HomeMy WebLinkAbout12-1340
2N'12 FEB 29 AM 11- 'QCs
CUBERLAND PEA PENNSYLVANIA
METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Attorney I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000
(717) 236-1816 (fax)
hzkelly(a,mette.com
Attorneys for Plaintiff
METRO BANK, f/k/a Commerce
Bank/Harrisburg, N.A.,
Plaintiff
V.
WILLIAM C. KOLLAS,
Defendant
: IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
DOCKET NO
NOTICE
YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the
following pages, you must take action within twenty (20) days after this Complaint and Notice
are served, by entering a written appearance personally or by attorney and filing in writing with
the Court your defenses or objections to the claims set forth against you. You are warned that if
you fail to do so the case may proceed without you and a judgment may be entered against you
by the Court without further notice for any money claimed in the Complaint or for any other
claim or relief requested by the Plaintiff. You may lose money or property or other rights
important to you.
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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.
Cumberland County Bar Association
34 S. Bedford St.
Carlisle, PA 17013
Telephone: (717) 249-3166
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METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Attorney I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000
(717) 236-1816 (fax)
METRO BANK, f/k/a Commerce
Bank/Harrisburg, N.A.,
Plaintiff
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
V.
WILLIAM C. KOLLAS,
Defendant
DOCKET NO.
COMPLAINT
NOW COMES, Metro Bank, f/k/a Commerce Bank/Harrisburg, N.A. ("Plaintiff'), by its
attorneys files the following Complaint:
Parties
1. Plaintiff is a Pennsylvania state chartered bank with an address at 3801 Paxton
Street, Harrisburg, PA 17111.
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2. Defendant is William C. Kollas, an individual with a resident address of 850
Kiehl Drive, Lemoyne, Cumberland County, Pennsylvania, 17043.
3. Defendant is the President of Yorktown Funding, Inc. ("Yorktown")
Jurisdiction & Venue
4. Jurisdiction and venue are proper in the Cumberland County Court of Common
Pleas because the events and occurrences giving rise to the claims set forth herein occurred in
Cumberland County.
Factual Background
5. On or about September 1, 2005, Yorktown executed a Demand Note in favor of
Plaintiff in the original principal amount of SEVEN MILLION DOLLARS ($7,000,000.00) (the
"Note"), which Note evidences a line of credit that Plaintiff extended to Yorktown (the "Line of
Credit"). A true and correct copy of the Note is attached hereto as Exhibit "A."
6. Also on September 1, 2005, Defendant executed a Guaranty and Suretyship
Agreement, pursuant to which Defendant unconditionally guarantied Yorktown's payment
obligations under the Note (the "Guaranty"). A true and correct copy of the Guaranty is attached
hereto as Exhibit "B."
7. Yorktown has defaulted under the Note for, among other things, failure to make
payment when due.
8. On February 9, 2010, Yorktown filed a petition under Chapter 11 of the United
States Bankruptcy Code in the United States District Court for the Middle District of
Pennsylvania (the "Yorktown Bankruptcy"). The Yorktown Bankruptcy is docketed as 1: 1 0-bk-
0 1 042-MDF.
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9. Pursuant to the terms of the Guaranty, "Should [Plaintiff] be legally barred from
pursuing [Yorktown] or [Yorktown's] assets for repayment of [Yorktown's] liabilities for any
reason, including but not limited to bankruptcy stay... [Plaintiff] may treat [Yorktown's]
liabilities to [Plaintiff] as being forthwith due and payable by [Defendant] under the terms of this
Guaranty, and [Plaintiff] may exercise and enforce [Plaintiff s] rights and remedies hereunder
against [Defendant] and [Defendant's] property." Guaranty, Ex. B, at Paragraph 1.
10. By correspondence dated February 15, 2012 Plaintiff demanded payment from
Defendant for amounts due and owing under the Note. A true and correct copy of the February
15, 2012 correspondence is attached hereto as Exhibit "C."
11. Defendant failed to satisfy his obligations under the Guaranty in response to the
February 15, 2012 correspondence.
COUNTI
BREACH OF CONTRACT
12. The above paragraphs are incorporated herein by reference.
13. As consideration for Plaintiff to extend the Line of Credit to Yorktown,
Defendant make the loan, Defendant personally and unconditionally guarantied Yorktown's
repayment obligations.
14. Defendant has breached its contractual obligations to Plaintiff by failing to make
payment to Plaintiff as required by the Guaranty.
15. The outstanding balance under the Note as of September 30, 2010 is
$4,228,606.27 which is calculated as follows:
Principal: $4,223,339.23
Interest: $4,493.10
Satisfaction Fees: $277.50
Late Fees: $496.44
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TOTAL
$4,228,606.27
16. Pursuant to the Guaranty, Defendant is also liable to Plaintiff for all costs,
expenses and fees incurred by Plaintiff in the "in the administration, enforcement or collection of
[Defendant's] obligations under [the Guaranty], including without limitation attorneys' fees."
(Guaranty, Ex. B, Paragraph 6).
17. As a result of Defendant's breach of his obligations under the Guaranty, Plaintiff
has been damaged in the amount of $4,228,606.27, plus continuing interest, attorneys fees and
costs.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter judgment
in its favor and against Defendant in the amount of $4,228,606.27 plus continuing interest,
attorneys fees, costs, and all other relief that the Court deems appropriate.
Respectfully submitted,
Date: -?/d f// L
METTE, EVANS & WOODSIDE
Bather . Kelly, Iffiquire
I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
Telephone: (717) 232-5000
Attorneys for Plaintiff
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VERIFICATION
I, John Robertson, have read the foregoing Complaint and verify that the facts set
forth therein are true and correct according to the best of my knowledge, information and belief
and that I am authorized to execute this Verification on behalf of Metro Bank.
I understand that any false statement made herein is subject to the penalties of 18
Pa. C.S.A. §4904, relating to unsworn falsification to authorities.
obertson
Recovery Manager, Metro Bank
f/k/a Commerce Bank/Harrisburg, N.A.
Dated: A112-
7
550385v1
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COPY
DEMAND NOTE
$7,000,000.00
hey, i, 205
Camp Hill, Pennsylvania
FOR VALUE RECEIVED, and intending to be legally bound, YORKTOWN
FUNDING, INC., a Pennsylvania corporation ("Borrower") having a principal business office at
Suite 101, 1104 Fernwood Avenue, Camp Hill, Pennsylvania 17011, promises to pay to or to the
order of COMMERCE BANK/HARRISBURG, N.A. ("Bank"), on demand, the principal sum
of Seven Million Dollars ($7,000,000.00), or so much thereof as may be advanced hereunder,
together with interest in arrears on the unpaid principal amount outstanding at any time at a rate
per annum equal to one quarter of one percent (0.25%) above the "Prime Rate" of interest.
("Prime Rate" shall mean the New York Prime Rate published in the Money Rates Section of the
Wall Street Journal, Eastern Edition, from time to time. The Prime Rate is an index, and loans of
the Bank may be established above or below such index. The Prime Rate is not necessarily the
Bank's lowest rate of interest.) The interest rate payable under this Note shall change each time
the Prime Rate published in the Wall Street Journal is changed. Any such change in the rate of
interest payable on this Note shall become effective as of the opening of business on the day in
which such change in the Prime Rate is published. If the Prime Rate is discontinued or no longer
quoted, Bank shall have the right, exercising reasonable judgment, to substitute a new method for
determining a comparable per annum interest rate charged by Bank and such rate of interest
determined by such method shall constitute the Prime Rate hereunder. If the Bank shall so
substitute a new method for determining the Prime Rate as aforesaid, such new method shall
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become effective immediately upon written notice to Borrower. If thereafter requested either by
Borrower or Bank, Borrower and Bank will execute, and the Bank will record, if requested by
Bank, at Borrower's expense, an agreement satisfactory in form to Bank, modifying this Note
and all instruments securing this Note to document the establishment of such new method of
determining the Prime Rate.
Interest shall be calculated on the basis of a 360-day year for the actual number of days
elapsed in each calendar year by multiplying the actual number of days the debt is outstanding in
each calendar year by the rate or rates of interest computed as aforesaid, and dividing the product
thereof by 360, to obtain a daily interest factor or factors. Interest only will be payable on the
first day of each calendar month on the balance of principal outstanding at any time. Until
demand for payment hereunder, Borrower will make payments of principal as provided in the
Loan Agreement (as hereinafter defined), or from time to time as elected by Borrower.
If any payment is not paid under the terms of this Note, or under the terms of any of the
other Loan Documents (as hereinafter defined), Borrower will pay Bank a late charge in an amount
equal to five percent (5%) of the amount past due, as compensation to Bank for the additional
administration of this Note which such late payment causes Bank to perform.
All payments required to be made hereunder or under the other Loan Documents (as
hereinafter defined) will be made without notice or demand, or setoff, counterclaim or deduction of
any nature. No interest rate provided for in this Note will at any time exceed the highest rate
permitted by applicable state or federal law, regulation, rule, order or other authority. Any interest
paid in excess of the permitted rate will be refunded to Borrower. Any refund will be made by
applying the excessive amount of interest paid against any sums outstanding under this Note or the
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other Loan Documents (as hereinafter defined) in such amount and order as Bank may determine.
If the excessive amount of interest paid exceeds the sums outstanding, the portion exceeding the
sums outstanding shall be refunded in cash by Bank. Any crediting or refund shall not cure or
waive any default by Borrower under this Note. Borrower agrees, however, that in determining
whether or not. any interest payable under this Note exceeds the highest rate permitted by law, any
non-principal payment other than interest (including, without limitation, late charges) shall be
deemed, to the extent permitted by law, to be an expense, fee, premium or penalty rather than
interest. The application or repayment of any excess interest as provided herein will be Borrower's
sole remedy with respect to the charging or payment of excess interest, and Borrower hereby waives
and releases Bank from any and all other claims, demands, proceedings, suits or actions of any
nature whatsoever, and any and all losses, damages, costs, expenses, charges or liabilities of any
nature whatsoever, arising from or in any way in connection with any charging or payment of
excess interest.
Defaults: Borrower shall be in default hereunder (1) for failure to pay when due any amount
payable under this Note, or under the line of credit agreement executed and delivered by Borrower
simultaneously with this Note ("Loan Agreement"), or under any assignments of notes and
mortgages (jointly and severally, "Assignment") given or to be given to Bank as collateral and
security for Borrower's obligations under this Note and the Loan Agreement, or under any other
agreement or document which otherwise evidences or secures Borrower's indebtedness and
obligations to Bank under or in connection with this Note (collectively, including the Note, Loan
Agreement and Assignment, the "Loan Documents"), all of the provisions all of which are
incorporated herein by reference and made a part hereof as is set forth in full; or (2) for failure to
observe or perform any provision of any of the Loan Documents.
In the event of any default, interest shall accrue at a rate four percent (4.0%) above the)
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interest rate previously provided for herein, and this default rate of interest will be chargeable and
payable despite any legally imposed moratorium on payment, or any delay in payment or other
alteration of payment terms ordered or permitted by any court assuming jurisdiction, and will be
chargeable and payable after the entry of any judgment hereunder or in connection herewith
(including any confessed judgment), notwithstanding the availability of any statutory or other
"legal" rate of interest.
Rights and Remedies of the Bank. Whenever the Borrower shall be in default hereunder, unless
the Bank elects otherwise, the entire unpaid amount of the indebtedness evidenced by this Note
shall become immediately due and payable without notice to or demand on Borrower, and without
setoff, counterclaim or deduction of any nature, and the Bank will have the immediate right to
enforce or realize on any collateral security granted for the indebtedness evidenced by this Note in
any manner or order which the Bank deems expedient and without regard to any equitable
principles of marshalling or otherwise. In addition to any rights granted hereunder or in any of the
other Loan Documents, the Bank shall have all of the rights and remedies available at law or in
equity, all of which shall be cumulative in nature.
Prepayment: Borrower shall have the right to prepay, at any time or from time to time, without
penalty, all or any portion of the principal sum hereof. Partial prepayment will be applied first to
any accrued and unpaid late charges and to any other amount which is due or payable under or in
connection with this Note or any of the other Loan Documents, in such amounts, manner and order
as Bank may determine in its sole discretion, and then in payment of accrued interest, and only then
in payment of the unpaid principal balance. Any prepayment will not be a substitute for any
payment required to be made hereunder or under any of the other Loan Documents, each of which
will be made as and when due as provided in this Note or any of the other Loan Documents.
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Waivers by Borrower: Borrower waives presentment for payment, demand and notice of demand,
notice of nonpayment or dishonor, protest and notice of protest, and any and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of the payment of
this Note, and Borrower agrees that the liability of Borrower shall be unconditional, without regard
to the liability of any other party, and shall not be affected in any manner by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by the Bank. Borrower
further waives and releases all errors, defects and imperfections in any proceedings instituted by the
Bank in exercising its rights and remedies against Borrower, as well as all benefits that might
accrue to Borrower by virtue of any present or future laws exempting the collateral security for the
indebtedness evidenced by this Note, or any other property of the Borrower, real or personal,
including the proceeds thereof, from attachment, levy or sale under execution or providing for any
stay of execution, exemption from civil process or extension of time for payment; and Borrower
agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof,
or any writ of execution issued thereon, may be sold upon any such writ, in whole or in part, in any
order desired by the Bank.
Waivers by the Bank: The Bank shall not be deemed, by any action or inaction, to have waived
any of its rights or remedies hereunder, unless such waiver is in writing and signed by the Bank, and
then only to the extent specifically set forth in writing. If the Bank shall have waived any right or
remedy hereunder, such waiver shall not be deemed to be a waiver upon a later occurrence or
recurrence of the event originally giving rise to such waiver.
Miscellaneous: All payments required hereunder shall be made to or to the order of Bank in the
lawful money of the United States of America. Any payment made hereunder shall be payable to
Commerce Bank/Harrisburg, N.A., 100 Senate Avenue, P.O. Box 8599, Camp Hill, Pennsylvania
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17001-8599, or otherwise as directed from time to time by Bank or any holder of this Note. Any
and all times for any payment or observance or performance of any obligation of Borrower are of
the essence of this Note. Borrower is referred to in the singular, even though there is more than
one. The captions contained in this Note are for convenience of reference only and are not an aid in
interpreting and do not limit or otherwise modify or affect the actual provisions of this Note. All
issues arising hereunder shall be governed by the laws of the Commonwealth of Pennsylvania,
without giving effect to the principles thereof relating to conflict of laws, if any. Any suit or action
brought by Borrower under or in connection with this Note or any of the other Loan Documents
may be brought only in the courts having jurisdiction over matters which arise in Cumberland
County, Pennsylvania, and which are seated in Pennsylvania, and Borrower hereby consents to the
jurisdiction of such courts. Borrower and Bank agree that any dispute or controversy arising under
or in connection with the Loan or this Note would not lend itself to resolution through trial by jury.
Therefore, Borrower and Bank hereby voluntarily, knowingly, intelligently and intentionally
waive the right to trial by jury in any action or proceeding arising from or in connection with
this Note. Neither this Note or any of the other Loan Documents, nor any right, interest or
obligation under this Note or any of the other Loan Documents may be assigned without the
express, written consent of Bank, which may be granted, withheld or conditioned by Bank in Bank's
sole and absolute discretion. This Note shall be binding upon the Borrower and the respective
permitted successors and assigns of the Borrower, and shall inure to the benefit of the Bank and its
successors and assigns.
CONFESSION OF JUDGMENT: THE 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 THE BORROWER, AND WITH OR
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WITHOUT COMPLAINT FILED, AS OF ANY TERM, CONFESS OR ENTER
JUDGMENT AGAINST THE BORROWER FOR EITHER (1) THE ENTIRE PRINCIPAL
SUM OF THIS NOTE, OR (2) THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS
NOTE AND THE ACCRUED INTEREST THEREON, AND LATE CHARGES AND
OTHER AMOUNTS DUE OR PAYABLE UNDER THIS NOTE OR THE OTHER LOAN
DOCUMENTS, AS ELECTED BY BANK, AND IN EITHER CASE TOGETHER WITH
COSTS OF SUIT, AND AN ATTORNEY'S COMMISSION OF TEN PERCENT (10%)
FOR COLLECTION, BUT IN ANY EVENT NOT LESS THAN FIVE THOUSAND
DOLLARS ($5,000); AND FOR SO DOING, THIS NOTE OR A COPY HEREOF
VERIFIED BY AFFIDAVIT OR SWORN STATEMENT SHALL BE SUFFICIENT
WARRANT. THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT
AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE
THEREOF, BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES
UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE HEREUNDER.
IN WITNESS WHEREOF, the Borrower has executed as an instrument under seal
(without the necessity of affixing any corporate seal hereto) this Note as of the day and year first
written above.
ATTEST: William C. Kollas
Secretary
YORK:er UNDING, INC.
By:
R. Kensinger
President
7
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF
. SS:
k
On this, the k S day of 2005 , before me, a Notary
Public, personally appeared -C a a 0 d (?.
p A, ,known to me to
be the person whose name is subscribed to the within document and acknowledged that she
executed the foregoing for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
NOTARIAL SE n,
CAROLE A ROSE
Notary Public Notary Public
TWSP of LOWER ALLEN
CUMBERLAND COUNTY My Commission Expires: (9?-{ - Z., Z IJ 7
M Cor mia?on Expires Oct 21, J2007
DEMAND NOTE MODIFICATION AGREEMENT
THIS DEMAND NOTE MODIFICATION AGREEMENT, made and entered into as of this 2nd day of
December, 2009, by and between Metro Bank (hereinafter called "Bank"), having its principal place of business at 3801
Paxton Street, Harrisburg Pennsylvania 17111, and Yorktown Funding, Inc. (hereinafter called "Borrower').
WITNESSETH:
WHEREAS, Borrower executed and delivered to Bank a Demand Note (the "Note") dated September 1, 2005,
in the original amount of $7,000,000.00, which evidences a loan (#88883307177) by the Bank to the Borrower, and
WHEREAS, the Bank and Borrower mutually agree to modify the terms of the Note to add an interest rate
floor, as hereinafter provided.
NOW THEREFORE, for value received and in consideration of the mutual covenants and agreements
hereinafter contained and intending to be legally bound hereby, Bank and Borrower covenant and agree to amend and
modify the Note heretofore descnibed as follows:
1. Effective with the signing of this Demand Note Modification Agreement, an interest rate floor in the
amount of 4,506/o will be added to this loan.
Except to the extent specifically set forth herein, all of the terms, conditions, covenants and agreements contained in the
Note shall remain in full force and effect. Borrower hereby ratifies and affirms each and every term and condition,
obligation, and covenant of Borrower under the Note in every respect and shall pay and discharge the indebtedness
evidenced by the Note in accordance with its terms as modified herein. This Modification shall not altar, diminish, or
otherwise affect the lien of the Mortgage or the collateral therein described.
Reference to Bank: This Demand Note Modification Agreement is being made by Metro Bank formerly known as
Commerce Bank/Harrisburg, N.A.
CONFESSION OF JUDGMENT: THE 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 THE
BORROWER, AND WITH OR WITHOUT COMPLAINT FILED, AS OF ANY TERM, CONFESS OR
ENTER JUDGMENT AGAINST THE BORROWER FOR EITHER (1) THE ENTIRE PRINCIPAL SUM OF
THIS MODIFICATION, OR (2) THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS MODIFICATION
AND THE ACCRUED INTEREST THEREON, AND LATE CHARGES AND OTHER AMOUNTS DUE OR
PAYABLE UNDER THIS NOTE OR THE OTHER LOAN DOCUMENTS, AS ELECTED BY BANK, AND IN
EITHER CASE TOGETHER WITH COSTS OF SUIT, AND AN ATTORNEY'S COMMISSION OF TEN
PERCENT (10%) FOR COLLECTION, BUT IN ANY EVENT NOT LESS THAN FIVE THOUSAND
DOLLARS (55,000.00); AND FOR SO DOING, THIS NOTE OR A COPY HEREOF VERIFIED BY
AFFIDAVIT OR SWORN STATEMENT SHALL BE SUFFICIENT WARRANT. THE AUTHORITY
GRANTED HEREIN TO CONFESS JUDGMENT AGAINST THE BORROWER SHALL NOT BE
EXHAUSTED BY ANY EXERCISE THEREOF, BUT SHALL CONTINUE FROM TIME TO TIME AND AT
ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE HEREUNDER.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.
AT'T'EST:
M B
BY
Josh D. Hocker
mercial Loan Officer
0 i": L LA
4n,,-
Bor
r777Z ding, Inc.
BY: Geraff R. f{ensinger, Prldent
I
BY: IA44-
William J
C. Kollas, Secretary
DISCLOSURE FOR CONFESSION OF JUDGMENT
THE UNDERSIGNED IS EXECUTING, AS OF THE 2ND DAY OF DECEMBER, 2009, A DEMAND
NOTE MODIFICATION AGREEMENT ("NOTE") PAYABLE TO METRO BANK ("BANK") IN
CONNECTION WITH A LINE OF CREDIT IN THE AMOUNT OF $7,000,000.00 TO THE UNDERSIGNED
FOR COMMERCIAL PURPOSES.
INITIALS;
THE UNDERSIGNED'S ATTORNEY HAS EXPLAINED TO THE UNDERSIGNED THAT THE
NOTE CONTAINS WORDING THAT WOULD PERMIT THE BANK TO ENTER JUDGMENT AGAINST
THE UNDERSIGNED AT THE COURTHOUSE, WITHOUT NOTICE, AND WITHOUT OFFERING THE
OPPORTUNITY TO DEFEND AGAINST THE ENTRY OF JUDGMENT, AND THAT THE JUDGMENT
MAY BE COLLECTED BY ANY LEGAL MEANS WITHOUT PRIOR NOTICE OR A HEARING BY USE
OF THE SHERIFF, WHO MAY SEIZE PROPERTY, REAL AND PERSONAL, WITHOUT PRIOR NOTICE
OR HEARING.
INITIALS:
IN EXECUTING THE NOTE, THE UNDERSIGNED IS KNOWINGLY, UNDERSTANDINGLY AND
VOLUNTARILY WAIVING ITS RIGHT TO RESIST THE ENTRY OF JUDGMENT AGAINST IT AT THE
COURTHOUSE, AND IS CONSENTING TO THE CONFESSION OF JUDGMENT. THE UNDERSIGNED
FURTHER KNOWINGLY, UNDERSTANDINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO ANY
PRIOR NOTICE OR HEARING PRIOR TO THE BANK'S SEIZING OF PROPERTY BY WRIT OF
EXECUTION AGAINST BANK ACCOUNTS AND PERSONAL AND/OR REAL PROPERTY AFTER THE
ATTAINMENT OF A JUDGMENT BY CONFESSION.
INITIALSz
THE UNDERSIGNED CERTIFIES THAT THE NOTE WAS EXECUTED IN CONNETION WITH A
COMMERCIAL TRANSACTION AND DOES NOT INVOLVE A CONSUMER TRANSACTION, AND
THAT THE UNDERSIGNED HAS RECEIVED A COPY OF THIS DISCLOSURE AT THE TIME OF
SIGNING.
YORKTOW DING, INC.
BY:
G KENSIN ER, PRESIDENT
y?f/
BY; ??
WILLIAM C. KOLLAS, SECRETARY
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COPY
GUARANTY AND SURETYSHIP AGREEMENT
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, and to induce
COMMERCE BANKMARRISBURG, N.A. ("Bank") to make a $7,000,000.00 line of credit
("Loan") available to YORKTOWN FUNDING, INC. ("Borrower"), the undersigned
("Guarantor"), agrees as follows:
1. Guarantor hereby guarantees and becomes surety for the full and timely payment of
principal, interest and any and all other sums of any nature whatsoever which are due or which
become due at any time or in any manner from Borrower to Bank under or in connection with the
Loan, and for the full and timely payment of any and all other loans, advances, debts, obligations,
sums, or liabilities of any nature whatsoever, whether direct or indirect, absolute or contingent,
voluntary or involuntary, and whether past, present or future, now due or to become due, from
Borrower to Bank (the Loan and all such other liabilities being referred to collectively in this
Agreement as "Obligations"), including by demand, maturity or acceleration, without notice or
demand or set off or counterclaim of any kind, except any of the Obligations which is defined as
"consumer credit" by Federal Reserve Board Regulation Z, 12 C.F.R. §226.1 et seq., and is not
exempted from the application of that regulation.
This agreement is a continuing, absolute and unconditional guaranty and suretyship of
payment and not merely of collection. The obligations of Guarantor hereunder are joint and several
(if more than one), and are independent of the obligations of Borrower and any other guarantor or
surety for the Obligations, and of the availability of any collateral or security for the Obligations.
Guarantor is liable to Bank hereunder, and Bank may enforce Bank's rights and remedies hereunder
against Guarantor, or any of them in any combination (if more than one), at any time and from time
to time, whether Bank attempts to enforce or enforces Bank's rights and remedies against Borrower
or any other guarantor or surety for the Obligations, or whether Bank joins Borrower in any
1
enforcement action or proceeding, or whether Bank first proceeds to liquidate or realize on any
collateral or security for the Obligations.
However, notwithstanding any other provision of this Guaranty to the contrary, before
Bank exercises Bank's rights and remedies against Guarantor, Bank shall first attempt to satisfy
Borrower's liabilities to Bank by directly pursuing Borrower and Borrower's assets, taking all
collection actions which Bank determines to be reasonable and appropriate under the
circumstances. After Bank has completed its pursuit of Borrower, Bank may notify Guarantor
that all such collection actions have been completed, and the remaining balance of Borrower's
liabilities to Bank shall at Bank's option be deemed to be forthwith due and payable by
Guarantor under the terms of this Guaranty, and Bank may exercise and enforce Bank's rights
and remedies hereunder against Guarantor and/or Guarantor's property. Should Bank be legally
barred from pursuing Borrower or Borrower's assets for repayment of Borrower's liabilities for
any reason, including but not limited to bankruptcy stay or other order of a court having
jurisdiction over Borrower, Bank may treat Borrower's liabilities to Bank as being forthwith due
and payable by Guarantor under the terms of this Guaranty, and Bank may exercise and enforce
Bank's rights and remedies hereunder against Guarantor and/or Guarantor's property.
2. Guarantor hereby voluntarily, intelligently, knowingly and unconditionally waives
(a) all notices to which Guarantor may be entitled but which may legally be waived, including
without limitation notice of (i) acceptance of this agreement, (ii) any obligation incurred at any time
by Borrower under or in connection with the Obligations, (iii) nonpayment, protest, dishonor or
default; and (b) presentment for payment, demand for payment, and protest; and (c) any defense
available to Borrower; and (d) any defense or circumstance which might constitute a legal or
equitable discharge of a guarantor or surety.
3. At any time and from time to time without notice to Guarantor, and without
affecting the liability of Guarantor hereunder, Bank may do any one or any combination of the
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following: (a) renew or extend the Obligations or the time for the Borrower's payment of principal,
interest or other sums due or to become due under the Obligations, or for performance or
observance of any of the provisions of the documents which evidence or secure the Obligations, or
which were otherwise executed or delivered in connection with the Obligations (collectively, "Loan
Documents"); (b) waive, settle, release, compromise, subordinate or discharge any such payment or
performance or observance by Borrower or the obligations of any other guarantor or surety for the
Obligations; (c) sell, transfer, exchange, substitute, surrender, release or demand additional
collateral or security for the Obligations; or (d) change any of the Loan Documents for any purpose,
including without limitation any change of or affecting the rights of Bank or the rights or
obligations of Borrower, or the payment of the Obligations.
4. Until all amounts due or payable under the Obligations or hereunder are paid in full,
Guarantor hereby unconditionally subordinates to any and all such amounts all present and future
-debts, liabilities, or obligations of Borrower to Guarantor. At Bank's request, Guarantor will
execute a subordination agreement in favor of Bank to further evidence and support the purpose of
this paragraph, which agreement may include, without limitation, provisions precluding Guarantor
from receiving any payment from Borrower, or provisions for collection by Bank of any amounts
due to Guarantor from Borrower or payment of such amounts over to Bank.
5. This agreement and Guarantor's payment obligations hereunder will remain in effect
if at any time any amount paid under or in connection with the Obligations is rescinded or
recovered by any person or entity, or if Bank otherwise becomes liable to or does repay, restore or
return any such amount, to the same extent as if such payment had not 'been made, and
notwithstanding any termination or cancellation of the Obligations or this agreement, both of which
shall be deemed to be reinstated even following any such termination or cancellation for purposes
of continuation of Guarantor's liability hereunder. Bank's determination as to whether to repay,
restore or return any payment shall be binding on Guarantor.
3
6. Guarantor hereby agrees to pay or reimburse Bank for any and all out-of-pocket
costs, expenses and fees at any time incurred or paid by Bank in the administration, enforcement or
collection of Guarantor's obligations under this agreement, including without limitation attorneys'
fees.
7. Guarantor will provide such financial information as Bank may from time to time
request, including federal income tax returns and schedules, and balance sheets and income
statements in form and content satisfactory to Bank.
8. This agreement is entered into in Cumberland County, Pennsylvania. Any payment
made hereunder shall be payable to Commerce Bank/Harrisburg, N. A., 100 Senate Avenue, P. 0.
Box 8599, Camp Hill, Pennsylvania 17001-8599, or otherwise as directed from time to time by
Bank or any holder of the Obligations or this agreement. Bank may assign this agreement, or any
rights hereunder, with any assignment of the Obligations or any rights thereunder. In the event of
any such assignment, the assignee shall have the same rights and remedies as if originally named
herein. This agreement shall be governed by and construed according to the laws of the
Commonwealth of Pennsylvania. Any suit or action brought by Guarantor under or in connection
with this agreement or the Loan may be brought only in the courts having jurisdiction over matters
which arise in Cumberland County, Pennsylvania, and which are seated in Pennsylvania, and
Guarantor hereby consents to the jurisdiction of such courts. Guarantor and Bank agree that any
dispute or controversy arising under or in connection with the Loan or this Agreement will not lend
itself to resolution through trial by jury. Therefore, Guarantor and Bank hereby voluntarily,
knowingly, intelligently and intentionally waive the right to trial by jury in any action or
proceeding arising from or in connection with the Loan or this Agreement. This agreement
and Guarantor's obligations hereunder may not be partially or entirely assigned or transferred by
Guarantor, and are binding upon the respective heirs, executors, administrators, successors and
assigns of Guarantor. This agreement is delivered to and inures to the benefit of Bank, its
4
successors and assigns. If any provision hereof shall for any reason be held invalid or
unenforceable, no other provision shall be affected thereby, and this agreement shall be construed
as if the invalid or unenforceable provision had never been a part of this agreement. This
agreement embodies the entire agreement of the parties and cannot be changed except in writing
signed by all parties.
IN WITNESS WHEREOF, intending to be legally bound, the undersigned Guarantor has
1 'ZOOS
executed this agreement as of 66`r
WITNESS:
B
i
By: (SEAL)
William C. Kollas
5
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF
SS:
On this, the k 5+ day of ? ,2005 , before me, a Notary
Public, personally appeared JAJJ C KO A any , known to me to
be the person whose name is subscribed to the within document and acknowledged that she
executed the foregoing for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
ML SEAL col"
CAROLE A ROSE
Noota?y Public Notary Public
M My Commission Expires: ?, ? ?U 7
CUMBERLAND tROUALLEN
M Caffff" n E e3 Oct 21]20W07
???G
METRO
BANK
William C. Kollas
850 Kiehl Drive
Lemoyne PA 17043
3801 Paxton Street
Harrisburg, PA 17111
888.937.0004
mymetrobank.com
February 17, 2012
Gerald R. Kensinger
4404 Avon Drive
Harrisburg PA 17112
Re. Loan No. 3307177 - Guaranty and Suretyship Agreement of William C. Kollas and
Gerald R. Kensinger (each a "Guarantor") for Line of Credit from Metro Bank,
f/k/a Commerce Bank, Harrisburg/N.A. ("Bank") to Yorktown Funding, Inc.
("Borrower") (the "Line of Credit")
THIS IS NOT AN ATTEMPT TO COLLECT A DEBT FROM BORROW)t! IL YORKTOWN
FUNDING. INC.
Dear Messrs. Kollas and Kensinger;
Reference is made to the September 1, 2005 Guaranty and Suretyship Agreement between you
and Bank (the "Guaranty"), pursuant to which you personally and unconditionally guarantied Borrowers'
repayment obligations under a September 1, 2005 Demand Note (the "Note").
The Note is in default for, among other things, Borrower's failure to make payments when due.
("Note Default"). This letter constitutes formal notice to Guarantor of the occurrence of the Note Default.
Because Borrower has filed for Bankruptcy, Bank is legally barred from pursuing Borrower or
Borrower's assets for repayment of the Note. Accordingly, Bank has elected to exercise its option under
the Guaranty to "treat Borrower's liabilities to Bank as being forthwith due and payable by Guarantor."
As of February 15, 2012, there is unpaid, due and owing to the Bank under the Note, the
aggregate amount of $4,573,757.62 (the `Balance Due"), an itemized summary of which is enclosed
herewith.
Demand is hereby made for immediate payment of the Balance Due, plus fees and costs which
Bank incurs after January 18, 2012 in connection with the enforcement of the Guaranty, together with any
and all other amounts which may become due under the Note, including, any post-petition interest that
may become due from Borrower in the future from the date that Borrower filed for Bankruptcy.. The
Balance Due may increase or decrease as a result of the receipt of payments and the proceeds of collateral
securing the Note and the accrual of interest, last charges, costs of collection and other fees, costs and
expenses. Therefore, immediately prior to remitting payment, please contact the undersigned to obtain
final payoff amounts and remittance instructions.
Nothing contained in this letter constitutes a waiver or release of any of the terms or provisions of
the Note, or of any and all other instruments or agreements between or among Bank and Borrower,
February 17, 2412
Page 2
Guarantor or any other guarantor for the Line of Credit (the "Loan Documents"). Bank reserves all rights
and remedies available to it under the Loan Documents and applicable law, all of which are expressly
hereby reserved.
No discussions between or among Bank, Borrowers, and/or Guarantor concerning this
notification, other loan relationships between or among Bank, Borrowers, and/or Guarantor or any other
matter shall imply an agreement of the part of the Bank to waive any of its rights and remedies or to
forbear from taking any action authorized by the Loan Documents or applicable law, whether or not such
discussions may be continuing.
Any communications with any representative of Bank, whether oral or written, will be mere
discussions only and will not in any way commit or be binding upon Bank unless reduced to a writing
signed by an authorized officer of Bank. Such communications will not represent any course of dealing,
and in no manner shall you be entitled to rely in any way on any such discussions unless such
communications are reduced to a writing signed by an authorized officer of Bank.
The acceptance of any partial payment of any of the obligations of Borrower or Guarantor to
Bank shall not be deemed a waiver or limitation of any of the Bank's rights reserved herein as to the full
amount of any unpaid balance. Any delay or forbearance by Bank in the enforcement or pursuit of any of
its rights and remedies under the Loan Documents or applicable law shall not constitute a waiver thereof,
nor shall it bar to the exercise of Bank's rights or remedies at a later date.
Should you have any questions, please do not hesitate to contact me.
Sincerely,
METRO BANK
i
-C)
J hn Robertson
Vice- resident
C: Heather Kelly (Email Only)
Henry Van Eck (Email Only)
SHERIFF'S OFFICE OF CUMBERLAND COUNTY
Ronny R Anderson
Sheriff
Jody S Smith m
Chief Deputy
Richard W Stewart
Solicitor
Metro Bank
vs.
William C. Kollas
Case Number
2012-1340
SHERIFF'S RETURN OF SERVICE
03/29/2012 05:51 PM - Robert Bitner, Deputy Sheriff, who being duly sworn according to law, states that on March 29,
2012 at 1751 hours, he served a true copy of the within Complaint and Notice, upon the within named
defendant, to wit: William C. Kollas, by making known unto himself personally, at 850 Kiehl Drive,
Lemoyne, Cumberland County, Pennsylvania 17043 its contents and at the same time handing to him
personally the said true and correct copy of the same.
SHERIFF COST: $44.45
March 30, 2012
ROB RT BITNER, DEPUTY
SO ANSWERS,
RON R ANDERSON, SHERIFF
METRO BANK, f/k/a COMMERCE BANK/
HARRISBURG, N.A.,
Plaintiff
V.
WILLIAM C. KOLLAS,
Defendant
:IN THE COURT OF COMMON PLEAS r? <
:CUMBERLAND COUNTY, PENNSI VA IA-;
r,
:DOCKET No. 2012-1340 Civil
C c
a -
C) CDC
PRELIMINARY OBJECTIONS OF DEFENDANT WILLIAM C. KOLLAS
NOW COMES, Defendant William C. Kollas ("Kollas"), by his counsel, The Law Offices
of Markian R. Slobodian, and makes the following Preliminary Objections to Plaintiff's
Complaint in the above-referenced case:
I. Motion to Dismiss
A. Legal Insufficiency of Pleading (Demurrer)
1. The third paragraph of numbered paragraph 1 of the Guaranty attached as Exhibit
"B" to Plaintiff's complaint states in its entirety as follows:
However, notwithstanding any other provision of this Guaranty to the
contrary, before Bank exercises Bank's rights and remedies against Guarantor,
Bank shall first attempt to satisfy Borrower's liabilities to Bank by directly
pursuing Borrower and Borrower's assets, taking all collection actions which
Bank determines to be reasonable and appropriate under the circumstances.
After Bank has completed its pursuit of Borrower, Bank may notify Guarantor
that all such collection actions have been completed, and the remaining balance
of Borrower's liabilities to Bank shall at Bank's option be deemed to be forthwith
due and payable by Guarantor under the terms of this Guaranty, and Bank may
exercise and enforce Bank's rights and remedies hereunder against Guarantor
and/or Guarantor's property. Should Bank be legally barred from pursuing
Borrower or Borrower's assets for repayment of Borrower's liabilities for any
reason, including but not limited to bankruptcy stay or other order of a court
having jurisdiction over Borrower, Bank may treat Borrower's liabilities to Bank
as being forthwith due and payable by Guarantor under the terms of this
Guaranty, and Bank may exercise and enforce Bank's rights and remedies
hereunder against Guarantor and/or Guarantor's property.
2. Plaintiff states in paragraph 8 of its complaint that "[o]n February 9, 2010, Yorktown
filed a petition under Chapter 11 of the United States Bankruptcy Code in the United States
District [sic] Court for the Middle District of Pennsylvania (the "Yorktown Bankruptcy")."
Plaintiff has failed to allege that the Yorktown Bankruptcy has legally barred it from
pursuing Yorktown or Yorktown's assets.
4. Plaintiff has failed to file a single Motion with the Bankruptcy Court for relief or
modification from any stay in the Yorktown Bankruptcy pursuant to applicable provisions of
the Bankruptcy Code, including, specifically, 11 U.S.C. §362.
5. Plaintiff has failed to file a single Motion with the Bankruptcy Court for adequate
protection payments pursuant to applicable provisions of the Bankruptcy Code, including,
specifically, 11 U.S.C. §361.
6. Plaintiff has failed to file a single Motion with the Bankruptcy Court to prohibit use
of its cash collateral or for adequate protection payments for Debtor's use of its cash collateral
pursuant to applicable provisions of the Bankruptcy Code, including, specifically, 11 U.S.C.
§363.
7. Plaintiff has failed to file a single Motion with the Bankruptcy Court to determine
the extent or validity of its asserted secured claim against the Debtor pursuant to applicable
provisions of the Bankruptcy Code, including, specifically, 11 U.S.C. §506.
8. Plaintiff has not attempted to collect any funds, payments, interest, or collateral
from Yorktown or its assets.
9. Plaintiff has failed to "first attempt to satisfy Borrower's [Yorktown's] liabilities to
Bank by directly pursuing Borrower and Borrower's assets" as required by the Guaranty.
10. Plaintiff is not "legally barred from pursuing Borrower [Yorktown] or Borrower's
assets for repayment of Borrower's liabilities" which legal condition is a prerequisite under the
Guaranty for Plaintiff being able to exercise any of its rights and remedies against Guarantor.
2
11, Plaintiff has failed to notify Guarantor that "all collection actions [against
Yorktown] have been completed" which notification is a prerequisite under the Guaranty for
Plaintiff being able to exercise any of its rights and remedies against Guarantor.
12. Plaintiff has failed to satisfy conditions precedent under the Guaranty which are
required to be satisfied before Plaintiff obtains any rights to proceed against Defendant.
13. Plaintiff has failed to state a claim pursuant to which relief can be granted by this
Court.
14. Pa. R.C.P. 1028(a)(4) authorizes a party to file Preliminary Objections on the basis
of "legal insufficiency of a pleading (demurrer)."
15. Because Plaintiff has failed to state a claim upon which relief can be granted, its
pleading is legally insufficient.
WHEREFORE, Defendant Gerald R. Kensinger requests that this Court enter an Order
dismissing Plaintiff's Complaint for legal insufficiency pursuant to Pa. R.C.P. 1028(a)(4).
B. Failure of Pleading to Conform to Law or Rule of Court - Failure to Attach
Documents
16. In Paragraph 5 of its Complaint, Plaintiff states: "On or about September 1, 2005,
Yorktown executed a Demand Note in Favor of Plaintiff in the original principal amount of
SEVEN MILLION DOLLARS ($7,000,000.00) (the "Note"), which Note evidences a line of credit
that Plaintiff extended to Yorktown (the "Line of Credit"). A true and correct copy of the Note
is attached hereto as Exhibit "A"."
17. In Paragraph 6 of its Complaint, Plaintiff states: "Also on September 1, 2005,
Defendant executed a Guaranty and Suretyship Agreement, pursuant to which Defendant
unconditionally guarantied Yorktown's payment obligations under the Note (the "Guaran ")
A true and correct copy of the Guaranty is attached hereto as Exhibit "B"."
18. In Paragraph 7 of its Complaint, Plaintiff states: "Yorktown has defaulted under
the Note for, among other things, failure to make payments when due."
19. In Paragraphs 10 and 11 of the Complaint and Exhibit "C" attached to Paragraph
10, Plaintiff alleges that Defendant has failed to satisfy his obligations under the Guaranty by
failing to cure Yorktown's alleged default under the Note.
20. The first full paragraph on page 3 of the Note states:
Defaults: Borrower shall be in default hereunder (1) for failure to pay when
due any amount payable under this Note, or under the line of credit agreement
executed and delivered by Borrower simultaneously with this Note ("Loan
Agreement"), or under any assignments of notes and mortgages (jointly and
severally, "Assignment") given or to be given to Bank as collateral and security
for Borrower's obligations under this Note and the Loan Agreement, or under
any other agreement or document which otherwise evidence or secures
Borrower's indebtedness and obligations to Bank under or in connection with
this Note (collectively, including the Note, Loan Agreement and Assignment, the
"Loan Documents"), all of the provisions all of which [sic] are incorporated
herein by reference and made a part hereof as is [sic] set forth in full; or (2) for
failure to observe or perform any provision of any of the Loan Documents.
21. Plaintiff has failed to attach to its Complaint the "line of credit agreement executed
and delivered by Borrower simultaneously with this Note ("Loan Agreement")" or any of the
other documents referenced in the above referenced paragraph, all of which are explicitly
incorporated into the Note as the Loan Documents and all of which are cited in the Note as
defining the term default upon which Plaintiff's Complaint is based.
22. Plaintiff has failed to attach to its Complaint the Loan Agreement and other
documents cited in the Note, all of which are specifically incorporated into the Note and are
part of the "Loan Documents" at issue in this case.
4
23. Pa. R.C.P. 1019(h) states that "[w]hen any claim or defense is based upon an
agreement, the pleading shall state specifically if the agreement is oral or written."
24. Pa. R.C.P. 1019(i) states in relevant part that "[w]hen any claim or defense is based
upon a writing, the pleader shall attach a copy of the writing, or the material part thereof ...."
25. Because Plaintiff alleges that Defendant has violated a written Note, which
document specifically incorporates by reference the Loan Agreement and other documents,
together referred to in the Note as the Loan Documents, the Loan Documents are material parts
of the writing or writings upon which Plaintiff's claim is based.
26. To the extent Plaintiff alleges that Defendant has violated the terms of an
agreement as specified on written documents, it has failed to attach a copy of the writing or
writings on which its claim is based in violation of Pa. R.C.P. 1019(i).
27. Pa. R.C.P. 1028(a)(2) authorizes a party to file Preliminary Objections on the basis
of the "failure of a pleading to conform to a law or rule of court ...."
28. Because Plaintiff has failed to attach copies of the documents upon which its claim
is based, its pleading fails to conform to law or rule of court.
WHEREFORE, Defendant William C. Kollas requests that this Court enter an Order
dismissing Plaintiff's Complaint for failure to conform to law or rule of court pursuant to Pa.
R.C.P. 1028(a) (2).
II. Motion for More Specific Statement
29. Defendant Kollas incorporates by reference Paragraphs 1 through 28 of his
Preliminary Objections.
30. Because Plaintiff makes reference in its Complaint to various documents that are
incorporated into the Note yet, at the same time, fails to attach copies of the incorporated
5
documents, it is impossible for Defendant to respond to Plaintiff's allegations regarding the
liabilities allegedly due.
31. Pa. R.C.P. 1028(a)(3) authorizes a party to file Preliminary Objections on the basis
of "insufficient specificity in a pleading".
32. Plaintiff's Complaint lacks sufficient specificity to provide Defendant with the
information he needs to form a meaningful evaluation of the truth and accuracy of Plaintiff's
averments and to formulate a meaningful defense.
WHEREFORE, Defendant William C. Kollas requests that this Court enter an Order
dismissing Plaintiff's Complaint for insufficient specificity or, in the alternative, that this Court
enter an Order requiring Plaintiff to plead with greater specificity.
Respectfully submitted,
THE LAW OFFICES OF MARKIAN R. SLOBODIAN
/Z -Y",
MARKIAN R. SLOBODIAN, ESQ.
ID NO. 41075
801 North Second Street
Harrisburg, PA 17102
717-232-5180
Counsel for William C. Kollas
Dated: 1.-
6
CERTIFICATE OF SERVICE
I hereby certify that I have this date served a true and correct copy of the foregoing
Preliminary Objections via first class mail, postage paid, to the following individual:
Heather Z. Kelly, Esq.
METTE, EVANS & WOODSIDE
3401 North Front Street, P.O. Box 5950
Harrisburg, PA 17110-0950
KAREN L. HAY CARROL, Legal Secretary
Dated: 0'? 1. ZS , IZ
f v `}
3
METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
METRO BANK, f/k/a Commerce
Bank/Harrisburg, N.A.,
Plaintiff
V.
WILLIAM C. KOLLAS,
Defendant
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
: DOCKET NO. 2012-1340
PLAINTIFF'S RESPONSE TO PRELIMINARY OBJECTIONS
OF WILLIAM C. KOLLAS
NOW COMES Plaintiff, Metro Bank f/k/a Commerce Bank/Harrisburg, N.A.
("Plaintiff'), by and through counsel, and files the following Response to Preliminary Objections
of William C. Kollas:
1. Motion to Dismiss
A. Legal Insufficiency of Pleading (Demurrer)
1. The Guaranty attached as Exhibit "B" to the Complaint is a written document that
speaks for itself.
2. The Complaint is a written document that speaks for itself.
3. Denied as Stated. Plaintiff specifically included the language from the Guaranty
which states: "Should Bank be legally barred from pursuing Borrower or Borrower's assets for
repayment of Borrower's liabilities for any reason, including but not limited to bankruptcy
stay ...Bank may treat Borrower's liabilities to Bank as being forthwith due and payable by
Guarantor under the terms of this Guaranty, and Bank may exercise and enforce Bank's rights
and remedies hereunder against Guarantor and/or Guarantor's property." (Compl. at ¶9).
Plaintiff further alleged that the Borrower, Yorktown Funding, filed for bankruptcy on February
9, 2010 (Compl. at ¶8). By the express terms of the Guaranty, the imposition of the automatic
bankruptcy stay under 11 U.S.C. §362 following the Borrower's filing of a bankruptcy petition
(the "Bankruptcy Stay") gave Plaintiff the right to pursue remedies against Defendant as
Guarantor.
4. The averment contained in this Paragraph is an averment of fact not within the
pleadings and not properly considered in a preliminary objection in the nature of a demurrer. By
way of further response, the terms of the Guaranty do not require Plaintiff to file a motion for
relief from or modification of the bankruptcy stay. By the express terms of the Guaranty, the
imposition of the Bankruptcy Stay gave Plaintiff the right to pursue remedies against Defendant
as Guarantor. Finally, although not relevant under the express terms of the Guaranty, and not
properly raised in a demurrer, Plaintiff specifically denies any inference that it has not acted with
complete diligence in conjunction with the Borrower's bankruptcy.
5. The averment contained in this Paragraph is an averment of fact not within the
pleadings and not properly considered in a preliminary objection in the nature of a demurrer. By
way of further response, the terms of the Guaranty do not require Plaintiff to file a motion for
adequate protection payments. By the express terms of the Guaranty, the imposition of the
Bankruptcy Stay gave Plaintiff the right to pursue remedies against Defendant as Guarantor.
Finally, although not relevant under the express terms of the Guaranty, and not properly raised in
a demurrer, Plaintiff specifically denies any inference that it has not acted with complete
diligence in conjunction with the Borrower's bankruptcy.
6. The averment contained in this Paragraph is an averment of fact not within the
pleadings and not properly considered in a preliminary objection in the nature of a demurrer. By
way of further response, the terms of the Guaranty do not require Plaintiff to file a motion to
prohibit use of its cash collateral or for adequate protection payments for the Borrower's use of
its cash collateral. By the express terms of the Guaranty, the imposition of the Bankruptcy Stay
gave Plaintiff the right to pursue remedies against Defendant as Guarantor. Finally, although not
relevant under the express terms of the Guaranty, and not properly raised in a demurrer, Plaintiff
specifically denies any inference that it has not acted with complete diligence in conjunction with
the Borrower's bankruptcy.
7. The averment contained in this Paragraph is an averment of fact not within the
pleadings and not properly considered in a preliminary objection in the nature of a demurrer. By
way of further response, the terms of the Guaranty do not require Plaintiff to file a motion to
determine the extent or validity of its asserted secured claim against the Borrower. By the
express terms of the Guaranty, the imposition of the Bankruptcy Stay gave Plaintiff the right to
pursue remedies against Defendant as Guarantor. Finally, although not relevant under the
express terms of the Guaranty, and not properly raised in a demurrer, Plaintiff specifically denies
any inference that it has not acted with complete diligence in conjunction with the Borrower's
bankruptcy.
8. The averment contained in this Paragraph is an averment of fact not within the
pleadings and not properly considered in a preliminary objection in the nature of a demurrer. By
way of further response, as a matter of law, Plaintiff is prohibited from attempting to collect any
funds, payments, interest or collateral from the Borrower by operation of the Bankruptcy Stay.
9. Denied. It is denied that Plaintiff has failed to meet all requirements under the
Guaranty prior to exercising its rights and remedies against Defendant. By the express terms of
the Guaranty, the imposition of the Bankruptcy Stay gave Plaintiff the right to pursue remedies
against Defendant as Guarantor.
10. Denied. By the express terms of the Guaranty, the imposition of the Bankruptcy
Stay gave Plaintiff the right to pursue remedies against Defendant as Guarantor.
11. Admitted in Part. Denied in Part. It is admitted that Plaintiff has not notified
Defendant as Guarantor that "all [ ] collection actions against Borrower have been completed..."
It is denied that such notification is a prerequisite under the Guaranty for Plaintiff to exercise any
of its rights and remedies against Defendant as Guarantor. To the contrary, by the express terms
of the Guaranty, the imposition of the Bankruptcy Stay gave Plaintiff the right to pursue
remedies against Defendant as Guarantor.
12. Denied. It is denied that Plaintiff failed to satisfy any condition precedent under
the Guaranty which are required to be satisfied before Plaintiff obtains any right to proceed
against Defendant as Guarantor. By the express terms of the Guaranty, the imposition of the
Bankruptcy Stay gave Plaintiff the right to pursue remedies against Defendant as Guarantor.
13. This Paragraph contains a conclusion of law to which no response is required. To
the extent this Paragraph is deemed to contain averments of fact, the same are denied.
14. This Paragraph contains a conclusion of law to which no response is required. By
way of further response, preliminary objections in the nature of demurrer require the Court to
resolve the issues solely on the basis of the pleadings, and no testimony or other evidence outside
the complaint may be considered to dispose of the legal issues presented by demurrer.
Defendant's preliminary objection in the nature of demurrer raises multiple factual issues not
contained in the Complaint.
15. This Paragraph contains a conclusion of law to which no response is required. To
the extent this Paragraph is deemed to contain averments of fact, the same are denied.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an Order
overruling Defendant's preliminary objection in the nature of demurrer.
B. Failure of Pleading to Conform to Law or Rule of Court - Failure to Attach
Documents
16. The Complaint is a written document that speaks for itself. By way of further
response. It is admitted that the referenced Demand Note is attached to the Complaint as Exhibit
"A" (the "Note")
17. The Complaint is a written document that speaks for itself. By way of further
response. It is admitted that the referenced Guaranty and Suretyship Agreement is attached to
the Complaint as Exhibit "B" (the "Guaranty")
18. The Complaint is a written document that speaks for itself.
19. The Complaint is a written document that speaks for itself.
20. The Note is a written document that speaks for itself.
21. Admitted in Part. Denied in Part. It is admitted that Plaintiff did not attached the
referenced "Loan Agreement" or other documents referenced in the "Defaults" provision of the
Note. It is denied that the referenced documents define "the term default upon which Plaintiff's
Complaint is based." To the contrary, Plaintiff specifically alleged that "Yorktown has defaulted
under the Note for, among other things, failure to make payment when due." (Compl. at ¶7).
The Note specifically provides that "Borrower shall be in default [under the Note] (1) for failure
to pay when due any amount payable under this Note...) (Note, Ex. A to Compl. at p. 3).
Further, the Note provides when amounts payable are due. Specifically, the Note states, "Interest
only will be payable on the first day of each calendar month..." (Note, Ex. A to Complaint at p.
2). The only default alleged by Plaintiff on the part of Yorktown is default of payment
obligations "under the Note," which Note Plaintiff has attached to the Complaint.
22. Admitted in Part. Denied in Part. It is admitted that Plaintiff did not attach the
referenced Loan Agreement and other documents cited in the Note. It is specifically denied that
any "Loan Documents" other than the Note and the Guaranty are at issue in this case. The only
documents at issue in the action are the Note and the Guaranty, both of which are attached to the
Complaint.
23. This Paragraph contains a conclusion of law to which no response is required. By
way of further response, the Complaint specifically states that the Borrower executed the Note
and that the Defendant executed the Guaranty, and copies of these written agreements are
attached to the Complaint.
24. This Paragraph contains a conclusion of law to which no response is required. By
way of further response, Plaintiff attached copies of the Note and Guaranty, which include all
material parties of the agreements giving rise to Plaintiff's action.
25. Denied as Stated. Defendant states that "the Loan Documents are material parts
of the writing or writing upon which Plaintiff's claim is based." Pennsylvania Rule of Civil
Procedure 1019(i) requires that "the material part" of an agreement upon which a claim or
defense is based be attached to the Complaint, not all material parts. Plaintiff has attached the
Note and Guaranty upon which the action is based.
26. Denied. It is denied that Plaintiff has failed to attach a copy of the written upon
which its claim is based. Plaintiff's claim is based upon the Note and Guaranty, both of which
are attached to the Complaint.
27. This Paragraph contains an averment of law to which no response is required.
28. As set forth above, it is denied that Plaintiff has failed to attach copies of the
documents upon which its claim is based, and it is further denied that Plaintiff's Complaint fails
to conform to law or rule of court.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an Order
overruling Defendant's preliminary objection on the basis of failure to conform to law or rule of
court.
II. Motion for More Specific Statement
29. The above responses are incorporated herein by reference.
30. Denied. It is denied that Plaintiff makes reference in its Complaint to various
documents that are incorporated into the Note. Plaintiff references the Borrower's failure to
make payment when due under the Note, which Note is attached to the Complaint. Accordingly,
it is not impossible for Defendant to respond to Plaintiff's allegations regarding the liabilities
allegedly due. Defendant can either admit or deny that the Borrower defaulted under the terms
of the Note, and Defendant can either admit or deny that Defendant has failed to satisfy his
payment obligations under the Guaranty. (Compl. at ¶¶ 7, 11).
31. This Paragraph contains an averment of law to which no response is required.
32. Denied. It is denied that Plaintiff's Complaint lacks sufficient specificity to
provide Defendant with the information necessary to form a meaningful evaluation of the truth
and accuracy of Plaintiff's averments and to formulate a meaningful defense. Defendant can
either admit or deny that Yorktown defaulted under the terms of the Note, and Defendant can
either admit or deny that Defendant has failed to satisfy his payment obligations under the
Guaranty. (Compl. at ¶T 7, 11).
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an Order
denying Defendant's Motion for a More Specific Statement.
Respectfully submitted,
METTE, EVANS & WOODSIDE
By: ?
eather Z. Kelly, quire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
Attorneys for Plaintiff
Date: April 30, 2012
CERTIFICATE OF SERVICE
I certify that I am this day serving a copy of the foregoing document upon the person(s)
and in the manner indicated below, which service satisfies the requirements of the Pennsylvania
Rules of Civil Procedure, by depositing a copy of same in the United States Mail at Harrisburg,
Pennsylvania, with first-class postage, prepaid, as follows:
Markian R. Slobodian, Esquire
801 N. Second Street
Harrisburg, PA 17102
METTE, EVANS & WOODSIDE
By:
Heather Z. Kelly, quir
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
Attorneys for Plaintiff
Date: April 30, 2012
569013v1
PRAECIPE FOR LISTING CASE FOR ARGUMENT
(Must be typewritten and submitted in triplicate) rri
TO THE PROTHONOTARY OF CUMBERLAND COUNTY
Argument Court.) June 1, 2012
CAPTION OF CASE
(entire caption must be stated in full)
Metro Bank, f/k/a Commerce Bank/Harrisburg, N.A.
vs.
William C. Kollas
No. 1340 2012 Term
1. State matter to be argued (i.e., plaintiffs motion for new trial, defendant's demurrer to
complaint, etc.):
Defendants Preliminary Objections
2. Identify all counsel who will argue cases:
(a) for plaintiffs:
Heather Z. Kelly, Esquire, Mette, Evans & Woodside
(Name and Address)
3401 N. Front Street, Harrisburg, PA 17110
(b) for defendants:
Markian R. Slobodian, Esquire
(Name and Address)
801 N. 2nd Street, Harrisburg, PA 17102
3. 1 will notify all parties in writing within two days that this case has been listed for
argument.
4. Argument Court Date:
June 1. 2012
Date: April 27, 2012
Signature
Print your name
Plaintiff
Heather Z. Kelly, Esquire
Attorney for
INSTRUCTIONS:
1. Original and two copies of all briefs must be filed with the COURT
ADMINISTRATOR (not the Prothonotary) before argument.
2. The moving party shall file and serve their brief 14 days prior to argument.
3. The responding party shall file their brief 7 days prior to argument.
4. If argument is continued new briefs must be filed with the COURT
ADMINISTRATOR (not the Prothonotary) after the case is relisted.
R. -7?S-pd a
(List the within matter fob ne:d- m F
-,
---------- ----------- ---------- ?> E -
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r?.,)
METRO BANK f/k/a COMMERCE : IN THE COURT OF COMMON PLEAS OF
BANK/HARRISBURG, N.A., CUMBERLAND COUNTY, PENNSYLVANIA
Plaintiff
vs.
WILLIAM C. KOLLAS,
Defendant
CIVIL ACTION - LAW
NO. 12-1340 CIVIL
IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS
BEFORE HESS, P.J. AND PECK, J.
ORDER
AND NOW, this day of June, 2012, following argument thereon, the
preliminary objections of the defendant are OVERRULED.
BY THE COURT,
Heather Z. Kelly, Esquire
3401 North Front Street
P. O. Box 5950
Harrisburg, PA 17110-0950
For the Plaintiff
Markian R. Slobodian, Esquire
801 North Second Street
Harrisburg, PA 17102
For the Defendant
:rlm Zrll t +.??' 1??r9?ld?
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10
METRO BANK f/k/a COMMERCE BANK/
HARRISBURG, N.A.,
Plaintiff
V.
WILLIAM C. KOLLAS,
Defendant
:IN THE COURT OF COMMON PLEAS
:CUMBERLAND COUNTY, PENNSYLVi
:DOCKET NO. 2012-1340 Civil ti
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ANSWER. NEW MATTER AND COUNTERCLAIM = N.)
NOW COMES, Defendant, William C. Kollas, by his counsel, The Law Offices of
Markian R. Slobodian, and makes the following Answer, New Matter and Counterclaim to
Plaintiff's Complaint:
ANSWER
1. Admitted.
2. Admitted.
3. Admitted.
Jurisdiction and Venue
4. Admitted.
Factual Background
5. Admitted in part and denied in part. Defendant admits that Yorktown executed
document attached to the Plaintiff's complaint as Exhibit "A." Exhibit "A" is a written
document that speaks for itself. Accordingly, Defendant denies any summary or
characterization of the contents of that document. Defendant further denies that the
attached to Plaintiff's complaint as Exhibit "A" constitutes the entire Demand Note ("Note").
By way of further answer, the Demand Note, by its terms, incorporates by reference other
documents, including, specifically, the line of credit agreement executed and delivered by
Yorktown simultaneously with the Note, assignments of notes and mortgages given or to be
w
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given to Plaintiff as collateral and security for Yorktown's obligations under the Note, a
security agreement, and any other documents which otherwise evidence or secure Yorktown's
indebtedness or obligations to Plaintiff, all of which constitute part of the terms and provision:
of the Note.
6. Admitted in part and denied in part. Defendant admits that Yorktown executed th
document attached to the Plaintiff's complaint as Exhibit "B." Exhibit "B" is a written
document that speaks for itself. Accordingly, Defendant denies any summary or
characterization of the contents of that document.
7. Denied. This paragraph contains a legal conclusion to which no answer is require(
To the extent an answer may be required, Defendant denies the allegation and demands proof
thereof at trial.
8. Admitted.
9. Denied. Exhibit "B" is a legal document that speaks for itself. Accordingly,
Defendant denies any summary or characterization of the contents of that document.
Defendant further specifically denies any inference that Metro Bank has been legally
barred from pursuing Yorktown or Yorktown's assets for repayment. By way of
further answer, Metro Bank has failed to file any motion with the Bankruptcy Court
relief from automatic stay in Yorktown's bankruptcy case with regard to either its
disputed or undisputed collateral. Moreover, Metro Bank has failed to file any mot
with the Bankruptcy Court to enjoin Debtor's use of its cash collateral, has failed to
negotiate or engage in any negotiations with Debtor with regard to use of cash
collateral, has failed to seek from the Bankruptcy Court any adequate protection
2
regarding either its disputed or undisputed collateral, has failed to request or receive
any interest or adequate protection payments and has otherwise failed to protect its
interests in Yorktown Funding's Chapter 11 bankruptcy case. Accordingly, Defendant
further denies any inference that Plaintiff is authorized under the terms of the alleged
Guaranty Agreement to pursue payment from him at this time.
10. Admitted in part and denied in part. Defendant admits that Plaintiff executed
document attached to the Plaintiff's complaint as Exhibit "C." Exhibit "C" is a written
document that speaks for itself. Accordingly, Defendant denies any summary or
characterization of the contents of that document
11. Denied. This paragraph states a conclusion of law to which no answer is
required. To the extent an answer may be required, Defendant denies that he has
to satisfy any obligation that he may have under the Guaranty.
Count I - Alleged Breach of Contract
12. Defendant incorporates by reference and restates his Answers to paragraphs 1
through 11 of the Complaint as if set forth in full below.
13. Denied. This paragraph states a conclusion of law to which no answer is
required. To the extent an answer may be required, Defendant denies the allegation
that he personally and unconditionally guarantied Yorktown's repayment o
14. Denied. This paragraph states a conclusion of law to which no answer is
required. To the extent an answer may be required, Defendant denies that he has
breached any contractual obligation to Plaintiff.
15. Denied. Defendant denies that the amounts set forth as being owed under
the Note are accurate and demands proof thereof at trial.
16. Denied. This paragraph states a conclusion of law to which no answer is
required. To the extent an answer may be required, Defendant denies that he is liable 1
Plaintiff for the costs, expenses, and fees set forth in this paragraph.
17. Denied. This paragraph states a conclusion of law to which no answer is
required. To the extent an answer may be required, Defendant denies that he has
breached any obligation that he may have under the Guaranty. Defendant further
denies that he has any liability to Plaintiff or that the amount set forth as being owed i,,
accurate. By way of further answer, Plaintiff has no cause of action against Defendant
under the guaranty because it has not first proceeded to enforce its remedies against
Yorktown as required by the terms of the Guaranty. Specifically, Plaintiff has not
sought relief from stay with regard to its secured claim, has not sought adequate
protection payments or to enjoin use of cash collateral, and has failed to take any other
action whatsoever to enforce its rights with regard to its collateral. Finally, as more
fully set forth in Defendant's new matter and counterclaim, to the extent Defendant
may have any liability to Plaintiff, which is denied, any such liability must be offset by
the amount Plaintiff has damaged Defendant's interest by failing to pursue its claim it
the Bankruptcy Court and, by failing to properly perfect its lien against Yorktown's
assets as specifically contemplated and required in the parties' loan documents. .
4
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment in
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, dismiss Plaintiff's
complaint and, further, award the Defendant such further relief as the Court deems equitable
and just.
NEW MATTER
A. Failure to Perfect Liens
1. On or about September 1, 2005, Commerce Bank/ Harrisburg, N.A., predecessor in
interest to Plaintiff (hereinafter "Commerce"), and Yorktown executed a Revolving Line of
Credit Agreement ("Line of Credit Agreement") for a line of credit to Yorktown in the amount
of $7,000,000.00. A true and correct copy of the Line of Credit Agreement is attached hereto
and made a part hereof as Exhibit "A."
2. Paragraph 1(b) of the Line of Credit Agreement provides in relevant part that
"Advances under the Line of Credit will be used only to provide financing during the interim
between the purchase of a manufactured home or modular home, and for homes built on site
(each, a "Unit") and settlement of the permanent financing for the Unit and lot in which the
Unit is located..." (emphasis added)
3. On or about September 1, 2005, Commerce and Yorktown executed a Security
Agreement (the "Security Agreement") which acknowledged in paragraph R-2 thereof that
pursuant to the terms of the Line of Credit Agreement, "the Secured Party ["Commerce"]
provides financing to the Borrower, which the Borrower in turn lends to the Borrower's
customers, during the interim between the Borrowers' purchase of manufactured or modular
homes, or for homes built on site (collectively the "Units") for Borrower's customers and the
settlement of the customers' permanent financing for the Units and the lots on which the Unit
5
are located. (emphasis added). A true and correct copy of the Security Agreement is attached
hereto and made a part hereof as Exhibit "B."
4. The Security Agreement provides in paragraph R-3 thereof that Yorktown shall
grant to Commerce a security interest in "all of Borrower's right, title and interest in, to and
under the mortgage bonds or notes executed and delivered by the Borrower's customers to the
Borrower, and the mortgages which secure the bonds or notes, the permanent financing
commitments related thereto, the fire and casualty policies related thereto and the proceeds
thereof, and the title insurance policies related thereto and the proceeds thereof for the Units
and lots for which financing is provided by the Secured party (collectively the "Units
Collateral"). (emphasis added).
5. Section 2 of the Security Agreement states that the security interest created therein
given as security for the prompt payment, performance, satisfaction and discharge of the
obligation s of Yorktown to Commerce under the Line of Credit Agreement and the other loar
documents.
6. The loan documents incorporated by the Note, including, specifically, but not
necessarily limited to, the Line of Credit Agreement and the Security Agreement executed by
Yorktown and Plaintiff, contemplated that Plaintiff was to obtain a duly perfected lien and/oi
assignment of the note, mortgage and all related documents resulting from Yorktown s loans
its customers and all collateral securing the Customer Loans.
7. Plaintiff had a duty to Yorktown and Defendant Guarantor to properly obtain and
perfect its lien on all of the Yorktown customer loans, including, without limitation, the site
built homes.
8. On or about September 5, 2005, Commerce filed with the Secretary of the
Pennsylvania Commonwealth a UCC-1 Financing Statement (the "Financing Statement") in
6
which it specifically listed as collateral the manufactured or modular homes for which
financing is provided by the Secured Party but omitted any mention of the "homes built on
site" specifically listed as collateral in the Security Agreement. A true and correct copy of the
Financing Statement is attached hereto and made a part hereof as Exhibit "C."
9. Plaintiff failed to properly perfect a lien on the site built homes by failing to
or make any reference to them in the Financing Statement.
10. Plaintiff failed to otherwise obtain or perfect a lien in all of the Yorktown
Customer Loans and the collateral provided to Yorktown for the Customer Loans.
11. Plaintiff was negligent in failing to properly obtain and/or perfect a lien on all of
the Customer Loans and collateral for the loans, including, without limitation, the site built
homes.
12. Plaintiff breached its duties under the Line of Credit, Security Agreement,
guaranty, and the other loan documents by failing to properly obtain and/or perfect its lien
all of the Customer Loans and collateral for the Customer Loans.
13. Plaintiff has breached its duty of good faith and fair dealing in connection with
Note, the Guaranty, the Financing Agreement, the Security Agreement and the related
agreements between the parties.
14. On February 9, 2010, Yorktown filed a voluntary petition under Chapter 11 of
Bankruptcy Code in the United States Bankruptcy Court for the Middle District of
Pennsylvania to No 1:10-bk-01042-MDF.
15. Asa result of Plaintiff's failure to properly obtain and/or perfect its lien on all of
the Customer Loans and collateral for the Customer Loans, Plaintiff's asserted liens are
avoidable in Bankruptcy by Yorktown acting as Debtor in Possession.
7
16. The value of the site built homes for which plaintiff failed to perfect its security
interest is no less than $981,500.00.
17. As a result of Plaintiff's actions, proceeds in the amount of no less than $981,500.
from the sale of certain collateral for the Customer Loans, including, but not limited to, the
built homes, will be distributed to Yorktown's other creditors and will not be applied to
Yorktown's obligations to Plaintiff.
18. Defendant has been substantially harmed by Plaintiff's failure to properly obtain
liens on all of the Customer Loan collateral.
19. Defendant is entitled to setoffs in the amount of no less than $981,500.00 against
any obligation that he may owe to Plaintiff on account of the Guaranty.
20. The amount of Plaintiff's asserted claim against Defendant is overstated in the
amount of no less than $981,500.00 plus interest, attorney's fees and costs.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, or, in the
alternative, reduce any amount the Court finds to be owing to the Plaintiff by the amount of
less than $981,500.00 plus interest, attorney's fees and costs, and, further, award the Defend
such further relief as the Court deems equitable and just.
B Failure to Liquidate or Protect Collateral
21. Defendant specifically incorporates by reference and reasserts the allegations set
forth in paragraphs 1-20 of his New Matter.
22. Plaintiff has failed to file a single Motion with the Bankruptcy Court for relief or
modification from any stay in the Yorktown Bankruptcy pursuant to applicable provisions of
the Bankruptcy Code, including, specifically, 11 U.S.C. §362.
8
23. Plaintiff has failed to file a single Motion with the Bankruptcy Court for adequate
protection payments pursuant to applicable provisions of the Bankruptcy Code, including,
specifically, 11 U.S.C. §361.
24. Plaintiff has failed to file a single Motion with the Bankruptcy Court to prohibit
of its cash collateral or for adequate protection payments for Debtor's use of its cash collateral
pursuant to applicable provisions of the Bankruptcy Code, including, specifically, 11 U.S.C.
§363.
25. Plaintiff has failed to file a single Motion with the Bankruptcy Court to determine
the extent or validity of its asserted secured claim against the Debtor pursuant to applicable
provisions of the Bankruptcy Code, including, specifically, 11 U.S.C. §506.
26. Plaintiff has failed to take any action to collect any funds, payments, interest, or
collateral from Yorktown or its assets.
27. Since the filing of Yorktown's bankruptcy petition, Plaintiff has failed to take any
action to take possession of and liquidate its collateral or to receive interest payments on the
portion of its secured claim that is undisputed by Yorktown.
28. Since the filing of Yorktown's bankruptcy petition, Plaintiff has taken no action
negotiate a stipulation with the Debtor for the use of Plaintiff's cash collateral.
29. By failing to file a motion for adequate protection or a motion to prohibit use of i
cash collateral, or endeavor to negotiate a stipulation for the Debtor's use of Plaintiff's cash
collateral, Plaintiff has allowed Debtor to use its cash collateral interest free since the filing
of February 9, 2010.
30. During the course of Yorktown's bankruptcy, interest has accrued but has not
paid to Plaintiff in connection with Plaintiff's secured claim in an amount, as of July 2,1012,
$349,028.25.
9
31. As a result of Plaintiff's inaction, interest continues to accrue and not be paid to
Plaintiff in connection with the undisputed portion of Plaintiff's secured claim at the rate set
forth in the loan documents.
32. Plaintiff was negligent in failing to take prompt action to liquidate its collateral or
to obtain interest or other adequate protection payments for Yorktown 's use of its collateral.
33. Plaintiff breached its duties under the Line of Credit Agreement, Security
Agreement, Guaranty and the other related loan documents by failing to take prompt action
liquidate its collateral or to obtain interest or other adequate protection payments for
Yorktown's use of its collateral.
34. Defendant has been substantially harmed by Plaintiff's failure to take prompt
action to liquidate its collateral or to obtain interest or other adequate protection payments
Yorktown's use of its collateral.
35. Defendant is entitled to additional setoffs in the amount of no less than $349,028
against any obligation that he may owe to Plaintiff on account of the Guaranty.
36. The amount of Plaintiff's asserted claim against Defendant is overstated in the
amount of no less than $349,028.25 plus interest, attorney's fees and costs.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, or, in the
alternative, reduce any amount the Court finds to be owing to the Plaintiff by the additional
amount of no less than $349,028.25 plus interest, attorney's fees and costs, and, further, awal
the Defendant such further relief as the Court deems equitable and just.
C Failure to Satisfy Contractual Condition Precedent
37. Defendant specifically incorporates by reference and reasserts the allegations set
forth in paragraphs 1-36 of his New Matter.
10
38. The third paragraph of numbered paragraph 1 of the Guaranty attached as
"B" to Plaintiff's complaint states in its entirety as follows:
However, notwithstanding any other provision of this Guaranty to the
contrary, before Bank exercises Bank's rights and remedies against Guarantor,
Bank shall first attempt to satisfy Borrower's liabilities to Bank by directly
pursuing Borrower and Borrower's assets, taking all collection actions which
Bank determines to be reasonable and appropriate under the circumstances.
After Bank has completed its pursuit of Borrower, Bank may notify Guarantor
that all such collection actions have been completed, and the remaining balance
of Borrower's liabilities to Bank shall at Bank's option be deemed to be forthwith
due and payable by Guarantor under the terms of this Guaranty, and Bank may
exercise and enforce Bank's rights and remedies hereunder against Guarantor
and/or Guarantor's property. Should Bank be legally barred from pursuing
Borrower or Borrower's assets for repayment of Borrower's liabilities for any
reason, including but not limited to bankruptcy stay or other order of a court
having jurisdiction over Borrower, Bank may treat Borrower's liabilities to Bank
as being forthwith due and payable by Guarantor under the terms of this
Guaranty, and Bank may exercise and enforce Bank's rights and remedies
hereunder against Guarantor and/or Guarantor's property.
39. Plaintiff has failed to take any action a) to obtain relief from the automatic stay, b,
to obtain adequate protection for its interest in its collateral, c) to obtain interest payments
Yorktown with regard to the use of its collateral; or d) to prohibit use of its cash collateral.
40. Plaintiff has not attempted to collect any funds, payments, interest, or collateral
from Yorktown or its assets.
41. Plaintiff has failed to "first attempt to satisfy Borrower's [Yorktown s] liabilities
Bank by directly pursuing Borrower and Borrower's assets" as required by the Guaranty.
42. Plaintiff is not "legally barred from pursuing Borrower [Yorktown] or Borrower'
assets for repayment of Borrower's liabilities" which legal condition is a prerequisite under
Guaranty for Plaintiff being able to exercise any of its rights and remedies against Guarantor.
43. Plaintiff's action is not authorized by the Guaranty.
44. Plaintiff's action against Defendant is premature and not ripe.
11
45. Plaintiff's action against Defendant is barred by the terms of the Guaranty for
failure to satisfy a contractual precondition for instituting any type of legal action against the
guarantor.
46. Plaintiff has failed to state a cause of action against the Defendant for which relief
can be granted.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, dismiss Plaintiff's
complaint and, further, award the Defendant such further relief as the Court deems equitable
and just.
D. Other New Matter
47. Plaintiff's action is barred by the Doctrine of Equitable Estoppel.
48. Plaintiff's action is barred by the Doctrine of Unjust Enrichment.
49. Plaintiff's action is barred by the Doctrine of Accord and Satisfaction.
50. Plaintiff's actions is barred by Doctrine of Waiver.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, dismiss Plaintiff's
complaint and, further, award the Defendant such further relief as the Court deems equitable
and just.
Counterclaim
50. Defendant specifically incorporates by reference and reasserts the allegations set
forth in paragraphs 1-46 of his New Matter.
51. As a result of Plaintiff's breach of contract, Defendant William C. Kollas has
sustained damages in the amount of no less than $1,330,528.25.
12
52. As a result of Plaintiff's negligence, Defendant William C. Kollas has sustained
damages in the amount of no less than $1,330,528.25.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment
his favor and against the Plaintiff in the amount of no less than $1,330,528.25 plus interest and
costs, and, further, award the Defendant such further relief as the Court deems equitable and
just.
Respectfully submitted,
THE LAW OFFICES OF MARKIAN R. SLOBOD
MARKIAN R. SLOBODIAN, ESQ.
ID #41075
801 North Second Street
Harrisburg, PA 17102
717-232-5180
Attorney William C. Kollas
Dated: '7 ? ?A -o--
13
EXHIBIT "A"
CO
REVOLVING LINE OF CREDIT AGREEMENT
y? ban-1 ?2r-CC
THIS AGREEMENT is made as of Augas. 3A83, by YORKTOWN FUNDING,
INC., a Pennsylvania corporation (Borrower"), having a principal business office at Suite 101, 1104
Fernwood Avenue, Camp Hill, Pennsylvania 17011, with COMMERCE BANK/HARRISBURG,
N.A., a national banking association organized and existing under the laws of the United States of
America, with offices at 100 Senate Avenue, P.O. Box 8599, Camp Hill, PA 17001-8599 ("Bank").
RECITALS
R-1, Borrower has requested Bank to establish a line of credit in the amount of
$7,000,000.00 for use in Borrower's business operations; and
R-2. Bank has approved Borrower's request to establish for Borrower's use a
$7,000,000.00 line of credit for Borrower's business purposes, subject to the provisions of this
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the Recitals, which are an integral part of this
Agreement, and of the agreements hereinafter set forth, and intending to be legally bound, Borrower
and Bank agree as follows:
1. Facility. Subject to the terms and conditions of this Agreement, the Bank agrees to
establish in favor of the Borrower a line of credit facility ("Line of Credit") under which the Bank
will make advances to the Borrower from time to time, and the Borrower may borrow, repay and.
reborrow from the Bank. The indebtedness outstanding under the Line of Credit shall be evidenced.
by a promissory note in the stated principal amount of $7,000,000.00 ("Note"). Notwithstanding
the stated principal amount of the Note, the Borrower's liability shall at all times be the actual,
outstanding amount of principal, interest and any other sums which may be due from Borrower
under or in connection with the Line of Credit.
a. Maximum Availability. The maximum principal amount which may be
outstanding at any time under the Line of Credit shall be $7,000,000.00.
b. Purpose of Advances. Advances under the Line of Credit will be used only
to provide financing during the interim between the purchase of a manufactured home or modular
home, and for homes built on site (each, a "Unit") and settlement of the permanent financing for the
Unit and lot on which the Unit is located, for a period not to exceed 360 days for each Unit (or sueh
Case 1: 1 0-bk-01 042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit Attach
1-4 Page 9 of 25
longer period as may be requested by Borrower and approved by Bank with respect to a particular
Unit), to assist in the purchase of the, land on which the Unit is to be located, the Unit, and
permanent attachment of the Unit to real estate by the purchaser(s) of the Unit.
C. Advances. Borrower will give the Bank written notice of each requested
advance under the Line of Credit, specifying the amount of such requested advance. The aggregate
amount of advances for any one loan transaction or Unit will not exceed 80% of the lesser of (1) the
purchase price of a Unit or (2) the appraised value of a Unit and the land on which the Unit will be
located. Each initial written notice will be accompanied by a copy of the executed Loan
Submission/Approval form for permanent mortgage financing for the Unit for which the advance is
requested, from a financial institution acceptable to the Bank and in form and substance satisfactory
to the Bank); by a fully executed, original assignment of the note and mortgage given by the
purchaser of the Unit to Borrower, in the recordable form attached hereto as Exhibit "A" (each an
"Assignment"); by a copy of the executed note from the purchaser of the Unit to Borrower, in form
and substance satisfactory to Bank; by evidence of recording of the construction mortgage from the
purchaser of the Unit to Borrower, which will be in form and substance satisfactory to Bank; if then
available, by a copy of the fire and casualty insurance policy covering the Unit, which will be issued
by an insurance company acceptable to Bank and in amount, form and content satisfactory to Bank
(which if not then available will be supplied to Bank as soon as available, but not later than the time
of delivery of the Unit to the land); by a copy of the title insurance policy (or binder if the policy is
not yet available), which will indicate that Borrower's mortgage to be assigned to Bank is a first lien
on the Unit and land on which the Unit is located, and will be issued by a title insurance company
acceptable to Bank, and will contain only such exceptions and such endorsements, and otherwise be
in such form and content, as are satisfactory to Bank; by a copy of the draw schedule for the
advance(s) to be made with respect to the Unit; and by a copy of an "as-built" FANNIE-MAE
appraisal of the land on which the Unit will be located and the Unit, satisfactory to Bank. All
advances subsequent to an initial advance will be accompanied by such invoices and other evidence
with respect to the requested advance as the Bank may require. All advances under the Line of
Credit shall be made by depositing the amount of the advance into any account of Borrower at the
Bank designated by Borrower in such notice.
Bank will deposit requested advances with reasonable promptness following notice
of a request for advance. Any such notice shall be given only by authorized officers of Borrower.
Bank shall be entitled presumptively and absolutely to rely upon any such notice, and the validity
and effectiveness of any such notice, in making any advance of the Line of Credit, without any duty
or obligation of any nature whatsoever on the part of Bank to investigate or inquire as to the validity
or effectiveness of any such notice or any advance made in connection with any such notice, and
Borrower hereby releases and agrees to indemnify, defend and hold harmless Bank and any and all
directors, officers and employees of Bank from and against any claim, demand, proceeding, suit or
action of any nature whatsoever, and from and against any loss, damage, cost, expense, fee
(including attorneys' fees) or liability of any nature whatsoever, at any time arising from or in
connection with the making or failure to make any advance of the Line of Credit by Bank, including
from or in connection with Bank's negligence.
Case 1:10-bk-01042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit
1-4 Page 10 of 25
Notwithstanding this or any other provision of this Agreement, the Bank
reserves the right to refuse to make an advance under the Line of Credit with respect to any
particular transaction for which an advance may be requested by Borrower.
d. Interest Rate and Payments. The interest rate payable on the principal
amount outstanding under the Line of Credit and payment of principal and interest shall be such as
are provided in the Note.
e. Demand. The entire amount of principal outstanding under the Line of
Credit, plus all accrued and unpaid interest and late charges, and an_yj -dI gtq,,.au=.-dw,,vnder
or in connection with h . Tine f .r . ; . will be due and payable in full upon demand, without
setoff or counterclaim.
f. Evidence and Security for Line of Credit. The Line of Credit is
evidenced and secured by:
(1) The Note; and
(2) Each Assignment, which may be recorded in the applicable county
Recorder's Office at Borrower's expense after the occurrence of a default under the
Loan Documents (hereinafter defined); and
(3) A Security Agreement and filed Uniform Commercial Code Financing
Statements granting and perfecting the Bank's security interest in the collateral for
the Line of Credit, as more particularly described therein; and
(4) The guaranty and suretyship agreements of William C. Kollas and,
Gerald R. Kensinger; and
(5) This Agreement; and
(6) Any and all other agreements, documents and materials executed and
delivered by Borrower to Bank in connection with the Line of Credit or at any time
as further evidence and security for the Line of Credit,
All of the documents described in this Paragraph 1 are referred to in the context of this
Agreement individually, collectively or in any combination as the "Loan Documents". All of the
provisions of all of the Loan Documents are incorporated herein by reference and made a part
hereof as if set forth in full herein. If there is any inconsistency or conflict among any provisions of
any of the Loan Documents, the provision determined by Bank in its sole and absolute discretion to
be applicable shall govern and control, and Borrower agrees to be bound by Bank's determination.
g. Repurchase Aareement. In addition to the foregoing, upon the earlier of a
default under this Agreement or any of the other Loan Documents, or a default by the purchaser
3
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1-4 Page 11 of 25
under any note and/or mortgage assigned to Bank as collateral and security for an advance
hereunder, or the date 360 days from the date of the initial advance by Bank for a particular Unit (or
such longer period as may be applicable pursuant to paragraph Lb), Borrower shall repurchase such
note and mortgage from Bank, upon demand of the Bank, and pay therefor the amount owing to
Bank on account of any and all advances secured by the assignment to Bank of such note and
mortgage, including all principal, interest and any and all charges, costs or expenses paid or
incurred by the Bank and due or payable in connection with any and all such advances. A
purchaser's failure to make any payment due for a purchase of a Unit on the assertion, either oral or
written, that the Unit sold is defective or is not as represented by Borrower or any seller, distributor
or manufacturer, or that Borrower or any seller, distributor or manufacturer refuses to honor any
warranty or service agreement of any of them, will not affect in any way Borrower's obligation to
repurchase the note and mortgage from the Bank, and Borrower will pay the Bank immediately in
accordance with the terms set forth above. Borrower further agrees to hold Bank harmless from
and against any and all claims, damages, loss or liability of any nature whatsoever of any purchaser
of any Unit, including attorney's fees, costs and expenses incurred in defending against claims
asserted by any purchaser and any claims for refunds of payments made by any purchaser.
2. Representations and Warranties. Borrower hereby represents and warrants to, and
covenants and agrees with, Bank that,
a. Power and Authority; Authortration; Enforceability. Borrower has the
full power, authority and legal right to execute, deliver and comply with each of the Loan
Documents; all actions of Borrower and authorizations which may be necessary or appropriate for
the execution and delivery of, and compliance with, the Loan Documents have been taken or
obtained; and, upon their execution, the Loan Documents will constitute the valid and legally
binding obligations of Borrower, enforceable against Borrower in accordance with their respective
terms,
b. Governmental Approval of Loan Documents. No consent, approval or
other authorization of or by any person, court, administrative agency or other governmental
authority is required in connection with Borrower's execution and delivery of, or compliance with,
any of the Loan Documents.
C. Conflict, Breach. Borrower's execution and delivery of, and compliance
with, the Loan Documents will not conflict with, or result in a breach of any applicable law,
judgment, order, writ, injunction, decree, rule or regulation of any court, administrative agency or
other governmental authority, or of any agreement or other document or instrument to which
Borrower is a party or by which Borrower is bound.
d. Litigation. There is no action, suit or proceeding pending or, to the
knowledge of Borrower, threatened against or affecting Borrower before or by any court,
administrative agency or other governmental authority, which may have an adverse affect on
Borrower's ability to make payment as provided in, or to observe or perform any provision of, any
Case 1:10-bk-01042-MDF Claim 28-1 Part2 Filed 09/30/10 Desc Exhibit Attach
1-4 Page 12 of 25
of the Loan Documents, or which brings into question the validity of the Line of Credit or the
transactions contemplated hereby.
e. Taxes. Any and all federal, state and local tax returns required to have been
filed by Borrower have been filed, and all taxes reflected upon any such tax returns, and all other
taxes of any nature whatsoever, payable by Borrower, including any past due taxes, interest,
penalties and estimated tax payments, have been paid.
f. Title to Personal Property. The notes and mortgages to which Borrower
has granted Bank a security interest pursuant to the Loan Documents are owned by Borrower free
and clear of any lien, encumbrance or security interest, except to Bank.
g. Bankruntey; Insolvency. Borrower has not applied for, or consented to the
appointment of a receiver, sequestrator, trustee or liquidator of Borrower or any of Borrower's
property, admitted in -writing Borrower's inability to pay Borrower's debts as they mature, made a
general assignment for the benefit of creditors, been adjudicated a bankrupt or insolvent or filed a
voluntary petition in bankruptcy or a petition or an answer seeking an arrangement with creditors or
seeking to take advantage of any bankruptcy, insolvency, readjustment of debt, receivership,
liquidation or similar law or statute, and no petition or action has been filed against Borrower in any
proceeding under any such law, and no action has been taken by Borrower for the purpose of
effecting any of the foregoing.
Borrower agrees that the representations and warranties and covenants and agreements
provided for herein will survive and remain in effect until the Line of Credit has been paid in full.
Borrower will provide Bank immediately with notice of any violation of any of these
representations and warranties or covenants and agreements.
3. Financial Reporting. Borrower will provide Bank with, or cause Bank to be
provided with, (a) Borrower's financial statements prepared by an independent certified public
accountant; and (b) copies of each Guarantor's signed federal income tax returns, as filed, including
all schedules, statements and related forms, and each Guarantor's personal financial statements.
Borrower's financial statements will contain, at a minimum, a statement of income or profit
and loss and a balance sheet, and will be provided to Bank within sixty (60) days after fiscal year
end. Each Guarantor's financial statements and tax returns required herein will be provided to
Bank by April 30 of each year. The Bank reserves the right to require such additional financial
information from time to time as the Bank determines to be necessary or desirable for the Bank's
financial review. All financial statements will be in form and content satisfactory to Bank.
4. Default. The occurrence of any one or more of the following events is a default of
Borrower's obligations under this Agreement:
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1-4 Page 13 of 25
a. Borrower or any Guarantor fails to pay when due any payment of principal,
interest or other amounts payable under the Note, this Agreement or any of the other Loan
Documents.
b. Borrower or any Guarantor fails to observe and perform any of the
covenants or agreements on Borrower's or any Guarantor's part to be observed and performed under
this Agreement or under any of the other Loan Documents.
C. Any representation or warranty of Borrower or any Guarantor under this
Agreement or under any of the other Loan Documents is at any time untrue in any material respect.
d. Any event of default occurs under any of the other Loan Documents.
e. Borrower or any Guarantor defaults under or in connection with any material
agreement, indebtedness or obligation with or to any other person or entity.
f. Borrower or any Guarantor applies for or consents to the appointment of a
receiver, sequestrator, trustee or liquidator for Borrower or any Guarantor or any of Borrower's or
any Guarantor's property, admits in writing Borrower's or -any Guarantor's inability to pay
Borrower's or any Guarantor's debts as they mature, makes a general assignment for the benefit of
creditors, is adjudicated a bankrupt, or insolvent or files a voluntary petition in bankruptcy or a
petition or an answer seeking an arrangement with creditors or seeking to take advantage of any
bankruptcy, insolvency, readjustment of debt or similar law or statute, or an answer admitting the
material allegations of a petition filed against Borrower or any Guarantor in any proceeding under
any such law, or if any petition or action is taken by or against Borrower or any Guarantor, whether
voluntarily or involuntarily, for the purpose of effecting any of the foregoing.
g. Any order, judgment or decree is entered in any court of competent
jurisdiction against Borrower or any Guarantor or any of Borrower's or any Guarantor's property,
and such order, judgment or decree shall continue unstayed and in effect for any period of thirty
(30) days.
4at, The financial condition of Borrower or any Guarantor shall change in such a
manner ' the judgment of Bank, Bank's risk of not receiving payment in full of the Line of
Credit shall materially increase.
5. Cross Default. Borrower agrees that a default under any of the Loan Documents, or
under any other agreement or document evidencing or securing any other indebtedness or obligation
of Borrower or any Guarantor to Bank, is a default under all of the Loan Documents and under all
such other agreements and documents.
6
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1-4 Page 14 of 25
Remedies.
a. Upon the occurrence of a default under this Agreement, unless the Bank
elects otherwise in writing, the Line of Credit shall be terminated and the entire amount of the
indebtedness outstanding under the Line of Credit shall become immediately due and payable
without notice or demand, or setoff or counterclaim or deduction of any nature, and Bank will have
no further obligation to make any advance of the Line of Credit immediately upon the occurrence of
any default.
b. Upon the occurrence of a default under this Agreement, Bank may exercise
or proceed to enforce any or all of the rights and remedies available to Bank under any or all of the
Loan Documents, or at law or in equity.
C. No right or remedy provided to Bank under any of the Loan Documents, or
at law or in equity, is intended to be or shall be deemed to be exclusive of any other such right or
remedy, and each and every such right or remedy shall be cumulative, and shall be in addition to
every other such right or remedy, and may be pursued singly, concurrently, successively or
otherwise, at the sole discretion of Bank, and shall not be exhausted by any one exercise thereof but
may be exercised as often as occasion therefor shall occur. The failure to exercise or delay in
exercising any such right or remedy, or the failure to insist upon strict performance of any provision
of any of the Loan Documents, is not a waiver or release of any such right, remedy or performance
by the Bank, or of.any event of any default, or of any obligation or liability of Borrower under any
of the Loan Documents. Any waiver, in order to be effective, must be in writing and signed by
Bank, and any such waiver shall be strictly limited in its effect to the condition, obligation or
default specified therein and shall not extend to any subsequent condition, obligation or default or
impair any right of Bank with respect thereto.
d. Borrower further waives and releases all errors, defects and imperfections in
any proceedings instituted by Bank under the terms of any of the Loan Documents or with respect
to the collateral and security for the Line of Credit.
( 7. Costs and Expenses. Borrower shall pay upon demand all costs and expenses
(including all amounts paid to attorneys, accountants, real estate brokers and other advisors
employed by Bank and/or to. any contractors for labor and materials) incurred by Bank (a) in the
preparation of the Loan Documents and otherwise in connection with the implementation and
securing of the Line of Credit as provided in the Loan Documents, and (b) in the exercise of any of
Bank's rights, remedies or powers under any of the Loan Documents or with respect to the collateral
and security for the Line of Credit, and any amount thereof, together with interest thereon at the rate
specified in the Note from the date of such demand, shall become part of the Line of Credit and
shall be secured by the collateral and security granted hereunder from the time of payment by Bank
until paid by Borrower to Bank..
8. Additional Security. In addition to the other collateral and security for the Line
Credit, Borrower;
Case 1:10-bk-01042-MDF Claim H-1 Part2 Filed 09/30/10 Desc Exhibit
1-4 Page 15 of 25
a. grants to Bank a security interest in, lien upon, and right of setoff against all
deposit accounts, credits, securities, monies or other property of Borrower which at any time may
be in the possession of, delivered to or owed by Bank; and
b. agrees that all collateral and security for any other loan from Bank to
Borrower or for any other obligation of Borrower to Bank will also be collateral and security for the
Line of Credit, and all collateral and security for the Line of Credit will also be collateral and
security for any and all other such loans or obligations; and
c. agrees that the Note shall evidence and the Loan Documents shall evidence
or secure any and all future loans or advances from Bank to Borrower and any other obligations of
Borrower to Bank.
9. No Third Party Beneficiaries. Except as provided in Paragraph 12, the parties do
not intend the benefits of this Agreement or of the Line of Credit or any portion thereof to inure to
any third party, including without limitation the purchasers of any Unit, the seller of any Unit, any
person or entity providing financing for any Unit, any contractor, subcontractor or supplier of labor'
or materials, or any of their respective creditors or any creditor of Borrower, or any other person or
entity other than the Bank and Borrower. Neither the Line of Credit nor any portion of the Line of
Credit will be subject to attachment or levy by any such person or entity. Notwithstanding anything
contained in the Loan Documents, or any course of conduct at any time by the Borrower or the
Bank, or both (including without limitation advances or payments directly to any such person or
entity other than Borrower), no rights, claims or causes of action are or are intended to be created,
and should not be construed at any time to have been created, in favor or for the benefit of any such
person other than Borrower.
10. Deposit Account. Borrower shall establish and maintain a primary deposit account
with Bank until the Line of Credit is paid in full and terminated.
11. Severability. In the event that for any reason one or more of the provisions of this
Agreement or their application to any person or circumstance shall be held to be invalid, illegal or
unenforceable in any respect or to any extent, such provisions shall nevertheless remain valid, legal
and enforceable in all other respects and to such extent as may be permissible. In addition, any such
invalidity, illegality or unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid, illegal or unenforceable provision has never been
contained herein.
12. Parties Bound. This Agreement inures to the benefit of Bank and Bank's
successors and assigns and binds Borrower and Borrower's respective personal representatives,
heirs, successors and assigns. However, Borrower will not voluntarily, or by operation of law,
assign or transfer any obligations, rights or other interests which Borrower may have under this
Agreement without the prior written approval of Bank.
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1-4 Page 16 of 25
13. Notices. All notices required or desired to be given to either of the parties
hereunder shall be in writing and shall be deemed to have been sufficiently given for all purposes
when presented personally to such party or sent by certified or registered mail, return receipt
requested, to such party at its address set forth below:
Borrower: Yorktown Funding, Inc.
Suite 101
1104 Fernwood Avenue
Camp Hill, Pennsylvania 17011
Bank: Commerce Bank/Harrisburg, N.A.
100 Senate Avenue
P.O. Box 8599
Camp Hill, PA 17001-8599
Attn: Kelly K. Neiderer
Any notice of any change in such address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such notice may be waived in writing by
the party entitled to receive such notice.
14. Captions. The captions or headings of the paragraphs of this Agreement are for
convenience only and shall not control, affect in any way, or give full notice of the meaning,
construction or interpretation of any of the provisions of this Agreement.
15. Form and Content. All documents, instruments, agreements and materials of any
nature whatsoever required to be executed or delivered, or both, to Bank or which are subject to
Bank's approval will be in form and content satisfactory to Bank in its discretion.
16. Time of the Essence. All dates and times for performance of Borrower's
obligations herein set forth wi11 be of the essence of this Agreement.
17. Legal Matters, All issues arising hereunder shall be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to the principles thereof relating to conflict
of laws, if any. Any suit or action brought by Borrower under or in connection with this Agreement
or any of the other Loan Documents may be brought only in the courts having jurisdiction over
matters which arise in Cumberland County, Pennsylvania, and which are seated in Pennsylvania,
and Borrower hereby consents to the jurisdiction of such courts. Borrower and Bank agree that any
dispute or controversy arising under or in connection with the Line of Credit or this Agreement will
not lend itself to resolution through trial by jury. Therefore, Borrower and Bank hereby
voluntarily, knowingly, intelligently and intentionally waive the right to trial by jury in any
action or proceeding arising from or in connection with the Line of Credit or this Agreement.
Case 1: 1 0-bk-0 1 042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit Attach
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IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement on the date
first above set forth.
ATTEST:
By:,
William C. Kollas
Secretary
YORKTOWN FUNDING, INC.
By:
Gera R. Kensinger
President
COMMERCE BANK/HARRISBURG, N.A.
By
Na
Title:
10
Case 1:10-bk-01042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit
1-4 Page 18 of 25
EXHIBIT "A"
ASSIGNMENT
FOR VALUE RECEIVED, and intending to be legally bound, YORKTOWN
FUNDING INC., a Pennsylvania business corporation having offices at Suite 101, 1104 Fernwood
Avenue, Camp Hill, Pennsylvania 17011 ("Assignor"), hereby sells, transfers, assigns and sets over
unto COMMERCE BANK/HARRISBURG, N.A., a national banking association having offices
at 100 Senate Avenue, P.O. Box 8599, Camp Hill, Pennsylvania 17001-8599 ("Assignee"), all of
Assignor's rights, title and interest in, to and under that certain Mortgage Bond (Note) dated
in the original principal amount of $ , and the Mortgage of even date therewith
securing the same, which Mortgage was recorded on
in
-County, in Book _, Page . and the permanent financing commitment(s)
related thereto, and the fire and casualty insurance policy related thereto and the proceeds thereof,
and the title insurance policy related thereto and the proceeds thereof, TO HAVE AND TO
HOLD THE SAME as collateral security for the payment by Assignor of principal, interest and all
other sums -to be paid and the performance and observance of all the terms and covenants to be li
performed and observed under the Demand Note and Revolving Line of Credit Agreement of
Assignor to Assignee dated August 30, 2005, in the original amount of $7,000,000.00, and any
extensions, modifications or renewals thereof and substitutions therefor and amendments thereto,
including amendments which increase or decrease the maximum amount of the secured line of
credit.
This Assignment constitutes a security agreement and creates a security interest in said
Mortgage Bond (Note) and Mortgage, which is hereby granted and confirmed by Assignor to
Assignee. This Assignment does not impose upon Assignee nor does it create an assumption by
Assignee of any obligations or liability of any nature whatsoever whether under or arising out of the
11
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1-4 Page 19 of 25
Mortgage Bond (Note), the Mortgage or otherwise. Assignor will remain fully obligated and liable
to perform all the terms and conditions to be performed by the Obligee (Payee) and the Mortgagee
of the Mortgage Bond (Note) and Mortgage, respectively, and will indemnify and save forever
harmless Assignee against liability for performance or nonperformance of the duties or obligations
thereunder.
Notwithstanding any provision hereof, Assignee grants to Assignor a license to collect all
payments on account of the Mortgage Bond (Note) and Mortgage to be held in trust for Assignee.
Upon revocation of said license, the obligor/mortgagor shall make any and all payments on account
of the Mortgage Bond (Note) and Mortgage directly to Assignee, to be applied by Assignee to
payment of principal, interest and all other sums provided to be paid under the Note of Assignor to
Assignee in accordance with the Demand Note and Revolving Line of Credit Agreement. Upon
revocation of the license to collect payments, Assignor agrees to execute and deliver to Assignee
immediately a completed letter in the form attached hereto as Exhibit "A" for mailing or delivery by
Assignee to the obligor/mortgagor. However, notwithstanding Assignor's agreement to execute and
deliver such letter to Assignee, Assignor hereby appoints Assignee as Assignor's attorney-in-fact,
with full power of substitution, to complete, sign and send to any obligor/mortgagor such letter, in
Assignor's name, or in Assignee's name, or both.
The terms of the Mortgage Bond (Note) and Mortgage will not be altered, modified or
changed, nor will said Mortgage Bond (Note) and Mortgage be surrendered, cancelled, nor will the
obligor/mortgagor be released of its obligations to make payments without prior written consent of
Assignee.
Assignor has not accepted and will not accept any payment(s) under the Mortgage Bond
(Note) and Mortgage in advance of its due date, provided, however, that Assignor may accept
permitted prepayment(s) if the same are applied promptly to payment of Assignor's Note to
Assignee.
12
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1-4 Page 20 of 25
Upon payment and performance of all indebtedness secured by this Assignment, and all
other obligations or liabilities of Assignor to Assignee, this Assignment shall be null and void, and
Assignee agrees to execute an instrument presented by Assignor in form and content satisfactory to
Assignee which shall reassign the Mortgage Bond (Note) and Mortgage to Assignor, at Assignee's
sole cost and expense.
Nothing contained in this Assignment obligates Assignee to exercise any right or remedy
provided herein. Assignee may exercise any or all rights and remedies available to Assignee under
the Note, the Revolving Line of Credit Agreement, this Assignment or any other agreement or
document executed or delivered in connection therewith or referred to therein, or otherwise at law
or in equity, singly, cumulatively or successively and from time to time as often as necessary or
desirable,
This Assignment shall bind the Assignor, its successors and assigns, and shall inure to the
benefit of Assignee and its successors an assigns.
IN WITNESS WHEREOF, Assignor has executed this Assignment this /S dray of
ATTEST:
l
William C. Kollas, Secretary
YORKTOWN FUNDING, INC.
By:
Gerald R, Kensinger, president
13
Case 1:10-bk-01042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit
1-4 Page 21 of 25
Exhibit "Alo
YORKTOWN FUNDING, INC.
1104 Fernwood Drive
suite 101
Camp Hill, PA 17011
To:
Effective immediately, and unless and until you are notified otherwise by Commerce
Bank/Harrisburg, N. A., you are hereby directed to make monthly payments on account of your
Mortgage Bond (Note) and Mortgage dated , payable to Commerce Bank/Harrisburg,
N. A., and to mail or deliver them to the Bank to the attention of Kelly K. Neiderer, Commerce
Bank, 200 S. Spring Garden Street, Suite B, Carlisle, PA 17013.
YORKTOWN FUNDING, INC.
By:
Title:
Date:
14
Case 1:10-bk-01042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit
1-4 Page 22 of 25
ACKNOWLEDGEMENT
COMMONWEALTH OF PENNSYLVANIA :
COUNTY OF
SS:
On the 30th day of August, 2005, before me personally came Gerald R. Kensinger, who
being duly sworn, did acknowledge himself to be the President of Yorktown Funding, Inc., a
Pennsylvania corporation, and that he as such officer, being authorized to do so, acknowledged the
foregoing instrument on behalf of such corporation for the purposes therein contained. In testimony
whereof, I have hereunto subscribed my name.
Notary Public
My Commission Expires:
After recording, please return to:
Kelly K. Neiderer
Commerce Bank/Harrisburg, N.A.
200 S. Spring Garden Street, Suite B
Carlisle,PA 17013
15
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1-4 Page 23 of 25
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF SS:
On this, the day of 2005 , before me, a Notary
Public, personally appeared Q .-.e.,nc&? , known to me to
be the person whose name is subscribed to the within document and acknowledged that she
executed the foregoing for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
l.ll?/ww Vt ??
CAROLE A ROSE
Notary Publ a Notary Public
C?f?RI%010 COUJ My Commission Expires; 0C4 , 2A
MY Commis m E es Oct 21, 2007
Case 1: 1 0-bk-01 042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit Attach
1-4 Page 24 of 25
DISCLOSURE FOR CONFESSION OF JUDGMENT
THE UNDERSIGNED IS EXECUTING, AS OF THE 30TH DAY OF AUGUST,
2005, A NOTE PAYABLE TO COMMERCE BANK/HARRISBURG, N.A. ("BANK") IN
CONNECTION WITH A LINE OF CREDIT IN THE AMOUNT OF $7,000,000.00 TO
THE UNDERSIGNED FOR COMMERCIAL PURPOSES.
INITIALS
THE UNDERSIGNED'S ATTORNEY HAS EXPLAINED TO THE UNDERSIGNED
THAT THE NOTE CONTAX14S WORDING THAT WOULD PERMIT THE BANK TO ENTER
JUDGMENT AGAINST THE UNDERSIGNED AT THE COURTHOUSE, WITHOUT
NOTICE, AND WITHOUT OFFERING THE OPPORTUNITY TO DEFEND AGAINST THE
ENTRY OF JUDGMENT, AND THAT THE JUDGMENT MAY BE COLLECTED BY ANY
LEGAL MEANS WITHOUT PRIOR NOTICE OR A HEARING BY USE OF THE
SHERIFF, WHO MAY SEIZE PROPERTY, REAL AND PERSONAL, WITHOUT PRIOR
NOTICE OR HEARING.
INITIALS:1?
IN EXECUTING THE NOTE, THE UNDERSIGNED IS KNOWINGLY,
UNDERSTANDINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO RESIST THE
ENTRY OF JUDGMENT AGAINST IT AT THE COURTHOUSE, AND IS CONSENTING
TO THE CONFESSION OF JUDGMENT. THE UNDERSIGNED FURTHER KNOWINGLY,
UNDERSTANDINGLY. AND VOLUNTARILY WAIVES ITS RIGHT TO ANY PRIOR
NOTICE OR HEARING PRIOR TO THE BANK'S SEIZING OF PROPERTY BY WRIT
OF EXECUTION AGAINST BANK ACCOUNTS AND PERSONAL AND/OR REAL
PROPERTY AFTER THE ATTAINMENT OF A JUDGMENT BY CONFESSION.
INITIALS:
THE UNDERSIGNED CERTIFIES THAT THE NOTE WAS EXECUTED IN
CONNECTION WITH A COMMERCIAL TRANSACTION AND DOES NOT INVOLVE A
CONSUMER TRANSACTION, AND THAT THE UNDERSIGNED HAS RECEIVED A COPY
OF THIS DISCLOSURE AT THE TIME OF SIGNING.
YORKTOWN FUNDING, INC.
By:
Ger Kenssnger, Pr silent
Case 1:10-bk-01042-MDF Claim 28-1 Part 2 Filed 09/30/10 Desc Exhibit Attachme
1-4 Page 25 of 25
EXHIBIT "B"
COPY
SECURITY AGREEMENT
This SECURITY AGREEMENT is made and entered into as of this a day of.
2005, by and between YORKTOWN FUNDING, INC., a Pennsylvania corporation
"Borrower"), and COMMERCE BANK/HARRISBURG, N.A., a national banking association
"Secured Party").
RECITALS
R-1. The Borrower and the Secured Party have executed a Revolving Line of
Agreement dated August 30, 2005 (the "Loan Agreement"),
R-2. Pursuant to the Loan Agreement, the Secured Party provides financing to the
Borrower, which the Borrower in turn lends to the Borrower's customers, during the interim between
the Borrowers' purchase of manufactured or modular homes, or for homes built on site (collectively,
the "Units") for the gorrower's customers and the settlement of the customers' permanent financings
for the Units and thd lots on which the Units are located.
R-3. As collateral and security for such financings, the secured party has required the
Borrower to assign to the Secured Party and grant a security interest to the Secured Party in all f
Borrower's right, title and interest in, to and under the mortgage bonds or notes executed and
delivered by the Borrower's customers to the Borrower, and the mortgages which secure the bonds or
notes, the permanent financing commitments related thereto, the fire and casualty policies relate
thereto and the proceeds thereof, and the title insurance policies related thereto and the proceeds
thereof for the Units and lots for which financing is provided by the Secured Party (collectively, the
"Units Collateral").
R-4. To further secure the Secured Party's loans or advances under the Loan Agreemen ,
since the enactment in Pennsylvania of the revised Article 9 of the Uniform Commercial Cod
(hereinafter defined), the Borrower and the Secured Party have agreed to the execution an
implementation of this Agreement,
R-5. The Secured Party is willing to continue to grant the extensions of credit
contemplated by the Loan Agreement only on the condition that the Borrower executes and delivers
1
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5-6 Page 14 of 26
this Security Agreement to the Secured Party.
R-6. Capitalized terms contained in Section 1 of this Agreement and used
have the meanings ascribed to them in the revised Article 9 of the Uniform Commercial Code in t
form approved by the Commonwealth of Pennsylvania on and codified at 13 Pa C.S.A. §9101,
seq. (the "Uniform Commercial Code"), unless the context requires otherwise. Other capitaliz
terms which are used herein without definition shall have the meanings ascribed to them in the Lo
Agreement.
NOW, THEREFORE, intending to be legally bound, the Borrower and the Secured Pi
hereby agree as follows:
Section 1. Creation of Security h*rest The Borrowerhereby grants to the Secured PI
a lien upon and security interest in the property hereinafter described, whether now owned
hereafter acquired or arising and wherever located (the "Collateral"):
(a) the Units Collateral;
(b) all monies which at any time the Secured Party shall have or have the
have in its possession;
(c) all books and records evidencing or relating to the Units Collateral, includ
without limitation, billing records of every kind and description, customer lasts, data storage
processing media, software and related material, including computer programs, computer to
cards, disks and printouts, and including any of the foregoing which are in the possession of
affiliate or any computer service bureau; and
(d) all proceeds of the Units Collateral.
Section 2. Secured Obi Lions. The security interest created herein is given as se
for the prompt payment, performance, satisfaction and discharge of the following oblig
(collectively, the "Obligations") of the Borrower:
(a) To pay the principal, interest, commitment fees and any other liabilities
Borrower to the Secured Party under the Loan Agreement and the other Loan Documents (as d(
2
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5-6 Page 15 of 26
in the Loan Agreement) in accordance with the terms thereof;
(b) To satisfy all of the other liabilities of the Borrower to the Secured
whether hereunder or otherwise, whether now existing or hereafter incurred, whether or
evidenced by any note or other instrument, matured or unmatured, direct, absolute or contin j
j oint or several, including any extensions, modifications, renewals thereof and substitutions then
(c) To repay the Secured Party all amounts advanced by the Secured
hereunder or otherwise on behalf of the Borrower, including, but without limitation, advances
principal or interest payments to prior secured parties, mortgagors or lienors, or for taxes,
insurance, rent, wages, or storage of any Collateral; and
(d) To reimburse the Secured Party, on demand, for all of the Secured
expenses and costs, including the reasonable fees and expenses of its counsel, in connection with
negotiation, preparation, implementation, administration, amendment, modification, or
of the Loan Agreement and the other Loan Documents.
Section 3. Rom%ntations and Warranties. The Borrower, as of the date hereof and at
time of each advance or extension of credit under the Loan Agreement, represents and warrants
follows:
3.01 Good Title to Collateral. The Borrower has good and marketable title to the
free and clear of all liens and encumbrances other than the security interests granted to the
Party hereunder and those liens and encumbrances set forth in Exhibit "A" to this
Agreement.
3.02 Organization. The Borrower is a organized under the laws of Pennsylvania.
Borrower's exact legal name is as set forth in the first paragraph of this Security Agreement. T
places of business of the Borrower are as set forth on Exhibit "B" and, if the Borrower has more tt
one place of business, the chief executive offices of the Borrower are at the address set forth
Exhibit B or at the location(s) hereafter disclosed to the Secured Party pursuant to Section 5.6 here
3.03 Filings of Record. Except as set forth on Exhibit "A" to this Security Agreement,
financing statement covering any of the Collateral is on file in any public office, other than
financing statements filed pursuant to this Security Agreement.
3
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5-6 Page 16 of 26
3.04 Other Representations. Each representation, warranty or other statement by
Borrower in, or in connection with, any of the other Loan Documents is true and correct and st
all material facts necessary to make it not misleading.
Section 4. Collection 2iggsition and Use of Collateral. The Collateral shall be
disposed of and collected or collected upon in accordance with the Loan Agreement, this
Agreement and the other Loan Documents.
Section 5. COVenants and A merits of the Borrower.
5.01 Maintenance and Inspection of Boos and Records. The Borrower shall mainl
complete and accurate books and records. The Borrower shall keep the Secured Party fully infom
as to the location of all such books and records and shall permit the Secured Party and its authoriagents to have full, complete and unrestricted access thereto at any reasonable time and to insp
audit and make copies, at the Borrower's cost, of all books and records, data storage and process
media, software, printouts, journals, orders, receipts, invoices, correspondence and other docume
and written or printed matter related to any of the Units Collateral. The Secured Parry's rig
hereunder shall be enforceable at law or in equity, and the Borrower consents to the entry of judi<
orders or injunctions enforcing specific performance of such obligations hereunder.
5.02 Confirmation of Collateral. The Borrower agrees that the Secured Party shall at
times have the right to confirm the existence and validity of the Units Collateral.
5.03 Notice of the Secured Party's Interests. If requested by the Secured Party,
Borrower shall give notice of the Secured Party's security interests in the Collateral to any th
person with whom the Borrower has any actual or prospective contractual relationship or otl
business dealings.
5.04 Delivery of Certain Collateral to the Secured part'. Immediately upon request by
Security Party, the Borrower shall deliver to the secured party such Units Collateral as is requv
by the Secured Party.
5.5 Existence. The Borrower shall preserve its existence and not merge into
consolidate with any other entity, or sell all or substantially all of its assets. The Borrower shall
change the state of its organization, its name, place of business or chief executive office with
obtaining the prior written consent of the Secured Party.
4
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5.6 Perfection of secured Party's Interests,
(a) The Borrower agrees to cooperate and join, at its expense, with the Secw
Party in taking such steps as are necessary, in the Secured Party's judgment, to perfect or continue 1
perfected status of the security interests granted hereunder, including, without limitation, i
execution and delivery of any financing statements, amendments thereto and continuation statemer
(b) The Secured Party may at any time and from time to time, file financi
statements, continuation statements and amendments thereto in Pennsylvania naming Borrower
"Debtor" that describe the Collateral in particular and which contain any other information requir
by the Uniform Commercial Code for the sufficiency or filing office acceptance of any financi;
statement, continuation statement or amendment, including whether the Borrower is an organizatic
the type of organization and any organization identification number issued to the Borrower. T
Borrower agrees to furnish any such information to the Secured Party promptly upon request. A
such financing statements, continuation statements or amendments may be signed by the Secure
Party on behalf of the Borrower, and may be filed at any time in any jurisdiction whether or n
Revised Article 9 of the Uniform Commercial Code is then in effect in that jurisdiction.
(c) The Borrower shall, at any time and from time to time, take such steps as t]
Secured Party may require for the Secured Party, (i) to obtain an acknowledgment, in form W
substance satisfactory to the Secured Party, of any third party having possession of any of tl
Collateral that the third party holds such Collateral for the benefit of the Secured Party, and (i
otherwise to insure the continued perfection and priority of the Secured Party's security interest
any of the Collateral and of the preservation of its rights therein.
5.7 Reimbursement and Indemnificati on. The Borrower agrees to reimburse the Secure
Party on demand for out-of-pocket expenses incurred in connection with the Secured Party's exerei i
of its rights under this Security Agreement. The Borrower agrees to indemnify the Secured Party an
hold it harmless against any costs, expenses, losses, damages and liabilities (including reasonab]
attorney's fees and court costs) incurred in connection with this Security Agreement, other than as
direct result of the Secured Party's gross negligence or willful misconduct.
Section 6. Power of Attorney. The Borrower hereby appoints the Secured Party as ii
lawful attorney-in-fact to do, at the Secured Party's option, and at the Borrower's expense an
5
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liability, all acts and things which the Secured Party may deem necessary or desirable to effectuate ii
rights under this Security Agreement, including without limitation, (a) file financing statements an
otherwise perfect any security interest granted hereby, (b) correspond and negotiate directly wit
insurance carriers, (c) upon the occurrence of a Default hereunder, receive, open and dispose of i
any reasonable manner all mail related to the Units Collateral addressed to the Borrower, (d) upo
the occurrence of a Default hereunder, communicate with Borrower's customers and other thir
parties for the purpose of protecting or preserving the Collateral, and (e) upon the occurrence of
Default hereunder, in the Borrower's or the Secured Party's name, to demand, collect, receive, an
receipt for, compound, compromise, settle and give acquittance for, and prosecute and discontinue c
dismiss, with or without prejudice, any suit or proceeding respecting any of the Collateral.
Section 7. Default The occurrence of any one or more of the following shall be a
("Default") hereunder:
7.01 Default Under Loan A meat. The occurrence of an Event of Default under
Loan Agreement or any of the other Loan Documents.
7.02 Failure to Observe Covenants. The failure of the Borrower to keep, observe
perform any provisions of this Security Agreement.
7.03 Representations Warranties. If any representation, warranty or certificate furnished
the Borrower under or in connection with this Security Agreement shall, at any time, be materia
false or incorrect.
Section 8. Screed Party's Rights Upon Default. Upon the occurrence of a
hereunder, or at any time thereafter, the Secured Party may immediately and without notice purs
any remedy available at law or in equity to collect, enforce or satisfy any Obligations, including, a
or all of the following, which rights and remedies are cumulative, may be exercised from time
time, and are in addition to any rights and remedies available to the Secured Party under the Le
Agreement or any of the other Loan Documents:
8.01 Uniform Commercial Code Rights. Exercise any and all of the rights and remedies
a secured party under the Uniform Commercial Code, including the right to require the Borrower
assemble the Collateral and make it available to the Secured Party at a place reasonably convene
to the parties.
6
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8.02 Collection Rights. Enforce the obligations of any person obligated on Collateral 4d
exercise the rights of the Borrower with respect to the obligation of any person obligated n
Collateral to make payment or otherwise render performance to the Borrower.
8.03 Sale of Collateral. Upon ten (10) calendar days' prior written notice to the Borrow ,
which the Borrower hereby acknowledges to be sufficient, commercially reasonable and proper, s 11
or otherwise dispose of any or all of the Collateral at any time and from time to time at public r
private sale, with or without advertisement thereof and apply the proceeds of any such sale first
the Secured Party's expenses in preparing the Collateral for sale (including reasonable attorneys'
fees), second to the complete satisfaction of the Obligations and third, as required by the Uniform
Commercial Code. The Borrower waives the benefit of any marshalling doctrine with respect to the
Secured Party's exercise of its rights hereunder. The Borrower grants a royalty-free license to the
Secured Party for all patents, service marks, trademarks, tradenames, copyrights, computer prograrrs
and other intellectual property and proprietary rights sufficient to permit Secured Party to exercise all
rights granted to Secured Party under this Section.
8.04 Set-Off. The Secured Party shall have the right, in addition to all other rights at
remedies available to it, without notice to the Borrower, to apply toward and set-off against at
apply to the then unpaid balance of the Obligations any items or funds held by the Secured Party, at
and all deposits (whether general or special, time or demand, matured or unmatured, fixed ,
contingent, liquidated or unliquidated) now or hereafter maintained by the Borrower for its ors
account with the Secured Party, and any other indebtedness at any time held or owing by the Securt
Party to or for the credit or the account of the Borrower. For such purpose the Secured Party she
have, and the Borrower hereby grants to the Secured Party, a first lien on all such deposits. 71
Secured Party is hereby authorized to charge any such account or indebtedness for any amounts dl
to the Secured Party. Such right of set-off shall exist whether or not the Secured Party shall hav
made any demand under this Security Agreement, or any other Loan Document and whether or nc
the other Obligations are matured or unmatured. The Borrower hereby confirms the Secured Party
lien on such accounts and right of set-off, and nothing in this Security Agreement shall be deeme
any waiver or prohibition of such lien and right of set-off.
7
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Section 9. Notices. Any written notices required or permitted by this Security
shall be effective if delivered in accordance with the Loan Agreement,
Section 10. Miscellaneous,
10.01 No Waiver. No delay or omission by the Secured Party in exercising any right
remedy hereunder shall operate as a waiver thereof or of any other right or remedy, and no single
partial exercise thereof shall preclude any further exercise thereof or the exercise of any other right
remedy.
10.02 Preservation of Riahts. The Secured Party shall have no obligation or responsibility
take any steps to enforce or preserve rights against any parties to any Account and such obligati
and responsibility shall be those of the Borrower exclusively.
10.03 Successors . The provisions of this Security Agreement shall inure to the benefit
and be binding upon the Secured Party and the Borrower and their respective successors and assigi
provided that the Borrower's obligations hereunder may not be assigned without the written copse
of the Secured Party.
10.04 Amendments. No modification, rescission, waiver, release or amendment of a
provisions of this Security Agreement shall be effective unless set forth in a written agreeme
signed by the Borrower and an authorized officer of the Secured Party.
10.05 Governing, Law. This Security Agreement shall be construed under the internal lai
of the Commonwealth of Pennsylvania without reference to conflict of laws principles.
10.06 Sev ra ili . If any provision of this Security Agreement shall be held invalid
unenforceable under applicable law in any jurisdiction, such invalidity or unenforceability shall n
affect the validity or enforceability of such provision in any other jurisdiction or the validity
enforceability of any other provision of this Security Agreement that can be given effect without su+
invalid or unenforceable provision.
10.07 Judicial Proceedings. Each party to this Security Agreement agrees that any su
action or proceeding, whether claim or counterclaim, brought or instituted by any party hereto or ai
successor or assign of any party, on or with respect to this Security Agreement or the dealings of U
parties with respect hereto, shall be tried only by a court and not by a jury. EACH PARTY HEREB
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIA
8
Case 1:10-bk-01042-MDF Claim 28-1 Part 3 Filed 09/30/10 Desc Exhibit
5-6 Page 21 of 26
BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives any ri
it may have to claim or recover, in any such suit, action or proceeding, .any special, exemph
punitive or consequential damages or any damages other than, or in addition to, actual damal
THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS PARAGRAPH IS
SPECIFIC AND MATERIAL ASPECT OF THIS SECURITY AGREEMENT AND THAT T
SECURED PARTY WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVE
SET FORTH IN THIS PARAGRAPH WERE NOT A PART OF THIS SECURITY AGREEMEr
10.08 Acknowledgment . THIS SECURITY AGREEMENT CONTAINS A POWER i
ATTORNEY COUPLED WITH AN INTEREST AND IS FOR THE SOLE BENEFIT OF Tl
SECURED PARTY. THIS SECURITY AGREEMENT IS BEING EXECUTED IN CONNECTI(
WITH A LOAN OR OTHER FINANCIAL TRANSACTION FOR BUSINESS PURPOSES Ar
NOT PRIMARILY FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. THE SECURI
PARTY UNDER THE POWER OF ATTORNEY, IS NOT A FIDUCIARY FOR T1
BORROWER. IN EXERCISING ANY OF ITS RIGHTS OR POWERS PURSUANT TO TI
POWER OF ATTORNEY, THE SECURED PARTY MAY DO SO FOR THE SOLE BENEFIT (
THE SECURED PARTY AND NOT FOR THE BORROWER. THE PARTIES ACKNO WLED(
AND AGREE THAT THE PROVISIONS OF TITLE 20, PENNSYLVANIA CONSOLIDATE
STATUTES, SECTION 5601 ET SEQ. AS AMENDED (SPECIFICALLYINCLUDINGACT:
OF 1999) SHALL NOT BE APPLICABLE TO THE POWER OF ATTORNEY.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
executed and delivered by their authorized officers the day and year first above written.
ATTEST:
By:-I/ 4
"William Kollas
Secretary
YORKTOWN FUNDING, INC.
By:
GMW R Kensinger
President
9
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attachm
5-6 Page 22 of 26
COMMERCE BANK41ARRISBURG, N.A.'i
By:
Name: m-14, e.
10
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5-6 Page 23 of 26
OTHER LIENS AND ENCUMBRANCES AND FILINGS
NONE
11
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5-6 Page 24 of 26
EXHIBIT B
Location of books and records and chief executive office:
Suite 101
1104 Fernwood Avenue
Camp Mill, Pennsylvania 17011
12
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attach
5-6 Page 25 of 26
COMMONWEALTH OF PENNSYLVANIA
SS:
COUNTY OF
On this, the -0t day of Sc y..1
Public, personally appeared u Q. - 005 , before me, a Notary
_ known to me to
be the person whose name is subscribed to the within current and acknowledged that she
executed the foregoing for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
MXARM IM
CA
ROIE A ROQE
Notaypum
C?NNlERLR A'OWW ND Nosy Public
«,na,*dw Oct jaw*vous Zt j My Commission Expires: (9 C4 LM-7
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit
5-6 Page 26 of 26
EXHIBIT "C"
'r
File Number: 13017 02 Date Filed: 08/0604:20 M
Pedro A. Cort6a
Secretary of the Commonw Ith
UCC FINANCING STATEMENT
CAREFULY State of Pennsylvania
A. WME a PH NE OF CONTACTAT M;;MI 1 a' 14 UCCt InMW F" 1 Paps(s)
GEOFFREY S. SNUFF (717) 7S7a40 l
6. WW PTO: at 1ft&1dAddiwd
e1? S. Shuff, Esquire,
, Muff. FWvnr& Lindsay
b*"St vet
Nlp, PA 17011
Sim
THE ADOW MFAC11p FOR RLWO OPRCf U" ONLY
1. DE9TORSWCACTFULL LEGAL NAME -k*w**coed.ato mw(Uor 1b)-ftim ebMWmwR?bYlonoaln
OR IS- OROA MTKWB NAME YORKTOWN RIINOINO, MC.
1b. INDIVIDUAL'S LAST NAME FIRST NAME IMDOLE NAAAE MUFPIX
it MAUA ADORM SWTE 101, 1104 FERNYMOOD AVMIF CrtY CAMP HN.L "AM POMTAL CM COUNTRY
PA 17011 USA
it TAX ID 1: so OR Eel Oft RE a TYPE OF ORQANnYM If ANODIMM OF O NONO7ATIN 19. CRBMM"ONAL D A r"
TION
BUMESS PMIRNSYLVMIA 0 NONE
CORPORATION PA 20x8480
2. AOWTIONALOEd1MEX&=FULL LEQA MW-mm**bp *uwr mpoor b)-dorm bM?Yeo«oombN??wnos
OR oROAtMMM MS NAME
120. 01011101"1 LAST
ft MAL" ADMWMM
W TAI101: MSN CR EIN
FOWNAME AeDOIENAk* -
CITY STATE POeTAt CODE
TYPE oFORakwAT10N 2L AegBDICm OF ORaANmmm ft meANRAT101ML M A0. Y wry
? NOIMe
3- SECtrRED Fti>1W" NAME (or NAME dTOTAL ASS04EEdA=GWK M+M). bononly=wo
OR 3i• OROANIZATXWSNAME COMMERCEBANKR ARROBURG, N.A.
3b. MIpMDUAL S LAST NNNE FRMT
or
30: MMLMADDRESS P.O. BOX son MY CAMAPHLL 8PA I""4Ntf USA
2d. TAX ID t. MSB OR BIN aiFO IM TYPE CF ORavaATM)N . ,NIRMID1CTaN OF OReAmTow 2p: OROAPMiATIO m D R T wV
aRavM:ATTON rAMMAL ttANigNG
ASSOCIATION USA
4. This FINANDMGSTATE MENTcovms the foMowft coMebrsl: AN cfDabtora dpht, W* tend kttMre- ln. to and undwft mw1pepe bc171;' obaeumclMed
and doNwred by the DebWa a* m fs loft Debby, and 9w morWo a which mm 01e bands er nalm the pen wW kwlakp owwAmw b fewed
thereto. thefke and oasllM4tptlNoin relabdtllereb cId ti+e prooeedetfiereof, and1111eM?tleknunaeeptlMdw neMtedttwelo and thepFSOade d'sisc : fwft
matuds Ilred or modular homes brwhbh tkw" Is pfd bytto Seared P and aM I w4a ofthe Debtorwhkh at &W dm the Secured Party OW
haw or"hairs the ?" IS he" ft poaealm end all boob and Feoorde evldara1 or reM1 q b the hoe ee torwhkh bmial p lop rovided by 1M
Setarred PaAy, indudlnp. wNtlout Mrrllhtfon, bpnp Teoo?de d everyIdnd and deeabtfon, talltorrler Mb, doh star
wid prooaeklp wwk eofbwm and
relabel materiel, kuctutiktp ocrlpriterproprame, tlomwrw ". code, diske and F& b^ and hick" any of tl1s ~ aye In the ponsubn of
any Agete or any oolnp be wrvloa b ;u; and all proceeds of any of the finepobrp collabral.
MWO OFFTCE COPY -NATOM UCC FNANCiNG STATEMENT (FARM UCc1) (REV. 07MW M
Case 1:10-bk-01042-MDF Claim 28-1 Part4 Filed 09/30/10 Desc Exhibit
A.,
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
true and correct to the best of my information and belief.
WILLIAM C. KOLLAS
. -f
CERTIFICATE OF SERVICE
I hereby certify that I have this date served a true and correct copy of the foregoing
Answer, New Matter and Counterclaim via first class mail, postage paid, to the following
individual:
Heather Z. Kelly, Esq.
METTE, EVANS & WOODSIDE
3401 North Front Street, P.O. Box 5950
Harrisburg, PA 17110-0950
L. HAY CARRO4, Legal
Dated: . 31 r?
14
Tilt 4i07td0FICOS::
TARY
!? JUI 23 AM
4Lii
,U PENNSYLVANIA TY
METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
METRO BANK, f/k/a Commerce
Bank/Harrisburg, N.A.,
Plaintiff
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVAT
: DOCKET NO. 2012-1340
V.
WILLIAM C. KOLLAS,
Defendant
PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANT'S
ANSWER, NEW MATTER AND COUNTERCLAIM
NOW COMES, Plaintiff, Metro Bank f/k/a Commerce Bank/Harrisburg, N.A.
("Plaintiff'), by and through counsel, and files the within Preliminary Objections to
Answer, New Matter and Counterclaim, in support whereof Plaintiff avers as follows:
PROCEDURAL HISTORY
1. Plaintiff initiated this action by filing a Complaint on February 29, 2012,
to enforce Defendant's personal guaranty of a loan made by Plaintiff to non-party Yorktown
Funding, Inc. ("Yorktown") pursuant to a Guaranty and Suretyship Agreement executed by
Defendant on September 1, 2005 (the "Guaranty").
2. On April 5, 2012, Defendant filed Preliminary Objections in the nature of
demurrer, alleging that Plaintiff failed to satisfy a condition requiring Plaintiff to pursue
Yorktown before enforcing the Guaranty.'
3. The parties filed comprehensive briefs regarding the issues raised in Defendant'
Preliminary Objections, and the Court held oral argument on the Preliminary Objections on J
1, 2012.
4. By Order dated June 19, 2012, the Court overruled Defendant's Preliminary
Objections in their entirety.
5. On July 3, 2012, Defendant filed an Answer, New Matter and Counterclaim.
FACTUAL ALLEGATIONS
6. The above Paragraphs are incorporated by reference.
Allegations Regarding Perfection of Yorktown Collateral
7. In the New Matter, Defendant asserts that (a) "Plaintiff had a duty to..
Guarantor to properly obtain and perfect its lien on all of the Yorktown [collateral]," but that
"Plaintiff failed to properly perfect a lien on" certain Yorktown collateral. (Def. New Matter at
TT7, 9, 10).
8. Defendant takes the position that Plaintiff "breached its duties" under the
Guaranty by its alleged failure to perfect its liens on Yorktown's collateral. (Def. New Matter at
112).
' Additionally, Defendant's Preliminary Objections asserted that Plaintiff failed to comply with Pennsylvania Rule
of Civil Procedure 1019(i). This portion of Defendant's Preliminary Objections are not relevant herein.
2
9. Defendant further avers that Plaintiff's alleged failure to perfect its liens on
Yorktown's collateral is a "breach[] of its duty of good faith and fair dealing in connection
the... Guaranty." (Def. New Matter at ¶13).
10. Finally, Defendant contends that Plaintiff's alleged failure to perfect its liens on
Yorktown's collateral will result in $981,500 being distributed to creditors of Plaintiff other
Yorktown, and, therefore, Defendant is entitled to a setoff of his obligations in this amount.
(Def. New Matter at ¶¶15-19).
Allezations ReLyardine Liquidation of Yorktown Collateral
11. The above Paragraphs are incorporated herein by reference.
12. Defendant avers that, in the Yorktown Bankruptcy, Plaintiff has been negligent
not seeking to liquidate its collateral or receive adequate protection (interest) payments from
Yorktown. (Def. New Matter at 1122-28).
13. Defendant further avers that, Plaintiff has allowed Yorktown to use cash
interest free since the bankruptcy filing date, and that Plaintiff was negligent and breached its
duties under the loan documents with Yorktown and the Guaranty in not taking prompt action
liquidate collateral or obtain payments from Yorktown. (Def. New Matter at ¶129, 32-33).
14. Finally, Defendant avers that it is entitled to a setoff of its obligations to Plaintiff
in the amount of $349,028.25, representing interest that has accrued since the filing of the
Yorktown Bankruptcy as a result of Plaintiff not taking action to liquidate collateral or obtain
adequate protection payments from Yorktown. (Def. New Matter at ¶¶34-36).
AlleEations ReEardine Alleged Failure to Satisfy Condition Precedent
15. The above Paragraphs are incorporated herein by reference.
3
16. Defendant's New Matter further alleges that Plaintiff has failed to satisfy a
condition precedent under the Guaranty prior to filing this action. (Def. New Matter at TT3
17. In argument identical to that raised, and overruled, on Preliminary Objections,
Defendant asserts that Plaintiff has not properly pursued Yorktown's assets before exercising i
rights and remedies under the Guaranty and that Plaintiff is not "legally barred" from pursuing
Yorktown's assets by the automatic stay in the Yorktown Bankruptcy. (Def. New Matter at
TT41-44).
COUNTERCLAIMS
18. The above Paragraphs are incorporated herein by reference.
19. Defendant pleads the following counterclaims:
a. "As a result of Plaintiff's breach of contract, Defendant William C.
has sustained damages in the amount of no less than $1,330,528.25."
Counterclaim at T51).
b. "As a result of Defendant's negligence, Defendant William C. Kollas has
sustained damages in the amount of no less than $1,330,528.25" (Def.
Counterclaim at T52).
20. Based on the above averments, Defendant seeks entry of judgment in the amount
of $1,330,528.25 plus other relief. (Def. Counterclaim at p. 13).
FIRST PRELIMINARY OBJECTION
Demurrer
(Defenses/Counterclaims for Allesed Failure to Perfect Security Interest)
21. The above Paragraphs are incorporated herein by reference.
4
22. Defendants' defense/counterclaim based on Plaintiffs alleged failure to perfect
liens should be dismissed pursuant to Pennsylvania Rule of Civil Proceeding 1028(4) (legal
insufficiency of the pleading).Z
23. First, the Guaranty expressly states: "This agreement is a continuing, absolute
and unconditional guaranty and suretyship of payment and not merely of collection. The
obligations of Guarantor hereunder... are independent of the availability of any collateral or
security for the Obligations." (Guaranty, Ex. B to Complaint, at p. 1) (emphasis added).
24. Second, Defendant fails to identify any provision of the Guaranty or any legal
authority supporting a contractual or legal duty of Plaintiff to perfect any security interest
granted by Yorktown.
25. Finally, the Court has already held that Plaintiff is not obligated under the terms
of the Guaranty to pursue collection actions against Yorktown prior to filing an action to ei
the Guaranty, and, therefore, the perfection of any security interest in collateral pledged by
Yorktown is irrelevant to Defendant's obligations under the Guaranty.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an Order
dismissing Defendants' defenses/counterclaims based on Plaintiff s alleged failure to perfect a
security interest in collateral pledged by Yorktown.
Second Preliminary Obiection
Demurrer
(Defenses/Counterclaims for Alleged Failure to Liquidate or Protect Collateral)
26. The above Paragraphs are incorporated herein by reference.
27. Defendant's defenses/counterclaims for the alleged failure to liquidate or protect
collateral in the Yorktown Bankruptcy should be dismissed
2 Plaintiff is not herein conceding that it did not properly perfect its security interest in the site built homes, but,
recognizes that for the purpose of Preliminary Objections, the Court must view the facts alleged in the Complaint
true.
5
28. Plaintiff had no legal or contractual duty to take affirmative steps to liquidate or
protect its cash collateral pursuant to Pennsylvania Rule of Civil Proceeding 1028(4) (legal
insufficiency of the pleading).
29. To the contrary, Yorktown Funding had an affirmative duty under the
Code to provide adequate protection payments to its secured creditors (including Plaintiff) and
for court approval to utilize its cash collateral.
30. Further, the Court has already held that Plaintiff is not obligated under the terms
of the Guaranty to pursue collection actions against Yorktown prior to filing an action to
the Guaranty, and, therefore, the actions taken by Plaintiff in the Yorktown Bankruptcy are
irrelevant to Defendant's obligations under the Guaranty.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an order
dismissing Defendant's defenses/counterclaims based on an alleged failure to liquidate or
collateral pledged by Yorktown.
Third Preliminary Obiection
Demurrer
(Defense for Alleged Failure to Satisfy Contractual Condition Precedent)
31. The above Paragraphs are incorporated herein by reference.
32. Defendant's defense based on the alleged failure to satisfy a contractual
precedent should be dismissed pursuant to Pennsylvania Rule of Civil Proceeding 1028(4)
insufficiency of the pleading).
33. Specifically, the Guaranty states: "[s]hould [Plaintiff] be legally barred from
pursuing [Yorktown] or [Yorktown's] assets for repayment of [Yorktown's] liabilities for any
reason, including but not limited to bankruptcy stay... [Plaintiff] may treat [Yorktown's]
obligations as being forthwith due and payable by [Defendant] under the terms of the Guaranty,
6
and [Plaintiff) may exercise and enforce [Plaintiff's] rights and remedies hereunder against
[Defendant] and/or [Defendant's] property" (Guaranty, attached to Complaint as Exhibit B, at
2)(emphasis added).
34. In overruling Defendant's Preliminary Objections, this Court has already held
that, because of the Yorktown Bankruptcy filing, pursuing Yorktown is not a condition
to Plaintiff's enforcement of its rights under the Guaranty.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an order
dismissing Defendant's defense based on an alleged failure to satisfy a contractual condition
precedent.
Fourth Preliminary Objection
Demurrer
(Counterclaim for Nealigence)
35. The above Paragraphs are incorporated herein by reference.
36. Defendant's counterclaim based on negligence are legally insufficient because it
is barred by the gist of the action doctrine.
7
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an order
dismissing Defendants' negligence counterclaim.
Respectfully submitted,
METTE, EVANS & WOODSIDE
By: C-i
Heather Z. Kelly, quire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
Attorneys for Plaintiff
Date: 7/,2o//,--)-
8
CERTIFICATE OF SERVICE
I certify that I am this day serving a copy of the foregoing document upon the person(s)
and in the manner indicated below, which service satisfies the requirements of the Pennsylvania
Rules of Civil Procedure, by depositing a copy of same in the United States Mail at Harrisburg,
Pennsylvania, with first-class postage, prepaid, as follows:
Markian R. Slobodian, Esquire
801 N. Second Street
Harrisburg, PA 17102
METTE, EVANS & WOODSIDE
By:
Heather Z. Kell, Esquire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
Attorneys for Plaintiff
Date: ?/??/lam
573299v1
C'? I p
PRAECIPE FOR LISTING CASE FOR ARGUMENT
(Must be typewritten and submitted in triplicate) 'POT ONOTAR
TO THE PROTHONOTARY OF CUMBERLAND COUNTY: (List the within matter foh?l el?% (l' 3?
Argument Court.) September 7, 2012
-
CAPTION ----------- OF ------ CASE _________-__-______------------------------------_-___?.? h? 0 E R L A Pi COUNTY
PENNSYLVANIA
(entire caption must be stated in full)
Metro Bank f/k/a Commerce Bank/Harrisburg N.A.
vs.
William C. Kollas
No 1340 2012 Term
1. State matter to be argued (i.e., plaintiffs motion for new trial, defendant's demurrer to
complaint, etc.):
Plaintiffs Preliminary Objections to Defendants Answer, New Matter and Counterclaim
2. Identify all counsel who will argue cases:
(a) for plaintiffs:
Heather Z. Kelly, Esquire, Mette, Evans & Woodside
(Name and Address)
3401 North Front Street, Harrisburg, PA 17110
(b) for defendants:
Markian R. Slobodian, Esquire
(Name and Address)
801 North Second Street, Harrisburg, PA 17102
3. 1 will notify all parties in writing within two days that this case has been listed for
argument.
4. Argument Court Date:
September 7, 2012
Heather Z. Kelly
Signature
rint your name
Plaintiff
Date: July 23, 2012 Attorney for
INSTRUCTIONS:
1. Original and two copies of all briefs must be filed with the COURT
ADMINISTRATOR (not the Prothonotary) before argument.
2. The moving party shall file and serve their brief 14 days prior to argument.
3. The responding party shall file their brief 7 days prior to argument.
4. If argument is continued new briefs must be filed with the COURT
ADMINISTRATOR (not the Prothonotary) after the case is relisted. pC? Q
,15'I
Q
b533?
C'? ?g337
CERTIFICATE OF SERVICE
I certify that I am this day serving a copy of the foregoing document upon the person(s)
and in the manner indicated below, which service satisfies the requirements of the Pennsylvania
Rules of Civil Procedure, by depositing a copy of same in the United States Mail at Harrisburg,
Pennsylvania, with first-class postage, prepaid, as follows:
Markian R. Slobodian, Esquire
801 N. Second Street
Harrisburg, PA 17102
METTE, EVANS & WOODSIDE
By:
Bather Z. Kel , Esquire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 - Phone
(717) 236-1816 - Fax
Attorneys for Plaintiff
Date: 171,2-311d--
573299v1
a,
METRO BANK f/k/a COMMERCE BANK/
HARRISBURG, N.A.,
Plaintiff
V.
WILLIAM C. KOLLAS,
Defendant
:IN THE COURT OF COMMON PLEAS
:CUMBERLAND COUNTY, PENNSYLVANIA
:DOCKET NO. 2012-1340 Civil
NOTICE TO PLEAD
TO: Metro Bank f/k/a Commerce Bank/ Harrisburg, N.A.
c/o Heather Z. Kelly, Esq.
METTE, EVANS & WOODSIDE
3401 North Front Street, PO Box 5950
Harrisburg, PA 17110-0950
17
cj
-
77
C-1
You are hereby notified to file a written response to the enclosed Amended New Matter
and Amended Counterclaim within twenty (20) days from service hereof or a Judgment may be
entered against you.
Respectfully submitted,
THE LAW OFFICES OF MARKIAN R. SLOBODIAN
?I I
Dated: F I
MARKIAN R. SLOBODIAN, ESQ.
ID #41075
801 North Second Street
Harrisburg, PA 17102
717-232-5180
Attorney for William C. Kollas
METRO BANK f/k/a COMMERCE BANK/
HARRISBURG, N.A.,
Plaintiff
V.
WILLIAM C. KOLLAS,
Defendant
:IN THE COURT OF COMMON PLEAS
:CUMBERLAND COUNTY, PENNSYLVANIA
:DOCKET NO. 2012-1340 Civil
AMENDED NEW MATTER AND COUNTERCLAIM
NOW COMES, Defendant, William C. Kollas, by his counsel, The Law Offices of
Markian R. Slobodian, and makes the following Amended New Matter and Counterclaim to
Plaintiff's Complaint:
Amended New Matter
A. Failure to Perfect Liens
1. On or about September 1, 2005, Commerce Bank/ Harrisburg, N.A., predecessor in
interest to Plaintiff (hereinafter "Commerce"), and Yorktown executed a Revolving Line of
Credit Agreement ("Line of Credit Agreement") for a line of credit to Yorktown in the amount
of $7,000,000.00. A true and correct copy of the Line of Credit Agreement is attached hereto
and made a part hereof as Exhibit "A."
2. Paragraph 1(b) of the Line of Credit Agreement provides in relevant part that
"Advances under the Line of Credit will be used only to provide financing during the interim
between the purchase of a manufactured home or modular home, and for homes built on site
(each, a "Unit") and settlement of the permanent financing for the Unit and lot in which the
Unit is located..." (emphasis added)
3. On or about September 1, 2005, Commerce and Yorktown executed a Security
Agreement (the "Security Agreement") which acknowledged in paragraph R-2 thereof that
pursuant to the terms of the Line of Credit Agreement, "the Secured Party ["Commerce"]
provides financing to the Borrower, which the Borrower in turn lends to the Borrower's
customers, during the interim between the Borrowers' purchase of manufactured or modular
homes, or for homes built on site (collectively the "Units") for Borrower's customers and the
settlement of the customers' permanent financing for the Units and the lots on which the Units
are located. (emphasis added). A true and correct copy of the Security Agreement is attached
hereto and made a part hereof as Exhibit "B."
4. The Security Agreement provides in paragraph R-3 thereof that Yorktown shall
grant to Commerce a security interest in "all of Borrower's right, title and interest in, to and
under the mortgage bonds or notes executed and delivered by the Borrower's customers to the
Borrower, and the mortgages which secure the bonds or notes, the permanent financing
commitments related thereto, the fire and casualty policies related thereto and the proceeds
thereof, and the title insurance policies related thereto and the proceeds thereof for the Units
and lots for which financing is provided by the Secured party (collectively the "Units
Collateral"). (emphasis added).
5. Section 2 of the Security Agreement states that the security interest created therein is
given as security for the prompt payment, performance, satisfaction and discharge of the
obligation s of Yorktown to Commerce under the Line of Credit Agreement and the other loan
documents.
6. The loan documents incorporated by the Note, including, specifically, but not
necessarily limited to, the Line of Credit Agreement and the Security Agreement executed by
Yorktown and Plaintiff, contemplated that Plaintiff was to obtain a duly perfected lien and/or
2
assignment of the note, mortgage and all related documents resulting from Yorktown's loans to
its customers and all collateral securing the Customer Loans.
7. The third paragraph of numbered paragraph 1 of the Guaranty attached as Exhibit
"B" to Plaintiff's complaint states in its entirety as follows:
However, notwithstanding any other provision of this Guaranty to the
contrary, before Bank exercises Bank's rights and remedies against Guarantor,
Bank shall first attempt to satisfy Borrower's liabilities to Bank by directly
pursuing Borrower and Borrower's assets, taking all collection actions which
Bank determines to be reasonable and appropriate under the circumstances.
After Bank has completed its pursuit of Borrower, Bank may notify Guarantor
that all such collection actions have been completed, and the remaining balance
of Borrower's liabilities to Bank shall at Bank's option be deemed to be forthwith
due and payable by Guarantor under the terms of this Guaranty, and Bank may
exercise and enforce Bank's rights and remedies hereunder against Guarantor
and/or Guarantor's property. Should Bank be legally barred from pursuing
Borrower or Borrower's assets for repayment of Borrower's liabilities for any
reason, including but not limited to bankruptcy stay or other order of a court
having jurisdiction over Borrower, Bank may treat Borrower's liabilities to Bank
as being forthwith due and payable by Guarantor under the terms of this
Guaranty, and Bank may exercise and enforce Bank's rights and remedies
hereunder against Guarantor and/or Guarantor's property.
8. Plaintiff had a duty to Yorktown and Defendant Guarantor under 13 Pa.C.S.A.
§3605(e), g3605(f), and §3605(g) not to impair the collateral for the Yorktown obligations for
which it seeks payment from Defendant guarantor.
9. Plaintiff had a duty to Yorktown and Defendant Guarantor under 13 Pa.C.S.A.
§3605(e), §3605(f), and §3605(g) to properly obtain and perfect its lien on all of the Yorktown
customer loans, including, without limitation, the site built homes.
10. Plaintiff had a duty to Yorktown and Defendant Guarantor under 13 Pa.C.S.A.
§9607(c) to act in a commercially reasonable manner in collecting and enforcing its claim
against Yorktown and Defendants.
11. Plaintiff had a duty to Defendant under the Guaranty to pursue Yorktown's assets
and to take reasonable collection actions, including appropriate actions to perfect Plaintiff's
contemplated lien on Yorktown 's assets.
12. On or about September 5, 2005, Commerce filed with the Secretary of the
Pennsylvania Commonwealth a UCC-1 Financing Statement (the "Financing Statement") in
which it specifically listed as collateral the manufactured or modular homes for which
financing is provided by the Secured Party but omitted any mention of the "homes built on
site" specifically listed as collateral in the Security Agreement. A true and correct copy of the
Financing Statement is attached hereto and made a part hereof as Exhibit "C."
13. Plaintiff failed to properly perfect a lien on the site built homes by failing to
include or make any reference to them in the Financing Statement.
14. Plaintiff failed to otherwise obtain or perfect a lien in all of the Yorktown
Customer Loans and the collateral provided to Yorktown for the Customer Loans.
15. Plaintiff breached its duty to Defendants under 13 Pa.C.S.A. §3605(e), 63605(f),
§3605(g), and 13 Pa.C.S.A. §9607(c) by failing to properly obtain and/or perfect a lien on all of
the Customer Loans and collateral for the loans, including, without limitation, the site built
homes.
16. Plaintiff has impaired collateral for the obligation allegedly guarantied by
Defendant by failing to properly perfect its security interest.
17. Pursuant to 13 Pa.C.S.A. §3605(e), §3605(f), and §3605(g) Defendant's liability to
Plaintiff, if any, is terminated to the extent of the impairment.
4
18. Pursuant to 13 Pa.C.S.A §9625 and 13 Pa.C.S.A §9626, Defendant's liability to
Plaintiff, if any, is reduced or terminated by the amount that he has been harmed by Plaintiff's
failure to properly perfect its security interest.
19. Plaintiff breached its duties under the Line of Credit, Security Agreement,
guaranty, and the other loan documents by failing to properly obtain and/or perfect its lien on
all of the Customer Loans and collateral for the Customer Loans.
20. Plaintiff has breached its duty of good faith and fair dealing in connection with the
Note, the Guaranty, the Financing Agreement, the Security Agreement and the related
agreements between the parties.
21. On February 9, 2010, Yorktown filed a voluntary petition under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Middle District of
Pennsylvania to No 1:10-bk-01042-MDF.
22. Asa result of Plaintiff's failure to properly obtain and/or perfect its lien on all of
the Customer Loans and collateral for the Customer Loans, Plaintiff's asserted liens are
avoidable in Bankruptcy by Yorktown acting as Debtor in Possession or a Bankruptcy Trustee
pursuant to 11 U.S.C. §544.
23. The value of the site built homes for which plaintiff failed to perfect its security
interest is no less than $981,500.00.
24. As a result of Plalintiff's actions, the collateral has been impaired in the amount of
no less than $981,500.00.
25. As a result of Plaintiff's actions, proceeds in the amount of no less than $981,500.00
from the sale of certain collateral for the Customer Loans, including, but not limited to, the site
built homes, will be distributed to Yorktown 's other creditors and will not be applied to
Yorktown's obligations to Plaintiff.
26. Defendant has been substantially harmed by Plaintiff's failure to properly obtain
liens on all of the Customer Loan collateral.
27. Defendant is entitled to setoffs and/or release of liability to Plaintiff in the amount
of no less than $981,500.00 against any obligation that he may owe to Plaintiff on account of the
Guaranty.
28. The amount of Plaintiff's asserted claim against Defendant is overstated in the
amount of no less than $981,500.00 plus interest, attorney's fees and costs.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment in
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, or, in the
alternative, reduce any amount the Court finds to be owing to the Plaintiff by the amount of no
less than $981,500.00 plus interest, attorney's fees and costs, and, further, award the Defendant
such further relief as the Court deems equitable and just.
B. Failure to Liquidate or Protect Collateral
29. Defendant specifically incorporates by reference and reasserts the allegations set
forth in paragraphs 1-28 of his New Matter.
30. Plaintiff has failed to file a single Motion with the Bankruptcy Court for relief or
modification from any stay in the Yorktown Bankruptcy pursuant to applicable provisions of
the Bankruptcy Code, including, specifically, 11 U.S.C. §362.
31. Plaintiff has failed to file a single Motion with the Bankruptcy Court for adequate
protection payments pursuant to applicable provisions of the Bankruptcy Code, including,
specifically, 11 U.S.C. §361.
6
32. Plaintiff has failed to file a single Motion with the Bankruptcy Court to prohibit use
of its cash collateral or for adequate protection payments for Debtor's use of its cash collateral
pursuant to applicable provisions of the Bankruptcy Code, including, specifically, 11 U.S.C.
§363.
33. Plaintiff has failed to file a single Motion with the Bankruptcy Court to determine
the extent or validity of its asserted secured claim against the Debtor pursuant to applicable
provisions of the Bankruptcy Code, including, specifically, 11 U.S.C. §506.
34. Plaintiff has failed to take any action to collect any funds, payments, interest, or
collateral from Yorktown or its assets.
35. Since the filing of Yorktown s bankruptcy petition, Plaintiff has failed to take any
action to take possession of and liquidate its collateral or to receive interest payments on the
portion of its secured claim that is undisputed by Yorktown.
36. Since the filing of Yorktown's bankruptcy petition, Plaintiff has taken no action to
negotiate a stipulation with the Debtor for the use of Plaintiff's cash collateral.
37. By failing to file a motion for adequate protection or a motion to prohibit use of its
cash collateral, or endeavor to negotiate a stipulation for the Debtor's use of Plaintiff's cash
collateral, Plaintiff has allowed Debtor to use its cash collateral interest free since the filing date
of February 9, 2010.
38. During the course of Yorktown's bankruptcy, interest has accrued but has not been
paid to Plaintiff in connection with Plaintiff's secured claim in an amount, as of July 2, 1012, of
$349,028.25.
7
39. As a result of Plaintiff's inaction, interest continues to accrue and not be paid to
Plaintiff in connection with the undisputed portion of Plaintiff's secured claim at the rate set
forth in the loan documents.
40. Plaintiff has violated its duty under 13 Pa.C.S.A. §3605(e), §3605(f), and §3605(g) by
impairing the collateral, including, specifically, by failing to preserve the value of the collateral
and by failing to take prompt action to liquidate its collateral or to obtain interest or other
adequate protection payments for Yorktown's use of its collateral.
41. Plaintiff has violated its duty under 13 Pa.C.S.A. §9607(c) to act in a commercially
reasonable mariner in collecting and enforcing its claim against Yorktown and Defendants by
failing to preserve the value of the collateral and by failing to take prompt action to liquidate
its collateral or to obtain interest or other adequate protection payments for Yorktown's use of
its collateral.
42. Plaintiff was negligent in failing to take prompt action to liquidate its collateral or
to obtain interest or other adequate protection payments for Yorktown's use of its collateral.
43. Plaintiff breached its duties under the Line of Credit Agreement, Security
Agreement, Guaranty and the other related loan documents by failing to take prompt action to
liquidate its collateral or to obtain interest or other adequate protection payments for
Yorktown's use of its collateral.
44. Defendant has been substantially harmed by Plaintiff's failure to take prompt
action to liquidate its collateral or to obtain interest or other adequate protection payments for
Yorktown's use of its collateral.
45. Pursuant to 13 Pa.C.S.A. §3605(e), §3605(f), and §3605(8) Defendant's liability to
Plaintiff, if any, is terminated to the extent of the impairment.
8
46. Pursuant to 13 Pa.C.S.A §9625 and 13 Pa.C.S.A §9626, Defendant's liability to
Plaintiff, if any, is reduced or terminated by the amount that he has been harmed by Plaintiff's
failure to to act in a commercially reasonable manner in collecting and enforcing its claim
against Yorktown and Defendants by failing to preserve the value of the collateral and by
failing to take prompt action to liquidate its collateral or to obtain interest or other adequate
protection payments for Yorktown's use of its collateral.
47. Defendant is entitled to additional setoffs in the amount of no less than $349,028.25
against any obligation that he may owe to Plaintiff on account of the Guaranty.
48. The amount of Plaintiff's asserted claim against Defendant is overstated in the
amount of no less than $349,028.25 plus interest, attorney's fees and costs.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment in
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, or, in the
alternative,, reduce any amount the Court finds to be owing to the Plaintiff by the additional
amount of no less than $349,028.25 plus interest, attorney's fees and costs, and, further, award
the Defendant such further relief as the Court deems equitable and just.
C. Failure to Satisfy Contractual Condition Precedent
49. Defendant specifically incorporates by reference and reasserts the allegations set
forth in paragraphs 1-38 of his New Matter.
50. The third paragraph of numbered paragraph 1 of the Guaranty attached as Exhibit
"B" to Plaintiff's complaint states in its entirety as follows:
However, notwithstanding any other provision of this Guaranty to the
contrary, before Bank exercises Bank's rights and remedies against Guarantor,
Bank shall first attempt to satisfy Borrower's liabilities to Bank by directly
pursuing Borrower and Borrower's assets, taking all collection actions which
Bank determines to be reasonable and appropriate under the circumstances.
After Bank has completed its pursuit of Borrower, Bank may notify Guarantor
that all such collection actions have been completed, and the remaining balance
9
of Borrower's liabilities to Bank shall at Bank's option be deemed to be forthwith
due and payable by Guarantor under the terms of this Guaranty, and Bank may
exercise and enforce Bank's rights and remedies hereunder against Guarantor
and/or Guarantor's property. Should Bank be legally barred from pursuing
Borrower or Borrower's assets for repayment of Borrower's liabilities for any
reason, including but not limited to bankruptcy stay or other order of a court
having jurisdiction over Borrower, Bank may treat Borrower's liabilities to Bank
as being forthwith due and payable by Guarantor under the terms of this
Guaranty, and Bank may exercise and enforce Bank's rights and remedies
hereunder against Guarantor and/or Guarantor's property.
51. Plaintiff has failed to take any action a) to obtain relief from the automatic stay, b)
to obtain adequate protection for its interest in its collateral, c) to obtain interest payments from
Yorktown with regard to the use of its collateral; or d) to prohibit use of its cash collateral.
52. Plaintiff has not attempted to collect any funds, payments, interest, or collateral
from Yorktown or its assets.
53. Plaintiff has failed to "first attempt to satisfy Borrower's [Yorktown's] liabilities to
Bank by directly pursuing Borrower and Borrower's assets" as required by the Guaranty.
54. Plaintiff is not "legally barred from pursuing Borrower [Yorktown] or Borrower's
assets for repayment of Borrower's liabilities" which legal condition is a prerequisite under the
Guaranty for Plaintiff being able to exercise any of its rights and remedies against Guarantor.
55. Plaintiff's action is not authorized by the Guaranty.
56. Plaintiff's action against Defendant is premature and not ripe.
57. Plaintiff's action against Defendant is barred by the terms of the Guaranty for
failure to satisfy a contractual precondition for instituting any type of legal action against the
guarantor.
58. Plaintiff has failed to state a cause of action against the Defendant for which relief
can be granted.
10
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment in
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, dismiss Plaintiff's
complaint and, further, award the Defendant such further relief as the Court deems equitable
and just.
D. Other New Matter
59. Plaintiff's action is barred by the Doctrine of Equitable Estoppel.
60. Plaintiff's action is barred by the Doctrine of Unjust Enrichment.
61. Plaintiff's action is barred by the Doctrine of Accord and Satisfaction.
62. Plaintiff's actions is barred by Doctrine of Waiver.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment in
his favor and against the Plaintiff, deny all relief requested by the Plaintiff, dismiss Plaintiff's
complaint and, further, award the Defendant such further relief as the Court deems equitable
and just.
Amended Counterclaim
63. Defendant specifically incorporates by reference and reasserts the allegations set
forth in paragraphs 1-48 of his New Matter.
64. As a result of Plaintiff's breach of contract and violation of 13 Pa.C.S.A. §3605(e),
§3605(f), §3605(g), and 13 Pa.C.S.A. §9607(c), Defendant William C. Kollas has sustained
damages in the amount of no less than $1,330,528.25.
WHEREFORE, Defendant William C. Kollas requests that this Court enter judgment in
his favor and against the Plaintiff in the amount of no less than $1,330,528.25 plus interest and
11
costs, plus statutory damages pursuant to 13 Pa.C.S.A §9625 and 13 Pa.C.S.A §9626 and, further,
award the Defendant such further relief as the Court deems equitable and just.
Respectfully submitted,
THE LAW OFFICES OF MARKIAN R. SLOBODIAN
Z/4.-t -C,
MARKIAN R. SLOBODIAN, ESQ.
ID #41075
801 North Second Street
Harrisburg, PA 17102
717-232-5180
Attorney William C. Kollas
Dated: F `'P I 1.?"
12
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 Amended New Matter and Amended
Counterclaim 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 foregoing
Amended New Matter and Amended Counterclaim via first class mail, postage paid, to the
following individual:
Heather Z. Kelly, Esq.
METTE, EVANS & WOODSIDE
3401 North Front Street, P.O. Box 5950
Harrisburg, PA 17110-0950
Dated: B's I 1 a.
jU Y L. HA BERT, Paralegal
13
COPY
REVOLVING LINE OF CREDIT AGREEMENT
y? plum w.,,- i ?2Ar
THIS AGREEMENT is made as of Aug 9t-39;-2A93y by YORKTOWN FUNDING,
INC., a Pennsylvania corporation (Borrower"), having a principal business office at Suite 101,1104
Fernwood Avenue, Camp Hill, Pennsylvania 17011, with COMMERCE BANKIE ARRISBURG,
N.A., a national banking association organized and existing under the laws of the United States of
America, with offices at 100 Senate Avenue, P.O. Box 8599, Camp Hill, PA 17001.8599 ("Bank").
RECITALS
R-1. Borrower has requested Bank to establish a line of credit in the amount of
$7,000,000.00 for use in Borrowers business operations; and
R-2. Bank has approved Borrower's request to establish for Borrower's use a
$7,000,000.00 line of credit for Borrower's business purposes, subject to the provisions of this
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the Recitals, which are an integral part of this
Agreement, and of the agreements hereinafter set forth, and intending to be legally bound, Borrower
and Bank agree as follows:
1. Facility. Subject to the terms and conditions of this Agreement, the Bank agrees to
establish in favor of the Borrower a line of credit facility ("Line of Credit") under which the Bank
will make advances to the Borrower from time to time, and the Borrower may borrow, repay and.
reborrow from the Bank. The indebtedness outstanding under the Line of Credit shall be evidenced.
by a promissory note in the stated principal amount of $7,000,000.00 ("Note"). Notwithstanding
the stated principal amount of the Note, the Borrower's liability shall at all times be the actual,
outstanding amount of principal, interest and any other sums which may be due from Borrower
under or in connection with the Line of Credit,
a. Maximum Availability. The maximum principal amount which may be
outstanding at any time under the Line of Credit shall be $7,000,000.00.
b. Purpose of Advances. Advances under the Line of Credit will be used only
to provide financing during the interim between the purchase of a manufactured home or modular
home, and for homes built on site (each, a "Unit") and settlement of the permanent financing for the
Unit and lot on which the Unit is located, for a period not to exceed 360 days for each Unit (or subh
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longer period as may be requested by Borrower and approved by Bank with respect to a particular
Unit), to assist in the purchase of the land on which the Unit is to be located, the Unit, and
permanent attachment of the Unit to real estate by the purchaser(s) of the Unit.
C. Advances. Borrower will give the Bank written notice of each requested
advance under the Line of Credit, specifying the amount of such requested advance. The aggregate
amount of advances for any one loan transaction or Unit will not exceed 80% of the lesser of (1) the
purchase price of a Unit or (2) the appraised value of a Unit and the land on which the Unit will be
located. Each initial written notice will be accompanied by a copy of the executed Loan
Submission/Approval form for permanent mortgage financing for the Unit for which the advance is
requested, from a financial institution acceptable to the Bank and in form and substance satisfactory
to the Bank); by a fully executed, original assignment of the note and mortgage given by the
purchaser of the Unit to Borrower, in the recordable form attached hereto as Exhibit "A" (each an
"Assignment"); by a copy of the executed note from the purchaser of the Unit to Borrower, in form
and substance satisfactory to Bank; by evidence of recording of the construction mortgage from the
purchaser of the Unit to Borrower, which will be in form and substance satisfactory to Bank; if then
available, by a copy of the fire and casualty insurance policy covering the Unit, which will be issued
by an insurance company acceptable to Bank and in amount, form and content satisfactory to Bank
(which if not then available will be supplied to Bank as soon as available, but not later than the time
of delivery of the Unit to the land); by a copy of the title insurance policy (or binder if the policy is
not yet available), which will indicate that Borrower's mortgage to be assigned to Bank is a first lien
on the Unit and land on which the Unit is located, and will be issued by a title insurance company
acceptable to Bank, and will contain only such exceptions and such endorsements, and otherwise be
in such form and content, as are satisfactory to Bank; by a copy of the draw schedule for the
advance(s) to be made with respect to the Unit; and by a copy of an "as-built" FANNIE-MAE
appraisal of the land on which the Unit will be located and the Unit, satisfactory to Bank. All
advances subsequent to an initial advance will be accompanied by such invoices and other evidence
with respect to the requested advance as the Bank may require. All advances under the Line of
Credit shall be made by depositing the amount of the advance into any account of Borrower at the
Bank designated by Borrower in such notice.
Bank will deposit requested advances with reasonable promptness following notice
of a request for advance. Any such notice shall be given only by authorized officers of Borrower.
Bank shall be entitled presumptively and absolutely to rely upon any such notice, and the validity
and effectiveness of any such notice, in making any advance of the Line of Credit, without any duty
or obligation of any nature whatsoever on the part of Bank to investigate or inquire as to the validity
or effectiveness of any such notice or any advance made in connection with any such notice, and
Borrower hereby releases and agrees to indemnify, defend and hold harmless Bank and any and all
directors, officers and employees of Bank from and against any claim, demand, proceeding, suit or
action of any nature whatsoever, and from and against any loss, damage, cost, expense, fee
(including attorneys' fees) or liability of any nature whatsoever, at any time arising from or in
connection with the making or failure to make any advance of the Line of Credit by Bank, including
from or in connection with Bank's negligence.
2
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Notwithstanding this or any other provision of this Agreement, the Bank
reserves the right to refuse to make an advance under the Line of Credit with respect to any
particular transaction for which an advance may be requested by Borrower.
d. Interest Rate and Payments. The interest rate payable on the principal
amount outstanding under the Line of Credit and payment of principal and interest shall be such as
are provided in the Note,
e. Demand. The entire amount of principal outstanding under the Line of
Credit, plus all accrued and unpaid interest and late charges, and any and ail otheg?nder
or in connection with he Tine of . rtv "i , will be due and payable in full upon demand, without
setoff or counterclaim.
f. Exidence and Security for Line of Credit. The Line of Credit is
evidenced and secured by:
(1) The Note; and
(2) Each Assignment, which may be recorded in the applicable county
Recorder's Office at Borrower's expense after the occurrence of a default under the
Loan Documents (hereinafter defined); and
(3) A Security Agreement and filed Uniform Commercial Code Financing
Statements granting and perfecting the Bank's security interest in the collateral for
the Line of Credit, as more particularly described therein; and
(4) The guaranty and suretyship agreements of William C. Kollas and-
Gerald R. Kensinger; and
(5) This Agreement; and
(6) Any and all other agreements, documents and materials executed and
delivered by Borrower to Bank in connection with the Line of Credit or at any time .
as further evidence and security for the Line of Credit,
All of the documents described in this Paragraph 1 are referred to in the context of this
Agreement individually, collectively or in any combination as the "Loan Documents". All of the
provisions of all of the Loan Documents are incorporated herein by reference and made a part
hereof as if set forth in full herein. If there is any inconsistency or conflict among any provisions of
any of the Loan Documents, the provision determined by Bank in its sole and absolute discretion to
be applicable shall govern and control, and Borrower agrees to be bound by Bank's determination.
g. Repurchase Agreement. In addition to the foregoing, upon the earlier of a
default under this Agreement or any of the other Loan Documents, or a default by the purchaser
3
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1-4 Page 11 of 25
under any note and/or mortgage assigned to Bank as collateral and security for an advance
hereunder, or the date 360 days from the date of the initial advance by Bank for a particular Unit (or
such longer period as may be applicable pursuant to paragraph Lb), Borrower shall repurchase such
note and mortgage from Bank, upon demand of the Bank, and pay therefor the amount owing to
Bank on account of any and all advances secured by the assignment to Bank of such note and
mortgage, including all principal, interest and any and all charges, costs or expenses paid or
incurred by the Bank and due or payable in connection with any and all such advances. A
purchaser's failure to make any payment due for a purchase of a Unit on the assertion, either oral or
written, that the Unit sold is defective or is not as represented by Borrower or any seller, distributor
or manufacturer, or that Borrower or any seller, distributor or manufacturer refuses to honor any
warranty or service agreement of any of them, will not affect in any way Borrower's obligation to
repurchase the note and mortgage from the Bank, and Borrower will pay the Bank immediately in
accordance with the terms set forth above. Borrower further agrees to hold Bank harmless from
and against any and all claims, damages, loss or liability of any nature whatsoever of any purchaser
of any Unit, including attorney's fees, costs and expenses incurred in defending against claims
asserted by any purchaser and any claims for refunds of payments made by any purchaser.
2. Representations and Warranties. Borrower hereby represents and warrants to, and
covenants and agrees with, Bank that:
a. Power and Authority; Authorization; Enforceability. Borrower has the
full power, authority and legal right to execute, deliver and comply with each of the Loan
Documents; all actions of Borrower and authorizations which may be necessary or appropriate for
the execution and delivery of, and compliance with, the Loan Documents have been taken or
obtained; and, upon their execution, the Loan Documents will constitute the valid and legally
binding obligations of Borrower, enforceable against Borrower in accordance with their respective
terms.
b. Governmental Approval of Loan Documents. No consent, approval or
other authorization of or by any person, court, administrative agency or other governmental
authority is required in connection with Borrower's execution and delivery of, or compliance with,
any of the Loan Documents.
C. Conflict: Breach. Borrower's execution and delivery of, and compliance
with, the Loan Documents will not conflict with, or result in a breach of any applicable law,
judgment, order, writ, injunction, decree, rule or regulation of any court, administrative agency or
other governmental authority, or of any agreement or other document or instrument to which
Borrower is a party or by which Borrower is bound.
d. Litigation. There is no action, suit or proceeding pending or, to the
knowledge of Borrower, threatened against or affecting Borrower before or by any court,
administrative agency or other governmental authority, which may have an adverse affect on
Borrower's ability to make payment as provided in, or to observe or perform any provision of, any
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1-4 Page 12 of 25
of the Loan Documents, or which brings into question the validity of the Line of Credit or the
transactions contemplated hereby.
e. Taxes. Any and all federal, state and local tax returns required to have been
filed by Borrower have been filed, and all taxes reflected upon any such tax returns, and all other
taxes of any nature whatsoever, payable by Borrower, including any past due taxes, interest,
penalties and estimated tax payments, have been paid.
f. Title to Personal Property. The notes and mortgages to which Borrower
has granted Bank a security interest pursuant to the Loan Documents are owned by Borrower free
and clear of any lien, encumbrance or security interest, except to Bank.
g. Bankruptcy: Insolvency. Borrower has not applied for, or consented to the
appointment of a receiver, sequestrator, trustee or liquidator of Borrower or any of Borrower's
property, admitted in writing Borrower's inability to pay Borrower's debts as they mature, made a
general assignment for the benefit of creditors, been adjudicated a bankrupt or insolvent or filed a
voluntary petition in bankruptcy or a petition or an answer seeking an an-angemant with creditors or
seeking to take advantage of any bankruptcy, insolvency, readjustment of debt, receivership,
liquidation or similar law or statute, and no petition or action has been filed against Borrower in any
proceeding under any such law, and no action has been taken by Borrower for the purpose of
effecting any of the foregoing.
Borrower agrees that the representations and warranties and covenants and agreements
provided for:herein will survive and remain in effect until the Line of Credit has been paid in full.
Borrower will provide Bank immediately with notice of any violation of any of these
representations and warranties or covenants and agreements.
3. Financial Reportine. Borrower will provide Bank with, or cause Bank to be
provided with, (a) Borrower's financial statements prepared by an independent certified public
accountant; and (b) copies of each Guarantor's signed federal income tax returns, as filed, including
all schedules, statements and related forms, and each Guarantor's personal financial statements.
Borrower's financial statements will contain, at a minimum, a statement of income or profit
and loss and a balance sheet, and will be provided to Bank within sixty (60) days after fiscal year
end. Each Guarantor's financial statements and tax returns required herein will be provided to
Bank by April 30 of each year. The Bank reserves the right to require such additional financial
information from time to time as the Bank determines to be necessary or desirable for the Bank's
financial review. All financial statements will be in form and content satisfactory to Bank.
4. Default. The occurrence of any one or more of the following events is a default of
Borrower's obligations under this Agreement:
5
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a. Borrower or any Guarantor fails to pay when due any payment of principal,
interest or other amounts payable under the Note, this Agreement or any of the other.Loan
Documents.
b. Borrower or any Guarantor fails to observe and perform any of the
covenants or agreements on Borrower's or any Guarantor's part to be observed and performed under
this Agreement or under any of the other Loan Documents.
c. Any representation or warranty of Borrower or any Guarantor under this
Agreement or under any of the other Loan Documents is at any time untrue in any material respect.
d. Any event of default occurs under any of the other Loan Documents.
e. Borrower or any Guarantor defaults under or in connection with any material
agreement, indebtedness or obligation with or to any other person or entity.
£ Borrower or any Guarantor applies for or consents to the appointment of a
receiver, sequestrator, trustee or liquidator for Borrower or any Guarantor or any of Borrower's or
any Guarantor's property, admits in writing Borrower's or -any Guarantor's inability to pay
Borrower's or any Guarantoes debts as they mature, makes a general assignment for the benefit of
creditors, is adjudicated a bankrupt, or insolvent or files a voluntary petition in bankruptcy or a
petition or -an answer seeking an arrangement with creditors or seeking to take advantage of any
bankruptcy, insolvency, readjustment of debt or similar law or statute, or an answer admitting the
material allegations of a petition filed against Borrower or any Guarantor in any proceeding under
any such law, or if any petition or action is taken by or against Borrower or any Guarantor, whether .
voluntarily or involuntarily, for the purpose of effecting any of the foregoing.
g. Any order, judgment or decree is entered in any court of competent
jurisdiction against Borrower or any Guarantor or any of Borrower's or any Guarantor's property,
and such order, judgment or decree shall continue unstayed and in effect for any period of thirty
(30) days.
The financial condition of Borrower or any Guarantor shall change in such a
manner that, ' the judgment of Bank, Bank's risk of not receiving payment in full of the Line of
Credit shall materially increase.
5. Cross Default. Borrower agrees that a default under any of the Loan Documents, or
under any other agreement or document evidencing or securing any other indebtedness or obligation
of Borrower or any Guarantor to Bank, is a default under all of the Loan Documents and under all
such other agreements and documents.
6
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6. Remedies.
a. Upon the occurrence of a default under this Agreement, unless the Bank
elects otherwise in writing, the Line of Credit shall be terminated and the entire amount of the
indebtedness outstanding under the Line of Credit shall become immediately due and payable
without notice or demand, or setoff or counterclaim or deduction of any nature, and Bank will have
no further obligation to make any advance of the Line of Credit immediately upon the occurrence of
any default.
b. Upon the occurrence of a default under this Agreement, Bank may exercise
or proceed to enforce any or all of the rights and remedies available to Bank under any or all of the
Loan Documents, or at law or in equity.
C. No right or remedy provided to Bank under any of the Loan Documents, or
at law or in equity, is intended to be or shall be deemed to be exclusive of any other such right or
remedy, and each and every such right or remedy shall be cumulative, and shall be in addition to
every other such right or remedy, and may be pursued singly, concurrently, successively or
otherwise, at the sole discretion of Bank, and shall not be exhausted by any one exercise thereof but
may be exercised as often as occasion therefor shall occur. The failure to exercise or delay in
exercising any such right or remedy, or the failure to insist upon strict performance of any provision
of any of the Loan Documents, is not a waiver or release of any such right, remedy or performance
by the Bank, or of.any event of any default, or of any obligation or liability of Borrower under any
of the Loan Documents. Any waiver, in order to be effective, must be in writing and signed by
Bank, and any such waiver shall be strictly limited in its effect to the condition, obligation or
default specified therein and shall not extend to any subsequent condition, obligation or default or
impair any right of Bank with respect thereto.
d. Borrower further waives and releases all errors, defects and imperfections in
any proceedings instituted by Bank under the terms of any of the Loan Documents or with respect
to the collateral and security for the Line of Credit.
(7, Costs and Expenses. Borrower shall pay upon demand all costs and expenses
(including all amounts paid to attorneys, accountants, real estate brokers and other advisors
employed by Bank and/or to. any contractors for labor and materials) incurred by Bank (a) in the
preparation of the Loan Documents and otherwise in connection with the implementation and
securing of the Line of Credit as provided in the Loan Documents, and (b) in the exercise of any of
Bank's rights, remedies or powers under any of the Loan Documents or with respect to the collateral
and security for the Line of Credit, and any amount thereof, together with interest thereon at the rate
specified in the Note from the date of such demand, shall become part of the Line of Credit and
shall be secured by the collateral and security granted hereunder from the time of payment by Bank
until paid by Borrower to Bank..
8. Additional Security. In addition to the other collateral and security for the Line of
Credit, Borrower:
Case 1:10-bk-01042-MDF Claim 28-1 Part 2 Filed 09130110 Desc Exhibit Attachments
1-4 Page 15 of 25
a. grants to Bank a security interest in, lien upon, and right of setoff against all
deposit accounts, credits, securities, monies or other property of Borrower which at any time may
be in the possession of, delivered to or owed by Bank; and
b. agrees that all collateral and security for any other loan from Bank to
Borrower or for any other obligation of Borrower to Bank will also be collateral and security for the
Line of Credit, and all collateral and security for the Line of Credit will also be collateral and
security for any and all other such loans or obligations; and
c. agrees that the Note shall evidence and the Loan Documents shall evidence
or secure any and all future loans or advances from Bank to Borrower and any other obligations of
Borrower to Bank.
9. No Third Party Beneficiaries. Except as provided in Paragraph 12, the parties do
not intend the benefits of this Agreement or of the Line of Credit or any portion thereof to inure to
any third party, including without limitation the purchasers of any Unit, the seller of any Unit, any
person or entity providing financing for any Unit, any contractor, subcontractor or supplier of labor
or materials, or any of their respective creditors or any creditor of Borrower, or any other person or
entity other than the Bank and Borrower. Neither the Line of Credit nor any portion of the Line of
Credit will be subject to attachment or levy by any such person or entity. Notwithstanding anything
contained in the Loan Documents, or any course of conduct at any time by the Borrower or the
Bank, or both (including without limitation advances or payments directly to any such person or
entity other than Borrower), no rights, claims or causes of action are or are intended to be created,
and should not be construed at any time to have been created, in favor or for the benefit of any such
person other than Borrower.
10. DeAosit Account. Borrower shall establish and maintain a primary deposit account .
with Bank until the Line of Credit is paid in full and terminated.
11. SeverabiHty. In the event that for any reason one or more of the provisions of this
Agreement or their application to any person or circumstance shall be held to be invalid, illegal or
unenforceable in any respect or to any extent, such provisions shall nevertheless remain valid, legal
and enforceable in all other respects and to such extent as may be permissible. In addition, any such
invalidity, illegality or unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid, illegal or unenforceable provision has never been
contained herein.
12. Parties Bound. This Agreement inures to the benefit of Bank and Bank's
successors and assigns and binds Borrower and Borrower's respective personal representatives,
heirs, successors and assigns. However, Borrower will not voluntarily, or by operation of law,
assign or transfer any obligations, rights or other interests which Borrower may have under this
Agreement without the prior written approval of Bank.
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13. Notices. All notices required or desired to be given to either of the parties
hereunder shall be in writing and shall be deemed to have been sufficiently given for all purposes
when presented personally to such party or sent by certified or registered mail, return receipt
requested, to such party at its address set forth below:
Borrower: Yorktown Funding, Inc.
Suite 101
1104 Fernwood Avenue
Camp Hill, Pennsylvania 17011
Bank: Commerce Bank/Harrisburg, N.A.
100 Senate Avenue
P.Q. Box 8599
Camp Hill, PA 17001-8599
Attn: Kelly K. Neiderer
Any notice of any change in such address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such notice may be waived in writing by
the party entitled to receive such notice,
14. Captions. The captions or headings of the paragraphs of this Agreement are for
convenience only and shall not control, affect in any way, or give full notice of the meaning,
construction or interpretation of any of the provisions of this Agreement.
15. Form and Content. All documents, instruments, agreements and materials of any
nature whatsoever required to be executed or delivered, or both, to Bank or which are subject to
Bank's approval will be in form and content satisfactory to Bank in its discretion.
16. Time of the Essence. All dates and times for performance of Borrower's
obligations herein set forth will be of the essence of this Agreement.
17. Lesal Matters. All issues arising hereunder shall be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to the principles thereof relating to conflict
of laws, if any. Any suit or action brought by Borrower under or in connection with this Agreement
or any of the other Loan Documents may be brought only in the courts having jurisdiction over
matters which arise in Cumberland County, Pennsylvania, and which are seated in Pennsylvania,
and Borrower hereby consents to the jurisdiction of such courts. Borrower and Bank agree that any
dispute or controversy arising under or in connection with the Line of Credit or this Agreement will
not lend itself to resolution through trial by jury, Therefore, Borrower and Bank hereby
voluntarily, knowingly, intelligently and intentionally waive the right to trial by jury in any
action or proceeding arising from or in connection with the Line of Credit or this Agreement.
9
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IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement on the date
first above set forth.
ATTEST:
By:
William C. Kollas
Secretary
YORKTOWN FUNDING, INC.
By:
Ger d R. ensinger
President
COMMERCE BANKMARRISBURG, N.A.
10
Case 1:10-bk-01042-MDF Claim 28-1 Part2 Filed 09!30110 Desc Exhibit Attachments
1-4 Page 18 of 25
Title: ?Y', U p ,
EXHIBIT "A"
ASSIGNMENT
FOR VALUE RECEIVED, and intending to be legally bound, YORKTOWN
FUNDING INC., a Pennsylvania business corporation having offices at Suite 101,1104 Femwood
Avenue, Camp Hill, Pennsylvania 17011 ("Assignor"), hereby sells, transfers, assigns and sets over
unto COMMERCE BANK/HARRISBURG, N.A., a national banking association having offices
at 100 Senate Avenue, P.O. Box 8599, Camp Hill, Pennsylvania 17001-8599 ("Assignee"), all of
Assignor's rights, title and interest in, to and under that certain Mortgage Bond (Note) dated
?, in the original principal amount of $ , and the Mortgage of even date therewith
securing the same, which Mortgage was recorded on in
County, in Book _, Page , and the permanent financing commitment(s)
related thereto, and the fire and casualty insurance policy related thereto and the proceeds thereof,
and the title insurance policy related thereto and the proceeds thereof, TO HAVE AND TO
HOLD THE SAME as collateral security for the payment by Assignor of principal, interest and all
other sums-to be paid and the performance and observance of all the terms and covenants to be
performed and observed under the Demand Note and Revolving Line of Credit Agreement of
Assignor to Assignee dated August 30, 2005, in the original amount of $7,000,000.00, and any
extensions, modifications or renewals thereof and substitutions therefor and amendments thereto,
including amendments which increase or decrease the maximum amount of the secured line of
credit,
This Assignment constitutes a security agreement and creates a security interest in said
Mortgage Bond (Note) and Mortgage, which is hereby granted and confirmed by Assignor to
Assignee. This Assignment does not impose upon Assignee nor does it create an assumption by
Assignee of any obligations or liability of any nature whatsoever whether under or arising out of the
11
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Case 1:10-bk-01042-MDF Claim28
Mortgage Bond (Note), the Mortgage or otherwise. Assignor will remain fully obligated and liable
to perform all the terms and conditions to be performed by the Obligee (Payee) and the Mortgagee
of the Mortgage Bond (Note) and Mortgage, respectively, and will indemnify and save forever
harmless Assignee against liability for performance or nonperformance of the duties or obligations
thereunder.
Notwithstanding any provision hereof, Assignee grants to Assignor a license to collect all
payments on account of the Mortgage Bond (Note) and Mortgage to be held in trust for Assignee.
Upon revocation of said license, the obligorlmortgagor shall make any and all payments on account
of the Mortgage Bond (Note) and Mortgage directly to Assignee, to be applied by Assignee to
payment of principal, interest and all other sums provided to be paid under the Note of Assignor to
Assignee in accordance with the Demand Note and Revolving Line of Credit Agreement. Upon
revocation of the license to collect payments, Assignor agrees to execute and deliver to Assignee
immediately a completed letter in the form attached hereto as Exhibit "A" for mailing or delivery by
Assignee to the obligor/mortgagor. However, notwithstanding Assignor's agreement to execute and
deliver such letter to Assignee, Assignor hereby appoints Assignee as Assignor's attorney-in-fact,
with full power of substitution, to complete, sign and send to any obligor/mortgagor such letter, in
Assignor's name, or in Assignee's name, or both.
The terms of the Mortgage Bond (Note) and Mortgage will not be altered, modified or
changed, nor will said Mortgage Bond (Note) and Mortgage be surrendered, cancelled, nor will the
obligor/mortgagor be released of its obligations to make payments without prior written consent of
Assignee.
Assignor has not accepted and will not accept any payment(s) under the Mortgage Bond
(Note) and Mortgage in advance of its due date, provided, however, that Assignor may accept
permitted prepayment(s) if the same are applied promptly to payment of Assignor's Note to
Assignee.
12
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Upon payment and performance of all indebtedness secured by this Assignment, and all
other obligations or liabilities of Assignor to Assignee, this Assignment shall be null and void, and
Assignee agrees to execute an instrument presented by Assignor in form and content satisfactory to
Assignee which shall reassign the Mortgage Bond (Note) and Mortgage to Assignor, at Assignee's
sole cost and expense.
Nothing contained in this Assignment obligates Assignee to exercise any right or remedy
provided herein. Assignee may exercise any or all rights and remedies available to Assignee under
the Note, the Revolving Line of Credit Agreement, this Assignment or any other agreement or
document executed or delivered in connection therewith or referred to therein, or otherwise at law
or in equity, singly, cumulatively or successively and from time to time as often as necessary or
desirable,
This Assignment shall bind the Assignor, its successors and assigns, and shall inure to the
benefit of Assignee and its successors an assigns.
/s7
N WITNESS WHEREOF, Assignor has executed this Assignment this day of
ATTEST:
t
William C. Kollas, Secretary
YORKTOWN FUNDING, INC.
By:
Gerald R. Kensinger, President
13
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Exhibit "All
YORKTOWN FUNDING, INC.
1104 Fernwood Drive
suite 101
Camp Hill, PA 17011
To:
Effective immediately, and unless and until you are notified otherwise by Commerce
Bank/Harrisburg, N. A., you are hereby directed to make monthly payments on account of your
Mortgage Bond (Note) and Mortgage dated . payable to Commerce Bank/Harrisburg,
N. A., and to mail or deliver them to the Bank to the attention of Kelly K. Neiderer, Commerce
Bank, 200 S. Spring Garden Street, Suite B, Carlisle, PA 17013.
YORKTOWN FUNDING, INC.
By:
Title:
Date:
14
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ACKNOWLEDGEMENT
COMMONWEALTH OF PENNSYLVANIA
SS:
COUNTY OF
On the 30th day of August, 2005, before me personally came Gerald R. Kensinger, who
being duly sworn, did acknowledge himself to be the President of Yorktown Funding, Inc., a
Pennsylvania corporation, and that he as such officer, being authorized to do so, acknowledged the
foregoing instrument on behalf of such corporation for the purposes therein contained. In testimony
whereof, I have hereunto subscribed my name.
Notary Public
My Commission Expires:
After recording, please return to:
Kelly K. Neiderer
Commerce Bank/Harrisburg, N.A.
200 S. Spring Garden Street, Suite B
Carlisle^ 17013
15
P rt 2 Filed /30/10 Desc Exhibit Attachments
Case 1:10-bk-01042-MDF Claim 28 4 Page 23 of 25
COMMONWEALTH OF PENNSYLVANIA
?ib?.f?t
COUNTY OF
: SS:
On this, the ^ day of Swkmb&: ? ,2005 , before me, a Notary
Public, personally appeared known to me to
be the person whose name is subscribed to the within document and acknowledged that she
executed the foregoing for the purpose therein contained,
IN WITNESS WHEREOF, I have hereunto set my hand and official seal,
1NOTARIAL S'AY` a
CAROLE A ROSE
Notay Pubft Notary Public
TVYSP oF LOWER ANN p ?C + ?
Ct?ASfRLANd COUNTY My Commission Ex ices: T
M C MMh* n E es OCt 21, 2007
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1-4 Page 24 of 25
DISCLOSURE FOR CONFESSION OF JUDGMENT
THE UNDERSIGNED IS EXECUTING, AS OF THE 30TH DAY OF AUGUST,
2005, A NOTE PAYABLE TO CONNERCE BXWHARRISBURG, N.A. ("BANK") IN
CONNECTION WITH A LINE OF CREDIT IN THE AMOUNT OF $7,000,000.00 TO
THE UNDERSIGNED FOR COMMERCIn PURPOSES.
INITIALS:?
THE UNDERSIGNED'S ATTORNEY HAS EXPLAINED TO THE UNDERSIGNED
THAT THE NOTE CONTAINS WORDING THAT WOULD PERMIT THE BANK TO ENTER
JUDGMENT AGAINST THE UNDERSIGNED AT THE COURTHOUSE, WITHOUT
NOTICE, AND WITHOUT OFFERING THE OPPORTUNITY TO DEFEND AGAINST THE
ENTRY OF JUDGMENT, AND THAT THE JUDGMENT MAY BE COLLECTED BY ANY
LEGAL MEANS WITHOUT PRIOR NOTICE OR A HEARING BY USE OF THE
SHERIFF, WHO MAY SEIZE PROPERTY, REAL AND PERSONAL, WITHOUT PRIOR
NOTICE OR HEARING.
INITIALS :r/??
IN EXECUTING C THE NOTE, THE UNDERSIGNED IS KNOWINGLY,
UNDERSTANDINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO RESIST THE
ENTRY OF JUDGMENT AGAINST IT AT THE COURTHOUSE, AND IS CONSENTING
TO THE CONFESSION OF JUDGMENT. THE UNDERSIGNED FURTHER KNOWINGLY,
UNDERSTANDINGLY. AND VOLUNTARILY NAIVES ITS RIGHT TO ANY PRIOR
NOTICE OR HEARING PRIOR TO THE BANK'S SEIZING OF PROPERTY BY WRIT
OF EXECUTION AGAINST BANK ACCOUNTS AND PERSONAL AND/OR REAL
PROPERTY AFTER THE ATTAINMENT OF A JUDGMENT BY CONFESSION.
INITIALS:66!fl*?
THE UNDERSIGNED CERTIFIES THAT THE NOTE WAS EXECUTED IN
CONNECTION WITH A COMMERCIAL TRANSACTION AND DOES NOT INVOLVE A
CONSUMER TRANSACTION, AND THAT THE UNDERSIGNED HAS RECEIVED A COPY
OF THIS DISCLOSURE AT THE TIM OF SIGNING.
YORKTOWN FUNDING, INC.
By:
Gar Keas ager, P sideat
Case 1:10-bk-01042-MDF Claim 28-1 Part2 Filed Og/30/10 Desc Exhibit Attachments
1-4 Page 25 of 25
COPY
SECURITY AGREEMENT
!!?_
This SECURITY AGREEMENT is made and entered into as of this 3M- day of. ,
2005, by and between YORKTOWN FUNDING, INC., a Pennsylvania corporation (the
"Borrower"), and COMMERCE BANK/HARRISBURG, N.A., a national banking association (the
"Secured Party").
REDS
R-l. The Borrower and the Secured Party have executed a Revolving Line of Credit
Agreement dated August 30, 2005 (the "Loan Agreement").
R-2. Pursuant to the Loan Agreement, the Secured Party provides financing to the
Borrower, which the Borrower in turn lends to the Borrower's customers, during the interim between
the Borrowers' purchase of manufactured or modular homes, or for homes built on site (collectively,
the "Units") for the iorrower's customers and the settlement of the customers' permanent financings
for the Units and thb lots on which the Units are located.
R-3. As collateral and security for such financings, the secured party has required the
Borrower to assign to the Secured Party and grant a security interest to the Secured Party in all of
Borrower's right, title and interest in, to and under the mortgage bonds or notes executed and
delivered by the Borrower's customers to the Borrower, and the mortgages which secure the bonds or
notes, the permanent financing commitments related thereto, the fire and casualty policies related
thereto and the proceeds thereof, and the title insurance policies related thereto and the proceeds
thereof for the Units and lots for which financing is provided by the Secured Party (collectively, the
"Units Collateral').
R-4. To further secure the Secured Party's loans or advances under the Loan Agreement,
since the enactment in Pennsylvania of the revised Article 9 of the Uniform Commercial Code
(hereinafter defined), the Borrower and the Secured Party have agreed to the execution and
implementation of this Agreement.
R-5. The Secured Party is willing to continue to grant the extensions of credit
contemplated by the Loan Agreement only on the condition that the Borrower executes and delivers
1
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attachments
5-6 Page 14 of 26
this Security Agreement to the Secured Party.
R-6. Capitalized terms contained in Section 1 of this Agreement and used hereinafter shall
have the meanings ascribed to them in the revised Article 9 of the Uniform Commercial Code in the
form approved by the Commonwealth of Pennsylvania on and codified at 13 Pa C.S.A. §9101, et
seq. (the "Uniform Commercial Code"), unless the context requires otherwise. Other capitalized
terms which are used herein without definition shall have the meanings ascribed to them in the Loan
Agreement.
ACiREEMHN'C
NOW, THEREFORE, intending to be legally bound, the Borrower and the Secured Party
hereby agree as follows:
Section 1. Creation of Security Interest, TheBorromhereby Wants to the Secured Party
a lien upon and security interest in the property hereinafter described, whether now owned or
hereafter acquired or arising and wherever located (the "Collateral"):
(a) the Units Collateral;
(b) all monies which at any time the Secured Party shall have or have the right to
have in its possession;
(c) all books and records evidencing or relating to the Units Collateral, including,
without limitation, billing records of every kind and description, customer lists, data storage and
processing media, software and related material, including computer programs, computer tapes,
cards, disks and printouts, and including any of the foregoing which are in the possession of any
affiliate or any computer service bureau; and
(d) all proceeds of the Units Collateral.
Section 2. Secured Obligations, The security interest created herein is given as security
for the prompt payment, performance, satisfaction and discharge of the following obligations
(collectively, the "Obligations") of the Borrower:
(a) To pay the principal, interest, commitment fees and any other liabilities of the
Borrower to the Secured Party under the Loan Agreement and the other Loan Documents (as defined
2
Case 1:10-bk-01042-MDF Claim 25 6 P rt 3 15 ed269/30/10 Desc Exhibit Attachments
in the Loan Agreement) in accordance with the terms thereof;
(b) To satisfy all of the other liabilities of the Borrower to the Secured Party,
whether hereunder or otherwise, whether now existing or hereafter incurred, whether or not
evidenced by any note or other instrument, matured or unmetured, direct, absolute or contingent,
j oint or several, including any extensions, modifications, renewals thereof and substitutions therefor;
(c) To repay the Secured Party all amounts advanced by the Secured Party
hereunder or otherwise on behalf of the Borrower, including, but without limitation, advances for
principal or interest payments to prior secured parties, mortgagors or lienors, or for taxes, levies,
insurance, rent, wages, or storage of any Collateral; and
(d) To reimburse the Secured Party, on demand, for all of the Secured Party's
expenses and costs, including the reasonable fees and expenses of its counsel, in connection with the
negotiation, preparation, implementation, administration, amendment, modification, or enforcement
of the Loan Agreement and the other Loan Documents.
Section 3. Representations and Warranties. The Borrower, as of the date hereof and at the
time of each advance or extension of credit under the Loan Agreement, represents and warrants as
follows:
3.01 Good Title to Collateral. The Borrower has good and marketable title to the Collateral
free and clear of all liens and encumbrances other than the security interests granted to the Secured
Party hereunder and those liens and encumbrances set forth in Exhibit "A" to this Security
Agreement.
3.02 anization. The Borrower is a organized under the laws of Pennsylvania. The
Borrower's exact legal name is as set forth in the first paragraph of this Security Agreement. The
places of business of the Borrower are as set forth on Exhibit "B" and, if the Borrower has more than
one place of business, the chief executive offices of the Borrower are at the address set forth in
Exhibit B or at the location(s) hereafter disclosed to the Secured Party pursuant to Section 5.6 hereof.
3.03 Filings of Record Except as set forth on Exhibit "A" to this Security Agreement, no
financing statement covering any of the Collateral is on file in any public office, other than the
financing statements filed pursuant to this Security Agreement.
3
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5-6 Page 16 of 26
3.04 Other Representations. Each representation, warranty or other statement by the
Borrower in, or in connection with, any of the other Loan Documents is true and correct and states
all material facts necessary to make it not misleading.
Section 4. CoUggA n_. iisposiition and Use of Collateral. The Collateral shall be used,
disposed of and collected or collected upon in accordance with the Loan Agreement, this Security
Agreement and the other Loan Documents.
Section S. Covenants and Agnents of the Borrower.
5.01 Maintenance and Ins 'on of Books and Records. The Borrower shall maintain
complete and accurate books and records. The Borrower shall keep the Secured Party fully informed
as to the location of all such books and records and shall permit the Secured Party and its authorized
agents to have full, complete and unrestricted access thereto at any reasonable time and to inspect,
audit and make copies, at the Borrower's cost, of all books and records, data storage and processing
media, software, printouts, journals, orders, receipts, invoices, correspondence and other documents
and written or printed matter related to any of the Units Collateral. The Secured Party's rights
hereunder shall be enforceable at law or in equity, and the Borrower consents to the entry of judicial
orders or injunctions enforcing specific performance of such obligations hereunder.
5.02 Confirmation of Collateral. The Borrower agrees that the Secured Party shall at all
times have the right to confirm the existence and validity of the Units Collateral.
5.03 Notice of the Secured Ply's Interests, If requested by the Secured Party, the
Borrower shall give notice of the Secured Party's security interests in the Collateral to any third
person with whom the Borrower has any actual or prospective contractual relationship or other
business dealings.
5.04 Delivery of Certain Collateral to the Secured Pa Party. Immediately upon request by the
Security Party, the Borrower shall deliver to the Secured Party such Units Collateral as is requested
by the Secured Party.
5.5 Existence. The Borrower shall preserve its existence and not merge into or
consolidate with any other entity, or sell all or substantially all of its assets. The Borrower shall not
change the state of its organization, its name, place of business or chief executive office without
obtaining the prior written consent of the Secured Party.
4
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5-6 Page 17 of 26
5.6 Perfection of Secured Party's Interests.
(a) The Borrower agrees to cooperate and join, at its expense, with the Secured
Party in taking such steps as are necessary, in the Secured Party's judgment, to perfect or continue the
perfected status of the security interests granted hereunder, including, without limitation, the
execution and delivery of any financing statements, amendments thereto and continuation statements.
(b) The Secured Party may at any time and from time to time, file financing
statements, continuation statements and amendments thereto in Pennsylvania naming Borrower as
"Debtor" that describe the Collateral in particular and which contain any other information required
by the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment, including whether the Borrower is an organization,
the type of organization and any organization identification number issued to the Borrower. The
Borrower agrees to furnish any such information to the Secured Party promptly upon request. Any
such financing statements, continuation statements or amendments may be signed by the Secured
Party on behalf of the Borrower, and may be filed at any time in any jurisdiction whether or not
Revised Article 9 of the Uniform Commercial Code is then in effect in that jurisdiction.
(c) The Borrower shall, at any time and from time to time, take such steps as the
Secured Party may require for the Secured Party, (i) to obtain an acknowledgment, in form and
substance satisfactory to the Secured Party, of any third party having possession of any of the
Collateral that the third party holds such Collateral for the benefit of the Secured Party, and (ii)
otherwise to insure the continued perfection and priority of the Secured Party's security interest in
any of the Collateral and of the preservation of its rights therein.
5.7 Reimbursement and Indemnification. The Borrower agrees to reimburse the Secured
Party on demand for out-of-pocket expenses incurred in connection with the Secured Party's exercise
of its rights under this Security Agreement. The Borrower agrees to indemnify the Secured Party and
hold it harmless against any costs, expenses, losses, damages and liabilities (including reasonable
attorney's fees and court costs) incurred in connection with this Security Agreement, other than as a
direct result of the Secured Party's gross negligence or willful misconduct.
Section 6. Power of Attorney. The Borrower hereby appoints the Secured Party as its
lawful attorney-in-fact to do, at the Secured Party's option, and at the Borrower's expense and
5
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attachments
5-6 Page 18 of 26
liability; all acts and things which the Secured Party may deem necessary or desirable to effectuate its
rights under this Security Agreement, including without limitation, (a) file financing statements and
otherwise perfect any security interest granted hereby, (b) correspond and negotiate directly with
insurance carriers, (c) upon the occurrence of a Default hereunder, receive, open and dispose of in
any reasonable manner all mail related to the Units Collateral addressed to the Borrower, (d) upon
the occurrence of a Default hereunder, communicate with Borrower's customers and other third
parties for the purpose of protecting or preserving the Collateral, and (e) upon the occurrence of a
Default hereunder, in the Borrower's or the Secured Party's name, to demand, collect, receive, and
receipt for, compound, compromise, settle and give acquittance for, and prosecute and discontinue or
dismiss, with or without prejudice, any suit or proceeding respecting any of the Collateral.
Section 7. pefault. The occurrence of any one or more of the following shall be a default
("Default") hereunder:
7.01 Default Under Loan Agreement. The occurrence of an Event of Default under the
Loan Agreement or any of the other Loan Documents.
7.02 Failure to Observe Covenants. The failure of the Borrower to keep, observe or
perform any provisions of this Security Agreement.
7.03 R&resentatiop. Warranties. If any representation, warranty or certificate furnished by
the Borrower under or in connection with this Security Agreement shall, at any time, be materially
false or incorrect.
Section 8. Secured. Party's Rights Upon Default. Upon the occurrence of a Default
hereunder, or at any time thereafter, the Secured Party may immediately and without notice pursue
any remedy available at law or in equity to collect, enforce or satisfy any Obligations, including, any
or all of the following, which rights and remedies are cumulative, maybe exercised from time to
time, and are in addition to any rights and remedies available to the Secured Party under the Loan
Agreement or any of the other Loan Documents:
8.01 Uniform Commercial Code Rights. Exercise any and all of the rights and remedies of
a secured party under the Uniform Commercial Code, including the right to require the Borrower to
assemble the Collateral and make it available to the Secured Party at a place reasonably convenient
to the parties.
6
1 od26 /30/10 Desc Exhibit Attachments
Case 1:10-bk-01042-MDF Claim 25 6 P rt 39
8.02 Collection Riahts. Enforce the obligations of any person obligated on Collateral and
exercise the rights of the Borrower with respect to the obligation of any person obligated on
Collateral to make payment or otherwise render performance to the Borrower.
8.03 Sale of Collateral. Upon ten (10) calendar days' prior written notice to the Borrower,
which the Borrower hereby acknowledges to be sufficient, commercially reasonable and proper, sell
or otherwise dispose of any or all of the Collateral at any time and from time to time at public or
private sale, with or without advertisement thereof and apply the proceeds of any such sale first to
the Secured Party's expenses in preparing the Collateral for sale (including reasonable attorneys'
fees), second to the complete satisfaction of the Obligations and third, as required by the Uniform
Commercial Code, The Borrower waives the benefit of any marshalling doctrine with respect to the
Secured Party's exercise of its rights hereunder. The Borrower grants a royalty-free license to the
Secured Party for all patents, service marks, trademarks, tradenames, copyrights, computer programs
and other intellectual property and proprietary rights sufficient to permit Secured Party to exercise all
rights granted to Secured Party under this Section.
8.04 Set Off. The Secured Party shall have the right, in addition to all other rights and
remedies available to it, without notice to the Borrower, to apply toward and set-off against and
apply to the then unpaid balance of the Obligations any items or funds held by the Secured Party, any
and all deposits (whether general or special, time or demand, matured or unmatured, fixed or
contingent, liquidated or unliquidated) now or hereafter maintained by the Borrower for its own
account with the Secured Party, and any other indebtedness at any time held or owing by the Secured
Party to or for the credit or the account of the Borrower. For such purpose the Secured Party shall
have, and the Borrower hereby grants to the Secured Party, a first lien on all such deposits. The
Secured Party is hereby authorized to charge any such account or indebtedness for any amounts due
to the Secured Party. Such right of set-off shall exist whether or not the Secured Party shall have
made any demand under this Security Agreement, or any other Loan Document and whether or not
the other Obligations are matured or unmatured. The Borrower hereby confirms the Secured Party's
lien on such accounts and right of set-off, and nothing in this Security Agreement shall be deemed
any waiver or prohibition of such lien and right of setoff.
7
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5-6 Page 20 of 26
Section 9. Notices. Any written notices required or permitted by this Security Agreement
shall be effective if delivered in accordance with the Loan Agreement.
Section 10. Miscellaneous.
10.01 No Waiver. No delay or omission by the Secured Party in exercising any right or
remedy hereunder shall operate as a waiver thereof or of any other right or remedy, and no single or
partial exercise thereof shall preclude any further exercise thereof or the exercise of any other right or
remedy.
10.02 Preservation ofNahts. The Secured Party shall have no obligation or responsibility to
take any steps to enforce or preserve rights against any parties to any Account and such obligation
and responsibility shall be those of the Borrower exclusively.
10.03 Successors . The provisions of this Security Agreement shall inure to the benefit of
and be binding upon the Secured Party and the Borrower and their respective successors and assigns,
provided that the Borrower's obligations hereunder may not be assigned without the written consent
of the Secured Party.
10.04 Amendments . No modification, rescission, waiver, release or amendment of any
provisions of this Security Agreement shall be effective unless set forth in a written agreement
signed by the Borrower and an authorized officer of the Secured Party,
10.05 Governing Law. This Security Agreement shall be construed under the internal laws
of the Commonwealth of Pennsylvania without reference to conflict of laws principles.
10.06 ev abili . If any provision of this Security Agreement shall be held invalid or
unenforceable under applicable law in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of such provision in any other jurisdiction or the validity or
enforceability of any other provision of this Security Agreement that can be given effect without such
invalid or unenforceable provision.
10.07 Judicial Proceedings. Each party to this Security Agreement agrees that any suit,
action or proceeding, whether claim or counterclaim, brought or instituted by any party hereto or any
successor or assign of any party, on or with respect to this Security Agreement or the dealings of the
parties with respect hereto, shall be tried only by a court and not by a jury. EACH PARTY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL
8
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attachments
5-6 Page 21 of 26
BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives any right
it may have to claim or recover, in any such suit, action or proceeding, any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to, actual damages.
THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS PARAGRAPH IS A
SPECIFIC AND MATERIAL ASPECT OF THIS SECURITY AGREEMENT AND THAT THE
SECURED PARTY WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS
SET FORTH IN THIS PARAGRAPH WERE NOT A PART OF THIS SECURITY AGREEMENT.
10.08 Acknowl gment . THIS SECURITY AGREEMENT CONTAINS A POWER OF
ATTORNEY COUPLED WITH AN INTEREST AND IS FOR THE SOLE BENEFIT OF THE
SECURED PARTY. THIS SECURITY AGREEMENT IS BEING EXECUTED IN CONNECTION
WITH A LOAN OR OTHER FINANCIAL TRANSACTION FOR BUSINESS PURPOSES AND
NOT PRIMARILY FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. THE SECURED
PARTY UNDER THE POWER OF ATTORNEY, IS NOT A FIDUCIARY FOR THE
BORROWER. IN EXERCISING ANY OF ITS RIGHTS OR POWERS PURSUANT TO THE
POWER OF ATTORNEY, THE SECURED PARTY MAY DO SO FOR THE SOLE BENEFIT OF
THE SECURED PARTY AND NOT FOR THE BORROWER. THE PARTIES ACKNOWLEDGE
AND AGREE THAT THE PROVISIONS OF TITLE 20, PENNSYLVANIA CONSOLIDATED
STATUTES, SECTION 5601 ET SEQ. AS AMENDED (SPECIFICALLYINCLUDINGACT 39
OF 1999) SHALL NOT BE APPLICABLE TO THE POWER OF ATTORNEY.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
executed and delivered by their authorized officers the day and year first above written.
ATTEST:
BY 4
'
"William Kollas
Secretary
YORKTOWN FUNDING, INC.
By:
MROffR. Kensinger
President
9
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5-6 Page 22 of 26
COMMERCE BANKMARRISBURG, N.A.
By: Name:-
Title:---
10
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5-6 Page 23 of 26
OTHER LIENS AND ENCUMBRANCES AND FILINGS
NONE
11
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5-6 Page 24 of 26
JQMT B
Location of books and records and chief executive office:
Suite 101
1104 Fernwood Avenue
Camp Hill, Pennsylvania 17011
12
Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attachments
5-6 Page 25 of 26
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF Q)3.Mea-U4 JO
. SS:
On this, the day of ?A?2005 , before me, a Notary
Public, personally appeared _ C-jAjLltd• X-e z,,. LA" , known to me to
be the person whose name is subscribed to the within &cument and acknowledged that she
executed the foregoing for the purpose therein contained.
IN WTINESS WHEREOF, I have hereunto set my hand and official seal.
7
Notary Notary Public
Cm::= J My Commission Expires: (9 &4
my ift Case 1:10-bk-01042-MDF Claim 28-1 Part3 Filed 09/30/10 Desc Exhibit Attachments
5-6 Page 26 of 26
UCC FINANCING STATEMENT
A. NAME A PNOW OP CONTACTAT PM (apeawQ
GEOFFREY & SHUFF (717) 737.3405
8 3ENDACIOIO%K2D01 WTO:( "4WAdArn)
Gootfeey S. 5flt4 Esquire
SWh4 $huff, Flow & Linrbay
2100 Market Street
Camp H N, PA 17011
File Numbe : 200 81301782
Date Fined: 090 ?M 04:20 PM
Pedro A Co 6s
Secretary of the Commonwealth
I. DEBTORS EXACT FULL LEGAL NAME-komo*omdobN?Awno(Uorft)-doaotit?IrrrlMoamdUlwnon
OR I& OROA RMATAONS RAW YORKTOVMN FUNOM, iNQ
W NIDIVDLAII'S 1ASTT NMI! NAME MR)ME MIME SUFFIX
1a mwooo ADDRESS SUITE 101,1104 FERNYMOOD AVENUE STATE POSTAL CODE Oow-w-
CrtV CAMP HLL PA 17011 USA
to TAX 0 r SSN OR EIN ADOt WO RE a TYPE OF ORGAMiAT*N It .t;1R OMFION OF ORWJWATION 1¢ OROAIerAlKWAL M AS r &V
MwrOR T sU8INE35 PENNSYLVANIA 0 MW
CORPORATION PA 2028480
z ADDMONALOEBTOR'SEXACT FULL LEGAL NAME-t+aNto*gagdowwmw(uw20)-do not=Iopaoon?MnrMs
OROA MMU10NS NAME
OR
2b. NIDIVIDUALI LAST NAME FIRST NAME MIDDLENAME btJP u
20. MAILM ADDRESS CRY STATE FOETAL CODE COON rAt
2d. TAX IO t SP OR EW fADIM WO RE TYPE OF ORSAWATM 2L. &W48DICTION OP ORO XE TKRI 4 OROANQATK*W 1DN, S ov
D JORWAWATION
13 um
a SECUREDPARTI"aNAME(vRANFatTOTALASQION?sAR?iRDttEAP)-Yr?+mlraDE•r?doMrwm.f?orae)
OR a. OROMOZATIOMB NAME COMMERCE MWHARMSBURG, N.A.
a Np1dWJAL'8 LAST NAME FWT MWS MSX7LE ROME SUFFIX
8a MWJW ADDRESS P.O. BOX #=
2d. TAX IO V SSN OR EIN LADOPLW
CAMP NLL PA 170014 UaA
RNOICaIONOFORGAtWATION 2a OROANUATIONALI EY&V
I DESTOR 1°^ NATIONAL BANKING
ASSWATON USA
4. Th1s FINANCMOt3TATEJwENTcolrerstlre fobwinp ooNstaal: Affil ofDeblorS dpAt, tlps turd lnleraSt ln.lo txtd undalhS nwlpp ba* rnaft owLled
and deNvered by 1M DebWs vid m m to tine DebW. and 01s mor%nes wN ch ssauro the bands or rata, the pwnw*M Arm x*v c o - Him Wromod
therdo. the firs and aesuWp Wi*s whdod Monift and fIe proceeds owed, andfiaftsltawanae poMdes o1oled -mew and lw p vm* thsneo4 for#*
manubdumd or modular homes forwwtft Aramolnp k provided bythe Seared P , and aN monies of theOoblorialft et any0w the 8saEed PwdysW
haw or shah Mate to ftM to hawin fear poesesebn; and aA books and reoads er atoGg a? teMfitp to 1h haaa tar whldt finmtdtq is proMded by the
Socund Party, IncNndlnD, wNhout tllydtadon, bttklp rncads of wary kind and dsaaipGor?, atsbrrna Nsb. data sbrape and proCetsinp medlar, sofbmare and
any aMMft or my aompuW service bbuceaw. and all eds of?iny? of do fMaab oobtarel any of the faropoknp whkdt ero in iM posssestort of
FIUNG OFFICE COPY --MTIONAL UCC FWANCLNG STATEMENT (FORM UCC1) (REV. a7MMI)
Case 1:10-bk-01042-MDF Claim 28-1 Part4 Filed 09/30/10 Desc Exhibit Attachments
T-9 r-dyu 2 012#
~~b
}~ ill ~r~ ~ MON~~A~.
2QIZ aI1G 17 AM IQ: 32
~%UMSERLANO G4U.NTY
~~NNSYL,VANIA
METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 -Phone
(717) 236-1816 -Fax
METRO BANK, f/k/a Commerce .
Bank/Harrisburg, N.A., .
Plaintiff
1N THE COURT OF COMMON PL$AS OF
CUMBERLAND COUNTY, PENN$YLVAZ
DOCKET NO. 2012-1340
v.
WILLIAM C. KOLLAS,
Defendant
PRAECIPE TO WITHDRAW PRELIMINARY OBJECTIONS
TO THE PROTHONOTARY:
Please withdraw Plaintiff s Preliminary Objections to Defendant's Answer, New Matter
and Counterclaim filed in the above action on July 23, 2012.
Respectfully submitted,
METTE, EVANS & WOODSIDE
By:
Bather Z. Kell , squire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 -Phone
(717) 236-1816 -Fax
Attorneys for Plaintiff
Date: August 16, 2012
METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 -Phone
(717) 236-1816 -Fax
METRO BANK, f/k/a Commerce
Bank/Harrisburg, N.A.,
Plaintiff
v.
WILLIAM C. KOLLAS,
Defendant
~r (1`rL ~'~tITHQf~(7TAF;v
~~'ii' A~~ 2$ !'~P91q~ 23
~LhPdSYLVANIA
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVAI
DOCKET NO. 2012-1340
NOW COMES, Plaintiff, Metro Bank f/k/a Commerce BanklHarrisburg, N.A.
("Plaintiff"), by and through counsel, and files the within Preliminary Objections to Defendant'
Answer, New Matter and Counterclaim, in support whereof Plaintiff avers as follows:
PROCEDURAL HISTORY
1. Plaintiff initiated this action by filing a Complaint on February 29, 2412,
to enforce Defendant's personal guaranty of a loan made by Plaintiff to non-party Yorktown
Funding, Inc. ("Yorktown") pursuant to a Guaranty and Suretyship Agreement exeGUted by
Defendant on September 1, 2005 (the "Guaranty").
__~
2. On Apri15, 2012, Defendant filed Preliminary Objections in the nature of
demurrer, alleging that Plaintiff failed to satisfy a condition requiring Plaintiff to pursue
Yorktown before enforcing the Guaranty. ~
3. The parties filed comprehensive briefs regarding the issues raised in Defendant'
Preliminary Objections, and the Court held oral argument on the Preliminary Objections on
1, 2012.
4. By Order dated June 19, 2012, the Court overruled Defendant's Preliminary
Objections in their entirety.
5. On July 3, 2012, Defendant filed an Answer, New Matter and Counterclaim.
6. On July 23, 2012, Plaintiff filed Preliminary Objections to Defendant's Answer,
New Matter, and Counterclaim.
7. Defendant filed an Amended New Matter and Counterclaim on August 8, 2012,
8. On August 17, 2012, Plaintiff filed a Praecipe to Withdraw Preliminary
Objections.
FACTUAL ALLEGATIONS
Defendant's Allesations Resarding Perfection of Yorktown Collateral
9. The above Paragraphs are incorporated by reference.
10. In the Amended New Matter, Defendant asserts that "Plaintiff had a duty
to...Defendant Guarantor under 13 Pa.C.S.A. §3605(e), §3605(f), and §3605(8) to properly
obtain and perfect its liens on all of the Yorktown [collateral]" and "under 13 Pa.C.S. §9607(c)
to act in a commercially reasonable manner in collecting and enforcing its claim," but that
' Additionally, Defendant's Preliminary Objections asserted that Plaintiff failed to comply with Pennsylvania
of Civil Procedure 1019(1). This portion of Defendant's Preliminary Objections are not relevant herein.
2
"Plaintiff breached its duty to Defendants under [those statutes) by failing to properly obtain
and/or perfect a lien [on the collateral]." (Def. Amended New Matter at ¶¶ 9, 10, 15).
11. In the Amended New Matter, Defendant further asserts that "Plaintiff had a
to Defendant under the Guaranty to take... appropriate actions to perfect Plaintiff s
lien on Yorktown's assets." (Def. Amended New Matter at ¶11).
12. Defendant takes the position that Plaintiff "breached its duties" under the
Guaranty and other loan documents by its alleged failure to perfect its liens on Yorktown's
collateral. (Def. Amended New Matter at ¶19).
13. Defendant further avers that Plaintiff's alleged failure to perfect its liens on
Yorktown's collateral is a "breach[] of its duty of good faith and fair dealing" in connection
the Guaranty and other loan documents. (Def. Amended New Matter at ¶20).
14. Finally, Defendant contends that Plaintiff s alleged failure to perfect its liens on
Yorktown's collateral will result in $981,500 being distributed to creditors of Plaintiff other
Yorktown, and, therefore, Defendant is entitled to a setoff of his obligations in this amount.
(Def. Amended New Matter at ¶¶22-27).
Defendant's Allegations Regardins Liquidation of Yorktown Collateral
15. The above Paragraphs are incorporated herein by reference.
16. Defendant avers that, in the Yorktown Bankruptcy, Plaintiff has beery negligent
not seeking to liquidate its collateral or receive adequate protection (interest) payments from
Yorktown. (Def. Amended New Matter at ¶¶30-36, 42).
17. Defendant further avers that Plaintiff has allowed Yorktown to use cash
interest free since the bankruptcy filing date, and that Plaintiff was negligent and breached its
duties under the loan documents with Yorktown and the Guaranty in not taking prompt action
3
liquidate collateral or obtain payments from Yorktown. (Def. Amended New Matter at ¶¶37,
43).
18. Defendant contends that Plaintiffhas violated a duty under 13 Pa.C.S.A.
§3605(e), §3605(fj, §3605(8), and §9607(c) to preserve the value of collateral, failing to
liquidate the collateral, and by failing to act in a commercially reasonable manner in enforcing
claim against Yorktown. (Def. Amended New Matter at ¶¶40-41).
19. Finally, Defendant avers that it is entitled to a setoff of its obligations to
in the amount of $349,028.25, representing interest that has accrued since the filing of the
Yorktown Bankruptcy as a result of Plaintiff not taking action to liquidate collateral or obtain
adequate protection payments from Yorktown. (Def. Amended New Matter at ¶¶34-36).
Defendant's Allegations Regarding Alleged Failure to Satisfy Condition Puecedent
20. The above Paragraphs aze incorporated herein by reference.
21. Defendant's New Matter further alleges that Plaintiff has failed to satisfy a
condition precedent under the Guazanty prior to filing this action. (Def. Amended New Matter
¶¶53-57).
22. In an azgument identical to that raised, and overruled, on Preliminary
Defendant asserts that Plaintiff has not properly pursued Yorktown's assets before exercising i1
rights and remedies under the Guazanty and that Plaintiff is not "legally barred" from pursuing
Yorktown's assets by the automatic stay in the Yorktown Bankruptcy. (Def. Amended New
Matter at ¶¶54,57).
AMENDED COUNTERCLAIM
23. The above Paragraphs aze incorporated herein by reference.
4
24. Defendant's Amended Counterclaim is based on allegations that "As a result of
Plaintiff s breach of contract, and violation of 13 Pa.C.S.A. §3605(e), §3605(fj, §3605(g) and 1
Pa.C.S.A. §9607(c), Defendant William C. Kollas has sustained damages in the amount of no
less than $1,330,528.25." (Def. Amended Counterclaim at ¶64).
25. Based on the above averment, Defendant seeks entry of judgment in the amount
of $1,330,528.25 plus other relief. (Def. Amended Counterclaim at p. 11).
FIRST PRELIMINARY OBJECTION
Demurrer
(Defenses/Counterclaims for Alleged Failure to Perfect Security Inter~at)
26. The above Paragraphs aze incorporated herein by reference.
27. Defendants' defense/counterclaim based on Plaintiff s alleged failure to perfect
liens should be dismissed pursuant to Pennsylvania Rule of Civil Procedure 1028(4) (legal
insufficiency of the pleading).2
28. The Guaranty includes the following provisions (collectively the "Waivers"):
a. "The obligations of Guazantor... aze independent of...the availability of
any collateral or security for the obligations." (Guaranty, Ex. B to
Complaint, at p. 1 Section 1).
b. "Guazantor hereby voluntarily, intelligently, knowingly and
unconditionally waives...any defense or circumstance which might
constitute a legal or equitable dischazge of guarantor or surety."
(Guaranty, Ex. B to Complaint, at p. 2 Section 2).
z Plaintiff is not herein conceding that it did not properly perfect its security interest in the site built homes, but,
recognizes that for the purpose of Preliminary Objections, the Court must view the facts alleged in the Complaint
true.
5
29. Plaintiff did not owe, nor did it breach, any duty to Defendant under Section
of the Pennsylvania Commercial Code not to impair, or to "properly obtain and perfect," its
on the Yorktown collateral:
a. Section 3605 does not contain an affirmative duty to protect collateral,
instead provides suretyship defenses under certain circumstances;
b Defendant is not an "indorser or accommodation party" under Section
3605(e);
c. The defense of impairment of collateral is not available to Defendant
pursuant to Section 3605(1) of the Commercial Code because Defendant
has waived such defenses pursuant to the Waivers contained in the
Guaranty.
30. Plaintiff did not owe, nor did it breach, any duty to Defendant under Section
9607(c) of the Pennsylvania Commercial Code because Section 9607(c) does not in any way
relate to the perfection of a security interest.
31. The provisions of Sections 9625 and 9626 of the Pennsylvania Commercial
are not applicable because there has been no violation of Article 9 of the Commercial Code.
32. Defendant is not a party to the Line of Credit Agreement, Security Agreement,
Financing Agreement, or any other loan document, with the exception of the Guaranty.
Therefore, Plaintiff did not breach any duty to Defendant under such documents.
33. Plaintiff did not owe, nor did it breach, any duty to Defendant under the
to properly obtain and/or perfect its liens on the Yorktown collateral.
34. Finally, the Court has already held that Plaintiff is not obligated under the terms
of the Guaranty to pursue collection actions against Yorktown prior to filing an action to
6
the Guaranty, and, therefore, the perfection of any security interest in collateral pledged by
Yorktown is irrelevant to Defendant's obligations under the Guaranty.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an
dismissing Defendants' defenses/counterclaims based on Plaintiff s alleged failure to perfect a
security interest in collateral pledged by Yorktown.
Second Preliminary Obiection
Demurrer
(Defenses/Counterclaims for Alleged Failure to Liquidate or Protect Call~teral)
35. The above Paragraphs are incorporated herein by reference.
36. Defendant's defenses/counterclaims for the alleged failure to liquidate or
collateral in the Yorktown Bankruptcy should be dismissed pursuant to Pennsylvania Rule of
Civil Proceedure 1028(4) (legal insufficiency of the pleading).
37. Plaintiffhad no legal or contractual duty to Defendant to take affirmative steps
liquidate or protect its cash collateral pursuant to the Guaranty or other loan documents in the
event that Yorktown filed for Bankruptcy.
38. Yorktown had an affirmative duty under the Bankruptcy Code to provide
adequate protection payments to its secured creditors (including Plaintiff) and for court
to utilize its cash collateral.
39. Plaintiff did not owe, nor did it breach, any duty to Defendant under Section
of the Pennsylvania Commercial Code to liquidate or obtain interest or other adequate
payments for Yorktown's use of collateral:
a. Section 3605 does not contain an affirmative duty to protect collateral,
instead provides suretyship defenses under certain circumstances;
7
b Defendant is not an "indorser or accommodation party" under Section
3605(e);
c. The defense of impairment of collateral is not available to Defendant
pursuant to Section 3605(1) of the Commercial Code because Defendant
has waived such defenses pursuant to the Waivers contained in the
Guaranty.
40. Plaintiff did not owe, nor did it breach, any duty to Defendant under Section
9607(c) of the Pennsylvania Commercial Code because Section 9607(c) does not create an
affirmative duty to liquidate collateral or to obtain interest or other adequate protection
for Yorktown's use of collateral.
41. The provisions of Sections 9625 and 9626 of the Pennsylvania Commercial
are not applicable because there has been no violation of Article 9 of the Commercial Code.
42. Defendant is not a party to the Line of Credit Agreement, Security Agreement,
Financing Agreement, or any other loan document, with the exception of the Guaranty.
Therefore, Plaintiff did not breach any duty to Defendant under such documents.
43. Under the circumstances (i.e., Yorktown filing for bankruptcy), Plaintiff did not
owe, nor did it breach, any duty to Defendant under the Guaranty to liquidate collateral or
interest or other adequate protection payments for Yorktown's use of collateral.
44. To the contrary, Yorktown had an affirmative duty under the Bankruptcy Code
provide adequate protection payments to its secured creditors (including Plaintiff j and for
approval to utilize its cash collateral.
45. The Court has already held that Plaintiff is not obligated under the terms of the
Guaranty to pursue collection actions against Yorktown prior to filing an action to enforce the
8
Guaranty, and, therefore, value of any collateral pledged by Yorktown and the actions taken by
Plaintiff in Bankruptcy Court are irrelevant to Defendant's obligations under the Guaranty.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an order
dismissing Defendant's defenses/counterclaims based on an alleged failure to liquidate or
collateral pledged by Yorktown.
Third Preliminary Objection
Demurrer
Defense for Alleged Failure to Satisfy Contractual Condition Precedent)
46. The above Paragraphs are incorporated herein by reference.
47. Defendant's defense based on the alleged failure to satisfy a contractual
precedent should be dismissed pursuant to Pennsylvania Rule of Civil Proceedure 1 U28(4)
insufficiency of the pleading).
48. Specifically, the Guaranty states: "[s]hould [Plaintiff) be legally barred from
pursuing [Yorktown] or [Yorktown's] assets for repayment of [Yorktown's] liabilities for any
reason, including but not limited to bankruptcy stay... [Plaintiff) may treat [Yorktown's]
obligations as being forthwith due and payable by [Defendant] under the terms of the Guaranty,
and [Plaintiff) may exercise and enforce [Plaintiff s] rights and remedies hereunder against
[Defendant] and/or [Defendant's] property" (Guaranty, attached to Complaint as Exhibit B, at
2)(emphasis added).
49. In overruling Defendant's Preliminary Objections, this Court has already held
that, because of the Yorktown Bankruptcy filing, pursuing Yorktown is not a condition
to Plaintiff s enforcement of its rights under the Guaranty.
9
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an order
dismissing Defendant's defense based on an alleged failure to satisfy a contractual condition
precedent.
Fourth Preliminary Objection
Demurrer
(Counterclaim)
50. The above Paragraphs aze incorporated herein by reference.
51. Defendant's counterclaim based on Plaintiff s alleged "breach of contract" and
alleged violations of the Pennsylvania Commercial Code should be dismissed pursuant to
Pennsylvania Rule of Civil Proceedure 1028(4) (legal insufficiency of the pleading).
52. Plaintiff has not breached any provisions of the Guaranty.
53. Plaintiff has not violated any provision of the Pennsylvania Commercial Code.
WHEREFORE, Plaintiff respectfully requests that this Honorable Court enter an order
dismissing Defendant's counterclaim in its entirety.
Respectfully submitted,
METTE, EVANS & WOODSIDE
By:
Heather Z. Kell , squire
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 -Phone
(717) 236-1816 -Fax
Attorneys for Plainti, f~ j`~
Date: August 27, 2012
10
CERTIFICATE OF SERVICE
I certify that I am this day serving a copy of the foregoing document upon the person(s)
and in the manner indicated below, which service satisfies the requirements of the Pennsylvania
Rules of Civil Procedure, by depositing a copy of same in the United States Mail at Harrisburg,
Pennsylvania, with fast-class postage, prepaid, as follows:
Markian R. Slobodian, Esquire
801 N. Second Street
Harrisburg, PA 17102
METTE, EVANS & WOODSIDE
Date: August 27, 2012
By:
Heather Z. Ke , Esquir
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000 -Phone
(717) 236-1816 -Fax
Attorneys for Plaintiff
11
s~6a~i
METRO BANK, f/k/a COMMERCE
BANK/HARR.ISBURG, N.A.,
Plaintiff,
V.
WILLIAM C. KOLLAS,
Defendant.
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
No. 2012-1340 CIVIL
IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANT'S
AMENDED NEW MATTER AND COUNTERCLAIM
BEFORE HESS, P.J., MASLAND AND PLACEY, J.J.
ORDER
AND NOW, this .2 b * day of December, 2012, upon consideration of Plaintiff's
Preliminary Objections to Defendant's Amended New Matter and Counterclaim, following
argument, and for the reasons contained in the opinion filed of even date herewith, Plaintiff's
preliminary objections are hereby SUSTAINED, and Defendant's defenses and counterclaim
contained in the within New Matter and Counterclaim based on an alleged failure to perfect a
security interest in certain collateral pledged by Yorktown Funding, Inc., an alleged failure to
liquidate or protect collateral pledged by Yorktown Funding, Inc., and an alleged failure to
satisfy a contractual condition precedent are hereby dismissed.
u' Heather Z. Kelly, Esquire
For the Plaintiff
Markian R. Slobodian, Esquire
For the Defendant
BY THE COURT,
Kevin ess, P.J. -'
y ? +? Pry
W
METRO BANK, f/k/a COMMERCE
BANK/HARRISBURG, N.A.,
Plaintiff,
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
V.
WILLIAM C. KOLLAS,
Defendant.
No. 2012-1340 CIVIL
IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANT'S
AMENDED NEW MATTER AND COUNTERCLAIM
BEFORE HESS, P.J., MASLAND AND PLACEY, J.J.
OPINION and ORDER
Plaintiff Metro Bank has filed Preliminary Objections to Defendant's Amended New
Matter and Counterclaim pursuant to Pa.R.Civ.P. 1028(a). (Plaintiff's Preliminary Objections to
Defendant's Amended New Matter and Counterclaim, filed Aug. 28, 2012). The underlying
complaint in this case seeks to enforce a guaranty and suretyship agreement which Plaintiff has
alleged was signed by Defendant and which is alleged to have unconditionally guaranteed
payment under a $7,000,000 demand note in the event of default by the borrower, Yorktown
Funding, Inc. and upon the inability of Plaintiff to collect directly from Yorktown. (Complaint, ¶
5, Ex. A, filed Feb. 29, 2012). Defendant has filed an Answer and an Amended New Matter and
Counterclaim which has been preliminarily objected to in the form of a demurrer to Defendant's
asserted defenses and counterclaim.
The facts of this case may be summarized as follows. Plaintiff is a Pennsylvania state
chartered bank, and Defendant is the President of Yorktown Funding, Inc. (hereinafter
"Yorktown"). (Complaint, ¶¶ 1, 3) (Admitted in Answer, ¶¶ 1, 3). Plaintiff's Complaint alleges
that, on September 1, 2005, Yorktown executed a demand note, attached to Plaintiff's Complaint
at Exhibit A, in favor of Plaintiff in the original principal amount of $7,000,000 and which
evidenced a line of credit extended to Yorktown. (Complaint, ¶ 5, Ex. A) (Admitted in
substantial part in Answer, ¶ 5). On that same date, Defendant executed a Guaranty and
Suretyship Agreement, attached to Plaintiff's Complaint at Exhibit B, in which Defendant is
alleged to have "unconditionally guaranteed Yorktown's payment obligations under the Note
(the `Guaranty')." (Complaint, ¶ 6, Ex. B) (Admitted in substantial part in Answer, ¶ 6).
Plaintiff's Complaint alleged. that Yorktown has defaulted under the Note for, among other
things, the failure to make payment when due. (Complaint, ¶ 7). On February 9, 2012,
Yorktown filed a bankruptcy petition under Chapter 11 of the United States Bankruptcy Code in
the United States District Court for the Middle District of Pennsylvania. (Complaint, ¶ 8)
(Admitted in Answer, ¶ 8).
In its Complaint, Plaintiff alleged that Defendant has become liable over to it for the
uncollected and outstanding balance due and owed under the Note, and has averred that, pursuant
to the terms of the Guaranty and Suretyship Agreement, all conditions precedent to its ability to
enforce the Guaranty have been satisfied. (Complaint, ¶ 9). In support thereof, Plaintiffs
Complaint set forth the following from the Guaranty and Suretyship Agreement:
Should [Plaintiff) be :legally barred from pursuing [Yorktown] or [Yorktown's]
assets for repayment of [Yorktown's] liabilities for any reason, including but not
limited to bankruptcy stay. . .[Plaintiff] may treat [Yorktown's] liabilities to
[Plaintiff] as being forthwith due and payable by [Defendant] under the terms of
this Guaranty, and [Plaintiff] may exercise and enforce [Plaintiffs] rights and
remedies hereunder against [Defendant] and [Defendant's] property.
(Complaint, ¶ 9) (bracketed quotations original).
Plaintiffs Complaint contains one count of breach of contract, asserting that Defendant
has failed to make payment to Plaintiff as required by the Guaranty, and setting forth damages
calculated as follows:
2
Principal: $4,223,339.23
Interest: $4,493.10
Satisfaction Fees: $227.50
Late Fees: $496.44
TOTAL: $4,228,606.27
(Complaint, ¶ 15).
On April 26, 2012, Defendant filed preliminary objections to Plaintiff's Complaint,
which included a demurrer to Plaintiff's breach of contract claim, contending that Plaintiff
"failed to `first satisfy Borrower's [Yorktown's] liabilities to Bank by directly pursuing
Borrower and Borrower's assets' as required by the Guaranty," and, furthermore, asserting that
Plaintiff was not "`legally barred from pursuing Borrower [Yorktown] or Borrower's assets for
repayment of Borrower's liabilities."' (Preliminary Objections of Defendant William C. Kollas,
¶¶ 8-9, filed Apr. 26, 2012). Defendant's preliminary objections were overruled and, shortly
thereafter, Defendant filed an. Answer, New Matter and Counterclaim. Following preliminary
objections thereto, Defendant filed an Amended New Matter and Counterclaim. Therein
Defendant alleges that Plaintiff has failed to proceed in a commercially reasonable manner in
undertaking to collect from or enforce Defendant's alleged obligation in violation of 13
Pa.C.S.A. § 9607(c), impaired the value of the bank's interest in the collateral in violation of 13
Pa.C.S.A. § 3-605(e), (f), and (g), acted in bad faith, and failed to satisfy a contractual condition
precedent by failing "to `first attempt to satisfy Borrower's [Yorktown's] liabilities to Bank by
directly pursuing Borrower and Borrower's assets' as required by the Guaranty." (Amended
New Matter and Counterclaim, filed Aug. 9, 2012). Additionally, Defendant's counterclaim
requested damages for Plaintiffs alleged breach of contract and violation of 13 Pa.C.S.A. §
3605(e), § 3605(f), § 3605(8), and § 9607(c). Defendant's Amended New Matter and
Counterclaim has been preliminarily objected to in the form of a demurrer.
3
Pursuant to Pennsylvania Rule of Civil Procedure 1028(a), preliminary objections may be
filed by any party to any pleading on several grounds, including the following:
(2) Failure of a pleading to conform to law or rule of court ...;
(3) Insufficient specificity in a pleading;
(4) Legal insufficiency of a pleading (demurrer).
Pa.R.C.P. 1028(a)(2), (3), (4).
In this Commonwealth, the standard of review for preliminary objections is well-settled.
Preliminary objections are properly sustained only when, "based on the facts pleaded, it is clear
and free from doubt that the complainant will be unable to prove facts legally sufficient to
establish a right to relief." Mazur v. Trinity Area School Dist., 599 Pa. 232, 240-41, 961 A.2d 96,
101 (2008) (internal citations omitted). In considering preliminary objections, "all well-pleaded
allegations and material facts averred in the [pleading], as well as all reasonable inferences
deducible therefrom, must be accepted as true." Wurth by Wurth v. City of Philadelphia, 136 Pa.
Commw. 629, 638, 584 A.2d 403, 407 (1990). However, the trial court "need not accept as true
conclusions of law, unwarranted inferences from fact, argumentative allegations, or expressions
of opinion." Penn Title Insurance Co. v. Deshler, 661 A.2d 481, 483 (Pa.Cmwlth. 1995).
The standard of review for a demurrer is likewise well-settled; "[a] preliminary objection
in the nature of a demurrer is properly granted where the contested pleading is legally
insufficient. Preliminary objections in the nature of a demurrer require the court to resolve the
issues solely on the basis of pleadings, no testimony or other evidence outside of the complaint
may be considered to dispose of the legal issues presented by the demurrer." Strausser v.
PRAMCQ III, 2008 PA Super 28, ¶ 12, 944 A.2d 761, 764-65 (internal citations omitted). A
demurrer is "an assertion that a complaint does not set forth a cause of action or a claim on
4
which relief can be granted." Lerner v. Lerner, 2008 PA Super 183, ¶ 11, 954 A.2d 1229,
1234 (internal citations omitted). "The question presented by the demurrer is whether, on the
facts averred, the law says with certainty that no recovery is possible. Where a doubt exists as to
whether a demurrer should be sustained, this doubt should be resolved in favor of overruling it."
Wawa, Inc. v. Alexander J. Litwornia & Associates, 2003 PA Super 55, ¶ 2, 817 A.2d 543, 544
(quoting Price v. Brown, 545 Pa. 216, 221, 680 A.2d 1149, 1151 (1966)). If any theory of law
will support the claim raised by the complaint, dismissal is improper. Slaybaugh v. Newman,
330 Pa.Super. 216, 220, 479 A.2d 517, 519 (1984).
Plaintiff's first preliminary objection is a demurrer to Defendant's asserted defenses and
counterclaims based on an "alleged failure to perfect security interest." (Preliminary Objections,
¶¶ 26-34). Specifically, Plaintiff takes issue with the following averments of Defendant's
Amended New Matter and Counterclaim:
9. Plaintiff had a duty to Yorktown and Defendant Guarantor under 13. Pa.C.S.A.
§3605(e), §3605(f), and §2605(g) to properly obtain and perfect its lien on all of
the Yorktown customer loans, including, without limitation, the site build homes
[i.e. all of the Yorktown collateral].
10. Plaintiff had a duty to Yorktown and Defendant Guarantor under 13 Pa.C.S.A.
§9607(c) to act in a commercially reasonable manner in collecting and enforcing
its claim against Yorktown and Defendants.
11. Plaintiff had a duty to Defendant under the Guaranty to pursue Yorktown's
assets and to take reasonable collection actions, including appropriate actions to
perfect Plaintiffs contemplated lien on Yorktown's assets.
15. Plaintiff breached its duty to Defendant under 13 Pa.C.S.A. §3605(e),
§3605(f), §3605(g), and 13 Pa.C.S.A. 9607(c) by failing to properly obtain and/or
perfect a lien on all of the Customer Loans and collateral for the loans, including,
without limitation, the site built homes.
5
19. Plaintiff breached its duties under the Line of Credit, Security Agreement,
guaranty, and the other loan documents by failing to properly obtain and/or
perfect. its lien on all. of the Customer Loans and collateral for the Customer
Loans.
20. Plaintiff has breached its duty of good faith and fair dealing in connection
with the Note, the Guaranty, the Financing Agreement, the Security Agreement
and the related agreements between the parties.
(Defendant's Amended New Matter and Counterclaim, ¶¶ 9-11, 15, 19, 20). Additionally,
Defendant asserted that, because of Plaintiff's alleged failure to perfect its liens on the Yorktown
collateral, $981,500.00 will be distributed to creditors of Plaintiff other than Yorktown, and,
therefore, Defendant contends he is entitled to a setoff of his obligations in this amount.
(Defendant's Amended New Matter and Counterclaim, ¶¶22-27). Thus, Plaintiff's first
preliminary objection, a demurrer, seeks the dismissal of Defendant's defense and counterclaim
based on the alleged failure to perfect liens as purportedly required by 13 Pa.C.S.A. § 3605.
13 Pa.C.S.A. § 3605 provides, in pertinent part, as follows:
(e) Impairment of collateral; discharge of indorser or accommodation party.
If the obligation of a party to pay an instrument is secured by an interest in
collateral and a person entitled to enforce the instrument impairs the value of the
interest in collateral, the obligation of an indorser or accommodation party having
a right of recourse against the obligor is discharged to the extent of the
impairment. The value of an interest in collateral is impaired to the extent the
value of the interest is reduced to an amount less than the amount of the right of
recourse of the party asserting discharge or the reduction in value of the interest
causes an increase in the amount by which the amount of the right of recourse
exceeds the value of the interest. The burden of proving impairment is on the
party asserting discharge.
(f) Impairment of collateral; discharge of party jointly and severally liable. If
the obligation of a party is secured by an interest in collateral not provided by an
accommodation party and a person entitled to enforce the instrument impairs the
value of the interest in collateral, the obligation of any party who is jointly and
severally liable with respect to the secured obligation is discharged to the extent
the impairment causes the party asserting discharge to pay more than that party
would have been obliged to pay, taking into account rights of contribution, if
impairment had not occurred. If the party asserting discharge is an
6
accommodation party not entitled to discharge under subsection (e), the party is
deemed to have a right to contribution based on joint and several liability rather
than a right to reimbursement. The burden of proving impairment is on the party
asserting discharge.
(g) Impairing value of an interest in collateral. Under subsection (e) or (f),
impairing value of an interest in collateral includes:
(1) failure to obtain or maintain perfection or recordation of the interest in
collateral;
(2) release of collateral without substitution of collateral of equal value;
(3) failure to perform a duty to preserve the value of collateral owed, under
Division 9 (relating to secured transactions) or other law, to a debtor or surety
or other person secondarily liable; or
(4) failure to comply with applicable law in disposing of collateral.
(i) Other limitations on discharge. A party is not discharged under this section
if.
(2) the instrument or a separate agreement of the party provides for waiver of
discharge under this section either specifically or by general language
indicating that parties waive defenses based on suretyship or impairment of
collateral.
13 Pa.C.S.A. § 3605(e)-(g), (i).
Comment 2 of the official comments to the Commercial Code is highly instructive of this
complex provision of the statute, and explains that the suretyship defenses set forth in § 3605,
while important in their own right, are often waived in the commercial context and, thus, are
often rendered inapplicable by agreement of the parties. Comment 2 provides as follows:
2. The importance of suretyship defenses is greatly diminished by the fact that
they can be waived. The waiver is usually made by a provision in the note or
other writing that represents the obligation of the principal debtor. It is standard
practice to include a waiver of suretyship defenses in notes given to financial
institutions or other commercial creditors. Section 3-605(1) allows waiver. Thus,
7
Section 3-605 applies to the occasional case in which the creditor did not include
a waiver clause in the instrument or in which the creditor did not obtain the
permission of the surety to take the action that triggers the suretyship defense.
13 Pa.C.S.A. § 3605 (cmt. 2).
Turning to the underlying Guaranty and Suretyship Agreement in this case, we find that
the suretyship defense of impairment of collateral as set forth in § 3605 has been waived by
Defendant and, as a result, must fail as a matter of law. The Guaranty executed by Defendant
provides, in pertinent part, as follows:
1. ... This agreement is a continuing, absolute and unconditional guaranty
and suretyship of payment and not merely of collection. The obligations of
Guarantor hereunder are joint and several (if more than one), and are
independent of the obligations of Borrower and any other guarantor or surety for
the Obligations, and of the availability of any collateral or security for the
Obligations....
2. Guarantor hereby voluntarily, intelligently, knowingly and
unconditionally waives ... (c) any defense available to Borrower; and (d) any
defense or circumstance which might constitute a legal or equitable discharge of
a guarantor or surety.
(Complaint, Ex. B, "Guaranty and Suretyship Agreement", 1-2) (emphasis added).
In light of the foregoing, we are constrained to conclude that, after examining the
Guaranty and Suretyship Agreement signed by the parties, the Agreement contains a waiver of
the suretyship defense of impairment collateral as outlined in Paragraphs 1 and 2. Defendant's
obligations under the Agreement were "independent of...the availability of any collateral or
security" and a waiver of "any defense. ..which might constitute a legal or equitable discharge of
a guarantor or surety" was executed. Defendant having clearly waived the suretyship defenses of
§ 3605, and such waiver being statutorily permissible, we find that the defense of impairment of
collateral contained in the Amended New Matter and Counterclaim must be stricken as a matter
of law and, as a result, Plaintiff's first preliminary objection will be sustained. Because we find
8
that Defendant executed a waiver of the § 3605 suretyship defenses, we need not address the
matter of whether Defendant is an "indorser" or an "accommodation party" under the statute, for
we conclude that such defenses are inapplicable as a result of the waiver.
Plaintiff's second preliminary objection is a demurrer to Defendant's asserted defenses
and counterclaim which are based on an alleged failure to liquidate or protect certain collateral.
(Preliminary Objections, ¶¶ 35-45). In the Amended New Matter and Counterclaim, Defendant
has asserted that Plaintiff has failed to proceed in a commercially reasonable manner as required
by § 9607(c) of the Pennsylvania Commercial Code, 13 Pa.C.S.A. § 9607(c). (Amended New
Matter and Counterclaim, ¶ 41). Specifically, Defendant averred the following:
41. Plaintiff has violated its duty under 13 Pa.C.S.A. §9607(c) to act in a
commercially reasonable manner in collecting and enforcing its claim against
Yorktown and Defendants by failing to preserve the value of the collateral and by
failing to take prompt action to liquidate its collateral or to obtain interest or other
adequate protection payments for Yorktown's use of its collateral.
42. Plaintiff was negligent in failing to take prompt action to liquidate its
collateral or to obtain interest or other adequate protection payments for
Yorktown's use of its collateral.
44. Defendant has been substantially harmed by Plaintiff's failure to take prompt
action to liquidate its collateral or to obtain interest or other adequate protection
payments for Yorktown's use of its collateral.
46. Pursuant to 13 Pa.C.S.A. §9625 and 13 Pa.C.S.A. §9626, Defendant's
liability to Plaintiff, if any, is reduced or terminated by the amount that he has
been harmed by Plaintiff's failure to act in a commercially reasonable manner in
collecting and enforcing its claim against Yorktown and Defendants by failing to
preserve the value of the collateral and by failing to take prompt action to
liquidate its collateral or to obtain interest or other adequate protection payments
for Yorktown's use of its collateral.
(Amended New Matter and Counterclaim, ¶¶ 41-42, 44, 46).
9
Division 9 of the Pennsylvania Commercial Code deals with "secured transactions" and
Chapter 96 of Division 9 addresses defaults, enforcement of security interests, and the effect of
non-compliance with Chapter 96 in connection with such enforcement. 13 Pa.C.SA. §§ 9601-
9628 et seq. Section 9601 of Chapter 96 provides that "[a]fter default, a secured party has the
rights provided in this chapter and, except as otherwise provided in section 9602 (relating to
waiver and variance of rights and duties), those provided by agreement of the parties." 13
Pa.C.S.A. § 9601(a). The statute goes on to provide that those rights include the right to reduce a
claim to judgment, to foreclose or otherwise enforce the claim or security interest, to take
possession of collateral after default, to dispose of collateral, and to accept the collateral in full or
partial satisfaction of the underlying obligation. 13 Pa.C.S.A. §§ 9601(a), 9609, 9610, 9620.
Specifically, Section 9607, entitled "Collection and enforcement by secured party," provides, in
relevant part, as follows:
(a) Collection and enforcement generally.--If so agreed, and in any event after
default, a secured party:
(1) may notify an account debtor or other person obligated on collateral to
make payment or otherwise render performance to or for the benefit of the
secured party;
(2) may take any proceeds to which the secured party is entitled under section
9315 (relating to secured party's rights on disposition of collateral and in
proceeds);
(3) may enforce the obligations of an account debtor or other person
obligated on collateral and exercise the rights of the debtor with respect to the
obligation of the account debtor or other person obligated on collateral to
make payment or otherwise render performance to the debtor and with
respect to any property which secures the obligations of the account debtor or
other person obligated on the collateral;
(4) if the secured party holds a security interest in a deposit account perfected
by control under section 9104(a)(1) (relating to requirements for control),
10
may apply the balance of the deposit account to the obligation secured by the
deposit account; and
(5) if the secured party holds a security interest in a deposit account perfected
by control under section 9104(a)(2) or (3), may instruct the bank to pay the
balance of the deposit account to or for the benefit of the secured party.
(c) Commercially reasonable collection and enforcement.--A secured party
shall proceed in a commercially reasonable manner if the secured party:
(1) undertakes to collect from or enforce an obligation of an account debtor
or other person obligated on collateral; and
(2) is entitled to charge back uncollected collateral or otherwise to full or
limited recourse against the debtor or a secondary obligor.
13 Pa.C.S.A. § 9607(a), (c).
Initially, we find it striking that nothing in § 9607(c), which Defendant has contended
placed an affirmative "duty" upon Plaintiff to act in a commercially reasonable manner,
mentions or relates to the perfection of security interests, the very act that Defendant contends
Plaintiff was obligated by the statute to perform. Instead, the statute merely states that a secured
party, in this case, Plaintiff, must proceed in a commercially reasonable manner if the secured
party either undertakes to collect from or enforce an obligation of an account debtor or other
person obligated on collateral, or is entitled to charge back uncollected collateral. Thus, neither
Chapter 96 as a whole nor Section 9607(c), on its own, imposes an affirmative duty on a secured
creditor to perfect or enforce a security interest, and the statute is clearly contingent upon the
actions of the secured creditor for its application. Defendant's contention that Plaintiff failed to
act in a commercially reasonable manner when collecting against collateral by failing to collect
against collateral is misguided. The statute simply does not impose an affirmative duty on
secured creditors to liquidate or protect against collateral; instead, the statute provides that if a
secured party undertakes to enforce on collateral it must be done so in a commercially reasonable
manner. As a result, Section 9607 is inapplicable to the facts of this case.
Moreover, Section 9607, on its face, clearly relates only to the enforcement of security
interests against account debtors, other "persons obligated on collateral," and deposit accounts.
In this case, there has been no assertion that Plaintiff undertook enforcement actions against
either an account debtor, a person obligated on collateral, or a deposit account. Rather,
Defendant's contention is simply that Plaintiff failed to perfect certain security interests and
failed to liquidate or protect certain collateral. We find that these assertions, even if true, simply
do not fall within the ambit of § 9607.
Defendant's Amended New Matter and Counterclaim also implicates §§ 9625 and 9626
which have likewise been objected to in Plaintiff's second preliminary objection. Subchapter B
of Chapter 96 is entitled "Noncompliance with Division" and contains the relevant sections.
Section 9625 of the Commercial Code provides remedies for a secured party's failure to comply
with Division 9, and Section 9626, entitled "Action in which deficiency or surplus is in issue,"
pertains to actions where a secured party has exercised its rights of "collection, enforcement,
disposition or acceptance" as set forth in Chapter 96 of Division 9 following a default where an
amount of deficiency or surplus is in issue. 13 Pa.C.S.A. §§ 9625-9626. After review, we find
that neither of these sections is relevant or applicable to the instant litigation.
Section 9625 provides various remedies for a secured party's failure to comply with
Division 9, yet the only violation alleged in Defendant's Amended New Matter and
Counterclaim as previously outlined concerns an alleged violation of § 9607 for the failure to
liquidate or protect certain collateral. As previously stated, we have found § 9607 to be
12
inapplicable as a matter of law and, as a result, the remedies provided in § 9625 are simply
irrelevant.
Likewise, § 9626 is inapplicable to the instant litigation. Comment 2 of the official
comments to § 9626 provides,, in relevant part, as follows:
2. Scope. The basic damage remedy under Section 9-625(b) is subject to the
special rules in this section for transactions other than consumer transactions. This
section addresses situations in which the amount of a deficiency or surplus is in
issue, i.e., situations in which the secured party has collected, enforced, disposed
of, or accepted the collateral. It contains special rules applicable to a
determination of the amount of a deficiency or surplus. Because this section
affects a person's liability for a deficiency, it is subject to Section 9-628, which
should be read in conjunction with Section 9-605. The rules in this section apply
only 1.0 noncompliance in connection with the "collection, enforcement,
disposition, or acceptance" under Part 6. For other types of noncompliance with
Part 6, the general liability rule of Section 9-625(b)-recovery of actual damages-
applies. Consider, for example, a repossession that does not comply with Section
9-609 for want of a default. The debtor's remedy is under Section 9-625(b). In a
proper case, the secured party also may be liable for conversion under non-UCC
law. If the secured party thereafter disposed of the collateral, however, it would
violate Section 9-610 at that time, and this section would apply.
13 Pa.C.S.A. § 9626 (cmt. 2).
Thus, § 9626 is only applicable where there is an allegation of noncompliance in
connection with "collection, enforcement, disposition, or acceptance" under Part 6. As stated
above, Defendant's contention concerning Plaintiff's alleged violation of § 9607 for the failure to
liquidate or protect certain collateral simply cannot stand as a matter of law. As a result,
Defendant has not alleged any cognizable violation of Chapter 96 and, accordingly, the defenses
set forth in §§ 9625 and 9626 must fail. For these reasons, Plaintiff's second preliminary
objection will be sustained.
Plaintiffs third preliminary objection is a demurrer to Defendant's defense for an
"alleged failure to satisfy contractual condition precedent." (Preliminary Objections, ¶¶ 46-49).
13
Specifically, Plaintiff takes issue with the defense found at ¶¶ 49-58 of Defendant's Amended
New Matter and Counterclaim, which provides, in substance, that Plaintiff has failed to first
attempt to satisfy the underlying obligation against Yorktown and has instead, prematurely, filed
the instant action in an attempt to collect from Defendant. Defendant's Amended New Matter
and Counterclaim provides, in relevant part, as follows:
51. Plaintiff has failed to take any action a) to obtain relief from the automatic
stay, b) to obtain adequate protection for its interest in its collateral, c) to obtain
interest payments from Yorktown with regard to the use of its collateral; or d) to
prohibit use of its cash collateral.
52. Plaintiff has not attempted to collect any funds, payments, interest, or
collateral from Yorktown or its assets.
53. Plaintiff has failed to "first attempt to satisfy Borrower's [Yorktown's]
liabilities to Bank by directly pursuing Borrower or Borrower's assets" as
required by the Guaranty.
54. Plaintiff is not "legally barred from pursuing Borrower [Yorktown] or
Borrower's assets for repayment of Borrower's liabilities" which legal condition
is a prerequisite under the Guaranty for Plaintiff being able to exercise any of its
rights and remedies against Guarantor.
55. Plaintiff's action is not authorized by the Guaranty.
56. Plaintiff's action against Defendant is premature and not ripe.
57. Plaintiff's action against Defendant is barred by the terms of the Guaranty for
failure to satisfy a contractual precondition for instituting any type of legal action
against the guarantor.
(Defendant's Amended New Matter and Counterclaim, ¶¶ 51-57). (bracketed quotations
original).
The Guaranty signed by the parties was attached to Plaintiff's Complaint at Exhibit B and
provides, at the third paragraph of numbered paragraph 1, as follows:
However, notwithstanding any other provision of this Guaranty to the contrary,
before Bank exercises Bank's rights and remedies against the Guarantor, Bank
14
shall first attempt to satisfy Borrower's liabilities to Bank by directly pursuing
Borrower and Borrower's assets, taking all collection actions which Bank
determines to be reasonable and appropriate under the circumstances. After Bank
has completed its pursuit of Borrower, Bank may notify Guarantor that all such
collection actions have been completed, and the remaining balance of Borrower's
liabilities to Bank shall at Bank's option be deemed to be forthwith due and
payable by Guarantor under the terms of this Guaranty, and Bank may exercise
and enforce Bank's rights and remedies hereunder against Guarantor and/or
Guarantor's property. Should Bank be legally barred from pursuing Borrower or
Borrower's assets for repayment of Borrower's liabilities for any reason,
including but not limited to bankruptcy stay or other order of a court having
jurisdiction over Borrower, Bank may treat Borrower's liabilities to Bank as
being forthwith due and payable by Guarantor under the terms of this Guaranty,
and Bank may exercise and enforce Bank's rights and remedies hereunder
against Guarantor and/or Guarantor's property.
(Complaint, Ex. B, "Guaranty and Suretyship Agreement") (emphasis added).
Upon consideration of the foregoing, we find that Defendant's defense of a failure to
satisfy a contractual condition precedent must fail as a matter of law because Plaintiff is legally
barred from pursing Yorktown and its assets for repayment of the obligation not only by
operation of the automatic stay imposed by the United States Bankruptcy Code, 11 U.S.C. § 362,
but also by agreement of the parties. In his brief in opposition to the instant preliminary
objections, Defendant sets forth various case law from a variety of jurisdictions in support of his
contention that the automatic stay is not a per se "legal bar" to Plaintiff's pursuit of Yorktown for
the collection of the underlying debt. However, even accepting as true the notion that as a matter
of law the stay is not a legal bar to such an action, the parties specifically and unequivocally
defined the imposition of a bankruptcy stay as a "legal bar" thereby triggering Plaintiff's ability
to provide notice to the Guarantor, Defendant, of its intent to proceed in collection of the debt
against the Guarantor and to subsequently "treat Borrower's liabilities to Bank as being forthwith
due and payable by Guarantor under the terms of this Guaranty" and to "exercise and enforce
Bank's rights and remedies.. .against Guarantor and/or Guarantor's property." We are not
15
convinced that the bankruptcy stay is not a legal bar to Plaintiff's continued collection of the
underlying debt against Yorktown, but, even assuming that it were, the parties to the Guaranty
have defined it as such and, as a result, the parties expressed their intent that Plaintiff could
enforce the Guaranty if it were "legally barred from pursuing Yorktown." As a result, Plaintiff's
action in collection against Defendant is not premature, and Plaintiff's third preliminary
objection will be sustained.
Plaintiff's fourth and final preliminary objection is a demurrer to Defendant's
counterclaim based on Plaintiff's alleged breach of contract and alleged violations of the
Pennsylvania Commercial Code. The entirety of Defendant's Amended Counterclaim provides
as follows:
63. Defendant specifically incorporates by reference and reasserts the allegations
set forth in paragraphs 1-48 of his New Matter.
64. As a result of Plaintiff's breach of contract and violation of 13 Pa.C.S.A.
§3605(e), §3605(f), §3605(g), and 13 Pa.C.S.A. §9607(c), Defendant William C.
Kollas has sustained damages in the amount of no less than $1,330,528.25.
(Amended New Matter and Counterclaim, ¶¶ 63-64).
Turning first to the matter of the alleged violations of the commercial code, as outline
above we have found, as a matter of law, no allegations have withstood challenge by demurrer
either as defenses to the underlying action or in the nature of a counterclaim for their asserted
violation. We have found the suretyship defenses of 13 Pa.C.S.A. § 3605(e), § 3605(f), and §
3605(g) to have been waived and inapplicable; the alleged failure to liquidate or protect certain
collateral in violation of 13 Pa.C.S.A. §9607(c) to be without merit; and the remedies contained
in § 9625 and § 9626 to be irrelevant and inapplicable. Likewise, we are simply unable to find
that Defendant has properly set forth the fundamental requirements of a breach of contract cause
16
of action for an alleged breach of the Guaranty and Suretyship Agreement. The Agreement by
its terms permitted Plaintiff to proceed with the enforcement of the Guaranty against Defendant
in the event of a legal bar to its collection against Yorktown, and the parties agreed by contract to
define the meaning of a "legal bar" to include the imposition of a bankruptcy stay.
For the foregoing reasons, Defendant's defenses and counterclaim based on an alleged
failure to perfect a security interest in certain collateral pledged by Yorktown, an alleged failure
to liquidate or protect collateral pledged by Yorktown, and an alleged failure to satisfy a
contractual condition precedent will be dismissed, and Plaintiffs preliminary objections to
Defendant's Amended New Matter and Counterclaim will be sustained.
To reflect the foregoing, the following order will be entered:
ORDER
AND NOW, this Z0- day of December, 2012, upon consideration of Plaintiffs
Preliminary Objections to Defendant's Amended New Matter and Counterclaim, following
argument, and for the reasons contained in the opinion filed of even date herewith, Plaintiffs
preliminary objections are hereby SUSTAINED, and Defendant's defenses and counterclaim
contained in the within New Matter and Counterclaim based on an alleged failure to perfect a
security interest in certain collateral pledged by Yorktown Funding, Inc., an alleged failure to
liquidate or protect collateral pledged by Yorktown Funding, Inc., and an alleged failure to
satisfy a contractual condition precedent are hereby dismissed.
BY THE COURT,
Kevin,A! Hess, P.J.
17
c�
PRAECIPE FOR LISTING CASE FOR NON JURY TRIAL -
M 57
(Must be typewritten and submitted in triplicate),
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TO THE PROTHONOTARY OF CUMBERLAND COUNTY r—:;= 6
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Please list the following case for a TRIAL WITHOUT A JURY. ,;� 2f
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----------------------------------------------------- �_- Vi'
CAPTION OF CASE
jentire caption must be stated in full] (check one)
Q■ Civil Action—Law
Appeal from arbitration
F
METRO BANK, f/k/a Commerce (other)
Bank/Harrisburg, NA. p
(Plaintiff) No. 2012-1340 Civil Term
VS.
WILLIAM C. KOLLAS
(Defendant)
VS.
Indicate the attorney who will try case for the party who files this praecipe:
Heather Z. Kelly, Esquire, Mette, Evans&Woodside, 3401 North Front Street, Harrisburg, PA 17110
Indicate trial counsel for other parties if known:
Markian R. Slobodian, Esquire
801 N. Second Street
Harrisburg, PA 17102
This case is ready for trial. Signed: & P'W�
Print Name: Heather Z. Kelly, Esquire
Date: May 3, 2013 Attorney for: Plaintiff
x
METRO BANK, f/k/a IN THE COURT OF COMMON PLEAS OF
COMMERCE BANK/ CUMBERLAND COUNTY, PENNSYLVANIA
HARRISBURG, N.A.,
Plaintiff
V. CIVIL ACTION—LAW
WILLIAM C. KOLLAS
Plaintiff NO. 12-1340 CIVIL TERM
IN RE: NONJURY TRIAL
AND NOW, this 7th day of August, 2013, a pretrial conference in this case is
scheduled for Monday, September 16, 2013, at 10:30 a.m., in Courtroom No. 5,
Cumberland County Courthouse, Carlisle, Pennsylvania. Pretrial memoranda shall be
submitted by each party in accordance with the local Cumberland County Rules of
Procedure 212-4, at least five days prior to the pretrial conference.
A NONJURY TRIAL in this case is scheduled for Thursday, October 17, 2013, at .
9:30 a.m., in Courtroom No. 5, Cumberland County Courthouse, Carlisle, Pennsylvania.
BY THE COURT,
Christy ye L. Peck, J.
Heather Z. Kelly, Esq.
3401 North Front Street
Harrisburg, PA 17110
Attorney for Plaintiff
-
arkian R. Slobodian, Esq.
801 N. Second Street
Harrisburg, PA 17102
Attorney for Defendant r '
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Court Administrator - �;J c c `" �.7 ,
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s METRO BANK, f/k/a IN THE COURT OF COMMON PLEAS OF
COMMERCE BANK/ CUMBERLAND COUNTY, PENNSYLVANIA
HARRISBURG, N.A.,
Plaintiff
V. CIVIL ACTION—LAW
WILLIAM C. KOLLAS
Plaintiff NO. 12-1340 CIVIL TERM /
--------------------------------------------------------
METRO BANK, f/k/a IN THE COURT OF COMMON PLEAS OF
COMMERCE BANK/ CUMBERLAND COUNTY, PENNSYLVANIA
HARRISBURG, N.A.,
Plaintiff
V. CIVIL ACTION—LAW
GERALD R. KENSINGER
Plaintiff NO. 12-1339 CIVIL TERM
IN RE: NONJURY TRIALS
AND NOW, this 90' day of September, 2013, the pretrial conferences previously
scheduled in these cases for September 16, 2013, are rescheduled to Thursday, October
24, 2013, at 9:30 a.m., in Courtroom No. 5, Cumberland County Courthouse, Carlisle,
Pennsylvania. Pretrial memoranda shall be submitted by each parry in accordance with
the local Cumberland County Rules of Procedure 212-4, at least five days prior to the
pretrial conference.
THE NONJURY TRIALS previously scheduled in these cases October 17, 2013,
are rescheduled to Tuesday, November 19, 2013, at 1:30 p.m., in Courtroom No. 5,
Cumberland County Courthouse, Carlisle, Pennsylvania.
BY THE COURT,
C--7
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Christ -ee . Peck, J. € r
Heather Z. Kelly, Esq.
3401 North Front Street r , -
Harrisburg, PA 17110
Attorney for Plaintiff
arkian R. Slobodian, Esq.
801 N. Second Street
Harrisburg, PA 17102
Attorney for Defendant
Court Administrator
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Pr
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9/x//3
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METTE, EVANS & WOODSIDE
Heather Z. Kelly, Esquire
Attorney I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
(717) 232-5000
(717) 236-1816 (fax)
hzkelly@mette.com
Attorneys for Plaintiff
METRO BANK, f/k/a Commerce
Bank/Harrisburg, N.A.,
Plaintiff
;. PR 0 IliONO7FA
2014 NAR 2 5 AN 14 7
CUMBE.RLAND COUNTY
PENNSYLVANIA
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
v. : DOCKET NO. 2012-1340
WILLIAM C. KOLLAS,
Defendant
PRAECIPE TO SETTLE, END AND DISCONTINUE
TO THE PROTHONOTARY:
Please mark the above matter settled, ended and discontinued.
Respectfully submitted,
METTE, EVANS & WOODSIDE
By:
Heather Z. Kelly,'Esqui e
Sup. Ct. I.D. No. 86291
Date: March 24, 2014 Attorneys for Plaintiff
CERTIFICATE OF SERVICE
I certify that I am this day serving a copy of the foregoing document upon the person(s)
and in the manner indicated below, which service satisfies the requirements of the Pennsylvania
Rules of Civil Procedure, by depositing a copy of same in the United States Mail at Harrisburg,
Pennsylvania, with first-class postage, prepaid, as follows:
Markian R. Slobodian, Esquire
801 N. Second Street
Harrisburg, PA 17102
By:
Respectfully submitted,
METTE, EVANS & WOODSIDE
Heather Z. Kell', Esqui
Sup. Ct. I.D. No. 86291
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110-0950
Date: March 24, 2014 Attorneys for Plaintiff
704464v1