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

• Citation: 507 Pa. 166,489 A.2d 733
• Parties: 2401 PENNSYLVANIA AVENUE CORPORATION, trading as 1528 Walnut Street, Appellant, v. FEDERATION OF JEWISH AGENCIES OF GREATER PHILADELPHIA, Appellee.
• Decision Date: 18 March 1985
• Court: Pennsylvania Supreme Court

Page 733

489 A.2d 733

507 Pa. 166

2401 PENNSYLVANIA AVENUE CORPORATION, trading as 1528 Walnut

Street, Appellant, v. FEDERATION OF JEWISH AGENCIES OF GREATER PHILADELPHIA, Appellee.

Supreme Court of Pennsylvania.

Argued Oct. 23, 1984.

Decided March 18, 1985.

Thomas P. Monteverde, Jean C. Hemphill, Philadelphia, for appellant.

Richard M. Squire, Susanna E. Lachs, Philadelphia, for appellee.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, HUTCHINSON, ZAPPALA and PAPADAKOS, JJ.

OPINION

NIX, Chief Justice. ^*

This appeal ¹ raises the question of whether there was an anticipatory breach of the lease agreement between the appellant owners of the building at 1528 Walnut Street (hereinafter referred to as "Walnut"), and the Federation of Jewish Agencies of Greater Philadelphia ("Federation"). At trial the Court of Common Pleas of Philadelphia County concluded that Federation had committed an anticipatory breach of its lease and entered judgment in favor of Walnut. Damages were assessed at Two Hundred Ninety-two Thousand Dollars ($292,000) plus interest.

On appeal a Superior Court panel determined that the lower court erred in its application of Pennsylvania contract law to the facts of this case. On the grounds that the evidence did not support the finding of an anticipatory breach and that the lower court had erroneously imposed on the Federation a duty to occupy the premises in addition to its obligation to pay rent, the Superior Court reversed and vacated the judgment against Federation. This Court granted Walnut's petition for allowance of appeal on February 29, 1984.

I.

In 1971, Federation decided that its headquarters was inadequate and appointed a search committee to find a new site. After a year and a half the committee recommended that Federation demolish its own building and construct a new one at its location at 1509-13 Walnut Street rather than buy an existing building at another site.

The Federation developed a plan to implement this recommendation. Under that plan Federation was to relocate for the two years during which the demolition and construction at its own location would take place. Therefore, Federation entered a lease agreement with Walnut for the rental of four floors of the building at 1528 Walnut Street.

The lease, dated November 8, 1973, provided for rental by Federation of space for a period of two years beginning May 1, 1974 and ending April 30, 1976. Attached to the lease before its execution by Federation was a letter, also dated November 8, 1973. The letter indicated that, as Federation well knew, ² part of the space referred to in the lease was then occupied by Catalytic, Inc. ("Catalytic") whose lease would not expire until August 31, 1974. Every effort was promised to be made to tender delivery to Federation as close to May 1, 1974 as possible.

Catalytic estimated that it would be able to vacate the premises some time in May of 1974. That move was delayed, however, by a sheet metal worker's strike in May, 1974, which prevented prompt completion of the Center Square building project into which Catalytic was to move. These circumstances indicated to Catalytic that not only would it be unable to vacate the premises on Walnut Street during May, 1974, but also that it would have trouble meeting the August 31st deadline. Catalytic, therefore, requested an option to extend its lease for up to ninety (90) days from the August 31, 1974, deadline. Walnut refused this request noting its obligations to lease the space to Federation.

During May and June of 1974 there was frequent correspondence between Catalytic, Walnut, Federation and those involved in the Center Square project on the subject of an extension of Catalytic's lease at 1528 Walnut Street. During that time Federation indicated its disappointment but accepted the fact that it would not be able to obtain possession until September 1, 1974. ³ In acquiescing to the delay until September 1st, Federation never agreed to any extension beyond that time even though repeatedly asked to agree.

Meanwhile, in late June Federation executives became aware of a building for sale at 226 South Sixteenth Street which would more than adequately meet Federation's needs for permanent headquarters. On July 1st that building was purchased and Federation abandoned all plans to demolish and rebuild at its old location. A newspaper account of this transaction indicated that Federation had been motivated to make this purchase by the amount of money it would save on construction costs and rental fees in the temporary location.

Subsequent to Federation's purchase of its new site, Catalytic continued to endeavor to get an extension from Walnut. Walnut repeatedly refused stating that it would not agree to the extension unless Federation approved. Federation, however, refused to give its approval claiming that it did not wish to lend any validity to the contract by agreeing to the extension.

At a meeting on August 1, 1974 Federation stated its position more specifically. Federation claimed that its lease with Walnut was invalid because Walnut had failed to deliver possession by May 1st which it claimed to be the date for delivery under the lease. Therefore Federation claimed that it could not give its approval without abandoning its claim of invalidity of the contract. Contrastingly, however, Ronald Rubin, then Assistant Treasurer of Federation, declared to Walnut agents that Federation "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." Exhibit 50, R. 796a.

On August 5, 1974, Walnut, relying on advice of counsel that Federation had anticipatorily breached the lease agreement, acquiesced to pressure by Catalytic and granted the ninety-day (90) extension on Catalytic's lease. Catalytic exercised its option to extend its lease beyond August 31st and remained in the space until October 31, 1974. ⁴

Despite Catalytic's continued tenancy Walnut sent a bill to Federation on October 24, 1974 for rent due from October 6th through the 31st. Federation refused to pay reiterating its claim that the lease was void. Walnut commenced this action in February, 1975, seeking damages alleged to have occurred as a result of Federation's breach of the lease agreement.

II.

To resolve the dispute between these two parties this Court must address two issues. The first is whether there was an anticipatory breach by Federation of its lease agreement with Walnut. Secondly, if we conclude that there was no breach by Federation we must determine whether Walnut's grant of the extension to Catalytic constituted a material breach of the lease. ⁵

In analyzing the issues presented here we note that the Court is bound by the trial judge's findings of fact unless those findings are not based on competent evidence. Conclusions of law, however, are not binding on an appellate court whose duty it is to determine whether there was a proper application of law to fact by the lower court. Lawner v. Engelbach, 433 Pa. 311, 249 A.2d 295 (1969). Our inquiry here, therefore, is limited to whether the trial court properly concluded that Federation had anticipatorily repudiated its lease and excused any subsequent performance by Walnut of its obligations under the contract.

A.

The requisite elements of an anticipatory breach were established by this Court in McClelland v. New Amsterdam Casualty Co., 322 Pa. 429, 185 A. 198 (1936). This Court, following the standards set out by the U.S. Supreme Court in Dingley v. Oler, 117 U.S. 490, 6 S.Ct. 850, 29 L.Ed. 984 (1886), stated that to constitute anticipatory breach under Pennsylvania law there must be "an absolute and unequivocal refusal to perform or a distinct and positive statement of an inability to do so." McClelland v. New Amsterdam Casualty Co., supra 322 Pa. at 433, 185 A. 198. The McClelland standard is still the rule of law in Pennsylvania. See, William B. Tanner v. WIOO, Inc., 528 F.2d 262 (3d Cir.1975); McCloskey v. Minweld Steel Co., 220 F.2d 101 (3d Cir.1955); Alabama Football, Inc. v. Greenwood, 452 F.Supp. 1191 (D.C.Pa.1978); Wolgin v. Atlas United Financial Corp., 397 F.Supp. 1003 (E.D.Pa.1975), aff'd. mem., 530 F.2d 966 (3d Cir.1976); Shafer v. A.I.T.S., Inc., 285 Pa.Super. 490, 428 A.2d 152 (1981).

The facts of this case indicate no statement or action which constituted an absolute and unequivocal refusal to perform or a distinct and positive statement of an inability to do so. There are only three instances that could arguably be interpreted as amounting to an anticipatory breach. Upon analysis, it is apparent that these instances do not meet the McClelland standard either standing alone or considered in combination.

The relevant facts as found by the trial court are as follows:

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

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

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

(d) on this same date [Federation's] ... informing [Walnut] that "the Federation 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]. ⁶

Whether viewed individually or collectively these statements are insufficient to meet McClelland's requirement of an absolute and unequivocal refusal. The July 24th statement that appellee had been advised that the lease would have no effect because of appellant's failure to deliver the space in May is insufficient because it does not provide...