Court Opinion

ID: 2826875
Source: CourtListenerOpinion
Date Created: 2015-08-12 22:23:46.79058+00
Date Added: 2024-06-11T11:28:47.865580
License: Public Domain

J-A19025-15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

RICHARD JOHNSON & JANET JOHNSON,              IN THE SUPERIOR COURT OF
TRUSTEES OF THE RICHARD AND JANET                   PENNSYLVANIA
JOHNSON TRUST DATED JULY 12, 2005

                        Appellee

                   v.

JOHN A. SLACK

                        Appellant                 No. 1189 WDA 2014

                     Appeal from the Order July 11, 2014
                in the Court of Common Pleas of Erie County
                     Civil Division at No(s): 2010-12640

BEFORE: BENDER, P.J.E., JENKINS, J., and MUSMANNO, J.

MEMORANDUM BY JENKINS, J.:                       FILED AUGUST 12, 2015

     Appellant John A. Slack (“Appellant”) appeals the July 11, 2014 order

of the Erie County Court of Common Pleas entering judgment for Richard

Johnson and Janet Johnson as Trustees of the Richard & Janet Johnson Trust

(“Appellees”) against Appellant in the amount of $221,443.24, plus statutory

interest from September 1, 2006. We affirm.

     On September 1, 2006, IDC Ohio Holdings, LLC (“Ohio Holdings”), of

whom Appellant was the sole member, purchased real property located at

201 West Plum Street in Edinboro, Erie County, Pennsylvania (“the

Property”), from Mr. and Mrs. G. Allen Gick for $495,000.00.     That same

day, Ohio Holdings sold the Property to the Richard and Janet Johnson Trust

(“the Trust”), of which Appellees are trustees, for $850,000.00.    Also on
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September 1, 2006, the Trust leased back the Property to Ohio Holdings by

executing a 20-year triple net lease.          Appellant provided the Trust with a

personal guarantee for the payment of Ohio Holdings’ lease obligations,

including the Property’s property taxes (“the Guaranty”).1

____________________________________________

1
  This personal guaranty is the subject of the instant litigation.            The
Guaranty reads:

                               PERSONAL GUARANTY

       FOR VALUE RECEIVED, in consideration for and as an
       inducement to (“Lessor”) to enter into that certain Lease, dated
       September 1, 2006, with IDC Ohio Holdings, LLC (“Lessee”).
       JOHN A. SLACK, the undersigned, on behalf of himself, and his
       legal representatives, heirs and assigns, guarantees the full
       performance and observation of all covenants, conditions and
       agreements therein provided to be kept, performed and
       observed by said Lessee, during the first five (5) years of said
       Lease (the “Guaranty Period”) until IDC Ohio Holdings, LLC has a
       minimum of ten (10) operating Dairy Queen stores or unless the
       property is sold by Lessor. The undersigned agrees that in the
       event of a default under the Lease by Lessee during the
       Guaranty Period, written notice of said default under the Lease
       by Lessee during the Guaranty Period, written notice of said
       default shall be presented to Guarantor, at which point
       Guarantor shall have fifteen (15) days to cure said default. The
       validity of this guaranty and the obligations of the Guarantor
       hereunder shall not be terminated, affected or impaired by
       reason of the assertion or non-assertion by Lessor against
       Lessee of any of the rights or remedies reserved to Lessor
       pursuant to the provisions of the within Lease, during the
       Guaranty Period. If any action be brought by Lessor against
       Guarantor hereunder to enforce the obligation of Guarantor
       hereunder, the unsuccessful party in such action shall pay to the
       prevailing party therein a reasonable attorney’s fee which shall
       be fixed by the court. The undersigned further agrees that this
       Guaranty shall remain and continue in full force and effect as to
       any renewal, modification or extension of the Lease, during the
(Footnote Continued Next Page)

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      At or around the same time, another Appellant-controlled entity, IDC

Ohio Management Company, LLC (“Ohio Management”), entered into a

franchise agreement with Dairy Queen that allowed Ohio Management to

open a Dairy Queen franchise on the Property, which it accordingly did and

operated until November 2008.

      In November 2008, Appellees learned that Dairy Queen had cancelled

its franchise agreement with Appellant and that all Dairy Queen activities at

the Property had ceased.           Shortly thereafter, Ohio Holdings ceased rent

payments to the Trust. Also at this time, Ohio Holdings ceased all property

tax payments.

      Appellant attempted to secure a release from the Guaranty by

drafting, executing, and transmitting a release to Appellees.          Appellees

declined to execute the release. Instead, Appellees demanded payment of

the unpaid rent and property taxes for the approximately three years

remaining on the lease.

                       _______________________
(Footnote Continued)

      Guaranty Period, and that the undersigned shall execute, from
      time to time, such additional instruments as may be required by
      Lessor to cause this Guaranty to remain and continue in full
      force and effect during such renewal, modification and
      extension, during the Guaranty Period.

Appellant testified that he executed similar guaranties in multiple other,
similar transactions wherein Ohio Holdings would purchase real estate, sell it
to a third party, and then lease the same property back for the purpose of
operating a Dairy Queen thereon.

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       The trial court conducted a bench trial on May 20, 2014, where it

received as evidence the prior deposition testimony of Janet Johnson,

Appellant, and William Springer, Ohio Management’s operations manager

from 2006 to 2008.            Appellees presented uncontroverted evidence of

$258,462.21 in damages, mitigated by their re-let of the Property to a third

party following Appellant’s default, for an aggregate loss of $151,998.51

over the 5-year term of the original lease.          Appellees also presented

evidence of re-letting expenses totaling $69,455.73, for a claimed total loss

of $221,443.24.        The trial court ruled in Appellees’ favor and awarded

$221,443.24 in damages.

       Appellant timely filed a notice of appeal and filed a Pa.R.A.P. 1925(b)

statement. The Rule 1925(b) statement of matters complained of on appeal

alleged the Guaranty contained a condition subsequent that rendered the

Guaranty unenforceable.2           The 1925(b) statement further alleged that

Appellant did not sign the Guaranty, and his signature thereon is a forgery.

Finally, the 1925(b) statement alleged that Appellees failed to properly

mitigate their damages, as required under the terms of the Guaranty, and

that Appellees failed to prove their damages at trial.

____________________________________________

2
   Appellant’s 1925(b) statement is a 5-page, single-spaced document
containing 23 separate paragraphs. Most of the 23 paragraphs consist of
factual assertions, not claims of error.

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        The trial court filed a Pa.R.A.P. 1925(a) Opinion that incorporated its

July 11, 2014 Order and Opinion.

        Appellant raises the following four (4) claims for review:

        1. Whether the trial court erred and committed an error of law
        and abuse[d] its discretion by not finding that the Personal
        Guaranty was conditional[?]

        2. Whether the trial court erred as a matter of law and abused
        its discretion in determining that “. . . [Appellant] has offered no
        credible evidence to dispute the claimed damages[”] and failing
        to find that the Personal Guaranty is void and unenforceable[?]

        3. Whether the trial court committed an error of law and abused
        its discretion by not finding that the Appellee[s] failed to attempt
        or in fact did not mitigate the alleged damages pursuant to the
        terms and conditions of the Lease Agreement[?]

        4. Whether the trial court commit[ed] an error of law or abused
        its discretion by not finding that the Appellees failed to prove the
        alleged damages of $258,462.21[?]

Appellants’ Brief, p. 3.3, 4

        This Court’s standard and scope of review in an appeal from a non-jury

verdict is as follows:

____________________________________________

3
    Appellees distilled the claims into the following single claim:

        [1.] Did the trial court err as a matter of law in awarding
        [Appellees] $221,443.24 in liquidated damages for [Appellant’s]
        breach of the duties owed to [Appellees] under the subject
        personal guaranty?

Appellees’ Brief, p. 6.
4
    We reorder and discuss Appellants issues infra for ease of disposition.

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       Our appellate role in cases arising from non-jury trial verdicts is
       to determine whether the findings of the trial court are
       supported by competent evidence and whether the trial court
       committed error in any application of the law. The findings of
       fact of the trial judge must be given the same weight and effect
       on appeal as the verdict of a jury. We consider the evidence in a
       light most favorable to the verdict winner. We will reverse the
       trial court only if its findings of fact are not supported by
       competent evidence in the record or if its findings are premised
       on an error of law.

J.J.   DeLuca    Co.   v.   Toll   Naval   Associates,   56 A.3d 402,    410

(Pa.Super.2012) (citation omitted). Further,

       [w]e will respect a trial court’s findings with regard to the
       credibility and weight of the evidence unless the appellant can
       show that the court’s determination was manifestly erroneous,
       arbitrary and capricious or flagrantly contrary to the evidence.

Id. (citation omitted).

       Essentially, Appellant disagrees with the trial court’s verdict in this

matter, and predictably feels the trial court should have ruled in his favor.

He claims the trial court erred by not finding that (1) the Guaranty was a

forgery, (2) the Guaranty was conditional and no longer enforceable, (3)

Appellees failed to mitigate their damages, and (4) Appellees failed to prove

their damages. See Appellant’s Brief, pp. 7-18. Appellant is incorrect.

   1. The Forgery Claim

       Appellant first claims the Guaranty was a forgery – that the Guaranty

his counsel previously drafted differed from the one produced by Appellees,

which he claims to have never signed. See Appellant’s Brief, pp. 7-8. This

claim lacks merit.

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             Generally, when the issue of a forgery is raised, the party
       claiming forgery has the burden of proving the existence of a
       forgery by clear and convincing evidence. Also, we note that
       because forgery presents an issue of fact, the resolution of the
       issue necessarily turns on the court’s assessment of the
       witnesses’ credibility.

De Lage Landen Servs., Inc. v. Urban P’ship, LLC, 903 A.2d 586, 590

(Pa.Super.2006) (internal quotations, citation, and brackets omitted).

       Here, the question of whether Appellant provided clear and convincing

evidence     of    forgery    is   easily      answered:   Appellant   provided   no

documentation, expert testimony, or any other evidence beyond his own

testimony to corroborate his claim that the Guaranty entered into evidence

by Appellees and which bore Appellant’s signature, was a forgery. The trial

court rejected Appellant’s testimony and the claim that the Guaranty was a

forgery.5    The competent evidence of record supports the trial court’s

conclusion. This claim fails.

    2. The Contractual Interpretation Claim

       Next, Appellant claims the Guaranty included a condition subsequent

that occurred and relieved him of the Guaranty obligations. See Appellant’s

Brief, pp. 8-10. This claim also fails.

       The interpretation of any contract is a question of law and this
       Court’s scope of review is plenary. Moreover, we need not defer
       to the conclusions of the trial court and are free to draw our own
____________________________________________

5
  See N.T. 5/20/2014 (“THE COURT: Then I’ll be clear. I find your testimony
incredible at this point.”).

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     inferences. In interpreting a contract, the ultimate goal is to
     ascertain and give effect to the intent of the parties as
     reasonably manifested by the language of their written
     agreement. When construing agreements involving clear and
     unambiguous terms, this Court need only examine the writing
     itself to give effect to the parties’ understanding. This Court
     must construe the contract only as written and may not modify
     the plain meaning under the guise of interpretation.

Sw. Energy Prod. Co. v. Forest Res., LLC, 83 A.3d 177, 187

(Pa.Super.2013), reargument denied (Feb. 4, 2014), appeal denied, 96 A.3d
1029 (Pa.2014) and appeal denied, 96 A.3d 1029 (Pa.2014) (quoting

Humberston      v.   Chevron    U.S.A.,   Inc.,   75 A.3d 504,   509–10

(Pa.Super.2013)).

     Appellant claims that the following Guaranty language created a

condition whereby Appellant would be absolved of the requirements of the

Guaranty upon the first of (1) the passage of five years, or (2) Appellant

operating ten Dairy Queens, or (3) the sale of the Property by Appellees:

     . . . [Appellant] guarantees the full performance and observation
     of all covenants, conditions and agreements therein provided to
     be kept, performed and observed by said Lessee, during the first
     five (5) years of said Lease (the “Guaranty Period”) until IDC
     Ohio Holdings, LLC has a minimum of ten (10) operating Dairy
     Queen stores or unless the property is sold by Lessor.

See Guaranty. Appellant argues the term “until” before the “has a minimum

of ten (10) operating Dairy Queen stores or unless the property is sold by

Lessor” indicates the parties’ intent to create an obligation conditioned on

the happening of either of those things. See Appellant’s Brief, pp. 8-10. He

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further maintains he operated ten Dairy Queens during the relevant time

period.

       Appellees do not contest that the Guaranty language created a classic

condition subsequent.          Instead, Appellees contend that the evidence

presented did not prove the occurrence of one of the conditions, to wit, that

Appellant operated a minimum of ten Dairy Queen restaurants. 6                    See

Appellees’ Brief, pp. 11-16. Appellees are correct.

       The pertinent evidence before the trial court consisted of the affidavit

of John Slack and the deposition testimony of William Springer, Vice

President of Operations for Ohio Management.7                 The real estate closing

statements attached as exhibits to John Slack’s affidavit, which he claimed

evidenced operating Dairy Queen locations, indicated that Ohio Holdings

purchased certain parcels of land.             See Affidavit of John Slack, Exhibit 4.

They do not show that Ohio Holdings operated Dairy Queens at these

properties or even had the right to do so.                Appellant did not produce

franchise agreements with Dairy Queen or any other evidence – beyond his

own testimony – that would have substantiated Appellant’s claim that each

____________________________________________

6
 There is no allegation that the Lessor – Appellees – sold the Property,
which they still owned at the time of trial.
7
  Appellees entered the transcript of William Springer’s April 4, 2012
deposition into evidence at trial. See N.T. 5/20/2014, pp. 3, 47; Trial
Exhibit 2.

                                           -9-
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of the locations was an operating Dairy Queen for the purpose of relieving

Appellant of his obligations under the Guaranty’s condition subsequent. In

fact,   William    Springer’s     deposition       testimony   confirmed   that   Ohio

Management only operated eight Dairy Queen restaurants in Ohio and

Pennsylvania.     See S.R.R., pp. 7, 10-16, 27-33.             This evidence does not

illustrate that Appellant ever operated ten Dairy Queen restaurants.8

        Accordingly, Appellant’s argument that he was relieved of any

Guarantee obligations by the occurrence of the condition subsequent that

Ohio Holdings operated ten Dairy Queens fails.

    3. The Failure to Mitigate Claim

        Appellant next claims that Appellees failed to mitigate their damages

as required by the lease. See Appellant’s Brief, p. 17. This claim also fails.

        The trial evidence illustrates that Appellees attempted to, and in fact

did, mitigate their damages by re-letting the Property to a Horton Foods

franchise.    As a result, during trial Appellees amended and reduced their

claimed damages from $258,462.61 to the $221,443.24 that the trial court

awarded, which included the amended rental loss figures and the costs

____________________________________________

8
  Appellees make the further point that the evidence does not illustrate
whether the Dairy Queen locations Appellant alleges to have operated were
operated by Ohio Holdings or Ohio Management. See Appellees’ Brief, pp.
14-16. While we appreciate the subtlety of Appellees’ argument, because
the evidence presented at trial failed to conclusively illustrate the operation
of sufficient Dairy Queen franchises by either entity, we need not discuss
this argument herein.

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associated with the re-let process.        See N.T. 5/20/2014, pp. 48-49.

Appellant’s claim lacks merit.

   4. The Failure to Prove Damages Claim

      Finally, Appellant claims Appellees failed to prove their damages. See

Appellant’s Brief, p. 18. Appellant is again incorrect.

      The trial court received into evidence the lease agreement at issue in

this matter as an attachment to Janet Johnson’s affidavit. See Affidavit of

Janet Johnson, Exhibit D. The lease outlines the required rents throughout

the leasehold period.     See id. at 2-5.       The submitted affidavits and

testimony outlined when Appellant ceased paying rent and taxes.           See

Affidavit of Janet Johnson; Affidavit of John Slack; N.T. 5/20/2014, p. 11.

The trial court also had before it Appellees’ mitigation information, discussed

supra. Appellant’s claim that Appellees failed to prove their damages lacks

merit.

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 8/12/2015

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