Matthew 2535 v. Denithorne, R. ( 2023 )

J-A16036-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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 :
:
Appellant : No. 285 EDA 2022
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.*
MEMORANDUM BY McCAFFERY, J.: FILED JANUARY 26, 2023
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,
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-A16036-22
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.
-2-
J-A16036-22
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
-3-
J-A16036-22
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.1 Id. at 21.
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 $400,000.2 Id. at 42-43.
____________________________________________
1 This letter was signed by Seller Priscilla in her capacity as president,
secretary, and treasurer of Denithorne Brothers.
2 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)
-4-
J-A16036-22
Buyer next called Sellers Richard and Priscilla as if on cross-
examination. 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.3 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.
3 Priscilla stated they paid an insurance premium one time. N.T. at 64.
-5-
J-A16036-22
original total amount of $450,000 and in exchange, receive the Property in its
current condition.4 Id. at 58.
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
17.5 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.
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.
____________________________________________
4 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.
5The 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.”
-6-
J-A16036-22
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:
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. . . .
-7-
J-A16036-22
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.6 Memo. Op. at 10. Buyer believed the
____________________________________________
6On 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
(Footnote Continued Next Page)
-8-
J-A16036-22
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 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
____________________________________________
by the court as a matter of law, ambiguous writings are interpreted by the
finder of fact.”).
-9-
J-A16036-22
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.”).
- 10 -
J-A16036-22
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.7 See Gamesa Energy, 181 A.3d at 1192. Rather, in the event
the parties could not reach a mutually agreeable reduced sales price, each
____________________________________________
7In light of this holding, we do not reach Sellers’ claim that it was Buyer who
breached the Agreement.
- 11 -
J-A16036-22
party was free to either proceed to close on the property as-is or simply walk
away from the deal.8
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.”9 See Newman Dev. Grp. of Pottstown, LLC v.
____________________________________________
8 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).
9Buyer’s attorney drafted the Agreement. N.T. at 11. See Ins. Adjustment
Bureau, Inc., 905 A.2d at 468 (“Under ordinary principles of contract
(Footnote Continued Next Page)
- 12 -
J-A16036-22
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.”).
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.
____________________________________________
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.
- 13 -
J-A16036-22
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.
- 14 -
J-A16036-22
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.
- 15 -
J-A16036-22
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.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/26/2023
- 16 -