Constructural Dynamics v. U.S. Venture, Inc.

• Court: Superior Court of Pennsylvania
• Decided: July 12, 2023
• Docket: 2008 EDA 2022
• Status: Unpublished

Opinion

J-A07017-23

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37

CONSTRUCTURAL DYNAMICS, INC. : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : U.S. VENTURE, INC. : : Appellant : No. 2008 EDA 2022

Appeal from the Judgment Entered July 14, 2022 In the Court of Common Pleas of Bucks County Civil Division at No(s): 2019-01165

BEFORE: DUBOW, J., McLAUGHLIN, J., and McCAFFERY, J.

MEMORANDUM BY McLAUGHLIN, J.: FILED JULY 12, 2023

U.S. Venture, Inc. (“U.S. Venture”) appeals from the judgment entered

against it and in favor of Constructural Dynamics, Inc. (“Constructural

Dynamics”). U.S. Venture contends the trial court erred in its interpretation of

certain terms in a lease agreement, or alternatively, erred in failing to apply

a prevailing wage deduction from the amount of rent it owed to Constructural

Dynamics. We affirm.

Constructural Dynamics is a corporation with real estate holdings in New

Jersey and Pennsylvania. U.S. Venture is a Wisconsin corporation with a

business model that includes the distribution and marketing of compressed

natural gas (“CNG”), biofuels, and other clean energy alternatives. On July

10, 2014, the parties entered into a 10-year lease (“Lease”), whereby U.S.

Venture, as tenant, would lease approximately one-acre of land from

Constructural Dynamics, as landlord, and construct and operate a CNG J-A07017-23

dispensing facility with separate public and private filling lines. The Lease

stated that rent would be $1,000 per month but the rent would increase

(“Increased Rent”) if U.S. Venture was “awarded a grant from the

Commonwealth of Pennsylvania” (the “Commonwealth”):

RENT: $1,000.00 per month; provided however, the Rent shall increase if Tenant is awarded a grant from the Commonwealth of Pennsylvania in which event monthly rent shall be an amount equal the grant amount, minus (a) the incremental increase in documented labor costs resulting directly from the requirement that Tenant retain “prevailing wage” laborers and (b) 10% of the grant amount, representing a contingency fee owed by Tenant to a third party vendor, which total shall be amortized over a thirty (30) month period. The increased rent obligation shall commence on the first day of the month following completion of the CNG Dispensing Facility. Tenant agrees to promptly apply for the grant, process the application in a diligent and commercially reasonable manner and promptly request payment of the grant dollars and shall Produce evidence reasonable [sic] acceptable to Landlord showing the incremental increase in costs as a result of engaging prevailing wage laborers.

Lease at ¶ 9 (emphasis added).

In May 2014, U.S. Venture applied for a grant (“Grant Application”)

offered by the Commonwealth through its Alternative and Clean Energy

(“ACE”) Program. In its Grant Application, U.S. Venture stated that it would

be building “a high-speed public fueling station with private slow-fill lines for

Silvi [Concrete’s] new fleet of CNG-fueled concrete mixers.” Grant Application

at p. 5. U.S. Venture also stated in the Grant Application that the grant funds

would “go directly toward purchasing and installing the CNG equipment as well

as covering the additional costs associated with opening the facility to the

public, such as security fencing, lighting, and improved access.” Id.

-2- J-A07017-23

On October 24, 2014, U.S. Venture received a letter from the

Commonwealth Financing Authority (“CFA”) informing it that the Grant

Application was conditionally approved, subject to conditions set forth in the

letter (“Grant Approval Letter”). The Grant Approval Letter stated that U.S.

Venture was “responsible for seeking competitive bids for all work conducted

with the [g]rant funds.” Grant Approval Letter, 10/24/14, at p. 2. The Grant

Approval Letter also required U.S. Venture to “comply with the Pennsylvania

Prevailing Wage Act which requires prevailing wage rates in all bid documents,

specifications, and construction contracts pertaining to the [p]roject.” Id. at

p. 6.

U.S. Venture and the CFA subsequently entered into a grant agreement

(“Grant Agreement”) on March 18, 2015, and $547,047.00 of Commonwealth

funds were earmarked by the CFA for reimbursement to U.S. Venture of

eligible costs relating to the construction of the CNG facility. The Grant

Agreement incorporated the conditions set forth in the Grant Approval Letter.

Construction on the CNG facility began in 2015. Design Develop

Construct, LLC (“DDC”) was the general contractor on the project.

Construction was completed in December 2016. At the completion of the

project, U.S. Venture submitted a payment request to the CFA. On July 31,

2017, the CFA issued a letter to U.S. Venture notifying it that the CFA would

not disburse the grant funds. The CFA identified two reasons for its refusal to

issue the funds: 1) The funds were specifically awarded to pay U.S. Venture

for construction costs and for the purchase of equipment; however, the CFA

-3- J-A07017-23

learned that U.S. Venture did not incur these costs as it elected to lease, and

not purchase, the CNG equipment/station; and 2) U.S. Venture did not engage

in a competitive bidding process when they chose DDC as general contractor,

which was in contravention of the Grant Agreement. Specifically, the letter

stated, in relevant part:

After reviewing the paperwork submitted, the CFA is unable to disburse the grant funds based on how U.S. Venture, Inc. structured the construction and financing of the project. ACE funds were specifically awarded to pay construction costs incurred by U.S. Venture, Inc. Unfortunately, U.S. Venture, Inc. did not incur construction costs, instead electing to lease the CNG equipment/station. Therefore, there are no eligible costs for the ACE grant to reimburse. Grant funds cannot be used to pay lease payments for the equipment, fund operations, and make grant sharing payments to the landowner.

The CFA was unaware that U.S. Venture, Inc. had decided to lease the CNG equipment/station instead of owning it. The funding commitment letter provided in the original application stated that U.S. Venture, Inc. would provide the matching funds. The application stated that the grant funds would be used to purchase equipment and pay construction costs, not to make lease payments.

In addition, the material provided by Michael Wormley and Catherine Chapple, U.S. Venture, Inc. does not indicate that a competitive bidding process was utilized for the selection of DDC, LLC for each of the projects as required in the grant agreement.

Letter from CFA, 7/31/17.

After the CFA refused to disburse the grant funds, U.S. Venture filed a

Statement of Claim with the Commonwealth’s Board of Claims alleging breach

of contract and equitable claims against the Commonwealth. The Board of

Claims ruled that U.S. Venture’s breach of contract claims were barred by

-4- J-A07017-23

sovereign immunity. U.S. Venture appealed to the Pennsylvania

Commonwealth Court, which affirmed the Board of Claims’ decision. U.S.

Venture then successfully petitioned the Pennsylvania Supreme Court for

allowance of appeal. The Pennsylvania Supreme Court affirmed the

Commonwealth Court and held that U.S. Venture’s breach of contract claims

were barred by sovereign immunity.

Constructural Dynamics filed the instant lawsuit against U.S. Venture

for breach of contract. Constructural Dynamics alleged that although U.S.

Venture continued to pay it $1,000 in monthly rent, it failed to pay the

Increased Rent as provided in the Lease. As set forth previously, the Lease

stated that U.S. Venture’s rent would increase, based on a specified formula,

if U.S. Venture was “awarded” a grant, and the Increased Rent was to

commence on the first day of the month following completion of the CNG

facility. See Lease at ¶ 9. Constructural Dynamics contended U.S. Venture’s

obligation to pay the Increased Rent was triggered when U.S. Venture was

“awarded” the grant by the CFA and that actual disbursement of grant funds

was not a condition on U.S. Venture’s obligation to pay Increased Rent. U.S.

Venture, on the other hand, maintained that because the CFA refused to

disburse the grant funds, it was not obligated to pay the Increased Rent.

After a bench trial, the court found in favor of Constructural Dynamics

and against U.S. Venture. U.S. Venture filed a motion for post-trial relief which

was denied. The trial court entered judgment in favor of Constructural

-5- J-A07017-23

Dynamics and against U.S. Venture in the amount of $550,615.48. This appeal

followed.

U.S. Venture raises the following two issues:

1. Whether the trial court committed an error of law in concluding that the doctrine of legal impossibility is inapplicable to the rent increase clause, by finding that the language “awarded a grant” is unambiguous, without giving effect to all of the language of said clause and Lease?

2. Alternatively, if the trial court was correct in concluding that the rent increase clause is enforceable, which is denied, whether it committed reversible error in finding that U.S. Venture is not entitled to a prevailing wage deduction from the amount owed because it failed to produce reasonably acceptable evidence, as required by the Lease?

U.S. Venture’s Br. at 3.

U.S. Venture first argues that the trial court erred when it found that

the Increased Rent provision was triggered when the grant was approved. Id.

at 28. It contends that the term “awarded a grant by the Commonwealth” in

the Lease meant the Increased Rent provision would be triggered only when

it was actually paid the grant money. Id. at 40-41. Since it was never paid

the grant money, it contends that it does not owe Constructural Dynamics the

Increased Rent. U.S. Venture maintains that the trial court erred by failing to

consider later language in Paragraph 9 of the Lease, namely: “Tenant agrees

to promptly apply for the grant, process the application in a diligent and

commercially reasonable manner and promptly request payment of the grant

dollars[.]” Id. at 36-37. According to U.S. Venture, when the two phrases

“award a grant” and “promptly request payment of the grant dollars” are read

-6- J-A07017-23

together, they indicate that the parties understood the term “award a grant”

to include actual payment of the grant funds. Id. at 38. U.S. Venture argues

that this additional language “was included to prevent U.S. Venture from

attempting to delay the [R]ent [I]ncrease clause from becoming applicable by

not diligently seeking the grant money.” Id. at 39. Otherwise, according to

U.S. Venture, “[i]f the [R]ent [I]ncrease provision was triggered regardless of

whether [it] received the grant money, there would be no need for this later

language.” Id.

U.S. Venture further argues that the court erred in not finding U.S.

Venture’s compliance with the Increased Rent provision was legally

impossible, and thus unenforceable. Id. at 42. It contends that it did not

receive the grant money “due to no fault of its own.” Id. at 26. According to

U.S. Venture, the CFA declined to award grant funds because the Increased

Rent provision improperly directed grant money to the landowner (called

“grant-sharing”), which was prohibited by the CFA. Id. at 44. U.S. Venture

therefore contends that it was excused from complying with the Increased

Rent provision under the doctrine of impossibility because the CFA’s

determination legally invalidated it. Id. at 45.

Our standard of review in a non-jury trial is well-settled:

We must determine whether the findings of the trial court are supported by competent evidence and whether the trial judge committed error in the application of law. Additionally, findings of the trial judge in a non-jury case must be given the same weight and effect on appeal as a verdict of a jury and will not be disturbed absent error of law or abuse of discretion.

-7- J-A07017-23

Davis ex rel. Davis v. Gov’t Employees Ins. Co., 775 A.2d 871, 873

(Pa.Super. 2001) (citation omitted). Our scope of review over questions of law

is plenary. Century Indem. Co. v. OneBeacon Ins. Co., 173 A.3d 784, 802

(Pa.Super. 2017).

A lease is a contract and must be interpreted according to the principles

of contract law. Stein Revocable Trust v. Gen. Felt Indus., Inc., 749 A.2d

978, 980 (Pa.Super. 2000). “The fundamental rule in interpreting the meaning

of a contract is to ascertain and give effect to the intent of the contracting

parties.” Murphy v. Duquesne Univ. of the Holy Ghost, 777 A.2d 418, 429

(Pa. 2001). “The intent of the parties to a written agreement is to be regarded

as being embodied in the writing itself.” Id. Further, we “do not assume that

a contract’s language was chosen carelessly, nor do [we] assume that the

parties were ignorant of the meaning of the language they employed.” Id.

Where “the language of the contract is clear and unambiguous, a court is

required to give effect to that language.” Prudential Prop. and Cas. Ins.

Co. v. Sartno, 903 A.2d 1170, 1174 (Pa. 2006) (citation omitted).

Here, the court found that the Lease was unambiguous, and that

pursuant to Paragraph 9 of the Lease, the parties agreed that U.S. Venture’s

monthly rent would increase following the “award” of a grant from the

Commonwealth. Trial Court Memorandum Decision, filed 7/13/22, at 1, 4. The

court determined that provision was triggered when U.S. Venture was

awarded a grant in the amount of $547,047.00 on March 18, 2015. Id. at 1.

The court stated that the plain language of the Lease did not require the direct

-8- J-A07017-23

payment of grant funds to Constructural Dynamics, nor did it indicate that the

Increased Rent payments would end if the Commonwealth terminated grant

payments. Id. at 3. The court noted that U.S. Venture prevented the

disbursement of grant funds awarded by the CFA by failing to comply with the

terms in the Grant Agreement. Id. at 5.

The trial court did not err. Contrary to U.S. Venture’s argument that it

must have received grant funds or that grant funds must have disbursed to

U.S. Venture before it was obligated to pay the Increased Rent, there was no

express language in the Lease stating that payment of the Increased Rent was

contingent on either of those requirements. Pursuant to the Lease’s plain

language, the Increased Rent was triggered when U.S. Venture was “awarded

a grant” by the Commonwealth, which occurred on March 18, 2015. The fact

that U.S. Venture ultimately did not receive the funds due to its failure to

comply with the terms of the Grant Agreement does not change the fact that

the grant was “awarded.” Thus, the court properly interpreted the phrase

“awarded a grant.”

The court also correctly determined that the doctrine of legal

impossibility was inapplicable. Legal impossibility or impracticality can

discharge a parties’ contractual obligations when “a party’s performance is

made impracticable without his fault by the occurrence of an event the non-

occurrence of which was a basic assumption on which the contract was

made[.]” Felix v. Giuseppe Kitchens & Baths, Inc., 848 A.2d 943, 947-48

(Pa.Super. 2004) (quoting Restatement (Second) of Contracts § 261 (1981))

-9- J-A07017-23

(emphasis added). U.S. Venture’s compliance with the terms set forth in the

Grant Agreement was not legally impossible. The CFA refused to issue the

grant funds because U.S. Venture elected to deviate from the terms by leasing

the equipment instead of purchasing it and not engaging in a competitive

bidding process when they chose DDC as general contractor. Therefore, U.S.

Venture itself caused the grant not to be disbursed by failing to comply with

the terms in the Grant Agreement. Accordingly, no relief is due on U.S.

Venture’s first issue.

U.S. Venture alternatively argues that if the court was correct in

concluding the Increased Rent provision was enforceable, it should have

deducted the prevailing wage costs from the amount of the verdict. U.S.

Venture’s Br. at 53. It notes that the grant required U.S. Venture to comply

with the Prevailing Wage Law. Id. Pursuant to Paragraph 9 of the Lease, the

increased costs of paying the prevailing wage would be subtracted from the

Increased Rent. Paragraph 9 also required U.S. Venture to “produce evidence

reasonable [sic] acceptable to [Constructural Dynamics] showing the

incremental increase in costs as a result of engaging prevailing wage

laborers.” Lease at ¶ 9. U.S. Venture argues that the court erred when it

determined that “certified payroll records were the only reasonably acceptable

evidence to show the prevailing wage cost increase[.]” U.S. Venture’s Br. at

55. It contends that it adequately provided evidence showing the costs it

incurred in complying with the Prevailing Wage Act by providing

documentation certified from its general contractor showing a lump sum price

- 10 - J-A07017-23

for the project, which included the increased costs, and there was nothing in

the Lease that mandated it provide “certified payroll records.” Id. at 62-63.

Pursuant to the Prevailing Wage Act, “[e]very contractor and

subcontractor shall keep an accurate record showing the name, craft and the

actual hourly rate of wage paid to each workman employed by him in

connection with public work, and such record shall be preserved for two years

from date of payment.” 43 P.S. § 165-6. The definition of “public work” under

the Prevailing Wage Act includes “construction, reconstruction, demolition,

alteration and/or repair work other than maintenance work, done under

contract and paid for in whole or in part out of the funds of a public body

where the estimated cost of the total project is in excess of twenty-five

thousand dollars ($25,000)[.]” 43 P.S. § 165-2.

In rejecting U.S. Venture’s request for a reduction in its monthly rent

obligation, the trial court found that U.S. Venture failed to produce

“reasonably acceptable evidence” of the increased costs of engaging prevailing

wage laborers, as required by the Lease. Memorandum Decision at 5. It

stated:

[U.S. Venture] failed to produce any credible evidence that the upcharge for prevailing wage was actually paid to the laborers. [U.S. Venture] never received any certified payroll records from its contractor, DDC. Moreover, [U.S. Venture] admitted that the Grant Agreement required such records to be maintained and that DDC would not or could not provide these records to [U.S. Venture] despite numerous requests by both parties.

In the Decision [dated March 10, 2022], the [c]ourt specifically found that [U.S. Venture] “did not produce evidence reasonably acceptable to Constructural Dynamics to establish the prevailing

- 11 - J-A07017-23

wages that were paid on the project, and the incremental cost increase that was incurred as a result thereof.” Under the terms of the Lease, and the Grant Agreement, [U.S. Venture] had a contractual obligation to create and maintain accurate records to establish compliance with payment of “prevailing wages” to laborers on the [p]roject. [U.S. Venture] failed to do so, and likewise failed to provide [Constructural Dynamics] and this [c]ourt with “reasonably acceptable” evidence of same. Thus, it was reasonable for [Constructural Dynamics] and this [c]ourt to reject [U.S. Venture’s] request for a reduction in its monthly rent obligation under Paragraph 9 of the Lease.

Id. at 4-5 (citations omitted).

The court did not err in declining to apply the prevailing wage deduction.

Pursuant to the Lease, U.S. Venture was required to produce evidence

reasonably acceptable to Constructural Dynamics showing the increase in

costs as a result of engaging prevailing wage laborers. U.S. Venture failed to

produce documentation of the actual hourly rate of wages paid to each laborer.

See N.T. Trial, 12/9/21, at 117-19, 123-25, 131. U.S. Venture was required

to maintain such records under the Prevailing Wage Act. See 43 P.S. § 165-

6. Accordingly, the court properly determined that U.S. Venture was not

entitled to the prevailing wage deduction.

Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 7/12/2023

- 12 - J-A07017-23

- 13 -