LURIA BROS. & CO., INC. v. Allen

• Decision Date: 11 May 1978
• Docket Number: Civ. A. No. 77-137.
• Citation: 452 F. Supp. 732
• Parties: LURIA BROTHERS & COMPANY, INC., a corporation, Plaintiff, v. Thomas R. ALLEN, Jr., and Morton J. Greene, trading as Economy Industrial Properties, a partnership, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

452 F. Supp. 732

LURIA BROTHERS & COMPANY, INC., a corporation, Plaintiff, v. Thomas R. ALLEN, Jr., and Morton J. Greene, trading as Economy Industrial Properties, a partnership, Defendants.

Civ. A. No. 77-137.

United States District Court, W. D. Pennsylvania.

May 11, 1978.

Charles R. Taylor, Jr., P. Jerome Richey, Pittsburgh, Pa., for plaintiff.

Edward C. Leckey, Pittsburgh, Pa., for defendants.

MEMORANDUM OPINION AND ORDER

TEITELBAUM, District Judge.

This is an action under 42 U.S.C. § 1983 brought by Luria Brothers & Company, Inc. ("Luria") against Thomas R. Allen, Jr. and Morton J. Greene trading as Economy Industrial Properties ("Economy"), a partnership, in which Luria claims that Economy violated the Fourteenth Amendment of the Constitution of the United States by depriving Luria of possession of certain steel plate without due process of law. In a separate count contained in the amended complaint Luria also brings an action in the nature of a replevin action against Economy.

During the course of the proceedings, Luria filed a bond in the amount of $90,000 pursuant to Order of Court which authorized Luria to remove the steel plate from the premises of Economy. The condition of this bond is such that if Luria establishes its right to possession of the steel plate the obligation is null and void. Otherwise, Luria and its surety are obligated to pay defendants the value of the plate and costs of the proceeding.

On a continuing basis prior to December of 1976, Luria stored certain steel plate in a building located in Ambridge, Pennsylvania. In mid-December of 1976, Luria received word through Ogden Metals, Inc. ("Ogden Metals"), its parent corporation, that the steel plate had been distrained upon by Economy, owner of the building. Upon further inquiry, Luria determined that all access gates through which the steel plate could be removed had been locked.

The building in question located in Ambridge was leased by Economy to Bollinger under a lease dated June 13, 1975. Thereafter, a portion of the building, approximately one-half, was leased by Bollinger to Ogden Metals under a sublease dated July 7, 1975.

Although there was some discussion about the advisability of making Luria the sublessee under the sublease, Ogden Metals remained on the sublease as sublessee at the time the sublease was executed by the parties in July and August of 1975.

At the time the sublease was executed by Allen on behalf of Bollinger, Allen was both a partner in Economy and the President of Bollinger. At that time he was also a member of the Board of Directors of Bollinger. Greene at the time was an officer of Bollinger and a member of its Board of Directors. Various members of the Greene family owned a substantial number of the shares of Bollinger and Greene himself is a trustee of the Morton J. Greene Company Pension Trust which holds in excess of 200,000 Bollinger shares.

By December of 1976, Luria, acting through Ogden Steel, had placed 407 tons of steel plate on the subleased premises with the consent and permission of Ogden Metals.

Ogden Metals paid $24,000 in rent in advance at or about the time it entered into the sublease with Bollinger. In Paragraph 20 both the lease and the sublease contain identical language relating to the distraint rights of the landlord and sublandlord, as follows:

As security for rent, LESSEE grants, bargains and sells to LESSOR all property of every kind on or to be brought on the DEMISED PREMISES, and whenever rent, or anything reserved as rent, is unpaid, LESSOR may seize or distrain said property, on or off the premises, and sell the same on due legal notice for all rent or other payment due as rent, expenses, etc., and for all rent not due hold the same as security.

On March 31, 1976, Bollinger filed a petition for an arrangement under Chapter XI of the Bankruptcy Act in the United States District Court for the Western District of Pennsylvania at No. 76-282. At the time the Petition was filed, an order was entered by the Bankruptcy Judge staying any and all proceedings relating to Bollinger. Carl L. Bigler was appointed Receiver for Bollinger by the court and through him the Chapter XI proceedings were conducted until March 14, 1977 when Bollinger was adjudicated a bankrupt. The Receiver continued to operate Bollinger until on or about October 31, 1976 when most of the remaining employees were terminated.

On or about November 3 or 4, 1976, the Receiver discontinued any further activity at the leased premises and by November 5 had removed everything to a facility in the near vicinity owned by Bollinger. Both prior and subsequent to the removal, the Receiver and Robert G. Sable his attorney, advised both Greene and Allen that the Receiver did not intend to use the premises any longer.

On November 16, 1976, Messrs. Bigler, Sable, Allen and Greene met at the Marriott Inn to discuss various outstanding matters involving Economy and Bollinger. Areas of concern related to a forklift being held by Economy which Bollinger wanted to reacquire; administrative rent to be paid during the period of occupancy by the Receiver from April 1 through November 5; outstanding real estate taxes and other matters of a business nature. On November 23, 1976 Sable sent a letter confirming the meeting to Bigler, Allen and Greene. Greene redrafted the letter and forwarded a copy of same to Sable. Allen, on the other hand, made only a few written changes to the letter and returned it with an indication that it was "okay as noted." One of the handwritten notes provided that "Receiver will formally terminate & abandon lease on Nov. 5."

In early December of 1976, Greene took certain steps to prevent third parties from removing any items contained in the subject premises, including the steel plate owned by Luria. On or about December 1 or 2, 1976, Greene caused Economy padlocks to be placed on the primary gates leading into the subleased premises and through which the steel plate could have been removed. After a telephone discussion with counsel on December 3, 1976, Allen entered the subleased premises on December 4, 1976 through an adjoining building owned by Economy and thumbtacked a notice of distraint on a doorway leading into certain offices located within the subleased premises. The notice was signed by Allen on behalf of Economy and contained the following language:

NOTICE OF DISTRAINT

TO: BOLLINGER CORPORATION

and

OGDEN METALS, INC.

TAKE NOTICE, that ECONOMY INDUSTRIAL PROPERTIES, owner of the premises and landlord, on December 4, 1976, distrained upon the goods and chattels of OGDEN METALS, INC., to wit, 300 tons of steel plate, more or less, located in the premises at Eleventh Street and P.C.R.R. Belt Line, Borough of Ambridge, Beaver County, Pennsylvania, for Two Hundred Ninety-three Thousand One Hundred Forty-five and 70/100ths ($293,145.70) Dollars rent due ECONOMY INDUSTRIAL PROPERTIES. If the said rent is not paid, or replevin action instituted to recover the said goods within five (5) days after notice hreof, (sic) the undersigned may cause the said goods to be appraised and sold.

Give (sic) by the undersigned this 6th day of December, 1976.

ECONOMY INDUSTRIAL

PROPERTIES By /s/ Thomas R. Allen, Jr.

Partner

The $293,145.70 figure set forth in the Notice of Distraint is a total of $9,600 rent due prior to the receivership, $7,945.70 in administrative rent due during the period of receivership ($1,464.90 per month was paid by the Receiver during this period) and the balance, namely, $275,600 is accelerated rent due for the remaining period of the lease which expires on August 31, 1985.

Between November of 1976 and May 13, 1977, Luria was denied access to the subleased premises and was unable to remove the steel plate in question. On May 13, 1977 the court entered an Order permitting plaintiff after filing a bond to remove the steel plate. The condition of the bond is such that if Luria establishes its right to possession of the steel plate the obligation ($90,000) is null and void. Otherwise Luria and its surety are obligated to pay Economy the value of the plate.

COUNT ONE

The Constitutionality of distraint under the Pennsylvania Landlord & Tenant Act of 1951, 68 P.S. § 250.302, et seq. has previously been tested in the United States District Court for the Western District of Pennsylvania and found to be wanting. Ragin v. Schwartz, 393 F.Supp. 152 (W.D. Pa.1975). Ragin held that the Pennsylvania statute, which authorizes the landlord to distrain a tenant's personal property for unpaid rent without notice or hearing and, upon the tenant's failure to replevy the goods within five days, to have the sheriff or constable sell such property at public sale upon six days' notice, violates the requirements of due process. Although Ragin involved both a seizure and sale of property, the Court acknowledged that seizure alone, without appropriate procedural safeguards, could provide the basis for a deprivation of due process claim:

"In the context of this case, the question is whether the seizure of property without a chance to be heard violates this procedural due process? While there is available to the tenant the Trespass Action, the Replevin Action, and the Action for Defalcation, . . . the tenant here is deprived of the unfettered use of property during the interim between the Distraint and the outcome of any of these actions. . . . The Plaintiffs have shown that the Constable in this case acted pursuant to the Act, as the Distraint Notice itself indicates and, without prior notice, entered the plaintiff's premises and made a physical levy on the property as set forth in the Inventory. This indeed is an adequate basis for finding the provisions of Article III of the Act to be violative of the Fourteenth Amendment." (citations omitted)

There can be little doubt in light of Ragin that Economy's summary seizure of Luria's steel plate was in contravention of the Fourteenth Amendment due process...