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1352 Lofts Property Corp., Trading As v. Bobby Chez of Pa

February 29, 2012

1352 LOFTS PROPERTY CORP., TRADING AS
1352 LOFTS PROPERTY HOLDINGS, LP, PLAINTIFF,
v.
BOBBY CHEZ OF PA, LLC, AND ROBERT SLIWOWSKI DEFENDANTS.



The opinion of the court was delivered by: Slomsky, J.

OPINION

I. INTRODUCTION

This case involves a dispute between parties who had a landlord-tenant relationship in a commercially leased property located in Center City, Philadelphia. The commercial property was leased by Plaintiff 1352 Lofts Property Corporation ("1352 Lofts") to Defendant Bobby Chez of Pennsylvania, LLC ("Bobby Chez"). The instant dispute is over two agreements: (1) a commercial lease agreement ("the Lease" or "the Lease Agreement") entered into between 1352 Lofts and Defendant Bobby Chez; and (2) a suretyship agreement ("the Suretyship Agreement") entered into between 1352 Lofts and Defendant Robert Sliwowski ("Sliwowski"), a principal of Bobby Chez who agreed to guarantee the performance of Bobby Chez under the Lease Agreement. Presently before the Court is a Motion for Summary Judgment filed by Plaintiff 1352 Lofts. (Doc. No. 22.)

Plaintiff commenced this action on September 8, 2010 against Defendants Bobby Chez and Robert Sliwowski. (Doc. No. 1.) On December 23, 2010, Plaintiff filed an Amended Complaint. (Doc. No. 14.) In the Amended Complaint, Plaintiff asserts breach of contract claims against Defendant Bobby Chez (Counts I and III)*fn1 and Defendant Sliwowski (Counts II and IV)*fn2 . (Id.) The case is before the Court based on diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). (Id.) Pennsylvania law applies according to the agreement of the parties. (Id., Exh. A at 26.)

On June 13, 2011, Plaintiff filed the Motion for Summary Judgment now before the Court. (Doc. No. 22.) Plaintiff contends that it is entitled to summary judgment in its favor on the breach of contract claims asserted in Counts I and III against Defendant Bobby Chez and in Counts II and IV against Defendant Sliwowski. In response, Defendants assert that the Court should deny the Motion with respect to Counts I and III because (1) Plaintiff rejected the Lease by failing to return the security deposit; (2) Plaintiff terminated the Lease by breaching the covenant of quiet enjoyment; and (3) Defendant Bobby Chez had the right to remove trade fixtures when it vacated the premises. With respect to Counts II and IV, Defendants argue that Plaintiff's Motion should be denied because the Suretyship Agreement was not in effect at the time of the alleged breaches and because Plaintiff has failed to establish any breaches at all. On September 13, 2011, the Court held a hearing on the Motion for Summary Judgment. (Doc. No. 32.) The Motion has been fully briefed by the parties and is now ripe for disposition.*fn3 For the following reasons, the Court will grant the Motion on Counts I and III against Defendant Bobby Chez and deny the Motion on Counts II and IV against Defendant Sliwowski.

II. FACTUAL BACKGROUND

Plaintiff owns 1352 Lofts, a building located on South Street in Philadelphia, Pennsylvania, and is the successor in interest on the commercial lease entered into by Bobby Chez and the Suretyship Agreement entered into by Sliwowski regarding the 1352 Lofts property. (Doc. No. 14 ¶ 6.) Defendant Bobby Chez is the lessee on the commercial lease. (Id. ¶ 2.) Defendant Sliwowski is a party to the Suretyship Agreement, in which he guaranteed the performance of Bobby Chez. (Id. ¶¶ 3, 8.) As noted, Plaintiff alleges that Bobby Chez breached the Lease when it failed to pay rent for May, June, and July 2010 and removed trade fixtures from the property. (Id. ¶¶ 14, 15, 18, 20.) Plaintiff alleges that Sliwowski is liable for these breaches under the Suretyship Agreement. (Id. ¶¶ 30-31.)

Bobby Chez Crabcakes is a seafood restaurant chain offering take-out food options to customers primarily in the New Jersey area. (Doc. No. 22-3 ¶¶ 6-7; Doc. No. 23-2 ¶¶ 6-7.) Bobby Chez, Inc. owns and operates Bobby Chez Crabcakes in New Jersey. (Doc. No. 22-3 ¶ 6; Doc. No. 23-2 ¶ 6.) Sliwowski is the sole owner of Bobby Chez, Inc. (Doc. No. 22-3 ¶ 5; Doc. No. 23-2 ¶ 5.) Defendant Sliwowski is also an owner and manager of Defendant Bobby Chez of PA, LLC, which was formed to own and operate a Bobby Chez Crabcakes restaurant in Pennsylvania. (Doc. No. 22-3 ¶¶ 4, 8; Doc. No. 23-2 ¶¶ 4, 8.)

In late 2006, Rimas Properties LP ("Rimas") was developing a building known as "1352 Lofts" located at 1326-1352 South Street, Philadelphia, Pennsylvania. (Doc. No. 22-3 ¶ 12; Doc. No. 23-2 ¶ 12.) A representative from Rimas approached Sliwowski to determine whether he would lease one of six commercial condominiums located in 1352 Lofts for the purpose of operating a Bobby Chez Crabcakes restaurant. (Doc. No. 22-3 ¶¶ 11, 15; Doc. No. 23-2 ¶¶ 11, 15.) Beginning in October 2006 and continuing for approximately six months thereafter, Rimas and Sliwowski negotiated the commercial lease agreement at issue here. (Doc. No. 22-3 ¶¶ 16-17; Doc. No. 23-2 ¶¶ 16-17.)

On April 23, 2007, Rimas and Bobby Chez entered into the Lease. (Doc. No. 22-4, Ex. F; see also Doc. No. 22-3 ¶ 21; Doc. No. 23-2 ¶ 21.) Sliwowski signed the Lease on behalf of Bobby Chez and did so only after his counsel read and reviewed it. (Doc. No. 22-3 ¶ 21; Doc. No. 23-2 ¶ 21.) The Lease provides that "[o]n or before the first day of each and every successive calendar month during the Term, Tenant [Bobby Chez] agrees to pay the Landlord the Minimum Rent." (Doc. No. 22-4, Ex. F ¶ 4.1.) Minimum Rent (also "Base Rent") was $51,000 for the first three years, $56,100 for years four to seven, and $59,500 for the last three years of the Lease. (Id. ¶ 1.1(g).) In addition to Minimum Rent, Bobby Chez was responsible to pay additional rent, which consisted of its share of condominium fees and operating expenses. (Id. ¶ 4.2.) The Lease contains a paragraph regarding a "Free Rent Period." It provides: Tenant's obligation to pay Minimum Rent shall be abated as to the entire Premises during the earlier of (i) the first five (5) months of the Term, commencing as of the Commencement Date or (ii) the date Tenant opens for business. (The "Free Rent Period"). Such abatement shall apply to the Minimum Rent payable under this Lease during the Free Rent Period; provided however, Tenant shall pay the cost of utility usage occurring during the Free Rent Period as well as Condominium Fees, Taxes (as hereinafter defined) and Use and Occupancy Taxes. Minimum Rent for any calendar month in which the Free Rent Period expires shall be prorated based upon a thirty (30) day month, and all such Minimum Rent shall be due and payable for the actual days that elapse during the remainder of the month in which the Free Rent Period expires. The abatement of Minimum Rent described above is expressly conditioned on Tenant's performance of all of its obligations and responsibilities under this Lease throughout the Term of this Lease, and the amount of the abated Minimum Rent is based in part on the amount of Minimum Rent due under this Lease for the Term. If Tenant breaches this Lease and such default results in the termination of this Lease, the Tenant shall pay to the Landlord on the date of such termination, in addition to all other amounts and damages to which Landlord is entitled, the amount of Minimum Rent which would otherwise have been due and payable during the Free Rent Period (based on the monthly Minimum Rent due during the month immediately following the Free Rent Period). (Doc. No. 22-4, Ex. F ¶ 4.3.)

With respect to the Term of the Lease Agreement, it provides:

3.1 Term. The duration of this Lease shall be the Term. The Term will commence on the Commencement Date and expire on the Termination Date, unless earlier terminated as provided herein. (Id. ¶ 3.1.) Section 1 of the Lease contains a definition of terms. It provides as follows:

In addition to the terms which are defined elsewhere in this Lease, the following defined terms are used in this Lease: * * *

(e) TERM: Ten Years, beginning on the expiration of the Free Rent Period . . . and expiring on the Termination Date. The Commencement Date shall be the date of the execution of this Lease by both Landlord and Tenant.

(f) TERMINATION DATE: (i) if the Rent Commencement Date is the first day of a calendar month, the 120-month anniversary of the day immediately preceding the Rent Commencement Date; or

(ii) if the Rent Commencement Date is not the first day of a month, the 120-month anniversary of the last day of the month in which the Commencement Date occurs.

The Lease Agreement was executed on April 23, 2007. (Doc. No. 22-4, Ex. F ¶ 1.1(a).) It contains an integration clause which provides, "This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior or contemporaneous agreements or understanding pertaining to any such matters shall be effective for any purpose." (Id. ¶ 31.10.)

On April 23, 2007, the same day Rimas and Bobby Chez entered into the Lease, Rimas and Sliwowski entered into the "Suretyship Agreement." (Doc. No. 22-4, Ex. G; see also Doc. No. 22-3 ¶ 22; Doc. No. 23-2 ¶ 22.) The Suretyship Agreement provides:

In consideration of the execution [of the Lease] . . . the undersigned, [Defendant] Robert Sliwoski [sic] (hereinafter referred to as "Surety") intending to be legally bound hereby, becomes surety for the prompt and faithful performance by Tenant of the within Lease and all of the terms, covenants and conditions thereof, including, but not limited to, the payment by Tenant of the rental and all other sums to become due thereunder, the timely opening, occupancy and continued operation of the Permitted Use (as defined in the Lease), and the obligation to repay to Landlord the tenant improvement allowance provided by Landlord in the amount of $71,800.00 in the event Tenant fails to perform. (Doc. No. 22-4, Ex. G at 1.) The Suretyship Agreement also contains an integration clause which provides, "This Agreement shall be considered to be the only Agreement between the parties pertaining to the Lease." (Id. at 2.) The Agreement was to be "effective only during the first three years of the lease term." (Id.)

On March 27, 2007, prior to the execution of the Lease and Suretyship Agreement, Rimas and Sliwowski executed an "Addendum to Letter of Intent" (the "Addendum"). (Doc. No. 23-3, Ex. C at 1.) The Addendum provides that Sliwowski "personally guarantees that a Bobby Chez gourmet seafood restaurant will open and occupy the premises and, in the event that the restaurant fails to conduct regular business, Robert Sliwowski shall be personally liable for the repayment of the $71,800.00." (Id.) The Addendum is typed, but it contains several handwritten edits, initialed by Sliwowski. (Id.) According to Defendants, this Addendum evidences the intent of Rimas and Sliwowski that Sliwowski would only guarantee Bobby Chez's performance in opening a restaurant and that he would only be liable for the repayment of $71,800. (Defendants' Statement of Undisputed Facts, Doc. No. 23-2 ¶¶ 3-7.)

On June 11, 2007, the premises were available for occupancy. (Doc. No. 22-3 ¶ 24; Doc. No. 23-2 ¶ 24.) Four weeks later, Defendants opened a Bobby Chez Crabcakes restaurant at 1352 Lofts.*fn4 (Doc. No. 22-3 ¶ 25; Doc. No. 23-2 ¶ 25.) On March 24, 2009, Rimas and Bobby Chez executed an amendment to the Lease (the "Amendment"). (Doc. No. 22-4, Ex. H; see also Doc. No. 22-3 ¶ 27; Doc. No. 23-2 ¶ 28.) The Amendment provides:

1. Base Rent will be reduced by $1,500.00 for a period of eight (8) months (April 2009 through and including November 2009), bringing base rent to $2,750.00 per month.

2. At the conclusion of the aforementioned eight months, Base Rent will be increased by $333.33 for a period of twelve (12) months (December 2009 through and including November 2010) bring ...


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