Parke Bank v. North Charlotte Road ( 2016 )

J. S69021/15
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
PARKE BANK : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
v. :
:
NORTH CHARLOTTE ROAD, LP AND :
GEORGE J. SPAEDER, BRUCE P. :
EARLE, RHOADS AVENUE NEWTOWN :
SQUARE, LP, ROSENDON HOLDING :
COMPANY LIMITED PARTNERSHIP, :
NORTH CHARLOTTE ROAD :
POTTSTOWN, GP, LLC, :
DOWNINGTOWN PIKE WEST CHESTER, :
LP, DOWNINGTOWN PIKE WEST :
CHESTER GP, LLC, EAST LINCOLN :
HIGHWAY, THORNDALE, LP, AND EAST :
LINCOLN HIGHWAY THORNDALE GP, :
LLC, : No. 1363 EDA 2015
:
Appellants :
Appeal from the Order Entered March 9, 2015,
in the Court of Common Pleas of Montgomery County
Civil Division at No. 2013-02279
PARKE BANK : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
v. :
:
NORTH CHARLOTTE ROAD :
POTTSTOWN, LP AND GEORGE J. :
SPAEDER, BRUCE P. EARLE, RHOADS :
AVENUE NEWTOWN SQUARE, LP, :
ROSENDON HOLDING COMPANY :
LIMITED PARTNERSHIP, NORTH :
CHARLOTTE ROAD POTTSTOWN, GP, :
LLC, DOWNINGTOWN PIKE WEST :
CHESTER, LP, DOWNINGTOWN PIKE :
WEST CHESTER GP, LLC, EAST :
LINCOLN HIGHWAY, THORNDALE, LP, :
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AND EAST LINCOLN HIGHWAY :
THORNDALE GP, LLC, :
:
APPEAL OF: NORTH CHARLOTTE :
ROAD POTTSTOWN, LP AND GEORGE :
J. SPAEDER, RHOADS AVENUE :
NEWTOWN SQUARE, LP, NORTH :
CHARLOTTE ROAD POTTSTOWN, GP, :
LLC, DOWNINGTOWN PIKE WEST :
CHESTER, LP, DOWNINGTOWN PIKE :
WEST CHESTER GP, LLC, EAST :
LINCOLN HIGHWAY, THORNDALE, LP, : No. 1666 EDA 2015
AND EAST LINCOLN HIGHWAY :
THORNDALE GP, LLC, :
:
Appellants :
Appeal from the Order Entered March 9, 2015,
in the Court of Common Pleas of Montgomery County
Civil Division at No. 2013-02279
BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., AND OLSON, J.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED APRIL 15, 2016
This is an appeal from the orders entered March 9, 2015, granting
Parke Bank’s petition to fix fair market value and denying appellants’ petition
to mark the judgment satisfied. We affirm.
The trial court has aptly summarized the history of this case as
follows:
The instant appeal arises from a Petition to Fix
Fair Market Value of Real Property Sold and for
Deficiency Judgment (the “Bank’s Petition”) filed by
Parke Bank (the “Bank”). On February 1, 2013, the
Bank filed a Praecipe to Transfer Judgment to this
Court. The judgment was in the amount of
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$9,762,357.86, and was originally entered by the
Court of Common Pleas of Delaware County,
Pennsylvania. A judgment in that amount was
thereafter entered against North Charlotte Road
Pottstown, LP (the “Debtor”) in this Court. The
judgment against North Charlotte Road Pottstown,
LP, arises from a loan taken out by North Charlotte
in the amount of $8,000,000.00 which North
Charlotte failed to repay as agreed. (N.T. 8/19/14,
p. 27). The Bank held a mortgage on the property
located at 1400 North Charlotte Street, Pottstown,
Pennsylvania (the “Property”)[Footnote 1] and thus
secured the $8,000,000.00 loan.
[Footnote 1] Situated on the Property is
a shopping center constructed in 1971.
(See N.T. 12/2/14, p. 32). This
shopping center has its own parking lot
in addition to a single building with
approximately 85,000 square feet of
space. The building has a long frontage
and is very deep as well. (N.T. 8/19/14,
p. 30).
On May 2, 2013, the Bank filed a Praecipe for
Writ of Execution Upon a Confessed Judgment. On
September 12, 2013, the Property was sold to the
Bank at a Sheriff’s Sale. On October 1, 2013, Parke
Bank filed its petition to fix fair market value. On
April 9, 2014, George J. Spaeder (“Spaeder”), a
respondent named in the Petition, filed a Verified
Petition to Mark Judgment Satisfied, to Strike the
Petition of Parke Bank to Fix Fair Market Value and
for Deficiency Judgment, and for Other Relief
(“Spaeder’s Petition”).
This Court held a hearing on the Petition and
Spaeder’s Petition on August 19, 2014. This Court
also heard testimony in the matter on December 2,
2014. On March 4, 2015, this Court entered two
Orders. The first Order denied Spaeder’s Petition.
The second Order Fixing Fair Market Value --
Deficiency Judgment granted the Bank’s Petition,
fixing the fair market value of the Property at
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$4,500,000.00. The Order further established that
the amount of the judgment owed to the plaintiff
that was not discharged by the sale of the property
was $5,369,725.37, plus continuing interest,
attorney’s fees and costs.
Subsequently, on March 18, 2015, Spaeder filed a
Motion for Post-Trial [relief] seeking relief from this
Court’s Orders entered March 4, 2015. On May 5,
2015, this Court held a hearing on the motion for
post-trial relief and entered an Order denying the
motion.
On April 8, 2015, Defendant North Charlotte Road
Pottstown, LP and Respondents George J. Spaeder,
Rhoads Avenue Newtown Square, LP, North
Charlotte Road Pottstown, GP, LLC, Downingtown
Pike West Chester, LP, Downingtown Pike West
Chester GP, LLC, East Lincoln Highway Thorndale,
LP, and East Lincoln Highway Thorndale GP, LLC
(“Appellants”) filed two Notices of Appeal indicating
that Appellants were challenging this Court’s two
Orders dated March 4, 2015. Appellants’ appeals of
those Orders are currently pending resolution under
Superior Court Docket Number 1363 EDA 2015. In
addition, on May 12, 2015, Appellants appealed this
Court’s Order dated May 5, 2015 denying Spaeder’s
motion for post-trial relief. This Opinion addresses
the appeal from this Court’s May 5, 2015 Order.
Trial court opinion, 6/22/15 at 1-3.1
1
On July 21, 2015, this court issued a rule to show cause why the appeal
should not be quashed as untimely, where the appeal was taken from the
May 5, 2015 order denying appellants’ motion for post-trial relief. See
Parke Bank v. North Charlotte Road Pottstown, LP et al., No. 1666
EDA 2015, per curiam order (Pa.Super. filed 7/21/15) (“A motion for
post-trial relief may not be filed to matters governed exclusively by the rules
of petition practice. Furthermore, a motion for post-trial relief may not be
filed to orders disposing of proceedings that do not constitute a trial.”)
(citations omitted). Because a deficiency judgment on the Bank’s petition to
fix fair market value was entered on the docket on March 9, 2015, it
appeared that appellants’ notice of appeal filed May 12, 2015 was untimely.
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Appellants have raised the following issues for this court’s review:
1. Did the trial court err in fixing fair market
value of the property in the amount of the
Appellee bank’s private sale of the property to
its customer with bank financing, without
exposing the property to the market, without
any appraisal or other evidence to support its
valuation, in an amount that was $1,300,000
less than the fair market value judicially
admitted in the bank’s Deficiency Judgment
Petition?
2. Did the lower court err in denying the
Appellants’ petition to mark the judgment
satisfied when the Appellee bank collected
$800,000 of an alleged deficiency on its
judgment before getting a determination that
there was any remaining deficiency?
3. Did the lower court err in permitting the bank
to apply that prematurely collected $800,000
to unrelated debt that was not
cross-collateralized with the North Charlotte
loan in order to collect the same $800,000 a
second time from the Appellee North Charlotte
Loan guarantors who did not guaranty
cross-collateralized debt?
Id. In their response, appellants averred that they filed two notices of
appeal on April 8, 2015, from the trial court’s orders entered on March 4,
2015, granting the Bank’s petition for a deficiency judgment and fixing fair
market value, and denying appellants’ petition to mark judgment satisfied.
Appellants noted that the trial court had not ruled on their post-trial motion
by the 30-day appeal deadline so they filed the April 8, 2015 appeals as a
precaution against waiver. (Appellants’ response to July 21, 2015 show
cause order, 7/28/15 at 2.) The trial court ordered argument on the
post-trial motion on May 5, 2015, and denied it that day. (Id.) Appellants
then filed an appeal on May 12, 2015, from the trial court’s May 5, 2015
order denying their post-trial motion. (Id.) As appellants’ April 8, 2015
notices of appeal were timely filed within 30 days after the trial court’s
orders docketed March 9, 2015, we will consider the instant appeal to be
timely.
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Appellants’ brief at 2-3.
The Deficiency Judgment Act (“DJA”) provides, in relevant part, as
follows:
(a) General rule.--Whenever any real property is
sold, directly or indirectly, to the judgment
creditor in execution proceedings and the price
for which such property has been sold is not
sufficient to satisfy the amount of the
judgment, interest and costs and the judgment
creditor seeks to collect the balance due on
said judgment, interest and costs, the
judgment creditor shall petition the court to fix
the fair market value of the real property sold.
42 Pa.C.S.A. § 8103(a).
“The initial duty and authority to determine fair market value under
the petition of the kind present here lies with the fact-finder, the trial court.
Our review is limited to deciding whether there is sufficient evidence to
sustain the holding of the trial court, or whether there is a reversible error of
law.” Loukas v. Mathias, 931 A.2d 661, 662 (Pa.Super. 2007), citing First
Pennsylvania Bank, N.A. v. Peace Valley Lakeside Community and
Agricultural Trust, Inc., 478 A.2d 42 (Pa.Super. 1984); Cheltenham
Federal Savings and Loan Association v. Pocono Sky Enterprises,
Inc., 451 A.2d 744 (Pa.Super. 1982); Shrawder v. Quiggle, 389 A.2d
1135 (Pa.Super. 1978).
The Deficiency Judgment Act applies when real
property is sold to the judgment creditor at a
sheriff’s sale. First National Consumer Discount
Company v. Fetherman, 515 Pa. 85, 527 A.2d 100-6-
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(1987). If the sale proceeds are insufficient to
satisfy the amount of the judgment debt, the Act
requires the judgment-creditor to file a petition to fix
the fair market value within six months after the
deed is delivered in order to proceed against the
debtor for the remainder of the debt. Id. at 91-93,
527 A.2d at 103.
Fidelity Federal Sav. and Loan Ass’n v. Capponi, 684 A.2d 580, 585
(Pa.Super. 1996), appeal denied, 698 A.2d 67 (Pa. 1997).
The Deficiency Judgment Act was enacted in
the 1940s in order to protect debtors after their
property was foreclosed. The act was aimed at
shielding the mortgagor-debtor from the mortgagee
who would purchase the mortgaged property for less
than fair market value, usually for cost, and then
reduce the debt only by the purchase price. [PNC
Bank, National Association v. Balsamo, 634 A.2d
645 (Pa.Super. 1993), appeal denied, 648 A.2d
790 (Pa. 1994)].
Prior to the Deficiency Judgment Act, the
judgment creditor often recovered the property and
the full amount of the debt. The Deficiency
Judgment Act prevented this by requiring the
judgment creditor to reduce the debt by the fair
market value of the property. This court in
[Commonwealth Bank & Trust Co., N.A. v.
Hemsley, 577 A.2d 627 (Pa.Super. 1990), appeal
denied, 583 A.2d 793 (Pa. 1990)] noted that the
purpose of the Deficiency Judgment Act was
to relieve a debtor of further personal
liability to the creditor, if the real
property taken by the creditor on an
execution has a “fair market value”, as of
the date of the execution sale, sufficient
so that the creditor may dispose of the
property to others (or even, sometimes,
use it himself) without a net loss to the
creditor.
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Hemsley, supra[], 577 A.2d at 629 (quoting
Cheltenham Federal Savings and Loan
Associations v. Pocono Sky Enterprises, Inc.,
305 Pa.Super. 471, 479, 451 A.2d 744, 748 (1982)).
Id. at 586 (emphasis in original).
The fair market value of land refers to the price a
purchaser, who is willing but not obligated to buy,
would pay an owner, who is willing but not obligated
to sell. First Pa. Bank, N.A. v. Peace Valley
Lakeside, 329 Pa.Super. 218, 478 A.2d 42 (1984).
A professional appraisal is not required in order to
determine fair market value, and although evidence
of fair market value may be obtained through expert
testimony, such testimony is not the exclusive
method of establishing value. National Council of
Junior Order of United American Mechanics v.
Zytnick, 221 Pa.Super. 391, 293 A.2d 112 (1972).
The trier of fact weighs the credibility of an expert
witness’ testimony regarding valuation. Mellon
Bank v. Restaurant of A.B.E., 364 Pa.Super. 567,
528 A.2d 654 (1987). An appellate court must
accept the credibility determinations of the trial court
with respect to the credibility of witnesses. Id.Bryn Mawr Trust Co. v. Healy, 667 A.2d 719, 723 (Pa.Super. 1995),
appeal denied, 681 A.2d 1340 (Pa. 1996).
The [DJA] requires the court to determine the ‘fair
market value’ of the premises, without defining such
value. This phrase has, however, been interpreted
by this Court to mean the price which the property
would bring at a fair sale between parties dealing on
equal terms.
Union Nat. Bank of Pittsburgh v. Crump, 37 A.2d 733, 735 (Pa. 1944)
(citation omitted).
Many elements properly enter into the determination
of ‘fair market value’. Among these are recent sales
of real estate of comparable location and
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description[]. No evidence of such sales was offered
in this case. Other factors of value include (1) the
uses to which the property is adapted and might
reasonably be applied[]; (2) the demand for the
property and similar properties, taking into
consideration economic conditions which depress
market value in its true sense and detrimentally
influence such demand[]; (3) the income produced
by the property, including rents, and (4) generally,
all elements which affect the actual value of property
and therefore influence its fair market value[].
Id. (citations omitted).
Appellants complain that the trial court should have used the
“as-stabilized” value of $13,500,000 provided by its expert,
John Paul Williams (“Williams”). An as-stabilized valuation assumes that the
property is 95% occupied with the tenants paying rent at a market rate.
(Appellants’ brief at 40.) According to Williams, the fair market value of the
property was $10,800,000 as of the date of the 2013 sheriff’s sale
($13,500,000 minus stabilization construction costs). Appellants complain
that the trial court used an “as is” valuation that failed to account for the
presently-unoccupied portion of the property.
The trial court, sitting as finder-of-fact, specifically found Williams’
testimony to be not credible and based on hypothetical assumptions. (Trial
court opinion, 6/22/15 at 6.) “These assumptions included a ninety-five
percent tenant occupancy rate, income from the lease of a pad site on the
Property, and the completion of numerous renovations.” (Id. (citations to
the transcript omitted).) Instead, the trial court accepted the testimony of
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the Bank’s experts, Anthony Salvitti (“Salvitti”) and Ralph Gallo (“Gallo”), in
determining that the fair market value of the property was equal to the sales
price, i.e., $4,500,000. (Id. at 5 n.3.) We find no abuse of discretion in
this regard. See Crump, 37 A.2d at 735 (trial court is not bound to adopt
the opinion of any one expert, or group of experts, but may determine the
fair market value on the whole record).
The trial court noted that the property is occupied by a single tenant,
Planet Fitness, and is 81% vacant. (Trial court opinion, 6/22/15 at 4.)
Appellants argue that the Bank did not expose the property to the market.
This argument is refuted by the testimony of Gallo, which was credited by
the trial court, that the Bank posted a sign advertising the sale of the
property and received several inquiries as a result. (Id. at 5.) The Bank
contacted its customers that it knew were engaged in the commercial real
estate business, eventually discussing the sale of the property with
approximately fifty individuals, including real estate developers and brokers.
(Id.) The Bank attempted to lease additional portions of the property but
was unable to do so. (Id.)
Appellants make much of the fact that the Bank eventually sold the
property to one of its own customers, Lenard Thylan (“Thylan”). Appellants
imply that the Bank sold the property for less than it was worth because
Thylan was an important long-term customer. Again, the record belies this
argument. Gallo testified that this was an arms-length transaction and the
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Bank and Thylan engaged in extensive negotiations. (Id.) This was not a
distressed sale, and each party had the opportunity to walk away. (Id.)
The Bank initially proposed a sale price of $5,000,000, but after
negotiations, agreed to sell the property to Thylan for $4,500,000. (Id.)
There is no indication that the Bank sold the property at a below-market
price to Thylan. To the contrary, the record reflects that the property is in
poor condition, requires hundreds of thousands of dollars in deferred
maintenance, and has only one tenant. The record fully supports the trial
court’s determination that the purchase price received by the Bank
represents the fair market value of the property.2
Finally, in their last two issues on appeal, appellants contend that the
Bank violated the DJA when it failed to apply $800,000 in proceeds from the
sale of property located at 3607 West Chester Pike, Newtown, Pennsylvania,
against the North Charlotte deficiency judgment. However, as explained by
2
Appellants argue that the Bank was bound by the contention in its petition
that the fair market value of the property was $5,800,000. (Appellants’ brief
at 43.) Appellants characterize this as a judicial admission. (Id. at 43-44.)
However, the $5,800,000 valuation was based on a 2011 appraisal when the
property had three tenants. As the trial court states, the DJA requires the
court to hear evidence regarding the fair market value of a property prior to
fixing that value if the value proffered by a petitioner is challenged by a
respondent. (Trial court opinion, 6/22/15 at 4 n.2.) See 42 Pa.C.S.A.
§ 8103(c)(4) (“If an answer is filed and testimony produced setting forth
that the fair market value of the property is more than the value stated in
the petition, the court shall hear evidence of and determine and fix the fair
market value of the property sold.”). Appellants have cited no authority for
the proposition that the trial court was bound by the value proposed in the
Bank’s petition.
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the trial court, this property was not sold to the Bank and the sale did not
occur in the context of an execution proceeding. (Trial court opinion,
6/22/15 at 7.) It was sold to a third party, and the proceeds were applied to
an entirely separate debt. (Id. at 7-8.) Therefore, the Bank did not violate
the DJA. See 42 Pa.C.S.A. § 8103(a) (“Whenever any real property is sold,
directly or indirectly, to the judgment creditor in execution proceedings
. . . .”).
Orders affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/15/2016
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