BL Partners Group v. Interbroad, LLC ( 2017 )

J-A31043-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
BL PARTNERS GROUP, L.P. IN THE SUPERIOR COURT OF
PENNSYLVANIA
v.
INTERBROAD, LLC,
Appellant No. 465 EDA 2016
Appeal from the Order January 7, 2016
in the Court of Common Pleas of Philadelphia County Civil Division
at No(s): May Term, 2015 - Case No. 02432
BEFORE: BENDER, P.J.E., DUBOW, J., and FITZGERALD, J.*
MEMORANDUM BY FITZGERALD, J.: FILED JUNE 15, 2017
Appellant, Interbroad, LLC, appeals from the order entered in the
Philadelphia County Court of Common Pleas granting judgment on the
pleadings in favor of Appellee, BL Partners Group, L.P., in Appellee’s
declaratory judgment action regarding the interpretation of a lease.
Appellant contends that the trial court erred in concluding that a termination
provision in the lease is unambiguous. We agree and therefore reverse and
remand for further proceedings.
The trial court summarized the facts and procedural posture of this
case as follows:
In a lease dated January 1, 2000, the Estate of Samuel
Rappaport (“the Rappaport Estate”), the lessor, gave
[Appellant], the lessee, the right to use the rooftop of 231
S. Broad Street, Philadelphia, Pa. [“the Building”] for a
*
Former Justice specially assigned to the Superior Court.
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billboard/outdoor advertising sign. The lease term
commenced on January 1, 2000 and is scheduled to
terminate on April 11, 2094.[1] The lease gave the
Rappaport Estate the following termination rights at
Section 7:
“In the event that Lessor’s building is damaged by
fire or other casualty and Lessor elects not to restore
such building, or Lessor elects to demolish the
building, Lessor may terminate the Lease upon not
less than 60 days notice to Lessee upon paying
Lessee ten (10) times the net operating income
earned by Lessee from the Advertising Structures or
the Premises for the immediately preceding twelve
(12) month period.”[2]
When [Appellee] acquired the [Building], the [Building]
was subject to the lease with [Appellant]. On April 7,
2015, [Appellee] sent a letter to Appellant stating that it
had taken assignment of the lease, had elected to
demolish the [Building] and was terminating the lease
effective sixty (60) days from that date. In the
termination notice, [Appellee] acknowledged its obligation,
upon terminating the Lease, to pay [Appellant] ten (10)
times the net operating income earned by Appellant during
the immediately preceding twelve (12) month period.
Despite [Appellee’s] demand, [Appellant] refused to
provide its Net Operating Income for the immediately
preceding twelve (12) month period prior to the
Termination Notice or any supporting documentation.
In a letter dated May 8, 2015, [Appellant] responded to
the Termination Notice and disagreed with [Appellee]'s
interpretation of the lease. [Appellant] took the position
that [Appellant] “had the right to quiet enjoyment of the
1
Appellant provided $1 in consideration for the lease.
2
For the purposes of this appeal, we refer to the clause “In the event that
the Lessor’s building is damaged by fire or other casualty” as the “Casualty
Clause,” the clause “Lessor elects not to restore such building” as the
“Restoration Clause,” and the clause “Lessor elects to demolish the building”
as the “Demolition Clause.”
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rooftop of the building located at 231 South Broad Street .
. . to the completion of the Lease on April 1, 2094.” On
May 21, 2015, [Appellee] initiated the instant action
seeking declaration that it has the right to terminate the
lease. In addition to its claim for declaratory judgment,
[Appellee] also asserts a claim for breach of contract based
on [Appellant]’s refusal to recognize [Appellee]’s
termination of the lease. On June 18, 2015, [Appellant]
answered [Appellee]’s complaint and filed a counterclaim
for its own declaratory judgment. [Appellant] claims that
under the lease, [Appellee] does not have the right to
terminate. On July 2, 2015, [Appellee] filed a reply to
[Appellant]’s new matter and counterclaim. On August 4,
2015, [Appellant] filed a motion for judgment on the
pleadings. On August 25, 2016, [Appellee] filed a cross
motion for judgment on the pleadings.
On November 9, 2015, after oral argument, [the trial
court] granted [Appellee]’s motion for judgment on the
pleadings and denied [Appellant]’s cross motion. On
November 19, 2015, [Appellant] filed a motion seeking
clarification of this court’s November 9, 2015 Order. On
December 9, 2015, the Order of November 9, 2015 was
vacated and a new hearing was scheduled. On January 7,
2016, the court entered a new Order granting [Appellee]’s
motion for judgment on the pleadings and denying
[Appellant]’s motion for judgment on the pleadings. We
specifically declared that the January 1, 2000 lease
agreement allowed [Appellee] to terminate the lease if
Appellee elects to demolish the [B]uilding . . . for any
reason. [Appellee]’s breach of contract [action] was
permitted to proceed.[3] On February 3, 2016, Appellant
appealed.
3
Although not raised by the parties, we note that the declaratory judgment
at issue constitutes a final, appealable order. See Riley v. Framers Fire
Ins. Co., 735 A.2d 124, 127 (Pa. Super. 1999) (“[T]he appealability of an
order is a question of jurisdiction and may be raised sua sponte.”). “[A]
order in a declaratory judgment action that either affirmatively or negatively
declares the rights and duties of the parties constitutes a final order.”
Nationwide Mut. Ins. Co. v. Wickett, 763 A.2d 813, 818 (Pa. 2000)
(citing 42 Pa.C.S. § 7532 and Pa.R.A.P. 341(b)(2)); see also Pa. Bankers
Ass’n v. Pa. Dep’t of Banking, 948 A.2d 790, 798 (Pa. 2008) (holding
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Trial Ct. Op., 6/3/16, at 1-3. Appellant timely filed a court ordered Pa.R.A.P.
1925(b) statement on February 24, 2016.
The trial court issued a responsive opinion on June 3, 2016. The trial
court opined that the plain language of Section 7 provides Appellee with the
right to terminate in the event that it “elects to demolish the [B]uilding for
any reason.” Trial Ct. Op. at 7. The trial court emphasized the Casualty and
Restoration Clauses (i.e., “In the event that the Lessor’s building is damaged
by fire or other casualty” and “Lessor elects not to restore such building,”
respectively) are connected by the word “and,” and thus the Casualty Clause
operates as a condition precedent to the operation of the Restoration Clause.
Therefore, the trial court explains, both clauses read together create a right
to terminate the lease in the event of a casualty when Appellee elects not to
declaratory judgment was interlocutory and not an appealable final order
“because [Appellant’s] might still be able to obtain the relief they are
seeking . . . based on one of their alternative theories pending before the
Commonwealth Court, the order dismissing their challenge . . . had no
practical effect upon the ultimate decision in this case.”). Instantly, the
order appealed from resolved the ultimate issue of the parties’ rights under
the lease, and Appellant does not have any other viable theory of recovery.
Accordingly, the declaratory judgment at issue constitutes a final, appealable
order. See Wickett, 763 A.2d at 818; Pa. Servs. Corp. v. Texan
Eastern Transmission, LP, 98 A.3d 624, 626 n.1 (Pa. Super. 2014);
Titeflex Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 88
A.3d 970, 974-976 (Pa. Super. 2014).
Subsequent to this appeal, the Pennsylvania Supreme Court amended
Pa.R.A.P. 311 and 341 and addressed the appealability of orders entered
under the Declaratory Judgment Act. See Pa.R.A.P. 311(a)(8), 341 (eff.
Apr. 1, 2016). The amended rules, however, do not apply in this case.
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restore the building. Conversely, the trial court reasoned that the comma
and “or” preceding the Demolition Clause (i.e., “Lessor elects to demolish
the building”) indicate the Demolition Clause provides an independent basis
for termination irrespective of the Casualty Cause. Trial Ct. Op. at 5-6
(citing John E. Warriner, English Grammar and Composition (10 ed. 1965.),
at 445). The trial court thus concluded that the Casualty Clause does not
preclude Appellee’s right to terminate the lease upon demolition of the
Building even if a casualty has not occurred. Further, the trial court noted
that the lease as a whole, including the ninety-four-year lease term and
Appellant’s nominal consideration, weighs in favor of allowing Appellee to
terminate the lease upon its election to demolish the Building in order to
exercise its property rights freely. Id. at 7.
Appellant raises the following issues for our review:
1. Did the trial court err in holding as a matter of law that
the Lease provision at issue gives [Appellee] the right to
terminate the Lease by electing to demolish the building
for any reason?
2. To the extent that the trial court did not accept
[Appellant’s] interpretation of the Lease, did the trial court
err in failing to hold that the Lease is ambiguous?
Appellant’s Brief at 5. We consider Appellant’s questions jointly.
Appellant first argues that the plain language of Section 7 permits
Appellee to terminate the lease only in the event of fire or other casualty. In
support, Appellant asserts the drafter’s use of two commas to set off the
Demolition Clause indicates that the Demolition Clause is nonrestrictive.
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Appellant further notes that the parallel structure of the Demolition Clause
and the Restoration Clause—both of which begin with the phase “Lessor
elects”— evinces the drafter’s intent that the Casualty Clause is a condition
precedent to the Restoration Clause and the Demolition Clause. Appellant
also suggests that interpreting the Demolition Clause as nonrestrictive is
necessary to clarify that if a casualty were to occur, and Appellee elected to
rebuild the Building after demolition, such action would not constitute
“restoring” under the lease. This distinction is important because, under the
terms of the lease, the act of “restoring” the Building would preclude
Appellee from terminating the lease.4
Moreover, Appellant argues that the trial court erred in finding that
Appellant’s suggested reading of Section 7 was incorrect in light of the lease
as a whole. According to Appellant, it was the intent of the parties to draft a
lease agreement favorable to Appellant, and the drafter of the lease could
have fashioned a clear unilateral termination provision for Appellee that was
similar to the termination provision provided to Appellant.5
Lastly, although Appellant claims that Section 7 clearly limits
Appellee’s right to terminate the lease to the occurrence of a fire or other
4
Under Section 7 Appellee can terminate the lease in the event of a fire or
other casualty as long as “Lessor elects not to restore such building.”
5
Appellant specifically refers to another provision in the lease that prohibits
Appellee from unilaterally terminating the lease even if Appellant defaults on
its obligations to maintain the advertising structure, and permits Appellant to
terminate the lease unilaterally.
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casualty, Appellant alternatively claims that the trial court erred by failing to
conclude Section 7 was ambiguous. Following our review, we are
constrained to conclude that Section 7 is ambiguous.
Our standard of review is well settled:
Entry of judgment on the pleadings is permitted under
Pennsylvania Rule of Civil Procedure 1034, which provides
that “after the pleadings are closed, but within such time
as not to unreasonably delay trial, any party may move for
judgment on the pleadings.” Pa.R.C.P. 1034(a). A motion
for judgment on the pleadings is similar to a demurrer. It
may be entered when there are no disputed issues of fact
and the moving party is entitled to judgment as a matter
of law.
Appellate review of an order granting a motion for
judgment on the pleadings is plenary. The appellate court
will apply the same standard employed by the trial court.
A trial court must confine its consideration to the pleadings
and relevant documents. The court must accept as true all
well pleaded statements of fact, admissions, and any
documents properly attached to the pleadings presented
by the party against whom the motion is filed, considering
only those facts which were specifically admitted.
We will affirm the grant of such a motion only when the
moving party's right to succeed is certain and the case is
so free from doubt that the trial would clearly be a fruitless
exercise.
Sw. Energy Prod. Co. v. Forest Res., LLC, 83 A.3d 177, 185 (citation
omitted).
A lease is a contract and must be interpreted according to the
principles of contract law. Stein Revocable Trust v. Gen. Felt Indus.,
749 A.2d 978, 980 (Pa. Super. 2000).
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The fundamental rule in interpreting the meaning of a
contract is to ascertain and give effect to the intent of the
contracting parties. The intent of the parties to a written
agreement is to be regarded as being embodied in the
writing itself. The whole instrument must be taken
together in arriving at contractual intent. Courts do not
assume that a contract’s language was chosen carelessly,
nor do they assume that the parties were ignorant of the
meaning of the language they employed. When a writing
is clear and unequivocal, its meaning must be determined
by its contents alone.
Only where a contract’s language is ambiguous may
extrinsic or parol evidence be considered to determine the
intent of the parties. A contract contains an ambiguity if it
is reasonably susceptible of different constructions and
capable of being understood in more than one sense. This
question, however, is not resolved in a vacuum. Instead
contractual terms are ambiguous if they are subject to
more than one reasonable interpretation when applied to a
particular set of facts. In the absence of an ambiguity, the
plain meaning of the agreement will be enforced. The
meaning of an unambiguous written instrument presents a
question of law for resolution by the court.
Ramalingam v. Keller Williams Realty Grp., Inc., 121 A.3d 1034, 1046
(Pa. Super. 2015) (citation and original emphasis omitted). Whether a
contract contains ambiguous terms is a question of law. Walton v. Phila.
Nat. Bank., 545 A.2d 1383, 1388 (Pa. Super. 1988).
“The pertinent dictionary definition of the word ‘or’ is a ‘choice
between alternative things, states, or courses.’” Frenchak v. Sunbeam
Coal Corp., 495 A.2d 1385, 1387 (Pa. Super. 1985) (citing Webster’s
Unabridged Third New International Dictionary) (holding lease provision in
question provided for multiple means of termination due to use of the word
“or”), disapproved of on other grounds by Hutchinson v. Sunbeam Coal
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Corp., 519 A.2d 385 (Pa. Super. 1986). Further, “[i]n English grammar, the
placement of a comma before the word ‘or,’ joins two independent clauses.”
Warriner, English Grammar and Composition at 445.
A “nonrestrictive” phrase is separated by commas and is construed as
a parenthetical, supplemental to the main clause. Cash Am. Net of Nev.,
LLC v. Com., Dept. of Banking, 8 A.3d 282, 293 n.4 (Pa. 2010) (citing
William Strunk, Jr. and E.B. White, The Elements of Style (4th ed. 2000) at
4);6 see also Tooey v. AK Steel Corp., 81 A.3d 851, 870 (Pa. 2013). Also
germane to this case is the grammatical use of parallel structure. See
Chester Water Auth. v. Pa. Pub. Util. Comm’s, 868 A.2d 384, 390-91
(Pa. 2005).7
6
In Cash Am. Net of Nev., the Pennsylvania Supreme Court addressed the
following definition of a lender who must be licensed to conduct business:
“[N]o person shall engage . . . in this Commonwealth, either as principal,
employe, agent or broker, in the business of negotiating or making loans
or advances of money on credit . . . .” Cash Am. Net of Nev., 8 A.3d at
285 (citation omitted) (emphasis added). The Court concluded that the
phrase “principal, employe, agent or broker” was nonrestrictive and did not
“restrict the meaning of ‘in this Commonwealth . . . .” Id. at 293. Rather
“[t]he nonrestrictive phrase modifies the preceding word ‘person.’” Id.
Thus, the Court rejected a lender’s suggestion that “a lender is not in this
Commonwealth if it does not have a ‘principal, employee, agent, or broker’
in Pennsylvania.” Id. at 293.
7
In Chester Water Auth., the Pennsylvania Supreme Court considered the
following provision:
For the purpose of enabling the commission to make such
finding or determination [i.e., the award of a certificate of
public convenience], it shall hold such hearings, which
shall be public, and, before or after hearing, it may make
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Further, “[a]s a general rule, [t]he law will not imply a different
contract than that which the parties have expressly adopted.” Clearfield
Volunteer Fire Dep’t v. BP Oil, Inc., 602 A.2d 877, 879 (Pa. Super.
1992) (citation omitted). However, where courts are called upon to interpret
ambiguities in lease agreements, “it is sound policy to adopt an
interpretation which does not impose on land undue restrictions tending to
deprive the owner of the customary rights, privileges and incidents of
ownership.” Id. at 880 (footnote omitted).
Instantly, we cannot agree with the trial court that the intent of the
contracting parties was made clear by the use of the comma and the word
such inquiries, physical examinations, valuations, and
investigations, and may require such plans, specifications,
and estimates of cost, as it may deem necessary or
proper in enabling it to reach a finding or
determination.
Chester Water Auth., 868 A.2d at 390 (citation omitted). The Court
concluded:
While one could conceive an argument that the qualifying
language “as it may deem necessary or proper in enabling
it to reach a finding or determination” pertains only to the
clause that immediately precedes it (the requirement of
plans, specifications and estimates of costs), this would
not explain the General Assembly’s parallel usage of the
qualifier “such” in conjunction with each of the preceding
clauses, including the relevant one prescribing the conduct
of hearings.
Id. 390-91 (footnote omitted). The Court thus held that the authority was
not required to convene a hearing on every application for an award of a
certificate of public convenience.
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“or” preceding the Demolition Clause. Although we agree with the general
proposition that a comma followed by the term “or” separates two
independent clauses, it does not follow that the Demolition Clause must be
read separately from the Casualty Clause. In reaching its interpretation, the
trial court essentially reads into the Demolition Clause a second conditional
term: i.e., “In the event that Lessor’s building is damaged by fire or other
casualty and Lessor elects not to restore such building, or [in the event
that] Lessor elects to demolish the building, Lessor may terminate the
Lease . . . .”
Similarly, we do not find Appellant’s interpretation of Section 7 to be
dispositive. Appellant focuses on the commas preceding and following the
Demolition Clause to suggest that the Demolition Clause is nonrestrictive.
However, it is equally plausible that the comma preceding the Demolition
Clause signals the creation of an independent basis for termination.
Moreover, the comma following the Demolition Clause could also be
interpreted as a separation between a conditional “if” clause and the ensuing
“then” clause (i.e., if Appellee elects to demolish the building, then it may
terminate).8
8
Section 10 and 12, for example, contain conditional clauses that are set off
by commas. Section 10 reads, in part: “In the event of condemnation or the
threat of condemnation or acquisition by any lawful governmental authority
of the demised property, . . . .” R.R. at 97a (emphasis added). Section 12
contains the following conditional clause: “Should the electrical service to the
Advertising Structures covered under this Lease be reduced by the request
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In sum, we are constrained to conclude that Appellee’s right to
terminate the lease upon its election to demolish the building cannot be
determined definitively from the particular terms, grammar, or structure of
Section 7.9 The parties and the trial court advance reasonable
interpretations of Section 7. Accordingly, we conclude that Section 7 is
ambiguous, and judgment on the pleadings was not appropriate. See
Ramalingam, 121 A.3d at 1046. Consequently, we find that Section 7 is
subject to a contextual analysis, including the use of extrinsic evidence. 10
See id. Thus, we reverse the order granting judgment on the pleadings and
remand for the trial court to consider extrinsic evidence to aid the
interpretation of Section 7.
Order reversed. Case remanded. Jurisdiction relinquished.
or order of any duly constituted governmental agency, or by the electrical
company, . . . .” Id. at 98a (emphasis added).
9
We note that Appellee asserts Appellant waived a claim that the Lease was
ambiguous. However, although Appellant filed a cross-motion for judgment
on the pleadings, it preserved its claim that the Lease could be construed as
ambiguous in its response to Appellee’s motion for judgment on the
pleadings. In any event, our review of the trial court’s interpretation of the
Lease is plenary. Therefore, we decline to find waiver.
10
The trial court suggested that Appellant’s interpretation of Section 7
constituted an “unreasonable and unwarranted restriction on Appellee’s
property rights.” Trial Ct. Op. at 17. However, the trial court rested its
decision on the plain language of Section 7 and elected not to find Section 7
ambiguous. Id.; cf. Clearfield Volunteer Fire Dep’t v. BP Oil, Inc., 602
A.2d at 879-80. The finder of fact will have an opportunity to revisit such
policy consideration following a further examination of extrinsic evidence
regarding the intent of the parties when entering the lease. Id.- 12 -
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/15/2017
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