Court Opinion

ID: 4152277
Source: CourtListenerOpinion
Date Created: 2017-03-14 16:11:06.024089+00
Date Added: 2024-06-11T14:37:45.771865
License: Public Domain

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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

____________________________________________

*
    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”.

                                      -2-
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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.

____________________________________________

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”).

                                           -3-
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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

____________________________________________

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.

                                           -4-
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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,
____________________________________________

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.

                                           -5-
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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].

                                    -6-
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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,

____________________________________________

4
  See Reply to New Matter and Answer and New Matter of Counterclaim,
5/29/2015, at ¶ 38.

                                           -7-
J-S78028-16

___ 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

                                     -8-
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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.

                                      -9-
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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

                                      - 10 -
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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

                                    - 11 -
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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,

____________________________________________

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)

                                          - 12 -
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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).

                                           - 13 -