Independence Ave. v. Tradavo, Inc. ( 2023 )

J-A22037-21
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
INDEPENDENCE AVENUE : IN THE SUPERIOR COURT OF
INVESTMENTS, LLC. : PENNSYLVANIA
:
Appellant :
:
:
v. :
:
: No. 1573 MDA 2020
TRADAVO, INC. :
Appeal from the Order Entered November 23, 2020
In the Court of Common Pleas of Cumberland County Civil Division at
No(s): 2018-08120
BEFORE: BOWES, J., OLSON, J., and KING, J.
CONCURRING AND DISSENTING MEMORANDUM BY BOWES, J.:
FILED: JANUARY 10, 2023
I concur with my learned colleagues on the disposition of some issues
raised in this appeal but would reach a different result on others. Specifically,
I agree with the Majority’s implicit recognition that Appellant (“Landlord”)
conclusively elected to terminate its lease (“the Lease”) with Appellee
(“Tenant”), and its resultant holding that the recoverable damages included
the build-out expenses that Landlord paid in connection with the Lease, but
not the broker’s commission and build-out expenses for the subsequent tenant
(“new tenant”). However, I would hold that Landlord is also entitled to confess
judgment for the balance of the broker’s commission it paid to Tenant’s
broker, as well as for the final month of unpaid rent prior to the
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commencement of Landlord’s lease with the new tenant. My reasoning for
these conclusions follows.
I begin by briefly reiterating the pertinent facts. Landlord and Tenant
agreed in February 2016 to the Lease, which was set to end on November 30,
2021. The Lease required Tenant to pay, inter alia, a security deposit and
monthly rents, into which was woven Landlord’s recoupment of just under
$26,000 in up-front build-out costs and a broker commission in excess of
$35,000. Landlord paid the broker’s bill when the Lease was signed and
performed the agreed-upon build-out. However, Tenant defaulted on its Lease
obligations by not paying the security deposit or taking occupancy in June
2016.
Landlord first confessed judgment in August 2016, for $77,325.57,
which included the unpaid security deposit, the past-due unpaid rents from
June through August 2016, accelerated rents for the upcoming six months of
September 2016 through February 2017, a late fee, attorney fees, costs, and
interest. Tenant did not contest this judgment.
Thereafter, Landlord found a new tenant for the premises, with rent
payments higher than Tenant had been paying, beginning on October 1, 2017,
and extending past the time that the Lease would have ended. See Joint
Stipulation of Facts at ¶ 8. The new tenant agreed to a higher monthly rent
than the Lease required of Tenant, which included recoupment by Landlord of
build-out costs for the new tenant and a commission to the new tenant’s
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broker. See N.T., 8/25/20, at 9, 11. Accordingly, Landlord’s ongoing losses
ended in October 2017.
In August 2018, Landlord confessed judgment again. This time, the
itemization of the judgment listed, inter alia, unpaid rent and expenses from
March through August 2017, and unamortized build-out expenses. Tenant
contested the judgment by filing a petition to open or strike and subsequent
amendments thereto, claiming that the judgment should be reduced by the
excess rent Landlord is receiving from the new tenant, and by the build-out
costs for the new tenant since Landlord will recoup those costs from the new
tenant. Landlord then sought to amend the judgment to include the following
items: (1) $25,927.62 for Tenant’s build-out costs; (2) $35,924.26 for
Tenant’s broker commission; (3) $76,562.00 for the new tenant’s build-out
costs; (4) $85,678.78 for the new tenant’s broker commission; and (5)
$7,737.40 for the rent payment Tenant failed to make in September 2017,
the last one before the new tenant’s lease began. See Motion to Amend
Judgment, 9/3/19, at ¶ 15. The trial court’s denial of Landlord’s request to
add those items is at issue in this appeal.
Next, I review the principles of law relevant to my analysis. It is well-
settled that “contract law and general contract principles govern lease
agreements. As such, when the language of a lease is clear and unequivocal,
its meaning will be determined by its contents alone in ascertaining the intent
of the parties.” Newman Dev. Grp. of Pottstown, LLC v. Genuardi’s
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Family Mkt., Inc., 98 A.3d 645, 658 (Pa.Super. 2014) (cleaned up). When
a contract is breached, “the law protects a party’s expectation interest by
attempting to put that party in as good a position as he would have been had
the contract been performed, that is, had there been no breach.” Id. at 659(cleaned up).
In determining an appropriate damage award, “the election of remedies
doctrine operates to bar windfall judgments or otherwise duplicative
recoveries resulting from a single injury; although such inconsistent remedies
may be pleaded and pursued in litigation, damages calculated pursuant to only
one theory may be recovered.” Gamesa Energy USA, LLC v. Ten Penn Ctr.
Associates, L.P., 217 A.3d 1227, 1239 (Pa. 2019).
[O]nce a party makes a “binding” election of one remedy over
other inconsistent remedies, it is precluded from thereafter
maintaining an action on those inconsistent remedies; further, a
“binding” election of remedies occurs when there has been a legal
resolution, such as a settlement, a stipulation, a waiver, an
expressed withdrawal or abandonment of claims, a judgment, or
application of another exclusionary rule, and in such
circumstances, the electing party may no longer pursue
alternative forms of relief on a given claim.
Id. at 1238–39. “Logically, as the particular facts and circumstances of a
case, including the conduct of the parties, are relevant in determining which
claims fail or succeed, they are also relevant in determining which one of any
inconsistent remedies is the appropriate award.” Id. at 1240.
Applying these principles to the case at hand, I believe that the key to
determining the damages to which Landlord was entitled is whether, expressly
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or through its conduct, it elected to terminate the Lease following its
undisputed breach by Tenant, or whether it proceeded to re-let the premises
without terminating the Lease. For the reasons that follow, I conclude that
Landlord made the binding election to obtain damages flowing from the
termination of the Lease.
The Lease states that “Landlord may do one or more of the following” in
the event of Tenant’s default:
a. Terminate this Lease by giving written notice of the
termination to the Tenant, in which event Tenant shall
immediately surrender the Premises to Landlord. If Tenant fails
to do so, Landlord may, without notice and without prejudice to
any other remedy Landlord may have, enter upon and take
possession of the Premises and expel or remove Tenant and its
effects without being liable to prosecution or any claim for
damages therefore; and Tenant shall be liable to Landlord for all
loss and damage which Landlord may suffer by reason of such
termination, whether through inability to re-let the Premises or
otherwise, including any loss of Rent for the remainder of the
Term. Any such loss of Rent shall be offset by any Rent received
by Landlord as a result of re-letting the Premises during the
remainder of the Term.
b. Terminate this Lease, in which event Tenant’s event of
default shall be considered a total breach of Tenant’s obligations
under this Lease and Tenant immediately shall become liable for
such damages for such breach amount, equal to the total of:
(1) the costs of recovering the Premises;
(2) the unpaid Rent and Additional Rent, if any, due from the
date of the Event of Default to the date of termination,
together with pre- and post judgment interest thereon at
a rate of .83% per month.
(3) the Rent and Additional Rent, if any, and other benefits
(i.e, operating expenses and common area maintenance
costs) which Landlord would have received under the
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Lease from the date of termination to the end of the
remainder of the Term, at the rates set forth herein,
together with all other expenses incurred by Landlord in
connection with Tenant’s default together with pre- and
post-judgment interest thereon at a rate of .83% per
month.
(4) all other sums of money and damages owing by Tenant
and Landlord as set forth in Paragraph 21.01 [which
references events that shall constitute a default but does
not specify any damages].
(5) The interest rate of .83% per month shall survive any
judgment being entered on the damages set forth in this
subparagraph.
c. Enter upon and take possession of the Premises as Tenant’s
agent without terminating this Lease and without being liable
to prosecution or any claim for damages therefor. Landlord may
re-let the Premises as Tenant’s agent and receive the Rent
therefore, in which event Tenant shall pay to Landlord on demand
any and all other amounts in addition to the lost rent necessary
to compensate Landlord for all the damages proximately caused
by the Tenant’s failure to perform its obligations under this Lease
or which in the ordinary course of things would be likely to result
therefrom including, but not limited to: additional broker’s
commissions, advertising costs, costs, utility costs, insurance
costs, rent concessions, renovating expenses, the balance of the
unamortized costs, as of the date of the Event of Default, incurred
by the Landlord in the building out special improvements to the
Premise for Tenant’s use of the Premises, repair expenses,
refitting expenses, any deficiency in rent that may arise by reason
of re-letting such re-letting should not affect Tenant’s liability for
Rent or for damages, and all other expenses related to re-letting
the Premises.
Lease at § 21.02 (emphases added).
The plain language of the contract indicates that, if Landlord decided to
terminate the Lease, it had two distinct remedies available that would make
it whole in different ways. Pursuant to subsection (a), which is not at issue in
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this appeal, Landlord could rescind the contract, take immediate possession
of the premises, and collect from Tenant damages associated with the
termination. With this option, Landlord would be made whole by being placed
it in the position in which it would have been had it never entered into the
Lease with Tenant.
Pursuant to subsection (b), Landlord could elect to terminate the Lease
and, instead of rescinding, consider Tenant in total breach of the Lease. This
election would render Tenant immediately liable for all losses Landlord realized
by Tenant’s breach, including any loss of rents, as well as the balance of the
build-out and broker costs from Tenant since no new tenant was assuming
Tenant’s responsibility to do so. With the Lease terminated, Landlord’s next
letting of the premises would begin a new lease, with the new tenant
responsible for its own renovation and broker’s commission costs associated
with that new lease, just as Tenant had been with the Lease.
If, however, Landlord chose not to terminate the Lease, it was entitled
under subsection (c) to be made whole by finding a third party to assume
Tenant’s unfulfilled Lease obligations and recovering any losses it realized in
the process. Those losses would include the unpaid monthly rents that had
been due between the default and the re-letting, plus the expenses Landlord
incurred through acting as Tenant’s agent, such as broker’s commissions and
renovation expenses. The new tenant thereafter would stand in Tenant’s place
to satisfy Tenant’s contractual duties for the remaining term of the Lease,
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including reimbursing Landlord for Tenant’s build-out and broker costs that
were amortized in Tenant’s rent payments. Furthermore, Tenant would be
entitled to receive a credit towards any sums owing if the new tenant agreed
to a higher rent than the Lease required Tenant to pay. See Lease at
§ 21.02(c) (“Should Landlord re-let Tenant’s premise after Tenant defaults
then Landlord shall credit any rent received from the new [t]enant against
that which this Tenant would otherwise be obligated to pay to Landlord
pursuant to the Lease.”). In sum, option (c)’s remedies maintain the efficacy
of the Lease and place Landlord in the position it would have realized had
Tenant fully performed, by allowing Landlord to recoup from Tenant the costs
of acting as Tenant’s agent to find a replacement to fulfill Tenant’s Lease
obligations, and obtain payments for those obligation from the new tenant.
In its 2018 complaint to confess judgment following Tenant’s default,
Landlord invoked both subsections (b) and (c), which the preceding discussion
makes clear are inconsistent theories. As noted above, the Lease states that
Landlord may choose more than one of the three remedies provided in
§ 21.02. This is a viable provision, as Landlord could initially opt not to
terminate, then later elect termination. See Lease at § 21.03 (indicating that
Landlord may terminate the lease for a previous default after reletting).
Further, under the law, Landlord was entitled to pursue alternative,
inconsistent theories. See, e.g., Gamesa, supra at 1239. Yet, the law also
provides that Landlord was not permitted to realize a windfall through
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obtaining a judgment for both termination and non-termination damages. Id.
at 1127 (“The law will not allow a party to claim by two judgments in the same
action, or to reverse his judgment and still claim by it; or to say I will hold by
the one and take all I can get by the other.” (cleaned up)). Moreover, it was
impossible for Landlord to simultaneously terminate and not terminate, or for
it to act as Tenant’s agent to find a substitute tenant to fulfill the Lease after
the Lease had already been terminated.
Realizing a windfall is precisely what Landlord is attempting to do. It
asks this Court to treat the contract as both terminated and not terminated at
the same time, and grant it the benefits of both subsection (b) and subsection
(c) without honoring the credits Tenant was due under either provision.
Landlord’s position is untenable. An election of remedies had to be made.
My review of the certified record reveals that Landlord in fact chose to
terminate the Lease, conclusively establishing that it elected to pursue the
remedies available pursuant to § 21.02(b) of the Lease and to forgo
§ 21.02(c)’s non-termination remedies. In the 2016 complaint to confess
judgment, under the heading “Plaintiff’s Choice of Remedies,” Landlord
invoked its right to terminate the Lease and obtain damages pursuant to
§ 21.02(b). See Complaint for Confession of Judgment, 8/19/16, at ¶17
(included in the certified record as Exhibit P-4 of Landlord’s Brief in Support
of Motion to Amend Confessed Judgment). This unequivocal act of electing
the subsection (b) termination remedies, an election reduced to judgment in
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2016, became thereafter binding. See Gamesa, supra at 1238–39 (“[A]
‘binding’” election of remedies occurs when there has been a legal resolution,
such as a . . . judgment, . . . and in such circumstances, the electing party
may no longer pursue alternative forms of relief on a given claim.”);
Wedgewood Diner, Inc. v. Good, 534 A.2d 537, 538 (Pa.Super. 1987)
(“[T]he adoption, by an unequivocal act, of one of two or more inconsistent
remedial rights has the effect of precluding a resort to the others.”). The
Lease was thus terminated in 2016, and Tenant thereafter ceased to have an
interest in the premises to re-let, either on its own or with Landlord as its
agent.
Landlord confirmed this election with its subsequent acts. First,
Landlord’s lease with the new tenant provided for a different term and
different rent amounts, which, critically, included amortized costs for the new
tenant’s build-out costs and broker’s commission. See N.T., 8/27/20, at 19-
22 (explaining that the broker’s commission and build-out costs are business
expenses Landlord recovers through the rent payments); Landlord’s Post-trial
Brief at 15 (acknowledging that Landlord will completely recoup the new
tenant’s build-out costs and broker’s commission from the new tenant upon
its payment of rent over the ten-year term of the new lease). Second,
Landlord did not credit any portion of the excess rent paid by the new tenant
to Tenant as was required by subsection (c) if Landlord had re-let as Tenant’s
agent. See N.T., 8/27/20, at 27. By opting to collect the new build-out-costs
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and broker’s commission from the new tenant and not crediting Tenant for
any of the new tenant’s payments, Landlord demonstrated its intent to seek
damages flowing from termination rather than those available if it had
preserved the Lease and re-let the premises as Tenant’s agent. Accord
Gamesa, supra at 1243 (“[A] non-breaching party to a contract may, by its
conduct following a breach, conclusively elect its remedy and be bound by it
to one theory for recovery of damages.”).
Thus, despite Landlord’s invocation of both subsections (b) and (c) in its
2018 complaint, and its repeated reference to items of damages enumerated
in subsection (c) at the hearing before the trial court, see N.T., 8/27/20, at
13, 24, 28, Landlord both expressly and through its actions elected to
terminate the Lease and seek the damages available to it pursuant to
§ 21.02(b). After termination, Landlord was not permitted to recover the non-
termination damages enumerated in § 21.02(c), such as the new tenant’s
broker and build-out costs. Instead, it was entitled to recover the loss of rents
between Tenant’s default and the commencement of the new lease, the
balance of Tenant’s build-out and broker costs remaining after the amortized
amounts paid in rent are deducted, attorney fees, and interest. See Lease at
§ 31.02(b)(2)-(5). Permitting Landlord to recover these items of damages,
and only these items of damages, will place Landlord in as good a position as
it would have been had Tenant performed its Lease obligations up until the
new tenant’s lease began on October 1, 2017.
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Accordingly, I agree with the Majority’s decision to affirm the trial court’s
ruling that Landlord was not entitled to damages based upon the new tenant’s
build-out costs and the commission for the new tenant’s broker. See Majority
Memorandum at 33. Those expenses, being recovered through the new lease
with the new tenant, are not recoverable from Tenant through the termination
provisions of the Lease. Landlord will recoup those costs from the new tenant
if the new tenant performs its lease obligations, and, if not, they are
recoverable from the new tenant through litigation.
Likewise, I agree with my colleagues that the balance of the
approximately $26,000 spent on Tenant’s build-out costs is properly
recovered by Landlord through § 21.02(b). See id. at 30-31. Specifically, I
too would hold that the trial court erred in refusing to allow Landlord to amend
to add the remainder of those costs after subtracting the portion recovered
through the monthly rents included in the 2016 and 2018 confessed
judgments.
However, I part with the Majority on the remaining two items of
damages. First, the Majority holds that Landlord was not entitled to recover
the $35,924.26 commission that it paid to Tenant’s broker. The Majority and
the trial court observed that the Lease provides that “a full brokerage
commission shall be due and payable upon occupancy.” Majority
Memorandum at 29 (quoting Lease at § 24.40) (emphasis omitted). With
Tenant defaulting by not taking occupancy, the Majority agrees with the trial
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court’s conclusion that the payment to Tenant’s broker never became due.
See id.
As Landlord notes, Tenant did not raise in its pleadings any suggestion
Tenant’s occupancy was a condition precedent triggering Landlord’s duty to
pay the commission for Tenant’s broker, leaving Landlord without notice that
it had cause to prove the terms of the broker’s contract in light of the parties’
stipulation as to the amount of the commission paid. See Appellant’s brief at
33-34. I find it telling that Tenant does not in its brief dispute Landlord’s claim
that Tenant waived any challenge to the timing of the commission. Rather,
Tenant offers a mere two-paragraph response to Landlord’s claim of error,
noting that the trial court also declined to award the commission based upon
the same flawed double-recovery analysis that both the Majority and I have
rejected as to Tenant’s build-out costs. See Appellee’s brief at 21; Majority
Memorandum at 32-33. Landlord’s waiver argument is therefore a plausible
basis to reject the trial court’s ruling.
However, even if the trial court did not err in permitting Tenant to prevail
on an issue not properly before it, I cannot agree with the Majority’s
affirmance of the trial court’s decision to treat the reference in the Lease to
occupancy as a condition precedent to Landlord’s obligation to pay the
brokerage commission. It is well-settled that “an event mentioned in a
contract will not be construed as a condition precedent unless expressly made
such a condition.” Wineburgh v. Wineburgh, 816 A.2d 1105, 1109
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(Pa.Super. 2002) (cleaned up). Neither the Majority nor the trial court
specified, nor was I able to discern, any expression in the contract that
Landlord and Tenant intended to make occupancy a necessary precondition to
Landlord paying the invoice submitted to it by Tenant’s broker. Indeed, the
only information about the timing of payment of the commission found in the
certified record is Landlord’s evidence that the payment of the broker’s
commission is typically done at lease signing; that Landlord received an
invoice from the broker dated April 6, 2016, indicating that payment was due
upon receipt; and that Landlord in fact paid the broker $35,924.26 on June 1,
2016. See N.T., 8/27/20, at 10, Exhibit P-5; Joint Stipulation of Facts at ¶ 2.
Absent indication that the reference to occupancy in the Lease was
intended to make it a condition precedent to the payment, there was no basis
to conclude that Landlord’s pre-occupancy payment of the invoice it received
from the broker was a mere voluntary act rather than an item of damages
flowing from Tenant’s default. Therefore, I would hold that, in order to make
Landlord whole in the face of Tenant’s breach of the Lease pursuant to
§ 21.02(b), Tenant is liable for the commission paid to Tenant’s broker, the
same as with the expense of Tenant’s build-out. Accordingly, just as with the
as-yet unrecovered build-out costs, I would hold that the trial court erred in
refusing to allow Landlord to amend the judgment to add the balance of the
broker’s commission remaining after subtracting the portion of it recovered
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through the monthly rents included in the 2016 and 2018 confessed
judgments.
Finally, the Majority holds that the trial court properly denied Landlord’s
request to amend the complaint to include the rent payment that Tenant failed
to make in September 2017, the last loss Landlord realized before the new
tenant’s lease began. The Majority finds that Landlord waived this claim of
error by failing to support it with authority or develop the argument that the
trial court abused its discretion. See Majority Memorandum at 35-36.
The Majority correctly observes that litigants are required to develop
their arguments with “such discussion and citation of authorities as are
deemed pertinent.” Majority Memorandum at 34 (quoting Pa.R.A.P. 2119(a)).
However, the authority pertinent to discerning the extent of the authorization
granted by the warrant of attorney is the language of the contract itself.
Therefore, I do not deem the lack of citations to legal authority to justify
application of waiver doctrine here.
My examination of the language of the Lease leads me to conclude that
this requested amendment is not outside of the scope of the warrant’s
authority. The warrant of attorney provided that Landlord could confess
judgment:
against the Tenant and in favor of the Landlord, its successors or
assigns, as of any term, for any Rent amount(s) to which the
Landlord would be entitled from the date of the Event of the
Default to the date of the filing of the judgment together with six
months accelerated rent as damages under the provisions hereof,
and shall have successive rights every six months to continue to
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file judgments for an amount equal to the rent accelerated for the
next six months and continue to confess judgment for six months
accelerated unpaid rent in the same fashion until the end of the
term or upon the Premises being re-letted, including also attorney
fees equal to ten percent (10%) of the total amount of such
damages for collection of the same of the total amount of such
damages, together with costs of suit . . . . The authority and
power contained herein shall not be exhausted by one exercise
thereof, but judgment may be confessed as aforesaid from time
to time and as often as there is an occurrence of any Event of
Default which is not cured by the Tenant as provided herein, or in
the event of an Event of Default; and furthermore such authority
and power may be exercised during the original and any extension
or renewal thereof, of after the expiration or earlier termination of
the term hereof.
Lease at § 21.02(d).
Manifestly, the contract does limit judgment for accelerated unpaid
rent to be confessed to six months at a time. However, it does not mandate
that the warrant be exercised every six months to recover accelerated rent,
and it does not limit the judgment to a specific number of months of past-
due rent outstanding as a result of the uncured default. The September 2017
rent amount Landlord sought to amend to add, and indeed all the unpaid rents
referenced in the 2018 complaint for confession of judgment, were past-due
rents. Thus, permitting the inclusion in this judgment of the final item of
damages flowing from Tenant’s breach of the Lease would not constitute the
type of overreaching into future, unrealized losses that the terms of the
contract sought to prohibit.
Furthermore, as detailed above, it is my view that Landlord should be
permitted to amend to include the heretofore unrecovered build-out and
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broker expenses. Consequently, including in this judgment the September
2017 rent, with its amortized portion of those expenses, would allow for the
most efficient, final resolution of the outstanding claims associated with the
Lease. See, e.g., Dominic’s Inc. v. Tony’s Famous Tomato Pie Bar &
Rest., Inc., 214 A.3d 259, 272 (Pa.Super. 2019) (“It has always been held
that formal defects, mistakes, and omissions in confessions of judgment may
be corrected by amendment where the cause of the action is not changed,
where the ends of justice require the allowance of such amendment, and
where the substantive rights of defendant or of any third persons will not be
prejudiced thereby.” (cleaned up)). Therefore, I would reverse the trial court’s
refusal to allow the inclusion of the last month of unpaid in the complaint and
judgment.
For the above reasons, I would remand for the addition to the judgment
of the sums discussed above, along with the concomitant interest and attorney
fees. To the extent that my analysis yields a greater increase to the judgment
than that ordered by the Majority, I respectfully dissent.
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