North City Development Co. v. General Foods LLC ( 2015 )

J-A15019-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
NORTH CITY DEVELOPMENT CO. IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
GENERAL FOODS, LLC
Appellant No. 1440 EDA 2014
Appeal from the Order Entered April 30, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): September Term, 2013 No. 03382
BEFORE: BOWES, J., MUNDY, J., and FITZGERALD, J.*
MEMORANDUM BY MUNDY, J.: FILED NOVEMBER 05, 2015
Appellant, General Foods, LLC, (General Foods) appeals from the
portion of the April 30, 2014 order denying its petition to open or strike a
confessed judgment entered in favor of Appellee, North City Development
Company (North City). After careful review, we affirm.
The trial court summarized the relevant factual and procedural history
of this case as follows.
[North City] confessed judgment pursuant to a
commercial lease with General Foods (hereinafter
“Lease”). At the time the Lease was signed, General
Foods and North City were both fully owned by the
same person – Mr. Abraham Woidislawsky, a real
estate investor who has been managing properties
for over 30 years.
____________________________________________
*
Former Justice specially assigned to the Superior Court.
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The Lease pertains to a property (hereinafter
“the Property”) that is located in a shopping center
owned by North City (hereinafter “Shopping
Center”). Mr. Woidislawsky served as the property
manager of the Shopping Center. The Lease, which
was drafted by Mr. Woidislawsky’s attorney, is for a
99-year term and, at the time that the Complaint
was filed, set rent for the Property at $1,537.34 per
month. As part of the Lease, General Foods was
required to pay estimated common area
maintenance fees and a pro rata share of taxes and
insurance each month (hereinafter collectively
referred to as “CAM”), in addition to rent. This was
supplemented by a CAM reconciliation total, which
was calculated and billed to each shopping center
tenant at the end of each year, and represented the
difference between the estimated CAM monthly
payments and the actual CAM costs. Though
General Foods is North City’s tenant, Mr.
Woidislawsky had subleased the Property to a third
party for about $6,500 per month, thereby allowing
General Foods to reap a profit of roughly $5,000 per
month. Undoubtedly, General Foods’ rent is so far
below market value because Mr. Woidislawsky owned
both entities at the time his attorney drafted this
Lease.
The Lease provides for several events of
default, the most relevant of which for the instant
case are described in Section 16(a) and 16(g) of the
Lease. Under Section 16(a), a tenant has defaulted
“to pay when due any installment of rent hereunder
or any other sum herein required to be paid by
Tenant, if such failure continues for 10 days after
written notice thereof by Lessor is received by
Tenant: is an event of default. Under Section 16(g)
of the Lease, it is an event of default when there is
“[r]epetition or continuation of any failure to timely
pay any rent or other sums herein required to be
paid by Tenant where such failure shall continue or
be repeated for two (2) months in any period of
twelve consecutive months.” The Lease also
contains a confession of judgment clause in Section
17(b), which allows for judgment to be entered
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pursuant to Pa.R.C.P. 2950, et seq. upon a default
by the lessee.
In May of 2007, Kyun Duk Seo and Myung Kyu
Seo purchased 89 shares of stock in North City.
They bought the remaining stock in April of 2013,
becoming the sole shareholders of North City.
Though Paul Seo, the new owners’ son, began
managing North City in 2010, Mr. Woidislawsky
remained the Shopping Center’s property manager.
As the property manager, Mr. Woidislawsky was in
charge of collecting the CAM reconciliations from the
tenants, including General Foods. However, in early
2011, shortly after becoming North City’s manager,
Paul Seo discovered that Mr. Woidislawsky had not
collected CAM reconciliation from General Foods for
the years 2007 through 2010. Mr. Seo testified in
his deposition that he informed Mr. Woidislawsky as
soon as he became aware of this fact. Mr. Seo
repeatedly requested satisfaction of the charges and
Mr. Woidislawsky consistently responded with
promises of payment, but then would fail to follow
through. Indeed, Mr. Woidislawsky admitted that he
did not pay the charges until after the confessed
judgment was entered. General Foods paid the CAM
reconciliation for 2011, but then failed to pay it again
for 2012. Mr. Woidislawsky maintains that he has
paid all that he owed because he disagreed with the
calculations of the CAM reconciliations and, thus, he
was not required to pay them.
In April of 2013, when the Seos assumed
complete ownership of North City and after they
found out that Mr. Woidislawsky was not collecting
CAM reconciliation from General Foods, they hired a
new company to manage the properties, thereby
replacing Mr. Woidislawsky. Subsequently, General
Foods did not pay its rent on time for May, June,
July, or September of 2013 and North City sent
letters via regular mail demanding payment of rent
and other charges dated May 6, 2013, June 6, 2013,
July 8, 2013 and August 6, 2013. In his deposition,
Mr. Woidislawsky contended that he always paid rent
on time, but North City didn’t pick up the checks on
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time. [H]owever, he also stated that, though the
Seos owned 89 percent of North City at the time, he
believed that he could pay whenever he wanted,
because he believed the properties still belonged to
him and, in addition, because he managed the
properties. On September [9], 2013, North City sent
a letter requesting payment of the unpaid charges
via UPS, which was received and signed for by Mr.
Woidislawsky’s secretary, Ms. June Amey, on
September 13, 2013. North City instituted this
action after General Foods did not respond to that
letter in 10 days.
On September 27, 2013, North City filed its
Complaint for Confession of Judgment for Money and
Possession of Real Property (hereinafter
“Complaint”). On October 25, 2013, General Foods
filed its Petition to Open/Strike Judgment. …
On November 13, 2013, North City filed its
Praecipe to Attach a Verification to its Complaint in
order to comply with Pa.R.C.P. 2952(a)(10) and
Pa.R.C.P. 1024. Five days later, it filed its
[r]esponse [to General Foods’ petition]. …
Subsequently, [the trial c]ourt entered an
[o]rder granting leave to the parties to take
discovery on disputed issues of fact. On March 31,
the parties submitted notes of testimony,
documentation and supplemental memoranda as
required by [the trial c]ourt’s January 14, 2014
[o]rder and on April 10, 2014, [the trial c]ourt held a
hearing on the Petition. Pursuant to leave granted
by [the trial c]ourt, the parties submitted additional
supplemental memoranda on April 14 and 15, 2014.
On April 30, 2014, after thorough consideration
of the record, briefs and oral argument, [the trial
c]ourt denied the Petition to Strike the confessed
judgment for possession and money and denied the
Petition to Open the confessed judgment for
possession; however [the trial c]ourt granted the
Petition to Open the confessed judgment for money
so that the proper amount of the judgment could be
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determined by a fact finder.[1] [The trial c]ourt also
ruled that that amount of the judgment and the
amount in controversy were not grossly excessive.
On May 7, 2014, General Foods [filed a timely notice
of appeal]. Pursuant to [the trial c]ourt’s May 8,
2014 order, General Foods filed its Statement of
Errors pursuant to Pa.R.A.P. 1925(b) on May 21,
2014 …. On July 23, 2014, [the trial c]ourt entered
an Order by Agreement, which stayed the execution
upon the confessed judgment for possession.
Trial Court Opinion, 9/9/14, at 1-6 (internal citations and footnote omitted).
On appeal, General Foods raises the following two issues for our
review.
1. Whether the [t]rial [c]ourt committed an error
of law and/or manifestly abused its discretion
by refusing to strike the judgments for
possession and for money in favor of [North
City] and against General Foods[?]
2. Whether the [t]rial [c]ourt committed an error
of law and/or manifestly abused its discretion
by refusing to open the judgment for
possession in favor of [North City] and against
General Foods[?]
General Foods’ Brief at 4.
In its first issue, General Foods avers that the trial court erred in not
striking the confessed judgment for possession or money. General Foods’
Brief at 22-39. We begin by noting our well-settled standard of review
pertaining to petitions to strike.
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1
North City has not filed a cross-appeal from this portion of the trial court’s
April 30, 2014 order.
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A petition to strike a judgment is a common[-
]law proceeding [that] operates as a demurrer
to the record. A petition to strike a judgment
may be granted only for a fatal defect or
irregularity appearing on the face of the
record…. An order of the court striking a
judgment annuls the original judgment and the
parties are left as if no judgment had been
entered.
In assessing whether there are fatal defects on the
face of the record …, a court may only look at what
was in the record when the judgment was entered.
Moreover, if any defect disclosed by the record is one
that can be remedied by an amendment of the
record or other action, nunc pro tunc, the judgment
should not be stricken off. We will reverse a trial
court’s denial of a petition to strike a judgment only
if there is a manifest abuse of discretion or an error
of law.
When a proceeding to confess judgment is instituted
by complaint, the complaint and confession of
judgment clause must be read together to determine
whether there are defects on the face of the record.
It is a firmly established rule of construction in
the case of warrants of attorney to confess
judgments that the authority thus given must
be clear, explicit and strictly construed, that if
doubt exists it must be resolved against the
party in whose favor the warrant is given, and
that all proceedings thereunder must be within
the strict letter of the warrant. If the authority
to enter judgment by confession on a warrant
of attorney is not strictly followed, the
judgment will be stricken.
Notably, we have observed that the rule of strict
construction may be constitutionally mandated in
light of … due process attacks on cognovit clauses.
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It has always been held that formal defects,
mistakes and omissions in confessions of
judgment may be corrected by amendment
where the cause of the action is not changed,
where the ends of justice require the allowance
of such amendment, and where the
substantive rights of defendant or of any third
persons will not be prejudiced thereby.
Dime Bank v. Andrews, 115 A.3d 358, 364-365 (Pa. Super. 2015)
(internal quotation marks and citations omitted; emphasis in original).
In arguing that the trial court erred in not striking the confessed
judgments, General Foods makes four distinct assignments of error. First,
General Foods argues that North City did not aver or prove a demand for
rent in its complaint. General Foods’ Brief at 25. Second, General Foods
avers that North City’s attaching a notice of default was not a permissible
technical amendment. Id. at 28. Third, General Foods submits that North
City did not sufficiently aver notice of eviction in its complaint. Id. at 35.
Fourth, General Foods maintains that the trial court incorrectly concluded
that North City’s complaint alleged a default by General Foods under a
section of the lease that did not require pre-confession notice. Id. at 37.
We elect to address General Foods’ first two arguments together as they are
interrelated to each other.
General Foods argues that North City did not aver or prove a demand
for rent, relying heavily on our Supreme Court’s decision in Elizabethtown
Lodge No. 596 Loyal Order of Moose v. Ellis, 137 A.2d 286 (Pa. 1958).
General Foods’ Brief at 23-27. General Foods also avers that the trial court
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erred in considering evidence de hors to the record, i.e., a demand letter
attached to North City’s response to General Foods’ petition. Id. at 26.
Related to this argument, General Foods maintains that the trial court
improperly considered this demand letter as an amendment to the record.
Id. at 28.
In Elizabethtown, our Supreme Court held that a petition to strike a
confessed judgment must be granted where the landlord “fail[s] to aver or
prove a demand for rent.” Elizabethtown, supra at 289 (emphasis
added). Our Supreme Court noted that this is consistent with the common
law rule that “forfeitures are odious and must be strictly construed.” Id. at
290. Instantly, the trial court concluded that Elizabethtown only required
North City to aver or to prove in its complaint that a demand for rent was
made, not both. Trial Court Opinion, 9/9/14, at 8. We agree with the trial
court that this is the best reading of the case. Our Supreme Court’s use of
the conjunction “or” strongly indicates its intent that under Pennsylvania law
a landlord may elect to aver in the complaint’s text itself, or prove via
exhibits attached to the complaint or otherwise in the record, that a demand
for rent was made. This is reinforced by our Supreme Court pointing out
that the landlord in Elizabethtown conceded that “no demand for payment
of the rent was made on the due date[.]” Id. at 289. Nor was the same
averred in the complaint. The judgment of our Supreme Court in
Elizabethtown was that because the landlord did not demand payment of
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rent and there was no waiver of such a demand in the underlying lease, the
confessed judgment was required to be stricken. Id. at 291.
In the case sub judice, it is undisputed that North City did not
specifically aver in its complaint that it made a demand for rent, nor did it
attach a demand letter to the same. However, this does not support the
conclusion that a demand for payment was never made, as was the case in
Elizabethtown.
Appellant is correct that when considering a petition to strike a
judgment, the trial court is confined to “only the record as filed by the party
in whose favor the warrant is given, i.e., the complaint and the documents
which contain confession of judgment clauses [and m]atters dehors the
record filed by the party in whose favor the warrant is given will not be
considered.” Resolution Trust Corp. v. Copley Qu-Wayne Assocs., 683
A.2d 269, 273 (Pa. 1996) (emphasis in original). However, as noted above,
Pennsylvania law prohibits the striking of a confessed judgment if an
“omission” can be corrected by the trial court allowing an amendment of the
record. Dime Bank, supra; see also Atl. Nat’l Trust, LLC v. Stivala
Invs., 922 A.2d 919, 923 (Pa. Super. 2007) (stating, “a motion to strike
may not be granted ‘[i]f the defect is one that can be remedied by an
amendment of the record or other action[]’”) (citation omitted), appeal
denied, 936 A.2d 39 (Pa. 2007). Here, North City’s failure to attach its
demand letter as an exhibit to its original complaint was undoubtedly an
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“omission.” However, the trial court properly considered the September 9,
2013 letter attached as an exhibit to North City’s response to General Foods’
petition to effectively amend the record and cure the omission. See A. B. &
F. Contracting Corp. v. Matthews Coal Co., 166 A.2d 317, 320 (Pa.
Super. 1960) (stating, “the failure to attach a copy of the notice [of the
default] was merely a formal defect[]”). This further distinguishes the
instant case from the situation our Supreme Court confronted in
Elizabethtown, most notably that a demand was made, and said demand
letter was supplied.
General Foods also argues the omission of the September 9, 2013
demand letter at the time of the filing of the complaint, caused it prejudice
because it was deprived of raising three meritorious defenses. Specifically,
General Foods claims it was prevented from raising the issues that it
contacted North City’s property manager within the 10-day period, that it
disputed the sums in North City’s September 9, 2013 letter, and that it did
pay all rent that was due and thus substantially performed under the terms
of the lease. General Foods’ Brief at 34.
We fail to see how North City’s initial omission of the September 9,
2013 demand letter “cause[d] General Foods to focus primarily on its strike
allegations in its Petition to Strike or Open.” Id. There was no practical or
legal obstacle to General Foods raising as many defenses and arguments as
it wanted. General Foods was always free to present to the trial court any
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and every reason as to why the confessed judgments should be open or
stricken. As we explain infra, this is required by Pennsylvania Rule of Civil
Procedure 2959. See generally Pa.R.C.P. 2959(a)(1). Based on these
considerations, we conclude the trial court did not abuse its discretion or
legally err when it denied General Foods’ petition to strike the confessed
judgments for possession and money.2 See Dime Bank, supra.
In its second issue on appeal, General Foods avers that the trial court
erred when it failed to grant its petition to open the confessed judgment for
possession. General Foods’ Brief at 40-52. We begin by noting our standard
of review. “A petition to open a confessed judgment is an appeal to the
equitable powers of the court.” Midwestern Fin. Acceptance Corp. v.
Lopez, 78 A.3d 614, 623 (Pa. Super. 2013) (citation omitted). “We review
a court's order denying a petition to open a confessed judgment for an
abuse of discretion.” Huntington Nat’l Bank v. K-Cor, Inc., 107 A.3d
783, 785 (Pa. Super. 2014) (citation omitted), appeal denied, 117 A.3d
1281 (Pa. 2015). “A petition to open a judgment should be granted when a
party acts promptly, alleges a meritorious defense to the judgment and
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2
In its last two arguments, General Foods avers first that the trial court
incorrectly concluded that North City sufficiently averred notice in its
complaint and second that the defaults complained of did not require notice
at all. General Foods’ Brief at 35, 37. However, because we have resolved
General Foods’ first two arguments in North City’s favor, we need not
address General Foods’ remaining two arguments since they are contingent
on this Court’s disagreeing with the trial court’s reading of Elizabethtown.
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presents evidence of that defense sufficient to reach a jury.” Atl. Nat’l
Trust, LLC., supra.
[It is axiomatic that] a court should open a
confessed judgment if the petitioner promptly
presents evidence on a petition to open which in a
jury trial would require that the issues be submitted
to the jury. A petitioner must offer clear, direct,
precise and believable evidence of a meritorious
defense, sufficient to raise a jury question. In
determining whether sufficient evidence has been
presented, [courts should] employ the same
standard as in a directed verdict: [the trial court
must] view all the evidence in the light most
favorable to the petitioner and accept as true all
evidence and proper inferences therefrom supporting
the defense while … reject[ing] adverse allegations
of the party obtaining the judgment.
Stahl Oil Co., Inc. v. Helsel, 860 A.2d 508, 512 (Pa. Super. 2004)
(internal citations omitted), appeal denied, 885 A.2d 43 (Pa. 2005).
Instantly, General Foods raises two arguments in support of its
position that the confessed judgment for possession should have been
opened. First, General Foods avers that the trial court applied an incorrect
standard as it failed to view the evidence in the light most favorable to it,
regarding its compliance within the demand letter’s 10-day period. General
Foods’ Brief at 42. Second, General Foods argues that the trial court failed
to apply the proper standard to determine whether it substantially
performed under the terms of the lease. Id. at 43. However, we must first
consider North City’s argument that General Foods waived these arguments
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by not presenting them in its petition to open the judgment in the trial court.
See generally North City’s Brief at 32-34, 39-40.
Petitions to open or strike a confessed judgment are governed by Rule
2959, which provides in relevant part, as follows.
Rule 2959. Striking Off or Opening Judgment;
Pleadings; Procedure
(a)(1) Relief from a judgment by confession shall be
sought by petition. Except as provided in
subparagraph (2), all grounds for relief whether
to strike off the judgment or to open it must be
asserted in a single petition. The petition may be
filed in the county in which the judgment was
originally entered, in any county to which the
judgment has been transferred or in any other
county in which the sheriff has received a writ of
execution directed to the sheriff to enforce the
judgment.
…
(c) A party waives all defenses and objections
which are not included in the petition or
answer.
…
Pa.R.C.P. 2959 (emphases added); see also Pa.R.A.P. 302(a) (stating,
“issues not raised in the lower court are waived and cannot be raised for the
first time on appeal[]”).
We have reviewed General Foods’ petition. Therein, it raised three
issues regarding its position that the confessed judgment for possession
should be opened. First, General Foods asserted that North City had not
produced any evidence that notice of nonpayment had been provided.
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General Foods’ Petition, 10/25/13, at ¶¶ 67-69. Second, General Foods
averred that the amount of the judgment was excessive and not supported
by evidence. Id. at ¶¶ 76-78. Third, General Foods submitted that the
signature on the lease did not relate to the warrant of attorney provision
contained in the lease and said warrant was not bolded, underlined, or
otherwise set apart from the rest of the lease’s text. Id. at ¶¶ 82-86.
Nowhere in its petition to open did General Foods assert that it complied
with the 10-day notice or substantially performed under the terms of the
lease.3 Regarding its alleged compliance with the 10-day notice, General
Foods did not make this argument until it filed its reply to North City’s
answer. See generally General Foods Reply, 11/21/13, at 4-5. As a result,
we agree with North City that General Foods’ arguments regarding its
petition to open the confessed judgment for possession are waived on
appeal.
Based on the foregoing, we conclude all of General Foods’ issues are
either waived or devoid of merit. Accordingly, the trial court’s April 30, 2014
order is affirmed.
Order affirmed.
____________________________________________
3
General Foods acknowledges that it did not raise these issues in its petition
to open. General Foods’ Brief at 34.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/5/2015
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