In re Associates

• Decision Date: 31 March 2011
• Docket Number: Bankruptcy No. 10–16094 Sr.,Adversary No. 10–0456.
• Citation: 454 B.R. 60
• Parties: In re 400 WALNUT ASSOCIATES, L.P., Debtor(s).400 Walnut Associates, L.P., Plaintiff(s)v.4th Walnut Associates, L.P., Ivy Realty LII, LLC, and Ivy Realty Services, LLC, Defendant(s).
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

454 B.R. 60

In re 400 WALNUT ASSOCIATES, L.P., Debtor(s).400 Walnut Associates, L.P., Plaintiff(s)

v.4th Walnut Associates, L.P., Ivy Realty LII, LLC, and Ivy Realty Services, LLC, Defendant(s).

Bankruptcy No. 10–16094 Sr.

Adversary No. 10–0456.

United States Bankruptcy Court, E.D. Pennsylvania.

March 31, 2011.

Aris J. Karalis, Esquire, Robert W. Seitzer, Esquire, Frank S. Marinas, Esquire, Maschmeyer Karalis, P.C., Philadelphia, PA, for Debtor.Francis M. Correll, Jr., Esquire, Domenic E. Pacitti, Esquire, Margaret M. Manning, Esquire, Shahan G. Teberian, Esquire, Klehr Harrison Harvey Branzburg LLP, Philadelphia, PA, for Movants/Defendants.

Opinion

STEPHEN RASLAVICH, Chief Judge.Introduction

Before the Court is the Motion of Defendants, 4th Walnut Associates, L.P. Ivy Realty LII, LLC, and Ivy Realty Services, LLC (hereinafter sometimes collectively referred to as 4th Walnut) to dismiss seven of the eight counts of this Adversary Proceeding. The motion is opposed by the Plaintiff/Debtor. Briefs were submitted and a hearing on the matter was held on February 10, 2011. The Court thereafter took the matter under advisement. For the reasons which follow, the Motion will be granted in part and denied in part.¹

Summary of Holding

Count I—Breach of Contract (Plaintiff against 4th Walnut)

• Basis for Contention: Count I is barred by the Statute of Frauds and, alternatively fails to allege the required elements of a contract.

• Holding: Count I will be dismissed.

Count II—Breach of Oral Contract (Plaintiff against 4th Walnut)

• Basis for Contention: Count II is barred by the Statute of Frauds and, alternatively, fails to allege the required elements of a contract.

• Holding: Count II will be dismissed.

Count III—Breach of Duty of Good Faith and Fair Dealing (Plaintiff against 4th Walnut)

• Basis for Contention: Count III fails to allege an underlying contract.

• Holding: Count III will be dismissed.

Count IV—Negligence (Plaintiff against 4th Walnut)

• Basis for Contention: The gist of Count IV is a contract and not a tort claim, and it must therefore be dismissed.

• Holding: Count IV will be dismissed.

Count V—Declaratory Judgment (Plaintiff against 4th Walnut)

• Basis for Contention: The requested relief is not within the scope of the Declaratory Judgment Act.

• Holding: Count V will be dismissed.

Count VI—Intentional Interference with Existing Contractual Relations (Plaintiff against all Defendants) • Basis for Contention: There is no existing contract with which Defendants could have interfered.

• Holding: Count VI will be dismissed because the Complaint fails to allege an existing contractual relationship.

Count VII—Intentional Interference with Prospective Contractual Relations (Plaintiff against all Defendants)

• Basis for Contention: There was no prospective contract with which Defendants could have interfered.

• Holding: The Motion to Dismiss Count VII will be denied because the Plaintiff has sufficiently stated this cause of action against all Defendants.

Standard Required for Stating a Claim

The Motion is premised on F.R.C.P. 12(b)(6) ²; to wit, that the Complaint fails to state a claim upon which relief can be granted. In order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009) (explaining that pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss). The Supreme Court explained that although factual allegations are to be accepted as true for purposes of legal sufficiency, the same does not apply to legal conclusions; therefore, the factual allegations must sufficiently support the legal claims asserted. Iqbal, 129 S.Ct. at 1949, 1950. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 1949 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955); see also Fowler, 578 F.3d at 210; and Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir.2008).

Counts I and II—Breach of Contract and Breach of Oral Contract

The first count alleges that the Defendants breached an agreement (the Forbearance Agreement) which the Debtor had reached with 4th Walnut's predecessor in interest, Sovereign Bank (“Sovereign”). In Count Two the Plaintiff contends that if the Court finds that the forbearance agreement was insufficiently memorialized, it should find there was nevertheless a breach of an oral forbearance agreement.³ Debtor refers in each instance to an alleged Forbearance Agreement discussed in the Court's previous Opinion in this action, In re 400 Walnut Associates, L.P., 2011 WL 915328 (Bankr.E.D.Pa. February 22, 2011). The Debtor continues to rely on this allegation herein, while 4th Walnut (and the other Defendants to this adversary proceeding) again disavow the existence of any such arrangement. The importance of the alleged Forbearance Agreement to this proceeding, as well as to the recent ruling on cash collateral, cannot be overstated. The Debtor's claim that it reached an accord with Sovereign is the common thread which runs through five of the eight counts of its complaint.⁴ If the Debtor is unable to sufficiently allege the existence of an enforceable contract with Sovereign, all five counts must be dismissed. Put differently, the Court's finding on the question of whether an enforceable forbearance agreement has been stated will apply to all of the counts which are premised on it.

In its previous Opinion, the Court noted that it would take up in this proceeding 4th Walnut's challenges to the claim that a forbearance agreement ever existed. In this respect 4th Walnut argues that the Debtor's claims of a forbearance agreement are barred by the Statute of Frauds or are insufficiently pleaded. With regard to the latter argument, 4th Walnut cites two deficiencies: 1) that the parties never agreed on all essential terms, and 2) that there was no exchange of legally sufficient consideration. The Court turns to those questions.

Statute of Frauds

In Pennsylvania, the common law Statute of Frauds is codified at 33 P.S. § 1:

From and after April 10, 1772, all leases, estates, interests of freehold or term of years, or any uncertain interest of, in, or out of any messuages, manors, lands, tenements or hereditaments, made or created by livery and seisin only, or by parol, and not put in writing, and signed by the parties so making or creating the same, or their agents, thereunto lawfully authorized by writing, shall have the force and effect of leases or estates at will only, and shall not, either in law or equity, be deemed or taken to have any other or greater force or effect, any consideration for making any such parol leases or estates, or any former law or usage to the contrary notwithstanding; except, nevertheless, all leases not exceeding the term of three years from the making thereof; and moreover, that no leases, estates or interests, either of freehold or terms of years, or any uncertain interest, of, in, to or out of any messuages, manors, lands, tenements or hereditaments, shall, at any time after the said April 10, 1772, be assigned, granted or surrendered, unless it be by deed or note, in writing, signed by the party so assigning, granting or surrendering the same, or their agents, thereto lawfully authorized by writing, or by act and operation of law.

The Statute of Frauds requires “a memorandum in writing signed by the parties to be charged which sufficiently indicates the terms of the contract and the property to be conveyed.” Brown v. Hahn, 419 Pa. 42, 51, 213 A.2d 342, 347 (1965). Its aim “is the prevention of successful fraud by inducing the enforcement of contracts that were never in fact made. It is not to prevent the performance or the enforcement of oral contracts that have in fact been made.” In re Estate of Beeruk, 429 Pa. 415, 418–19, 241 A.2d 755, 758 (1968) quoting 2 Corbin, Contracts § 498 at 680–81 (1950). It eschews exalting “informality in the memorandum or its incompleteness in detail [which] neither promotes justice nor lends respect to the statute.” Axler v. First Newport Realty Investors, 279 Pa.Super. 14, 420 A.2d 720, 722 (Pa.Super.1980) citing Beeruk, supra. Accordingly “some note or memorandum' that is adequate ... to convince the court that there is no serious possibility of consummating fraud by enforcement” will place the claim outside the statute of frauds. Id.

The Statute of Frauds has been held applicable to bar oral forbearance agreements regarding real estate. See Eastgate Enterprises, Inc. v. Bank and Trust Company of Old York Road, 236 Pa.Super. 503, 508, 345 A.2d 279, 281 (Pa.Super.1975) citing Second National Bank of Uniontown, v. Hustead, 334 Pa. 421, 423, 6 A.2d 63, 64 (1939); see also Atlantic Financial Federal v. Orianna Historic Associates, 406 Pa.Super. 316, 319, 594 A.2d 356, 357 (Pa.Super.1991); Horanic v. Westmoreland County Tax Claim Bureau, 1992 WL 510284 at *1 (Pa.Com.Pl. March 5, 1992); Strausser v. PRAMCO, III, 944 A.2d 761, 765 (Pa.Super.2008); and Hansford v. Bank of America, 2008 WL 4078460, at *13 (E.D.Pa. August 22, 2008)

The Debtor must accordingly allege the existence of some writing which demonstrates an intent to forbear on Sovereign's (and by succession, 4th Walnut's) part. On this score the Debtor points, principally, to two sets of documents: certain January 29, 2010, letters to the Debtor's subtenants, and a state court docket reflecting the suspension of a mortgage foreclosure action. Sovereign's intention and agreement to a forbearance is...