Westmoreland Regional v. Subway Real Estate ( 2017 )

J-S78028-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
WESTMORELAND REGIONAL HOSPITAL IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
SUBWAY REAL ESTATE CORP.
Appellant No. 613 WDA 2016
Appeal from the Order March 31, 2016
In the Court of Common Pleas of Westmoreland County
Civil Division at No(s): 1249 OF 2015
BEFORE: BENDER, P.J.E., OTT, J., and FITZGERALD, J.*
MEMORANDUM BY OTT, J.: FILED MARCH 14, 2017
Subway Real Estate Corp. (“SREC”) appeals from the order entered
March 31, 2016, in the Westmoreland County Court of Common Pleas,
granting Westmoreland Regional Hospital’s (“Hospital”) motion for judgment
on the pleadings with regard to a commercial lease, denying SREC’s cross-
motion for judgment on the pleadings, and directing SREC and its sublessee
vacate the leased premises at issue within 60 days. On appeal, SREC
contends the trial court erred in granting Hospital’s motion for judgment on
the pleadings, and denying its cross-motion. For the reasons below, we
affirm.
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*
Former Justice specially assigned to the Superior Court.
J-S78028-16
The facts underlying this appeal are summarized by the trial court as
follows:
This case involves an Agreement of Lease entered into by the
parties, which began on February 1, 2005, and ended on January
31, 2010, for property located at 532 West Pittsburgh Street,
Greensburg[,] PA 15601. Said Lease Agreement contained a
renewal term for one (1) five (5) year period, which option was
exercised by [SREC] and accepted by [Hospital] by way of
correspondence dated January 7, 2009 and December 1, 2009.
Accordingly, said renewal term commenced on February 1, 2010
and expired on January 31, 2015.
In the December 1, 2009 letter (hereinafter “December
[L]etter”) which confirmed the agreement for the first renewal
period, [Hospital] agreed to amend the initial Lease Agreement
to include the option of a Second Renewal Term, beginning
February 1, 2015 and ending January 31, 2020, and provided
the terms of said second Renewal Term as follows:
Provided that Lessee is not in default of this Lease, the
parties may extend the term of this Lease by mutual
written agreement a second time for an additional five (5)
year period (the “Second Renewal Term”) at the same
terms and conditions provided in the original Lease
Agreement and this amendment thereto; provided
however, that the minimum base rent for the Second
Renewal Term (the “Second Renewal Base Rent”) shall be
determined by fair market value, in an amount not to
exceed fifteen percent (15%) over the rental rate in effect
at the end of the Renewal Term (January 31, 2015); and
provided, further, that if the Second Renewal Base Rent,
as calculated herein, would be less than fair market value,
Lessor shall not renew the term. Any renewal of this Lease
shall be on the terms and conditions negotiated between
the parties. The Initial Term and all Renewal Terms are
hereinafter collectively referred to as the “Term”.
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The December Letter further provided for an increase in rent
during the third year of the Renewal Term[1] and provided
signature lines for [SREC’s] representatives to sign and send
back the agreement, which was not done. [SREC disputes this
fact, and, indeed claims it returned a signed copy of the
December Letter.] Subsequently, by letter dated January 17,
2014, [SREC] attempted to exercise its alleged option for a
Second Renewal Term; however, [Hospital] responded by letter
dated January 31, 2014 that the December Letter was never
signed and returned, and as a result, the rent was never raised
and said Second Renewal Term was never accepted in writing.
Trial Court Opinion, 3/31/2016, at 1-2 (record citations omitted).
Accordingly, Hospital asserts the lease term expired on January 31, 2015.
On May 11, 2015, Hospital filed a complaint seeking judgment for
possession of real property and money damages. Thereafter, on April 9,
2015, SREC filed an answer, with new matter and counterclaim, seeking a
declaration that SREC properly exercised the second renewal option detailed
in the December Letter. Hospital filed a timely reply in which it asserted
SREC never countersigned and returned the December Letter.
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1
Specifically, the December Letter provided:
According to our discussion, the rent rate will remain at the
current rate for the initial three years of the extended term-
February 1, 2010 to January 31, 2013. The rent rate will
increase for years four and five of the Renewal Term in
accordance with the CPI in effect at the year end prior to the
beginning of the fourth and fifth term years. Increases for years
four and five will be capped at three percent (3%) per year.
Answer with New Matter and Counterclaim, 4/9/2015, at Exhibit B,
December 1, 2009, Letter (“December 2009 Letter”).
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Thereafter, on January 5, 2016, Hospital filed a motion for judgment
on the pleadings, asserting it was entitled to judgment as a matter of law.
SREC responded with a cross-motion for judgment on the pleadings filed on
February 4, 2016. The trial court heard oral argument on March 23, 2016,
and, on March 31, 2016, entered an opinion and order granting Hospital’s
motion, denying SREC’s cross-motion, and directing SREC to vacate the
premises. This timely appeal followed.2
On appeal, SREC first argues the trial court erred in granting Hospital’s
motion for judgment on the pleadings because the court improperly relied on
disputed facts, and wrongly determined the December Letter did not include
a “meeting of the minds” concerning rent for the second renewal period.
See SREC’s Brief at 12-17. Moreover, SREC asserts, at the very least, the
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2
The trial court did not direct SREC to file a concise statement of errors
complained of on appeal pursuant to Pa.R.A.P. 1925(b). However, on May
9, 2016, the trial court entered an order stating the reasons for its March 31,
2016, ruling were set forth in the accompanying opinion.
That same day, SREC filed a motion to stay the enforcement of the
March 31, 2016, order pending appeal. On May 13, 2016, Hospital filed a
responsive brief opposing the stay, or, in the alternative requesting the court
direct SREC to file an appeal bond. That same day, the trial court entered
an order granting SREC’s request for a stay, and directing that SREC
continue to pay rent on the premises in lieu of an appeal bond. See Order,
5/13/2016.
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December 2009 letter was ambiguous, and should have been interpreted
against the drafter, Hospital.3 See id. at 17-21.
When considering an order granting judgment on the pleadings,
[o]ur review … is limited to whether the trial court committed an
error of law or whether unresolved questions of material fact
remained. Because the question of whether judgment on the
pleadings was proper is a question of law, our scope of review is
plenary.
Grimes v. Enter. Leasing Co. of Philadelphia, LLC, 105 A.3d 1188,
1192–1193 (Pa. 2014) (internal citations omitted). Furthermore,
[o]ur review is confined to the pleadings and relevant
documents. We 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 that 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.
McLafferty v. Council for the Ass'n of Owners of Condo. No. One,
Inc., 148 A.3d 802, 806–807 (Pa. Super. 2016).
At issue herein is the parties’ lease agreement, and the purported
amendment to that agreement contained in the December Letter. By way of
background, we note:
In Pennsylvania, lease agreements are governed by
contract law and general contract law principles. As such,
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3
We note SREC listed these arguments as three separate issues in its brief.
See SREC’s Brief at 4. However, for ease of disposition, we will address
them together.
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when the language of a lease is clear and unequivocal, its
meaning will be determined by its contents alone in
ascertaining the intent of the parties.
Inasmuch as a lease must be construed according to general
principles of contract law, we are mindful that the primary
objective in construing a contract is to effectuate the intentions
of the parties.
Nonetheless, “[i]t is firmly settled that the intent of the parties
to a written contract is contained in the writing itself.”
Accordingly, when the words of a contract are clear and
unambiguous, we are to determine what the parties intended by
looking only at the express language of the agreement.
Giant Food Stores, LLC v. THF Silver Spring Dev., L.P., 959 A.2d 438,
447–448 (Pa. Super. 2008) (internal citations omitted), appeal denied, 972
A.2d 522 (Pa. 2009).
The trial court provided the following rationale for its ruling granting
Hospital’s motion for judgment on the pleadings:
The Court finds that the December Letter is not ambiguous
and must be interpreted on its face. Said Letter provides that
the parties “may extend the term of the Lease by mutual written
agreement.” Said language could not have created an option in
favor of [SREC] without a document confirming the alteration to
the Lease signed by both parties, as the language clearly states
the intent that a mutual written agreement be required for the
possible renewal. Additionally, there was no meeting of the
minds with regard to rent, a material term of any lease
agreement. The December Letter further stated, “Any renewal
of this Lease shall be on the terms and conditions negotiated
between the parties.” However, the December letter was never
signed or accepted so it could not have taken effect, as
evidenced by the fact that the rent was never raised or
renegotiated by [Hospital] as per the terms of the letter.
Accordingly, because the Court cannot find that there was a
meeting of the minds with regard to a Second Renewal Term
based upon the pleadings, it must grant judgment in favor of
[Hospital].
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Trial Court Opinion, 3/31/2016, at 4.
SREC first claims the trial court erred in finding SREC “never signed or
accepted” the December Letter because “both parties agreed in their
respective motions for judgment on the pleadings that the question of
whether the December Letter was countersigned and returned was in
dispute.” SREC’s Brief at 13 (emphasis omitted). We agree.
While Hospital averred in its answer and new matter to SREC’s
counterclaim that SREC did not return a signed copy of the December
Letter,4 it acknowledges in its appellate brief that “the issue of whether the
December Letter was counter-signed and returned is admittedly in
dispute.” Hospital’s Brief at 9 (emphasis supplied). Indeed, SREC attached
a signed copy of the December Letter to its counterclaim. See Answer with
New Matter and Counterclaim, 4/9/2015, at Exhibit B, December Letter. As
noted supra, a trial court should not grant judgment on the pleadings when
“unresolved questions of material fact remain[.]” Grimes, supra, 105 A.3d
at 1192. Accordingly, we find the court erred to the extent that it relied
upon a disputed fact in ruling for Hospital.
Nevertheless, it is well-established that “[t]his Court may affirm an
order of the trial court on any basis.” Conestoga Bank v. Tioga
Investments II, 138 A.3d 652, 659 n.7 (Pa. Super. 2016), appeal denied,
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4
See Reply to New Matter and Answer and New Matter of Counterclaim,
5/29/2015, at ¶ 38.
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___ A.3d ___, 2016 WL 4921763 (Pa. Sept. 15, 2016). Here, we find the
question of whether or not SREC signed and returned the December 2009
letter was not material to the trial court’s ruling. Indeed, even assuming
SREC did timely sign and return the letter, under the terms of the
agreement, SREC could not unilaterally invoke the second renewal option.
Rather, the December Letter clearly states: “the parties may extend the
term of this Lease by mutual written agreement.” December Letter, at 1
(emphasis supplied). “[W]hen the words of a contract are clear and
unambiguous, we are to determine what the parties intended by looking only
at the express language of the agreement.” Giant Food Stores, LLC,
supra, 959 A.2d at 448.
SREC’s remaining arguments do not alter our interpretation of the
plain language in the December Letter. First, SREC claims the trial court
“erred by holding that the parties did not reach a meeting of the minds
regarding the rent amount during the Second Renewal Term.” SREC’s Brief
at 14. It emphasizes the second renewal option included a rental
calculation, based upon fair market value, and limited any increase to 15
percent. See id. at 15. Further, SREC points out the option “included built
in protection” for Hospital if the 15 percent limit was significantly less than
fair market value. Id. at 16. Nonetheless, while we agree the parties came
to a basic understanding of the financial terms for a second renewal period,
and as the trial court noted, the December Letter also provided that “[a]ny
renewal of this Lease shall be on the terms and conditions negotiated
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between the parties.” December Letter, at 2. This language tracks the
earlier, unambiguous provision that the option had to be invoked by both
parties in a “mutual written agreement.” Id. at 1. Accordingly, read
together, these provisions establish the parties contemplated and required
further discussions before mutually agreeing to a second renewal period.
Second, SREC’s contention that the December Letter is ambiguous,
and should be construed against Hospital is also of no moment. SREC
focuses on the Hospital’s uses of both mandatory (shall) and permissive
(may) language. See SREC’s Brief at 18. However, that claim only supports
the trial court’s ruling. While the mandatory language implies the parties
agreed upon a rental ceiling, the permissive language (“the parties may
extend the term of this Lease”) demonstrates the second rental term was
not a foregone conclusion. We do not agree this language makes the lease
ambiguous.
Moreover, the language of the December Letter does not support
SREC’s claim that “SREC held an option to renew the Lease, so long as SREC
was not in default and the rent calculation did not result in rent below fair
market value.” SREC’s Brief at 20-21. While we recognize the December
Letter refers to the paragraph at issue as an “option,” the language therein
clearly provides the second renewal term must be agreed upon by both
parties in a written agreement, and the renewal “shall be on the terms and
conditions negotiated between the parties.” December Letter, at 2.
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Therefore, again, the language indicates the parties contemplated a future
“mutual” agreement before extending the lease for a second renewal term.
In its remaining claim, SREC argues the trial court erred in denying its
cross-motion for judgment on the pleadings because “the parties orally
agreed to modify the Lease to provide SREC the option of a Second
Renewal Term and SREC properly exercised that option.” SREC’s Brief at 21
(emphasis supplied). Relying on a decision of a federal district court, AFCO
Cargo PIT LLC v. DHL Express (USA), Inc., 2010 WL 5140622 (W.D. Pa.
2010), SREC claims the parties orally agreed to modify the lease, and the
December Letter was simply a “written confirmation of the oral agreement.”
SREC’s Brief at 23. Again, we disagree.
Preliminarily, we note AFCO is both non-binding, and factually
distinguishable from the case sub judice. We remind SREC that
“pronouncements of the lower federal courts have only persuasive, not
binding, effect on the courts of this Commonwealth[.]” In re Stevenson,
40 A.3d 1212, 1221 (Pa. 2012). See also Newman Dev. Grp. of
Pottstown, LLC v. Genuardi's Family Mkt., Inc., 98 A.3d 645, 657, n.11
(Pa. Super. 2014) (noting unpublished decision of United States District
Court for the Eastern District of Pennsylvania, cited by appellant “has no
precedential value in this matter.”), appeal denied, 117 A.3d 1281 (Pa.
2015).
Moreover, any potential persuasive authority of the decision is negated
by its significant factual differences. In AFCO, the landlord and tenant were
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parties to a five-year lease agreement that specifically granted the tenant
the right to renew the lease for an additional five-year term. The renewal
option stated it was “personal to Tenant and shall not be applicable to any
assignee, subtenant or successor of Tenant.” AFCO., supra, 2010 WL
5140622Id. at *1. Further, the agreement stated the option had to be
invoked by the tenant “by the giving of a written notice.” Id. (citation
omitted).
The tenant subsequently subleased the property to the sublessee, who
notified the landlord by email that it intended to renew the lease. The
landlord acknowledged the written notice requirement, but informed the
sublessee “[a] formal notice by e-mail would serve this office to confirm your
renewal of the Lease as per the terms of the agreement.” Id. (citation
omitted). Thereafter, the sublessee sent an email specifically invoking the
renewal option and paid rent retroactive to the expiration of the initial lease
term. However, two years into the new five-year renewal period, the
sublessee informed the landlord that it was terminating the lease effective
immediately. See id. at *2.
The landlord subsequently filed a civil action seeking rent due under
the renewed lease. The sublessee argued that, under the terms of the
lease, it had no right to renew the lease as a sublessee. See id. Further, it
also claimed it did not provide written notice of renewal six months prior to
the end of the lease term, again as required by the lease. See id. In
denying the sublessee’s motion for judgment on the pleadings, the district
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court recognized that a written contract “may be modified by subsequent
words or conduct,” and in the case before it, there were unresolved issues of
material fact, namely whether the parties modified the written terms of the
lease by their subsequent conduct. Id. at *4. The court emphasized it
would be “inequitable” to allow the sublessee to argue it was “incapable of
renewing the Lease” when it requested the renewal, and paid rent under the
favorable renewal terms for two years. Id. Moreover, the court also found
it would be “inequitable to allow [the sublessee] to assert now that its e-mail
was ineffective to renew the Lease” when the landlord informed the
sublessee that its email would satisfy the written notice requirement. Id.
Here, however, SREC does not point to any conversations or conduct
subsequent to the December Letter that would have altered the terms of
that written agreement. Rather, SREC emphasizes the December Letter was
written to “confirm” the parties’ earlier telephone conversation. SREC’s Brief
at 23. Accordingly, the terms of the renewal option provided for in the
December Letter were those agreed upon by the parties. Had SREC believed
the renewal option was within its sole discretion, it could have requested an
amendment to the December Letter reflecting that language.5 Accordingly,
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5
We note, too, that the parties’ conduct in invoking the first renewal option
supports our interpretation of the agreement. SREC sent a letter to Hospital
on January 7, 2009, advising Hospital that it was exercising its option to
renew the lease. See Complaint, 3/11/2015, Exhibit B. The December
Letter that followed states, in relevant part: “[Hospital] accepts your
(Footnote Continued Next Page)
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we find the trial court did not err in denying SREC’s cross-motion for
judgment on the pleading.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/14/2017
_______________________
(Footnote Continued)
option to renew the lease for an extended term beginning February 1, 2010
and ending January 31, 2015.” December Letter, at 1 (emphasis supplied).
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