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COMMONWEALTH PENNSYLVANIA v. HENRY A. BERGER AND SAMUEL A. BERGER (11/20/73)

decided: November 20, 1973.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PROPERTY AND SUPPLIES, APPELLANT,
v.
HENRY A. BERGER AND SAMUEL A. BERGER, T/D/B/A THE EXECUTIVE HOUSE, APPELLEES. HENRY A. BERGER AND SAMUEL A. BERGER, T/D/B/A THE EXECUTIVE HOUSE, APPELLANTS, V. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PROPERTY AND SUPPLIES, APPELLEE



Appeals from the award of the Board of Arbitration of Claims in case of Henry A. Berger and Samuel A. Berger, t/d/b/a Executive House v. Commonwealth of Pennsylvania Department of Property and Supplies, Docket No. 187.

COUNSEL

Gerry J. Elman, Deputy Attorney General, with him Israel Packel, Attorney General, for Commonwealth.

Charles B. Zwally, with him James A. Ulsh, Robert E. Woodside and Shearer, Mette, Hoerner & Woodside, for the Executive House.

President Judge Bowman and Judges Kramer, Mencer, Rogers and Blatt. Judges Crumlish, Jr. and Wilkinson, Jr. did not participate. Opinion by Judge Blatt.

Author: Blatt

[ 11 Pa. Commw. Page 334]

Henry A. Berger and Samuel A. Berger (the Bergers) are the owners and operators of a high-rise apartment-office building in Harrisburg, known as the Executive House. The building was erected in 1966 and 1967, with the original plans calling for the first three floors to be designed for office use and the upper floors to be designed as apartments.

[ 11 Pa. Commw. Page 335]

Prior to completion of the Executive House, the Bergers entered into leasing negotiations with the Department of Public Welfare (DPW), and, because the first three floors had been leased before these negotiations were concluded, an agreement was reached to rent the fourth and fifth floors to the DPW; these, of course, had been laid out as apartments. On June 20, 1967, the Bergers and the DPW, the latter acting through the Department of Property and Supplies (DPS),*fn1 entered into a five-year lease for the fourth and fifth floors, with the effective date of the lease being October 1, 1967, but it being further provided that "no rentals shall be due or payable until the premises are completed to the satisfaction of and occupancy by the Department of Public Welfare. All rentals shall abate during non-occupancy." Exhibit "C", which was attached to and made part of the lease, provided that the Bergers would submit detailed plans and specifications pertaining to their proposed alterations to DPW for approval by July 15, 1967 and that, if such approval was not received by August 1, 1967, the Bergers could, at their option, cancel this lease. It was also provided that, if the building was not complete and ready for occupancy by December 1, 1967, the DPW could cancel the lease at its sole option.

Following execution of this lease, the Bergers continued with the originally planned construction of the fourth and fifth floors, completing the floors as apartments as shown in the Typical Floor Plan submitted to DPW and DPS prior to June 20, 1967. On November 15, 1967, however, when neither the DPW nor the DPS had notified the Bergers of any requested alterations, the Bergers notified the DPW that the two floors were

[ 11 Pa. Commw. Page 336]

    available. The Bergers then also requested the DPW to advise when it intended to take possession. Thereafter the DPS Secretary notified the Bergers that the removal of all facilities on the fourth and fifth floors would be required along with the installation of certain telephone cables, and the Bergers replied that this would be impossible. Despite continued negotiations between the parties, the Commonwealth refused either to take possession of the premises or to pay any rent, finally canceling the lease on February 2, 1968. The Bergers subsequently filed a complaint with the Board of Arbitration of Claims (Board), which, on March 6, 1973, made an award against the Commonwealth and in the Bergers' favor in the amount of $273,170.00.

Our scope of review on an appeal from an order of the Board is governed by Section 8(c) of the Act of May 20, 1937, P.L. 728, as amended, 72 P.S. ยง 4651-8(c). "[W]e must affirm the order unless it was not in accordance with law or there is an absence of substantial evidence to support the findings of the Board as to the facts. Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." John McShain, Inc. v. General State Authority, 9 Pa. Commonwealth Ct. 427, 431, 307 A.2d 469, 472 (1973).

The Board's findings of fact were to the effect that, prior to June 20, 1967, the Bergers submitted a Typical Floor Plan for the fourth and fifth floors to appropriate officials of the DPW and the DPS, and that this Plan showed the floors laid out as apartments. Following the signing of the lease, the Bergers made numerous efforts to find what alterations the DPW would require but were given no guidance, even though officials in the DPW knew that both floors had been designed as apartments and that some alterations would surely be necessary for use by the DPW. Significantly, too, the Board found that plans were even drawn up by

[ 11 Pa. Commw. Page 337]

    the DPW regarding their proposed use of these floors, which would have required only the removal of 6-10 partitions between apartments and a few other changes, but these plans were never submitted to the Bergers.

The Board further found that, shortly after the lease was executed, a new Secretary of the DPW was appointed, who decided that the DPW should try to break the lease by submitting plans to the Bergers as if only the shell of the building was involved, disregarding the existence of apartment walls, kitchens, bathrooms and closets, although their existence was actually well known to the DPW and the DPS. The DPW then requested the DPS to cancel the lease, and the Bergers were on November 28, 1967 sent the proposed alterations, which would literally involve the gutting out of both completed floors. These plans, moreover, were not detailed or construction plans. The Board found that the DPW had adamantly refused to take possession and eventually cancelled the lease.

A careful review of the record indicates substantial evidence to support these findings by the Board. The Commonwealth, however, objects to the Board's going outside the four corners of the lease in taking testimony regarding the negotiations and other extrinsic factors. It also questions the result reached by the Board, even if the facts so found by the Board are assumed correct. We shall attempt here to deal with each of the Commonwealth's objections.

Admission of Parol Evidence

The Commonwealth argues that it was error, because of the parol evidence rule, for the Board to hear evidence of negotiations which had led to the lease and of DPW's "knowledge" and "intent" regarding the two floors. "The parol evidence rule . . . ...


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