J-A10040-16 

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 

LAWRENCE R. NEWMAN T/D/B/A BRIAR 

CLIFF FINANCIAL SERVICES 

IN THE SUPERIOR COURT OF

PENNSYLVANIA 

 Appellant 

v. 

MICHAEL DESALVO, ANTHONY J. 

RAZZANO AND KATIE RAZZANO 

 Appellees No. 817 WDA 2015 

Appeal from the Judgment Entered June 16, 2015 

In the Court of Common Pleas of Lawrence County 

Civil Division at No(s): 1059 of 2011 

BEFORE: GANTMAN, P.J., BENDER, P.J.E., and PANELLA, J. 

MEMORANDUM BY GANTMAN, P.J.: FILED JUNE 09, 2016 

 Appellant, Lawrence R. Newman t/d/b/a Briar Cliff Financial Services, 

appeals from the judgment entered in the Lawrence County Court of 

Common Pleas in favor of Appellees, Anthony J. Razzano and Katie 

Razzano.1 We affirm. 

 The trial court opinion set forth most of the relevant facts and 

procedural history of this case as follows: 

1. In 2007, ...Michael DeSalvo [“DeSalvo”] started a 

construction business and was interested in purchasing 

property from which he could conduct business. 

____________________________________________ 

1

 A default judgment was entered against Michael DeSalvo on June 20, 

2011. Mr. DeSalvo is not a party to this appeal. 
J-A10040-16 

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2. [Appellee] Anthony J. Razzano...told DeSalvo about a 

parcel of commercial property [the “property”] that was 

owned by [Anthony and Katie Razzano’s] company, 

Razzano Holdings, LLC, and was located in Shenango 

Township, Lawrence County, Pennsylvania. This vacant 

land was assessed for tax purposes at $16,000.00. 

3. Sometime before November 7, 2007, DeSalvo and 

[Mr.] Razzano...entered into an arm’s length agreement 

whereby DeSalvo would purchase the property for 

$25,000.00, $16,000.00 of which he would obtain through 

a loan. 

4. [Mr.] Razzano introduced DeSalvo to [Appellant],

Lawrence R. Newman, who trades and does business as

Briar Cliff Financial Services..., in order to obtain a loan. 

5. On November 7, 2007, DeSalvo executed a 

mortgage note and mortgage to [Appellant]. The note is 

in the amount of $16,000.00 at a [13%] interest rate and 

18% default rate. The note provides for monthly 

payments of $219.94 for a period of 60 months beginning 

January 1, 2008, and a final balloon payment of 

$12,220.93 on December 1, 2012. 

6. [The] Razzanos executed a Guarantee and 

Suretyship Agreement (the “guarantee”) under which they 

agreed to “the prompt and punctual payment and 

performance of all of [DeSalvo’s] obligations to 

[Appellant.]” The guarantee provided that [the] Razzanos 

“indemnify, protect and hold [Appellant] harmless, and will 

pay to [Appellant] on demand all costs and expenses

(including reasonable counsel fees) which may be incurred 

in the enforcement of any liability of [DeSalvo], or any of 

the rights of [Appellant] against [the Razzanos].” 

7. DeSalvo experienced a lack of growth in his company 

and immediately failed to make timely monthly payments 

to [Appellant]. 

8. On January 12, 2009, judgment was entered by 

confession against...DeSalvo and in favor of [Appellant] at 

docket number 10040 of 2009, C.A. in the Lawrence 

County Court of Common Pleas. 
J-A10040-16 

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9. The parties stipulated that [Mr.] Razzano paid 

[Appellant] a total of $1,800.00 which cured DeSalvo’s 

default during the [period from October 2008 to February 

2009]. As a result, on March 16, 2009, the case at docket 

number 10040 of 2009, C.A. was settled and discontinued 

without prejudice. 

10. [Appellant] excused DeSalvo from making the March 

2009 payment.... 

11. [Mr.] Razzano, as guarantor/surety, made regular 

payments of approximately $220.00 to [Appellant] from 

April 2009 through September 2010[.] [Mr.] Razzano

suggested to DeSalvo that [Appellant] may be willing to 

hire DeSalvo to work on [Appellant’s] properties and credit 

the work against the debt, and DeSalvo performed 

construction work for [Appellant] on four different projects 

identified as the following: Main Medical, Riverview, Lower 

Burrell, and South Park. 

12. While DeSalvo testified that he had an oral 

agreement with [Appellant] whereby he would not charge 

the full price for this work and [Appellant] would credit the 

difference between the fair market value of the work 

performed and the charges actually made toward the 

balloon payment obligation, this was denied by 

[Appellant], and as the statement is self-serving and 

DeSalvo has no records to substantiate it, the [c]ourt finds 

this allegation not proven. 

13. [Appellant] introduced...an accounting of the 

payments [Appellant’s] business, Briar Cliff [Financial 

Services], LLC, rendered to DeSalvo. The accounting 

shows that [Appellant] issued checks to DeSalvo for the 

Main Medical and Review projects from September 4, 2009 

to March 3, 2010, totaling [$13,721.43]. [Appellant] also 

issued checks to DeSalvo for the Lower Burrell project on 

April 28, 2010, for $1,900.00; and [Appellant] issued 

checks for the South Park project on September 21, 2009, 

September 30, 2009, October 13, 2009, for $4,500.00, 

$3,000.00, and $100.00, respectively. 

14. Although neither party presented expert testimony, 
J-A10040-16 

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DeSalvo testified that the fair market value for the 

construction he performed totaled approximately 

$50,000.00 and that [Appellant] agreed that the work 

would pay the amount owed under the balloon payment. 

As stated above this allegation was not proven. 

15. [Mr.] Razzano had no further contact with 

[Appellant] until [Appellant] filed the Complaint in the 

instant case. 

16. Sometime in...2010, ...DeSalvo ceased performing 

construction work for [Appellant] and relocated to 

Tennessee. 

17. In 2011 [Appellant] had a phone conversation with 

DeSalvo in which he informed DeSalvo that the property 

was scheduled to be sold for unpaid taxes. DeSalvo stated 

that he had no further interest in the property.[2] 

[Appellant] obtained a tax deed from the Tax Claim Bureau 

of Lawrence County for the property on October 3, 2011 in 

exchange for $1,000.00. No notice of the tax sale or of 

the purchase by [Appellant] was given to [the Razzanos]. 

18. [Appellant] filed a Complaint against [DeSalvo and 

the Razzanos] on February 2, 2011. 

19. DeSalvo failed to respond to the Complaint, and

[Appellant] filed a praecipe to enter default judgment 

against him in the amount of $19,181.14.[3] 

20. On June [20], 2011, default judgment was entered 

by the Prothonotary of Lawrence County against DeSalvo 

in the above amount. 

(Trial Court Opinion, filed January 5, 2015, at 1-4) (internal citations to the 

record omitted). 

____________________________________________ 

2

 Appellant successfully bid $1,000.00 for the property at the tax sale, which 

occurred in May 2011. 

3

 The Razzanos filed their answer to the complaint on June 6, 2011. 
J-A10040-16 

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 The court conducted a bench trial on October 27, 2014. On January 5, 

2015, the court entered a verdict in favor of the Razzanos and against 

Appellant. Appellant timely filed a post-trial motion on January 15, 2015. 

On April 21, 2015, the Razzanos filed a motion to conform pleadings to 

evidence, to add any defenses available to the Razzanos based on the 

evidence presented at trial, including the defense of “discharge.” On May 1, 

2015, the court denied Appellant’s post-trial motion and granted the 

Razzanos’ motion to conform pleadings to evidence. Appellant filed a 

premature notice of appeal on May 21, 2015. The court entered final 

judgment in favor of the Razzanos on June 16, 2015.4 The court did not 

order Appellant to file a concise statement of errors complained of on 

appeal, pursuant to Pa.R.A.P. 1925(b), and Appellant filed none. 

 Appellant raises the following issues for our review, which we have 

reordered for purposes of disposition: 

____________________________________________ 

4

 Ordinarily, an appeal properly lies from the entry of judgment, not from 

the order denying post-trial motions. See generally Johnston the Florist, 

Inc. v. TEDCO Constr. Corp., 657 A.2d 511, 516 (Pa.Super. 1995) (en 

banc). Nevertheless, a final judgment entered during pendency of an appeal 

is sufficient to perfect appellate jurisdiction. Drum v. Shaull Equipment 

and Supply, Co., 787 A.2d 1050 (Pa.Super. 2001), appeal denied, 569 Pa. 

693, 803 A.2d 735 (2002). Here, Appellant filed a notice of appeal 

prematurely on May 21, 2015, prior to the entry of judgment. Thus, 

Appellant’s notice of appeal relates forward to June 16, 2015, the date 

judgment was entered. See Pa.R.A.P. 905(a) (stating notice of appeal filed 

after court’s determination but before entry of appealable order shall be 

treated as filed after such entry and on date of entry). Hence, no 

jurisdictional defects impede our review. 
J-A10040-16 

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WHETHER THE TRIAL COURT ERRED ALLOWING THE 

RAZZANOS TO PRESENT THE AFFIRMATIVE DEFENSE OF 

“WAIVER”? 

WHETHER THE TRIAL COURT ERRED BY ALLOWING THE 

RAZZANOS TO PRESENT ANY AFFIRMATIVE DEFENSES? 

WHETHER THE TRIAL COURT ERRED IN HOLDING THAT 

[APPELLANT] “SURRENDERED” OR “IMPAIRED” 

COLLATERAL TO DESALVO? 

WHETHER THE TRIAL COURT ERRED IN DETERMINING 

THAT THERE WAS A “MATERIAL MODIFICATION” OF THE 

TERMS OF THE RELATIONSHIP BETWEEN [APPELLANT] 

AND DESALVO? 

WHETHER THE TRIAL COURT ERRED IN DETERMINING 

THAT THE RAZZANOS WERE “GRATUITOUS” OR 

“UNCOMPENSATED” SURETIES? 

WHETHER THE TRIAL COURT ERRED IN HOLDING THAT 

[APPELLANT’S] DEMAND FOR A JUDGMENT WAS 

“UNCONSCIONABLE”? 

(Appellant’s Brief at 7). 

 In issues one and two, Appellant argues the Razzanos failed to raise 

“discharge”5 or any other affirmative defense in their answer and new 

matter. Appellant asserts the Razzanos did not amend their new matter to 

include the defense of discharge at any time before or during trial, so it is 

waived. Appellant further contends the Razzanos were barred from raising 

any affirmative defense due to the entry of default judgment against Mr. 

____________________________________________ 

5

 Appellant’s brief mistakenly refers to the Razzanos’ discharge defense as a 

“waiver” defense. The Razzanos, however, claimed their surety obligation 

was discharged by Appellant’s purchase of the property at the tax sale. 
J-A10040-16 

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DeSalvo. Appellant maintains the judgment against Mr. DeSalvo operated 

as res judicata against the Razzanos because the Razzanos’ liability was 

contingent on Mr. DeSalvo’s liability under the mortgage note. Appellant 

concludes the court erred when it permitted the Razzanos to raise any 

affirmative defense not pled in their responsive pleading. We disagree. 

Our standard of review of a judgment following a non-jury trial is as 

follows: 

We must determine whether the findings of the trial court 

are supported by competent evidence and whether the

trial judge committed error in the application of law. 

Additionally, findings of the trial [court] in a non-jury case 

must be given the same weight and effect on appeal as a 

verdict of a jury and will not be disturbed absent error of 

law or abuse of discretion. 

Good v. Holstein, 787 A.2d 426, 429 (Pa.Super. 2001), appeal denied, 568 

Pa. 738, 798 A.2d 1290 (2002) (citation omitted). 

When this Court reviews the findings of the trial [court], 

the evidence is viewed in the light most favorable to the 

victorious party below and all evidence and proper 

inferences favorable to that party must be taken as true 

and all unfavorable inferences rejected. 

The trial court’s findings are especially binding on appeal, 

where they are based upon the credibility of the witnesses, 

unless it appears that the court abused its discretion or 

that the court’s findings lack evidentiary support or that 

the court capriciously disbelieved the evidence. 

Conclusions of law, however, are not binding on an 

appellate court, whose duty it is to determine whether 

there was a proper application of law to the fact by the 

trial court. With regard to such matters, our scope of 

review is plenary as it is with any review of questions of 

law. 
J-A10040-16 

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Piston v. Hughes, 62 A.3d 440, 443 (Pa.Super. 2013) (internal citations 

omitted). 

 “[A]n affirmative defense pertains to a defendant’s assertion of facts 

and arguments that, if true, will defeat the plaintiff’s...claim, even if all the 

allegations in the complaint are true.” Reott v. Asia Trend, Inc., 618 Pa. 

228, 240, 55 A.3d 1088, 1095 (2012). Generally, “affirmative 

defenses...must be pleaded in a responsive pleading under the heading ‘New 

Matter.’” Dilauro v. One Bala Avenue Associates, 615 A.2d 90, 92 

(Pa.Super. 1992) (citing Pa.R.C.P. 1030). Affirmative defenses not raised in 

new matter are generally waived pursuant to Pa.R.C.P. 1032. Iorfida v. 

Mary Robert Realty Co., Inc., 539 A.2d 383, 386 (Pa.Super. 1988), 

appeal denied, 520 Pa. 576, 549 A.2d 136 (1988). Nevertheless, 

Pennsylvania Rule of Civil Procedure 1033 states: 

Rule 1033. Amendment 

A party, either by filed consent of the adverse party or by 

leave of court, may at any time change the form of 

action, add a person as a party, correct the name of a 

party, or otherwise amend the pleading. The amended 

pleading may aver transactions or occurrences which have 

happened before or after the filing of the original pleading, 

even though they give rise to a new cause of action or 

defense. An amendment may be made to conform 

the pleading to the evidence offered or admitted.

Pa.R.C.P. 1033 (emphasis added). 

 “Leave to amend lies within the sound discretion of the trial court and 

the right to amend should be liberally granted at any stage of the 
J-A10040-16 

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proceedings unless there is an error of law or resulting prejudice to an 

adverse party.” Werner v. Zazyczny, 545 Pa. 570, 584, 681 A.2d 1331, 

1338 (1996). “Prejudice that would prevent the grant of an amendment 

must be...something more than a detriment to the other party since any 

amendment almost certainly will be designed to strengthen the legal position 

of the amending party and correspondingly to weaken the position of the 

adverse party.” Carpitella by Carpitella v. Consolidated Rail Corp., 533 

A.2d 762, 763-64 (Pa.Super. 1987). “[T]he lateness of a proposed 

amendment is only to be considered insofar as it presents a question of 

prejudice to the opposing party. It has been consistently held that 

‘unreasonable delay,’ by itself, is an insufficient ground upon which to base a 

denial of an amendment motion.” Horowitz v. Universal Underwriters 

Ins., 580 A.2d 395, 399 (Pa.Super. 1990), appeal denied, 527 Pa. 610, 590 

A.2d 297 (1991). See also Dilauro, supra (stating trial court properly 

instructed jury on assumption of risk even though defendant did not raise 

defense in responsive pleading, where facts indicated assumption of risk 

would be central issue in case; court in effect permitted amendment of 

defendant’s answer on court’s own motion); Standard Pipeline Coating 

Co. v. Solomon & Teslovich, Inc., 496 A.2d 840 (Pa.Super. 1985) 

(holding trial court did not err when it permitted plaintiff to amend complaint 

to state cause of action based upon breach of oral novation, where 

defendant first raised issue of novation and presented testimony regarding 
J-A10040-16 

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meeting at which purported novation had occurred). 

 “The doctrine of res judicata holds that a final valid judgment upon the 

merits by a court of competent jurisdiction bars any future suit between the 

same parties or their privies on the same cause of action.” Dempsey v. 

Cessna Aircraft Co., 653 A.2d 679, 680-81 (Pa.Super. 1995) (en banc), 

appeal denied, 541 Pa. 631, 663 A.2d 684 (1995). “Application of the 

doctrine of res judicata requires that the two actions possess the following 

common elements: (1) identity of the thing sued upon; (2) identity of the 

cause of action; (3) identity of the parties; (4) identity of the capacity of the 

parties.” Id. at 681. 

 Instantly, the trial court reasoned as follows: 

During the course of the trial and in [Appellant’s] case in 

chief, [Appellant’s] counsel asked [Appellant]: 

Q. Sir, there was a reference a moment ago in 

[the Razzanos’ counsel’s] opening statement about 

the fact that you have, in fact, acquired this property 

– the subject property? 

A. Yes. 

Q. Is it a vacant lot? 

A. Yes. 

Q. Where is it located? 

A. On 65 near the corner of 422. 

Q. Did you acquire the property through a 

mortgage foreclosure? 

A. Tax -- tax sale. 
J-A10040-16 

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Q. How did you acquire the property? 

A. I bid at the tax sale. 

Q. Okay, so you didn’t use a mortgage foreclosure 

process to obtain this property? 

A. No. 

Q. Okay, and how much did you pay at the tax 

sale? 

A. $1,000. 

Q. Was the public able to bid on this property? 

A. Yes. Somebody else bid $500. 

[N.T. Trial, 10/27/14, at 24-25]. 

The purchase by [Appellant] at [the] tax sale of the 

property in question[,] which was the subject of a 

mortgage loan from [Appellant] to [Mr.] DeSalvo[,] is the 

single fact upon which the court determined that [the 

Razzanos] as sureties were discharged from any further 

liability. [The Razzanos] did not present any of the 

evidence concerning [Appellant’s] purchase of the property 

at tax sale. The evidence of the purchase was presented 

by [Appellant] as hereinabove stated. As such there is no 

issue of failure to plead an affirmative defense. 

[Appellant] cannot present the evidence on which the court 

relies and then complain that the evidence was admitted. 

(Trial Court Opinion, filed May 1, 2015, at 1-2). We agree that the 

Razzanos’ initial failure to plead the affirmative defense of discharge in their 

answer and new matter was not fatal under these circumstances. The tax 

sale occurred after Appellant had filed the complaint, so the complaint did 

not refer to it. There also is no evidence that prior to filing a responsive 
J-A10040-16 

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pleading, the Razzanos otherwise knew Appellant had acquired the property 

at a tax sale. Appellant’s own testimony regarding the purchase of the 

property introduced the evidence underlying the Razzanos’ discharge 

defense.6 Following the close of evidence, the Razzanos argued in their trial 

memorandum that they were discharged from liability as sureties for Mr. 

DeSalvo’s mortgage debt based on Appellant’s acquisition of the collateral, 

i.e., the property. In a motion for post-trial relief, Appellant claimed the 

Razzanos had waived that defense. The Razzanos, in turn, successfully 

sought to conform the pleadings to the evidence, including the addition of 

the affirmative defense of discharge. Appellant fails to explain how the 

Razzanos’ amendment of their answer and new matter prejudiced Appellant. 

Appellant was the first party to present evidence supporting the Razzanos’ 

discharge defense and did not claim unfair surprise. Additionally, the timing 

of the Razzanos’ motion to amend, absent more, is insufficient to establish 

prejudice. See Horowitz, supra. Based on the foregoing, we conclude the 

court properly allowed the Razzanos to conform their pleadings to the 

evidence presented at trial. See Werner, supra. 

 Additionally, the default judgment against Mr. DeSalvo did not trigger 

____________________________________________ 

6

 Contrary to the statement of the trial court, the Razzanos also presented 

testimony regarding Appellant’s purchase of the property. (See N.T. Trial at 

66-67). Nevertheless, at that point, Appellant already had testified that he 

bought the property. Mr. Razzano’s testimony was cumulative of the 

evidence first presented by Appellant. Thus, the trial court’s misstatement 

does not affect our analysis. 
J-A10040-16 

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the doctrine of res judicata and preclude the Razzanos from raising any 

defenses. Mr. DeSalvo and the Razzanos are separate parties. Further, the 

nature of Appellant’s cause of action against Mr. DeSalvo as principal 

borrower was distinct from Appellant’s claims against the Razzanos in their 

capacity as sureties (and whether the Razzanos had any meritorious 

defenses in their capacity as sureties). The default judgment against Mr. 

DeSalvo established only his individual liability for the mortgage debt. 

Therefore, the doctrine of res judicata is inapplicable to Appellant’s cause of 

action against the Razzanos. See Dempsey, supra. 

 In issue three, Appellant argues the property would have been lost to 

a third-party buyer if Appellant had not purchased it at the public tax sale, 

which protected and preserved the property as collateral. Appellant asserts 

the Razzanos had no “security” in the property under the mortgage note, 

and Appellant’s purchase of the property did not impair any legal right of the 

Razzanos. Appellant concludes the trial court erred when it decided 

Appellant had surrendered or impaired the collateral under the note, which 

discharged the Razzanos’ surety obligations. We disagree. 

 The following general principles govern a surety arrangement: 

Where there is a surety relationship, an obligee...is entitled 

to performance of a contractual duty by the principal or 

alternatively, if the principal defaults, by the principal’s 

surety. The surety, therefore, stands in the shoes of the 

principal and must complete any obligation due the obligee 

at the time of default. 

Kiski Area School Dist. v. Mid-State Surety Corp., 600 Pa. 444, 450, 
J-A10040-16 

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967 A.2d 368, 371 (2008). “Attendant to this special relationship are duties 

of the creditor to the surety.” Good, supra at 430. “[W]here a surety has 

performed upon the default of the principal debtor, the surety has a right to 

reimbursement from the principal debtor and is subrogated to the rights of 

the creditor.” Reuter v. Citizens & Northern Bank, 599 A.2d 673, 677 

(Pa.Super. 1991). “[A] release or impairment of collateral defeats in whole 

or part the surety’s right to look to such security for recourse should he have 

to pay the principal debt.” Keystone Bank v. Flooring Specialists, Inc., 

513 Pa. 103, 114, 518 A.2d 1179, 1185 (1986). “[I]f a creditor surrenders 

or impairs collateral which serves as security for the principal’s debt, the 

surety is discharged from his obligation to the extent that the collateral 

would have produced sufficient funds to pay the debt in whole or in part.” 

First Federal Sav. & Loan Ass’n of Pittston v. Reggie, 546 A.2d 62, 65 

(Pa.Super. 1988). See also Franklin Savings & Trust Co. of Pittsburgh 

v. Clark, 283 Pa. 212, 129 A. 56 (1925) (stating: “[W]hen a creditor has in 

his possession the property of a principal debtor, out of which his debt may 

be paid, and does not apply it to the payment of the debt, but gives it up, a 

surety is discharged; or if the property be not actually in his hands, or he did 

not really assent to its passing from him, yet if, by the use of reasonable 

diligence, the property may be obtained and applied to the debt, his duty is 

to obtain and so use it”); First Nat. Bank & Trust Co. of Ford City v. 

Stolar, 197 A. 499 (Pa.Super. 1938) (stating impairment of collateral 
J-A10040-16 

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discharges surety to extent of impaired value even if surety was not in 

position to enforce subrogation at time of impairment). 

 Instantly, Mr. DeSalvo obtained a mortgage loan from Appellant to 

purchase the property from Razzano Holdings, LLC. The Razzanos executed 

a surety agreement with Appellant with respect to Mr. DeSalvo’s obligations 

under the mortgage note. Mr. DeSalvo subsequently defaulted on the 

mortgage, and the Razzanos cured the default with an agreed-upon payment 

to Appellant. Mr. DeSalvo again failed to make payments, and Appellant 

filed the instant complaint against Mr. DeSalvo and the Razzanos in February 

2011. The property also was tax delinquent. After he filed his complaint 

against Mr. DeSalvo and the Razzanos, Appellant purchased the property at 

a public tax sale in May 2011 for $1,000.00. The Razzanos had no notice of 

the tax sale. The property served as collateral securing Mr. DeSalvo’s 

mortgage debt. As sureties, the Razzanos were entitled to subrogation to 

Appellant’s creditor rights in the event they paid off Mr. DeSalvo’s debt, 

including the right to the collateral. After Appellant purchased the property 

at the tax sale, however, he failed to apply its value to Mr. DeSalvo’s debt, 

and the Razzanos could no longer exercise their subrogation rights to obtain 

the property. Therefore, Appellant’s actions impaired the entire value of the 

collateral and discharged the Razzanos’ obligation as sureties to the extent 

of the impairment. See Franklin Savings & Trust Co. of Pittsburgh, 

supra; First Federal Sav. & Loan Ass’n of Pittston. The property was 
J-A10040-16 

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valued at $25,000.00 by an “arm’s length” transaction between Appellant 

and Mr. DeSalvo in 2007.7 The tax sale occurred in May 2011. According to 

Appellant’s own documentary evidence, Mr. DeSalvo’s mortgage debt 

amounted to $17,703.69 as of June 2, 2011. Thus, the impaired collateral 

would have provided sufficient funds to pay off the entire debt. Therefore, 

the trial court properly concluded the Razzanos were completely discharged 

from their obligation as sureties on behalf of Mr. DeSalvo. See id. 

 In issues four and five, Appellant argues the Razzanos’ suretyship 

materially benefitted the Razzanos’ company because it facilitated the 

company’s sale of the property to Mr. DeSalvo. Appellant contends the 

Razzanos were not gratuitous or uncompensated sureties in light of their 

material interest in the loan to Mr. DeSalvo. Appellant asserts the Razzanos 

could only be discharged if, without their consent, there was a material 

modification of the creditor-debtor relationship that substantially increased 

the Razzanos’ risk. Appellant claims the creditor-debtor relationship 

between Appellant and Mr. DeSalvo was not materially modified by 

Appellant’s purchase of the property at a tax sale. Appellant maintains Mr. 

DeSalvo had no involvement in Appellant’s decision to buy the property, and 

no evidence shows the purchase of the property had any purpose other than 

____________________________________________ 

7

 Appellant produced no evidence regarding any change in the property’s 

value since that time. Mr. Razzano also presented testimony that he valued 

the property at $35,000.00 or $40,000.00 at the time of the sale to Mr. 

DeSalvo. 
J-A10040-16 

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to preserve the collateral. Appellant further argues there was no evidence 

that the tax sale purchase substantially increased the risk borne by Mr. 

DeSalvo, who had already defaulted on the note. Appellant concludes the 

court erred when it determined the Razzanos’ surety obligation was 

discharged on the grounds that they were gratuitous sureties and Appellant’s 

purchase of the property materially modified the contractual relationship 

between Appellant and Mr. DeSalvo. We disagree. 

 “[W]here the creditor and the debtor materially modify the terms of 

their relationship without obtaining the surety’s assent thereto, the surety’s 

liability may be affected.” J.F. Walker Co. v. Excalibur Oil Group, Inc., 

792 A.2d 1269, 1274 (Pa.Super. 2002). 

A material modification in the creditor-debtor relationship 

consists of a significant change in the principal debtor’s 

obligation to the creditor that in essence substitutes an 

agreement substantially different from the original

agreement on which the surety accepted liability. 

Furthermore, Pennsylvania courts have consistently 

differentiated between gratuitous (uncompensated) 

sureties and sureties who are compensated: 

While we have held that in cases of corporate 

sureties the bond is to be strictly construed in favor 

of the obligee, we have also held that, when 

obligations of suretyship or indemnity are assumed 

by individuals without pecuniary compensation, their 

obligations are not to be extended by implication or 

construction. Their liability is strictissimi juris. 

[W]here, without the surety’s consent, there has been a 

material modification in the creditor-debtor relationship, a 

gratuitous (uncompensated) surety is completely 

discharged. In contrast, a compensated surety is 

discharged only if, without the surety’s consent, there has 
J-A10040-16 

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been a material modification of the creditor-debtor

relationship and said modification has substantially 

increased the surety’s risk. 

Id. (internal citations and quotation marks omitted) (holding sole 

shareholder in corporation was not gratuitous surety where, in exchange for 

his guarantee, creditor extended line of credit to corporation). 

 Instantly, the trial court reasoned as follows: “[The] Razzanos are 

gratuitous sureties. [The] R[a]zzanos are discharged from any liability on 

the Guarantee and Suretyship Agreement as [Appellant] has taken for his 

own benefit the collateral, thus drastically altering the relationship between 

[Appellant] and DeSalvo.” (Trial Court Opinion, filed January 5, 2015, at 7). 

We agree. Appellant’s acquisition of the property effectively eliminated the 

collateral securing the loan and materially modified the creditor-debtor 

relationship. The Razzanos did not consent to Appellant’s purchase of the 

property. Consequently, as gratuitous sureties, the Razzanos were 

completely discharged from performance of Mr. DeSalvo’s obligations to 

Appellant. See id. The Razzanos’ indirect benefit from the loan transaction 

did not make them compensated sureties. The facts of J.F. Walker Co. 

supra, are distinguishable because the surety in that case was also the sole 

shareholder of the corporation that received the guaranteed line of credit. 

Moreover, the unavailability of the collateral to the Razzanos substantially 

increased their risk as sureties. Therefore, the Razzanos would be 

discharged even if they were classified as compensated sureties. See id. 
J-A10040-16 

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Based on the foregoing, the trial court properly concluded the Razzanos’ 

surety obligations were completely discharged on two grounds: (1) 

Appellant’s impairment of the collateral; and (2) material modification of the 

creditor-debtor relationship between Appellant and Mr. DeSalvo. 

Accordingly, we affirm.8 

 Judgment affirmed. 

Judgment Entered. 

Joseph D. Seletyn, Esq. 

Prothonotary 

Date: 6/9/2016 

____________________________________________ 

8

 In issue six, Appellant disputes the court’s use of the word 

“unconscionable” and cites law pertaining to the defense of unconscionability 

in contract law. The court stated: “Now [Appellant] seeks to collect the 

money loaned and keep the land. Such a result is not only unconscionable 

but also not sanctioned by the law.” (Trial Court Opinion, filed January 5, 

2015, at 7). The context of the statement makes clear the court was not 

using the term “unconscionable” in the strict contract law sense but simply 

emphasizing the unjust result that would occur if the court granted 

Appellant’s requested relief. Therefore, we give this issue no further 

attention.