Gamesa Energy USA v. Ten Penn Center Associates

Facts

P entered into a commercial lease agreement with D. The base terms of the Lease provided for a ten-year term. P was not allowed to sublet all or any part of the Premises or permit the same to be occupied or used by anyone other than Tenant or its employees without Landlord's prior written approval, which approval shall not be unreasonably withheld, conditioned, or delayed. The Lease required D to grant or refuse its consent to the proposed sublease within thirty days. In the event of a default by P, the Lease entitled D to terminate the lease, repossess the premises, accelerate the amount of rent owed for the remainder of the ten-year lease term, charge interest on overdue rent, and recover related attorney's fees. D approved a request to sublease approximately 15,000 square feet or forty percent of the Premises. In April 2012, P informed D it would be moving out of the Premises as part of a corporate consolidation and would continue to pay its monthly rent and attempt to find a sub-lessee for the open space. The current sub-leasee remained. P submitted its June 2012 rent payment eighteen days late, and its July rent two days late. P continued to make all of its rent payments on time thereafter. P submitted a request to sublease 5,200 square feet to Business Services International, LLC (BSI), a business entity comprised of two foreign corporations formed for the particular purpose of subleasing office space through P. The sublease anticipated rental payments totaling $265,460 over a three-year term. D responded informing P it was in default of the Lease for vacating the Premises and, as a result, D had no obligation to entertain the request to sublease. D provided comments and questions about the proposed BSI sublease and requested BSI's financials, which had not been included with the initial request. P objected to the assertion a default had occurred. P provided D with the requested information. D reiterated its position asserting P was in default for vacating the Premises. D proposed it would grant consent to the BSI sublease if P forfeited its remaining tenant improvement allowance. The negotiations fell apart and the proposed sublease never materialized. P sued D for breach of contract, tortious interference in business relationships, and unjust enrichment. P sought a declaration the Lease had been terminated as of the date D declared Gamesa in default, and damages reflecting, lost revenue associated with the proposed BSI sublease and return of all rent payments P made to D since July 2012. In 2015, prior to trial, D provided P with the remainder of its tenant improvement allowance, and P improved the unfinished portion of the Premises. P has continued to pay its rent, accept sub-rent from its sub leasee, and attempt to recruit potential sub-lessees, including hiring brokers, developing marketing materials, and coordinating building access for prospective sub-lessees. P got the verdict. The court determined P's breach was material and sufficient to terminate the Lease retroactively to July 22, 2012. The court awarded P damages equal to the amount it would have received under the proposed three-year BSI sublease (totaling $265,463 plus pre-judgment interest). The court also concluded D was unjustly enriched in the amount of rent paid by D from the July 22, 2012 Lease termination until the conclusion of trial, and awarded P additional damages of $3,639,202.87. D appealed. A three-judge panel affirmed the trial court's award of damages on the BSI sublease but reversed the retroactive termination of the Lease. It determined that P had defaulted by vacating the Premises. But since D chose not to terminate the Lease, as allowed under its terms, and did not seek any damages as a result D waived any legal remedies it had due to breach of contract by P. The panel rejected the trial court's ruling that D failed to timely accept or reject the sublease. The panel discerned no error in the trial court's finding that D unreasonably withheld or conditioned its consent to sublease, thereby breaching one of its duties under the Lease. It affirmed the award to P of damages for breach of contract. The panel then reasoned P had 'elected its remedy' of damages for breach of contract, instead of reimbursement of rents paid after termination, by continuing to perform and benefit under the Lease after the date of breach. P could not achieve a double recovery through reimbursement of rent paid after D breached the Lease in addition to damages for the breach. A party's unequivocal choice of 'one of two or more inconsistent remedial rights' precludes any benefit from the other remedies. In a breach of contract suit, the plaintiff either may rescind the contract and seek restitution or enforce the contract and recover damages based on expectation. The panel reversed the trial court's decision retroactively terminating the Lease and awarding damages based on rent payments made after D's breach.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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