ACT Dealerships v. McLaren, D. ( 2016 )

J. A29010/15
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
ACT DEALERSHIPS, INC., : IN THE SUPERIOR COURT OF
D/B/A ANDRETTI AIRPORT TOYOTA, : PENNSYLVANIA
:
Appellant :
:
v. :
: No. 1862 WDA 2014
D.A. McLAREN, L.P. AND :
THEODORE A. McWILLIAMS :
Appeal from the Order Entered October 15, 2014,
in the Court of Common Pleas of Allegheny County
Civil Division at No. GD-07-15208
BEFORE: FORD ELLIOTT, P.J.E., BOWES AND MUSMANNO, JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED FEBRUARY 26, 2016
ACT Dealerships, Inc., d/b/a Andretti Airport Toyota (“ACT”), appeals
from the order entered October 15, 2014, granting summary judgment for
defendants/appellees and dismissing the case. In this breach of contract
action, ACT, a lessee of two separate properties at 798-800 Narrows Run
Road, claimed that appellees violated their obligations under the respective
leases to properly maintain the roofs, resulting in damages to ACT when it
sold its car dealership to a third party. According to ACT, appellees’ failure
to repair/replace the roofs forced ACT to sell its business at a discount. The
Honorable Timothy P. O’Reilly found that, with respect to appellee
Theodore A. McWilliams (“McWilliams”), lessor of 800 Narrows Run Road,
ACT failed to prove any violation of the lease agreement. With respect to
J. A29010/15
appellee D.A. McLaren, L.P. (“McLaren”), lessor of 798 Narrows Run Road,
the trial court found that ACT failed to prove causation and damages. After
careful review, we agree and, therefore, affirm.
On January 6, 2012, the trial court granted appellees’ first motion for
summary judgment, which related to Count I of ACT’s complaint and
800 Narrows Run Road (McWilliams). On October 15, 2014, the trial court
granted appellees’ second motion for summary judgment, which related to
Count II of the complaint and 798 Narrows Run Road (McLaren). In these
two opinions, the trial court has summarized the history of this matter as
follows:
This Motion for Summary Judgment on the
Pleadings as characterized by the Plaintiff ACT
Dealership, Inc., d/b/a Andretti Airport Toyota (ACT),
involves the assertion by ACT that the roofs on
2 buildings on 2 parcels of land - 798 Narrows Run
Road and 800 Narrows Run Road were defective and
must be repaired by the lessors of those properties,
Defendant, D. A. McLaren (McLaren) as to
798 Narrows Run Road and Defendant Theodore A.
McWilliams (McWilliams) as to 800 Narrows Run
Road.
On analysis, however, the case is more
complicated than the above recital would indicate.
ACT operated a car dealership at both locations
but in 2006 sought to sell that dealership. In the
course of attempting to sell the dealership, a
prospective purchaser had the buildings inspected -
that is at both 798 and 800 Narrows Run Road. That
inspector opined that the roofs on both properties
were in such a state of disrepair so as to require
replacement.
-2-
J. A29010/15
ACT, relying on the leases it had with
McWilliams and McLaren, requested those lessors to
replace the roof. They did not do so.
ACT proceeded with the sale of the dealership
but avers it had to reduce the price sought because
of the deteriorating roofs. It attributes that
reduction in price to the failure by McWilliams and
McLaren to repair the roofs and seeks payment by
them for the reduction in price.
Defendant McWilliams has countered that
Motion with its own Motion for Partial Summary
Judgment as to Count I only of the Complaint
pertaining to 800 Narrows Run Road. The argument
as to Count I is that even if the lease required
McWilliams to replace the roof or reimburse ACT,
that obligation arises only if ACT itself had paid to
have the roof replaced. Since it did not and only
reduced its selling price, it cannot receive any money
under its theory in Count I. McWilliams relies on
Section 12.9 of the lease for this proposition.
Defendants also assert that ACT sold the
dealership in 2007 to an entity known as KRT and
that KRT has not replaced the roof.
The lease language at Section 12.9 relied on
by ACT requires the lessors to “keep and maintain
the foundations, support walls and other structural
portions of the premises in good order and
condition.” If the lessors fail to abide by the
aforesaid obligation, and fail to “. . . make repairs or
replacements required under this Section 12.9,
Tenant may make same and collect the costs thereof
and expenses incurred in connection therewith . . .”
Trial court opinion, 1/6/12 at 1-2 (emphasis in original). The trial court
determined that even assuming, arguendo, that Section 12.9 applies to the
roof, ACT failed to repair or replace the roof; in fact, it was never replaced.
(Id. at 2-3.) Section 12.9 only provides for reimbursement to the lessee in
-3-
J. A29010/15
the event the lessor, after reasonable notice, fails to repair/replace the roof.
(Id.) Therefore, the trial court ruled that ACT could not recover on Count 1
of the complaint against McWilliams. With respect to McLaren, the trial court
stated:
McLaren owned a building which it leased to ACT for
its auto dealership. ACT contended that the roof was
in need of repair and so notified McLaren on
February 28, 2007. A few days later ACT sold its
dealership to KRT, also a dealer. ACT alleges that at
the closing on its sale to KRT issues as to the roof
were raised and ACT had to reduce its selling price.
The record does not reflect how much ACT reduced
its price and how much is attributable to the roof.
Indeed, the deposition of the designated
corporate representatives for ACT and for KRT shed
little light on this issue. Further, KRT utilized the
building for another 4 years and made no complaints
about the roof. Finally, it was replaced by McLaren
on [sic] 2013 on its own.
Trial court opinion, 10/15/14 at 1-2. The trial court determined that ACT
could not recover as a matter of law against McLaren where it failed to prove
a causal connection between the alleged breach and resulting damages. The
trial court noted that McLaren was not a party to negotiations between ACT
and KRT, and had no knowledge of any impending sale. (Id. at 2.) McLaren
received notice of a problem with the roof just a few days before closing.
(Id. at 1.) KRT occupied the building for four years without complaint, and
eventually, McLaren replaced the roof on its own accord. (Id. at 2.)
Furthermore, the trial court found that ACT failed to prove how much of its
reduction in selling price was attributable to the roof. (Id. at 1-2.)
-4-
J. A29010/15
Therefore, the trial court dismissed Count II of the complaint against
McLaren.
This timely appeal followed on November 12, 2014. On November 13,
2014, the trial court filed a Rule 1925 statement, relying on its previous
opinions and orders disposing of appellees’ first and second motions for
summary judgment.1
Appellant has raised the following issues for this court’s review:
1. Does ACT’s claim that the Defendants
[McWilliams] and [McLaren] [] breached the
800 Narrows Run Lease and the 798 Narrows
Run Lease (collectively, “Leases”) fail because
ACT itself did not pay for repairs?
2. Did Defendants waive the affirmative defense
of failure of a condition precedent when they
failed to plead it in their Answer?
3. Are there material factual disputes as to the
condition of the roofs at the time of the sale to
KRT?
4. Are damages a question of fact, which
precludes the granting of summary
judgment[?]
5. Did ACT fail to demonstrate some causation
between its reduction in price to KRT and
anything McLaren did or did not do?
Appellant’s brief at 7.
1
Appellant was not directed to file a statement of errors complained of on
appeal pursuant to Pa.R.A.P., Rule 1925(b), 42 Pa.C.S.A.
-5-
J. A29010/15
Initially, we note:
Our scope of review of a trial court’s
order disposing of a motion for summary
judgment is plenary. Accordingly, we
must consider the order in the context of
the entire record. Our standard of
review is the same as that of the trial
court; thus, we determine whether the
record documents a question of material
fact concerning an element of the claim
or defense at issue. If no such question
appears, the court must then determine
whether the moving party is entitled to
judgment on the basis of substantive
law. Conversely, if a question of
material fact is apparent, the court must
defer the question for consideration of a
jury and deny the motion for summary
judgment. We will reverse the resulting
order only where it is established that
the court committed an error of law or
clearly abused its discretion.
Grimminger v. Maitra, 887 A.2d 276, 279
(Pa.Super.2005) (quotation omitted). “[Moreover,]
we will view the record in the light most favorable to
the non-moving party, and all doubts as to the
existence of a genuine issue of material fact must be
resolved against the moving party.” Evans v.
Sodexho, 946 A.2d 733, 739 (Pa.Super.2008)
(quotation omitted).
Ford Motor Co. v. Buseman, 954 A.2d 580, 582-583 (Pa.Super. 2008),
appeal denied, 970 A.2d 431 (Pa. 2009). “A party claiming breach of
contract must establish (1) the existence of a contract, including its essential
terms, (2) a breach of a duty imposed by the contract and (3) resultant
damages.” Ruthrauff, Inc. v. Ravin, Inc., 914 A.2d 880, 888 (Pa.Super.
2006) (citation and quotation marks omitted).
-6-
J. A29010/15
“However, damages in a breach of contract action
must be proved with reasonable certainty.
Otherwise, they are generally not recoverable.
Spang & Co. v. U.S. Steel Corp., 519 Pa. 14, 545
A.2d 861, 866 (1988) (“As a general rule, damages
are not recoverable if they are too speculative,
vague or contingent and are not recoverable for loss
beyond an amount that the evidence permits to be
established with reasonable certainty.”). The
question of whether damages are speculative “has
nothing to do with the difficulty in calculating the
amount, but deals with the more basic question of
whether there are identifiable damages.” Wachovia
Bank, N.A. v. Ferretti, 935 A.2d 565, 572
(Pa.Super. 2007).
Newman Development Group of Pottstown, LLC v. Genuardi’s Family
Market, Inc., 98 A.3d 645, 661 (Pa.Super. 2014) (en banc), appeal
denied, 117 A.3d 1281 (Pa. 2015) (additional citation omitted).
First, we will examine the trial court’s grant of summary judgment as
to Count I of the complaint, appellant’s claim against McWilliams.
Section 12.9 of the 800 Narrows Run Road lease provides as follows:
Lessor shall keep and maintain the foundations,
support walls and other structural portions of the
Premises in good order and condition and shall make
all repairs and replacements thereto and to each and
every part thereof which may be necessary, required
or desired. In the event Lessor shall fail, within
thirty (30) days after notice in writing by
Tenant, to make repairs or replacements
required under this section 12.9, Tenant may
make same and collect the costs thereof and
expenses incurred in connection therewith,
together with interest thereon at the then prevailing
commercial rate, from Lessor, by offsetting such
costs and expenses against Fixed Rent or other
payments to Lessor hereunder or, at Tenant’s option,
by exercising all remedies provided by law.
-7-
J. A29010/15
RR at 22 (emphasis added).
Instantly, ACT did not comply with Section 12.9, which requires
30 days’ notice if “structural portions” of the premises are in need of repair
or replacement. Assuming that the roof constitutes a “structural portion” of
the leased premises, ACT violated Section 12.9 by giving notice to
McWilliams of the deteriorated condition of the roof on February 27, 2007,
and then selling the dealership on March 1, 2007, just a few days later.
(RR at 100.) McWilliams had no opportunity to make repairs or replace the
roof. Furthermore, Section 12.9 clearly states that, in the event the lessor
fails to make repairs within 30 days, the lessee may make the repairs and
recoup the costs. The record reflects that, in fact, the roof was never
replaced. (Deposition testimony of James Ross, president of KRT, Inc.,
11/4/10 at 63; RR at 302 (“Q. Since March of 2007, neither roof has been
replaced, has it? A. I don’t believe so.”).) ACT wants McWilliams to pay for
a new roof that was never installed. The lease agreement does not
contemplate reimbursing ACT for a purchase price credit made to an
unrelated third party. ACT failed to establish that McWilliams breached the
-8-
J. A29010/15
lease agreement. The trial court did not err in granting appellees’ first
motion for summary judgment and dismissing Count I of the complaint.2
Next, we turn to the lease for 798 Narrows Run Road. The McLaren
lease did not contain an identical provision as that found in Section 12.9 of
the McWilliams lease; however, appellant alleged that McLaren’s failure to
replace the roof at 798 Narrows Run Road constituted a breach of the lease
and forced appellant to give KRT a credit against the purchase price of the
dealership to pay for repair/replacement of the roof. It is not disputed that,
under the terms of the lease, McLaren was obligated to maintain the roof.
(RR at 88-98.) However, the trial court found that there was no causal
connection between McLaren’s alleged breach and ACT’s damages; and
2
Appellant argues that failure of a condition precedent, i.e., ACT’s failure to
repair/replace the roof, is an affirmative defense which must be raised as
new matter in the defendants’ answer or it is waived. (Appellant’s brief at
13-15.) See Pa.R.C.P. 1030 (affirmative defenses are waived if not raised in
a responsive pleading). Appellant relies on Judge v. Celina Mut. Ins. Co.,
449 A.2d 658, 661 (Pa.Super. 1982), which is inapposite (“The defense of
salvage value arises from the insurance contract and, as such, is an
affirmative defense which must be properly pleaded in new matter.” (citation
omitted)). Appellant cites no authority for the proposition that failure of a
condition precedent is an affirmative defense that cannot be raised for the
first time at the summary judgment stage. In fact, the weight of authority
indicates the opposite. See, e.g., Wells Fargo Bank, N.A. v. Goebel, 6
N.E.3d 1220, 1227 (Ohio App. 2 Dist. 2014) (“Whereas an affirmative
defense is separate from the merits of the plaintiff’s cause of action and bars
recovery even when the plaintiff has established a prima facie case, a
condition precedent is directly tied to the merits of the plaintiff’s cause of
action, which is itself contingent upon satisfaction of the condition.” (citation
omitted)). At any rate, while they may not have used the phrase “condition
precedent,” appellees raised the issue of ACT’s failure to repair or replace
the roof in their answer. (Appellees’ brief at 19.)
-9-
J. A29010/15
furthermore, that ACT’s alleged damages were uncertain and speculative.
We agree.
In Macchia v. Megow, 50 A.2d 314 (Pa. 1947), our supreme court
re-stated the well-established rule that:
‘Damages for which compensation may be justly
claimed and allowed are such only as naturally and
ordinarily flow from the breach of contract
complained of. They should be such as may fairly be
supposed to have entered into the contemplation of
the parties when they made the contract, or such as
might according to the ordinary course of things be
expected to follow its violation’: Billmeyer, Dill &
Co. v. Wagner, 91 Pa. 92, 94; Hutchinson v.
Snider, 137 Pa. 1, 6, 7, 20 A. 510, 511; Spiese v.
Mutual Trust Co., 258 Pa. 422, 426, 102 A. 121,
122, 123; Raby, Inc., v. Ward-Meehan Co., 261
Pa. 468, 471, 472, 104 A. 750, 751.
....
‘Parties, when they enter into contracts, may well be
presumed to contemplate the ordinary and natural
incidents and consequences of performance or
non-performance; but they are not supposed to
know the condition of each other’s affairs, nor to
take into consideration any existing or contemplated
transactions, not communicated nor known, with
other persons. Few persons would enter into
contracts of any considerable extent as to
subject-matter or time if they should thereby
incidentally assume the responsibility of carrying out,
or be held legally affected by, other arrangements
over which they have no control and the existence of
which are [sic] unknown to them’: Sutherland on
Damages, 4th ed. vol. 1, p. 182, § 47.
Id. at 316.
- 10 -
J. A29010/15
In Macchia, the defendant denied that it was he who breached the
contract, and asserted that, on the contrary, it was the plaintiff who was in
default by failing to make deliveries within the times promised by him or at
least within a reasonable time, and claimed that because of such default on
the part of the plaintiff a third party cancelled its contract with the
defendant. The defendant filed a counterclaim, including an alleged loss of
profits he would have made under his contract with the third party had it not
been cancelled. Our supreme court in Macchia held that even if the
defendant had proved that the cancellation of his contract with the third
party was due to the plaintiff’s alleged breach of his contract with the
defendant, the defendant could not hold the plaintiff liable for the kind of
damages asserted in his counterclaim: “There is therefore nothing in the
evidence to establish that plaintiff was obliged to have in mind that a failure
on his part to make deliveries within any given time would involve defendant
in the cancellation of another contract and cause him a large resulting loss of
profits.” Id.
Similarly, here, even if ACT were able to prove McLaren breached the
lease by failing to make repairs to the roof, McLaren cannot possibly have
anticipated the resulting damages, as they were not a natural consequence
of the alleged breach. As appellees argue, there is no evidence that in 2000,
when the ten-year lease was signed, McLaren should have known that ACT
would sell its dealership business in 2007 and that the condition of the roof
- 11 -
J. A29010/15
would be a factor in the purchase price of the dealership. (Appellees’ brief
at 24-25.) McLaren cannot be faulted for failing to predict ACT’s future
transactions with third parties more than six years after the lease was
signed. ACT gave notice to McLaren of the need for a replacement roof just
a few days before closing on the deal with KRT, and McLaren was not a party
to their transaction. ACT agreed to provide KRT with a purchase credit
towards a new roof without any input from McLaren. Simply stated, the type
of damages alleged here, a credit given to KRT at closing, could not have
been contemplated by the parties when the lease was signed in 2000. The
alleged damages are not such as would “naturally and ordinarily flow from
the breach of contract complained of,” Macchia, supra.
In addition, ACT failed to allege damages with any reasonable
certainty. ACT argues that it is undisputed that it paid for the
repair/replacement of the roof at 798 Narrows Run Road through a purchase
credit to KRT. (Appellant’s brief at 21.) ACT received estimates from
J.L. Miller & Sons of $120,000 to replace the roof at 798 Narrows Run Road,
and $92,400 to replace the roof at 800 Narrows Run Road. (Id. at 22; RR at
100-103.) ACT argues that there is substantial evidence it paid to
repair/replace the roofs and its damages were not speculative. (Id.)
ACT’s argument ignores the fact that the roofs were not replaced,
despite ACT’s February 27, 2007 letter warning that “the roof is in such a
state of disrepair that it must be immediately replaced . . . .” As stated
- 12 -
J. A29010/15
above, Mr. Ross testified that since the sale of the dealership on March 1,
2007, the roof at 798 Narrows Run Road had not been replaced. In addition,
it is unclear how much of the credit on the purchase price was for the
replacement of the roof at 798 Narrows Run Road. Mr. Ross testified that,
“ACT paid to replace both roofs through a credit. They gave us a credit. My
understanding is it wasn’t to replace both roofs, it was a lot of things.”
(Ross deposition, 11/4/10 at 56-57; RR at 298-299.) John Caponigro, an
equity owner and secretary of ACT, testified that,
I recall that there was a list of a lot of things that the
Rosses wished to have credits for. It wasn’t just the
roof. The roof was a major portion of it. The roofs
were definitely a major portion of it, but there was
[sic] a number of other items as well that we spoke
of in reaching the overall credit towards the purchase
price.
Caponigro deposition, 11/9/10 at 71; RR at 316. Despite the fact that the
estimate to replace the roofs was $212,400, Mr. Caponigro testified that the
overall reduction to the purchase price pertaining to the roofs was $173,000.
(Id. at 74; RR at 319.) Mr. Caponigro could not recall specifically how they
arrived at the $173,000 figure. (Id. at 72; RR at 317.) He testified that
they had continued discussions with KRT right up until closing. (Id. at 75;
RR at 320.)
Clearly, as a matter of law, ACT could not prove with reasonable
certainty the amount of damages sustained as a result of McLaren’s alleged
breach of the 798 Narrows Run Road lease. For these reasons, the trial
- 13 -
J. A29010/15
court did not err in granting appellees’ second motion for summary
judgment and dismissing Count II of the complaint.
Order affirmed.
Musmanno joins the Memorandum.
Bowes, J. files a Concurring Statement.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/26/2016
- 14 -