Matthew 2535 v. Denithorne, R. ( 2023 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MATTHEW 2535 PROPERTIES, LLC : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
RICHARD E. DENITHORNE AND :
PRISCILLA F. DENITHORNE :
: No. 285 EDA 2022
Appellants :
Appeal from the Judgment Entered March 4, 2022
In the Court of Common Pleas of Carbon County Civil Division at No(s):
18-1411
BEFORE: McLAUGHLIN, J., McCAFFERY, J., and PELLEGRINI, J.*
DISSENTING MEMORANDUM BY PELLEGRINI, J.: FILED JANUARY 26, 2023
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
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
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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
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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
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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
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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.
***
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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
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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
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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.
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