DONOHUE
Appeal from the Judgment entered February 25, 2010,
Court of Common Pleas, Chester County,
Civil Division at No. 2002-02413
BEFORE: FORD ELLIOTT, P.J., STEVENS and DONOHUE, JJ. CONCURRING AND DISSENTING OPINION BY DONOHUE, J.:
I respectfully disagree with the learned Majority's reversal of the trial court's award of accelerated rent payments to Landlord because the award was not reduced to present value. My disagreement is based on three reasons: first, contrary to the conclusions of the Majority, Landlord did not conceded the issue by way of judicial or evidentiary admission; second, the trial court's refusal to reduce the accelerated rent award to present value follows the law of the case; and finally, there is no requirement under Pennsylvania law that future damages in a breach of contract action be reduced to present worth, and absent a term in the contract requiring reduction to present value, any such reduction is improper.
Present value is defined as "[t]he sum of money that, with compound interest, would amount to a specified sum at a specified future date; future value discounted to its value today." BLACK'S LAW DICTIONARY 1222 (8th ed. 2004).
The certified record reflects that Landlord contested the reduction to present worth of the award of damages under Section 20.2.2 of the lease, and thus, the Majority's conclusion to the contrary is incorrect. Majority Op. at 14. Marc Newman, one of the owners of Newman Development Group, testified that Landlord was entitled to damages of lost rent pursuant to Section 20.2.2 of the lease agreement, which measured the loss in value to the whole contract ("Section 20.2.2 Damages"). See N.T., 1/17/06, at 85- 91. Those damages, according to his calculations, were $10,494,490.00. Id. at 91. On cross-examination, counsel for Tenant asked Newman the following question: "Mr. Newman, first we agree, don't we, that pursuant to the lease and the various calculations you have to go to - your gross number of 11 million needs to be reduced to present value, doesn't it?" Id. Newman responded by referring counsel for Tenant to the agreement between the parties, stating the damages would only need to be reduced to present value if that requirement was included in the lease agreement. Id. at 91-92. The lease agreement includes no such provision. Lease Agreement, 4/14/00, at § 20.2.2.
Section 20.2.2 of the lease agreement, which appears under the heading "DEFAULT & REMEDIES," states:
Reletting: Without terminating this Lease, Landlord may re-enter and repossess the Leased Premises, or any part thereof, and lease them to any other Person upon such terms as are reasonable, for a term within or beyond the Term [set forth in the lease agreement]. Any such reletting shall be for the account of Tenant, and
Tenant shall remain liable for the excess (if any) of (a) all Rent which would be payable under this Lease by Tenant in the absence of such repossession; over (b) the proceeds, if any, of any reletting effected for the account of Tenant after deducting from such proceeds any Reletting Expenses [...] No repossession of the Leased Premises or any part thereof pursuant to this section 20.2.2. shall relieve Tenant of its liabilities and obligations hereunder, all of which shall survive such repossession, and
Landlord may, at its option, sue for and collect all Rent and other charges due hereunder at any time when such charges accrue.
Lease Agreement, 4/14/00, at § 20.2.2 (emphasis added).
The only evidence presented by Landlord at trial regarding the reduction of the award to present value came after it rested its case. The record reflects that Landlord's expert, Richard Marchitelli, testified in rebuttal to Tenant's expert's present worth calculation. Marchitelli testified to a different calculation of damages reduced to present value from that presented by the Tenant. N.T., 1/20/06, at 68-72. Marchitelli clarified that his present value testimony was based solely upon Tenant's expert's testimony, and did not reflect his opinion regarding the appropriate measure of damages. Id. at 75, 90-91.
In Marchitelli's opinion, the correct measure of damages is based upon the diminution in the value to property because of Tenant's breach, as reflected by the sale of the shopping center by Landlord to Inland. N.T., 11/10/05, at 65-67, 81-82.
The Majority is correct that Landlord presented the Section 20.2.2 Damages reduced to present value in its proposed conclusions of law and post-trial motion before the trial court. Plaintiff's Proposed Conclusions of Law, 4/5/06, at 40-42; Plaintiff's Post Trial Motion, 9/18/06, at 8. This does not constitute an admission or "concession" as Tenant claims. See Tenant's Brief at 24-25. There are only two types of admissions: judicial admissions and evidentiary admissions. Both are limited in scope to factual matters otherwise requiring evidentiary proof. A party cannot "admit" a legal theory or question of law. In re: Paxson Trust I, 893 A.2d 99, 113 n.10 (Pa. Super. 2006); Gibbs v. Herman, 714 A.2d 432, 437 (Pa. Super. 1998). As discussed infra, Tenant acknowledges that reduction of damages to present value is not a question of fact, instead asserting that it is a matter of settled law. Tenant's Brief at 31; Tenant's Reply Brief at 8; see Helpin v. Trustees of Univ. of Pennsylvania, 608 Pa. 45, 50, 10 A.3d 267, 269 (2010) (the question of how to calculate damages is a question of law). Thus, it is incapable of being an admission.
A judicial admission is "a clear and unequivocal admission of fact." Dearmitt v. New York Life Ins. Co., __ A.3d __, 2013 WL 3270841, *8 (Pa. Super. June 28, 2013) (citation omitted). It is "an express waiver made in court or preparatory to trial by a party to gain an advantage, conceding for the purposes of trial the truth of the admission." Id. (citation omitted).
An evidentiary admission is a statement made by party relating to certain facts. Gibbs v. Herman, 714 A.2d 432, 437 (Pa. Super. 1998). "Judicial admissions are conclusive, whereas evidentiary admissions may always be contradicted or explained." Id. (citation omitted).
Furthermore, my review of this Court's Memorandum decision resolving the parties' first appeal reveals that the prior panel determined that the proper measure of damages in this case was to award Section 20.2.2 Damages. Newman Dev. Grp. of Pottstown, LLC v. Genuardi's Family Mkt., Inc., 162 EDA 2007, 19 (Pa. Super. April 25, 2008) (unpublished memorandum). It made no mention of reducing the Section 20.2.2 damages to present value. Rather, the Court called for the imposition of damages pursuant to the express language of the lease agreement, which does not call for a reduction of damages to present value. Id. at 17-18; see Lease Agreement, 4/14/00, at § 20.2.2. This is the law of the case, which is unalterable by the trial court on remand or by this Court in a subsequent appeal.
The law of the case doctrine has been defined by our Supreme Court as follows:
This doctrine refers to a family of rules which embody the concept that a court involved in the later phases of a litigated matter should not reopen questions decided by another judge of that same court or by a higher court in the earlier phases of the matter. Among the related but distinct rules which make up the law of the case doctrine are that: (1) upon remand for further proceedings, a trial court may not alter the resolution of a legal question previously decided by the appellate court in the matter; (2) upon a second appeal, an appellate court may not alter the resolution of a legal question previously decided by the same appellate court; and (3) upon transfer of a matter between trial judges of coordinate jurisdiction, the transferee trial court may not alter the resolution of a legal question previously decided by the transferor trial court.
Commonwealth v. Starr, 541 Pa. 564, 574, 664 A.2d 1326, 1331 (1995).
Lastly, I note that it is not, as Tenant claims, "hornbook law" that future damages must be reduced to present value in Pennsylvania. Tenant's Brief at 31; see also Tenant's Reply Brief at 8. In support of this proposition, Tenant cites to two national treatises, neither of which point to any Pennsylvania or other precedential law. See Tenant's Brief at 31 (citing C.J.S. Damages § 38 (2010)); Tenant's Reply Brief at 8 (citing WILLISTON ON CONTRACTS § 66:86 (4th ed. 2002)). In support of its assertion that reduction to present value "has long been the rule of Pennsylvania," Tenant cites to two personal injury cases, one from the 1920s and one from the 1960s, without any recognition that our Supreme Court instructed Pennsylvania Courts "to abandon the practice of discounting lost future earnings" in personal injury cases nearly 35 years ago. See Tenant's Brief at 31; see also Kaczkowski v. Bolubasz, 491 Pa. 561, 583, 421 A.2d 1027, 1039 (1980). Nor does Tenant cite to any case law concerning the reduction of damages to present value in a breach of contract action, which is the issue involved in this case.
Tenant also cites an unpublished 2006 decision from United States District Court for the Eastern District of Pennsylvania, which has no precedential value in this matter. See Tenant's Brief at 31 (citing HC Consulting, Inc. v. Goodman, No. 05-2249, 2006 U.S. Dist. LEXIS 79821 (E.D. Pa. Oct. 31, 2006); see also In re Stevenson, __ Pa. __, 40 A.3d 1212, 1221 (2012) ("pronouncements of the lower federal courts have only persuasive, not binding, effect on the courts of this Commonwealth").
Interestingly, in Tenant's post-remand submission to the trial court, citing the same law as it did in its appellate brief, Tenant included a footnote regarding the holding in Kaczkowski, which it omitted from its appellate brief. Defendants' Memorandum Regarding Outstanding Issues on Remand, 11/6/08, at 5 n.6.
I recognize that in Helpin v. Trustees of Univ. of Pennsylvania, our Supreme Court stated that it "decided Kaczkowski narrowly," and that "in other contexts" the Court "did not wish to disturb the requirement that an award be discounted to present value, assuming an interest rate of six percent." Helpin, 608 Pa. at 57, 10 A.3d at 274 (citing Kaczkowski, 491 Pa. at 579 n.21, 421 A.2d at 1036 n.21). Helpin involved a claim for lost future profits by a plaintiff claiming breach of his employment contract, where the Supreme Court determined, relying on Kaczkowski, that the future damage award should not be reduced to present value. Id. at 62, 10 A.3d at 277. Similarly, the Pennsylvania cases referenced in Helpin are all cases that involve a lack of precision in the calculation of future losses based upon an individual's prospects. To the contrary, contract cases, which govern lease agreements, involve damages, which, by definition, provide for a precise calculation pursuant to the contract terms. I have found no breach of contract case law applying a general "requirement" of the reduction of damages to present value. Rather, the only Pennsylvania appellate court case addressing the issue holds that in order to reduce damages to present value, it must be a negotiated term contained in the contract. See Trust Co. of Glen Rock v. Shrewsbury Furniture & Mfg. Co., 158 A. 641, 643 (Pa. Super. 1932) (holding that damages for breach of contract should not be reduced to present worth where that term is not specifically included in the contract).
It is pertinent to note that Tenant's expert did not use the six percent interest rate referenced in Helpin. Tenant's expert used a nine percent factor. Tenant's Exhibit D-100.
The exception is cases governed by Section 2A-529 of the Uniform Commercial Code, which controls leases of goods and requires the reduction of damages to present value when the lessee defaults. U.C.C. § 2A-529(1).
I do not express an opinion as to whether awards of future damages should, as a matter of law, be reduced to present value in cases involving the breach of commercial leases. There are compelling arguments both for reduction as a matter of law and for maintaining the position that contracting parties are free to negotiate all terms of an agreement. I only note that, contrary to Tenant's representation, it is certainly not established law in this Commonwealth that courts must reduce damages to present value in these types of cases.
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As noted above, contract law and general contract principles govern lease agreements. Giant Food Stores, LLC v. THF Silver Spring Dev., L.P., 959 A.2d 438, 447 (Pa. Super. 2008). "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." Id. (citation omitted). "Where the language of the contract is ambiguous, the provision is to be construed against the drafter." State Farm Fire & Cas. Co. v. PECO, 54 A.3d 921, 928 (Pa. Super. 2012). Further,
[a] court may imply a missing term in a parties' contract only when it is necessary to prevent injustice and it is
abundantly clear that the parties intended to be bound by such term. A court should only imply a term into a contract where it is clear that the parties contemplated it or that it is necessary to imply it to carry out the parties intentions.
Glassmere Fuel Serv., Inc. v. Clear, 900 A.2d 398, 403 (Pa. Super. 2006) (emphasis in the original) (citations omitted).
The record reflects that Tenant drafted the lease agreement in question. See Lease Agreement, 4/14/00. Section 20.2.2 of the lease agreement, which permits Landlord to accelerate rent payments upon breach of the agreement by Tenant, does not call for these payments to be reduced to present value. Id. at § 20.2.2. To the extent the absence of this term could be considered an ambiguity, which I do not believe is the case, it must be construed against Tenant and thus, against reducing the damages to present value. Moreover, based upon Marc Newman's testimony, it is not "abundantly clear" that Landlord intended for the lost rent payments to be reduced to present value. See N.T., 1/17/06, at 85-91. Quite the opposite, Marc Newman testified that absent its inclusion in the lease agreement, Landlord did not intend damages for lost rent to be reduced to present value. Id. at 91. It is therefore error for this Court to read this missing term into the lease agreement.
Based upon the testimony presented at trial, the plain language of the lease agreement, and the law of the case, I would therefore conclude that the trial court did not err by denying Tenant's request to reduce the damages for lost rent to present value. I therefore further disagree that remand is necessary to recalculate the interest awarded on the damages to account for the present value discount.
I agree with the Majority's conclusion, however, based upon the trial court's credibility determination and the express terms of the lease agreement, that remand is necessary for the trial court to account in the damage award for Landlord's duty to mitigate damages for the second half of the 20-year lease. Majority Op. at 15-16. The lease agreement plainly states that in the event Tenant defaults, Landlord is required to "endeavor in good faith to mitigate any damages for which Tenant may be liable." Lease Agreement, 4/14/00, at § 20.3. The trial court found that Marc Newman's damage testimony was "highly unreliable" because of his failure to "account for future tenants or any other factors that may have affected the amount of rent [Landlord] would have received." Trial Court Opinion, 8/15/06, at 13. The prior panel of this Court did not alter the trial court's finding on this issue in any respect.
I also agree that remand is required for the trial court to account solely for the savings Marchitelli testified Landlord experienced as a result of the breach by Tenant. Majority Op. at 15-17. The trial court credited the testimony of Marchitelli that Landlord enjoyed a savings of $505,821.00 as a result of Tenant's breach, and disbelieved Marc Newman's testimony that Landlord experienced $536,629.00 in reletting expenses because of the breach, finding that the testimony of the two witnesses were at odds with each other. Trial Court Order, 12/19/06, at 2 n.2. This Court affirmed that credibility determination in the original appeal, finding it "was amply supported by the record," and instructing, "any cost savings associated with [Tenant's] breach must be deducted from the trial court's assessment of damages." Newman Dev. Grp. of Pottstown, LLC, 162 EDA 2007, at 19 n.9. For reasons unknown, the trial court on remand subtracted the savings testified to by Marchitelli from the costs testified to by Marc Newman, ultimately adding the difference - $30,808.00 - to Landlord's damage award. Based upon the trial court's prior credibility determinations and this Court's affirmance of the same, this was error.
Finally, pursuant to the express terms of the lease agreement, I agree with the Majority that the trial court granted prejudgment interest and interest on attorney's fees from the appropriate date. Majority Op. at 18-30. No further calculations on these amounts are necessary.
In summary, I would conclude that the trial court did not err by denying Tenant's request to reduce the damages for lost rent to present value. With respect to the other issues raised by Tenant on appeal (apart from the Majority's determination that interest awarded on the damages must be recalculated to account for the present value of the damages), I join in the remainder of the Majority Opinion.
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