The opinion of the court was delivered by: POLLAK
In December, 1974, United States Gypsum Co. commenced this landlord-tenant action, alleging that defendant-tenant Schiavo Brothers, Inc., failed to surrender the leasehold property on time and clear of debris. A ten-day non-jury trial was held in late 1975 and early 1976. In May, 1978, Judge Fogel ruled in defendant's favor, filing an exhaustive opinion which concluded that defendant had not breached "either an express covenant to peaceably surrender the [premises] or an implied covenant to return the land in substantially the same condition as existed at the inception of the lease, (reasonable wear and tear excepted)."
Pursuant to Rule 59 of the Federal Rules of Civil Procedure, plaintiff has moved for a new trial.
Before considering the grounds of plaintiff's motion, it will be helpful to summarize Judge Fogel's findings of facts and conclusions of law.
In January, 1963, the parties to this litigation entered into a lease agreement for a tract of land located in Southwest Philadelphia and referred to throughout the litigation as Area F. The map below shows its location.
Prior to 1963, Area F was leased by plaintiff to so-called "junk-car dealers" whose business it is to mine wrecked and abandoned automobiles for valuable parts. Under the January, 1963 lease, defendant assumed that role of master tenant responsible for the junk-car dealer subtenants. In August, 1963, a second lease was signed extending the leasehold property some 200 feet along Essington Avenue to a depth of approximately 100 feet. (This area is marked A' on the map.) Both 1963 leases contained a clause requiring the defendant to return the property as found, reasonable wear and tear excepted.
In 1966, plaintiff and defendant entered into a third lease, superseding and terminating the 1963 leases. The leasehold property was enlarged to encompass all of Areas A and B, parts of which were "below grade." The lease required the defendant to bring the land up to grade and authorized subletting once landfill was complete. Lease Paragraph 20 limited sublessees to persons engaged in the junk-car business.
The lease also provided for termination by either party upon 120 days written notice and required surrender of the premises peaceably on termination. But unlike the 1963 leases, the 1966 lease did not contain an express clause imposing on the defendant a duty to return the property as found.
Pursuant to this agreement, defendant undertook landfill operations and sublet to additional junk-car dealers. By 1972, land-fill was complete, and dealers had subleased property on Areas F, A feet, and A inch and spread themselves without subleases onto at least some part of the remainder (the "back portion") of Area A. As they spread, the dealers left a trail of old car seats and tires -- parts they found difficult to sell. In addition, the back portion of Area A attracted "fugitive dumpers" who favored it with their refuse.
In August, 1973, plaintiff gave defendant written notice of termination, effective January 1, 1974.
Defendant, in turn, notified the junk-car dealers who quickly formed an association to fight eviction. Faced with this opposition, defendant acted expeditiously to remove the subtenants by instituting eviction proceedings in Philadelphia Municipal Court. At a March 4, 1974 hearing, the Municipal Court gave the dealers until June to vacate the premises. One of plaintiff's attorneys was present at the hearing; but since his client was not a party to the eviction suit, he was there in observer status and took no part.
In the meantime, plaintiff had arranged for sale of the leasehold property to Swann Oil Company with closing set for June, conditioned on the removal of all accumulated debris from the property. It was not until September, however, that the last junk-car dealer vacated the premises. And left behind was a considerable accumulation of old cushions and tires and "material from fugitive dumping, which took virtually every imaginable form, from watermelons to dead cats." 450 F.Supp. at 1301. Plaintiff claims that it spent $144,500 to remove this debris before finally closing with Swann on September 26, 1974.
On the basis of these facts, Judge Fogel ruled as follows: (1) under Pennsylvania law, the 1966 lease contained an implied duty requiring the defendant to return the leasehold premises to the plaintiff at the termination of the lease in substantially the same condition as existed at its inception, reasonable wear and tear excepted; (2) Areas F and A' were in at least as good condition, when returned to plaintiff, as they were in at the inception of the lease in 1966; (3) in Area A" (the portion of Area A leased after 1966 to the junkdealers), the debris, while substantial, was an inevitable consequence of the junkdealer business -- a business expressly contemplated by the 1966 lease -- and accordingly, "constituted reasonable wear and tear in the context of the junk-car industry"; (4) as to the junk-dealer debris on the remainder of Area A, which defendant did not sublease to the dealers, but onto which they spread, the debris was also reasonable wear and tear "in the context of this industry"; (5) as to fugitive dumping on the back part of Area A, the defendant was not negligent in failing to take the expensive measures required to prevent this dumping and therefore, under Pennsylvania law, was not liable for breach of its implied covenant; and (6) return of the leasehold in littered condition did not breach the defendant's express covenant to surrender the premises peaceably.