2401 Pennsylvania Ave. Corp. v. Federation of Jewish Agencies of Greater Philadelphia

• Citation: 2401 Pennsylvania Ave. Corp. v. Federation of Jewish Agencies of Greater Philadelphia, 466 A.2d 132, 319 Pa.Super. 228 (Pa. Super. Ct. 1983)
• Decision Date: 19 August 1983
• Court: Pennsylvania Superior Court
• Parties: 2401 PENNSYLVANIA AVENUE CORP. t/a 1528 Walnut Street Company v. FEDERATION OF JEWISH AGENCIES OF GREATER PHILADELPHIA, Appellant.

Page 132

466 A.2d 132

319 Pa.Super. 228

2401 PENNSYLVANIA AVENUE CORP. t/a 1528 Walnut Street Company v. FEDERATION OF JEWISH AGENCIES OF GREATER PHILADELPHIA, Appellant.

Superior Court of Pennsylvania.

Argued Feb. 23, 1982.

Filed Aug. 19, 1983.

Reargument Denied Oct. 25, 1983.

Richard M. Squire, Philadelphia, for appellant.

Tom P. Monteverde, Philadelphia, for appellee.

Before SPAETH, BROSKY and BECK, JJ.

BROSKY, Judge:

Lessee/appellant appeals here from the dismissal of its exceptions and from judgment against it for $292,686.83 in rent. Following a bench trial, the Court of Common Pleas held that lessee had anticipatorily repudiated his lease and was liable to the lessor/appellee for the rent due. This court finds that lessee did not, as a matter of law, anticipatorily breach the contract. Further, this court finds that it was the lessor who materially breached the lease by not tendering a timely delivery of the leasehold to the lessee. Therefore, the lessee is relieved of any liability under the lease and the judgment is vacated.

This case involves an action for breach of contract. The contract being a lease agreement duly entered into by the appellee, 2401 Pennsylvania Avenue Corporation (hereinafter lessor), and the appellant, Federation of Jewish Agencies of Greater Philadelphia (hereinafter lessee). The validity of the contract per se is not at issue. Rather, the primary issue is whether or not the lessee anticipatorily breached the contract prior to the time for performance--thus relieving the lessor of its obligations under the lease. The court below found that the tenant had anticipatorily breached the contract and had relieved the landlord of the duty to deliver the premises on the agreed upon date. As this Court finds, to the contrary, that the lessee did not anticipatorily breach the lease contract, the second issue is whether the lessor breached the lease by failing to tender a timely delivery of the leased premises. On this issue, the court below further found that if the tenant had not anticipatorily breached, the landlord's actions would constitute a material breach of the contract and would thus relieve the tenant of any liability under the contract. We agree with this dicta and make it the basis for our resolution of the second issue.

The appellant/lessee raises four questions on appeal. They are: (1) Whether the lower court erred as a matter of law in finding that the lessee had anticipatorily breached its lease with the lessor. The lessee contends that the evidence fails to support a finding that lessee would not or could not perform its sole affirmative obligation under the lease--the obligation to pay rent--if the lessor had tendered possession of the demised premises by the date upon which such possession was due. (2) Whether the lower court erred as a matter of law in awarding damages to the lessor when the lessee's obligation under the lease was excused by the lessor's unjustified breach of the lease agreement. (3) Whether the lower court erred as a matter of law in awarding damages to the lessor when the plaintiff failed to properly exercise its duty to mitigate damages. (4) Assuming that the plaintiff was entitled to damages, whether the lower court's calculations of damages was erroneous. In this opinion, we need only reach the first two issues raised by appellant/lessee. We find that the lessee's actions do not support a finding of anticipatory breach and that the lessor's actions constituted a material breach of the lease agreement between the two parties. We reverse and vacate the judgment.

Facts

In November of 1973, the lessee negotiated a lease with the lessor, owner of an office building at 1528 Walnut Street, Philadelphia. The lease, dated November 8, 1973, provided for a basic term of two years lasting from May 1, 1974 to April 20, 1976. An addendum to the lease reads, in pertinent part:

As you understand, the premises being demised are now occupied by Catalytic, Inc. whose lease expires August 31, 1974. They have indicated to us and we have advised you accordingly, that they will make every possible effort to give Federation possession as close to May 1st, as possible.

If, however, they are unable to move into their new quarters, it may be necessary for them to remain beyond May 1, 1974, on these floors, but in no event beyond August 31, 1974, which is the expiration date of their lease.

The parties do not contest that September 1, 1974 is the date on which each party's obligations under the lease commenced.

From May through August of 1974, the lessor sought an agreement from the lessee waiving its right to occupy on September 1 in the event that the current occupants would be unable to vacate by August 31. The lessee consistently refused to grant the requested extension.

During July, 1974, the lessee negotiated the purchase of an office building, thus obviating its need to occupy the leased office space.

Due to delays in the preparation of its intended new facilities, the occupying tenant requested that the lessor grant it a three-month extension beyond the August 31 termination of its lease. Without receiving a waiver from the lessee, on August 5, 1974 the lessor entered into a formal extension agreement with the current occupant for three months commencing September 1, 1974.

The demised property was not tendered by the lessor to the lessee on May 1 nor on September 1. In fact, three floors of the building were not tendered until October 6, 1974 and the fourth floor was tendered at the end of October, 1974.

The court below held that the lessee had anticipatorily repudiated the lease. In so holding, the court concluded that the following declarations of the lessee prior to the week ending August 1, 1974, constituted "an absolute and unequivocal refusal to perform [on the contract] or a distinct and positive statement of inability to do so":

(a) On July 24, 1974 [lessee's] statement that "he was advised that the lease would have no effect because of an inability of Lessor to give possession in May as called for in the lease;"

(b) an inconclusive meeting with [lessee] on July 30, 1974, followed by

(c) a meeting with [lessee] on August 1, 1974, at which time [lessee] declined to grant an extension because "they were being advised by their attorney's [sic] that any extension given by Federation would in essence acknowledge the validity of the lease," and

(d) on this same date [lessee] informing [lessor] that "the [lessee] did not want to occupy [the four floors], had no use for it, and would not consider any type of extension without a release of liability from the lease.

(Emphasis in original.)

Further, the trial court's Finding of Fact number nine is relevant here. It states, "Up to and including August 31, 1974, Federation [lessee] did not expressly state to Walnut Street Co. [lessor] that the former would not pay rental for the four floors, nor was a demand made therefor by Walnut Street Co." (Emphasis added.)

Scope of Review

It is well settled that the findings of the trial judge sitting as a trier of fact will not be disturbed unless there is a determination that those findings are not based upon competent evidence. His Conclusions of Law will also not be disturbed unless the trial judge based his decisions on an erroneous application of the law. Courts v. Campbell, 245 Pa.Super. 326, 369 A.2d 425 (1976); Taylor v. Township of Wilkins, 60 Pa.Cmwlth. 65, 430 A.2d 1014 (1981).

In this appeal, the lessee contends that the facts relied on by the trial court cannot justify the conclusion that an anticipatory breach occurred. Since the lessee challenges only the application of the facts to the law, we must determine whether the facts as given can, as a matter of law, justify the legal conclusions that the trial court drew from them.

Anticipatory Breach

The first question raised is whether the preceding set of facts is sufficient, as a matter of law, to support the finding of an anticipatory breach of the lease by the lessee.

We begin with the observation that leases are in the nature of contracts and are thus controlled by principles of contract law. Cusamano v. DiLucia, 281 Pa.Super. 8, 421 A.2d 1120 (1980); Pugh v. Holmes, 253 Pa.Super. 76, 384 A.2d 1234 (1978), aff'd. as modified, 486 Pa. 272, 405 A.2d 897 (1979).

Under the law of Pennsylvania, conduct which constitutes an anticipatory repudiation of a contract is set forth in McClelland v. Amsterdam Casualty Company, 322 Pa. 429, at 433, 185 A. 198 at 200 (1938). McClelland states: "In order to give rise to a renunciation amounting to a breach of contract, there must be an absolute and unequivocal refusal to perform or a distinct and positive statement of an inability to do so."

The theory of anticipatory breach is further explained in McAlpine v. Aamco Automatic Transmission, Inc., 461 F.Supp. 1232 at 1253 (E.D.Mich., 1978):

Pennsylvania law is well-settled that more than a threat of non-performance is needed before conduct can amount to an anticipatory breach of contract. The conduct must manifest an absolute and unequivocal refusal to perform. Pennsylvania Law Encyclopedia, Vol. 8, § 365, at 414; McCloskey & Co. v. Minweld Steel Co., 220 F.2d 101 (3d Cir.1955); McClelland v. New Amsterdam Casualty Co., 322 Pa. 429, 185 A. 198 (1936).

There are three theories upon which the trial court may have relied to support its finding that the lessee anticipatorily repudiated the lease. The first is that the lessee breached the contract by disavowing the existence of the contract or all liability under it. The second theory is that the lessee breached a duty, implied-in-law, to occupy the leased premises. The third theory is that the lessee breached a duty, based on the contract, to occupy the leased premises. Upon close scrutiny, none of these theories are supported by the facts as found by the trial court.

Pursuant to the first theory, the trial court relied on William B. Tanner Co., Inc....