IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

NORTHWEST SAVINGS BANK :

AND FINANCIAL SERVICES, :

: Civil Action No. 4: 09-CV-1416

Plaintiff, :

:

v. :

: (Judge McClure)

NS FIRST STREET LLC and 220 :

SOUTH ATHERTON :

STREET LLC, :

:

Defendants. :

:

MEMORANDUM

January 6, 2010

I. INTRODUCTION

This civil action was initiated by plaintiff Northwest Savings Bank and

Financial Services in the Court of Common Pleas of Centre County. Plaintiff has

named as defendants NS First Street LLC and 2200 South Atherton Street LLC. 

The case later was removed to this Court upon the defendants’ Notice of Removal,

which was filed with this Court on July 22, 2009. (Rec. Doc. No. 1). Removal

was appropriate under 28. U.S.C. § 1441, as this Court has jurisdiction over the

matter pursuant to 28 U.S.C. § 1332.

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II. PROCEDURAL HISTORY

In its complaint, plaintiff asserts against the above-named defendants one

count for damages and two counts for declaratory judgment. These counts arise

out of a lease agreement concerning a property located at 2200 South Atherton

Street, State College, Pennsylvania.

After the matter was removed to federal court, the defendants filed an

answer to the complaint on August 3, 2009. (Rec. Doc. No. 4). In their answer,

the defendants included eight affirmative defenses as well as counterclaims. Id. at

8-13. The plaintiff filed a reply to the defendants’ counterclaims on August 12,

2009. (Rec. Doc. No. 9).

On October 8, 2009, pursuant to Fed. R. Civ. P. 15(a), the plaintiff filed a

stipulation agreed to by the parties providing for the plaintiff’s filing of an

amended complaint (“First Amended Complaint”). (Rec. Doc. No. 14). This

Court issued an order on October 13, 2009, approving the stipulation to amend the

complaint. (Rec. Doc. No. 18). The plaintiff filed an amended complaint on

October 8, 2009 (Rec. Doc. No. 15), and the defendants filed an answer, with

affirmative defenses and counterclaims, to the First Amended Complaint on

October 27, 2009. (Rec. Doc. No. 19). On November 19, 2009, the plaintiff filed

a reply to the defendants’ counterclaims to the plaintiff’s First Amended

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Complaint. (Rec. Doc. No. 22).

Plaintiff, on October 13, 2009, filed the motion currently at issue entitled

“Motion to Hold Rent Monies in an Escrow Account.” (Rec. Doc. No. 16). The

plaintiff has filed the requisite accompanying brief. (Rec. Doc. No. 17). On

October 28, 2009, the defendants filed a brief opposing the plaintiff’s motion

seeking to hold its rent monies with this Court or in an interest-bearing escrow

account. (Rec. Doc. No. 20). Plaintiff filed a reply brief on November 9, 2009. 

(Rec. Doc. No. 21).

As the matter is now ripe for disposition, we will deny, for the following

reasons, the plaintiff’s “Motion to Hold Rent Monies in an Escrow Account.” 

(Rec. Doc. No. 16).

III. FACTUAL BACKGROUND

The instant lawsuit arises from a lease agreement pertaining to a property

located at 2200 South Atherton Street, State College, Pennsylvania (“the

Property”). Plaintiff entered into a lease agreement concerning the property with a

third party, DWEK Branches, LLC (“DWEK”), on July 14, 2005. The lease

agreement, and a rider dated July 15, 2005, provided that plaintiff was to lease the

property for 10 years, with the option of extending that time period for an

additional 3 to 5 years. Under the agreement, plaintiff is only allowed to use the

Case 4:09-cv-01416-YK Document 23 Filed 01/06/10 Page 3 of 9
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property as a “retail branch bank and general office.” (Rec. Doc. No. 1-5 at 8). 

Pursuant to the rider, the plaintiff acknowledged the restriction preventing use of

the property as a bank until March 15, 2009.

Eventually DWEK filed for bankruptcy, and the current defendants

purchased the property during the bankruptcy proceedings. The defendants have

continued to lease the property to the plaintiff pursuant to the terms of the July

2005 lease agreement.

At issue in the current litigation is the plaintiff’s desire to occupy the

property and use the property, as the March 15, 2009 use restriction deadline has

since passed. The property is apparently in noticeable disrepair, and negotiations

between the parties have been ongoing in respect to how the parties will incur the

cost of renovating the property. The July 2005 lease agreement declares that “[n]o

alterations, additions or improvements may be made, and no climate regulating, air

conditioning, cooling, heating or sprinkler systems, television or radio antennas,

heavy equipment, apparatus and fixtures, may be installed in or attached to the

Premises, without the written consent of the Landlord.” Id.

Plaintiff contends that on or about June 2008 a meeting was held between

representatives of plaintiff and defendants at the property. At this meeting, major

renovations to the property were discussed, and plaintiff contends that

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“[d]efendants reviewed and accepted” these plans (Rec. Doc. No. 17 at 3), though

the defendants state that “the defendants’ principals never approved either verbally

or in writing any renovation plans that the plaintiff submitted . . . .” (Rec. Doc. No.

20 at 3).

In early 2009 through April or May of 2009, plaintiff and defendants

negotiated over the potential purchase by plaintiff of the property. However, it

appears as though these negotiations have since broken down.

Plaintiff claims that, in anticipation of the expiration of the use restriction on

March 15, 2009, it eventually undertook to begin work on the property. Plaintiff

claims that these actions fell within the plans that the defendants had previously

reviewed and accepted. Although plaintiffs obtained permits related to this

remodeling, in May of 2009 the Centre Region Code Administration (“CRCA”)

issued a stop-work order to plaintiff. It was CRCA’s conclusion that plaintiff was

without the authority to undertake such work on the property as the plaintiff was

not the actual owner, and merely a tenant, of the property.

Since the issuance of this stop-work order, the plaintiff has continued to pay

rent on a monthly basis to the defendants. Plaintiff states, however, that it has been

unable to access the property and cannot resubmit a building permit application

absent the defendants’ consent.

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IV. DISCUSSION

Plaintiff claims that it should be entitled, while the litigation is ongoing, to

deposit rent monies with this Court or, alternatively, into an interest-bearing

escrow account. It is plaintiff’s contention that this relief is necessary to properly

protect its interests while not unduly burdening the interests of the defendants. 

Defendants, on the other hand, claim that they are entitled to the continued rental

payments. First, defendants note that, while a lease dispute does exist between the

parties, the defendants’ contractual rights should not be infringed upon in the

manner proposed by plaintiff. Second, defendants argue that, in light of the

doctrine of unclean hands, the plaintiff’s instant request for relief is barred.

We are constrained to agree with the defendants that, in the present case, it

would be improper for this Court to accept rent money deposits or order such

deposits into escrow. Several of the cases to which the plaintiff refers provided for

an escrow or payment to the court for claims that had already vested or accrued

United States Air Conditioning Corp. v. Fogel, 172 F. Supp. 539, 542 (E.D. Pa.

1959) (in which plaintiff claimed “that ever since July 1958 defendants have owed

it $95,377.14 on the indemnity contract . . .”); Busy Bee, Inc. v. Corestates Bank

N.A., 2004 Pa. Dist. & Cnty. Dec. LEXIS 183, *18 (Pa. County Ct. 2004) (noting

that the court had ordered payment of rent into an interest-bearing escrow account

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to protect a third-party who was neither a lessor nor a lessee under the lease

agreement). The bankruptcy cases to which plaintiff refers are similarly

unavailing. In re Mylotte, David & Fitzpatrick, 2007 Bankr. LEXIS 3572, *9-10

(Bankr. E.D. Pa. Oct. 11, 2007); Titus & McConomy, LLP v. TrizecHahn

Gateway, LLC (In re Titus & McConomy, LLP), 375 B.R. 165, 169 (Bankr. W.D.

Pa. 2007) (noting that the “debtor was required by the plan to deposit funds in an

amount equal to the amount of [the plaintiff’s] claim in an interest-bearing escrow

account” within a specified period of time after adjudication of the debtor’s

objection to the plaintiff’s claim). Similarly, plaintiff references 1600 Penn Corp.

v. Computer Scis. Corp., 2008 U.S. Dist. LEXIS 76764 (E.D. Pa. Sept. 30, 2008)

for supporting its contention that the depositing of rent monies with a court or into

an interest-bearing escrow account is a “common practice for handling rental

payments during a lease dispute.” (Rec. Doc. No. 17 at 9). However, we fail to

see how 1600 Penn could support this “common practice,” as plaintiff itself admits

that “[t]he court did not ultimately rule on the defendant’s proposal for the manner

of depositing funds . . . .” Id.

In the present case, there are no vested interests or bona fide debts that the

defendants owe to the plaintiff in this case. Similarly, there has not been an

adjudication of the underlying claim at issue. As such, we conclude that, at the

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1 Because we conclude that the defendants’ contractual rights should not be

infringed upon in the manner proposed by plaintiff, we need not address the

defendants’ contention that the relief sought by plaintiff is barred by the doctrine of

unclean hands.

8

present time, it would be inappropriate for this Court to order plaintiff to pay rent

monies to the Court or into an interest-bearing escrow account.1

 Therefore, we will

deny the plaintiff’s “Motion to Hold Rent Monies in an Escrow Account.” (Rec.

Doc. No. 16).

V. CONCLUSION

In light of the above, we will deny the plaintiff’s “Motion to Hold Rent

Monies in an Escrow Account.” (Rec. Doc. No. 16).

 s/ James F. McClure, Jr. 

James F. McClure, Jr.

United States District Judge

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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

NORTHWEST SAVINGS BANK :

AND FINANCIAL SERVICES, :

: Civil Action No. 4: 09-CV-1416

Plaintiff, :

:

v. :

: (Judge McClure)

NS FIRST STREET LLC and 220 :

SOUTH ATHERTON :

STREET LLC, :

:

Defendants. :

:

ORDER

January 6, 2010

IT IS HEREBY ORDERED THAT: 

Plaintiff’s “Motion to Hold Rent Monies in an Escrow Account” is

DENIED. (Rec. Doc. No. 16).

 s/ James F. McClure, Jr. 

James F. McClure, Jr.

United States District Judge

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