J -A04039-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GLOMAR HOLDING, L.P., 1 IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
EASTERN METAL RECYCLING -TERMINAL,
LLC,
Appellee No. 1939 EDA 2016
Appeal from the Order May 25, 2016
in the Court of Common Pleas of Delaware County
Civil Division at No.: 15-10942
BEFORE: SHOGAN, J., SOLANO, J., and PLATT, J.*
MEMORANDUM BY PLATT, J.: FILED MAY 08, 2017
Appellant, Glomar Holding, L.P., appeals from the order sustaining the
preliminary objections in the nature of a demurrer of Appellee, Eastern Metal
Recycling -Terminal, L.L.C., and dismissing Appellant's amended complaint
with prejudice. We affirm.
We take the following background from our independent review of the
certified record. On April 18, 2013, Appellee entered into a due diligence
and option agreement (the Option Agreement) with Eddystone Rail
Company, LLC (Eddystone), that granted Eddystone exclusive rights to
conduct due diligence of the property (Property) and the option to purchase
* Retired Senior Judge assigned to the Superior Court.
J -A04039-17
it. On March 26, 2015, Eddystone assigned its rights under the Option
Agreement to Canopy Prospecting, Inc. (Canopy). On March 31, April 28,
and May 27, 2015, pursuant to the Option Agreement's terms, Canopy made
payments to Appellee to extend the deadline for exercising the option to
purchase the Property. The option deadline was continued to July 15, 2015,
with any other extension required to be submitted fifteen days prior.
However, only one day before, on July 14, 2015, Canopy assigned its rights,
title and interest in the Option Agreement to Appellant. The same day,
although it had conducted no due diligence, Appellant sent Appellee a letter
exercising its option to purchase the Property pursuant to the Option
Agreement's terms. Pursuant to section 6(d) of the Option Agreement, the
closing was to occur not less than sixty nor more than ninety days after the
option's exercise, unless otherwise agreed to by the parties. (See Amended
Complaint, Exhibit A, Due Diligence and Option Agreement, at unnumbered
page 4 ¶ 6(d)). Section 14 of the Option Agreement stated that "[t]ime is
of the essence as to the performance of all of the terms and
conditions of this Agreement." (Id. at unnumbered page 8 '11 14)
(emphasis added).
The new closing date was scheduled for October 15, 2015. On or
about October 11, 2015, Appellant became aware of damage and vandalism
on the Property that had been the subject of police reports. On October 14,
2015, Appellant notified Appellee that it intended to proceed with closing in
-2
J -A04039-17
spite of the on -going casualty, but subject to a purchase price adjustment
consistent with the Option Agreement's terms. Appellant requested an
extension of the closing date for an insurance adjuster to assess the damage
cost. Appellee granted Appellant a thirty -day extension, and set a new
closing date for November 13, 2015. Appellee memorialized the extension
in a letter to Appellant that stated, in pertinent part:
. . . interest of avoiding unnecessary disputes, [Appellee]
in the
has agreed to provide an extension of the closing date for the
purchase and sale of the Property, which closing date shall occur
on or before November 13, 2015, time being of the essence
with respect thereto. [Appellee] shall not extend the
closing date beyond November 13, 2015 for any reason.
(Preliminary Objections to Amended Complaint, at Exhibit B, Modification
Letter, 10/14/15).
On October 20, 2015, Appellant identified Michael Simpson, of Sphere
Risk Partners, as the insurance adjuster, and Appellee agreed to him on
October 26, 2015. Mr. Simpson inspected the Property on October 29 and
30, 2015. On November 12, 2015, Mr. Simpson provided a preliminary
estimate of repair costs of at least seven to fifteen million dollars, and stated
that he required a minimum of four more weeks to complete his review.
(See Amended Complaint, at Exhibit F, Simpson Letter, 11/12/15).
On November 13, 2015, Appellant appeared at closing, and advised
that it was willing to proceed with the purchase, but requested that Appellee
either provide it with a credit toward the purchase price pursuant to the
preliminary extimate, or grant an extension to allow Mr. Simpson time to
-3
J -A04039-17
complete the inspection. Appellee offered a credit on the purchase price at
the capped amount of $100,000.00, and denied a request for another
extension to complete the evaluation, on the ground that such is not an
appropriate remedy under section 6(d) of the Option Agreement.
Thereafter, believing Appellant to be in default, with no further contractual
rights, Appellee continued to market the Property to other prospective
buyers.
On January 11, 2016, Appellant filed a complaint against Appellee for
breach of contract, specific performance, and a declaratory judgment on the
basis of Appellee's alleged failure to keep the Property secure and avoid
waste and to extend the closing date to allow further inspection. Appellant
also filed a praecipe to index a /is pendens on the Property, and a motion to
compel Appellee to allow Mr. Simpson to perform a further inspection.
On February 1, 2016, Appellee filed a response to the motion to
compel and preliminary objections to the complaint on the bases of (1)
Appellant's lack of standing for its failure to attach either a copy of the
actual assignment from Eddystone to Canopy or the agreement to extend
the closing date to November 13, 2015, and (2) Appellant's failure to state a
claim on which relief could be granted because Appellee was under no duty
to extend the closing date again where time was of the essence. (See
Appellee's Preliminary Objections to Appellant's Complaint, 2/01/16, at 6-
15).
-4
J -A04039-17
On February 22, 2016, Appellant filed an amended complaint, but did
not remedy any of the issues raised in the preliminary objections. (See
Amended Complaint, 2/22/16, at pages 2-15, Exhibits A -G). On March 14,
2016, Appellee filed a petition to strike the praecipe to index a /is pendens
and preliminary objections to the amended complaint in which it raised the
same issues it had claimed in its prior pleading, in addition to claims that
Appellant failed to state a claim for equitable relief. (See Appellee's
Preliminary Objections to Appellant's Amended Complaint, 3/14/16, at 7-
27).
The trial court held oral argument on the preliminary objections on
April 18, 2016. On May 25, 2016, the court sustained the preliminary
objection in the form of a demurrer on the basis that the amended complaint
was legally insufficient to state any cognizable claims against Appellee. The
court dismissed Appellant's amended complaint, denied Appellant's motion
to compel, and granted Appellee's petition to strike the /is pendens.
Appellant timely appealed.'
Appellant raises four questions for this Court's review:
1. Did the trial court err when it sustained preliminary objections
based on its determination that a condition that "time is of the
essence" effectively nullified [Appellant's] express right to a
credit for damage to the property it sought to purchase and
'On July 11, 2016, Appellant filed a concise statement of errors complained
of on appeal, pursuant to the court's order. See Pa.R.A.P. 1925(b). The
court filed an opinion on August 23, 2016. See Pa.R.A.P. 1925(a).
-5
J -A04039-17
precluded [its] claim for breach of contract and/or specific
performance?
2. Did the trial court err when it sustained preliminary objections
based on its determination that [Appellant] did not establish
entitlement to an equitable exception to any contractual timing
condition?
3. Did the trial court err in sustaining preliminary objections
based on its determination that [Appellant] failed to meet the
requirements of Pennsylvania Rules of Civil Procedure 2002(a)
and 1019(i) because [it] did not attach a copy of a prior third -
party assignment of the Option Agreement to its Amended
Complaint even though Appellee ratified the assignment
. . .
through its actions negotiating with, and accepting payment
from, the prior assignee?
4. Did the trial court err when it sustained preliminary objections
based on its determination that the assignment of the Option
Agreement to [Appellant] was invalid because the assignment
did not reference [Appellant's] acceptance of its predecessor's
contractual obligations?
(Appellant's Brief, at 2-3) (questions reordered for ease of disposition).
Our standard of review for a court's order sustaining preliminary
objections in the nature of a demurrer is well -settled:
A preliminary objection in the nature of a
demurrer is properly granted where the contested
pleading is legally insufficient. Preliminary objections
in the nature of a demurrer require the court to
resolve the issues solely on the basis of the
pleadings; no testimony or other evidence outside of
the complaint may be considered to dispose of the
legal issues presented by the demurrer. All material
facts set forth in the pleading and all inferences
reasonably deducible therefrom must be admitted as
true.
In determining whether the trial court properly
sustained preliminary objections, the appellate court
must examine the averments in the complaint,
- 6 -
J -A04039-17
together with the documents and exhibits attached
thereto, in order to evaluate the sufficiency of the
facts averred. The impetus of our inquiry is to
determine the legal sufficiency of the complaint and
whether the pleading would permit recovery if
ultimately proven. This Court will reverse the trial
court's decision regarding preliminary objections only
where there has been an error of law or abuse of
discretion. When sustaining the trial court's ruling
will result in the denial of claim or a dismissal of suit,
preliminary objections will be sustained only where
the case is free and clear of doubt.
Thus, the question presented by the demurrer
is whether, on the facts averred, the law says with
certainty that no recovery is possible. Where a
doubt exists as to whether a demurrer should be
sustained, this doubt should be resolved in favor of
overruling it.
Where the complaint fails to set forth a valid cause of
action, a preliminary objection in the nature of a demurrer is
properly sustained. The complaint need not identify specific
legal theories, but it must provide essential facts to support the
claim. Assertions of legal rights and obligations in a complaint
may be construed as conclusions of law, which have no place in
a pleading.
412 North Front Street Assoc., LP. v. Spector Gadon & Rosen, P.C.,
151 A.3d 646, 656 (Pa. Super. 2016) (citations and quotation marks
omitted).
In its first issue, Appellant maintains that "any condition that time was
of the essence should not be interpreted to abrogate [its] express
contractual rights." (Appellant's Brief, at 34) (unnecessary capitalization
and internal quotation marks omitted). We disagree.
-7
J -A04039-17
The amended complaint states claims against Appellee for specific
performance, breach of contract, and declaratory judgment. (See Amended
Complaint, at 11-15). Each of these counts is premised on Appellee's
alleged breach of the Option Agreement. (See id. at 12-14 1111 61, 65, 70).
In its preliminary objections, Appellee maintained that "the
Amended Complaint fails to allege facts showing that [Appellee] breached
the [Option] Agreement-a central element of each of [Appellant's] three
claims . . . against [Appellee]-because [Appellee] was under no obligation to
extend the existing November 13, 2015 closing date." (Preliminary
Objections to Amended Complaint, at 19 ¶ 91) (citing Amended Complaint,
at 12-14 1111 61, 65, 70). The trial court sustained this preliminary objection,
finding that "[Appellant's] amended complaint fails as a matter of law to
state any cognizable claims against [Appellee] and to establish any claim for
equitable relief[.]" (Trial Court Opinion, 7/11/16, at 34) (unnecessary
capitalization omitted). We agree.
"It is well -established that three elements are necessary to plead a
cause of action for breach of contract: (1) the existence of a contract,
including its essential terms[;] (2) a breach of the contract; and, (3)
resultant damages." See 412 North Front Street Assoc., supra at 657
(citation omitted).
"The fundamental rule in contract interpretation is to ascertain the
intent of the contracting parties. In cases of a written contract, the intent of
-8
J -A04039-17
the parties is the writing itself." Lesko v. Frankford Hospital-Bucks
County, 15 A.3d 337, 342 (Pa. 2011) (citation omitted).
Here, the relevant sections of the Option Agreement stated that
Appellee gave Appellant exclusive rights to conduct due diligence on the
Property, which included "investigat[ing] at its own expense the condition,
quality, and suitability of the [Property.]" (Option Agreement, at
unnumbered page 1 '11 1(b)). The Agreement also provided Appellant with
the option to purchase the Property. (See id. at unnumbered page 2 '11 2).
Once Appellant exercised the option, closing was to occur within sixty to
ninety days, unless the parties otherwise agreed in writing. (See id. at
unnumbered page 4 '11 6(d)). All risk of loss was on Appellee prior to closing.
(See id. at unnumbered page 6 '11 6(i)(ii)). Section 6(i)(ii) further provided
that, in the event of casualty involving the Property:
[Appellant] may either (i) continue to closing, but [Appellee] will
give [Appellant] a credit against the Purchase Price equal to the
cost to repair the damage from such casualty as determined by
an insurance adjuster engaged by [Appellant] and reasonably
acceptable to [Appellee] , or (ii) terminate this Agreement
. . .
and this Agreement shall be null and void and of no force or
effect.
(Id.).
Importantly, section 14 expressly stated: "Time is of the essence as
to the performance of all of the terms and conditions of this Agreement."
(Id. at unnumbered page 8 '11 14) (emphasis added).
Based on the Option Agreement's language, the trial court found:
-9
J -A04039-17
The law is settled in this Commonwealth that time is always of
the essence in an option contract whether or not it is expressly
provided unless the parties stipulate otherwise which . is not
. .
the case sub judice. Further, [Appellant's] failure to attach
[Appellee's] Modification Letter[2] extending the closing to no
later than November 1[3], 2015[;] with the express warning that
"time is of the essence" in that regard to the Complaint and
Amended Complaint suggests that [Appellant] believed that this
Due Diligence and Option Agreement differed in no way from any
other contract surrounding the sale of land.
This inference is reinforced by [Appellant] erasing all signs
that time was of the essence from the wording of its pleadings
and the lack of the Modification Letter from [Appellee] and its
timing advisory being appended thereto. Because time was
intrinsically of the essence when [Appellant] attended the closing
on November 13, 2015, but did not perform its obligation to
provide a damages estimate through which the sale price for this
Property could be adjusted, the Agreement was terminated and
voided by [Appellant] whose responsibility alone was to assure
that the sale was consummated in a timely fashion. Simply put,
[Appellant] could not obfuscate or erase this fact and escape its
own burden by eliminating altogether any mention of the
existence of that clause from its pleadings and the exhibits
appended thereto.
(Trial Ct. Op., at 29) (citations omitted). We agree with the trial court's
reasoning that Appellant's failure to perform its obligations at closing
2 Appellant did not attach this letter as an exhibit to the amended complaint.
However, the amended complaint pleaded that Appellee agreed to extend
the closing date to November 13, 2015. This is a material fact on which
Appellant's claim is based and, pursuant to the terms of the Option
Agreement, any extension of the closing date had to be by agreement of the
parties and in writing. (See Option Agreement, at unnumbered page 4 ¶
6(d)). Therefore, Appellant should have pleaded that the agreement to
extend was in writing and attached it to the amended complaint. See
Pa.R.C.P. 1019(i).
- 10 -
J -A04039-17
violated the time is of the essence requirement and terminated the Option
Agreement.
It is well -settled that "Winne is always of the essence in an option
contract." New Eastwick Corp. v. Phil. Builders Eastwick Corp., 241
A.2d 766, 769 (Pa. 1968) (citations omitted). "[I]t is a sound legal principle
that unless an option is exercised within the time fixed it necessarily
expires[.]" Western Say. Fund Soc. of Phil. v. Southeastern Pa.
Transp. Auth., 427 A.2d 175, 178 (Pa. Super. 1981) (citations omitted)
(emphasis added).
Here, Appellant agreed to accept the assignment of the Option
Agreement from Canopy on July 14, 2015, although the option termination
date was scheduled for the next day. (See Amended Complaint, at page 4
1111 12-13). In spite of first having no opportunity to conduct due diligence
on the Property, Appellant immediately exercised the option to purchase it.
(See id. at page 4 ¶ 18). Closing was scheduled for October 15, 2015.
(See id. at page 7 ¶ 28). On October 11, 2015, Appellant "became aware"
of damage to the Property. (Id. at page 5 ¶ 20). Appellee agreed in writing
to extend closing to enable Appellant the opportunity to inspect this damage,
stating, the "closing date shall occur on or before November 13, 2015, time
being of the essence with respect thereto. [Appellee] shall not
extend the closing date beyond November 13, 2015 for any reason."
J -A04039-17
(Modification Letter, 10/14/15, at 1) (emphasis added); (see also Option
Agreement, at unnumbered page 8 11 14).
On October 20, 2015, Appellant identified Michael Simpson, AIC as an
insurance adjuster pursuant to section 6(i)(ii) of the Option Agreement, and
Appellee agreed to the selection on October 26, 2015. (See Amended
Complaint, at page 7 III 30-31). On November 12, 2015, Simpson provided
a preliminary damage estimate, but stated he required a minimum of four
more weeks to inspect the Property. (See id. at page 8 III 32-33).
Appellant did not provide Appellee with an insurance adjuster's
determination on the extended closing date of November 13, 2015, but
demanded that Appellee either provide it with a credit on the purchase price
based on the preliminary estimate or extend the closing date, although
neither of the two remedies was provided in the Agreement. (See id. at III
35-36). However, contrary to Appellant's assertion, Appellee was under no
duty to extend the closing deadline further where the Option Agreement
expressly stated that time was of the essence and Appellee reiterated this
fact in its October 14, 2015 letter granting Appellant an extension of the
closing date. In fact, Appellee specifically advised Appellant that no more
extensions would be granted for any reason.
Therefore, based on the foregoing facts, as pleaded in the amended
complaint, because time was of the essence and Appellant did not fulfill
its obligation to provide an insurance adjuster's determination pursuant to
- 12 -
J -A04039-17
section 6(i)(ii) of the Option Agreement, the Agreement terminated and the
trial court properly found that Appellee is unable to state a claim for which
relief can be granted. See 412 North Front Street Assoc., supra at 656.
Appellant's first issue lacks merit.3
In Appellant's second issue, it argues that, "[e]ven if a 'time is of the
essence' condition is found to apply, equitable factors preclude its
enforcement." (Appellant's Brief, at 39) (emphasis omitted). Specifically,
Appellant asserts that it "was innocent with regard to the delay in closing"
and that it "acted reasonably and diligently in its efforts to assess the
damage and finalize the purchase." (Id. at 40). Appellant's claim does not
merit relief.
Anything short of the utmost good faith and diligence
on the part of the party seeking to be relieved from the
consequences of a failure to conform strictly to the terms of [an
option] contract will not be regarded as sufficient; but where it
appears that by the act of the other party, or by unavoidable
3 Moreover, although Appellant maintains that Appellee breached the
Agreement by "failing to keep the Property safe and secure[ and] allowing
waste and diminution in value to the Property[,]" the amended complaint
fails to identify any duty imposed by the Agreement in this regard.
(Amended Complaint, at page 12 ¶ 61). In fact, it would not have been in
Appellee's interest to allow damage to the Property where it bore "all risk of
loss prior to any closing." (Id. at page 6 ¶ 25 (quoting Option Agreement,
at unnumbered page 6 ¶ 6(i)(ii))). The plain language of the Option
Agreement provides that Appellant had the duty to conduct due diligence
and, had it conformed to the express terms of the Agreement by appearing
at closing with the insurance adjustor's determination, Appellee, which bore
the risk of any casualty, would have had the duty to provide a credit in the
purchase price equal to the cost of the damage. (See Amended Complaint,
at page 7 ¶ 27; Option Agreement, at unnumbered page 6 ¶ 6(i)(ii)).
- 13 -
J -A04039-17
accident of such character as could not be foreseen and guarded
against, the performance of the contract, with the exercise of
due diligence was rendered impossible, and the other party
at the earliest opportunity performed his part of the contract, the
court will enforce it.
Western Say. Fund Soc. of Phil., supra at 195 (citation omitted)
(emphasis added).
In this case, Appellant did not plead that it exercised any due
diligence after being assigned the Option Agreement and before exercising
its option to purchase. (See Amended Complaint, at page 4 ¶¶ 13-18).
Appellant pleaded that it accepted the assignment of the Option Agreement
from Canopy one day before the option period expired, even though,
pursuant to its express terms, this precluded it from extending the option
term to conduct due diligence. (See Option Agreement, at unnumbered
page 3 ¶ 4 (granting optionee leave to extend the option term upon written
notice provided to optionor fifteen days before term's expiration); Amended
Complaint, at page 4 ¶¶ 12-13). The amended complaint does not allege
that Appellee in any way interfered with Appellant's opportunity to conduct
due diligence before closing, let alone that it rendered it impossible. See
Western Say. Fund Soc. of Phil., supra at 195. In fact, Appellee
extended the closing date to allow Appellant the opportunity to assess any
damage to the Property to enable it to provide a determination of costs at
closing. (See Modification Letter, 10/14/15, at 1).
- 14 -
J -A04039-17
Therefore, based on the foregoing, we conclude that the trial court
properly found that Appellant failed to exercise "the utmost good faith and
diligence" where, as pleaded in the amended complaint, it accepted the
assignment of the Option Agreement one day before the termination of the
due diligence period, and then failed to insure that a complete inspection
was performed before the extended closing date, which was granted
specifically for that purpose. Western Say. Fund Soc. of Phil., supra at
195 (citation omitted). Hence, Appellant has failed to establish its right to
be "relieved from the consequences of a failure to conform strictly to the
terms of [an option] contract[.]" Id. (citation omitted). Accordingly, the
trial court properly found that Appellant was not entitled to equitable
considerations to relieve it of its duties under the time is of the essence
provision. Appellant's second issue does not merit relief.
In summary, because we conclude that the trial court properly found
that Appellant's violation of the time is of the essence provision of the Option
Agreement rendered it unable to state a claim on which relief could be
granted, we affirm its order sustaining Appellee's preliminary objections and
dismissing Appellant's amended complaint where, "on the facts averred, the
- 15 -
J -A04039-17
law says with certainty that no recovery is possible." 412 North Front
Street Assoc., LP., supra at 656 (citation omitted).4
Order affirmed.
Judge Shogan joins the Memorandum.
Judge Solano concurs in the result.
Judgment Entered.
J seph D. Seletyn,
Prothonotary
Date: 5/8/2017
4 Because we conclude that the trial court properly sustained the preliminary
objections on the basis of Appellant's failure to state a claim on which relief
can be granted we need not reach its second two issues challenging the trial
court's findings regarding the effect of Appellant's failure to attach
documents to the amended complaint or the sufficiency of Canopy's
assignment.
- 16 -