J-A24030-18

                              2019 PA Super 15

 AMERICAN SOUTHERN INSURANCE              :   IN THE SUPERIOR COURT OF
 CO., INC.                                :        PENNSYLVANIA
                                          :
                                          :
              v.                          :
                                          :
                                          :
 JAMES A. HALBERT, JULIE BETH             :
 WRIGHT HALBERT, DOUGLAS E.               :   No. 504 MDA 2018
 HALBERT , DAVID R. HALBERT AND           :
 VIRGINIA V. HALBERT                      :
                                          :
                    Appellants            :

             Appeal from the Order Entered February 22, 2018
  In the Court of Common Pleas of Dauphin County Civil Division at No(s):
                             2017-CV-298-CV


BEFORE: OTT, J., McLAUGHLIN, J., and FORD ELLIOTT, P.J.E.

OPINION BY McLAUGHLIN, J.:               FILED: JANUARY 17, 2019

      James A. Halbert, Julie Beth Wright Halbert, Douglas E. Halbert, David

R. Halbert, and Virginia Halbert (collectively, the Halberts) appeal from the

order entered February 22, 2018, granting American Southern Insurance Co.,

Inc. (American Southern) summary judgment in this indemnity contract

dispute. As the terms of the contract are clear and dispositive, and further, as

Halberts’ claims on appeal are devoid of merit, we affirm.

      American Southern is in the business of providing performance surety

bonds, including those related to completion of public improvements. In May

2006, the Halberts individually signed a general agreement of indemnity in

favor of American Southern. The agreement set forth the terms of

indemnification. In relevant part, the Halberts agreed to indemnify American
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Southern from any claim or liability arising from the issuance of a performance

bond. See American Southern’s Complaint, 01/10/2017, Exhibit A (“General

Agreement of Indemnity”) (hereafter, Agreement), ¶ 2. Moreover, the

Agreement granted American Southern the sole authority to determine

whether a claim brought pursuant to a performance bond was valid:

      The Company [i.e., American Southern] shall have the exclusive
      right to determine for itself and the Indemnitors [i.e., the
      Halberts] whether any claim or suit brought against the Company
      or the Principal upon any such bond shall be settled or defended
      and its decision shall be binding and conclusive upon the
      Indemnitors.

Agreement, ¶ 5.

      Thereafter, and in reliance upon the Agreement, American Southern

issued a performance bond in favor of North Cornwall Township, Pennsylvania,

in the original amount of $650,580.63, later revised by bond rider to

$740,000.00, to secure completion of certain subdivision improvements by

Oaklea Corporation for a local development. See American Southern’s

Complaint,    01/10/2017,   Exhibit   B   (“Subdivision   Performance   Bond”)

(hereafter, Performance Bond). Mr. James A. Halbert signed the performance

bond as president of Oaklea. Id.

      In July 2016, the township advised American Southern that it had made

a demand upon Oaklea to complete required improvements but had received

no response or performance. Accordingly, the township demanded the

improvements or compensation from American Southern, which in turn sent

notice to the Halberts, who did not respond.

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       In June 2017, American Southern commenced this litigation, seeking

damages arising from its performance under the surety bond. In response,

the Halberts answered that the improvements demanded by the township

were unnecessary. See Halberts’ Answer, 02/07/2017, at ¶¶ 18-27

(unpaginated). In addition, the Halberts pleaded new matter, including several

affirmative defenses to American Southern’s claims. Id. at “New Matter” ¶¶

1-13 (unpaginated). American Southern filed a reply thereto.

       In October 2017, American Southern filed a motion for summary

judgment, asserting that “[t]here are no genuine issues of material fact in

dispute and American Southern is entitled to judgment as a matter of law.”

American Southern’s Motion for Summary Judgment (Motion), 10/31/2017, at

¶ 24. In their response, the Halberts did not counter American Southern’s

assertion with evidence of record, choosing instead to reiterate prior

averments that the improvements demanded by the township were

unnecessary. See Halberts’ Response in Opposition (Response), 12/04/2017,

at ¶¶ 11, 16-19, 23-25.1 Further, the Halberts cited no evidence essential to

any affirmative defense. See generally id.



____________________________________________


1 In several paragraphs, the Halberts also averred that they could not
challenge the evidence provided by American Southern establishing that it had
relied upon the Agreement as a condition of issuance for the Performance
Bond because “[n]o discovery in this matter has been undertaken.” See, e.g.,
Response at ¶ 23(b). This is specious, as no discovery was requested. See
generally Pa.R.C.P. 4001-25.


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      In February 2018, the lower court held argument on the motion for

summary judgment. At the argument, which was not transcribed, the Halberts

conceded that Paragraph 5 of the Agreement applied to the improvements

demanded by North Cornwall Township. See Summary Judgment Order,

02/22/2018. Nevertheless, the Halberts raised two affirmative defenses not

previously pleaded. According to the Halberts, (1) the Agreement was a

contract of adhesion, and (2) the federal Equal Credit Opportunity Act (ECOA),

15 U.S.C. §§ 1691–1691, precluded any judgment against Ms. Julie Halbert.

See Statement in Absence of Transcript, 03/26/2018. Following argument,

the court granted summary judgment, concluding that Paragraph 5 of the

Agreement “negates [the Halberts’] sole defense that the requested

improvements were not necessary.” Summary Judgment Order at 1. In

addition to this ruling, the court explicitly rejected the Halberts’ assertion that

the Agreement was unconscionable as a contract of adhesion; however, it did

not address the Halberts’ purported ECOA argument. Id. at 2.

      The Halberts timely appealed and filed a court-ordered Pa.R.A.P.

1925(b) statement. In response, the lower court issued a statement directing

our attention to its prior order. See Pa.R.A.P. 1925(a) Opinion, 04/25/2018.

      On appeal, the Halberts raise the following issues:

      1. Whether the trial court erred by ruling the contract at issue was
      not a contract of adhesion.

      2. Whether the trial court erred by ruling Julie Halbert did not have
      a defense under the Equal Credit Opportunity Act, (“ECOA”) [sic]
      15 U.S.C. §1691, and Regulation B (“Reg B”), 12 C.F.R., Part 202,
      et seq.

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Halberts’ Br. at 2.

      Before we address the Halberts’ arguments, we note the following.

      Summary judgment is appropriate where the record clearly
      demonstrates there is no genuine issue of material fact and the
      moving party is entitled to judgment as a matter of law. When
      considering a motion for summary judgment, the trial court must
      take all facts of record and reasonable inferences therefrom in a
      light most favorable to the non-moving party. Whether there are
      no genuine issues as to any material fact presents a question of
      law, and therefore, our standard of review is de novo and our
      scope of review plenary.

Estate of Agnew v. Ross, 152 A.3d 247, 259 (Pa. 2017) (citations omitted).

      The Pennsylvania Rules of Civil Procedure recognize two species of

summary judgment:

      After the relevant pleadings are closed, but within such time as
      not to unreasonably delay trial, any party may move for summary
      judgment in whole or in part as a matter of law

         (1) whenever there is no genuine issue of any material fact
         as to a necessary element of the cause of action or defense
         which could be established by additional discovery or expert
         report, or

         (2) if, after the completion of discovery relevant to the
         motion, including the production of expert reports, an
         adverse party who will bear the burden of proof at trial has
         failed to produce evidence of facts essential to the cause of
         action or defense which in a jury trial would require the
         issues to be submitted to a jury.

Pa.R.C.P. 1035.2. Thus, we have previously remarked, “a record that supports

summary judgment will either (1) show the material facts are undisputed or

(2) contain insufficient evidence of facts to make out a prima facie cause of

action or defense and, therefore, there is no issue to be submitted to the jury.”


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Cigna Corp. v. Executive Risk Indem., Inc., 111 A.3d 204, 210-11

(Pa.Super. 2015) (citation omitted).

       Here, following the close of pleadings, American Southern sought

summary judgment of the first species, asserting that “[t]here are no genuine

issues of material fact in dispute and American Southern is entitled to

judgment as a matter of law.” Motion at ¶ 24. It supported this assertion with

evidence of record, setting forth the terms of the Agreement, the Performance

Bond, the township’s demands for performance, American Southern’s

invocation of the Agreement, the Halberts’ failure to perform and breach of

the Agreement, and American Southern’s resulting damages. Id. at 2, 7, 8,

9, 10, 12, 14, 19-23.2
____________________________________________


2 We note that American Southern supported its assertion of damages by
affidavit. See Motion, ¶¶ 20-22, 23(h), Exhibit A (Affidavit of Jerry
Underwood, Vice President of American Southern). The Halberts challenged
these assertions by averring that “[n]o discovery has been undertaken to
determine the veracity” of the affidavit, Response at ¶¶ 20-22, and “[t]he
demands for [sic] improvements were unnecessary.” Id. at ¶ 23(e). It is not
clear from these averments whether the Halberts sought relief pursuant to
Nanty-Glo v. American Surety Co., 163 A. 523 (Pa. 1932). Further,
although they cited Nanty-Glo in their supporting brief, the Halberts
presented no argument premised upon it. See Halberts’ Response
Memorandum, 12/04/2017, at 2-3. Rather, the Halberts again denied that the
improvements were necessary and suggested that it was unclear whether the
Performance Bond issued in reliance upon the Agreement. Id. at 3.

The Nanty-Glo rule provides that “[t]estimonial affidavits [or depositions] of
the moving party or [its] witnesses, not documentary, even if uncontradicted,
will not afford sufficient basis for the entry of summary judgment, since the
credibility of the testimony is still a matter for the factfinder.” Shamis v.
Moon, 81 A.3d 962, 965 (Pa.Super. 2013). Thus, it may be relevant to this
case. Nevertheless, the Halberts failed to preserve any such claim for relief in



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        Pennsylvania Rule of Civil Procedure 1035.3 governs a non-moving

party’s response to a motion for summary judgment and provides in relevant

part:

        [T]he adverse party may not rest upon the mere allegations or
        denials of the pleadings but must file a response within thirty days
        after service of the motion identifying

           (1) one or more issues of fact arising from evidence in the
           record controverting the evidence cited in support of the
           motion or from a challenge to the credibility of one or more
           witnesses testifying in support of the motion[.]

Pa.R.C.P. 1035.3(a).

        In their response, the Halberts cited no “evidence in the record

controverting” the evidence cited by American Southern. Id. Further, though

permitted by rule to do so, the Halberts made no effort to “supplement the

record or set forth the reasons why” they could not do so. Pa.R.C.P. 1035.3(b).

Rather, the Halberts merely reiterated the denial repeatedly set forth in their

answer, that the improvements were unnecessary. Compare Halberts’

Response at ¶¶ 11, 16, 17, 18, 19, 23, with Halberts’ Answer, at ¶¶ 18-27.

        Rule 1035.3 explicitly prohibits a party from “rest[ing] upon the mere

allegations or denials of the pleadings.” Pa.R.C.P. 1035.3(a). Thus, the

Halberts’ Response was deficient, and summary judgment was properly

entered against them. See Pa.R.C.P. 1035.3(d).


____________________________________________


their Pa.R.A.P. 1925(b) statement, nor do they attempt to argue the claim on
appeal. Accordingly, we deem it waived. Id. at 971 n.10; Lineberger v.
Wyeth, 894 A.2d 141, 149 (Pa.Super. 2006).

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      Moreover, the Halberts conceded during oral argument that the terms

of the Agreement applied to the improvements demanded by North Cornwall

Township. See Summary Judgment Order at 1; see also Response at ¶ 23(a)

(admitting that each of the Halberts had executed the Agreement). Paragraph

5 of the Agreement grants American Southern the exclusive right to determine

whether claims such as the one brought by the township “shall be settled or

defended.” Agreement at ¶ 5. As noted by the lower court, “[t]his [provision]

negates [the Halberts’] sole defense that the requested improvements were

not necessary.” Accordingly, as we discern no error in the court’s decision, we

shall affirm the order granting American Southern summary judgment.

      We now address the Halberts’ arguments on appeal. According to the

Halberts, summary judgment was inappropriate because (1) the Agreement

was a contract of adhesion and (2) the ECOA, as enforced by federal

regulation, precluded any judgment against Ms. Julie Halbert.

      Both of these arguments raise affirmative defenses. See Pa.R.C.P.

1030, 1032. “An affirmative defense is distinguished from a denial of facts

which make up the plaintiff's cause of action in that a defense will require the

averment of facts extrinsic to the plaintiff's claim for relief.” Coldren v.

Peterman, 763 A.2d 905, 908 (Pa.Super. 2000).

      Generally, failure to properly plead an affirmative defense constitutes a

waiver of that defense. See Charles v. Henry, 334 A.2d 289, 291 (Pa. 1975).

However, this Court has declined to find waiver if an opposing party fails to

object to an improperly pleaded affirmative defense. See Pollina v. Dishong,

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98 A.3d 613, 617 n.3 (Pa.Super. 2014). While the Halberts did not raise these

claims in their Answer to American Southern’s Complaint, and they did not

seek leave to amend their pleadings, the certified record does not reveal

whether American Southern raised an objection with the lower court. See

American Southern’s Br. at 4 n.2 (acknowledging the Halberts raised these

claims during argument but failing to cite where in the record any objection

was preserved); see also Pa.R.A.P. 1923 (defining procedure supplementing

record where no transcript is available). Thus, we decline to find waiver based

on this procedural error. Pollina, 98 A.3d at 617 n.3.

      Nevertheless, this does not eliminate the Halberts’ obligation to support

their claims with evidence, and they have failed to do so. See Pa.R.C.P.

1035.3(a)(1).

      “An adhesion contract is a standard-form contract prepared by one

party, to be signed by the party in a weaker position, usually a consumer, who

adheres to the contract with little choice about the terms.” Chepkevich v.

Hidden Valley Resort, L.P., 2 A.3d 1174, 1190 (Pa. 2010). The manner in

which a party may establish that a contract is one of adhesion is dependent

upon “the particular circumstances and parties involved.” Denlinger, Inc. v.

Dendler, 608 A.2d 1061, 1067 (Pa.Super. 1992). The Halberts have failed to

cite any evidence of record, detailing circumstances or the parties involved,

that would support a finding that the Agreement was a contract of adhesion.

See generally Halberts’ Response; see also Summary Judgment Order at 2




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(observing that parties entered Agreement for commercial purposes and were

not “unsophisticated consumers who require protection”).

     Not every contract of adhesion is unenforceable. Denlinger, 608 A.2d

at 1066. The doctrine of unconscionability provides an affirmative defense to

an adhesion contract’s enforcement. Id. at 1067 (“[T]he party challenging the

contract or provision bears the burden of affirmatively pleading and proving

the unconscionability …”). There are two requirements. “First, for a contract

or a term to be unconscionable, the party signing the contract must have

lacked a meaningful choice in accepting the challenged provision. Second, the

challenged provision must ‘unreasonably favor’ the party asserting it.” Id. at

1068. The Halberts cite no evidence of record that would establish either of

these requirements. See generally Halberts’ Response; see also, e.g.,

Denlinger, 608 at 177-78 (suggesting there must be evidence a contract’s

terms were non-negotiable or that terms were dictated by “an exclusive

supplier of rare or much-sought-after goods”).

     The Halberts’ ECOA claim fares no better.

     The ECOA was enacted to ensure fairness in creditors'
     consideration of credit applications. Through the ECOA, Congress
     chose to protect women from credit discrimination by requiring
     that creditors treat all credit applicants—male and female, married
     and unmarried—in an identical manner. On the other hand,
     Congress did not enact the ECOA to permit permissibly bound
     debtors to escape contractual liability when called upon to
     perform.

     Guarantors are considered “applicants,” and thus are protected by
     the ECOA. A guarantor may assert an ECOA violation as a defense
     to a state-court confession of judgment. If the defense is


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       successful, the guarantor's obligation is voided, but the underlying
       debt and any other guarantees are not voided.

Sw. Pa. Reg’l Council, Inc. v. Gentile, 776 A.2d 276, 281-82 (Pa.Super.

2001) (internal punctuation and formatting modified; citations omitted).

However, the Agreement signed by the Halberts was not a credit agreement—

it did not provide a right to defer payment on a debt. Rather, it created a

contractual obligation for the Halberts to compensate American Southern for

losses it might incur due to Oaklea’s failure to complete improvements

required by the Performance Bond. See Capitol Indem. Corp. v. Aulakh,

313 F.3d 200, 201 (4th Cir. 2002) (“[A] surety bond does not constitute a

credit transaction.”).3 Thus, an ECOA defense has no relevance in this matter.

       Further, even if we were to accept the Halberts’ claim as relevant, they

have failed to cite evidence of record that would support such a claim. For

example, federal regulations provide, in part, that “a creditor shall not require

the signature of an applicant’s spouse or other person, other than a joint

applicant, on any credit instrument if the applicant qualifies under the

creditor’s standards of creditworthiness for the amount and terms of the credit

requested.” 12 C.F.R. 202.7(d)(1). However, the record includes no evidence

documenting the marital status of Ms. Julie Halbert or anyone else, nor does

it document whether any of the Halberts, including Mr. James Halbert, meet

the necessary “standards of creditworthiness.” Id.


____________________________________________


3Huber v. Etkin, 58 A.3d 772, 779 n.7 (Pa.Super. 2012) (en banc) (noting
we may rely on federal precedent to the extent we find it persuasive).

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      Lacking any evidence to support their claims on appeal, the Halberts are

due no relief.

      Order affirmed.



Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 01/17/2019




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