Davis, A. v. Borough of Montrose , 194 A.3d 597 ( 2018 )

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2018 PA Super 228ALICE DAVIS : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
BOROUGH OF MONTROSE :
:
Appellant : No. 1210 MDA 2017
Appeal from the Judgment Entered August 30, 2017
In the Court of Common Pleas of Susquehanna County Civil Division at
No(s): 2014-168 C.P.
ALICE DAVIS : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
BOROUGH OF MONTROSE : No. 1250 MDA 2017
Appeal from the Judgment Entered August 30, 2017
In the Court of Common Pleas of Susquehanna County Civil Division at
No(s): 2014-168 C.P.
BEFORE: STABILE, J., NICHOLS, J., and PLATT J.*
OPINION BY NICHOLS, J.: FILED AUGUST 13, 2018
Appellant/Cross-appellee Borough of Montrose (Borough) appeals from
the judgment entered awarding $99,989.81 in damages for breach of contract
in favor of Appellee/Cross-appellant Alice Davis (Landlord). Borough claims
that the trial court erred in barring the testimony of three of Borough’s
witnesses, in failing to credit its defense of impossibility of performance, and
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* Retired Senior Judge assigned to the Superior Court.
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in awarding Landlord damages when Landlord did not give Borough an
opportunity to resume the lease. Landlord cross-appeals claiming that the
trial court erred in its calculation of damages and in denying pre-judgment
interest. We vacate the judgment, affirm in part and reverse in part the order
denying Landlord’s post-trial motion, affirm the order denying Borough’s post-
trial motion, and remand for further proceedings as set forth below.
The trial court set forth the following finding of facts:
1. On December 21, 2012, [Landlord] and [Borough] entered
into a lease agreement for property located at 4 Mill Street in
the Borough of Montrose, Susquehanna County, Pennsylvania
[(the property or the building)].
2. The lease was for a five (5) year term and provided that
[Borough] pay $59,940 annual rent, payable in monthly
installments of $4,995. The lease also provided that, in
addition to rent, [Borough] was responsible to pay all real
estate taxes, all insurance on the premises, utilities, and any
and all maintenance, upkeep, and repairs.
3. Other than several members of Borough Council doing a “walk
through” prior to signing the lease, [Borough] did not conduct
any inspections of the property.
4. [Borough] accepted the keys to the property on or about
January 1, 2013 but never used the building for any purpose.
5. The building had been previously used as a gym/fitness
center and contained a small swimming pool for water
aerobics. The building also houses a small apartment, not
included in the lease, which [Landlord] rents separately, and
which was occupied during the term of the lease.
6. In March of 2013, [Borough] tested the building and found
mold. In June, [Borough] drained the swimming pool. The
property was retested in July and August of 2013 and mold
was again found to be present.
7. [Borough] notified [Landlord] of the mold findings sometime
in August of 2013.
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8. Thomas Lamon[t], President of Borough Council, had a few
casual discussions with [Landlord] about remediation of the
mold between August and October of 2013.
9. In early November of 2013, [Borough] advised [Landlord] by
mail that it was terminating the lease as of December 31,
2013 due to the presence of mold in the building.
10. After receiving [Borough]’s notice, [Landlord] hired Flood
Pros of NY, LLC to conduct successful mold remediation in the
building. [Landlord] did not advise [Borough] of this result.
[Landlord] also did repairs and alterations to the building.
11. [Landlord] contacted a realtor in January, 2014 to place the
building back on the rental market; however, remediation and
renovations were not complete until September of 2014.
[Landlord] then signed a listing agreement on September 23,
2014 with a rental price of $3,995 per month.
12. Meanwhile, on February 12, 2014, [Landlord] had filed the
subject Complaint against [Borough] for breach of the lease
agreement. [In Borough’s answer, it included as new matter
the defense of impossibility of performance and asserted that
Landlord fraudulently represented there was no mold in the
building prior to entering into the lease].
Trial Ct. Op. & Verdict, 4/28/17, at 1-2 (unpaginated).
Prior to trial, Landlord filed motions in limine seeking to exclude expert
and fact witnesses from testifying for Borough. See generally Landlord’s
Mot. in Limine to Exclude Testimony of Tenant’s Expert Witness, 6/27/16;
Landlord’s Mot. in Limine to exclude Testimony of Witnesses Identified Eight
Days Prior to Trial, 9/29/16. Specifically, Landlord sought to exclude
testimony of a recently disclosed expert, Gary Lyons,1 who, according to
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1 Borough initially identified its proposed expert as “Gary Johnson” in a
September 23, 2016 letter. During trial, however, Borough clarified that the
expert’s correct name is Gary Lyons. See N.T., 10/4/16, at 10.
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Borough, would opine that the mold existed in the building before the lease
was entered into by the parties. Landlord’s Mot. in Limine to Exclude
Testimony of Tenant’s Expert Witness, 6/27/16, at ¶ 19. Additionally,
Landlord sought to preclude four fact witnesses—Jason Beardsley, Jean Pierce,
Bernard Bell, and Jeffrey Strohl from testifying.2 See generally Landlord’s
Mot. in Limine to exclude Testimony of Witnesses Identified Eight Days Prior
to Trial, 9/29/16. Landlord asserted that these fact witnesses should be
precluded from testifying because Borough failed to identify the witnesses or
the substance of their testimony in response to Landlord’s interrogatories.3
Id. at ¶ 9-11, 16.
On October 4th and 5th, 2016, the trial court conducted a bench trial.
At the outset of trial, the trial court denied Landlord’s motions in limine, but
explained that it would “sort things out as [they] come[] in.” See N.T.,
10/4/16, at 2.
Landlord testified at trial in support of her position that Borough
breached the lease and presented evidence regarding her damages, including,
the lease, the invoice from Flood Pros—the mold remediation company,
utilities bills, etc. See generally N.T., 10/4/16, at 15-93; N.T., 10/5/16, at
15-19. Landlord also admitted the deposition testimony of Kevin Telfer, owner
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2 The Borough did not call Bernard Bell or Jeffrey Strohl to testify at trial, and
they are not relevant to the instant appeal.
3Landlord did not seek to exclude the testimony of Kenneth DiPhillips, whom
Borough listed as a witness in response to Landlord’s interrogatories.
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of Flood Pros, who was hired by Landlord to perform mold remediation. See
Dep. of Kevin Telfer, 8/17/16, at 2. In his deposition, Telfer described the
procedure employed in performing the mold remediation in the building. See
generally id. Telfer also stated that the mold issue was remediated and the
work completed by December of 2013. Id. at 10.
Borough, in relevant part, called Richard Tarnowski as an expert in mold
testing. N.T., 10/4/16, at 117. Tarnowski testified that he was contacted by
Borough to create a protocol for mold remediation. Id. at 122. Tarnowski
stated that, on July of 2013, he conducted a visual inspection and identified
areas in the building with elevated moisture levels. Id. at 128. He testified
that he “found elevated moisture levels pretty much everywhere, which isn’t
unusual. They had an indoor swimming pool, so we kind of suspected that
there could be some moisture issues.” Id. at 130. He further noted that “the
construction of the building was at a lower grade than the road level. So in
our opinion, in looking at some of my photos, we had moss growth and mold
growth and sediment placed at the front of the building, which is most likely
from runoff of the road.” Id. Tarnowski explained that “the building condition
certainly could lead to continued mold problems if they weren’t remediated.”
Id.
Tarnowski testified that every area of the carpeting that he checked had
elevated mold levels, that dehumidifiers were not present on site the day he
visited, and that there was standing water in the pool. Id. at 131. Further,
there was moisture behind the metal panels where the insulation was located.
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Id. He continued that he could not recall if he saw visible signs of mold in the
carpeting, but that he saw visible signs of mold in the HVAC4 ductwork, in the
pool room, in the sauna room, and on wood door surfaces in the offices. Id.
at 133.
Borough called Jean Pierce, who was one of the subjects of Landlord’s
motion in limine, to testify. Id. at 169. Landlord objected to Pierce’s
testimony regarding the condition of the building before the lease because she
was not identified in a timely manner and Landlord did not know what Pierce
was going to testify to or the basis for her conclusions. Id. at 169-170. The
trial court deferred ruling on Landlord’s objection and permitted her to testify.
Id. at 170.
Pierce thereafter testified that she taught exercise and aerobic classes
at the property prior to the lease. Id. at 172. She stated that there were “a
great deal of problems” with the pool area, including too many chemicals in
the pool and the smell being so strong because there was nothing to circulate
the air. Id. at 172-74. She further made observations as to there being
“black mold” on some of the steps leading to the second floor. Id. at 175.
Pierce explained that she complained to Landlord about the chlorine smell in
the pool area but not about the existence of mold. Id. at 175-76.
Upon cross-examination, Pierce acknowledged that she has never been
employed in the field of mold remediation. Id. at 177-78. She also
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4 Heating, ventilation, and air conditioning.
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acknowledged that she never knew of any testing performed that revealed the
presence of mold. Id. at 178.
Borough called Jason Beardsley, who was also one of the subjects of
Landlord’s motion in limine. N.T., 10/5/16, at 2. At the outset of Beardsley’s
testimony, Landlord similarly requested a continuing objection for the same
reasons she had set forth during her objection to Pierce’s testimony. Id.
Beardsley then testified that during the period of 2002 and 2003, he worked
at the gym located in the property. Id. at 3. He testified that his job was
primarily as a “desk attendant” and that he would “also be responsible for
making sure that any rubbish was cleaned up and -- you know -- cleaning
down, you know, wiping down machines that had gotten sweat on them or
any other substance.” Id. at 4. He stated that he observed “mold
everywhere,” and that he would try to “scrub it off the walls.” Id. at 5, 8.
On cross-examination, Beardsley acknowledged that he had no training
on mold remediation or identification. Id. at 10. He stated that he was basing
his conclusions on his “visual observations” and “experience in life,” but that
there was no testing performed to identify mold in the building. Id. at 11.
Borough also called Kenneth DiPhillips, who was employed by Tenant
and performed some maintenance work in the building after Tenant entered
into the lease. N.T., 10/4/16, at 180-181. DiPhillips admitted that he had
never been in the building prior the lease. Id. He testified that while
conducting a walk-through of the property in January of 2013, he noticed that
water was dripping between the glass entry and the doors to go into the
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building, the carpet was wet, there were holes on the ceiling of the second
floor, and there was ice and water in between the steel and the insulation.
Id. at 182-85. He also observed that there were no gutters. Id. at 199.
DiPhillips agreed with Tarnowski’s testimony regarding the property having a
negative grade, that is, the building being lower than the crown of the road.
Id. at 182. He stated that he notified Borough Councilman Craig Reimel of
his observations. Id. at 184.
On cross-examination, DiPhillips testified that the negative grade
towards the property was open and obvious, as was the fact that there were
no gutters. Id. at 201-02, 204-05. He also acknowledged that when he saw
the ice inside the building, it was in January and it was cold enough to form
ice. Id. at 202. DiPhillips further acknowledged that he had no training in
mold remediation. Id. at 203. Moreover, DiPhillips testified that from the
time Borough entered into the lease, only Borough had access to the property
and Landlord did not interfere with Borough’s possession and use of the
property. Id. at 203-04. He also acknowledged that while he did minor
repairs to property, his job was not to determine whether the HVAC system
was functioning or whether there was a dehumidification system. Id. at 204.
Borough further called Councilman Craig Reimel. See id. at 250.
Reimel testified that during a walk-through prior to entering into the lease, he
asked, “what about the mold?” and that Landlord responded that “[t]he mold
will not be an issue.” Id. at 252. He testified that he did not ask anything
else regarding mold after this brief exchange. Id. at 253.
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Reimel further stated that he did not rely on Landlord’s statement. Id.
at 255. Reimel explained that after signing the lease, DiPhillips informed him
of water dripping inside the front floor. Id. at 256-57. Reimel testified that
he went to the building and observed the water dripping and the carpet was
wet. Id. at 257. He further observed that there was ice behind the insulation
and that he never saw or heard an HVAC, humidification, or dehumidification
system. Id. at 260, 264. Finally, he testified that the intended purpose of
the building was for a community center. Id. at 264.
On cross-examination, Reimel acknowledged that while he had some
concerns regarding mold prior to signing the lease, the Borough never asked
whether it could bring a mold inspector into the premises. Id. at 267. He
further acknowledged that Borough did not inform Landlord when they
discovered water and ice in the building. Id. at 268. Reimel stated that the
Borough thereafter conducted three mold tests in March, July, and August of
2013 and that all of the tests revealed mold in the building. Id. He stated
that he was “surprised to learn” that Landlord wasn’t informed about the mold
until the last week of August. Id. 270. Finally, Reimel explained that although
he had concerns regarding the mold and that while he did not believe Landlord
when she stated that the mold would not be an issue, he still voted to enter
into the lease. Id. at 273-74.
During trial, Borough, who had previously indicated that Lyons would
provide his expert opinion regarding the presence of mold in the building prior
to the signing of the lease, proffered Lyons as an expert to testify regarding
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whether the mold remediation performed by Flood Pros was successful. Id.
at 163-64. Landlord, however, objected on the basis of Borough’s failure to
provide a copy of Lyons’ expert report during discovery. Id. at 164-69. The
trial court agreed and precluded Lyons from testifying. Id. at 169.
After the parties rested, they requested the opportunity to present trial
briefs, which the trial court granted. On April 28, 2017, after receiving trial
briefs from both parties, the trial court awarded Landlord $99,989.81. See
Trial Ct. Op. & Verdict, 4/28/17. The trial court, in the opinion in support of
its decision, asserted that it sustained Landlord’s objections to Pierce’s and
Beardsley’s testimony regarding the alleged presence of mold before the
lease.
Both parties filed motions for post-trial relief. Landlord sought judgment
non obstante veredicto (JNOV), or in the alternative a new trial limited to
damages, and that the decision include pre-judgment interest. See
generally Landlord’s Mot. for Post-Trial Relief, 5/5/17 (unpaginated).
Borough sought JNOV5 due to trial court alleged errors in (1) excluding
Beardsley, Pierce, and DiPhillips’ testimony; (2) not granting a decision in its
favor where there was impossibility or impracticability of performance; and
(3) not concluding that Landlord’s failure to notify Borough that the
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5 Counsel for Borough requested JNOV—not a new trial—based on an alleged
error in the court’s evidentiary rulings. Although ordinarily this would result
in waiver, we will address the issues on the merits.
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remediation had been completed prevented Borough from resuming the lease.
Id. at ¶ 1-2.
The trial court denied both motions on July 5, 2017. On August 4, 2017,
Borough filed a timely appeal.6 On August 11, 2017, Landlord filed a timely
cross-appeal.7 See Pa.R.A.P. 903(b) (“[I]f a timely notice of appeal is filed
by a party, any other party may file a notice of appeal within 14 days of the
date on which the first notice of appeal was served[.]”). On August 22, 2017,
this Court entered an order stating that final judgment had not been entered
and directing Landlord to praecipe the trial court’s prothonotary to enter
judgment, and file a certified copy of the trial court docket reflecting entry of
the judgment with this Court. Order, 8/22/17. Landlord complied with this
order and a final judgment was entered on August 30, 2017.
Before addressing the parties’ issues on appeal, we note that the
standard of review applicable to a non-jury trial is the following:
Our appellate role in cases arising from non[-]jury 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.
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6 Borough’s appeal was docketed at 1210 MDA 2017.
7 Landlord’s cross-appeal was docketed at 1250 MDA 2017.
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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.
[Moreover, t]he trial court, as the finder of fact, is free to believe
all, part or none of the evidence presented. Issues of credibility
and conflicts in evidence are for the trial court to resolve; this
Court is not permitted to reexamine the weight and credibility
determination or substitute our judgment for that of the fact
finder.
Gamesa Energy USA, LLC v. Ten Penn Center Associates, L.P., 181 A.3d
1188, 1191-92 (Pa. Super. 2018) (internal quotation marks and citations
omitted).
I. Borough’s Appeal
Borough presents the following questions in its appeal:
1. Did the [t]rial [c]ourt improperly bar testimony of 3 of
[Borough]’s fact witnesses whose testimony established the
existence of mold in the subject premises during [Borough]’s
occupancy of the building and prior to the lease negotiations
between the parties?
2. Did the [t]rial [c]ourt err as a matter of law by failing to
recognize the evidence offered by [Borough] relative to the
defense of impossibility of performance of the lease due to the
presence of potentially harmful mold inside the leased
property, including but not limited to [Borough]’s expert
witness who opined, among other things, that th[ese] premises
would never be mold free as well as the fact witnesses whose
testimony was stricken by the [t]rial [c]ourt?
3. Did the [t]rial [c]ourt err as a matter of law in failing to
recognize that [Landlord]’s own lease required her to rectify
the hazardous condition caused by the mold, and to notify
[Borough] of the subsequent remediation of the premises and
provide [Borough] with an opportunity to resume the lease,
and does this failure in question act as a bar to [Landlord]’s
recovery and require a verdict in favor of [Borough]?
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Borough’s Brief at 15.
A. Fact witnesses’ testimony
In its first issue, Borough argues that the trial court erred in ruling that
three fact witnesses, DiPhillips, Beardsley, and Pierce, could not testify
regarding the existence of mold in the building before Landlord and Borough
entered into the lease agreement. Id. at 22. As noted above, although the
court had initially denied the motion in limine to exclude their testimony, the
court was open to revisiting the issue. Indeed, after all of the witnesses
testified and the parties rested, the trial court, in its opinion in support of its
decision granted the motion in limine and excluded “any evidence relating to
the presence of mold in the building prior to the parties entering into the
lease.” Trial Ct. Op. & Vedict at 3. The court stated that “there [wa]s no
evidence that any discussions about mold occurred prior to the signing of the
lease and no evidence by [Borough] that it relied on assurances from
[Landlord] about this issue.” Id. It explained that the only testimony
regarding this issue was from Borough Council member, Reimel, who asked
Landlord about mold in the building during a walk through, to which Landlord
responded that it was not an issue. Id. Reimel testified, however, that he
did not rely on Landlord’s statement. Id.
Landlord counters that the witnesses excluded by the trial court were
not identified until eight days before trial “despite the fact that [Landlord] had
served discovery requests seeking identification of witnesses more than two
years [earlier].” Landlord’s Reply Brief at 23. Moreover, Landlord continues,
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Borough does not justify why it failed to identify the witnesses in a timely
manner. Id. Landlord further asserts that Borough not only provided no legal
authority as to how the trial court erred, but also did not articulate how it was
harmed by the trial court’s alleged error. Id.
When reviewing a trial court’s determination on motions in limine, we
apply an abuse of discretion standard. See Turner v. Valley Housing
Development Corp., 972 A.2d 531, 535 (Pa. Super. 2009) (citation omitted).
“An abuse of discretion may not be found merely because an appellate court
might have reached a different conclusion, but requires a manifest
unreasonableness, or partiality, prejudice, bias, or ill-will, or such lack of
support as to be clearly erroneous.” Crespo v. Hughes, 167 A.3d 168, 177
(Pa. Super. 2017) (citation omitted).
The purpose of the discovery rules is to prevent surprise and
unfairness and to allow a fair trial on the merits. Analogous case
law on this subject is found in those decisions that discuss whether
to allow the testimony of a witness who has not been included in
a pre-trial memorandum. Such cases focus on the factors a court
must consider in determining whether or not a witness should be
precluded for failure to comply with discovery rules. These factors
are: (1) the prejudice or surprise in fact of the party against whom
the excluded witnesses would have testified, (2) the ability of that
party to cure the prejudice, (3) the extent to which waiver of the
rule against calling unlisted witnesses would disrupt the orderly
and efficient trial of the case or of cases in the court, (4) bad faith
of [sic] willfulness in failing to comply with the court’s order. In
the absence of bad faith or willful disobedience of the rules, the
most significant considerations are the importance of the witness’
testimony and the prejudice, if any, to the party against whom
the witness will testify.
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Smith v. Grab, 705 A.2d 894, 902 (Pa. Super. 1997) (internal quotation
marks, citations, and alterations omitted). We agree with the above rationale
and discern no abuse of discretion by the trial court in granting the motion in
limine. See id.B. Defense of impossibility of performance
Initially, Borough argues that the purpose of the lease was to
“establish[] either a community center, business incubator, or a combination
of the two.” Borough’s Brief at 23. Borough argues that the parties discussed
this purpose and that it would require the involvement and participation of the
general public. Id. Landlord claims that the “existence of high levels of
potentially harmful mold on the leased premises effectively prevented the
[Borough] from using the property for its intended (and negotiated for) use,
and indeed, any use that could include or involve the general public.” Id. at
24. This, Borough analogizes, is the functional equivalent of a fire leveling
the building. Id. Borough relies on Greenfield & Co. v. Kolea, 380 A.2d
758 (Pa. 1977), in support of its position. Id. at 24-25.
In support, Borough contends that the testimony of its expert,
Tarnowski, regarding “the strong likelihood that the leased building’s
construction assured that the mold therein would be difficult, if not impossible,
to eradicate,” fully supports Borough’s defense of impossibility. Id. at 24-25.
Borough claims this testimony proves that the building could not be used for
public purposes. Id. at 25.
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Finally, Borough points to paragraph 23 of the lease,8 which addresses
the occurrence of “damages to premises.” Id. Borough argues that the
paragraph “clearly states that upon notice to the Landlord of a dangerous or
defective condition, the Borough shall not be required to pay rent for the
premises that are unusable,” and “that the condition causing the inability to
use the premises []shall be repaired by the Landlord as speedily as reasonably
possible.” Id. Borough claims it attempted to communicate with Landlord
twice regarding the situation but that Landlord stated that Borough “caused
the mold and [Borough] was responsible for its clean up.” Id. at 26.
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8 Specifically, paragraph 23 of the lease provides:
23. DAMAGE TO PREMISES:
A. [Borough] must give Landlord prompt notice of fire, accident,
damage or dangerous or defective condition. If the Premises
cannot be used because of fire or other casualty, [Borough] is not
required to pay rent for the time the Premises are unusable. If
part of the Premises cannot be used, [Borough] must pay rent for
the usable part.
B. In case the Premises shall be damaged by fire or other casualty,
the same shall be repaired by Landlord as speedily as reasonably
possible. In case the Premises shall be totally destroyed or so
damaged by fire or other casualty, the same incapable of repair
and restoration within six (6) months, then either party, by notice
given to the other within thirty (30) days after such destruction or
damage, may elect to cancel and terminate this Lease. If in such
case neither party elects to terminate this Lease, Landlord shall
proceed to rebuild or restore the Premises as promptly as possible.
If this Lease is canceled under this paragraph, Landlord shall not
be required to repair or rebuild this building.
See Lease, 12/21/12, at ¶ 23.
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It is well-established that contract law governs lease agreements.
Gamesa, 181 A.3d at 1192. We have explained that:
[t]he 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.
Id. (citing Loughman v. Equitable Gas Co., LLC, 134 A.3d 470, 474 (Pa.
Super. 2016)).
This Court has explained the doctrine of impossibility of performance as
follows:
Pennsylvania law recognizes the doctrine of frustration of
contractual purpose or “impracticability of performance” as a valid
defense to performance under a contract.
The Restatement (Second) of Contracts § 261 provides:
§ 261. Discharge By Supervening Impracticability
Where, after a contract is made, a party’s performance is made
impracticable without his fault by the occurrence of an event the
non-occurrence of which was a basic assumption on which the
contract was made, his duty to render that performance is
discharged, unless the language or the circumstances indicate the
contrary.
Restatement (Second) of Contracts § 261 (1981).
***
Once impracticability of performance or frustration of purpose
occurs, “it is up to the parties to waive the difficulties or seek to
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terminate the agreement.” [Ellwood City Forge Corp. v. Fort
Worth Heat Treating Co., Inc., 636 A.2d 219,] 223 (Pa. Super.
1994). If a party proceeds under the original contract, despite
the impracticability that would otherwise justify his non-
performance, and is then unable to perform as previously agreed,
he can be liable for damages. Restatement (Second) of Contracts
§ 261 (1981). On the other hand, a party who has already
performed under a contract, which is dissolved on the ground of
supervening impracticability, is generally allowed a claim for
restitution to the extent his performance has benefited the other
party. Restatement (Second) of Contracts § 272 Comment: b.
Relief including restitution. In a proper case recovery may go
beyond mere restitution and include elements of reliance by the
claimant, even though they have not benefited the other party.
Hart v. Arnold, 884 A.2d 316, 335 (Pa. Super 2005) (some internal quotation
marks and citations omitted).
In Greenfield, the case relied upon by Borough, an accidental fire
destroyed one of the buildings leased by the tenant. Greenfield, 380 A.2d
at 758. The lease agreement did not contain a provision with respect to the
tenant’s obligations in the event of destruction due to a fire. Id. The
Pennsylvania Supreme Court held that “the accidental destruction of the
building by fire excused the parties from further performance of their
obligations under the lease.” Id. at 760. In so holding, the Court replaced
an “outdated common law presumption [that] the land [i]s always more
valuable than the buildings erected on it.” Id. at 760. The Court explained
that buildings are critical to the functioning of modern society and that when
parties bargain for the use of a building, “the soil beneath is generally of little
consequence.” Id.
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In Hirsch v. Carbon Lehigh Intermediate Unit # 21, 65 Pa. D. &
C.4th 390 (C.C.P. Carbon Cty. 2003),9 the case relied upon by Landlord, the
tenant discovered mold in a building it had leased for purposes of a Learning
Adjustment School. Hirsch, 65 Pa. D. & C.4th at 392. The first time the
tenant discovered mold, it informed the landlord who remediated the problem,
and tenant moved back in. Id. Approximately a year later, tenant again
discovered mold. Id. at 395-97. The tenant had some environmental studies
performed on the building to determine the occurrence of mold. Id. Then,
with no advance notice, the tenant mailed a letter to landlord advising landlord
that the Board had voted to terminate the lease effective as of the end of the
month. Id. at 397.
The trial court, in Hirsch, found that tenant had no valid reason for
terminating the lease. Id. at 401. The court reasoned that “[t]he occurrence
of mold, though an uninsured condition, did not entitle tenant to terminate
the lease under paragraph 19, which pertains to damage by fire or other
casualty. The occurrence of mold in this case did not cause the leased
premises to be totally or partially destroyed.” Id. at 401. Further, “landlord
was never notified and given a reasonable opportunity to correct the
condition.” Id.
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9 We note that except for when the law-of-the-case doctrine applies, generally,
“trial court decisions are not binding upon the Superior Court.” Echeverria
v. Holley, 142 A.3d 29, 36 n.2 (Pa. Super. 2016).
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Here, the trial court found that Greenfield was wholly inapplicable. See
Trial Ct. Op. & Verdict at 4. The trial court explained that the facts in
Greenfield significantly differ from the present facts. Id. The court further
found Hirsch, the case relied upon by Landlord in its trial brief, to be more
akin to the present facts. Id.Initially, Borough’s contention that Tarnowski’s testimony proves that
the building could not be used for public purposes is not supported by the
record. Tarnowski testified that “the building condition certainly could lead to
continued mold problems if they weren’t remediated.” N.T., 10/4/16, at
130 (emphasis added).10 Thus, the premise for the Borough’s position that it
was justified in invoking the impossibility of performance doctrine lacks record
support.11
Even if impracticability of performance had occurred, Borough “waived
the difficulty” by continuing with the lease. See Hart, 884 A.2d at 335.
____________________________________________
10 Borough claims that Tarnowski testified that there was a strong likelihood
that due to the leased building’s construction, the mold therein would be
difficult, if not impossible, to eradicate. See Borough’s Brief at 24-25. We
have thoroughly reviewed Tarnowski’s testimony and we cannot find this
contention in the record. See generally N.T., 10/4/16, at 117-158
(Testimony of Tarnowski). Further, Borough has failed to cite to the relevant
pages in the record where this testimony can be found.
11 We observe that Borough’s proposition that presence of mold in the building
is equal to a fire destroying the building is unconvincing. Unlike a fire that
destroys a building and renders it completely unusable, mold can be
remediated. See generally Dep. of Kevin Telfer (discussing mold
remediation); N.T., 10/4/16, at 117-158 (Testimony of Tarnowski) (same).
Thus, it follows that because mold did not render the building destroyed or
beyond repair and restoration, paragraph 23 of the lease is inapplicable.
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Borough first tested the building for mold on March 13, 2013, approximately
three months after the signing of the lease, and the building tested positive
for mold. See id. at 98. Borough did not notify Landlord of the results. Id.
at 99. Borough conducted a second testing for mold in July of 2013, which
again tested positive for mold. Id. Borough conducted a third testing for
mold in August of 2013, which also revealed mold. Id. Borough did not
terminate the lease after receiving the results of any of the three tests.
Moreover, Borough did not notify Landlord of the results of these tests. It was
not until the end of August of 2013 that Borough contacted Landlord regarding
the mold issue, and not until December 31, 2013 that it terminated the lease
agreement. See id. at 107; Ltr. Terminating Lease, 11/6/13. For all of the
foregoing reasons, we conclude the trial court did not abuse its discretion in
finding that the presence of mold did not entitle Borough to terminate the
lease. See Hart, 884 A.2d at 335 (citing Restatement (Second) of Contracts
§ 261).
C. Notice of remediation
In its last issue, Borough argues that under the lease agreement that
Landlord drafted,12 Landlord was obligated to remediate the situation and
notify Borough. Borough’s Brief at 27. Borough argues that while Landlord
____________________________________________
12In her reply brief, Landlord argues that this contention was never raised or
established at trial. Landlord’s Reply Brief at 11. Further, Landlord argues
that the statement is “factually inaccurate in that both parties were
represented by counsel at the time the lease was negotiated between the
parties.” Id.
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fulfilled her obligation to remediate, she failed to notify Borough. Id.
Moreover, Borough contends that because it had given notice to Landlord of
its intent to terminate the lease effective December 31, 2013, Landlord should
have notified Borough of the remediation “given the fact that [the] lease term
was still in place.” Id. Finally, Borough claims that Landlord, “despite
knowing the intended use of the building and that she was responsible for all
casualties occurring within it[,] refused and failed to meet her duty under this
contract to provide [Borough] with . . . premises that would be
environmentally suitable for use as a public facility.” Id. at 28. Therefore,
Borough continues, “[h]er failure to do so effectively nullified the lease with
[Borough].” Id.
Pennsylvania Rule of Appellate Procedure 2119(a) provides that “[t]he
argument shall [have] such discussion and citation of authorities as are
deemed pertinent.” Pa.R.A.P. 2119(a) (emphasis added). Failure to include
citations to relevant authority constitutes waiver of this issue on appeal.
Giant Food Stores, LLC v. THF Silver Spring Development, L.P., 959
A.2d 438, 444 (Pa. Super. 2008) (citation omitted).
Borough’s argument on this issue consists of two lengthy paragraphs.
Borough, however, includes absolutely no citation to relevant case law or rules
in support of its position that Landlord was under a duty to notify Borough
that the remediation had been successfully completed. In fact, Borough has
included one citation to paragraph 23 of the lease, which does not discuss
notice after mold remediation. Accordingly, we find this issue waived.
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In any event, as we discussed above, paragraph 23 of the lease is
inapplicable to the situation where the building requires mold remediation.
Moreover, paragraph 23 of the lease makes no mention of a requirement that
Landlord give notice to Borough after mold remediation has been performed.
See Lease, 12/21/12, at ¶ 23.
II. Landlord’s Appeal
Landlord raises the following questions on appeal:
1. Did the trial court err when it failed to grant [Landlord]’s motion
for JNOV or in the alternative a new trial limited to damages
only when the trial court inappropriately calculated the
damages due [Landlord] by failing to place her in as good a
position as she would have been but for the breach of contract
by the [Borough]?
2. Did the trial court err as a matter of law in failing to grant
prejudgment interest to [Landlord]?
Landlord’s Brief at 6 (full capitalization omitted).
A. Calculation of damages
In support of Landlord’s first issue, she argues that the lease was for a
duration of five years and that Borough failed to make any payments after the
first year. Id. at 20. Landlord claims that she is entitled to the full amount
of rent owed under the lease because that would put her in the same position
as she would have been but for the breach of contract. Id. She claims the
trial court erred because it “deviated from existing law and utilized
[Landlord]’s testimony regarding her attempts to mitigate her damages to
engage in a quantum meruit analysis of the fair rental value for the property.”
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Id. at 20-21. Landlord further claims that “[w]hen the parties explicitly agree
and contract for a monthly rental it is beyond the province of the trial court to
set aside such an agreement and engage in a quantum meruit analysis for fair
rental.” Id. at 22. Landlord contends that the proper award or damages
would be $239,760, which represents forty-eight months at $4,995 per
month. Id. at 23. Finally, Landlord argues that the trial court erred in
depriving her of rent during the time she was remediating and repairing the
property because Borough had already engaged in conduct constituting
anticipatory breach. Id. at 24.
The Pennsylvania Supreme Court has discussed the damages prong of
the breach of contract analysis as follows:
Where 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 [or
she] 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) (internal quotation marks and citation omitted). “A damage award
should place the non-breaching party as nearly as possible in the same
position [it] would have occupied had there been no breach.” Gamesa, 181
A.3d at 1194 (internal quotation marks and citation omitted).
Here, the lease agreement provides as follows:
27. MITIGATION
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Not[]withstanding any term previously set forth herein, the
parties agree that in the event Tenant’s reasonably accepted
use(s) for the premises do not meet with meaningful success as
reasonably determined by Tenant, Tenant shall not be excused
from performance under the lease.
Provided, however, that should Tenant vacate the premises after
at least thirty (30) days written notice to Landlord, Landlord
agrees to exercise reasonable commercial efforts to relet or
and/or sell the premises. If Landlord is able to relet the premises,
Tenant shall be entitled to a credit for rent received from
Landlord’s new tenant less any costs actually incurred by Landlord
in achieving the reletting of the premises.
R.R. at 23a.
While Landlord attempted to find other lessees, her attempts were
unsuccessful and she did not receive any amount in mitigation of damages.
No party has challenged the sufficiency of Landlord’s attempts to mitigate.
Therefore, the trial court erred as a matter of law when, in its calculation of
damages, it presumptively decreased the amount of damages Landlord was
entitled to by applying the amount she could have made had she, in fact,
actually relet the premises. Indeed, the trial court cited no legal authority for
doing so. See Trial Ct. Op. & Verdict at 5-6. We therefore remand for the
trial court to conduct a hearing limited to recalculation of damages based on
the existing record.
B. Prejudgment interest
In her second issue, Landlord argues that the trial court erred in not
granting her pre-judgment interest. Landlord’s Brief at 24-25. She relies on
TruServ v. Morgan Tool & Supply Co., 39 A.3d 253 (Pa. 2012), in support
of her argument that “when a party’s right to the payment of interest is not
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specifically addressed by the terms of the contract, the non[-]breaching party
to a contract may recover, as damages, interest on the amount due under
the contract.” Landlord’s Brief at 25 (citing TruServ, 39 A.3d at 263).
Landlord argues that Pennsylvania, through TruServ, adopted Section 354 of
the Restatement (Second) of Contracts, which states that “an award of
prejudgment interest under Section 354 is not subject to a court’s discretion.”
Id. (citing TruServ, 39 A.3d at 263-64). Landlord claims that “[t]he statutory
rate of interest in Pennsylvania is six percent (6%) per anuum. Id. (citing 41
P.S. § 202). Thus, Landlord claims, because Borough “repudiated the lease
contract at the conclusion of 2013, [Landlord] is entitled to prejudgment
interest on all sums due her from the outset of 2014 through the date of
verdict.” Id.
We review a denial for pre-judgment interest for an abuse of discretion.
See Cresci Const. Servs., Inc. v. Martin, 64 A.3d 254, 258 (Pa. Super.
2013) (citation omitted).
We have explained that “[a] court has discretion to award or not award
prejudgment interest on some claims, but must or must not award
prejudgment interest on others.” Id. (citing Fidelity Bank v. Com. Marine
and Gen. Assurance Co., 592 F. Supp. 513, 522 (E.D. Pa. 1984)). Section
354 of the Restatement (Second) of Contracts provides:
(1) If the breach consists of a failure to pay a definite sum in
money or to render a performance with fixed or ascertainable
monetary value, interest is recoverable from the time for
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performance on the amount due less all deductions to which the
party in breach is entitled.
(2) In any other case, such interest may be allowed as justice
requires on the amount that would have been just compensation
had it been paid when performance was due.
Cresci, 64 A.3d at 259 (citing Restatement (Second) of Contracts § 354(1)-
(2) (1981)). Thus, “before awarding prejudgment interest, the court must
identify the nature of the breach.” Id.
We further explained that:
Section 337(a) of the Restatement (First) of Contracts provides:
If the parties have not by contract determined otherwise, simple
interest at the statutory legal rate is recoverable as damages for
breach of contract as follows:
(a) Where the defendant commits a breach of a contract to
pay a definite sum of money, or to render a performance
the value of which in money is stated in the contract or is
ascertainable by mathematical calculation from a standard
fixed in the contract or from established market prices of
the subject matter, interest is allowed on the amount of the
debt or money value from the time performance was due,
after making all the deductions to which the defendant may
be entitled.
Id. at 258 (citing Restatement (First) of Contracts § 337(a)).13
Under this standard, recovery of pre-judgment interest is a matter of
law, not of discretion. Id. Therefore, in Pennsylvania, pre-judgment interest
____________________________________________
13 “Restatement [(First)] of Contracts § 337(a) (1932) is currently found at
Restatement (Second) of Contracts § 354(1) (1981).” Cresci, 64 A.3d at 260(alteration in original omitted).
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may be recovered only if:
(1) a defendant commits a breach of a contract to pay a definite
sum of money; or
(2) a defendant commits a breach of contract to render a
performance the value of which in money is stated in the contract;
or
(3) a defendant commits a breach of contract to render a
performance the value of which is ascertainable by mathematical
calculation from a standard fixed in the contract; or
(4) a defendant commits a breach of a contract to render a
performance the value of which in money is ascertainable from
established market prices of the subject matter[.]
Id. (emphasis omitted).
Otherwise, pre-judgment interest is awarded at the court’s discretion:
d. Discretionary in other cases. Damages for breach of contract
include not only the value of the promised performance but also
compensation for consequential loss. The amount to be awarded
for such loss is often very difficult to estimate in advance of trial
and cannot be determined by the party in breach with sufficient
certainty to enable him to make a proper tender. In such cases,
the award of interest is left to judicial discretion, under the rule
stated in Subsection (2), in the light of all the circumstances,
including any deficiencies in the performance of the injured party
and any unreasonableness in the demands made by him.
Restatement (Second) of Contracts § 354 cmt. d.
Here, the contract provided for a specified amount – $59,940 annual
rent, payable in monthly installments of $4,995, plus all real estate taxes,
insurance, utilities, and any and all maintenance, upkeep, and repairs. See
Trial Ct. Op. & Verdict at 1. Because Borough breached the lease agreement
to pay a definite sum of money, Landlord was entitled to pre-judgment interest
as a matter of law. See Cresci, 64 A.3d at 258; Restatement (Second) of
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Contracts § 337(a). Therefore, we conclude that the trial court erred in not
awarding Landlord pre-judgment interest.
Accordingly, we remand with instructions to conduct a hearing limited
to recalculation of damages based on the existing record and to award pre-
judgment interest. Based on this record, no new trial on damages is required.
Judgment is vacated. Order denying Landlord’s post-trial motion is
affirmed in part and reversed in part. Order denying Borough’s post-trial
motion is affirmed. Remanded with instructions. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/13/18
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