Pennsylvania Superior Court Strikes Judgment Entered Against Indoor Cannabis Cultivator, Finding That Its Landlord Had Sought An Improper “Double Recovery”
September 28, 2023
By: Carl L. Engel
On September 25, 2023, the Superior Court affirmed a decision to strike a confessed judgment against a cannabis cultivator that had defaulted on its lease, because the landlord had sought a “double recovery.” Specifically, the landlord had entered judgment both for early possession of the property and for future rent owed under the lease, when the law requires the landlord to choose between one remedy or the other. If the landlord were allowed to take early possession of the property and to collect all future rents, it becomes a double recovery, because the landlord is able to rent the property to a new tenant while also having recovered rent for that period from the old tenant. Because the cultivator’s landlord had obtained judgment for both items, the judgment had to be stricken.
On June 1, 2020, Green Line Labs LLC leased a 10,000 square-foot space, known as “The Greenhouse,” from Samuel and Susan Stoltzfus. Green Line Labs used the property as a “hemp genetics cultivation facility.” Rent was $55,000 per year, to be paid in monthly installments of $4,583.33. The lease included a confessed-judgment clause, which allowed the Stoltzfuses to enter a judgment against Green Line Labs in the event of a breach, without going through litigation.
On August 6, 2021, the Stoltzfuses filed a complaint seeking (i) confession of judgment for money and (ii) ejectment of Green Line Labs and possession of the property. In the complaint, the Stoltzfuses alleged that Green Line Labs had failed to pay rent when due and had used the property for activities beyond what was allowed under the lease. The Stoltzfuses sought a total of $110,766.17, which included past rent, accelerated rent, and attorneys’ fees.
At the same time that they filed their complaint, the Stoltzfuses also confessed judgment against Green Line Labs. On November 17, 2021, they ejected Green Line Labs from the premises. The Stoltzfuses also filed a writ of execution, and, on March 23, 2022, Green Line Labs’s inventory, equipment, fixtures, and other assets were sent to public auction.
On June 17, 2022, Green Line Labs files a petition to strike the confessed judgment because, among other reasons, the Stoltzfuses were attempting a double recovery for a single wrong. Specifically, they had improperly entered judgment for possession of the property and accelerated rent simultaneously. On August 22, 2022, the trial court granted Green Line Labs’s petition to strike the confessed judgment. The Stoltfuses appealed.
The Superior Court affirmed, reasoning that the law is well-settled in Pennsylvania that “where a lessor terminates a lease and enters into possession, he may not have possession of the premises and also judgment for rent for the unexpired period of the lease.” In other words, a landlord may not recover twice, once by taking possession of the property before the lease expiration, and a second time by recovering the rent for the remainder of the lease term. The reason that this is a double recovery is that, by taking possession of the property early, the landlord is able to lease it to another tenant. If the landlord is also allowed to obtain accelerated rent from the prior tenant, they will be collecting rent twice for each month that the property is rented to a new tenant before the expiration of the old lease.
Therefore, when a tenant defaults on a lease, the landlord must decide which remedy is more advantageous. To do this, a landlord should assess the rental market to determine whether they would be able to rent the property to a new tenant for a higher amount, or whether the market has softened since the lease was executed. If the market has strengthened, the landlord should consider taking possession of the property early, so they may rent it at a higher price. If the market has softened, the landlord should consider collecting accelerated rent from the tenant in default.