by Mark Bauman | Mar 18, 2023 | Commercial Litigation & Corporate Law, Legal News
In TCPF Limited Partnership v. Skatell, 2009 Pa.Super. 112 (2009) the Pennsylvania Superior Court held that when a commercial landlord confesses judgment for the “entire unexpired balance of the Term of Lease”, but the landlord miscalculates the amount due and thus requests less than the full unexpired balance, the landlord may not attempt to amend his complaint to recover the full amount.
A confession of judgment is an arrangement in which a debtor agrees in advance to allow judgment to be entered against him in favor of his creditor without litigation for money which the debtor owes. A warrant of attorney is the writing in which a debtor allows his attorney to confess judgment on his behalf.
In Skatell, two officers of an incorporated entity which owned a Quiznos sandwich shop signed an individual guaranty in which they pledged the full and prompt payment of all rent. As the Court opinion states, “The guaranty contained a warrant of attorney and confession of judgment provision enabling” the landlord “to bring an action to confess judgment against Altmiller and Skatell for all or any sums due.” Furthermore, the guaranty “contained language allowing for the successive exercises of the warrant of attorney until all obligations of Altmiller and Skatell under the lease had been discharged.” In June 2006, the entity that owned the sandwich shop defaulted on its obligations under the lease.
The landlord invoked the right to accelerate the rent and other charges for the entire unexpired balance of the term of the lease and calculated that amount as $65,196.21. The landlord then sought confession of judgment of that amount and the trial court entered confession of judgment. Shortly after this entry of judgment, the landlord “discovered that it had calculated only a portion of the unexpired balance of the term of the lease, from June of 2006 through September of 2007, and not the entire lease term.” In August of 2007, the Landlord requested to amend his complaint in confession of judgment to increase the amount of judgment to $203,420.45, which represented the entire unexpired balance of the term of the lease from June of 2006 through September of 2010. On October 25, 2007, the trial court denied this request.
On appeal, the Landlord argued that Pennsylvania Rule of Civil Procedure 1033 allows for liberal amendments to pleadings. The Superior Court held, however, that under PA case law “an amendment will not be permitted where it is against a positive rule of law.” Capobianchi v. BIC Corp., 446 Pa.Super. 130, 666 A.2d 344, 346 (1995). The positive rule of law the court found here was in B. Lipsitz Co. v. Walker, 361 Pa.Super. 238, 522 A.2d 562, 566 (1987), appeal granted, 515 Pa. 617, 531 A.2d 426 (1987). The Court in that case held that “severable portions of a debt can be sought to be collected with the use of a single warrant of attorney as each become[s] due; provided, of course, the instrument is not used to collect the same portion of the debt already confessed.” The Court therefore did not interpret the portion of the individual guaranty mentioned above “allowing for the successive exercises of the warrant of attorney until all obligations of Altmiller and Skatell under the lease had been discharged” in favor of the landlord where the landlord sought to confess judgment a second time for the same debt. The Court also cited Pennsylvania Rule of Civil Procedure 2953 and 2953(a) in demonstrating that the successive exercises of the warrant of attorney must be for separate sums.
by Mark Bauman | Mar 18, 2023 | Legal News, Other News
The Superior Court of Pennsylvania overturned an order for summary judgment on appeal to the extent that it nullified a reservation of rights clause contained in a release signed by appellant. In Maloney v. Prendergrast, appellant’s suit centered primarily on the treating physician negligently failing to disclose a lesion on the right scapula of the appellant’s decedent from a 1988 x-ray. Appellant executed a joint tortfeasor release with appellees which provided that, in acceptance of an amount of money paid, appellant released appellees from further liability. However, there was a provision regarding the treating physician that reduced his liability based on a pro rata share of legal responsibility or legal liability for which each appellee was found to be liable. Appellees filed for summary judgment asserting that the language of the release operated to insulate them from liability so that all claims against them should be dismissed. The trial court agreed. On appeal, appellant asserted that a reservation of rights provision in the release only discharged the medical facilities from direct liability while preserving issues of vicarious liability against them and that the treating physician was not so insulated.
The court followed the Uniform Contribution Among Tortfeasors ACT (UCATA), 42 Pa.C.S.A § 8326 contract law principles in finding in favor of appellants. Section 8326 of the Act provides that discharge of one joint tortfeasor does not operate to discharge the other(s) unless so specified in the release. The words of the release specifically and comprehensively effectuate the discharge of all listed health care providers save the treating physician by encompassing any and all acts capable of incurring either direct or indirect liability which extinguished all of appellant’s claims against appellees other than that of the treating physician.
The law pertaining to releases is well settled: “it is axiomatic that releases are construed in accordance with traditional principles of contract law, fundamental to which is the directive that, ‘the effect of a release must be determined from the ordinary meaning of its language.'” Clark v. Philadelphia College of Osteopathic Medicine, 693 A.2d 202, 207 (Pa. Super. 1997), appeal dismissed as improvidently granted, 557 Pa. 487, 734 A.2d 859 (Pa. 1999) [**7] (citing Buttermore v. Aliquippa Hosp., 522 Pa. 325, 561 A.2d 733, 735 (Pa. 1989)). Moreover, Pennsylvania contract law prescribes that, “an interpretation will not be given to one part of the contract which will annul another part of it.” Capek v. Devito, 564 Pa. 267, 767 A.2d 1047, 1050 (Pa. 2001). Further, Pennsylvania contract law, recognizing that the intention of the parties is paramount in any interpretive effort, explains that the court should adopt a construction “which under all circumstances ascribes the most reasonable, probable, and natural conduct of the parties, bearing in mind the objects manifestly to be accomplished.” Tuscarora Wayne Mutual Ins. Co. v. Kadlubosky, 2005 PA Super 402, 889 A.2d 557, 563 (Pa. Super. 2005).
Here, the trial court’s interpretation not only annuls a major portion of the Release, but ignores the express objective of the settlement, that is, to limit further litigation while not forestalling it completely. Accordingly, the court vacated the summary judgment order and remanded for further proceedings consistent with the court’s opinion.
by Mark Bauman | Mar 17, 2023 | Commercial Litigation & Corporate Law, Legal News
The Supreme Court of Pennsylvania decided on May 31, 2007 that an arbitration agreement which reserved judicial remedies in favor of a sub-prime lender was not presumptively unconscionable. A residential mortgagor instituted a lawsuit against a sub-prime lender in the U.S. District Court for the Eastern District of Pennsylvania. The mortgagor was a low-income homeowner and applied for a residential mortgage loan with a sub-prime lender. The mortgage application required that the parties enter into a written agreement for arbitration of any disputes. However, the sub-prime lender excepted certain disputes from arbitration and reserved the right to pursue judicial remedies. These included foreclosure proceedings, self-help remedies (e.g. repossession), and several other legal remedies (e.g. attachment, garnishment, assignment of income). The mortgagor complained that this constituted a predatory lending practice and sought rescission of the contract. He argued that the arbitration agreement was unconscionable and therefore unenforceable.
The case was dismissed by the Federal District Court and the mortgagor appealed to the U.S. Court of Appeals for the Third Circuit. The Third Circuit certified a question to the Supreme Court of Pennsylvania. The mortgagor was relying on a Pennsylvania Superior Court case which held that when a financial institution reserved for itself access to the courts, at the exclusion of the consumer, a presumption of unconscionability was created. Lytle v. CitiFinancial Services, Inc., 810 A.2d 643 (Pa.Super. 2002). Lytle was in conflict with a prior decision by the Third Circuit, which to the contrary stated that such reservations did not make an arbitration agreement unenforceable. Harris v. Green Tree Financial Corporation, 183 F.3d 173 (3d Cir. 1999). Federal policy strongly favors arbitration agreements. It also permits consideration of state contract law defenses such as fraud, duress, or unconscionability. Generally, unconscionability exists when one party lacks meaningful choice in accepting a contract or term (procedural unconscionability) and the contract or term unreasonably favors another party who is asserting it (substantive unconscionabilty). The burden of proving unconscionability rests with the challenging party. Accordingly, the question before the Supreme Court of Pennsylvania was whether or not Lytle accurately reflected the law in Pennsylvania. If so, the mortgagor could prove his case merely by showing the existence of a reservations clause.
The question before the Supreme Court of Pennsylvania was relatively narrow. However, the question was considered in conjunction with several overarching policy issues such as predatory lending practices. Accordingly, numerous amicus curiae briefs were written in favor of both sides. The Supreme Court of Pennsylvania acknowledged that arbitration clauses could be employed by the sub-prime lending industry with predatory effect. However, an arbitrator must determine whether a predatory effect actually resulted. The Supreme Court of Pennsylvania conceded that arbitration clauses, as involved in this case, often resulted in a “split-forum effect” which placed additional burden on the borrower but federal and state consumer protection laws served as mitigating factors. The U.S. Supreme Court has clearly stated that parties may agree to arbitrate some claims while reserving the right to litigate others. Moreover, the Supreme Court of Pennsylvania reasoned that there were appropriate business justifications and sound practical and pragmatic reasons favoring pursuit of foreclosure proceedings in a court of law.
Thus, the Supreme Court of Pennsylvania overturned Lytle, indicating that it “swept too broadly” and there was no presumption of unconscionability. Rather, a party asserting unconscionability is required to prove it in cases involving arbitration agreements, such as the one at issue here, or otherwise. Specifically, under Pennsylvania law, the reservation of judicial remedies within the context of an arbitration agreement consummated in conjunction with a residential mortgage loan is not presumptively unconscionable.
by Mark Bauman | Mar 17, 2023 | Legal News, Other News
Recently, the Supreme Court of Pennsylvania promulgated new Rules of Civil Procedure dealing with cross claims and joinder, certificates of merit, and notice of intent to file non pros. These rules are effective immediately.
1. Cross Claims & Joinder:
Effective June 1, 2007, all cross claims are governed by Pa.R.C.P. 1031.1 – Crossclaim. Prior to this, such claims were governed by Pa.R.C.P. 2252. Right to Join Additional Defendants, specifically under subdivision (d), now rescinded.
Under the newly amended Pa. R.C.P. 2252, Joinder of Additional Defendants is limited to the joinder of persons not already parties to the action.
2. Certificates of Merit:
According to the newly amended Pa.R.C.P. 1042.3(c)(2), similar to the Rule regarding a Defendant who joins a licensed professional as an Additional Defendant, a Defendant who asserts a cross claim against a licensed professional must file a certificate of merit if the cross claim is based on negligence that is unrelated to the acts of negligence that are the basis for the claims against the cross claiming party.
3. Notice Of Intent To File Non Pros:
Newly enacted Pa.R.C.P. 1042.6, requires a Defendant to give a thirty (30) day Notice before filing a Praecipe for a judgment of non pros for failing to file a certificate of merit. Under the new Rule, notice does not need to be given where the court has granted an extension of time to file a certificate of merit and the plaintiff fails to do so or where the court denies a motion to extend time for such filing. Pa. R.C.P. 1042.6(b). If a notice is filed, the plaintiff may file a motion to seek “a determination by the court that the filing of a certificate of merit is not required.” Filing such a motion will toll the time period for which the certificate of merit must be filed until a ruling is rendered. Pa.R.C.P. 1042.6(c). However, if it is determined that a certificate of merit is required, the new Rule provides that the certificate of merit must be filed within twenty (20) days of the entry of the order or the original time period, whichever is later – thereby, potentially providing plaintiff with additional time to file the certificate of merit.
The Rule pertaining to entry of judgment of non pros (formerly Pa.R.C.P. 1042.6, now Pa.R.C.P. 1042.7) has also been amended to conform to the new notice Rules.
by Mark Bauman | Mar 16, 2023 | Commercial Litigation & Corporate Law, Legal News
The Superior Court of Pennsylvania recently interpreted the standard inspection contingency language as contained in the Standard Agreement for the Sale of Real Estate endorsed by the Pennsylvania Association of Realtors (“Agreement”). Such an Agreement was executed by the parties in Welteroth v. Harvey, 912 A.2d 863 (Pa. Super. 2006). The buyers agreed to purchase a six acre residential property on a wooded rural lot. They later alleged that the sellers of the property breached the Agreement by harvesting thirty (30) large trees for timber. The buyers sought specific performance and damages for devaluation of the property, damage to the grounds, and the expense of removing stumps that were left behind.
The sellers of the parcel filed preliminary objections to the Complaint, asserting that the buyers failed to state a cause of action. In support of this assertion, the sellers relied upon the inspection contingency language contained in the Agreement. This standard language gave the buyers fifteen (15) days to inspect the property and raise objections to the conditions thereon. In the event that objectionable conditions were discovered and properly placed in issue, the seller had the options to repair, offer a credit, or do nothing. If the seller chose to do nothing the onus was upon the buyer, within five (5) days, to accept the property as is or terminate the Agreement. The sellers in Welteroth asserted that the timbering operation was underway and obvious when the buyers inspected the property. Accordingly, the sellers argued that the Agreement provided exclusive remedies (i.e. reject or accept as is), which were not exercised by the buyers. The trial court, refused to order specific performance, and declined to consider claims for breach of contract and conversion of timber.
The Superior Court of Pennsylvania reversed the trial court’s order and remanded for further proceedings. The Superior Court stated that the remedies provision of the Agreement would only be triggered if the sellers refused to repair or offer a credit after the fifteen (15) day inspection contingency was exercised. The Superior Court also pointed out that other language contained in the Agreement imposed on the seller a duty to maintain the property in its present condition and opined that this duty did not terminate after the window for inspection closed. The inspection contingency provided buyers the ability to unilaterally terminate the Agreement within a specified window of time (or quickly modify the Agreement with consent of the sellers). Thereafter, the buyers lost the ability to terminate as a matter of course but could seek traditional remedies of damages and specific performance. The Superior Court cautioned that the manner in which the trial court exclusively construed the inspection contingency language contained in the Agreement could yield absurd and inequitable results.
In addition to finding that the trial court misinterpreted the Agreement, the Superior Court found that it was error for the trial court to determine that the buyers knew of the timbering operation before the inspection window closed. Whether and when the buyers learned of the timbering was a crucial factual determination bearing on the applicability of the remedies provision contained in the Agreement and the range and extent of remedies available to the buyers.
