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
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 failure to perform. Plaintiff
then changed the locks on the building and dismantled the passcard
ITMG made no rental payment after September 1999. Plaintiff demanded
that defendant, as guarantor, pay the accelerated rent. Defendant has
made no payment to plaintiff. Plaintiff did receive one payment of
$25,000 from the trustee in bankruptcy for ITMG. Plaintiff obtained a new
tenant, effective August 1, 2000.
It is undisputed that ITMG filed for bankruptcy on September 22, 1999
and that this action constituted a default under the lease agreement.
Defendant argues, however, that plaintiff breached the lease agreement
first by impairing ITMG's right to quiet enjoyment because the condition
of the leased space was so substandard that plaintiff had "substantially
interfered with the intended use of the property," and by failing to
deliver possession at the agreed-upon time.*fn2
A tenant's right to quiet enjoyment is impaired when the landlord
blocks the tenant's access to the premises or changes some essential
aspect of the premises so substantially as to render the property
unsuitable for the purposes for which
it is leased. See 2401 Pennsylvania
Avenue Corp. v. Federation of Jewish Agencies of Greater Philadelphia,
489 A.2d 733, 738 (Pa. 1985); Pollock v. Morelli, 369 A.2d 458, 460
(Pa.Super. 1976). Defendant, however, has not shown that the simultaneous
operation of the heat and air conditioning systems rendered the premises
unsuitable for the purpose for which it was leased.*fn3 The single
discharge of dirt at the very beginning of ITMG's occupancy of the first
floor clearly was not a permanent or substantial change in the condition
of the space.*fn4 One cannot reasonably find from the competent evidence
of record that these conditions breached the right to quiet enjoyment.
A lack of air conditioning could breach the covenant of quiet
enjoyment.*fn5 It is uncontroverted, however, that plaintiff installed
an air conditioning system in the second floor space upon ITMG's
request. Defendant does not state and produces no competent evidence that
plaintiff was aware the system was not operating properly and thus had
reasonable cause to rectify the situation.
As for plaintiff's delay in delivering the first floor space, the lease
agreement expressly provided that plaintiff would not be subject to any
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. Thus, ITMG contractually waived any defense based on a failure
to deliver the leased premises by April 1, 1999.*fn6
Plaintiff is thus entitled to summary judgment on liability. The
issue of damages, however, is another matter.
A landlord whose tenant has abandoned the premises in violation of the
lease is not required to mitigate damages. See Stonehedge Square v. Movie
Merchants, 715 A.2d 1082, 1084 (Pa. 1998). Here, however, there is an
express lease provision imposing on plaintiff a duty to
Moreover, "even upon breach of a material condition in a commercial lease
a landlord must elect between repossession and actual damages or
acceleration of the balance due." Finkle v. Gulf & Western Mfg. Co.,
744 F.2d 1015, 1020 (3d Cir. 1984) (emphasis in original). See also
Howart Development Co. v. Sgrenci, 662 A.2d 1092, 1100-01 (Pa.Super.
1995) (holding landlord may not recover both possession and rent for
balance of term upon default by tenant despite provision for both
remedies in lease); 8 Summ. Pa. Jur. 2D Property § 26:144 (1993).
Having repossessed the leased premises when ITMG filed for bankruptcy,
plaintiff cannot recover accelerated rent.
There is no evidence of record of plaintiff's actual damages. There is
no evidence of the amount plaintiff has realized from the new tenant.
There is no evidence regarding whether plaintiff undertook "commercially
reasonable efforts to mitigate its damages" as required by the lease
agreement. The Court thus cannot enter judgment on the issue of damages.
It would appear to be practical and economical under the circumstances
for the parties to endeavor in good faith to achieve agreement as to the
amount of actual damages. The court encourages such an effort. Should
this prove unachievable, the case will proceed to trial on damages.
AND NOW, this day of March, 2001, upon consideration of plaintiff's
Motion for Summary Judgment (Doc. #7) and defendant's response thereto,
consistent with the accompanying memorandum, IT IS HEREBY ORDERED that
said Motion is GRANTED on the issue of liability and DENIED on the issue