Sears, Roebuck & Co. v. 69th St. Retail Mall, L.P.

• Decision Date: 02 October 2015
• Docket Number: Nos. 2359 EDA 2014,s. 2359 EDA 2014
• Citation: 126 A.3d 959
• Parties: SEARS, ROEBUCK & CO., Appellee v. 69TH STREET RETAIL MALL, L.P., 69th Street Retail Owner, L.P., 69th Street GP, LLC, 69th Street GP II, LLC, AAC Management Corp., and Ashkenazy Acquisition Corp., Appellants. Sears, Roebuck & Co., Appellant v. 69th Street Retail Mall, L.P., 69th Street Retail Owner, L.P., 69th Street GP, LLC, 69TH Street GP II, LLC, AAC Management Corp., and Ashkenazy Acquisition Corp., Appellees.
• Court: Pennsylvania Superior Court

126 A.3d 959

SEARS, ROEBUCK & CO., Appellee

v.69TH STREET RETAIL MALL, L.P., 69th Street Retail Owner, L.P., 69th Street GP, LLC, 69th Street GP II, LLC, AAC Management Corp., and Ashkenazy Acquisition Corp., Appellants.

Sears, Roebuck & Co., Appellant

v.69th Street Retail Mall, L.P., 69th Street Retail Owner, L.P., 69th Street GP, LLC, 69TH Street GP II, LLC, AAC Management Corp., and Ashkenazy Acquisition Corp., Appellees.

Nos. 2359 EDA 2014

Superior Court of Pennsylvania.

Argued April 8, 2015.

Filed Oct. 2, 2015.

Joseph C. Crawford, Philadelphia, for 69th Street Retail Mall, et al.

Joseph S. D'Amico, Jr., Center Valley, for Sears, Roebuck & Co.

BEFORE: FORD ELLIOTT, P.J.E., OLSON, J., and WECHT, J.

OPINION BY WECHT, J.:

In this case, Sears, appellee and cross-appellant before this Court, sued the above-captioned appellants, who are also the cross-appellees in this matter, alleging, inter alia, that the appellants had constructively evicted Sears from a building that Appellant entities variously owned, marketed, and maintained. Sears' claim was based upon a years-long history of Appellants' alleged failure to maintain the interior and exterior of the building occupied by Sears, as well as the parking garage that serviced the building, in violation of Appellants' obligations under the parties' lease agreement ("the Lease"). Sears alleged that these necessitated Sears' extensive and ongoing self-help and adversely impacted their business to such an extent that it effectively forced them to abandon the property. The jury found in Sears' favor, entitling Sears to withhold all rent obligations remaining on the Lease at the time of their abandonment. As well, the jury awarded Sears damages for intentional interference with contractual relations.

Appellants, which all are related to each other and were formed to administer the property at issue ("the Premises"), appeal the trial court's refusal to enter judgment in their favor notwithstanding the jury's verdict (hereinafter "JNOV"). They maintain that Sears failed to present evidence sufficient to satisfy the stringent standard governing claims for constructive eviction. They also dispute the jury's award of damages for intentional interference with contractual relations. In its cross-appeal, Sears argues that the trial court erred in denying it the opportunity to submit its punitive damage claim to the jury. After careful review, we must vacate the judgment. However, we do so for only one narrow purpose—to allow Sears the opportunity to try its claim for punitive damages, which we find that the trial court improperly declined to submit to the jury. In so doing, we deny all of Appellants' issues on appeal.

Before we may address the factual underpinnings of, or the issues raised in, this case, it is necessary to review the parties and their complex interrelationships. Sears is simply the tenant in this matter; the complications arise thanks to the intertwined corporate entities named as defendants in this litigation, whose relationships must be understood to grasp the arguments presented in this case.

• Monarch, Inc. ("Monarch"), was the original lessee with Sears. Monarch's entire interest in the Premises later was acquired by the entities with "69th Street" in their names.

• 69th Street Retail Mall, L.P.; 69th Street Retail Owner, L.P.; 69th Street GP, LLC; and 69th Street GP II, LLC, who collectively purchased the relevant assets from Monarch and served as assignees of the Lease. These entities are collectively identified throughout this Opinion as the "Landlord."

• Ashkenazy Acquisition Corp. (hereinafter, "Ashkenazy"¹ ) served as the Landlord's leasing and development agent.

• AAC Management Corp. was the property manager (hereinafter, "AAC"). AAC eventually was dismissed as a party from this litigation.

When possible, we refer to these parties collectively as Appellants as a mere convenience, recognizing that not in all instances are all captioned Appellants actually involved in the question under examination. However, in certain instances we must refer to the non-Landlord parties individually, and we do so according to the above conventions.

The trial court has provided the following account of the factual and procedural history of this case:

[O]n May 28, 2013, [Sears] filed an Amended Complaint which contained the following three (3) counts requesting relief: 1) breach of the [L]ease/covenant of quiet enjoyment by [the Landlord] (Count I); 2) constructive eviction of Sears by [the Landlord] (Count II); and 3) intentional interference with the [L]ease contract between Sears and [the Landlord] by AAC (later removed as a party) and Ashkenazy (Count III). Sears sought compensatory and punitive damages for the alleged intentional interference....² [The Landlord] and Ashkenazy ..., by Counterclaim for breach of contract, sought to have Sears pay the accelerated balance of all rent due through August 16, 2018.

Trial was conducted on March 17, 2014 through March 25, 2014.

* * * * * *

Sears averred, in its Amended Complaint, that, pursuant to [the Lease,] dated April 19, 1988, [Sears] commenced operating a department store at the [P]remises.... On August 2, 2007, Sears invoked its right to extend [the L]ease for an additional ten (10)[-]year period until August 16, 2018 pursuant to the [Lease's] terms. Sears was to initially conduct business on the first two (2) floors of the building, an area consisting of approximately [133,373] square feet with options to occupy additional spaces. The [Premises] also included common areas that contained a [four-level] parking deck and [a] surface parking lot....

An entity known as Monarch Inc. was the original landlord. On or about June 23, 2005, Monarch assigned its contractual rights under the [L]ease to [the Landlord]. Sears alleged ... that after it declined a February 2006 offer from [the Landlord] to consider a buyout of the [L]ease, that the maintenance and attention to the property was insufficient to maintain the building as provided for in the [Lease]. Sears alleged [L]andlord default in deficient lighting and electric systems in the parking deck, deteriorated structural aspects of the parking deck, water and sewer leaks, sewage backup inside the department store, deterioration of the store façade, and failure to maintain, clean and landscape the [Premises] pursuant to the [Lease].

Sears issued a series of notices of default to the [L]andlord commencing on May 1, 2009 to provide notice of intent to perform self-help remedies pursuant to the [Lease]. Sears was told by [AAC] not to self-remedy and told by [the L]andlord's lawyers that they would be in default if they resorted to self-help. Sears averred that during the ensuing three (3) years, repeated commitments to make repairs were never fulfilled by [the Landlord]. Sears claimed that Ashkenazy, through AAC, its property managers, and its own leasing agents, desired to force Sears out of the [Premises] due to their attempt to secure other tenants for the space and their failed attempts to buy Sears out of the balance of the [Lease]. [The Landlord] countered that the alleged conditions in the parking areas and store did not prevent or deprive Sears of operating its business on a day to day basis up through May of 2012. [The Landlord] countered that Sears is obligated to pay the balance of the [Lease] and that the closing of the Sears store ... was due to the nationwide economic downturn of the Sears Corporation. Specifically, Sears announced in December of 2011 its closing of approximately one hundred fifty-seven (157) stores nationwide, which included the [P]remises.

At the close of [Sears' case, AAC] was removed as a party by stipulation. After the close of the record evidence, [the trial court] granted [Appellants'] Motion for a Directed Verdict as to punitive damages....

The jury found that [the Landlord] breached the [Lease] by constructively evicting Sears[,] thereby suspending Sear[s'] obligation to pay rent. The jury further found that Ashkenazy ... was not an agent of [the Landlord] acting within the scope of its authority and that Ashkenazy intentionally interfered with the [Lease] between [Landlord] and Sears. The jury awarded $66,119.30 as compensatory damages as a result of the intentional interference with contractual relations.

Trial Court Opinion ("T.C.O."), 11/13/2014, at 2–7 (record citations omitted).

Appellants raise the following issues on appeal:

1. When the [Lease] explicitly obligated [Sears] to continue to pay rent even if the Landlord breached its repair and maintenance duties under the Lease, did the trial court err by failing to enter judgment as a matter of law in favor of the Landlord on its counterclaim for unpaid rent and on [Sears'] constructive eviction claim when [Sears] failed to introduce any evidence of substantial interference by the Landlord with [Sears'] possession of the Premises, and [Sears] at all times used the Premises as a full-line Sears department store as the Lease contemplated?

2. Did the trial court err by failing to enter judgment as a matter of law in favor of [Ashkenazy] on [Sears'] claim for tortious interference with contract (i.e., the Lease) when the undisputed evidence showed that the Landlord was a single-purpose corporate entity that had no employees and acted solely through its leasing and management agents[, respectively Ashkenazy and AAC,], and [Sears] did not introduce any evidence to prove that [Ashkenazy] acted outside the scope of its agency?

3. Did the trial court err by failing to grant the Landlord's motion for a new trial on [Sears'] constructive eviction claim and the Landlord's counterclaim for unpaid rent, when: (a) the [c]ourt incorrectly instructed the jury that it could find a constructive eviction based on nothing more than a substantial decrease in the "utility" of the Premises; and (b) the jury's verdict was against the overwhelming weight of the evidence?

Brief for Appellants at 3–4. In its cross-appeal, Sears...