Newman Dev. Grp. of Pottstown, LLC v. Genuardi's Family Mkt., Inc.

98 A.3d 645

2014 PA Super 173

NEWMAN DEVELOPMENT GROUP OF POTTSTOWN, LLC, Appellee

v.GENUARDI'S FAMILY MARKET, INC., and Safeway, Inc., Appellants.

Superior Court of Pennsylvania.

Argued April 23, 2014.

Filed Aug. 19, 2014.

Robert L. Byer, Pittsburgh, for appellants.

Thomas A. Riley, Jr., Exton and Jeanette N. Simone, Binghampton, NY, for appellee.

BEFORE: GANTMAN, P.J., FORD ELLIOTT, P.J.E., BENDER, P.J.E., PANELLA, DONOHUE, ALLEN, LAZARUS, MUNDY and OTT, JJ.

OPINION BY DONOHUE, J.:

Genuardi's Family Market, Inc. (“Genuardi's”) and Safeway, Inc. (“Safeway”) (collectively, “Tenant”) appeal from the March 1, 2010 order filed by the Court of Common Pleas, Chester County, following a bench trial in this breach of contract action initiated by Newman Development Group of Pottstown, LLC (“Landlord”). After careful review, we affirm the trial court's decision not to reduce the damages awarded to Landlord to present value,¹ its determination as to the amount of damages to deduct as mitigation, and its grant of contractual interest on the damages beginning on February 13, 2002. Nonetheless, we must vacate the verdict and remand, as the trial court erred by including claimed reletting expenses in the award and by awarding interest on Landlord's attorneys' fees, costs and expenses prior to the court's verdict. Our reasoning follows.

We previously summarized the facts and procedural history of this case when deciding a prior appeal:

This appeal arises from [Tenant's] termination of a lease agreement to take possession of and operate a proposed grocery store, which was to be built in a shopping center, to be known as the ‘Town Square Plaza,’ which [Landlord] was developing in Chester County, Pennsylvania. [Landlord], in 1996, had identified the potential site for commercial development and executed several agreements of sale to acquire the land. At that time, the land was not zoned for commercial uses, and [Landlord] conditioned its obligations to close upon the sales agreements on its ability to obtain approval to construct the shopping center.

Negotiations between [Landlord] and Genuardi's, Safeway's predecessor in interest, began in 1998, and the parties drafted a written lease agreement to govern the construction and occupancy of a grocery store in the as-yet-unbuilt shopping center. Section 6.4 of the lease agreement provided, in relevant part:

Completion Date. If building permits for the Tenant Building shall not have been issued by January 1, 2001, if the footings and foundations of the Tenant's Building shall not have been completed and the structural steel erected on or before May 1, 2001, or if the Delivery Date shall not have occurred on or before September 1, 2001, ... Tenant shall have the right, at its option, in any such event, to (i) extend from time to time a Completion Date; or, (ii) upon notice to Landlord and Landlord's failure to comply within an addition[al] thirty (30) day period to terminate this Lease whereupon this Lease and the term hereof shall immediately cease and expire....

Lease Agreement, § 6.4.

Continued negotiations between [Landlord] and Genuardi's revealed the parties' shared concerns that [Landlord] would not be able to meet the deadlines set forth in section 6.4 of the draft lease, and that [Landlord] had yet to enter into a lease with a retail store as a co-anchor. Genuardi's['] counsel, in a letter dated March 31, 2000, proposed a plan to execute a long-term lease and place the lease into ‘escrow.’ That proposal read in relevant part:

In accordance with our mutual understanding, the five (5) fully executed copies [of the lease] will be held in escrow by [Genuardi's] pending [Landlord] entering into a fully binding lease agreement or agreement of sale with either Target or Lowe's Home Center to build and operate a store as the anchor tenant located in the shopping center. At such time as the aforementioned lease or agreement of sale is verified, the lease agreements will be released and [Genuardi's] will mail two (2) fully executed copies to your attention. In the event that the aforesaid lease agreement or agreement of sale are not entered into within the six months period beginning April 1, 2000, [Genuardi's] reserves the right to terminate the lease agreements upon written notice to [Landlord] and all the fully executed lease agreements being destroyed.

I also wish to clarify that [Landlord's] right to delay commencement of [Landlord's] Work until the cotenancy requirements have been met by [Landlord], do [sic] not in any way negate [Landlord's] obligation to perform as required under section 6.4 of the Lease in regard to [Landlord's] completion dates and [Genuardi's] rights under the lease.

Letter from Robert C. Fernandez to Howard M. Rittberg, March 31, 2000 (emphasis supplied).

Representatives of [Landlord] and Genuardi's thereafter signed the lease agreement on April 4, and April 14, 2000, respectively. Counsel for [Landlord], in a letter dated April 25, 2000, addressed to Genuardi's, memorialized the terms of the escrow arrangement when he wrote:

Five copies of the Lease have been executed by [Landlord] and are delivered to you for execution by [Genuardi's] to be held in Escrow pursuant to the terms of your letter of March 31, 2000 as amended by this letter....

* * *

The Lease will be held in Escrow pursuant to the terms of your letter with the additional condition that either party, i.e. [Landlord] or [Genuardi's] may terminate the Lease, if the condition set forth in your letter regarding the Sale or Lease to Target or Lowe's Home Centers is not satisfied within one (1) year from the date of the closing of the Sale of the Shopping Center property to Landlord. In the event of a delay in the closing which affects the construction schedule, the parties agree to discuss amending the completion dates set forth in the Lease to reflect a reasonable schedule.

Letter from Howard M. Rittberg to Robert C. Fernandez, April 25, 2000 (emphasis supplied).

Counsel for Genuardi's then responded with the letter dated May 2, 2000, which read as follows:

Response is made to your letter of April 25, 2000 regarding the above captioned lease agreement between our respective clients. Enclosed are copies of the signature pages to the lease agreement indicating that they have been executed on behalf of [Genuardi's] and will be held in escrow in accordance with my letter of March 31, 2000 and your amending letter of April 25, 2000. I am holding five (5) fully executed copies of the lease agreement in escrow pursuant thereto.

Letter from Robert C. Fernandez to Howard M. Rittberg, May 2, 2000 (emphasis supplied).

Representatives of Genuardi's, in December of 2000, informed [Landlord] of its pending acquisition by Safeway. That acquisition was completed in February of 2001, and all parties agreed to an assignment of the lease agreement to Safeway. At that time, representatives for Safeway and [Landlord] also met to discuss the Town Square Plaza project. As a result of this meeting, [Landlord] mailed a proposed timeline to Safeway indicating, inter alia, that it was not expecting final approval of the development plan until March of 2002. Nonetheless, throughout 2001, the parties continued to communicate regarding Safeway's presence in the shopping center, as well as the structural details of the planned grocery store. Moreover, Safeway, in a letter dated October 16, 2001, proposed the construction of a larger store while maintaining the same total rent as provided for under the lease agreement, a request that was motivated by the fact that a competitor had recently opened in a nearby shopping center. [Landlord] replied that it could redesign the footprint of the grocery store, but would impose an additional charge for the additional space sought by Safeway at the per-square-foot rental rate set forth in the lease agreement.

Nearly four months later, Safeway, by letter dated February 13, 2002, informed [Landlord] that it was terminating the lease agreement due to [Landlord's] failure to meet the deadlines set forth in section 6.4 of the lease agreement. [Landlord] responded by letter dated February 14, 2002, in which it reminded Safeway of the arrangement to hold the lease in escrow, and stated that it would not accept termination. Safeway, however, maintained that it had a right to terminate under the lease agreement. Consequently, on March 20, 2002, [Landlord] filed a complaint against [Tenant] alleging, inter alia, an anticipatory breach of the lease agreement.

After commencing its action against [Tenant], [Landlord] sought replacement tenants, and eventually obtained commitments from PetSmart and [Michaels] (hereinafter the ‘substitute tenants') to occupy the area previously reserved for Safeway. [Landlord] thereafter obtained zoning approval and permits for the construction of the shopping center. In March of 2004, [Landlord] closed upon the agreements for the sales of the land underlying the shopping center, and consummated a lease with Lowe's Home Center. Three months later, in June of 2005, [Landlord] entered into an agreement of sale with Inland Real Estate Acquisitions ( [’]Inland['] ) for the sale of the shopping center.

On October 3, 2005, [Landlord's] action against [Tenant] proceeded to a nonjury trial, which encompassed ten days of testimony taken from October of 2005, to January of 2006. During trial, [Landlord] began receiving rent payments from its substitute tenants for December of 2005, and, on December 28, 2005, [Landlord] closed on its agreement to sell the shopping center to Inland. The trial judge, on September 6, 2006, rendered a verdict in which he found that [Tenant] had breached the lease agreement and entered an award in favor of [Landlord] in the amount of $131,277.00. Both parties filed post [-]trial motions, and the trial court, on December 19, 2006, granted [Landlord's] motion in part, increased the amount awarded to [Landlord] to $316,889.92, and...