Samuel Rappaport Family Partnership v. Meridian Bank

• Decision Date: 11 April 1995
• Citation: 441 Pa.Super. 194,657 A.2d 17
• Parties: , 26 UCC Rep.Serv.2d 474 SAMUEL RAPPAPORT FAMILY PARTNERSHIP, Appellant, v. MERIDIAN BANK.
• Court: Pennsylvania Superior Court

Page 17

657 A.2d 17

441 Pa.Super. 194, 26 UCC Rep.Serv.2d 474

SAMUEL RAPPAPORT FAMILY PARTNERSHIP, Appellant, v. MERIDIAN BANK.

Superior Court of Pennsylvania.

Argued Nov. 30, 1994.

Filed April 11, 1995.

David L. Braverman, Philadelphia, for appellant.

Michael Onufrak, Philadelphia, for appellee.

Before OLSZEWSKI, JOHNSON and HESTER, JJ.

HESTER, Judge:

The Samuel Rappaport Family Partnership appeals from the order entered in the Court of Common Pleas of Philadelphia County on February 1, 1994, which granted Meridian Bank judgment notwithstanding the verdict. For the reasons set forth below, we affirm.

The facts and procedural history of this case may be summarized as follows. On May 7, 1985, McKlan, Inc., apparently seeking to take over the operation of a Philadelphia restaurant, agreed to lease from several individuals and entities property housing both the restaurant and a delicatessen. The lease, which incorporated by reference a contemporaneously executed escrow agreement, encompassed an initial term of five years and could be renewed at McKlan's option for two additional five-year periods. Although the lease's effectiveness was contingent upon the Pennsylvania Liquor Control Board approving the transfer of the landlords' liquor license, it required McKlan to post a substantial cash security deposit with a named escrow agent pending the Board's decision. In addition, the lease obliged McKlan to substitute an irrevocable $100,000 letter of credit for the cash security deposit upon approval of the liquor license transfer. The terms of the lease required the letter of credit to be drawn on a reputable bank and made payable to the escrow agent upon the presentation of his sight draft ¹ and certain other documentation. That documentation was to consist of the escrow agent's certification that McKlan had been given ten days notice of the sight draft's presentment and the landlords' certification regarding the existence of an uncured default.

In August, 1985, Marvin Orleans purchased the property, and the original landlords assigned their interest in the lease to him. I. David Pincus, Esquire, was named the new escrow agent. On October 2, 1985, at McKlan's behest, Central Penn National Bank issued the letter of credit required by the lease. The letter of credit provided that it would remain effective for a period of one year and that payment was contingent upon the bank's receipt of certain documentation. Specifically, it required the presentation of Mr. Pincus's sight draft along with his certification that McKlan had received ten days notice of the presentment. The letter of credit also required the submission of a certificate signed by Mr. Orleans indicating that an event of default had occurred under the terms of the lease, that McKlan was notified of the default's existence, and that McKlan failed to cure it in a timely fashion.

Following the issuance of the letter of credit, Central Penn merged into Meridian Bank. Meridian subsequently advised both McKlan and Mr. Pincus that all sight drafts seeking payment under the letter of credit would have to be drawn upon it. On September 24, 1986, Meridian amended the letter of credit to extend its effective period for another year. Shortly thereafter, Mr. Orleans died. Later, when appellant purchased the property from Mr. Orleans's estate, the estate assigned the lease to it. None of appellant's agents examined the letter of credit prior to the purchase.

On September 14, 1987, after McKlan instituted bankruptcy proceedings, Meridian again amended the letter of credit to provide for a one-year extension of its effective period. McKlan subsequently defaulted under the lease, and Samuel Rappaport, appellant's sole general partner, examined the letter of credit's terms for the first time. Later, Mr. Pincus submitted a $100,000 sight draft to Meridian, which certified that McKlan had received the requisite notice of presentment. Among the documents accompanying the sight draft was a certification signed by Mr. Rappaport. In that certification, Mr. Rappaport indicated that appellant was the lawful assignee of Mr. Orleans's interest in the lease, that an event of default had occurred under the lease's terms, and that McKlan had failed to cure that default in a timely fashion. In addition, he noted that appellant and McKlan had amended the lease on April 5, 1985, to restate its provisions relating to the letter of credit.

Michael Bohley, one of Meridian's employees, examined both the letter of credit and the documentation supporting the sight draft's presentment. He noticed that Mr. Pincus failed to include in his presentment the required certificate signed by Mr. Orleans. Consequently, Mr. Bohley contacted McKlan to see if it would waive that requirement and permit payment. McKlan's representatives informed him that it would not consent to payment. Accordingly, Meridian refused to honor Mr. Pincus's sight draft. ²

On October 28, 1988, shortly after Meridian dishonored the sight draft, appellant filed a complaint against it. In that complaint, appellant asserted causes of action for both breach of contract and breach of the implied warranty of good faith. In addition, it requested a declaration of the parties' rights and obligations with respect to the letter of credit.

On November 18, 1988, Meridian filed an answer and new matter, which denied liability and asserted numerous defenses. The parties subsequently engaged in discovery and filed additional pleadings. On January 6, 1989, alleging that no genuine issue of material fact existed and that it was entitled to judgment as a matter of law, Meridian moved for summary judgment. In support of its request for relief, Meridian relied upon both an affidavit of Mr. Bohley and a memorandum of law. In the memorandum, Meridian asserted, among other things, that appellant lacked the standing necessary to obtain relief.

On May 16, 1989, the trial court denied Meridian's summary judgment motion. Forty-seven months later, a jury found that Mr. Pincus's presentment complied with the terms of the letter of credit and determined that Meridian's improper dishonor of the sight draft caused appellant to sustain $100,000 in damages. Consequently, the jury awarded appellant the face amount of the letter of credit. Meridian subsequently filed post-trial motions, which reasserted its standing claim and requested both the entrance of judgment n.o.v. and the grant of a new trial. On January 31, 1994, sitting en banc, the trial court denied Meridian's request for a new trial. However, the court, which did not address Meridian's standing claim, concluded that Meridian properly dishonored the sight draft due to the presentment's failure to comply with the strict terms of the letter of credit. Accordingly, it granted Meridian judgment n.o.v. This timely appeal followed the entrance of the court's order on the docket.

Raising a purely legal claim, appellant challenges the propriety of the trial court's decision to grant judgment n.o.v. in Meridian's favor. In support of its challenge, appellant relies upon the principles of contract interpretation and asserts that the death of Mr. Orleans created an ambiguity in the terms of the letter of credit, which the jury properly resolved after examining extrinsic evidence. We conclude that this claim entitles appellant to no relief. Consequently, we need not consider questions related to the particularly thorny threshold issue of whether appellant possessed the standing necessary to contest Meridian's failure to honor the sight draft presented by Mr. Pincus.

It is clear in this Commonwealth that issues not asserted in the trial court may not be raised for the first time on appeal. See Weir v. Weir, 428 Pa.Super. 515, 631 A.2d 650 (1993); Kryeski v. Schott Glass Technologies, Inc., 426 Pa.Super. 105, 626 A.2d 595 (1993); Pa.R.A.P. 302. Thus, a party cannot rely upon one theory of relief in the trial court and pursue a different theory on appeal. Kryeski v. Schott Glass Technologies, Inc., supra; Guidry v. Johns-Manville Corp., 377 Pa.Super. 308, 547 A.2d 382 (1988).

In the present case, our review of the record reveals that appellant did not assert its ambiguity theory in the trial court. Rather, our examination of the record demonstrates that appellant alleged the existence of an obvious mistake in the renewal of the letter of credit which rendered performance impossible. Accordingly, we conclude that the theory of relief presently relied upon by appellant has not been preserved for our review.

Our conclusion in this regard is supported by an examination of both the notes of testimony and certain memoranda filed by appellant. Our review of the notes of testimony reveals that appellant noted in its closing argument that Meridian's sole reason for dishonoring Mr. Pincus's sight draft was the lack of an accompanying certificate signed by Mr. Orleans. See Notes of Testimony ("N.T."), 4/14/93, at 109. Consequently, appellant argued that since the letter of credit had been renewed after Mr. Orleans's death, the document signed by Mr. Rappaport should be considered adequate to satisfy the terms of the letter of credit. Id. Appellant attempted to buttress its argument by pointing out that it was to receive any money paid in accordance with the letter of credit and that the requirement at issue was not essential to the lease transaction because no provisions in either the lease or the escrow agreement referred to Mr. Orleans. Id. at 110. However, appellant never mentioned the term "ambiguity," never indicated that the death of Mr. Orleans rendered the terms of the letter of credit unclear, and never asked the jurors to resolve any lack of clarity. Furthermore, we note that the notes of testimony are devoid of any indication that appellant requested a jury instruction related to its ambiguity theory.

Our examination of the memoranda filed by appellant in the trial court demonstrates...