Kohl v. PNC Bank National Ass'n

912 A.2d 237, 590 Pa. 151, 2006 Pa. LEXIS 2523
CourtSupreme Court of Pennsylvania
DecidedDecember 27, 2006
Docket89 MAP 2005
StatusPublished
Cited by19 cases

This text of 912 A.2d 237 (Kohl v. PNC Bank National Ass'n) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kohl v. PNC Bank National Ass'n, 912 A.2d 237, 590 Pa. 151, 2006 Pa. LEXIS 2523 (Pa. 2006).

Opinions

OPINION

Justice BAER.

We granted allowance of appeal in this dispute between J. Carl Kohl, a landowner (“Landowner”), and PNC Bank (“Bank”), which eventually became Landowner’s tenant, to consider the test applied by the Superior Court in its determination that Landowner did not breach the implied covenant of quiet enjoyment by pursuing litigation against Bank. The Superior Court concluded that “a suit by a landlord which substantially impairs a tenant’s possessory interest in a leasehold, brought in bad faith, maliciously, or otherwise without probable cause and primarily for a purpose unrelated to seeking legal redress, constitutes a breach of the landlord’s [154]*154covenant of quiet enjoyment.” Kohl v. PNC Bank Nat’l Ass’n., 863 A.2d 23, 31 (Pa.Super.2004). Applying that test to the instant case and concluding that the record did not support the trial court’s determination of a breach of the covenant of quiet enjoyment, the Superior Court reversed the judgment entered in favor of Bank and remanded for entry of judgment in favor of Landowner and assessment of damages. After review, we adopt the test espoused by the Superior Court but reverse the court’s holding that the record did not support the determination of a breach of the covenant of quiet enjoyment based on bad faith litigation. Instead, we remand to the trial court to allow the parties to develop the record regarding the issue of bad faith litigation and for further proceedings based upon the trial court’s determination of that issue.

Although this case involves a convoluted fact pattern discussed in full below, we begin by reproducing the apt summary presented by the trial court:

When [the original lessees] defaulted on their Lease and filed bankruptcy, [Landowner] was left with an empty building and [Bank] was left with a bad loan authorized by its predecessor. Although approximately ten years have passed since the occurrence of their business disappointment, the landowner and the bank have not attempted any cooperative effort to cut their losses. Instead, they have assumed intransigent positions through almost ten years of litigation[,] which has only increased their respective losses from this transaction.

Trial Ct. Slip Op., 12/4/02, at 5.

The case involves a tract of land in Monroe County that is improved with a 10,000 square foot commercial building. In 1979, Landowner, the appellee in the case at bar, entered into a ninety-nine year lease with the predecessors of the lessees relevant to the current dispute. The 1979 lease (the Lease) contained the following provisions regarding the payment of taxes and termination:

[155]*155(5) TAXES All Taxes, if any, imposed upon the land comprising the leased premises and the building and improvements erected thereon shall be the obligation of the Lessee.
* * *
(11) TERMINATION This lease shall terminate upon the occurrence of any of the following:
(a) The expiration of the first term hereof without renewal by Lessee as herein provided.
(b) The expiration of the second term hereof.
(c) The abandonment of the premises by Lessee without first having sub-leased the premises as herein provided.
(d) Failure of the Lessee to pay the rental as herein provided for a period in excess of thirty (30) days from the date of written notice of non-payment given by Lessor to Lessee.
(e) The bankruptcy or insolvency of Lessee while in occupancy of the premises.
(f) Election by Lessee of its desire to terminate the lease at any time during the term hereof provided that notification be given to Lessor in writing not less than six (6) months from the date of termination.

Lease, 7/16/79, at 2-5.

In 1990, the leasehold was assigned to William and Marilyn Schmidt, nominal appellees in the case at bar (Lessees), who obtained a mortgage on the leasehold interest of $800,000 from Bank, the litigating appellant herein.1 In addition, Landowner, Bank, and Lessees entered into a Nondisturbance and Attornment Agreement containing the following relevant provisions:

H. Bank desires to be assured of continued rights to utilize the Premises in the event Bank succeeds to the interests of [Lessees] under the Loan between Bank and [Lessees], [156]*156either by way of foreclosure, assignment in lieu of foreclosure, or otherwise.
* * * *
3. Nondisturbance. In the event that Bank succeeds to the interests of the [Lessees] under the Lease Agreement, Bank and [Landowner] hereby agree to be bound to one another under all of the terms, covenants, and conditions of the Lease Agreement; accordingly, from and after such event Bank and [Landowner] shall have the same remedies against one another for breach of the Lease Agreement just as if Bank had been the original Lessee under the terms and conditions of the Lease Agreement, provided, however, Bank shall not be:
(i) liable for any act or omission of [Lessees] or any prior tenant; or
(ii) subject to any offsets or defenses which [Landowner] might have had against [Lessees]; or
(iii) bound by any amendment or modification of the Lease Agreement made subsequent to the date of this instrument without Bank’s prior written consent.

Nondisturbance and Attornment Agreement, 9/28/90, at 2-4.

In June 1992, Landowner filed a complaint against Lessees seeking approximately $33,000 for the unpaid taxes, termination of the Lease, and possession of the property based on the claim that Lessees breached the Lease by non-payment of taxes.2 In October 1992, after Lessees defaulted on the mortgage but prior to a decision in Landowner’s action, Bank confessed judgment in ejectment and took possession of the property. In December 1992, Bank filed a mortgage foreclosure action against Lessees.3 Without joining Bank, Land[157]*157owner then filed for default judgment in its action against Lessees seeking the unpaid taxes and possession of the property, which was entered on January 8, 1993, thus putatively terminating the Lease between Landowner and Lessees.4 A week later, on January 15, 1993, Bank obtained default judgment in its mortgage foreclosure action against Lessees.

In October 1993, Landowner commenced a declaratory judgment action against Bank seeking a declaration that Bank had no interest in the leasehold due to the Lessees’ failure to pay property taxes since 1991 in violation of the Lease and the resulting judicial termination of Lessee’s leasehold interest. (1993 Litigation) The case turned on whether Landowner’s default judgment against the Lessees was valid despite Landowner’s failure to join Bank. If the Lessees’ failure to pay taxes automatically terminated the lease prior to Bank’s taking possession, then Landowner did not have to join Bank because Bank could never have taken possession of the land.

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Kohl v. PNC Bank National Ass'n
912 A.2d 237 (Supreme Court of Pennsylvania, 2006)

Cite This Page — Counsel Stack

Bluebook (online)
912 A.2d 237, 590 Pa. 151, 2006 Pa. LEXIS 2523, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kohl-v-pnc-bank-national-assn-pa-2006.