Mintz v. Carlton House Partners, Ltd.

• Decision Date: 07 August 1991
• Citation: 407 Pa.Super. 464,595 A.2d 1240
• Parties: Howard B. MINTZ and Heddie A. Mintz, Appellants, v. The CARLTON HOUSE PARTNERS, LTD., Appellee.
• Court: Pennsylvania Superior Court

Page 1240

595 A.2d 1240

407 Pa.Super. 464

Howard B. MINTZ and Heddie A. Mintz, Appellants, v. The CARLTON HOUSE PARTNERS, LTD., Appellee.

Superior Court of Pennsylvania.

Argued May 8, 1991.

Filed Aug. 7, 1991.

Simon W. Tache, Philadelphia, for appellants.

Michael E. Garner, Philadelphia, for appellee.

Before ROWLEY, President Judge, CIRILLO and JOHNSON, JJ.

CIRILLO, Judge:

This is an appeal from an Order of the Court of Common Pleas of Philadelphia County granting partial summary judgment in favor of the appellee, The Carlton House Partners, Ltd. ("Carlton House"). We affirm.

On November 29, 1984, the appellants, Howard B. and Heddie A. Mintz, (collectively "the Mintzes"), entered into a commercial lease agreement with an agent of Carlton House. The agreement contemplated the lease of premises located on the Arcade level of the Carlton House Apartments. By its terms, the lease was intended to operate for a term of one hundred and twenty-one months beginning on December 1, 1984.

On November 21, 1986, the Mintzes filed a complaint in the Court of Common Pleas of Philadelphia County alleging breach of contract, breach of warranties, breach of the covenant of quiet enjoyment, negligence, and intentional infliction of emotional distress. The factual allegations common to all of the Mintzes' claims focused upon Carlton House's alleged failure to make certain improvements to the leased premises as stipulated in the lease agreement. Specifically, the Mintzes' claim that Carlton House failed to provide an adequate heating, ventilation, and air-conditioning unit for the leased premises. The Mintzes contend that Carlton House's failure to make such improvements constitutes a breach of the lease agreement and that they are therefore entitled to damages arising from that breach.

In its answer to the complaint, Carlton House denied that it breached the lease agreement and asserted a counterclaim for unpaid rent and other expenses due under the lease.

While the Mintzes' action was pending in the Court of Common Pleas, an involuntary Chapter 11 bankruptcy petition was filed against Carlton House in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Carlton House converted the filing to a voluntary bankruptcy proceeding and submitted a plan for reorganization thereunder. See In re TM Carlton House Partners, Ltd., 91 B.R. 349 (Bankr.E.D.Pa.1988). The Mintzes were prevented from pursuing their action in the Philadelphia County Court of Common Pleas during the pendency of the bankruptcy proceeding by operation of the automatic stay provision of the Bankruptcy Code. ¹

On May 20, 1988, the Mintzes applied to the bankruptcy court for relief from the automatic stay so that they might go forward with their state law action against Carlton House. This motion was denied after a hearing on July 7, 1988 by the Honorable David A. Scholl, United States Bankruptcy Judge. The order issued in conjunction with the denial of the Mintzes' motion granted Carlton House the opportunity to proceed in state court against the Mintzes on any claims or counterclaims that may have existed prior to the filing of the bankruptcy petition.

The Mintzes subsequently filed a proof of claim against Carlton House in the bankruptcy proceeding with the hope of participating in Carlton House's plan of reorganization. ² An evidentiary hearing was conducted in the bankruptcy court on September 20, 1989 specifically to determine the validity of the Mintzes' proof of claim. The bankruptcy court found that Carlton House was not liable to the Mintzes "in any amount" and therefore refused to award the Mintzes a claim for either pre- or post-petition damages. In re IM Carlton House Partners, Inc., Bankr. No. 88-10774S, 1989 WL 120577 (Bankr.E.D.Pa. Oct. 11, 1989). The Mintzes' post-trial motions were denied by order of the bankruptcy court on November 29, 1989. On April 16, 1990, the Honorable James T. Giles of the United States District Court issued an order affirming the bankruptcy court's disallowance of the Mintzes' proof of claim. In re IM Carlton House Partners, Inc., Civ. No. 90-0084, 1990 WL 44698 (E.D.Pa. Apr. 16, 1990).

Subsequent to the confirmation of its plan of reorganization on May 31, 1989, Carlton House filed a motion for partial summary judgment in the Philadelphia County Court of Common Pleas with respect to all of the issues raised in the Mintzes' complaint. The motion was granted on August 24, 1990 by the Honorable Samuel M. Lehrer. This timely appeal was then filed.

The Mintzes raise the following issues for review:

I. Whether the Common Pleas Court committed reversible error in granting defendant's Motion for Summary Judgment despite the existence of disputed issues of material fact.

II. Whether the Common Pleas Court committed reversible error in holding that the Order of the Bankruptcy Court entered after an evidentiary hearing is res judicata with regard to the claims set forth in the plaintiff's complaint.

The Mintzes' first argument is that the trial court erred in its application of the standard for ruling upon a motion for summary judgment. The standard for granting summary judgment is set forth in Pennsylvania Rule of Civil Procedure 1035(b). That section provides that summary judgment

shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file ... 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.

Pa.R.C.P. 1035(b) (emphasis added); see also 6 Standard Pa. Practice § 32:1 (1986).

The court of common pleas determined that the "entry of the order confirming the plan [of reorganization] acts as a full and complete discharge of any debt which might be otherwise due and owing from [Carlton House]." Mintz v. The Carlton House Partners, Ltd., Civ. No. 3965 (Pa.Com.Pl. Nov. 19, 1990), slip op. at 3. Thus, the court concluded that there was no genuine issue of fact surrounding the alleged liability of Carlton House to the Mintzes which remained to be tried in the court of common pleas.

A determination of whether the grant of a motion for summary judgment is to be upheld requires an appellate court to determine whether the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law. Overly v. Kass, 382 Pa.Super. 108, 110, 554 A.2d 970, 971 (1989). If the materials submitted by the parties meet the standards set forth in Rule 1035(b) the case is ripe for summary disposition. Bell Tel. Co. of Pa. v. Uni-Lite, Inc., 294 Pa.Super. 89, 439 A.2d 763 (1982); 6 Standard Pa. Practice § 32:47 (1986). We will not disturb the trial court's ruling absent an error of law or a manifest abuse of discretion. Vargo v. Hunt, 398 Pa.Super. 600, 581 A.2d 625 (1990). ³

The Mintzes also contend that the order confirming Carlton House's plan of reorganization did not operate as a full and complete discharge of their claims. They argue that a disputed issue of material fact exists as to whether the entry of the order confirming Carlton House's plan of reorganization acts as a full and complete discharge of their claims which arose after the date of the confirmation of the plan. ⁴ Similarly, the Mintzes argue that there has been no final valid judgment on the merits entered by the bankruptcy court which affects the totality of their claims and that the trial court therefore erred in applying the doctrine of res judicata. We disagree.

Section 1141(d) of the Bankruptcy Code provides that the confirmation of a plan of reorganization discharges the debtor from any debt which arose before the date of such confirmation. See 11 U.S.C. § 1141(d). ⁵ A debt, as that term is used in the Bankruptcy Code, includes the damages which the Mintzes seek to recover. See 11 U.S.C. §§ 101(11), 101(4). ⁶

Furthermore, the question of when a debt arises for bankruptcy purposes is to be resolved by application of state law. In re Frenville Co., Inc., 744 F.2d 332, 336 (3d Cir.1984). Under the law of this Commonwealth, a debt occurs at the time of the breach which gives rise to the cause of action. Chittenholm v. Giffin, 357 Pa. 616, 55 A.2d 324 (1947). Therefore, the debt assertedly owed to the Mintzes is deemed to have arisen at the time of the breach which gave rise to the cause of action. Id. We find, as did the trial court, that the breach alleged here occurred prior to the confirmation of Carlton House's plan of reorganization. Thus, the Mintzes' "future claims" have been fully and completely discharged by the confirmation of the plan of reorganization pursuant to section 1141 of the Bankruptcy Code. 11 U.S.C. § 1141(d)(1)(A).

Moreover, the bankruptcy court determined that there was no breach of duty on the part of Carlton House. In re TM Carlton House Partners, Inc., Bankr. No. 88- 10774S, 1989 WL 120577 (Bankr.E.D.Pa. Oct. 11, 1989). Therefore, the Mintzes are not entitled to damages irrespective of whether they may have arisen prior to or after the confirmation of the plan of reorganization. It is a fundamental principle of jurisprudence that there can be no award of damages without a finding of liability. See Incollingo v. Ewing, 444 Pa. 299, 282 A.2d 206 (1971) (the amount of damages to be awarded must be limited to the amount of the loss sustained). Thus, the final valid judgment entered by the bankruptcy court regarding the lack of merit of the Mintzes' claims disposes of all claims to damages contained in the Mintzes' complaint. See Bailey v. Harleysville Mutual Ins. Co., 341 Pa.Super. 420, 424, 491 A.2d 888, 890 (1985). The time of the transaction or the breach, not the time at which damages may have been incurred, is dispositive of this issue. Kapil v. Ass'n. of Pa. St. College & Univ., 504 Pa. 92, 99, 470 A.2d 482, 485 (1983). ⁷

The second issue raised by the Mintzes...