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Newman Development Group of Pottstown, LLC v. Genuardi's Family Markets

September 28, 2012

NEWMAN DEVELOPMENT GROUP OF POTTSTOWN, LLC, APPELLEE
v.
GENUARDI'S FAMILY MARKETS, INC. AND SAFEWAY INC., APPELLANTS



Appeal from the Judgment of the Superior Court entered March 18, 2011 at 744 EDA 2010, quashing the appeal from the Order of the Court of Common Pleas of Chester County entered February 25, 2010 at No. 2002-02413. 18 A.3d 1182 (Pa. Super. 2011)

The opinion of the court was delivered by: Mr. Chief Justice Castille

[J-43-2012]

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.

ARGUED: April 11, 2012

OPINION

This appeal presents a discrete issue of post-trial procedure governed by Rule 227.1 of the Pennsylvania Rules of Civil Procedure, which requires a party to file post-trial motions with the trial judge within ten days of certain enumerated events, with the failure to so file resulting in the significant consequence of a waiver of issues on appeal. The specific question presented is whether a party must file post-trial motions in a remand scenario -- here, a circumstance where, on remand from the Superior Court, the trial court recalculated a damage award without receiving any additional evidence from the parties. The Superior Court quashed appellants' appeal from the trial court's recalculated damages order, holding that appellants had waived all claims by failing to file a second round of post-trial motions. Also implicated in this matter is the fact-bound question of whether a trial occurred on remand, thereby triggering the post-trial motion procedure contemplated by Rule 227.1. For the reasons that follow, we find that the panel erred in deeming appellants' claims to be waived for non-compliance with Rule 227.1. Accordingly, we vacate the quashal order below and remand for consideration of the merits.

Genuardi's Family Markets, L.P. is the successor in interest to Genuardi's Family Markets, Inc. ("Genuardi's"), and a division of Safeway, Inc. ("Safeway" or collectively with Genuardi's "appellants"). Newman Developmental Group of Pottstown, LLC ("Newman" or "appellee") is a real estate development company comprised of Marc Newman, David Newman, Barry Newman, Michael Wachs, and three members of the Akel family.

In 1996, Wachs identified a potential site consisting of six separate parcels at the intersection of Cedarville Road and Route 100 in North Coventry Township, Chester County, as a location to construct a shopping center to be known as Town Square Plaza. Newman entered into agreements of sale for the six properties contingent upon Newman's ability to construct the shopping center at the site. Newman applied to the Township for the necessary rezoning to permit a shopping center on the properties, which resulted in significant public opposition against the plan.

Meanwhile, in 1998, before the necessary zoning was in place and before Newman had legal title to the properties, Newman began negotiations with several grocery store chains, among them Genuardi's, which signed a letter of intent to lease space in the shopping center in June of 1998. On April 14, 2000, Genuardi's and Newman entered into an Agreement of Lease ("lease") for space in Town Square Plaza. Because Newman had equitable title pursuant to the agreements of sale but not legal title to the properties, the lease included provisions relating to the construction of the shopping center, including time frames for specific stages of construction. Section 6.4 of the lease provided that, if building permits were not issued by January 1, 2001, or the footings and foundations of the building were not completed and steel erected by May 1, 2001, or if the delivery date of the property did not occur before September 1, 2001, Genuardi's would have the option to extend the completion date or, upon notice to Newman and after Newman's failure to comply within an additional thirty-day period, terminate the lease.

In the course of negotiations, Newman indicated to Genuardi's that meeting the dates for the stages of construction might be problematic; therefore, the parties agreed to hold the lease in escrow in order to grant Newman an extension of time if necessary to complete the project. Counsel for both parties, through the exchange of correspondence, established an escrow agreement whose purpose was to commit the parties to the Town Square Plaza project without obligating Newman to adhere to a construction schedule that both parties knew to be unrealistic. The escrow agreement, as it emerged from the correspondence, provided that the lease would be held in escrow by Genuardi's pending Newman's entering into a lease agreement or agreement of sale with either Target or Lowe's Home Center to serve as the shopping center's anchor tenant; but that, if such a lease agreement or agreement of sale was not executed within one year of the closing of the sale of the properties to Newman, Genuardi's reserved the right to terminate the lease upon notice to Newman. In the event of a delay in the closing that affected the construction schedule set forth in Section 6.4 of the lease, the parties would discuss amending the completion dates to reflect a reasonable schedule.

In December of 2000, Genuardi's notified Newman by letter that Safeway planned to acquire Genuardi's business and requested an acknowledgment that, once Safeway assumed the lease, Genuardi's would be released from further obligations under it. Marc Newman signed the letter acknowledging the assignment and returned it to Genuardi's counsel. Safeway purchased Genuardi's in February of 2001, and, that same month, representatives of Safeway and Newman met to discuss moving forward and with timelines for approvals for the project.

On February 13, 2002, counsel for Safeway sent Newman a letter notifying Newman of Safeway's intent to terminate the lease due to noncompliance with the completion dates set forth in Section 6.4 of the lease. The letter specifically stated that Newman had failed to obtain building permits prior to January 1, 2001, did not complete the footing and foundation or erect structural steel by May 1, 2001, and failed to deliver the property to Safeway by September 1, 2001. At the time the letter was sent, Donald Wright, Safeway's senior vice president of real estate and engineering, who authorized the termination letter, was unaware of the escrow agreement and had not seen the documents establishing that agreement. The following day, February 14, 2002, Newman's counsel apprised Safeway's counsel by letter of the escrow agreement and stated that neither party had the right to terminate the lease at that time. Safeway responded to Marc Newman that Newman's obligations under Section 6.4 of the lease were independent of the co-tenancy requirement regarding Target or Lowe's Home Center that was the subject of the escrow agreement and reiterated that Safeway intended to terminate the lease.

On March 20, 2002, Newman filed the instant lawsuit against appellants alleging an anticipatory breach of the lease agreement and asserting claims in equity for quantum meruit and promissory estoppel based on the assertion that appellants had no right to terminate the lease agreement. Newman then sought replacement tenants and eventually obtained commitments from PetSmart and Michael's Arts and Crafts ("Michael's") to occupy the space previously reserved for Genuardi's. Newman obtained zoning approval and construction permits for the shopping center and closed on the agreements of sale for the properties in March of 2004. Lowe's signed a lease with Newman on the date Newman acquired the site. On December 28, 2005, Newman sold the shopping center to Inland Real Estate Acquisitions, Inc.

Meanwhile, on October 3, 2005, this matter proceeded to a non-jury trial before the Honorable William P. Mahon that consisted of ten days of testimony taken from October 2005 to January 2006.*fn1 Judge Mahon found that appellants had breached the lease agreement with Newman. He determined that Newman was entitled to rent from appellants from June 25, 2005 until Newman sold the shopping center on December 28, 2005. The court awarded Newman $131,277 in damages, which represented the difference between the amount of rent owed by appellants and the rent Newman actually received from PetSmart and Michael's over the same period.

Both parties filed post-trial motions. As pertinent here, Newman claimed that the trial court erred in calculating damages only until December 28, 2005, rather than awarding damages based on the entire twenty-year term of the lease. The trial court ruled that Newman was entitled only to the difference in rental income between that anticipated under the lease and the rent paid by PetSmart and Michael's for the period of time during which it owned the property. However, the court found that it had miscalculated the rental loss from June 25, 2005 through the date of the sale because PetSmart and Michael's did not begin paying rent until December 1, 2005. Thus, the court recalculated the loss to Newman to include full rent from June 25 through December 1, 2005, and, on December 19, 2006, amended the verdict, awarding Newman damages in the amount of $316,889.92, exclusive of contractual counsel fees, expenses and costs.

Newman appealed to the Superior Court, and appellants cross-appealed. Appellants challenged the trial court's finding that they breached the lease agreement with Newman as well as Newman's entitlement to damages; the panel affirmed the trial court's decisions in this regard. Newman renewed the argument made in its post-trial motions, claiming that the trial court erred in not applying the measure of damages outlined in Section 20.2.2 of the lease, entitled "Reletting," which provided for damages equal to the loss of rental income over the entire twenty-year term of the lease.*fn2

The Superior Court panel agreed. The panel described the operation of Section 20.2.2 :

When applied to an abandonment of the lease by Safeway, section 20.2.2 measured (1) Newman's expectation interest in the contract as the total rent owed over the term of the entire lease, (2) the loss caused by the difference between the rent promised by Safeway and the rent ultimately received from the substitute tenants, and (3) the costs attendant to the effort to secure substitute tenants. In short, the formula agreed to by Newman and Safeway provided compensation in the form of the actual damages caused by Safeway's total breach of the lease agreement.

Super. Ct. Op., 4/25/2008 at 17. The panel held that the trial court erred in failing to award damages in accordance with the lease terms, vacated the trial court's judgment, and remanded for proceedings consistent with its memorandum opinion.

On remand, the parties filed legal memoranda and presented oral argument, but the trial court received no additional evidence on damages. In its opinion on remand, the trial court noted that the parties argued "that there is no need nor is it appropriate to take additional evidence in this matter." Tr. Ct. Op., 1/25/2012 at 1. The trial court, on the record before it, then recalculated the damages in accordance with Section 20.2.2 of the lease and determined that:

Based upon this clear language and the holding in the Superior Court's decision, [Newman] has established an expectation interest in total rent over the entire twenty (20) year term of the lease with Safeway in the amount of $15,104,960. The record further supports that [Newman] entered into leases with replacement tenants for a period of only ten (10) years in an amount of $4,610,470. This amount, when subtracted from total expected rent, equals a net damages amount of $10,494,490 in rent expectation damages. There are also brokerage commission costs for the replacement tenants of $30,808 proven by [Newman] to secure the substitute tenants in this matter.

Id. at 2 (footnotes and record citations omitted). The trial court further determined that it would award reasonable counsel fees and expenses pursuant to the lease in an order to follow the opinion. On February 25, 2010, the trial court entered a molded judgment in favor of Newman in the amount of $18,489,221.60,*fn3 which included counsel fees and expenses to date, and stated that counsel fees and costs would be recalculated at the conclusion of the appellate process or thirty days from the entry of the judgment if no appeal was taken.

Appellants appealed the new judgment to the Superior Court, raising a number of challenges to the trial court's calculation of damages, i.e., the failure to discount to present value, the failure to consider mitigation of damages for the second half of the twenty-year lease, and the proper determination of prejudgment interest. In a published opinion, the Superior Court quashed the appeal, finding that appellants had waived all issues by failing to file new post-trial motions pursuant to Pa.R.C.P. 227.1(c). Rule 227.1(c) requires that:

(c) Post-trial motions shall be filed within ten days after

(1) verdict, discharge of the jury because of inability to agree, or non-suit in the case of a jury trial; or

(2) notice of non-suit or the filing of the decision in the case of a trial without jury.

The panel rejected appellants' argument that, given the procedural posture of this case, Rule 227.1(c) neither requires nor allows for the filing of post-trial motions because the proceeding on remand did not constitute a trial. In the panel's view, the purpose of post-trial motions would be "improperly subverted" if they were excused here. The panel noted that such motions "give[] the trial court an opportunity to correct errors in its ruling, and avert[] the need for appellate review." The panel then continued, stating:

Pertinent to the matter currently before us wherein Appellants have asked this Court to modify or change an allegedly erroneous damage award, Rule 227.1 gives that very power to the trial court. Pa.R.C.P. 227.1(a)(4); Diamond Reo Truck Co. ...


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