HomeMy WebLinkAbout2011-7596
CITIZENS BANK OF PENNSYLVANIA,
Plaintiff
IN THE COURT OF COMMON PLEAS
v.
OF THE NINTH JUDICIAL DISTRICT
SHEFFIELD LAW FIRM, LLC AND
CHRISTOPHER SHEFFIELD,
Defendants 11-7596 CIVIL ACTION
IN RE: OPINION PURSUANT TO PA.R.A.P. 1925
Placey, C.P.J., 8 October 2012.
In this assumpsit action, Defendants filed an appeal with the Superior Court from
an Order of Court denying Defendants’ Petition to Open Judgment, in which this court
found that Defendants failed to assert a meritorious defense to compel the opening of
the judgment against them. In Defendants’ Concise Statement of Matters Complained
of on Appeal, the sole issue raised is whether the court “erred in determining that the
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Answer filed by Defendants with the Petition to Open Judgment was not meritorious.”
This opinion in support of the court’s denial of Defendant’s Petition to Open Judgment is
written pursuant to Pennsylvania Rule of Appellate Procedure 1925(a).
STATEMENT OF FACTS
Defendant Sheffield Law Firm, LLC executed a Business Credit Application
(Application) and Business Credit Line Agreement (Credit Agreement) on 5 April 2006
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through Plaintiff, Citizens Bank of Pennsylvania. In conjunction with the Application
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Concise Statement of Matters Complained of on Appeal, filed 17 July 2012.
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Plaintiff’s Complaint, ¶ 4, filed 4 Oct. 2011 (hereinafter Cmplt, ¶ __).
and Credit Agreement, Defendant Christopher Sheffield executed a Guaranty
Agreement to pay Defendant Sheffield Law Firm, LLC’s obligations under the
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Application and Credit Agreement, should the firm be unable to meet its obligations.
Defendant Sheffield Law Firm, LLC defaulted under the terms of the Credit Agreement
by failing to make payments, and, subsequently, Defendant Christopher Sheffield
defaulted under the terms of the Guaranty Agreement, leaving an outstanding balance
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of $27,557.63 as of 17 August 2011. On 4 October 2011, Plaintiff brought an action
against Defendants for breach of contract, requesting compensatory damages,
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attorneys’ fees, interest, and any other relief the court deemed appropriate.
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On 15 November 2011, Defendants filed Preliminary Objections to Complaint.
On 14 December 2011, counsel for Plaintiff filed a Praecipe for Listing Case for
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Argument. Defendants failed to appear at the oral argument on their preliminary
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objections. The preliminary objections were overruled on 9 January 2012.
Plaintiff filed a Praecipe for Default Judgment on 2 March 2012, due to
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Defendants’ failure to file an answer to Plaintiff’s Complaint. Default judgment was
entered by the Prothonotary on 2 March 2012, in the amount of $27,557.63, including
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interest at a rate of $4.28 per diem, late charges, and attorneys’ fees and costs. On
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Cmplt, ¶ 7.
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Cmplt, ¶ 10.
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Cmplt.
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Defendants’ Preliminary Objections to Complaint, filed on 15 Nov. 2011.
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Praecipe for Listing Case for Argument, filed 14 Dec. 2011.
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Order of Court, filed 9 Jan. 2012.
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Praecipe for Default Judgment, filed 2 Mar. 2012.
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Praecipe for Default Judgment, filed 2 Mar. 2012.
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12 March 2012, Defendants filed a Petition to Open Judgment. The Petition stated, in
its entirety:
1. Plaintiff filed a Civil Action in this matter on October 4, 2011 and Defendants
filed Preliminary Objections thereto.
2. The Court overruled Plaintiff’s Preliminary Objections by Order dated January
9, 2012.
3. Plaintiff took Judgment by Default on March 2, 2012.
4. Defendants have attached hereto a verified copy of the Answer which
Petitioners wish to file.
5. Pursuant to Pennsylvania Rules of Civil Procedure Rule 237.3, Petitioners
hereby request that the Judgment entered in this matter be opened and the
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Prothonotary strike the judgment from the docket.
Defendants’ Petition did not go further to state any reason for opening judgment, but did
attach an Answer to the Petition. Defendants’ Answer responded to the allegations set
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forth in Plaintiff’s Complaint, without raising any grounds for opening the judgment.
The Answer claims the following: (1) the copies of the contract attached to the Plaintiff’s
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Complaint were not legible; (2) Plaintiff closed Defendant Sheffield Law Firm LLC’s
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checking account without notice; (3) Defendant Chris Sheffield did not act outside the
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Defendant’s Petition to Open Judgment, filed 12 Mar. 2012 (hereinafter Petition to Open, ¶ __). It is
Defendants’
noted that the court overruled Preliminary Objections by Order of Court dated 9 January
2012.
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Defendants’ Answer, attached to Petition to Open (hereinafter Answer, ¶ __).
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Answer, ¶ 4.
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Answer, ¶¶ 5, 8-11, 14.
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scope of his employment with Defendant Sheffield Law Firm, LLC; (4) Plaintiff violated
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banking regulations; (5) Plaintiff breached the contract; and (6) Plaintiff did not act in
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good faith.
A hearing was held on Defendants’ Petition on 16 May 2012 before the
undersigned judge. On 31 May 2012, Defendants’ Petition to Open Judgment was
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denied for failure to state a meritorious defense. Defendants filed their Notice of
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Appeal on 25 June 2012.
DISCUSSION
The Supreme Court of Pennsylvania has stated that default judgments are to be
opened only when the petition is promptly filed, a meritorious defense to the underlying
claim is alleged, and there is a reasonable excuse as to why the party failed to act upon
the original complaint. McFarland v. Whitham, 544 A.2d 929, 930 (Pa. 1988).
Pennsylvania Rule of Civil Procedure 237.3 further clarifies as follows: “[i]f the petition is
filed within ten days after the entry of the judgment on the docket, the court shall open
the judgment if the proposed complaint or answer states a meritorious cause of action
or defense.” Pa.R.C.P. No. 237.3(b).
A meritorious claim is a defense that the court believes could be successful if
brought before a jury; however, by opening judgment, the court is not necessarily
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Answer, ¶¶ 7-10, 17.
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Answer, ¶¶ 8-10, 17.
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Answer, ¶¶ 8-10, 12-13, 17.
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Answer, ¶¶ 11, 16.
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Order of Court, filed 31 May 2012.
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Notice of Appeal, filed 25 June 2012.
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indicating that the defense will be successful. Duffy v. Gerst, 429 A.2d 645, 652 (Pa.
Super. 1981); See Reid v. Boohar, 856 A.2d 156 (Pa. Super. 2004). To demonstrate
that a claim could be meritorious, a defendant must show “more than mere conflict of
evidence, or oath against oath, but such evidence as would persuade the court that,
upon submission of the issue to a jury, a verdict in their favor could be upheld.” Ehnes
v. Wagner, 130 A.2d 171, 172 (Pa. 1957), citing Ahrens v. Goldstein, 102 A.2d 164,
167 (Pa. 1954). The Ehnes Court further explained that “the petitioner must not only
aver a valid defense but he must also establish equitable considerations which impress
the court with the need for relief.” Id. Equitable considerations go beyond technical
defenses and “must be set forth in precise, specific, clear and unmistakable terms.”
Brown & Bigelow, Inc. v. Borish, 67 A.2d 823, 825 (Pa. Super. 1949).
Determining what constitutes a meritorious defense is within the sole discretion
of the court, which will not be overturned on appeal unless there was a clear abuse of
discretion. Liberty Nat’l Bank of Pittston v. Degillio, 176 A.2d 446, 447 (Pa. 1962).
A court abuses its discretion when “the law is overridden or misapplied,” not when
another court could have reasonably reached a different conclusion. Brown, 67 A.2d at
825. The requirement of a meritorious defense is one that, if properly pled and
subsequently proven at trial, would justify the relief requested. Penn-Delco School
Dist. v. Bell Atlantic-PA, Inc., 745 A.2d 14, 19 (Pa. Super. 1999) (citations omitted).
The party asserting the defense does not have to provide evidence of every element,
but must plead the defense in “precise, specific and clear terms.” Id.
In Pennsylvania, the duty of good faith has been recognized in
limited situations. However, this Court has held that a lending institution
does not violate a separate duty of good faith by adhering to its
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agreements with a borrower or enforcing its contractual rights as a
creditor. See Corestates Bank, N.A. v. Cutillo, 723 A.2d 1053
(Pa.Super.1999);
Heritage Surveyors & Engineers, Inc. v. National Penn Bank, 801 A.2d 1248,
1253 (Pa. Super. 2002)
Application of law to facts. As the default judgment was entered on 2March
2012, and the Petition to Open Judgment was filed on 12 March 2012, Defendants
satisfied the timeliness requirement of Rule 237.3(b), and it was accordingly deemed to
be prompt. Thus, the sole issue to be determined is whether Defendants’ Petition to
Open Judgment stated a meritorious claim.
Assuming arguendo that legibility of a contract attached to a complaint is a
defense, the contract was read, albeit with difficulty, in its entirety, and thus, this
allegation is not meritorious. Gleaned from reading the Application pages provided was
that Defendants are a criminal defense and personal injury law firm, that the business or
principal had previously declared bankruptcy in 1995, and that Defendant Christopher
Sheffield had signed the Application twice, as both the member of the firm and personal
guarantor.
In reading the Credit Agreement attached to the Complaint, it provided for “Cash
Collateralization” and default procedures that Plaintiff could follow upon nonpayment.
Defendants now strain to change the implementation of these procedures as a defense,
which is specious. Clearly, alleging that Plaintiff acted in comportment with the terms of
the contract is not a meritorious defense.
The guarantor language in the Application, whereby Mr. Sheffield “agrees and
accepts to be bound by the Documents,” obviates any proof by Plaintiff that the
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guarantor acted outside the scope of his status as a member of the law firm. The
allegation that proof of going beyond the scope of one’s employment is needed is not a
meritorious defense in this contract action.
Defendants allegation that Plaintiff violated banking regulations, specifically
IOLTA, is not precise, specific, or in clear terms upon which a meritorious defense can
be found. IOLTA is neither a banking regulation nor is any IOLTA regulation of lawyers’
professional conduct applicable to Plaintiff. Hence, it is not capable of being claimed as
a defense in this action.
Defendants’ claim that Plaintiff somehow breached the contract is not supported
in the Answer. The specifics on how Plaintiff breached is silent in the Answer, and,
unlike in the trespass case of Reid where alleging someone else caused the accident is
sufficient for raising a meritorious defense, mere allegations of a breach are insufficient
in an assumpsit action. If the purported defense is that Plaintiff breached by following
the terms of the Credit Agreement, then the reasons for finding Defendants failed to
state a meritorious defense are set out above. If Defendants are claiming that the
breach was caused by some other action on the part of Plaintiff, those reasons beyond
“conditions and obligations under the” Credit Agreement, such reasons are not clearly
and succinctly found in the Answer.
Finally, the allegation that Plaintiff acted somehow in bad faith by not finalizing
negotiations with Defendants, and instead acted in comportment with the terms of the
Credit Agreement, is not a meritorious defense. Defendants may have couched the
allegation in the Answer that it was Plaintiff’s good faith duty to negotiate and finalize a
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settlement, which may be Defendants ultimate desire, but Plaintiff is under no
contractual obligation to go above and beyond the terms of the Credit Agreement.
It is clear from the pleadings, testimony, and argument that Defendants wish to
be in a position of equal footing when negotiating a settlement and are using the legal
system in an attempt to gain this advantage. Plaintiff seeks to limit that positional
strategy by not agreeing to open the judgment. On the merits of the Petition, there is
neither a conflict of evidence nor a valid defense that cries out for relief warranting the
opening of this judgment.
After a careful review of the record, including Defendants’ proposed Answer
attached to the Petition to Open Judgment, the court was unable to conclude that the
Answer provided a meritorious defense. Similarly, neither the Petition to Open
Judgment, nor the Answer, clearly and precisely provided equitable considerations that
should have been weighed when ruling on Defendants’ Petition. As such, the Petition
lacks any equitable considerations warranting opening of the judgment. In its discretion,
this court concluded that from this lack of evidence, Defendants failed to set forth a
meritorious defense to the underlying claim. Accordingly, the court properly denied
Defendants’ Petition to Open Judgment.
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CONCLUSION
Based on the foregoing discussion, Defendants’ Petition to Open Judgment was
properly denied.
BY THE COURT
_________________________________
Thomas A. Placey, C.P.J
Christopher J. Fox, Esq.
Linda B. Alle-Murphy, Esq.
3600 Horizon Blvd., Suite 150
Trevose, PA 19053
Christopher Sheffield, Esq.
303 S Queen Street
Shippensburg, PA 17257
Christopher Sheffield, Esq.
P. O. Box 218
Shippensburg, PA 17257
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