United States Gypsum Co. v. Schiavo Bros., Inc., Civ. A. No. 74-3165.

• Decision Date: 15 January 1980
• Docket Number: Civ. A. No. 74-3165.
• Citation: 485 F. Supp. 46
• Parties: UNITED STATES GYPSUM CO. v. SCHIAVO BROTHERS, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

485 F. Supp. 46

UNITED STATES GYPSUM CO. v. SCHIAVO BROTHERS, INC.

Civ. A. No. 74-3165.

United States District Court, E. D. Pennsylvania.

May 22, 1979.

Memorandum January 15, 1980.

Michael M. Baylson, Duane, Morris & Heckscher, Philadelphia, Pa., for plaintiff.

John M. Elliott, Philadelphia, Pa., for defendant.

POLLAK, District Judge.

In December, 1974, United States Gypsum Co. commenced this landlord-tenant action, alleging that defendant-tenant Schiavo Brothers, Inc., failed to surrender the leasehold property on time and clear of debris. A ten-day non-jury trial was held in late 1975 and early 1976. In May, 1978, Judge Fogel ruled in defendant's favor, filing an exhaustive opinion which concluded that defendant had not breached "either an express covenant to peaceably surrender the premises or an implied covenant to return the land in substantially the same condition as existed at the inception of the lease, (reasonable wear and tear excepted)."¹ Pursuant to Rule 59 of the Federal Rules of Civil Procedure, plaintiff has moved for a new trial.²

I.

Before considering the grounds of plaintiff's motion, it will be helpful to summarize Judge Fogel's findings of facts and conclusions of law.

In January, 1963, the parties to this litigation entered into a lease agreement for a tract of land located in Southwest Philadelphia and referred to throughout the litigation as Area F. The map below shows its location.³

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Prior to 1963, Area F was leased by plaintiff to so-called "junk-car dealers" whose business it is to mine wrecked and abandoned automobiles for valuable parts. Under the January, 1963 lease, defendant assumed the role of master tenant responsible for the junk-car dealer subtenants. In August, 1963, a second lease was signed extending the leasehold property some 200 feet along Essington Avenue to a depth of approximately 100 feet. (This area is marked A' on the map.) Both 1963 leases contained a clause requiring the defendant to return the property as found, reasonable wear and tear excepted.

In 1966, plaintiff and defendant entered into a third lease, superseding and terminating the 1963 leases. The leasehold property was enlarged to encompass all of Areas A and B, parts of which were "below grade." The lease required the defendant to bring the land up to grade and authorized subletting once landfill was complete. Lease Paragraph 20 limited sublessees to persons engaged in the junk-car business.⁴ The lease also provided for termination by either party upon 120 days written notice and required surrender of the premises peaceably on termination. But unlike the 1963 leases, the 1966 lease did not contain an express clause imposing on the defendant a duty to return the property as found.

Pursuant to this agreement, defendant undertook landfill operations and sublet to additional junk-car dealers. By 1972, landfill was complete, and dealers had subleased property on Areas F, A', and A" and spread themselves without subleases onto at least some part of the remainder (the "back portion") of Area A. As they spread, the dealers left a trail of old car seats and tires — parts they found difficult to sell. In addition, the back portion of Area A attracted "fugitive dumpers" who favored it with their refuse.

In August, 1973, plaintiff gave defendant written notice of termination, effective January 1, 1974.⁵ Defendant, in turn, notified the junk-car dealers who quickly formed an association to fight eviction. Faced with this opposition, defendant acted expeditiously to remove the subtenants by instituting eviction proceedings in Philadelphia Municipal Court. At a March 4, 1974 hearing, the Municipal Court gave the dealers until June to vacate the premises. One of plaintiff's attorneys was present at the hearing; but since his client was not a party to the eviction suit, he was there in observer status and took no part.

In the meantime, plaintiff had arranged for sale of the leasehold property to Swann Oil Company with closing set for June, conditioned on the removal of all accumulated debris from the property. It was not until September, however, that the last junk-car dealer vacated the premises. And left behind was a considerable accumulation of old cushions and tires and "material from fugitive dumping, which took virtually every imaginable form, from watermelons to dead cats." 450 F.Supp. at 1301. Plaintiff claims that it spent $144,500 to remove this debris before finally closing with Swann on September 26, 1974.

On the basis of these facts, Judge Fogel ruled as follows: (1) under Pennsylvania law, the 1966 lease contained an implied duty requiring the defendant to return the leasehold premises to the plaintiff at the termination of the lease in substantially the same condition as existed at its inception, reasonable wear and tear excepted; (2) Areas F and A' were in at least as good condition, when returned to plaintiff, as they were in at the inception of the lease in 1966; (3) in Area A" (the portion of Area A leased after 1966 to the junkdealers), the debris, while substantial, was an inevitable consequence of the junkdealer business—a business expressly contemplated by the 1966 lease—and accordingly, "constituted reasonable wear and tear in the context of the junk-car industry"; (4) as to the junk-dealer debris on the remainder of Area A, which defendant did not sublease to the dealers, but onto which they spread, the debris was also reasonable wear and tear "in the context of this industry"; (5) as to fugitive dumping on the back part of Area A, the defendant was not negligent in failing to take the expensive measures required to prevent this dumping and therefore, under Pennsylvania law, was not liable for breach of its implied covenant; and (6) return of the leasehold in littered condition did not breach the defendant's express covenant to surrender the premises peaceably.

II.

A.

Two of the arguments advanced by plaintiff in support of its motion for new trial have sufficient merit to warrant post-trial relief.

1. Plaintiff contends that the Court failed to rule on two of its damage claims: (1) its claim for rent from February 1, 1974, plaintiff's intended date of termination, to September 26, 1974, when plaintiff conveyed to Swann; and (2) its claim for loss of use of purchase monies under the agreement of sale with Swann. The thrust of both claims is that defendant should be held liable for damages caused by the subtenants who remained on the property after the expiration of the lease, and who thereby prevented plaintiff from (a) completing the sale to Swann on time, or (b) otherwise putting the property to some gainful use after defendant stopped paying rent. (Although characterized as separate items of damage, it would seem analytically more useful to view the two claims as alternative ways of describing the economic loss to plaintiff allegedly occasioned by plaintiff's inability to sell or otherwise utilize its land for a period of several months.)

Defendant does not dispute that these claims were tried and were before the Court,⁶ but argues that Judge Fogel "specifically found that Defendant was not responsible for the subtenants' illegal refusal to timely vacate." My own reading of Judge Fogel's opinion yields a different conclusion. The opinion focused on the difficult question of liability for left-over debris, and not on the relatively straightforward question of liability for hold-over subtenants. As a result, while Judge Fogel did find that defendant acted expeditiously to remove its subtenants and that plaintiff's attorney did not object to the extension of time granted the dealers by the Philadelphia Municipal Court, he did not discuss whether, as a matter of law, such conduct relieved defendant of liability for damages caused by the hold-overs or estopped plaintiff from seeking such damages. Similarly, while Judge Fogel ruled that defendant did not breach the express covenant to peaceably surrender the premises, this conclusion was reached in the course of rejecting plaintiff's contention that the duty to surrender carried with it a concurrent duty to clean up the debris. Judge Fogel's opinion did not announce that defendant was free of responsibility for subtenants who remained on the premises after February, 1974.

In short, my reading of Judge Fogel's opinion does not permit me to conclude, as the Court of Appeals for the Seventh Circuit concluded in Switzer Brothers, Inc. v. Locklin, 297 F.2d 39, 45 (1961), that "the failure to enter findings with respect to these claims is tantamount to findings adverse to the claimant." Here, I conclude that the failure to enter findings on these two claims was oversight, and one which Judge Fogel would have been required to correct had he still been on the bench when plaintiff's motion was filed. As his successor, I am equally obliged to reopen the judgment, take what additional evidence may be necessary, hear argument on the law, and make findings of fact and conclusions of law in order to resolve these two claims. F.R.Civ.P. 63. Accordingly, the judgment is reopened for the purpose of adjudicating these claims.

2. Plaintiff challenges Judge Fogel's conclusion of law that reasonable wear and tear to junkyard property includes a substantial accumulation of junkyard debris. Judge Fogel wrote:

The uncontradicted evidence produced at trial established that junk car dealers were, in general, an extremely difficult group with whom to deal; that it was an arduous, if not impossible, task to keep them within the bounds of their obligations; that there was a natural expansion of debris beyond their lease boundaries; and that upon termination of a junkyard lease, the dealer rarely, if ever, cleared the property of accumulated debris beyond removing the scrap metal which could be sold. . . . We cannot ignore this evidence. When the lease was executed in 1966, both parties had had experience with junk car

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