Meridian Bank v. Elverta Washington Sq.

• Court: Superior Court of Pennsylvania
• Decided: November 6, 2024
• Docket: 2242 EDA 2023
• Status: Unpublished

Opinion

J-A20031-24

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37

MERIDIAN BANK, APEX REALTY, LLC : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : ELVERTA WASHIGTON SQUARE, LLC : : : No. 2242 EDA 2023 APPEAL OF: AREZZO SKY CAPITAL, : LTD :

Appeal from the Order Entered August 15, 2023 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): 210702006

BEFORE: LAZARUS, P.J., PANELLA, P.J.E., and DUBOW, J.

MEMORANDUM BY DUBOW, J.: FILED NOVEMBER 6, 2024

Appellant, Arezzo Sky Capital, LTD (“Arezzo”), appeals from the July 17,

2023 order entered in the Philadelphia County Court of Common Pleas denying

its petition to set aside a sheriff’s sale. Arezzo also appeals from the August

15, 2023 order denying its motion for reconsideration. After careful review,

we affirm the orders on appeal.

Background

Elverta Washington Square, LLC (“Elverta”) owned a condominium unit

at 210 West Washington Square in Philadelphia (“Condo”), on which Mid Penn

Bank (“Mid Penn”) initially held a first lien mortgage.

SPM Holdings Trust (“SPM”) is a Nevada Spendthrift Trust, which owns

Elverta as one of its assets. To pay off Mid Penn’s Mortgage on the Condo, J-A20031-24

SPM, on September 13, 2019, borrowed $1,760,000 from Meridian Bank

(“Meridian”) and entered into various agreements with Meridian (“Loan

Agreement”). SPM then paid this amount to Mid Penn and Mid Penn marked

its mortgage on the Condo as satisfied and released.

Also, as part of the Loan Agreement, SPM executed a note in favor of

Meridian (“SPM Note”). Before executing the SPM Note, the trustees of SPM

adopted a resolution that authorized the loan and SPM Note, specifically noting

that the SPM Note is “approved and that any Trustee is hereby authorized,

empowered and directed, in the name and on behalf of the Trust, to execute

and deliver the Loan Documents[.]” Resolution, 9/13/19, at 1 (unpaginated).

Pursuant to this authority, Kenneth Bjorkelo (“Bjorkelo”), Investment Trustee,

executed the SPM Note.

The Loan Agreement also included an agreement between Meridian and

Elverta, as the owner of the Condo. Elverta agreed to grant Meridian a

mortgage on the Condo and guarantee SPM’s obligations pursuant to the SPM

Note (“Surety Agreement”). The Surety Agreement included a confession of

judgment provision and, important to our analysis of the issues raised in this

appeal, a provision in which Elverta agreed to be independently obligated to

repay the loan even if the SPM Note were to be found invalid or unenforceable.

In particular, the Surety Agreement provides:

The surety . . . is an absolute and unconditional, primary, direct, continuing, and immediate guarantee of payment and not of collectability and shall be valid and binding upon the Surety [Elverta] regardless of any invalidity, irregularity, defect, or unenforceability of any provision of or in the Note or

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Loan Documents or any other obligation of agreement of the Borrower [SPM] or the Surety [Elverta] in favor of the Bank [Meridian]. . . .

Surety Agreement, 9/13/19, at § 3(d) (emphasis added).

Elverta also adopted a resolution directing Bjorkelo, the managing

member of Elverta, to execute and deliver surety documents and to take such

action as Bjorkelo deemed necessary and appropriate.

Also, as part of the Loan Agreement, Bjorkelo, on behalf of Elverta,

signed the Mortgage, filed the mortgage with the Recorder of Deeds and

assigned to Meridian the leases of the Condo and the right to collect rents.

Confession of Judgment Action

In May 2021, SPM ceased making loan payments to Meridian, which

triggered Elverta’s obligation to make the loan payments. Elverta then failed

to make payments to Meridian. Thus, on July 23, 2021, Meridian initiated the

instant action by filing a complaint in confession of judgment against Elverta

for payment of $1,832,316.97. Elverta did not file a timely petition to open

and/or strike the confessed judgment.

On January 14, 2022, Meridian initiated a separate action against

Elverta seeking to conform the judgment confessed in the instant action

pursuant to Pa.R.Civ.P. 29861 (“Conformance Action”). Elverta failed to

respond, Meridian filed the appropriate praecipe, and on March 8, 2022, the

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1 Rule 2986 provides that “[j]udgment shall be entered in the action for the

amount, if any, due the plaintiff from the defendant or the amount, if any, due the defendant from the plaintiff. That judgment shall merge with the confessed judgment.”

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Prothonotary entered a default judgment in the Conformance Action against

Elverta for $1,885.026.97.

On May 23, 2022, the trial court merged the Conformance Action with

the instant action and, three days later, updated the instant action to reflect

the merger of the judgments.

Meridian subsequently assigned the confessed judgment to Appellee,

Apex Realty LLCs (“Apex”). Apex filed the appropriate praecipe with the

Prothonotary and, on July 14, 2022, Apex, based on the confessed judgment,

issued a writ of execution for the Condo. The sheriff scheduled a sale of the

Condo for October 4, 2022.

Arezzo’s Challenge to Proceedings as a Third Party

On September 30, 2022, Arezzo contacted Apex to request that the

sheriff postpone the sheriff’s sale. Arezzo alleged that it had a mortgage on

the Condo that had priority over Apex’s confessed judgment because the SPM

Note was void ab initio.2 The sheriff postponed and rescheduled the sale of

the Condo for December 6, 2022.

On December 5, 2022, Arezzo filed a motion to stay the upcoming

sheriff’s sale, but the trial court rejected the filing on the morning of the sale.

Arezzo did not refile the motion to stay the sheriff’s sale and did not participate

2 We note that the Recorder of Deeds recorded Meridian’s mortgage on September 17, 2019. Arezzo obtained its mortgage on the Condo several months later, on January 27, 2020, and did not have the Recorder of Deeds record the mortgage until almost two years later, on January 24, 2022.

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in the December 6, 2022 sale as a bidder to protect its alleged interest in the

Condo.

On December 6, 2022, Apex purchased the Condo at sheriff’s sale as

the foreclosing party for a credit bid equal to the highest third party bid of

$1,500,000. As a result, there were no proceeds for distribution to junior

creditors, such as Arezzo.

On December 22, 2022, Arezzo filed a petition seeking to set aside the

sheriff’s sale pursuant to Pa.R.Civ.P. 3132. Arezzo argued that the entry of a

confessed judgment was based on the SPM Note, which was invalid. In

particular, Arezzo asserted that the SPM Note in favor of Meridian was void

because SPM, as a Nevada trust, lacked the legal authority to borrow funds.

Arezzo concluded that the Note was, therefore, void and Meridian lacked

authority to confess judgment against Elverta. Arezzo argued in the

alternative that the Surety Agreement was not valid because a trustee of SPM

was required to sign the Surety Agreement, but did not do so.

On December 29, 2022, Arezzo filed with the sheriff exceptions to the

sheriff’s proposed schedule of distribution, arguing that, as a matter of law

and equity, the court should give Arezzo’s mortgage the highest priority. In

support of this argument, Arezzo relied on the same reasons stated in its

petition to set aside the sheriff’s sale. On January 23, 2023, the sheriff filed

the exceptions and its acknowledgement of deed with the trial court.

On March 17, 2023, Arezzo indexed a lis pendens against the Condo.

On April 12, 2023, Apex filed a motion to strike the lis pendens.

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On July 17, 2023, the trial court entered an order denying Arezzo’s

petition to set aside the sheriff’s sale and exceptions to the sheriff’s proposed

schedule of distribution. The court rejected Arezzo’s arguments because

Meridian’s right to confess judgment arose from the Surety Agreement and

not the SPM Note and thus, any challenge to the SPM Note was irrelevant.

The trial court similarly rejected Arezzo’s argument that the confessed

judgment provision in the Surety Agreement was invalid because a trustee of

SPM did not sign the Surety Agreement. The trial court found that since the

parties to the Surety Agreement were Elverta and Meridian, and not SPM, a

SPM trustee was not required to sign the Surety Agreement. The court also

noted that it was Elverta, and not SPM, who was the fee owner of the Condo.

Additionally, the trial court found that Elverta engaged in the necessary

corporate formalities to authorize Elverta to enter into the Surety Agreement.

The trial court also denied Arezzo’s exceptions to the sheriff’s proposed

schedule of distribution “for the same reasons” it denied the petition to set

aside the sheriff’s sale. Trial Ct. Op., 7/17/23, at 12.

On August 2, 2023, Arezzo filed a motion for reconsideration of the

court’s denial of Arezzo’s petition to set aside the sheriff’s sale and its

exceptions to the sheriff’s distributions claiming that it had discovered “new

evidence” that Bjorkelo was not the managing member of Elverta and, thus,

lacked authority to execute the Surety Agreement. On August 15, 2023, the

trial court denied this motion on the grounds that evidence of Bjorkelo’s

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position at Elverta was not “new evidence” and granted Apex’s motion to strike

the lis pendens on the Condo. This appeal followed.

Arezzo raises the following five issues on appeal:

1. Whether the court failed to apply the law when holding valid a confessed judgment based on guarantee of payment of an invalid note?

2. Whether the court committed an error of law by holding that the validity of the confessed judgment could not be attacked?

3. Whether under the law, Meridian’s Mortgage is discharged?

4. Whether the [Surety Agreement] and [Mortgage] without authorized signatures are invalid and could not authorize the confessed judgment?

5. Whether the trial court should have granted the Motion to Allow Evidence New to Arezzo [] on Persons with Authority to Sign the Surety Agreement [] and [] Mortgage?

Arezzo’s Brief at 7.

B.

Arezzo’s claims of error are based upon its argument that the trial court

erred in denying its petition to set aside a sheriff’s sale. We review the denial

of a motion to set aside a sheriff’s sale for an abuse of discretion. See Irwin

Union Nat’l. Bank and Trust Co. v. Famous, 4 A.3d 1099, 1102 (Pa. Super.

2010). “[T]he relevant inquiry is whether proper cause has been shown to

set aside the sheriff’s sale.” Id. (citation omitted); see also Pa.R.C.P. No.

3132. The burden of establishing proper cause lies with the petitioner. See

Irwin Union Nat’l. Bank and Trust Co., 4 A.3d at 1102. “Sheriff’s sales

have been set aside where the validity of the sale proceedings is challenged,

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a deficiency pertaining to the notice of the sale exists, or where misconduct

occurs in the bidding process.” Id.

“[A] petition to set aside a sheriff’s sale may only be granted when the

petition is filed before the sheriff’s delivery of the deed.” Mortgage

Electronic Registration Systems, Inc. v. Ralich, 982 A.2d 77, 79 (Pa.

Super. 2009) (citation omitted). There is, however, an exception to the time

bar. Id. at 80. Under this exception, a trial court may set aside a sheriff’s

sale after delivery of the sheriff’s deed “based upon fraud or lack of authority

to make the sale.” Id.

*

In its first issue, Arezzo claims that the trial court erred in finding that

the confessed judgment underlying the sheriff’s sale was valid, averring that

the SPM Note upon which the confessed judgment was based was invalid.

Arezzo’s Brief at 20-22. Arezzo reasserts the argument made to the trial court

that the Note is void because “[i]t is Nevada law that a note by a trust, which

is a nonexistent legal entity, is void from the start.” Id. at 21.

In ruling on Arezzo’s petition to set aside the sheriff’s sale, the trial court

concluded that Arezzo had not established proper cause to do so. The court

explained that “the instrument used to confess judgment against Elverta was

not the Meridian Promissory Note signed by SPM, but rather, the Surety

Agreement signed by Elverta.” Trial Ct. Op. at 10. Thus, the court concluded

that the validity of the Note is irrelevant to the validity of the confessed

judgment.

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Arezzo bases it argument that the trial court erred by baldly claiming

that Meridian’s right to confess judgment under the Surety Agreement is only

valid if the SPM Note is valid and the SPM Note is invalid because Nevada law

does not authorize a trust to borrow funds. Arezzo’s Brief at 22. To the extent

that Arezzo has provided legal authority for this argument, Appellant relies on

an unpublished case from a Nevada appellate court, Thomas & Kathleen

Garland Family Trust v. Melton, 460 P.3d 31 (Nev. App. 2020) (Table).

Whether the trust had the legal authority to borrow funds and, thus,

whether the SPM Note, is invalid is irrelevant to this appeal. The language of

the Surety Agreement clearly and unambiguously provides Meridian with the

right to confess judgment regardless of the validity of the SPM note:

The surety . . . is an absolute and unconditional, primary, direct, continuing, and immediate guarantee of payment and not of collectability and shall be valid and binding upon the Surety [Elverta] regardless of any invalidity, irregularity, defect, or unenforceability of any provision of or in the Note or Loan Documents or any other obligation of agreement of the Borrower [SPM] or the Surety [Elverta] in favor of the Bank [Meridian]. . . .

Surety Agreement at § 3(d) (emphasis added). Thus, the trial court properly

rejected Arezzo’s argument that since Nevada law does not authorize SPM to

borrow funds, the SPM Note is invalid and Meridian lacked the right to confess

judgment against the Condo.

In its second issue, Arezzo claims that the trial court erred in finding

that Arezzo, as a third party, lacked standing to attack the confessed

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judgment. Arezzo asserts that a third party has the right to challenge a

confessed judgment for two reasons. First, Arezzo argues that it has the right

to challenge the confessed judgment because the judgment is based on the

SPM Note. Arezzo’s Brief at 22-25. Arezzo also contends that Arezzo had the

right to challenge the judgment pursuant to Pa.R.Civ.P. 3132 because the Rule

permits the court to “set aside the [sheriff’s] sale . . . or enter any other order

which may be just and proper under the circumstances.” Id. at 26-27

(quoting Pa.R.Civ.P. 3132).

As a threshold matter, we note that the trial court properly found that a

third-party only has standing to attack a confessed judgment in limited

circumstances—where the third party can establish fraud or collusion in the

grant of the right to confess judgment. Roemer v. Denig, 18 Pa. 482, 484

(Pa. 1852). The trial court found that Arezzo failed to establish any fraud or

collusion. Trial Ct. Op. at 9. We agree. Our review of the record demonstrates

that Arezzo has provided no evidence of fraud or collusion. Additionally, we

reject Arezzo’s argument that the invalidity of the SPM Note meets this criteria

for the reasons discussed above and, even if relevant, does not rise to the

level of establishing fraud or collusion.

Arezzo relies on M & P. Mgmt., L.P. v. Williams, 937 A.2d 398 (Pa.

2007); Romberger v. Romberger, 139 A. 159 (Pa. 1927); Forum Realty

Co. v. Yoon, 272 A.3d 454 (Pa. Super. 2022) (unpublished memorandum);

and Com. ex. rel. Penland v. Ashe, 19 A.2d 464 (Pa. 1941) to support its

position that it has standing to challenge Meridian’s right to confess judgment.

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None of these cases, however, involve the matter at issue here, i.e., whether

a third-party may at any time seek to open or strike a confessed judgment.

Therefore, we find no legal authority to support Arezzo’s conclusion that the

trial court abused its discretion in finding that it lacked standing to collaterally

attack the confessed judgment.

Last, we consider Arezzo’s claim that the court erred when it found that

that Rule 3121, which governs petitions to set aside sheriff’s sales, did not

provide Arezzo the right to challenge the confessed judgment. Arezzo has not

cited to any legal authority suggesting that the “any other relief” provision of

Rule 3121 would permit the court to grant broad relief to Arezzo to challenge

the confessed judgment, especially when Arezzo’s challenge to the confessed

judgment ignores the clear and unambiguous language of the Surety

Agreement.

Additionally, we see no equitable reason to grant Arezzo “any other

relief.” The Recorder of Deeds recorded Meridian’s mortgage on September

17, 2019, and Arezzo obtained its mortgage on the Condo several months

later, on January 27, 2020. Thus, when Arezzo obtained its mortgage on the

Condo, it was constructively aware that Meridian already held a mortgage on

the Condo. Thus, Arezzo’s claim that the court erred in denying its petition to

strike the sheriff’s sale fails.

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In Arezzo’s third issue, it contends that the SPM Note was “extinguished”

because it was “void from the start, which discharges Meridian’s Mortgage.”

Arezzo’s Brief at 28.

It is well-settled that “failure to argue and to cite any authority

supporting any argument constitutes a waiver of issues on appeal.” Jones v.

Jones, 878 A.2d 86, 90 (Pa. Super. 2005). “This Court will not act as counsel

and will not develop arguments on behalf of an appellant.” Bombar v. West

American Ins. Co., 932 A.2d 78, 93 (Pa. Super. 2007).

Instantly, Arezzo has failed to develop this issue with citation to

controlling case law, as required by our Rules of Appellate Procedure. See

Pa.R.A.P. 2119(a) (requiring an appellant to include in his argument

“discussion and citation of authorities”). Arezzo’s failure to develop this issue

with citation to and discussion of relevant authority has substantially hindered

our ability to conduct meaningful appellate review of this issue. Accordingly,

this issue is waived. See Bombar, 932 A.2d at 95; Jones, 878 A.2d at 90.

In its fourth issue, Arezzo makes two interrelated claims. First, Arezzo

avers that even if the SPM Note were valid and the mortgage not discharged

as a result of the SPM Note being void, the Surety Agreement would still be

invalid because it was not signed by an authorized signatory. Arezzo’s Brief

at 29-34. Arezzo claims the trial court erred when it found that Bjorkelo was

authorized to sign the Surety Agreement as managing member of Elverta

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because Bjorkelo was not properly appointed as managing member of Elverta.

Id. at 30-32. Next, Arezzo asserts that the trial court abused its discretion in

denying its motion for reconsideration and permit Arezzo to provide evidence

to support this challenge.3 Id. at 33-34. Arezzo avers that it only learned of

Bjorkelo’s lack of authority to sign the Surety Agreement when Elverta filed

its petition to strike the default judgment and set aside the sheriff’s sale and

attached thereto a “Deed of Trust and Action by Written Consent,” dated

December 31, 2018. Id.

In addressing Arezzo’s assertion that the Surety Agreement was invalid,

the trial court explained that the claim that Bjorkelo did not have “managing

partner4” authority from Elverta to sign the Surety Agreement was contrary

to the numerous pleadings in this case since 2021 identifying Bjorkelo as

Elverta’s principal. Trial Ct. Op., 3/14/24, at 2. The court also found that

Arezzo lacked standing to assert this claim as it “belongs to Elverta and not

Arezzo because it is Elverta that signed the Surety Agreement [] that Arezzo

attempts to contest.” Id. at 3. With respect to its reason for denying Arezzo’s

request to open the record to take new evidence, the court found that because

3 We review the trial court’s order denying a motion to reopen the case for an

abuse of discretion. Beaumont v. ETL Servs., Inc., 761 A.2d 466, 468 (Pa. Super. 2000). 4 We note that since Elverta is a limited liability company and not a partnership, Bjorkelo’s role is that of the managing member and not managing partner. The trial court’s designation of him as a managing partner, however, does not affect the trial court’s well-reasoned analysis of the legal issues in this appeal.

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the pleadings throughout the history of the case had identified Bjorkelo as

Elverta’s principal, the purported “new evidence” was not, in fact, new. See

id. at 2. We agree.

As a threshold matter, we note that we have already addressed, and

rejected, Arezzo’s assertion that it has grounds to challenge the confessed

Even assuming Arezzo had such grounds, Arezzo has failed to provide

any meaningful arguments. Our review of the record confirms the trial court’s

finding that throughout the case the parties had identified Bjorkelo as Elverta’s

principal and that, therefore, Bjorkelo had authority to sign the Surety

Agreement on Elverta’s behalf. We, thus, discern no abuse of discretion in

the trial court’s conclusion that Arezzo’s claim is not based on “new” evidence.

We further note that Arezzo has failed to address, let alone provide legal

support, for its contention that the trial court erred or abused its discretion in

concluding that the purported “new evidence” was not actually new.

Accordingly, this claim likewise fails.

C.

In sum, having found each of Arezzo’s issues either meritless or waived,

we affirm the July 17, 2023 order denying Arezzo’s petition to set aside the

sheriff’s sale and the August 15, 2023 order denying Arezzo’s Motion for

Reconsideration based on new evidence.

Orders affirmed.

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Date: 11/06/2024

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