Opinion ID: 377118
Heading Depth: 1
Heading Rank: 4

Heading: material adverse change

Text: 30 The district court determined that the material adverse change clause was not a condition precedent to Aetna's obligation to buy the construction loan. First, the district court noted that paragraph four of the Buy-Sell Agreement contained an extensive list of conditions precedent to Aetna's obligations. The material adverse change clause was not in that paragraph. Normally this might be probative evidence that the material adverse change clause was not a condition precedent. However, the material adverse change clause was in a totally different document, which preceded the Buy-Sell Agreement. The material adverse change clause was contained in the Loan Application, which in turn became part of the Permanent Commitment, which as previously noted, became part of the Buy-Sell Agreement by incorporation. Therefore, the fact that such a clause was not in paragraph four of the Buy-Sell Agreement does not by itself support the district court's conclusion that the material adverse change clause was not a condition precedent to Aetna's obligation. The insolvency condition also was not in paragraph four, but in the Permanent Loan Commitment. 31 The district court also held that the insolvency clause was not a condition precedent to Aetna's obligation based on the language of the clause. The clause stated: 32 If the application is approved, we (the borrowers) agree to the following: . . . we (the borrowers) will furnish evidence satisfactory to you (Aetna) at the date of funding that there has been no material adverse change in our financial or other condition. . . . 33 Record at 29a. 34 The rule in Pennsylvania is that a condition precedent to an obligation must be expressed by clear language or it will be construed as a promise or covenant. Language not clearly written as a condition precedent is presumed not to be, unless the contrary clearly appears to be the intention of the parties. Britex Waste Co. v. Nathan Schwab and Sons, 139 Pa.Super. 474, 12 A.2d 473 (1940); Potts Mfg. Co. v. Loffredo, 96 Dauph. 413 (Ct. of Common Pleas), aff'd, 235 Pa.Super. 294, 340 A.2d 468 (1974); Sharp v. McKelvey, 57 Lanc.Rev. 377, exceptions dismissed, 57 Lanc.Rev. 391, aff'd 196 Pa.Super. 138, 172 A.2d 580 (1961). We hold that it was not error for the district court to construe the material adverse change clause as a promise of the borrowers, and as consideration for Aetna's promise and not a condition precedent to Aetna's obligation. It was also not error for the district judge to hold that this clause was fulfilled. Aetna required no more information than they received, and expressed no dissatisfaction with this information. Aetna added the insolvency/bankruptcy condition in the acceptance of the application which already contained the material adverse change clause. It is a rational interpretation to view the insolvency clause as addressing Aetna's concerns about the borrowers' financial condition because it viewed the material adverse change clause as insufficient to cover the same potential problems. The material adverse change clause was the procedural way Aetna was to receive information about the financial status of the borrowers. Unless the borrowers and Mellon were in substantial noncompliance with their obligations under the Buy-Sell Agreement/Permanent Loan Commitment, Aetna was limited to the insolvency condition as a ground for refusing to purchase the construction loan.