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Diocese of Harrisburg v. Summix Development Co.

March 10, 2010


The opinion of the court was delivered by: Judge Conner


This case stems from a purchase and sale contract that the plaintiff, the Diocese of Harrisburg (the "Diocese"), claims was breached by the defendants, Summix Development ("Summix"), THF Harribsurg Development, L.P. ("THF Harrisburg") and THF Harrisburg Realty, Inc. ("THF Harrisburg Realty"). Presently before the court is plaintiff's summary judgment motion on all claims (doc. 48). We will evaluate the motion under the well established standard. See Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008). For the reasons that follow, we will deny the motion.

I. Statement of Facts

A. Factual Background

The events that gave rise to this litigation began October 15, 2003 when the Diocese and defendants entered into a contract (the "Purchase Agreement") under which defendants agreed to pay the Diocese $12,000,000 for real estate, home to the Holy Name of Jesus ("HNJ") campus, located in Lower Paxton Township, Dauphin County, Pennsylvania. (See Doc. 15 ¶¶ 1-2). Rather than pay the plaintiff directly, the defendants agreed to pay the purchase price under a construction contract for the building of a new HNJ campus on property owned by the Diocese in another township. (Doc. 55 ¶ 1). The new campus was to include a church, school, office, rectory, gymnasium and football field. (Doc. 50 ¶ 1). The Purchase Agreement provided that the total cost of the new campus would be $16,000,000 to be executed under a construction contract with Westra Construction, Inc., a non-party to the litigation. (Doc. 55, Ex. 1 § 2).

The Purchase Agreement provided nine contingencies that needed to be satisfied in order for the defendants to be obligated to close. Of these nine contingencies, three are at issue in the case sub judice: (1) the Diocese acquires the necessary permits, licenses and approvals for the new HNJ campus; (2) the parties and Westra Construction approve construction plans for the new HNJ campus; and (3) the parties and Westra Construction enter into a construction contract. (Doc. 55, Ex. 1 § 5). The Purchase Agreement contained a clause specifying that if the contingencies are not met, the agreement may terminate. Id.

Throughout the original due diligence period, the parties engaged in a joint effort to acquire the necessary governmental approval for the new Holy Name of Jesus campus. (Doc. 50 ¶ 18). The approval process however was not without difficulties. (See Doc. 50 ¶ 45). As a result, the parties entered into negotiations to extend the due diligence period to allow more time to obtain municipal approval. (Doc. 49 pg. 6).

On November 2, 2004, the parties reached agreement on an amended sale agreement ("amended agreement") that extended the due diligence period to April 15, 2005 with the option to extend the period, if elected by the defendants, to April 15, 2006. (Doc. 55, Ex. 2 § 1). The amended agreement further provided that if the defendants were to terminate the Purchase Agreement at any time prior to the expiration of the due diligence period that they would reimburse the Diocese for all expenses, to a maximum of $750,000, it incurred in pursuing governmental approval for the new campus location. Id. This reimbursement provision, however, contains two exceptions. If the defendants terminated the agreement due to the plaintiff's default or if the contingencies were not satisfied due to the fault of the plaintiff, then the defendants are not liable to reimburse the Diocese's third-party expenses Id.

On January 24, 2005, West Hanover Township, Pennsylvania granted the necessary land use permit for the new Holy Name of Jesus campus. (Doc. 50 ¶ 22). On February 22, 2005, a local citizen's group appealed West Hanover Township's decision to grant the permit. (Doc. 50 ¶ 23).*fn1 Subsequently, on April 10, 2006, Michael Staenberg, president and co-founder of THF, through a letter attached to an e-mail, terminated the Purchase Agreement. (Doc. 50 ¶ 56). In the termination letter, Staenberg thanked the parties for their hard work and indicated that "for a variety of reasons" the deal "could not be put together." (Doc. 50, Ex. I, doc. 011477).

B. Procedural History

The Diocese commenced the instant action in the Court of Common Pleas of Dauphin County on November 12, 2007, alleging breach of contract against Summix, THF Harribsurg and THF Harrisburg Realty, Inc. Specifically, the Diocese claims that the defendants breached the Purchase Agreement when they failed to reimburse the Diocese for expenses incurred in its attempt to obtain government approval for the new HNJ campus. On December 17, 2007, the case was removed to this court. We have jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

The plaintiff filed its summary judgment motion on September 16, 2009, arguing that there is no genuine issue of material fact and asserting that the defendants nevertheless failed to produce any evidence showing the Diocese at fault for any breach. (Doc. 49). The defendants, however, counter that the evidence indicates that there is a dispute as to plaintiff's fault and as to the measure of damages should the defendants be found liable. The parties have fully briefed these issues, which are now ripe for disposition.

II. Discussion

In this diversity case, the Diocese asserts common law breach of contract claims against all defendants. Under Pennsylvania law, which the parties agree applies in this case, [c]ontract interpretation is a question of law that requires the court to ascertain and give effect to the intent of the contracting parties as embodied in the written agreement. Courts assume that a contract's language is chosen carefully and that the parties are mindful of the meaning ...

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