T&R BATTLE CREEK LIMITED PARTNERSHIP v. UG BUTLER PA, LLC
Filing
23
MEMORANDUM OPINION re 14 MOTION to Dismiss filed by UG BUTLER PA, LLC. Signed by Judge Arthur J. Schwab on 7/20/2017. (lmt)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
T&R BATTLE CREEK LIMITED
PARTNERSHIP,
17cv0666
ELECTRONICALLY FILED
Plaintiff,
v.
UG BUTLER PA, LLC,
Defendant.
MEMORANDUM OPINION
Currently before the Court in this Declaratory Judgment/Breach of Contract action is a
Motion to Dismiss and Brief in Support filed by Defendant pursuant Fed.R.Civ.P. 12(b)(6). ECF
14, 16. Plaintiff has filed a Brief in Opposition. ECF 22. The matter is ripe for disposition.
Jurisdiction in this matter is predicated upon 28 U.S.C. § 1332, given that Plaintiff is an
Ohio Limited Partnership, Defendant is a Delaware limited liability company, and the amount in
controversy exceeds $75,000.00. Because: (1) the contract at issue involved the sale of real
estate in the Commonwealth of Pennsylvania; (2) the contract indicates that the governing law
shall be construed in accordance with the laws of the Commonwealth of Pennsylvania; and
(3) the Parties to this lawsuit agree, Pennsylvania law controls the substantive issues raised by
Defendant herein.
I.
FACTUAL BACKGROUND
The following facts, taken from the Complaint and the documents attached thereto, are
accepted as true solely for the purpose of adjudicating Defendant’s Motion to Dismiss.
On July 26, 2016, Plaintiff and Defendant entered into an agreement for the sale of real
property located in Butler County, Pennsylvania, at 400 Greenwood Plaza (“Agreement”). ECF
1, ¶ 8. Defendant was the “Seller” of the real property, and Plaintiff was the “Buyer.” ECF 1-2.
Section 4.5 of the Agreement reads as follows:
4.5
Closing Costs and Charges. Seller shall be responsible for the cost
of all state, county and local transfer or documentary stamp taxes. Buyer
shall be responsible for: (i) all escrow fees and recording fees; (ii) the cost
of any survey obtained by Buyer; and (iii) such title insurance as Buyer
shall desire to obtain. Each party shall bear its own legal, accounting,
and other professional fees.
ECF 1-2.
The closing date was October 5, 2017, and the total realty transfer tax was $201,500.00.
ECF 1, ¶ 17. Although the Agreement indicated that Defendant-Seller was to pay the realty
transfer tax, Plaintiff paid one-half of the tax under protest at the closing. ECF 1, ¶ 36.
II. STANDARD OF REVIEW
In considering a Rule 12(b)(6) motion, Federal Courts require notice pleading, as
opposed to the heightened standard of fact pleading. Fed. R. Civ. P. 8(a)(2) requires only “‘a
short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to
‘give the defendant fair notice of what the . . . claim is and the grounds on which it rests.’” Bell
Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47
(1957)).
Building upon the landmark United States Supreme Court decisions in Twombly and
Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Court of Appeals for the Third Circuit
explained that a District Court must undertake the following three steps to determine the
sufficiency of a complaint:
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First, the court must take note of the elements a plaintiff must plead to state a
claim. Second, the court should identify allegations that, because they are no more
than conclusions, are not entitled to the assumption of truth. Finally, where there
are well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement for relief.
Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir. 2013) (citation omitted).
The third step requires this Court to consider the specific nature of the claims presented
and to determine whether the facts pled to substantiate the claims are sufficient to show a
“plausible claim for relief.” Covington v. Int’l Ass’n of Approved Basketball Officials, 710 F.3d
114, 118 (3d Cir. 2013). “While legal conclusions can provide the framework of a Complaint,
they must be supported by factual allegations.” Iqbal, 556 U.S. at 664.
This Court may not dismiss a Complaint merely because it appears unlikely or
improbable that Plaintiff can prove the facts alleged or will ultimately prevail on the merits.
Twombly, 550 U.S. at 563 n.8. Instead, this Court must ask whether the facts alleged raise a
reasonable expectation that discovery will reveal evidence of the necessary elements. Id. at 556.
Generally speaking, a Complaint that provides adequate facts to establish “how, when, and
where” will survive a Motion to Dismiss. Fowler v. UPMC Shadyside, 578 F.3d 203, 212 (3d
Cir. 2009).
In short, a Motion to Dismiss should not be granted if a party alleges facts, which could,
if established at trial, entitle him/her to relief. Twombly, 550 U.S. at 563 n.8.
III. ANALYSIS
Defendant raised three arguments in support of its Motion to Dismiss: (1) Pennsylvania’s
doctrine of merger of title bars Plaintiff’s claims; (2) Plaintiff’s claims are time-barred; and
(3) Plaintiff’s claim is barred by the limit on contractual remedies set forth in Section 7.3 of the
Agreement.
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A. Doctrine of Merger of Title
The doctrine of merger of title provides that, as a general rule, an agreement of sale
merges into the deed, and no recovery may be had based upon an earlier agreement. Stoever v.
Gowen, 124 A. 684 (Pa. 1924); Elderkin v. Gaster, 447 Pa. 118, 288 A.2d 771 (Pa. 1972). The
merger rule, however, does not apply where the expressed intention of the parties is to the
contrary. Carsek Corp. v. Stephen Schifter, Inc., 431 Pa. 550, 246 A.2d 365 (1968). An
agreement is not merged as to that which is not to be consummated by the deed, and which is of
an entirely different nature and collateral to it. Rappaport v. Savitz, 220 A.2d 401 (Pa. 1966).
The doctrine of merger is normally applied to warranties of title. Elderkin v. Gaster, 288 A.2d
771, 775 (Pa. 1972).
In Carsek Corp., the Supreme Court of Pennsylvania held:
Merger is said to be the rule, except when the intention of the parties is
otherwise, or where the stipulations in the contract sought to be enforced
are collateral to the functions performed by the deed. Anno: Merger of
Contract in Deed, 38 A.L.R.2d 1310, 1313 (1954). Actually, the latter
exception is subsumed in the former, since the fact that the stipulations are
collateral to the functions of the deed gives rise to the inference that the
parties did not intend that the stipulations merge into the deed. . . .‘A
covenant has been said to be collateral, and therefore one which survives
delivery of the deed, if it bears no relation to title, possession, quantity or
emblements of the transferred property.’ Friedman, Contracts and
Conveyances of Real Property, 411-12 (1963). Clauses in the contract
dealing with consideration fit within this category.
246 A.2d at 559.
Simply put, Pennsylvania recognizes two exceptions to the doctrine of merger of title:
(1) where the expressed intention of the parties is contrary to the doctrine; and (2) where the
contract provision sought to be enforced is collateral to the consummation of the deed.
Turning to the facts pled by Plaintiff in the instant matter, this Court finds that Plaintiff
has adequately pled facts which, if proven, would support a finding that one or both of the
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exceptions to the doctrine of merger apply. Plaintiff first presents facts contending that
Defendant was required to pay all of the realty transfer tax, and presented a signed a written
agreement to that effect. See ECF 1-2. Plaintiff next presents facts which indicate a dispute
arose on or before the closing date, and on the closing date, Plaintiff executed a document
indicating that it would pay half of the realty transfer tax, but was making such payment under
protest.
These facts pled by Plaintiff, if proven, give rise to a viable claim for breach of contract,
because said facts suggest that Plaintiff’s claim for Defendant’s alleged breach of Section 4.5 of
the Agreement could support a finding that the Parties intended to resolve the realty transfer tax
matter after consummating the deed, and/or Section 4.5 of the Agreement was collateral to the
consummation of the deed.
B. Statute of Limitations
Defendant next argues that the Plaintiff is time-barred from bringing this lawsuit, because
it was not filed within the six-month time frame outlined in Section 9.1 the Agreement.
The Court agrees with Defendant’s basic premise that Parties to a contract can “make
their own contract,” including the modification of an applicable limitations period. Defendant
contends that the Parties agreed to a six-month statute of limitations to bring a lawsuit with
respect to the specific claims raised by Plaintiff in its Complaint.
The portion of the contract upon which Defendant relies for this argument reads as
follows:
9.1 Survival; Termination. The representations, warranties and
agreements of the parties contained or provided for in this Agreement
shall survive the Closing and the recordation and delivery of the Deed
conveying the Property to Buyer for a period of six (6) months.
ECF 1-2.
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However, the facts as pled by Plaintiff suggest that the Parties did not intend to shorten
the four-year statute of limitations for breach of contract. Plaintiff’s Complaint indicates that
Plaintiff complied with Section 9.1 by seeking reimbursement from Defendant of the realty tax
Plaintiff paid at the closing well within the six-month time frame. The facts, as pled by
Plaintiff, indicate that Plaintiff’s claim for repayment of one-half of the realty transfer tax arose
at the closing. On that same date, Plaintiff, in a writing, demanded that Defendant reimburse
Plaintiff for the transfer tax it paid so as to comply with Section 4.5 of the Agreement.
The Court concludes that Section 9.1 did not alter the four-year statute of limitations to
assert a breach of contract claim. Rather, Section 9.1 provided that the representations,
warranties and agreements of the Parties which had been set forth in the Agreement would
“survive” the closing and recordation of the deed for six months from the date the deed was
recorded. Plaintiff’s allegations concerning Section 9.1 suggest that Plaintiff timely notified
Defendant (well within six months from the date the deed was recorded) of Defendant’s alleged
obligation to pay the entire transfer tax amount. Accordingly, Plaintiff’s Complaint will not be
dismissed as time-barred.
C. Exclusive Remedy
Defendant’s third and final argument in support of dismissal is that Section 7.3 of the
Agreement bars Plaintiff’s claims. Plaintiff disagrees.
Section 7.3 reads as follows:
7.3 Failure of Condition; Default by Seller. Should the conditions· set
forth in this Agreement not be satisfied on or prior to the Closing Date, or
upon breach by Seller of any of its obligations hereunder, then Buyer shall
be entitled, at its option, to (i) specific performance of this this Agreement
and the consummation of the transactions contemplated by this
Agreement, or (ii) terminate this Agreement, in which event (y) the
Deposit, and any accrued interest, shall be immediately returned to Buyer,
and (z) neither Seller nor Buyer shall have any further rights
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or obligations hereunder or liability to the other, except with respect to the
provisions of this Agreement which survive termination.
ECF 1-2.
Defendant argues that under Section 7.3 of the contract, instead of closing and paying
one-half of the realty transfer tax, Plaintiff could have either enforced specific performance or
terminated the Agreement. Defendant contends Plaintiff chose neither option, and instead,
proceeded to close on the real estate. Plaintiff concurs that when Defendant breached its
obligation to pay the entire realty transfer tax as required by Section 4.5, Plaintiff could have “at
its option” selected one of these two remedies – either enforced specific performance or
terminated the Agreement. Plaintiff contends that it selected the first option (specific
performance by Defendant) by writing a letter to Defendant and, in this writing, indicated that
Plaintiff was “closing under protest,” and “preserving all causes of action” and was “not
releasing Defendant” of its obligation to pay the entire realty transfer tax. ECF 1, ¶ 20.
The Court finds that based on the allegations set forth in Plaintiff’s Complaint, Platiniff
has asserted a viable cause of action for declaratory judgment and breach of contract. In
reaching this conclusion, the Court finds that the facts pled by Plaintiff support its theory of
recovery, but must yet be proven in order to obtain recovery. For these reasons, the Court will
deny Defendant’s Motion to Dismiss predicated upon Section 7.3 of the Agreement.
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IV. CONCLUSION
Based on the foregoing law and authority, the Court will deny the Defendant’s Motion to
Dismiss. An appropriate Order follows.
s/ Arthur J. Schwab
Arthur J. Schwab
United States District Judge
cc:
All ECF Registered Counsel of Record
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