Firstrust Bank v. Wilkinson Roofing & Siding

J-A03035-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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(s):
2019-02916-MJ
BEFORE: STABILE, J., DUBOW, J., and McCAFFERY, J.
MEMORANDUM BY McCAFFERY, J.: FILED APRIL 11, 2022
20 West Park, LLC (20 West Park), and Richard Balagur (collectively
Appellants)1 appeal from the order entered in the Chester County Court of
____________________________________________
1 As will be discussed below, Wilkinson Roofing and Siding, Inc. (Wilkinson),
Equitable Property Investments, I, LLC (EPI), Kenneth S. Balagur, and
Kimberly A. Reitz were named defendants in the underlying action. However,
they were not listed on the notice of appeal or in the appellant’s brief.
Additionally, neither the corporations nor the individuals filed a notice with
this Court pursuant to Pa.R.A.P. 908, indicating they had no interest in the
outcome of the appeal. Therefore, pursuant to Rule 908, Wilkinson, EPI,
Kenneth S. Balagur, and Reitz shall be deemed appellees. Moreover, 20 West
Park and Richard Balagur are the only proper appellants.
J-A03035-22
Common Pleas, granting summary judgment to Firstrust Bank (Firstrust)
against Wilkinson, EPI, 20 West Park, Reitz, Kenneth S. Balagur, and Richard
Balagur. The order also denied Appellants’ cross-motion for summary
judgment. The central issue on appeal concerns a question of contract
interpretation in a mortgage agreement. After careful review of the contract
and the relevant law, we affirm.
This case arises from a dispute regarding the extent of Firstrust’s
mortgage lien on a commercial property located at 20 West Park Street,
Lebanon, New Hampshire (the New Hampshire Property). See Order and
Memorandum, 5/6/21, at 2. 20 West Park is the owner of the Property. See
id. It is a limited liability company with Richard Balagur as the managing
member. See Appellants’ Motion for Summary Judgment Against Firstrust
Bank Pursuant to Pa.R.C.P. 1035, 2/1/21, at ¶¶ 6, 8. The sole asset of the
company is the New Hampshire Property. See id. at ¶ 7. Additionally, the
company’s membership interests at the time were as follows: (1) 45% by
Richard Balagur; (2) 45% by Kenneth Balagur; and (3) 10% by a third party.
See Firstrust’s Motion for Summary Judgment, 1/28/21, at ¶ 7; see also
Appellants’ Answer to Firstrust’s Motion for Summary Judgment, 2/26/2021,
at ¶ 7.2
____________________________________________
2 As indicated in the Appellants’ brief, Richard and Kenneth Balagur are
brothers. See Appellants’ Brief at 26.
-2-
J-A03035-22
On February 19, 2015, Firstrust made a small business administration
loan to Wilkinson3 in the principal amount of $1,300,000.00, which was
evidenced by a note (Note), dated the same day. See Order and
Memorandum at 2. Kenneth Balagur executed the Note as president of
Wilkinson. See Appellants’ Motion for Summary Judgment Against Firstrust
Bank Pursuant to Pa.R.C.P. 1035 at ¶ 5.
Wilkinson’s indebtedness under the Note was guaranteed by 20 West
Park pursuant to an Unconditional Limited Guarantee (Guarantee), as
executed by 20 West Park. See Firstrust’s Complaint, 3/19/19, at ¶¶ 12-13.
The Guarantee contained a collateral provision pertaining to the New
Hampshire Property, which provided, in relevant part:
COLLATERAL/RECOURSE: The guarantee is limited to the amount
Lender obtains from the following Collateral pledged by
Guarantor:
20 West Park Street, City of Lebanon, County of Grafton, State of
New Hampshire a/k/a/ Tax Map#: 91-232.
Firstrust’s Motion for Summary Judgment, Exhibit C, Unconditional Limited
Guarantee, 2/19/15, at 2. The lender is identified as Firstrust and the
guarantor is 20 West Park. See id. at 1.
____________________________________________
3 Wilkinson primarily performed commercial roofing and siding projects, and
was owned and operated by Kenneth Balagur. See Firstrust’s Motion for
Summary Judgment at ¶ 5; see also Appellants’ Answer to Firstrust’s Motion
for Summary Judgment at ¶ 5. According to the complaint, Wilkinson, EPI,
Kenneth Balagur, and Reitz all shared the last known address of 731 Pheasant
Run, West Chester, Pennsylvania. See Complaint at ¶¶ 2-3, 5-6.
-3-
J-A03035-22
To secure the Note and 20 West Park’s Guarantee, 20 West Park
executed and delivered to Firstrust a Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing (Mortgage), which granted Firstrust a mortgage
lien in and upon the New Hampshire Property. See Firstrust’s Complaint at ¶
15. Pertinent to this appeal, the Mortgage set forth a secured obligations
provision and Paragraph 2.1(e) provided, in relevant part:
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 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.
Firstrust’s Motion for Summary Judgment, Exhibit D, Mortgage, Assignment
of Rents, Security Agreement and Fixture Filing, 2/19/15, at 3 (emphasis
added).4 As mentioned, the New Hampshire Property “was encumbered by
____________________________________________
4 The Assignment of Rents provided, in relevant part:
1. Until payment in full of all Obligations is made, the Assignee is
authorized to either in its own name or in the name of the
Assignors to do any and all things with reference to the
Collateral that the Assignors might or could have done but for
this Assignment including the rights:
1.1 To receive, collect and receipt for any and all rents or
other payments due under the Collateral; the receipt
of the Assignee for such payments to be a full
discharge therefore[.]
(Footnote Continued Next Page)
-4-
J-A03035-22
two mortgages held by Mascoma Savings Bank (MS Bank). Those mortgages
were in the amounts of” $1,045,000 and $300,000. See Order and
Memorandum at 2. Notably, the lien held by Firstrust “pursuant to the
Mortgage sat in third position.” Id.
Firstrust, Wilkinson, EPI, 20 West Park, Kenneth Balagur and Reitz also
executed a Loan and Security Agreement (Loan Agreement). See Appellants’
Memorandum in Support of Motion for Summary Judgment Against Firstrust
Bank Pursuant to Pa.R.C.P. 1035, 2/1/2021, at 5. The Loan Agreement
provided, in relevant part, similar language as set forth in the Mortgage:
2.2 Security. As security for the due and punctual payment of
the Note, performance under the Loan Documents, and to
secure any and all other loans and credit accommodations
made by the Lender to the Obligors (hereinafter the
“Obligations”):
2.1.1. One or more Obligors, by executing and delivering the
Mortgage and Security Agreement to the Lender
simultaneously herewith, has granted to the Lender a first
mortgage lien in the amount of the Loan on the property
known as 1218 Caln Meetinghouse Road, Township of Caln,
County of Chester, Commonwealth of Pennsylvania a/k/a
____________________________________________
* * *
4. The Assignors hereby authorize the Assignee to give notice
in writing of this Assignment at any time to any tenant or
other person having an interest in the Collateral.
Firstrust’s Motion for Summary Judgment, Exhibit E, Assignment of Leases,
Rents and Other Agreements, 2/19/15, at 2-3. In other words, Firstrust could
give notice to the tenants of the New Hampshire Property that it was
authorized to collect rents.
-5-
J-A03035-22
Parcel Number 39-4-167 on the Tax Map (the “Caln
Property”), a second mortgage lien in the amount of the
Loan on the property known as 731 Pheasant Run, Township
of Birmingham, County of Chester, Commonwealth of
Pennsylvania a/k/a Parcel Number 65-4-40.37 on the Tax
Map (the “Pheasant Run Property”) and a third mortgage
lien in the amount of the Loan on the property known as 20
West Park Street, City of Lebanon, County of Grafton, State
of New Hampshire a/k/a Tax Map #:91-232 (the “New
Hampshire Property”)*, as more particularly described in
the Mortgage and Security Agreement (collectively the
“Premises”);
* The amount of the Lender’s mortgage on the New
Hampshire Property is $1,300,000.00. Notwithstanding
that, upon the sale of the New Hampshire Property the
Lender agrees to release its lien and to limit its interest
in the New Hampshire Property to 45% of the
proceeds received from the sale of the New
Hampshire Property 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 member interest in 20 West Park, LLC,
which is the owner of the New Hampshire Property.
Firstrust’s Motion for Summary Judgment, Exhibit F, Loan and Security
Agreement, 2/19/15, at 3 (emphasis added).
Wilkinson defaulted on the Note, and consequently, Firstrust
commenced non-judicial foreclosure proceedings against the New Hampshire
Property pursuant to the terms of the Mortgage. See Firstrust’s Motion for
Summary Judgment, Exhibit G, Complaint with Petition for Declaratory Relief,
8/2/18, at ¶ 13.
Appellants originally filed a declaratory judgment action in New
Hampshire, seeking a declaration that Firstrust’s interest in the Property was
-6-
J-A03035-22
limited to the value of Kenneth Balagur’s membership interest in 20 West
Park. See Firstrust’s Motion for Summary Judgment, Exhibit G, Complaint
with Petition for Declaratory Relief, 8/2/18, at ¶ 34. The Superior Court of
New Hampshire dismissed the action due to the forum selection clause in the
Loan Documents, “which provided that Pennsylvania has exclusive jurisdiction
to decide disputes regarding the Loan Documents.” Trial Ct. Op., 7/23/21, at
1.5 The court also stayed Firstrust’s “real estate foreclosure action on the New
Hampshire Property in anticipation of th[e Pennsylvania] court’s interpretation
of the Loan Documents at issue and [its] declaration of the scope of
[Firstrust]’s mortgage lien.” Id.
____________________________________________
5 The Loan Agreement provided the following: “Any and all disputes arising
out of or under the loan documents shall be litigated in the Commonwealth of
Pennsylvania and decided by a judge, sitting without a jury[.]” Firstrust’s
Motion for Summary Judgment, Exhibit F, Loan and Security Agreement at 11
(most capitalization removed). Whereas the Mortgage contained language
that it “shall be governed by the laws of the State of New Hampshire.”
Firstrust’s Motion for Summary Judgment, Exhibit D, Mortgage, Assignment
of Rents, Security Agreement and Fixture Filing at 15. The New Hampshire
court found that the latter provision articulated notice requirements that the
mortgagee must follow to conduct a lawful non-judicial foreclosure and in
Appellant’s complaint, they did not allege improper foreclosure or a dispute
regarding the terms and conditions of the mortgage. See Firstrust’s Motion
for Summary Judgment, Exhibit H, New Hampshire Ct. Order, 2/26/19, at 8.
As the court pointed out, the Appellants sought a judicial determination as to
the actual sum of money that 20 West Park owed as the guarantor of the loan
at issue. Id. Moreover, the court stated that if Appellants had alleged the
foreclosure was improper, the statutorily mandated notice requirements would
apply but the forum selection clause would not because the claims would
relate only to the foreclosure proceedings and not the loan agreement. Id.
-7-
J-A03035-22
Firstrust subsequently instituted this lawsuit in March 2019, by filing a
complaint for declaratory judgment6 against Appellants. In the complaint, the
bank alleged it was entitled to 45% of the proceeds of the sale of the Property
following payment of the two senior MS Bank mortgages.
Appellants filed an answer and new matter, asserting, inter alia, that
Firstrust’s mortgage and lien was limited to Balagur’s membership interest in
20 West Park, and not the proceeds from the sale of the New Hampshire
property.
In January 2021, Firstrust filed a motion for summary judgment.7
Appellants filed a response, and subsequently, a cross-motion for summary
judgment. On April 22, 2021, oral argument was held regarding both motions.
On May 6, 2021, the trial court issued an order, granting Firstrust’s motion
and denying Appellants’ motion.8 The court “declared that the scope of
[Firstrust]’s lien is controlled by the plain meaning of [Paragraph] 2.1(e) of
____________________________________________
6 See 42 Pa.C.S. §§ 7531 and 7541.
7 Wilkinson, EPI, Kenneth Balagur, and Reitz did not respond to Firstrust’s
motion for summary judgment.
8 Since Wilkinson, EPI, Kenneth Balagur, and Reitz did not respond to
Firstrust’s motion, the court granted summary judgment for Firstrust against
them as well.
-8-
J-A03035-22
the Mortgage[.]” Trial Ct. Op. at 2. Appellants then filed a timely notice of
appeal.9
Appellants raise the following issues on appeal:
A. Whether the Trial Court erred in concluding that the Appellants’
understanding/interpretation of the Mortgage contradicts the plain
language of the various loan documents, and that Appellants’
argument with respect to the sentence in dispute, results in
changing the meaning of the prior sentence in the Mortgage[?]
B. Whether the Trial Court erred in granting Firstrust Bank’s
Motion for Summary Judgment, and denying the Appellants’
Motion for Summary Judgment, by misinterpreting the provision
in the Mortgage describing how the Mortgage interest of the Bank
is measured[?]
C. In the alternative, to the extent that there is any ambiguity in
the Mortgage, it should be resolved in favor of the Appellants, as
Firstrust Bank was the drafter of the loan documents.
D. Whether the Trial Court erred in concluding the intent of the
parties would have been to execute a pledge agreement if there
was an intent to limit the lien to Kenneth Balagur’s membership
interest[?]
E. Whether the Trial Court erred in failing to consider that there
was no consideration provided to 20 West Park, LLC[?]
Appellants’ Brief at 4-5.
Based on the nature of Appellants’ claims, we will address their first four
arguments together. First, Appellants contend that the trial court “incorrectly
ruled that [the] 45% language present in [Paragraph 2.1(e) of] the Mortgage
____________________________________________
9 Appellants timely complied with the trial court’s directive to file a Pa.R.A.P.
1925(b) concise statement of errors complained of on appeal.
-9-
J-A03035-22
represents 45% of the equity in the Property after payment of the first and
second mortgages, instead of [Kenneth] Balagur’s membership interest.”
Appellants’ Brief at 16. They allege it is “undisputed” that the 45% did not
reference “an equity interest in the [New Hampshire] Property after payment
of the first and second mortgage[s].” Id.
Next, Appellants assert that the trial court “incorrectly conclude[d] that
the second and third sentences of the Mortgage should not be read together”
because in their view, it is “nonsensical” and “contradicts the plain meaning
of the documents” Firstrust drafted. Appellants’ Brief at 19. In support of this
argument, Appellants point to the deposition testimony of Marcus Mies,
Esquire,10 wherein he answered that membership interest is different than
property interest and that Paragraph 2.1(e) references membership interest.
Id. at 20. Appellants argue the court “cannot erase the third sentence [of
Paragraph 2.1(e)] with the stroke of a pen to rewrite and change the deal the
parties negotiated. Appellant did not agree to this interpretation, nor did they
authorize it[.]” Id. at 20-21.
Third, Appellants claim that to extent the court determined any
ambiguity existed in the Mortgage, “it was required to be resolved in favor of
the Appellants” since Firstrust drafted the document. Appellants’ Brief at 21.
____________________________________________
10 Mies worked for the law firm representing Firstrust at the time with respect
to different types of loans and loan documentation. See Appellants’ Motion
for Summary Judgment Against Firstrust Bank Pursuant to Pa.R.C.P. 1035,
Exhibit F, Oral Deposition of March Mies, 11/17/20, at 9.
- 10 -
J-A03035-22
They contend the “writing must be construed most strongly against the party
drafting it, and the interpretation which makes a rational and probable
agreement must be preferred.” Id. at 22.
Fourth, Appellant argue, in the alternative, that while they “do not
concede the Mortgage is ambiguous, . . . if the Trial Court believed the
Mortgage to be ambiguous, then it should have examined parol evidence[,]”
which would have “confirmed that the Mortgage is limited to [Kenneth]
Balagur’s membership interest” in 20 West Park. Appellants’ Brief at 23. For
example, Appellants rely on statements made by Kenneth Balagur concerning
his ownership interest in 20 West Park to Mies and Carl Bieber, Vice President
of Firstrust. See id. at 26 (October 2014 email from Kenneth Balagur to
Bieber discussing limited guarantors). Appellants refer to electronic
communications evidence by Kenneth Balagur, in which he expressed
“concerns about how the language of the Mortgage was drafted.” Id. at 27.
Appellants also point to deposition testimony by Mies and Bieber where they
were asked whether they clarified with Kenneth Balagur that the 45%
represented property interest as opposed to membership interest. Id. at 26-
27. Both testified they believed that this understanding was conveyed to
Kenneth Balagur. Id. Nevertheless, Appellants argue that Bieber “has no
documents to support that statement, and the Mortgage, Loan Agreement,
and Resolution directly contradict his position.” Id. at 30 (emphasis omitted).
- 11 -
J-A03035-22
In addressing the grant of a motion for summary judgment, our
standard of review is limited:
When a party seeks summary judgment, a court shall enter
judgment whenever there is no genuine issue of any material fact
as to a necessary element of the cause of action or defense that
could be established by additional discovery. A motion for
summary judgment is based on an evidentiary record that entitles
the moving party to a judgment as a matter of law. In considering
the merits of a motion for summary judgment, a court views the
record in the light most favorable to the non-moving party, and
all doubts as to the existence of a genuine issue of material fact
must be resolved against the moving party. Finally, the court may
grant summary judgment only when the right to such a judgment
is clear and free from doubt. An appellate court may reverse the
granting of a motion for summary judgment if there has been
an error of law or an abuse of discretion.
Gallagher v. Geico Indem. Co., 201 A.3d 131, 136-37 (Pa. 2019) (citations
and quotation marks omitted).
Since the crux of Appellants’ arguments concern a dispute over the
terms of a contract, we are guided by the following: “Because a mortgage is
a contract, it is subject to principles of contract law. We have explained that
contract interpretation is a question of law over which our standard of review
is de novo. Therefore, this Court is not bound by the trial court’s interpretation
of a contract.” Enterprise Bank v. Frazier Family Ltd. P’ship, 168 A.3d
262, 265 (Pa. Super. 2017) (citations and quotation marks omitted).
Moreover,
[t]he cardinal rule in interpreting a contract is to ascertain the
parties’ intent. The court must construe the entire contract to
arrive at its intent. If contractual terms are clear and
unambiguous, they are deemed the best reflection of the parties’
intent. If they are ambiguous, it is permissible to ascertain their
- 12 -
J-A03035-22
meaning through parol (i.e., extrinsic) evidence. Contractual
terms are ambiguous if they are subject to more than one
reasonable interpretation when applied to a particular set of facts.
A contract is not ambiguous, however, merely because the parties
do not agree on its construction. Nor does ambiguity exist if it
appears that only a lawyer’s ingenuity has made the language
uncertain.
Pass v. Palmiero Auto. of Butler, Inc., 229 A.3d 1, 5 (Pa. Super. 2020)
(citations and quotation marks omitted). Additionally, “[w]here the language
of the contract is ambiguous, the provision is to be construed against the
drafter.” State Farm Fire and Casualty Company v. PECO, 54 A.3d 921,
928 (Pa. Super. 2012).
In granting the motion for summary judgment, the trial court explained
its rationale as follows:
During oral argument, both parties conceded that the
second sentence of the relevant section is clear if it stood on its
own: “Notwithstanding that, upon the sale of the Property the
Mortgagee agrees to release its lien and to limit its interest in the
[New Hampshire] Property to 45% of the proceeds received from
the sale of the Property 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
(maximum amount of $450,000.00) are satisfied.” Mortgage, ¶
2.1(e). The dispute hinges on whether the clarity of that second
sentence is muddied, or, as [Appellants] argue, the meaning
altered by the addition of the third sentence -- “The 45%
represents Kenneth S. Balagur’s membership interest in [20 West
Park], which is the owner of the [New Hampshire] Property.” Id.[Appellants] argue that [Kenneth Balagur] could only pledge
the value of his membership interest in the entity that owned the
[New Hampshire] Property and could not and did not pledge the
interest to the Property. Moreover, [Appellants] state that “45%
of the proceeds received from the sale” should really read and be
modified by the third sentence to give the effect of reading a
- 13 -
J-A03035-22
pledge of 45% of the value of the membership interest of
[Kenneth Balagur].
Such a reading flies in the face of the plain language of the
various loan documents. The mortgage granted was for
$1,300,000.00 and, as noted by [Appellants], the mortgage and
guaranty were necessarily executed by [20 West Park] as the
owner of the [New Hampshire] Property. It is [20 West Park] that
granted a security interest in the Property – not [Kenneth
Balagur]. [Firstrust] did agree to release its lien after receipt of
45% of the proceeds after [20 West Park] satisfied the senior
lienholders. It defies logic to suggest that the third sentence
noting the reason for using 45% in the portion of the second
sentence reading “45% of the proceeds from the sale of the
Property” transforms that plain and ambiguous language into 45%
of the value of [Kenneth Balagur]’s membership interest.3
Instead, the third sentence can be read in conjunction with the
second sentence without need to changing wholesale the meaning
of the second sentence – namely, that [Firstrust] agreed to limit
its lien on the [New Hampshire] Property to net proceeds in a
percentage equal to that of the percentage of interest [Kenneth
Balagur] then owned in [20 West Park] as owner of the Property.
__________________
3 In fact, the parties agreed that [Kenneth Balagur] now
only owns approximately 11% of the entity and [Appellants]
suggest that such reduction means the language should be
further modified to allow payment of only 11% of the value
of [Kenneth Balagur]’s membership interest.
__________________
Pledge agreements, convertible notes, and various other
mechanisms exist by which the parties could have limited the
amount of the lien to a value based on [Kenneth Balagur]’s
membership interest. No such agreements were provided. There
is no indicia of that being the intent of the parties within in Loan
Documents as no pledge agreement exists, no restrictions or
comments on the ability of [Kenneth Balagur] to transfer or
encumber his membership interest in [20 West Park], no
agreement to subordinate the bank’s lien to any third parties
(including [Appellants]), no method of calculating a minority
member’s interest in a closely-held entity, or the like. Instead,
the parties executed a straight-forward mortgage pledging an
- 14 -
J-A03035-22
interest in real estate to secure a loan by one of the property
owner’s members.
To the extent that [Appellants] (which notably does not
include [Kenneth Balagur]) object now to the fact that it
guaranteed a loan to [him] and pledged 45% of the net proceeds
after payment of two senior liens from the sale of the Property as
security and wish to limit it to the value of [Kenneth Balagur]’s
membership interest in the entity,4 that objection is too late.
[Appellants] signed clear and unambiguous documents granting a
security interest in property owned by [20 West Park] and gave a
straight-forward and simple explanation of the amount required
from a sale to release [Firstrust]’s lien on the [New Hampshire]
Property.
__________________
4 As [Firstrust] notes in its reply to the Motion for Summary
Judgment by [Appellants], it is unclear if the argument of
[Appellants] is that the security was an encumbrance on
[Kenneth Balagur]’s membership interest or the value of
[his] membership interest. The result is the same no matter
the argument.
Order and Memorandum at 4-6 (emphasis and one footnote omitted).
We agree with the trial court’s well-reasoned conclusion that the
document at issue is clear and unambiguous. First, we emphasize the fact
that the document is a mortgage. Black’s Law Dictionary defines “mortgage”
as “[a] conveyance of title to property that is given as security for the
payment of a debt or the performance of a duty and that will become void
upon payment or performance according to the stipulated terms[;]” “[a] lien
against property that is granted to secure an obligation (such as a debt) and
that is extinguished upon payment or performance according to stipulated
terms[;]” and “[l]oosely, any real-property security transaction, including a
deed of trust.” MORTGAGE, Black’s Law Dictionary (11th ed. 2019)
- 15 -
J-A03035-22
(emphasis). See also Estate of Dutton, 37 A. 582, 586 (Pa. 1897) (“A
mortgage is defined to be ‘the conveyance of an estate or property by way of
pledge for the security of the debt, and to become void upon payment of it.’”).
Simply stated, a mortgage concerns property.
This leads us to the language of the Mortgage at issue – Paragraph
2.1(e), which we recite again:
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 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.
Firstrust’s Motion for Summary Judgment, Exhibit D, Mortgage, Assignment
of Rents, Security Agreement and Fixture Filing at 3 (emphasis added).
Appellants’ argument focuses solely on the exact wording of the third
sentence and asks to ignore the preceding language. However, we “may not
disregard a provision in a contract if a reasonable meaning may be ascertained
therefrom . . . each and every part of it must be taken into consideration and
given effect, if possible, and the intention of the parties must be ascertained
from the entire instrument.” Newman Dev. Grp. of Pottstown, LLC v.
Genuardi's Family Mkt., Inc., 98 A.3d 645, 654 (Pa. Super. 2014) (citation
and quotation marks omitted).
- 16 -
J-A03035-22
Moreover, we also note that although the loan documents, including the
Mortgage, were drafted by Firstrust, the sentence in question was included at
the direction of Kenneth Balagur who reviewed and consented to its inclusion.
In a January 22, 2015, email from Kenneth Balagur to Bieber, Balagur wrote:
“I am not a lawyer but in theory the mortgage could include wording 3rd lien
for 45% of the building representing the ownership position of Kenneth
Balagur.” Firstrust’s Reply to Defendants’ Objection to Firstrust’s Motion for
Summary Judgment, 3/23/2021, at Exhibit A, January 22, 2015 Email from
Kenneth Balagur to Carl Bieber.11 Thus, it cannot be construed against
Firstrust. See State Farm Fire and Casualty Company, 54 A.3d at 928.
The third sentence that the parties have spent much time dissecting and
arguing about does nothing to modify or alter the Mortgage, nor does it create
an ambiguity. To the contrary, the sentence was included-at Kenneth
Balagur’s insistence, to explain why Firstrust’s recovery was limited to “45%
of the proceeds from the sale of the Property.” Rather than creating an
ambiguity, this sentence is declaratory and explanatory and confirms the
____________________________________________
11 See also N.T., 4/22/21, at 24 (counsel for Firstrust stating: “Membership
interest. That language actually comes from Kenneth Balagur’s email where
he says, including wording, third lien for 45 percent of the building
representing the owner – he says ownership position of Kenneth Balagur,
clearly it wasn’t ownership position. It was membership interest.”).
Appellant’s counsel confirmed Kenneth Balagur was the drafter of the
third sentence at argument on January 27, 2022.
- 17 -
J-A03035-22
parties understanding that Kenneth Balagur owned only 45% of the LLC that
owned the property. Therefore, Firstrust was precluded from attempting to
recover, in a foreclosure proceeding, more of “the proceeds from the sale of
the Property” than Kenneth Balagur would be entitled upon the sale of the
Property. Read in context to the transaction as a whole, this sentence appears
to have been included by Kenneth Balagur to insulate the 55% interests of his
partners from execution by Firstrust.
We are mindful that these were sophisticated business parties12
negotiating the terms of a loan and mortgage agreement concerning a
considerable amount of money. While Appellants refer to a couple of
comments made by Kenneth Balagur during negotiations, there is nothing in
the loan documents to suggest that these sophisticated parties intended
Kenneth Balagur’s interest to be confined to his membership interest in 20
West Park, which owned the property, and not the actual property itself.
Likewise, based on the facts, we can discern that the question of “membership
interest” versus “property interest” is a distinction without a difference as the
____________________________________________
12 While Appellants mention that Kenneth Balagur was not represented at the
time of negotiations, that was at his own peril as a party’s pro se status confers
no special benefit on that individual.
- 18 -
J-A03035-22
sole asset of 20 West Park was the New Hampshire Property.13 Therefore,
Kenneth Balgur’s interest solely derived from that property.
Furthermore, as the trial court emphasizes as evidence of the parties’
intent, or lack thereof, no other documents were provided which would have
established that the amount of the lien was based on Kenneth Balagur’s
membership interest. See Order and Memorandum at 5 (“[N]o pledge
agreement exist[ed], no restrictions or comments on the ability of [Kenneth
Balagur] to transfer or encumber his membership interest in [20 West Park],
no agreement to subordinate the bank’s lien to any third parties (including
[Appellants]), no method of calculating a minority member’s interest in a
closely-held entity, or the like.”).14 Appellants do not address this finding or
____________________________________________
13 We reiterate the fact that the loan was guaranteed by 20 West Park, which
identified the New Hampshire Property as the only collateral.
14 At oral argument, the following exchange took place between the parties
and the trial court which demonstrates Appellants’ misconception:
THE COURT: … If I stated to you[, counsel for Appellants] that
generally speaking when I see a bank take a membership interest
as a pledge that there’s a whole different set of documents that
goes along with that.
[Appellants’ Counsel]: Yes, your Honor, but those are not the
documents that the bank drafted. The bank drafted these
documents and that was relied upon by Mr. Balagur that the bank
was drafting what everyone was in agreement to of what he
actually owed.
(Footnote Continued Next Page)
- 19 -
J-A03035-22
refute otherwise in their brief. As for Appellants’ argument concerning parol
evidence, we need not address this claim in light of our above analysis. See
Pass, 229 A.3d at 5. Accordingly, Appellants’ first four arguments lack merit.
With respect to their remaining claim, Appellants assert that the trial
court “failed to factor in that [20 West Park] received no consideration for the
transaction.” Appellants’ Brief at 32. They state, “There is no reason for [20
West Park] to further encumber [its] sole asset to the detriment of [its] other
members who had no interest in [Firstrust]’s loan, and received no benefit for
allowing the Mortgage to be placed on the Property.” Appellants’ Brief at 32.15
____________________________________________
THE COURT: Essentially, you’re telling me the bank made a large
mistake because they use[d] property documents when what they
should have been using was . . . pledge agreement documents?
[Appellants’ Counsel]: Yes, your Honor.
* * *
[Firstrust’s Counsel]: I’ll reiterate that this was not a pledge of
membership interest. This is a mortgage. There’s a major
difference between those two types of collateral. [Appellants’]
argument . . . convolutes the issues as to whether the mortgage
is a pledge agreement or not, which it’s not. It’s a mortgage and
. . . the guarantee says . . . it’s a lien on real estate. It’s not a
lien on the membership interest.
N.T., 4/22/21, at 22-23 (emphasis added).
15 While Appellants did raise this issue in their concise statement, the trial
court did not address it in its Rule 1925(a) opinion.
- 20 -
J-A03035-22
As Firstrust points out, this appeal concerns a declaratory judgment
action, which sought a declaration as to the meaning of the contract at issue
and the extent of its mortgage lien on the New Hampshire Property – this is
not an action to enforce the mortgage and the issue of whether the mortgage
is enforceable was not before the trial court. See Appellee’s Brief at 27. As
such, the question is not properly before this Court. However, it merits
mention that 20 West Park executed the Mortgage. This fact is not in dispute
and there is no mention in the record that Kenneth Balagur signed the
documents on behalf of 20 West Park without the consent of its other
members.
Accordingly, we conclude the trial court appropriately determined there
were no genuine issues of material fact and properly entered summary
judgment in favor of Firstrust. See Gallagher, 201 A.3d at 136-37.
Order affirmed.
Judge Dubow joins the Memorandum.
Judge Stabile files a Concurring/Dissenting Memorandum.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/11/2022
- 21 -