Utilities, Inc. v. Blue Mountain Lake Associates, L.p.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 04-1617
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UTILITIES, INC.,
Appellant
v.
BLUE MOUNTAIN LAKE ASSOCIATES, L.P.;
BLUE MOUNTAIN LAKE UTILITIES ASSOCIATION
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On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. No. 02-cv-00186)
Magistrate Judge: Honorable Thomas M. Blewitt
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Argued January 26, 2005
Before: SCIRICA, Chief Judge, RENDELL and FISHER, Circuit Judges.
(Filed: February 10, 2005)
David E. Lehman (Argued)
Charles T. Young, Jr.
McNees, Wallace & Nurick
100 Pine Street
P.O. Box 1166
Harrisburg, PA 17108-1166
Attorney for Appellant

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Patrick J. Egan (Argued)
239 South Camac Street
Philadelphia, PA 19107
Attorney for Appellee
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OPINION OF THE COURT
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FISHER, Circuit Judge.
Appellant Utilities, Inc. brought the underlying action seeking specific
performance of its agreement to purchase a water and sewage treatment facility from
Appellees Blue Mountain Lake Associates, L.P. (the “Partnership”) and Blue Mountain
Lake Utilities Association (the “Association”) (together “Appellees”). Appellees
counterclaimed, seeking rescission of the agreement based on Utilities’ alleged material
breach. The District Court denied Utilities’ request for specific performance and granted
Appellees’ claim for rescission. We will affirm.
On October 27, 2000, Utilities and the Partnership entered into an asset purchase
agreement (the “Agreement”) to buy and sell a water and sewer treatment facility serving
the Blue Mountain Lake residential development in Monroe County, Pennsylvania (the
“Facilities”). More than a year after the execution of the Agreement, Utilities and the
Partnership had still not closed on the transaction. The Partnership, concluding that the
deal with Utilities would not close, entered into an agreement to sell the Facilities to
Pennsylvania American W ater Company (“PAWC”).

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On February 5, 2002, Utilities brought the instant action against the Appellees
seeking specific performance of the Agreement. The Partnership counterclaimed that it
was entitled to rescission because Utilities had materially breached the Agreement by,
among other things, refusing to purchase accounts receivable relating to the Facilities as
required under the Agreement. After a bench trial, the District Court issued a
memorandum and order entering judgment in Appellees’ favor on Utilities’ specific
performance claims, and further found that Appellees were entitled to rescission because
Utilities had materially breached the Agreement.
The District Court properly exercised subject matter jurisdiction pursuant to 28
U.S.C. § 1332(a). We have appellate jurisdiction pursuant to 28 U.S.C. § 1291. We
review a district court’s findings of fact following a bench trial under the clearly
erroneous standard. See Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2d
635, 642 (3d Cir. 1991) (citing Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d
98, 101-02 (3d Cir. 1981)). “We exercise plenary review to determine whether there is an
adequate remedy at law.” Sheet Metal Workers’ Int’l Ass’n Local 19 v. Herre Bros., Inc.,
201 F.3d 231, 249 (3d Cir. 1999) (citation omitted).
“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 justice
requires it.” Clark v. Pennsylvania State Police, 436 A.2d 1383, 1385 (Pa. 1981)
(citations omitted). “An action for damages is an inadequate remedy when there is no

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method by which the amount of damages can be accurately computed or ascertained.” Id.
at 1385 (citations omitted). “Damages cannot be accurately ascertained ‘where the
subject matter of an agreement is an asset that is unique or one such that its equivalent
cannot be purchased on the open market.’” Allegheny Energy, Inc. v. DQE, Inc., 171
F.3d 153, 160 (3d Cir. 1999) (quoting Tomb v. Lavalle, 444 A.2d 666, 668 (Pa. Super.
1981)) (footnote omitted).
Parties seeking specific performance bear the burden of showing their entitlement
to it, and Utilities has failed to carry that burden here. Utilities offered testimony that
purchasing the Facilities was important to making its presence in the region economically
viable, but it failed to adduce evidence showing that the Facilities themselves – as
opposed to similar facilities in other parts of Pennsylvania or, for that matter, in another
state entirely – were uniquely capable of satisfying that objective. Utilities further
suggests that the fact that the Facilities were a “rotating biological contactors plant” made
them unique, but it never offers anything more specific as to why such a system was
meaningfully unique as compared to so-called “extended air plants” or more traditional
water-sewer facilities.
Utilities also failed to demonstrate that monetary damages would be inadequate
due to incalculability. Not only was there a contractual purchase price placed on the
Facilities, but the District Court also could have referred to the higher price at which the
Partnership sold the Facilities to PAWC as a measure of damages. Moreover, there was

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1In addition to specific performance, Utilities sought indemnification under the
Agreement due to the Partnership’s alleged breach of various of its representations in the
Agreement. The District Court did not consider the merits of this claim because its
finding of material breach and rescission precluded Utilities from recovering on the
Agreement. Because we will affirm the District Court’s material breach / rescission
conclusion, we also need not consider the merits of Utilities’ indemnification claim.
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unrebutted evidence that the potential number of ratepayers that would and could be
serviced by the Facilities was finite, thus further enabling a calculation of monetary
damages. Accordingly, we find that the District Court did not err in refusing to grant
Utilities the remedy of specific performance.
The District Court went on to conclude that Utilities had materially breached the
Agreement, thus entitling Appellees to rescission.1 This presents a slightly closer
question on appeal, but our narrow standard of review of the District Court’s Fed. R. Civ.
P. 52(a) bench trial conclusions ultimately compels us to affirm on this issue. The
District Court found that Utilities materially breached the Agreement by, in combination,
refusing to purchase accounts receivable as required by the Agreement, causing lengthy
delay in the closing on the transaction, and refusing to purchase certain personal property
attendant to the Facilities for consideration additional to the purchase price. The conduct
allegedly causing the delay included Utilities’ failure timely to make a required escrow
deposit and its failure timely to secure PUC approval of the transaction.
The Agreement provided that Utilities would purchase certain accounts receivable
“transferred” to it by the Partnership. During the closing negotiations in late 2001,
Utilities made clear that it would not purchase accounts receivable. Utilities argues on

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appeal that it was not obligated to purchase the accounts receivable because those
accounts belonged to the Association, not the Partnership, and Utilities had not agreed to
purchase accounts from the Association. We disagree. One need not have title to
property in order to “transfer” or effect the change of possession of that property from
one person or entity to another. The Partnership appeared to have full authority to effect
the transfer of the accounts receivable from the Association and Utilities adduces no
evidence to the contrary.
As noted, however, the District Court did not find that Utilities’ breach of the
Agreement’s accounts receivable provision alone constituted a material breach. It also
found that Utilities’ conduct in delaying the closing on the transaction and refusing to
purchase personal property relating to the Facilities contributed to the materiality of the
breach. The District Court’s findings regarding delay are not particularly compelling as it
seemingly glosses over its finding that the Partnership was responsible for at least part of
the delay by failing to provide the documents necessary to complete the closing.
But the issue of whether a breach is material is generally a factual one, Forest City
Grant Liberty Assocs. v. Genro II, Inc., 652 A.2d 948, 951 (Pa. Super. 1995), and because
we review the District Court’s findings pursuant to Rule 52(a), our review is limited.
Despite the less-than-compelling nature of some of the District Court’s findings
concerning delay and the purchase of personal property, other findings supporting the
court’s material breach conclusion are free from error – Utilities breached the Agreement

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by refusing to purchase the accounts receivable, Utilities was tardy in making the required
escrow deposit, and Utilities played at least some role in causing delay in closing the deal.
Under our clearly erroneous standard of review, and on the strength of these findings, we
will not disturb the District Court’s finding of material breach, and will affirm the District
Court’s judgment in Appellees’ favor.

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