181 A.3d 1188
Pa. Super. Ct.2018Background
- Gamesa leased ~35,000 sq ft from Ten Penn Center (TenPC) through a lease running until 2018 that allowed subleases with Landlord approval and provided a tenant improvement allowance.
- TenPC approved a sublease to Viridity for ~15,000 sq ft; Viridity remained and paid rent after Gamesa vacated the premises in May 2012.
- Gamesa vacated in May 2012, continued paying rent, and sought Landlord consent in June 2012 to sublease additional space to BSI, providing required financial information only in a July 5, 2012 letter.
- TenPC responded in July 2012 by asserting Gamesa was in default for vacating and late rent, and conditioned approval of the BSI sublease on Gamesa waiving its remaining tenant improvement allowance (a counter-offer).
- Gamesa sued in March 2013 for breach of contract and related claims, alleging TenPC failed to approve or reject the BSI sublease within 30 days and seeking damages and declaratory relief; after a nonjury trial the trial court found TenPC breached and awarded damages and retroactively terminated the lease.
Issues
| Issue | Plaintiff's Argument (Gamesa) | Defendant's Argument (TenPC) | Held |
|---|---|---|---|
| Whether Gamesa was in default under the lease for vacating the premises | Gamesa argued it did not default because it did not intend to abandon and continued paying rent | TenPC argued Gamesa defaulted upon vacating (vacate = default) | Vacating the premises triggered default under the lease; trial court erred by conflating "vacate" with "abandon" and by concluding no default |
| Whether TenPC failed to approve/deny the BSI sublease within 30 days under the lease | Gamesa argued TenPC did not timely approve/deny, so TenPC materially breached | TenPC argued its counter-offer conditioned approval and thus rejected within 30 days; also contended Gamesa had been in default | 30-day period ran only after Gamesa supplied required materials (July 5); TenPC rejected within the period by making a counter-offer on July 13; trial court erred finding failure to decide within 30 days |
| Whether TenPC unreasonably withheld or conditioned consent to the BSI sublease | Gamesa argued TenPC unreasonably conditioned approval (waiver of allowance) and thus breached §20.1 | TenPC said conditioning was reasonable given Gamesa's default and BSI's weak finances | Appellate court affirmed trial court: on credibility grounds TenPC unreasonably conditioned approval and breached §20.1 |
| Proper remedies and damages: expectation vs. rescission/unjust enrichment | Gamesa sought damages equal to BSI sublease rent and asked lease termination; continued to act under lease (paid rent, used allowance) | TenPC argued Gamesa could not both continue under the lease and obtain retroactive termination/unjust enrichment recovery | Gamesa elected to continue the lease (paid rent, used allowance), so it could not retroactively terminate; judgment as to damages for the lost sublease was affirmed, but retroactive termination and unjust enrichment award were reversed |
Key Cases Cited
- Allegheny Energy Supply Co. v. Wolf Run Mining Co., 53 A.3d 53 (Pa. Super. 2012) (standard of review for nonjury trial findings)
- Pugh v. Holmes, 405 A.2d 897 (Pa. 1979) (lease interpretation governed by contract principles)
- Ferrer v. Trustees of the Univ. of Pennsylvania, 825 A.2d 591 (Pa. 2002) (measure and foreseeability of contract damages)
- McCausland v. Wagner, 78 A.3d 1093 (Pa. Super. 2013) (elements of breach and election of remedies discussion)
- Helpin v. Trustees of Univ. of Pennsylvania, 10 A.3d 267 (Pa. 2010) (aim of damages to place non-breaching party in position as if no breach occurred)