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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P 65.37

MILLER BOYS PROPERTIES, LLC,             :: IN THE SUPERIOR COURT OF
                                         :       PENNSYLVANIA
                    Appellant            :
                                         :
            v.                           :
                                         :
CONESTOGA BANK,                          :
                                         :
                    Appellee             : No. 800 EDA 2015

                     Appeal from the Order February 9, 2015,
                  Court of Common Pleas, Philadelphia County,
                 Civil Division at No. April Term, 2013 No. 04218


MILLER BOYS PROPERTIES, LLC,  :             IN THE SUPERIOR COURT OF
                              :                  PENNSYLVANIA
              Appellant       :
                              :
         v.                   :
                              :
ADVANCED MERCHANT GROUP, INC. :
and CONESTOGA BANK,           :
                              :
              Appellee        :             No. 824 EDA 2015

                 Appeal from the Order entered February 6, 2015,
                   Court of Common Pleas, Philadelphia County,
                 Civil Division at No. April Term, 2013 No. 04858

BEFORE: DONOHUE, MUNDY and FITZGERALD*, JJ.

MEMORANDUM BY DONOHUE, J.:                 FILED SEPTEMBER 28, 2015

      Appellant, Miller Boys Properties, LLC (the “Miller Boys”), appeals from

the trial court’s entry of summary judgment in the two above-captioned

actions. For the reasons that follow, we affirm the trial court’s rulings.




*Former Justice specially assigned to the Superior Court.
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     In its written opinion in support of its grant of summary judgment, the

trial court provided the following summary of the factual background

underlying these actions:

           [Miller Boys] filed the case captioned above, along
           with two other cases against [Appellee Conestoga
           Bank (“Conestoga”)] as well as [Advanced Merchant
           Group, Inc. (“AMG”)] and Onexcellence, Inc. (case
           Nos. 130404858 and 130404863, respectively). In
           the present case, the Miller Boys claim that
           Conestoga misapplied and/or failed to pay to them
           certain rents allegedly received by Conestoga
           pursuant to an assignment of rents agreement after
           the Miller Boys defaulted under loans extended to
           them by Conestoga. Further, the Miller Boys seek
           declaratory   judgment      and   allege     fraudulent
           inducement,     breach    of   contract,    intentional
           interference with contractual relations, promissory
           estoppels, unjust enrichment, conversion, breach of
           fiduciary duty based on property damages, and a
           violation of the Equal Credit Opportunity Act
           (“ECOA”).    The Miller Boys is an LLC that was
           created for the purpose of purchasing and owning
           real estate investments. Jack Miller and Ari Miller,
           two members of the Miller Boys, have extensive
           experience in the financial sector.        Jack Miller
           previously worked as a mortgage loan officer at
           Federal Savings Bank, and subsequently became the
           president of Gelt Financial Corporation, in addition to
           working as the chief executive officer of Public
           Savings Bank. Ari Miller is a licensed real estate
           agent.

           In 2006, the Miller Boys applied for several loans
           with Conestoga in order to finance the purchase of a
           property    at    600   Louis   Drive,    Warminster,
           Pennsylvania (the “property”).      On February 26,
           2006, the Miller Boys signed a commitment letter
           that set out the terms of one of the loans. The Miller
           Boys understood that one of the conditions of



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          Conestoga extending the loan was the right of
          Conestoga to collect certain rents, and the fully
          integrated agreement held that any oral or written
          representations not expressly set forth in the letter
          were superseded by the terms of the agreement.

          The parties closed on the first loan on May 10, 2006
          and Conestoga extended a second loan to the Miller
          Boys several weeks later. Both loans were secured
          by open-end mortgages on the property.            The
          maturity dates for the loans were June 1, 2011, and
          July 1, 2016, respectively, with an interest rate of
          7.250% for each loan. The parties also entered into
          several assignment agreements in connection with
          these loans, which were created to secure
          indebtedness and to ensure the Miller Boys’
          performance of their obligations under the loans.
          These agreements granted Conestoga several rights
          regarding the property, including the right to collect
          and receive rents from the tenants, the right to enter
          and maintain the property, and the right to lease the
          property. However, the agreements explicitly stated
          that Conestoga had no requirement to act on any of
          its rights with regard to the property.

          By May 2010, the property had sustained losses, and
          the Miller Boys asked Conestoga to modify the terms
          of the loans, specifically to defer principal payments
          until the property could be fully leased.          On
          September 21, 2010, the parties entered into a
          modification of the loan agreements, whereby the
          maturity dates were extended to October 5, 2011,
          the interest rates were reduced 0.9 percentage
          points to 6.35%, and the monthly payments were
          reduced. However, the Miller Boys were still unable
          to make timely payments. Because of the cash flow
          loss the property was suffering, the Miller Boys
          requested another modification of the terms of the
          loan agreements.         The parties executed such
          modifications on April 5, 2011, whereby the interest
          rates of the loans were reduced to 5.75% and the
          Miller Boys were required to make interest only



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          payments, which is what the Miller Boys requested.
          The amounts of the monthly payments were reduced
          but the maturity dates remained at October 5, 2011.
          The parties agreed that, except for the changes
          listed in the agreements, the remaining terms of the
          original agreements still governed.

          The Miller Boys subsequently defaulted on the loans
          by failing to make timely payments and never paying
          the total principal that was due on October 5, 2011.
          Conestoga did not immediately begin foreclosure
          proceedings, but offered the Miller Boys a six month
          extension to extend the maturity on both loans to
          April 5, 2012. The Miller Boys rejected this offer,
          and unilaterally proposed to change the interest rate
          and maturity terms, which Conestoga would not
          accept. On February 2, 2012, the Miller Boys orally
          agreed to the extension that Conestoga originally
          offered, yet refused to sign the agreement with the
          change in terms. Instead, the Miller Boys asked
          Conestoga to release Jack Miller and Ari Miller from
          their personal guarantees, which Conestoga agreed
          to do.      However, Jack and Ari Miller rejected
          Conestoga’s proposal to release the personal
          guarantees and never made a counterproposal.
          Subsequently, the parties could not come to an
          agreement on a change in terms and the Miller Boys
          never remedied their default.

          Conestoga enforced its right to collect rents on
          January 10, 2012, and demanded rents from [AMG]
          and OPG Systems, Inc. (“OPG”), the tenants of the
          property.[1] AMG and OPG never paid any rents to
          Conestoga.    The Miller Boys allege that AMG
          complained about a sump pump that was causing an
          odor on the property, yet Conestoga asserts that it
          was never made aware of this or any other
          maintenance issues by the Miller Boys or AMG.
          Aside from demanding rents be paid, Conestoga
          never took over management of the property or
          made any repairs, and was unable to enter the




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            property because the Miller Boys never provided
            Conestoga with keys or other access.

            The Miller Boys understood that by not agreeing to a
            proposed change in terms with Conestoga, the loans
            would be in default. The Miller Boys do not dispute
            that they have not paid the principal, interest, and
            charges due on the loans’ maturity date.
            Consequently, Conestoga foreclosed on the property
            and sold it on August 9, 2013. Conestoga has now
            brought forth the current motion for summary
            judgment on all claims against it.
            ______________
            [1]
                  OPG Systems, Inc. is the predecessor of
            Onexcellence, Inc.

Trial Court Opinion, 2/6/2015, at 1-4.

     The Miller Boys filed three lawsuits, one against Conestoga (case

number 130404218), a second against AMG and Conestoga (case number

case Nos. 130404858), and a third against Onexcellence, Inc. and

Conestoga (case number 130404863). On or about February 6, 2015, the

trial court granted Conestoga’s motions for summary judgment in all three

cases.    The Miller Boys appealed these rulings, and two of these three

appeals are presently before this Court (case numbers 130404218 and

130404858). The Miller Boys assert the same two issues for our review and

determination in both appeals:

     1.     Whether the [t]rial [c]ourt erroneously entered
            summary judgment in favor of [Conestoga] and
            against Miller Boys when it failed to address
            obligations that arose after the Bank asserts its right
            to collect rent.




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      2.    Whether genuine issues of material fact exist to
            preclude the entry of judgment as a matter of law,
            including whether genuine issues of material fact
            exist with regard to Miller Boys’ damages.

Miller Boys’ Brief at 3.

      Our standard of review of a trial court's grant of summary judgment is

well settled:

            A reviewing court may disturb the order of the trial
            court only where it is established that the court
            committed an error of law or abused its discretion.
            As with all questions of law, our review is plenary.
            In evaluating the trial court's decision to enter
            summary judgment, we focus on the legal standard
            articulated in the summary judgment rule. Pa.R.C.P.
            1035.2. The rule states that where there is no
            genuine issue of material fact and the moving party
            is entitled to relief as a matter of law, summary
            judgment may be entered. Where the non-moving
            party bears the burden of proof on an issue, he may
            not merely rely on his pleadings or answers in order
            to survive summary judgment. Failure of a non-
            moving party to adduce sufficient evidence on an
            issue essential to his case and on which it bears the
            burden of proof establishes the entitlement of the
            moving party to judgment as a matter of law.
            Lastly, we will view 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.

Thompson v. Ginkel, 95 A.3d 900, 904 (Pa. Super. 2014) (citations

omitted).

      For their first issue on appeal, the Miller Boys contend that the trial

court erred when it ruled that Conestoga had no obligation to collect rent




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from the two tenants (AMG and Onexcellence, Inc.) after Conestoga notified

these tenants that it was exercising its right to collect rents. According to

the Miller Boys, once Conestoga exercised its right to receive rental

payments, it then had a contractual duty to take further (unspecified)

actions to collect the rent due, and that the rent collected (or due) after

Conestoga sent the notices should have been applied to the Miller Boys’

outstanding balance due on the loans. Miller Boys’ Brief at 10. Rather than

collect rent, the Miller Boys argue that Conestoga took no action and instead

merely increased the outstanding balance due and charged additional

interest, late fees, and penalties. Id.

      The Miller Boys do not refer this Court to any particular provision of

the loan documents that obligated Conestoga to make additional efforts to

collect rent from the tenants.      Rather, the Miller Boys assert that the

obligation springs from the implied duty of good faith and fair dealing. Id.

at 11. This Court has said that “[e]very contract imposes upon each party a

duty of good faith and fair dealing in its performance and its enforcement,”

Kaplan v. Cablevision of PA, Inc., 671 A.2d 716, 722 (Pa. Super. 1996)

(quoting Restatement (Second) of Contracts, § 205); John B. Conomos,

Inc. v. Sun Co. (R&M), 831 A.2d 696, 706-07 (Pa. Super. 2003). But a

review of Pennsylvania appellate decisions reflects that we have recognized

this implied duty only in limited situations.   As we explained in Creeger




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Brick & Bldg. Supply Inc. v. Mid-State Bank & Trust Co., 560 A.2d 151

(Pa. Super. 1989), although a duty of good faith has been recognized in

commercial contracts as well as in contracts between franchisors and their

franchisees and between insurers and their insureds, no such duty is

generally implied in contracts between lenders and borrowers. Id. at 153-

54 (citing Atlantic Richfield Co. v. Razumic, 390 A.2d 736 (Pa. 1978),

Loos & Dilworth v. Quaker State Oil Refining Corp., 500 A.2d 1155

(Pa. Super. 1985), Gray v. Nationwide Mutual Ins. Co., 223 A.2d 8

(Pa. 1966), Gedeon v. State Farm Ins. Co., 188 A.2d 320 (Pa. 1963), and

Heights v. Citizens National Bank, 342 A.2d 738 (Pa. 1975)); see also

13 Pa.C.S.A. § 1304; Cable & Associates Ins. Agency, Inc. v.

Commercial Nat. Bank of Pennsylvania, 875 A.2d 361, 364 (Pa. Super.

2005).

     The Miller Boys refer us to a decision of the United States District

Court for the Eastern District of Pennsylvania, in which that court predicted

the Supreme Court of Pennsylvania would conclude that an implied duty of

good faith exists in all contracts in Pennsylvania, including those between

borrowers and lenders. Bedrock Stone and Stuff, Inc. v. Manufacturers

and Traders Trust Co., 2005 WL 1279148 at *8 (E.D. Pa., May 25, 2005).

In Bedrock, the federal district court noted that our Supreme Court adopted

section 205 of the Restatement (Second) of Contracts in Bethlehem Steel




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Corp. v. Litton Industries, Inc., 488 A.2d 581, 600 (Pa. 1985), and thus

reasoned:

            We find it inconsistent and unworkable to state that
            there is such a duty in every contract, but then to
            attempt to limit the application of the implied
            covenant in certain instances but not others. The
            covenant is either implied in every contract or it is
            not.    There cannot be any other reasonable
            interpretation of the adoption by the Supreme Court
            of Pennsylvania of Section 205 of the Restatement
            than to apply it equally to every contract. To do
            otherwise would strain the use and meaning of the
            word “every” to mean something other than “all”.

Bedrock, 2005 WL 1279148 at *7.

     The Bedrock decision is not binding upon this Court. In this regard, it

is instructive that the federal court in that case did not rely upon prior

precedent from this Court, but rather focused on two decisions of the

Philadelphia County Court of Common Pleas.        In particular, the federal

district court did not cite to this Court’s 2002 decision in Heritage

Surveyors & Engineers, Inc. v. Nat'l Penn Bank, 801 A.2d 1248 (Pa.

Super. 2002), in which we reaffirmed our ruling in Creeger Brick that the

duty of good faith and fair dealing has been recognized only in “limited

situations.” Id. at 1253. We also reaffirmed Creeger Brick’s admonition

that the duty of good faith and fair dealing “does not compel a lender to




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surrender rights which it has been given by statute or by the terms of its

contract.”1 Id. (quoting Creeger Brick, 560 A.2d at 154).

     We need not resolve this issue here, since even if the duty of good

faith and fair dealing applies to the present loan documents, it is beyond

cavil that the implied duty can never trump the express language of the

written contract. The duty of good faith and fair dealing does not license a

court to interpose contractual terms to which the parties never assented, as

this would violate the long-standing axiom that a court may “not imply a

different contract than that which the parties have expressly adopted.”

Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 388 (Pa. 1986); Greek

v. Wylie, 109 A. 529, 530 (Pa. 1920) (“there can be no implied covenants

as to any matter specifically covered by the written terms of the contract

itself.”). When it applies, the duty of good faith and fair dealing does not

command complete loyalty to the other contracting party, but rather only

ensures that the parties are faithful to the spirit and terms of the contract



1
    The Miller Boys note that this Court recognized an exception to the
Creeger Brick rule in Corestates Bank, N.A. v. Cutillo, 723 A.2d 1053
(Pa. Super. 1999), in which we indicated that while a lending institution
generally does not violate the duty of good faith by adhering to its
agreements with a borrower, additional “good faith” obligations may be
imposed where the parties have a “longstanding relationship.” Id. at 1059.
In Corestates, however, we recognized that the “longstanding relationship”
there involved a 19-year history between the parties during which the bank
had exclusively served the lender’s financial needs. Id. The Miller Boys
have not directed us to any evidence to demonstrate that any similar
“longstanding relationship” exists with Conestoga.


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the parties signed, requiring that discretion, when granted, is exercised

reasonably.   As the Delaware Court of Chancery put it, the implied duty

“seeks to enforce the parties’ contractual bargain by implying only those

terms that the parties would have agreed to during their original

negotiations if they had thought to address them.”        ASB Allegiance Real

Estate Fund v. Scion Breckenridge Managing Member, LLC, 50 A.3d

434, 440 (Del. Ch. 2012), aff’d in part, rev’d in part on other grounds, 68

A.3d 685 (Del. 2013).

     In the present case, there is no need to imply terms the parties would

have agreed to “if they had thought to address them,” since here the parties

directly addressed the precise scenario about which the Miller Boys now

complain -- namely what actions (if any) Conestoga must take after

exercising its right to collect rents from tenants. The assignment of rents

agreement provides that Conestoga may, among other things, “send notices

to any tenants of the Property advising them of this Assignment and

directing all Rents to be paid directly to [Conestoga] or [Conestoga’s]

agent.”    Second   Amended       Complaint,   10/15/2013,     ¶    5   Exhibit    B.

Immediately   thereafter,   the   agreement     (in   a   section   entitled      “No

Requirement to Act”) then states that “the fact that Conestoga shall have

performed one or more of the foregoing acts or things shall not require

[Conestoga] to do any other specific act or thing.” Id. As such, the express




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language of the loan documents explicitly absolves Conestoga from any

obligation to perform the acts that the Miller Boys now claim were required

here (i.e., additional efforts to collect rents). Hence, even if the implied duty

of good faith and fair dealing applies generally under the facts presented

here, it cannot be construed to impose upon Conestoga the obligations the

Miller Boys insist that it does.

      Finally, the Miller Boys insist that a contrary decision would authorize

financial institutions like Conestoga “to act in a predatory manner.” Miller

Boys’ Brief at 15. The Miller Boys claim that Conestoga exercised its right to

collect rents with no intention of actually collecting the rents, and that it

instead did so solely to collect additional fees, interest, and penalties. Id.

Whether    or   not   Conestoga’s   actions   can   properly   be   described   as

“predatory,” however, Conestoga acted in all respects in accordance with its

rights under the terms of the loan documents signed by the Miller Boys. As

this Court has made clear in prior lender-borrower cases, “it cannot be said

that a lender has violated a duty of good faith merely because it negotiated

terms of a loan which are favorable to itself.”      Heritage Surveyors, 801

A.2d at 1253 (quoting Creeger Brick, 560 A.2d at 154).

      Moreover, while the Miller Boys claim that Conestoga had no intention

of collecting rents from the property’s tenants, it offered no evidence in

support of this contention in response to Conestoga’s motion for summary




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judgment.    As explained hereinabove, where the non-moving party to a

motion for summary judgment bears the burden of proof on an issue, it may

not merely rely on unsubstantiated allegations to         survive summary

judgment, and instead must adduce sufficient evidence on the issue to

create a genuine issue of material fact. Thompson, 95 A.3d at 904. Based

upon our review of the certified record on appeal, the Miller Boys have not

done so in this case.

      For their second issue on appeal, the Miller Boys argue that the trial

court erred in granting summary judgment because genuine issues of

material fact remain for consideration regarding the amount of damages

suffered as a result of Conestoga’s actions.   The trial court ruled that the

Miller Boys failed to present any evidence of its alleged damages, including

no report from a damages expert and no attempt to quantify the amount of

any damages suffered. Trial Court Opinion, 2/6/2015, at 7.

      Because we agree with the trial court’s determination that the Miller

Boys did not state a cognizable claim against Conestoga under the terms of

the loan documents, the issue of damages would appear to be moot. In any

event, we concur with the trial court’s analysis. In their Second Amended

Complaint (case number 130404218), the Miller Boys claimed unspecified

damages against Conestoga, asserting that its actions had “snowballed into

financial losses to Miller Boys in excess of two hundred thousand dollars,”




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including reputational harm and “jeopardy to its assets.” Second Amended

Complaint, 10/15/2013, ¶¶ 25, 52. In response to Conestoga’s motion for

summary judgment, however, the Miller Boys offered no evidence to support

these contentions. Even in an affidavit by Jack Miller filed in response to the

motion for summary judgment, he merely repeats the contention in the

Second Amended Complaint that financial losses have “snowballed” because

of Conestoga’s actions.      Affidavit of Jack Miller in Support of Plaintiff’s

Response to Motion of Defendant Conestoga Bank for Summary Judgment,

12/22/2014, ¶ 29. In their appellate brief, the Miller Boys likewise have not

referred this Court to any supporting evidence, instead merely stating that

the “amount of damages Miller Boys suffered as a result of [Conestoga’s]

failure to collect rent is a genuine issue of material fact.” Miller Boys’ Brief

at 17. Because the Miller Boys have proffered no evidence in support of its

damages claims and instead merely rely upon the allegations in their

pleadings, the trial court did not err in its ruling on this issue.

      Orders affirmed.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/28/2015




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