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

Superior Court of Pennsylvania

July 29, 2013

NEWMAN DEVELOPMENT GROUP OF POTTSTOWN, LLC, Appellee
v.
GENUARDI'S FAMILY MARKET, INC., AND SAFEWAY, INC., Appellants

Appeal from the Judgment Entered February 25, 2010 In the Court of Common Pleas of Chester County Civil Division at No(s): 2002-02413.

BEFORE: FORD ELLIOTT, P.J., STEVENS, J., and DONOHUE, J.

OPINION

STEVENS, J.

Genuardi's Family Markets, Inc. and Safeway Inc., appeal a February 25, 2010 judgment entered in the Court of Common Pleas of Chester County in favor of Newman Development Group of Pottstown, LLC.

This matter stems from a dispute over a commercial lease originally entered into by Genuardi's and Newman, pursuant to which Genuardi's was to lease shopping center space from Newman ("Landlord").[1] Genuardi's was subsequently acquired by Safeway ("Tenant"). On February 13, 2002, Tenant informed Landlord that it was terminating the lease due to Landlord's failure to meet certain completion dates. On March 20, 2002, Landlord filed a complaint against Tenant, alleging, in pertinent part, that Tenant had breached the parties' contract. Complaint filed 3/20/02 at ¶¶ 57-59.[2] The shopping center, named Town Square Plaza, was eventually completed in 2005, and replacement tenants Michael's and PetsMart were secured to fill the space slated for Tenant.[3] On December 28, 2005, Landlord sold the shopping center to Inland, a buyer unrelated to this action.

In due course, Landlord's complaint against Tenant resulted in a lengthy non-jury trial before the Honorable William P. Mahon, encompassing ten days of hearings conducted during October and November of 2005, and January 2006. At the conclusion of trial, Landlord requested that Judge Mahon award it damages of $5, 511, 219.00, representing the alleged lesser sale price received by Landlord when it sold the property in 2005 without Tenant in place. Landlord's Proposed Conclusions of Law Filed 4/5/06 at 52.

On August 15, 2006, Judge Mahon issued a Verdict and Opinion. With regard to liability, Judge Mahon determined that when Tenant notified Landlord in February 2002 of its intention to terminate the Lease, it anticipatorily breached the Lease. Opinion filed 8/15/06 at 11.[4] As the result of this breach, Judge Mahon determined that Landlord was entitled to $131, 227.00 in damages, representing the rent Landlord would have received from Tenant during the time period Landlord owned the property, offset by the rent received from the replacement tenants during that time period. Verdict filed 8/15/06; Opinion filed 8/15/06.[5] Both parties filed post trial motions.

In response, Judge Mahon denied Tenant's post trial motion, and refused Landlord's request that the damage award by modified to reflect $5, 511, 219.00 in lost profits, but increased the damage award to $316, 889.92, to reflect that the replacement tenants had not begun to pay rent until December 1, 2005, not June 25, 2005, as previously determined. Order filed 12/19/06 at 1. Both parties appealed to the Superior Court.

Following oral argument and the submission of briefs, the Superior Court issued a memorandum of law on April 25, 2008, affirming Judge Mahon's verdict with regard to liability and the existence of damages, but vacating the judgment and remanding the matter for the determination of the proper measure of damages on the grounds that Judge Mahon erred in failing to enforce the measure of damages set forth in Section 20.2.2. of the parties' Lease. Memorandum filed 4/25/08 at 12, 15, 19.

On January 15, 2010, Judge Mahon issued an Opinion, followed by a Verdict, entering judgment in favor of Landlord in the amount of $18, 489, 221.60 ($10, 494, 490.00 expectation damages; $30, 808.00 reletting expenses; $6, 279, 734.26 interest; $1, 684, 189.34 attorneys' fees, costs and expenses). Opinion dated and filed 1/15/10; Verdict dated 2/25/10.[6]

Tenant has filed a timely appeal, and complied with the lower court's order to file a Statement of Errors Complained of on Appeal.[7] We are now asked to address the following five allegations of error:

1. Must [Landlord's] damages for future lost rent be reduced to present value where: (a) [Landlord] previously conceded that its lost rent damages needed to be reduced to present value and thus waived any claim that they should not be so reduced; (b) such reduction is the only result that is consistent with this Court's decision in the first appeal; and (c) reduction of [Landlord]'s future damages to present value is required in order to avoid conferring a windfall on [Landlord]?
2. Must [Landlord]'s lost future rent damages be reduced to reflect mitigation for the second half of [Tenant]' twenty-year lease term where: (a) the trial court previously had found [Landlord]'s damages submission "highly unreliable" precisely because it assumed no mitigation for the second half of the lease; and (b) [Landlord] did not challenge that finding in either its post trial moving papers or in the first appeal?
3. Must the trial court's award of prejudgment interest to [Landlord] be reduced where: (a) in cases of anticipatory breach, prejudgment interest does not begin to run until the date on which performance would have been due; and (b) performance was not due until June 2005, more than three years after the date from which the trial court awarded prejudgment interest?
4.Must the trial court's award of $536, 629 in reletting expenses to [Landlord] be eliminated where: (a) the trial court previously found that [Landlord]'s testimony regarding that $536, 629 in reletting expenses was not credible; and (b) this Court affirmed that finding in the first appeal?
5. Must the trial court's award of prejudgment interest to [Landlord] on the entirety of its attorneys' fees and costs be eliminated where [Tenant] had no contractual obligation to pay [Landlord]'s attorneys' fees and costs prior to the trial court's entry of final judgment?

Tenants' brief at 2-3.

Generally speaking, our standard of review over a non-jury verdict requires us to determine whether the trial court committed an error of law and whether the trial court's findings of fact are supported by competent evidence of record. Rissi v. Cappella, 918 A.2d 131, 136 (Pa. Super. 2007). Our scope of review requires us to review the factual findings of the trial court with deference and to consider the evidence of record in a light most favorable to the verdict winner. Id.

Trizechahn Gateway LLC v. Titus, 930 A.2d 524, 533 (Pa. Super. 2007) rev'd in part, 976 A.2d 474 (Pa. 2009).

We turn first to Tenant's allegations regarding reduction to present value, mitigation, and reletting expenses. In order to address these claims, it is necessary to set forth in greater detail the positions taken by the parties during this lengthy matter.

Throughout these proceedings, Landlord consistently suggested to the courts that there were three possible damage amounts to which it was entitled. It is undisputed that Landlord's primary damage theory requested damages of $5, 511, 219.00, representing lost profits from the sale of the shopping center. N.T. 11/10/05 at 52, 65, 82; Landlord's Proposed Findings of Fact filed 4/5/06 at 91; Landlord's Proposed Conclusions of Law filed 4/5/06 at 40, 49-50; Landlord's Response to Tenant's Motion to Strike New Damages Figures and Calculations filed 4/27/06 at 2, fn. 1; Landlord's Post Trial Motion filed 9/18/06 at 2. The evidence in support of this theory of damages was presented through Richard Marchitelli, Landlord's expert witness. Landlord held out Mr. Marchitelli's theory of damages to be "the most comprehensive and appropriate measure of damages, " and this is the amount Landlord requested of Judge Mahon at both the trial and post trial levels. Landlord's Proposed Conclusions of Law filed 4/5/06 at 6, 40, 52; Landlord's Post Trial Motion filed 9/18/06 at 2.[8]

As an alternative to its $5, 511, 219.00 damages request, Landlord proffered a lesser figure to which it alleged entitlement under Section 20.2.2 of the "Default & Remedies" section of the parties' Lease.[9] Under this theory, Landlord asserted that Tenant's breach had deprived Landlord of the benefit of the bargain of the twenty year lease. Landlord's Proposed Conclusions of Law filed 4/5/06 at 40-41. Landlord further asserted that pursuant to Section 20.2.2, it properly mitigated its damages by securing replacement tenants, and had incurred reletting expenses in doing so. Id. at 41.

Landlord thus requested at trial that Judge Mahon award Section 20.2.2 damages calculated by:

taking nine (9) months of rent [Tenant] would have already paid ($531, 534)[10]adding the present value of the remainder of [Tenant's] Lease ($6, 616, 978), subtracting the present value of the Michael's lease ($1, 270.409), subtracting the present value of the PetsMart lease ($1, 667, 382) and finally, adding in the reletting expenses ($536, 629), resulting in a total damages figure of $4, 746, 850.

Id. at 42 (underline in original).

In suggesting Section 20.2.2 damages of $4, 746, 850.00, Landlord insisted that despite its best efforts, the replacement tenants only signed ten year leases, and Landlord could not assume they would renew at the end of the ten year period. Landlord's Proposed Conclusions of Law filed 4/5/06 at 42. Thus, the $4, 746, 850.00 figure did not include mitigation for the second ten year term of Tenant's twenty year lease period.

Although disputing that it had an ongoing duty to mitigate during the second ten year period, Landlord proposed a second Section 20.2.2 damage figure in response to testimony from Tenant's expert witness, whereby Landlord suggested that if it was determined that mitigation was required for the second ten year period, damages should be calculated as follows:

adding the nine (9) months of [Tenant's] rent, $531, 534, with the present value of [Tenant's] Lease ($6, 616, 978), subtracting the present value of the PetsMart ($2, 193, 068) and Michael's ($1, 639, 387) leases – both of which assume a fifty percent (50%) renewal for the remaining term of [Tenant's] Lease, and adding in construction costs ($536, 629) for a total of $3, 852, 186.

Id. at 44 (underline in original).

It is thus apparent that Landlord conceded that any Section 20.2.2 damages awarded to it would be reduced to present value.[11] This position is consistent with an exchange that occurred during the presentation of the testimony of Marc Newman in support of Section 20.2.2 damages.

In rebutting the damages calculations made by Mr. Marchitelli and Mr. Newman, Tenant had introduced the testimony and report of Michael Axler. Pertinent to the appeal currently before us, Mr. Axler opined that because Landlord had an ongoing obligation to mitigate after the expiration of the replacement tenants' ten year leases, Mr. Newman erroneously failed to account for rent due during the second ten years of the twenty year term of Tenant's lease. N.T. 1/19/05 at 63. Additionally, Mr. Axler suggested that the damage calculations performed by Mr. Newman should be reduced to present value, resulting in damages of $2, 947, 698.00 (Tenant's rent over 20 years, minus rent from replacement tenants over 20 years, plus construction costs). Id. at 68-69. Exhibit D-100 (Mr. Axler's "Response to Newman Alternate Damages Claim" (in which Mr. Axler used a rate of 9%)). When Tenant sought to introduce Exhibit D-100, Landlord objected and the following discussion over the propriety of reducing the damages to present value occurred:

[Landlord]: My objection is to any testimony or any of these calculations regarding the first ten years of [Tenant's] lease, the PetsMart lease, and the Michael's lease as indicated in this document.
The Court: And you're offering the first ten years for what purpose?
[Tenant]: Well, the only difference in the first ten years presented by Marc Newman and Mr. Axler is the discounted present value and this is a portion of his opinion.
The Court: And do you object to that?
[Landlord]: Only to the extent that he offers an opinion as to what that percentage interest was to use for present value, the numbers.

N.T. 1/19/06 at 64-65 (emphasis added). After brief additional comments, Landlord clarified that it objected to "the introduction of this testimony as to present value." Id. at 65 (emphasis added). Tenant then complained "[y]our Honor, she just changed her objection. A minute ago she said she was objecting to the rate, not the concept of discount." Id. (emphasis added). The following exchange then occurred:

The Court: Well, you can't introduce – it doesn't make a difference what her objection is, it's to the introduction of the present value based upon percentage calculation or something else. Is that the basis?
[Landlord]: That's the basis, your Honor.
[Tenant]: I think, your Honor, if I understand [Landlord] correctly, what he is saying, [Landlord] agree[s] there should be discount for present value, but dispute[s] the rate. I would submit that's inappropriate [sic] for cross-examination of Mr. Axler, not admissibility issue.
The Court: Is that your issue?
[Landlord]: Your Honor, the issue is two-fold. That he is offering expert testimony as to a factual matter that has not been included in his report, and –
The Court: One to ten years, one to ten are not going to be considered by me other than on the issue of present value, one to ten, ten years on the leases calculation of the figures introduced, if I allow it to be introduced for that purpose.
[Landlord]: Objection, your Honor. The Court: What is your objection now? …
The Court: You're still asking that it be exclude because of the rate Mr. Axler has used for purpose of determining present value?
[Landlord]: Yes, your Honor. The rate Mr. Axler has used, in and of itself, is an expert opinion as to what that rate should be. And this is a factual matter. It's a matter for the Court to decide and it's a matter that [Tenant] [was] on notice of that this testimony would be offered.
The Court: Are you saying I'm supposed to make a determination as to what the present value is?
[Landlord]: It is within the Court's purview your Honor. Yes, you can, but there was also factual evidence as to what rate was to be used.

Id. at 65-67. It is clear from this exchange that Landlord did not object at trial to the reduction to present value. In addition, when Mr. Axler was later questioned about the present value rate used in his calculations on cross examination, re-direct examination, and re-cross examination, Landlord did not even renew its objection to that rate, much less contest that the underlying reduction to present value of the Section 20.2.2 damages was to occur. N.T. 1/19/06 at 137, 139, 145, 147.

Further, Mr. Marchitelli was recalled to rebut Mr. Axler's testimony and Exhibit D-100, containing Mr. Axler's present value calculation of Mr. Newman's alternate damage figures. N.T. 1/20/06. Landlord's Exhibit P- 434 was introduced into evidence, correcting alleged errors in Mr. Axler's calculations and providing Mr. Marchitelli's present value calculation of Mr. Newman's alternate damage figures resulting in total damages of $3, 852, 186.00. Id. at 68-72, 92. In so doing, Mr. Marchitelli used the same rate as had Mr. Axler to discount the figures to present value. Id. at 71.

Landlord continued to request Section 20.2.2 damages reduced to present value at the post trial level, averring that Landlord "[c]ould also be made whole by calculating damages based upon lost rental income as specifically set forth in Section 20.2.2." Landlord's Post Trial Motion filed 9/18/06 at 8; Landlord's Memorandum of Law in Support of Post Trial Motion filed 11/8/06 at 18-19, 32. In its post trial request that the damage award be modified, Landlord stated:

[Judge Mahon] actually found Marc Newman's calculation of damages in years 1-10 to be reliable. Thus, there is no question that [Landlord] is at least entitled to recover damages for present value of lost rent through the first 10 years and 9 months, ($2, 713, 739.00 as set forth above). [Landlord] should have, at a minimum been awarded the lost rental income for the first 10 years and nine months to which there is no dispute and no speculation.
While there was no legal obligation for [Landlord] to find a replacement tenant for the same lease length, if the Court determined some rent must be attribute to the last 9 years and 3 months, sufficient evidence and calculation to find such, has been presented to the Court. In fact, both [Tenant's] "expert, " Axler and [Landlord's] expert, Marchitelli, agreed that a 50% renewal probability is a reasonable assumption and methodology for calculating the remaining anticipated rent. While both experts concur that a 50% renewal probability is reasonable, Axler's calculations were admittedly incomplete. Marchitelli adopted and modified Axler's calculations using standard real estate assumptions, which were supported by the testimony of March Newman and uncontested. Ultimately, Marchitelli calculated the present value of [Landlord's] damages, per the Remedies section of the Lease, to be $3, 852, 186.00.

Landlord's Memorandum of Law in Support of Post Trial Motion filed 11/8/06 at 24. Thus, Landlord's Post Trial Motion preserved the request for a Section 20.2.2 damage figure reduced to present value.

Landlord argued on the previous direct appeal to the Superior Court that it had presented "two alternate theories of damages, either of which would have acted to award [Landlord] its expectation damages, " and that the damages awarded by Judge Mahon were "insufficient in that they failed to award [Landlord] its expectation damages, necessary to make [Landlord] whole. Landlord's Pa.R.A.P. 1925(b) Statement of Matters Complained of on Appeal filed 1/31/07. As it had up to that point, Landlord structured its appellate brief to primarily argue in favor or damages based on the diminished sale price of the shopping center allegedly attributable to Tenant's breach, and only secondarily requested Section 20.2.2 damages. Landlord's Pa.R.A.P. 1925(b) Statement of Matters Complained of on Appeal filed 1/31/07 at 21, 24.

Thus, we find it abundantly clear from the contents of the certified record that neither the trial court nor the prior panel of the Superior Court was asked to award Section 20.2.2 damages not reduced to present value. Quite to the contrary, Landlord's damages requests were figures consistently so reduced. While the parties argued over numerous other aspects of this case, the propriety of reduction to present value was simply not made an issue. Unsurprisingly, the April 25, 2008 Memorandum of the Superior Court is thus silent on the topic, and we discern nothing in that Memorandum which would permit Landlord to abandon on remand its consistently held position in this regard, and argue instead that the trial court must award Section 20.2.2 damages not reduced to present value. Our exhaustive review of the record in this case compels the conclusion that it does not support Judge Mahon's failure to reduce Landlord's damages to present value. Therefore, we find it necessary to vacate the award of damages and remand the matter for calculation of damages reduced to present value.

On remand, such damages must also reflect Landlord's duty to mitigate for the second half of the twenty year lease term. Judge Mahon's August 15, 2006 Opinion faulted Landlord's 20.2.2 damage evidence for failing to account for the second ten year period. In challenging the judge's damage award via post trial motion, Landlord conceded the necessity of mitigation for the second ten year period, and requested $3, 852, 186.00 in Section 20.2.2 damages, reflecting the fifty percent (50%) renewal rate that both parties' experts agreed was "reasonable." Landlord's Memorandum of Law in Support of Post Trial Motion filed 11/8/06 at 24, 32. In arguing to the prior panel of this Court that the evidence supported Section 20.2.2. damages, Landlord noted that "both [Landlord] and [Tenant] presented testimony through their experts, who both agreed that it would be reasonable to assume a 50% renewal probability that the substitute tenants would exercise during [the second ten year period]." Landlord's brief filed 6/26/07 at 29. In remanding the matter to Judge Mahon for enforcement of the measure of damages in Section 20.2.2, the prior Panel of this Court did not find fault in the judge's conclusion that mitigation was required for the second ten year period, and it is unclear to this Court why the Judge's January 15, 2010 Opinion did not reflect his prior determination regarding the necessity for mitigation during the second ten year period.

Finally, with regard to reletting expenses, Tenant asserts that Judge Mahon "erred in awarding $534, 629 in reletting expenses when it had previously found that figure not credible and [the Superior Court] affirmed that finding on appeal." Tenant's brief at 40. Judge Mahon's December 19, 2006 order acknowledged that Marc Newman testified that Landlord incurred $536, 629.00 in additional construction costs to accommodate PetsMart and Michaels, but the judge also noted that Richard Marchitelli had testified, to the contrary, that Landlord saved $505, 821.00 in construction costs when building for the replacement tenants. Order filed 12/19/06 at 1, fn. 2. Faced with this conflicting evidence from Landlord, Judge Mahon specifically credited Mr. Marchitelli's testimony and concluded that "[Landlord] failed to prove by a preponderance of the evidence that it is entitled to $536, 629.00 in reletting expenses." Id.; Opinion filed 5/8/07 at 20. Such a credibility determination was, undisputedly, a matter for the factfinder, who is free to believe any portion or none of the evidence presented. Spang & Co. v. USX Corp., 599 A.2d 978, 983 (Pa. Super. 1991) (citing Aletto v. Aletto, 537 A.2d 1383 (1988)).

On appeal, the prior panel of this Court did not disturb Judge Mahon's conclusion regarding reletting expenses, explaining that "[s]ince the trial court's determination was amply supported in the record, we decline to disturb the specific finding, and need only note that any cost savings associated with [Tenant's] breach must be deducted from the trial court's assessment of damages." Memorandum filed 4/25/08 at 19, fn. 9.

On remand, Judge Mahon confirmed that he "did not find the testimony offered by Marc Newman creditable on the issue of additional construction costs." Opinion filed 1/15/10 at 2, fn. 4. In apparent conflict with this statement, however, the judge then subtracted the $505, 821.00 construction savings credibly testified to by Mr. Marchitelli, from the $536, 629.00 construction costs presented through Mr. Newman's discredited testimony. Id.

However, since Judge Mahon discredited Mr. Newman's testimony, and the Superior Court found that such determination was supported by the record, the $536, 629.00 figure is a number irrelevant to the question of Landlord's reletting expenses, and it was error for Judge Mahon to insert it into his calculations. In light of Judge Mahon's previous finding, affirmed by the prior panel of this Court, that Landlord presented credible testimony that it enjoyed a savings of $505, 821.00 in construction costs as the result of Tenant's breach, as opposed to incurring $536, 629.00 in additional construction costs, the $505, 821.00 saved must be subtracted from Landlord's reletting expenses, and the $536, 629.00 number testified to by Mr. Newman plays no part in their calculation.

In addition to Tenant's claims regarding reduction to present value, mitigation and reletting expenses, Tenant also challenges the interest awarded on Landlord's damages. Landlord initially requested of the trial court that it award damages, as discussed above, "together with interest at the Default Rate as provided in Paragraph 20.4 of the Lease and Paragraph 1.15 of the Lease, and Costs." Landlord's Proposed Conclusions of Law and Discussion filed 4/5/06 at 52.[12] Section 20.4 of the Lease reads as follows:

20.4 Expenses. At any time following a default, in the event that the Landlord commences suit for the repossession of the Lease Premises, for the recovery of Rent or any other amount due under the provision of this Lease, or because of the breach of any other covenant herein contained on the part of the Tenant to be kept or performed, and a breach shall be established, the Tenant shall pay to the Landlord all expenses incurred in connection therewith, including reasonable attorneys' fees and costs. If the Tenant defaults under this Lease, all sums of money owed to the Landlord under this Lease shall bear interest at the Default Rate until the sums are paid to the Landlord.

Lease Section 20.4. Section 1.15 defines "Default Rate" as the "lesser of: (a) the Prime Rate (as hereinafter defined) plus two percent (2%) per annum; or (b) the highest interest rate permitted by Applicable Law." Lease Section 1.15.[13] Tenant disputed Landlord's damage claim, but did not specifically challenge the applicability of Section 20.4 if the trial court concluded that interest was due. Tenant's Proposed Findings of Fact and Conclusions of Law filed 4/5/06. As noted above, Judge Mahon's initial damage award did not include interest. Verdict and Opinion filed 8/15/06 at 1, 14, Verdict filed 9/6/06 at 1. When the parties filed their subsequent post trial motions, the issue of interest was not raised, nor was it addressed during the prior direct appeal to the Superior Court.

On remand from the Superior Court, however, Landlord asked Judge Mahon to award damages, and "[i]nterest as permitted in the Lease" from "February 13, 2002 at a rate of prime plus 2%." Landlord's Brief in Support of the Proper Calculation of Damages Pursuant to the Memorandum of the Superior Court filed 11/5/08 at 2, 17.[14] The amount of interest requested was $5, 657, 613.00. Landlord's Response to [Tenant's] Memorandum Regarding Calculation of Damages of Remand filed 12/2/08 at 14.[15]

In response to Landlord's request, Tenant conceded that Landlord "may recover interest, " but insisted that such interest did not begin to accrue until June 25, 2005, the date Tenant would have begun to pay rent had it not breached the Lease. Tenant's Memorandum Regarding Outstanding Issues on Remand filed 11/6/08 at 11. To support its position, Tenant relied on the wording of Section 20.4, that "all sums of money owed to Landlord under this Lease shall bear interest as the Default Rate until the sums are paid to the Landlord." Id. (emphasis in Memorandum). Tenant also pointed to Section 4.3 of the Lease, which directed that rental payments must be paid within fifteen days of the due date, and if a payment was not paid, it bear interest "from its due date at the Default Rate …" Id. (emphasis in Memorandum).[16]

After considering the parties' positions, Judge Mahon awarded Landlord contractual interest of $6, 279, 734.26 "from the date of the anticipatory breach of the contract on February 13, 2002 pursuant to §§20.4 and 1.15 of the lease." Opinion filed 1/15/10 at 3; Verdict dated 2/25/10.

On appeal of Judge Mahon's award, Tenant now insists that "the prejudgment interest award should be vacated and the trial court should be directed to recalculate the interest award." Tenant's brief at 40. Specifically, Tenant asks:

Must the trial court's award of prejudgment interest be reduced where: (a) in cases of anticipatory breach, prejudgment interest does not begin to run until the date on which performance would have been due; and (b) performance was not due until June 2005, more than three years after the date from which the trial court awarded prejudgment interest.

Tenant's brief at 2.

Tenant's argument on appeal mirrors that presented to Judge Mahon in response to Landlord's request for interest accruing as of February 13, 2002. Tenant initially asserts that Section 4.3 of the Lease "unambiguously provides that [Tenant] cannot be charged prejudgment interest for failing to make rental payments that had not yet come due." Tenant's brief at 38.[17]As we noted, above, however, Judge Mahon did not award "default interest" under Section 4.3 for rent "unpaid within fifteen days after its due date." Section 4.3 is inapplicable here because this is not a case where Tenant took up occupancy and only then began to fail to pay its rental obligation. Instead, as Judge Mahon clearly determined and the prior panel of this Court reiterated, Tenant's actions in refusing to occupy the property in the first place amounted to a total anticipatory breach of the Lease, creating at the time of such breach the obligation to pay Landlord all rent owed.[18]

Tenant's argument also cites to cases pertaining to prejudgment interest, which we find inapplicable to Judge Mahon's determination that Landlord is entitled to contractual interest under Sections 20.4 and 1.15. Id. at 38-39 (citing Fernandez, supra; Somerset Community Hospital v. Allan B. Mitchell & Associates, Inc., 685 A.2d 141, 148 (1996)).

We find similarly unavailing Tenant's citation to Section 354 of the Restatement (Second) of Contracts and Section 66.112 of Williston on Contracts. Tenant's brief at 39-40. As Comment a. to Section 354 clearly states, it does not deal with "the injured party's right to interest under the terms of the contract. If the parties have agreed on the payment of interest, it is payable not as damages but pursuant to a contract duty that is enforceable as is any other such duty, subject to legal restrictions on the rate of interest." Restatement (Second) of Contracts § 354 (1981) Comment a. Judge Mahon's January 15, 2010 Opinion clearly awarded contractual interest under Section 20.4 of the Lease, thus Section 354 is inapplicable to the circumstances before us. As Section 66.112 of Williston on Contracts also pertains to interest awarded as damages, it is also irrelevant to the propriety of Judge Mahon's award of contractual interest.

Thus, we find that Tenant has failed to persuade us that the award of interest from February 13, 2012 on Landlord's damages requires reversal.[19]Our review of the circumstances before us leads us to conclude the opposite. Judge Mahon determined, and the prior panel of this Court affirmed, that Tenant's February 13, 2002 refusal to proceed as contracted under the Lease resulted in a total anticipatory breach of that Lease, creating in Tenant an obligation as of the time of the breach, to pay Landlord all rent. We find that pursuant to Section 20.4 of the Lease, interest at the Default Rate accompanied that obligation. Judge Mahon committed no error in awarding interest on Landlord's damages as of February 13, 2002. We must remand for the recalculation of such interest, however, in light of our determination that the damages must be reduced to present value.

In addition to challenging Judge Mahon's award of interest on Landlord's damages, Tenant lastly asserts that Judge Mahon erred in awarding interest on Landlord's attorneys' fees and costs. Judge Mahon's January 15, 2010 Opinion directed the following with regard to counsel fees:

[B]oth parties are seeking counsel fees pursuant to the terms of the lease agreement. [Landlord] is entitled to reasonable counsel fees and expenses pursuant to § 20.4 and also as the prevailing party under § 24.10. Counsel for the parties shall contact this Court within ten (10) days of the entry of this Opinion about the need for an evidentiary hearing to determine [Landlord's] expenses and reasonable counsel fees.
This Opinion shall not be the final award of damages. The Court will issue another Order to include the total amount of damages awarded, plus interest, counsel fees and expenses.

Opinion filed 1/15/10 at 3.

In accordance with this Opinion, Landlord provided Tenant with calculations setting forth attorneys' fees, costs, and expenses (from August 31, 2003 through February 22, 2010), plus interest, totaling $1, 684, 189.34. The affidavits presented by Landlord on this issue set forth fees from August 31, 2003 and include $412, 727.28 in interest at a rate of 6%. Affidavit filed 2/19/10, Exhibit C. Tenant informed Judge Mahon that it did not contest Landlord's "claimed fees and expenses themselves, " but "reserve[d] the right to challenge whether pre-judgment interest can be charged on fees and expenses, " and the right to "challenge any award of fees and expenses to [Landlord], and any determination that [Landlord] is the prevailing party, following the resolution of [Tenant's] motion for reconsideration and any appeals." Tenant's Letter to Judge Mahon, dated 2/17/10, attached as Exhibit B to Landlord Affidavit.[20] The referenced Motion for Reconsideration and accompanying Memorandum of Law raised two issues inapplicable to the question currently before us, but the Memorandum of Law also contained a footnote stating, in pertinent part:

In an abundance of caution, [Tenant] expressly preserves and does not waive or intend to waive any appeal issues not raised herein, including without limitation, its appeal of …(2) the Court's award of interest from the date of the anticipatory breach (February 2002), rather than from the date on which rent would have first become due, (June 2005); (3) the Court's future calculations and awards of interest and attorney's fees; and (4) the Court's determination of "prevailing party" under the lease, pending any appeal of the aforementioned issues. It is well settled under Pennsylvania law that an appellant does not waive appeal issues by not raising them in a motion for reconsideration.

Memorandum of Law to Motion for Reconsideration filed 2/17/10 at 1, fn. 1 (citations omitted).

Landlord then sent Judge Mahon a letter asking him to enter a final order and expressing Landlord's belief that Tenant should not be permitted to submit a memorandum of law regarding whether prejudgment interest can be charged on fees and expenses in light of the "unambiguous" language set forth in Section 20.4 of the Lease, which provides for "interest at the default rate following a default, for 'all expenses incurred in connection therewith including reasonable attorneys' fees and costs.'" Letter dated 2/19/10, filed 3/1/10.[21] No further correspondence or motions from either party appear in the certified record.

On February 25, 2010, Judge Mahon denied Tenant's Motion for Reconsideration and issued the verdict currently under appeal, [22] including "$1, 684, 189.34 in attorney fees, costs and expenses with interest." Verdict dated 2/25/10. In rendering this award, the judge specifically "reserve[d] determination of further attorney fees, costs, expenses and interest until the appellate process has concluded." Id.

Tenant now asks on appeal "[m]ust the trial court's award of prejudgment interest to [Landlord] on the entirety of it attorneys' fees and costs be eliminated where [Tenant] had no contractual obligation to pay [Landlord's] attorneys' fees and costs prior to the trial court's entry of final judgment?" Tenant's brief at 3.[23] Tenant argues that it had "no contractual obligation to pay [Landlord's] attorneys' fees and costs at the time they were being incurred, " and that such contractual obligation did not arise until after judgment was entered. Id. at 43 (citing Reproduced Record at 76a, 83a). It appears that Tenant is relying on Sections 20.4 and 24.10 of the Lease, as those are the only relevant portions of the Lease appearing on the pages of the Reproduced Record cited by Tenant. As we noted above, Section 20.4 states:

20.4 Expenses. At any time following a default, in the event that the Landlord commences suit for the repossession of the Lease Premises, for the recovery of Rent or any other amount due under the provision of this Lease, or because of the breach of any other covenant herein contained on the part of the Tenant to be kept or performed, and a breach shall be established, the Tenant shall pay to the Landlord all expenses incurred in connection therewith, including reasonable attorneys' fees and costs. If the Tenant defaults under this Lease, all sums of money owed to the Landlord under this Lease shall bear interest at the Default Rate until the sums are paid to the Landlord.

Lease Section 20.4 (emphasis added). Section 24.10 states, in pertinent part:

24.10 Attorneys' Fees. In any litigation between the parties regarding this Lease, the losing party shall pay to the prevailing party all reasonable expenses and court costs including attorneys' fees incurred by the prevailing party. A party shall be considered the prevailing party if … it initiated the litigation and substantially obtains the relief it sought, either through a judgment or the losing party's voluntary action before arbitration (after it is scheduled), trial or judgment.

Lease Section 24.10.[24]

Tenant's argument in support of its challenge to the interest awarded on the attorneys' fees mirrors its position with regard to the interest awarded on the damage award. For the reasons expressed above, we find Tenant is not entitled to relief. Through its refusal to comply with its obligations under the Lease, Tenant committed an anticipatory total breach of the Lease, triggering at the time of the breach, Landlord's right to collect damages and expenses, including attorneys' fees, plus interest.

For the foregoing reasons, we vacate the Verdict of February 25, 2010, and remand this matter for recalculation of damages and interest in accordance with this opinion.

Verdict Vacated. Matter Remanded. Jurisdiction Relinquished.

CONCURRING AND DISSENTING OPINION BY DONOHUE, J.

I respectfully disagree with the learned Majority's reversal of the trial court's award of accelerated rent payments to Landlord because the award was not reduced to present value.[1] My disagreement is based on three reasons: first, contrary to the conclusions of the Majority, Landlord did not conceded the issue by way of judicial or evidentiary admission; second, the trial court's refusal to reduce the accelerated rent award to present value follows the law of the case; and finally, there is no requirement under Pennsylvania law that future damages in a breach of contract action be reduced to present worth, and absent a term in the contract requiring reduction to present value, any such reduction is improper.

The certified record reflects that Landlord contested the reduction to present worth of the award of damages under Section 20.2.2 of the lease, and thus, the Majority's conclusion to the contrary is incorrect. Majority Op. at 14. Marc Newman, one of the owners of Newman Development Group, testified that Landlord was entitled to damages of lost rent pursuant to Section 20.2.2 of the lease agreement, which measured the loss in value to the whole contract ("Section 20.2.2 Damages").[2] See N.T., 1/17/06, at 85- 91. Those damages, according to his calculations, were $10, 494, 490.00. Id. at 91. On cross-examination, counsel for Tenant asked Newman the following question: "Mr. Newman, first we agree, don't we, that pursuant to the lease and the various calculations you have to go to – your gross number of 11 million needs to be reduced to present value, doesn't it?" Id. Newman responded by referring counsel for Tenant to the agreement between the parties, stating the damages would only need to be reduced to present value if that requirement was included in the lease agreement. Id. at 91-92. The lease agreement includes no such provision. Lease Agreement, 4/14/00, at § 20.2.2.

The only evidence presented by Landlord at trial regarding the reduction of the award to present value came after it rested its case. The record reflects that Landlord's expert, Richard Marchitelli, testified in rebuttal to Tenant's expert's present worth calculation. Marchitelli testified to a different calculation of damages reduced to present value from that presented by the Tenant. N.T., 1/20/06, at 68-72. Marchitelli clarified that his present value testimony was based solely upon Tenant's expert's testimony, and did not reflect his opinion regarding the appropriate measure of damages.[3] Id. at 75, 90-91.

The Majority is correct that Landlord presented the Section 20.2.2 Damages reduced to present value in its proposed conclusions of law and post-trial motion before the trial court. Plaintiff's Proposed Conclusions of Law, 4/5/06, at 40-42; Plaintiff's Post Trial Motion, 9/18/06, at 8. This does not constitute an admission or "concession" as Tenant claims. See Tenant's Brief at 24-25. There are only two types of admissions: judicial admissions[4]and evidentiary admissions.[5] Both are limited in scope to factual matters otherwise requiring evidentiary proof. A party cannot "admit" a legal theory or question of law. In re: Paxson Trust I, 893 A.2d 99, 113 n.10 (Pa. Super. 2006); Gibbs v. Herman, 714 A.2d 432, 437 (Pa. Super. 1998). As discussed infra, Tenant acknowledges that reduction of damages to present value is not a question of fact, instead asserting that it is a matter of settled law. Tenant's Brief at 31; Tenant's Reply Brief at 8; see Helpin v. Trustees of Univ. of Pennsylvania, 608 Pa. 45, 50, 10 A.3d 267, 269 (2010) (the question of how to calculate damages is a question of law). Thus, it is incapable of being an admission.

Furthermore, my review of this Court's Memorandum decision resolving the parties' first appeal reveals that the prior panel determined that the proper measure of damages in this case was to award Section 20.2.2 Damages. Newman Dev. Grp. of Pottstown, LLC v. Genuardi's Family Mkt., Inc., 162 EDA 2007, 19 (Pa. Super. April 25, 2008) (unpublished memorandum). It made no mention of reducing the Section 20.2.2 damages to present value. Rather, the Court called for the imposition of damages pursuant to the express language of the lease agreement, which does not call for a reduction of damages to present value. Id. at 17-18; see Lease Agreement, 4/14/00, at § 20.2.2. This is the law of the case, which is unalterable by the trial court on remand or by this Court in a subsequent appeal.[6]

Lastly, I note that it is not, as Tenant claims, "hornbook law" that future damages must be reduced to present value in Pennsylvania. Tenant's Brief at 31; see also Tenant's Reply Brief at 8. In support of this proposition, Tenant cites to two national treatises, neither of which point to any Pennsylvania or other precedential law. See Tenant's Brief at 31 (citing C.J.S. Damages § 38 (2010)); Tenant's Reply Brief at 8 (citing Williston on Contracts § 66:86 (4th ed. 2002)). In support of its assertion that reduction to present value "has long been the rule of Pennsylvania, " Tenant cites to two personal injury cases, one from the 1920s and one from the 1960s, [7]without any recognition that our Supreme Court instructed Pennsylvania Courts "to abandon the practice of discounting lost future earnings" in personal injury cases nearly 35 years ago. See Tenant's Brief at 31; see also Kaczkowski v. Bolubasz, 491 Pa. 561, 583, 421 A.2d 1027, 1039 (1980).[8] Nor does Tenant cite to any case law concerning the reduction of damages to present value in a breach of contract action, which is the issue involved in this case.

I recognize that in Helpin v. Trustees of Univ. of Pennsylvania, our Supreme Court stated that it "decided Kaczkowski narrowly, " and that "in other contexts" the Court "did not wish to disturb the requirement that an award be discounted to present value, assuming an interest rate of six percent." Helpin, 608 Pa. at 57, 10 A.3d at 274 (citing Kaczkowski, 491 Pa. at 579 n.21, 421 A.2d at 1036 n.21). Helpin involved a claim for lost future profits by a plaintiff claiming breach of his employment contract, where the Supreme Court determined, relying on Kaczkowski, that the future damage award should not be reduced to present value. Id. at 62, 10 A.3d at 277. Similarly, the Pennsylvania cases referenced in Helpin are all cases that involve a lack of precision in the calculation of future losses based upon an individual's prospects. To the contrary, contract cases, which govern lease agreements, involve damages, which, by definition, provide for a precise calculation pursuant to the contract terms.[9] I have found no breach of contract case law applying a general "requirement" of the reduction of damages to present value.[10] Rather, the only Pennsylvania appellate court case addressing the issue holds that in order to reduce damages to present value, it must be a negotiated term contained in the contract. See Trust Co. of Glen Rock v. Shrewsbury Furniture & Mfg. Co., 158 A. 641, 643 (Pa. Super. 1932) (holding that damages for breach of contract should not be reduced to present worth where that term is not specifically included in the contract).[11]

As noted above, contract law and general contract principles govern lease agreements. Giant Food Stores, LLC v. THF Silver Spring Dev., L.P., 959 A.2d 438, 447 (Pa. Super. 2008). "As such, when the language of a lease is clear and unequivocal, its meaning will be determined by its contents alone in ascertaining the intent of the parties." Id. (citation omitted). "Where the language of the contract is ambiguous, the provision is to be construed against the drafter." State Farm Fire & Cas. Co. v. PECO, 54 A.3d 921, 928 (Pa. Super. 2012). Further,

[a] court may imply a missing term in a parties' contract only when it is necessary to prevent injustice and it is abundantly clearthat the parties intended to be bound by such term. A court should only imply a term into a contract where it is clear that the parties contemplated it or that it is necessary to imply it to carry out the parties intentions.

Glassmere Fuel Serv., Inc. v. Clear, 900 A.2d 398, 403 (Pa. Super. 2006) (emphasis in the original) (citations omitted).

The record reflects that Tenant drafted the lease agreement in question. See Lease Agreement, 4/14/00. Section 20.2.2 of the lease agreement, which permits Landlord to accelerate rent payments upon breach of the agreement by Tenant, does not call for these payments to be reduced to present value. Id. at § 20.2.2. To the extent the absence of this term could be considered an ambiguity, which I do not believe is the case, it must be construed against Tenant and thus, against reducing the damages to present value. Moreover, based upon Marc Newman's testimony, it is not "abundantly clear" that Landlord intended for the lost rent payments to be reduced to present value. See N.T., 1/17/06, at 85-91. Quite the opposite, Marc Newman testified that absent its inclusion in the lease agreement, Landlord did not intend damages for lost rent to be reduced to present value. Id. at 91. It is therefore error for this Court to read this missing term into the lease agreement.

Based upon the testimony presented at trial, the plain language of the lease agreement, and the law of the case, I would therefore conclude that the trial court did not err by denying Tenant's request to reduce the damages for lost rent to present value. I therefore further disagree that remand is necessary to recalculate the interest awarded on the damages to account for the present value discount.

I agree with the Majority's conclusion, however, based upon the trial court's credibility determination and the express terms of the lease agreement, that remand is necessary for the trial court to account in the damage award for Landlord's duty to mitigate damages for the second half of the 20-year lease. Majority Op. at 15-16. The lease agreement plainly states that in the event Tenant defaults, Landlord is required to "endeavor in good faith to mitigate any damages for which Tenant may be liable." Lease Agreement, 4/14/00, at § 20.3. The trial court found that Marc Newman's damage testimony was "highly unreliable" because of his failure to "account for future tenants or any other factors that may have affected the amount of rent [Landlord] would have received." Trial Court Opinion, 8/15/06, at 13. The prior panel of this Court did not alter the trial court's finding on this issue in any respect.

I also agree that remand is required for the trial court to account solely for the savings Marchitelli testified Landlord experienced as a result of the breach by Tenant. Majority Op. at 15-17. The trial court credited the testimony of Marchitelli that Landlord enjoyed a savings of $505, 821.00 as a result of Tenant's breach, and disbelieved Marc Newman's testimony that Landlord experienced $536, 629.00 in reletting expenses because of the breach, finding that the testimony of the two witnesses were at odds with each other. Trial Court Order, 12/19/06, at 2 n.2. This Court affirmed that credibility determination in the original appeal, finding it "was amply supported by the record, " and instructing, "any cost savings associated with [Tenant's] breach must be deducted from the trial court's assessment of damages." Newman Dev. Grp. of Pottstown, LLC, 162 EDA 2007, at 19 n.9. For reasons unknown, the trial court on remand subtracted the savings testified to by Marchitelli from the costs testified to by Marc Newman, ultimately adding the difference – $30, 808.00 – to Landlord's damage award. Based upon the trial court's prior credibility determinations and this Court's affirmance of the same, this was error.

Finally, pursuant to the express terms of the lease agreement, I agree with the Majority that the trial court granted prejudgment interest and interest on attorney's fees from the appropriate date. Majority Op. at 18-30. No further calculations on these amounts are necessary.

In summary, I would conclude that the trial court did not err by denying Tenant's request to reduce the damages for lost rent to present value. With respect to the other issues raised by Tenant on appeal (apart from the Majority's determination that interest awarded on the damages must be recalculated to account for the present value of the damages), I join in the remainder of the Majority Opinion.


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