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JORDAN v. BERMAN

May 1, 1992

JOE J. JORDAN, et al.
v.
ARNOLD T. BERMAN, et al.



The opinion of the court was delivered by: JAY C. WALDMAN

 WALDMAN, J.

 I. BACKGROUND

 Plaintiffs brought this action against defendants Arnold T. Berman, Myron J. Berman *fn1" and the Prothonotary of Philadelphia. Pursuant to 42 U.S.C. § 1983, plaintiffs alleged that they were denied property without due process of law. Plaintiffs also asserted against the Bermans a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et. seq., as well as several state law claims.

 In response to defendants' motions to dismiss, the court issued an opinion which sets forth in greater detail the factual background to this litigation. See Jordan v. Berman, 758 F. Supp. 269 (E.D.Pa. 1991). The court dismissed plaintiffs' civil rights claim against the Prothonotary as well as the state law claims against the Bermans. The dismissal of plaintiffs' fraud claim was without prejudice to replead, which plaintiffs have done. The court denied the Bermans' motion to dismiss the RICO and civil rights claims against them. Presently before the court is a motion by the Bermans for summary judgment on the remaining claims. *fn2"

 II. LEGAL STANDARD

 In considering a motion for summary judgment, the court must consider whether the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact, and whether the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c). Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Arnold Pontiac-GMC, Inc. v. General Motors Corporation, 786 F.2d 564, 568 (3d Cir. 1986); Only facts that may affect the outcome of a case under applicable law are "material." Anderson, 477 U.S. at 248.

 All reasonable inferences from the record must be drawn in favor of the non-movant. Anderson, 477 U.S. at 255. Although the movant has the initial burden of demonstrating an absence of genuine issues of material fact, the non-movant must then establish the existence of each element on which it bears the burden of proof. J.F. Feeser, Inc. v. Serv-A-Portion, 909 F.2d 1524, 1531 (3d Cir. 1990), cert. denied, 113 L. Ed. 2d 246, 111 S. Ct. 1313 (1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)).

 III. FACTS

 The pertinent facts in the light most favorable to plaintiffs are as follow. On July 8, 1981, plaintiff Jordan executed a lease agreement (hereinafter "the Lease") with Arnold Berman, trading as H.P. Realty, Inc. ("H.P."). Jordan executed the Lease on behalf of Joe J. Jordan, FAIA, Inc. for the fifth floor of a building located at 1920 Chestnut Street in Philadelphia. Plaintiffs organized their architectural firm, Jordan, Mitchell, Inc. ("Jordan, Mitchell") a few months after the Lease was executed and operated it from the leased premises. The Lease was to expire at the end of July 1986 but would automatically renew if neither party gave written notice of termination ninety days before expiration.

 Jordan, Mitchell received a notice of termination from H.P., dated April 30, 1986. It was received by plaintiffs on May 16, 1986. After receiving advice from counsel, plaintiffs informed H.P. that timely notice had not been provided and that the Lease had automatically renewed. In response, Myron Berman, who helped to manage the building, telephoned Jordan on May 21, 1986 and threatened him with hostile treatment and the prospect of legal action if he persisted in taking this position.

 The parties' dispute as to whether the Lease had renewed was resolved when an agreement was reached to extend it after negotiation through counsel. The parties executed an Amendment to the lease, effective July 31, 1986, which substituted Jordan, Mitchell as the lessee and extended the Lease until the end of July 1989. It also contained a provision for the mutual release of "all claims heretofore having arisen under this Lease." The Amendment expressly provided that unless otherwise specified, the terms and conditions in the Lease would continue in effect. These included confession of judgment and rent adjustment provisions which were not discussed during negotiations and as to which the Amendment was silent.

 The rent adjustment provision gives the lessor the right to charge the lessee as additional rent a proportionate share of increases in lessor's real estate taxes and operating expenses. *fn3" During the original term of the Lease, the provision had not been invoked and no additional rent had been demanded of plaintiffs under its terms.

 In May of 1987 Myron Berman received a proposal from Metropolitan Management Corporation ("MMC") to perform property management services for buildings at 1920 Chestnut Street, the premises rented by plaintiffs, 1930 Chestnut Street and 219 North Broad Street. Arnold Berman, through H.P. Realty, owned the first two buildings, and the third was owned by a partnership in which Arnold Berman held a sixty percent interest and Myron Berman the remaining forty percent. H.P. accepted the proposal and engaged MMC to perform property management services, one of which was to "prepare tenant bills for past due amounts, i.e. increased real estate taxes, [and] operating costs." After its review of H.P.'s financial situation prior to making a building improvement loan in September of 1985, General Electric Credit Corporation had alerted Myron Berman that H.P. was not collecting income to which it appeared to be entitled under the rent adjustment provisions.

 On February 10, 1988, MMC billed Jordan, Mitchell for $ 1,416.20, an amount representing a proportionate share of increases in real estate taxes from 1982 to 1988. In October 1988, MMC billed Jordan, Mitchell for $ 19,991.23, an amount representing a proportionate share of increased operating expenses since 1981. This second bill also contained a prospective monthly adjustment for increased operating expenses. These amounts were subsequently amended by an invoice dated December 20, 1988, showing that $ 22,606.29 was due retroactively and $ 799.15 would be due prospectively each month.

 Jordan, Mitchell paid the February 10, 1988 bill,purportedly without realizing what it was. It refused to pay the amounts billed in October and December. Jordan, Mitchell did not dispute the calculation of the adjustments, but rather maintained that it was not liable for these adjustments at all. In January 1989, after realizing that Jordan, Mitchell was not paying its share of operating costs, Myron Berman refused to pay PGW for service to the leased premises. To ensure continued service, Jordan, Mitchell had to assume the obligation of paying PGW thereafter.

 The parties were unable to resolve their dispute. Jordan, Mitchell gave notice to H.P. in March 1989 that it would not be renewing the lease which would therefore terminate effective July 31, 1989. *fn4" Based on defendants' claim for nonpayment of the rent adjustment, counsel acting on behalf of H.P. and Arnold Berman confessed judgment against plaintiffs on May 16, 1989 for $ 41,082.62 and obtained a writ of execution from the Prothonotary immediately thereafter. That day, the writ was served by the Sheriff upon Fidelity Bank, effectively attaching the Jordan, Mitchell corporate checking account maintained at that institution.

 On May 24, 1989, plaintiffs filed a petition to open the judgment and obtained an order allowing them to substitute $ 10,000 in escrow for the garnished account. With the consent of defendants, the escrow was released on June 5, 1989. On July 21, 1989, the state court granted plaintiffs' petition, opened the confessed judgment and allowed plaintiffs to assert a defense. That litigation is still pending.

 Ten of the 200 tenants at properties in which either Arnold or Myron Berman hold an interest disputed retroactive rent adjustments calculated by an accountant engaged by MMC and billed by MMC between the end of 1987 and the fall of 1988. Eight of these tenants leased space at 1930 Chestnut Street.

 In two cases, the calculations were revised and the adjusted amounts were then paid. In two instances, tenants were allowed to pay the amounts due in monthly installments. In another case, the amount assessed was reduced and future adjustments were tied to the consumer price index ("CPI"). MMC credited one tenant with the amount considered past due. In one case, a tenant agreed to a new five year lease at a higher rent, a portion of which was in lieu of immediate payment of the rental adjustment. One tenant, the Better Business Bureau, was allowed to pay its adjustment by increasing monthly payments over the remainder of an existing lease. Other than Jordan, Mitchell, judgment was confessed against only one tenant. That dispute was amicably settled.

 The final tenant who contested a retroactive assessment was Diversified Community Services ("DCS"). DCS rented space at 121 North Broad Street, a building owned by Ate-Kay Company ("Ate-Kay"). Ate-Kay is a partnership in which Myron Berman holds a one-third interest, but in which Arnold Berman holds no interest. On December 7, 1987, MMC, also engaged by Myron Berman to provide services for Ate-Kay, billed DCS for past due amounts under the rental adjustment provision. DCS refused to pay and gave termination notice in April 1988 for the end of July. On the ground that DCS had not paid its rental bill in full, Myron Berman instructed the building superintendent not to allow DCS to use the ...


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