Opinion ID: 1971884
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Heading Rank: 4

Heading: Material Breach of Lease by Lessor

Text: This leads us to the second issue whether the lessor's granting of a lease extension to the current occupant constituted a material breach of the lease which justified the lessee's regarding the whole transaction as at an end. We answer this in the affirmative. The evidence shows that lessor failed to deliver the demised premises by September 1, 1974, the last permissible date for delivery as specified in the lease. Lessee argues that, absent an anticipatory breach by itself, this failure by lessor to tender a timely delivery constituted a material breach of the lease and excused the lessee from its rental obligation and precluded the lessor from any recovery of damages. The two questions raised are: (1) whether Clause 22 of the Lease agreement operated to relieve the lessor of its duty to deliver the premises on September 1, 1974 thereby binding the lessor to the lease; and, (2) whether lessor's grant of a three-month extension to the current occupant constituted a material breach of the lease. Clause 22 of the lease agreement states in pertinent part: In the event that the herein demised premises are not ready for Lessee's occupancy at the time herein fixed for the beginning of the term of this lease, because . . . of the failure or refusal of the occupant of the said demised premises . . . to vacate and surrender up the same . . . this lease . . . shall not be affected thereby . . . Additionally, the addendum to the lease, stating the possibility of a September 1 commencement date, stated, . . . but in no event [would the current occupant occupy the leasehold] beyond August 31, 1974, which is the expiration date of their lease. In construing a lease agreement, it is fundamental that the intention of the parties is controlling, and that intention must be ascertained from the entire instrument. Waldman v. Shoemaker, 367 Pa. 587, 80 A.2d 776 (1951); Sharp v. McKelvey, 196 Pa.Super. 138, 172 A.2d 580 (1961). We conclude, as did the trial court, that Clause 22 does not operate to relieve the lessor of its duty to tender delivery of the premises on the agreed upon date. The pertinent condition in Clause 22 (cited previously) did not occur. The continued occupancy by the current occupant was by formal agreement with lessor, not by that occupant's recalcitrance. Further, reading the lease agreement as a whole to determine the intent of the parties, it is clear that they intended September 1, 1974 as a fixed date for the tender of the leasehold. Clause 22 referred only to a delivery later than May 1 but earlier than September 1. An implied covenant of quiet enjoyment applies in regard to every lease of real property and is breached when the tenant's possession is impaired by acts of the lessor or those acting under him. Pollock v. Morelli, 245 Pa.Super. 388, 369 A.2d 458 (1976). In Easton Theatres v. Wells Fargo, 265 Pa.Super. 334, 401 A.2d 1333 (1979), appeal dismissed 498 Pa. 557, 449 A.2d 1372 (1982), this Court established the test to be applied: Whether a breach is so substantial as to justify an injured party's regarding the whole transaction as at an end is a question of degree; and must be answered by weighing the consequences in the actual custom of men in the performance of contracts similar to the one that is involved in the specific case. 4 Corbin, Contracts, § 946 (1951). See also Restatement Second of Contracts § 266 (Tent. Draft No. 8, 1973) (setting forth factors to be considered in determining whether a breach is material) . . . Ibid. 265 Pa.Super. at 344, 401 A.2d at 1338. Lessor's act of failing to tender possession of the premises by the last allowable date as fixed in the lease is the most extreme possible type of breach of the covenant of quiet enjoyment. As noted above, this failure was an express act of lessor's, chargeable to him, through his negotiating an extended lease with the occupying tenant. Thus, we concur with the trial court dicta that the lessor's three-month extension of the current lease was a material breach of the lease, discharging the lessee from its obligations under the agreement. Since we have found that lessee did not anticipatorily breach the lease contract and that lessor did materially breach, the judgment against lessee must be vacated. The lower court's order holding the Federation of Jewish Agencies liable for damages in the amount of $292,686.83, plus interest, is vacated. SPAETH, J., files a concurring statement in which BECK, J., joins. BECK, J., also joins in the majority by BROSKY, J. SPAETH, Judge, concurring: While I join Judge BROSKY's opinion, I find it unnecessary to decide whether appellant had a duty to occupy the premises, for if there were such a duty, appellant could not have breached it, since the opportunity to do so was thwarted by appellee's conduct as lessor. During the period July 25 through August 1, 1974, appellee and appellant engaged in discussions in which the appellee sought appellant's agreement to a short-term extension of the beginning of appellant's lease term so that Catalytic, the existing tenant, could remain on the premises until its new quarters were completed. In exchange, appellant sought relief from its liability under the lease. Appellant's participation in these discussions suggests that it had not repudiated any obligation under the lease. At one point in the negotiations, cancellation of the lease with a lump-sum payment by appellant was rejected by appellee. See R. 805a. In the final discussion between the parties  on August 1  appellee's agent stated that the next day he would propose additional ideas for possible compromise. R. 794a. The record contains no evidence that any such further proposals were made. Instead, on August 5 appellee acceded to Catalytic's demand for an extension of Catalytic's lease, without having obtained appellant's agreement to such an extension. As part of the extension agreement, R. 810a, Catalytic rented four additional floors from appellee for a term of two years, with three one-year renewal options. See also R. 774a. Thus appellee, by entering into the extension agreement, ended compromise negotiations with appellant. That being the case, it was impossible for appellant to repudiate any obligation it may have had under the lease to occupy the premises.