Opinion
Civil Action No. 03-CV-1706.
March 3, 2004
MEMORANDUM ORDER
Presently before the Court is Defendant DM Realty, LLC's ("DM") Motion for Summary Judgment (Doc. No. 30). For the following reasons, we will grant DM's Motion.
The facts relevant to this motion are not in dispute. We will grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c).
This case arises out of a promotion agreement entered into between RCN Corporation ("RCN") and Paramount Pavilion Group, LLC ("PPG"), dated as of August 1, 2001, as amended February 28, 2002 (the "Agreement"). (Doc. No. 30, Ex. B.) In the Agreement, PPG agreed to construct an ice skating facility on a certain piece of property (the "Property") and assign the naming rights to that facility to RCN in exchange for seven installment payments made by RCN to PPG totaling $2,000,000. ( Id. ¶ 5.) The Agreement was to last for twenty years following the first public event at the facility. ( Id. ¶ 4.) It is undisputed that RCN paid PPG $300,000 pursuant to the Agreement. It is also undisputed that RCN purported to terminate the Agreement on September 4, 2002, because it claimed PPG was in default of the Agreement. (Doc. No. 30, Ex. E; Doc. No. 1 ¶¶ 31-35.) Upon default by PPG and termination of the Agreement by RCN, PPG is obligated to return all amounts paid by RCN to PPG pursuant to the Agreement within fifteen days of termination. (Doc. No. 30, Ex. B ¶ 24(b)(ii).) RCN therefore demanded that PPG return the $300,000 RCN paid to PPG. (Doc. No. 30, Ex. E.) PPG has failed to return the $300,000 to RCN. (Doc. No. 1 ¶ 35.)
PPG did not build the facility. Instead, on March 10, 2003, PPG sold the Property to DM. (Doc. No. 1 ¶ 40.) DM then leased the Property to other entities that built an ice skating facility on the property. (Doc. No. 37, Ex. B ¶ 9.) Those entities operate and maintain the facility, which is called the "Flyer Skate Zone at Bethlehem." (Doc. No. 32, Ex. U at 9.) DM did not enter into a naming rights agreement in connection with the facility. (Doc. No. 37, Ex. B ¶ 9.)
DM was not a party to the Agreement and claims it is not bound by its terms. RCN claims that the Agreement created a covenant that runs with the Property. Therefore, DM's ownership of the Property is subject to RCN's contractual rights under the Agreement. If the Agreement created a covenant that is enforceable against DM, then DM is potentially liable to RCN for the $300,000 installment payment that RCN paid to PPG and which PPG never returned. If the Agreement did not create such an enforceable covenant, then DM cannot be liable to RCN for the $300,000 installment payment, and we must grant DM's motion for summary judgment.
RCN and PPG clearly intended that the Agreement would create a covenant that would run with the Property. Paragraph 28(a) of the Agreement states as follows:
(a) Covenants Run with the Land. The covenants, agreements, promises, duties and restrictions set forth herein shall be construed as covenants and not as conditions. To the fullest extent legally possible, PPG expressly agrees and declares that all covenants contained herein shall run with the Facility and the Land and shall inure to the benefit of, and be binding upon, PPG, its tenants, licensees and any party using the Facility and/or its or their respective successors and assigns. Enforcement may be had by actions at law or in equity (including, but not limited to, specific performance and injunctive relief), and the party seeking enforcement shall not be required to prove special damages.
(Doc. No. 30, Ex. B ¶ 28(a).) As further evidence of their intent to create a covenant, RCN and PPG executed a recording memorandum in connection with the Agreement and filed it with the Recorder of Deeds of Northampton County, where the Property is located. (Doc. No. 32, Ex. B.) The recording memorandum provides:
Pursuant to the Agreement, [RCN], among other things, has the sole and exclusive right during the term of the Agreement to designate the name of the Facility on the Premises; to cause signs bearing such name, together with the Facility Logo, to be erected on and about the Facility; and to have such name and logo displayed at various locations throughout the Facility and on various materials used throughout the facility. Such rights together with all covenants, promises, duties and restrictions set forth in the Agreement run with the Facility and the Land and inure to the benefit of, and are binding upon PPG, its tenants, licensees and any party using the Facility and/or its or their respective successors and assigns.
(Doc. No. 32, Ex. B.) DM had actual notice of the recording memorandum before it bought the Property. (Doc. No. 32, Ex. W.)
DM's motion raises two issues: (1) whether the Agreement created a covenant that ran with the Property; and (2) if the Agreement created a covenant that ran with the Property, whether that covenant is enforceable against DM. We need not address the first issue because we conclude that even if the Agreement created a covenant that ran with the Property, any such covenant is not enforceable against DM. Accordingly, we will grant DM's motion for summary judgment.
Analysis
RCN seeks $300,000 from DM in accordance with the Agreement, and an injunction prohibiting DM from using the Property in any manner inconsistent with the Agreement. Before assessing whether RCN may enforce the Agreement against DM, we need to identify which provisions in the Agreement remain viable. To do this, we must determine the effect of RCN's purported termination of the Agreement. We conclude that when RCN purported to terminate the Agreement, it substantially limited the provisions in the Agreement that it could enforce. Upon the effective date of RCN's termination, the term of the Agreement ended. (Doc. No. 30, Ex. B ¶ 24(b)(i).) If RCN's termination of the Agreement was effective (which RCN claims it was), then months before DM bought the property, many of the provisions in the Agreement had expired and were unenforceable. Included among the expired provisions was RCN's right to name the facility. ( See id. ¶ 3 ("RCN hereby names the Facility, the "RCN CENTER." The Facility will continue to be so named . . . until this Agreement is terminated in the manner herein provided.").) However, the provisions in Paragraph 24 of the Agreement survived RCN's termination. ( Id. ¶ 24(d).) Of the surviving provisions, RCN only seeks to enforce against DM the provision that obligates PPG to return the $300,000 installment payment to RCN. For purposes of this motion, we will assume that the obligation to return the installment payment is a covenant that runs with the property. We therefore must determine whether that covenant may be enforced against DM under Pennsylvania law.
Even if the provision giving RCN the authority to name the facility had not expired, that provision would still have no force since the "facility" described in the Agreement was never built.
We are satisfied that the case of Leh v. Burke, 331 A.2d 755 (Pa.Super. 1975) answers this question. In Leh, plaintiff Leh Brothers, a partnership and land developer, conveyed some land to Mitchell, who then conveyed the land to Burke. The deed to the land contained a covenant that required Mitchell and her assigns to pay a proportionate share of the expenses incurred in paving a road abutting the property. After Burke took title to the land, Leh Brothers built the road and requested Burke to pay his proportionate share of the expenses. Burke refused and Leh Brothers sued to collect the expenses. Leh Brothers later joined Mitchell, the original grantee, as a defendant, arguing that the terms of the deed also rendered her liable for the expenses.
The court agreed that the deed purported to hold Mitchell liable even though she no longer held title to the land Nevertheless, the court concluded that Mitchell was not liable to Leh Brothers for the expenses. In so holding, the court stated the following rule:
When a promise to do an affirmative act, such as in this case to make a monetary payment, is found to run with the land, the person in possession at the time the obligation matures is responsible for discharging it. Conversely, prior or subsequent owners of the property, including the original covenantor, are relieved of responsibility not arising contemporaneously with their interest in the landLeh, 331 A.2d at 761.
This case falls within the rule stated in Leh. RCN claims that PPG became obligated to return the $300,000 installment payment to it on October 7, 2002. DM did not acquire any interest in the Property until March 10, 2003. Since the obligation to pay RCN $300,000 matured prior to DM acquiring an interest in the Property, we conclude that DM has no responsibility with respect to that obligation. See id.
We also find guidance in the case of Washington Nat. Gas Co. v. Johnson, 16 A. 799 (Pa. 1889). In Johnson, a gas company acquired a lease interest in land that was subject to a covenant. The covenant required the lessee of the land to complete construction of one well on the land within six months from the date of the lease, and to commence construction on a second well within four months thereafter. However, by the time the gas company acquired the lease, those deadlines had all passed. In other words, at the time the gas company acquired an interest in the land, the covenant had already been breached. Under those circumstances, the court refused to hold the gas company liable for breach of the covenant. The court stated: "The covenant ran with the land until the breach. It then ceased to run, because it was turned into a cause of action." Johnson, 16 A. at 801. The same rule applies in this case. When PPG refused to return the $300,000 to RCN in accordance with the Agreement, that covenant ceased to run with the Property and became RCN's cause of action against PPG. Therefore, we conclude DM is not liable under the Agreement.
An appropriate Order follows.
ORDER
AND NOW, this 3rd day of March, 2004, upon consideration of Defendant DM Realty, LLC's ("DM") Motion for Summary Judgment (Doc. No. 30), and all papers filed in support thereof and opposition thereto, it is ORDERED that:
1. Summary judgment is GRANTED in favor of DM and against RCN with respect to Count IV of the Complaint;
2. RCN's Motion for Summary Judgment with respect to Count IV of the Complaint is DENIED; and
3. It is DECLARED that the recording memorandum executed by PPG and RCN does not in any way act as a covenant to restrict the use of DM in its use of the Property.
IT IS SO ORDERED.