Moore, K. v. Moore, M.

J-A14039-21

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

KATHERINE M. MOORE : IN THE SUPERIOR COURT OF : PENNSYLVANIA Appellant : : : v. : : : MARK L. MOORE : No. 974 WDA 2020

Appeal from the Order Entered August 17, 2020 In the Court of Common Pleas of Erie County Civil Division at No(s): No. 12434-17

BEFORE: MURRAY, J., KING, J., and MUSMANNO, J. MEMORANDUM BY MUSMANNO, J.: FILED: AUGUST 27, 2021

Katherine M. Moore (“Katherine”) appeals from the August 17, 2020, Order granting the Motion for Summary Judgment filed by Mark L. Moore (“Mark”) and denying Katherine’s Motion for Summary Judgment. After careful review, we affirm.

The trial court provided the following history underlying this appeal:

The controversy in this case stems from a $200,000 KeyBank Small Business Administration (SBA) loan [(the “SBA loan”)] made to J.J. Moore Sales, Inc. [(“J.J. Moore”)][,] in May of 2002. [Mark] was the sole owner and proprietor of J.J. Moore at the time of the loan, and both [Katherine] and [Mark], who were married at the time, individually guaranteed the loan. They executed a suretyship agreement titled “Unconditional Guarantee” on May 15, 2002 [(the “Suretyship Agreement”)], which states[,] in relevant part:

Guarantor unconditionally guarantees payment to Lender of all amounts owing under the Note. This Guarantee is in effect until the Note is paid in full. Guarantor must pay all amounts due under the Note when Lender issues written demand upon Guarantor.

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Lender is not required to seek payment from any other source before demanding payment from Guarantor.

Under the Suretyship Agreement, both [Katherine] and [Mark] also waived their rights to require demand be made upon the borrower, J.J. Moore, and to notice of default under the Note.

Prior to the [SBA] loan’s scheduled date of maturity[,] on May 15, 2009, both J.J. Moore and [Mark] filed for bankruptcy. J.J. Moore filed for Chapter 11 bankruptcy on May 11, 2006[,] and had its Chapter 11 Plan and Disclosure Statement approved on May 16, 2007. [Mark] filed for Chapter 7 bankruptcy on December 7, 2008[,] and was discharged by [O]rder of court, dated April 7, 2009.

Meanwhile, on February 15, 2008, [Katherine] filed for divorce in the Erie County Court of Common Pleas. [Katherine] and [Mark] executed a Separation and Property Agreement [(the “Separation Agreement”)] on May 1, 2012[,] whereby the marital assets and liabilities were divided between [Katherine] and [Mark]. On June 12, 2012, the [c]ourt adopted the terms of [the Separation Agreement] and issued a [D]ivorce [D]ecree. One of the paragraphs in the Separation Agreement, clause 11, is entitled “Future Title, Ownership, and Liability.” The first paragraph of this clause divided the claims and rights of both parties to the property granted them under the [Separation Agreement], giving each party full ownership of whatever property either was granted. The second paragraph of clause 11 [(the “Indemnification Clause”)] … reads:

The Husband and the Wife represent and warrant to each other that they have not incurred debts or made any contracts for which the other or his or her estate may be liable and will not hereafter incur any such debts or make any such contracts. Each party agrees to indemnify the other from any debts or contracts that may exist or come into existence in violation of this clause.

[Separation Agreement, 5/1/12, at 5.]

In January of 2014, the SBA sent [Katherine] a [N]otice demanding she satisfy the balance remaining on the SBA loan. [Katherine] disputed her obligation to [the SBA] loan and hired

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counsel to seek her release from any obligation thereunder. [Katherine] argued several claims before the SBA, including [that] the SBA claim was time-barred; she detrimentally relied on the SBA’s inaction to that point; and the SBA failed to join [Mark] as an indispensable party. The SBA, by administrative [O]rder, rejected [Katherine’s] claims in June of 2015. Since April of 2016, the Department of the Treasury has been garnishing [Katherine’s] wages to recover the balance of the SBA loan. [Katherine] filed suit against [Mark] on August 30, 2017.

In the instant case, [Katherine] claims [Mark] has breached the terms of the [Indemnification Clause] by not agreeing to indemnify her SBA loan obligation. [Katherine] argues [that] since [Mark] was required under the Separation Agreement to notify her of any obligations or debts he incurred for which she would be held liable, [Mark] was obligated to inform her of and indemnify her against the SBA loan. She asserts [that Mark], acting in his capacity as the sole owner and proprietor of J.J. Moore, incurred a debt when J.J. Moore defaulted on the SBA loan, which [Katherine] is now being held liable for. [Katherine] also argues [that Mark] was not discharged of this debt in bankruptcy proceedings. [Katherine] alleges in her Complaint that she did not have any recollection of signing the Suretyship Agreement, and that if she did, it was only at the “request and insistence” of [Mark]. In [Katherine’s] view, however, and regardless of the Suretyship Agreement, this debt was incurred by the actions of [Mark], and [Mark] is liable under the Separation Agreement to indemnify [Katherine].

[Mark] claims, on the other hand, he had no duty under the Separation Agreement to notify [Katherine] of her obligation to the SBA loan and he has no duty to indemnify her against her obligation, either. [Mark] argues J.J. Moore, a corporate entity, and not [Mark] individually, defaulted on the SBA loan, and [Katherine] incurred her obligation through the Suretyship Agreement she signed in 2002. [Mark] also argues he was discharged of this debt in bankruptcy court and, therefore, did not have any debt to notify [Katherine] of when he signed the Separation Agreement. [Mark] argues it is absurd for [Katherine] to require him to notify her and indemnify her against her own debt obligation.

Both parties filed respective Motions for Summary Judgment. The parties are not disputing the formation or validity

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of the Suretyship Agreement, nor is either party disputing whether both [Katherine] and [Mark] signed the Suretyship Agreement, as indicated during the hearing on the record. The parties are not disputing the formation or validity of the Separation Agreement, nor that both parties have signed and are bound by the Separation Agreement. And, as explained above, whether [Mark] or J.J. Moore were discharged of liability for the SBA loan during the relevant bankruptcy proceedings does not affect the outcome in this case, and is, therefore, not material to this case. There is one substantive issue before this [t]rial [c]ourt: whether [Mark] is liable under the Separation Agreement to indemnify [Katherine] against her obligation to secure the SBA loan. In other words, whether the [Indemnification Clause] relieves [Katherine] of her obligation under the Suretyship Agreement and places it on [Mark].

Trial Court Opinion, 8/17/20, at 2-4 (citation and footnotes omitted).

The trial court held a hearing on the parties’ Motions for Summary Judgment on August 3, 2020. Thereafter, the trial court entered an Order denying Katherine’s Motion for Summary Judgment and granting Mark’s Motion for Summary Judgment. Katherine filed a timely Notice of Appeal, and a court-ordered Pa.R.A.P. 1925(b) Concise Statement of matters complained of on appeal.

Katherine presents the following question for our review:

Did the [t]rial [c]ourt err in denying [Katherine’s] Motion for Summary Judgment and granting [Mark’s] Motion for Summary Judgment where: (i) the parties’ [Separation Agreement] requires [Mark] to indemnify [Katherine] for any debts [Mark] incurred or any contracts [Mark] made for which [Katherine] may be liable, (ii) during their marriage, [Mark] made a contract in the form of a SBA [l]oan, (iii) [Mark] solely and unilaterally incurred a debt to the benefit of his business of which he was the President and sole shareholder, (iv) [Katherine] was held liable for the SBA [l]oan, and (v) [Mark] failed to indemnify [Katherine] for the SBA [l]oan?

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Appellant’s Brief at 2-3.1

Our standard of review of a trial court’s grant or denial of a motion for summary judgment is well settled:

We view the record in the light most favorable to the nonmoving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Only where there is no genuine issue as to any material fact and it is clear that the moving party is entitled to a judgment as a matter of law will summary judgment be entered. Our scope of review of a trial court’s order granting or denying summary judgment is plenary, and our standard of review is clear: the trial court’s order will be reversed only where it is established that the court committed an error of law or abused its discretion.

Good v. Frankie & Eddie’s Hanover Inn, LLP, 171 A.3d 792, 795 (Pa. Super. 2017) (citing Hall v. CNX Gas Co., LLC, 137 A.3d 597, 601 (Pa. Super. 2016) (citation omitted)).

In support of her appeal, Katherine argues that the trial court erred because the plain language of the Indemnification Clause was triggered when Mark incurred a debt for which Katherine may be liable. Brief for Appellant at 13. Specifically, Katherine argues that “[Mark] agreed to indemnify [Katherine] for [] any debts ‘incurred’ or [] any ‘contracts’ that [Mark] ‘made’ from either of which [Katherine] ‘or her estate may be liable.’” Id. at 14. Katherine argues that the undisputed facts show that Mark, on behalf of J.J. Moore, made a contract, and that the Indemnification Clause does not place ____________________________________________ 1 In her brief, Katherine also argues that she is entitled to reimbursement for

legal fees accrued in conjunction with defending the collection activity as well as the instant breach of contract litigation. Brief for Appellant at 21-23.

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any qualifiers on the phrase “made a contract.” Id. at 15. She asserts that the Indemnification Clause does not limit the scope of debts nor the means by which Katherine may be liable. Id. She further avers that, according to Pennsylvania’s rules of contract interpretation, this Court is required to “ascertain and give effect to the intent of the contacting parties.” Id.

Katherine also argues that Mark incurred the debt – the SBA loan – in his capacity as the President of J.J. Moore. Id. at 16. She posits that even though she signed the Suretyship Agreement for the debt, the debt would not have come due if J.J. Moore had not defaulted on the loan. Id. She further claims that the Indemnification Clause contains no limit on the mechanism of liability, and the term “may be liable” applies regardless of whether the liability was caused by Mark’s actions alone or only incurred during the marriage. Id. at 17. Katherine also points to the fact that her interpretation of the Indemnification Clause is consistent with the remainder of the Separation Agreement, because the Indemnification Clause is listed after the provisions that distribute assets and liabilities. Id. at 17-18.

Thus, Katherine contends that she was entitled to summary judgment on her breach of contract claim as a matter of law, because Mark had a duty to indemnify her for the SBA loan; he failed to do so; and that breach caused Katherine’s damages. Id. at 19.

In his brief, Mark argues that Katherine’s claim must fail because she entered into the Suretyship Agreement of her own undertaking and that the

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Suretyship Agreement formed the sole basis for her liability. Brief for Appellee at 6. Mark further claims that the purpose of the Indemnification Clause “was not to allocate responsibility for known obligations because, presumably, the parties would have done that explicitly and directly.” Id. He posits that “the parties distributed the known assets and obligations of the marital estate, and wanted to ensure, through [the Indemnification Clause], that the other spouse had not and would not incur any additional debt on their behalf.” Id.

Mark asserts that, ultimately, Katherine’s claim must fail because he did not incur any debt or contracts on behalf of Katherine. Id. He avers that the Suretyship Agreement was an individual obligation of Katherine’s and the sole basis for liability for the SBA Loan. Id. Pursuant to that Agreement, the SBA could seek repayment of the SBA loan from Katherine, individually, without seeking payment from either Mark or J.J. Moore. Id. 6-7.

Alternatively, Mark argues that even if Katherine’s general interpretation of the Indemnification Clause were correct, it is undisputed that Mark did not incur the debt, but rather, it was a non-marital debt of J.J. Moore. Id. at 8. Mark further asserts that the fact that he was the sole shareholder and President of J.J. Moore is insufficient “to consider the SBA [l]oan as a personal obligation or undertaking of Mark.” Id. (citing Marano v. Granata, 24 A.2d 148, 149 (Pa. Super. 1942), as standing for the proposition that an agent acting for a disclosed principal is not a party to the contract.). Moreover, Mark points to the fact that the Note identifies the borrower as J.J. Moore and his

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signature line stated, “Mark L. Moore, President,” and he signed the Note followed by the word “Pres.” Id. at 9. This is in contrast to the signature line on the Suretyship Agreement which reads, “Mark L. Moore, Individual.” Id. Thus, in the absence of fraud or wrongdoing, Mark contends that the law does not support Katherine’s argument that the obligation of the principal should be attributed to the agent. Id. Finally, Mark argues that Katherine has failed show that the corporate veil should be pierced, and Mark held liable for the debt of J.J. Moore. Id. at 10.

In its Opinion, the trial court aptly addressed Katherine’s issue on appeal, set forth the relevant law, and found no merit to that issue. We adopt the sound analysis and Opinion of the trial court as if set forth fully herein. See Trial Court 1925(a) Opinion, 11/16/20, at 4-12.

Further, the contract between Katherine and the SBA is one for a suretyship. See McIntyre Square Assocs. v. Evans, 827 A.2d 446, 452 n.7 (Pa. Super. 2003) (discussing suretyship and guarantee agreements, and noting “[w]hile both guaranty and suretyship agreements are agreements to be liable for the debt of another, the principal difference is that the creditor may look to the surety for immediate payment upon the debtor’s default, without first attempting to collect the debt from the debtor, whereas the creditor must first seek payment from the debtor before going after a guarantor.”); see also 8 P.S. § 1 (providing that all agreements to answer for the debt of another will be considered a suretyship unless the agreement

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specifically states otherwise). Thus, pursuant to the terms of the Suretyship Agreement, Katherine agreed to repay the SBA loan upon the default of J.J. Moore, and not upon any action on the part of Mark.

In the instant case, Katherine has failed to show that Mark breached the duties imposed upon him by the Indemnification Clause and consequently, her claim must fail. See McCausland v. Wagner, 78 A.3d 1093, 1101 (Pa. Super. 2013). (To succeed on a breach of contract claim, a plaintiff must prove the following elements: 1) existence of a contract, including essential terms, 2) a breach of the duty imposed by the contract, and 3) resulting damages.) As the trial court found, Katherine’s obligation to repay the SBA loan is the result of the Suretyship Agreement, which she individually signed. See Trial Court 1925(a) Opinion, 11/16/20, at 12. The trial court’s findings are supported in the record, and its legal conclusions are sound. Finding no abuse of discretion or error of law on the part of the trial court in granting summary judgment in favor of Mark and denying Katherine’s Motion for Summary Judgment, we affirm the trial court’s Order.2

Order affirmed. ____________________________________________ 2 Given our disposition of Katherine’s first issue, we conclude she is not entitled to attorneys’ fees.

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Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 8/27/2021

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