A three-judge panel of the Pennsylvania Superior Court has refused to disturb a $20 million verdict against developer Pulte Homes of PA for breaching an agreement to build a residential community around a Chester County golf course.
A Chester County jury returned the verdict in Applecross Club Operations v. Pulte Homes of PA after more than two weeks of trial in September 2015.
It is the second-largest verdict out of Chester County ever reported by The Legal. A $32.8 million medical malpractice verdict in Ciechoski v. Phoenixville Hospital was awarded in January 2014.
In a June 13 ruling, Superior Court Judges Jack A. Panella, Jacqueline O. Shogan and Lillian Harris Ransom rejected Pulte’s arguments that it is entitled either to judgment not withstanding the verdict, a new trial or a molded verdict of only $500,000.
According to court papers, the dispute arose after Pulte failed to build more than 1,000 units on a residential community surrounding a golf course in Chester County. The plaintiff, Applecross Club Operations, contended the developer had agreed to build the properties on split parcels in East Brandywine and West Brandywine. The West Brandywine portion was to include about 375 age-restricted units, but Pulte failed to acquire a portion of that land, known as the “Anderson” or “Del Webb” tract, court documents said.
While Applecross had argued that Pulte’s failure to acquire that tract constituted a breach of the amended development and acquisition agreement the parties entered into in June 2010, Pulte disagreed.
Applecross sued, and a Chester County trial judge ruled that the agreement was ambiguous because exhibits to the agreement were missing and the case proceeded to the jury trial.
In seeking JNOV or, in the alternative, a new trial, Pulte argued on appeal that the lower court was wrong to find that the agreement was ambiguous and to allow parol evidence of the parties’ intent to be admitted.
The Superior Court disagreed, however, noting that “the missing exhibit directly affects the issue that was a primary focus of litigation in this case: the intended size of the community which Pulte was to build to support the country club.”
“Pulte contends that the exhibit was never meant to provide a scope for the development of the community,” Panella wrote for the court. “However, this supposition is precisely the point. In the absence of the exhibit itself, there is no way to know what the exhibit would have shown without reference to parol evidence. The agreement was not clear and unambiguous on this issue.”
Panella added that while Pulte’s argument that the agreement did not explicitly guarantee a specific number of homes that would be built, it was up to the trier of fact to determine what the parties’ intent had been.
“Pulte presented a strong case that it never intended to be bound to build a certain number of homes,” Panella said. “The jury, however, rejected Pulte’s assertions and instead found that Applecross had established that the parties had agreed that the community would consist of approximately 1,000 homes and included the Del Webb tract.”
The panel also rejected Pulte’s argument that the testimony of Applecross’ economics experts, John E. Mitchell and Jeffrey R. Dugas, should not have been permitted because it was unreliable and lacked foundation.
Pulte had contended that those experts’ testimony on the lost profits Applecross suffered was speculative given that the golf course was a new business with no prior profit history.
“Here, as a matter of logic, it is clear that the reduction in the number of homes that were required to purchase memberships in the country club and golf course caused some damage to Applecross’s business,” Panella said. “Indeed, Pulte’s appraisal expert, Shaun Henry, opined that the reduction in the number of homes in the community reduced the value of the golf course by $3,300,000. Thus, Applecross was not required to prove its lost profits damages to a mathematical certainty, but merely to a reasonable level of certainty.”
The final argument raised by Pulte was that the trial court should have enforced a damages cap provided for in Section 23.3 of the amended development and acquisition agreement. The section states that, in the event of a breach by Pulte, Applecross has the right “if specific performance is not available, to terminate this agreement in which event [Pulte] shall promptly reimburse [Applecross] for [Applecross's] actual out-of-pocket costs incurred in connection with this agreement and the performance of [Applecross's] obligations hereunder, but in no event shall such amount exceed $500,000.’”
But Panella called Pulte’s interpretation of that language “a strained reading.”
“The highlighted language, which includes the $500,000 limitation, does not contain the term ‘damages’ at all,” Panella said. “Nor does it explicitly refer to lost profits. It refers solely to ‘actual out-of-pocket costs’ borne by Applecross. It does not purport to limit any other form of damage, such as consequential or incidental, that Applecross might suffer.”
Counsel for Applecross, Timothy T. Myers at Elliott Greenleaf in Blue Bell, said the Superior Court’s ruling “confirmed that the jury and the judge got it right.”
Counsel for Pulte, Joel L. Frank of Lamb McErlane in West Chester, did not a return a call for comment.
(Copies of the 14-page opinion in Applecross Club Operations v. Pulte Homes of PA, PICS No. 17-0943, are available at http://at.law.com/PICS.) •