McIntyre Square Associates v. Evans

CONCURRING AND DISSENTING OPINION BY

GRACI, J.:

¶ 1 I am reluctant to disagree with my learned colleagues in the majority and agree, in large measure, with the result reached by its learned author. However, in my view, the Guarantors were not discharged by the material modification of the lease. Accordingly, I write separately. 16

¶ 2 I fully agree with the majority’s disposition of the first issue on appeal, that the trial court did not err by sua sponte granting judgment for First City on the morning of trial, after the jury was selected. However, I disagree with the majority’s disposition of the next issue that it addresses, regarding whether Guarantors 17 cease to be liable under a lease when the terms and duration of the lease are changed without their notice.

¶ 3 As the majority indicates, in Reliance Ins. Co. v. Penn Paving, Inc., 557 Pa. 439, 734 A.2d 833 (1999) our Supreme Court stated:

*460 Cognizant of the problems posed by the three-party composition of suretyships, Pennsylvania courts have uniformly recognized that where the creditor and the debtor materially modify the terms of their relationship without obtaining the surety’s assent thereto, the surety’s liability may be affected. A material modification in the creditor-debtor relationship consists of a significant change in the principal debtor’s obligation to the creditor that in essence substitutes an agreement substantially different from the original agreement on which the surety accepted liability. Where, without the surety’s consent, there has been a material modification in the creditor-debtor relationship, a gratuitous (uncompensated) surety is completely discharged. A compensated surety is discharged only if, without the surety’s consent, there has been a material modification in the creditor-debtor relationship and said modification has substantially increased the surety’s risk.

Id. at 838 (citation omitted). “In determining whether a surety has consented to a material modification, the suretyship ‘contract must be given effect according to its own express intention as gathered from all the words and clauses used, taken as a whole, due regard being had also to the surrounding circumstances.’ ” Id. (citation omitted).

¶ 4 The Court found that the surety agreement in that case did not contain an express waiver of a material modification of risk of liability. Consequently, the Court held that the surety should be discharged.

¶ 5 Here, I agree with the majority that Guarantors were compensated sureties since they were officers and owners of Professional Male when making the guarantee and that the amended lease was a material modification of the original lease which substantially increased Guarantors’ risk in that it extended the lease term for an additional five years. Moreover, I agree that section (a) of paragraph 2 of the Guaranty Agreement, providing that by signing the Guaranty Agreement, Guarantors agree that “any amendment or modification of the- provisions of the Lease Agreement” shall not discharge them, Guaranty Agreement, 10/8/91, at ¶ 2, § a, does not, itself, bind Guarantors since it does not expressly refer to a material modification of risk of liability as required under Reliance Ins. Co. However, I cannot agree that section (e) of paragraph 2 of the Guaranty Agreement creates an ambiguity as to whether or not Guarantors consented to material modifications in the lease that increased their risk.

¶ 6 “In construing a contract, the intention of the parties is paramount and the court will adopt an interpretation which under all circumstances ascribes the most reasonable, probable, and natural conduct of the parties, bearing in mind the objects manifestly to be accomplished.” Charles D. Stein Revocable Trust v. General Felt Industries, Inc., 749 A.2d 978, 980 (Pa.Super.2000) (citation omitted). “If the language appearing in the written agreement is clear and unambiguous, the parties’ intent must be discerned solely from the plain meaning of the words used.” Id. (citation omitted).

[Contractual language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. This is not a question to be resolved in vacuum. Rather, contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts. We will not, however, distort the meaning of the language or resort to strained contrivance in order to find an ambiguity.

*461 J.W.S. Delavau, Inc. v. Eastern America Transport & Warehousing, Inc., 810 A.2d 672, 681-82 (Pa.Super.2002) (citation omitted).

¶ 7 In my opinion, there is only one reasonable interpretation of section (e), which provides that by signing the Guaranty Agreement, Guarantors agree that “any act, thing, omission or delay to do any act or thing that may, in any manner, or to any extent, vary the risk of Guarantor or that would otherwise operate as a discharge of any Guarantor as a matter of law ” shall not discharge them. Guaranty Agreement, 10/8/91, at ¶2, § e (emphasis added). I agree that the amended lease was a material modification of the original lease as it substantially increased Guarantors’ risk. Such a material modification substantially varies Guarantors’ risk and would otherwise operate as a discharge of any Guarantor as a matter of law pursuant to Reliance Ins. Co. Section (e) clearly and unambiguously changes this result. Under that section, any act that would otherwise operate to discharge the Guarantors as a matter of law (such as a substantial material modification of the lease as here) simply does not have such an effect. The liability of the Guarantors shall not be discharged, under the terms of the agreement, even though as a matter of law, in the absence of such a clause in the agreement, they “otherwise” or “in a different manner” would be discharged. When the clear language of section (e) is read in the context of the whole agreement under this particular set of facts as is required under Reliance Ins. Co. and J.W.S. Delavau, Inc., then the only reasonable conclusion is that the Guarantors are not discharged. Accordingly, I would affirm the judgment entered against Guarantors.

¶ 8 Because I would not vacate the judgment entered against Guarantors based on their contention that they cease to be liable since the terms and duration of the lease were changed without their notice, I would also review Guarantors’ final argument, that material changes in Professional Male’s lease with First City constitute a new and different lease for which the guarantors of the first lease are not hable.

¶ 9 “[Ojnce a contract has been formed, its terms may be modified only if both parties agree to the modification and the modification is founded upon valid consideration.” J.W.S. Delavau, Inc., 810 A.2d at 681 (citation omitted). “A modification does not displace a prior valid contract; rather, the new contract acts as a substitute for the original contract, but only to the extent that it alters it.” Melat v. Melat, 411 Pa.Super. 647 , 602 A.2d 380, 385 (1992) (citation omitted).

¶ 10 Here, the caption of the modifying document itself clearly and unambiguously indicates that it is a “Lease Amendment and Extension Agreement,” not a new and different lease agreement. Lease Amendment and Extension Agreement, 2/15/96. The document, signed by representatives of First City and Professional Male, also clearly and unambiguously states that it is “amending the terms and conditions” of the original agreement, id. at 1, that Professional Male and First City agree that the original agreement “shall be, and hereby is, amended and extended,” id., and that all other terms, provisions, and conditions of the original agreement “not amended by this Agreement shall remain in full force and are hereby ratified and confirmed by [First City and Professional Male].” Id. at 3. Moreover, Professional Male agreed to pay First City “$3,697.83 per month payable in equal monthly installments on the first day of each Calendar Month of the sixth through the eighth Lease Year, inclusive” and “$4,076.02 per month payable in equal monthly installments on the first day of each Calendar *462 Month of the ninth through the tenth Lease Year, inclusive” in exchange for the lease extension. Id. at 1-2. Therefore, in my view, both Professional Male and First City agreed to the modification, and the modification was founded upon valid consideration. Accordingly, since the modification was valid and did not displace the prior valid contract, I would affirm the judgment entered against Guarantors.

¶ 11 I fully agree with the majority’s disposition of the first and second issues that First City raises in its cross-appeal, that the trial court erred when it sua sponte, by order dated October 2, 2000, substituted McIntyre Square in place of First City in the caption and that the trial court correctly prohibited the admission of the confessed judgment against Professional Male as evidence of Guarantor’s liability in the action by First City against them. However, since I would affirm the judgment entered against Guarantors, I would also review First City’s final argument, that it was entitled to an award of counsel fees under the Guaranty Agreement.

¶ 12 “Although parties to a lawsuit are generally responsible for their own attorney’s fees, where one party expressly contracts to pay the other’s fees, such an obligation will be enforced.” Putt v. Yates-American Mach. Co., 722 A.2d 217, 226 (Pa.Super.1998) (citation omitted). Here, Guarantors expressly contracted to “pay to [First City], on demand, all expenses ('including reasonable expenses for attorney’s fees and reasonable charges of every kind) incidental to, or relating to the enforcement of th[e] Guaranty Agreement.” Guaranty Agreement, 10/8/91, at 1, ¶ 1 (emphasis added). Accordingly, in my view, First City is entitled to an award of counsel fees.

¶ 18 For these reasons, I would affirm the lower court at No. 868 WDA 2001, reverse the Order of October 2, 2000, altering the caption at No. 924 WDA 2001, affirm the order granting Guarantors’ motion in limine, prohibiting First City from introducing its confessed judgment against Professional Male at No. 924 WDA 2001, and remand the case for a determination of appropriate attorney’s fees and charges as due First City under the Guarantee Agreement at No. 924 WDA 2001.

. Because of my different resolution of this issue, I am compelled to address some issues not reached by the majority.

.As the majority notes, although denominated as "guarantors,” they are more properly categorized as sureties. See Majority Opinion, at 437 n. 7.