                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-4-2005

Hampden Real Estate v. Metro Mgmt Grp Inc
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-2500




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"Hampden Real Estate v. Metro Mgmt Grp Inc" (2005). 2005 Decisions. Paper 739.
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                                       NOT PRECEDENTIAL

              UNITED STATES COURT OF APPEALS
                   FOR THE THIRD CIRCUIT


                             No. 04-2500


      HAMPDEN REAL ESTATE, INC., GENERAL PARTNER;
       JAGDISH BANSAL; ASHOK LUHADIA; INDU GARG;
        ANIL GUPTA, LIMITED PARTNERS, TRADING AS
HAMPDEN ENTERPRISES, L.P., A NEW JERSEY LIMITED PARTNERSHIP

                                  v.

          METROPOLITAN MANAGEMENT GROUP, INC.;
          SKYLINE APARTMENTS, LLC, A PA. LIMITED
          LIABILITY COMPANY; KEVIN TIMOCHENKO

                Metropolitan Management Group, Inc.,

                                       Appellant


            On Appeal from the United States District Court
               for the Eastern District of Pennsylvania
                     (D.C. Civil No. 02-cv-01160)
               District Judge: Hon. Michael M. Baylson


           Submitted Pursuant to Third Circuit LAR 34.1(a)
                            June 3, 2005

    BEFORE: FUENTES, GREENBERG and COWEN, Circuit Judges

                        (Filed August 4, 2005)


                              OPINION
COWEN, Circuit Judge.

       Metropolitan Management Group, Inc. appeals the District Court’s order granting

summary judgment in favor of Hampden Real Estate and against Metropolitan

Management with respect to the breach of contract claim. Metropolitan Management

contends that the parties modified and amended the agreement of sale to exclude the

escrow account credit by executing the final settlement statement. Alternatively,

Metropolitan Management asserts that there was at a minimum disputed issues of material

fact concerning whether (1) the parties intended the final settlement statement to represent

the final purchase price, (2) the parties intended that the escrow account credit would be

released by Hampden Real Estate as part of the sale negotiations, and (3) Metropolitan

Management would have proceeded to close the transaction if it was aware it would have

to pay the escrow account credit. The District Court had jurisdiction pursuant to 28 U.S.C.

§ 1332 and we have jurisdiction pursuant to 28 U.S.C. § 1291. We will reverse the

District Court’s judgment and remand for further proceedings.

       As we write solely for the parties, we only provide a brief recitation of the facts.

Hampden Real Estate sold Metropolitan Management a residential property pursuant to an

Amended Agreement of Sale (the “Sale Agreement”). The Sale Agreement provided that

the property would be sold for $3.7 million, that Metropolitan Management would assume

Hampden Real Estate’s mortgage on the building, and that Hampden Real Estate would




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receive a credit in the amount of $120,549.78—the amount being held in escrow pursuant

to the mortgage (the “Escrow Account Credit”).

       Between the execution of the Sale Agreement and the closing, the parties

negotiated certain adjustments to the purchase price to compensate for required repairs.

During these negotiations, the parties reviewed a draft and final HUD-1 Settlement

Statement (the “Settlement Statement”), prepared by the closing agent, which did not list

the Escrow Account Credit among the various debits and credits. A few weeks after the

closing, Hampden Real Estate demanded payment of the Escrow Account Credit.

       Following Metropolitan Management’s refusal to pay the Escrow Account Credit,

Hampden Real Estate filed a complaint claiming breach of contract, unjust enrichment,

and conversion. Metropolitan Management brought counterclaims for breach of contract,

unjust enrichment, and fraudulent or negligent misrepresentation. Hampden Real Estate

brought a partial motion for summary judgment as to the breach of contract claim, which

was granted and its unjust enrichment and conversion claims were dismissed as moot.

Metropolitan Management’s cross motion for summary judgment on all counts was

denied. After summary judgment was granted as to the breach of contract claim, the

parties withdrew all remaining claims.

       We review a district court’s order granting plaintiff’s motion for summary

judgment under a plenary standard, applying the same test employed by the district court

under Federal Rule of Civil Procedure 56(c). Morton Int’l, Inc. v. A.E. Staley Mfg. Co.,



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343 F.3d 669, 679 (3d Cir. 2003). Summary judgment is appropriate if “the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the affidavits,

if any, show that there is no genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In making this

determination, we view the facts in the light most favorable to the non-moving party.

       The District Court correctly determined that the threshold issue is the role of the

Settlement Statement, “based on both the intent of the parties and the custom and usage of

the document.” (App. at 7.) However, the Court refused to consider extrinsic or parol

evidence to determine the intent of the parties, reasoning that the parol evidence rule

precluded such consideration absent ambiguity in the written contract. We find that the

District Court misapplied the rule. The parol evidence rule seeks to preserve the integrity

of written agreements by precluding the introduction of contemporaneous or prior

declarations to alter the meaning of written agreements. See Rose v. Food Fair Stores,

Inc., 262 A.2d 851, 863 (Pa. 1970). The rule does not apply, however, where a party seeks

to introduce evidence of subsequent oral modifications. See Kersey Mfg. Co. v. Rozic, 215

A.2d 323 (Pa. Super. Ct. 1965), rev’d on other grounds 222 A.2d 713 (Pa. 1966). As the

Kersey court held, a “written agreement may be modified by a subsequent written or oral

agreement and this modification may be shown by writings or by words or by conduct or

by all three. In such a situation the parol evidence rule is inapplicable.” Id. at 324. Here,

the parol evidence rule does not preclude testimony regarding the parties intention to alter



                                              4
the final purchase price by executing a Settlement Statement, after the execution of the

Sale Agreement, which omitted the Escrow Account Credit.

       The cases cited by Hampden Real Estate are not to the contrary as each involved

the admissibility of prior negotiations to demonstrate misrepresentations made in the

inducement of the contract. As example, the court in Rempel v. Nationwide Life

Insurance Company, held that “[i]f a party contends that a writing is not an accurate

expression of the agreement between the parties, and that certain provisions were omitted

therefrom, the parol evidence rule does not apply.” 370 A.2d 366, 371 (Pa. Super. Ct.

1977) (permitting the introduction of parol evidence to establish that the contract omitted

provisions which appellees represented would be included in the writing); see also 1726

Cherry Street P’ship v. Bell Atlantic Prop., Inc.,653 A.2d 663 (Pa. Super. Ct. 1995)

(precluding the introduction of evidence of a prior representation to prove fraudulent

inducement).

       The District Court further held that the integration clause contained in the written

contract supports the conclusion that the Settlement Statement, which mentioned neither

the Escrow Account Credit nor that it was amending the Sale Agreement, is not a

modification of the Sale Agreement. The Court explained that the outcome might be

different if the Settlement Statement mentioned “the escrow credit but provided different

details, but as the [Settlement Statement] in this case simply ignored the escrow credit, and

both parties agree that there were no oral discussions regarding the escrow credit, the



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[Settlement Statement] cannot be said to modify the escrow credit provision in the

Agreement of Sale.” (App. at 9.) We disagree.

       It is well-settled law in Pennsylvania that a “written contract which is not for the

sale of goods may be modified orally, even when the contract provides that modifications

may only be made in writing.” Somerset Cmty. Hosp. v. Allan B. Mitchell & Assocs., Inc.,

685 A.2d 141, 146 (Pa. Super. Ct. 1996). “The modification may be accomplished either

by words or conduct,” First Nat’l Bank of Pa. v. Lincoln Nat’l Life Ins. Co., 824 F.2d 277,

280 (3d Cir. 1987) demonstrating that the parties intended to waive the requirement that

amendments be made in writing, Somerset Cmty. Hosp., 685 A.2d at 146. An oral

modification of a written contract must be proven by “clear, precise and convincing

evidence.” Fina v. Fina, 737 A.2d 760, 765 (Pa. Super. Ct. 1999). Viewing the evidence

in the light most favorable to Metropolitan Management, we find that the District Court

erred in concluding that there was insufficient evidence in the record to raise a genuine

issue of material fact as to whether the parties intended to orally modify the Sale

Agreement. Metropolitan Management introduced a Settlement Statement which omitted

the Escrow Account Credit, while listing all other debits and credits (app. at 94-95) and

submitted an affidavit from its President who “reviewed the Draft Settlement Statement

and understood that the Escrow Account Credit had been omitted as part of the ongoing

negotiations between the parties concerning the amount of the credit to which




                                              6
Metropolitan Management was entitled” due to the poor condition of the property (app. at

117-18).

       Accordingly, the District Court erred in granting summary judgment in favor of

Hampden Real Estate. At a minimum, there was a triable issue of fact concerning whether

the Settlement Statement was intended to modify the prior written Sale Agreement and

serve as the final and binding manifestation of the purchase price. Specifically, whether

the parties intended to exclude the Escrow Account Credit from the purchase price as part

of the negotiations to address Hampden Real Estate’s failure to maintain the property.

       For the foregoing reasons, the judgment of the District Court entered on February

18, 2004, will be reversed and remanded for further proceedings. Since we will reverse

the District Court’s grant of summary judgment as to Count I (Breach of Contract) and the

District Court dismissed Counts II (Unjust Enrichment) and III (Conversion) as moot by

its issuance of summary judgment, we likewise remand those counts to the District Court

for further consideration.




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