February 11, 2014
ARWAY LINEN & UNIFORM RENTAL SERVICE, INC. Appellee
NORTH PHILADELPHIA SULLIVAN'S, INC., T/A SULLIVAN'S STEAKHOUSE Appellant
Appeal from the Judgment Entered March 27, 2013 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): 2481 February Term, 2011
BEFORE: BENDER, P. J., LAZARUS, J., and FITZGERALD, J. [*]
North Philadelphia Sullivan's, Inc., T/A Sullivan's Steakhouse ("Sullivan's) appeals from the judgment entered in the Court of Common Pleas of Philadelphia County following a verdict in favor of Arway Linen and Uniform Rental Service, Inc. ("Arway"). After our review, we affirm in part and we vacate and remand in part.
Arway, a Pennsylvania corporation, provides linen and uniform rentals to various restaurants and dining facilities. On March 10, 2008, the parties entered into a 60-month rental agreement whereby Arway provided black linens to Sullivan's. Arway delivered the linens to Sullivan's King of Prussia restaurant three times each week. The parties stipulated that Arway had drafted the agreement; the parties also stipulated that Sullivan's had terminated the agreement by two certified letters in which it claimed that 20% of the linens had shadings and creases that rendered them substandard and not usable.
Following Sullivan's unilateral termination of the agreement, Arway filed a breach of contract action against Sullivan's. Sullivan's filed a motion for summary judgment, which was denied.
On October 3, 2012, the parties appeared before the Honorable Patricia A. McInerney for a bench trial on stipulated facts. Following trial, the court entered findings of fact and conclusions of law, and entered judgment in favor of Arway for $112, 800 in loss of bargain damages and attorney fees, plus interest at a rate of 18% per annum from June 1, 2010 until the date of the court's decision. Sullivan's filed post-trial motions. The trial court granted Sullivan's request to remove interest, but otherwise denied Sullivan's request for relief. Sullivan's filed this appeal and a Statement of Errors pursuant to Pa.R.A.P. 1925(b). The trial court issued a Rule 1925(a) opinion finding that Sullivan's improperly terminated the rental agreement and, therefore, it had breached the contract. On appeal, Sullivan's raises the following claims:
1. Whether Sullivan's is entitled to summary judgment where no genuine issues of material fact exist related to Sullivan's termination of the rental agreement at issue?
2. Whether the trial court erred as a matter of law in finding a breach of the rental agreement at issue where the facts surrounding the termination of the agreement were stipulated to at the time of trial?
3. Alternatively, whether the trial court erred as a matter of law in finding that the contract at issue was unambiguous where both parties differed in their interpretation of the contract and neither aligned with the explanation of the rental agreement as provided by the court?
4. Whether the trial court erred in its award of damages where no evidence or supporting documentation was presented at trial by [Arway] to support a contractual award of $112, 800?
The rental agreement provides, in relevant part:
The Customer expressly waives the right to terminate this Agreement during the initial term or any extension thereof for claimed deficiencies in service and/or quality of merchandise which the Customer claims does not meet the above standards unless (1) the claims are made promptly in writing to the Company, (2) the Company is afforded a minimum of thirty (30) days from date of receipt of the written claim to resolve the claimed deficiency and (3) the Company does not resolve the claimed deficiency within that period of time. All written notices regarding claimed deficiencies in service, quality of goods and/or notice to terminate under this Agreement shall be sent by certified mail, return receipt requested, by Customer to the Company at the above address and the signed certified mail receipt shall constitute the sole proof of delivery of said notice.
Rental Agreement, ¶ 7 (emphasis added). Paragraph 6 of the agreement states:
[Arway] agrees that its quality of merchandise and processing shall be comparable to the generally accepted standards of industrial laundries. [Arway] further agrees to promptly replace any merchandise that, in it's [sic] sole opinion, does not meet such standards at no cost to [Sullivan's].
Rental Agreement, ¶ 6 (emphasis added).
The court made several findings of fact: On April 8, 2010, Sullivan's sent Arway an undated certified letter addressing deficiencies in service and quality of the linens. On April 13, 2010, representatives of the parties, George Skipper on behalf of Sullivan's, and Louis DiDonato and David Newman on behalf of Arway, met briefly on this issue. Although Arway's representatives did not agree with Sullivan's claim that the linens were shaded and creased, Arway purchased 600 dozen new black napkins and 115 new black tablecloths. DiDonato testified that this was done "to keep the customer happy." See N.T. Trial, 10/03/2012, at 51, 157. Newman testified that at that meeting he indicated to Skipper that Sullivan's concerns would be remedied. Id. at 77, 136. On May 26, 2010, Sullivan's sent a second undated certified letter to Arway stating that the linens remained substandard, that Sullivan's had given Arway "ample time to correct the situation[, ]" and that it was terminating the contract as of June 1, 2010 pursuant to the Rental Agreement terms. See Letter (undated) from Sullivan's to Arway.
The court found that between the date of the meeting and the receipt of the second letter in May 2010, Arway delivered to Sullivan's 600 new black napkins and was phasing in 8 dozen new black tablecloths. Trial Court Opinion, Findings of Fact and Conclusions of Law, 11/30/2012, ¶ 26. The court also found that after the April 13, 2010 meeting, Skipper made no attempt to communicate with either DiDonato or Newman, other than the certified letter. Additionally, the court found the testimony of DiDonato and Newman credible, found Skipper's testimony was not credible, and found that in between sending these two letters, Skipper obtained bids to replace Arway's services. Id. at ¶¶ 28, 29, 32. Notably, Sullivan's ultimately obtained linens from a company that services all of the other Sullivan's locations. See N.T. Trial, 10/03/2012, at 129.
Based on the undisputed facts, the court denied Sullivan's motion for summary judgment. Sullivan's argues that the court erred in denying summary judgment because there were no issues of material fact remaining. Sullivan's claims that since the parties stipulated as to the two certified letters, it therefore strictly complied with the requirements of section 7 of the Rental Agreement. Sullivan's contends that it met the conditions precedent to unilateral termination, and, therefore, there was no breach of the agreement.
In its first issue, Sullivan's challenges the court's order denying its motion for summary judgment. An order denying a motion for summary is a non-appealable interlocutory order. See Pa.R.A.P. 311. We note, however, that while Sullivan's argues there was no genuine issue of material fact related to the termination of the agreement, that question is effectively subsumed in the appeal from final judgment and in issue 2 of Sullivan's appeal. Specifically, Sullivan's argues the court erred in concluding that it had improperly terminated, and thus breached, the agreement between Arway and Sullivan's. We disagree.
As Sullivan's notes, the termination procedure is explicitly set forth in section 7 of the rental agreement. Despite the fact that Sullivan's sent two certified letters as required in section 7, the court determined that Sullivan's presented nothing, either in support of summary judgment or at trial, to indicate that Arway's actions in remedying the problem were insufficient. Prior to trial, there remained questions of fact with respect to both deficiency and cure. At trial, Sullivan's did not present any demonstrative evidence, or credible testimony, that Arway's actions were insufficient to cure the claimed deficiency. As the trial court found, Sullivan's "intended to terminate this contract by whatever means." Findings of Fact and Conclusions of Law, ¶ 38, 11/30/2012. The evidence of record supports this finding.
In Pennsylvania, conditions precedent to a contract termination must be strictly fulfilled. Accu-Weather, Inc. v. Prospect Communications, Inc., 644 A.2d 1251 (Pa.Super. 1994). Notwithstanding the fact that Arway did not agree with Sullivan's claimed deficiency, Arway took reasonable actions to cure the deficiency, and Sullivan's presented no evidence to indicate that Arway did not cure the deficiency within the thirty days set forth in section 7. In fact, the evidence presented indicated that by mid-May 2010, Arway had delivered 600 new black napkins and was phasing in eight dozen new black table cloths for Sullivan's exclusive use (Arway washed these linens separately), and Arway picked up and delivered these linens three times each week. N.T. Trial, 10/3/2012, at 33-34. The evidence also established that in between the first and second letter, Sullivan's representative, Skipper, made no attempt to contact Arway, but instead sought other bids for linen service. Id. at 127. Ultimately, Sullivan's contracted with Linens of the Week, now owned by Alsco, to supply linens to Sullivan's. Id. at 129-130. Prior to that time, Alsco provided linen service to all other Sullivan's restaurants except for the Sullivan's in King of Prussia. Id. at 129.
The court concluded, therefore, that despite the fact that Sullivan's had sent two certified letters (albeit undated) pursuant to section 7 of the Agreement, Arway, also pursuant to section 7, had cured the claimed deficiency within thirty days from receipt of the claim and had resolved the claimed deficiency within that time. Other than Skipper's testimony, which the trial court did not find credible, Sullivan's presented no evidence at trial to establish that Arway's actions were insufficient to cure. See Trial Court Opinion, supra at ¶ 29. The conditions precedent to termination, therefore, were not strictly fulfilled. Sullivan's, therefore, had improperly terminated the agreement and was in breach. Our review of the record confirms the trial court's conclusion that Sullivan's terminated the contract because it no longer wished to be bound to Arway, not because Arway's cure was insufficient. McEwing v. Lititz Mut. Ins. Co., 77 A.3d 639 (Pa.Super. 2013) (appellate role in cases arising from non-jury trial verdicts is to determine whether findings of trial court are supported by competent evidence and whether trial court committed error in application of law).
Next, Sullivan's claims the "claimed deficiency" portion of the Rental Agreement was ambiguous and, therefore, the court should construe it against Arway as the drafter of the agreement. See Keystone Dedicated Logistics, LLC v. JGB Enterprises, Inc., 77 A.3d 1 (Pa.Super. 2013). The question of whether an ambiguity exists in a contract is question of law, Merriam v. Cedarbrook Realty, Inc., 404 A.2d 398 (Pa.Super. 1978), and our standard of review is plenary. See E.R. Linde Const. Corp. v. Goodwin, 68 A.3d 346 (Pa.Super. 2013).
Contractual language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. Hutchison v. Sunbeam Coal Co., 519 A.2d 385, 390 (Pa. 1986). A contract is not ambiguous if the court can determine its meaning without any guide other than knowledge of the simple facts and from the nature of the language in general. A contract is not rendered ambiguous because the parties disagree as to its proper construction. Metzger v. Clifford Realty Corp., 476 A.2d 1 (Pa.Super. 1984).
In its brief, Sullivan's argues solely that the Rental Agreement at issue "did not define what steps would be required for Arway to adequately remedy any claimed defect." Appellant's Brief, at 19. Sullivan's argues, therefore, that the contract language is ambiguous. This argument fails.
Section 6 of the contract clearly states that Arway was required to provide linens "comparable to the generally accepted standards of industrial laundries[, ]" and it was required to "promptly replace any merchandise that, in it's [sic] sole opinion, does not meet such standards at no cost to [Sullivan's]." Rental Agreement, ¶ 6. There is nothing so intricate or complex in this contract or the business relationship that renders this language ambiguous. Obviously, the claimed deficiency was shading in the coloring of the linens, and the only way for Arway to adequately cure the claimed deficiency was for it to purchase new linens for Sullivan's exclusive use, storing and laundering them separately from other linens.
Finally, Sullivan's argues that the court erred in its award of damages because Arway presented no evidence to support its alleged damages. This claim too is meritless.
The contract contains a liquidated damages clause, which states:
[Sullivan's] shall pay to [Arway] as liquidated damages and not as a penalty, the sum of fifty percent (50%) of the product of the number of weeks remaining under the agreement or any extension thereof from the date of breach to the expiration date, . . .[and] the actual weekly billing at the time of termination. . . .
Rental Agreement, ¶15. In other words, the later in the contract period the breach occurred, the lower the amount of damages would be. DiDonato testified on behalf of Arway and estimated the loss of bargain damages to be $94, 000. See N.T. Trial, supra at 47-51. Sullivan's cross-examination was extremely limited, see id. at 64, and the trial court accepted DiDonato's uncontradicted testimony. Additionally, as Arway points out, of the 260 weeks of the agreement, 145 remained. The weekly usage and unit prices were set forth in the March 10, 2008 agreement and the subsequent Price Schedule Amendment. See Price Schedule Amendment to Agreement Dated 3/10/08, Exhibit P-2, April 1, 2009. Therefore, the $648 per week amount arrived at in the formula (½ ($1296 x 145)) was neither unreasonable nor unsupported. Sullivan's claim that there was no documentation to support the weekly expenditures or the number of weeks remaining on the contract is meritless, and we therefore find no error or abuse of discretion. See Lobozzo v. Eidemiller, Inc., 263 A.2d 432, 436-37 (Pa. 1970); Kirkbride v. Lisbon Contractors, 560 A.2d 809 (Pa.Super. 1989). We do note, however, that our calculations indicate a $60.00 discrepancy in the $1296 figure, in Sullivan's favor, ½ ($1236 x 145), and therefore we remand for a recalculation. This discrepancy translates into a $618 per week amount ($618 x 145 = $89, 610) and an ultimate difference in the damages award of $4, 390 ($94, 000 - 89, 610 =$4, 390). Assuming this discrepancy is not explained, the attorney's fees award, calculated at 20% of damages, would also be altered, decreasing it from $18, 800 to $17, 922. Therefore, we affirm the verdict in favor of Arway, and we vacate the judgment and remand for recalculation in accordance with this decision.
Affirmed in part, vacated in part, and case remanded. Jurisdiction is relinquished. Judgment Entered.