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Henrik Klinge Retained Trust v. Triumph Apparel Corp

January 12, 2011


The opinion of the court was delivered by: Martin C. Carlson United States Magistrate Judge



This is a breach of contract action brought by the Plaintiff arising out of a longstanding commercial lease arrangement at a property in York County, Pennsylvania. The Plaintiff, the Henrik Klinge Retained Trust (hereafter "Klinge"), alleges a straightforward breach of this lease agreement in its complaint, asserting that the parties entered into a lease in September of 1990, and that Triumph breached the lease by vacating the premises without notice in August, 2009, after accruing several months' delinquencies of rent payments. (Doc. 1.)

For its part, the Defendant Triumph Apparel Corporation (hereafter "Triumph") filed an amended answer to this complaint, in which Triumph disputes these allegations of breach of contract and asserts a counterclaim of unjust enrichment against Klinge. (Doc. 11.) This unjust enrichment counterclaim is premised upon an assertion by Triumph that it paid a "security deposit" of $93,132.00 on this lease at the time that it entered into the lease agreement on September 12, 1990. (Doc. 11, ¶26.) Asserting that Klinge has retained this security deposit for the past twenty years, Triumph alleges this unjust enrichment on Klinge's part as a counterclaim in this contract action.

(Magistrate Judge Carlson)

As the parties prepared for the trial of this case, Klinge filed a motion in limine in which the Plaintiff sought to preclude Triumph from presenting evidence in support of this security deposit counterclaim. (Doc. 18.) According to the parties' briefs, on or about September 12, 1990, a corporate predecessor of Triumph sold the real estate at issue here to Henrik Klinge, who placed the real estate in the Henrik Klinge Retained Trust. It appears that the parties then simultaneously entered into a lease agreement which allowed Triumph's corporate antecedent to lease the property back from Klinge.

The written lease agreement is silent with respect to any security deposits paid by Triumph to Klinge. However, the settlement sheet on these transactions reflects a single, enigmatic entry showing the following deposit: "3 month rent deposit." No further explanation for this "deposit" is found on the settlement sheet, and our review of the contemporaneous lease agreement sheds no further light on the meaning of this "deposit."

Moreover, it appears that the parties little noted, nor long remembered, this aspect of their 1990 transaction until it was alleged in 2009 that the lease had been breached. Faced with an alleged breach in 2009, Triumph insists that the "deposit" was a "security deposit", which its records reveal has not been repaid. Klinge, in turn, characterizes the payment as a three month rent advance, and urges the Court to exclude any testimony regarding this deposit from the trial of this case.

Given the fact that the actual transaction occurred more than twenty years ago, we found it to be unremarkable that both parties advanced their competing views of the meaning of this single entry on the settlement sheet in somewhat speculative fashions. For its part, Triumph characterized the deposit as a security deposit and asserts that it was never repaid this deposit. However, in its brief opposing Klinge's motion, Triumph presented no direct testimony from a witness with personal knowledge of the September 1990 transaction who could state that the deposit was, in fact, a security deposit that was paid pursuant to the terms of the lease. In contrast, Klinge insisted that the deposit was merely an advance payment of rent, but presented no witnesses who had personal knowledge of the September 1990 transaction who could support its description of this payment. On the basis of these competing, and speculative, views regarding the meaning of these decades-old events, Klinge requested the Court to enter an order precluding any of this proof at trial.*fn1

Upon consideration of the parties' competing briefs, and competing characterizations of Triumph's payment to Klinge as either a security deposit, or as a rental advance, we entered an order that denied without prejudice Klinge's motion in limine. (Doc. 28.) However, we advised Triumph that to the extent the party sought to present evidence in support of its stated position that the payment constituted a security deposit paid pursuant to the terms of the lease, it was incumbent upon Triumph to present competent evidence, in accordance with Rule 602 of the Federal Rules of Evidence, which defines such evidence as that "sufficient to support a finding that the witness has personal knowledge of the matter. Fed. R. Evid. 602. We, therefore, instructed Triumph to make an offer of proof, prior to presenting evidence at trial, that demonstrated both the competence of its witnesses to testify to the company's characterization of the payment to Klinge as a security deposit.

In this regard, we further advised the parties that an assertion by a witness without personal knowledge of the transaction that the $93,132 deposit was never repaid would not, standing alone, constitute competent proof that the payment was, in fact, a security deposit. Such proof in isolation is not probative since it presents a fact that is equally consistent with Klinge's claim that the payment was an advance of rent. In both instances, the payment once made, typically would not be returned. Therefore, Triumph cannot carry its burden of presenting competent proof concerning the essential nature of the deposit by simply citing the fact that the moneys were not repaid. Rather, more is, and will be, required here before this proof will be admitted at trial. (Doc. 28, at 8.)


In response to our ruling and admonition, Klinge has renewed its motion in limine, arguing, inter alia, that because the original lease agreement of 1990 was silent on the issue of deposits -- security or otherwise -- the Court should not permit Triumph to introduce parol evidence to prove the existence of a term that was never included in the contract. (Doc. 40, at 2.) Klinge maintains that the lease agreement itself is unambiguous, and without any ambiguity in the contract document itself, it would be improper for the Court to permit Triumph to introduce parol evidence in order to supply a new term or to create the appearance of an ambiguity. (Id., at 3.)

Klinge notes that Triumph has offered four exhibits that appear to constitute records of the company that characterize the payment to Klinge as a deposit, and accounted for as an asset that Triumph kept on its records, at least at some times. (Id. at 2-3.) Klinge dismisses these bookkeeping entries as "nothing more than useless, irrelevant, and self-serving declarations." (Id. at 3.) In this regard, Klinge notes that Triumph has not supported its exhibits with an affidavit or declaration, nor has the company identified who the author of the accounting entries may have been, or established that the exhibits are, in fact, business records. (Id.) In sum, Klinge renews its objection to Triumph's use of the ...

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