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March 27, 2001


The opinion of the court was delivered by: Jay C. Waldman, J.


Plaintiff asserts a breach of contract claim arising from defendant's alleged default under a lease for commercial space. Plaintiff seeks accelerated rent payments of $1,515,406.20. Presently before the court is plaintiff's motion for summary judgment.

When considering a motion for summary judgment, the court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564, 568 (3d Cir. 1986). Only facts that may affect the outcome of a case are "material." Anderson, 477 U.S. at 248. All reasonable inferences from the record are drawn in favor of the non-movant. Id. at 256.

Although the movant has the initial burden of demonstrating the absence of genuine issues of material fact, the non-movant must then establish the existence of each element on which he bears the burden of proof. J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1965)). The non-moving party may not rest on his pleadings but must come forward with competent evidence from which a reasonable factfinder could render a verdict in his favor. Anderson, 479 U.S. at 248; Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989); Woods v. Bentsen, 889 F. Supp. 179, 184 (E.D.Pa. 1995).

From the competent evidence presented, as uncontroverted or otherwise viewed most favorably to defendant, the pertinent facts are as follow.

In February 1999, Intown Management Group ("ITMG") was awarded three contracts to manage Philadelphia-area properties administered by the United States Department of Housing and Urban Development ("HUD"). ITMG was obligated to begin servicing the contracts in April 1999. To do so, ITMG required appropriate office space with many phone lines.

On March 12, 1999, ITMG entered into a lease agreement with plaintiff pursuant to which ITMG agreed to lease approximately 17,075 square feet on the first floor of plaintiff's office building. The term of the lease was five years at a graduated rent which ranged from $23,478.13 per month during the first six months to $27,035.42 per month for the final six months. The lease provided that ITMG would move into the building's first floor on April 1, 1999 after certain agreed-upon improvements were made to the space. The lease agreement did not state that time was of the essence. To the contrary, it provided that plaintiff would not be subject to liability for failure to deliver possession by the target date and that ITMG's obligations under the lease would not be affected by such a failure.

The lease agreement provided that ITMG would be in default if it were to file for bankruptcy. The section of the lease listing remedies in the event of a default included repossession of the premises and an acceleration of all rental payments. The lease agreement also contains a provision that "notwithstanding anything to the contrary stated herein, Landlord shall undertake commercially reasonable efforts to mitigate its damages in the event of a Tenant default."

Defendant executed a lease guaranty on March 12, 1999 by which defendant guaranteed lease payments to plaintiff "subject to any rights or defenses applicable to the obligations of [ITMG]."

After plaintiff represented to ITMG that it would be unable to complete the agreed-upon improvements to the first floor space by April 1, 1999, the parties agreed that ITMG would use second floor space in the building until the improvements were completed. The second floor space was dirty, and initially had no air conditioning system or ventilation and had inadequate phone lines for ITMG's business needs. Plaintiff later installed an air conditioning system at ITMG's request, but the system "did not work." ITMG then installed fans, but did not use them because the air circulation disturbed papers in the office.

ITMG could not meet the processing deadlines imposed by HUD because the temporary nature of the space made installation of appropriate work stations economically unfeasible and because of the lack of adequate telephone lines.*fn1

The first floor space was not ready until the middle of June 1999, at which point ITMG was preparing to sign an amendment to the lease for an additional 10,000 square feet in the building. This amendment also provided that ITMG could occupy the second floor of the building until December 1999 when improvements to the additional space would be completed. The amendment was executed on September 10, 1999.

ITMG moved most of its personnel into the first floor space in June 1999, although some overflow personnel continued to occupy the second floor pursuant to the amendment. The heating and air conditioning systems in the first floor space would run simultaneously. Several employees became ill from a black film emitted by the air conditioning system when it was first turned on.

On September 22, 1999, ITMG filed for bankruptcy. ITMG received notice of termination due to its default on the same day. Later that day, plaintiff's property manager informed ITMG that it was in default under the lease and that all ITMG employees must vacate the premises. Also on September 22, 1999, HUD representatives informed ITMG that the HUD contracts would be terminated due to ITMG's ...

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