Court Opinion

ID: 9951321
Source: CourtListenerOpinion
Date Created: 2024-03-15 19:13:11.330761+00
Date Added: 2024-06-11T14:38:30.123078
License: Public Domain

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                                   2024 PA Super 47

  MATTHEW 2535 PROPERTIES, LLC                 :   IN THE SUPERIOR COURT OF
                                               :        PENNSYLVANIA
                v.                             :
                                               :
  RICHARD E. DENITHORNE AND                    :
  PRISCILLA F. DENITHORNE                      :
                                               :
                       Appellants              :   No. 285 EDA 2022

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

BEFORE: PANELLA, P.J., LAZARUS, J., STABILE, J., DUBOW, J.,
        KUNSELMAN, J., NICHOLS, J., MURRAY, J., McLAUGHLIN, J., and
        KING, J.

OPINION BY KUNSELMAN, J.:                               FILED MARCH 15, 2024

                                  I.     Introduction

       This case involves the sale of a restaurant which burned down after the

parties signed a sales agreement but before they closed on the deal. A court

of equity ordered specific performance1 – namely, that the owners of the now-

vacant land, Richard and Priscilla Denithorne (Sellers), transfer legal title to

Matthew 2535 Properties, LLC (Buyer). The court directed Buyer to pay the

purchase price of $400,000, minus the value of insurance proceeds that a

third party received following the fire. On appeal, Sellers challenge the finding

that they breached the sales agreement and the order of specific performance.

We affirm the finding of breach, but we vacate and remand for a new trial on

what the order of specific performance should be.

____________________________________________

1 Specific performance is a court order directing a party to fulfill a contractual

obligation. See Lackner v. Glosser, 892 A.2d 21, 31 (Pa. Super. 2006).
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                  II.   Factual & Procedural Background

      Sellers purchased the subject property in 1992 for their sons (Vincent,

Michael, and David Denithorne) to run a restaurant. The three sons formed

Denithorne Brothers, Inc. That corporation rented the property from Sellers

and held a liquor license. Denithorne Brothers, Inc. closed the restaurant in

early 2017.

      Thereafter, Catherine Jaindl-Leuthe and her fiancé expressed interest in

purchasing the property. See N.T., 6/2/20, at 7-8. Ms. Jaindl-Leuthe formed

Matthew 2535 Properties, LLC to acquire the property. She formed a separate

company, Good Spirits, LLC, to acquire the liquor license from Denithorne

Brothers, Inc. and the restaurant equipment and inventory from Sellers.

      Over several months, the parties engaged in counseled negotiations.

On January 13, 2018, the parties signed a sales agreement for the real estate

at a purchase price of $400,000. See Trial Ex. P-2 at 1, ¶ 3. They set the

closing for April 30, 2018 but gave Buyer two optional extensions of 30 days,

with the contract terminating on June 30, 2018. See id. at 1-2, ¶ 4(a).

      Paragraph 16 of the agreement, “Risk of Loss/Condemnation,” provided,

“Seller[s] shall bear all risk of loss until closing and shall deliver the property

in its current condition as of this date.” Id. at 7, ¶ 16. In the event of damage

to the property, Paragraph 16 further stated, “Seller[s] shall [(1)] coordinate

any remediation of casualty with Buyer or [(2)] 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.” Id.

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Finally, it required the parties to “cooperate and coordinate any remediation

or assignment of proceeds to achieve the desired result of the Buyer without

added cost to Seller[s].” Id.

      On March 17, 2018, the restaurant was destroyed by a fire.

      Nonetheless, Buyer wished to proceed with the sale. See N.T., 6/2/20,

at 14, 16. Buyer expected Sellers “would get in touch” and the parties would

“work out together how they would remediate the property or if [Buyer] could

accept the property in its then-condition with any funds to . . . take the

property back to where the restaurant was.” Id. at 18.

      Buyer made several requests to discuss the next steps and exercised its

right to extend the closing date to give Sellers more time to coordinate

remediation efforts. Sellers never met with Buyer to coordinate those efforts.

Eventually, Buyer’s attorney wrote to Sellers’ attorney to set the closing for

June 29, 2018. The letter also demanded Sellers assign to Buyer the proceeds

from the insurance on the restaurant. See Trial Ex. P-6. Buyer’s attorney

advised Sellers that Buyer was “financially ready, willing, and able to go to

closing on the property.” N.T., 6/2/20, at 19.

      Buyer assumed Sellers were insured or that they chose to be self-

insured.   Id. at 27.   Buyer later learned that Sellers had no insurance.

Importantly, Denithorne Brothers, Inc. had insurance on the restaurant, but

that corporation was not a party to the sales agreement. Because Sellers had

no insurance proceeds to assign to Buyer, they refused to appear at the closing

on June 29th.

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      Buyer sued Sellers for breaching the sales agreement and asked the trial

court for specific performance. Buyer did not name the sons or Denithorne

Brothers, Inc. as defendants.

      The matter proceeded to a bench trial, and Buyer presented evidence of

the above facts. When counsel for Buyer asked one of the Sellers how much

insurance proceeds Denithorne Brothers, Inc. received after the fire, Sellers’

attorney objected. She argued:

      I don’t think [the court of equity should] consider the equities [as
      Buyer contends]. What [the court should] consider is the actual
      cost for remediation. And we need an appraisal, or we’re going to
      need a contractor’s proposal. The amount of the insurance money
      is not relevant. What we need to figure out, if [the court] is going
      to order remediation, is how much remediation would be, and
      there is no evidence of that.

Id. at 57. The court sustained Sellers’ objection.

      In presenting their defense, Sellers testified to receiving a written, post-

fire offer on the property from CNJ Holdings for $375,000. However, this offer

included the liquor license, and no representative of CNJ Holdings testified as

to the breakdown of the offer. See id. at 74-75.

      The parties filed proposed findings of fact and conclusions of law, along

with supporting memoranda of law. Eventually, the court issued an opinion

and equitable decree in favor of Buyer.

      The court found that the phrase “without added costs to the Sellers” in

Paragraph 16 of the sales agreement was ambiguous. See Opinion and Order,

7/9/21, at 11. Because neither party had offered parol evidence to clarify the

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ambiguous phrase, the court found itself forced to rely on the other sentences

of Paragraph 16 to interpret the contract. In its opinion, the plain language

of those sentences clearly and unambiguously placed the risk of loss on Sellers

until closing.   Thus, the sales agreement required Sellers to deliver the

property to Buyer “in its current condition,” as of January 13, 2018. Id. at

11-12. Because Sellers failed to do so, the equity court found them to be in

breach.

      The court ordered specific performance of the contract at the purchase

price of $400,000, “minus the amount of insurance proceeds paid to

Denithorne Brothers, Inc. for the loss of the restaurant structure, excluding

therefrom any amount paid for the loss of equipment and inventory contained

within the structure.” Id. at 16-17. The court considered this to be equitable,

given the unique circumstances of this case.

      It offered the following rationale for the order of specific performance:

      because there was no testimony or evidence presented as to the
      value of the damaged and destroyed restaurant, the insurance
      proceeds provide the best estimate as to the true value of that
      structure . . . [Buyer] is, in effect, receiving the value of the
      insurance settlement as negotiated by the parties in the event of
      a loss and a failure to remediate on the part of [Sellers].

Id. at 14-15.

      Sellers sought post-trial relief, which was denied. This appeal followed.

Initially, in a split decision, a three-judge panel of this Court reversed and

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granted judgment to Sellers, as a matter of law.2 Buyer asked for reargument

before this Court en banc, which we granted.

                                    III. Analysis

       Sellers raise the following four claims of error on appeal:

       1.     Whether the [equity] 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?

____________________________________________

2 A majority of the panel held that Sellers did not breach, because Paragraph

16 did not explicitly require Sellers to obtain insurance or to remediate without
added costs to themselves. The majority also noted Buyer could have had its
attorney use more detailed language to explain what the parties should do in
the event of damage to the restaurant. Thus, the majority concluded that, as
the parties never agreed upon a post-fire sales price, both sides were free to
walk away from the deal. Additionally, the majority found that the equity
court erred by subtracting the amount of the insurance proceeds from the
purchase price. Because the amount of insurance proceeds was unknown and
excluded as irrelevant, the majority held that their inclusion in the order of
specific performance was speculative.

      The dissenting judge claimed the majority substituted its factual findings
for those of the equity court and failed to defer to that court’s finding that the
clause “without added costs to Sellers” was ambiguous. The majority did not
analyze whether the equity court’s interpretation of the ambiguous phrase
was unreasonable, especially when read in context of the risk-of-loss
paragraph as a whole. In the dissent’s view, “without added cost to Sellers”
only modified the phrase “the assignment of [insurance] proceeds.” Thus, if
(and only if) Buyer elected the insurance proceeds, then those proceeds were
Buyer’s sole recovery. Furthermore, the dissent endorsed the order of specific
performance as the equity court had fashioned it. By ordering Sellers to close
for the purchase price, minus the amount of insurance proceeds, the court of
equity found that this formula represented the value of the property after the
fire. The dissent agreed with the equity court’s math, because the sales
agreement provided for insurance proceeds to serve as a substitute measure
of remediation costs, if the parties’ negotiations over remediation failed.

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      2.    Whether the [equity] 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 Buyer refused to proceed with the sale on or
            before that date?

      3.    Whether the [equity] court erred in granting specific
            performance where the order led to an inequitable result
            and failed to properly assess the value of the property?

      4.    Alternatively, whether the [equity] 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 2 (capitalization removed). We address each issue in turn.

A.    Whether Sellers Breached

      First, Sellers contend the equity court erroneously interpreted Paragraph

16 of the sales agreement when it found them in breach. Although Paragraph

16 provided, “Seller[s] shall bear all risk of loss until closing and shall deliver

the property in its current condition as of this date,” in their view, that

sentence was negated by the clause “without added costs to Sellers,” which

appears later in the paragraph. Trial Ex. P-2 at 7, ¶ 16.

      Sellers claim they were only obligated to coordinate remediation of the

property, “if they could do so without added cost to themselves.” Sellers’ Brief

at 11. According to Sellers, “it is clear by the plain language of the contract

that the parties contemplated that [Sellers’] maximum exposure, in the event

of loss, would be the amount, if any, of their insurance proceeds.” Id. at 14.

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They “are not able to coordinate remediation of the property without added

cost, [because] they did not carry insurance on the property.”       Id. at 15.

Thus, Sellers claim that they did not breach the sales agreement.

       This argument suffers a fundamental flaw, because Sellers failed to raise

and address a preliminary issue regarding contract ambiguity. They ignored

the finding of the equity court that the phrase upon which Sellers chiefly rely

– i.e., “without added costs to Sellers” – was ambiguous. As a prerequisite

for us to adopt Sellers’ interpretation of that phrase, we would first have to

review and reverse the finding of ambiguity.

       However, Sellers do not challenge that finding on appeal.3 Instead, they

assume that that phrase is unambiguous, a presumption that is fatal to their

appellate argument. In order for us to substitute Sellers’ interpretation of the

clause for the equity court’s finding of ambiguity, Sellers needed to convince

us that this finding was erroneous. They make no such claim.

       Also, Sellers disregard our narrow scope of review for an ambiguous

contract.   “While unambiguous contracts are interpreted by the court as a

____________________________________________

3 We note that Sellers copied, verbatim, their pre-decree memorandum of law

to the equity court as the argument section in their appellate brief. Compare
Sellers’ Memorandum of Law in Support of Proposed Findings of Fact and
Conclusions of Law at 2-3 with Sellers’ Brief at 12-15. Sellers’ continued
reliance upon their pre-decree memorandum of law was misplaced, because
Buyer won the trial, based on specific findings of fact and rulings by the court
of equity. When a finder of fact reaches a decision, that is an important event,
especially where, as here, he ruled a provision of the contract was ambiguous.
Because Sellers’ brief is a reproduction of the argument they made prior to
the issuance of the decree, their argument contains no reference to or
argument about the court’s finding of ambiguity.

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matter of law, ambiguous writings are interpreted by the finder of fact.”

Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 469 (Pa.

2006) (emphasis added).       When ambiguity is found, “parol evidence is

admissible to explain or clarify or resolve the ambiguity, irrespective of

whether the ambiguity is created by the language of the instrument or by

extrinsic or collateral circumstances.” Yocca v. Pittsburgh Steelers Sports,

Inc., 854 A.2d 425, 437 (Pa. 2004). Thus, when a contract is ambiguous, the

issue shifts from a pure question of law to a mixed question of fact and law,

with issues of fact predominating. See id. We may only reverse a finding of

contractual ambiguity if the finding is unsupported by competent evidence of

the record or it is premised upon an error of law.        See, e.g., Jones v.

McGreevy, 270 A.3d 1, 12 (Pa. Super. 2022).

      Sellers do not contend (much less prove) that the equity court’s finding

of ambiguity was unsupported by competent evidence or based upon an error

of law. Sellers undoubtedly view their own interpretation of “without added

costs to Sellers” as superior to the interpretation of the equity court. To grant

Sellers appellate relief, we would have to adopt their unsubstantiated

presumption that the clause is clear and unambiguous. However, we may not

replace the court of equity’s finding of ambiguity with Sellers’ unsubstantiated

presumption of unambiguity. See Jones, supra.

      The equity court interpreted Paragraph 16 as a complete section and

principally replied upon the earlier sentences to hold Sellers in breach of those

provisions, which it deemed clear and unambiguous. Sellers would have us

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reinterpret the contract in their favor, without first explaining why the equity

court’s finding of ambiguity was erroneous. Thus, the equity court’s ruling of

ambiguity is now final and binding, as is the equity court’s ultimate conclusion

that Sellers breached the first sentence of Paragraph 16, i.e., that they would

deliver the restaurant to Buyer in the condition it existed at the time the

parties signed the sales agreement.

      Thus, Sellers’ first issue affords them no relief.

B.    Whether Buyer Breached

      In Sellers’ second appellate issue, they claim that Buyer breached the

sales agreement. Sellers’ argument is seven sentences, and they cite no legal

authority. Their entire argument is:

            Pursuant to the agreement, the final date for settlement
      expired on June 30, 2018. [Trial Ex. P-2 at 1]. [Buyer] did not
      ever express a willingness to close on the property and pay
      [Sellers] the purchase price prior to June 30, 2018. By refusing
      to proceed with the sale, [Buyer] is the party that has breached
      the agreement. Per the agreement, it was [Buyer’s] responsibility
      to proceed to closing for the sale of the property without a
      structure on it. Or [Buyer] could agree to terminate the contract.2

             FN 2 – The agreement permits [Buyer] to default on the
             contract with little penalty. [Id. at 8].

      It has refused to do either, and the agreement has now expired.
      Because [Sellers] did not breach [the sales] agreement, judgment
      should be entered in their favor.

Sellers’ Brief at 16.

      In an appellate brief, an “argument . . . shall have . . . such discussion

and citation of authorities as are deemed pertinent.” Pa.R.A.P. 2119(a).

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Further, “It is a well settled principle of appellate jurisprudence that

undeveloped claims are waived . . . on appeal.”            Commonwealth v.

McDermitt, 66 A.3d 810, 814 (Pa. Super. 2013). When “defects in a brief

prevent meaningful review, the issue may be found waived.”4 Sephakis v.

Pennsylvania State Police Bureau of Recs. & Identification, 214 A.3d

680, 687 (Pa. Super. 2019).

       Because Sellers cite no authority and provide no meaningful appellate

argument to support their claim that Buyer breached the agreement, we

dismiss their second issue as waived.

C.     Whether Buyer Offered Sufficient Evidence for Specific Performance

       Third, Sellers ask, “whether the [equity] court erred in granting specific

performance where the order led to an inequitable result and failed to properly

assess the value of the property?” Sellers’ Brief at 2. Given that the equity

court ruled that the amount of insurance proceeds Denithorne Brothers, Inc.

received was irrelevant, Sellers argue, “specific performance should not have

been awarded.” Id. at 20. They contend, because Buyer did not prove the

post-fire value of the property, Buyer is not entitled to specific performance

of the sales agreement, as a matter of law.

____________________________________________

4 “The applicability of waiver principles presents a question of law, over which

our standard of review is de novo . . . [and] our scope of review is plenary.”
Temple Est. of Temple v. Providence Care Ctr., LLC, 233 A.3d 750, 760
(Pa. 2020).

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       Critically, in Sellers’ post-trial motion, they never requested judgment,

as a matter of law, based on Buyer’s lack of proof of post-fire property value.5

Instead, they sought a modification of the specific-performance order based

on Buyer’s lack of proof.

       Sellers framed their issue of post-trial relief as “Whether modification of

the memorandum opinion and directed verdict is proper, because evidence at

trial established that the value of property is currently $375,000?” Sellers’

Brief in Support of Motion for Post-Trial Relief at 4; see also Sellers’ Motion

for Post-Trial Relief at 5. They claimed, “while there was testimony that a

third party received insurance funds [due to the fire], the amount of that

payment was excluded from evidence.” Sellers’ Motion for Post-Trial Relief at

7. Sellers did not assert that the lack of evidence in Buyer’s case-in-chief

necessitated the denial of any specific performance whatsoever. Instead, they

asked the equity court to rely upon the evidence they offered during their

defense. Sellers wrote, “Indeed, the only evidence whatsoever of the value

of the property was submitted by [Sellers] – an offer of $375,000 for the

property received after the fire . . . .” Id.      They therefore contended that

“the property must be sold for $375,000, as the only evidence at trial

establishing its post-fire value indicated that the property was worth $375,000

after the fire.” Id. (emphasis added).

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5 We reincorporate our scope and standard of review from Note 4, supra.

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      In response, the equity court addressed the limited issue that Sellers

raised.   It explained that Sellers argued, “specific performance should be

ordered for the purchase price of [$375,000] based upon an unsolicited offer

from CNJ Holdings, purportedly received by [Sellers] following the fire . . . .”

Trial Court Order, 12/23/21, at 1 n.1 (emphasis added). Rejecting Sellers’

evidentiary argument, the equity court stated, “we find that this third party

offer does not accurately represent the true value of the property, [because]

no representative of CNJ Holdings testified at trial and . . . the $375,000 offer

also included purchase of the restaurant liquor license.”        Id. (emphasis

added). Clearly, the court viewed Sellers’ post-trial motion as a request to

modify the order of specific performance and change the purchase price, not

a request to deny specific performance entirely.

      We agree with the equity court that Sellers’ post-trial motion did not

contend that specific performance was inappropriate. Indeed, Sellers did not

seek judgment, as a matter of law, on that ground.         They only sought a

modification of the order. Thus, the Sellers’ third appellate issue differs from

the one they raised below in their post-trial motion.

      “Issues not raised in the trial court are waived and cannot be raised for

the first time on appeal.” Pa.R.A.P. 302(a). Moreover, the Supreme Court of

Pennsylvania has long held, “Pa.R.Civ.P. 227.1 requires parties to file post-

trial motions in order to preserve issues for appeal. If an issue has not been

raised in a post-trial motion, it is waived for appeal purposes.” L.B. Foster

Co. v. Lane Enters., Inc., 710 A.2d 55, 55 (Pa. 1998).

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      Because Sellers’ motion for post-trial relief did not challenge the grant

of specific performance, as a matter of law, based on Buyer’s lack of evidence

regarding the post-fire value of the property, we dismiss this portion of Sellers’

third appellate issue as waived. To the extent Sellers argue that the specific

performance, as ordered below, was inequitable, because the court of equity

failed to determine the post-fire value of the property, we address that

argument in the next section.

D.    Whether Specific Performance Should Be Modified

      In their final appellate issue, Sellers alternatively contend the court of

equity erred in crafting the specific-performance order by deducting the

insurance proceeds, paid to a third party, from the purchase price. Sellers’

Brief at 22. They claim that the deduction lacks evidentiary support in the

record. According to Sellers, “the only evidence submitted at trial was that

the property’s post-fire value was $375,000.” Id. They derive that figure

from a post-fire offer that Sellers received from CNJ Holdings.        See N.T.,

6/2/20, at 75. Therefore, they seek a modification of the specific-performance

order to direct the sale of the property for $375,000, as opposed to $400,000

minus the insurance proceeds.

      When we review an equitable decree, the equity court’s “findings of fact

will not be disturbed absent an abuse of discretion, a capricious disbelief of

the evidence, or a lack of evidentiary support on the record for the findings.”

Carroll v. Ringgold Education Ass'n, 680 A.2d 1137, 1140 (Pa. 1996).

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      “A decree of specific performance involves the exercise of the equity

power and discretion of the court.” Wagner v. Est. of Rummel, 571 A.2d

1055, 1058 (Pa. Super. 1990). “Such a decree will be granted only if a plaintiff

clearly is entitled to such relief, there is no adequate remedy at law, and the

[equity] court believes that justice requires such a decree.” Oliver v. Ball,

136 A.3d 162, 166 (Pa. Super. 2016).

      Here, Buyer sought specific performance based on Sellers’ breach of a

contract for the sale of land. “Contracts for the sale of land have traditionally

been accorded a special place in the law of specific performance. A specific

tract of land has long been regarded as unique and impossible of duplication

by the use of any amount of money.” Oliver, 136 A.3d at 167. If Buyer had

sought only transfer of the property at the purchase price of $400,000, it

would clearly be entitled to that relief.

      Instead, Buyer sought one of three additional remedies from Sellers:

      1.    sell the property to [Buyer] with the restaurant building on
            the property in the condition it existed as of the time the
            agreement of sale was signed;

      2.    coordinate the remediation of the property with [Buyer]; or

      3.    in the alternative, after coordinating the remediation of the
            property with [Buyer,] provide the agreed upon funds to
            [Buyer] at the time of closing.

Buyer’s Proposed Findings of Fact and Legal Memorandum at 16.

      The equity court did none of the above, because it did not wish to involve

itself with negotiations over the remediation process and/or the transfer of

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the “agreed upon funds.” Id. Instead, the court fashioned its own specific

performance and ordered the parties to close on the property, in its current

condition, for $400,000, less the amount of insurance proceeds paid to

Denithorne Brothers, Inc., excluding the proceeds, if any, paid for the loss of

the restaurant’s equipment and inventory.

       We agree with Sellers that this order lacks evidentiary support.       As

Sellers contend, the record is devoid of evidence establishing how much

money the insurance company paid to Denithorne Brothers, Inc. on its policy.

Nor does the record indicate what the insurance covered. Was it to replace

the building? To repair the building? Did it cover its contents? Did it include

loss of business revenues? Good will? Lost wages? Did the insurance cover

all or some combination thereof? We simply do not know. We also do not

know whether the policy listed the Sellers, who were the landlords of

Denithorne Brothers, Inc., as additional insureds. Lastly, we do not know if

the insurance proceeds were itemized.

       This gap in the record exists, because the equity court ruled that the

amount and details of the insurance policy were irrelevant6 and, therefore,

inadmissible.    See N.T., 6/6/20, at 55-57.       But the court of equity, after

excluding the evidence of insurance, then relied upon it to fashion the specific-

performance order. Although courts of equity enjoy broad discretion when

fashioning remedies, that discretion “in any given case must be exercised in

____________________________________________

6 See Pa.R.E. 401.

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accordance with accepted judicial principles.” Di Pompeo v. Preston, 123

A.2d 671, 674 (Pa. 1956). For indeed, “equity follows the law.” First Fed.

Sav. & Loan Ass'n of Lancaster v. Swift, 321 A.2d 895, 898 (Pa. 1974).

      It is a basic principle of the law that a “court may not consider evidence

outside of the record in making its determination.” Ney v. Ney, 917 A.2d

863, 866 (Pa. Super. 2007). See also Commonwealth v. Allshouse, 969

A.2d 1236, 1241 (Pa. Super. 2009) (“Reliance on documents not admitted

into evidence is error.”). “Nor may this court uphold a trial court’s order on

the basis of off-the-record facts.” Ney, 917 A.2d at 866.

      Here, the court of equity committed an error of law by relying upon

evidence that it explicitly excluded as irrelevant to fashion its order of specific

performance. Once the court ruled that the amount of insurance proceeds

was irrelevant, that evidence became incompetent, as a matter of law. See

Ney, supra. Therefore, the equity court could not consider the insurance

proceeds when fashioning its order of specific performance. Because the order

of specific performance “lack[s] evidentiary support on the record,” we cannot

affirm it. Carroll, 680 A.2d at 1140.

      Furthermore, in order to fashion a truly equitable remedy, the court of

equity needed to know how much money it was ordering Sellers to deduct

from the purchase price. Potentially, the deduction was reasonable in light of

the loss that the property suffered. Buyer may need to expend a great deal

of money to replace the restaurant.        Yet, it is equally possible that the

insurance proceeds may vastly exceed the $400,000 purchase price. Thus,

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the specific-performance order may force Sellers to go to the closing on their

property and pay Buyer a substantial amount of money. Those funds might

exceed the cost of replacing the restaurant. Under the current order of specific

performance, Buyer could acquire the property and enough money to build a

brand-new restaurant, something for which it did not contract, giving Buyer

a windfall. Thus, the remedy fashioned by the equity court may have been

patently inequitable or created an undue hardship for Sellers.

      The Supreme Court of Pennsylvania has long held, “Inequity or hardship

may be a valid defense in an action for specific performance, and such

decree refused if in the exercise of a sound discretion it is determined that,

under the facts, specific performance would be contrary to equity and justice.”

Payne v. Clark, 187 A.2d 769, 771 (Pa. 1963) (emphasis added). Still, there

is no “valid defense if the hardship is due to the defendant’s own acts or to

events clearly foreseeable.    Moreover, mere inadequacy of price, unless

grossly disproportionate, will not defeat specific performance.” Id.

      By excluding the amount of insurance proceeds from the record, the

equity court prevented the parties from putting all of their cards on the table

and, thereby, impeded itself from fashioning an order of specific performance

that encompassed the totality of the circumstances. As we have said, “The

Chancelor had a duty to examine whether hardship or injustice would result

to the [sellers] if the [buyer’s] request for specific performance were granted.”

Wagner, 571 A.2d at 1059. In this instance, because the court of equity had

no way of knowing the degree of hardship (if any) that its specific performance

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imposed upon Sellers, the remedy it fashioned was manifestly unreasonable.

It may not stand.

      However, Sellers requested appellate remedy is also not possible. They

ask this Court to modify the specific-performance order to direct Buyer to pay

them a purchase price of $375,000 – the amount of the post-fire offer for the

property that Sellers received from CNJ Holdings.        Such a modification is

untenable on the current record.

      As Buyer correctly contends, the court of equity rejected that figure as

incredible. See Trial Court Order, 12/23/21, at 1 n.1. The court logically

explained its rejection of Sellers’ evidence regarding the post-fire value of the

property, because the $375,000 did not itemize the cost of the liquor license

and no one from CNJ Holdings testified at trial. As such, the equity court did

not capriciously disbelieve Sellers’ evidence offered in their defense. Carroll,

680 A.2d at 1140.

      This Court may not modify the award of specific performance based on

evidence that the equity court explicitly and rationally rejected as not credible.

If we did, we would essentially repeat the error that the court of equity made

by relying upon the excluded amount of insurance proceeds to fashion its

order of specific performance.

      Because the record is devoid of any competent evidence regarding the

post-fire value of the property, the only equitable result is a new trial on the

amount of the purchase price that Buyer owes Sellers. This will allow the

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equity court another opportunity to modify the order of specific performance

based on competent evidence.

      We previously ordered such relief when an equity court improperly

fashioned a specific-performance order in Wagner, supra. There, an owner

of land had agreed to lease 16 acres of property to various tenants to farm

and sell Christmas trees. The agreement also provided that, upon owner’s

death, tenants could purchase the 16 acres for $550. Many years later, when

owner died, tenants sought specific performance of the contract from owner’s

estate. The estate attempted to defend on the ground that the sales contract

was unconscionable. However, the equity court deemed that defense to be

waived, because the estate had not raised it in their answer and new matter.

The court compelled the estate to transfer the property to tenants for $550.

      On appeal by the estate, we found error and said that a “court of equity

should not order specific performance where it appears that hardship or

injustice will result to either of the parties.” Wagner, 571 A.2d at 1058. This

Court vacated the order of specific performance, because the court of equity

failed to consider the potential injustice and hardship that the specific

performance might impose on the estate. We said, “it is apparent that we

must vacate the order of the [equity] court and remand this case to that court

for further consideration . . . In fairness to the parties, the court will be

required to accept further testimony . . . .” Wagner, 571 A.2d at 1060.

      As in Wagner, we vacate the order of specific performance and remand

for further proceedings. In fairness to the parties, we direct the equity court

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to accept further testimony and evidence on the post-fire value of the property

from both parties. This will allow the court of equity to measure the extent of

loss that Sellers agreed to incur, and ensure that its order of specific

performance does not cause them inequity or undue hardship. See Payne,

supra. It will also ensure that neither party receives an unintended windfall

from the fire.

      Judgment vacated. Order denying motion for post-trial relief partially

affirmed and partially reversed. Case remanded for a new trial in accordance

with this Opinion.

      Jurisdiction relinquished.

Date: 3/15/2024

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