Pops Pce TT, LP v. R&R Rest. Grp., LLC.

• Decision Date: 11 April 2019
• Docket Number: No. 644 WDA 2018,644 WDA 2018
• Citation: 208 A.3d 79
• Court: Pennsylvania Superior Court
• Parties: POPS PCE TT, LP, Appellee v. R & R RESTAURANT GROUP, LLC., f/k/a Brewstone Pittsburgh, LLC, Appellant

208 A.3d 79

POPS PCE TT, LP, Appellee

v.R & R RESTAURANT GROUP, LLC., f/k/a Brewstone Pittsburgh, LLC, Appellant

No. 644 WDA 2018

Superior Court of Pennsylvania.

Argued October 31, 2018

Filed April 11, 2019

Reargument Denied June 12, 2019

Matthew A. Bole, Pittsburgh, for appellant.

Jason M. Yarbrough, Pittsburgh, for appellee.

BEFORE: BENDER, P.J.E., SHOGAN, J., and MURRAY, J.

OPINION BY BENDER, P.J.E.:

Following this Court's November 18, 2016 remand of this case to the trial court,¹ R & R Restaurant Group, LLC, f/k/a Brewstone Pittsburgh, LLC ("Appellant") appeals from the April 9, 2018 order denying its petition to open the confessed judgment in favor of Pops PCE TT, LP ("Pops"). After careful review, we reverse and remand to the trial court for further proceedings consistent with this opinion.

This case arises from a commercial lease executed between Appellant and Pops for premises located in Pittsburgh, Pennsylvania, for a 10-year term commencing on December 22, 2013, and ending on November 30, 2023 ("Lease"). Pursuant to the terms of the Lease, Appellant was to pay Pops a total of $ 21,028.41 per month for the period of December 22, 2013 through December 21, 2018, and $ 22,421.08 per month during the period of December 22, 2018 through November 30, 2023, while remaining responsible for certain additional charges actually incurred. See Complaint in Confession of Judgment, 6/30/15, Exhibit A (Lease) at 2. In the event of a default by Appellant, the Lease contained a provision for the acceleration of rent, see id. at 28-30 ¶ 23, and further provided that Pops may confess judgment for all sums due under the Lease. Id. at 42 ¶ 45.

Appellant leased the premises with the intention of operating a restaurant and bar and, thus, avers its obligations under the Lease, in whole or in part, were contingent upon its ability to obtain a liquor license. Appellant's Petition to Open and/or Strike Judgment Entered by Confession ("Petition to Open"), 7/22/15, ¶¶ 21-22. The Lease instructs Appellant to "take whatever reasonable actions" to acquire the liquor license – referred to by the parties as the Landlord Liquor License ("LLL") – that was owned by a former tenant of the property. See Lease at 44 ¶ 49(A)(ii). In the event that Appellant is unsuccessful, the Lease provides Appellant with the option of attempting to obtain a Tenant Liquor License ("TLL"). Id. at 46-47 ¶ 49(A)(xi). If Appellant is unable to secure a TLL within a prescribed period of time ("TLL Transfer Period"), then Appellant is permitted to extend the TLL Transfer Period and, ultimately, to terminate the Lease by undertaking specified action:

If, notwithstanding [Appellant's] best efforts, [Appellant] is unable to obtain approval to transfer the [TLL] to the Premises within [the TLL Transfer Period], then [Appellant] shall have the right to extend the [TLL] Transfer Period by up to sixty (60) days by delivery of written notice thereof to [Pops]. If, following such extension, [Appellant] is unable to obtain the necessary governmental approvals to sell alcoholic beverages at the [p]remises during all hours of operation, [Appellant] may elect to terminate the Lease by providing notice of its intent to terminate this Lease by: (i) delivering to [Pops], within two (2) business days following the expiration of the [TLL] Transfer Period, with written noticeof its inability to obtain the [TLL] prior to expiration of the [TLL] Transfer Period and exercising its right to terminate this Lease; and (ii) including with such notice all documentary evidence of [Appellant's] efforts to obtain the [TLL] on or before expiration of the [TLL] Transfer Period. If [Appellant] elects to so terminate this Lease and satisfied all of the conditions stated in the preceding sentence with respect thereto, then this Lease shall terminate[.]

Lease at 48 ¶ 49(B)(iv). Paragraph 49 further states that for any period that Appellant is unable to sell alcohol "as a result of [a] pending application" for a liquor license, all minimum rent "shall be abated and shall not be due and payable until" the license is secured. Id. at 43 ¶ 49.

On May 31, 2014, Appellant notified Pops via e-mail that it had exhausted its efforts to transfer the LLL, was electing to obtain a TLL, and was in discussions to purchase a liquor license from a potential seller. Petition to Open, Exhibit B. On July 1, 2014, Appellant informed Pops by letter that it "intends, pursuant to [paragraph] 49(B)(iv) to elect its right to terminate the [L]ease ... if it is unable to obtain approval to transfer a [TLL] to the Premises within the [TLL] Transfer Period." Id. , Exhibit D ("July 1, 2014 letter"). The July 1, 2014 letter further stated that the TLL Transfer Period would expire on August 28, 2014.² As of November of 2014, Appellant continued to undertake efforts to secure a TLL to be used at the premises leased from Pops. See Affidavit in Support of Petition to Open ("Affidavit"), 10/13/15, at 4 ¶ 27 (unpaginated). Ultimately, however, Appellant did not obtain a liquor license and failed to pay rent beginning in January of 2015. Complaint in Confession of Judgment at 5 ¶ 22.

On January 20, 2015, Pops filed a landlord-tenant complaint before a Magisterial District Judge ("MDJ"), seeking possession of the leased premises only. On January 29, 2015, the MDJ entered a notice of judgment, finding, inter alia , that Appellant was in default of the Lease and granting possession of the premises to Pops. No monetary damages were awarded. Appellant did not appeal the MDJ's decision. Subsequently, Pops filed a complaint in confession of judgment for money damages against Appellant. Confessed judgment in the amount of $ 2,334,608.87, plus post-judgment interest and costs of suit, was entered against Appellant on June 30, 2015. This sum included accelerated rent due under the Lease through November 2023.

On July 22, 2015, Appellant filed a petition to open and/or strike the confessed judgment, raising, inter alia , the following defenses: (1) it had not breached the Lease; (2) its July 1, 2014 letter to Pops properly terminated the Lease; and (3) Pops was precluded from entering the confessed judgment pursuant to Paragraph 45 of the Lease, as Pops had already obtained possession of the leased premises. Petition to Open at 5 ¶ 20. On August 25, 2015, the trial court denied Appellant's request to strike the confessed judgment, but issued a rule to show cause on Pops as to why Appellant's petition to open should not be granted. In response, Pops filed an answer and new matter accompanied by a brief in which it argued generally that all of Appellant's defenses were barred by res judicata and collateral estoppel because they had already been litigated and decided by the MDJ. Appellant then filed a brief, a reply to Pops' new matter, and an affidavit prepared by Louis Caputo, Esquire, who was retained by Appellant to assist it in obtaining a liquor license.³

After conducting oral argument, the trial court concluded that Appellant's defenses to the confessed judgment were barred by res judicata and collateral estoppel and, on November 13, 2015, the court denied Appellant's petition to open. Appellant appealed to this Court, which issued a memorandum decision on November 18, 2016. See Pops I , supra . We held that Appellant's defenses to the entry of confessed judgment were not barred by res judicata or collateral estoppel. Accordingly, we vacated the trial court's November 13, 2015 order and remanded for further proceedings for the court to consider the defenses raised in Appellant's petition to open. Id. at *9.

On January 31, 2018, the trial court heard argument on the merits of Appellant's petition to open. At the hearing, Appellant maintained that this case presented questions of fact for a jury, including whether Appellant undertook reasonable steps to secure a liquor license and whether its July 1, 2014 letter properly terminated the Lease. N.T. Hearing, 1/13/18, at 6-9. Appellant also appealed to the equitable powers of the court by arguing that the confessed judgment was "extremely inequitable." Id. at 10. Pops replied that Appellant did not dispute Pops' claim of unpaid rents and, furthermore, argued that Appellant failed to properly terminate the Lease. Id. at 15, 22.

Pops extensively argued that Paragraph 49 of the Lease prescribed a specific procedure and timeline for termination: Appellant was to notify Pops of termination within two days following the expiration of the TLL Transfer Period . Pops interpreted this provision to mean, when the TLL Transfer Period expired on August 28, 2014, that Appellant was required to notify Pops between August 29 and 31, 2014. Id. at 33, 51. Pops contended that Appellant's July 1, 2014 letter could not have terminated the Lease because not only did the letter predate the expiration of the TLL Transfer Period, but Appellant also continued to pay rent and attempted to obtain a liquor license after the letter was sent. Id. at 32, 38, 44-45, 51. Pops reasoned that there was no dispute regarding any question of fact in terms of what Appellant did, but Pops argued, rather, that the issue was "what Paragraph 49 means," and that the interpretation of a contract is a question of law for the court, not the jury. Id. at 27, 52. Appellant responded, without further explanation, that its July 1, 2014 notification to Pops was timely "[b]ased on [its] calculation of what [it] understood the [L]ease to be," and reiterated "this is a factual issue as to whether [the July 1, 2014 letter] was appropriate under the [L]ease." Id. at 51-52.⁴

On April 9, 2018, the trial court denied Appellant's petition to open. It found that Appellant's July 1, 2014 letter could give rise to a jury question as to whether [Appellant] properly terminated the Lease. Trial Court Opinion ("TCO"), 4/9/18, at 4. However, the court determined that the letter failed to include any documentary evidence of Appellant's efforts to obtain a TLL, as required by ...