The opinion of the court was delivered by: SNYDER
This matter is before the Court on the defendants' Motion for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The action involves an agreement for the sale of real estate located in the State of New York in which the defendants, residents of Pennsylvania, were the sellers, and the plaintiffs' assignee, a resident of Illinois, was the purchaser. It is alleged that, pursuant to the terms of the agreement, the defendants completed their acquisition of the subject premises; completed the construction of a shopping plaza; obtained a lease from S. S. Kresge Company; obtained the requisite mortgage; and conveyed the subject premises as directed to Orchard Park Associates, a joint venture composed solely of the plaintiffs herein. It is further alleged that pursuant to the terms of the agreement, Orchard Park Associates paid to the defendants the full purchase price of $200,000.00, and that, in addition, they performed every other condition precedent to the operation of the agreement.
A dispute arose as to the liability of the defendants to repay the aggregate sum of $72,371.37, being the amount by which the real estate taxes assessed against the parcel for the years 1968 through 1971 exceeded the sum of $20,000.00 per annum. The agreement also provided:
"In addition, after receipt of the fourth of the tax bills (the bill for the fourth of the years described hereinbefore), the difference between such fourth tax bill and the estimated figure of TWENTY THOUSAND DOLLARS ($20,000.00) capitalized at 10.4% shall be repaid by Seller to Purchaser when such tax is due".
The real estate taxes assessed against the parcel for 1971 were $53,464.49, which capitalized at the rate of 10.4% would be an additional $321,773.94. In 1969 there was an adjustment made on the agreement to increase the estimated tax figure of $20,000.00 to $22,500.00. This was done to reflect the additional minimum rental of $2,500.00 to be received during the last three months of 1969. Further, the estimated $20,000.00 was increased to $30,000.00 for the years 1970 and 1971 to reflect the additional minimum rental of $10,000.00 to be received by the plaintiffs during 1970 and subsequent years of the lease. Because of the changes, the sums presently claimed by the plaintiffs are: (1) the additional taxes for the years 1969, 1970 and 1971 which equal $49,871.37, and (2) the amount due as the capitalized figure of $225,620.09 ($23,464.49 capitalized at the rate of 10.4%). Thus, the plaintiffs claimed that by the end of 1971 the defendants owed the plaintiffs the total sum of $275,491.46 under the terms of the agreement, which sum the defendants repeatedly refused to pay.
Attached to the plaintiffs' Complaint was a copy of the Agreement which was eleven pages in length and which detailed the property to be conveyed, permitted encumbrances and other documents deemed necessary. Paragraph No. 18 of the Agreement, provides as follows:
"MISCELLANEOUS. Risk of loss to the date of closing shall be upon the Seller. This Agreement shall be interpreted under Pennsylvania law and any disputes hereunder shall be tried in the Courts of the Commonwealth of Pennsylvania, the parties hereby waiving the right to a jury trial. Any transfer taxes imposed upon this transaction shall be paid by Seller. Seller shall not be bound by any possible custom or practice of the State of New York in connection with the transfer of title to any real estate, such as a presentation of an abstract of title."
To this Complaint, defendants filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b) on the ground that the Court lacked jurisdiction over either the parties or the subject matter of the action, contending that the above quoted section of the agreement was to be interpreted as limiting "any disputes hereunder" to the Courts of the Commonwealth of Pennsylvania.
On February 12, 1973, Judge Joseph F. Weis, Jr. (then District Judge and now on the Third Circuit Court of Appeals) heard oral arguments and received briefs from the parties, and time was enlarged for the filing of additional memorandums by both plaintiffs and defendants. On March 26, 1973, Judge Weis filed a Memorandum and Order treating the motion to dismiss as one for summary judgment and denying the motion without prejudice to renew after a hearing to resolve the disputed factual issue. This Order is set forth in full below as it is pertinent to the discussion herein contained.
"The question presented to us is whether this Court in a diversity action should decline to exercise jurisdiction because of a contractual provision limiting the forum in which relief can be sought.
Plaintiffs claim that the defendants breached a certain Agreement, dated September 2, 1966 and later amended in October 1969, for the sale of real property located in the State of New York. The defendants moved to dismiss the action under Rule 12(b) of the Federal Rules of Civil Procedure on the ground that Section 18 of the Agreement limits the plaintiffs to maintain their action only in the state courts of Pennsylvania. Section 18 of the Agreement provides:
'. . . This Agreement shall be interpreted under Pennsylvania law and any disputes hereunder shall be tried in the Courts of the Commonwealth of Pennsylvania, the parties hereby waiving the right to a jury trial . . .'
Both parties filed opposing affidavits of fact concerning the discussions that had occurred before the execution of the Agreement as to the meaning of Section 18 of the Agreement. Consequently the motion to dismiss will be treated as one for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. See Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341, 343 (3rd Cir. 1966).
Since Section 18 of the Agreement is ambiguous and there is a genuine factual issue as to its meaning, summary judgment must be denied. See 6 Moore's Federal Practice, § 56.17(43), page 2590, n.n. 7, 10 (1972); Adickes v. Kress & Co., 398 U.S. 144, 153-161 [90 S. Ct. 1598, 26 L. Ed. 2d 142] (1970).
This case will be scheduled for a preliminary hearing to resolve the factual issue, so that the litigation may proceed on the merits in either this court or the state forum.
AND NOW, to-wit, this 26th day of March, 1973, upon consideration of the Motion to Dismiss and opposing Affidavits, the Motion to Dismiss will be treated as one for Summary Judgment and for the reasons stated in this Memorandum, IT IS ORDERED that the Motion be denied, without prejudice to renewal after a hearing to resolve the disputed factual issue has been held."
Subsequent to the Court's Order, plaintiffs served on the defendants an interrogatory requesting the defendants to disclose any witness having knowledge of the conversations, discussions or negotiations relating in any way to the subject matter of Paragraph No. 18 of the Agreement. The defendants answered that the other parties having knowledge of any such conversations, discussions or negotiations were the defendants, Richard Zappala, Donald A. Kahan and Jake Jacobs. The depositions of Richard Zappala and Donald A. Kahan were duly filed with the Court. On September 10, 1973, the defendants filed their Motion for Summary Judgment supported by the sworn testimony of Richard A. Zappala at his deposition. In addition, an affidavit was filed by Richard Zappala.
We approach the duty of deciding the very interesting but difficult question posed by the motion within the confines of the law that a summary judgment is proper only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. This is the mandate of the Federal Rule of Civil Procedure 56(c). Furthermore, any doubt as to the existence of a genuine issue of fact must be resolved against the moving party, and documents filed in support of a motion for summary judgment are to be used to determine whether issues of fact exist and not in order to decide the fact issues themselves. United States ex rel. Tyrrell v. Speaker, 471 F.2d 1197 (3rd Cir. 1973); Bowman Steel Corp. v. Lumbermens Mutual Casualty Co., 364 F.2d 246 (3rd Cir. 1966); Janek v. Celebrezze, 336 F.2d 828 (3rd Cir. 1964); Krieger v. Ownership Corporation, 270 F.2d 265 (3rd Cir. 1959). Furthermore, the burden of demonstrating the justification for the motion for summary judgment always lies with the movant. Adickes v. Kress & Co., 398 U.S. 144, 153-161, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1969). To state it another way, the Court is authorized to examine proffered materials extraneous to the pleadings not for the purpose of trying an issue but to determine whether there is a genuine issue of material fact to be tried. If there is no such genuine issue of material fact, the parties are not entitled to a trial and the Court applying the law to the undisputed material facts may render summary judgment. See 6 Moore's Federal Practice, Par. 56.04 (1972 ed.).
As indicated in the above discussion, the complaint and the agreement disclosed that the defendants, real estate developers based in Pennsylvania, sold to the plaintiffs' assignee who was a citizen of Illinois, certain commercial real estate located in the State of New York. Thus, the transaction touched three states. In order to resolve any uncertainty as to which of the three states' laws would govern, or to avoid any uncertainty within a given foreign state as to the proper choice of law, the parties determined that the agreement should be interpreted under Pennsylvania law. Secondly, it prescribed clearly that any dispute was to be tried in Pennsylvania which was the defendants' domicile. Since Judge Weis' previous order declared that the agreement was patently ...