Newman Development Group of Pottstown, LLC v. Genuardi's Family Market, Inc.
98 A.3d 645
| Pa. Super. Ct. | 2014Background
- Landlord (Newman) and Tenant (Genuardi’s/Safeway) executed a 20‑year commercial lease for an anchor grocery store; the lease included a contractual damages formula (§20.2.2) and an interest/default rate (§20.4, §1.15) and an attorneys’‑fee provision (§24.10).
- Safeway sent notice terminating the lease as an anticipatory breach on February 13, 2002; Landlord sued for damages and later obtained substitute tenants (PetSmart and Michaels) with 10‑year leases.
- After a bench trial, the trial court found Tenant breached and, on remand from the Superior Court, awarded Landlord damages under §20.2.2 (including future rent for the 20‑year term), interest from the breach date, reletting expenses, and attorneys’ fees with interest.
- Tenant appealed several rulings (whether future rent must be reduced to present value; mitigation for the second half of the lease; timing of interest; inclusion of reletting expenses; interest on attorneys’ fees). The Superior Court considered the case en banc.
- The Superior Court affirmed (1) that §20.2.2 damages need not be reduced to present value because the lease negotiated an express remedy that did not require present‑value reduction, (2) the mitigation deduction used, and (3) award of contractual interest from February 13, 2002; but vacated and remanded to (a) remove reletting expense amounts based on testimony the trial court previously found not credible and (b) limit interest on attorneys’ fees to start no earlier than the date Landlord became the prevailing party (the trial court’s original verdict date).
Issues
| Issue | Plaintiff (Landlord) Argument | Defendant (Tenant) Argument | Held |
|---|---|---|---|
| Whether future rent damages under §20.2.2 must be reduced to present value | §20.2.2 sets an agreed damage formula; no contractual requirement to reduce to present value — full contractual measure should apply | Future damages must be discounted to present value as matter of law or based on prior proceedings; failure to reduce would give windfall | Held: No reduction required — parties negotiated §20.2.2 as the remedy and did not include present‑value reduction; Pennsylvania law does not mandate reduction where contract specifies damages |
| Whether Landlord must deduct mitigation for the second 10 years (post‑substitute tenants’ 10‑yr leases) | Landlord contends it endeavored in good faith to mitigate; replacement tenancies and costs were accounted for under §20.2.2; uncertainty about renewals makes further deduction speculative | Tenant urges deduction for likely mitigation in years 11–20 (probabilistic renewals, expert 50% renewal model) | Held: Trial court’s calculation (deducting substitute tenants’ rents for their 10‑yr terms only) was acceptable — further mitigation for the second decade would be speculative and was not required given the evidence and §20.3 duty to mitigate was satisfied |
| When contractual interest on breached sums accrues (interest start date) | Interest under §20.4 attaches to sums owed by reason of the anticipatory breach and thus may run from February 13, 2002 | Interest should not accrue until rent would have been due (June 25, 2005) or be treated as prejudgment interest only when appropriate | Held: Interest awarded as contractual interest under §20.4 may run from the date of anticipatory breach (Feb. 13, 2002); §4.3 default‑interest provision (post‑due payments) is inapplicable here |
| Inclusion of reletting expenses and interest on attorneys’ fees before verdict | Landlord sought reletting expenses and interest on fees per lease provisions; originally presented expense figures | Tenant argued trial court previously found certain reletting expense testimony not credible and that interest on attorneys’ fees cannot accrue before Landlord became prevailing party | Held: Trial court erred by including reletting expense figures the court had earlier discredited — remand to recalculate using only Marchitelli’s credited savings; interest on attorneys’ fees should run from the date Landlord became prevailing (original verdict date), not earlier |
Key Cases Cited
- Kaczkowski v. Bolubasz, 421 A.2d 1027 (Pa. 1980) (addresses reduction to present value in future‑damages context and discusses total offset method)
- Trust Co. of Glen Rock v. Shrewsbury Furniture & Mfg. Co., 158 A. 641 (Pa. Super. 1932) (parties’ contract must include present‑value term to require discounting of agreed damages)
- TruServ Corp. v. Morgan’s Tool & Supply Co., Inc., 39 A.3d 253 (Pa. 2012) (distinguishes contractual interest from prejudgment interest and explains recovery methods)
- Helpin v. Trustees of Univ. of Pennsylvania, 10 A.3d 267 (Pa. 2010) (contract interpretation and proper standards for damages calculation are legal questions reviewed de novo)
- Seven Springs Farm, Inc. v. Croker, 748 A.2d 740 (Pa. Super. 2000) (principle that contract terms must be read together and given effect)
- Spang & Co. v. USX Corp., 599 A.2d 978 (Pa. Super. 1991) (failure to raise an issue in an earlier appeal can forfeit later review)