*1
v. FEDERATION OF JEWISH AGENCIES OF GREATER
PHILADELPHIA, Appellee. Supreme Pennsylvania. Court of
Argued Oct. 1984. Decided March *2 Monteverde, Philadelphia, Hemphill, Thomas P. Jean C. for appellant. Lachs, Philadelphia,
Richard E. Squire, M. Susanna appellee. FLAHERTY, NIX, C.J., LARSEN, McDER-
Before PAPADAKOS, MOTT, HUTCHINSON, ZAPPALA and JJ. OPINION NIX, Chief Justice.* appeal1
This question raises the of whether there anwas anticipatory breach of the lease between the appellant of owners the building at 1528 Walnut Street (hereinafter referred to “Walnut”), and the of Federation Agencies Jewish Philadelphia (“Federation”). Greater At trial the Court Common of Philadelphia Pleas County concluded that Federation had committed an anticipatory breach of its lease and entered judgment favor of Wal- nut. Damages were assessed at Two Hundred Ninety-two ($292,000)plus Thousand Dollars interest.
On appeal panel Court determined lower court erred its application of Pennsylvania contract law to the facts this grounds case. On the *3 evidence did support finding not the of an anticipatory breach and that the lower court had imposed on erroneously the duty Fedеration a to occupy the premises in to addition its obligation rent, to pay the Court reversed and vacated the judgment against Federation. This Court granted petition Walnut’s of allowance appeal Febru- 29, ary 1984.
I. 1971, In Federation decided its headquarters was inadequate and appointed a search committee to find a new site. After a year and a half the committee recommended that Federation demolish building its own and a construct new one at its location at 1509-13 Walnut Street rather than an buy existing building at another site.
The Federation developed plan implement to this recom- mendation. Under that plan Federation was to relocate for during years two which the demolition and construction at its Therefore, own location would place. take Federation * reassigned 4, This case was to the writer on December 1984. 1. jurisdiction This Court is pursuant vested with to 42 Pa.C.S. 724. § rental of Walnut for the a lease with entered at 1528 Walnut Street. building four floors of the 8, 1973, lease, by for rental provided November The dаted beginning of two space period years for a Federation 30, 1976. Attached to the 1, ending April May letter, was a also its execution Federation lease before that, The letter indicated as dated November 1973. knew,2 referred to part space Federation well (“Catalytic”) Inc. occupied by Catalytic, lease was then August Every not until expire whose would to delivery effort to be made to tender promised was possible. May Federation as close to estimated that it would be able vacate the Catalytic of 1974. That move was premises May some time however, strike in May, a sheet metal worker’s delayed, completion of the Center prevented prompt which was to move. Square building project Catalytic into which Catalytic only These circumstances indicated to on Walnut Street premises would it be unable vacate it would have during May, but also that trouble therefore, meeting August Catalytic, 31st deadline. (90) up ninety its lease for requested option an to extend 31, 1974, from deadline. Walnut rеfused days August noting obligations space this its to lease the request Federation.
2. The text of the letter indicates specifically that the Federation had apprised Catalytic’s occupancy the tenure of its lease. been *4 The letter states: understand, occupied you premises being are now As demised Inc., They by Catalytic, expires August have whose lease 1974. you accordingly, they will that indicated to us and we have advised May every give possession as close to make effort to the Federation possible. 1st as If, however, quarters, may they new are unable to move into the necessary beyond May on these for them to remain 31, 1974, floors, beyond August no which is but event expiration date of their lease. record, you please sign will In order for this to be a matter of acknowledging receipt Lease copy of the return a of this letter Agreement indicated above. May and of 1974 there
During frequent June was corre- Walnut, spondence between Catalytic, Federation and those Square project involved in Center on the subject of an of Catalytic’s extension lease 1528 Walnut Dur- Street. ing that time Federation indicated its disappointment but the fact not accepted that it would be able to obtain posses- September 1, sion In until 1974.3 to the acquiescing delay 1st, until September agreed Federation never any to exten- sion that time beyond though repeatedly even asked to agree.
Meanwhile, in late June Federation executives became a building aware of for sale at 226 South Sixteenth Street more which would than meet adequately Federation’s needs for permanent headquarters. On 1st July building that was purchased and Federation abandoned all plans demolish and rebuild at its old location. A newspaper account of this transaction indicated that Federation had been motivated to purchase make this by the amount of would money it save on construction costs rental fees the temporary location.
Subsequent purchase site, Federation’s of its new Catalytic continuеd to to get endeavor an extension from Walnut. Walnut refused repeatedly stating that it would agree not to the approved. extension unless Federation Federation, however, give approval refused its claiming any it did wish to lend validity to the contract by agreeing to extension. meeting
At a on August 1974 Federation stated its position more specifically. Federation claimed its with Walnut was invalid because Walnut failed had possession by deliver 1st which May it claimed to be the date for delivery under the lease. Therefore Federation claimed that it could not its give approval abandon- without ing its claim invalidity contract. Contrastingly, Hurwitz, In his letter June 1974 Donald B. Executive Vice Federation, "Obviously President of the stated: we have no alterna- tive, sincerely hope problem but I will be resolved and that therefore, period delays (R. 742a). will be curtailed.” *5 however, Rnbin, Ronald then Assistant Treasurer of Feder- ation, declared to agents Walnut that Federation “did not want occupy floors], four had no use for it [the and would not cоnsider any type of extension without a release of liability from the lease.” Exhibit R. 796a. August 5, 1974,
On Walnut, relying advice of counsel that Federation had anticipatorily breached the agree- lease ment, acquiesced pressure by Catalytic granted and (90) ninety-day extension on Catalytic’s lease. Catalytic option exercised its to extend its lease beyond August 31st remained the space until October 1974.4 Despite Catalytic’s continued tenancy Walnut sent a bill to Federation on October 1974 for rent due from Octo- ber 6th through 31st. Federation refused to pay reit- erating its claim that the lease was void. Walnut com- menced this action in February, seeking damages alleged to have occurred as a result of Federation’s breach of the agreement.
II. To resolve the dispute between these parties two this Court must address two issues. The first is whether there was an anticipatory breach Federation of its lease agree- ment with Walnut. if Secondly, we conclude that there was no breach by Federation we must determinе whether Wal- nut’s grant of the extension to Catalytic constituted a material breach of the lease.5
4. Part of the space was vacated on October 6th but the entire area was not delivered until October 31st. alleges 5. Walnut granted that it reargument by should have been Superior Beck, member, Judge Phyllis Court because panel failed to recuse Judge herself. Walnut participation claims that Beck’s in the consideration and determination of Superior this case Court’s panel gives appearance impropriety since she was a substantial paid contributor and had dues to the Federation and because her law clerk was the mother of attorneys. one of the Federation’s In view of independent entertaining matter, our disposition the re- quest reargument before the Court need con- independent sidered. Our any consideration also moots issue of the possible appearance impropriety part Judge on the Beck. presented
In
the issues
here we note
analyzing
*6
findings
the trial
of fact
by
judge’s
is
Court
bound
on
findings
competent
are
based
evidence.
unless those
however,
law,
binding
appel
are not
on an
Conclusions
it is to determine whether there was
duty
late court whose
by
of law to fact
the lower court.
proper application
a
311,
(1969).
433 Pa.
The relevant facts as found the trial by court are as follows:
(a) July statement that “he [Federation’s] was advised that the lease would have no because effect of the inability of [appellant] give possession asMay lease;” called for
(b) an inconclusive meeting with on July [Federation] 30, 1974, followed
(c) meeting with on August 1, 1974, at [Federation] which time declined to grant an extension [Federation] because “they being were advised their attorneys that *7 any given extension by the Federation essence, would in acknowledge lease,” the validity the and
(d) on this same date ... informing [Federation’s] that “the Federation did not want to occupy [Walnut] [the four floors], it, had no use for and would not consider any type release, extension without a of liability from the lease.” [Emphasis original].6
Whether viewed or individually collectively these statements are insufficient to meet McClelland’s require ment of an absolute and unequivocal refusal. The July 24th statement appellee had been advised that lease would have no effect because of appellant’s failure to deliver the space in May is insufficient because it does not provide a definitive indication that appellee intends to act on this advice or treat the contract as Appellee’s void. August 1st statement that it did not wish to approve an extension for Catalytic because it would lend validity to the lease does not indicate that inwill fact perform. Moreover, not appellee’s statement that it had no use for space and would not consider approving the extension without a re lease from obligations its under the lease indicates that Walnut, Appellant, has asserted that the Court misread findings Therefore, of fact made the trial court. to avoid confu- findings sion the directly above were cited from the trial court’s opinion.
174 obligation least a very possible at the recognize did appellee party preserve The fact that a seeks to contract. under the required perform- defense to the legal to be a what it deems deliberately an intention to breach not reflect ance does to it reflects an intention contrary, To the agreement. for the legal if there is a basis only performance avoid performance. refusal of anticipatory repudiation the rule of
The rationale behind
obligee/plaintiff
An
of economic waste.
prevention
is the
act as a
perform
a useless
required
not be
should
for a breach when
right
of his
to recover
condition
re-
unequivocal
an
and
hаs demonstrated
absolute
obligor
Ra-
v. Transitone Automobile
Baldwin
perform.
fusal
v.
Weinglass
(1934);
In conclusion we Federation since it did agreement by breach or a refusal unequivocal utter an absolute *8 its an to fulfill inability statement of positive definite and contract.8 obligations under the anticipatory argument reject the definition of Walnut’s 7. We (Second) of Contracts Section 250 of the Restatement breach stated in 250 would explication of the McClelland standard. Section is a mere anticipatory there was finding breach in a situation wherе a allow inability That only apparent under the contract. an unacceptable of the McClel- clearly represents an dilution provision land rule. the issue of whether lower courts addressed 8. We note that both however, agree, duty occupy the lease. We under Federation had unnecessary to concurring it is Judge Spaeth’s statement with occupy the opportunity for Federation to decide this issue since Catalytic by grant Walnut’s of an extension premises was thwarted possession. in the tenant then III. Having concluded that Federation did not anticipatorily agreement breach its lease with Walnut we must now address the issue of whether materially Walnut breached granting the lease by Catalytic’s extension of lease for That ninety days. extension allowed Catalytic to remain lawfully space until November 1974.
Appellant claims that it obligation was under no to deliver possession to Federation on September 1974 because the agreement contained a clause prohibiting forfeiture by the Federation reason of by delay delivery where that delay was caused by failure of the existing tenant to space. vacate the Clause 22 of the contract states: 22. In the event that the herein demised premises are not ready for lessee’s occupancy at the time herein fixed for the beginning lease, of the term of this because ... of the failure or refusal of the tenant of the said demised premises ... to vacate and surrender up the same ... this lease ... shall not be effected thereby. [sic] Regardless of whether we agree with Walnut’s assertion that it had no duty possession deliver by September 1, 1974 if its existing tenant refused to leave the demised premises August 1974, deadline, we must con- clude that this clause is inapplicable to the facts of this case. Since Clause 22 refers to the only instance where the existing tenant holds over it is irrelevant to our determina- tion in the instant case where the tenant remained on the premises written Thus, with the lessor. it is Walnut’s approval of the extension rather than Catalytic’s recаlcitrance prevented which Federation from taking pos- by September 1, session
More importantly we conclude that because Walnut signed the extension of Catalytic’s lease and affirmatively acted to keep Catalytic on the premises despite its lease with Federation Walnut materially breached its own obli gations under the lease. As the Superior Court properly stated there is an implied quiet covenant of enjoyment
176 property. real When lease of every accompanying lease under the taking possession from prevented is tenant is then that covenant the lessor acts of affirmative 388, 369 A.2d Morelli, Pa.Super. 245 v. Pollock breached. Pa.Super. 265 Fargo, v. Wells (1976); Easton Theatres 458 dismissed, 498 Pa. (1979), appeal 1333 334, 401 A.2d this covenant breached (1982). Walnut 449 A.2d extend agreement signing act of the affirmative lease.9 Catalytic’s antici- did not breach Federation hold that therefore
We Walnut, whose and that Walnut its lease with patorily breach, held must be aby prior excused actions were leаse. the terms of the under for its failure liable Court the order affirm Accordingly, we herein stated. the reasons dissenting opinion.
LARSEN, J., files a in which opinion HUTCHINSON, J., dissenting a files ZAPPALA, J., joins. Justice, dissenting.
LARSEN, Ave- Pennsylvania is the in this case The appellant (hereinafter Street as 1528 Walnut trading Corporation, nue 8, 1983, Walnut “Walnut”). November On to as referred of the Federation appellee, with into an entered (hereinafter re- Philadelphia of Greater Agencies Jewish four floors “Federation”), leasing of for the ferred to as in Philadel- 1528 Walnut Street located at building an office phia. 1975, when February, began litigation protracted
This
in the Court
assumpsit
complaint
filed a
Walnut
that Federa-
alleging
County
Philadelphia
Pleas
Common
dam-
sought
agreement,
lease
had breached
tion
breach.
of said
as a result
accrued
to have
ages alleged
Maru-
M.
trial,
William
the Honorable
Following non-jury
taking
tenant
from
dispute
preventing the
be no
There can
a material
two-year
constitutes
months of a
possession for three
breach.
*10
24,
tani ruled in favor of Walnut on June
1980 and assessed
$292,000
damages
approximately
plus
against
of
interest
A
panel (Spaeth,
Federation.1
Court
Brosky
Beck, JJ.)
unanimously reversed
lower court and vacat-
ed
judgment
Pa.Super. 228,
award. 319
Most of facts are dispute, although not in the infer- ences arising from those are vigorously facts contested. The record discloses the following facts. 1973,
In Federation had decided to replace its head- quarters at 1511 Walnut A Street. Site Search Committee failed an acceptable to locate permanent and, headquarters so, the was decision made that Federation would secure temporary facilities use while the existing headquarters was and replaced demolished awith new structure. To that end, agreement a lease was entеred into with Walnut on 8, 1973 provided November which year a two period. the lease
Originally, a contemplated beginning 1, However, date of 1974. May a simultaneously executed addendum a beginning established date than Sep- no later tember This provided: 1974. addendum understand, youAs premises being demised are now occupied Inc., by Catalytic, whose August lease expires 1. Walnut us informs that "because the defendant a well known and is charity, parties agreed influential Jewish that it should be tried non-jury one judges satisfactory before of three non-Jewish to both Appellant sides.” by Brief for am 5. I offended the innuendo that judge a Jewish of determination the Court of Common Pleas of Philadelphia County might merely suspect somehow be because one Moreover, parties organization. was a Jewish charitable I disapprove per judge-shopping private agreement of this blatant parties assignment judges to a suit. law The selection and is strictly a matter of Judicial Administration within our Unified Judi- System, cial negotiated a matter is to be and between litigаnts. Pennsylvania See Rules Judicial Administration Nos. 702, 703, 706. indicated to us and we have advised They have every give make effort to they will
you accordingly, 1st, May possible. as close possession the Federation If, however, to move into their new are unable they for them to remain necessary beyond quarters, may be floors, in no 1, 1974, beyond on these but event May date of their expiration which is the August lease. record, you a matter of will may
In order that this copy return the of this letter acknowl- sign and please indicated above. Agreement of the Lease edging receipt *11 Street, Inc., at 1528 had the tenant Walnut Catalytic, under construction that was facility to lease a new plans Square A strike at Centre Square. as labor known Centre delayed completion of 1974 and summer during spring chance that Federation eliminating any project, that by May per- Street 1st move into 1528 Walnut might date in jeopardy. 1st start placing September haps strike created the labor Due to the uncertainties 1974), Walnut (which by mid-July, settled apparently was to ex- from Federation to an attempted obtain beyond September of their lease beginning tend the date inability to vacate by Catalytic’s if necessitated first, cooper- At Federation was that date. premises before extension, albeit to acquiesce and appeared ative surprising initial is not cooperation This reluctantly. in Federation’s key officials of the fact that several view in the financial interests had or hierarchy proprietary also to avoid and wanted Square at Centre project construction tenant, Inc. Catalytic, new Square’s difficulties Centre with Kravitz, Federation’s Morris A. These officials were: key in Centre President, ownership interest had an then who an counsel, had- Cohen, Federation’s who M. Square; Sylvan Eisen, a and Albert Square; ownership Centre interest an Committee Search Site member Federation’s Co., estate the real & executive of Albert M. Greenfield managed Square. Centre company 28, 1974, letter, On Mr. May Eisen sent a on Albert M. & Hurwitz, Greenfield Co. Mr. stationary, Donald Exeсu- Federation, tive Vice President of which pertinent stated in part:
You recall that I may spoke you ago about four weeks concerning the of a possibility hold-over by Catalytic as a Construction result of inability to their complete Centre space Square____ at estimate this time is [0]ur Catalytic space that the will not be some ready until time near the end of August and may extend necessary period September. into request At gentlemen several of the copied below Philip Seltzer, Kravitz, Messrs. S. Morris A. Sylvan [“cc: Cohen, Rubin”, M. Ronald all officials of the I Federation] asking am for your agreement at go this time to along period with whatever is necessary complete for us to space in Catalytic’s order that we can turn posses- over Federation____ sion area they are vacating to the we will Obviously, do everything possible to get Catalytic space out of the as practical, soon we but would appreciate your assistance at this time in this matter. 17, R. Exhibit 736a. Mr. responded, Hurwitz letter of 30,1974, May that although Fеderation was disappointed by “facts are delay, facts and have to be faced” and *12 indicated all have to do the hope best we can and “[w]e’ll things work out 18, 737a. satisfactorily.” Exhibit R. On 1974, 20, June Mr. Hurwitz wrote another Eisen in letter to response to Eisen’s request for a ninety extension day by Federation. Hurwitz’ letter stated have no “[o]bviously we sometimes, ... alternative circumstances make decisions and all that’s there is to it.” Exhibit 23. R. 742a.
Meanwhile, 24, 1974, on about June an alternative head- quarters site at 226 South 16th Street came to the attention of Federation’s Site Search Committee.2 This location had not been previously available and was a attrac- much more 28, 2. The minutes of Federation’s June meeting 1974 cabinet indicates that 226 16th South Street had first been of examined members the Site Search Committee on June 1974. 751a. Exhibit R. headquarters, primarily be- for Federation’s new site tive 2 million savings (approximately cause of the substantial selling “very from a reasonable” dollars) result that would headquarters eliminating temporary a move from price, at present headquarters sale of the back, and from the and meeting at a held on Accordingly, Street. 1511 Walnut unanimously adopted 28, 1974, Federation’s Cabinet June as the new 226 South 16th Street purchase resolution 27, R. 758a. Exhibit building. headquarters permanent on of the lease meeting, “question this the Additionally at pointed out brought up, and was Street was 1528 Walnut in time delivered to Federation has not been space that the is to Federation agreement price special that a 2, 1974, at 226 South property the July Id. On involved.” Federation head- as the new purchased was 16th Street temporary pending relocation quarters plans headquarters of a new demolition and construction 28, R. 757a Exhibit abandoned. See Walnut Street were to Feder- as President of Federation (letter Philip of Seltzer Trustees). Board of ation newspaper in a local appeared an article July
On its original had abandoned that Federation confirmed which realize savings it would of the tremendous because plans head- to move intо the new Federation intended and that in no indication 1976. There was January, quarters the minutes of Federation accounts or newspaper either the was property that purchase to this meetings prior Square project delay the Centre any acquired because not have Catalytic may possibility consequent and the September 1528 Walnut Street to vacate been able were, rather, acquisition All indications and abandonment headquarters 16th Street South by the substantial solely motivated prior plans were to be derived. financial benefits Federation headquarters, of the new acquisition After to se- attempts continued unreceptive Walnut’s became date of beginning for the cure an extension *13 who Street, Federation officials at 1528 Walnut also had interests in the Centre Square project withdrew their support for such extension. Federation at this point began to espouse position that the lease had legal no validity possession since had not been delivered to it on May 1, (thus ignoring and contradicting the simultaneously executed addendum to the lease agreement setting a start date of September 1, 1974). no later than See, e.g. Exhibit 27, 67, R. 753a and Exhibit 1, R. 804a-806a. August On 1974, Federation declined grant an extension to Walnut on the advice of Federation attorneys that “any extension given essence, Federation would in acknowledge the validity 50, the lease.” Exhibit R. 796a. Also on August 1st, Rubin, Ronald member, Federation Cabinet stated to agents of Walnut that “of course the Federation did not want to in occupy space Street, 1528 Walnut no had use it, and would not consider any type extension without a release of from the liability lease.” Exhibit R. 796a.
Faced September 1, with the date, therefore, 1974 start Walnut made arrangements with Catalytic to move Catalyt- ic out of 1528 Walnut Street in August. late Walnut had agreed pick up the costs of overtime expenses labor on Square Centre project so that Catalytic’s facility would completed there time for Catalytic to move into Centre Square on the August weekends of 23 and 1974. Under- however, standably Catalytic was not pleased with the prospect of rushing its move in light of the fact Federation did not intend to use or occupy Walnut had, fact, Street and informed Walnut to looking “start for a tenant for us.” Exhibit R. 806a. Accordingly, Catalytic began put pressure economic on Walnut to agree to a three month (This extension. pressure took the form of an offer to lease other space office at 1528 Walnut Street which offer was conditioned upon the granting of the three month extension on the four floors that had been Federation.) leased to
Faced with coercion, this economic Walnut acceded to Catalytic’s ultimatum August granted three month extension an option with to terminate at an
182 extension fact, did terminate the Catalytic In earlier date. floors of the demised and vacated three an earlier date at floor 5,1974 by and the fourth October premises by October 30, 1974. to Federa- 1974, transmitted a bill 6, Walnut October
On begin- at 1528 Walnut Street of three floors tion for rental 30, on October replied Fedеration 6th. ning October part on the liability no whatsoever 1974, recognize that “we premises of the to the owner the Federation ... of of the possession deliver the failure to due to question court R. 882a. The trial Exhibit agreed.” as premises that, to prior at no time October found as a fact specifically that it expressly state to Walnut 30, 1974 did Federation premises, nor was rental for the demised pay would 6th. to October prior made Walnut by demand therefor Judge Marutani found foregoing, upon Based its lease repudiated anticipatorily had Federation Walnut, stating: with declarations____we and this series of events
Viewing
consti-
conclusion that such
to come to the
compelled
are
Federa-
refusal
unequivocal
tuted “an absolute
[of
positive
statement
or a distinct
to
tion]
Cas-
v. New Amsterdam
to do so”: McClelland
inability
(1936).] ...
Co.,
429, 433, 185 A.
Pa.
ualty
[322
disavowal, it would
triple-pronged
Rubin’s
After [Ronald]
to
cling
any
folly
height
have been
[Walnut]
might
have harbored
hope
shred of
Federation.
be observed
agreement would
seeking
subsequent аct
Accordingly, [Walnut’s]
August
floors on
leasing the four
minimize loss
justified.
must be viewed
Catalytic,
on to observe
court then went
23-24. The
Slip opinion
assumed
declarations were
acts and
that if Federation’s
repudiation,
anticipatory
an
to constitute
be insufficient
in material
event,
have been
then,
would
in that
Walnut
possession
failing to tender
of contract for
breach
6, until October
premises
demised
appeal,
On
the panel
Court
reversed the trial
court’s determination that Federation had anticipatorily re-
pudiated
agreement.
the lease
319 Pa.Super.
466 A.2d
(1983).
In so doing, that court accepted
principal
argument
Federation,
advanced by
(1)
namely that:
there
duty,
was no
either in law or per
agree-
the terms of the
ment, on the part of Federation to actually
occupy
premises
Street; (2)
at 1528 Walnut
the only performance
required
rent; (3)
of Federation
duty
was the
to pay
Federa-
*15
expressly
rent;
tion never
repudiated
obligation
its
to pay
and, (4) therefore, since there was not an “absolute and
unequivocal
perform”
rent,
refusal to
duty
its
to
Feder-
pay
ation could not be found to have anticipatorily repudiated
Continuing,
the lease.3
the
Court then held:
concur with the trial court dicta that
[W]e
[Walnut’s]
three-month extension of the current lease was a material
lease,
breach
discharging
from its
[Federation]
obligations under
agreement.
the
Since we have found
did not anticipatorily breach the lease
[Federation]
contract and that
did
breach,
materially
the
[Walnut]
judgment against
must be vacated.
[Federation]
Id. at 319 Pa.Superior
243,
Ct.
Pennsylvania has long recognized that an anticipatory
repudiation
an
by
obligor to
gives
a contract4
the obligee
the immediate right
or,
to sue for breach of contract
alter-
to treat
natively,
repudiation
obligor
as justifica-
tion for not performing a condition otherwise
to
precedent
obligor’s duty,
thereby losing
without
to
right
sue
for breach of contract when the time for obligor’s perform-
ance arrives. McClelland v. New Amsterdam Casualty
Cо.,
429,
(1938);
322 Pa.
The rationale behind the rule of anticipatory repudiation is the prevention of economic waste. Weinglass See v. Gibson, Cameron v. supra; Eynon, supra; Murray, su- *16 213; at 207 and pra Restatement Second of Contracts §§ Repudiation Excusing Effect of a the Non-Occur- § rence of a Condition.5 It is clear that the rule of anticipato- ry repudiation closely mitigation is related to the rule of damages or as a limitation on avoidability damages. See Restatement Second of Contracts as a Avoidability § and, Limitation on Damages, supra at Murray, § repudiation mitigate and the Anticipatory duty damages. stated, As E. Murray Dean John has at Murray, supra 213: §
That the has a to insist obligee right upon performance perform precedent and to the conditions which the con- 5. Comment a to section 255 of the Restatement states: “No one should act, if, required party’s repudia- be to do a useless because of a tion, appears duty that the occurrence of a condition of a would not by performance duty, be followed of the the non-occurrence generally condition is excused."
185 him requires perform, tract this will not enhance if is clear. damages, permit But to him to ignore the repudiation and to his own undertakings, when this course conduct will increase the obligor’s loss, principle is to violate the that an is obligee not to permitted recover avoidable Most damages. courts rejected have this notion and have reached the obligee conclusion that the may ignore repudia- cases, it, tion all must act upon case, but a proper least to the extent of refraining from enhancing the damages The unnecessarily. Uniform Commercial Code (the permits aggrieved party repudiatee) to await performance for a commercially time. In reasonable a given fact repudiatee situation the may per- not await formance performance until the time for arrives. If he he does will not recover damages which could have been
avoided if he had treated repudiation as a breach for performance. Thus, before time brings the Code the law of contracts for the sale of goods within the modern prevailing view.
(emphasis added; omitted). footnotes See the Pennsylvania Code, Uniform Commercial (Anticipa- Pa.C.S.A. §§ (Retraction tory Repudiation) of Anticipatory Re- pudiation). key
The issue in the instant case is what an constitutes repudiation. The anticipatory Restatement Second Con- tracts, 250, provides: §
When a Statement or an Repudiation Act is a A repudiation is
(a) a obligor statement to the obligee indicating obligor that the will commit a breach that itself would give the obligee a claim for damages total breach under or §
(b) voluntary affirmative act obligor which renders the *17 or apparently perform unable unable to without such a breach. Development Industries,
See Jonnet
v.
Corp.
Dietrich
Inc.,
316 Pa.Super.
(1983)
186
section 250 of the Restatement
Contracts)
Second of
v.
Rosenberg
Rosenberg,
Pa.Super. 293,
The majority today reaffirms the definition of an anticipa-
in
tory repudiation enunciated McClelland v. New Amster-
Co.,
dam
Casualty
supra
198, that,
at 322 Pa.
185 A.
give
“order to
rise to a renunciation amounting to a
of contract
breach
there must be an absolute and unequivo-
cal refusal
or a
positive
distinct and
statement
so,”6
alia,
inter
of an
to do
v.
inability
relying,
Dingley
Oler,
(1886).
117 U.S.
6 S.Ct.
[Tjhere subsequent are a number of judicial utterances Oler, v. Dingley [following to the effect supra] nothing short of an unequivocal absolute and renunciation of the contract will suffice to ground brought an action repudiation. Both anticipatory the Uniform Commer- cial (Second) Code and the Restatement expressly reject v. Oler the holding of Dingley upon McClel- [relied land, supra]____ applying Pennsylvania consistently
6. The federal courts
law have
regarded
expression
the McClelland formulation as the definitive
anticipatory repudiation
what constitutes an
in this Commonwealth.
See,
Co.,
WIOO,-Inc.,
e.g.
(3d
William B. Tanner
Inc. v.
In Pennsylvania, the General Assembly has adopted the modern in enacting view section 2-610 of the Uniform Code, 2610, Commercial 13 Pa.C.S.A. which provides: § Anticipatory Repudiation repudiates
When either party respect the contract with performance not yet due the loss of which will substantially impair the value other, of the contract to the the aggrieved party may:
(1) for a commercially reasonable per- time await formance by the repudiating party; or
(2) resort (section for any remedy breach 2703 or 2711), even he though has notified the repudiating party that he performance would await latter urged retraction; and has
(3) in suspend either case performance____ his own 255, Nov. P.L. No. effective Jan. § repudiation, an anticipatory acts constitute what On 2 pro- of “reasonableness”. Comment a rule adopts Code vides: performance necessary repudiation
It is not can impossible. Repudiation literally utterly made indicates a reasonably rejection which result from action continuing obligation. *19 Third of for the Appeals the Circuit Court agree I with recognize a Pennsylvania is desirable that that it Circuit all con- governing breach anticipatory rule of consistent the Commercial tracts, or without Uniform whether within WIOO, Inc., 528 v. Company B. Tanner Code. William Cir.1975). repre- (3d As 13 Pa.C.S.A. F.2d § of expression most recent on the law legislature’s the sents modern with adopts and the view repudiation anticipatory Code, it is inconsistent and contracts respect to within of anticipatory to the outmoded definition cling to unwise v. New Amsterdam expressed McClelland repudiation I the mod- Co., Accordingly, adopt would supra. Casualty of the Restatement approve and the formulation ern view operation of the for contracts outside Second of Contracts a Code, that, repudia- in “order to constitute namely of the to tion, sufficiently positive must be language a be party’s not or that a will interpreted party to mean reasonably (b), lan- and that section Comment perform,” cannot alone, insufficient to consti- which, standing might be guage repudia- constitute a may a nevertheless repudiation, tute acts of accompanied by voluntary, affirmative tion when and/or indicat- inability an to obligor manifesting Id.; supra to perform. Murray, a lack of intention ing Indus- Corp. v. Dietrich Development 208. See Jonnet § supra. tries, Inc., Rosenberg Rosenberg, and v. supra case, I to the instant foregoing principles Applying of the affirming the conclusion difficulty have no would anticipatorily repudiated Federation had trial court that Walnut, excusing thus the latter’s with (i.e., Sep- possession) obligation performance to tender record, that as of late From the it is clear tember June, 1974, Federation had no intention of taking ever possession premises at 1528 Walnut Street and that reason change its for the heart was not to due Catalytic’s possibility September holdover 1st beyond but was, rather, solely motivated because of substantial financial benefits reaped by purchasing be 226 South permanent 16th Street as headquarters. its By early August had crystal Federation made it clear that it no had intention of occupying 1528 Walnut Street wrongly unreasonably— considered— the lease to invalid possession because of the premises Moreover, had not been tendered May. Federation had directed Walnut find a new tenant the premises, is exactly which what attempted Walnut do. Arrangements had been made Walnut Cata- remove from lytic 1, 1974, 1528 Walnut by September Street but such move would required have a labor-intensive effort with heavy financial expenditures. Catalytic rea- correctly soned that such actions were completely since unnecessary *20 Federation had no intention taking possession of on Septem- ber 1974 or any at time thereafter. Faced with Catalyt- ultimatum, ic’s economic recognize Federation’s refusal to the of validity the lease and its to directive locate a new tenant, and Walnut’s duty mitigate to damages, Walnut finally granted Catalytic a three month extension. Under circumstances, I agree with the trial court that it would been “height have folly” of to to a cling belief that Federation would honor the lease agreement. state- The and ments actions of Federation officials were sufficiently positive to support Walnut’s reasonable interpretation that Federation would not take possession of 1528 Walnut Street September or 1st thereafter. Accordingly, Walnut’s to duty possession tender duty which was otherwise —a precedent condition to obligation Federation’s to rent— pay excused, was and Walnut justified per- was in suspending formance and in taking to steps mitigate avoid losses or damages. 350; Restatement of Second Contracts §§ Murray, supra see (Anticipatory repudiation and § damages), duty mitigate to Pa.C.S.A. 2610.7 § argument by accepted The advanced Federation and by it repudiated Court —that since had not its to rent and since it had no obligation pay duty take it possession premises, the demised could not have antici- the lease its patorily repudiated by statements and deeds manifesting possession an intention not to take a smok- —is escreen that has obscured the real issue. Whethеr was not, obligated possession to take or Federation made it clear that it would not take absolutely possession of 1528 and, therefore, Walnut Street obligation Walnut’s tender possession precedent as a condition duty Federation’s pay rent was excused. point
The discussion to this also demonstrates the error that, both courts below and of the if majority holding contract, Federation not in anticipatory was breach of then possession October, the failure of Walnut to tender until 1974 constituted a material breach of contract the latter. The holds that “the majority Superior Court stated properly implied there is an of quiet enjoyment accompany- covenant ing every lease of real property. When the tenant is prevented from taking possession under the lease af- firmative acts of the lessor then that covenant is breached.” Slip opinion that, at 11. The reasoning basic flaw this is concedes, as Federation it had no intention “enjoying” premises, fact, the demised or In quietly otherwise. since Federation did not intend to use or occupy premises since it assign could not sublet or its lease without Walnut,8 permission of only thing then the Federation could premises have done with the pay upon was to rent them. formulation, 7. Even under the McClelland I would affirm the trial *21 court’s conclusion that Federation had breached the lease by anticipatory repudiation indicating absolutely unequivocally in and Street, possession excusing that it would not take of 1528 Walnut thus performing tendering from possession. Walnut the useless act of See Gibson, Eynon, supra Weinglass supra. Cameron v. v. against subletting assignment 8. The restriction or is contained paragraph 1 of the lease. If, believe, as Federation expectation would have us its only under the lease as of late July early August, 1974 was to — pay Street, rent for 1528 Walnut then how could those expectations have been disappointed when Walnut granted Catalytic a three month extension? The ability of Federa- tion to rent pay unimpaired was prior holdover of the tenant or the extension. disingenuousness The of Federa- tion’s argument while it required was not to take —that possession and had no so, intention of doing Walnut’s failure to possession tender September 1974 was nevertheless a material breach—is apparent. Obviously, Federation negotiate did not bargain for the privilege of paying rent for an unused building and any substitute tenant that Walnut may have found for the premis- demised es, including tenant, the holdover could only Feder- benefit ation and diminish its liability on its duty pay rent. As expectations no of Federation were disappointed and as Walnut’s granting of an extension to Catalytic good was a faith and reasonable attempt mitigate Federation’s dam- ages, Walnut’s failure to possession tender October, until 1974 cannot be deemed a material breach of contract. See Restatement Contracts, Second of Circumstances § Significant in Determining whether a Failure Is Material.
Federation
argues that,
also
assuming it breached the
contract, Walnut failed “to properly mitigate damages since
it never offered the space at a rent equal to or less than
that offered to Federation in attempting to re-let
prem-
ises after Catalytic vacated.” Brief for Appellee at 41. It
is the party who has breached the contract that bears the
burden of proving that the losses could have been avoided
or lessened through reasonable efforts of the damaged
party.
Masters,
Williams v.
America,
Mates & Pilots of
Local No.
384 Pa.
(1956);
192 during year period two of Federation’s lease. The tenant eventually which took over the demised premises in 1977 rented the space for approximately price the same as agreed Federation had upon. slip See lower court opinion 17, 5, n. 21 and n. 2. During the year two lease period, Walnut had rented other space office at 1528 Walnut Street price. about that same agents While for Walnut may not have offered the four floors in question at less than or equal to Federation’s price during the year period, two leasing agent for Walnut testified that none of eighteen prospective tenants contacted declined to rent the premises because of the rental price offered. Finally, Federation offered no evidence that any prospective tenants would have leased the premises had they been offered a rate less than or equal agreed to that to by Federation. From the it is foregoing, apparent that Walnut made reasonable efforts to mitigate damages, see Restatement Second of Federation, Contracts and that who was responsible § loss, for the failed to meet its burden of proving that any the losses sustained were avoidable. reasons,
For the foregoing I would reverse the order and decision of the Superior Court and reinstate the judgment award entered the Court of Common Pleas of Philadel- phia County.
HUTCHINSON, Justice, dissenting. The majority reaffirms pre-existing Pennsylvania law with respect breach, to anticipatory set out McClel- land v. Co., New Amsterdam 429, 433, 322 Casualty Pa. 185 A. (1936). 200 case, As the majority says here that an anticipatory breach is “an absolute and un- equivocal refusal or a distinct positive statement of inability do so.” Based on the evidence he heard, Judge Marutani found such a inability refusal or perform did occur. findings His were affirmed against exceptions. They are therefore entitled to the same defer- ence as a verdict. jury See Carabello, Cerbo v. 376 Pa. (1954). A.2d The majority not only them, ignores recognize but fails to the inference of un- equivocal refusal its required by own factual recital. Since satisfied, is I McClelland standard find it unnecessary to consider the case under the more liberal Restatement standard on the supported appealing pragmatic grounds Mr. *23 Justice Larsen sets out in dissenting detail his I opinion. would simply reverse Court on Judge Marutani’s opinion. able
ZAPPALA, J., joins this dissenting opinion.
v. Henry WATTS, Appellee.
Supreme Court of Pennsylvania.
Argued Dec. 1984. April Decided Kane, Michael J. Dist. Atty., Stephen Harris, B. Doyles- town, for appellant.
Robert J. Kupits, Doylestown, appellee. NIX, C.J., Before LARSEN, FLAHERTY, McDER- MOTT, HUTCHINSON, ZAPPALA PAPADAKOS, JJ.