J. A15017/16


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37


DANIEL F. MCGARITY, CHRISTOPHER           :     IN THE SUPERIOR COURT OF
D. SWANSON AND MICHAEL J.                 :          PENNSYLVANIA
DONNELLY                                  :
           APPELLANTS                     :
                v.                        :
                                          :
JOHN S. DIGIUSEPPE AND STEVEN C.          :
LAURIELLO                                 :
                                          :
                                          :     No. 2586 EDA 2015
                                          :


             Appeal from the Judgment Entered August 13, 2015
              In the Court of Common Pleas of Chester County
                     Civil Division at No(s): 13-01411-CT

BEFORE: FORD ELLIOTT, P.J.E., DUBOW, J., and JENKINS, J.

MEMORANDUM BY DUBOW, J.:                               FILED JULY 29, 2016

      Appellants, Daniel F. McGarity, Christopher Swanson, and Michael J.

Donnelley, appeal from the judgment entered on August 13, 2015, in the

Chester County Court of Common Pleas following a non-jury trial.         Upon

careful review, we affirm on the grounds that Appellants have no right to

contribution when the Appellants did not make the payments for which

Appellants seek contribution.   Rather, it was Wayne Moving and Storage,

Inc. (“WMS”), a corporation of which Appellants are shareholders, that made

the payment for which Appellants seek contribution.

      The trial court set forth the facts and procedural history of the instant

litigation as follows:
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        The five individually-named parties were all shareholders
        in a company known as “Land Associates, Inc.” Land
        Associates is a Pennsylvania Corporation with a principal
        place of business at 100 Colonial Way, West Chester,
        Pennsylvania. Land Associates was formed by the five
        parties for the purpose of owning and then developing real
        estate. [1] In December of 2004, Land Associates borrowed
        $2,600,000 from The Bankcorp Bank which was evidenced
        by a note representing the loan and a construction loan
        agreement. Under the terms of the construction loan
        agreement, all of the individual shareholders of Land
        Associates were required to sign personal guaranties.
        Each individual executed guaranties to the bank for the
        repayment of the $2,600,000 note fully, jointly and
        severally. In January of 2005, Land Associates increased
        the loan by $1,130,000 to bring the total money borrowed
        to $3,730,000. The aforementioned guaranties applied to
        the now full indebtedness of $3,730,000.

        Land Associates reached an agreement to purchase 44
        acres in London Grove Township, Chester County,
        Pennsylvania. The purpose was to develop this real estate
        into 40 single-family homes. Work commenced on the
        project and eventually township land development
        approval was granted. Unfortunately for the parties, this
        process was interrupted when a sewer moratorium was
        imposed by the township. The project was eventually
        completed and the parties agree that it took considerably
        longer to bring the land development project to conclusion
        than they had hoped.

        Importantly for this litigation, the loan to Bankcorp was
        paid in full. The testimony revealed that at no time was
        the loan ever declared in default and at no time did the
        bank move to collect on the individual party guarantees.


1
 It is also relevant to this appeal that Appellant McGarity was the president
and chief executive officer of WMS, and Appellants Swanson and Donnelley
were WMS shareholders. Appellants worked for WMS and “used WMS
money as their own personal bank account.” Trial Ct. Op., 4/1/15, at 5.
WMS is not a party to the instant lawsuit. Appellees had no interest in WMS.




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         Both prior to this project and throughout the various
         stages of the project, Land Associates also acquired other
         property at other locations and proceeded to commence
         with real estate development on those properties.
         Testimony was presented about a development called
         Chamber Rock, Winchester, Appleton Partners, and
         throughout this period of time it was clear that the parties
         were moving money between projects as part of Land
         Associates’ business model.

         The genesis of this litigation is the claim by [Appellants]
         that they paid money both to the bank and to vendors as
         individuals and sought reimbursement or contribution for
         those payments from [Appellees]. [Appellants] advanced
         the theory that they are owed contribution from the
         [Appellees] for the payments they made to vendors or the
         bank pursuant to the guaranties given to Bankcorp.

Trial Ct. Op., 4/1/15, at 2-4 (footnote omitted).

      Following   the   filing   of   an   Answer,   New   Matter,   and   some

Counterclaims, the parties engaged in discovery.           On June 25, 2014,

Appellees filed a Motion for Summary Judgment.                Appellants filed a

Response in Opposition to Appellees’ Motion and a Cross-Motion for

Summary Judgment on Liability on August 8, 2014.                  Following oral

argument, the trial court granted Appellants’ Motion on August 20, 2014. In

granting summary judgment, the trial court concluded that Appellees were

liable to Appellants, but that “the issue of damages remained subject to a

trial for ultimate resolution as to the amounts.” Id. at 1.

      On September 4, 2014, Appellees filed a Motion for Reconsideration of

the trial court’s August 20, 2014 Order. The trial court held a hearing on the

Motion, at which it “became clear that neither party agreed on the facts.”



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Id. at 2.      The trial court, therefore, granted Appellees’ Motion for

Reconsideration on October 9, 2014, vacated its August 20, 2014 Order,

denied both parties’ Motions for Summary Judgment, and set a trial date.

      The trial court held a bench trial on February 23 and 24, 2015.

Following the trial the trial, the court found in favor of Appellees on April 1,

2015, concluding, in relevant part, that the testimony and evidence

established that WMS, and not Appellants individually, made the payments

to the bank to prevent the loan from going into default. Trial Ct. Op. at 9.

      Appellants filed a timely Post-Trial Motion, which the trial court denied.

The trial court entered judgment on its verdict on August 13, 2015.        This

timely appeal followed.      Appellants and the trial court complied with

Pa.R.A.P. 1925.

      Appellants present the following issues for this Court’s review, which

we have reordered for ease of disposition:

         1. Whether $2,800,000 paid by Wayne Moving and
         Storage, Inc. to the Bank and to finish the project was paid
         by Wayne Moving and Storage, Inc. on behalf of the
         individual shareholders of Wayne Moving and Storage,
         Inc., McGarity, Swanson, and Donnelly, for purposes of
         contribution by [Appellees]?

         2. Whether a default, or a default declared by a lending
         bank, is a condition precedent to [Appellees’] obligation for
         contribution as co-sureties or co-guarantors on The
         Bankcorp Bank (“Bank”) note?

         3. Whether the guarantors not only guaranteed payment
         to The Bankcorp Bank, but also guaranteed performance of
         the borrower’s obligations, including completion of the
         project?


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         4. Whether payments made by [Appellants] to vendors to
         complete the project enabling the loan to be fully paid are
         equivalent to payments to the Bank for contribution by
         [Appellees]?


Appellants’ Brief at 5-6.

      When reviewing a trial court’s decision in the non-jury trial, our

standard of review is well-established. “We may reverse the trial court only

if its findings of fact are predicated on an error of law or are unsupported by

competent evidence in the record.          As fact finder, the judge has the

authority to weight the testimony of each party's witnesses and to decide

which are most credible.” Parker Oil Co. v. Mico Petro and Heating Oil,

LLC, 979 A.2d 854, 856 (Pa. Super. 2009) (citation omitted).           The trial

judge’s findings made after a bench trial must be given the same weight and

effect as a jury verdict and will not be disturbed on appeal unless they are

not supported by competent evidence in the record. See Levitt v. Patrick,

976 A.2d 581, 589 (Pa. Super. 2009). “Furthermore, our standard of review

demands that we consider the evidence in the light most favorable to the

verdict winner.” Id. (citation omitted).

      In their first issue, Appellants argue that the “trial court made legal

and factual errors when it determined that the payments made by [WMS] to

the Bank and to vendors . . . were not the same as payments by

[Appellants].” Appellants’ Brief at 37. Appellants note that their accountant,

Roger Davis, testified that WMS’s accounting books showed that WMS’s


                                     -5-
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payments to the Bank and vendors were payments from Appellants,

shareholders of WMS.        They argue that “there is no difference between

[WMS] making payments on behalf of its three owners, [Appellants], and

treating those payments as loans or income to the individuals, and making

actual cash payments to [Appellants] and then having the three individual

[Appellants] write checks to the Bank and vendors.” Id. at 38.

        We disagree. It is undisputed that it was WMS, and not the individual

Appellants, who made the payments to vendors and to the bank to prevent

the loan from going into default. See Trial Ct. Op., 4/1/15, at 6 (where the

trial court found “the testimony was significant in that the advancements

either on behalf of Land Associates for vendors or to the bank as alleged

were made by [WMS]”); see also Trial Ct. Op., 10/21/15, at 9. Although

Appellants are shareholders of WMS and may have provided funds to WMS

to subsidize the payments to the bank and vendors, there is still no legal

basis    to   disregard   the   legal   distinction   between   corporations   and

shareholders. To hold otherwise would require us to overlook the corporate

wall between the two.

        As such, Appellants cannot assert a claim for contribution from

Appellees for payments made by WMS. It is axiomatic that in order for a

surety to succeed in a claim for contribution against co-sureties for

payments made to the parties’ creditor, the surety must have made

payment to the creditor. See, e.g., Croft v. Moore, 9 Watts 451, 452 (Pa.



                                        -6-
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1840); Hoff v. Kauffman, 282 Pa. 471, 475 (Pa. 1925). Since it was WMS

and not Appellants who made the payments, Appellants have not made the

payment to the creditor and cannot meet the threshold requirement to

obtain contribution.

      Because we have concluded that it was not Appellants who made the

payments for which they seek contribution from Appellees, we need not

address Appellants’ remaining issues on appeal.

      Judgment affirmed. Jurisdiction relinquished.

Judge Ford Elliott joins the memorandum.

Judge Jenkins concurs in result.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary

Date: 7/29/2016




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