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VIRGINIA HEART INST. v. NORTHWEST PENNSYLVANIA BAN

April 4, 1978

VIRGINIA HEART INSTITUTE, LTD., a Virginia Corporation, Plaintiff,
v.
NORTHWEST PENNSYLVANIA BANK & TRUST COMPANY, a Pennsylvania Corporation, Elizabeth Breene Gilger, an Individual, and Sally Breene Huxley, an Individual, Executors of the Estate of George A. Breene, Deceased, Defendants



The opinion of the court was delivered by: WEBER

 The parties are Plaintiff, as Lessee of an expensive piece of diagnostic medical equipment, and Defendants, as Lessors. The equipment was destroyed in a fire. Plaintiff demands that Defendants replace the equipment and Defendants have declared the lease terminated. Count I of the Complaint is based on a contractual cause of action. Count II asserts a cause of action in negligence for the failure of Defendants to secure the proper insurance protection on the equipment.

 I.

 The Plaintiff's complaint is a lengthy narrative statement of the business and family relationships between the parties. The briefs of the parties deal extensively with such extrinsic matters. In the disposition of the motions before us they are irrelevant. If the contract between the parties can be construed within its four corners, the Court must determine the matter without the consideration of extrinsic evidence. *fn1"

 Lessee argues that the rules of contract interpretation require that an ambiguity in a lease must be construed strictly against the party who drafted the unclear agreement and in favor of the other party. This argument loses its effect, regardless of our finding of an ambiguity, when we consider the statement set forth fifteen pages later in Lessee's brief that Lessor was initially a direct participant in the business of the Lessee, in terms of both financial investment and control. There was no adversary element. It was a sweetheart deal. The recital of facts revealed that the original Lessor, Breene, arranged for the conversion of Lessee into a business corporation to enable himself and his wife to participate in the ownership and control of the corporation. Breene became the Vice President and a Director of the Lessee corporation, his wife was also a Director, and together they owned fifty percent of the capital stock of Lessee. They were the uncle and aunt of the Director of Lessee Institute. The cited rule of construction has no logical application to such a situation.

 We have cross-motions for judgment on the pleadings. Both parties agree that the controversy between them centers on the interpretation of a paragraph in an Equipment Lease Agreement which was in effect between the parties at the time that the equipment was destroyed by fire.

 The motions are designated as motions for judgment on the pleadings because the complaint pleads the terms of the agreement and both parties rely on its terms in support of their motion. The Court concludes that judgment on the pleadings is proper if the intention of the parties can be clearly determined from the four corners of the instrument. If there is any ambiguity in the instrument, then we will have to have recourse to extrinsic evidence to determine the intention of the parties.

 The instrument provides for a lease of the equipment for a term of 90 months at a rental of $216,000 payable in equal consecutive monthly installments of $2,400.

 Before we proceed with an analysis of the contract language, it is important to consider what the parties were attempting to do. It appears that they were attempting to provide insurance protection against the risks of loss to both parties from damage or destruction of the leased property, and allocating the responsibility for this between themselves.

 The foreseeable risks of loss to the Lessor because of damage or destruction would be

 
a) the loss of its capital investment;
 
b) the loss of rental income under the lease;
 
c) liability for personal injury or property damage arising out of the ownership or use of the property.

 The foreseeable risks of loss to the Lessee are:

 
a) the loss of the value of its leasehold interest in ...

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