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11/21/97 FIRST LEHIGH BANK v. HAVILAND GRILLE

November 21, 1997

FIRST LEHIGH BANK,
v.
HAVILAND GRILLE, INC., PETER J. KAROLY AND NATHAN SELDEN, PETER J. KAROLY, LAUREN B. ANGSTADT, NATHAN A. SELDEN, KRISTIN G. SELDEN, AND THE NEW HAVILAND, INC., T/A THE NEW HAVILAND GRILLE, V. JAMES LEUTHE, INDIVIDUALLY AND FIRST LEHIGH BANK; APPEAL OF: FIRST LEHIGH BANK



Appeal from the ORDER ENTERED December 6, 1996, in the Court of Common Pleas of LEHIGH County, CIVIL, at No. 91-C-1688. Before GARDNER, J.

Before Cavanaugh, Eakin, And Montemuro,* JJ.

OPINION:

Filed November 21, 1997

First Lehigh Bank appeals from the order of the Court of Common Pleas of Lehigh County, denying its post-verdict motions. *fn1 We are constrained to remand.

This appeal derives from the sale of a restaurant business formerly called the Haviland Inn, located on Tilghman Street in Allentown. On August 2, 1989, appellant entered an agreement with Peter J. Karoly and Nathan A. Selden (the "Karoly group"), to convey the Inn's real estate, business equipment, inventory, and liquor license for a price of $225,000. Appellant had acquired the restaurant as a result of mortgage foreclosure proceedings against its owners, Gregory and Dorothy Newhard.

At settlement, appellant informed the Karoly group it did not own the restaurant's liquor license, nor could it convey the license without the express consent of the Newhards. Nevertheless, appellant's representatives insisted the Newhards would cooperate in transferring the license and that the delay was merely a technicality. The Karoly group agreed to close, but $25,000 of the purchase price was placed in escrow pending transfer of the license. Appellant subsequently failed to transfer the license and the escrowed money was returned to the Karoly group.

The Karoly group tried to purchase another license, but discovered the Liquor Code prevented any other liquor license from being used at that location because of its proximity to a church and school. As such, the Karoly group engaged in direct negotiations with the Newhards, and opened their restaurant in July, 1990, without a liquor license.

In October of 1990, appellant agreed to finance the Karoly group's purchase of the Newhard's license, in return for their commitment to execute a demand note upon successful transfer of the license. That agreement, embodied in a Letter of Intent, dated October 16, 1990, provided appellant would loan $17,500, pay $2,500 against the purchase price of the license, and discharge outstanding tax liens and accounting fees. Although appellant advanced $15,353.25 pursuant to that agreement, the Karoly group refused to execute a demand note or to repay the loan. The Karoly group subsequently acquired the license directly from the Newhards, and began selling alcoholic beverages on February 1, 1991.

On June 20, 1991, appellant instituted a breach of contract and fraud action against the Karoly group to recover the funds loaned under the Letter of Intent. The Karoly group commenced a similar action October 4, 1991, claiming lost profits attributed to the lack of a liquor license; they alleged appellant fraudulently induced the sale of the restaurant by misrepresenting the Newhards' cooperation, and breached the Agreement when it failed to convey the liquor license. The matters were consolidated for trial.

On January 18, 1995, a jury returned a verdict in favor of the Karoly group, awarding lost profits of $115,400. The jury also awarded appellant $15,353.25 on its breach of contract claim. Appellant's post-verdict motions were denied on December 8, 1996, and this timely appeal followed.

Appellant raises several allegations of error in connection with the jury's finding of fraud. However, because the jury awarded identical damages for fraud as it did for breach of contract, we need not determine whether the evidence is sufficient to support the finding of both. Thus, we limit our review to the following: *fn2

I. Whether the evidence is sufficient to support the jury's finding that the Letter of Intent did not supersede the sales Agreement?

II. Whether the trial court properly declined to impose sanctions notwithstanding the Karoly group's willful failure to comply with discovery?

III. Whether the trial court's denial of a continuance was manifestly unreasonable in light of the Karoly group's eleventh-hour disclosure of properly ...


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