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

• Decision Date: 21 February 2017
• Docket Number: Bankruptcy No. 14–11277–JAD,Adversary No. 16–01029–JAD
• Citation: 564 B.R. 495
• 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

564 B.R. 495

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 February 21, 2017

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

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

MEMORANDUM OPINION ¹

The Hon. Jeffery A. Deller, Chief U.S. Bankruptcy Judge

The question presented to the Court, in the context of a Motion for Judgment on the Pleadings filed by the plaintiff, is whether the language of a contract renders the defendant liable to the plaintiff for damages to property destroyed by fire. Because the contract at issue does result in such liability as to the defendant, the Court finds that the plaintiff's Motion for Judgment on the Pleadings shall be granted, in part, with respect to the cause of action asserted in Count I of the Complaint . Specifically, judgment on the pleadings shall be entered as to the defendant's liability for breach of contract, and a trial will be scheduled as to the amount of damages to be assessed against the defendant under Count I of the Complaint .

Given this disposition, and given the nature of notice pleading under the Federal Rules, it is also appropriate for the Court to enter an order which denies a dueling Motion for Judgment on the Pleadings filed by the defendant. It is also appropriate for the Court to stay the prosecution of the remaining counts of the plaintiff's Complaint because the plaintiff is entitled to only one recovery against the defendant.

I.Summary of the Lawsuit as Framed by Both the Pleadings on File and the Record Made Before This Court

While this case is quite contested, the facts (as admitted in the pleadings and as contained in the undisputed record) are not complicated.

The plaintiff is the Trustees of Conneaut Lake Park, Inc. (referred interchangeably herein as the "plaintiff" or "TCLP"). See Complaint (filed at ECF Doc. # 1) at ¶ 6. TCLP owns real estate located in Crawford County, Pennsylvania. On this real estate sat a building known as the "Beach Club." See Complaint at ¶ 7; See Park Restoration, LLC Amended Answer to Complaint and Counterclaim (hereinafter referred to as the "Answer ")(filed at ECF Doc. # 12) at ¶ 7²

The defendant is an entity known as Park Restoration, LLC (referred interchangeably herein as the "defendant" of "Park Restoration"). On or about November 24, 2008, TCLP and Park Restoration entered into a Beach Club Management Agreement , pursuant to which the defendant agreed to provide operational and management services with respect to the Beach Club. See Complaint at ¶ 8; Answer at ¶ 8.

The Beach Club Management Agreement contained various terms and conditions, including provisions whereby for a term of twenty years the defendant agreed to undertake "physical control and security, all maintenance at the facility, ... insuring that the property is fully secured and maintained in a commercially reasonable manner ..." See Complaint at ¶ 9(b)(quoting the Beach Club Management Agreement at § 1); Answer at ¶ 9.

The Beach Club Management Agreement also provided that the defendant agreed to hold the plaintiff "harmless and fully indemnify the [plaintiff] from any loss, cost or damage with respect to any ... damage claimed to ... property ... as a result of [defendant's] use, misuse, occupancy, procession [sic], or abandonment of the Beach Club." See Complaint at ¶ 15 (quoting § 7 of the Beach Club Management Agreement ); Answer at ¶ 15.

The Beach Club Management Agreement contained additional terms and conditions which imposed certain duties upon the defendant in the event of termination of the agreement. Specifically, the agreement provided that "In the Event of termination for any reason, Park Restoration warrants and represents that it will vacate the premises ensuring that it is in broom clean condition without any damage to any equipment or property." See Complaint at ¶ 11 (quoting § 6(c) of the Beach Club Management Agreement ); Answer at ¶ 11.

From the inception of the Beach Club Management Agreement through August 1, 2013, the defendant occupied, used and possessed the Beach Club. See Complaint at ¶ 16; Answer at ¶ 16. On August 1, 2013, the Beach Club was destroyed by fire. See Complaint at ¶¶ 17 and 18; Answer at ¶¶ 17 and 18. The Beach Club building was never rebuilt and by letter dated March 20, 2015, TCLP advised Park Restoration that the Beach Club Management Agreement has been terminated. See Complaint at Exhibit B ; Answer at ¶ 19.

After the Beach Club was destroyed by the fire, a dispute arose with respect to the right to insurance proceeds payable by Erie Insurance on account of the calamity. By way of background, TCLP did not insure the Beach Club. Rather, Park Restoration insured the Beach Club building for $611,000.³ After the fire, Park Restoration and TCLP made competing claims to the insurance proceeds. To further complicate the matter, various tax creditors of TCLP also claimed a right to be paid from the insurance proceeds.

Ultimately, after the insurance proceeds were deposited into the Court's registry, this Court determined that the defendant had an insurable interest in the Beach Club and that, but for the claims of the tax creditors, all of the insurance proceeds would be payable to the defendant. The Court also determined that the plaintiff was neither an insured nor loss payee under the policy and that the plaintiff was entitled to none of the proceeds. See Memorandum Opinion dated 12/22/2015 (Adversary Proceeding 15–01010–JAD at ECF Doc. # 82) and Memorandum Opinion Signed on 4/12/2016 (Adversary Proceeding No. 15–01010–JAD at ECF Doc. # 145).

An appeal was taken by Park Restoration and this Court's determination that the tax creditors were entitled to some of the insurance proceeds was reversed by the District Court. Thus, all of the insurance proceeds are payable to Park Restoration on account of the fire at the Beach Club. A further appeal was taken by the tax creditors to the Third Circuit Court of Appeals, which remains pending.

In any event, this Court determined that TCLP had no direct claim to any of the insurance proceeds payable to Park Restoration on account of the building destroyed by fire. Undaunted by this result, TCLP filed this adversary proceeding on June 13, 2016.

On June 20, 2016 the plaintiff also sought in this adversary proceeding a preliminary injunction enjoining the payment of any insurance proceeds to Park Restoration. In essence, TCLP sought a prejudgment attachment of all insurance proceeds payable to Park Restoration.

Finding that the prejudgment injunction (or attachment) sought by TCLP exceeded this Court's jurisdiction, this Court denied the plaintiff's request for injunctive relief pursuant to the United States Supreme Court's holding in Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc ., 527 U.S. 308, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999). See Memorandum Opinion Regarding Plaintiff's Motion For Preliminary Injunction Signed on 8/1/2016 (filed at ECF Doc. # 25); Order Signed on 8/1/2016 Denying Plaintiff's Motion For Preliminary Injunction (filed at ECF Doc. # 26).

The current status of the proceeds of insurance is that $132,948.17 has been released to Park Restoration and the remaining balance remains on hand with the Clerk pending the outcome of the appeal lodged by the tax creditors. See 11/10/2016 Letter from Clerk's Office to Attorney John F. Mizner Regarding Payment of Registry Funds (Adversary Proceeding No. 15–01010–JAD at ECF Doc. # 178).

As to the instant adversary proceeding, the Complaint alleges, among other things, that the Beach Club Management Agreement was terminated as a result of the cessation of operations occasioned by the fire (for after all the Beach Club ceased to exist). See Complaint at ¶ 18.

Indeed, under the Beach Club Management Agreement , Park Restoration was to insure "that the Beach Club is a fully operational and full service club;" but, again, after August 1, 2013 the Beach Club was not operational. See Beach Club Management Agreement at § 1.

By letter dated March 15, 2015, TCLP advised Park Restoration of the termination of the underlying agreement, and advised Park Restoration that TCLP reserved all rights and remedies that TCLP may have against Park Restoration. See Complaint at Exhibit B .⁴

The Complaint also alleges that upon the termination of the agreement, the defendant failed to "ensure" that the Beach Club was left in "broom clean condition without any damage to any equipment or property." See Complaint at ¶ 21. As a result, the plaintiff alleges two causes of action sounding in breach of contract and one cause of action sounding in contractual indemnity. See Complaint at ¶¶ 23–44.

Within each cause of action, TCLP contends that it has been harmed as a result of the destruction of the Beach Club (which the plaintiff alleges is valued of "no less than $611,000").See Complaint at ¶¶ 21 and 22. The defendant disputes these allegations and denies any liability whatsoever with respect to the causes of action asserted in the Complaint .

II.The Dueling Motions for Judgment on the Pleadings

After the pleadings closed, TCLP moved for judgment on the pleadings as to Count I of its Complaint .

Count I of the Complaint is a cause of action for breach of contract. In its Motion for Judgment on the Pleadings , the plaintiff contends that the admissions contained in the pleadings establish that, upon termination of the Beach Club Management Agreement , Park Restoration had a duty to vacate the Breach Club and return it to the plaintiff in a "broom clean" condition "without damage" for any reason.

The Motion for Judgment on the Pleadings further avers that, due to the fire, the defendant failed to return the property in a "broom clean" condition "without any damage" and is liable for the damages sustained by TCLP as a...