Firstrust Bank v. Wilkinson Roofing & Siding ( 2022 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
FIRSTRUST BANK : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
WILKINSON ROOFING AND SIDING, :
INC. EQUITABLE PROPERTY :
INVESTMENTS, I, LLC 20 WEST : No. 1108 EDA 2021
PARK, LLC KENNETH S. BALAGUR :
KIMBERLY A. REITZ RICHARD :
BALAGUR :
:
:
APPEAL OF: 20 WEST PARK, LLC :
AND RICHARD BALAGUR :
Appeal from the Order Entered May 6, 2021
In the Court of Common Pleas of Chester County
Civil Division at No: 2019-02916-MJ
BEFORE: STABILE, J., DUBOW, J., and McCAFFERY, J.
CONCURRING/DISSENTING MEMORANDUM BY STABILE, J.:
FILED APRIL 11, 2022
Respectfully, I dissent from the learned Majority’s conclusion to affirm
the trial court’s grant of summary judgment in favor of Appellee Firstrust Bank
(“Firstrust”) on the basis that the contractual provision at issue is
unambiguous. The Majority affirms the trial court’s conclusion that this
provision may be interpreted as a matter of law to provide Firstrust a
mortgage lien of 45% of the sale proceeds in the New Hampshire Property1
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1For sake of consistency, references herein to the “New Hampshire Property”,
“Appellants”, “Appellee”, “20 West Park”, “Note”, “Guarantee”, “Mortgage”,
and “Loan Agreement” shall be as defined in the Majority’s memorandum.
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after satisfaction of the two more senior Mascoma Bank liens. In my opinion,
the flaw in this analysis is that it does not recognize the ambiguity created by
reference to both a “lien” secured by a mortgage in real estate and a limited
liability company “member interest” in that real estate for purposes of
declaring Firstrust’s interest in the sale proceeds of the the New Hampshire
Property. Because I believe the use of both terms to refer to Firstrust’s
interest in the sale proceeds renders the contractual provision ambiguous, I
would reverse the trial court’s grant of summary judgment and remand for an
evidentiary hearing for the trial court to consider extrinsic evidence in order
to make appropriate findings of fact as to the intent of the parties when
drafting this provision. I further believe the Majority errs by considering
extrinsic evidence and by invoking the presumption against draftsmanship. I
concur, however, with the Majority’s rejection of Appellants’ last issue that the
contract fails for lack of consideration.
I begin with a reproduction of the contractual provision at issue recited
in various of the loan documents, and in particular, the Mortgage, without a
detailed recitation of the background facts, as the Majority aptly has set forth
those details.
Paragraph 2.1(e) of the Mortgage, repeated in other of the loan
documents, provides:
The amount of this mortgage is $1,300,000.00. Notwithstanding
that, upon the sale of the Property the Mortgagee agrees to
release its lien and to limit its interest in the Property to
45% of the proceeds received from the sale of the Property
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after the first lien to Mascoma Savings Bank in the original amount
of $1,045,000.00 and second lien to Mascoma Savings Bank in the
original amount of $300,000.00 (and a maximum amount of
$450,000.00) are satisfied. The 45% represents Kenneth S.
Balagur’s membership interest in [20 West Park], which is
the owner of the [New Hampshire] Property.
(Emphasis added). In this action for declaratory judgment, Firstrust alleges
that based upon the foreclosure of its mortgage lien, it is entitled to 45% of
the proceeds of the sale of the New Hampshire Property following payment of
the two more senior Mascoma Bank liens. Appellants, 20 West Park and
Richard Balagur (“Balagur”), disagree, and assert that Firstrust instead, is
limited to the 45% membership interest that Kenneth Balagur (“Ken Balagur”)
has in the sale proceeds of the New Hampshire Property after satisfaction of
the Mascoma Bank liens. The competing positions of the parties demonstrate
on their face that an ambiguity exists in this provision by reference to both a
“lien” and a “membership interest” in the sale proceeds. To understand why
reference to both the terms “lien” and “member interest” in the provision
create an ambiguity, it is necessary to explore briefly the difference between
a mortgage lien in real estate and a member interest in a limited liability
company that owns real estate.
“It is well settled in Pennsylvania that a mortgage, although in form a
conveyance of title, is in reality only a security for payment of money or
performance of other collateral contract.” Winthrop v. Arthur W. Binns,
Inc., 50 A.2d 718, 719 (Pa. Super. 1947). “Pennsylvania recognizes
mortgages as acting both as conveyances and as security interests or liens.”
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Pines v. Farrell, 848 A.2d 94, 100 (Pa. 2004) (citation omitted). “As
between the parties it is a conveyance so far as is necessary to enforce it as
a security.” Winthrop, 50 A.2d at 719. “Although the mortgagor remains
the real owner of the mortgaged property, the mortgagee is entitled to its
possession, to be held as security until his debt is paid.” Id. “A mortgage is
in essence a defeasible deed, requiring the grantee to reconvey the property
held as security to the grantor upon satisfaction of the underlying debt or the
fulfillment of established conditions.” Hahnemann Med. Coll. & Hosp. of
Philadelphia v. Com, 416 A.2d 604, 607 (Pa. Cmwlth. 1980) (citing
HanePayne’s Administrator v. Patterson’s Administrator, 77 Pa. 134,
137 (1874)). The term “lien” expresses a broad concept embracing a variety
of security devices both legal and equitable. Anderson Contracting Co. v.
Daugherty, 417 A. 2d 1227 (Pa. Super. 1979), appeal denied, 425 A.2d
329 (Pa. 1980). The word “lien” is of the same origin as the word “liable”,
and the right of “lien” expresses the liability of certain property for a certain
legal duty, or a right to resort to it in order to enforce the duty. Id. (citing
Wood’s Appeal, 30 Pa. 274, 277 (1858)). In more simple terms, a mortgage
may be defined as any obligation evidenced by a security document and
secured by a lien upon real property. See Bennett v. Seave, 554 A. 2d 886,
891 (Pa. 1989) (citing 41 P.S. § 101 (Act 6) and 35 P.S. § 1680.401c(a) (Act
91)). It is a specific lien against a particular piece of real property. PNC
Bank, Nat. Ass’n v. Balsamo, 634 A.2d 645, 650 (Pa. Super. 1993), appeal
denied, 648 A.2d 790 (Pa. 1994).
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A member interest in a limited liability company is an entirely different
creature from a mortgage lien. To illustrate, a limited liability company in
Pennsylvania,2 is an entity distinct from its member or members and has
perpetual duration. 15 Pa.C.S.A. § 1818(a) and (c). It has the power to do
all things necessary or convenient to carry on its activities and affairs. 15
Pa.C.S.A. § 8819. It has the legal capacity of a natural person to act, see id.
cmt., and this of course would permit ownership of real estate. An LLC has
an “operating agreement” that governs the relations among members and
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2 Limited liability companies are governed in Pennsylvania under the
Pennsylvania Uniform Limited Liability Company Act of 2016 (the “LLC Act”).
15 Pa.C.S.A. §§ 8811 - 8898. 20 West Park, LLC, is a New Hampshire limited
liability company. The New Hampshire Revised Limited Liability Company Act,
§§ 304-C:1 et. seq, is substantially similar to Pennsylvania with regard to the
formation and the treatment of member interests. I recognize that this
litigation began in New Hampshire and that the Superior Court of New
Hampshire determined that this matter had to be litigated in Pennsylvania
based upon the forum selection clause in the Loan and Security Agreement
that provides that all disputes arising out of or under the loan documents shall
be litigated in Pennsylvania. The New Hampshire Court, however, only
determined the forum in which the parties had to litigate. The court did not
resolve any choice of law issues relating to interpretation of the loan
agreements. See New Hampshire Superior Court order, 2/27/19, at 3, 6. I
likewise do not attempt to resolve any such conflict of law issues, but merely
use Pennsylvania’s statute to illustrate the nature of a LLC member interest
which I believe for present purposes is sufficiently aligned with New
Hampshire’s law to demonstrate the point. In passing, I also note that the
Loan and Security Agreement provides that the agreement and all other loan
documents are to be governed by and construed in accordance with
Pennsylvania law. Loan Documents are defined to include all other
documents, certificates and instruments executed and delivered by the
obligors in connection with, or for the benefit of, Firstrust. In contrast, the
Mortgage provides it shall be governed by the laws of the state of New
Hampshire. In addition to any potential conflict of law issues, it is possible
that conflicts between the applicable law provisions contained within these
documents also may have to be reconciled.
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between members and the LLC, the rights and duties as a member or
manager, the activities and affairs of the LLC, the means for amending an
operating agreement, and the means and conditions for approving entity
transactions. 15 Pa.C.S.A. § 8815(a). A person becomes a member in an LLC
at the time of formation, or as provided for in the operating agreement. 15
Pa.C.S.A. § 8841(a), (b), and (d). As seems typical, Pennsylvania’s LLC Act
does not specify the manner in which member ownership in a limited liability
company is evidenced. Membership interests, however, are typically stated
in terms of percentage interests or membership units. Membership carries
with it both the rights of a member and a transferable interest, or in other
words, both a non-economic and an economic interest. See
15 Pa.C.S.A. § 8852(g). A “transferable interest” is the right to receive
distributions. See 15 Pa.C.S.A. § 8812 (definition of “Transferable interest”).
A person may not transfer any rights in a limited liability company other than
a transferable interest. 15 Pa.C.S.A. § 8851(b). When a member transfers a
transferable interest, the member retains the rights, duties, and obligations
of a member other than the transferable interest. 15 Pa.C.S.A. § 8852(g).
Importantly, a member’s interest in a limited liability company is considered
personal property. 15 Pa.C.S.A. §§ 8841(f) and 8851(a). A judgment creditor
of a member cannot execute on a member’s transferable interest. Rather, a
judgment creditor must secure from a court a charging order against the
transferable interest of the judgment debtor member. See 15 Pa.C.S.A.
§ 8853. The charging order then operates as a lien on the judgment debtor
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member’s transferable interest and obligates the limited liability company to
pay to the judgment creditor any distributions that otherwise would be paid
to the judgment debtor member. Id. A member’s judgment creditor does
not have the right to foreclose upon the whole of a limited liability company’s
assets to satisfy the debt owed by a single member. More to the point, a
“member interest”, whether expressed as a percentage or in membership
“units”, represents ownership in the legal entity, the LLC, and not in the assets
owned by the LLC. The value of a member’s interest in the LLC is not
measured by any single asset owned by the LLC, but is determined under the
LLC’s operating agreement and/or applicable law. The value of a member’s
interest also may vary depending upon, for instance, whether the LLC
continues to operate or is in liquidation. A member’s transferable interest or
economic interest in an LLC entitles the member to distributions of money
from the LLC. See 15 Pa.C.S.A. §§ 8812, 8844. However, a member’s right
to distributions may depend upon consideration of such things as the book
value of the company’s assets and liabilities and depreciation. See 15
Pa.C.S.A. § 8845. In case of dissolution, return of contributions also has to
be considered. 15 Pa.C.S.A. § 8877.
In simple terms, a mortgage lien encumbers real estate as collateral to
secure an underlying obligation. In contrast, a member interest in an LLC is
ownership treated as personalty measured by the percentage of or units held
by the member interest. The value of a member interest or ownership in an
LLC cannot be determined by simply calculating the member’s percentage
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interest as against the company’s assets. Instead, the interest must take into
consideration other factors incident to valuing the LLC in order to determine
the value of a member interest. With respect to real estate, a member has
an indirect interest in the real estate through ownership in the LLC, but the
member has no direct ownership rights in the real estate solely as a result of
membership in the LLC. Undoubtedly, Firstrust understood these distinctions
when it insisted that Ken Balagur pledge all his assets in consideration of the
$1.3 million loan to his company. It realized that it could not directly lien the
New Hampshire Property through Ken Balagur’s member interest in 20 West
Park and that Ken Balagur could not pledge the New Hampshire Property. It
therefore, had to have 20 West Park agree to mortgage the the New
Hampshire Property so that in the event of foreclosure it could collect on Ken
Balagur’s membership interest in the proceeds.
The difference between a “mortgage lien” and a “member interest” in
an LLC confirm the tension and ambiguity created by Paragraph 2.1(e) of the
Mortgage and related loan documents that reference both Firstrust’s mortgage
lien and Balagur’s 45% membership interest in 20 West Park to define what
portion of the sale proceeds of the New Hampshire Property are to be paid to
Firstrust upon foreclosure. It is a simple matter to determine what amount
Firstrust is entitled to collect on its mortgage lien under the second sentence
of Paragraph 2.1(e) if one need only consider a mortgage lien. Firstrust would
be entitled to collect on its mortgage lien 45% of the sale proceeds from
foreclosure on the New Hampshire Property after satisfaction of the two senior
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Mascoma Bank liens. The relatively straightforward application of that second
sentence, however, is complicated by the third sentence that declares that the
45% interest referenced in the second sentence represents Ken Balagur’s 45%
membership interest in 20 West Park.
Assuming for the moment that Section 2.1(e) is to be construed as a
lien but measured by an ownership interest, then calculation of Ken Balagur’s
member interest in the sale proceeds becomes more complicated. As Firstrust
concedes in its brief, the determination of Ken Balagur’s 45% membership
interest in the sale proceeds of the the New Hampshire Property would require
that someone (presumably an expert) provide an opinion as to the value of
that membership interest. See Firstrust’s Brief at 12. The importance of this
distinction also was noted by Firstrust to the trial court when it stated that the
document was not a pledge of a membership interest, that it was a mortgage,
and that there is a major difference between those two types of collateral.
See Majority Memorandum at n.14 (citing N.T., Hearing, 4/22/21, at 22-23.)
Within the record there also exists an illustration prepared by Richard Balagur
demonstrating that the difference in value to be paid to Firstrust as between
a 45% mortgage lien and a 45% mortgage lien limited to Ken Balagur’s equity
interest in the LLC is twofold. See Equity Distribution from 20 West Park, LLC
as of 12/31/14, Prepared by Richard Balagur. In coming to a value of Ken
Balagur’s membership interest in the LLC, the illustration takes into
consideration things such as subordinated debt, tenant security deposits, New
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Hampshire business profits tax, and a bonus to Balagur.3 Therefore, I must
respectfully and strongly disagree with the Majority’s statement that “the
question of ‘membership interest’ versus ‘property interest’ is a distinction
without a difference as the sole asset of 20 West Park was the New Hampshire
Property. Therefore, Kenneth Balagur’s interest solely derived from that
property.” Majority Memorandum at 18-19. This statement fails completely
to acknowledge the nature of ownership in an LLC (as the parties do), as
opposed to the simple concept of a mortgage lien that merely encumbers real
estate to secure an underlying obligation.
It has been suggested by Firstrust, the court, and the Majority that
interpretation of Section 2.1(e) is somehow affected by the fact that it was 20
West Park, and not Ken Balagur, that granted the mortgage lien. Certainly,
the mortgage lien granted by 20 West Park is what gave Firstrust the right to
foreclose on the New Hampshire Property. I fail to see how this impacts the
distinction between a mortgage lien and a member interest when discussing
the value to be received by Firstrust. Although 20 West Park, as owner of the
the New Hampshire Property, executed the Mortgage, the operative provision
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3 I offer no opinion as to the correctness of this illustration in valuing Ken
Balagur’s membership interest. The exhibit merely demonstrates, as Firstrust
concedes, that the value of a mortgage lien and the value of a membership
interest are two different things. It does appear that the illustration is based
upon a liquidation value, as the record reflects that the New Hampshire
Property is the sole principal asset of the company.
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regarding distribution of sale proceeds to Firstrust still is defined by Ken
Balagur’s 45% membership interest.4
In Hutchinson v. Sunbeam Coal Corp., 519 A.2d 385 (Pa. 1986), our
Supreme Court set forth basic rules of contract interpretation pertinent to this
appeal.
Determining the intention of the parties is a paramount
consideration in the interpretation of any contract. The intent of
the parties is to be ascertained from the document itself when the
terms are clear and unambiguous. However, . . . where an
ambiguity exists, parol evidence is admissible to explain or clarify
or resolve the ambiguity, irrespective of whether the ambiguity is
created by the language of the instrument or by extrinsic or
collateral circumstances.
We first analyze the contract . . . to determine whether an
ambiguity exists requiring the use of extrinsic evidence. A
contract is ambiguous if it is reasonably susceptible of different
constructions and capable of being understood in more than one
sense. The court, as a matter of law, determines the existence of
an ambiguity and interprets the contract whereas the resolution
of conflicting parol evidence relevant to what the parties intended
by the ambiguous provision is for the trier of fact.
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4 Firstrust expresses concern in its brief that accepting Appellants’
interpretation would mean that the bank could take collateral subject to
dilution, i.e., 11%, since as the trial court noted, there is nothing in the loan
documents that restricts or comments on the ability of Ken Balagur to transfer
or encumber his membership interest. Firstrust’s Brief at 20; Trial Court
Opinion n.3. I would not construe Section 2.1(e) to permit such a result, since
the unambiguous language grants a 45% interest. The percentage was fixed
as of the time the loan documents were executed—not as of the time of any
potential foreclosure. The question remains whether that percentage pertains
to the priority of a mortgage lien or to Ken Balagur’s 45% member interest in
the remaining proceeds after all other required adjustments and distributions
are made first.
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Id. at 389-90 (citations and quotation marks omitted). Under these
aforementioned principles, I conclude that the second and third sentences to
Paragraph 2.1(e) of the Mortgage, and as contained in other of the loan
documents, indeed create an ambiguity. It is unclear whether 20 West Park
simply agreed to grant Firstrust a mortgage lien in the New Hampshire
Property based upon 45% of the sale proceeds which equate to Ken Balagur’s
45% membership interest in the company, or whether 20 West Park only
agreed to lien Ken Balagur’s 45% membership interest in the remaining
proceeds after sale of the the New Hampshire Property. Both interpretations
may be deemed reasonable considering the possible intent of the parties
under the loan documents. On the one hand, Firstrust could reasonably argue
its only interest in the sale proceeds was to secure 45% of those proceeds
regardless of any internal membership interest considerations. On the other
hand, Appellants 20 West Park and Ken Balagur could reasonably argue that
20 West Park had no interest in the loan extended by Firstrust to benefit Ken
Balagur and his company, Wilkinson Roofing and Siding, Inc., and that it would
reasonably make sense that the only proceeds Firstrust could lien would be
those that would be paid as against Ken Balagur’s membership interest. To
resolve this ambiguity extrinsic evidence had to be considered by the trial
court, thus creating triable issue of fact precluding the entry of summary
judgment. The record is full of testimony and evidence to argue either
position.
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Although the trial court had ample testimony and evidence before it
when deciding the parties’ competing summary judgment motions, its decision
was not based upon any of that evidence. It was the trial court’s conclusion
that Section 2.1(e) could be interpreted as a matter of law, since it believed
the only reasonable interpretation was one whereby Firstrust agreed to limit
its mortgage lien in the the New Hampshire Property to a percentage equal to
that of Ken Balagur’s interest in 20 West Park. Trial Court Memorandum,
5/6/21, at 5. Reading the third sentence as only describing a 45% interest in
sale proceeds, however, ignores any reference to Ken Balagur’s membership
interest as a modifier to the second sentence and the legal ramifications that
flow from membership status. If as the trial court contends, the third sentence
merely was intended to restate that Firstrust was entitled to 45% of the sale
proceeds after satisfaction of the two senior liens, then the third sentence is
rendered superfluous. This violates rules governing contract interpretation,
since all words in a contract are to be given meaning. “Courts do not assume
that a contract’s language was chosen carelessly, nor do they assume that the
parties were ignorant of the meaning of the language they employed.”
Murphy v. Duquesne Univ. Of The Holy Ghost, 777 A.2d 418, 429 (Pa.
2001) (citation omitted). A cardinal rule of contractual interpretation counsels
against rendering words or provisions meaningless. Pac. Emps. Ins. Co. v.
Glob. Reinsurance Corp. of Am., 693 F. 3d 417, 430 (3d Cir. 2012) (citing,
Morris v. Am. Liab. & Sur. Co., 185 A. 201, 202 (Pa. 1936)). Therefore, if
we are to give meaning to all words chosen by the parties, and if doing so
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reveals ambiguity, extrinsic evidence must be considered to determine the
intent of the parties. The trial court simply chose to ignore the third sentence
modifier and further, chose to focus on what was not in the record, as opposed
to what was in the record regarding the parties’ intentions on this provision.
The Majority similarly concludes that the third sentence does not create
an ambiguity because it merely explains why Firstrust’s recovery was limited
to “45% of the proceeds from the sale of the Property.” Rather than creating
an ambiguity, the Majority maintains the sentence is declaratory and explains
the understanding that Ken Balagur owned only 45% of the LLC that owned
the the New Hampshire Property. The Majority concludes that Firstrust was
precluded from attempting to recover more of the proceeds from the sale of
the New Hampshire Property than Ken Balagur would be entitled upon the
sale. Ken Balagur, however, was not entitled to receive 45% of the sale
proceeds. He only was entitled to receive his 45% interest in them after all
other company obligations were satisfied before surplus could be distributed
to the members. Read in context to the transaction as a whole, the Majority
further concludes the third sentence appears to have been included by Ken
Balagur to insulate the 55% interest of his partners [sic] from execution by
Firstrust. Majority Memorandum at 17-18. Respectfully, this part of the
Majority’s rationale in fact demonstrates why there is an ambiguity in these
provisions. It treats Ken Balagur’s 45% membership interest as equivalent to
a 45% mortgage lien. Construing Firstrust’s recovery to 45% of the sale
proceeds as measured by the percentage of Ken Balagur’s member interest
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would not necessarily insulate the 55% interest of the other members. A
recovery of 45% of the sale proceeds may well include amounts in excess of
Ken Balagur’s 45% membership interest after adjustments and could
distribute to Firstrust some part of the proceeds that belong to the other 55%
member(s). Both Firstrust and Balagur agree that there is a difference in
value between a 45% mortgage lien and Ken Balagur’s 45% member interest
in the sale proceeds. See, supra.
In reaching its conclusion that the trial court should be affirmed because
Section 2.1(e) of the Mortgage is clear, the Majority also strays into
considering extrinsic evidence to bolster this conclusion and to construe the
provision against 20 West Park, noting that the third sentence was included
at the direction of Ken Balagur.5 The Majority observes that although the loan
documents were drafted by Firstrust, the sentence in question was included
at the direction of Ken Balagur who reviewed and consented to its inclusion.
Majority Memorandum at 17. The Majority cites an email from Ken Balagur
and statements by counsel to find that Ken Balagur was the drafter of the
third sentence to conclude that the third sentence cannot be construed against
Firstrust. Id. (citing, State Farm Fire and Cas. Co. v. PECO, 54 A.3d 921,
928 (Pa. Super. 2012) (where the language of a contract is ambiguous, the
provision is to be construed against the drafter)). I believe the error here is
twofold.
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5The Majority must assume that in drafting this provision that Ken Balagur
was acting on behalf of 20 West Park.
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First, if the terms of a contract are clear and unambiguous, the intent of
the parties is to be ascertained solely from the writing, without reference to
any external testimony or other evidence. Hutchison, supra. The trial court
did not consider extrinsic evidence. The Majority does so in order to buttress
its interpretation of Section 2.1(e). This is error. Second, the Majority
compounds this error by invoking the presumption against draftsmanship
without first requiring that the trial court consider extrinsic evidence to
ascertain the intent of the parties. In Burns Manufacturing Company, Inc.
v. Boehm, 356 A.2d 763 (Pa. 1976), the Court stated the following when the
chancellor in that case invoked the presumption against draftsmanship before
determining that no extrinsic evidence could explain the intent of the parties.
The chancellor made no apparent attempt to construe the
language of the addendum clause in light of the circumstances
which surrounded its execution. Instead he appears to have relied
on the apparent imprecision of the language as a sufficient basis
to rule against appellan. This, in our view, is not a satisfactory
approach to the construction of the facially ambiguous language
contained in the addendum. While it is a well settled rule of
construction that in cases of ambiguity, leases and grants should
be construed most strongly against the drafter; it is equally clear
that the rule is not intended as a talismanic solution to the
construction of ambiguous language. Rules of construction serve
the legitimate purpose of aiding courts in their quest to ascertain
and give effect to the intention of parties to an instrument. They
are not meant to be applied as a substitute for that quest. Where
a document is found to be ambiguous, inquiry should
always be made into the circumstances surrounding the
execution of the document in an effort to clarify the
meaning that the parties sought to express in the language
which they chose. It is only when such an inquiry fails to
clarify the ambiguity that the rule of construction relied
upon by the chancellor should be used to conclude the
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matter against that party responsible for the ambiguity,
the drafter of the document. Because, however, we are able
to decide the issue on the theory of easement by implied
reservation there is no need to engage in an analysis of the
language of the addendum.
Id. at 767 n.3. (citations omitted) (emphasis added). I already stated my
view that if the Majority found the provision at issue to be clear, then it could
proceed no further to consider extrinsic evidence in order to bolster its
interpretation as a matter of law. The same concern holds true with respect
to the invocation of the presumption against draftsmanship. The presumption
has no place in interpretation if, as the Majority concludes, the provision is
clear and unambiguous. Even if the Majority would agree that the provision
is ambiguous, as I contend, it still improperly invokes the presumption against
draftsmanship because extrinsic evidence of the parties’ intent has not been
reviewed to determine if that evidence may clarify the meaning of the
provision. If, and only if, extrinsic evidence is not capable of ascertaining the
intent of the parties may the court then, as a last resort, invoke the
presumption against draftsmanship as an aid to interpretation. And of course,
the task of making those findings is for the trial court.
Finally, I do concur in the Majority’s holding that it was not error for the
trial court to fail to consider that 20 West Park received no consideration for
the transaction. Firstrust argues, and the Majority agrees, that the issue of
consideration was not properly before the trial court, since this is a declaratory
judgment action as to the meaning of the contract and not an action to enforce
the Mortgage. I agree, but wish to offer a more substantive reason for
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rejecting this argument. The record reflects that on February 17, 2019 and
October 28, 2018, Richard Balagur and Kenneth Balagur, respectively,
representing 100% of the membership having a voting and controlling stake
in 20 West Park, amended the company’s operating agreement to memorialize
the basis upon which the company was willing to pledge as collateral Ken
Balagur’s 45% equity in the company to secure a bank loan related to his
other private investments. The approved amendment states:
It is agreed that it in exchange for a waiver of the LOC credit
guarantee fee currently paid to Kenneth Balagur and his
agreement to waive interest payments if the LLC manager
determines that to be advantageous, Kenneth Balagur may enter
into an agreement where his 45% equity in 20 West Park, LLC is
pledged as collateral to secure a bank loan related to his other
private investments. This pledge of collateral may be evidenced
or secured as required by the lending institution provided that as
part of any recording of a lien, security filing or mortgage that
within the public record there is clear wording that even if a
mortgage reflects a security interest in the whole building that
that the banks [sic] interest is limited to Kenneth Balagur’s equity
position and that the balance of the buildings [sic] equity remains
with the other financial owners of the LLC, excluding Kenneth
Balagur’s equity.
20 West Park, LLC Operating Agreement Amendment, Trial Exhibit No. 39. It
is evident from this document alone that consideration was in fact given in
exchange for 20 West Park executing the loan documents, and in particular,
the Mortgage. It did so in order to facilitate the Firstrust loan to Ken Balagur
and his company. Apparently, Ken Balagur was willing to waive a LOC credit
guarantee fee and interest payments in exchange for 20 West Park agreeing
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to encumber his membership interest in favor of Firstrust extending the loan
to Ken Balagur’s company.
For the foregoing reasons, I respectfully dissent from the Majority’s
decision to affirm the grant of summary judgment in favor of Firstrust. I
concur in its disposition of Appellants’ last claim regarding the lack of
consideration for this transaction. Further, I would deny Appellants’ request
that summary judgment be entered in its favor, as factual questions remain
as to the intentions of the parties with respect to the contractual provision at
issue contained within the Mortgage and the other loan documents.
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