Opinion
285 EDA 2022 J-A16036-22
01-26-2023
MATTHEW 2535 PROPERTIES, LLC v. RICHARD E. DENITHORNE AND PRISCILLA F. DENITHORNE, Appellant
Joseph D. Seletyn, Esq.
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Judgment Entered March 4, 2022 In the Court of Common Pleas of Carbon County Civil Division at No(s): 18-1411
Joseph D. Seletyn, Esq.
BEFORE: McLAUGHLIN, J., McCAFFERY, J., and PELLEGRINI, J.[*]
MEMORANDUM
McCAFFERY, J.
Richard E. and Priscilla F. Denithorne (Sellers) appeal from the judgment entered against them, following a non-jury trial, in the Carbon County Court of Common Pleas, directing, with certain conditions, specific performance of the agreement of sale (Agreement) for commercial property entered into with Matthew 2535 Properties, LLC (Buyer). Sellers argue, inter alia, the trial court erred in finding they breached the Agreement. We agree and thus reverse.
I. Facts
Sellers, who are husband and wife, own the underlying commercial property (the Property), at 845 Interchange Road, Lehighton, in Carbon County. Their adult children, Vincent, Michael, and Dave, have a corporation, Denithorne Brothers, Inc. (Denithorne Brothers), which operated a restaurant, Trainer's Inn, on the Property. Additionally, there was a smaller building behind the restaurant. N.T. Non-Jury Trial, 6/2/20, at 25. Catherine Jaindl-Leuthe is the sole member of Matthew 2535 Properties LLC; for ease of discussion, we will refer to them both together generally as "Buyer." Sometime in 2017, the restaurant closed. Id. at 45.
On January 13, 2018, Sellers and Buyer entered into an agreement of sale for the Property, with an agreed-upon sale price of $400,000. Both parties agree the restaurant "needed work," and Buyer intended to spend $500,000 to $600,000 for major repairs and renovations. N.T. at 29, 32, 74.
Pertinently, the Agreement included the following risk-of-loss clause:
16. Risk of Loss/Condemnation: Seller shall bear all risk of loss until Closing, and shall deliver the Property in its current condition as of this date. Seller shall coordinate any remediation of casualty with Buyer or arrange for the provision of the funds for remediation at Closing and may leave the Property in its damaged condition if the proposed insurance settlement is acceptable to Buyer. The parties shall cooperate and coordinate any remediation or assignment of proceeds to achieve the desired result of the Buyer without added cost to Seller....Agreement of Sale, 1/13/18, at 7 (emphasis added). The Agreement also stated, with regard to default:
20. Default: . . . Seller acknowledges that the remedies to Buyer and Seller are different, since Buyer is investing substantial time and effort and funds of the intended investigation, design and other work contemplated herein. If Seller shall default, then Buyer or its assign, shall be entitled to a return of the Deposit paid and may file a lis pendens and seek Specific Performance.Id. at 8.
The Agreement further provided the following: closing was scheduled for April 30, 2018, but Buyer had the option to extend closing, twice, for 30 days. Additionally, closing was contingent upon the closing of two separate sale agreements, between Ms. Jaindl-Leuthe's second company, Good Spirits 845, LLC (Good Spirits), and: (1) Sellers for the contents of the restaurant, including equipment and inventory, for $35,000; and (2) Denithorne Brothers, for the restaurant's liquor license for $15,000. See Agreement of Sale at 5; N.T. at 13. Accordingly, both Buyer and Sellers considered the "entire transaction" to be worth $450,000. Id. at 13, 50, 61.
On March 17, 2018, two months after the execution of the Agreement, the restaurant was destroyed by a fire. The first floor "was smashed into the cellar." N.T. at 16. The parties stipulated the cause of the fire was not determined. Id. at 3. Sellers did not carry insurance on the Property, although non-party Denithorne Brothers did. Despite Buyer's desire to proceed to closing with remediation of the Property, Sellers did not attend the closing.
II. Non-Jury Trial &Verdict
On July 6, 2018, Buyer filed the underlying complaint, seeking specific performance of the Agreement and, in the alternative, averring breach of contract. This matter proceeded to a non-jury trial on June 2, 2020.
Ms. Jaindl-Leuthe testified to the following. She believed that under the "risk of loss" paragraph of the Agreement, Sellers would either purchase insurance or be self-insured. N.T. at 27-28. After the fire, she "attempt[ed] to continue forward toward closing," and believed Sellers would contact her to work out either remediation of the Property or transferring the Property with funds to "take the [P]roperty back to" its prior condition. Id. at 16, 18.
Buyer's attorney "made several contacts" to Sellers' attorney, but received no response. Id. at 18, 28-29. Buyer also exercised the two options to extend the time for closing. Id. at 14. Meanwhile, two weeks after the fire, Denithorne Brothers notified Buyer it was canceling the transfer of the liquor license. Id. at 21.
This letter was signed by Seller Priscilla in her capacity as president, secretary, and treasurer of Denithorne Brothers.
Finally, Buyer's attorney sent a letter to Sellers, requesting they proceed to closing on June 29, 2018. N.T. at 19. This letter stated that because Buyer had not received requested information about insurance proceeds, it would place the amount of the sale price in escrow. Id. at 38. Buyer also waived some "pre-conditions to the closing," including receipt of the liquor license. Id. at 19. However, Sellers did not attend the closing. Id. The relief that Buyer desired was the transfer of the Property, with either Sellers' funds to remediate the Property or "insurance proceeds" assigned to her, in exchange for the sale price of $400,000. Id. at 42-43.
On cross-examination, Ms. Jaindl-Leuthe testified that in December of 2017 - one month before the signing of the Agreement - St. Luke's Hospital (Footnote Continued Next Page)
Buyer next called Sellers Richard and Priscilla as if on crossexamination. Priscilla testified to the following: Richard worked at a steel company for 43 years, and she also worked there for seven or eight years, before going to work at the restaurant "one or two days." N.T. at 65. However, she "never got a paycheck from the restaurant and didn't want one." Id. Instead, Sellers helped their sons by getting "them started without debt[.]" Id. at 64. Their son Dave paid all the operating expenses of the restaurant. Id. at 73.
As stated above, Sellers did not maintain insurance on the Property. N.T. at 54. However, after the restaurant closed in 2017, they paid the insurance premiums for the policy held by Denithorne Brothers. N.T. at 46, 64. Sellers insisted those insurance proceeds would go to Denithorne Brothers, not Sellers. Id. at 55, 64. Richard also stated that the original total sale proceeds of the transactions, $450,000, would have gone to their sons, not Sellers. Id. at 55. Richard expected that presently, Buyer should pay the contacted her about buying a nearby property she owned, it "was looking to [build] a hospital in the Lehighton area." N.T. at 34-36. Priscilla testified she and Richard did not know about these hospital's plans. Id. at 63. Sellers argued that Buyer's having this information was relevant, as the presence of a hospital would increase the value of the Property. Id. at 35. However, on appeal, Sellers do not present any argument concerning the hospital. original total amount of $450,000 and in exchange, receive the Property in its current condition. Id. at 58.
Priscilla stated they paid an insurance premium one time. N.T. at 64.
Sellers also testified that after the fire, they received an offer for both the Property and liquor license for $375,000. N.T. at 75- 76.
On July 9, 2021, the trial court entered the underlying judgment in favor of Buyer and ordered specific performance of the Agreement. The court directed Sellers to transfer the Property to Buyer for $400,000, "minus the amount of insurance proceeds paid to Denithorne Brothers . . . for the loss of the restaurant structure, excluding therefrom any amount paid for the loss of equipment and inventory contained within the structure." Verdict, 7/9/21, at 17. Pertinently, the trial court found: (1) the Agreement required Sellers to deliver the Property in its condition as of the date the Agreement was made; and (2) Sellers' failure to do so was a breach of the Agreement. Memo. Op., 7/9/21, at 11-12.
The trial court issued one document, containing both a memorandum opinion and verdict, with continuous pagination. Thus, the two-page verdict appears as pages 16 and 17 of the filing entitled, "Memorandum Opinion." The interpretation of any contract is a question of law and this Court's scope of review is plenary. [W]e 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. ...
Sellers filed a timely post-trial motion, which was denied on December 23, 2021, and judgment was entered in favor of Buyer on March 4, 2022. Sellers took a timely appeal and complied with the trial court's order to file a Pa.R.A.P. 1925(b) statement of errors complained of on appeal.
III. Statement of Questions Involved
Sellers present the following issues for our review:
A. Whether the lower court erred in determining that Sellers breached the Agreement of Sale where the Agreement provided that in the event of a loss, the Sellers were only obligated to coordinate remediation if they could do so without added cost to themselves?
B. Whether the lower court erred in determining that Sellers breached the Agreement of Sale where the Agreement provided that settlement was to occur on or before June 30, 2018, but Buyers refused to proceed with the sale on or before that date?
C. Whether the lower court erred in granting specific performance where the order led to an inequitable result and failed to properly assess the value of the Property?
D. Alternatively, whether the lower court erred in valuing the Property as the purchase price less "the amount of insurance proceeds paid to Denithorne Brothers, Inc. for the total loss of the restaurant structure, excluding therefrom any sum paid by the insurance company for the loss of personal property contained within the restaurant" where the only evidence submitted at trial was that the Property's post-fire value was $375,000?Sellers' Brief at 1138-39 (citation omitted).
IV. Standard of Review &Relevant Law
Preliminarily, we consider the relevant standard of review and guiding principles in contract law:
To prove a breach of contract, a party must establish the following: "(1) the existence of a contract, including its essential terms, (2) a breach of duty imposed by the contract, and (3) resultant damages."Gamesa Energy USA, LLC v. Ten Penn Ctr. Assocs., L.P., 181 A.3d 1188, 1192 (Pa. Super. 2018) (Gamesa Energy) (citations omitted).
With respect to specific performance, this Court has explained:
[A] request for specific performance is an appeal to the court's equitable powers. ... "A decree of specific performance is not a matter of right, but of grace." Such a decree will be granted only if a plaintiff clearly is entitled to such relief, there is no adequate remedy at law, and the trial court believes that justice requires such a decree. ...
Courts in this Commonwealth consistently have determined that specific performance is an appropriate remedy to compel the conveyance of real estate where a seller violates a realty contract and specific enforcement of the contract would not be contrary to justice.[ ]Oliver v. Ball, 136 A.3d 162, 166-67 (Pa. Super. 2016) (citations omitted).
V. Breach of Contract
In their first issue, Sellers aver the trial court erred in finding they breached the Agreement. For ease of review, we first set forth the trial court's reasoning. It found the following: the phrase in the risk-of-loss paragraph, "without added cost to Seller," was ambiguous because the parties had different understandings of this term. Memo. Op. at 10. Buyer believed the term meant Sellers would either purchase insurance or remediate the Property themselves should a casualty occur. Id. On the other hand, Sellers believed "the term protected them from any liability for loss other than the amount of insurance proceeds, if any existed," and specifically, they were not required to perform any remediation. Id. at 10, 11 (emphasis added). Nevertheless, the Agreement is clear that Sellers were required "to deliver the [P]roperty to [Buyer] 'in its current condition' as of January 13, 2018," the date the Agreement was executed. Id. at 11-12. The trial court concluded that because Sellers failed to deliver the Property in this condition, they were in breach. Id. at 12.
On appeal, Sellers do not challenge this finding - that this Agreement term was ambiguous. See Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 469 (Pa. 2006) ("While unambiguous contracts are interpreted by the court as a matter of law, ambiguous writings are interpreted by the finder of fact.").
On appeal, Sellers assert the following: they acknowledge the Agreement required them to bear the risk of loss, but emphasize the Agreement also provided that in the event of a loss, they "were only obligated to coordinate remediation if they could do so without added cost to themselves." Sellers' Brief at 14. Under the plain language of the Agreement, their "maximum exposure in the event of loss would be the amount, if any, of their insurance proceeds." Id. (emphasis added). Sellers claim it was undisputed they could not coordinate remediation without added cost, as they did not carry insurance on the Property. Id. at 15. Sellers acknowledge their sons received insurance compensation, but maintain it was payable to the sons, not Sellers. Id. After careful review, we agree that Sellers were not in breach of the Agreement.
We review the following: Sellers agreed to sell the Property in as-is condition for $400,000. Buyer was also in agreement, with the understanding it would need to undertake major renovations at an estimated cost of $500,000 to $600,000. N.T. at 30-32. As stated above, the Agreement provided:
. . . Seller shall bear all risk of loss until Closing, and shall deliver the Property in its current condition as of this date.
Seller shall coordinate any remediation of casualty with Buyer or arrange for the provision of the funds for remediation at Closing and may leave the Property in its damaged condition if the proposed insurance settlement is acceptable to Buyer. The parties shall cooperate and coordinate any remediation or assignment of proceeds to achieve the desired result of the Buyer without added cost to Seller....Agreement of Sale at 7 (paragraph break &emphasis added).
Although the above clause contemplates that remediation could come from the proceeds of an insurance policy, the plain language of the Agreement does not require either party to procure a policy of insurance to cover loss. Buyer does not allege, and the trial court did not find, that Sellers' lack of an insurance policy was a breach of the Agreement. See Buyer's Brief at 14 ("In this instance, [Sellers] elected not to shift [the risk of loss] to an insurance company, but rather maintained that risk themselves.").
The parties do not dispute the meaning of the first sentence of the contract provision: "Seller shall bear all risk of loss until closing, and shall deliver the Property in its current condition as of this date." See Agreement of Sale at 7. However, while the Agreement requires the parties to negotiate an acceptable settlement from any available insurance proceeds, the agreement includes a separate proviso that under no circumstances would Sellers be required to remediate at a personal loss to themselves. Buyer ignores this provision - "without added cost to Seller" - in maintaining Sellers were bound by the Agreement to either remediate the property to its prior condition or "provide[ ] the funds necessary to remediate the Property." See Buyer's Brief at 9.
The parties did not reach any agreement as to a reduced purchase price for the fire-ravaged structure. As the Agreement does not require Sellers to obtain an insurance policy, nor to remediate the damage without additional costs to themselves, we conclude Sellers did not breach the plain terms of the Agreement. See Gamesa Energy, 181 A.3d at 1192. Rather, in the event the parties could not reach a mutually agreeable reduced sales price, each party was free to either proceed to close on the property as-is or simply walk away from the deal.
In light of this holding, we do not reach Sellers' claim that it was Buyer who breached the Agreement.
We note the latter part of the Agreement's risk-of-loss clause provided:
In the event of a condemnation of any part of the Premises or the termination of any presently used or permitted or existing access to the Premises, Buyer may: (i) terminate this Agreement and receive a full refund of the Deposit and interest if Buyer shall so elects, in which event there shall be no further rights or obligations in either party; or (ii) proceed to Closing and receive an assignment from Seller of the condemnation proceeds payable by reason of the condemnation in an amount not to exceed the Purchase Price.Agreement at 7 (emphasis added).
We acknowledge that after the execution of the Agreement, Buyer undertook preparations for the purchase of the Property. Ms. Jaindl-Leuthe testified she filed documents with, and met with, the Pennsylvania Liquor Control Board in connection with the liquor license. N.T. at 14-15. She also arranged a sewer or septic inspection and building inspection, and engaged an architect. Id. at 15. Nevertheless, to the extent the risk-of-loss terms were disadvantageous to Buyer's interests, we note it was represented by an attorney, and "we are interpreting a negotiated commercial contract between sophisticated business people who had the ability to control, decide and design remedies for breach." See Newman Dev. Grp. of Pottstown, LLC v. Genuardi's Family Mkt., Inc., 98 A.3d 645, 659 (Pa. Super. 2014) (en banc). See also Memo. Op. at 10-11 (observing, "The Agreement could have mandated [Sellers'] purchase of insurance. Alternatively, the parties could have agreed on a more detailed procedure as to what should happen in the event of a casualty if [Sellers] chose not to insure the [P]roperty.").
Buyer's attorney drafted the Agreement. N.T. at 11. See Ins. Adjustment Bureau, Inc., 905 A.2d at 468 ("Under ordinary principles of contract interpretation, the agreement is to be construed against its drafter."). However, the Agreement provided:
The parties have had an opportunity to discuss this Agreement with their attorneys and have both participated or had the ability to participate in drafting this [A]agreement and this Agreement shall not be construed against any party as the "drafter" based on rule or custom[.]Agreement of Sale at 8.
In any event, as we determine Buyer did not establish that Sellers breached the Agreement, we further hold the trial court erred in granting specific performance. See Oliver, 136 A.3d at 166-67. We thus reverse the judgment entered in favor of Buyer.
VI. Reduction of Sale Price as Ordered in Specific Performance
Although our disposition of Sellers' first claim may conclude our review, we briefly address Sellers' fourth claim, that in directing specific performance of transferring the Property, the trial court erred in directing the purchase price to be $400,000, less the amount of insurance proceeds paid to Denithorne Brothers. Sellers' Brief at 20.
The trial court acknowledged the Agreement clearly required Sellers to bear all risk of loss until closing. Mem. Op. at 12. The court then set forth the following reasoning: the Agreement also clearly provided that in the event of loss, "[t]he parties shall cooperate and coordinate any remediation or assignment of proceeds . . . without added cost to Seller[s]." Id. at 12. Pursuant to this plain language, "the parties contemplated that [Sellers'] maximum exposure in the event of loss would be the amount of insurance proceeds paid as a consequence of such loss." Id. However, the court could not order Sellers to give the Denithorne Brothers' insurance proceeds to Buyer, because those proceeds were not paid to Sellers. Id. at 14. Nevertheless, the court found the most equitable remedy was to direct Buyer to purchase the Property for $400,000, less the amount of insurance proceeds paid to Denithorne Brothers, excluding any insurance sum paid for the loss of personal property. Id.
On appeal, Sellers assert the trial court erred in imposing this valuation. They maintain the only evidence of the value of the Property was their own evidence, that another party offered, post-fire, $375,000 for the Property and liquor license. We would agree with this discrete Seller's argument.
It is not disputed that the insurance policy was held by Denithorne Brothers, who is not a party to this lawsuit. Sellers point out, without objection, that Buyer was not seeking to recover from Denithorne Brothers, Inc. N.T. at 56.
The sole evidence at trial about the insurance proceeds was both Sellers' testimony that the proceeds would be paid to their children. See N.T. at 55, 64. There was no evidence about the amount of the insurance proceeds requested or actually received, nor the basis of the proceeds, i.e., what the insurance proceeds were intended to reimburse Denithorne Brothers for and in what amounts.
In fact, the trial court precluded Buyer from eliciting testimony about the amount of the insurance payout. Buyer asked Richard whether he knew the amount of the insurance proceeds. N.T. at 55. Sellers objected on relevance grounds, arguing: (1) Buyer was not attempting to recover from Denithorne Brothers, Inc.; and (2) instead, Buyer was seeking "to remediate a property and the fact that somebody else has insurance money or how much that might be has no relevance to [Buyer's] claims." Id. at 56. The trial court sustained Sellers' objection and precluded Richard from testifying about the amount of the insurance paid to Denithorne Brothers. Furthermore, as stated above, there was no evidence as to basis for the insurance proceeds, i.e. what losses the insurance company meant to reimburse the policy holder for, and in what amounts. Accordingly, we would hold the trial court's inclusion of the insurance proceeds was speculative.
VII. Conclusion
For the foregoing reasons, we conclude the trial court erred in finding Sellers breached the Agreement, entering judgment in Buyer's favor, and ordering specific performance. We thus reverse the judgment.
Judgment reversed. Jurisdiction relinquished.
Judge McLaughlin joins this Memorandum.
Judge Pellegrini files a Dissenting Memorandum.
Judgment Entered.
DISSENTING MEMORANDUM
PELLEGRINI, J.
Because the majority, in reversing the trial court, has engaged in impermissible fact finding, and that fact finding is not supported by competent evidence and is at variance with the words of the provision at issue and has reversed the trial court's remedy based on a misapprehension of law and facts, I respectfully dissent.
On January 13, 2018, Richard E. Denithorne and Priscilla F. Denithorne (Sellers) and Matthew 2535 Properties, LLC (Buyer) entered into an agreement of sale for the Property on which there was a bar-restaurant with an agreed-upon sale price of $400,000. The Sellers' three sons, through Denithorne Brothers, Inc., operated the bar-restaurant and it insured the Property, even though it did not own the Property. Sellers did not have their own insurance on the Property. Prior to closing, on March 17, 2018, a large fire engulfed the Property and destroyed the bar-restaurant.
After Sellers refused to remediate the damages to and close on the sale of the Property, Buyer brought an action for specific performance seeking to enforce the agreement of sale (Agreement). The key provision in that Agreement at issue is Paragraph 16 that provides, in pertinent part:
Risk of Loss/Condemnation. Seller shall bear all risk of loss until Closing, and shall deliver the Property in its current condition as of this date. Seller shall coordinate any remediation of casualty with Buyer or arrange for the provision of the funds for remediation at Closing and may leave the Property in its damaged condition if the proposed insurance settlement is acceptable to Buyer. The parties shall cooperate and coordinate any remediation or assignment of proceeds to achieve the desired result of the Buyer without added cost to Seller....
In granting specific performance, the trial court found this paragraph to be ambiguous because of the different understandings of what "without additional cost to the Seller" meant. The Sellers contended that that clause protected them from any loss other than the amount of the insurance proceeds, if they existed, while the Buyer stated that that provision meant that the Buyer was required to assume all risks of cost until closing. In resolving the ambiguity, the trial court found that because the Sellers were obligated to close on the Property and deliver the Property in its current condition but was also obligated to compensate the Buyer the value of the bar-restaurant as measured by insurance proceeds received by Denithorne Brothers, Inc. rather than remediate the Property.
In reversing the trial court, the majority states that the trial court did not give proper effect to the phrase "without added cost to Seller" in holding that the Sellers were bound by the Agreement to either remediate the property to its prior condition or "provide[ ] the funds necessary to remediate the Property." As a result of that lack of emphasis, the majority rewrites Paragraph 16 which states the Sellers are responsible for "all risk of loss until Closing" to the Seller is "not" responsible for risk of loss unless they have insurance. Because the majority ignores a whole lot of words in arriving at this conclusion and substitutes factual interpretation for that of the trial court, I respectfully dissent for several reasons.
I.
As the majority points out, on appeal, Sellers do not challenge the trial court's finding that Paragraph 16 is ambiguous. What the majority does not squarely address, though, is our narrow scope of review when reviewing a trial court's findings regarding an ambiguous contract. Unlike unambiguous provisions which are interpreted as a matter of law, ambiguous provisions are interpreted by the finder of fact. See Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 469 (Pa. 2006). Because the trial court is the finder of fact, we must begive those findings the same weight and effect on appeal as the verdict of a jury and interpret those provisions most favorable to the verdict winner, and we can only reverse the trial court's interpretation of an ambiguous contract that is not supported by competent evidence in the record or if its findings are premised on an error of law. Jones v. McGreevy, 270 A.3d 1, 12 (Pa. Super. 2022).
The majority does not discuss why the trial court's interpretation is unreasonable or wrong by emphasizing the topic sentence of Paragraph 16 that "Seller shall bear all risk of loss until Closing, and shall deliver the Property in its current condition . . ." Presumably, it believes its interpretation is "better," a conclusion that is not ours to make under our scope of review.
Moreover, not only does it usurp the trial court's fact finding function, the majority's interpretation is not better because it does not take into consideration all the language of Paragraph 16 in that:
• It reads out the first sentence which provides that "Seller shall bear all risk of loss until Closing and shall deliver the Property in its current condition as of this date." All risk of loss is just that - all risk of loss.
• It also ignores the next sentence which states that "Seller shall coordinate any remediation of casualty with Buyer or arrange for the provision of the funds for remediation at Closing and may leave the Property in its damaged condition if the proposed insurance settlement is acceptable to Buyer." Under this sentence, it is clear that Sellers can cure any loss by remediation, funds for remediation or any insurance settlement, if acceptable to Buyer. By denominating those options, this provision clearly does not provide that only if Sellers have insurance are they obligated for loss; only if they do have insurance, Buyer, at its discretion, can accept that amount.
• The best reading of the phrase in the last sentence - "without added cost to the Seller," upon which the majority relies, modifies "the assignment of [insurance] proceeds" mentioned in
previous sentences. In other words, it means that if the Buyer accepts the insurance proceeds, that was all that it was to receive.
Because the trial court's interpretation is not unreasonable and is consistent with all words of the Agreement, I disagree with the majority essentially making its own findings and arriving at its interpretation of the contract, something that is not permissible under our narrow scope of review.
II.
Even if Sellers were entitled to specific performance, the majority then goes on to say that the trial court erred in directing the purchase price to be $400,000 less the amount of insurance proceeds paid to Denithorne Brothers, Inc. because Buyer did not present evidence of the fair market value of the Property, and the only evidence submitted was the $375,000 post-fire offer they had received from a third party. I respectfully disagree because the majority relies on a mistaken view of the law and a misimpression of what the trial court ordered.
Specific performance of an agreement for the sale of real estate is not an action for damages but to have the effect of the
From the moment an agreement of sale of real estate is executed and delivered it vests in the grantee [(purchaser)] what is known as an equitable title to the real estate. Thereupon the vendor [(seller)] is considered as a trustee of the real estate for the purchaser and the latter becomes a trustee of the balance of the purchase money for the seller. Hence, if the terms of the agreement are violated by the [seller], [the purchaser] may go into a court of equity seeking to enforce the contract and to compel specific performance.
* * *
Courts in this Commonwealth consistently have determined that specific performance is an appropriate remedy to compel the conveyance of real estate where a seller violates a realty contract and specific enforcement of the contract would not be contrary to justice.Oliver v. Ball, 136 A.3d 162, 167 (Pa. Super. 2016), appeal denied, 145 A.3d 167 (Pa. 2016) (citations and quotation marks omitted; emphases added).
In this case, the terms of the Agreement provided Sellers with the right to seek specific performance in the event of a breach, given the necessarily unique nature of the sale of real property. In addition, Paragraph 16 provided how any damages involving the structure incurred before closing would be compensated or remediated for which the Sellers were to bear the risk of "all loss."
In crafting its order for specific performance of the Agreement, the trial court recognized that remediation had to take the form of money damages representing the value of the Property that were paid due to the destruction of the Property. It reasoned that:
[We] are mindful that the subject property no longer contains the restaurant structure as a result of the fire. The plaintiff has sought other possible forms of relief, but they are not feasible. We cannot order the parties to coordinate the remediation of the property because remediation in this case would require the Defendants to construct an entirely new restaurant on the property. There has been no testimony or evidence presented to this Court concerning the value of the restaurant structure prior to the fire. There has been no testimony or evidence presented to this Court as to the timeframe or cost of constructing a new restaurant on the property. . . . We also cannot order the Defendants to provide the insurance proceeds to
the Plaintiff because the insurance proceeds were not paid to the Defendants, but to Denithorne Brothers, Inc.
Based on the foregoing, we find the most equitable remedy to be one where the Plaintiff may purchase the subject property for the sum of four hundred thousand dollars ($400,000), as set forth in the Agreement, minus the amount of the insurance proceeds paid to Denithorne Brothers, Inc. for the total loss of the restaurant structure, excluding therefrom any sum paid by the insurance company for the loss of personal property contained within the restaurant. We find that because there was no testimony or evidence presented as to the value of the damaged and destroyed restaurant, the insurance proceeds provide the best estimate as to the true value of that structure. . . . The Plaintiff is, in effect receiving the value of the insurance settlement as negotiated by the parties in the event of a loss and a failure to remediate on the part of the Defendants.(Trial Ct. Op., at 13-15).
As can be seen, the trial court did not order the amount of insurance proceeds paid to Denithorne Brothers, Inc. to be paid to the Sellers. What this order did was use that amount as a measure of damages for remediation that Sellers were required to pay. It was also an amount envisioned by Paragraph 16 as an alternative measure of damages rather than remediation, i.e., that Sellers rebuild the bar-restaurant, something that the trial court could have ordered.
As to the Sellers' claim that the trial court should have accepted their evidence of a market value of $375,000 in the form of the third-party offer for the Property after the fire, presumably, the Sellers would contend that if accepted, they would argue that the Buyer only suffered a $25,000 loss. What that ignores is that this is an action for specific performance seeking to have the Agreement enforced, not an action for money damages. Even if there was a bona fide offer of one million dollars for the Property after the fire, that would not have defeated the request for specific performance to close on the Property with the Property in the same condition as it was when the Agreement was entered.
Moreover, the trial court properly rejected that evidence because the party who purportedly made the offer was not called as a witness to verify the contents of the offer or its authenticity and the trial court refused to accept it. Viewing the evidence in the light most favorable to the Buyer as the verdict winner and giving appropriate weight to the findings and credibility determinations of the trial court as factfinder, we decline to disturb the trial court's assessment in this regard. See Jones, supra at 12.
Accordingly, because I agree with the trial court that equity required specific performance of the sale of the Property at the contract price, adjusted downward measured by the amount of the insurance proceeds paid as a proxy for the amount needed to cover the loss, I respectfully dissent.
[*] Retired Senior Judge assigned to the Superior Court.