The opinion of the court was delivered by: SEAN McLAUGHLIN, District Judge
Presently pending before the Court is the Defendant, Developers
Diversified Realty Corporation's Motion for Summary Judgment.
Plaintiff, Zemenco, Inc. ("Zemenco"), is a Pennsylvania
corporation with its principal place of business in Erie,
Pennsylvania. (Amended Complaint ¶ 1).*fn1 At all times
relevant herein, Zemenco owned and operated a manufactured home
community known as Peachtree Place located in Summit Township,
Erie County, Pennsylvania. (Id. at ¶ 5).
On or about November 14, 1998, Zemenco and another Pennsylvania
corporation, Scott's Development Company ("Scott's"), entered
into an Agreement of Sale ("the Agreement") whereby Scott's
agreed to purchase a 46 acre portion of land within Peachtree
Place for $3,980,000. (Amended Complaint ¶ 6). The Agreement
required Scott's to make quarterly payments of $20,000 into an
escrow account, with each payment being released to Zemenco 90
days thereafter, assuming neither party breached or defaulted on
the contract. In the event of a default by the purchaser, the
Agreement contemplated that those payments received by Zemenco
prior to default would constitute Zemenco's full liquidated
20. DEFAULT: A. If Purchaser defaults hereunder, Seller shall
retain any of the Deposit then in its possession as
full liquidated damages and Seller shall have no
other recourse thereafter.
(Amended Complaint, Exhibit A, Section 20).
Significantly, the parcel of real estate described in the
Agreement included a narrow strip of land (the "intersecting
parcel") constituting Zemenco's only frontage on Peach Street, a
busy six-lane highway lined with shopping plazas. (Amended
Complaint ¶ 26-27). To the west, on the opposite side of Peach
Street, a small east/west road called "Downs Drive" pointed
directly into the heart of the intersecting parcel. The Agreement
contemplated that Downs Drive might eventually be extended to
cross Peach Street and bisect the Zemenco property in an easterly
29. DOWNS DRIVE EXTENSION:
As additional consideration from Seller to Purchaser
for entering into this Agreement, Seller hereby
agrees to allow Purchaser, at any time after the date
of mutual execution hereof, to construct an extension
of Downs Drive over and upon a portion of the
Premises subject to the parties' mutual approval of
plans therefor, which approval shall not be
unreasonably delayed or withheld.
(Amended Complaint, Exhibit A, Section 20).
On November 20, 1998, Scott's assigned the Agreement to
Defendant, Developers Diversified Realty Corporation
("Diversified"), an Ohio corporation that owned the land
immediately to the north of the Zemenco property. (Amended
Complaint ¶ 14; Motion for Summary Judgment, Exhibit B).
Diversified had been using this land to develop a shopping center
known as Peach Street Square. However, unbeknownst to Zemenco,
Summit Township had notified Diversified that the township would
not issue any more retail occupancy permits for Peach Street
Square unless Diversified could provide an additional means of
ingress and egress to Peach Street. (Amended Complaint, Exhibit
C, ¶ 8). Because of an existing traffic light at the intersection
of Downs Drive and Peach Street, Diversified had ascertained that
its best solution would be to extend Downs Drive easterly to
intersect with a small access road known as "Mandy Lane" that
crossed Diversified's property from north to south, ending at the
northern border of Zemenco's land. Each of the conceptualized
extensions, and the intersection thereby created, were located on
In December of 1998, Diversified made its first $20,000 deposit
into escrow. This payment was released to Zemenco from escrow in
March, 1999. (Motion for Summary Judgment, ¶ 6).
On January 11, 1999, Diversified entered into a Development
Agreement with Summit Township in which Diversified agreed to
construct the extensions of Mandy Lane and Downs Drive in
accordance with plans and specifications approved by Summit:
7. Developer agrees to construct (East) Downs Drive
to the intersection point with Mandy Lane marginal
access road including the extension of Mandy Lane to
(East) Downs Drive pursuant to plans and
specifications approved by Summit.
8. Developer and Summit agree that Summit will not
issue any further occupancy permits for any structure
in Peach Street Square, Phase II Project until the
above-referenced public road improvements and other
public improvements and all other requirements of the
paragraph of this Agreement have been met by the
Developer to the satisfaction of Summit.
(Motion for Summary Judgment, Ex. E, ¶¶ 7-8).
On May 25, 1999, Diversified presented Zemenco with a
Reciprocal Easement Agreement ("REA") that would have allowed
Diversified to begin construction on the Downs Drive and Mandy
Lane extensions. (Amended Complaint, ¶ 28; Motion for Summary
Judgment, ¶ 7). Zemenco refused to sign, noting that, although
Paragraph 29 of the Agreement contemplated a future extension of
Downs Drive, the Agreement did not mention Mandy Lane. (Amended
Complaint, ¶ 30). Moreover, Zemenco feared that the envisioned
extension of Mandy Lane would bisect the area immediately
adjacent to Peach Street where Zemenco maintained its sales
office and several model manufactured homes. (Id.)
On May 28, 1999, Diversified terminated the Agreement,
asserting that Zemenco had defaulted on the Agreement by refusing
to sign the REA. (Amended Complaint, Exhibit F). At that time,
only the first of the $20,000 payments made by Diversified to the
escrow account had been released to Zemenco.
On June 4, 1999, Diversified wrote a letter to the Summit
Township Board of Supervisors requesting that the township
condemn the portion of Zemenco's property necessary for the Mandy Lane extension. (Amended Complaint, Exhibit G). Subsequently, on
June 16, 1999, Summit Township unanimously adopted a resolution
authorizing its solicitor to file a Declaration of Taking under
the Eminent Domain Code so that the Mandy Lane extension could
take place. (Amended Complaint, ¶ 42; Motion for Summary
Judgment, ¶ 11). Zemenco's owner attended the hearing and, with
assistance of counsel, unsuccessfully opposed the resolution.
(Motion for Summary Judgment, Exhibit H, Zafiropoulos Deposition,
pp. 172-77). Thereafter, Diversified completed construction on
the Downs Drive and Mandy Lane intersection in accordance with
the January 11, 1999 Development Agreement. Zemenco received
compensation of $287,000 for the land taken by the township.
(Motion for Summary Judgment, Exhibit H, p. 136).
On May 28, 2003, Zemenco filed a complaint against Diversified
alleging that the latter had breached the Agreement and had acted
in bad faith during the condemnation proceedings. Developers
moved for summary judgment on January 14, 2005. Following a
response by Zemenco, oral argument on the motion was held on
February 8, 2005. During arguments, Zemenco expressed a desire to
amend the complaint to add a claim of fraud in the inducement. We
granted Zemenco leave to amend the complaint, and denied
Diversified's motion for summary judgment without prejudice to
re-assert the motion following discovery on Zemenco's fraud
claim. On March 2, 2005, Zemenco filed the Amended Complaint
Diversified filed the instant motion for summary judgment on
April 7, 2005. Zemenco responded on April 28, 2005, and
Diversified replied on May 13, 2005. A second oral argument took
place on ...