Trs. of Conneaut Lake Park, Inc. v. Park Restoration, LLC (In re Trs. of Conneaut Lake Park, Inc.)

• Decision Date: 15 December 2017
• Docket Number: Adversary No. 16–01029–JAD,Bankruptcy No. 14–11277–JAD
• Citation: 577 B.R. 474
• Parties: IN RE: TRUSTEES OF CONNEAUT LAKE PARK, INC., Debtor. Trustees of Conneaut Lake Park, Inc., Plaintiff, v. Park Restoration, LLC, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Pennsylvania

577 B.R. 474

IN RE: TRUSTEES OF CONNEAUT LAKE PARK, INC., Debtor.Trustees of Conneaut Lake Park, Inc., Plaintiff,

v.Park Restoration, LLC, Defendant.

Bankruptcy No. 14–11277–JAD

Adversary No. 16–01029–JAD

United States Bankruptcy Court, W.D. Pennsylvania.

Signed December 15, 2017

As Amended December 27, 2017

Jeanne S. Lofgren, Stonecipher Law Firm, Pittsburgh, PA, for Plaintiff.

John F. Mizner, Mizner Law Firm, Erie, PA, for Defendant.

MEMORANDUM OPINION

JEFFERY A. DELLER, Chief United States Bankruptcy Judge

Trustees of Conneaut Lake Park, Inc. ("Plaintiff" or "TCLP") commenced the above-captioned adversary proceeding by filing its three-count Complaint against Park Restoration, LLC ("Defendant" or "Park Restoration", and together with Trustees of Conneaut Lake Park, Inc., "the Parties"). See Complaint, ECF No. 1.

Pursuant to the Complaint, TCLP alleges two counts of breach of contract (Counts I and II) and one count of contractual indemnification (Count III) against Park Restoration stemming from the Parties' Beach Club Management Agreement. See Complaint, ECF No. 1.

The details of the Beach Club Management Agreement are discussed more in-depth in this Court's Memorandum Opinion dated February 21, 2017, which addressed the Parties' cross motions for judgment on the pleadings. See Mem. Op., ECF No. 67.

In the Memorandum Opinion and corresponding orders, the Court: (1) entered judgment on the pleadings as to liability only in favor of TCLP with respect to Count I of the Complaint, (2) stayed prosecution of Counts II and III, (3) denied Park Restoration's Cross Motion for Judgment on the Pleadings, and (4) set trial on the issue of damages relative to Count I. See id.; Order, ECF No. 68; and Scheduling Order Regarding Trial on Damages, ECF No. 69.

A trial was held on the issue of damages with respect to Count I of the Complaint on May 17, 2017 and July 24, 2017. Thereafter, the Parties were provided with an opportunity to brief the issues which are now ripe for decision.¹

I.Procedural and Factual History

TCLP seeks recovery from Park Restoration in relation to the Beach Club Management Agreement. As stated above, the details of the Beach Club Management Agreement are more specifically set out in this Court's February 21^stMemorandum Opinion. However, the details pertinent to resolution of the issue of damages as to Count I only, are as follows:

TCLP owns certain real property located on the lakefront of Conneaut Lake in Crawford County, Pennsylvania and upon which sat a structure referred to as the Beach Club (the "Property"). See Mem. Op. 2, ECF No. 67. The Property is subject to a charitable use restriction (the "Charitable Use Restriction") which states that the Property is to be held:

IN TRUST, NEVERTHELESS, for the use of the general public forever subject, however, to such rules and regulations for the use of said land to be known as "Conneaut Lake Park" as may be made from time-to-time by the Trustees of Conneaut Lake Park, Inc., and their successors; AND FURTHER specifically, in part for use as a public amusement park and the like, and in part for use as a public park with open parkland and the like, and in part for the use for public buildings and the like forever; AND FURTHER in addition specifically in part for public access to and use of Conneaut Lake and the lake shore, for swimming and boating and the like, forever; AND FURTHER, for other like and similar and related public purposes; all forever.

See Appraisal Report("TCLP's Appraisal") 27, ECF No. 103, Ex. P–11.

The Parties entered into the Beach Club Management Agreement on or about November 24, 2008, whereby Park Restoration agreed to provide operational and management services for the Beach Club. See Mem. Op. 3, ECF No. 67. The Beach Club Management Agreement stated that upon its termination, Park Restoration was duty bound to "vacate the premises ensuring that it is in broom clean condition without any damages to any equipment or property." Id. at 15.

On August 1, 2013, a fire completely destroyed the Beach Club. Thereafter, TCLP declared the Beach Club Management Agreement to be terminated at which time Park Restoration failed to return the Beach Club in "broom clean" condition free from damage. See Complaint, Ex. B, ECF No. 1; Mem. Op. 15, ECF No. 67.

After this bankruptcy was commenced, TCLP initiated this adversary proceeding alleging at Count I a claim of breach of contract due to Park Restoration's failure to return the Beach Club to TCLP in "broom clean" condition free from damage. See Mem. Op., ECF No. 67.

Following the close of pleadings, the Parties filed their respective cross-motions for judgment on the pleadings, which were adjudicated in TCLP's favor as to liability on Count I only, with prosecution of Counts II and III stayed pending resolution of the issue of damages on Count I.

Contemporaneously with the issuance of the February 21^stMemorandum Opinion, the Court issued a scheduling order setting the trial on damages for May 17, 2017, and inter alia, fixed the deadline for completing discovery as April 14, 2017. See Scheduling Order Regarding Trial on Damages, ECF No. 69.

On May 3, 2017, the Parties submitted their Meet & Confer Stipulation, ECF No. 76, wherein it was disclosed to the Court for the first time that Park Restoration intended to present at the May 17^th trial a pre-fire and post-fire appraisal ("Park's Appraisal") of the Property. The gist of this evidence was that Park Restoration claimed that the subject Property was worth more after the fire and that TCLP had no cognizable claim for damages. TCLP, however, identified no appraisal evidence as part of its prepared witness list and exhibit list.

Park's Appraisal was identified in the section of the Meet & Confer Stipulation titled "Agreed, Marked Exhibits for Trial" and appraiser Vicki Gillette was listed as the associated witness. See ECF No. 76.

On May 5, 2017, Park Restoration filed a motion for summary judgment on the basis that the appropriate measure of damages for Count I was the diminution of fair market value of the Property occasioned by the fire, and since TCLP failed to identify in its pre-trial filings any appraisal or other evidence which would demonstrate a diminution, TCLP would be unable to sustain its burden at the May 17^th trial. See Def.'s Mot. to Lift Stay and for Summ. J., ECF No. 83. Due to the close proximity of the trial, the deadline to respond to the summary judgment motion was not set to expire until after the May 17^th trial. Accordingly, as of the date of trial, no responsive pleading was yet filed by TCLP.

At the May 17^th trial, TCLP proceeded on its legal argument that the appropriate measure of damages is repair and replacement costs of the Beach Club, and presented evidence that the replacement costs were $1,978,375 and $830,917, with the latter figure taking into account depreciation attributable to age and condition of the Beach Club. See Plaintiff's Exhibit List, Ex. P–4, Ex. B, ECF No. 77. These replacement costs were stipulated to by Park Restoration. See id., Tr. of Evidentiary Hr'g Regarding Damages 7–9, ECF No. 117 ("May 17th Transcript").

At the trial, Park's Appraisal and the testimony of Vicki Gillette were offered into evidence by Park Restoration. TCLP's Counsel objected to the admissibility of Park's Appraisal, arguing that although Park's Appraisal was identified as an "Agreed, Marked Exhibit[ ] for Trial" in the Meet & Confer Stipulation, its inclusion was a courtesy. Counsel also argued that TCLP did not intend to stipulate to the alleged facts set forth in Park's Appraisal, and in fact, Park's Appraisal was only provided to TCLP on May 3, 2017—nearly three weeks after the close of discovery. See May 17^th Transcript 6–15, 73–77.

Perhaps now wavering in her confidence of TCLP's legal theory of damages, TCLP's Counsel requested a continuance of the trial in order to allow TCLP to obtain its own appraisal of the Property. Unsurprisingly, Park Restoration objected.

In weighing the unique circumstances of the case, the Court recognized that Park Restoration failed to adequately disclose its appraisal, but noted that the Parties included it in the Meet & Confer Stipulation and TCLP failed to file a motion in limine despite having two weeks to do so prior to trial. See id.

Nonetheless, in the interest of fairness and finding no prejudice to Park Restoration, the Court continued the trial to July 24, 2017, in order to allow TCLP to obtain an appraisal. See May 17^th Transcript 75–79; Scheduling Order Regarding Continued Trial on Damages, ECF No. 90 ("Order Continuing Trial"). The Court also directed that the Parties be permitted to conduct additional limited discovery until July 7, 2017, with depositions concluding no later than July 14, 2017. See Order Continuing Trial 5.

In the interim between the May 17^th and July 24^th trial dates, TCLP filed a response to the summary judgment motion. On July 17, 2017, Park Restoration filed a Motion to Compel Production, or in the Alternative, In Limine to Exclude Testimony("Motion to Compel").

Central to the Motion to Compel, Park Restoration complained of TCLP's failure to provide records upon which TCLP's expert appraiser, Robert Glowacki, formulated his pre-fire opinion of value of the Property. See Motion to Compel, ECF No. 102. TCLP defended against the Motion to Compel by arguing that not only was the information confidential, but that it was irrelevant as TCLP agreed to stipulate to Park Restoration's pre-fire fair market value of $622,000. See Resp. to Mot. to Compel Production, ECF No. 106. Thus, the only question of value was the post-fire fair market value of the Property (and the extent to which it showed a diminution in fair market value occasioned by the fire damage).

Immediately prior to the continued trial on damages, a hearing was held on the Motion to Compel. The result of the hearing was that irrespective of TCLP's stipulation to pre-fire value, the documents underlying Glowacki's pre-fire...