The Pennsylvania Supreme Court has agreed to hear an appeal in a commercial landlord/tenant contract dispute in which the state Superior Court found the trial judge rendered an inconsistent award for the plaintiff that simultaneously rescinded and enforced the lease contract.
In Gamesa Energy v. Ten Penn Center, a Philadelphia trial judge found the landlord had breached the lease contract by failing to timely respond to its tenant’s request to sublease part of its premises. The judge retroactively rescinded the contract and awarded the tenant damages for unjust enrichment. But the judge also awarded the tenant damages equal to the amount it would have received under the proposed sublease.
In March, the state Superior Court reversed in part and denied in part the trial judge’s ruling in favor of Gamesa Energy USA in its case against Ten Penn Center Associates.
Gamesa alleged TenPC (as it is referred to in the Superior Court’s opinion) breached the lease by failing to make a decision on a proposed sublease with another company, BSI, within the timeframe dictated by the lease, according to Superior Court Judge Jack Panella’s opinion. Gamesa claimed that TenPC had broken the terms of the lease and demanded damages based on expectation. But Gamesa also sought a ruling that the lease had been rescinded as of the date TenPC failed to accept or reject the sublease request. Based on a theory of unjust enrichment, Gamesa sought reimbursement of the rent it paid after that point.
The trial judge held that TenPC breached the lease contract, that the breach effectively rescinded the contract and that TenPC was unjustly enriched by any rent payments it subsequently received from Gamesa. But the judge also awarded Gamesa the amount it would have received under the three-year sublease with BSI.
Panella said in the Superior Court’s opinion that those rulings were inconsistent and noted the plaintiff can only recover for breach of contract because that was the remedy it chose by continuing to pay rent to TenPC and collect rent for its sublease following the breach.
“The remedy Gamesa had chosen for trial was to enforce the contract and recover based on expectation, i.e., recover the expected rent from the BSI sublease. Thus, the trial court’s actions in retroactively terminating the contract and awarding Gamesa damages based upon a theory of unjust enrichment was clearly in error,” Panella said.
The Superior Court upheld the trial court’s determination that TenPC imposed unreasonable conditions for subleasing and affirmed the judge’s award of $265,000 damages based on the amount due under the BSI sublease.
Lazarus filed a concurring statement to the court’s opinion in which she noted that the state Supreme Court has not made a definitive ruling on the issue of inconsistent awards.
“Therefore, while the Supreme Court may choose to address this particular issue in a future appeal, the current state of the law as dictated by the Superior Court requires the result reached by the majority in this case,” she said.
In its Aug. 20 order granting allocatur, the Supreme Court agreed to take up two issues:
First, “May a litigant simultaneously pursue inconsistent, alternative remedies in a civil action in Pennsylvania prior to the entry of final judgment?”
And second, “When one party to a contract breaches, should the non-breaching party be permitted to continue performance, if reasonable under the circumstances, and to maintain, in the alternative, causes of action for termination of the agreement if material, or if not material, for damages from the breach?”
Jeffrey Batoff of Obermayer Rebmann Maxwell & Hippel represents Gamesa and Robert Ebby of Hangley Aronchick Segal Pudlin & Schiller represents TenPC. Neither responded to calls for comment on the allocatur grant.