual reaffirmation Interest Rate: Prime plus 0.25%, floating Collateral: Assignment (unperfected) to Bank by Borrower of the construction mortgages financed by Bank. Guarantees: Borrower principals, William C. Kollas, Gerald R. Kensinger and their spouses (Guarantors) will jointly and severally guarantee any amounts owed, but not exceeding $5,000,000, to the Bank which is in arrears for fifteen (15) days or more including, but not limited to, principal and interest on the line of credit. 336 Cumberland Street / Lebanon, Pennsylvania 17042 / (717) 274-0800 / Fax: (717) 273-8357 Member FDIC AftMkste Mercar Ms Bankshares CorporaWn Page 2 February 22, 2007 Yorktown Funding, Inc. Conditions 1. Annual accountant reviewed financial statements and tax returns of Borrower submitted to Bank by April 30 of the following year. These documents must be in form and content acceptable to Bank. Quarterly accountant compiled financial statements including balance sheets and income statements submitted to Bank within thirty days of the close of such periods in satisfactory form and content. 3. Annual guarantors' financial statements on Bank forms submitted to Bank by April 30 of the following year. Copies of their tax returns will be provided to the Bank within fifteen days of filing. 4. Quarterly reports to Bank of all work-out and foreclosure portfolio mortgages . These reports will contain for each listed mortgage the date of classification, marked to market value, loan balance and status of collectability. 5. Borrower promises to not grant preferential collateral treatment to any other party. This promise will be evidenced by a negative pledge agreement satisfactory to Bank. Further, there will be a cross-default for Bank with any other lender to Borrower. 6. Borrower will give Bank the right of first refusal on all of Borrower's additional future lines of credit and/or increases to existing lines of credit. Should Bank refuse such addition and/or increase, it may at its sole discretion terminate with notice to Borrower its commitment to make any further advances for new mortgage assignments upon which it had not previously made advances. Line advances will be subject to receipt of the following in form and content satisfactory to Bank: original note instrument, copy of mortgage document (filing information when received), permanent lender take out commitment, loan advance schedule, loan assignment to Bank, a declaration to the type house (manufactured/modular or site built), and any other documents reasonably required by the Bank. Advance requests will be accompanied by inspection reports prepared by firms acceptable to Bank. 8. Borrower will maintain a construction advance deposit account with Bank into which Bank will make credit line advances and from which Borrower will issue checks for construction loan advances on loans assigned to Bank. Page 3 February 22, 2007 Yorktown Funding, Inc. 9. Borrower will permit Bank to annually examine financial records, construction loan documents and files in Borrower's offices. Borrower will pay the examination expenses of Bank. 10. For any assigned mortgage to the Bank two (2) years from its first advance or not having a permanent mortgage take-out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure and mark its book value to market in a manner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. 12. Any funds lent to Borrower by Guarantors shall be subordinate in payment to funds lent by Bank to Borrower. 13. William C. and Dianne L. K.ollas, guarantors, will personally maintain a minimum of $4,000,000 in riet liquid assets comprised of cash plus listed marketable securities, less margin account total balance. 14. The prime rate as used herein refers to that interest rate set by Mercantile-Safe Deposit & Trust Company from time to time as an interest rate base for borrowings. The Prime is one of several interest rate bases used by the Bank. Mercantile lends at rates above and below the prime rate. Interest will be payable monthly. If Maker fails to pay any amount within fifteen (15) days after the date on which it is due, Maker agrees to pay a late charge of the greater of $2.00 or five percent (5.0%) of the delinquent amount. All payments shall be applied first to late charges, then to accrued interest, then to reimbursable expenses and principal. 15. This commitment letter is intended to convey the basic terms and conditions of the loan to you. Any change in the Borrower organization, ownership composition, officers and/or the guarantors of this financing commitment will require prior Bank approval and satisfactory documentation revision to reflect such change. All legal fees related to the documentation of this loan will be at the expense of the Borrower. The Bank reserves the right to add, delete or modify any and all terms and conditions expressed herein at its sole discretion. Page 4 February 22, 2007 Yorktown Funding, Inc. 16. This commitment is offered with our usual condition that we continue to be satisfied with the financial and managerial operation of the company and adherence with the terms and conditions as outlined in this proposal letter. I hope you find this commitment letter acceptable. If you do, please so indicate below and return this letter to me by March 15, 2007. Documentation reflecting the changed terms will then be prepared for execution. If not received by then, this commitment will be null and void at the close of business on that date. I look forward to continuing this banking relationship and serving your financial needs. Yours Inily, erne S. S atz Vice President to I hereby accept the above terms and conditions this Yorktown F g, Inc. by t P"X, G d R. Kensinger day of 2007: We, Guarantors, hereby accept the above terms and conditions this day of , 2007: ? i iam C. as 0er . Kensinger 1 _ Dianne L. Kollas Lori A. Kensinger EXHIBIT "E" 'Revjsed reporting Page 1 of 2 Jerry From: Spatz, Kenneth (Kenneth.Spatz c@mercantile.com] Sent: Monday, March 19, 2007 3:01 PM To: jerry@yorktownfunding.com Subject: Revised reporting Jerry, Please let me know what you think of this draft. I'd like to get it on a fast track for our mutual benefit. Looking forward to hearing from you. Ken RE: Revised procedure to monitor and curtail work-out and foreclosure loans Here are my thoughts on putting a new monitoring procedure in place. I am trying to balance what is required in Merc's commitment letter with YFI's system capabilities as much as possible. Our last conversation leads me to think some of this will need to be manually performed on one or both of our ends. It is my hope that what we accomplish here will also satisfy the needs to syndicate your total line of credit demands. Please consider this as a draft for the basis of a conversation seeking your feedback on what is possible and most efficient, or alternatives for what is not workable. To start, I think we agree on what are "work-out and foreclosure loans." I look at it as being covered by the following three (3) situations: ? Any loan so designated by YFI due to borrower(s) or builder default ? And, any loan older than two (2) years from its first advance (commit letter pp#10) ? And, any loan at longer than three months from construction completion without a permanent mortgage take- out (commit letter pp#10) For the curtailment of work-out and foreclosure loans assigned to Merc, any loan being so designated should immediately begin the mark to market process as described in paragraphs # 10 & 11 of the commitment letter, to be followed by the loan being reduced to that value and thereafter, annual ten percent (10%) curtailment payments to the Bank. Since instituting these above requirements, we have been trying to monitor work-out and foreclosure loans with a combination of the Merc generated monthly reports of six months and older loans, YFI's status report covering those loans, and YFI's quarterly work-out and foreclosure report. The latter did not necessarily cover all instances of over two (2) year old loans and completed home loans without perms. But, Merc's monthly report of over six months old loans does identify those exceeding two years. That leaves to identify the completed homes without perms, which we attempt to find with the help of YFI's monthly status report. This monitoring process needs improvement to focus more closely and efficiently on the defined work-out and foreclosure loans and the curtailment process. To accomplish this, I propose that YFI generate three quarterly reports for Merc: 1) loans older than two years from first advance; 2) loans at longer than three months after construction completion without permanent take-out and; 3) the existing GL "work-out and foreclosure loans' report with some additional info. The following is what info I think those reports should contain. 03/19/2007 Revised reporting Page 2 of 2 2. Report of Two Year + Loans ? Account name ? Account balance ? First advance date ? Status narrative brief Report of Loans W/O Perm ? Account name ? Account balance ? Construction completion date ? Status narrative brief GL Report of Work-Out and Foreclosure Loans ? Account name ? Account balance ? Date of classification to work-out or foreclosure ? Mark to market value ? Mark to market balance after write down and curtailment I believe that should take care of it. Please let me know what you think on this. IMPORTANT REMINDER: Because the security of e-mail messages cannot be guaranteed, Mercantile-Safe Deposit & Trust Co. requires that all transaction or investment instructions be communicated verbally to your Client Advisor, or be delivered to the bank, in writing, by hand or secured mail. As a precaution, Mercantile-Safe Deposit & Trust Co. recommends that you never disclose your account numbers, social security number, passwords, or PIN numbers in an email. The opinion expressed in this e-mail message are those of the sender alone and do not represent the position of Mercantile Bankshares or its Affiliates unless specifically so stated herein. Additionally, the information contained in this message is intended only for the persons to whom it is addressed and may contain confidential or privileged material. Copying, distributing, dissemination, reliance on, or other use of the information by persons other than intended recipients(s) is prohibited. If you receive this message in error, please notify the sender and delete the entire message from any computer. 03/19/2007 PNCBANK December 15, 2008 Gerald R. Kensinger Lori A. Kensinger 4404 Avon Dr. Harrisburg, Pa. 17112 RE: Credit Agreement dated April 14, 1998 in the original amount of $5,000,000 in favor of Mercantile-Safe Deposit and Trust Company, as amended and restated Dear Mr. & Mrs. Kensinger: As the guarantor of the referenced loan you are hereby advised the loan is in default for failing to pay the entire principal balance on the Credit Line Expiration Date of Oct., 31, 2008. PNC Bank, as successor in interest to Mercantile-Safe Deposit and Trust Company, demands payment in; full of the loan. As of the date of this letter the following is due and owing: Principal: $4,211,905.46 Interest: 53,719.72 Late Charges: 210,595.73 Total: $4,476,220.53 Interest continues to accrue at.the rate set forth in the Note, as amended and restated. Your failure to pay the amount due prior to December 30, 2008 may result in the Bank taking legal action to collect the loan. Sincerely, Michael J. Fina Member of The PNC Financial Services Group 4242 Carlisle Pike Camp Hill Pennsylvania 17011 www.pnc.com a, a G PNCBANK December 15, 2008 William C. Kollas Dianne L. Kollas 850 Kiehl Dr. Lemoyne, Pa. RE: Credit Agreement dated April 14, 1998 in the original amount of $5,000,,000 in favor of Mercantile-Safe Deposit and Trust Company, as a"mended and restated Dear Mr. & Mrs. Kollas: As the guarantor of the referenced loan you are hereby advised the loan is in default for failing to pay the entire principal balance on the Credit Line Expiration Date of Oct., 31, 2008. PNC Bank, as successor in interest to Mercantile-Safe Deposit and Trust Company, demands payment In full of the loan. As of the date of this letter the following is due and owing: Principal: $4,211,905.46 Interest: 53,719.72 Late Charges: 210,595.73 Total: $4,476,220.53 Interest continues to accrue at the rate set forth in the Note, as amended and restated. Your failure to pay the amount due prior to December 30, 2008 may result in the Bank taking legal action to collect the loan. Sincerely, Michael J. Fina Member of The PNC Financial Services Group 4247 Carliste Pike Camp Hill Pennsylvania 17011 www.pnc.com .? A EXHIBIT "B" PNC BANK, NATIONAL ASSOCIATION :IN THE COURT OF COMMON PLEAS successor to Mercantile-Safe Deposit & Trust :CUMBERLAND COUNTY, PENNSYLVANIA Company, Plaintiff : CIVIL ACTION - LAW V. : NO. 10-1385 WILLIAM C. KOLLAS, :CONFESSION OF JUDGMENT Defendant AFFIDAVIT OF GERALD R. KENSINGER I, Gerald R. Kensinger, President of Yorktown Funding, Inc. ("Yorktown") hereby affirm under the penalties of 18 Pa. C.S. §4904 that the following is true and correct based upon my personal knowledge and recollection: 1. I am the President of Yorktown Funding, Inc. 2. In or about November or December 2005, in connection with a contemplated $11,000,000 Line of Credit from Mercantile-Safe Deposit and Trust Company ("Mercantile") to Yorktown, subject to a contemplated Guaranty by William C. Kollas, Gerald R. Kensinger, and their spouses, in an amount not to exceed $5,000,000, I specifically orally negotiated with Mercantile's Vice President Ken Spatz a work out arrangement with regard to non-performing assigned mortgages pursuant to which Yorktown would immediately classify such mortgages as work-out or foreclosure and mark their book value to market, pay Mercantile all of the amount advanced in the excess of the market value, and at each subsequent one year anniversary thereafter, pay Mercantile an additional ten percent of such assigned mortgage marked to market value. 3. The ten year payoff was negotiated upon Mercantile's recognition that it would be impossible for Yorktown to pay off its Line of Credit without causing the demise of the company. v .? I 4. Yorktown's negotiated right to a ten year payment was not subject to any restriction and was not limited by any non-renewal or other termination of the Line of Credit facility. 5. PNC's acceleration of the Mercantile loan caused Yorktown to file a Chapter 11 Bankruptcy Petition and caused other lenders to demand immediate payment of Yorktown loans totaling more than $36,000,000. 7. PNC's acceleration and demand for immediate payment of the Mercantile Note loan directly caused the inability of either Yorktown or the loan guarantors to immediately pay the accelerated. balance on the PA State Note loan. 8. Yorktown is current with its monthly interest payments to PNC with regard to both the Mercantile Note and PA State Note loan obligations. GE AL ENSINGE PNC BANK, NATIONAL ASSOCIATION :IN THE COURT OF COMMON PLEAS successor to Mercantile-Safe Deposit & Trust :CUMBERLAND COUNTY,. PENNSYLVANIA Company, Plaintiff CIVIL ACTION - LAW V. : NO. 10-1385 WILLIAM C. KOLLAS, :CONFESSION OF JUDGMENT Defendant AFFIDAVIT OF WILLIAM C. KOLLAS I, William C. Kollas, hereby affirm under the penalties of 18 Pa. C.S. §4904 that the following is true and correct based upon my personal knowledge and recollection: 1. 1 am the Secretary and majority stockholder of Yorktown Funding, Inc. ("Yorktown") 2. Prior to PNC's acceleration of the Mercantile Note loan, I had set aside sufficient cash to pay PNC the difference between the loan balance and the ascertainable market value of real estate securing various Yorktown construction loans and was both prepared to and in fact offered to make such payment to PNC. 1 also had sufficient funds to pay any accelerated balance on the PA State Note loan. 3. PNC's acceleration of the Mercantile Note loan and the resulting actions of other lenders made it impossible for me to pay PNC the difference between loan balance and ascertainable market value of real estate securing construction loans on the Mercantile Note loan and made it impossible for me pay all guaranteed accelerated balanced on Yorktown loan obligation, including any accelerated liability owed to PNC Bank under the PA State Note loan that is at issue in this case. WILLIAM C. KOLLAS IL CERTIFICATE OF SERVICE I hereby certify that I have this date served a true and correct copy of the above Brief on the following individuals via U.S. first class mail, postage paid: Geoffrey S. Shuff, Esq. 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 AR L.. HAY CAR LL, Legal Secretary Dated: V * 0 Z ?, ` I D 13 Geoffrey S. Shuff Attorney ID #24848 Charles T. Young, Jr. Attorney ID #80680 McNEES WALLACE & NURICK LLC P.O. Box 1166, 100 Pine Street Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff PNC Bank, National Association PNC BANK, NATIONAL IN THE COURT OF COMMON PLEAS ASSOCIATION, OF CUMBERLAND COUNTY, Successor to Pennsylvania State PENNSYLVANIA Bank, a division of BLC Bank, N.A., Plaintiff, DOCKET NO. 10-1385 CIVIL TERM V. CONFESSION OF JUDGMENT WILLIAM C. KOLLAS, PREVIOUSLY ASSIGNED TO: Defendant. Hon. Albert H. Masland BRIEF OF PNC BANK, NATIONAL ASSOCIATION FILED IN OPPOSITION TO THE PETITION OF DEFENDANT WILLIAM C. KOLLAS TO STRIKE OR OPEN CONFESSED JUDGMENT TABLE OF CONTENTS Page TABLE OF CITATIONS .............................................................................. ii 1. SUMMARY .................................................................................................1 II. FACTUAL BACKGROUND ........................................................................1 A. PSB Line Of Credit - Confession of Judgment ................................1 B. Mercantile Line Of Credit - Dauphin County Action .........................2 III. PROCEDURAL HISTORY ..........................................................................5 IV. LEGAL ARGUMENT ..................................................................................6 A. PNC's Confessed Judgment Is Not Invalid On Its Face, And Defendant Is Distorting The Facts ...................................................6 B. Defendant Is Improperly Injecting Unrelated Matters Into This Proceeding; And, Even Assuming This Were Permitted, These Matters Would Not Afford Defendant With The Basis For A Legitimate Defense In This Action ........................7 1. The Mercantile Line Of Credit And The Dauphin County Action ........................................................................7 2. The Mercantile Line Of Credit, Repayment Plan, And The Credit Line Expiration Date ............................................9 C. The Attorneys' Fees Included In The Confessed Judgment Were Proper And Authorized .........................................................11 D. The Confessed Judgment Properly Includes Accrued Interest ..........................................................................................12 V. CONCLUSION .........................................................................................13 TABLE OF CITATIONS Cases: Paqe Cintas Corp. v. Lee's Cleaning Serv., Inc., 700 A.2d 915 (Pa. 1997) ..............................5 Citicorp Mortgage, Inc. v. Morrisville Hampton Village Realty Limited Partnership, 662 A.2d 1120 (Pa. Super. 1995) ...................................................11 Creeger Brick and Building Supply, Inc. v. Mid-State Bank and Trust Co., 560 A.2d 151 (Pa. Super. 1989) .........................................................................10 Davis v. Woxall Hotel, Inc., 577 A.2d 636 (Pa. Super. 1990) ............................................5 Dollar Bank, Federal Savings Bank v. Northwood Cheese Co., Inc., 637 A.2d 309 (Pa. Super. 1994) .........................................................................12 Federal Land Bank of Baltimore v. Fetner, 410 A.2d 344 (Pa. Super. 1980) .................12 Germantown Savings Bank v. Talacki, 657 A.2d 1285 (Pa. Super. 1995) .......................5 Iron Worker's Savings and Loan Ass'n v. IWS, Inc., 622 A.2d 367 (Pa. Super. 1993) .....................................................................................................................5 John B. Conomos, Inc. v. Sun Co., Inc. (R&M), 831 A.2d 696 (Pa. Super. 2003) ...........9 Manor Bldg. Corp. v. Manor Complex Assoc., Ltd., 645 A.2d 843 (Pa. Super. 1994) ...................................................................................................................... 5 Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78 (P Cir. 2000) .................9 PNC Bank v. Kerr, 802 A.2d 634 (Pa. Super. 2002) ........................................................5 Stamerro v. Stamerro, 889 A.2d 1251 (Pa. Super. 2005) ................................................ 9 Stonehedge Square Limited Partnership v. Movie Merchants, Inc., 685 A.2d 1019, 1025 (Pa. Super. 1996), affirmed, 715 A.2d 1082 (Pa,. 1998) ..................................................................................................................... 9 Rules: Pa. R.C.P. 2959 ...............................................................................................................5 I. SUMMARY This case is about the Line of Credit provided by Pennsylvania State Bank ("PSB"), and the default of Yorktown Funding, Inc. and Defendant,under its provisions. Yorktown failed to make the required payment under the PSB Line of Credit, and Defendant then defaulted on his Guaranty. It is that simple. This case is not about the Line of Credit provided by Mercantile-Safe Deposit and Trust Company ("Mercantile.") While PNC Bank, National Association is the successor to both Mercantile and PSB, this does not make the Mercantile transaction relevant to this case. The Mercantile Line of Credit is the subject of an ongoing Dauphin County Action, and it does not provide Defendant with a basis for opening the confessed judgment here. Defendant is attempting to re-write the terms of the Mercantile Line of Credit, and then use it as a defense to this action - an action based on a different line of credit. This is improper and should not be tolerated. II. FACTUAL BACKGROUND A. PSB Line Of Credit - Confession of Judgment On or about August 7, 2007, Defendant executed a Commercial Guaranty ("Guaranty") in connection with a $4.0 million line of credit provided to Yorktown Funding, Inc. ("Yorktown") by PNC's predecessor, Pennsylvania State Bank (the "PSB Line of Credit.") (Exhibit "A.'J The Guaranty identified "Loan No. 7150001782," as the debt guaranteed. (Exhibit "A,"at pp.2-3). The Guaranty also contained a confession of judgment clause, and Defendant executed a "Disclosure for Confession of Judgment," identifying "Loan No. 7150001782." (Exhibit "B.') 1 At the same time that Defendant executed the Guaranty, Yorktown executed the Promissory Note (the "Note") for the $4.0 million line of credit. The Note specifically identified "Loan No. 7150001782," and included a pre-printed date of August 6, 2007. (Exhibit "C.') Inexplicably, some unidentified person wrote the date "8/7/09" in two of the blank spaces provided in the Note. (Emphasis added). After the Note and Guaranty were executed, Yorktown defaulted on the Note, and PNC demanded payment from Defendant as guarantor. (Exhibit "D.') By this point, Yorktown and Defendant had already defaulted with respect to the $11.0 million Mercantile Line of Credit, which is the subject of a separate Dauphin County Action. B. Mercantile Line Of Credit - Dauphin County Action On or about December 15, 2005, PNC's predecessor, Mercantile-Safe Deposit and Trust Company, issued a commitment letter to Yorktown in connection with an $11.0 million line of credit (the "Mercantile Line of Credit.") (Exhibit "E.'? The Mercantile Line of Credit was subject to "Annual reaffirmation," and the commitment letter included a repayment plan. The letter provided, in relevant part, as follows: 10. For any open mortgage assigned to the Bank two (2) years from its first advance or not having a permanent mortgage take-out after three (3) months from its construction completion, Borrower will immediately classify such mortgage as a work-out or foreclosure and mark its book value to market in a manner satisfactory to the Bank. 11. At the time a mortgage assigned to the Bank is marked to market value, Borrower will immediately pay to the Bank all of the amount advanced to date in excess of the marked to market value. At each subsequent one-year anniversary thereafter, Borrower will pay to the Bank an additional ten (10) percent of such assigned mortgage marked to market value. 2 15. This commitment letter is intended to convey the basic terms and conditions of the loan to you. ... The Bank reserves the right to add, delete or modify any and all terms and conditions expressed herein at its sole discretion. (Exhibit "E"; emphasis added). PNC will henceforth refer to Paragraphs 10 and 11 above as the "Mercantile Loan Repayment Plan" or "Repayment Plan." On or about March 6, 2006, the Repayment Plan provisions were incorporated into the First Amendment to Amended and Restated Credit Agreement ("Credit Agreement") executed by Yorktown. (Exhibit "F.'J However, the parties made the Repayment Plan subject to an absolute deadline, identified as the "Credit Line Expiration Date." The Credit Agreement provided, in relevant part, as follows: Notwithstanding the foregoing provisions, on the Credit Line Expiration Date, the entire principal balance of the Credit Line and all outstanding Borrowing Tranches, to the extent not previously repaid, shall become due and payable and, on that date, Borrower shall pay to Bank the entire outstanding principal balance of the Credit Line and all outstanding Borrowing Tranches, plus accrued interest thereon and all other unpaid costs, charges and expenses under any of the Loan Documents (hereinafter defined)[.] (Exhibit "F," at p.2, ¶1(a); emphasis added). The Third Amended and Restated Promissory Note (Line of Credit) ("Promissory Note") also included the Credit Line Expiration Date as an absolute deadline on the Repayment Plan. (Exhibit "G.'? The Promissory Note provided, in relevant part, as follows: On the Credit Line Expiration Date (as defined in Section 1(a) of the Loan Agreement), the entire outstanding principal balance of the Credit Line and all outstanding Borrowing Tranches, to the extent not previously repaid, shall become due and payable and, on that date, Borrower shall pay to Bank the entire outstanding principal balance of the Credit Line and all outstanding Borrowing Tranches, plus accrued 3 interest thereon and all other unpaid costs, charges and expenses under any of the Loan Documents. (Exhibit "G," at p.2, ¶1 b; emphasis added). Under the Credit Agreement and Promissory Note described above, the outstanding principal balance was due on the Credit Line Expiration Date, regardless of the status of any payments under the Repayment Plan. On or about February 22, 2007, PNC's predecessor, Mercantile-Safe Deposit and Trust Company, issued another commitment letter to Yorktown. (Exhibit "H.'? Again, the commitment letter was subject to "Annual reaffirmation," and included the Repayment Plan provisions at Paragraphs 10 & 11. The commitment letter also provided that, "This commitment letter is intended to convey the basic terms and conditions of the loan to you. ... The Bank reserves the right to add, delete or modify any and all terms and conditions expressed herein at its sole discretion." (Exhibit "H, " at p.3, ¶15; emphasis added). On or about March 19, 2007, a Mercantile representative sent Yorktown an e- mail discussing the Mercantile Line of Credit and Repayment Plan. (Exhibit "V. On or about February 26, 2008, the parties executed the Second Amendment to Loan Documents, amending the Credit Agreement and Promissory Note. (Exhibit "V. The Second Amendment to Loan Documents extended the Credit Line Expiration Date until May 21, 2008, and omitted any reference to the Repayment Plan. A series of extensions followed with the final Credit Line Expiration Date established as October 31, 2008. (Exhibit 'X '? Neither Yorktown nor Defendant made the required principal payment on October 31, 2008. Indeed, they did not even make the 10% payment called for in the 4 Repayment Plan. By letter dated December 15, 2008, PNC demanded repayment of the amount remaining on the original Mercantile Line of Credit. (Exhibit "U. Neither Yorktown nor Defendant made the payment. Instead, on or about February 9, 2010, Yorktown filed for bankruptcy in the Middle District of Pennsylvania. (Exhibit 'X'? III. PROCEDURAL HISTORY On or about February 25, 2010, PNC confessed judgment against Defendant William C. Kollas for the amount remaining on the PSB Line of Credit. On or about March 5, 2010, PNC filed the Complaint in the Dauphin County Action, seeking to recover from Defendant and Yorktown's other principals on Mercantile Line of Credit. (See Exhibit "N," Notice bearing date-stamp of 3/5/10). Yorktown itself was already in bankruptcy, and not a party to the Dauphin County Action. On or about March 25, 2010, Defendant filed a Petition to Strike or Open Confessed Judgment,' which was largely based on the Mercantile Line of Credit at issue in the Dauphin County Action, rather than the PSB Line of Credit on which the A petition to strike and a petition to open a judgment are not interchangeable. Cintas Corp. v. Lee's Cleaning Serv., Inc., 700 A.2d 915, 918 (Pa. 1997) (emphasis added). Rather, they are "two forms of relief with separate remedies; each is intended to relieve a different type of defect in the confession of judgment proceedings." Manor Bldg. Corp. v. Manor Complex Assoc., Ltd., 645 A.2d 843, 845 n.2 (Pa. Super. 1994) (en banc). "[A] confessed judgment is properly stricken only when there is a defect in the judgment apparent on the face of the record." Davis v. Woxall Hotel, Inc., 577 A.2d 636, 638 (Pa. Super. 1990). "A motion to strike a judgment operates as a demurrer to the record." Manor Bldg. Corp., 645 A.2d at 846. A court "should open a confessed judgment only when the petitioner'acts promptly, alleges a meritorious defense and presents sufficient evidence of that defense to require submission of the issues to the jury."' PNC Bank v. Kerr, 802 A.2d 634, 638 (Pa. Super. 2002) (citation omitted); see also Pa. R.C.P. 2959. "A petitioner must offer clear, direct, precise and believable evidence of a meritorious defense, sufficient to raise a jury question." Germantown Savings Bank v. Talacki, 657 A.2d 1285, 1289 (Pa. Super. 1995) (citing Iron Worker's Savings and Loan Ass'n v. IWS, Inc., 622 A.2d 367, 370 (Pa. Super. 1993)) 5 judgment was confessed in this action. On or about April 20, 2010, PNC filed an Answer to the Petition. On or about May 21, 2010, Defendant filed a Brief in Support of its Petition to Strike or Open the Confessed Judgment. PNC submits this Brief in Opposition to the Petition to Strike or Open. IV. LEGAL ARGUMENT A. PNC's Confessed Judgment Is Not Invalid On Its Face, And Defendant Is Distorting The Facts. Defendant argues that the Guaranty refers to a Note dated August 7, 2007, and PNC has therefore attached an incorrect document to the Complaint because the Note in question, is dated August 7, 2009. However, this argument is disingenuous and misleading. The Guaranty clearly applies to the Note upon which judgment was confessed. The Guaranty and Note both identify Loan No. 7150001782, and PNC did not attach an incorrect document to the Complaint. (Exhibits "A" & "C.'? It is unknown who handwrote the date 8/7/09 in the blank spaces of the Note or why it was done. However, the handwritten date is clearly erroneous. The Note contains both the correct loan number and the pre-printed loan date of 08-06-2007, and all of the documentation refers to the PSB Line of Credit. Defendant does not dispute that he executed the Guaranty and Note. He does not claim that the money was never loaned. An erroneous date is simply not a valid defense to the confession of judgment. Defendant clearly understands that the August 2009 date is a mistake. In his own brief, Defendant argues that PNC accelerated the Mercantile Line of Credit by letter dated December 15, 2008. (Brief in Support, at 7; Exhibit "U. Defendant's argument 6 would require that PNC defaulted Yorktown on the Mercantile Line of Credit in December 2008, and then resurrected Pennsylvania State Bank for the purpose of loaning Yorktown an additional $4.0 million seven months later, in August 2009. This is ridiculous. Yorktown was in default on the Mercantile Line of Credit and only months away from bankruptcy. Pennsylvania State Bank no longer existed. B. Defendant Is Improperly Injecting Unrelated Matters Into This Proceeding; And, Even Assuming This Were Permitted, These Matters Would Not Afford Defendant With The Basis For A Legitimate Defense In This Action. Defendant relies on events surrounding the Mercantile Line of Credit in an attempt to open the confessed judgment on the PSB Line of Credit, which is the subject of this action. This is improper. The Mercantile Line of Credit and the documents related to it, have no bearing on PNC's ability to confess judgment here. Moreover, PNC has not violated any alleged duty of good faith and fair dealing in either of the transactions. On the contrary, Defendant is improperly attempting to use the implied duty of good faith to override the express provisions of the parties' agreement at issue in the Dauphin County Action. Regardless, PNC did not act in bad faith by adhering to the express provisions of the contract. The Mercantile Line Of Credit And The Dauphin County Action. Defendant has repeatedly and improperly injected the Mercantile Line of Credit and Dauphin County Action into this proceeding to a degree that makes it impossible to ignore. Indeed, Section B of Defendant's Brief is entirely dedicated to the Promissory Note for the Mercantile Line of Credit. PNC has not confessed judgment on the Mercantile Line of Credit. It has confessed judgment on the PSB Line of Credit. The 7 two lines of credit were separate transactions involving different banks. PNC's acquisition of Mercantile does not make the Mercantile Line of Credit relevant to the confession of judgment at issue in this case. Defendant claims that PNC's actions "not only caused Yorktown to file a petition under Chapter 11 of the Bankruptcy Code, but also precipitated the acceleration of all of Yorktown's loan obligations to other lenders." (Brief in Support, at 9). Apparently, this is Defendant's way of tying the different transactions together. However, there is no basis whatsoever for Defendant's allegation. On February 9, 2010, Yorktown filed for bankruptcy. (Exhibit 'X') On February 25, 2010, PNC confessed judgment against Defendant (Yorktown's guarantor) in connection with the PSB Line of Credit. Defendant does not even offer speculation as to how PNC's actions on February 25, could possibly have caused Yorktown's bankruptcy several weeks earlier. PNC did not even demand payment of the amount outstanding on the PSB Line of Credit until February 19 - some 10 days after Yorktown had already filed for bankruptcy and defaulted under the loan documents. (Exhibit 'U') As far as the Dauphin County Action on the Mercantile Line of Credit, that was not filed until March 5 - close to a month after Yorktown had already filed for bankruptcy and defaulted under the loan documents. (Exhibit "N," date- stamped 3/5/10). Defendant is an attorney, and not some naive consumer. He fully understood the business transactions at issue, and his defenses to the Mercantile Line of Credit are simply not relevant here. He is effectively (and improperly) forcing PNC to litigate the exact same issues in both the Dauphin County Action and this confession of judgment proceeding. 8 2. The Mercantile Line Of Credit, Repayment Plan, And The Credit Line Expiration Date. The Repayment Plan for the Mercantile Line of Credit included an absolute deadline in the form of the Credit Line Expiration Date of October 31, 2008. PNC did not act in bad faith by insisting upon full repayment at that time. Defendant cannot rely upon letters of intent and a-mails to revise contractual terms that he presently finds to be inconvenient. "'The duty of good faith ... appl[ies] only in limited circumstances. Implied duties cannot trump the express provisions in the contract." Stamerro v. Stamerro, 889 A.2d 1251, 1259 (Pa. Super. 2005) (citation omitted). "Unequivocal contractual terms hold a position superior to any implied by courts, leaving implied covenants to serve as gap filler." John B. Conomos, Inc. v. Sun Co., Inc. (R&M), 831 A.2d 696, 706 (Pa. Super. 2003). "It is well established that, '[t]he law will not imply a contract different than that which the parties have expressly adopted."' Stonehedge Square Limited Partnership v. Movie Merchants, Inc., 685 A.2d 1019, 1025 (Pa. Super. 1996), affirmed, 715 A.2d 1082 (Pa. 1998) (citation omitted). The implied duty of good faith "is not divorced from the specific clauses of the contract and cannot be used to override an express contractual term." Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 91 (3`d Cir. 2000). Here, Defendant bases his Petition on the $11.0 million Promissory Note, which is the subject of the Dauphin County Action. Even assuming Defendant was free to import these collateral matters into this confession of judgment proceeding (he is not), both the amended Credit Agreement and Promissory Note clearly and unequivocally provided that the entire outstanding principal balance of the Note was due and payable 9 on the Credit Line Expiration Date of October 31, 2008. (Exhibit "F," at p.2, ¶1(a); Exhibit "G," at p.2, ¶1b). "[A] lending institution does not violate a separate duty of good faith by adhering to its agreement with the borrower or by enforcing its legal and contractual rights as a creditor." Creeger Brick and Building Supply. Inc. v. Mid-State Bank and Trust Co., 560 A.2d 151, 154 (Pa. Super. 1989). The Mercantile Line of Credit was subject to annual review, and it expired on October 31, 2008. Defendant cannot rely on the implied duty of good faith and fair dealing to override the express provisions of the documents. "The duty of good faith imposed upon contracting parties does not compel a lender to surrender rights which it has been given by statute or by the terms of its contract." Id. While the commitment letters and e-mail do not reference the Credit Line Expiration Date, this simply does not matter. The commitment letters provide that, "This commitment letter is intended to convey the basic terms and conditions of the loan to you. ... The Bank reserves the right to add, delete or modify any and all terms and conditions expressed herein at its sole discretion." (Exhibits "E" & "H," at ¶15; emphasis added). PNC's predecessor added a Credit Line Expiration Date into the final agreement, and Yorktown subsequently executed the document and agreed to be bound. Signer's remorse is not a valid defense. On or about February 26, 2008, over a year after the last commitment letter, Defendant executed the Second Amendment to Loan Documents, agreeing to a Credit Line Expiration Date of May 21, 2008 - a date later extended to October 31, 2008. (Exhibits "J" & 'X'? Under the terms of the note at issue, the entire amount of the 10 principal was due on October 31, 2008. Neither Yorktown nor Defendant paid the principal amount due, and they were therefore in default as of that time. The Note and transactions at issue in the Dauphin County Action simply do not afford Defendant with a basis for opening the judgment in this action, which was not confessed until February 25, 2010. By that time, Yorktown was already in bankruptcy and in default under the loan documents for that reason alone. (Exhibit 'X'? Defendant is arguing that Yorktown had the right to make payments in accordance with the Repayment Plan, as opposed to paying the full principal amount. Yet, Yorktown has not made any of these payments. C. The Attorneys' Fees Included In The Confessed Judgment Were Proper And Authorized. PNC's inclusion of attorneys' fees in the confessed judgment was proper and authorized by the Guaranty. The Guaranty specifically provides that, "Guarantor agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses." (Exhibit "A," at p.2). Furthermore, the confession of judgment provision specifically identifies "AN ATTORNEY'S COMMISSION OF TEN PERCENT (10%) OF THE UNPAID PRINCIPAL BALANCE AND ACCRUED INTEREST FOR COLLECTION." (Exhibit "A," at p.3). "In Pennsylvania, a mortgagee is entitled on foreclosure to recover reasonable expenses, including attorney's fees." Citicorp Mortgage, Inc. v. Morrisville Hampton Village Realty Limited Partnership, 662 A.2d 1120, 1123 (Pa. Super. 1995). Moreover, Pennsylvania courts have repeatedly upheld 10% attorneys' commissions, and even greater amounts. See Citicorp Mortgage, Inc., 662 A.2d at 1123 (affirming award of attorneys' fees constituting 10% of the claim); Dollar Bank. Federal Savings Bank v. 11 Northwood Cheese Co., Inc., 637 A.2d 309, 314 (Pa. Super. 1994) (declining to strike confessed judgment that included attorneys' fees of 15% of the total); Federal Land Bank of Baltimore v. Fetner, 410 A.2d 344, 347 (Pa. Super. 1980) (finding counsel fees of 10% was reasonable). PNC's confessed judgment did not include any improper or unauthorized sums. Rather, the confessed judgment properly included the attorneys' fees authorized by the Guaranty. D. The Confessed Judgment Properly Includes Accrued Interest. PNC's confessed judgment properly included accrued interest. Contrary to Defendant's assertions, there is no requirement that PNC attach its interest rate calculations to the Complaint for Confession of Judgment. Moreover, given that PNC would be entitled to 6% interest on any liquidated sum as a matter of law, it is difficult to understand how Defendant hopes to gain by disputing PNC's interest rate calculation. 12 V. CONCLUSION For the foregoing reasons, Plaintiff PNC Bank, National Association, requests that the Court deny, in its entirety, the Petition of Defendant William C. Kollas to Strike or Open Confessed Judgment. Respectfully submitted, McNEES W LLACE NU ICK LC i By Geoffrey S. Shuff Attorney ID# 248 Charles T. Youn§, Jr. Attorney ID# 806 0 P.O. Box 1166;, 00 Pine Street Harrisburg, PA 17108-1166 Phone: 717-237-5439 Dated: May ai(, 2010 Attorneys for Plaintiff PNC Bank, National Association 13 CERTIFICATE OF SERVICE A I, Charles T. Young, Jr., hereby certify that on this day of May 2010, a true and correct copy of PNC Bank, N.A.'s Brief in Opposition to the Petition to Strike or Open Confessed Judgment (and related Appendix) was served by HAND DELIVERY upon the following: (Attorney for Defendant) Markian R. Slobodian, Esq. The Law Offices of Marki R. Slobodian 801 North Seco stye Harrisburg, P 1710 / /? Charles T. Young, Of counsel to Plgiotiff PNC Bank, N.A. McNees Wallace & Nurick t_Lc ?aa,t,? u??r E ; _r, PA 17t ?8 11 Charles T. Young, Jr. 77 "17 7 17 2 Direct Dial: 717-237-5397 Direct Fax: 717-260-1760 E-mail address: cyoung@mwn.com June 11, 2010 The Honorable Albert H. Masland BY HAND DELIVERY Cumberland County Courthouse One Courthouse Square Carlisle, PA 17013-3387 RE: PNC Bank, N.A. v. Kollas, Cumberland County Docket No. 10-1385 CIVIL TERM Confession of Judgment Dear Judge Masland: At the oral argument in this matter, we pointed out to the Court that the Defendant's Petition to Strike or Open Confessed Judgment did not raise the Promissory Note's date as a basis for striking or opening the confessed judgment. Our Brief in Opposition did not contain citations addressing this issue, and we wish to provide the relevant citations to the Court. The case law establishes that, "Defenses to a confessed judgment that are not contained in the petition to open or strike the judgment are waived." Davis v. Woxall Hotel. Inc., 577 A.2d 636, 638-39 (Pa. Super. 1990). "A party waives all defenses and objections which are not included in the petition." Pa. R.C.P. 2959(c). In this case, Defendant waived his argument regarding an improper date by failing to include the argument in his Petition to Strike or Open. We also note that, "An immaterial change in the wording of a judgment note does not prevent the entry of judgment by confession." Duque v. D'Angelis, 568 A.2d 231, 232 (Pa. Super. 1990). Here, the Note contains both the correct loan number and the pre-printed loan date of 08-06-2007, and all of the documentation refers to the PSB Line of Credit. Accordingly, the date issue identified by Defendant is immaterial and does not serve as a valid defense to the confessed judgment. www.mwn.com June 11, 2010 Page 2 We previously provided the above citations to Judge Coates in a related Dauphin County Action, and we wanted your Honor to have the benefit of the same case law. Sincerely, McNEES AL -E N RICK LLC V By Charles T. Yo n , Jr. CC.' Markian R. Slobodian, Esq. (By Hand Delivery) THE LAW OFFICES OF MARKIAN R. SLOBODIAN 801 NORTH SECOND STREET, HARRISBURG, PA 17102 MARKIAN R. SLOBODIAN, ESQ. June 17, 2010 The Honorable Albert H. Masland Chambers of The Honorable Albert H. Masland One Courthouse Square Carlisle, PA 17013-3387 RE: PNC Bank, National Association, v. William C. Kollas, Docket No. 10-1385 Civil Term, Confession of Judgment Dear Judge Masland: Defendant William C. Kollas ("Kollas") submits this letter brief in response to the post- argument letter brief submitted by PNC Bank ("PNC') on June 11, 2010. In its letter brief, PNC argued that Kollas waived the right to contest liability on the alleged Promissory Note and that the fact that the Note contained the incorrect date was "immaterial". Strict Construction of Warrant Standard It is undisputed that the Pennsylvania courts view confession of judgment as an extreme and suspect remedy. As the Pennsylvania Superior Court stated in the case of Beckett v. Laux, 395 Pa. Super. 563, 577 A.2d 1341 (1990), "In general, the law does not favor confession of judgment provisions". Id., 395 Pa. Super. at 575, 577 A.2d at Standard 1347, citing Drum v. Leta, 354 Pa. Super. 448, 452, 512 A.2d 36, 38 (1986). In the case of Crum v. F.L. Shaffer Co., 693 A.2d 984 (Pa. Super 1997), the court stated: Furthermore, the determination of the validity of a judgment entered by confession rests upon a strict construction of the language of the warrant of attorney, and any doubt as to validity must be resolved against the party entering the judgment (emphasis added). Citing Scott Factors, Inc, v. Hartley, 425 Pa. 290, 228 A.2d 887 (1967); Continental Bank v. Tuteur, 303 Pa. Super 489, 450 A.2d 32 (1982). Crum, 459 A.2d at 986. (717) 232-5180 FAX: (717) 232-6528 LAW.MSOVERIZON NET The Honorable Albert H. Masland Page 2 The Crum court continued, stating: Because a warrant of attorney authorizing the confession of judgment can be an oppressive weapon, entry of a valid judgment by confession can only be accomplished if such entry is made in rigid adherence to the provisions of the warrant of attorney, which must be fully complied with; otherwise, such judgment will be stricken (emphasis added). Id. citing Scott Factors, Inc. v. Hartley, 425 Pa. 290, 291, 228 A.2d 887, 888 (1967). See also, Langman v. Metropolitan Acceptance Corp., 318 Pa. Super. 381, 384, 465 A.2d 5, 7 (1983) and cases cited therein; First Union National Bank v. Portside Refrigerated Services, Inc., 2003 Pa. Super. 244, 827 A.2d, 1224, 1231 (2003). See also PNC Bank v. Bolus, 440 Pa. Super. 372, 379, 655 A.2d 997, 1000 (1995) ("Confession of judgment is a powerful tool, because it effectively prevents the debtor from having his day in court. Such power must be exercised fairly and with exacting precision.") Analysis of Warrant Language In the case at hand, the warrant of confession contained in the Commercial Guaranty states: GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANYTIME FOR GUARANTOR AFTER THE AMOUNTS HEREUNDER BECOME DUE AND WITH OR WITHOUT COMPLAINT FILED, CONFESSED OR ENTERED JUDGMENT AGAINST GUARANTOR FOR THE ENTIRE PRINCIPAL BALANCE OF THIS GUARANTY AND ALL ACCRUED INTEREST, LATE CHARGES AND ANY OR ALL AMOUNTS EXPENDED OR ADVANCED BY LENDER RELATING TO ANY COLLATERAL SECURING THE INDEBTEDNESS,- (emphasis added). See Exhibit A of Plaintiff's Appendix to Brief at page 3. The word "indebtedness" is defined in the Guaranty to mean "all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses relating thereto permitted by law, attorneys' fees arising from any and all debts, liability and obligations that Borrower [Yorktown Funding, Inc.] individually or collectively or interchangeably with others, owes or will owe Lender under the Note and related documents and any renewals, extensions, modifications, refinancings, consolidations, and substitutions of the Note and related documents." (emphasis added). See Exhibit A of Plaintiff's Appendix to Brief at page 1. The Honorable Albert H. Masland Page 3 The Commercial Guaranty defines "Note" to mean "the promissory note dated 8/7/07, in the original principal amount of $4,000,000 from Borrower [Yorktown Funding, Inc.] to Lender [PA State Bank] together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement." See Exhibit A of Plaintiff's Appendix to Brief at page 3. It is clear from the above language that the only liability that Kollas may have to PNC and the only damages PNC can claim pursuant to the warrant of attorney are the amounts specifically enumerated in the Promissory Note dated August 7, 2007. The record must contain a copy of the alleged Note and all claimed damages must be specifically authorized by the Note. Application of Standard In this case, PNC has produced a Note signed by Yorktown Funding, Inc., not by the guarantor, in which the only provision concerning the dating of the Note itself is as follows: "Date of Note: 8/ 7/ 09." See Exhibit C of Plaintiff's Appendix to Brief at page 1. Applying the applicable standard of "strict construction" and "rigid adherence" to the provisions of the warrant of attorney, which, if not followed exactly, require that the judgment to be stricken, See Crum, 693 A.2d at 986, PNC has failed to show on the face of the record that any of the damages it currently seeks are authorized by the warrant of attorney contained in the Commercial Guaranty. That warrant authorizes only damages resulting from Yorktown Funding, Inc.'s breach of a Promissory Note dated August 7, 2007. The record, on the other hand, contains only a Note dated August 7, 2009. Accordingly, applying the standards set forth in Crum, this Court must strike PNC's confessed judgment. Opening of judgment as Alternative In the alternative, to the extent this Court should find that PNC's judgment is not defective on its face, the Court should, nevertheless, open the judgment on the basis that the PNC's failure to include in the record a Note bearing the same date as the Note allegedly guaranteed by Kollas creates an issue of fact for the jury. The Crum court set forth the appropriate standard for opening a confessed judgment. The court stated: In determining whether sufficient evidence has been presented, we employ the same standard as in a direct inverdict: "viewing all the evidence in the light most favorable to the petitioner and accepting as true all evidence and proper inferences therefrom supporting the defense while rejecting adverse allegations of the party obtaining the judgment." r s The Honorable Albert H. Masland Page 4 Crum, 693 A.2d at 986, citing Suburban Mechanical Contractors, Inc. v. Leo, 348 Pa. Super. 324, 327, 502 A.2d 230, 232 (1985). In the case at hand, viewing the Guaranty and the alleged Note in the light most favorable to Kollas and accepting as true all evidence and proper inferences therefrom, PVC's failure to attach a Note bearing the same date as the date of Note specified in the warrant of attorney, must, at a minimum, present an issue of fact as to whether the claimed damages are authorized by the warrant, thereby requiring the Court to open PNC's confessed judgment against Kollas. Alleged Waiver of Rights PNC's allegation that Kollas waived the right to contest PNC's alleged damages is similarly misguided. In paragraph 15 of his Petition to Strike or Open Confessed Judgment, Kollas "disputes the alleged amount owed and demands proof thereof at trial." Although Kollas did not specifically identify the incorrect date stated on the Promissory Note, he clearly put the defense of unwarranted damages at issue in paragraph 15 of his Petition. Kollas clearly contested the asserted damages and demanded proof thereof at trial. In addition, in accordance with this Court's local rules, Kollas filed his brief and affidavits setting forth with specificity the defects in the record which preclude the awarding of all damages sought by PNC no less than twelve days prior to the Court's argument on the Petition to Open. PNC clearly has not been prejudiced in any way by the short delay in obtaining specifics regarding the clear defects in its own case against the Guarantor. In fact, Pa. R.C.P. No. 206.7 specifically provides for a period of discovery prior to the Petition being argued before the court. In the case at hand, this Court ordered that depositions be completed within 45 days of the date of the Court's Order of March 31, 2010 to show cause. Kollas raised the unwarranted damages issue in his Petition and provided specific evidentiary support of his position well before the date this matter was heard by the Court. Finally, PNC's attempt to prevail on the basis of an alleged technical defect in Kollas' pleadings violates sound and well established judicial policy. As the court stated in the case of Atlantic National Trust, LLC v. Stivala Investments, Inc,, 2007 Pa. Super. 96, 922 A.2d, 919 (2006), "it is well established that courts 'should not be astute in enforcing technicalities to defeat apparently meritorious claims;"' Id. 922 A.2d at 923. In the case at hand, Kollas has clearly placed the question of unauthorized damages before the Court in his Petition to Open and has clarified and provided specific details regarding that position prior to hearing. This Court should reject PNC's attempt to impose a judgment against Kollas exceeding $1,000,000 which is clearly improper on its face on the basis of a perceived technical defect in Kollas' pleadings. For the reasons set forth in this letter brief, this Court should strike, or in the alternative, open PNC's confessed judgment. The Honorable Albert H. Masland Page 5 Thank you for giving me the opportunity to submit this letter brief in response to PNC's post argument letter brief to the Court. Very truly yours, Markian R. Slobodian cc: Geoffrey S. Shuff, Esq. William C. Kollas MRS/ klhc r CERTIFICATE OF SERVICE I hereby certify that I have this date served a true and correct copy of the aforementioned Statement in Absence of Transcript to the following individual via U.S. first class mail, postage paid: Geoffrey S. Shuff, Esq. 100 Pine Street, PO Box 1166 Harrisubrg, PA 17108-1166 III oil Zia AR L. I-IA CARR L, Legal Secretary Dated:, c, 0 110 FILP-t! 'r !1r T CUMBER?- ID COUNTY MCNEES WALLACE & NURICK, LLC PENNSYLVANIA Geoffrey S. Shuff, I.D. No. 24848 Debra P. Fourlas, I.D. No. 62047 100 Pine Street, P.O. Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff, PNC Bank, National Association PNC BANK, NATIONAL ASSOCIATION,: IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA V. :NO. 10-1385 Civil Term WILLIAM C. KOLLAS, : Confession of Judgment Defendant ANSWER OF PLAINTIFF, PNC BANK, NATIONAL ASSOCIATION, TO PETITION FOR SUPERSEDEAS SUBMITTED BY APPELLANT, DEFENDANT, WILLIAM C. KOLLAS Plaintiff/Appellee, PNC Bank, National Association, by its undersigned counsel, responds as follows to the petition for supersedeas submitted by Defendant William C. Kollas. 1. Admitted. 2. Admitted that Defendant filed a notice of appeal on or about August 5, 2010. The averment that the notice of appeal was timely is a conclusion of law to which no response is required. 3. Admitted. 4. Denied. Having as yet been unable to conduct discovery in aid of execution on its judgment, PNC is without knowledge or information concerning the extent of Defendant's assets subject to execution. However, upon information and belief, Defendant and Defendant's spouse own assets as tenants by the entireties, and PNC's judgment constitutes an inchoate lien on some or all of those assets. For these reasons, at least, Defendant's averment that his assets are limited to half interests in certain real properties is denied. It is further denied that the averment is relevant to the supersedeas request. 5. Denied. Having as yet been unable to conduct discovery in aid of execution on its judgment, PNC is without knowledge or information concerning any co-ownership of Defendant's assets subject to execution. Defendant's averment concerning the co-ownership of those assets is therefore denied. It is further denied that the averment is relevant to the supersedeas request. 6. Denied. It is denied that any execution by PNC against any property of Defendant in the furtherance of PNC's right to collect the debt owed to PNC by Defendant would constitute irreparable harm to Defendant. Defendant has not at any time denied - because he cannot deny - that he owes the debt to PNC for which he is liable pursuant to the Commercial Guaranty that he executed and delivered to PNC, on which the judgment was entered in this action. Rather, PNC will be harmed by the denial of its right to collect the debt owed to PNC without the posting of appropriate security by Defendant. In fact, if Defendant were to post appropriate security, this averment by Defendant - and indeed, Defendant's Petition - would be moot. Further, that Defendant allegedly may lose his interest in certain real properties upon execution on PNC's judgment does not support issuance of a supersedeas 2 without the posting of appropriate security. Pa. R.A.P. 1731(a) provides that where, as here, the judgment at issue is solely for the payment of money, a supersedeas generally requires the posting of appropriate security of 120% of the judgment amount. Defendant has not averred that he is unable to post such security, and indeed, upon information and belief, he is well able to post the required security to obtain an automatic supersedeas under Rule 1731. Moreover, Defendant has failed to demonstrate the requisite elements for obtaining a stay, including a strong showing of likelihood that he will prevail on the merits, inasmuch as this Court has already denied Defendant's petition to open or strike the judgment. See RFP Assocs., Ltd. V. Reuters Information Servs., Inc., 20 Phila. 118, 126-27 (C.P. Phila. 1989) (citing, interalia, Pennsylvania P.U.C. v. Process Gas Consumers Group, 502 Pa. 545, 552-53, 467 A.2d 805 (1983) and noting that petitioner seeking stay pending appeal failed to show strong likelihood it would prevail on the merits, and stating that the court "cannot grant a stay based on irreparable injury when the sole basis for such a claim is an empty charge of injury"). 7. Denied. See response to paragraph 5 above. It is denied that Mr. Costopoulos, an attorney, will be forced to incur substantial legal fees by reason of PNC's execution of its judgment against Defendant. It is further denied that Mr. Costopoulos will have to relocate his law office. Moreover, it is denied that the consequences to Mr. Costopoulos are relevant, as they are the same consequences to which any co-owner is susceptible when a creditor obtains a money judgment against the other co-owner. 3 8. Denied. See response to paragraph 7 above. 9. Denied. It is denied that allowing supersedeas in this action without the posting of appropriate security will maintain the status quo. Instead, the status quo in this action will be maintained if PNC is free to exercise its right to enforce its judgment, unless the Defendant posts appropriate security. For the same reason, it is denied that a supersedeas under the circumstances of this case will promote the public good. See responses to paragraphs 5-7 above. 10. Admitted that Yorktown has made some interest payments since the entry of the judgment; however, those payments have not reduced the amount owed on the judgment. It is further denied that the averment is relevant to the supersedeas request. 11. Denied. Yorktown has been alleging for several months that letters of intent and/or commitment letters for the full amount of the debt were imminent; but to date, PNC has not been provided with any evidence that such letters have been or will actually be obtained. Defendant's averment that such letters are expected "in the near future" is therefore denied as mere conjecture and speculation on Defendant's part. Further, even the issuance of any commitment letters does not assure that funds will ultimately be available to pay the full amount of the debt to PNC, and Defendant's allusion to the possible availability of funds for the payment of the full amount of the debt to PNC is also merely conjecture and speculation. It is further denied that the averment is relevant to the supersedeas request. 12. Denied. See responses to paragraphs 9, 10, and 11 above. PNC will be harmed by being further delayed in obtaining payment of a money judgment that is 4 rightfully owed to it and which Defendant, by his guaranty, expressly undertook responsibility to pay in the event of Yorktown's default, which default is beyond dispute. Cf. Luszczynski v. Bradley, 1999 Pa. Super. 85, 729 A.2d 83, 88 (Pa. Super. 1999) (noting that "real prejudice" could result from repeated failures to obey court's order for discovery in aid of garnishment for execution on judgment). 13. Denied. See responses to paragraph 4, 5, and 6 above. Further, without discovery in aid of execution, PNC is without knowledge or information sufficient to form a belief of whether PNC's judgment would preclude the transfer or encumbrance of any of Defendant's assets, and the same is therefore denied. It is further denied that the averment is relevant to the supersedeas request. 14. Admitted. WHEREFORE, Plaintiff/Appellee, PNC Bank, National Association, respectfully requests that Defendant's petition for supersedeas be denied and that he be required to comply with the requirements of Pa. R.A.P. 1731(a) by posting appropriate security of 120% of the judgment amount, i.e., $1,470,219.59, in order to obtain a supersedeas. In the alternative, in the event that the Court grants the petition for supersedeas, PNC requests that Defendant be ordered by comply with Pa. R.A.P. 1733(a) & (c) by posting 5 appropriate security as determined by the Court, and that the Court set the amount of that appropriate security at 120% of the judgment amount i.e., $1,470,219,59. Respectfully submitted, MCNEES WALLACE & NURICK, LLC By_ Geoffrey S. Shuff, I.D. No. 24848 Debra P. Fourlas, I.D. No. 62047 100 Pine Street, P.O. Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff, PNC Bank, National Association Dated: August r-' F, , 2010 6 VERIFICATION Subject to the penalties of 18 Pa.C.S. § 4904 (relating to unsworn falsification to authorities), I, Michael J. Fina, hereby certify as follows: (1) 1 am a Vice President of PNC Bank, National Association; (2) As a Vice President, I have the authority to execute this Verification on behalf of PNC Bank, National Association; (3) 1 have reviewed the foregoing Answer of Plaintiff, PNC Bank, National Association, to Petition for Supersedeas Submitted by Appellant, Defendant, William C. Kollas; and (4) The responses contained therein are true and correct to the best of my knowledge, information, and belief. By Dated: Augu/ 2010 PNC Bank, National Association CERTIFICATE OF SERVICE I certify that on this date, I am serving a true and correct copy of the foregoing document on the person identified below, by depositing the copy in the United States mail, first class postage prepaid, addressed as follows: Markian R. Slobodian, Esquire 801 North Second Street Harrisburg, PA 17102 MCNEES WALLACE & NURICK, LLC Geoffrey S. Shuff, I.D. No. 24848 Debra P. Fourlas, I.D. No. 62047 100 Pine Street, P.O. Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff, PNC Bank, National Association Dated: August ,?, 2010 CERTIFICATE AND TRANSMITTAL OF RECORDS UNDER PENNSYLVANIA RULE OF APPELLATE PROCEDURE 1931 (C) To the Prothonotary of the Apellate Court to which the within matter has been appealed: Superior Court of PA The undersigned, Prothonotary of the Gourt of Common Pleas of Cumberland County, the said court being a court of record, do hereby certify that annexed hereto is a true and correct copy of the whole and entire record, including an opinion of the court as required by PA R.A.P. 1925, the original papers and exhibits, if any on file, the transcript of the proceedings, if any, and the docket entries in the following matter: PNC Bank, National Association Successor to Pennsylvania Bank, a division of BLC Bank, N.A. ~ COINt Vs. SEP 2 4 2010 William C. Kollas ~ M+~~ 10-1385 Civil 1303 MDA 2010 The documents comprising the record have been numbered from No.l to 196, and attached hereto as Exhibit A is a list of the documents correspondingly numbered and identified with reasonable definiteness, including with respect to each document, the number of pages comprising the document. The date on which the record has been transmitted to the Appellate Court is 09/24/2010 av' uell, Pr thonotary Regina Lebo, Deputy An•additional copy of this certificate is enclosed. Please sign and date copy, thereby acknowled~ins receipt of this record. Date Signature & Title PNC BANK, NATIONAL ASSOCIATION : IN THE COURT OF COMMON PLEAS OF successor to Pennsylvania State CUMBERLAND COUNTY, PENNSYLVANIA Bank, a division of BLC Bank, N.A., PLAINTIFF V. WILLIAM C. KOLLAS, DEFENDANT 10-1385 CIVIL TERM ORDER OF COURT AND NOW, this day of March, 2011, the petition for supersedeas filed by the Defendant, William C. Kollas is DENIED. The fact that the Plaintiffs interest in this matter may be protected by a lien it holds against the Defendant's property does not excuse the Defendant from compliance with Rule of Appellate Procedure 1731(a) requiring the posting of an appropriate security of 120% of the amount of the judgment due as a prerequisite to the issuance of a supersedeas. See Kipps v. DeFrehn, 40 Pa. D. & C. 3d 27 (1985). Inasmuch as the Defendant seeks such relief without the deposit of an appropriate security, such relief must be denied. By the Court, /Geoffrey S. For Plaintiff V/ Shuff, Esquire Markian R. Slobodian, Esquire For Defendant :saa >> Albert H . Masland, J. CX) CDP 3l 3 o" :. Koren Rdd Brardett, Esq. Midcte Di?riCt F?nreyiva?ia Wdzl Center Rothonotay P. O. Box 62435 Kim K Mrkobrad, Est. 601CaTniorwedthAve nm Wte1600 DeplyRothorday Haridxrg PA17106.2435 (717) 772-1294 www. siperi or. court. std a pa us CERTIFICATE OF REMITTAUREMAND OF RECORD TO: David D. Buell Prothonotary RE: PNC Bank v. Kollas, W. 1303 M DA 2010 Trial Court: Cumberland County Court of Common Pleas Trial Court Docket No: 10-1385 Civil Term Annexed hereto pursuant to Pennsylvania Rules of Appellate Procedure 2571 and 2572 is the entire record for the above matter. Original Record contents: Item Filed Date Description Part September 24, 2010 Remand/Remittal Date: 06/27/2011 ORIGINAL RECIPIENT ONLY - Please acknowledge receipt by signing, dating, and returning the enclosed copy of this certificate to our office. Copy recipients (noted below) need not acknowledge receipt. Respectfully, Milan K. Mrkobrad, Esq. c C Deputy Prothonotary rn "- 1 =-n /alv i cnr 1 ru -urn Q Enclosure -C 00 4C? cc: Debra P. Fourlas, Esq. < ss ?' Masland, Albert H., Judge acs Za aic -" corn Markian Roman Slobodian, Esq. ..? N PNC Bank v. Kollas, W. 1303 MDA 2010 Letter to: Buell, David D. Acknowledgement of Certificate of Remittafflemand of Record (to be returned): Signature Date Printed Name J-A09010-11 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P.65.37 PNC BANK, NATIONAL ASSOCIATION SUCCESSOR TO MERCANTILE-SAFE DEPOSIT & TRUST COMPANY, Appellee V. WILLIAM C. KOLLAS, Appellant IN THE SUPERIOR COURT QF PENNSYLVAOA MW M;= Z -Di ? -< N m -40 r =-n _,_ 2 6 7 0 +C :`; -ice No. 1303 MDA 2010 Appeal from the Order Entered July 14, 2010 In the Court of Common Pleas of Cumberland County Civil Division at No. 10-1385 Civil Term BEFORE: BENDER, DONOHUE and OTT, JJ. MEMORANDUM: FILED: May 18, 2011 William C. Kollas (Appellant) appeals from the order. denying his petition to strike or open a confessed judgment entered against him by PNC Bank (PNC). Appellant raises several allegations of error, all of which we conclude lack merit. Therefore, we affirm. The facts of this case are relatively straightforward. Appellant executed a Commercial Guaranty (Guaranty), dated August 7, 2007, in which he agreed to guarantee the payment of amounts due under a $4,000,000 Promissory Note (Note), in connection with a line of credit extended to Yorktown Funding, Inc. (Yorktown). Reproduced Record (R.) at 10a-12a. As part of the Guaranty, Appellant also executed a Disclosure for J-A09010-11 • Confession of Judgment (Disclosure). R. at 13a. The Disclosure lists the loan date in typeface as August 6, 2007, and also in handwriting as August 7, 2007. Id. Although the Guaranty references a note dated August 7, 2007, the Note itself bears two dates. The first date is in typeface and states the "Loan Date" as August 6, 2007. R. at 14a. However, in two separate locations on the Note, the date is handwritten as "8/7/09." R. at 14a-15a (emphasis added). Appellant executed the Note in his capacity as "Secretary/Treasurer" of Yorktown. R. at 16a. The Guaranty, the Disclosure, and the Note all bear the same loan number, the amount of $4,000,0000, and the same bank officer number. R. at 10a-16a. Yorktown subsequently defaulted on the Note, and PNC demanded payment from Appellant as guarantor. By letter, dated February 19, 2010, PNC informed Appellant that Yorktown was in default and that the amount due was $1,112,591.99. R. at 17a. When Appellant failed to pay this amount, PNC filed a Complaint for Confession of Judgment seeking payment of the amount due along with attorneys' fees in an amount equal to ten percent of the amount due, or $112,591.18, which PNC was entitled to under the express terms of the Note. R. at 7a, 15a. PNC confessed judgment against Appellant on February 25, 2010, and less than thirty days later, Appellant filed his petition to strike or open the judgment. The court -2- J-A09010-11 denied the petition and this appeal followed in which Appellant raises three questions for our review: 1. Did Plaintiff's both referencing and attaching to its Complaint a Promissory Note bearing a different date than the date specified in the Guaranty constitute "de minimis" flaws that did not justify striking or opening the confessed judgment? 2. Can Plaintiff collect a ten percent (10%) attorney's commission in the amount of $112,591.19 rather than the Plaintiff's actual attorney's fees and expenses as specifically set forth in the Promissory Note? 3. Should the Court disregard Plaintiff's actions which a) were taken in bad faith and in violation of PNC's contractual obligations to the obligor and Kollas and b) directly impaired the obligor's ability to comply with the Promissory Note and Kollas' ability to comply with the Guaranty upon which PNC confessed judgment merely because the actions were not specifically prohibited by the loan documents upon which Plaintiff confessed judgment in this case? Brief for Appellant at 3. Our standard for reviewing an order denying a petition to strike a judgment is as follows: Our standard of review from the denial of a petition to strike a judgment is limited to whether the trial court manifestly abused its discretion or committed an error of law. A petition to strike a judgment will not be granted unless a fatal defect in the judgment appears on the face of the record. Matters outside of the record will not be considered, and if the record is self- sustaining, the judgment will not be stricken. For example, a judgment is properly stricken where the record indicates a fatal flaw such as defective service. Vogt v. Liberty Mut. Fire Ins. Co., 900 A.2d 912, 915-16 (Pa. Super. 2006) (citation omitted). We employ a different standard when reviewing a court's denial of a petition to open a judgment. - 3 - I-A09010-11 A petition to open judgment is an appeal to the equitable powers of the court. As such, it is committed to the sound discretion of the hearing court and will not be disturbed absent a manifest abuse of discretion. Furthermore, a court should open a confessed judgment if the petitioner promptly presents evidence on a petition to open which in a jury trial would require that the issues be submitted to the jury. A petitioner must offer clear, direct, precise and believable evidence of a meritorious defense, sufficient to raise a jury question. In determining whether sufficient evidence has been presented, we employ the same standard as in a directed verdict: we view all the evidence in the light most favorable to the petitioner and accept as true all evidence and proper inferences therefrom supporting the defense while we reject adverse allegations of the party obtaining the judgment. Stahl Oil Co., Inc. v. Helsel, 860 A.2d 508, 512 (Pa. Super. 2004) (citation omitted). In the first question presented for our review, Appellant claims that the trial court should have either stricken or opened the judgment because the Guaranty references a note dated August 7, 2007, and the Note itself contains two dates, one in typeface stating August 6, 2007 and the other in handwriting stating August 7, 2009. Appellant argues that this constituted a "clear defect appearing on its face and required PNC to prove at trial that the Note submitted to the court, in fact, evidenced the obligation referenced in the Guaranty." Brief for Appellant at 13. Alternatively, Appellant claims that "PNC's failure to attach a Note bearing the same date as the date of the Note specified in the warrant of attorney, must, at a minimum, present an issue of fact as to whether the claimed damages are authorized by the -4- J-A09010-11 warrant," and therefore, the court should have opened the judgment. Brief for Appellant at 14. We conclude that both of these claims are waived due to Appellant's failure to include them in his petition to open or strike the judgment. Rule 2959 requires that "gall grounds for relief whether to strike off the judgment or to open it must be asserted in a single petition" and that "[a] party waives all defenses and objections which are not included in the petition or answer." Pa.R.C.P. 2959(a)(1), (c). Here, there is no doubt that Appellant failed to raise in his petition the issue of the inconsistent dates between the Guaranty and the Note. Although he subsequently raised the issue during oral argument before the trial court and in a supporting memorandum of law, these acts could not resuscitate the already waived claim. See Stahl on, 860 A.2d at 514-15 (concluding that an issue was waived due to a party's failure to include it in its petition to strike a judgment despite the fact that the party subsequently raised the issue in a petition for rule to show cause); Duque v. D'Angells, 568 A.2d 231, 233 (Pa. Super. 1990). Alternatively, we conclude that neither claim is meritorious. We begin with the denial of the petition to strike. In order for Appellant to succeed on a petition to strike, he was required to show a fatal defect on the face of the record. All that he points to is what is obviously a scrivener's error in the Note. This is so readily apparent because one need only compare the Note to the Guaranty and the Disclosure to discern that the handwritten 2009 -5- ... J-A09010-11 date (the month and the day were substantially consistent with the dates listed in the other documents) to see that in all other respects the documents are consistent with one another. Appellant has not cited any authority that deems such a de minimis error a fatal defect, nor are we so inclined to find in this case. Accordingly, we conclude that the trial court did not err in denying Appellant's petition to strike. Next, we address the trial court's denial of Appellant's petition to open the judgment. As stated above, in order for Appellant to succeed on a petition to open, he was required "to offer clear, direct, precise and believable evidence of a meritorious defense." Stahl Oil, 860 A.2d at 512. However, rather than offer any evidence of a defense, Appellant has simply rested on his allegation that the Note "does not appear to have any relationship whatsoever to the Guaranty." Brief for Appellant at 6. Appellant makes this incredible claim despite the fact that they bear the same loan number, same bank officer number, the same amount, and approximately the same day and month. Furthermore, Appellant does not offer any alternative to what the Note could be other than the document related to the Guaranty. Thus, he has no explanation for how PNC came into possession of a Note for $4,000,000 bearing his signature. Therefore, we conclude that Appellant's simply pointing to an erroneous date falls far short of offering clear, precise and perhaps most importantly, believable evidence of a meritorious defense. Under these circumstances we have no difficulty -6- J-A09010-11 concluding that the trial court did not err in denying Appellant's petition to open the judgment. In the second question presented for our review, Appellant presents less than one page of argument claiming that PNC was not entitled to collect attorney's fees of ten percent despite the clear provision in the Note granting it such. The argument on this issue is wholly undeveloped and is not supported by any citation to legal authority. Therefore, it is waived. See Neal v. Bavarian Motors, tnc., 882 A.2d 1022, 1030 (Pa. Super. 2005) (finding an issue waived due to lack of development of the argument and a failure to cite legal authority). In the third question presented for our review, Appellant claims that PNC has violated its duty of good faith and fair dealing. More particularly, he claims that "PNC's improper action in calling the [unrelated] $11 million line of credit interfered with Yorktown and Kollas' ability to pay off the obligation upon which judgment was confessed in the case at hand." Brief for Appellant at 20. Ostensibly, Appellant is arguing that PNC's allegedly wrongful acts in connection with a second unrelated loan impacted his ability to meet his obligations under the Note in this case. To the extent that PNC committed some proscribed act in connection with the second loan, Appellant's redress is in an action involving that loan, not the instant one. Appellant has provided no legal basis for linking the loans other than to vaguely assert that PNC breached its duty of good faith in this case. -7- J-A09010-11 However, Appellant does not direct us to any acts by PNC that contravene the terms of the loan documents in this case or to any bad faith actions by PNC related to the loan in this case. Therefore, we are not persuaded by the argument that Appellant presents in his third question. Order affirmed. Judgment Entered. Deputy Prothonotary Date: May 18, 2011 -8- COURT OF COMMON PLEAS OF CUMBERLAND COUNTY,PENNSYLVANIA CIVIL ACTION PNC BANK,NATIONAL ASSOCIATION, DOCKET NO. 2010-013 85 successor to Pennsylvania State Bank, a division of BLC Bank,N.A., Plaintiff V. CONFESSION OF JUDGMENT WILLIAM C. KOLLAS, PREVIOUSLY ASSIGNED J()�: Defendant Honorable Albert H. Maslan r°l -'f c PRAECIPE - b� -- c-) TO THE PROTHONOTARY: �f Please mark the judgment entered in the above-captioned action satisfied. Respectfully submitted, McNEES WALLACE &NURICK LLC Date: September 16, 2013 By Geof . Sh Attorney No. 24848 McNees Mace &Nurick LLC 100 Pin Street - P.O. Box 1166 Harrisburg, PA 17108-1166 (717) 237-5439 Attorneys for Plaintiff