Date: 11-16-2001

Case Style: Ethan Good v. Timothy A. Holstein and Donna L. Holstein

Case Number: J.A31045/01

Judge: Kelly

Court: Superior Court of Pennsylvania

Plaintiff's Attorney: Unknown

Defendant's Attorney: Unknown

Description: 1 Appellants, Timothy and Donna Holstein, ask us to determine whether the trial court erred when it found them personally liable to Appellee, Ethan Good, in the amount of $315,841.18. We hold that the trial court improperly found Appellants personally liable and reverse the trial court’s judgment.

2 The relevant facts and procedural history of this appeal are as follows. On May 29, 1992, Appellants’ corporation, Blue Mack, Inc., bought real estate at 401 West High Street in Pottstown, Pennsylvania, from Mrs. Smiths, Inc. (later “Eggo”). The parties executed a purchase money mortgage to finance the conveyance in the amount of $340,000.00. Appellants also executed a personal surety agreement with Mrs. Smith’s for the full amount of the mortgage.

3 In 1993, Blue Mack purchased the assets of Appellee’s corporation, Good Transport Ltd. In the transaction, Good Transport acquired a second mortgage from Blue Mack on the 401 West High Street property. There was no personal surety agreement between the parties concerning the second mortgage. In May, 1995, Blue Mack defaulted on both mortgages. Mrs. Smith’s, now doing business as Eggo, did not sue on the default of the first mortgage, but Good Transport did sue on the second mortgage and obtained a writ of execution for the 401 West High Street property on June 4, 1998. Appellee, Ethan Good, then purchased the first mortgage and note on the property from Eggo on August 28, 1998 for $70,000.00. No mention was made of the surety agreement during this transaction.

4 On September 29, 1998, Appellee filed a confession of judgment against Appellants on the surety agreement. On November 18, 1998, Appellee filed an action in assumpsit against Appellants seeking payment on the surety agreement.

5 On January 20, 1999, pursuant to the writ of execution on the second mortgage, the property was sold to Good Transport’s attorney at a sheriff’s sale for $1,959.24. The attorney later assigned the bid to Appellee and his wife. In accordance with the Deficiency Judgment Act, Appellee petitioned the court to determine the fair market value of the property. The court set the fair market value at $400,000.00. In its April 14, 1999 order, the trial court applied the value of the property to the debt and costs attributable to the first mortgage, which Appellee had purchased from Eggo. The court then applied the remaining balance of the fair market value ($59,120.70) to the second mortgage on the same property. This allocation left a deficiency of $325,021.18 on the second mortgage.

6 The confessed judgment and assumpsit action were consolidated and the case went to trial on September 6, 2000. The trial court determined that Appellants were personally liable to Appellee for $315,841.18. The court arrived at this amount by subtracting the deficiency amount ($325,021.18) from the fair market value of the property ($400,000.00). The court then took this number ($74,978.82) and subtracted it from the debt on the first mortgage including interest and costs($390,820.00). Based on the personal surety agreement created to secure the first mortgage, the trial court found Appellants personally liable to Appellee in the amount of $315,841.18.

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Click the case caption above for the full text of the Court's opinion.

Outcome: ¶20 Judgment reversed.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: Reported by Kent Morlan