by Mark Bauman | Mar 16, 2023 | Commercial Litigation & Corporate Law, Legal News
The Superior Court of Pennsylvania recently interpreted the standard inspection contingency language as contained in the Standard Agreement for the Sale of Real Estate endorsed by the Pennsylvania Association of Realtors (“Agreement”). Such an Agreement was executed by the parties in Welteroth v. Harvey, 912 A.2d 863 (Pa. Super. 2006). The buyers agreed to purchase a six acre residential property on a wooded rural lot. They later alleged that the sellers of the property breached the Agreement by harvesting thirty (30) large trees for timber. The buyers sought specific performance and damages for devaluation of the property, damage to the grounds, and the expense of removing stumps that were left behind.
The sellers of the parcel filed preliminary objections to the Complaint, asserting that the buyers failed to state a cause of action. In support of this assertion, the sellers relied upon the inspection contingency language contained in the Agreement. This standard language gave the buyers fifteen (15) days to inspect the property and raise objections to the conditions thereon. In the event that objectionable conditions were discovered and properly placed in issue, the seller had the options to repair, offer a credit, or do nothing. If the seller chose to do nothing the onus was upon the buyer, within five (5) days, to accept the property as is or terminate the Agreement. The sellers in Welteroth asserted that the timbering operation was underway and obvious when the buyers inspected the property. Accordingly, the sellers argued that the Agreement provided exclusive remedies (i.e. reject or accept as is), which were not exercised by the buyers. The trial court, refused to order specific performance, and declined to consider claims for breach of contract and conversion of timber.
The Superior Court of Pennsylvania reversed the trial court’s order and remanded for further proceedings. The Superior Court stated that the remedies provision of the Agreement would only be triggered if the sellers refused to repair or offer a credit after the fifteen (15) day inspection contingency was exercised. The Superior Court also pointed out that other language contained in the Agreement imposed on the seller a duty to maintain the property in its present condition and opined that this duty did not terminate after the window for inspection closed. The inspection contingency provided buyers the ability to unilaterally terminate the Agreement within a specified window of time (or quickly modify the Agreement with consent of the sellers). Thereafter, the buyers lost the ability to terminate as a matter of course but could seek traditional remedies of damages and specific performance. The Superior Court cautioned that the manner in which the trial court exclusively construed the inspection contingency language contained in the Agreement could yield absurd and inequitable results.
In addition to finding that the trial court misinterpreted the Agreement, the Superior Court found that it was error for the trial court to determine that the buyers knew of the timbering operation before the inspection window closed. Whether and when the buyers learned of the timbering was a crucial factual determination bearing on the applicability of the remedies provision contained in the Agreement and the range and extent of remedies available to the buyers.
by Mark Bauman | Mar 14, 2023 | Commercial Litigation & Corporate Law, Legal News
Recently, in Carter-Jones Lumber Co. v. Northwestern PA Humane Society, 913 A.2d 1002 (Pa.Cmwlth. 2006), the Court found that an animal shelter served a purely public purpose and thus rendered it exempt from mechanics’ liens under Section 1303(b) of the PA Mechanics’ Lien Law of 1963 (49 P.S. §1101, et seq.). In rendering its decision, the Court reviewed case law and determined that Courts have evaluated four factors in considering whether the purely public purpose exception applies. Those four factors are: (1) the public’s access to the services provided by the entity; (2) whether the entity’s function with respect to the property is a governmental function or a propriety function, (3) whether the entity operates with the possibility or motive of profit, and (4) whether allowing execution upon the liens would disrupt an essential public service.
However, the Court failed to address how, if at all, the “substitute remedy” provision of the PA Public Works Contractors’ Bond Law of 1967 (8 P.S. §191, et seq.) interplays with this purely public purpose exemption. Specifically, the Public Works Contractors’ Bond Law was designed to, among other things, provide substitute remedies for subcontractors who are excluded from the protections afforded by Mechanics’ Lien Law of 1963. However, the Bond law only applies in certain circumstances and has specific definitions. It is unlikely that a nonprofit or its property will fall within the applicable definitions. Thus, given the decision in Carter-Jones, in a purely public purpose project, the subcontractors are left without the mechanics lien remedy or the substitute remedies.
by Mark Bauman | Mar 13, 2023 | Commercial Litigation & Corporate Law, Legal News
The first, and most important, issue is to know the limit of your liability and to protect yourself and your investment in your company by incorporating your business. In order to do this, it is important to consult with an attorney and disclose everything about your proposed business venture and past business experiences, both positive and negative. Your attorney can help outline the advantages and disadvantages of the various forms of business entities. Together, you should review all of the “corporate formalities” to which you must adhere in order to preserve the limited liability afforded to you by virtue of having incorporated your business.
As you get to know your customers and suppliers, your attorney can create contracts that suit your specific needs with each of them. Discuss with your attorney the need for a written employee handbook and written employment agreements containing confidentiality and non-competition obligations if necessary.
If you intend to enter into a partnership, you must discuss with your attorney the need for a detailed written buy-sell agreement with your business partners. If you and your partners do not spell out your rights and responsibilities in a written partnership agreement, disputes could end up being a “free for all” and create nothing but additional work and expense if conflicts arise. In addition, without a written agreement saying otherwise, your state’s law will control many aspects of your business. A partnership agreement allows you to structure your relationship with your partners in a way that suits your business. It outlines the shares of profits or losses for each partner, the responsibilities of each partner, and what will happen to the business if a partner decides to no longer be a part of the business.
This process must be carefully considered and outlined. As such, it is important to consult the proper professionals who can help you make the right decisions.
by Mark Bauman | Mar 13, 2023 | Commercial Litigation & Corporate Law, Legal News
The United States District Court for the Eastern District of Pennsylvania, in a memorandum opinion denying a bank’s request to dismiss a complaint, found that a bank violated the Deficiency Judgment Act when it received payment from the sale of a residential property on which it held a second mortgage as payment towards an earlier deficiency judgment obtained after it foreclosed on the debtor’s commercial property. Munoz v. Sovereign Bank, 06-2876 (September 18, 2006).
The Munoz’s borrowed money from Sovereign Bank to purchase a commercial property and business but they subsequently defaulted on the loan. The bank foreclosed and obtained a judgment for $1.14 million. It then executed on the property and purchased it at Sheriff’s sale for $31,000. The Munoz’s residential property was then sold pursuant to a judicial sale. Sovereign bank, which also held a second mortgage on the residential property, received $587,000 toward the satisfaction of its judgment obtained relative to the commercial property. The Munoz’s sued claiming that the bank failed to comply with Pennsylvania’s Deficiency Judgment Act, 42 Pa. C.S. § 8103.
The Deficiency Judgment Act prevents creditors from purchasing a debtor’s real property, often below fair market value, and continuing to execute on the debtor’s other property to satisfy the judgment without first considering the fair market value of the property it executed on. In other words, the bank must determine the balance due on the judgment by subtracting the property’s fair market value, not the price it paid to purchase the property, from the amount of the deficiency judgment. A creditor has six months to petition the court to fix the fair market value. If the creditor fails to do so, the court, upon petition of the debtor, may mark the entire judgment satisfied.
The bank argued that it had not violated the statute because, among other things, it did not execute against the residential property and the time in which it was required to fix the fair market value of the commercial property had not expired. The district court disagreed. It stated that the Deficiency Judgment Act requires the creditor to fix the fair market value by petitioning the court before “seeking to collect the balance due . . .” not before executing against the second property. Thus, Sovereign Bank’s obligations under the statute arose at the time it received the deed to the commercial property and it violated the act when it continued to collect the debt on the commercial property without first having determined the property’s fair market value. The district court also stated that the sixth month period in which a creditor has to fix the fair market value does not give a creditor a six month window in which to undermine the protection that the Deficiency Judgment Act gives the debtor.
by Mark Bauman | Mar 12, 2023 | Commercial Litigation & Corporate Law, Legal News
O’Brien & Ryan, LLP prepares and reviews employment contracts for health care practitioners, as well as for employers and employees outside of the health care industry. Typically, these contracts include a restrictive covenant, which is commonly referred to as a non-competition provision. The restrictive covenant aims to protect an employer from an employee who leaves the employment relationship and then seeks employment that is in direct competition with the former employer. The restrictive covenant places limitations on where the former employee is permitted to work and also provides a time period in which the limitation applies. The effectiveness and reasonableness of the restrictive covenant has been frequently challenged and therefore, it is imperative to fully understand the intricacies of the restrictive covenant before entering into the employment contract.
In addition to restrictive covenants, employment contracts will discuss benefits and compensation. Employers and employees need to carefully scrutinize the benefits and compensation that will be offered and accepted in order to ensure that a fair and reasonable package is being offered. Without ample consideration of the benefits and compensation, the employer or employee could be faced with a long-term commitment that does not provide what is rightfully deserved.
For more information on employment contracts, please contact Anthony P. DeMichele.
by Mark Bauman | Mar 11, 2023 | Commercial Litigation & Corporate Law, Legal News
O’Brien & Ryan, LLP handles a substantial number of commercial litigation claims. Of interest, O’Brien & Ryan, LLP is currently representing a dental practice that was recently sold to a purchasing dental group. This transaction involved an asset purchase agreement, restrictive covenants, leases, a commercial note and other related documents that are involved with this type of business transaction. Shortly after the transaction was finalized, the purchasing group claimed that there were several breaches of the asset purchase agreement and related documents. The existence of an arbitration agreement in the asset purchase agreement prompted the purchasing group to file a demand for arbitration with the American Arbitration Association.
In addition to handling the typical construction litigation claims involving disputes between owners, general contractors, subcontractors, design professionals and sureties, O’Brien & Ryan, LLP is currently embroiled in a construction litigation claim involving successor in interest liability. This type of a claim adds a twist to the typical construction litigation claim and involves a theory of recovery against an acquiring corporation that purchases the assets and liabilities of a corporation that was involved in the underlying construction dispute.
These are just a small sampling of the commercial litigation matters that O’Brien & Ryan, LLP is currently handling. For more information on the commercial litigation department at O’Brien & Ryan, LLP, please contact Anthony P. DeMichele.
