No. 1129 October Term, 1977, Appeal from the Order of the Court of Common Pleas of Philadelphia County, January Term, 1973, No. 1513 Entered February 10, 1977, Trial Division, Law.
Marvin Comisky, Philadelphia, with him Alan C. Gershenson, Philadelphia, for appellant.
David I. Grunfeld, Philadelphia, with him Samuel Phillips Lavine, Philadelphia, for appellee.
Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Watkins, former President Judge, and Hoffman, J., did not participate in the consideration or decision of this case.
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This appeal arises from the order of the court below granting appellee, Arel Realty Corp. (hereinafter lessor), a declaratory judgment. The question presented is one of contract interpretation. Specifically, whether, for purposes of computing rent due under a commercial lease between the parties, appellant, Meyers Bros. Parking Corp. (hereafter lessee), is entitled to deduct from calculation of its gross receipts the sums it was paying for the Business Use and Occupancy Tax of Philadelphia.
The facts are not in dispute. On March 15, 1962, the parties entered into a 25 1/2 year percentage lease*fn1 for a large parking garage located in lessor's property in center city Philadelphia. Under this lease, appellant-lessee pays lessor a guaranteed minimum annual rental of $110,000.00, plus 50% of its gross receipts from its operations in excess of $220,000.00.
In June of 1970, the Philadelphia City Council enacted an ordinance authorizing the Board of Education of the School
[ 258 Pa. Super. Page 550]
District of Philadelphia to impose a tax on the use or occupancy of commercial or industrial real estate. In Wanamaker v. Philadelphia School District et al., 441 Pa. 567, 274 A.2d 524 (1971), the Supreme Court addressed the issue of whether this tax, i. e., the Business Use and Occupancy Tax, was violative of the Uniformity Clause of the Pennsylvania Constitution as an unequal tax on real estate. In sustaining the constitutionality of the tax, the Court held it was a privilege tax on the use of real estate. In doing so, the Court explained, "[w]hile economically the incidence of the tax is on the property itself, its legal incidence is on the privilege of using, making it a true excise tax." Wanamaker v. Phil. Sch. Dist., supra, 441 Pa. at 575, 274 A.2d at 527. [Emphasis added.] The instant controversy arose after the decision in Wanamaker when lessee began deducting from its gross receipts the payments due under the Business Use and Occupancy Tax.
Lessor then filed a petition for declaratory judgment requesting the court to construe the lease and declare that lessee was not entitled to deduct the tax from its gross receipts. Lessee responded by filing preliminary objections in the nature of a demurrer. Following an amended petition and submission of memorandums by the parties, the lower court overruled the preliminary objections and granted declaratory judgment in favor of lessor. Lessee then appealed to this Court and we reversed and remanded on the basis that the lower court erred in granting a declaratory judgment without first affording lessee an opportunity to file an answer to the amended petition after the preliminary objections had been overruled. Arel Realty Corp. v. Meyers Bros. Parking Corp., 237 Pa. Super. 87, 346 A.2d 796 (1975).
On remand, lessee filed an answer and new matter to which lessor filed a reply. Thereafter, both parties filed briefs and a hearing was held on September 28, 1976. At this hearing counsel agreed that no further pleadings would be filed and no factual testimony would be proffered unless the court first found the ...