G.C. Murphy Co. v. M. Goldfarb-My Florist Inc.

11 Pa. D. & C.4th 614, 1991 Pa. Dist. & Cnty. Dec. LEXIS 250
CourtPennsylvania Court of Common Pleas, Alleghany County
DecidedApril 10, 1991
Docketno. GD 88-18498
StatusPublished

This text of 11 Pa. D. & C.4th 614 (G.C. Murphy Co. v. M. Goldfarb-My Florist Inc.) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Alleghany County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
G.C. Murphy Co. v. M. Goldfarb-My Florist Inc., 11 Pa. D. & C.4th 614, 1991 Pa. Dist. & Cnty. Dec. LEXIS 250 (Pa. Super. Ct. 1991).

Opinion

WETTICK, J,

The subject of this opinion and order of court is defendants’ motion for the award of counsel fees against plaintiff’s counsel pursuant to 42 Pa.C.S. §2503(6), (7), and (9).1 Defendants may seek counsel fees, and costs against a party’s counsel because counsel is included within the definitions of “participant” and’ “party.” 42 Pa.C.S. §102.

Plaintiff (landlord) instituted this declaratory judgment action to reform or modify its lease .with defendants (tenants). The leased premises are a garden supply store located in a shopping center. The lease was entered into in 1965. Assuming that the tenant exercises its option to renew, the lease will not expire until 2027.

The lease provides for a minimum annual rent of $30,000. The lease also provides for the tenant to pay as additional rent 5 percent of its gross sales in excess of $.600,000 and 4 percent of its gross sales in excess of $1 million. The lease further provides that the landlord, at its own expense, will repair, maintain, and paint the tenant’s premises throughout the term of the lease. It also requires the landlord throughout the term of the lease to pay for all of the tenant’s utility services and to maintain fire, extended coverage, and plate glass insurance for the tenant’s premises.

The landlord sought to modify or reform this lease because the financial burdens that it imposes on the [616]*616landlord are drastically different from those imposed when the lease was executed. Since 1974, the tenant’s sales have remained static. Consequently, the tenant’s rental payments have not increased. However, the landlord’s expenses for maintaining the tenant’s premises, providing utility services to the premises, and providing insurance have dramatically increased. At the present time, the landlord’s payments for the tenant’s maintenance, utility, and insurance expenses exceed the rent that it receives. Consequently, the landlord would be in a better position if it could simply permit the tenant to occupy its premises at no rent for the next 36 years (even with the landlord paying all real estate taxes, debt service, and common area expenses associated with the tenant’s premises) provided that the tenant paid its maintenance, utility, and insurance expenses. Furthermore, the evidence that the landlord would present supports a finding that the difference between the rent that the landlord receives from the tenant and the expenses incurred solely in connection with the tenant’s premises will significantly increase during the remainder of the lease.

Plaintiff was not the owner of the shopping center at the time the parties entered into the lease. The owner was represented by Mr. David'Stevenson. Mr. Stevenson testified that he did not anticipate that the maintenance, utility, and insurance expenses for the tenant’s premises would ever exceed the rentals that it received from the tenant. At the time the parties entered into the lease, the lease produced rentals that substantially exceeded these expenses. He assumed that the increased expenses that were anticipated in the future would be more than covered by increased rent from the increased sales that were also anticipated.

[617]*617The tenant was represented by Mr. Hyman Messing during the negotiations. He testified that the tenant anticipated more sales than have occurred. According to his testimony, the tenant would have not entered the Pittsburgh market if it did not anticipate sales substantially in excess of the breakeven point.

At the same time, both the landlord and the tenant knew that rental increases were tied only to increased sales and that the lease did not contain an escape clause that would allow the landlord. to terminate or modify the lease if future sales did not meet the parties’ anticipations. This meant that the lease substantially shifted the risk that the tenant’s sales would not meet anticipated levels from the tenant to the landlord.

The landlord based its lawsuit on case law permitting contracts to be terminated or reformed under an impracticability standard that many courts have utilized in recent years in place of the more restrictive doctrine of impossibility of performance. The landlord cited several cases in which courts gave serious consideration to claims to modify or reform a contract because of future events that drastically altered the burdens that the contract placed upon the'parties. See, e.g., Freidco of Wilmington, Delaware, Ltd. v. The Farmers Bank, 529 F. Supp. 822 (D. 1981); Atlas Corp. v. United States, 895 F.2d 745 (Fed. Cir. 1990); Florida Power & Light Co. v. Westinghouse Electric Corp., 826 F.2d 239 (4th Cir. 1987); National Presto Industries Inc. v. United States, 338 F.2d 99 (Ct. Cl. 1964); Madreperla v. The Williard Co., 606 F. Supp. 874, 878-79 (E.D. Pa. 1985); Haas v. Pittsburgh National Bank, 495 F. Supp. 815 (W.D. Pa. 1980); Aluminum Company of America v. Essex Group Inc., 499 F. Supp. 53 (W.D. [618]*618Pa. 1980); and E.C. Ernst Inc. v. Koppers Co. Inc., 476 F. Supp. 729 (W.D. Pa. 1979), modified on other grounds, 476 F.2d 729 (3d Cir. 1980).

The case of Freidco of Wilmington, Delaware v. Farmers Bank, supra, involved a claim similar to the present claim. In 1967, the parties entered into a 35-year lease. The lease required the tenant to pay a proportional share of the actual costs for water, electricity, heating, and air conditioning provided that the annual cost to the tenant would not exceed $1.10 per square foot of occupied space. At the time the parties entered into the lease, the estimated utility cost was $.52 per square foot. At the time this lawsuit was initiated, the cost was $1.43 per square foot. Consequently, the landlord was paying $.33 per square foot of the tenant’s utility costs. These payments were approximately 7 percent of the total rental payments that the landlord received from the tenant.

The landlord sought to reform the lease on the ground that drastic increases in utility. costs were not anticipated at the time the parties entered into the lease. The court held that “[i]n recent years, courts have abandoned the restrictive doctrine of ‘impossibility of performance’ for the more flexible ‘impracticability’ standard.” Id. at 824. Discharge of an obligation by reason of impracticability requires proof of three elements.

First, the party claiming the discharge must establish the occurrence of an event, the non-occurrence of which was a basic assumption of the contract. However, the event “need not be unexpected, unforeseeable, or even unforeseen. The nonoccurrence of that event, however, must have been a fundamental assumption on which both parties made the contract.” Id. at 825. (citations omitted)

[619]*619Second, the party claiming the discharge must show that continued performance is not commercially practicable. The critical question is whether “the cost of performance has in fact become so excessive and unreasonable that failure to excuse performance would result in grave injustice.” Id. at 825, quoting Gulf Oil Co. v. FPC,

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Bluebook (online)
11 Pa. D. & C.4th 614, 1991 Pa. Dist. & Cnty. Dec. LEXIS 250, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gc-murphy-co-v-m-goldfarb-my-florist-inc-pactcomplallegh-1991.