Mericle v. Jackson Nat'l Life Ins. Co.

193 F.Supp.3d 435

Robert F. MERICLE, et al., Plaintiffs,

v.JACKSON NATIONAL LIFE INSURANCE COMPANY, et al., Defendants.

CIVIL ACTION NO. 3:15-CV-419

United States District Court, M.D. Pennsylvania.

Signed June 27, 2016

Aaron Krauss, Philip G. Kircher, Cozen and O'Connor, Philadelphia, PA, for Plaintiffs.

Christopher F. Petillo, Stephen C. Baker, Drinker Biddle & Reath LLP, Philadelphia, PA, for Defendants.

MEMORANDUM

A. Richard Caputo, United States District Judge

Presently before me is Defendants Jackson National Life Insurance Company ("Jackson") and PPM Finance, Incorporated's ("PPM") Motion for Summary Judgment. (Doc. 16) Jackson and PPM seek summary judgment on Plaintiffs Robert Mericle and Mericle Development's (collectively "Mericle") claims of breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and negligent misrepresentation. (Exhibit A, Doc. 1-2, Complaint "Compl. ", 3-12.)¹ Jackson and PPM's motion for summary judgment will be granted in part and denied in part. Because an ambiguity exists in the parties' loan agreements and an issue of material fact remains as to the voluntariness of Mericle's payment of a Prepayment Premium demanded pursuant to one of the parties' agreements, Jackson and PPM's motion for summary judgment will be denied in part. However, because Jackson and PPM are entitled to judgment as a matter of law on Mericle's claims regarding the parties' other loan agreement and on Mericle's unjust enrichment and negligent misrepresentation claims, Jackson and PPM's motion for summary judgment will be granted in part.

I. Background

A. Factual and Procedural Background

The following facts are taken from the Complaint and the parties' statements of fact. (Docs. 1-1;18; 26)

Mericle Commercial Real Estate Services was established in 1985 and is a full service commercial real estate company that builds industrial offices and flex buildings in Pennsylvania. (Doc. 18, ¶ 1 (quotations omitted).) In 1987, Mericle Development Company, was founded by Robert Mericle, its CEO and sole shareholder, and is organized under the parent company of Mericle Commercial Real Estate Services. (Id. at ¶¶ 2-3.) Funding is essential to Mericle Development's success, so Mr. Mericle devised the following specific financing program for his companies: use conventional commercial lenders for temporary, interim, and construction debt, and when construction is complete and the project stabilizes, pursue a life insurance company lender for permanent debt financing. (Id. at ¶¶ 4-5 (quotations omitted).)

In 1995, Mericle engaged Carey Kramer Pettit Panichelli and Associates ("Carey Kramer"), a Pennsylvania mortgage broker, to assist in obtaining financing from a life insurance lender. (Id. at ¶ 6.) Mericle chose Jackson, a life insurance company, to provide financing, and PPM, who services loans for companies like Jackson, serviced the loans involved in this case. (Id. at ¶ 7; Compl., ¶ 7.) When agreement was reached, a representative of PPM signed the loan documents as an authorized agent for Jackson. (Compl. at ¶ 16.)

After Mericle selected Jackson, the parties engaged in substantial negotiations, including negotiating over the term sheet, or loan application, that included the amount and duration of the loan and the prepayment terms. (Doc. 18, ¶¶ 10-11.) Mericle disagrees that the parties negotiated the terms of the prepayment provisions, but instead, that the terms regarding prepayments came from Jackson's form documents. (Doc. 26, ¶¶ 10-12.) Mericle did, however, request and the parties agreed to a one-year "lockout period", or the period during which the loan could not be repaid; despite Jackson's request for a five-year period. (Id. at ¶ 14.) Other than the lockout period, Mericle did not request any changes to language providing the method for calculating the Prepayment Premium in the Loan Application. (Id. at ¶ 15.) The language included in the Loan Application is virtually identical to the prepayment provision contained in the final versions of the loans currently at issue. (Id at ¶ 12.)

Following negotiations, Mr. Mericle conducted his own "material" review of the Loan Application containing the major business terms and Mr. Mericle and Mericle Development were also represented by outside counsel, Lewis Sebia, who was an experienced commercial real estate lawyer. (Id. at ¶ 13.) Prior to entering into the Loan Agreements, the loan documents went through serial revisions at the request of Mericle and counsel. (Id. at ¶ 16.) Mr. Sebia read the promissory note "carefully."(Id. )

On November 5, 1996, Mr. Mericle signed a Loan Agreement with Jackson. (Compl. , ¶ 5.) Jackson issued a loan to Mericle in the amount $ 15,890,000 with an eighteen-year (18) term, an interest rate of 8.57 %, and a maturity date of December 1, 2014 (hereinafter "1996 Loan").² (Doc. 18, ¶ 20.) On November 20, 1997, the parties entered into another agreement for a $ 10,000,000 loan with a seventeen-year (17) term and a 7.69 % interest rate (hereinafter "1997 Loan"). (Id. at ¶ 21.) The 1997 Loan was advanced in two tranches. (Id. ) Both loan packages contained several loan documents including, among others documents, a "Loan Agreement", a "Promissory Note", and a borrower's counsel letter; and both loans were collateralized with several properties in Pennsylvania. (Id. at ¶¶ 22-23.) Mr. Mericle signed the loan documents on behalf of himself and Mericle Development. (Id. at ¶ 24.) When executing the Promissory Note, Mr. Mericle and Mericle Development represented that both were "knowledgeable in business matters" and, there was language, specifically in the Confession of Judgment clause, stating that the terms of the loan were "negotiated and agreed upon in a commercial context." (Id. at ¶ 25.)

Pursuant to the Loan Agreement, Jackson was permitted to assign³ the 1996 Loan. Mericle, as the borrower, had "no right to make prepayments of the Loan in whole or in part except in accordance with the terms of the [Promissory] Note." (Id. at ¶¶ 26, 30.) The Prepayment Provision in the promissory notes is as follows:

9. Prepayment. This Note may not be prepaid for one year. Thereafter, Maker may prepay the Note in whole or in part upon payment of a prepayment premium equal to the greater of (1) 1 % of the prepaid amount and (ii) an amount calculated at the time of prepayment using a formula designed to compensate the Noteholder for the loss of the performing Loan. This yield protection payment will be calculated by (a) assuming reinvestment of the prepaid amount in U.S. Treasury Securities with maturities as close as practicable to the Maturity Date, (b) assuming conversion of this Note to a bond-equivalent, interest-only note without changing its interest rate, and (c) determining the present value of the difference between the two assumed interest-payment streams, using the yield of the assumed reinvestment as the discount rate. Maker may prepay the Loan at par during the ninety-day period preceding the Maturity Date. No prepayment premium will be charged on amounts attributable to insurance or condemnation proceeds applied to reduce the principal balance of the Loan...

(Id. at ¶ 31.)

Carey Kramer was retained by Jackson and PPM and served as the mortgage correspondent for the both loans. (Id. at ¶¶ 33, 35; Doc. 26, ¶ 33.)⁴ Carey Kramer collected payments from Mericle, processed Mericle's requests (including requests for prepayment), calculated prepayment premiums, collected prepayment premiums, and served as an overall intermediary between the Mericle and Jackson and PPM. (Doc. 18, ¶ 34; Doc. 26, ¶ 34.)

On January 30, 2001, Jackson sold the 1996 Loan to Wells Fargo Bank Minnesota, N.A., as trustee for Morgan Stanley Dean Witter Capital I, Inc., Commercial Mortgage Pass-Through Certificates, Series 2001-PPM (hereinafter the "Trust"). (Id. at ¶ 36.) The 1996 Loan was then securitized pursuant to a Pooling and Servicing Agreement. (Id. at ¶ 37.) Despite the sale, the party who had control over the 1996 Loan following securitization is disputed; Jackson and PPM assert the securitized loan was controlled by the Master Servicer at the time; but, Mericle contends that PPM, as the Special Servicer, retained the right to service the 1996 Loan after it was securitized. (Id. at ¶ 38; Doc. 26, ¶ 38.) The parties also dispute who Carey Kramer communicated with when Mericle contemplated paying off the 1996 Loan and whether the Master Servicer or PPM made the final calculation. (Doc. 18 at ¶ ¶ 39, 41; Doc. 26, ¶¶ 39, 41.)

In 2005, Mericle prepaid a portion of the 1996 Loan. (Doc. 18, ¶ 40; Doc. 26, ¶ 40.) At the time, Carey Kramer contested the calculated Prepayment Premium by communicating with the Master Servicer, challenging the fact that the calculation did not take amortization into account, but the Master Servicer denied the request to recalculate the Prepayment Penalty. (Doc. 18, ¶¶ 45-46; Doc. 26, ¶¶ 45-46.) Mericle paid a Prepayment Premium in 2005. (Doc. 26, ¶ 46.) Mericle paid the following additional Prepayment Premiums: in 2006, in the amount of $ 16,988.71; in 2007, in the amount of $ 147,404.12; and, in 2008, in the amount of $ 156,270.16. (Doc. 18, ¶¶ 47-50.) Mericle paid the premiums and did not file suit because the amount paid was not sufficiently large enough to cause it to file suit. (Doc. 26, ¶¶ 47-50.)

In 2011, Mericle prepaid the loans in their entirety in order to use the 1996 and 1997 Loan collateral properties as substitute collateral for a multi-million dollar financing arrangement with another life insurance lender. (Doc. 18, ¶¶ 53-54; Doc. 26, ¶¶ 53-54.) Upon request of Mericle, Carey Kramer calculated the Prepayment Premium for the 1997 Loan and the calculation was confirmed by Karl Hildebrand, the loan administrator for PPM Finance. (Doc. 18, ¶¶ 55; Doc. 26, ¶ 55; Doc. 20, ¶ 1, 7-8.) The Master Servicer calculated the Prepayment Premium for the 1996 Loan. (Doc. 18, ¶ 56; Doc. 26, ¶ 56.)⁵ Neither calculation took...