Court Opinion

ID: 9956282
Source: CourtListenerOpinion
Date Created: 2024-04-01 17:11:10.560969+00
Date Added: 2024-06-11T08:15:16.676431
License: Public Domain

J-A28029-23

                                   2024 PA Super 63

  1700 MARKET STREET ASSOCIATES,               :   IN THE SUPERIOR COURT OF
  L.P. BY ITS GENERAL PARTNER, SRI             :        PENNSYLVANIA
  ELEVEN 1700 MARKET HOLDINGS                  :
  REIT LLC, AND 1700 PROPERTY                  :
  OWNER, LLC                                   :
                                               :
                       Appellants              :
                                               :
                                               :   No. 1314 EDA 2023
                v.                             :
                                               :
                                               :
  COMMON GROUNDS 1700 MARKET                   :
  STREET, LLC AND COMMON                       :
  GROUNDS HOLDINGS, LLC                        :

                  Appeal from the Order Entered April 20, 2023
              In the Court of Common Pleas of Philadelphia County
                   Civil Division at No: 02451 May Term 2022

BEFORE:      OLSON, J., STABILE, J., and COLINS, J.*

OPINION BY STABILE, J.:                                   FILED APRIL 1, 2024

       Appellants, 1700 Market Street Associates, L.P., SRI Eleven 1700

Market Holdings REIT, LLC, and 1700 Property Owner, LLC (collectively

“Appellants”) appeal from the award of $223,000 in damages entered in this

commercial lease case following a non-jury trial. Appellants contend that the

trial court erred in finding Appellees, Common Grounds 1700 Market Street,

LLC and Common Grounds Holdings, LLC (collectively “Appellees”), were

evicted, and thus erred in not awarding Appellant its actual damages of

$2,149,435.75. We affirm.

____________________________________________

* Retired Senior Judge assigned to the Superior Court.
J-A28029-23

       Appellants and Appellees entered into an Agreement of Lease (“Lease”)

dated July 2, 2019, whereby Appellees leased 62,428 square feet of

Appellants’ premises for use as a coworking space (“the premises”).1         The

initial term of the Lease was eleven years. Lease, 7/1/19, ¶ 2(b). Appellee

paid Appellants $2,500,000.00 for the security deposit and agreed to pay base

monthly rent of $171,677.00, increasing by 2.5% each year. Id. ¶ 2(c), (d).

Additionally, Appellees were responsible for “additional rent” defined as

operating expenses and tax expenses. Id. at ¶ 7(a), (b). Under the terms of

the Lease, Appellants provided Appellees $4,588,030.00 as a tenant

improvement allowance, with the option for a supplemental allowance of

$2,010,340.00. Id. at ¶ 55(a), (b). If Appellees opted for the supplemental

allowance, it would be amortized into the monthly rent. Id.

       Initially, rent was abated for the first ten months of the first year. Id.

at 2(c). On December 9, 2020, the parties executed a First Amendment to

Agreement of Lease (“First Amendment”), which confirmed the Lease

commenced on February 20, 2020, and extended the abatement period to

January 20, 2021. First Amendment, 12/9/20, ¶ B, D, 2.

       The Lease provided that an event of default of the Lease would include,

inter alia, failure to pay rent timely. Lease, 7/1/19, ¶ 25(a)(1). If an event

of default occurred, the Lease provided for the following remedies:

____________________________________________

1 The premises was defined as the 23rd and 24th floors of 1700 Market Street,

Philadelphia, Pennsylvania.

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     1. Landlord may terminate Tenant’s right to possession of the
        Premises at any time by written notice to Tenant. . . .

       Upon such termination in writing of Tenant’s right to possession
       of the Premises, this Lease shall terminate and Landlord shall
       be entitled to recover damages from Tenant as provided in any
       applicable existing or future Legal Requirement providing for
       recovery of damages for such breach, including but not limited
       to the following:

          (i)     The reasonable cost of recovering the Premises; plus

          (ii)    The reasonable cost of removing Tenant’s Alterations,
                  trade fixtures and improvements; plus

          (iii)   All unpaid rent due or earned hereunder prior to the
                  date of termination, less the proceeds of any reletting
                  or any rental received from subtenants prior to the
                  date of termination . . .; plus

          (iv)    The amount by which the rent which would be payable
                  by Tenant hereunder, including Additional Rent . . . as
                  reasonably estimated by Landlord, from the date of
                  termination until the date of the award of damages. .
                  .; plus

          (v)     The amount by which the rent which would be payable
                  by Tenant hereunder, including Additional Rent . . . as
                  reasonably estimated by Landlord, for the remainder
                  of the then term, after the date of the award of
                  damages . . .; plus

          (vi)    Such other amounts in addition to or in lieu of the
                  foregoing as may be permitted from time to time by
                  applicable law, including without limitation any other
                  amount necessary to compensate Landlord for all the
                  detriment proximately caused by Tenant’s failure to
                  perform its obligations under this Lease or which in
                  the ordinary course of things would be likely to result
                  therefrom.

     2. Landlord may continue this Lease in full force and effect and
        may enforce all of its rights and remedies under this Lease,
        including, but not limited to, the right to recover rent as it
        becomes due. After the occurrence of an Event of Default,

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          Landlord may enter the Premises without terminating this
          Lease and sublet all or any part of the Premises for Tenant’s
          account to any person, for such term (which may be a period
          beyond the remaining term of the Lease), at such rents and on
          such other terms and conditions as Landlord deems advisable.

                                     ****

     5. Landlord may cure the Event of Default at Tenant’s expense, it
        being understood that such performance shall not waive or cure
        the subject Event of Default. If Landlord pays any sums or
        incurs any expense in curing the Event of Default, Tenant shall
        reimburse Landlord upon demand for the amount of such
        payment or expense with interest at the Interest Rate from the
        date the sum is paid or the expense is incurred until Landlord
        is reimbursed by Tenant. Any amount due Landlord under this
        subsection shall constitute additional rent hereunder.

Lease, 7/1/19, ¶ 25(b). The Lease also contained a confession of judgment

clause:

     1. Tenant covenants and agrees that if there is an Event of Default
        and this lease is terminated the term thereof is terminated or
        expires, then, Landlord may, without limitation, cause
        judgments in ejectment for possession of the premises
        to be entered against Tenant and, for those purposes, Tenant
        hereby grants the following warrant of attorney: (I)
        Tenant hereby irrevocably authorizes and empowers any
        prothonotary, clerk of court, attorney of any court of record
        and/or Landlord (as well as some one [sic] acting for Landlord)
        in any and all actions commenced for recovery of possession of
        the premises to appear for Tenant and confess or otherwise
        enter judgment in ejectment for possession of the premises
        against Tenant and all persons claiming directly or indirectly
        by, through or under Tenant, and thereupon a writ of
        possession may forthwith issue and be served, without
        any prior notice, writ or proceeding whatsoever; (II) if, for
        any reason after the foregoing action or actions shall have been
        commenced, it shall be determined that possession of the
        premises should remain in or be restored to Tenant, Landlord
        shall have the right to commence one or more further actions
        as hereinbefore set forth to recover possession of the premises,
        including, without limitation, appearing for Tenant and

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          confessing or otherwise entering judgment for possession of
          the premises as hereinbefore set forth.

       2. Tenant hereby acknowledges that by agreeing to the foregoing
          confession of judgment and warrant of attorney, Tenant
          waives the right to notice and a prior judicial proceeding
          to determine its rights and liabilities, and further acknowledges
          that Landlord may, on default by Tenant under the lease,
          subject to such notice requirements, if any, as are herein
          expressly provided, obtain a judgment against Tenant for
          ejectment without any opportunity of Tenant to raise any
          defense, setoff, counterclaim or other claim that Tenant may
          have, and that Tenant knowingly, voluntarily and
          intelligently grants Landlord the foregoing right to
          confess judgment and warrant of attorney as an explicit
          and material part of the consideration bargained for
          between Tenant and Landlord. Tenant certifies that it has been
          represented by (or has had the opportunity to be represented)
          at the signing of this lease and in the granting of this confession
          of judgment and warrant of attorney by independent legal
          counsel, selected of its own free will, and that it has had the
          opportunity to discuss the confession of judgment and warrant
          of attorney with counsel. Tenant further certifies that it has
          read and understands the meaning and effect of the foregoing
          confession of judgment and warrant of attorney. Tenant
          further acknowledges that this lease is a commercial
          transaction, and that the relationship between Landlord and
          Tenant created hereunder is commercial in nature. Tenant
          further waives all rights under, and agrees that Landlord shall
          have no obligations to tenant pursuant to, the provisions of 20
          Pa.C.S. § 5601.3(b).

Lease, 7/1/19, ¶ 25(c) (emphasis added).2

       On March 9, 2021, Appellants sent a written notice of default to

Appellees due to unpaid rent for March 2021.            N.T., 1/9/23, at 30-31.

Appellees were provided an opportunity to cure the default, and they did not.

Id. at 31.    A second notice of default was sent on February 3, 2022, and
____________________________________________

2 The First Amendment included an identical confession of judgment clause.

First Amendment of Lease, 12/9/20, ¶ 6(c).

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Appellees were again provided an opportunity to cure and they did not. Id.

at 31-32.

       On March 21, 2022, Appellants filed a Landlord and Tenant Complaint

in Philadelphia Municipal Court, seeking possession of the premises and money

judgment in the amount of $2,498,499.73, itemized as follows:

            Unpaid Rent March 2021–Feb 2022         $2,487,630.24
            (calculated at $207,302.52 / month)
            Electric                                $7,502.24
            Attorney’s Fees                         $1,500.00
            Other                                   $1,740.00
            Court Costs                             $127.73
            TOTAL                                   $2,498,499.73

Landlord and Tenant Complaint, 3/21/22. On May 10, 2022, judgment was

entered in favor of Appellants in the amount of $3,065,058.72, as well as

judgment for possession of the premises.3 On May 26, 2022, Appellees filed

an appeal to the Court of Common Pleas of Philadelphia County.

       Thereafter, on June 9, 2022, Appellants filed a complaint for breach of

contract seeking damages and possession of the premises. Appellants sought

damages in the amount of $3,238,504.15 - $2,500,000.00 to replenish the

security deposit and $783,504.15 in unpaid rent and additional rent – plus

ongoing rent and additional rent as it accrues.     Complaint, 6/9/22, ¶ 11.

Appellants also requested judgment in ejection for possession of the premises.

Id. at ¶ 15.

____________________________________________

3 The docket indicates Appellees’ counsel was present, but it does not indicate

if there was a hearing or argument prior to the entry of judgment.

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J-A28029-23

      Following a non-jury trial, the trial court entered judgment in favor of

Appellants in the amount of $223,000.00, the amount due to Appellants up to

July 1, 2022 when it regained possession of the premises. Trial Court Opinion,

4/20/23, at 3. Appellants filed a post-trial motion and asserted that the trial

court erred in determining Appellants were not entitled to actual damages

because it did not confess judgment or seek accelerated rent.        Post-Trial

Motion, 1/20/23, ¶ 10-13. Specifically, Appellants argued they were entitled

to actual damages of $2,149,435.75, the amount of unpaid rent due at the

time judgment was entered. Id., ¶ 7(f). The trial court denied Appellants’

post-trial motion, finding that Appellants ejected Appellees from the premises

and, therefore, were only entitled to unpaid rent until Appellants regained

possession of the premises. Trial Court Opinion, 4/20/23, at 3. Appellants

filed a motion for reconsideration, which was denied. This appeal followed.

      Appellants raise the following issues for our review:

      1. Did the Trial Court err by not awarding Landlord damages
         including both past due rent and rent as it accrues for the
         remainder of the term of a commercial least until judgment,
         less any mitigation if required, because contract law is
         designed to put the non-breaching party in the same position
         that it would be in if the breaching party had complied with the
         lease without permitting any double recovery of damages?

      2. Did the Trial Court misapply the law by limiting and capping
         Landlord’s damages as of the date landlord obtained
         possession rather than awarding Landlord its actual damages
         that continued to accrue under the terms of the lease until
         judgment after trial?

      3. Did the Trial Court err in finding that the Tenant had been
         evicted rather than voluntarily vacating the premises and erred

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            by not applying the law related to a tenant’s voluntarily
            vacating a commercial premise?

Appellants’ Brief at 4. We will address the issues together because they are

interrelated.

         Our standard of review in a non-jury trial is

         to assess whether the findings of facts by the trial court are
         supported by the record and whether the trial court erred in
         applying the law. Upon appellate review[,] the appellate court
         must consider the evidence in the light most favorable to the
         verdict winner and reverse the trial court only where the findings
         are not supported by the evidence of record or are based on an
         error of law. Our scope of review regarding questions of law is
         plenary.

Woullard v. Sanner Concrete & Supply, 241 A.3d 1200, 1207 (Pa. Super.

2020) (internal citation omitted). “Findings of the trial judge in a non-jury

case must be given the same weight and effect on appeal as a verdict of a

jury.”    Shaffer v. O’Toole, 964 A.2d 420, 422 (Pa. Super. 2009), appeal

denied, 981 A.2d 220 (Pa. 2009) (internal citation omitted).

         This Court, almost 100 years ago, declared that a landlord cannot evict

a tenant and then recover both the possession of the property and the rent

for the balance of the term. See Greco v. Woodlawn Furniture Co., 99 Pa.

Super. 290, 292 (1930). However, if the tenant abandons the property, the

landlord is entitled to possession and accelerated rent:

         The distinction must always be made between possession of
         vacated premises taken by the landlord merely to protect the
         property or minimize the damages that would follow the tenant’s
         abandonment, and a possession which would be adverse to any
         resumption of occupation by the tenant and thus amount to an
         eviction.

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Id. (internal quotation and citation omitted). “[A] landlord must elect whether

to confess judgment for possession and for all monies then due, or to confess

judgment for all monies due for the entire term.”       Homart Dev. Co. v.

Sgrenci, 662 A.2d 1092, 1101 (Pa. Super. 1995) (en banc). “The landlord .

. . cannot . . . enter judgment for possession and for all mon[ie]s which would

otherwise be due as rents through the end of the term.” Id. Thus,

      [i]f the landlord terminates the lease and evicts the tenant before
      the acceleration clause is enforced, the landlord cannot recover
      rent for the post-eviction period.       If the landlord collects
      accelerated rent and receives possession of the property by
      abandonment, the landlord may keep the accelerated rent, but is
      required to account to the tenant for rent received from a new
      tenant.

Ferrick v. Bianchini, 69 A.3d 642, 656 (Pa. Super. 2013). The legal crux of

this matter is whether Appellants evicted Appellees or whether Appellees

abandoned the premises.

      Appellants argue that Appellees abandoned the premises, and no

evidence was presented to show Appellees were evicted. Appellants’ Brief at

19. Thus, Appellants contend they are entitled to actual damages, defined as

rent and additional rent due through the date of trial, less any applicable

mitigation. Id. at 15-16. Appellants attempt to distinguish Homart on the

ground that the case involved confessed judgments, and here, Appellants did

not file for a confessed judgment.       However, this is not a meaningful

distinction.   The basic tenant of our civil justice system remains the same

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regardless of whether judgment was confessed – a plaintiff may not obtain a

double recovery for a single wrong. Homart, 662 A.2d at 1100.

      To establish abandonment of a lease, the landlord must prove: (1) an

intention to abandon; and (2) conduct by which the intention is carried

through. See Ferrick, 69 A.3d at 656. Conversely, an eviction is possession

of a property by a landlord “which would be adverse to any resumption of

occupation by the tenant.”    Greco, 99 Pa. Super. at 292.      Pennsylvania’s

Landlord Tenant Act, 68 P.S. §§ 250.101-250.602, was enacted in 1951 and

“is a comprehensive regulatory scheme governing the landlord and tenant

relationship. It sets up a procedure whereby a landlord may repossess [the]

premises if he has a right to evict the tenant.” Fraport Pittsburgh, Inc. v.

Allegheny Cnty. Airport Auth., 296 A.3d 9, 19 (Pa. Super. 2023) (internal

quotations and citations omitted). “It is intended that [the Landlord Tenant

Act] shall furnish a complete and exclusive system in itself,” and repealed all

inconsistent acts. 68 P.S. § 250.602.

      To evict a tenant, landlords must comply with the procedure established

in the Landlord Tenant Act.   A complaint for possession must be filed in a

municipal court or with the magistrate court, and “[i]f it appears that the

complaint has been sufficiently proven, the [judge] shall enter judgment

against the tenant that the real property be delivered up to the landlord.” 68

P.S. § 250.503(a)(1). Five days after judgment is entered, the landlord may

request, and the judge shall issue, a writ of possession for the premises. See

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68 P.S. § 250.503(b). “This writ is to be served within no later than forty-

eight hours and executed on the eleventh day following service upon the

tenant of the leased premises.” Id.

      The record demonstrates that Appellants followed this procedure to

legally evict Appellees from the premises. On March 21, 2022, Appellants filed

a landlord tenant complaint in Philadelphia Municipal Court seeking unpaid

rent and possession of the premises. N.T., 1/9/23, at 48. On May 10, 2022,

Appellants obtained a judgment for possession and a monetary judgment for

unpaid rent. Id. On May 31, 2022, Appellants obtained a writ of possession

that was posted on the premises.       Id. at 48-49.    The writ of possession

directed Appellees to vacate the premises within eleven days and warned that

a failure to vacate would result in an alias writ of possession, “and all force

necessary to eject you in order to execute the said Writ will be employed.”

Id., Exhibit D-1 (emphasis added). The writ also included the following notice:

“Judgment was entered for non-payment of rent. If the full amount of the

judgment plus court costs is paid on or prior to the eviction date, eviction

shall not proceed.” Id. (emphasis added).

      On June 16, 2022, Appellants obtained an alias writ of possession that

was also posted on the premises. Id. at 49-50, 64. Scott Anderson, chief

operating officer for Appellees, testified that when the alias writ of possession

was posted, the landlord tenant officer could come any day to padlock the

premises, thereby locking Appellees out. Id. at 64. As a result of the alias

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writ of possession, on or about June 30, 2022, Appellees returned the keys to

the premises, and left all property inside. Id.

      Regardless of how Appellants want to characterize their actions,

Appellees were legally evicted from the premises.        Moreover, Appellants

followed the procedure set forth in the confession of judgment clause of the

Lease. Thus, the trial court did not err or abuse its discretion in finding that

Appellees were evicted, and, therefore, Appellants are only entitled to

damages for unpaid rent through July 1, 2022, when Appellants obtained

possession of the property. Homart, supra; Ferrick, supra.

      Order affirmed.

Date: 4/1/2024

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