In a breach of contract case involving a commercial landlord/tenant dispute, the Pennsylvania Superior Court reversed a Philadelphia judge's ruling that the landlord simultaneously breached a contract while no contract existed.

A three-judge panel consisting of Judges Jack A. Panella, Anne E. Lazarus and Correale F. Stevens reversed in part and denied in part a Philadelphia Court of Common Pleas judge's ruling in favor of Gamesa Energy USA's case against Ten Penn Center Associates (referred to as “TenPC” in the court's opinion).

Gamesa alleged TenPC 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 Panella's opinion. Gamesa claimed that TenPC had broken the terms of the lease and demanded damages along with a ruling that the lease had been rescinded as of the date TenPC failed to accept or reject the sublease. Gamesa also requested that it be reimbursed for the rent it paid after that point.

The Philadelphia judge held that the breach effectively rescinded the contract and that the landlord was unjustly enriched by any rent payments it subsequently received from the tenant.

However, Panella said the 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 its award of damages for past rent to Gamesa, totaling roughly $265,000.

“The trial court found TenPC's breach resulted in reasonably certain damages of $265,460, or the amount due under the BSI sublease,” Panella said. “We find no error in this finding, as the evidence presented was legally sufficient. So, TenPC's claim that the trial court's finding of damages was unsupported by the record, fails.”

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.

Jeffrey Batoff of Obermayer Rebmann Maxwell & Hippel represents Gamesa and Robert Ebby of Hangley Aronchick Segal Pudlin & Schiller represents TenPC. Neither responded to requests for comment.