Opinion
CIVIL ACTION NO. 03-3878.
September 2, 2004
MEMORANDUM AND ORDER
Presently before this Court is Defendant McDonald's Corporation's Motion for Summary Judgment (Doc. 9). For the reasons set forth below, upon consideration of Defendant's Motion, Plaintiff's Response (Doc. 12), and Defendant's Reply (Doc. 14), this Court will grant the Defendant's Motion for Summary Judgment.
BACKGROUND
From the evidence of record, taken in a light most favorable to the Plaintiff, the pertinent facts are as follows. On May 15, 2002, 27th Girard Limited Partnership ("Girard") and McDonald's Corporation ("McDonald's") entered into a Lease for Property located at 2630 West Girard Avenue, Philadelphia, Pennsylvania (the "Property"). The Lease Term commenced on May 15, 2002, and was to expire twenty (20) years from the earlier to occur of (i) the date that a McDonald's restaurant opened for business, or (ii) the Rent Commencement Date (twelve (12) months from May 15, 2002). McDonald's agreed to pay rents to Girard on the Rent Commencement Date, and, in addition, McDonald's agreed to pay Girard the sum of $270,000.00 on the Rent Commencement Date.
Under Paragraph 6(A)(i) of the Lease Agreement, McDonald's was required to apply for all permits and variances for the construction and operation of the restaurant without unreasonable delay. Pl's Compl. ¶ 11. In return, Girard agreed to "execute such documents, make such appearances and do such other things as Tenant [McDonald's] may reasonably request to assist Tenant to obtain such Permits." Id. Under Paragraph 5F, McDonald's was required to comply with all governmental regulations applicable to the Property or the development of the Property. Id. If McDonald's was "unable to obtain all necessary permits and approvals," by May 14, 2003, the lease could be terminated. Id.
By letter dated May 17, 2002, Girard authorized McDonald's to file and prosecute all applications and plans required by any governmental body for the development of a McDonald's restaurant at the Property. On June 6, 2002, McDonald's applied to the Department of Licenses and Inspections for permits (i) for its signage and (ii) to use the Property for "Eat In and Take-Out Food and Drive Thru services with all food being served on disposable ware." The first application was refused. On June 24, 2002, the Department of Licenses and Inspections (i) refused McDonald's second application for permits for its desired signage and (ii) refused, and referred to the Zoning Board of Adjustment ("Zoning Board"), McDonald's applications to use the Property for "Eat In and Take-Out Food and Drive Thru services, with all food being served on disposable ware." Pl's Compl. ¶ 13. McDonald's appealed to the Zoning Board, and the matter was listed for a hearing on July 31, 2002.
Regulations governing practice before the Zoning Board require that notice of the hearing be posted by the applicant (McDonald's) on each street frontage of the Property for at least twelve consecutive days immediately prior to and including the day of the hearing. Thus notice was required to be posted from July 20 through July 31, 2002. Pl's Compl. ¶ 15. On July 19, 2002, McDonald's posted notice of a zoning hearing to take place on July 31, 2002, on each street frontage of the Property. At the Zoning Board hearing, the issue of proper posting was raised by Chairman Kelly, whose file contained a handwritten note from a Zoning Board Inspector and two photographs. The note stated, and the photograph evidenced, that on July 22, 2002, Notice was not posted on the 27th Street frontage. McDonald's presented the Zoning Board with five photographs taken on July 19, 2002, showing that on that date Notice was posted on each frontage. No other evidence was offered on that issue. After reviewing the submitted photographs, the Zoning Board proceeded to hear McDonald's appeal. On August 2, 2002, the Zoning Board issued its Notice of Decision in favor of McDonald's without requiring re-posting.
On September 3, 2002, counsel for the Fairmount Civil Association (the "Association") and various individuals filed a Motion for Reconsideration of the Zoning Board's decision on the grounds that notice had not been properly posted on the Property. The motion was denied. On the same date, counsel for the Association also filed a Notice of Appeal to the Court of Common Pleas, Philadelphia County as of September Term, 2002, No. 00014. Pl's Compl. ¶ 19. On September 24, 2002, Girard assented to an amendment of the Lease Agreement which stated that if McDonald's, notwithstanding the pendency of appeals, proceeded with construction on the Property, McDonald's Termination Right under Paragraph 6A of the Lease would remain in effect as would Paragraph 5 and all other terms of the Lease. Pl's Compl. ¶ 20.
On October 7, 2002, the Association, in connection with its appeal to the Court of Common Pleas, sought a stay of all proceedings. The sole ground for its application was that "[n]otice of the hearing was not posted on all Streets Fronts for twelve consecutive days prior to the hearing, as required by law, and the applicants had no notice of the hearing." Pl's Compl. ¶ 21. On October 18, 2002, Judge Carrafiello stayed the Zoning Board decision of August 2, 2002, and also stayed "the issuance of and reliance upon permits including use and construction of" the Property. Pl's Compl. ¶ 22.
On December 19, 2002, the court's stay order was modified to state that until further order of the court, the Property could not be operated for take-out restaurant use, and no sign could be erected that did not conform with existing zoning ordinances. McDonald's was not prohibited from use, work and construction performed in accordance with current zoning laws and building permits.
On May 8, 2003, Judge Carrafiello decided the Association's appeal from the Zoning Board's August 2, 2002 decision and ordered that "this case is remanded to the Philadelphia Zoning Board of Appeals for rehearing. The Property shall be posted properly, and notice given to all interested parties of the new date." Pl's Compl. ¶ 25. On May 12, 2003, McDonald's sent Girard a formal Notice of Termination based on the lease provision which stated that if the Tenant was unable to obtain all necessary permits within 365 days, Tenant could terminate the lease.
On May 20, 2003, Girard rejected McDonald's Notice of Termination and issued a Notice of Default and Demand for Performance. In response to Girard's Notice of Default and Demand for Performance, McDonald's re-asserted its right to terminate the Lease, and withdrew its application to the Zoning Board for variances and certificates. On June 4, 2003, because of McDonald's failure to make the payments under Paragraphs 3 and 23 of the Lease, Girard sent McDonald's a notice of monetary default.
LEGAL STANDARD
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). An issue is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed.2d 202 (1986). A factual dispute is "material" if it might affect the outcome of the case under governing law. Id.
A party seeking summary judgment always bears the initial responsibility for informing the district court of the basis of its motion and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed.2d 265 (1986). Where the non-moving party bears the burden of proof on a particular issue at trial, the movant's initial Celotex burden can be met simply by "pointing out to the district court that there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325, 106 S. Ct. at 2553-54. After the moving party has met its initial burden, "the adverse party's response, by affidavits or otherwise as provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). That is, summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S. Ct. at 2552-53. "[I]f the opponent [of summary judgment] has exceeded the `mere scintilla' [of evidence] threshold and has offered a genuine issue of material fact, then the court cannot credit the movant's version of events against the opponent, even if the quantity of the movant's evidence far outweighs that of its opponent." Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). Under Rule 56, the court must view the evidence presented on the motion in the light most favorable to the opposing party. Anderson, 477 U.S. at 255, 106 S. Ct. at 2513-14.
DISCUSSION
Plaintiff asserts this one-count breach of contract claim against Defendant based on two theories. First, Plaintiff alleges that the Defendant breached its duty under the lease to obey every law or regulation applicable to the construction and operation of a McDonald's restaurant by failing to properly post notice of a public Zoning Board hearing on the Property. Second, Plaintiff alleges that McDonald's breached its duty to apply for all permits needed to build the restaurant without unreasonable delay. "A cause of action for breach of contract under Pennsylvania law has three elements: `(1) the existence of a contract, including its essential terms, (2) a breach of duty imposed by the contract, and (3) resultant damages.'" Gazarov v. Diocese of Erie, 80 Fed. Appx. 202, 206 (3d Cir. 2003) (non-precedential) (quoting Williams v. Nationwide Mut. Ins. Co., 750 A.2d 881, 884 (Pa.Super. 2000)). The element at issue in this case is whether McDonald's breached a duty imposed by this Lease Agreement. The Court will address each of Plaintiff's theories in turn.
A. Article 5F of the Lease Agreement
According to Paragraph 5F of the Lease Agreement, McDonald's was required to comply with all governmental regulations applicable to the Property or the development of the Property. Regulation 3 of the Zoning Board of Appeals Regulations, which is the regulation that Plaintiff claims McDonald's failed to comply with, states in relevant part:
Notice of an Appeal shall be posted by the applicant on each street frontage on the premises . . . for at least twelve (12) consecutive days immediately prior to and including the day of the hearing. . . . No appeal which requires a public hearing shall be heard until proper posting has occurred. Plaintiff argues that McDonald's failed to properly post the Property as mandated by Zoning Regulations and is in breach of Article 5F of the lease. Plaintiff further states that the issue of whether McDonald's properly posted the Property has been previously decided by the Pennsylvania Court of Common Pleas, thus, it has been decided as a matter of law that McDonald's breached Article 5F of the Lease requiring compliance with zoning regulations. Plaintiff asserts that McDonald's is collaterally estopped from claiming otherwise.
1. Collateral Estoppel
"The elements of collateral estoppel under Pennsylvania law are well settled. It applies when: (1) the identical issue was decided in a prior adjudication; (2) there was a final judgment on the merits; (3) the party against whom the bar is asserted was a party to or in privity with a party to the prior litigation; and (4) the party against whom the bar is asserted had a full and fair opportunity to litigate the issue in question." Sicalides v. Hartford Cas. Ins. Co., 94 Fed. Appx. 882, 884 (3d Cir. 2004) (non-precedential). Plaintiff is easily able to show that the first, third and fourth elements are satisfied. However, it falls short of establishing the second element.
Plaintiff argues that the final judgment on the merits was decided by Judge Carrafiello on May 8, 2003, when he issued an order stating the following: "[t]his case is remanded to the Philadelphia Zoning Board of Appeals for rehearing. The Property shall be posted properly, and notice given to all interested parties of the new date." Plaintiff urges this Court to find by necessary implication that Judge Carrafiello found that McDonald's was in violation of Regulation 3 of the Zoning Board of Appeals Regulations because he ordered that the Property be properly posted on remand. This Court is unable to make such a finding.
Judge Carrafiello's order, which disposed of the previous case, states simply that the case is remanded to the Zoning Board for rehearing without making a finding of fault or reaching the merits of the case. Both sides concede that the only issue before Judge Carrafiello was whether or not the Property was properly posted, yet the Judge made no statement as to whether the Property had been properly posted or not. When a court makes a finding by necessary implication that an issue was adjudicated, it is usually based on specific language or findings made by the court, such as an express denial of recovery on a related pleading, a jury verdict of guilty, or a statement reading, "Plaintiff failed to meet her burden of proof." See Rutter v. Rivera, 74 Fed. Appx. 182, 188 (3d Cir. 2003) (non-precedential) (quoting an order stating that plaintiff failed to meet her burden of proof).
Judge Carrafiello did not find McDonald's in violation of the zoning regulation, nor did he include any language in the order that would lead this Court to imply that he made a finding of fault. Therefore, McDonald's is not collaterally estopped from arguing that it is not in breach of Article 5F of the lease.
2. Compliance with Zoning Board of Appeals Regulation 3
As previously stated, Article 5F of the Lease Agreement requires that McDonald's comply with all governmental regulations applicable to the Property or the development of the Property. Plaintiff argues that McDonald's breached that requirement by not complying with Regulation 3 of the Zoning Board of Appeals Regulations, and is therefore precluded from exercising its termination right under the Lease.
The record does not support Plaintiff's claim that McDonald's failed to comply with Zoning Board regulations in violation of Article 5F of the Lease Agreement. In fact, the Zoning Board regulation in question states that "no appeal which requires a public hearing shall be heard until proper posting has occurred." In this case, the Zoning Board held that posting was proper and proceeded with the hearing. At the Zoning Board hearing, McDonald's presented evidence that it had posted the Property according to Zoning Board guidelines on July 19, 2003. There was a dispute as to whether or not the Property was posted on all street fronts for twelve consecutive days, but the Zoning Board ruled in favor of McDonald's. In addition, when the issue of posting was brought before the Court of Common Pleas, the Judge declined to find that McDonald's had not properly posted the Property. Further, at no time between the Zoning Board hearing and the date McDonald's terminated the Lease did Plaintiff claim that McDonald's was in breach of the lease, and in fact consented to McDonald's litigating the issue.
3. Right of Termination
Under the Lease Agreement, McDonald's was required to apply for permits necessary for the construction and operation of a complete McDonald's restaurant, and, "[i]f Tenant is unable to obtain all necessary permits and approvals, this Lease may be terminated as provided in Article 6A." Lease Agreement ¶ 6(A)(I). Plaintiff states that under Pennsylvania contract law, "if a party acts to hinder the satisfaction of a condition, the condition is excused. In other words, where a party claiming the condition has not been satisfied is the cause of the non-occurrence, he or she may not claim the non-occurrence to his or her advantage." P.L.E. 2d Contracts § 446.
Plaintiff argues that "the posting of notices was an act completely within the control of McDonald's. It's failure to do so properly prevented it from obtaining necessary permits." Pl's Brief at 8. Therefore, McDonald's is barred from claiming that it was unable to obtain all necessary permits as its reason for terminating the lease. This claim is completely without merit. All evidence submitted suggests that McDonald's did everything in its power to obtain the necessary permits to begin construction on the restaurant. McDonald's applied for zoning permits within a month of the lease signing. Furthermore, McDonald's exhausted the Zoning Board's appeals process until it obtained a favorable ruling. After that Zoning Board hearing ruling was challenged by the Association, McDonald's not only fought that appeal in the Pennsylvania Court of Common Pleas, it also obtained an amendment to the Lease from Plaintiff which allowed it to begin construction on the Property during the pendency of that appeal with the full understanding that it was at its own risk. McDonald's expended over $300,000.00 on construction before Judge Carrafiello's ruling. This is not the behavior of a party intentionally acting to hinder the satisfaction of a condition, and no evidence exists whereby it could be reasonably inferred.
The undisputed facts demonstrate that McDonald's is not in breach of Article 5F of the Lease Agreement, and was within its right to terminate the Lease under Article 6A. Consequently, this Court will grant summary judgment in favor of the Defendant.
B. Article 6(A)(i) of the Lease Agreement requiring that the applications for permits proceed "without unreasonable delay"
Plaintiff argues that McDonald's breached its obligation under Paragraph 6(A)(i) of the Lease Agreement, which obligated McDonald's to apply for all permits and variances without unreasonable delay. It is Plaintiff's position that as soon as McDonald's knew there was evidence showing that the Property had not been properly posted on or before July 31, 2002, it had a duty to produce evidence to the contrary in its defense or reschedule the Zoning Board hearing so that it could repost. In short, it is Plaintiff's contention that rather than simply reposting and going back before the Zoning Board in August of 2002, McDonald's unreasonably litigated the posting issue before the Philadelphia Court of Common Pleas, a process which took nine months and ended with the case being remanded back to the Zoning Board for re-hearing.
Paragraph 6(A)(i) of the Lease Agreement states in relevant part:
Tenant agrees to apply for Permits without unreasonable delay after last execution of this Lease and Landlord agrees to execute such documents, make such appearances and do such other things as Tenant may reasonably request to assist Tenant to obtain such Permits . . . If Tenant is unable to obtain all necessary permits and approvals, this Lease may be terminated as provided in Article 6A. (emphasis added)
The problem with the Plaintiff's argument is that hindsight is 20/20. There is no evidence that the Plaintiff made the above arguments at the July 31, 2002 zoning hearing or at the time that McDonald's decided to litigate the issue of posting before the Court of Common Pleas, rendering the Plaintiff's argument dubious at best. Plaintiff signed off on McDonald's decision to litigate and was a named party in the litigation. If the Plaintiff thought that litigating before the Court of Common Pleas was unreasonable, the Lease Agreement provides that it did not have to join as a party to the litigation. Without Plaintiff as a named party in the litigation, the Defendant would have been unable to proceed and would have been forced to prepare for another hearing before the Zoning Board. To come before this Court after an unsatisfactory ruling in the Court of Common Pleas and argue that the litigation should have never taken place would be allowing the Plaintiff to have it both ways.
The undisputed facts demonstrate that Defendant was not in breach of Article 6(A)(i) of the Lease Agreement and was entitled to terminate the Lease under the same provision. Therefore, this Court will grant summary judgment in favor of the Defendant.
CONCLUSION
For the foregoing reasons, this Court will grant Defendant's Motion for Summary Judgment. An appropriate order follows.