Jon Campisi May 6, 2013, 7:07am

A three-judge panel of the Pennsylvania Superior Court has affirmed a Philadelphia

judge’s judgment in favor of a plaintiff who had sued over a commercial real estate transaction.

The civil case involved Amritpal Singh, the owner of a Lukoil gas station on the 9100 block of Frankford Avenue in Philadelphia, who entered into a contract with Hillmen Inc. whereby the defendant would purchase the gas station for $275,000, according to the court record.

According to the contract, Hillmen was to pay Singh $60,000 at the signing of the contract, Singh would hold a purchase money mortgage for $200,000, and Hillmen would make $5,000 monthly payments toward the mortgage balance and then pay $15,000 at the time of final settlement.

The contract also required Singh to put down a security deposit on behalf of Hillmen to Lukoil, which led to an amendment in the contract that lowered Hillmen’s monthly payments to $4,000, the record shows.

Years later, on Oct. 1, 2010, Singh filed a breach of contract suit against Hillmen alleging that the defendant had failed to make its contractually obligated monthly payments.

Philadelphia Common Pleas Court Judge Idee C. Fox entered a default judgment against Hillmen in early December of that year, the record shows.

During a subsequent hearing, both parties stipulated that Hillmen had already paid Singh a total of $163,500 under its contract, with the only contention having to do with the contract apparently being contingent upon the transfer of a house in Bucks County.

The contract stated that if Singh failed to purchase the home, then a buyer, identified in the suit only as “Mr. Khan,” had the option to terminate the agreement between Singh and Hillmen, which would mean all sums paid “shall be returned to appropriate parties without any further liability to any party.”

Hillmen argued that the trial court erred in its assessment for damages by not finding that Hillmen was owed some consideration for the transfer of that property under the contract, which Hillmen asserted was about $125,000.

Hillmen’s argument, according to the appellate court ruling, was based on Khan’s trial testimony in which he said he feared that “I will take his gas station and he’s not getting the house, and my fear was he was going to take my house and I’m not getting the gas station.”

When this clause was put into the contract, the appellate ruling notes, the actual value of the Bucks County home was in dispute.

Court papers don’t spell out the relationship between the three separate parties.

Khan had testified that he stopped making mortgage payments on the home when he believed he had paid Singh the difference between the purchase price of the gas station and the value of his equity in the property, understanding that the two men mutually agreed that Khan would get credit from Singh following the home’s appraisal.

The trial court found Hillmen’s interpretation of this portion of the contract inadmissible under the parol evidence rule, and subsequently entered judgment in favor of Singh in the amount of $111,500, plus interest dating back to Dec. 3, 2010.

Hillmen then appealed to the Superior Court, arguing that the parties’ agreement has “patent and latent ambiguities,” and the court should have considered parol evidence regarding the value of the property as a credit against the gas station sales price.

Specifically, Hillmen argued that the contract contained patent ambiguities because it discusses the transfer of property, but doesn’t have any value assigned to the property or any credits toward the sale.

Hillmen further argued that latent ambiguities arose during the assessment of damages hearing, when Singh testified that the property’s equity was $125,000, although the total sales price was $400,000.

Hillmen also introduced evidence showing that the parties had placed a value of the transaction at $300,000, without any reference to the property.

At the hearing, Hillmen stated, “this collateral evidence shows that the parties never intended to value the [gas station] at $400,000,” according to the appellate court decision, citing trial testimony.

Citing state Supreme Court precedence, the Superior Court panel wrote that the trial court’s decision must stand.

The parties’ contract “clearly states” the purchase price of the gas station to be $275,000, it sets forth the manner by which Hillmen would satisfy payment, and indicates the transfer of the property “is a condition precedent to the transfer of the gas station.”

The panel, noting that the contract was silent on the value of the property, said it agreed with the trial court that there were no ambiguities that would permit parol evidence to vary the terms of the contract.

The term “parol evidence” is a legal rule that says oral evidence cannot be used to contradict the terms of a written contract.

Fox, the Philadelphia judge who had presided over the non-jury commerce case, had written in her ruling that because there was no ambiguity in the contract to indicate the mortgage was to be satisfied in any way other than by Hillmen making monthly payments toward the balance, Hillmen’s interpretation of paragraph 4.4(e) of the contract – the section dealing with the house transfer – was inadmissible under the parol evidence rule.

Fox had issued her opinion back in mid May 2012.

“Accordingly, as we agree with the sound rationale of the trial court, we affirm,” the Superior Court opinion states.

The opinion was written by Superior Court Judge Paula Francisco Ott. She was joined by Judge Anne E. Lazarus and Senior Judge Eugene B. Strassburger, III.

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