Michael and Linda, LLC v. Smith, R.

• Court: Superior Court of Pennsylvania
• Decided: July 25, 2019
• Docket: 2654 EDA 2018
• Status: Published

Opinion

J-S06018-19

2019 PA Super 226

MICHAEL AND LINDA, LLC : IN THE SUPERIOR COURT OF : PENNSYLVANIA v. : : ROBERT S. SMITH AND RENEE M. : SMITH, : : Appellants : : No. 2654 EDA 2018

Appeal from the Judgment Entered August 2, 2018 In the Court of Common Pleas of Montgomery County Civil Division at No(s): 2016-10803

BEFORE: BOWES, J., DUBOW, J., and FORD ELLIOTT, P.J.E.

OPINION BY DUBOW, J.: FILED JULY 25, 2019

Robert S. Smith and Renee M. Smith (hereafter, Sellers) appeal from

the Judgment entered against them on August 2, 2018, in this real estate

transaction dispute. We discern no trial court error of law or abuse of

discretion and, therefore, affirm.

We derive the following statement of facts from the trial court’s

Decision, which is supported by the record. See Trial Ct. Decision, 7/3/18, at

1-4.1

Sellers owned vacant real estate in Towamencin Township, Montgomery

County. Buyer, Michael and Linda, LLC, is a homebuilder.

The parties executed an Agreement of Sale in December 2015 for three

adjacent parcels of real estate (collectively, the Property). The three parcels

were identified as Lots 25, 26, and 27, which corresponded to parcel ____________________________________________

1Sellers do not challenge the trial court’s factual findings on appeal. See generally Sellers’ Br.; Sellers’ Pa.R.A.P. 1925(b) Statement, 9/27/2018. J-S06018-19

identification numbers: 533-00-00943-003, 53-00-00942-004, and 53-00-

08142-004, respectively. The total, negotiated purchase price for these lots

was $370,000.2

The Agreement of Sale included a “time is of the essence” provision. It

obligated Sellers to provide good and marketable title, free and clear of all

liens and encumbrances. The Agreement of Sale set settlement for January

29, 2016, but also provided for the extension of the settlement date by written

agreement of the parties.

Prior to settlement, a title search revealed a mortgage on Lot 27. The

parties agreed to settle on the other lots for two-thirds of the negotiated price

and, further, to extend settlement on Lot 27 to February 29, 2016. As the

new settlement date approached, because the title issue remained unresolved,

the parties agreed to extend settlement further until March 14, 2016. At some

point thereafter, when it became clear that the title issue was yet unresolved,

Buyer proposed a third extension to the settlement date, but Sellers refused.

In April 2016, Buyer learned that the title issue was resolved and,

therefore, advised Sellers that settlement could proceed. However, Sellers

refused to settle on Lot 27.

In May 2016, Buyer commenced this litigation by Summons, thereafter

filing a Complaint asserting breach of contract. Complaint, 8/22/16. Following

a bench trial in May 2018, the court found in favor of Buyer, granting its ____________________________________________

2The trial court also noted that Lot 27 was considerably larger than the other two lots. See Trial Ct. Decision at 1.

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request for specific performance and thus directing Sellers to convey Lot 27

to Buyer.

Sellers timely filed a Post-Trial Motion seeking judgment

notwithstanding the court’s verdict. Sellers’ Post-Trial Motion, 7/12/18. The

trial court denied the Motion and entered Judgment in favor of Buyer. Trial

Ct. Order, 7/31/18; Trial Ct. Judgment, 8/2/18.

Sellers timely appealed and filed a court-ordered Pa.R.A.P. 1925(b)

Statement. The trial court issued a responsive Opinion, citing its prior

Decision. See Trial Ct. Op., 10/24/18.

Sellers raise the following issues on appeal:

[1.] [Whether] the [t]rial [c]ourt err[ed] as a matter of law in holding that [Sellers] were in breach of the Agreement of Sale because they were unable to provide [Buyer] with clear title to Lot 27[;]

[2.] [Whether] the [t]rial [c]ourt err[ed] as a matter of law in holding that [Sellers] were in breach of the Agreement of Sale by failing to close on the sale of Lot 27 to [Buyer] by the March 14, 2016 [c]losing date[;]

[3.] [Whether] the [t]rial [c]ourt err[ed] as a matter of law in holding that [Sellers’] refusal to agree to continue to extend the March 14, 2016 [c]losing date did not terminate the Agreement of Sale[; and]

[4.] [Whether] the [t]rial [c]ourt err[ed] as a matter of law in granting the extraordinary remedy of specific performance to [Buyer] where [Buyer] had no clear right to relief and justice did not require the relief.

Sellers’ Br. at 7-8.

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Sellers contend that we should reverse the court’s Order denying their

Motion for judgment notwithstanding the verdict (JNOV). Our standard of

review is well settled.

A JNOV can be entered upon two bases: (1) where the movant is entitled to judgment as a matter of law; and/or, (2) the evidence was such that no two reasonable minds could disagree that the verdict should have been rendered for the movant. When reviewing a trial court’s denial of a motion for JNOV, we must consider all of the evidence admitted to decide if there was sufficient competent evidence to sustain the verdict. In so doing, we must also view this evidence in the light most favorable to the verdict winner, giving the victorious party the benefit of every reasonable inference arising from the evidence and rejecting all unfavorable testimony and inference. Concerning any questions of law, our scope of review is plenary. Concerning questions of credibility and weight accorded the evidence at trial, we will not substitute our judgment for that of the finder of fact. If any basis exists upon which the [court] could have properly made its award, then we must affirm the trial court’s denial of the motion for JNOV. A JNOV should be entered only in a clear case.

Haan v. Wells, 103 A.3d 60, 69-70 (Pa. Super. 2014) (citation omitted).

Sellers’ first three issues, which we address concurrently, concern the

proper interpretation of the parties’ Agreement of Sale, a real estate contract.

As such, the scope of our review is plenary, and our standard of review is de

novo. Maisano v. Avery, 204 A.3d 515, 520 (Pa. Super. 2019).

Sellers assert that (1) they did not breach the Agreement of Sale; (2)

they never refused to convey the title they were able to convey; and (3) Buyer

allowed the Agreement of Sale to expire when it failed to close on the

transaction. Sellers’ Br. at 29. In support of these bold assertions, Sellers

principally rely on what is commonly known as a “time is of the essence”

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provision in their contract. Id. at 36. According to Sellers, because the parties

had agreed that time was of the essence, upon learning that Sellers were

unable to convey clean title to the Property, Buyer was required to terminate

the Agreement or “take such title as [Sellers were] able to convey.” Id. at

25. For the following reasons, we reject these assertions as devoid of merit.

“The fundamental rule in interpreting the meaning of a contract is to

ascertain and give effect to the intent of the contracting parties.” Maisano,

204 A.3d at 520 (citation omitted). We determine that intent from the written

agreement, provided the language employed is clear and unequivocal. Id.

(citation omitted). “In the absence of an ambiguity, the plain meaning of the

agreement will be enforced.” Id. (citation omitted).

“When parties have deliberately by their agreement or covenants fixed

a time for the performance of an act, a court of equity will be very cautious

how it interferes in disregard of it, and thus in effect change the contract which

the parties have made.” Doughty v. Cooney, 109 A. 619, 619 (Pa. 1920)

(citation omitted).

However, “the law will not require the doing of a futile act.” Messina

v. Siberstein, 528 A.2d 959, 961 (Pa. Super. 1987) (citing Williams v.

Barbaretta, 59 A.2d 161 (Pa. 1948)). Thus, for example, a buyer’s obligation

to tender by a fixed date is excused where it is established that the seller is

not ready to settle. Id. at 62 (declining to enforce a “time is of the essence”

provision in a real estate contract where sellers conceded they were unable to

convey good title on the settlement date); but see McKuen v. Serody, 112

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A. 460, 461 (Pa. 1921) (holding that mere allegation that seller was unable to

convey title at designated time was insufficient to excuse buyer’s non-tender);

Phaff v. Gerner, 303 A.2d 826, 830-31 (Pa. Super. 1973) (foreclosing

specific performance as remedy to buyer where (1) buyer failed to timely

tender and (2) seller denied that timely tender would have been futile).

The contract at issue here is not ambiguous. Pursuant to their

Agreement of Sale, in exchange for Sellers’ conveyance of the Property, Buyer

agreed to tender the purchase price of $370,000. Complaint, Exh. A

(Agreement of Sale, 12/10/15, at 2 ¶¶ 1, 2(A)).

The parties further agreed that the Property “will be conveyed with good

and marketable title . . . free and clear of all liens, encumbrances, and

easements.” Agreement of Sale at 8 ¶ 18(A) (recognizing certain exceptions

regarding easements not relevant to this dispute). In the event a title issue

arose, the Agreement provides a remedy:

If [Sellers] [are] unable to give good and marketable title . . . [Buyer] may terminate this Agreement by written notice to [Sellers], with all deposit monies returned . . . Upon termination, [Sellers] will reimburse [Buyer] for any costs incurred[.]

Id. at 8 ¶ 18(D) (emphasis added). Thus, in its discretion, Buyer was free to

terminate the Agreement, without penalty, if Sellers were unable to meet their

obligation to provide clean title to the Property. Id.3 ____________________________________________

3 Absent equitable claims, “[g]enerally, a vendee’s [i.e., a purchaser’s] action for breach of contract to sell land is limited to recovery of the consideration paid plus reasonable expenses incurred.” Baldassari v. Baldassari, 420

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The Agreement of Sale set the date for settlement, January 29, 2016,

but also provided for the extension of that date “by mutual written agreement

of the parties.” Id. at 2 ¶¶ 4(A), 5(D). Finally, as highlighted by Sellers, the

parties agreed that “[t]he [s]ettlement [d]ate and all other dates and times

identified for the performance of any obligations of this Agreement are of the

essence and binding.” Id. at 2 ¶ 5(B).

As found by the trial court, the evidence established that Sellers were

unable to convey the Property as agreed. Specifically, Sellers were unable to

convey Lot 27 with clean title on the negotiated settlement date. Trial Ct.

Decision at 3.4 Nevertheless, Buyer tendered two-thirds of the negotiated

purchase price for the Property, and the parties twice agreed to extend the

settlement date, eventually setting settlement for March 14, 2016. Id.; see

also Answer and New Matter, Exh. D1 at 3 (Signed Addendum). These

extensions afforded Sellers an opportunity to meet their contractual obligation

to convey clean title. Thus, we discern no breach of the Agreement of Sale at

this point.

____________________________________________

A.2d 556, 561 (Pa. Super. 1980) (footnote omitted). In this case, Paragraph 18(D) of the Agreement of Sale embodies this remedy. Alternatively, there exists a narrow claim for “loss of bargain” damages premised upon a vendor’s bad faith. Id. at 561-62 (quoting Seidlek v. Bradley, 142 A. 914, 915 (Pa. 1928)). Buyer has not pursued such a claim in this litigation.

4 As noted, Sellers do not challenge the findings of the trial court. Supra at n.1. Nevertheless, we note further that Sellers conceded this specific fact prior to trial. Answer and New Matter, 12/29/2016, at 2 ¶ 7 (admitting their inability to convey clear and marketable title).

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On the extended settlement date, Sellers were not yet able to convey

clean title. Trial Ct. Decision at 3. Therefore, as of March 14, 2016, Sellers

were in breach of Paragraph 18(A) of the Agreement of Sale. Pursuant to

Paragraph 18(D), Buyer was empowered to terminate the Agreement of Sale.

Further, Buyer was entitled to the return of deposit monies paid and costs

incurred. However, there is no evidence that Buyer terminated the Agreement

by written notice to Sellers, nor is there evidence that Sellers returned deposit

monies or reimbursed Buyer for its costs. Absent such evidence, and mindful

that Paragraph 18(D) affords Buyer sole discretion to terminate, we conclude

that the Agreement of Sale remained in force.

Moreover, in light of these facts—in particular, (1) Buyer’s partial

performance in tendering two-thirds of the negotiated price, (2) Sellers’

inability to meet their contractual obligation to convey the Property with clean

title, and (3) the parties’ multiple agreements to extend settlement for the

express purpose of affording Sellers an opportunity to remedy the title issue

on Lot 27—we conclude that there is no legal basis to enforce Paragraph 5(B)

to Sellers’ benefit. The evidence is indisputable that Sellers were not ready

to settle on the last negotiated settlement date, March 14, 2016. Therefore,

any tender by Buyer on that date would have been futile, and its obligation to

tender the balance of the negotiated sale price is excused. Messina, 528

A.2d at 961.

Thereafter, in April 2016, Sellers successfully cleared the encumbrance

upon Lot 27, thus potentially curing their prior breach of the Agreement of

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Sale. This afforded Sellers yet another opportunity to meet their contractual

obligation to convey the Property to Buyer. However, in May 2016, upon

refusing to complete settlement, Sellers eschewed this opportunity.

Accordingly, we conclude that Sellers remained in breach of their contractual

obligation. Maisano, 204 A.3d at 520.

In their fourth issue, Sellers assert that the trial court erred in granting

specific performance to Buyer. Sellers’ Br. at 39-41.

Specific performance is an equitable remedy in which the court compels

performance of a contract. Lackner v. Glosser, 892 A.2d 21, 31 (Pa. Super.

2006). A claim for specific performance “should only be granted where the

facts clearly establish the plaintiff’s right thereto; where no adequate remedy

at law exists; and, where the [court] believes that justice requires it.” Payne

v. Clark, 187 A.2d 769, 771 (Pa. 1963).

Due to the unique qualities of real estate, “[c]ourts in this

Commonwealth consistently have determined that specific performance is an

appropriate remedy to compel the conveyance of real estate where a seller

violates a realty contract and specific enforcement of the contract would not

be contrary to justice.” Oliver v. Ball, 136 A.3d 162, 167 (Pa. Super. 2016)

(citing Borie v. Satterthwaite, 37 A. 102 (Pa. 1897)).

In light of the foregoing analysis, the trial court properly granted specific

performance. Sellers clearly violated the terms of the Agreement of Sale when

they refused to convey the entire Property, including Lot 27. Their refusal left

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Buyer without an adequate remedy at law, and it would be inequitable to deny

Buyer relief under the circumstances of this case. Id.

Accordingly, we affirm the trial court’s denial of Sellers’ Motion for JNOV.

Haan, 103 A.3d at 70.

Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 7/25/19

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