By insisting on a covenant not to sue, a full release, or other documentation from the DER of like import, the buyers manifestly bargained for the right to walk away from the deal unless the DER provided a document that would prevent the DER from taking any future action against the buyers with respect to the soil contamination. The November 16, 1994 letter fell far short of that, as indeed the DER took pains to point out on more than one occasion. The letter, in substance, said no more than what the parties knew anyway: the DER would not require additional remediation or closure activities if the report submitted earlier proved accurate, at least absent a change in toxicological information or a failure of the previous remediation to achieve the anticipated results. The DER therefore preserved its options and certainly did not provide the buyers with the security for which they bargained.
SMF rejoins that the DER letter was sufficient because even a general release is voidable for fraud, mutual mistake or failure of consideration. In consequence, it argues, the loopholes left by the letter were no greater than would have existed as a matter of law even if the buyers had obtained a general release.
This argument fails as well. The Court assumes that SMF is correct in arguing that the DER, had it given a release, could have avoided it on the basis of fraud, mistake or failure of consideration. But the case the DER would have to prove to avoid a release given by the DER could well be far different from the circumstances that would permit it to proceed in the face of the November 16, 1994 letter. In order to avoid a release on the basis of fraud, for example, the DER would have to establish that it justifiably had relied to its detriment on a material false statement or nondisclosure. See Beeman v. Calvert Fire Ins. Co., 173 Pa. Super. 20, 94 A.2d 90 (1953). Given the DER's ability to conduct independent testing of the site prior to giving the release, however, a court might well sustain a release even in the face of evidence that the report submitted by the seller was false. See Emery v. Third Nat'l Bank of Pittsburgh, 314 Pa. 544, 548, 171 A. 881, 882 (1934) (suggesting that reliance may be less justified when parties have equal access to information). A court likewise might enforce a release over a claimed mutual mistake of fact since the DER did not avail itself of its right to conduct its own inspection. See, e.g., Smith v. Thomas Jefferson Univ. Hosp., 424 Pa. Super. 41, 45-46, 621 A.2d 1030, 1032 (1993); Sanders v. Lawn Mutual Ins. Co., 194 Pa. Super. 491, 494-95, 168 A.2d 758, 760 (1961). Moreover, the DER would be required to prove fraud or mutual mistake by clear and convincing evidence. Wolbach v. Fay, 488 Pa. 239, 242, 412 A.2d 487, 488 (1980). Finally, the DER might be unable to avoid a release for lack of consideration because a written release that expresses the releasor's intent to be legally bound is binding without further consideration under Pennsylvania law. American Equitable Assurance Co. v. Mussoline, 201 Pa. Super. 271, 277, 191 A.2d 862, 866 (1963); 33 PA. CONS. STAT. ANN. § 6 (1995). No such impediments would stand in the way of a lawsuit by the DER absent a release. In short, while there is something to SMF's point, there is not enough. The DER documentation the buyers bargained for offered materially more protection than the November 16, 1994 letter upon which SMF relies.
This view becomes all the more compelling against the background of the letter by SMF's attorney, dated July 21, 1994. If there were any ambiguity in the contractual language -- and the Court finds none -- it would be resolved by the July 21, 1994 letter. That communication demonstrates the seller's awareness that the terms of the closing condition had not been met by, DER correspondence prior to that date, which was not materially different from the November 16, 1994 letter upon which SMF now relies.
See Capitol Bus Co. v. Blue Bird Coach Lines, Inc., 478 F.2d 556, 560 (3d Cir. 1973) (practical construction by parties may be considered in construing ambiguous agreement); Demharter v. First Fed Sav. & Loan Ass'n of Pittsburgh, 412 Pa. 142, 154, 194 A.2d 214, 220 (1973) (same).
SMF's final point is that a construction of the closing condition in the buyers' favor -- or, more accurately, a reading of the closing condition in accordance with the plain meaning of its language -- "would make occurrence of the condition precedent impossible." (Pl. Reply Br. 8) While SMF contends that this supports reading the contract contrary to its plain meaning (see id. 8-9), it really raises an issue neither briefed nor argued by the parties: the effect of the parties' assumption that a release would be available from the DER in appropriate circumstances.
In essence, SMF submits that the parties executed this contract while laboring under a mutual mistake as to whether the DER ever would give a legally binding "sign off" in a situation like this.
The Court assumes arguendo that the record permits the inference that both parties erroneously believed when the contract was signed that the DER would "sign off" in a manner that would satisfy the closing condition. But that assumption does not aid SMF. Given the scope of potential liability for hazardous waste clean up and the evident importance this issue assumed in the parties' negotiations, the effect of any mutual mistake on this issue would be to defeat SMF's claim by precluding the formation of a contract in the first place or rendering it voidable at the buyers' option. Loyal Christian Benefit Ass'n v. Bender, 342 Pa. Super. 614, 618, 493 A.2d 760, 762 (1985). In either case, SMF could not enforce the contract against the buyers.
As noted, the sale contract provided for settlement "within forty-five (45) days of Buyer's receipt of a copy of the DER Clearance (as defined in the Lease). . ." (Sussman Cert. Ex. A, Contract, P 3) The contract itself fixed no outside time limit on the receipt of that Clearance and gave the buyers no right of termination if the closing condition was not met by any particular date. The lease, however, provided for an initial term of three years (unless sooner terminated) and, at the buyers' option, for an extension in the event DER Clearance had not been received during the initial term of an additional two years. (Id. Lease P 2) It provided further that the failure to receive DER Clearance during the term of the lease would extinguish the buyers' obligation to purchase the property. Thus, SMF had a minimum of three years in which to obtain DER Clearance. SMF therefore argues that the buyers' January 23, 1995 statement that they did not intend to purchase the property constituted an anticipatory repudiation of the purchase agreement, excused SMF from further performance, and rendered themselves liable for breach of contract. Mr. Gans, for his part,
contends that the January 23 statement was merely a response to SMF's demands that they close notwithstanding the unsatisfied condition and did not evidence an unequivocal refusal to go forward with the transaction in the event the condition were satisfied at some point during the term of the lease.
The facts concerning the alleged repudiation are less than clear. In arguing that the January 23 letter was merely a response to demands by SMF that the buyers close, Gans points to letters from SMF's counsel dated November 28, December 22 and December 23, 1994 (Sussman Cert. Exs. E, F & G), which reflect SMF's efforts to schedule a closing on December 28, 1994. There is no indication as to what happened on that date. The January 23, 1995 document relied upon by SMF, moreover, is addressed "To whom it may concern" rather than the seller. Its purpose and the identity of the person to whom it was written, are unclear.
In order to establish an anticipatory repudiation of a contract, the party seeking to establish the breach must demonstrate a clear and unequivocal refusal by the defendant to perform the defendant's contractual obligations. 2401 Pennsylvania Ave. Corp. v. Federation of Jewish Agencies of Greater Philadelphia, 507 Pa. 166, 172 489 A.2d 733, 736 (1985). In determining whether SMF is entitled to summary judgment, the evidence must be viewed in the light most favorable to the buyers and all reasonable inferences drawn in their favor. As the language and circumstances of the January 23 letter, at least to the extent disclosed on this record, leave doubt as to whether the letter is properly construed as such an unequivocal refusal, SMF is not entitled to summary judgment on this basis. See Accu-Weather, Inc. v. Prospect Communications, Inc., 435 Pa. Super. 93, 99-103, 644 A.2d 1251, 1254-56 (1994).
The fact that the parties have cross-moved for summary judgment does not of itself mean that Gans is entitled to prevail on this issue, in assessing that motion, SMF is entitled to a correspondingly charitable view of the record. Viewing that record in the light most favorable to SMF, the Court cannot say that Gans has established that the January 23 letter did not reflect an unequivocal refusal to go forward. Hence, Gans' cross-motion for summary judgment also will be denied.
Gans Cross-Motion for a Stay
Defendant Gans asserts also as a basis for his cross-motion that plaintiff's action against him should be stayed because of the pending bankruptcy case of his co-defendant Consolini. Gans offers several cases as authority for the proposition that the automatic stay provided to the debtor under Section 362(a)(1) of the Bankruptcy Code can be extended to a non-debtor, but he overlooks a basic principle which informs those cases. Section 362(a)(1) by its terms provides a stay only to the debtor. 11 U.S.C. § 362(a)(1) (1988). "It does not, however, extend to separate legal entities such as . . . codefendants in pending litigation." 2 COLLIER ON BANKRUPTCY P 362.04 (Lawrence P. King, et al., eds. 15th ed. 1995). When courts act to extend the automatic stay to a non-debtor, they do so by means of their authority under Section 105(a) of the Bankruptcy Code to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105 (1988). Thus, in order to achieve the Bankruptcy Code's goals of fair and orderly resolution of claims against the bankrupt estate, courts may enjoin a suit against a non-debtor defendant if it would offer a plaintiff the means to make an "end run" around the protection provided by the Code to the debtor. E.g., A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir.) (barring suit by products liability plaintiffs against bankrupt manufacturer's insurer where judgment would impede viable reorganization of the debtor and amount to a preference over other creditors), cert. denied, 479 U.S. 876, 93 L. Ed. 2d 177, 107 S. Ct. 251 (1986). Even where appropriate, however, such "stays" take the form of injunctions issued by the bankruptcy court after a hearing to determine whether such unusual action is necessary to protect the administration of the bankruptcy estate. Patton v. Bearden, 8 F.3d 343, 349 (6th Cir. 1993). The Bankruptcy Court for the District of New Jersey, in which Consolini's case is pending (Gans Aff. P 26; Def. Mem. 5) is the appropriate forum for any such determination. Patton, 8 F.3d at 349.
For the foregoing reasons, plaintiff's motion for summary judgment is denied in all respects. Gans' cross-motion for summary judgment, insofar as it seeks dismissal of the claim based on the premise that the November 16, 1994 DER letter satisfied the closing condition, is granted, but the cross-motion is denied in all other respects.
Dated: November 16, 1995
Lewis A. Kaplan
United States District Judge