True R.R. Assocs., L.P. v. Ames True Temper, Inc., 1000 MDA 2015

152 A.3d 324

TRUE RAILROAD ASSOCIATES, L.P., Appellant

v.AMES TRUE TEMPER, INC., Appellee

True Railroad Associates, L.P., Appellant

v.Ames True Temper, Inc., Appellee

True Railroad Associates, L.P., Appellant

v.Ames True Temper, Inc., Appellee

True Railroad Associates, L.P., Appellant

v.Ames True Temper, Inc., Appellee

True Railroad Associates, L.P., Appellant

v.Ames True Temper, Inc., Appellee

No. 1000 MDA 2015

No. 1001 MDA 2015

No. 1311 MDA 2015

No. 1312 MDA 2015

No. 1448 MDA 2015

Superior Court of Pennsylvania.

Argued May 24, 2016

FILED DECEMBER 13, 2016

Robert L. Byer, Pittsburgh, for appellant.

Mark D. Bradshaw, Harrisburg, for appellee.

BEFORE: BOWES, OTT AND PLATT,^* JJ.

OPINION BY BOWES, J.:

True Railroad Associates, L.P. ("True Railroad") filed five appeals from various orders entered in these declaratory judgment actions wherein the trial court upheld the exercise of an option. We quash the appeals filed at docket numbers 1000 MDA 2015, 1001 MDA 2015, and 1312 MDA 2015. We affirm the orders appealed at docket numbers 1311 MDA 2015 and 1448 MDA 2015.

On November 10, 2011, True Railroad instituted an action at docket number 2011–08463 against Ames True Temper, Inc. ("Ames") asking that the court declare Ames' attempt to exercise an option invalid. The pertinent facts with respect to the 2011 action are as follows. Ames is the successor-in-interest to True Temper Hardware Company ("True Temper"). On November 30, 1994, True Temper and True Railroad entered into a document titled Amended and Restated Lease Between True Railroad Associates, L.P., as Landlord, and True Temper Hardware Company, as Tenant, Dated November 30, 1994 (the "Lease"). Therein, True Railroad leased approximately 44 acres of land that it owned in Hampden Township, Cumberland County, to True Temper.

Article 42, which spanned eleven pages of the Lease, outlined the terms and conditions of a purchase option. The Lease provided, "Landlord hereby gives and grants to Tenant the exclusive right and option (‘Purchase Option’) to purchase" the leased premises "on the terms and conditions hereinafter set forth." Lease at Art. 42(a). The tenant was granted the right to "exercise the Purchase Option at any time during the period commencing on January 1, 2011, and ending at midnight on October 31, 2011 (the ‘Option Period’)." Id. at 42(b). Under the Lease, the Purchase Option was exercised if the tenant gave True Railroad written notice of its intent to exercise the option during the Option Period so long as the tenant had cured any event of default of which it had been notified. Id. at 42(c) (emphasis added) ("Provided Landlord has not then notified Tenant of an Event of Default which remains uncured, Tenant may exercise the Purchase Option at any time during the Option Period by giving to Landlord a written notice to that effect."). Events of default were defined in another article of the Lease.

Article 42 continued that the purchase price for the leased premises under the Purchase Option was the greater of $6.7 million dollars, with reductions not here relevant, or the market value of the leased premises less the market value of space constructed by the tenant. The term market value was specifically defined as fair market value. The determination of fair market value was to be submitted to "two (2) independent appraisers within ten (10) days after the end of the Option Period." Id. at 42(d). The tenant and landlord were each accorded the right to select an appraiser.

The Lease further provided that, if "the higher appraisal [was] one hundred and ten (110%) percent or more of the lower appraisal, the two appraisers shall be instructed to select a third appraiser to determine the ‘Market Value’ in the manner specified above." Id. In the event that the two independent appraisers were "unable to agree upon the choice of the third appraiser, then the third appraiser shall be appointed by the president judge of the Court of Common Pleas of Cumberland County, Pennsylvania." Id. The parties were to be "conclusively bound by the third appraiser's determination of ‘Market Value.’ " Id.¹

The Lease was amended on October 22, 2010. The October 22, 2010 amendment indicated that Ames had exercised its right to renew the lease and extend its terms and conditions through April 30, 2020. At that time, True Railroad tendered to Ames $250,000, which Ames had to utilize to improve, maintain or repair the building then located on the leased premises. The October 20, 2010 amendment re-set the rent during the renewal term. The Lease and amendment expressly provided that rent was $116,666.66 a month from May 1, 2012, through April 30, 2017, and it increased thereafter. Section five of the amendment contained an affirmation that the terms of the Lease were otherwise intact. Amendment to Lease, 10/22/10, at § 5 ("in all other respects, the Lease is hereby ratified and confirmed.").

Accordingly, the Lease's Purchase Option remained intact under the amendment, and the period for exercise of that option was set to commence on January 1, 2011, about two and one-half months after execution of the October 22, 2010 amendment. Accordingly, the October 22, 2010 amendment provided for the return of the $250,000 advanced by True Railroad for improvements to the property if Ames exercised the Purchase Option. That obligation was outlined as follows: "If Ames exercises the Purchase Option set forth in Article 42 of the Lease, the $250,000 paid to Ames pursuant to this Amendment shall be paid to True [Railroad]. Payment shall be made upon execution of the Purchase Option." Lease Amendment, 10/22/10, at 3 (emphases added).

On October 26, 2011, Ames sent True Railroad written notice that was exercising the Purchase Option. On November 9, 2011, True Railroad responded to the October 26, 2011 written notice. In the November 9, 2011 letter, True Railroad informed Ames that it did not intend to honor the exercise of Ames' option. Its position was that, under the October 22, 2010 lease amendment, the $250,000 had to be tendered concurrently with the written notice of Ames' intent to exercise the Purchase Option, i.e. , when the Purchase Option was exercised rather than when the Purchase Option was executed, as set forth in the written amendment. The November 9, 2011 letter informed Ames that Ames' exercise of the Purchase Option was invalid because Ames failed to forward the $250,000 within the Option Period. True Railroad also took the position that the Purchase Option had expired and that Ames could no longer exercise it.

On November 10, 2011, Ames responded to the November 9, 2011 letter sent by True Railroad. Ames' position was that it had properly exercised its Purchase Option under the October 22, 2010 amendment for the following reasons. The language in the October 22, 2010 amendment provided that the $250,000 was due "upon execution" of the Purchase Option. Ames contrasted the word "execution" with the term "exercise," which was used at the beginning of the clause contained in the October 22, 2010 amendment. Ames informed True Railroad that "upon execution" clearly meant that the $250,000 was due when the option was actually executed, i.e. , at the closing when the property was purchased.

Ames noted that, not only did the language of the October 22, 2010 amendment support its position, the nature of the $250,000 bolstered Ames' interpretation of the October 20, 2010 amendment. Specifically, Ames noted that the $250,000 amounted to a reimbursement to True Railroad for improvements to the real estate rather than a down payment on the purchase price for the leased property. Ames reasoned that, since the $250,000 was not an advance payment of part of the purchase price and was, instead, a reimbursement, it did not have to be paid until the purchase of the property was consummated.

Despite its interpretation of terms of the October 20, 2010 amendment, Ames tendered the $250,000 with its November 10, 2011 response to True Railroad's November 9, 2011 letter. True Railroad refused that tender, and instituted the declaratory judgment action at 2011–08463. In that action, it sought a single declaration, which was that the Purchase Option outlined in the Lease was lapsed, void, and had not been validly exercised during the Option Period because Ames did not tender $250,000 with its October 26, 2011 written notification that it was exercising its Purchase Option.

Ames thereafter sent to True Railroad a notice of default, wherein it maintained that True Railroad was in default of Lease because it had failed to select an independent appraiser to determine the market value of the leased premises, as required by Article 42(d) of that document. Ames also filed an answer, new matter, and counterclaim in the 2011 lawsuit. In its counterclaim, Ames asked that True Railroad be held in material breach of the Lease and its October 20, 2010 amendment due to True Railroad's refusal to honor Ames' proper exercise of its Purchase Option and to accept the $250,000 within the period for cure set forth in the Lease. Ames also sought attorneys' fees under Article 38 of the Lease, which is outlined infra in connection with our discussion of the trial court's award of attorneys' fees.

True Railroad responded to the counterclaim, and Ames and True Railroad thereafter filed cross-motions for judgment on the pleadings as to the allegations contained in True Railroad's complaint, i.e. , whether Ames had properly exercised its option within the Option Period. The parties presented the court with their respective positions as to whether the October 22, 2010 amendment required the $250,000 to be tendered upon exercise of the Purchase Option or upon execution of the Purchase Option. Ames additionally asserted that it had cured any default in its exercise of the Purchase Option by tendering the $250,000 within one day of when True Railroad sent its November 9, 2011 letter notifying Ames that it was in breach of the terms of the Purchase Option, as...