Channel Home Centers Div. of Grace Retail Corp. v. Grossman
| Decision Date | 30 June 1986 |
| Docket Number | No. 85-1346,85-1346 |
| Citation | 795 F.2d 291 |
| Parties | CHANNEL HOME CENTERS, DIVISION OF GRACE RETAIL CORPORATION, Appellant, v. Frank GROSSMAN, Tri Star Associates, Baker Investments Corporation, Cedarbrook Associates, a Pennsylvania Limited Partnership, Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Joel C. Meredith (argued), Bruce K. Cohen, Meredith & Cohen, Philadelphia, Pa., for appellant.
C. Gary Wynkoop (argued), Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for appellees.
Sidney Ginsberg, Philadelphia, Pa., for amicus curiae Mr. Good Buys of PA, Inc.
Before WEIS, HIGGINBOTHAM, BECKER, Circuit Judges.
This diversity case presents the question whether, under Pennsylvania law, a property owner's promise to a prospective tenant, pursuant to a detailed letter of intent, to negotiate in good faith with the prospective tenant and to withdraw the lease premises from the marketplace during the negotiation, can bind the owner for a reasonable period of time where the prospective tenant has expended significant sums of money in connection with the lease negotiations and preparation and where there was evidence that the letter of intent was of significant value to the property owner. We hold that it may. We therefore vacate and reverse the district court's determination that there was no enforceable agreement, and remand the case for trial.
Appellant Channel Home Centers ("Channel"), a division of Grace Retail Corporation, operates retail home improvement stores throughout the Northeastern United States, including Philadelphia and its suburbs. Appellee Frank Grossman, a real estate broker and developer, with his sons Between November, 1984 and February, 1985, the Grossmans, through Baker, were in the process of acquiring ownership of Cedarbrook Mall ("the mall") located in Cheltenham Township, Pennsylvania, a northern suburb of Philadelphia. During these months, Baker was the equitable owner of the mall, Tri-Star was acting as the mall's leasing agent, and legal title was in Equitable Life Assurance Society. It was anticipated that, upon closing in February, 1985, Baker would become both legal and equitable owner of the mall. App. at 218a-219a, 496a. The Grossmans intended to revitalize the mall, which had fallen on hard times prior to their acquisition, through an aggressive rehabilitation and leasing program.
Bruce and Jeffrey Grossman, either owns or has a controlling interest in appellees Tri-Star Associates ("Tri-Star"), Baker Investment Corporation ("Baker"), and Cedarbrook Associates, a Pennsylvania Limited Partnership ("Cedarbrook"). 1
In the third week of November, 1984, Tri-Star wrote to Richard Perkowski, Director of Real Estate for Channel, informing him of the availability of a store location in Cedarbrook Mall which Tri-Star believed Channel would be interested in leasing. Perkowski expressed some interest, and met the Grossmans on November 28, 1984. After Perkowski was given a tour of the premises, the terms of a lease were discussed. App. at 457a, 496a. Frank Grossman testified that "we discussed various terms, and these terms were, some were loose, some were more or less terms." App. at 364a, 496a-497a.
In a memorandum dated December 7, 1984, to S. Charles Tabak, Channel's senior vice-president for general administration, Perkowski outlined the salient lease terms that he had negotiated with the Grossmans. App. at 97a. On or about the same date, Tabak and Leon Burger, President of Channel, visited the mall site with the Grossmans. They indicated that Channel desired to lease the site. App. at 413a-415a. Frank Grossman then requested that Channel execute a letter of intent that, as Grossman put it, could be shown to "other people, banks or whatever." App. at 366a-367a. Tabak testified that the Grossmans wanted to get Channel into the site because it would give the mall four "anchor" stores. App. at 414a. Apparently, Frank Grossman was anxious to get Channel's signature on a letter of intent so that it could be used to help Grossman secure financing for his purchase of the mall. App. at 366a-367a, 497a.
On December 11, 1984, in response to Grossman's request, Channel prepared, executed, and submitted a detailed letter of intent setting forth a plethora of lease terms which provided, inter alia, that
[t]o induce the Tenant [Channel] to proceed with the leasing of the Store, you [Grossman] will withdraw the Store from the rental market, and only negotiate the above described leasing transaction to completion.
Please acknowledge your intent to proceed with the leasing of the store under the above terms, conditions and understanding by signing the enclosed copy of the letter and returning it to the undersigned within ten (10) days from the date hereof.
App. at 31a. 2
Frank Grossman promptly signed the letter of intent and returned it to Channel.
App. at 499a. Grossman contends that Perkowski and Tabak also agreed orally that a draft lease be submitted within thirty (30) days. App. at 331a-332a, 365-366a. Perkowski and Tabak denied telling Grossman that a lease would be forthcoming within 30 days or any finite period of time. App. at 445a, 473a.
Thereafter, both parties initiated procedures directed toward satisfaction of lease contingencies. The letter of intent specified that execution of the lease was expressly On December 14, 1984, Channel directed the Grace legal department to prepare a lease for the premises. Channel's real estate committee approved the lease site on December 20, 1984. App. at 472a. Channel planning representatives visited the premises on December 21, 1984, to obtain measurements for architectural alterations, renovations and related construction. App. at 379a. Detailed marketing plans were developed, building plans drafted, delivery schedules were prepared and materials and equipment deemed necessary for the store were purchased. App. at 91a-96a, 99a-135a, 422a-423a, 517a-547a. The Grossmans applied to the Cheltenham Township building and zoning committee for permission to erect commercial signs for Channel and other tenants of the mall. App. at 15a.
subject to each of the following: (1) approval by Channel's parent corporation, W.R. Grace & Company ("Grace"), of the essential business terms of the lease; (2) approval by Channel of the status of title for the site; and (3) Channel's obtaining, with Frank Grossman's cooperation, all necessary permits and zoning variances for the erection of Channel's identification signs. App. at 30a; see supra note 2.
On January 11, 1985, Frank Shea, Esquire, of the Grace legal department sent to Frank Grossman two copies of a forty-one (41) page draft lease and, in a cover letter, requested copies of several documents to be used as exhibits to the lease. App. at 43a-44a. On January 16, 1985, Frank Shea received the following letter from Bruce Grossman:
Dear Mr. Shea:
As you requested, enclosed please find the following documents:
3) A site plan of the Mall, and
4) A description of the Landlord's construction.
As we discussed, we have commenced work on the Channel location at the Mall and would, therefore, appreciate your assistance in expediting the execution of the Channel lease.
I look forward to hearing from you soon.
App. at 16a. On January 21, 1985, Frank Shea received a copy of a letter from Frank Grossman to Richard Perkowski dated January 17, 1985. It provided:
At Frank Shea's request, enclosed is a site plan for the Cedarbrook Mall and also a copy of the proposed pylon sign design.
We look forward to executing the lease agreement in the very near future. If you have any questions, please feel free to call me.
Bruce Grossman called Shea on January 23, 1985 to discuss the lease. The only item Grossman could recall discussing pertained to the "use" clause in the lease, specifically whether Channel could use the site for warehouse facilities at some future point. App. at 286a-287a, 502a. Apparently, Grossman then related other areas of concern and Shea suggested that a telephone conference be arranged with all parties the following week. App. at 382a, 502a. Grossman agreed. According to Grossman, Shea was supposed to initiate the conference call; however, when the call was not forthcoming, Grossman did not attempt to reach Shea or anyone else at Channel. App. at 389a-390a. Shea understood that the Grossmans were going to discuss the lease among themselves and get back to him. App. at 448a.
On or about January 22, 1985, Stephen Erlbaum, Chairman of the Board of Mr. Good Buys of Pennsylvania, Inc. ( ), contacted Frank Grossman. Like Channel, Mr. Good Buys is a corporation engaged in the business of operating retail home improvement centers; it is a major competitor of Channel in the Philadelphia area. App. at 20a-21a. Erlbaum advised Grossman that Mr. Good Buys would be interested in leasing space at Cedarbrook Mall, and sent Grossman printed information about Mr. Good Buys. App. at 202a.
On January 24, 1985, construction representatives from Channel met at the mall site to go over building alterations and designs. App. at 287a-288a, 503a. The next day, January 25, 1985, Erlbaum and other representatives from Mr. Good Buys met with the Grossmans and toured Channel's proposed lease location. App. at 503a. When Erlbaum expressed an interest in leasing this site, lease terms were discussed. Id.
On February 6, 1985, Frank Grossman notified Channel that "negotiations terminated as of this date" due to Channel's failure to submit a signed and mutually acceptable lease for the mall site within thirty days of the December 11, 1984 letter of intent. App. at 42a. ...
To continue reading
Request your trial
-
Sodexomagic, LLC v. Drexel Univ. Sodexomagic, LLC
...A.2d 380, 385 (1995) ; see also Flight Sys., Inc. v. Elec. Data Sys. Corp. , 112 F.3d 124, 130 (3d Cir. 1997) ; Channel Home Ctrs. v. Grossman , 795 F.2d 291, 299 (3d Cir. 1986). Thus, under Pennsylvania law, a promise to renegotiate in good faith is likely not – as a category – too indeter......
-
Cambridge Capital LLC v. Ruby Has LLC
...Bennett v. Itochu Int'l, Inc. , 682 F. Supp. 2d 469, 482 (E.D. Pa. 2010) (citing Channel Home Centers, Div. of Grace Retail Corp. v. Grossman , 795 F.2d 291, 298 (3d Cir. 1986) ). Under Delaware law, language that an agreement's terms are non-binding does not alone relieve a party of an obl......
-
Peoples Mortg. Co., Inc. v. Federal Nat. Mortg. Ass'n
...an agreement is enforceable only if it is supported by consideration on both sides. Channel Home Centers, Div. of Grace Retail Corp. v. Grossman, 795 F.2d 291, 299 (3d Cir.1986) (citing Stelmack v. Glen Alden Coal Co., 339 Pa. 410, 14 A.2d 127 (1940); Cardamone v. University of Pittsburgh, ......
-
City of Rome v. Glanton
...Id. Ex. H at 41-42. This is hardly evidence that the parties resolved their disagreement on those terms. In Channel Home Centers v. Grossman, 795 F.2d 291, 298-300 (3d Cir. 1986), on which plaintiffs rely, there was an agreement to negotiate in good faith. This record contains no evidence t......
-
Making Sure Theres No Deal Until Theres A Deal
...Teachers Ins. and Annuity Ass'n of America v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987). 12 Id. 13 Channel Home Centers v. Grossman, 795 F.2d 291 (3rd Cir. 14 Id. at 300. 15 Johnson, 192 Ariz. at 473. 16 See, e.g., A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chemical ......
-
CHAPTER 2 PRELIMINARY AGREEMENTS
...Broadcasting Company v. Wilson Communications, Inc., 170 Mich.App. 812, 428 N.W.2d 784 (1988). [5] See Channel Home Centers v. Grossman, 795 F.2d 291 (3d Cir. 1986) (Preliminary Agreement to be shown to "other people, banks or whatever with a view to getting permanent financing"). [6] Rev.R......
-
CHAPTER 6 NEGOTIATING AND DRAFTING CONTRACTS FOR THE SALE OF NATURAL GAS TO END USERS
...App.—Houston [1st Dist.] 1987, writ ref'd n.r.e.). [51] Birdsong v. Welch, 181 Cal. 2d 749 (1960). [52] Channel Home Centers v. Grossman, 795 F.2d 291 (3rd Cir. 1986); Teachers Insurance and Annuity Ass'n v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987). [53] See, Uniform Commercial Code § ......
-
CHAPTER 2 BASIC CONTRACT PRINCIPLES IMPACTING EXPLORATION PROJECTS
...§ 205 cmt. a (1981). [23] .%sRestatement (Second) of Contracts%s § 205 cmt. d (1981). [24] .E.g., Channel Home Centers v. Grossman, 795 F.2d 291, 300 (3d Cir. 1986) ("the letter of intent and the circumstances surrounding its adoption both support a finding that the parties intended to be b......
-
CHAPTER 2 BASIC CONTRACT PRINCIPLES IMPACTING EXPLORATION PROJECTS
...of Contracts § 205 cmt. a (1981). [23] Restatement (Second) of Contracts § 205 cmt. d (1981). [24] E.g., Channel Home Centers v. Grossman, 795 F.2d 291, 300 (3d Cir. 1986) ("the letter of intent and the circumstances surrounding its adoption both support a finding that the parties intended ......