South Main Street Redevelopement, LLC v. R/C Theatres Management LLLP et al
Filing
38
MEMORANDUM and ORDER granting 20 Dfts' Motion for Summary Judgment; and denying 27 pltf's Motion for Summary Judgment; Granting dfts' request for fees; Clerk of Court is directed to enter judgment in favor of dfts and close the case. Signed by Honorable James M. Munley on 3/13/13 (sm)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
SOUTH MAIN STREET
REDEVELOPMENT, LLC,
Plaintiff
:
No. 3:12cv24
:
:
(Judge Munley)
:
v.
:
:
R/C THEATRES MANAGEMENT LLLP :
and R/C THEATRES MANAGEMENT :
CORPORATION,
:
Defendants
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
MEMORANDUM
This case arises from a dispute over the apportionment of real estate
taxes between a commercial landlord and tenant under the applicable terms
of their lease. The commercial landlord in this case, Plaintiff South Main
Street Redevelopment, LLC (hereinafter “SMSR”), and the commercial
tenants, Defendant R/C Theatres Management LLP and Defendant R/C
Theatres Management Corporation (collectively hereinafter “R/C Theaters”),
filed cross-motions for summary judgment pursuant to Federal Rule of Civil
Procedure 56. (Docs. 20, 27). Each party maintains that no genuine issues
of material fact exist and that summary judgment is appropriate. The parties’
respective motions are briefed and ripe for disposition. For the following
reasons, SMSR’s motion will be denied, R/C Theatres’ motion will be granted
and the court will grant judgment in R/C Theatres’ favor.
BACKGROUND
SMSR owns property located on the corner of South Main and East
Northampton Streets in the City of Wilkes-Barre, Pennsylvania (hereinafter
the “property” or the “Mixed Use Development”). (Doc. 21, Defs.’ Statement
of Undisputed Material Facts Pursuant to Local Rule 56.1 (hereinafter “Defs.’
SOF”) ¶ 1; Doc. 28, Statement of Undisputed Material Facts of Pl., South
Main Street Redevelopment, LLC (hereinafter “Pl.’s SOF”) ¶ 1). The property
is improved with a commercial complex colloquially called the “University
Corners,” which consists of a movie theater, thirteen other commercial units
and an associated parking garage. (Defs.’ SOF ¶ 1; Pl.’s SOF ¶ 2). R/C
Theatres, the commercial tenants in this case, own and operate movie theater
complexes in several states. (Defs.’ SOF ¶¶ 5-6). The undisputed material
facts, as presented by both parties, are as follows.
The Property’s KOZ Designation
Some time prior to August 31, 2004, the Pennsylvania Department of
Community and Economic Development (hereinafter “DCED”) designated the
property as a Keystone Opportunity Zone (hereinafter “KOZ”). (Defs.’ SOF ¶
20; Pl.’s SOF ¶ 4). Due to its designation as a KOZ, the property was not
subject to certain local real estate taxes. (Id.) In particular, the KOZ
designation fully abated real estate taxes assessed on the property by (1) the
City of Wilkes-Barre, (2) Luzerne County and (3) the Wilkes-Barre Area
2
School District.1 (Id.) The property’s KOZ status was originally scheduled to
expire on December 31, 2010. (Defs.’ SOF ¶ 21).
The Lease
On August 31, 2004, SMSR and R/C Theatres entered into a lease
agreement in which R/C Theatres agreed to lease a portion of the property for
use as a movie theater complex (hereinafter the “leased premises”). (Id. ¶ 7;
Pl.’s SOF ¶ 3; Doc. 24, Ex. F, Lease (hereinafter “Lease”)). Article VI of the
lease addresses each party’s responsibility with respect to the payment of
taxes. (See Defs.’ SOF ¶ 8; Pl.’s SOF ¶ 58; Lease art. VI). Article VI,
paragraph 1 governs how the property’s KOZ status affects the parties’ tax
obligations through December 31, 2010, and this provision also requires R/C
Theatres to pay SMSR a percentage of any tax savings realized through
future KOZ extensions.2 Article VI, paragraph 2 sets forth the formula by
1
A parcel that receives KOZ benefits is taxable until the county tax
assessment office receives a letter from the DCED certifying that the property
is entitled to receive KOZ benefits. (Pl.’s SOF ¶ 37). The KOZ benefits
provided to a parcel take the form of an abatement of the real estate taxes.
(Id. ¶ 38). KOZ benefits are not automatically renewed, and a parcel must
qualify for KOZ benefits every year. (Id. ¶ 40).
2
Article VI, paragraph 1 of the lease states:
As the Demised Premises shall be located in a Keystone
Opportunity Zone (the “KOZ”), Tenant shall not be obligated to pay
any real estate or personal property taxes, amusement tax,
mercantile/business privilege tax, Pennsylvania State corporate
tax, or capital franchise tax during the Lease Term through
December 31, 2010, unless and to the extent the benefits of the
KOZ are terminated by the Commonwealth. If Landlord is
successful in extending the benefits of the KOZ beyond December
3
which R/C Theatres’ pro rata real estate tax payment to SMSR is calculated.3
31, 2010, Tenant shall pay to Landlord, annually within sixty (60)
days after the end of each calendar year after January 1, 2011, an
amount equal to twenty-five percent (25%) of the tax savings to
Tenant, determined by multiplying the amount of tax that Tenant
would have otherwise paid, but for the KOZ, by twenty-five percent
(25%). Tenant shall cooperate with Landlord in all respects,
including, without limitation, providing sales reports and other
information, and permitting Landlord the right to audit Tenant’s
books and records, to assist Landlord in determining the amount
of tax that would have otherwise been due.
(Lease art. VI, ¶ 1).
3
Article VI, paragraph 1 of the lease states:
After such time as any real estate taxes or assessments (“Taxes”)
become payable, Tenant shall pay its Pro Rata Share (defined
below) of Taxes to Landlord within sixty (60) days after submission
of a bill therefor to Tenant. “Taxes” shall include such taxes as
are general or special, ordinary or extraordinary. In addition, real
estate taxes shall include any tax or imposition on the value of this
Lease or upon the rents, if the same is imposed in lieu of or in
addition to real estate taxes. Taxes shall also include Landlord’s
cost to contest any taxes or assessments upon the Demised
Premises or Mixed Use Development, or the land upon which the
same is located. For the purpose of this Lease, Tenant’s Pro Rata
Share shall be [a] fraction, the numerator of which is the LFA in
the Demised Premises, and the denominator is the gross leasable
area of all space in the Mixed Use Development. Landlord shall
furnish Tenant with written notice (“Tax Notice”) of the amount of
Tenant’s share of Taxes promptly after receipt by Landlord of the
tax bill for each tax year. Payments required pursuant to this
Section 6.2shall be made within sixty (60) days after the receipt of
the Tax Notice without interest or penalty; provided, however, in
no event shall Tenant be required to pay such Taxes prior to
fifteen (15) days before the same are due and payable by
Landlord, and further provided that Landlord shall be solely
4
On June 22, 2006, SMSR and R/C Theatres entered into a lease
modification agreement, which addressed the definition of Leasable Floor
Area (“LFA”) under the lease. (Defs.’ SOF ¶ 11; Pl.’s SOF ¶ 28). In relevant
part, the lease modification provides:
1. The “Leasable Floor Area” as set forth in Article III, Paragraph
3.9 of the Lease shall mean: “56,630 square feet of space
including the following spaces, all measured from the outside of
the exterior walls: first floor lobby, first floor Theatre storage and
office space, entire second floor and the elevator serving the first
and second floor of the Theatre; specifically excluding any
mezzanine space and any stairwells and elevators serving the
mezzanine space and excluding all vertical transportation area (as
defined in Exhibit “C”).”
(Doc. 24-1, Ex. G, Lease Modification Agreement). The leasable area for the
entire Mixed Use Development consists of 85,475 square feet. (Defs.’ SOF ¶
12; Pl.’s SOF ¶ 28).
Thus, pursuant to the formula set forth in article VI paragraph 2 of the
lease, R/C Theatres’ pro rata share is 56,630/85,475 or 66.25%. (Defs.’ SOF
¶ 13; Pl.’s SOF ¶¶ 30, 59). Accordingly, 66.25% is the percentage used to
calculate the real estate tax payments R/C Theatres must make to SMSR
responsible for any interest or penalty assessed due to late
payment of such tax unless the Tax Notice is given to Tenant at
least sixty (60) days prior to the date such Taxes are due and
Tenant fails to pay its pro rata share. If in any tax year during the
Lease Term and any Renewal Lease Term, Landlord receives a
discount for early payment of Taxes or a refund or reduction of all
or a portion of the Taxes, the discount, refund and/or reduction
shall be passed on to Tenant reducing the amount which Tenant
is obligated to pay pursuant to this Section 6.2 so long as Tenant
has timely paid Taxes.
(Lease art. VI, ¶ 2) (emphasis in original).
5
under the lease. (Defs.’ SOF ¶ 14; Pl.’s SOF ¶ 29).
Original 2011 Real Estate Tax Bills
As the parties anticipated when they entered into the lease, the
property’s KOZ status expired on December 31, 2010 and local real estate
taxes were assessed against the property for the 2011 calendar year. (Defs.’
SOF ¶¶ 21, 29-30; Pl.’s SOF ¶¶ 5-6, 10-16). On February 1, 2011, the City of
Wilkes-Barre issued a real estate tax bill to SMSR for the entire Mixed Use
Development in the face amount of $120,014.46. (Defs.’ SOF ¶ 54; Pl.’s SOF
¶¶ 10, 56; Doc. 26-1, Ex. Q, 2011 City Tax Bill dated 2/1/11 (hereinafter
“Original City Bill”)). The 2011 city taxes were based on an assessed value of
the entire Mixed Use Development of $1,242,000.00 as determined by the
City of Wilkes-Barre. (Original City Bill).
On March 13, 2011, Luzerne County issued a real estate tax bill to
SMSR for the entire Mixed Use Development in the face amount of
$56,981.18. (Pl.’s SOF ¶ 11; Doc. 1-1, Compl., Ex. B, 2011 County Tax Bill
dated 3/13/11(hereinafter “Original County Bill”)). The 2011 county taxes
were based on an assessed value of the entire Mixed Use Development of
$10,926,400.00 as determined by the Luzerne County Board of Assessments
and Appeals (hereinafter the “Board”). (Id.)
On July 16, 2011, Berkheimer Tax Administrator, the appointed tax
administrator for the Wilkes-Barre Area School District, issued a real estate
tax bill to SMSR for the entire Mixed Use Development in the face amount of
$167,921.29. (Defs.’ SOF ¶¶ 42, 46; Pl.’s SOF ¶ 12; Doc. 25-5, Ex. O, 2011
6
School Tax Bill dated 7/16/11 (hereinafter “Original School Bill”)). The 2011
school taxes were based on an assessed value of the entire Mixed Use
Development of $10,926,400.00 as determined by the Board.4 (Pl.’s SOF ¶
12; Original School Bill). Accordingly, the real estate taxes initially issued with
respect to the Mixed Use Development totaled $344,916.93.
The Subdivision and Reassessment of the Property
At the time the lease was executed, the property was one undivided
parcel, identified in Luzerne County tax records as parcel number 73-H9SE2024-000.5 (Defs.’ SOF ¶ 16). Subsequent to the execution of the lease,
SMSR subdivided the property into fourteen condominium commercial units.
(Id. ¶ 17). These fourteen units were identified with the following parcel
numbers: 73-H9SE2-024-001-101; 73-H9SE2-024-001-102; 73-H9SE2-024001-103; 73-H9SE2-024-001-104; 73-H9SE2-024-001-105; 73-H9SE2-024001-106; 73-H9SE2-024-001-107; 73-H9SE2-024-001-108; 73-H9SE2-024001-109; 73-H9SE2-024-001-110; 73-H9SE2-024-001-111; 73-H9SE2-024-
4
The Wilkes-Barre Area School District relies on Luzerne County to
determine the appropriate value for properties subject to School Taxes.
(Defs.’ SOF ¶ 43). The School District, through Berkheimer Tax
Administrators, further relies upon Luzerne County to determine whether a
particular property is tax exempt or subject to an abatement through the KOZ
Program. (Id. ¶ 44). Thus, real estate tax abatements recognized by Luzerne
County are applied to both county taxes and school taxes. (Id. ¶ 45).
5
The court notes that the City of Wilkes-Barre uses a separate
identification system from that of Luzerne County, but, for simplicity’s sake,
the court will refer only to Luzerne County parcel identification numbers.
7
001-112; 73-H9SE2-024-001-113; and 73-H9SE2-024-001-114.6 (Id.; Doc.
24-2, Ex. H, Pl.’s Response to Request for Interrogatories at 8). As a result of
the subdivision, the leased premises is now identified as Parcel Number 73H9SE2-024-001-101.7 (Defs.’ SOF ¶ 18).
Nearly one month after the initiation of this lawsuit, on February 9, 2012,
the Board reassessed the property. (Id. ¶ 34; Pl.’s SOF ¶ 15; Doc. 25-2, Ex.
L, Change of Assessment Notice dated 2/9/12 (hereinafter “2/19/12 Notice”)).
When it reassessed the property, the Board assessed each commercial unit
separately, as opposed to providing one assessment for the entire property,
as had been the previous practice. (Pl.’s SOF ¶¶ 15-16; 2/9/12 Notice). The
change of assessment notices applied retroactively to the 2011 calendar year.
(Defs.’ SOF ¶ 35).
The Property’s KOZ Status in 2011
In 2008, the Pennsylvania Legislature amended the KOZ statute to
allow for the extension of KOZ benefits to commercial parcels that were not
occupied as of the effective date of the KOZ amendment. See 73 PA. CONS.
STAT. ANN. 820.301c. Pursuant to this change in the KOZ statute, the Greater
6
The fourteen parcels identified as constituting the Mixed Use
Development do not include the parking garage associated with the property.
(Doc. 24-2, Ex. H, Pl.’s Response to Request for Interrogatories at 8; Doc. 222, Ex. C, Dep. of William Geary at 25). After SMSR subdivided the property,
the parking garage was assigned the property’s former parcel number (73H9SE2-024-000). (Id.)
7
For ease of identification, each parcel will hereinafter be referred to by
its last three digits (e.g. Parcel 73-H9SE2-024-001-101 will be referred to as
Parcel 101).
8
Wilkes-Barre Development Corporation, on behalf of SMSR, sent an
application to DCED for the extension of the KOZ status for those portions of
the property that remained unoccupied on the statute’s effective date. (Defs.’
SOF ¶ 22; Pl.’s SOF ¶ 8). Submitted some time after December 31, 2010,
this appliaction sought to secure KOZ status for Parcels 102, 103, 104, 105,
106, 107, 108, 109, 110 and 113 (hereinafter the “KOZ Parcels”) for the 2011
tax year. (Defs.’ SOF ¶ 22).
In a letter dated May 25, 2011, the DCED approved the application and
extended the tax exempt status for the KOZ Parcels. (Id. ¶ 23; Pl.’s SOF ¶
22; Doc. 25, Ex. J, DECD Letter dated 5/25/11). As a result of the DCED’s
approval of SMSR’s application, the real estate taxes for the KOZ Parcels
were abated for the 2011 tax year. (Defs.’ SOF ¶ 24; Pl.’s SOF ¶¶ 8-9, 2425). When SMSR received the May 25, 2011 letter from DCED it understood
that real estate taxes would only have to be paid with respect to Parcels 101,
111 and 114 (hereinafter the “non-KOZ Parcels”) and that no real estate taxes
were payable with respect to the KOZ Parcels. (Defs.’ SOF ¶¶ 25-28; Pl.’s
SOF ¶ 23).
Revised 2011 Real Estate Tax Bills
SMSR notified the City of Wilkes-Barre of the tax exempt status of the
KOZ Parcels, and the city issued SMSR a notice of abatement. (Defs.’ SOF ¶
55; Pl.’s SOF ¶ 25; Doc. 24-3, Ex. I, Dep. of Joann Kittrick at Ex. 1).
Subsequently, the City of Wilkes-Barre issued separate tax bills for the three
non-KOZ Parcels. (Defs.’ SOF ¶ 56; Pl.’s SOF ¶¶ 19-20; Doc. 26-2, Ex. R,
9
Revised 2011 City Tax Bills (hereinafter “Revised City Bills”)). The non-KOZ
Parcels were issued a city tax bill for the collective face amount of
$69,412.23, and this real estate tax was based on the three parcels’ total
assessed value of $718,330.00, as determined by the City of Wilkes-Barre.
(Pl.’s SOF ¶ 19; Revised City Bills). The revised city tax bills supersede the
original bill issued on February 1, 2011, and the revised bills reflect the real
estate tax abatement for the KOZ Parcels. (Defs.’ SOF ¶ 56; Pl.’s SOF ¶ 21).
Similarly, Luzerne County was notified of the DCED’s May 25, 2011
letter extending the KOZ status for portions of the property. (Pl.’s SOF ¶ 24).
On May 1, 2012, Luzerne County issued fourteen supplemental tax bills for
each of the parcels comprising the property. (Defs.’ SOF ¶ 36; Pl.’s SOF ¶
18; Doc. 25-3, Ex. M, Revised 2011 County Tax Bills dated 5/1/12 (hereinafter
“Revised County Bills”)). The supplemental county tax bills were consistent
with the February 9, 2012 change of assessment notice with respect to the
base property value applied to each unit of the Mixed Use Development.
(Compare 2/9/12 Notice, with Revised County Bills). The May 1, 2011
supplemental county tax bills contained a cumulative face amount of
$55,890.21. (Pl.’s SOF ¶ 53; Revised County Bills). The supplemental
county tax bills replaced the original 2011 county tax bill issued on March 13,
2011.8 (Defs.’ SOF ¶ 37). The supplemental county tax bills for the non-KOZ
8
The court notes that the total face amount for the fourteen
supplemental county tax bills issued on May 1, 2012 is approximately $1,000
less than the face amount of the original 2011 county tax bill issued on March
13, 2011. (Compare Original County Bill, with Revised County Bills).
10
Parcels contained a combined face amount of $42,844.35. (Defs.’ SOF ¶ 38;
Revised County Bills). The 2011 county taxes attributable to the KOZ Parcels
were abated at the end of the year, and SMSR was only liable for the amount
assessed against the non-KOZ Parcels. (Defs.’ SOF ¶¶ 39-40).
Luzerne County also issued supplemental real estate tax bills on behalf
of the Wilkes-Barre Area School District on May 1, 2012. (Defs.’ SOF ¶ 47;
Pl.’s SOF ¶ 18; Doc. 26, Ex. P, Revised 2011 School Tax Bills dated 5/1/12
(hereinafter “Revised School Bills”)). Like the supplemental county tax bills,
Luzerne County issued separate supplemental school tax bills with respect to
each of the fourteen parcels comprising the Mixed Use Development. (Defs.’
SOF ¶¶ 47; Revised School Bills). The supplemental school tax bills also
incorporated the real estate assessments contained in the February 9, 2012
change of assessment notice. (Defs.’ SOF ¶ 48). The supplemental school
tax bills issued on May 1, 2012 had a total face amount of $82,353.10 for the
fourteen commercial units of the Mixed Use Development.9 (Pl.’s SOF ¶ 54;
Revised School Bills). The school taxes for the KOZ Parcels were abated,
and SMSR is not liable for the 2011 school taxes issued for these parcels.
(Defs.’ SOF ¶¶ 50-51). As such, with respect to the May 1, 2012
supplemental school tax bills, SMSR is only liable for $63,115.31–the amount
9
The May 1, 2012 supplemental school tax bills were issued for the
prorated six month period from January 1, 2011 to June 30, 2011. (Defs.’
SOF ¶ 49; Pl.’s SOF ¶ 54). Thus, at the current millage rate and property
values, the fourteen parcels of the Mixed Use Development would have a
school tax face amount of $164,706.20 for a full tax year. (Pl.’s SOF ¶ 55).
11
assessed against the non-KOZ Parcels.10 (See Revised School Bills).
Accordingly, after the city, county and school taxes were revised to
comport with the 2011 KOZ extensions and the February 2, 2012
reassessment by the Board, SMSR is liable for a total of $238,517.20 in real
estate taxes for the 2011 tax year.
SMSR’s Demand for Payment Under Article VI of the Lease
On July 18, 2011, SMSR first provided R/C Theatres with written notice
of the original February 1, 2011 city tax bill. (Defs.’ SOF ¶ 61; Pl.’s SOF ¶
44). In this notice, William Geary, a managing member of SMSR,11 informed
R/C Theatres that their pro rata share of the city taxes was 66.3% of
$120,014.46 or approximately $79,569.58. (Doc. 22-2, Ex. C, Dep. of William
Geary (hereinafter “Geary Dep”) at Ex. 8). Despite the fact that the city tax bill
was in the penalty phase on July 18, 2011 and had increased to $138,016.63,
Geary used the face value amount of $120,014.46 when calculating R/C
Theatres’ pro rata share. (Defs.’ SOF ¶¶ 64-65; Original City Bill).
On July 22, 2011, SMSR first provided R/C Theatres with written notice
of the original July 16, 2011 school tax bill issued by Berkheimer Tax
10
At the current millage rate and property values, the non-KOZ Parcels
of the Mixed Use Development would have a combined school tax face
amount of $126,230.62 for a full school year. (See Pl.’s SOF ¶ 55; Revised
School Bills).
11
William Geary resides in California, and, as a managing member of
SMSR, he is ultimately responsible for addressing the tax issues between
SMSR and any taxing authorities regarding the Mixed Use Development.
(Defs.’ SOF ¶¶ 2-4).
12
Administrators. (Defs.’ SOF ¶ 62; Pl.’s SOF ¶ 45). Geary informed R/C
Theatres that their pro rata share of the school tax bill was 66.3% of $164,563
or approximately $109,105. (Geary Dep. at Ex. 9). In calculating the pro rata
share of the school taxes, Geary used the early payment discount tax value of
$164,562.86 and not the face amount of $167,921.29. (See id.; Original
School Bill).
On August 2, 2011, SMSR first provided R/C Theatres with written
notice of the original March 13, 2011 county tax bill. (Defs.’ SOF ¶ 63; Pl.’s
SOF ¶ 46). Geary informed R/C Theatres that their pro rata share of the
county taxes was 66.3% of $56,981.18 or approximately $37,756. (Geary
Dep. at Ex. 10). Despite the fact that the county tax bill was in the penalty
phase on August 2, 2011 and had increased to $62,679.30, Geary used the
face amount of $56,981.18 when calculating R/C Theatres’ pro rata share.
(Defs.’ SOF ¶¶ 64-65; Original County Bill).
On or about August 2, 2011, SMSR informed R/C Theatres that they
had sixty (60) days to pay their pro rata share of the original city, county and
school tax bills, which Mr. Geary calculated to be $226,430.58. (Pl.’s SOF ¶
47; Geary Dep. at Exs. 8-10). SMSR understood in August 2011 that it was
not going to have to pay the original total face amount of $344,916.96
because of the KOZ status of portions of the property. (Defs.’ SOF ¶ 33).
After receiving the original 2011 city, county and school tax bills, R/C
Theatres advised SMSR that they disputed the amount of the pro rata share
as calculated by SMSR. (Pl.’s SOF ¶ 48). Specifically, R/C Theatres asserts
13
that the 2011 city, county and school tax bills SMSR relied upon to calculate
R/C Theatres’ pro rata share should be reduced by the KOZ abatements
extended to the property. (Defs.’ SOF ¶ 67; Geary Dep. at Exs. 11, 13, 16).
On several occasions in mid to late 2011, R/C Theatres requested information
regarding KOZ extensions for the property. (Defs.’ SOF ¶ 66). SMSR
refused to provide information regarding KOZ extensions because it believed
this information to be “irrelevant to the payment of property taxes.” (Doc. 263, Ex. S, Letter from Geary to Cohen dated 11/4/11).
R/C Theatres did not submit a real estate tax payment to SMSR by
October 1, 2011, and, on November 1, 2011, SMSR forwarded a written
default notice to R/C Theatres in which SMSR demanded a real estate tax
payment of $227,736.40 by November 30, 2011. (Pl.’s SOF ¶¶ 49-51; Doc. 11, Compl. at Ex. D, Default Notice dated 11/1/11). Moreover, in a November
4, 2011 letter to Scott Cohen, the CEO and President of R/C Theatres, Mr.
Geary demanded that R/C Theatres pay SMSR an additional $29,586.17 in
late payment penalties. (Doc. 26-3, Ex. S, Letter from Geary to Cohen dated
11/4/11).
On November 22, 2011, R/C Theatres notified SMSR that they intended
to contest SMSR’s claim of default pursuant to Article XVIII, paragraph 1 of
the lease.12 (Defs.’ SOF ¶ 70). In their November 22, 2011 letter, R/C
12
Article XVIII, paragraph 1 of the lease provides that “Tenant shall
have the right to ‘contest’ a claim of default by Landlord and request that such
issue shall be subject to judicial interpretation and/or arbitration before Tenant
is required to commence a cure.” (Lease art. XVIII, ¶ 1).
14
Theatres explained their position that the real estate tax notices prepared by
SMSR were inflated, and R/C Theatres stated that they are “prepared to pay
[their] pro rata share of the taxes that South Main is required to pay.” (Doc.
26-4, Ex. T, Letter from Winfield to MacNeely dated 11/22/11). R/C Theatres
did not pay the real estate taxes by November 30, 2011 as requested in the
default notice. (Pl.’s SOF ¶ 52).
Procedural History
SMSR filed a complaint against R/C Theatres in the Luzerne County
Court of Common Pleas on December 8, 2011. (Doc. 1-1, Compl.). In its
complaint SMSR advanced two counts: count I seeks money damages
pursuant to a theory of breach of lease and count II petitions the court for a
declaration that all future real estate tax payments owed by R/C Theatres will
be calculated pursuant to the formula advanced by SMSR. (Id.)
On January 5, 2012, R/C Theatres removed the case to this court.
(Doc. 1, Notice of Removal). On January 6, 2012, R/C Theatres filed an
answer with counterclaims, in which R/C Theatres also seeks a declaratory
judgment pursuant to 23 U.S.C. § 2201. (Doc. 2, Answer). The court held a
case management conference on February 6, 2012, after which the parties
initiated discovery. (Doc. 10, Case Management Order). The parties filed
timely cross-motions for summary judgment on October 1, 2012. (Docs. 20,
27). The issues are fully briefed, bringing this case to its current posture.
15
JURISDICTION
The court has jurisdiction pursuant to the diversity statute, 28 U.S.C. §
1332. Plaintiff South Main Street Redevelopment, LLC is a Pennsylvania
limited liability company. (Defs.’ SOF ¶ 1). SMSR’s managing member,
William W. Geary Jr., is a citizen of California, and none of its members are
citizens of Maryland, North Carolina or Virginia. (Id. ¶ 2; Doc. 1, Notice of
Removal ¶ 7). Defendant R/C Theatres Management LLLP is a Maryland
limited liability limited partnership with a principal place of business in
Reistertown, Maryland. (Defs.’ SOF ¶ 5). Defendant R/C Theatres
Management LLLP’s partners are citizens of either Maryland, North Carolina
or Virginia. (Doc. 1, Notice of Removal ¶¶ 9-10). Defendant R/C Theatres
Management Corporation is a Maryland corporation with a principal place of
business in Reistertown, Maryland. (Defs.’ SOF ¶ 5). Because complete
diversity of citizenship exists among the parties and the amount in controversy
exceed $75,000.00, the court has jurisdiction over this case. Chamberlain v.
Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie R.R. v. Tompkins,
304 U.S. 64, 78 (1938)).
LEGAL STANDARD
Granting summary judgment is proper “‘if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.’” See Knabe v. Boury
Corp., 114 F.3d 407, 410 n.4 (3d Cir. 1997) (quoting FED. R. CIV. P. 56(c)).
16
“[T]his standard provides that the mere existence of some alleged factual
dispute between the parties will not defeat an otherwise properly supported
motion for summary judgment; the requirement is that there be no genuine
issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48
(1986) (emphasis in original).
In considering a motion for summary judgment, the court must examine
the facts in the light most favorable to the party opposing the motion. Int’l
Raw Materials, Ltd. v. Stauffer Chem. Co., 898 F.2d 946, 949 (3d Cir. 1990).
The burden is on the moving party to demonstrate that the evidence is such
that a reasonable jury could not return a verdict for the non-moving party.
Anderson, 477 U.S. at 248. A fact is material when it might affect the
outcome of the suit under the governing law. Id. Where the non-moving party
will bear the burden of proof at trial, the party moving for summary judgment
may meet its burden by establishing that the evidentiary materials of record, if
reduced to admissible evidence, would be insufficient to carry the nonmovant’s burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). Once the moving party satisfies its burden, the burden shifts to the
non-moving party, who must go beyond its pleadings, and designate specific
facts by the use of affidavits, depositions, admissions, or answers to
interrogatories demonstrating a genuine issue for trial. Id. at 324; see also
Goode v. Nash, 241 F. App’x 868, 869 (3d Cir. 2007) (“[A]lthough the party
opposing summary judgment is entitled to ‘the benefit of all factual inferences
in the court’s consideration of a motion for summary judgment, the nonmoving
17
party must point to some evidence in the record that creates a genuine issue
of material fact,’ and ‘cannot rest solely on assertions made in the pleadings,
legal memorandum, or oral argument.’” (quoting Berckeley Inv. Grp., Ltd. v.
Colkitt, 455 F.3d 195, 201 (3d Cir. 2006))).
Ordinarily, the interpretation of a contract is a legal question for the
court and may be decided on summary judgment when the contractual
language is subject to only one reasonable interpretation. See IBEW Local
Union No. 102 v. Star-Lo Elec., Inc., 444 F. App’x 603, 607 (3d Cir. 2011);
see also Allied Erecting & Dismantling, Co. v. USX Corp., 249 F.3d 191, 201
(3d Cir. 2001) (noting that where the meaning of the terms of a contract are
“‘unambiguous and can be interpreted only one way, the court interprets the
contract as a matter of law.’” (quoting Pacitti v. Macy’s, 193 F.3d 766, 773 (3d
Cir. 1999))). Although, if the contract terms at issue are ambiguous, “‘then
the interpretation of that term is a question of fact for the trier of fact to resolve
in light of the extrinsic evidence offered by the parties in support of their
respective interpretations.’” Star-Lo Elec., Inc., 444 F. App’x at 607 (quoting
Sanford Inv. Co. v. Ahlstorm Mach. Holdings, Inc., 198 F.3d 415, 420-21 (3d
Cir. 1999)).
DISCUSSION
SMSR and R/C Theatres agree on much in their cross-motions for
summary judgment. The parties agree that the lease agreement executed on
August 31, 2004 is valid and enforceable. The parties agree that R/C
Theatres is obligated to make real estate tax payments to SMSR pursuant to
18
Article VI of the lease. The parties further agree that R/C Theatres’ liability for
any real estate taxes is equivalent to their “Pro Rata Share,” which is
computed under Article VI by taking 66.25% of SMSR’s “real estate taxes or
assessments.”
The parties dispute, however, the figure that will be used to determine
R/C Theatres’ pro rata share, or in other words, the parties cannot agree on
the number that represents SMSR’s “real estate taxes or assessments.” For
the 2011 tax year, SMSR argues that this figure should be $343,825.96 (the
amount assessed against the KOZ and non-KOZ Parcels), while R/C
Theatres asserts that it should be $238,517.20 (the amount actually due on
the non-KOZ Parcels). After careful review, the court agrees with R/C
Theatres’ interpretation of the lease and the court will grant R/C Theatres’
motion for summary judgment.
A. The Interpretation of Article VI of the Lease
The clear and unambiguous terms of Article VI, paragraph 2 of the lease
provide that R/C Theatres’ pro rata share shall consist of 66.25% of then real
estate taxes and assessments that are payable by SMSR. The court will
accordingly issue a declaratory judgment in favor of R/C Theatres with
respect to the future interpretation and payment of real estate taxes under
Article VI of the lease.
Under Pennsylvania law, “a lease is in the nature of a contract and is
controlled by principles of contract law.” T.W. Phillips Gas & Oil Co. v.
19
Jedlicka, 42 A.3d 261, 267 (Pa. 2012) (citing Willison v. Consol. Coal Co., 637
A.2d 979, 982 (Pa. 1994)). Pennsylvania courts will first look to the language
of a contract when attempting to determine the parties’ intent, “and when the
words are clear and unambiguous the intent is to be discovered only from the
express language of the agreement. Steuart v. McChesney, 444 A.2d 659,
661 (Pa. 1982); see also Crawford Cent. Sch. Dist. v. Commonwealth, 888
A.2d 616, 623 (Pa. 2005) (noting that “[w]hen contractual language is clear
and unequivocal, its meaning must be determined by its contents alone.”);
Seven Springs Farm, Inc. v. Croker, 748 A.2d 740, 750 (Pa. Super. Ct. 2000)
(“In the absence of technical terminology, words of a contract are to be
construed according to their plain and ordinary meaning.”). It is not the
function of the court to alter parties’ agreement, or rewrite what has been
agreed to. See Nw. Savings Bank & Fin. Servs. v. NS First Street LLC, 802
F. Supp. 2d 580, 588 (M.D. Pa. 2011) (quoting Steuart, 444 A.2d at 661-62);
see also Willison, 637 A.2d at 982 (“The accepted and plain meaning of the
language used, rather than the silent intentions of the contracting parties,
determines the construction to be given [to] the agreement.”).
When courts interpret contract provisions, the instrument as a whole
must be considered. See Robert F. Felte, Inc. v. White, 302 A.2d 347, 351
20
(Pa. 1973). Moreover, courts do not assume that a contract’s language was
chosen carelessly, or that the parties were ignorant of the meaning of the
language employed. See Steuart, 444 A.2d at 662.
The relevant provisions of the lease governing the instant dispute are
found in Article VI, paragraph 2 (hereinafter “Article 6.2”). The meaning of this
lease provision is clear and unequivocal–R/C Theatres’ Pro Rata Share
consists of a percentage (66.25%) of the real estate taxes and assessments
that SMSR must pay on the entire Mixed Use Development. The court’s
holding in this matter became evident upon the examination of several
specific lease provisions.
The court first finds that the use of the words “become payable” in the
first sentence of Article 6.2 is indicative of the parties’ intent for R/C Theatres
to be obligated to pay a share of those taxes that SMSR actually owes to
taxing authorities. This provision provides in pertinent part that “[a]fter such
time as any real estate taxes or assessments (“Taxes”) become payable,
Tenant shall pay its Pro Rata Share . . . .” (Lease art. VI, ¶ 2) (emphasis
added). The selection of the word “payable” to serve as the condition
precedent to trigger R/C Theatres’ obligation to pay real estate taxes was no
accident. “Payable” is defined as that which “is to be paid,” BLACK’S LAW
21
DICTIONARY (9th ed. 2009), or phrased slightly differently, it is that which “may,
can or must be paid,” MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (10th ed.
1999). The use of the word “payable” in the lease as the triggering
mechanism illustrates that the parties envisioned that R/C Theatres’ real
estate tax obligation under the lease would coincide with SMSR’s liability to
local taxing authorities. In other words, the phrase “become payable” in the
first sentence of Article 6.2 evidences a deliberate scheme by the parties to
link R/C Theatres’ tax obligations to SMSR’s actual tax liabilities.
Moreover, the parties’ intent that R/C Theatres only pay a share of the
real estate taxes actually payable by SMSR is exhibited by the use of the
phrase “Pro Rata Share” to describe R/C Theatres tax liability. “Pro rata” is
defined as “[p]roportionateley, according to an exact rate, measure, or
interest.” BLACK’S LAW DICTIONARY (9th ed. 2009). Another source similarly
defines “pro rata” as “proportionately, according to an exactly calculable factor
(as a share or liability).” MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (10th
ed. 1999). “Share” is defined as “[a]n alloted portion owned by, contributed
by, or due to someone.” BLACK’S LAW DICTIONARY (9th ed. 2009). The use of
the words “Pro Rata Share” to describe R/C Theatres’ tax obligation indicates
that R/C Theatres is paying a proportionate allotment of whatever must be
22
paid by SMSR for the Mixed Use Development as a whole.
The timing mechanisms in Article 6.2 similarly support a finding that R/C
Theatres’ tax obligations are linked to SMSR’s actual tax liability. The
pertinent timing mechanisms provide as follows:
Payments required pursuant to this Section 6.2 shall be made
within sixty (60) days after the receipt of the Tax Notice without
interest or penalty; provided, however, in no event shall Tenant
be required to pay such Taxes prior to fifteen (15) days before
the same are due and payable by Landlord, and further
provided that Landlord shall be solely responsible for any interest
or penalty assessed due to late payment of such tax unless the
Tax Notice is given to Tenant at least sixty (60) days prior to
the sate such Taxes are due and Tenant fails to pay its pro rata
share.
(Lease art. VI, ¶ 2) (emphasis added). In other words, the timing provisions of
Article VI provide that R/C Theatres’ duty to pay taxes, penalty fees, and /or
interest charges is tied directly to SMSR’s responsibility to make payments to
taxing authorities. These provisions would make little sense if the lease
somehow obligated R/C Theatres to pay real estate taxes on invalid or
uncollectible invoices.13
13
The bills SMSR used to calculate R/C Theatres’ pro rata share
contained amounts that were not payable by SMSR; thus, rendering
application of the timing mechanisms in Article 6.2 impossible. Furthermore,
Geary’s demand for interest and penalty fees is puzzling in light of the fact
that the timing mechanisms of Article 6.2 cannot apply unless SMSR actually
owes taxes.
23
The court also finds that the plain language of the final sentence of
Article 6.2 conveys the parties’ intent that R/C Theatres pay a percentage of
the real estate taxes actually owed. This provision provides that “[i]f in any tax
year . . . Landlord receives a discount for early payment of Taxes or a refund
or reduction of all or a portion of the Taxes, the discount, refund and/or
reduction shall be passed on to Tenant reducing the amount which
Tenant is obligated to pay pursuant to this Section 6.2 so long as Tenant
has timely paid Taxes. (Lease art. VI, ¶ 2) (emphasis added). This clause
makes clear that the intent of the parties was for R/C Theatres’ pro rata share
to be based upon what SMSR must ultimately pay. KOZ tax abatements
qualify, under the broad language of Article 6.2 as a “discount, refund and/or
reduction” that must be passed onto R/C Theatres.14 As is evidenced by
14
In their briefs, SMSR focuses on the fact that the KOZ program is an
abatement program. SMSR argues, with respect to the last sentence of
Article 6.2, that SMSR is not obligated to pass on any “abatements” to R/C
Theatres because it is only obligated to pass on a “discount, refund and/or
reduction.” The court finds SMSR’s argument on this point unconvincing. A
review of the plain meaning of “abatement” demonstrates that it is, if anything,
a “reduction.” See MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (10th ed.
1999) (defining “abatement” as “1: the act or process of abating : the state of
being abated . . . a deduction from the full amount of a tax,” and defining
“abate” in part as “2 . . . b: to reduce in value or amount : make less esp. by
way of relief”); WEBSTER’S COLLEGIATE THESAURUS (1988) (identifying the
following synonyms for abatement: “discount, rebate, reduction, subtraction”).
Thus, the court does not accept SMSR’s assertion that an abatement is
24
Article VI, paragraph 1, (hereinafter ”Article 6.1”) the parties were aware that
the property’s real estate taxes were to be reduced by virtue of the KOZ
program; thus, if the parties intended to exclude abatements for subdivided
units of the property from inclusion as a “discount, refund and/or reduction,”
then they would have stated as much in the lease.15
SMSR presents a strained and confusing argument in support of its
position that R/C Theatres must pay a pro rata share of all taxes assessed
against the property, whether those taxes are payable or uncollectible.
SMSR’s argument centers on the placement of “become payable” before the
term “Taxes.” SMSR specifically avers as follows:
[B]y appearing after the term “Taxes”, the phrase “become
payable” merely serves as a triggering mechanism for when the
Theatre’s obligation to pay its pro rata share of the “Taxes”
commences. Only after the “Taxes” become payable does the
somehow not a reduction for the purposes of the lease provisions in dispute.
15
The court disagrees with SMSR’s contention that the parties intended
for Article 6.1 to be the only Article to deal with KOZ abatements while Article
6.2 was intended to involve all other reductions. Rather, the court finds that a
plain language reading of Article 6.1 reveals that it was intended to incentivize
the landlord to seek KOZ extensions as well as to compensate the landlord
for KOZ extensions achieved. In reaching this conclusion, the court first notes
that the word “abatement” is mentioned in neither Articles 6.1 or 6.2 while
discounts, refunds and/or reductions are covered in Article 6.2. Moreover, the
fact that the parties endeavored to create such an incentive structure further
indicates that the parties intended for KOZ benefits (partial or otherwise) to be
passed on to R/C Theatres.
25
Theatre have a duty to pay its pro rata share of such “Taxes”.
Thus, the phrase “become payable” addresses an issue (i.e. the
commencement of the Theatre’s obligation to pay its pro rata
share of the “Taxes”) that is completely distinct from what real
estate taxes are actually in the term “Taxes”.
(Doc. 37, Pl.’s Reply Br. in Supp. of its Mot. for Summ. J. at 4). In other
words, SMSR contends that the plain language of the lease provides that R/C
Theatres must pay a percentage of all taxes assessed against the property
once SMSR owes any real estate taxes for any part of the property, even if
SMSR’s tax liability is substantially abated.
The court finds that SMSR’s interpretation of Article 6.2 misses the
mark. SMSR repeatedly maintains that the term “Taxes” is defined by the
words “any real estate taxes or assessments.” (Doc. 31, Pl.’s Br. in Supp. of
its Mot. for Summ. J. at 11; Doc. 33, Pl.’s Br. in Opp’n to Defs.’ Mot. for
Summ. J. at 6; Doc. 37, Pl.’s Reply Br. in Supp. of its Mot. for Summ. J. at 34). Contrary to SMSR’s assertions, “Taxes” is an abbreviation for “any real
estate taxes or assessments,” and the word “Taxes,” for the purposes of this
lease, is not defined solely by these six words. In fact, the parameters of
“Taxes” are subsequently clarified in Article 6.2 as follows:
“Taxes” shall include such taxes as are general or special,
ordinary or extraordinary. In addition, real estate taxes shall
include any tax or imposition on the value of this Lease or upon
the rents, if the same is imposed in lieu of or in addition to real
26
estate taxes. Taxes shall also include Landlord’s costs to
conduct any taxes or assessments upon the Demised Premises
or Mixed Use Development, or land upon which the same is
located.
(Lease art. VI, ¶ 2). Regardless of how the parties indicated that “Taxes”
would serve as an abbreviation for “any real estate taxes or assessments,”
the court finds, as is fully discussed above, that the use of “become payable”
in the first sentence demonstrates the parties’ intent that R/C Theatres’ pro
rata share consist of payable taxes.
Moreover, SMSR’s interpretation of “Taxes” as including all assessed
taxes, whether payable or fully abated, makes little sense in light of the other
provisions of Article 6.2. For instance, SMSR’s approach renders the timing
mechanisms of Article 6.2 meaningless. Furthermore, we find that the plain
meaning of “reduction” does not include KOZ abatements, despite the fact
that the purpose of the KOZ program is to reduce property owner’s real estate
taxes.
Accordingly, the court rejects SMSR’s arguments regarding its
interpretation of Article 6.2. The parties developed and agreed upon a formula
so as to apportion the taxes due and owing on the property as a whole as it
relates to the square footage occupied by R/C Theatres. The parties could
have provided for alternative means of calculating property taxes in the event
27
that SMSR subdivided the property into condominium units and sought KOZ
abatement extensions for a portion of those subdivisions. The parties,
however, included no such contingencies. Even though SMSR may regret
entering into a lease that predicates one tenant’s property tax obligations
upon the real estate taxes assessed and payable on the property as a whole,
the court cannot rescue SMSR from the clear import of Article 6.2. As such,
the court will enter a declaratory judgment in R/C Theatres’ favor.16
B. Calculation of R/C Theatres’ 2011 Real Estate Tax Liability
As the court explains above, R/C Theatres’ pro rata share consists of
66.25% of the real estate taxes assessed against the property and payable by
SMSR. Given this finding, the court will declare that R/C Theatres must pay
SMSR 66.25% of the payable face value of the 2011 revised tax bills issued
by the relevant tax authorities.
For the full 2011 tax year, the revised county and school tax bills for the
property’s non-KOZ Parcels contain face values of $42,844.35 and
$126,260.62 respectively. The revised 2011 city tax bill for the non-KOZ
Parcels contains a payable face value of $69,412.23. Thus, SMSR was
16
In granting R/C Theatres declaratory judgment with respect to the
interpretation of Article 6.2, the court does not express an opinion as to
whether R/C Theatres is liable to SMSR for any payments pursuant to Article
6.1.
28
assessed and expected to pay local taxing authorities real estate taxes with a
total face value of $238,517.20 in 2011. The court will declare that R/C
Theatres must pay SMSR 66.25% of this amount or $158,017.64.
C. R/C Theatres’ Failure to Remit Payment for the 2011 Taxes
As is discussed above, SMSR argues that the calculation of R/C
Theatres’ pro rata share includes all assessed taxes, regardless of whether
those taxes were subsequently abated. SMSR alleges that R/C Theatres
“breached the terms of Article 6.2 of the Lease by failing to pay South Main its
pro rata share of the taxes that were assessed against the Mixed Use
Development” by October 1, 2011. (Doc. 33, Pl.’s Br. in Opp’n to Defs.’ Mot.
for Summ. J. at 14).
The court rejects SMSR’s argument that R/C Theatres’ pro rata share
consists of uncollectible taxes. Thus, the question facing the court is whether
R/C Theatres breached the lease by failing to remit the amount of real estate
taxes that they actually owed to SMSR (66.25% of $238,517.20) by October
1, 2011. After careful consideration, the court finds that R/C Theatres did not
breach Article 6.2 of the lease.
Article 6.2 provides, in pertinent part, as follows:
Landlord shall furnish Tenant with written notice (“Tax Notice”) of
the amount of Tenant’s share of Taxes promptly after receipt by
29
Landlord of the tax bill for each tax year. Payments required
pursuant to this Section 6.2 shall be made within sixty (60) days
after the receipt of the Tax Notice without interest or penalty . . . .
(Lease art. VI, ¶ 2) (emphasis in original). R/C Theatres’ obligation to pay
real estate taxes was never triggered under the lease because SMSR failed to
provided adequate written notice of the amount that R/C Theatres actually
had to pay. Rather than providing notice of what the lease actually required,
SMSR furnished R/C Theatres with written notice of uncollectible tax bills that
SMSR knew were superseded by revised bills.
Moreover, R/C Theatres’ obligation to make payment under Article 6.2
was simply never triggered because SMSR repeatedly denied R/C Theatres’
requests for information regarding the 2011 KOZ extensions. SMSR
deliberately withheld information about the real estate taxes that it actually
had to remit to local taxing authorities. If SMSR had provided this information,
then R/C Theatres could have determined the appropriate pro rata share.
R/C Theatres, however, did not possess this information until the
commencement of this litigation, making the timely payment of their pro rata
share impossible.
The court cannot hold R/C Theatres in breach of the lease when SMSR
deliberately prevented R/C Theatres from performing under Article 6.2. See
30
In re Weedling, 205 F. App’x 955, 959 (3d Cir. 2006) (observing that “a party
cannot prevail for nonperformance if she alone is responsible for the
nonperformance.” (citing Liddle v. Scholze, 768 A.2d 1183, 1185 (Pa. Super.
Ct. 2001))); McDermott v. Party City Corp., 11 F. Supp. 2d 612, 621 (E.D. Pa.
1998) (finding that “where a party claiming the condition has not been
satisfied is the cause of the non-occurrence, he or she may not claim the
non-occurrence to his or her advantage.”); Craig Coal Mining Co. v. Romani,
513 A.2d 437, 440 (Pa. Super. Ct. 1986) (A party “may not, in fact, take
advantage of an insurmountable obstacle placed, by himself, in the path of
the other party’s adherence to an agreement.”). Accordingly, the court will
grant R/C Theatres summary judgment on this point, deny SMSR summary
judgment and hold that R/C Theatres did not breach the lease.
D. Attorney’s Fees and Costs
Both SMSR and R/C Theatres request an additional award pursuant to
Article XXXII of the lease. SMSR seeks payment for its reasonable costs,
attorneys’ fees, expenses, interest for the 2011 real estate taxes R/C
Theatres must pay and a late charge. R/C Theatres seeks payment for their
reasonable costs, attorneys’ fees and expenses. For the following reasons,
the court will grant R/C Theatres’ request and deny that of SMSR.
31
Article XXXII of the lease addresses enforcement costs, the applicable
interest rates and late fees. This article provides in relevant part as follows:
32.1 In the event any action is instituted by a party to enforce
any of the terms and provisions contained herein, the prevailing
party in such action shall be entitled to its reasonable attorneys’
fees, costs, and expenses.
32.2. Where this Lease provides for the payment of interest,
such interest shall be the lesser of eight percent (8%) per annum
or the highest lawful rate permissible under the laws of the State
in which the Demised Premises are located. Such interest shall
accrue from the date payment becomes due and payable under
the terms of this Lease, until paid.
32.3 In the event any . . . sum [owed] under this Lease shall not
be paid within ten (10) days following the original due date thereof,
a “Late Charge” of three (3) cents per each dollar so overdue shall
be paid . . . .
(Lease art. XXXII, ¶¶ 1-3).
As the court explained above, R/C Theatres did not breach the lease by
failing to remit to SMSR a 2011 real estate tax payment by October 1, 2011.
Accordingly, the interest and late charge provisions of Article XXXII are not
applicable as no real estate tax payments were due on October 1, 2011.
With respect to the first paragraph of Article XXXII, the court finds that
R/C Theatres is the prevailing party and is entitled to reasonable costs,
attorneys’ fees and expenses. Under Pennsylvania law, the prevailing party is
the party who obtained the relief sought in an action. See Eastern Elec. Corp.
32
of N.J. v. Shoemaker Constr. Co., 657 F. Supp. 2d 545, 561-62 (E.D. Pa.
2009) (“Pennsylvania courts have described a substantially prevailing party as
‘a party in whose favor a judgment is rendered, regardless of the amount of
damages awarded.’” (quoting Zavatchen v. RHF Holdings, Inc., 907 A.2d 607,
610 (Pa. Super. Ct. 2006))).
Even though the court will declare that R/C Theatres must pay SMSR
$158,017.64, this is the amount that R/C Theatres acknowledges that they
owe. In all other respects the court is granting summary judgment in R/C
Theatres’ favor. As such, R/C Theatres is the prevailing party and the court
will grant them fourteen days to submit evidence of their reasonable costs,
attorneys’ fees and expenses.
33
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
SOUTH MAIN STREET
REDEVELOPMENT, LLC,
Plaintiff
:
No. 3:12cv24
:
:
(Judge Munley)
:
v.
:
:
R/C THEATRES MANAGEMENT LLLP :
and R/C THEATRES MANAGEMENT :
CORPORATION,
:
Defendants
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
ORDER
AND NOW, to wit, this 13th day of March 2013, it is hereby ORDERED
as follows:
1) Plaintiff South Main Street Redevelopment, LLC’s motion for
summary judgment (Doc. 27) is DENIED;
2) Defendants R/C Theatres Management LLLP and R/C Theatres
Management Corporation’s motion for summary judgment (Doc. 20) is
GRANTED;
3) The Clerk of Court is directed to enter judgment in favor of
Defendants R/C Theatres Management LLLP and R/C Theatres
Management Corporation pursuant to 28 U.S.C. § 2201, and it is
DECLARED: (A) Article 6.2 of the lease requires the Tenant to remit
payment of a pro rata share of the amount of real estate taxes that the
Landlord is actually required to pay to the taxing authorities; (B)
Defendants R/C Theatres Management LLLP and R/C Theatres
Management Corporation’s pro rata share of real estate taxes for the
2011 tax year is limited to $158,017.64; and (C) Defendants R/C
Theatres Management LLLP and R/C Theatres Management
Corporation is not in breach of Article 6.2 of the lease, and any
34
obligation under the lease to remit a pro rata share of real estate taxes
assessed against the property for the 2011 tax year has yet to be
triggered;
4) Defendants R/C Theatres Management LLLP and R/C Theatres
Management Corporation’s request for reasonable costs, attorneys’
fees and expenses pursuant to Article XXXII of the lease is GRANTED.
Defendants shall have fourteen (14) days from the date of this order to
submit their litigation costs, expenses and an itemized list of attorneys’
fees. Plaintiff shall then have fourteen (14) days from the date of
Defendants’ filing to lodge objections; and
5) The Clerk of Court is directed to CLOSE this case.
BY THE COURT:
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court
35
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