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EASTON THEATRES v. WELLS FARGO LAND AND MORTGAGE CO. (04/12/79)

decided: April 12, 1979.

EASTON THEATRES, INC., APPELLANT,
v.
WELLS FARGO LAND AND MORTGAGE CO., INC., AND NORTHEASTERN NATIONAL LAND CO., INC., INDIVIDUALLY AND D/B/A 25TH STREET SHOPPING CENTER. WELLS FARGO LAND AND MORTGAGE CO., INC., APPELLANT, V. EASTON THEATRES, INC., APPELLEES



No. 175 & 184 Oct. Term 1978, Appeal from Order of the Court of Common Pleas, Northampton County, entered Sept. 20, 1977, at No. 20, May Term, 1973, Civil Action, Equity.

COUNSEL

H. Donald Busch, Bala Cynwyd, for appellant at No. 175 and appellee at No. 184.

James C. Hogan, Easton, for appellants at No. 184 and appellees at No. 175.

Jacobs, President Judge, and Hoffman, Cercone, Price, Van der Voort, Spaeth and Hester, JJ. Jacobs, former President Judge, and Hoffman, J., did not participate in the consideration or decision in this case.

Author: Spaeth

[ 265 Pa. Super. Page 340]

This cases arises on cross appeals in an equity action. The issues raised involve whether there was a breach of contract, and if there was, whether the chancellor should have awarded monetary damages in addition to specific performance.

On February 29, 1972, Easton Theatres, Inc., entered into a written lease with Wells Fargo Land and Mortgage Co., Inc. The lease provided that Easton would let from Wells Fargo a 13,000 square foot theatre building, to be built on land Wells Fargo owned in the 25th Street Shopping Center in Palmer Township, Northampton County. The building was to be built by Wells Fargo in accordance with plans and specifications to be prepared by Easton's architect. In the spring of 1972, the parties encountered problems in connection with the proposed construction site. Accordingly, they agreed that the theatre building should be built in another part of the shopping center, on land owned by Northeastern National Land Co., Inc.*fn1 On July 17, 1972, the lease was amended to add Northeastern as an additional party and to formalize the change of construction site. Wells Fargo remained a party to the lease because its land was to be used for the erection of signs and additional parking facilities. Otherwise the terms of the lease were not changed.*fn2

As regards the present case, the following terms of the lease are important. Within sixty days of the execution of the lease, Easton was to prepare final plans and specifications for the theatre building. Wells Fargo then had fifteen days to approve or reject the plans and specifications. Construction of the building was to commence no later than

[ 265 Pa. Super. Page 341]

    sixty days from the execution of the lease or thirty days after Wells Fargo's approval of Easton's plans and specifications, whichever date was later, and was to be completed within one hundred twenty working days from the commencement of construction. Wells Fargo's financial commitment for the construction was limited to $215,000, but Easton had the option of paying for construction costs over that figure. If Wells Fargo was unable to obtain a mortgage loan of $215,000 within sixty days of the execution of the lease "on terms of a twenty (20) year payback with interest not to exceed 9 1/2% and with the lease premises as the only security, provided no extreme conditions as to pre-payment of Landlord," Easton was to attempt to obtain such financing for Wells Fargo. See Lease Addendum at 3. If within sixty days Easton could not obtain such financing, either party had the right to cancel the lease.

Following the signing of the lease, as amended, on July 17, Wells Fargo made preliminary inquiries regarding obtaining a mortgage loan for the construction of the theatre building; however, it did not submit any written application for a mortgage to any potential mortgagee, and it did not obtain financing. On September 27, 1972, the parties by their agents agreed that Easton would attempt to obtain a mortgage. As of that date, Easton had not completed final plans and specifications for the building, although it had furnished Wells Fargo with preliminary schematics of the building in June. During the fall of 1972, Easton did obtain a mortgage commitment from one of its affiliated companies. Wells Fargo rejected this commitment on the ground that the terms of the commitment contravened the terms of the lease. Negotiations between the parties continued, and during the first quarter of 1973, Wells Fargo indicated to Easton that it was still willing to accept a mortgage commitment if this commitment conformed to the terms of the lease. On April 16, 1973, Easton obtained a permanent mortgage commitment in the amount of $215,000 from the Continental Bank in Philadelphia. This commitment was communicated to Wells Fargo on or about April 27, 1973.

[ 265 Pa. Super. Page 342]

Wells Fargo rejected this commitment, again on the ground that its terms contravened the terms of the lease. At the time Wells Fargo rejected this commitment, Easton had not yet completed final plans and specifications for the building.

On July 16, 1973, Easton filed a complaint in equity seeking specific performance of the lease and monetary damages. On June 7, 1977, following a seven day trial, the Chancellor issued an adjudication consisting of findings of fact, conclusions of law, discussion, and a decree nisi. The Chancellor found that Wells Fargo did not breach the lease by rejecting the first mortgage commitment, from Easton's affiliated company, because the commitment contravened the terms of the lease, but that Wells Fargo did breach the lease by rejecting the second commitment, from Continental Bank. He also found that the 25th Street Shopping Center was "ideally suited" for a theatre. The Chancellor ordered Wells Fargo to perform the contract by accepting the Continental mortgage commitment, if it was still available, or a comparable commitment from any reliable lending institution, and by constructing in its shopping center, and leasing to Easton, a twin motion picture theatre building. This order was conditioned on Easton's filing, within sixty days of the date the decree nisi became final, complete plans and specifications for the construction of a standard twin theatre building. The building contemplated by such plans had to be of such design that it could have been constructed in 1972 for not more than $215,000 by reputable contractors. The Chancellor dismissed Easton's claim for loss of profits, and allocated all delay costs equally between the parties.

Both parties filed exceptions to the Chancellor's adjudication. On September 20, 1977, the lower court en banc affirmed and adopted as its own the Chancellor's adjudication, and entered a final order. On October 17, 1977, Easton filed with the Chancellor final plans and specifications in accordance with the decree nisi and final order. On October 20, Easton and Wells Fargo filed cross-appeals to this court. On November 30, Wells Fargo filed objections to the plans and specifications with the Chancellor. On April 27, 1978,

[ 265 Pa. Super. Page 343]

    we remanded the case, pursuant to our powers under Pa.R.A.P. 1701(b)(5), for the limited purpose of allowing the Chancellor to take testimony and rule on Wells Fargo's objections to Easton's plans and specifications.*fn3 Testimony was taken, and on July 5, 1978, the Chancellor dismissed the objections and ordered Wells Fargo to commence construction of the theatre building within thirty days, unless it posted a supersedeas bond in the amount of $200,000. On October 17, the lower court en banc affirmed this order.

-- Wells Fargo's Appeal --

Wells Fargo argues that the Chancellor erred in ordering specific performance because 1) it was discharged from any duty to accept the Continental commitment since by the time that commitment was obtained, Easton had already committed various breaches of the lease, and 2) even if it was not so discharged, it did not commit a breach by rejecting the Continental commitment since the terms of that commitment contravened the terms of the lease.

In considering these arguments, we are guided by "the well-established rule that a chancellor's findings of fact, approved by a court en banc, have all the force and effect of a jury's verdict if they are supported by adequate evidence and ordinarily will not be disturbed on appeal. . . . However, the chancellor's 'conclusions, whether of law or ultimate fact are no more than his reasoning from the underlying facts and are reviewable.'" Keyser v. Margolis, 422 Pa. 553, 557, 223 A.2d 13, 15 (1966) (citation omitted). See also Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 513-14, 351 A.2d 207, 213 (1976); Shydlinski v. Vogt, 406 Pa. 534, 537, 179 A.2d 240, 241 (1962); Sechler v. Sechler, 403 Pa. 1, 4-5, 169 A.2d 78, 80 (1961).

-- 1 --

The Chancellor found that Easton was in fact the first party to breach the lease. He ...


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