Matthew 2535 Props. v. Denithorne

MATTHEW 2535 PROPERTIES, LLC v. RICHARD E. DENITHORNE AND PRISCILLA F. DENITHORNE, Appellant

No. 285 EDA 2022

No. J-A16036-22

Superior Court of Pennsylvania

January 26, 2023

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

Appeal from the Judgment Entered March 4, 2022 In the Court of Common Pleas of Carbon County Civil Division at No(s) 18-1411

Joseph D. Seletyn, Esq.

BEFORE: McLAUGHLIN, J., McCAFFERY, J., and PELLEGRINI J.^[*]

MEMORANDUM

McCAFFERY, J.

Richard E. and Priscilla F. Denithorne (Sellers) appeal from the judgment entered against them, following a non-jury trial, in the Carbon County Court of Common Pleas, directing, with certain conditions, specific performance of the agreement of sale (Agreement) for commercial property entered into with Matthew 2535 Properties, LLC (Buyer). Sellers argue, inter alia, the trial court erred in finding they breached the Agreement. We agree and thus reverse.

I. Facts

Sellers, who are husband and wife, own the underlying commercial property (the Property), at 845 Interchange Road, Lehighton, in Carbon County. Their adult children, Vincent, Michael, and Dave, have a corporation, Denithorne Brothers, Inc. (Denithorne Brothers), which operated a restaurant, Trainer's Inn, on the Property. Additionally, there was a smaller building behind the restaurant. N.T. Non-Jury Trial, 6/2/20, at 25. Catherine Jaindl-Leuthe is the sole member of Matthew 2535 Properties LLC; for ease of discussion, we will refer to them both together generally as "Buyer." Sometime in 2017, the restaurant closed. Id. at 45.

On January 13, 2018, Sellers and Buyer entered into an agreement of sale for the Property, with an agreed-upon sale price of $400,000. Both parties agree the restaurant "needed work," and Buyer intended to spend $500,000 to $600,000 for major repairs and renovations. N.T. at 29, 32, 74.

Pertinently, the Agreement included the following risk-of-loss clause:

16. Risk of Loss/Condemnation: Seller shall bear all risk of loss until Closing, and shall deliver the Property in its current condition as of this date. Seller shall coordinate any remediation of casualty with Buyer or arrange for the provision of the funds for remediation at Closing and may leave the Property in its damaged condition if the proposed insurance settlement is acceptable to Buyer. The parties shall cooperate and coordinate any remediation or assignment of proceeds to achieve the desired result of the Buyer without added cost to Seller....

Agreement of Sale, 1/13/18, at 7 (emphasis added). The Agreement also stated, with regard to default:

20. Default: . . . Seller acknowledges that the remedies to Buyer and Seller are different, since Buyer is investing substantial time and effort and funds of the intended investigation, design and other work contemplated herein. If Seller shall default, then Buyer or its assign, shall be entitled to a return of the Deposit paid and may file a lis pendens and seek Specific Performance.

Id. at 8.

The Agreement further provided the following: closing was scheduled for April 30, 2018, but Buyer had the option to extend closing, twice, for 30 days. Additionally, closing was contingent upon the closing of two separate sale agreements, between Ms. Jaindl-Leuthe's second company, Good Spirits 845, LLC (Good Spirits), and: (1) Sellers for the contents of the restaurant, including equipment and inventory, for $35,000; and (2) Denithorne Brothers, for the restaurant's liquor license for $15,000. See Agreement of Sale at 5; N.T. at 13. Accordingly, both Buyer and Sellers considered the "entire transaction" to be worth $450,000. Id. at 13, 50, 61.

On March 17, 2018, two months after the execution of the Agreement, the restaurant was destroyed by a fire. The first floor "was smashed into the cellar." N.T. at 16. The parties stipulated the cause of the fire was not determined. Id. at 3. Sellers did not carry insurance on the Property, although non-party Denithorne Brothers did. Despite Buyer's desire to proceed to closing with remediation of the Property, Sellers did not attend the closing.

II. Non-Jury Trial &Verdict

On July 6, 2018, Buyer filed the underlying complaint, seeking specific performance of the Agreement and, in the alternative, averring breach of contract. This matter proceeded to a non-jury trial on June 2, 2020.

Ms. Jaindl-Leuthe testified to the following. She believed that under the "risk of loss" paragraph of the Agreement, Sellers would either purchase insurance or be self-insured. N.T. at 27-28. After the fire, she "attempt[ed] to continue forward toward closing," and believed Sellers would contact her to work out either remediation of the Property or transferring the Property with funds to "take the [P]roperty back to" its prior condition. Id. at 16, 18.

Buyer's attorney "made several contacts" to Sellers' attorney, but received no response. Id. at 18, 28-29. Buyer also exercised the two options to extend the time for closing. Id. at 14. Meanwhile, two weeks after the fire, Denithorne Brothers notified Buyer it was canceling the transfer of the liquor license.^[1] Id. at 21.

Finally, Buyer's attorney sent a letter to Sellers, requesting they proceed to closing on June 29, 2018. N.T. at 19. This letter stated that because Buyer had not received requested information about insurance proceeds, it would place the amount of the sale price in escrow. Id. at 38. Buyer also waived some "pre-conditions to the closing," including receipt of the liquor license. Id. at 19. However, Sellers did not attend the closing. Id. The relief that Buyer desired was the transfer of the Property, with either Sellers' funds to remediate the Property or "insurance proceeds" assigned to her, in exchange for the sale price of $400,000.^[2] Id. at 42-43.

Buyer next called Sellers Richard and Priscilla as if on crossexamination. Priscilla testified to the following: Richard worked at a steel company for 43 years, and she also worked there for seven or eight years, before going to work at the restaurant "one or two days." N.T. at 65. However, she "never got a paycheck from the restaurant and didn't want one." Id. Instead, Sellers helped their sons by getting "them started without debt[.]" Id. at 64. Their son Dave paid all the operating expenses of the restaurant. Id. at 73.

As stated above, Sellers did not maintain insurance on the Property. N.T. at 54. However, after the restaurant closed in 2017, they paid the insurance premiums for the policy held by Denithorne Brothers.^[3] N.T. at 46, 64. Sellers insisted those insurance proceeds would go to Denithorne Brothers, not Sellers. Id. at 55, 64. Richard also stated that the original total sale proceeds of the transactions, $450,000, would have gone to their sons, not Sellers. Id. at 55. Richard expected that presently, Buyer should pay the contacted her about buying a nearby property she owned, it "was looking to [build] a hospital in the Lehighton area." N.T. at 34-36. Priscilla testified she and Richard did not know about these hospital's plans. Id. at 63. Sellers argued that Buyer's having this information was relevant, as the presence of a hospital would increase the value of the Property. Id. at 35. However, on appeal, Sellers do not present any argument concerning the hospital. original total amount of $450,000 and in exchange, receive the Property in its current condition.^[4] Id. at 58.

On July 9, 2021, the trial court entered the underlying judgment in favor of Buyer and ordered specific performance of the Agreement. The court directed Sellers to transfer the Property to Buyer for $400,000, "minus the amount of insurance proceeds paid to Denithorne Brothers . . . for the loss of the restaurant structure, excluding therefrom any amount paid for the loss of equipment and inventory contained within the structure." Verdict, 7/9/21, at 17.^[5] Pertinently, the trial court found: (1) the Agreement required Sellers to deliver the Property in its condition as of the date the Agreement was made; and (2) Sellers' failure to do so was a breach of the Agreement. Memo. Op., 7/9/21, at 11-12.

Sellers filed a timely post-trial motion, which was denied on December 23, 2021, and judgment was entered in favor of Buyer on March 4, 2022. Sellers took a timely appeal and complied with the trial court's order to file a Pa.R.A.P. 1925(b) statement of errors complained of on appeal.

III. Statement of Questions Involved

Sellers present the following issues for our review:

A. Whether the lower court erred in determining that Sellers breached the Agreement of Sale where the Agreement provided that in the event of a loss, the Sellers were only obligated to coordinate remediation if they could do so without added cost to themselves?

B. Whether the lower court erred in determining that Sellers breached the Agreement of Sale where the Agreement provided that settlement was to occur on or before June 30, 2018, but Buyers refused to proceed with the sale on or before that date?

C. Whether the lower court erred in granting specific performance where the order led to an inequitable result and failed to properly assess the value of the Property?

D. Alternatively, whether the lower court erred in valuing the Property as the purchase price less "the amount of insurance proceeds paid to Denithorne Brothers, Inc. for the total loss of the restaurant structure, excluding therefrom any sum paid by the insurance company for the loss of personal property contained within the restaurant" where the only evidence submitted at trial was that the Property's post-fire value was $375,000?

Sellers' Brief at 1138-39 (citation omitted).

IV. Standard of Review &Relevant Law

Preliminarily we consider the relevant standard of review and guiding principles in...