Court Opinion

ID: 4242730
Source: CourtListenerOpinion
Date Created: 2018-02-06 20:28:53.32753+00
Date Added: 2024-06-11T14:44:13.448855
License: Public Domain

J-A08042-17

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

 GAMESA ENERGY USA, LLC AND               :     IN THE SUPERIOR COURT OF
 GAMESA TECHNOLOGY                        :          PENNSYLVANIA
 CORPORATION INC.                         :
                                          :
                                          :
              v.                          :
                                          :
                                          :
 TEN PENN CENTER ASSOCIATES,              :     No. 1635 EDA 2016
 L.P. AND SAP V TEN PENN CENTER           :
 NF G.P. L.L.C.                           :
                                          :
                    Appellant             :

              Appeal from the Judgment Entered May 20, 2016
            In the Court of Common Pleas of Philadelphia County
            Civil Division at No(s): March Term, 2013 No. 03678

BEFORE:    PANELLA, J., LAZARUS, J., and STEVENS*, P.J.E.

MEMORANDUM BY PANELLA, J.                         FILED FEBRUARY 06, 2018

      This appeal involves a commercial landlord/tenant dispute. Appellants,

Ten Penn Center Associates, L.P. and SAP V Ten Penn Center NF G.P. L.L.C

(collectively, “TenPC”), appeal from the judgment entered in favor of Appellee,

Gamesa Energy USA, LLC and Gamesa Technology Corporation, Inc.

(“Gamesa”), by the Philadelphia Court of Common Pleas following a nonjury

trial. We affirm in part and reverse in part.

      In 2008, Gamesa signed a contract (the “Lease”) with TenPC to lease

approximately 35,000 square feet of office space in TenPC’s building, located

at 1801 Market Street, Philadelphia (the “Premises”). The Lease, which was

scheduled to run until September 1, 2018, provided Gamesa with a credit,

named the tenant improvement allowance, for Gamesa to use to construct the

____________________________________
* Former Justice specially assigned to the Superior Court.
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office space to its specifications. The Lease also permitted Gamesa to enter

into subleases for portions of the premises, provided Gamesa received TenPC’s

prior approval.

      In   May    2011,   TenPC     approved       Gamesa’s   request   to   sublet

approximately 15,000 square feet of office space to Viridity Energy, Inc.

Gamesa’s sublease with Viridity was scheduled to run until August 30, 2018.

TenPC permitted Gamesa to use a portion of its tenant improvement allowance

to outfit the office space for Viridity’s needs.

      Subsequently, after giving one month’s notice to TenPC, Gamesa

vacated the Premises in May 2012. Viridity remained at the Premises under

the terms of its sublease with Gamesa. Additionally, while Gamesa submitted

its June rent payment late, neither party disputed the fact that Gamesa

continued to make rent payments after it vacated the Premises.

      On June 12, 2012, Gamesa submitted a request for TenPC’s consent to

sublet a portion of its remaining office space to Business Services

International, LLC (“BSI”). TenPC’s initial response to this request was to

inform Gamesa that its action in defaulting on the terms of the Lease, by

vacating the Premises and making a late rent payment, absolved TenPC of the

responsibility of entertaining any requests for subleases; however, TenPC

requested additional information concerning BSI’s financials from Gamesa to

evaluate the sublease request under the terms of the Lease.

      Gamesa responded to TenPC’s letter on July 5, 2012, denying the

alleged default, once again requesting the approval of the BSI sublease, and

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providing TenPC with the requested information about BSI. In response,

TenPC reiterated its belief that it was not required to entertain the proposed

sublease, and proposed Gamesa waive its right to use its remaining tenant

improvement allowance in exchange for TenPC’s approval of the sublease.

Following this correspondence, negotiations between the parties stalled.

      On March 23, 2013, Gamesa filed a complaint against TenPC, asserting

claims including breach of contract, unlawful interference in business

relations, and unjust enrichment. Gamesa alleged TenPC breached the Lease

by failing to accept or reject the proposed sublease with BSI within 30 days,

pursuant to the terms of the lease. As a result, Gamesa alleged that TenPC

had materially breached the terms of the Lease and asked for damages arising

from the breach, as well as a declaration that the Lease had been terminated

as of the date TenPC failed to accept or reject the sublease. Further, through

its claim for unjust enrichment, Gamesa requested the return of the rent paid

following the alleged material breach. TenPC denied these allegations in its

response.

      The matter proceeded to a nonjury trial. Only two witnesses were called:

Jamie Rodriguez, Gamesa’s general services manager, and Daniel Busch, a

managing member of one of TenPC’s limited partners. Rodriguez testified the

sublease with BSI was never consummated due to TenPC’s actions in delaying

its approval or denial of the proposed BSI sublease. Rodriguez also confirmed

Gamesa was continuing to pay rent under the Lease, had used its remaining

tenant improvement allowance to improve space within the building, and, at

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the time of trial, was looking for a subtenant with TenPC’s approval. And he

confirmed Viridity continued to pay Gamesa rent under the terms of the

sublease from the time it vacate the Premises until the time of trial.

      Busch established the course of action TenPC took, as described above,

and reiterated that Gamesa was in default in the summer of 2012 after

vacating the premises. Busch also claimed TenPC’s reluctance in approving

the proposed sublease with BSI stemmed partially from TenPC’s belief that

BSI did not appear to be a financially stable company. Therefore, he did not

believe TenPC’s action in conditioning approval of the sublease upon Gamesa’s

waiver of the remaining tenant improvement allowance was unreasonable.

      Ultimately, the trial court ruled in favor of Gamesa. The court found Ten

PC had materially breached the lease by advising Gamesa it was in default

and by failing to approve or reject the proposed BSI sublease within 30 days

of its presentation. Because of this breach, the court awarded Gamesa

damages equal to the amount it would have received under the three-year

BSI sublease. And the court found TenPC’s material breach was sufficient to

terminate the lease as of July 22, 2012. As a result, the court found TenPC

was unjustly enriched in the amount of rent Gamesa paid to TenPC from that

date through December 2015. Lastly, the trial court found that despite the

termination of the lease, Viridity’s sublease was to remain in effect until its

August 30, 2018 expiration date.

      Both Gamesa and TenPC filed post-trial motions. Gamesa requested the

court mold the verdict to include pre- and post-judgment interest. In contrast,

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TenPC requested the court vacate its judgment against it. And it presented a

motion to supplement the trial record with evidence that Gamesa had

subleased space in the building after trial. The trial court granted Gamesa’s

request to mold the verdict and denied TenPC’s motions.

      After the entry of judgment, this timely appeal followed. TenPC presents

seven issues for our review. See Appellant’s Brief, at 4-6.

      We apply the following standard of review to a nonjury trial verdict:

             Our appellate role in cases arising from nonjury trial verdicts
      is to determine whether the findings of the trial court are
      supported by competent evidence and whether the trial court
      committed error in any application of the law. The findings of fact
      of the trial judge must be given the same weight and effect on
      appeal as the verdict of the jury. We consider the evidence in a
      light most favorable to the verdict winner. We will reverse the trial
      court only if its findings of fact are not supported by competent
      evidence in the record or if its findings are premised on an error
      of law. However, [where] the issue … concerns a question of law,
      our scope of review is plenary.

             The trial court’s conclusions of law on appeal originating
      from a non-jury trial are not binding on an appellate court because
      it is the appellate court’s duty to determine if the trial court
      correctly applied the law to the facts of the case.

Allegheny Energy Supply Co., LLC v. Wolf Run Min. Co., 53 A.3d 53, 60-

61 (Pa. Super. 2012) (citation and quotation marks omitted; brackets and

ellipses in original). The trial court, as the finder of fact, is free to believe “all,

part or none of the evidence presented.” Ruthrauff, Inc. v. Ravin, Inc., 914

A.2d 880, 888 (Pa. Super. 2006) (citation omitted). “Issues of credibility and

conflicts in evidence are for the trial court to resolve; this Court is not

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permitted to reexamine the weight and credibility determination or substitute

our judgment for that of the fact finder.” Id. (citation and internal quotation

marks omitted).

      TenPC’s first two issues center upon the trial court’s determination it

breached the terms of the lease.

      “[A] lease is in the nature of a contract and is to be controlled by

principles of contract law.” Pugh v. Holmes, 405 A.2d 897, 903 (Pa. 1979).

      The interpretation of any contract is a question of law and this
      Court’s scope of review is plenary. Moreover, we need not defer
      to the conclusions of the trial court and are free to draw our own
      inferences. In interpreting a contract, the ultimate goal is to
      ascertain and give effect to the intent of the parties as reasonably
      manifested by the language of their written agreement. When
      construing agreements involving clear and unambiguous terms,
      this Court need only examine the writing itself to give effect to the
      parties’ understanding. This Court must construe the contract only
      as written and may not modify the plain meaning under the guise
      of interpretation.

Loughman V. Equitable Gas Co., LLC, 134 A.3d 470, 474 (citation omitted).

      To prove a breach of contract, a party must establish the following: “(1)

the existence of a contract, including its essential terms, (2) a breach of duty

imposed by the contract, and (3) resultant damages.” McCausland v.

Wagner, 78 A.3d 1093, 1101 (Pa. Super. 2013) (citation and internal

quotation marks omitted).

      TenPC first contends the trial court misconstrued the evidence and the

terms of the Lease when it concluded TenPC breached its duties under the

Lease by incorrectly declaring Gamesa in default and conditioning its consent

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to sublet. Instead, TenPC argues Gamesa was in default under the Lease when

they requested the BSI sublease.

      The analysis of the trial court and the arguments of the parties in general

center on the default and subletting provisions in the Lease. The first provision

at issue is provision 22, the default provision. Under this provision, “[i]t shall

be an ‘Event of Default’ under th[e] Lease if … [Gamesa] vacates the

Premises….” Lease, ¶ 22.

      The trial court concluded Gamesa had not defaulted under this section

of the Lease because it did not show an intent to abandon the premises.

Whether Gamesa abandoned the Premises is not at issue. The Lease did not

use the term “abandon.” It used “vacate.” The trial court was required to

interpret the contract the parties expressly adopted, not something of its own

design. We therefore conclude the trial court’s analysis was incorrect.

      And by using the correct term “vacate,” it is clear that the trial court

erred as a matter of law in finding breach on this basis. The Lease clearly

specified Gamesa would be in default if it vacated the Premises. Gamesa

vacated the Premises when it moved from the bulding in May of 2012. As

such, TenPC’s correctly asserted Gamesa defaulted under the terms of the

Lease. While TenPC was entitled to pursue legal remedies as a result of this

breach, it acknowledged at trial that it chose not to terminate the lease or

pursue damages, and therefore waived these remedies.

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       Turning to the trial court’s next finding of breach, that TenPC

unreasonably withheld consent to sublet, we look to the Lease’s sublease

provisions. In relation to its conditional offer, TenPC claims the offer

constituted a rejection of Gamesa’s request within the required 30-day time

period. Additionally, TenPC justifies its conditional offer based on BSI’s poor

financials.

       Pursuant to the terms of the Lease, Gamesa was not permitted to sublet

portions of the Premises to another party “without [TenPC’s] prior written

approval, which approval shall not be unreasonably withheld, conditioned or

delayed.” Lease, ¶ 20.1. And after Gamesa submitted a written request,

including “the name, address, and description of the proposed … subtenant,

its most recent financial statement and other evidence of financial

responsibility,” to TenPC’s for its review, TenPC was required to approve or

deny the request within 30 days. See Lease, ¶ 20.2.

       Here, the trial court found TenPC breached its duties under both

provisions 20.1 and 20.2 of the Lease. The court found TenPC breached

provision 20.2 by failing to accept or reject Gamesa’s sublease request with

BSI by July 22, 2012—30 days after the request was initially made.1 However,

TenPC argues, and we agree, that under the terms of the Lease, the 30-day

____________________________________________

1 The trial court’s calculations appear to be inaccurate. Gamesa’s first request
to TenPC for approval of its BSI sublease was made on June 12, 2012. Using
this date, the 30-day time period for approval would be July 12, 2012.

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time period does not begin to run until Gamesa supplied TenPC with all of the

information required by provision 20.2. The evidence adduced at trial, and not

disputed by Gamesa, shows Gamesa did not include the most recent financials

for BSI, a necessary document under provision 20.2, until its July 5, 2012

letter and renewed request for the BSI sublease. Therefore, under the 30-day

deadline in provision 20.2, TenPC was required to approve or deny this request

by August 4, 2012.

      Despite the trial court’s finding otherwise, it is evident TenPC denied this

request on July 13, 2012, when it proposed that Gamesa waived its remaining

tenant improvement allowance in exchange for approval of the proposed

sublease. This proposal clearly constituted a counter-offer. A counter-offer

extinguishes the original offer and places a new offer on the table for the

parties to review. See, e.g., Yarnall v. Almy, 703 A.2d 535, 539 (Pa. Super.

1997). Thus, TenPC rejected Gamesa’s sublease request through its counter-

offer on July 13, 2012, within the 30-day period provided under the Lease.

Therefore, the trial court committed an error of law when it found that TenPC

failed to accept or reject the sublease within 30 days.

      However, we find no error in the trial court’s conclusion that TenPC

unreasonably conditioned its approval of the BSI sublease, and therefore

breached one of its duties under the Lease. While TenPC claims it reasonably

conditioned its sublease approval based upon Gamesa’s default under the

Lease and BSI’s poor financials, the trial court found otherwise. Specifically,

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the trial court found that Gamesa’s request was a “good faith and reasonable

sublease application.” Findings of Fact and Conclusions of Law, 2/23/12, at 5-

6 ¶ 21. The trial court clearly did not believe the evidence presented by TenPC

at trial that TenPC’s decision to deny the sublease application was based upon

Gamesa’s default and BSI’s poor financials. As an appellate court, we will not

challenge a trial court’s credibility determinations. Thus, we find no error in

the trial court’s determination that TenPC unreasonably conditioned its

sublease approval.

      TenPC bases its next argument concerning the trial court’s error in

finding a breach of contract on Gamesa’s alleged inability to prove damages.

Specifically, TenPC alleges Gamesa cannot prove damages based on an

unexecuted sublease, and cannot rely on the inadmissible testimony of

Gamesa’s representative that BSI “moved on” due to Gamesa’s inability to

obtain approval from TenPC.

      In relation to the damages prong of a breach of contract analysis, our

Supreme Court has provided that

      [w]here one party to a contract, without any legal justification,
      breaches the contract, the other party is entitled to recover,
      unless the contract provided otherwise, whatever damages he
      suffered, provided (1) they were such as would naturally and
      ordinarily result from the breach, or (2) they were reasonably
      foreseeable and within the contemplation of the parties at the time
      they made the contract, and (3) they can be proved with
      reasonable certainty.

Ferrer v. Trustees of the Univ. of Pennsylvania, 825 A.2d 591, 610 (Pa.

2002) (quotation marks and citation omitted). A damage award should “place

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the non-breaching party as nearly as possible in the same position [it] would

have occupied has there been no breach.” Helpin v. Trustees of the Univ.

of Pennsylvania, 10 A.3d 267, 270 (Pa. 2010) (citation and internal

quotations omitted; brackets in original).

      Despite TenPC’s claims the only evidence of damages Gamesa adduced

was an unexecuted sublease, Gamesa provided the terms of its BSI sublease

to the court. Rodriguez testified BSI had agreed to a term of three years with

a total rent of $265,460. This information was also contained within Gamesa’s

July 5, 2012 letter to TenPC. And Rodriguez testified the sublease remained

unexecuted as Gamesa never received consent from TenPC for the sublease

with BSI.

      While TenPC claims the court relied on inadmissible hearsay from

Rodriguez that BSI “moved on” when it could not get sublease approval from

TenPC, the court found this statement was offered to explain a course of

conduct, and thus did not constitute hearsay. We find no error with this

evidentiary ruling. See Commonwealth v. Tselepis, 181 A.2d 710, 712

(1962) (finding a statement is properly qualified as an explanation of a course

of conduct if it is “evidence as to the reason action is taken[]”).

      Based upon this evidence of record, the trial court found TenPC’s breach

resulted in reasonably certain damages of $265,460, or the amount due under

the BSI sublease. We find no error in this finding, as the evidence presented

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was legally sufficient. So, TenPC’s claim that the trial court’s finding of

damages was unsupported by the record, fails.

      Next, TenPC challenges the trial court’s decision to terminate the lease

following its finding of a material breach. TenPC argues Gamesa elected its

remedy by continuing under the terms of the Lease. As such, Gamesa should

not be allowed to benefit from retroactive termination of the Lease. We agree.

      The doctrine of election of remedies denotes “the act of choosing

between two or more different and coexisting modes of procedure and relief

allowed by the law on the same state of facts.” Wedgewood Diner, Inc. v.

Good, 534 A.2d 537, 538 (Pa. Super. 1987) (citation omitted). Once a party

has unequivocally chosen “one of two or more inconsistent remedial rights,”

the application of the doctrine precludes them from benefitting from the

others. Id. (citation omitted). And,

      [i]n a breach of contract suit, the plaintiff either may rescind the
      contract and seek restitution or enforce the contract and recover
      damages based on expectation. In such a case, the inconsistent
      nature of those actions is obvious—one cannot attempt to
      terminate his contractual obligations and, at the same time, seek
      to enforce the contract and enjoy its full benefits in an action for
      breach.

McCausland v. Wagner, 78 A.3d 1093, 1102 (Pa. Super. 2013) (citations

omitted; emphasis in original).

      Here, Gamesa elected its remedy by continuing under the terms of the

Lease. Following the breach, Gamesa continued to pay rent to TenPC and

received rent from Viridity for the sublease. Both parties agreed at trial that

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Gamesa requested, and received, the use of the remaining tenant

improvement allowance to build out its leased space in the Premises. Further,

Gamesa’s representative testified that it was searching for tenants to sublease

its space in the Premises as recently as the time of trial. Despite Gamesa’s

contentions that TenPC’c actions in the summer of 2012 justified the rescission

of the Lease, all of the evidence points to its continued benefit from the terms

of the Lease following summer 2012.

       Based upon these actions, the remedy Gamesa had chosen for trial was

to enforce the contract and recover based on expectation, i.e., recover the

expected rent from the BSI sublease. Thus, the trial court’s actions in

retroactively terminating the contract and awarding Gamesa damages based

upon a theory of unjust enrichment was clearly in error.

       Judgment affirmed in part and reversed in part.2

       Judge Lazarus joins the memorandum.

       President Judge Emeritus Stevens files a concurring statement.

____________________________________________

2 Given our resolution, we need not address the remainder of Appellant’s
issues on appeal.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 2/6/18

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