Trizechahn Gateway LLC v. Titus
| Decision Date | 22 July 2009 |
| Docket Number | No. 53 WAP 2008.,No. 51 WAP 2008.,51 WAP 2008.,53 WAP 2008. |
| Citation | 976 A.2d 474 |
| Parties | TRIZECHAHN GATEWAY LLC, a Delaware Limited Liability Company, Appellant v. Paul H. TITUS, James H. McConomy, Lindsey D. Alton, Thomas D. Arbogast, S. Link Christian, David I. Cohen, Suzanne L. DeWalt, Donald T. Dulac, Jr., Martin J. Hagan, Thomas M. Hardiman, Henry R. Johnston, III, Stephen R. Kaufman, David B. Mulvihill, David G. Oberdick, Manning J. O'Connor II, Debra M. Parrish, Adrian N. Roe, Thomas J. Santone, Mark Stadler, C. Richter Taylor, Jr., Charles B. Watkins, Thomas C. Wettach, as Individuals, Trading and doing Business as Titus & McConomy, a Pennsylvania General Partnership, also known as Titus & McConomy, LLP, Appellees. |
| Court | Pennsylvania Supreme Court |
BEFORE: CASTILLE, C.J., and SAYLOR, EAKIN, BAER, TODD, McCAFFERY and GREENSPAN, JJ.
This appeal involves a commercial landlord/tenant dispute in which the tenant, a now-dissolved law firm, defaulted on rent payments and moved out of the building with several years remaining on the lease. The legal questions raised pertain to individual partner liability, lease interpretation, and the award of counsel fees.
In 1995, a third-party landlord and the law firm of Titus & McConomy LLP ("T & M"),1 began negotiating a lease agreement for occupation of the entire twentieth floor, part of the twenty-first floor, and basement storage space in Four Gateway Center, located in downtown Pittsburgh. Shortly after negotiations began, the third-party landlord sold Four Gateway Center to the present owner, Trizechahn Gateway LLP ("Trizechahn"). After further negotiations, T & M and Trizechahn reached an agreement and, subsequently, executed the ten-year master lease that is the principal subject of this litigation. Trizechahn's director of leasing testified that the master lease was originally drafted by the third party who sold Four Gateway Center to Trizechahn, that Trizechahn's lawyers reviewed the master lease before it was executed, and that certain terms of the original draft were changed after negotiations with T & M. The lease ran from October 1, 1995, through June 30, 2005. In June 1998, the parties entered into a second lease for an additional storage area in the basement of the building. The term of the storage lease ran from June 15, 1998, until June 30, 2005.
In August 1999, T & M decided to liquidate and wrap up its affairs. To this end, Appellee Paul Titus sent a letter to Trizechahn's general manager advising of the impending dissolution and offering to work toward subletting the master lease premises. A formal plan of liquidation was executed on that same date. Shortly thereafter, T & M vacated the master lease premises, but left behind office fixtures in the office space and files in the basement storage spaces. T & M continued to pay rent through January 2000, when all rental payments ceased. More than five years remained on the lease term at the time of default.
As it became clear that T & M would default on the lease, Trizechahn exercised its rights pursuant to Paragraph 15 of the master lease, which provided for an extensive array of landlord remedies, including the ability to enter the premises to remove the tenant's signs and other evidence of tenancy without terminating the lease or relieving the tenant of its obligations under the lease. See Master Lease at 9, ¶ 15(b), (d), RR. 136a. Pursuant to these provisions, Trizechahn sought to re-lease the space to subtenants in an effort to reduce its own risk and T & M's liability.
In February 2000, Trizechahn sent a letter to T & M outlining two termination plans into which it would be willing to enter to settle T & M's outstanding obligations under the master lease, both of which called for T & M to remit payments totaling less than $1 million. After T & M did not formally respond to this letter, Trizechahn sent a second letter notifying T & M that it had failed to remit rental payments for February and March of 2000. The letter stated Trizechahn would forego adding interest or penalty charges to the outstanding balance as a professional courtesy. In mid-July 2000, Trizechahn sent a third letter to T & M, notifying it that Trizechahn was attempting to relet the master lease storage space, and requesting T & M to remove any miscellaneous files left there after the firm's abandonment of the space. Four days later, T & M replied by agreeing to remove the files; however, T & M still did not remit any rent payments that were by this time overdue.
In late July 2000, having received no rental payments for March through July of 2000, Trizechahn commenced an action in the common pleas court, naming as defendants T & M as a Pennsylvania general partnership, as well as the partners in their individual capacities (collectively, the "Titus Appellees"), and seeking all sums still due under the lease. Trizechahn's complaint was amended several times to add additional parties and to advance a claim for re-letting and alteration expenses. Protracted litigation ensued in the trial court based on Trizechahn's amended complaint. After motions and argument, the court held a non-jury trial and issued a memorandum opinion setting forth its findings and conclusions. The issues centered on whether Trizechahn had a duty to mitigate damages; whether Trizechahn had terminated the lease by re-letting the space or had merely acted under the lease terms to obtain proceeds that could be deducted from the amount owed by T & M; and whether various partners of T & M were individually liable for any award in favor of Trizechahn. In the latter regard, the master lease contained a provision stating:
28. Special Stipulations
...
(i) In the absence of fraud, no person, firm or corporation, or the heirs, legal representatives, successors and assigns, respectively, thereof, executing this lease as agent, trustee or in any other representative capacity shall ever be deemed or held individually liable hereunder for any reason or cause whatsoever.
Master Lease at 12, ¶ 28(i), RR. 139a (hereinafter, "Subclause (i)").
The trial court awarded damages to Trizechahn for unpaid rent, expenses, interest, and counsel fees, ultimately entering judgment for approximately $3,274,000, a figure that included Trizechahn's renovation and re-letting costs, pre-judgment interest, and counsel fees. In reaching its verdict, the court reasoned that, once T & M breached the master lease, Trizechahn had no duty to mitigate and, additionally, had the option, under Paragraph 15(b) of the master lease, to re-let the premises without terminating the lease, and deduct the proceeds of such re-letting from the balance owed by T & M. On appeal to the Superior Court, T & M and the individual Titus Appellees asserted various grounds of error, including that the trial court had improperly held the partners who signed the master and storage leases individually liable notwithstanding Subclause (i), and that it should not have allowed Trizechahn to recover legal fees.
In a published decision, the Superior Court affirmed in part, reversed in part, vacated in part, and remanded. See Trizechahn Gateway LLC v. Titus, 930 A.2d 524 (Pa.Super.2007). After rejecting several of T & M's allegations of trial court error not presently relevant, the court turned to the issue of which partners, if any, were shielded from personal liability under Subclause (i). The court first stated that the clause facially could apply only to partners Thomas Arbogast and Thomas Wettach, as they were the ones who executed the two leases on behalf of T & M. Although the court found the clause ambiguous on the question of whether it relieved these partners of liability in their individual capacities, it agreed with the trial court's decision not to entertain any parol evidence on the question, because the clause was drafted by the original property owner, and not Trizechahn, thus rendering any inquiry into Trizechahn's "intent" in drafting the clause meaningless. Further, the court indicated that any parol evidence from Trizechahn would have little credibility—because Trizechahn would simply assert that it did not intend to release Arbogast and Wettach from liability—and that, therefore, only Arbogast and Wettach could offer testimony worthy of belief. See Id. at 538-39. Ultimately, however, the Superior Court found that the trial...
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