Allure Hair Designs v. George, J. ( 2021 )

J-A23039-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
ALLURE HAIR DESIGNS AND MINI SPA, IN THE SUPERIOR COURT
INC. OF PENNSYLVANIA
APPELLEES
v.
JOHN S. GEORGE, JR. AND JAAM REAL
ESTATE HOLDINGS, LLC,
APPELLANTS No. 588 WDA 2018
Appeal from the Order April 18, 2018
In the Court of Common Pleas of Allegheny County
Civil Division at No: GD16-005896
-------------------------------------------------------------------------------------
ALLURE HAIR DESIGNS AND MINI SPA, IN THE SUPERIOR COURT
INC. OF PENNSYLVANIA
APPELLANTS
v.
JOHN S. GEORGE, JR. AND JAAM REAL
ESTATE HOLDINGS, LLC,
APPELLEES
No. 629 WDA 2018
Appeal from the Order Entered April 18, 2018
In the Court of Common Pleas of Allegheny County
Civil Division at No: GD16-005896
BEFORE: BOWES, SHOGAN, and STABILE, J.
MEMORANDUM BY STABILE, J.: FILED JANUARY 21, 2021
J-A23039-18
These consolidated appeals arise from an action by a hair salon, Allure
Hair Designs and Mini Spa, Inc. (“Tenant”), against its landlord, John S.
George, Jr. (“George”), and a limited liability company owned by George,
Jaam Real Estate Holdings, LLC (“Jaam”),1 for breach of a commercial lease
and fraud. Tenant alleged that Landlord breached a noncompetition covenant2
in the lease by renting space to a competing hair salon on property
approximately fifty yards away from Tenant’s premises. The trial court, sitting
without a jury, entered a decision in favor of Tenant in the amount of
$20,392.40 on its claim against Landlord for breach of the lease. The court
ruled in favor of Landlord on Tenant’s claim for fraud. We affirm in part,
reverse in part and remand for further proceedings.
The record reflects that on August 6, 2004, George leased Tenant 1,309
square feet within a shopping center located at 171 Wexford-Bayne Road in
Wexford, Pennsylvania (“Tenant’s building”). Specifically, Tenant leased
those certain premises designated on the attached Exhibit “A” as
Tenant Suite No. 1 containing one thousand three hundred nine
(1,309) square feet (“Leased Square Feet”) of space (hereinafter
the “Premises”), within a commercial building located at 171
Wexford-Bayne Road (hereinafter referred to as “Building”) in
Wexford, Pennsylvania. The premises represent 21.4[%] of the
total occupiable square footage of the Building.
____________________________________________
1 We will refer to George and Jaam collectively as “Landlord.”
2 Pennsylvania courts frequently refer to noncompetition covenants as
“restrictive covenants.” See, e.g., Pocono Summit Realty, LLC v. Ahmad
Amer, LLC, 52 A.3d 261, 269-71 (Pa. Super. 2012). We will use the term
“noncompetition covenant” in this memorandum.
-2-
J-A23039-18
Lease, 8/6/04, at 1. The lease included the following noncompetition
covenant:
Lessor shall not lease, rent or permit any tenant or occupant of
the Premises, other than the lessee, to conduct any activity on the
premises which consists of skin care, pedicure, manicure, or hair
design/styling services.
Lease, § 33. The lease also included the following provision entitled “Common
Areas”:
Landlord agrees to cause to be provided, operated, managed and
maintained during the term of this Lease, certain common areas
in or adjacent to the Building including parking areas, sidewalks,
steps and/or other walkways. The manner in which such areas
and facilities shall be maintained and operated and the
expenditures therefore shall be at the sole discretion of the
Landlord, and the use of such areas and facilities shall be subject
to such reasonable regulations as Landlord shall make from time
to time.
Landlord hereby grants to Tenant, its employees, agents,
customers and invitees, the nonexclusive right to use the parking
and other common areas as from time to time constituted, such
use to be in common with Landlord, Landlord’s licensees and all
other tenants and occupants of the building, its and their
employees, agents, customers and invitees, except when the
common areas are being repaired, altered or constructed. The
Landlord will maintain said[] common areas in conjunction with
the reasonable business operations of the Tenant and make efforts
to maintain said common areas in a commercially reasonable
manner . . . .
Each calendar year quarter, Tenant will pay a pro-rata portion of
any common area expenses related to cleaning, lighting, snow
removal, landscaping, grass and tree cutting or trimming, and
striping of parking spaces. Tenant’s payment of such expenses
will be calculated based on the percentage that the Premises
represent of the total occupied square footage of the Building.
Id. at § 6.
-3-
J-A23039-18
The lease was for a five-year term expiring on October 31, 2009, and it
gave Tenant options to renew the lease for additional five-year periods after
expiration of the initial term. Tenant declined to exercise its options to renew,
electing instead to enter one-year lease extensions for each of the seven years
following the initial term. There is no evidence that the parties amended the
terms of the lease.
In 2010, Jaam acquired property at 181 Wexford-Bayne Road, adjacent
to Tenant’s building. Jaam constructed a building at 181 Wexford-Bayne Road
approximately fifty yards from Tenant’s building (“the Adjacent Building”).
Trial Transcript, at 32, 238. The two buildings are virtually identical in
appearance, id., and share the same parking lot and curb cut. Id. at 32, 37.
In February 2015, Landlord consolidated the 171 and 181 Wexford-Bayne
Road properties into a single tax parcel. Id. at 237-38.
On September 21, 2015, Tenant and George executed a one-year
extension for Tenant’s salon covering the period November 1, 2015 through
October 31, 2016. Prior to this extension, Tenant’s owners confronted George
about rumors of a new salon locating to the Adjacent Building. George denied
entering into a lease with a competing salon but omitted the fact that he was
negotiating with another salon, Eleven Eleven Pennsylvania, LLC, d/b/a Sola
Salon Studios (“Sola”). Tenant’s owner, Tami McClearly, testified that she did
not believe George’s denial. Id. at 44-45.
-4-
J-A23039-18
On November 10, 2015, Jaam entered into a ten-year lease with Sola
for space within the Adjacent Building. Sola made substantial tenant
improvements totaling $663,000.00 in the Adjacent Building and is paying
annual rent of $135,450.00 to Jaam.
Prior to Sola’s lease, Tenant paid common area expenses for 21.4% of
its own building based on the formula in Tenant’s lease (the percentage that
the Premises represent of the total occupied square footage of Tenant’s
building). Id. at 117. After Sola’s lease began, George billed Tenant for
7.21% of common area expenses for both buildings, including lighting, lawn
maintenance, snow removal, garbage pickup, window cleaning and pest
control. Id. at 36-37, 117, 238-40. Despite the drop in percentage, the
common area charges increased, and Tenant paid the increased charges. Id.
at 117-18. George admitted that he billed Tenant common area expenses for
“both 171 and 181,” that is, both Tenant’s building and the Adjacent Building.
Id. at 238-39.
In early 2016, when eight months remained on the lease, Tenant
learned of the lease with Sola and asked to be released from its own lease in
order to rent other space in the area. George refused.
On April 5, 2016, Tenant filed a complaint against Landlord alleging
breach of contract, injunctive relief, and breach of the Unfair Trade Practices
and Consumer Protection Law (“UTPCPL”), 73 P.S. §§ 201-1—201-9.3.
Several days later, Tenant filed a motion for emergency injunctive relief.
-5-
J-A23039-18
Landlord filed preliminary objections to the complaint and a response to the
emergency motion for injunctive relief. On April 14, 2016, George notified
Tenant that he was terminating the lease at the expiration of the current
extension on October 31, 2016. He indicated he would consider negotiating a
new lease with Tenant so long as it did not contain a noncompetition clause.
On May 2, 2016, following a hearing on Tenant’s emergency motion, the
court issued orders denying emergency injunctive relief and dismissing the
counts in the complaint for injunctive relief and breach of the UTPCPL. The
court permitted Tenant to pursue its claim for breach of contract. On January
5, 2017, Tenant amended its complaint to include a count for fraud.
In its contract claim, Tenant asserted that Landlord breached the
noncompetition covenant in its lease by entering into a lease with Sola for
space in the Adjacent Building. In its fraud claim, Tenant alleged that George
fraudulently induced Tenant to renew its lease by failing to divulge that he
was negotiating a lease with Sola.
On February 2, 2018, following a non-jury trial, the trial court entered
a memorandum and order ruling in favor of Tenant on its breach of contract
claim in the amount of $20,392.40, the final eight months of rent that Tenant
paid following Landlord’s breach. The court denied Tenant’s claims for
relocation costs and lost profits, and it did not award damages on Tenant’s
fraud claim despite observing that George “chose . . . to lie to [Tenant] about,
-6-
J-A23039-18
or at least conceal, the fact that he was leasing to another hair salon.”
Memorandum, 2/2/18, at 6.
Tenant filed post-trial motions in which it complained that the trial court
failed to award various items of damage on the contract claim and failed to
decide the fraud claim. Landlord filed post-trial motions seeking judgment
n.o.v. on the breach of contract claim. The trial court denied all post-trial
motions, and the parties cross-appealed to this Court. Tenant subsequently
perfected all appeals by filing a praecipe for entry of judgment. On April 11,
2019, we remanded this matter to the trial court for preparation of a Pa.R.A.P.
1925(a) opinion. On May 1, 2019, without ordering the parties to file
statements of matters complained of on appeal, the trial court filed an opinion
explaining its decision.
Tenant raises the following issues in its appeal at 629 WDA 2018:
I. Whether the trial court erred in denying [Tenant]’s Motion for
Post-Trial Relief?
II. Whether the trial court erred [] as a matter of law in denying
the issues raised by [Tenant]’s Motion for Post-Trial Relief as
follows:
a. The Court did not issue a ruling on the claim of Fraudulent
Misrepresentation, which was added by way of Amended
Complaint on January 5, 2017, and properly before the Court,
especially as the Court found “[Appellant] George also chose to
either lie to [Tenant] about, or at least conceal, the fact that
he was leasing to another hair salon.”
b. Additionally, the Court erred in failing to analyze the
damages through Restatement Second of Property; Landlord &
Tenant 7.2 as prescribed in Teodori v. Werner, 415 A.2d 31,
34 (Pa. 1980).
-7-
J-A23039-18
c. By failing to find that [Tenant], as tenant, had the first right
of refusal under the lease and [was] therefore entitled to
remain on the property indefinitely and that the Landlord’s
termination of the lease was impermissible under Section 2 of
the Lease.
III. Whether the Court abused its discretion in ruling against the
weight of the evidence in the following manners:
a. By failing to award lost profits to [Tenant] under either of
the following two arguments: 1.) the employees left [Tenant]
as a direct consequence of the Defendants’ actions in leasing
the property to a competitor; and/or 2.) [Tenant] was not able
to fill open positions in a timely manner as a result of
Defendant[s] leasing the property to a competitor, leading to
significant lost profits.
b. By failing to rule in favor of the weight of the clear evidence
that [Tenant] was unable to fill empty employment positions
for over six months, thereby causing lost profits, as a direct
result of the Defendants’ action.
c. By failing to consider the lost profits as introduced into
evidence at trial by Judy Campbell between the 2016 and 2015
tax returns in the amount of $60,919.00.
d. By failing to award moving and construction costs in light of
evidence presented at trial in the amount of $40,960.20 and
the Restatement Second of Property; Landlord & Tenant 10.2
in light of the evidence presented.
e. The Court’s determination that text messages between
[Tenant] and a prospective employee were inadmissible
hearsay and not properly authenticated over [Tenant]’s
objections that it was admissible evidence as provided under
Commonwealth v. Mosley, 114 A.3d 1072 (Pa. Super.
2015); see also Commonwealth v. Koch, 106 A.3d 705 (Pa.
2014). Tamara McCleary was not permitted to testify as to her
own text messages which she sent and received. This evidence
would have further established [Tenant]’s inability to fill critical
positions, i.e., further evidence of lost profits[,] as profits are
generated by having stylists in the salon.
-8-
J-A23039-18
Tenant’s Brief at 4-7.
Landlord raises the following issues in their cross-appeal at 588 WDA
2018:
I. Whether the court erred as a matter of law in finding that a
lease in after-acquired property was a breach of the non-
competition restrictions.
II. Whether Landlord [is] entitled to judgment as a matter of law
since the trial court held the damages claimed were not proven or
proximately caused by the actions complained of.
III. Whether the court erred as a matter of law by basing its
decision [] on its belief that Landlord “made a poor business
decision in holding [Tenant] to the remaining months of its lease”
and therefore awarding rent abatement.
Landlord’s Brief at 4. The issues raised in the briefs fall into four categories:
whether the trial court (1) properly held Landlord liable to Tenant for breach
of contract; (2) properly awarded the final eight months of rent to Tenant on
its contract claim; (3) properly denied Tenant relocation costs and lost profits
on its contract claim; and (4) properly denied Tenant’s fraud claim.
We begin by addressing Landlord’s argument that the trial court erred
by ruling in Tenant’s favor on its breach of contract claim. In effect, Landlord
argues that the trial court erred by denying Landlord’s post-trial motion for
judgment n.o.v. on the contract claim.3 An appellate court will reverse the
____________________________________________
3 To preserve the right to request judgment n.o.v., a party ordinarily must
first request a binding charge to the jury or move for a directed verdict or
compulsory non-suit. Wag-Myr Woodlands Homeowners Association by
Morgan v. Guiswite, 197 A.3d 1243, 1250 n.10 (Pa. Super. 2019). A motion
-9-
J-A23039-18
trial court’s decision to grant or deny judgment n.o.v. only when it finds an
abuse of discretion or an error of law. Rost v. Ford Motor Co., 151 A.3d
1032, 1042 (Pa. 2016). In an appeal from the trial court’s decision to deny
judgment n.o.v., we must consider the evidence, together with all favorable
inferences drawn therefrom, in a light most favorable to the verdict winner.
Drake Mfg. Co., Inc. v. Polyflow, Inc., 109 A.3d 250, 258 (Pa. Super.
2015).
The interpretation of any contract is a question of law. Currid v.
Meeting House Restaurant Inc., 869 A.2d 516, 519 (Pa. Super. 2005). Our
standard of review of such questions is de novo, and our scope of review is
plenary. Smith v. Wells, 212 A.3d 554, 557 (Pa. Super. 2019).
“[A] lease is in the nature of a contract and is . . . controlled by
principles of contract law.” Gamesa Energy USA, LLC v. Ten Penn Center
Associates, L.P., 217 A.3d 1227, 1238 (Pa. 2019). The fundamental rule in
construing a contract is to ascertain and give effect to the intent of the
contracting parties. Maisano v. Avery, 204 A.3d 515, 520 (Pa. Super. 2019).
____________________________________________
for a directed verdict is also appropriate in non-jury trials. Id. Landlord did
not request a directed verdict on Tenant’s contract claim orally or in writing at
the close of evidence at trial, but they filed post-trial motions seeking
judgment n.o.v. on the contract claim following the trial court’s decision. The
trial court did not find waiver and addressed Landlord’s contract argument on
the merits. Under these circumstances, we decline to find waiver. Id.; see
also Capital Care Corp. v. Hunt, 847 A.2d 75, 84 (Pa. Super. 2004)
(declining to find waiver where party failed to move for directed verdict,
sought judgment n.o.v. in post-trial motion, and trial court addressed claim
as presented in post-trial motion).
- 10 -
J-A23039-18
Landlord challenges the trial court’s construction of the noncompetition
covenant in Tenant’s lease, which prohibits anyone other than Tenant from
providing hair salon services on “the premises.” Landlord contends that the
definition of “premises” in the lease, “1,309 square feet of space within a
commercial building at 171 Wexford-Bayne Road,” limits the covenant’s reach
to the space leased to Tenant in 2004 and does not extend to the Adjacent
Building. The trial court determined that Landlord’s strict construction of the
covenant would produce an absurd result, because it would have been
meaningless for Tenant to negotiate a noncompetition covenant that only
prevented competition in its own space. The court wrote:
[I]n interpreting the non-competition clause in the Lease this
Court must apply contract principles and give effect to the
economic realities of shopping centers. The fact is [Landlord’s]
deliberate act of putting a competing hair salon in the shopping
center would have the same adverse effect on [Tenant] regardless
of whether the competitor was located in 171 Wexford-Bayne
Road or 181 Wexford-Bayne Road [because] [t]he two buildings
are located directly across a shared parking lot from each other.
In following these basic principles, this Court believes the most
logical and reasonable interpretation of the non-competition
clause is to have it apply to the entire shopping center, which
includes 171 and [181] Wexford-Bayne Road.
Memorandum at 5.
We agree with the trial court. Pennsylvania courts will not enforce the
plain language of a contract when it would produce an absurd result. In
United Refining Co. v. Jenkins, 189 A.2d 574 (Pa. 1963), Jenkins owed
money to United and entered into a contract to sell United all the oil that he
produced. The contested phrase in the oil contract stated that the contract
- 11 -
J-A23039-18
was to continue “so long as there remains any unpaid indebtedness” of Jenkins
to United. Id. at 579. Jenkins defaulted on the loan but argued that the oil
contract was still in force and that United had to buy his oil because he still
owed money to United. United argued that the contested phrase in the oil
contract should be interpreted to mean that the agreement would continue so
long as Jenkins remained indebted to United and Jenkins had not defaulted in
his obligations. Our Supreme Court accepted United’s interpretation of the
phrase, even though doing so required the Court to interpret a facially
unambiguous phrase as meaning something different than what it appeared
to mean on its face. The Court reasoned that
if Jenkins’ contention is correct, United was bound to continue
purchasing all [of] Jenkins’ oil . . . even though Jenkins failed to
honor his obligation to United . . . . Such an interpretation of the
language of this contract is both absurd and unreasonable. Under
such an interpretation, Jenkins could take his profits from the “oil
runs,” dishonor his obligations to United and United would be
bound indefinitely to the agreement.
Id. at 580. Jenkins demonstrates that if the plain meaning of a contract
term would lead to an interpretation that is absurd and unreasonable,
Pennsylvania courts should construe the contract otherwise in order to reach
“the only sensible and reasonable interpretation” of the contract. Id.; see
also Binswanger of Pennsylvania, Inc. v. TSG Real Estate LLC, 217 A.3d
256, 262 (Pa. 2019) (“before a court will interpret a provision in a statute or
in a contract in such a way as to lead to an absurdity or make the statute or
- 12 -
J-A23039-18
contract ineffective to accomplish its purpose, it will endeavor to find an
interpretation which will effectuate the reasonable result intended”).
As in Jenkins, the result urged by Landlord would lead to an absurd
result by limiting the noncompetition covenant to space rented by Tenant
itself. No rational person in Tenant’s position would accept such illusory
protection in a commercial lease. Moreover, Landlord exploited this
preposterous interpretation of the noncompetition covenant by (1) building
the Adjacent Building mere yards from Tenant’s building, a building identical
in appearance to Tenant’s building that shares the same parking lot and curb
cut, (2) leasing space to Sola, a competing hair salon, in the Adjacent Building,
(3) effectively operating the two buildings as a single integrated shopping
center by combining the addresses into one tax parcel, and (4) charging
Tenant for maintenance of the common areas in the Adjacent Building, thus
forcing Tenant to subsidize Sola’s business. The trial court correctly held that
the noncompetition covenant covered the entire shopping center, that is, both
Tenant’s building and the Adjacent Building and all other land in the tax parcel.
We hold that Landlord’s conduct constitutes a breach of contract and affirm
the trial court’s decision holding Landlord4 liable on Tenant’s breach of contract
claim.
____________________________________________
4 The trial court held Appellant Jaam liable for breach of contract even though
Jaam was not a signator on the lease. Appellants, however, did not seek relief
- 13 -
J-A23039-18
Next, we address the trial court’s computation of damages on the
contract claim. Tenant found out about the lease with Sola when eight months
remained on Tenant’s lease. Tenant asked to be released from its lease at
that time, but George refused. The court determined that Tenant was entitled
to an abatement of $20,392.40, the rent for the final eight months of the
lease. Landlord argues that the award of all eight months’ rent represented a
windfall to Tenant, because Tenant enjoyed the use of the premises during
the final eight months of the lease. We conclude that further proceedings are
necessary on this issue.
In Teodori v. Werner, 415 A.2d 31 (Pa. 1980), our Supreme Court
stated that when the landlord defaults on a promise, the tenant “can retain
possession of the premises and deduct from the rent the difference between
the rental value of the premises as it would have been if the lease had been
fully complied with by the landlord and the rental value in the condition it
actually was.” Id. at 34 (citing McDanel v. Mack Realty Co., 172 A. 97 (Pa.
1934)). Teodori also recognized that a slightly different remedy is embodied
within a chain of sections in the Restatement (Second) of Property. The first
section, Section 7.2, states in relevant part:
Except to the extent the parties to a lease validly agree otherwise,
the failure of the landlord to perform a promise contained in the
lease that he, or someone holding under him, will not use other
____________________________________________
for Jaam on this basis in the trial court or this Court. Accordingly, we decline
to disturb the finding of liability against Jaam.
- 14 -
J-A23039-18
property in a manner that will compete with a business of the
tenant, or of someone holding under the tenant, on the leased
property, makes the landlord in default under the lease, if he does
not cease, or cause to cease, the competing business within a
reasonable time after being requested by the tenant to do so. For
that default, the tenant may:
(2) continue the lease and, if the landlord's promise is valid, obtain
appropriate equitable and legal relief including the various
remedies prescribed in [§] 7.1(2) [of the Restatement
(Second)].
Teodori, 415 A.2d at 34 (reciting Section 7.2) (emphasis added). Section
7.1(2), in turn, provides:
Except to the extent the parties to a lease validly agree otherwise,
if the landlord fails to perform a valid promise contained in the
lease to do, or to refrain from doing, something on the leased
property or elsewhere, and as a consequence thereof, the tenant
is deprived of a significant inducement to the making of the lease,
and if the landlord does not perform his promise within a
reasonable period of time after being requested to do so, the
tenant may . . .
(2) continue the lease and obtain appropriate equitable and legal
relief, including:
(a) the recovery of damages to the extent prescribed in § 10.2;
(b) an abatement of the rent to the extent prescribed in §
11.1;
(c) the use of the rent to perform the landlord's promise to the
extent prescribed in § 11.2; and
(d) the withholding of the rent in the manner and to the extent
prescribed in § 11.3 until the landlord performs his promise.
Id. (emphasis added).5 Finally, Section 11.1 provides:
If the tenant is entitled to an abatement of the rent, the rent is
abated to the amount of that proportion of the rent which the fair
____________________________________________
5 Teodori refers in passing to Section 7.1 without reciting its text. We fill in
this gap by reciting the relevant portion of Section 7.1.
- 15 -
J-A23039-18
rental value after the event giving the right to abate bears to the
fair rental value before the event. Abatement is allowed until the
default is eliminated or the lease terminates, whichever first
occurs.
Teodori, 415 A.2d at 34-35 & n.6 (reciting Section 11.1). Teodori observed
that “the Restatement’s proportional value rule differs from McDanel’s loss
of fair rental value rule,” but the Court did not instruct which rule to apply.
Id.
Here, the trial court concluded that the entire eight months of rent was
awardable under Section 11.1 of the Restatement (Second) of Property. This
award likely is excessive. An award of all eight months of rent is tantamount
to the conclusion that the leasehold premises had no value whatsoever.
Common sense indicates, however, that the premises had some rental value
during the final eight months of the lease, since Tenant remained in the
leasehold premises during this time and continued to operate its business.
Therefore, we vacate the judgment of $20,392.40 and remand to the trial
court for a determination of the proper amount of rent abatement. When
making this determination, the trial court shall explain whether it applied the
Restatement’s proportional value rule or McDanel’s loss of fair rental value
rule and the reason for its selection.
Next, we address Tenant’s argument that the trial court erred by
denying its claims for relocation costs and construction costs at the new
premises. No relief is due. To recover damages for breach of contract, the
plaintiff must prove that “(1) [the damages] were such as would naturally and
- 16 -
J-A23039-18
ordinarily result from the breach, or (2) they were reasonably foreseeable and
within the contemplation of the parties at the time they made the contract,
and (3) they can be proved with reasonable certainty.” Ferrer v. Trustees
of University of Pennsylvania, 825 A.2d 591, 610 (Pa. 2002). Had Tenant
been forced to vacate the premises before the end of the lease, relocation and
construction costs might have been recoverable, because it is “foreseeable
that a tenant whose lease is prematurely brought to an end will incur
relocation expenses [such as] moving costs, expenses of obtaining a lease of
other property, adapting the tenant’s furnishings to a new location, and an
increase in rental for a comparable new location.” Restatement (Second) of
Property, Landlord and Tenant, § 10.2, comment d. Here, however, Tenant
remained in the leasehold premises until the end of the lease and moved out
after deciding not to renew the lease. Landlord did not cause the relocation
or construction costs; Tenant elected to incur them, like any other tenant who
decides to leave at the end of the lease. Thus, Tenant was not liable for these
costs.
We further conclude, based on our review of the record, that the trial
court correctly rejected Tenant’s claim for lost profits and lost goodwill. In
particular, we agree with the trial court’s conclusions that (1) Tenant failed to
prove lost goodwill because it was unable to demonstrate what its goodwill
was prior to George’s breach or that it lost customers to Sola; (2) Tenant
failed to prove lost profits due to alleged loss of employees, because the
- 17 -
J-A23039-18
testimony of Tenant’s former employee, Amy Pusateri, demonstrates that
several employees left out of desire to start their own salon, not because of
any misconduct by Landlord; and (3) Tenant could not prove that Landlord’s
conduct left Tenant unable to hire new employees, because the evidence that
Tenant attempted to introduce on this point was inadmissible hearsay (text
messages from an individual who allegedly turned down Tenant’s offer and
joined Sola instead). Opinion, 5/1/19, at 11-13.
Finally, we hold that the trial court correctly rejected Tenant’s fraud
claim. An essential element of fraud is justifiable reliance by the plaintiff on
a misrepresentation by the defendant. Bortz v. Noon, 729 A.2d 555, 560
(Pa. 1999). The evidence demonstrates that before Tenant entered into the
2015-16 lease extension, Tenant’s owners met with George and inquired
whether Jaam had signed a lease with a rival salon. George denied that there
was a lease with any salon, but he concealed the fact from Tenant that Jaam
was negotiating a lease with Sola. In early 2016, Tenant discovered that Jaam
entered into a lease with Sola after Tenant entered the 2015-16 lease
extension.
This evidence, construed in the light most favorable to the verdict
winners on the fraud claim, i.e., Landlord, shows that Tenant did not rely on
George’s statement in making its decision to enter into the 2015-16 lease
extension. To the contrary, Tenant did not fully trust George’s word but
decided to enter into the lease extension anyway. Absent evidence of any
- 18 -
J-A23039-18
reliance on George’s word, let alone justifiable reliance, Tenant has failed to
present sufficient evidence of fraud.
For the foregoing reasons, we affirm the trial court’s decision on all
issues except for the amount of rent abatement that Tenant should receive
for Landlord’s breach of the lease. On that issue, we remand for further
proceedings in the manner specified above.
Judgment affirmed in part and reversed in part. Case remanded with
instructions. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/21/2021
- 19 -