author: HARLACHER SIBUM, J,

text:
    Jones v. Magobet

      C.P. of Monroe County,
    No. 2632 CV 2014

      Holly B. Conway, for plaintiffs.

      Christopher S. Brown, for defendants.
    Sept. 22, 2014
   HARLACHER SIBUM, J,

This matter comes before the court on defendants Angel and Cindy lee Magobet’s (“defendants”) preliminary objection to plaintiffs Traci and Wayne Jones’ (“plaintiffs”) complaint. On July 28, 2012, plaintiffs and defendants entered into a month to month lease (“Lease”) for the rental of the basement of the property located at 4404 Clermont Drive, Albrightsville, Pennsylvania 18210. Plaintiffs commenced this action by filing suit on April 4, 2014 alleging breach of contract, breach of warranty for purpose, breach of warranty, common law fraud, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, negligence, negligent infliction of emotional distress, and intentional infliction of emotional distress. Plaintiffs also requested punitive damages. On May 14, 2014 defendants filed preliminary objections to the complaint, averring legal insufficiency as to all counts. We address these preliminary objections in turn below.

DISCUSSION

Pursuant to Pa.R.C.P. 1028(a), preliminary objections may be filed by any party to any pleading on several grounds, including:

(2) Failure of a pleading to conform to law or rule of court or inclusion of scandalous or impertinent matter;

Pa.R.C.P. 1028(a)(2). In ruling on preliminary objections, we recognize that the court must accept as true “all well-pleaded allegations and material facts averred in the complaint, as well as all reasonable inferences deducible therefrom....”, Wurth by Wurth v. City of Philadelphia, 584 A.2d 403, 407 (Pa. Cmwlth.1990). The court need not accept as true, however, “conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion.” Myers v. Ridge, 712 A.2d 791, 794 (Pa. Cmwlth. 1998).

The plaintiff must state the material facts of a complaint “in a concise and summary form.” Pa.R.C.P. 1019(a). The allegations “must apprise the defendant of the claim being asserted and summarize the essential facts to support the claim.” Estate of Swift v. Northwestern Hospital of Philadelphia, 690 A.2d 719, 723 (Pa. Super. 1996) appeal denied, 701 A.2d 577 (Pa. 1997). The “lower court has broad discretion in determining the amount of detail that must be averred since the standard of pleading set forth in Rule 1019(a) is incapable of precise measurement.” United Refrigerator Co. v. Appelbaum, 189 A.2d 253, 255 (Pa. 1963).

When ruling on a preliminary objection that would dismiss the action, we are mindful to sustain the objection only in those cases which are clear and free from doubt. King v. Detroit Tool Co., 682 A.2d 313, 314 (Pa. Super. 1996). Alternatively, a motion to strike a pleading may be granted when lack of conformity to a law or a rule of court occurs. Pa.R.C.P. 1028(a)(2). Such a motion is the proper way to object to formal errors in a pleading. See Commonwealth ex rel. Sheppard v. Central Penn Bank, 375 A.2d 874 (Pa. Commw. Ct, 1977).

The Rules of Civil Procedure are in place to ensure that a complaint not only gives the opposing party notice of the claim, but also makes clear the grounds upon which it rests by including a summary of the facts essential to support that claim or defense as well as by attaching necessary documents and exhibits. See Alpha Tau Omega Fraternity v. University of Pennsylvania, 464 A.2d 1349, 1352 (Pa. Super. Ct. 1983); Clemleddy Const, Inc. v. Yorston, 810 A.2d 693, 696 (Pa. Super. Ct. 2002), citing Denlinger, Inc. v. Agresta, 714 A.2d 1048, 1050 (Pa. Super. Ct. 1998); see also Pa.R.C.P. 1019(a). Therefore, a preliminary objection in the nature of a motion to strike may be filed when a complaint contains vague allegations or lacks necessary accompanying documentation. See Connor v. Allegheny General Hospital, 461 A.2d 600, 603 (Pa. 1983). With these standards in mind, we now address defendants’ first preliminary objection to plaintiffs’ complaint.

I. DEFENDANTS’ PRELIMINARY OBJECTIONS TO COUNTS I-III: LEGAL INSUFFICIENCY- BREACH OF CONTRACT, BREACH OF WARRANTY, AND BREACH OF WARRANTY FOR A PURPOSE

Defendants aver that counts I-III of plaintiff’s complaint must be dismissed because of the alleged legal insufficiency of the claims. We agree.

As defendants assert, the Lease contains an integration clause through which it expressly states:

this lease is the entire agreement between Landlord and Tenant. No spoken or written agreements made before are a part of this Lease unless they are included in this Lease in writing. No waivers or modifications of this Lease during the Term of this Lease are valid unless in writing signed by both Landlord and Tenant.

Exhibit A, Residential Lease between plaintiffs and defendants, P. 5, ¶ 30. When integration clauses such as this are incorporated into a contract, “neither oral testimony, nor prior written agreements, or other writings, are admissible to explain or vary the terms of the contract.” McGuire v. Schneider, Inc., 534 A.2d 115, 118 (Pa. Super. 1987) aff’d, 548 A.2d 1223 (Pa. 1988) (citations omitted). Known as the “parol evidence rule,” this rule prevents testimony regarding negotiations and agreements leading up to the execution of the final written contract. Nat'l Cash Register Co. v. Modern Transfer Co., Inc., 302 A.2d 486, 488 (Pa. Super. 1973). The presumption created by the rule is that all negotiations and agreements made prior to the execution of the contract were merged into the document itself. Id. The case for the exclusion of this additional evidence is only enhanced when a contract includes an integration clause indicating that the document expresses the entirety of the agreement. McGuire, 534 A.2d at 117.

In their complaint, plaintiffs aver multiple times that their Lease was conditioned on the premises being free from water issues and flooding and that the premises were dry. Counts I-III of plaintiffs’ complaint rely upon these assertions. However, nowhere in the Lease is there mention of any such warranty or condition of the premises. In the absence of such mention in the Lease, it is clear that plaintiffs, through their complaint, are relying on some kind of extrinsic oral agreement or promise. As this arrangement does not appear within the Lease, plaintiffs are relying on parol evidence when making their assertions. Per the parol evidence rule, absent some exceptions (which are not applicable here) such evidence may not be considered when evaluating a written contract. As such, defendants’ preliminary objections to Counts I-III of plaintiffs’ complaint are sustained.

II. DEFENDANT’S PRELIMINARY OBJECTION TO COUNT IV: LEGAL INSUFFICIENCY-COMMON LAW FRAUD

Plaintiffs claim that defendants are liable for common law fraud. To establish a case of common law fraud, plaintiffs must demonstrate the following five elements:

(1) a misrepresentation, (2) a fraudulent utterance of the misrepresentation, (3) an intention by the maker that the recipient will thereby be induced to act, (4) justifiable reliance by the recipient upon the misrepresentation, and (5) damage to the recipient as a proximate result.

Fox’s Foods, Inc. v, Kmart Corp., 870 F. Supp. 599, 607 (M.D. Pa. 1994). At present, plaintiffs have difficulty establishing the existence of the first and fourth elements.

A misrepresentation is established if a false statement is made knowingly, in conscious ignorance of the truth, or with reckless disregard for the truth or falsity of the statement. Fox’s Foods, Inc. v. Kmart Corp., 870 F. Supp. 599, 607 (M.D. Pa. 1994). As discussed above, any misrepresentation claimed by plaintiffs is not present in the Lease and is based solely on parol evidence; the admission of which is generally impermissible. Plaintiffs allege that defendants represented the property to be suitable for storage and failed to disclose any water related issues. We do not find such a statement, if made by defendants, to be sufficient to establish an intentional or fraudulent misrepresentation. Such a statement, without more, could have been intended to reflect that the basement was suitable for storage from a zoning or land use perspective. It may have also been intended to reflect the basement as appropriate for storage with the provision and operation of the two sump pumps located therein and that water damage had never previously occurred because the sump pumps prevented water from entering the basement space.

Assuming for argument purposes, that defendants’ statement did constitute an intentional and fraudulent misrepresentation, we find that plaintiffs have still failed to establish a cause of action for common law fraud for lack of justifiable reliance on such a statement. Where a defendant deliberately conceals or fails to disclose material facts, this may amount to a material misrepresentation sufficient to satisfy the first element of common law fraud. Marian Bank v. Int’l Harvester Credit Corp., 550 F. Supp. 456, 461 (E.D. Pa. 1982) aff’d sub nom. Appeal of Int’l Harvester Credit Corp., 725 F.2d 668 (3d Cir. 1983) and aff’d sub nom. Marian Bank v. Int’l Harvester Co., 725 F.2d 669 (3d Cir. 1983). However the documents of record (the complaint, defendants’ preliminary objections, and defendants’ brief in support of preliminary objections-plaintiffs failed to file a response or brief) indicate that even if defendants indicated the basement was suitable for storage, plaintiffs were not justified in relying on defendants’ representation. The record indicates that there were not one, but two sump pumps in the basement. The presence of these pumps should have put plaintiffs on inquiry notice that the premises may have flooding or water issues. Given the presence of the sump pumps in the basement, a person of ordinary understanding or diligence would not reasonably rely on any nondisclosure by defendants that the basement was suitable for storage.

Even if plaintiffs can establish a valid claim for common law fraud, such a claim is barred by the gist of the action doctrine. The gist of the action doctrine was formulated to prevent plaintiffs from doing exactly what plaintiffs in the current case seek to do: recast their contract claim as a tort action. Vives v. Rodriguez, 849 F. Supp. 2d 507, 516 (E.D. Pa. 2012). Tort claims generally arise from underlying social policy, whereas contract claims arise from a breach of duties imposed by a mutual agreement or contract. Vives v. Rodriguez, 849 F. Supp. 2d 507, 518 (E.D. Pa. 2012); Sullivan v. Chartwell Inv. Partners, LP, 873 A.2d 710, 719 (Pa. Super. 2005). Where the allegations or claims stem from the performance or nonperformance of a duty imposed by an underlying contract, tort claims will be barred under the gist of the action doctrine. Vives v. Rodriguez, 849 F. Supp. 2d 507, 518 (E.D. Pa. 2012).

Multiple times in their complaint, plaintiffs discuss the Lease and representations made by defendants in the Lease. Notwithstanding that much of this extrinsic evidence is barred by the parol evidence rule, the plaintiffs’ complaint indicates that their claim for common law fraud is the direct result of the alleged agreements and Lease between the parties. Plaintiffs’ allegations arise under the Lease itself, and therefore any claim, if it could be sustained at all, is barred by the gist of the action doctrine. For these reasons defendants’ preliminary objection to Count IV is sustained.

V. DEFENDANTS’ PRELIMINARY OBJECTION TO COUNT V: LEGAL INSUFFICIENCY-THE PENNSYLVANIA UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW, Pa.C.S. §201-2

Defendants next object to Count V of plaintiffs’ complaint. In their objection, defendants allege that plaintiffs’ Unfair Trade Practices and Consumer Protection claim is legally insufficient. To establish a violation of the “catch-all” provision of Pa.C.S. §201-2, plaintiffs must establish all of the elements of common law fraud. Weinburg v. Sun Co., Inc., 777A.2d 442 (Pa. 2001). To establish the elements of common law fraud, plaintiffs must again rely on inadmissible evidence extrinsic to the Lease. This type of parol evidence may not be admitted where the contract is fully integrated, as the Lease here is. Exhibit A, residential Lease between plaintiffs and defendants, P. 5, ¶30.

Assuming that plaintiffs may rely upon such extrinsic evidence, as discussed above, plaintiffs still have not sufficiently pled the elements of fraud. Plaintiffs have neither demonstrated that defendants actually concealed information nor have they demonstrated that any reliance was justifiable. In fact, they have shown the opposite.

Defendants made no attempt to hide or disguise the presence of the sump pumps in the basement. Defendants’ actions may actually constitute an outward representation that the basement had flooding issues. Further, the presence of the sump pumps, as discussed, should have placed defendants, at minimum, on inquiry notice as to the possibility of flooding. For these reasons, as well as the fact that plaintiffs are once again attempting to turn their breach of contract claim into a tort action, defendants’ Preliminary Objection to CountV is sustained.

VI. DEFENDANTS’ PRELIMINARY OBJECTBON TO COUNT VI: LEGAL INSUFFICIENCY-NEGLIGENCE

Defendants object to Count VI of plaintiffs’ complaint alleging insufficiency of the negligence claim. This court finds that plaintiffs’ claim is barred by the gist of the action doctrine. Any alleged duty owed by defendants, as described in the complaint, clearly arose out of the contractual agreement, not out of underlying public policy concerns. The failure to perform a contract is not a tort claim but a contract claim. Vives v. Rodriguez, 849 F. Supp. 2d 507, 516 (E.D. Pa. 2012). Further, any allegation of failure to perform or for the premises to live up to defendants’ representations is grounded firmly in parol evidence, which this court cannot consider. For these reasons, defendant’s preliminary objection to count VI is sustained.

VII.DEFENDANTS’ PRELIMINARY OBJECTION TO COUNT VII: LEGAL INSUFFICIENCY-NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS

Defendants aver that counts VII of plaintiffs’ complaint must be dismissed because of the legal insufficiency of the claim. We agree.

Defendants correctly identify that in claims for negligent infliction of emotional distress, the law requires some identifiable physical injury. Cathcart v. Keene Indus. Insulation, 471 A.2d 493, 508 (Pa. Super. 1984). Plaintiffs in negligent infliction of emotional distress cases must at minimum plead some sort of physical injury. Toney v. Chester Cnty. Hosp., 961 A.2d 192, 200 (Pa. Super. Ct. 2008) aff’d, 36 A.3d 83 (Pa. 2011). This pleading requirement may be satisfied by alleging “long continued nausea or headaches, repeated hysterical attacks or mental aberration.” Toney v. Chester Cnty. Hosp., 961 A.2d 192, 200 (Pa. Super. Ct. 2008) aff’d, 36 A.3d 83 (Pa. 2011).

At most, plaintiffs have alleged damage to their health, plaintiffs’ complaint, P. 11 ¶64. Nowhere in plaintiffs’ complaint is there an averment of specific physical harm or injury. It is well established in Pennsylvania that for a valid negligent infliction of emotional distress action a plaintiff must demonstrate that she is a foreseeable plaintiff and that she suffered physical injury resulting from the defendant’s negligence. Armstrong v. Paoli Mem’l Hosp., 633 A.2d 605, 609 (Pa. Super. 1993). Where a plaintiff fails to demonstrate the requisite showing of physical injury, there can be no claim for negligent infliction of emotional distress. As plaintiffs have failed to indicate physical harm with any particularity, defendants’ preliminary objection to Count VII of plaintiffs’ complaint is sustained.

VIII. DEFENDANTS’ PRELIMINARY OBJECTION TO COUNT VIII: LEGAL INSUFFICIENCY-INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

Defendants aver that Counts VIII of plaintiffs 1 complaint must be dismissed because of the legal insufficiency of the claim. We agree.

Pennsylvania courts have been hesitant to fully adopt the tort of intentional infliction of emotional distress as defined under the Second Restatement of Torts. Hoy v. Angelone, 720 A.2d 745, 753-54 (Pa. 1998). When such claims are recognized, plaintiffs must establish that the defendant, by extreme and outrageous conduct, intentionally or recklessly caused severe emotional distress to another. Hoy v. Angelone, 720 A.2d 745, 753 (Pa. 1998). courts have held that this tort is usually only recognized in Pennsylvania when the degree of the defendant’s conduct is clearly extreme or outrageous. Hoy v. Angelone, 720 A.2d 745, 753-54 (Pa. 1998). As one court described in regards to the pleading of an action for intentional infliction of emotional distress:

[T]he conduct must be so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in any civilized society ... [I]t has not been enough that the defendant has acted with intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by “malice,” or a degree of aggravation that would entitle the plaintiff to punitive damages for another tort.

Toney v. Chester Cnty. Hosp., 961 A.2d 192, 202 (Pa. Super. Ct. 2008) aff’d, 36 A.3d 83 (Pa. 2011). Thus the “gravamen of the tort of intentional infliction of emotional distress is outrageous conduct on the part of the tortfeasor.” Kazatsky v. King David Mem’l Park, Inc., 527 A.2d 988, 991 (Pa, 1987).

At present, plaintiffs have failed to identify with any particularity the conduct causing their alleged emotional distress. Moreover, there is no allegation that this conduct is extreme or outrageous. Because plaintiffs have failed to plead the minimum requirements for the tort of intentional infliction of emotional distress, defendants’ preliminary objection to Count VII of plaintiffs’ complaint is sustained.

IX. DEFENDANTS’ PRELIMINARY OBJECTION TO COUNT IX: LEGAL INSUFFICIENCY-PUNITIVE DAMAGES

Defendants lastly assert that Count IX of plaintiffs’ complaint, Punitive Damages, must be dismissed because it is legally insufficient. Because plaintiffs’ only viable claims, if any, arise out of contract, we agree with defendants’ contention. Plaintiffs cannot recover punitive damages for actions sounding solely under breach of contract. See DiGregorio v. Keystone Health Plan E., 840 A.2d 361, 370 (Pa. Super. 2003) (noting that allowing punitive damages in a contract claim would be inconsistent with traditional theories of contract law); N. Am. Pub. Co. v. Sungard Availability Servs., LP, 77 Pa. D. & C.4th 219 (Com. Pl. 2005). Punitive damages are not a cause of action on their own, but rather are a consideration the fact finder may make when determining damages in tort actions. Hilbert v. Roth, 149 A.2d 648, 652 (Pa. 1959), plaintiffs currently have no basis or claim onto which punitive damages may be attached and therefore defendants’ preliminary objection to count IX of plaintiffs’ complaint is sustained.

For the reasons set forth in this opinion, defendants’ four (4) preliminary objections are sustained. Accordingly, we enter the following order.

ORDER

And now, this 22nd day of September, 2014, upon consideration of defendants Angel and Cindylee Magobet’s preliminary objections to plaintiff Traci and Wayne Jones’ complaint, it is hereby ordered that defendants’ preliminary objections are sustained, plaintiffs are given twenty (20) days from the date of this order in which to file an amended complaint.


source: Caselaw Access Project

author: GRAY, J.,

license: Public Domain

text:
    In re Estate of Bower

      C.P. of Lycoming County,
    No. 41-11-0692

      Douglas N. Engelman, for petitioner.

      Patricia Shipman, for administratrix.
    Sept. 23, 2014
   GRAY, J.,

Before the court is John I. Bower Jr. ’s petition to remove his mother, Anna Bower, as administrator of the estate of his father, John I. Bower Sr. A non-jury hearing on the petition was held on September 10, 2014. After review of the testimony, exhibits, trial memoranda and arguments of counsel, the court denies the petition for the reasons that follow.

Findings of Fact

John I. Bower Sr. died intestate on May 6, 2011. About six months later, on November 18,2011, his widow, Anna Bower, petitioned and was granted letters of administration of John I. Bower Sr.’s estate. The petition identified the following heirs and beneficiaries: the deceased’s widow, Anna Bower, and the five children of John I. Bower Sr. and Anna Bower: Jacqueline M. Wright, Penelope A. Bower, Carolyn M. Stubler, John I. Bower Jr. and Matthew J. Bower. Once the certification of notice to beneficiaries was filed on January 17, 2012, nothing else was filed to the estate case until April 2, 2014 when John Bower Jr. filed the instant petition for removal of Anna Bower as administrator of the estate.

Atthetime of JohnBower Sr.’s death, he, John Bower Jr. and North Branch Transfer, Inc., (NBT) were plaintiffs in a lawsuit in Lycoming County against Penelope and Matthew Bower and Matthew Bower Trucking under docket No. 09-03094. Plaintiffs filed that suit on December 30,2009. An amended complaint was filed in that matter on July 19, 2010. In that lawsuit, plaintiffs sought the following: to enjoin Penelope Bower from dissipating the assets of NBT, to recover funds allegedly converted by Penelope Bower, to recover damages for a breach of fiduciary duty alleged against Penelope Bower as an officer of NBT, to obtain an accounting of NBT, to declare the invalidity of NBT stock issued to Penelope Bower, to seek replevin of equipment and assets belonging to NBT and to declare the transfer of 100 Rose Street to Matthew Bower Trucking null and void. Once John I. Bower Sr. died, ownership of NBT came to the forefront. On February 14, 2014, after a non-jury trial on the sole issue of ownership of NBT, the court found the percentage of ownership of NBT as follows: John Bower Jr., 25%, Penelope Bower, 25%, and the estate of John Bower Sr., 50%. The remaining issues were scheduled for trial to begin on April 14, 2014.

On March 27, 2014, Anna Bower, as administrator of the estate and as majority shareholder of NBT, issued a notice scheduling a closed special meeting of shareholders for April 4, 2014.

The stated purpose of the meeting was to:

1) elect a board of directors; 2) review all sales and lease contracts from 1/1/08 onward; 3) vote on continuation as plaintiff in action docketed at no. 09-03,-094 in the Lycoming County Court of Common Pleas; and 4) transact any other such business as is necessary to the management of the business.

On April 2, 2014, John Bower Jr. obtained an ex parte temporary injunction enjoining the shareholders’ meeting for NBT and ordering the withdrawal of any notice of such a meeting until a full hearing. After a hearing on April 3, 2014, the court denied the injunction. On April 7, 2014, Anna Bower issued a new notice for a shareholders meeting to be held on April 13, 2014 to elect a board of directors and discuss any needed business. At the meeting, the shareholders, representing 75% of the NBT shares, voted to discontinue NBT as a plaintiff in the Lycoming Case No. 09-03,-094.

Administration of the Estate

There was very little testimony regarding the details of the administration of the estate. Anna Bower testified broadly that there is money in the estate account but she did not testify as to how much money is in the account. She was not questioned on the amount. Anna Bower testified that the taxes have not been paid on the gross amount of the estate and that there is no money to pay those taxes. Anna Bower testified that about $30,000 from the estate account was used to pay legal fees. The rest of the evidence regarding the administration of the estate appears in the trial briefs. John Bower Jr.’s trial brief concurs that there are outstanding tax liens.

Anna Bower’s trial brief provides the following information about the administration of the estate.

As Administrator, Anna Bower has opened the estate for probate, provided all beneficiaries with notice of estate administration, advertised the opening of the estate, notified creditors of the estate, inventoried John Bower, Sr.’s, safe deposit box, and collected information from creditors as to amounts owed.

The estate obtained possession of all trucks titled in the name of John Bower, Sr. The estate intervened in a lawsuit in 2012 and “was able to preserve ownership and possession of the containers for the estate.” However, the estate has been “unable to secure possession of trucks and other tangible property owned by” NBT that are stored on John Bower Jr.’s property. “At the time of his death, John Bower, Sr., owed real estate taxes, state and federal income taxes, and other debts which are expected to far exceed his assets.” The trial brief asserts that there is a potential claim by the estate against Bower Container and Services, Inc. (BCS) for failure to pay the debts of John I Bower Sr. during his lifetime as agreed upon at the time of the formation of BCS. Finally, the trial brief asserts that “[t]here are no liquid assets of the estate from which to pay a third-party administrator.”

Evidence of Hostility and/or Favoritism

John Bower Jr. contends that his mother should be removed as administrator because she favors his sister and brother and harbors hostility toward him which impacts her administration of the estate. In particular, John Bower Jr. contends that his mother’s vote to discontinue NBT arises from hostility and favoritism for his siblings and was detrimental to the estate. Anna Bower continues a relationship with John Bower Jr.’s siblings Penelope and Matthew Bower. Penelope Bower resides with Anna Bower. Anna Bower denies working for Matthew Bower Trucking but communicates with him and has given him access to vehicles and transferred property to him.

The evidence suggests that John Bower Jr. and his mother had a relationship at one time that rapidly deteriorated after the death of John Bower Sr. Anna Bower worked for many years for BCS, operated by John Bower Jr. When John Bower Sr. was hospitalized from a motor vehicle accident, John Bower Jr. and Anna Bower went to Ohio together to be with him. There was some tension between them when John Bower Jr. brought his wife Brenda and her family to Ohio while John Bower Sr. was hospitalized. This tension worsened when John Bower Jr. took care of all of the funeral arrangements and buried his father in a cemetery with his wife’s family. John Bower Jr. paid for the burial out of personal and BCS funds. John Bower Jr. was resentful that his mother did not participate or pay for the arrangements and that she was unwilling to reimburse him for the costs. Anna Bower was resentful that her husband was buried with her daughter in law’s family against her wishes. Communications between them ceased when John Bower Jr. refused to discontinue claims against his sister and brother, and his mother stopped working for him. They dispute whether John Bower Jr. fired his mother or whether she quit. In any event, John Bower Jr. told his mother to put all of the business belongings on the porch for him to retrieve. She did that, and John Bower Jr. retrieved them. And, “that was it.” They have not communicated since that time. Anna Bower testified that she still loves her son John Bower Jr. and denied having disdain or hatred for him. On cross-examination, she acknowledged calling John Bower Jr. “that thing,” and explained that she believes that John Bower Jr. stole from her and her deceased husband.

Discontinuing NBT as Plaintiff in the 2009 Lawsuit

The court finds that the primary reason John Bower Jr. seeks to remove his mother as administrator of the estate is because she voted the estate’s shares to discontinue NBT as a plaintiff in the lawsuit against his sister Penelope Bower and his brother Matthew Bower and Matthew Bower’s trucking company. The court will first discuss the claim for misappropriated money against Penelope Bower and next will discuss the claim to invalidate the transfer of real property to Mathew Bower Trucking.

NBT Claims against Penelope Bower

John Bower Jr. contends that his mother’s “motives to thwart litigation regarding the misappropriation of the assets of North Branch by Penny Bower are personal and not in the best interests of the estate.” John Bower Jr. contends that Penelope Bower stole hundreds of thousands of dollars from NBT. In support of that contention, John Bower Jr. relies upon the deposition of Lynn Resides, an auditor with the Pennsylvania Department of Revenue Bureau of Audits (department of revenue), conducted on October 24,2012. Mr. Resides audited NBT and Penelope Bower for the years 1999 to 2006. The audit revealed a significant amount of money categorized as “road money” cashed by Penelope Bower but for which she did not have receipts to account for the specific expenses. Because Penelope Bower did not produce receipts for the expenses, the department took the position that it would impute the unaccounted for expenses as income to Penelope Bower. As a result, department imputed hundreds of thousands of dollars of income to Penelope Bower from NBT for income tax purposes.

Imputing income for tax purposes, however, is not the same as establishing misappropriation of funds. It is undisputed the Bower family frequently used a system by which a family member would write a check to herself for cash and use the cash to pay drivers for expenses such as fuel, tolls and on the road repairs. Since Anna Bower used this system herself without stealing, she does not believe this practice evidences stealing by Penelope Bower. Misappropriation is not the only explanation for the differences. Penelope Bower testified that the fluctuation in amounts arose in part from the variance in which they relied upon the cash system from year to year. In addition, the number of drivers varied from year to year. The need for tires, gas and repairs fluctuated from year to year. Also, some receipts were damaged and lost prior to the audit. There are other possible explanations for the differences. Mr. Resides suspected that perhaps more business was being conducted than was being reported or that the expenses may have been greatly overstated to reduce tax liability. Moreover, Mr. Resides conceded that there may have been a whole class of expenses for income that was not reported for vehicles that did not have an international fuel tax agreement (IFTA) sticker decal. The audit involved IFTA trucks, and specifically the department did not have any records for roll off trucks.

The court concludes that proving claims against Penelope Bower would be difficult and costly. It would be difficult to establish by a preponderance of the evidence that Penelope Bower stole money and how much. Even if NBT could succeed in the suit, the court concludes that it is unlikely that the estate would recover significant funds from Penelope Bower. Penelope Bower does not have an attorney; she lives in a rented place with her mother. As a result of the costs and difficulty of being successful in proof and collection on a judgment, the court believes that it was in the best interest of the estate to discontinue the claims against Penelope Bower.

NBT Claims for Rose Street Property

In addition to claims against Penelope Bower, the lawsuit also sought to invalidate the transfer of property from NBT to Mathew Bower Trucking which was alleged to be for less than fair market value. By a deed dated September 24, 2009, NBT transferred 2 parcels in the Sixth Ward of Williamsport on Rose Street and Dix Street for consideration listed as $43,791.41. The transfer was effectuated by Anna Bower excising her power of attorney for John Bower Sr. as owner of NBT approximately two years prior to his death. Anna Bower contends that in addition to the amount listed as consideration on the deed, Mathew Bower also paid the outstanding liens on the property. Anna Bower could not state whether the liens plus the amount paid equaled the fair market value of the property. On the witness stand, John Bower Jr. testified that his father gave Anna Bower a power of attorney for anything she wanted to do. For that and other reasons, the court believes there is a low likelihood of success on the merits of the claim to void the transfer of the property. In addition to a low likelihood of success of voiding the transfer, the remedy of voiding of the transfer would require that NBT reimburse Matthew Bower for the consideration and liens that were paid. There was no evidence as to the current fair market value of the property or that NBT has any liquid assets to reimburse Matthew Bower. The court believes it was in the estate’s best interest to discontinue NBT’s claim to void the transfer of the Rose Street property.

Evidence Regarding Vehicles (89 Mack Roll Off Truck and Kenworth)

In addition to the discontinuation of the lawsuit, John Bower Jr. contends his mother also evidenced favoritism at the expense of the estate by transferring title of the 1989 Mack roll off truck to Mathew Bower Trucking for less than fair consideration and by transferring the Kenworth to herself and allowing Matthew Bower Trucking to run it without proper compensation. Both transfers occurred shortly prior to the letters of administration being granted to Anna Bower in November 2011.

89 Mack Roll Off

On October 24, 2012, Anna Bower transferred the 1989 Mack roll off truck in John I. Bower Sr.’s name to Matthew Bower Trucking to help pay property taxes. Anna Bower contends that BCS failed to honor an agreement to pay those property taxes which were incurred during the lifetime of John Bower Sr. No proceeds from the transfer went into the estate’s account. At the time of the transfer, the odometer listed 200,200 miles, the vehicle was 22 years old, and it did not run. There was no effort to obtain an appraisal of the vehicle. Matthew Bower expended funds to restore the 89 Mack roll off to running condition. Anna Bower tried to sell the Mack but no one wanted to give her money for it because it did not run. Anna Bower did not put a “for sale” sign on it. Anna Bower denies that Matthew Bower Trucking was using the Mack until the spring or summer of 2014. Anna Bower admits that she did authorize Mathew Bower to put a sign on the Mac and run it without compensation to the estate in the spring or summer of 2014. Anna Bower intended to charge Mathew Bower Trucking for running the truck. Anna Bower believes a document was signed about it, but she does not recall if that document indicate what was charged. The 1989 Mack roll off truck has since broken down.

Kenworth 2004

On September 26, 2011, the Kenworth (2004) was transferred into Anna Bower’s name as a surviving spouse upon certificate of death. The Odometer was at 80,000. The Kenworth is currently in Anna Bower’s name. Anna admits that perhaps she was mistaken in failing to sell it for $25,000, but she believed it would be worth more than that if it worked. John Bower Jr. took possession of the Kenworth around the time of his father’s death. He had it locked up on his lot. The Kenworth was removed from his lot. Afterwards, Anna Bower authorized Mathew Bower Trucking to put its sign on the Kenworth and drive it. John Bower Jr. asserts that the estate should have been compensation at three to five thousand dollars per month for use of the Kenworth.

Benefits to John Bower Jr. from the Estate

In response to the claim that Penelope and Matthew Bower have unduly benefitted from Anna Bower’s administration of the estate, Anna Bower identified benefits received by John Bower Jr. from the estate as well as potential claims by the estate against him.

Perhaps most significantly, Anna Bower contends that at the time BCS was formed, there was an agreement that John Bower Jr. would pay the profits of BCS to pay the bills of Anna Bower and John Bower Sr. during his lifetime. As a result, Anna Bower contends that the estate has a claim against John Bower Jr. for the debts of the estate which comprise bills that should have been paid by BCS pursuant to that agreement. Anna Bower has not sued John Bower Jr. pursuant to this potential claim on behalf of the estate. Anna Bower contends that the property taxes, paid by Matthew Bower in consideration for the 89 Mack roll off truck and the Rose Street property, were bills that should have been paid pursuant to the agreement. In addition, Anna Bower contends that one of the bills that John Bower Jr. was obligated to pay under that agreement was the life insurance premiums for John Bower Sr. and which was not paid. Anna Bower did not filed a claim for breach of contract to recover the loss of $900,000 proceeds life insurance proceeds that would have been available to her if the premiums had been paid.

In addition to claims related to the agreement to pay bills during the lifetime of John Bower Sr., there are claims against John Bower Jr. for property belonging to NBT, which is now part of the estate. On August 11, 2010, Penelope Bower filed an answer and new matter in case no. 09-03094 asserting on behalf of NBT claims against John Bower Jr. Those counterclaims averred that John Bower Jr. obtained real property at Reach Road, Catawissa Ave, Dix St. Garage, and 2/3 lots on Wood Street for less than fair market value. John Bower Jr., contends that the real property transferred was done so that John Bower Jr. could pay extensive fines with the County that were owed. However, a significant amount of those fines were in John Bower Jr. and Mathew Bower’s names. The monthly payments on the fines amounted to $1030 per month for John Bower Sr. and $530 per month each for John Bower Jr. and Matthew Bower. Anna Bower contends the amount of fines paid was about $200,000, which she asserts was less than what she and John Bower Sr. originally paid for them. The court further notes that John Bower Jr. and Matthew Bower received a benefit from paying off the County fines that were partially in their own names, regardless of whether they had ever paid or intended to pay anything out of their own pockets for them.

Penelope Bower also sought, on behalf of NBT, possession of red 1996 Freightliner roll off truck; mobile office and its contents; a cardboard baling machine; truck tractors and various trailers property of NBT. In addition, she sought rental income from John Bower Jr.’s having rented roll off refuse containers that belonged to NBT. Evidence was presented that a 1994 freightliner was transferred to BCS after the death of John Bower Sr. without Anna Bower’s authorization. Nothing was paid to the estate for running the freightliner. Insurance proceeds were paid to BCS, and some checks paid from BCS to Anna Bower, but no proceeds were paid to the estate.

There was also evidence that John Bower Jr. has a Volvo in his possession that belongs to the estate for which he never paid anything to the estate. Admittedly, the Volvo does not run and is currently scrap.

II. Conclusions of Law

1. Any party in interest may petition for removal. 20 Pa.C.S. §3183.

2. The grounds for removal of a personal representative are set forth in 20 Pa.C.S. § 3182 (2014) as follows.

The court shall have exclusive power to remove a personal representative when he:

(1) is wasting or mismanaging the estate, is or is likely to become insolvent, or has failed to perform any duty imposed by law; or
(2) (Deleted by amendment).
(3) has become incapacitated to discharge the duties of his office because of sickness or physical or mental incapacity and his incapacity is likely to continue to the injury of the estate; or
(4) has removed from the Commonwealth or has ceased to have a known place of residence therein, without furnishing such security or additional security as the court shall direct; or
(4.1) has been charged with voluntary manslaughter or homicide, except homicide by vehicle, as set forth in sections 3155 (relating to persons entitled) and 3156 (relating to persons not qualified), provided that the removal shall not occur on these grounds if the charge has been dismissed, withdrawn or terminated by a verdict of not guilty; or
(5) when, for any other reason, the interests of the estate are likely to be jeopardized by his continuance in office.

3. “Upon removal, the court may direct the grant of new letters testamentary or of administration by the register to the person entitled[.]” 20 Pa.C.S. § 3183.

4. A personal representative of an estate has a “duty to collect the assets of the estate, including any debts.” In re Estate of Andrews, 92 A.3d 1226 (Pa. Super. 2014), citing the following, including the quoted summaries: In re Kurkowski’s Estate, 487 Pa. 295, 409 A.2d 357, 360-61 (Pa. 1979) (“A decedent’s personal representative is under a duty to take custody of the estate and administer it in such a way as to preserve and protect the property for distribution to the proper persons within a reasonable time.”); In re Wallis’ Estate, 421 Pa. 104, 218 A.2d 732, 736 (Pa. 1966) (“primary duty” of estate’s personal representative is “to marshal the assets and to liquidate and terminate as soon as possible”); 20 Pa.C.S. § 3311 (“A personal representative ... shall take possession of.. . all the real and personal estate of the decedent...”)

5. “Removal of an administrator, while within the sound discretion of the trial court, is a drastic action that should only be taken when it is evident that the estate is actually endangered and that court intervention is necessary in order to prevent further waste and/or mismanagement of the estate assets.” In Re Francis Edward McGillick Foundation, 537 Pa. 194, 200, 642 A.2d 467 (1994) (citations omitted)(emphasis added)

6. A conflict of interest justifies removal when the administrator’s personal interest in securing ownership of property conflicts with the estate’s interest in establishing ownership of property. See, e.g., In re Estate of Andrews, 92 A.3d 1226 (Pa. Super. 2014); also see, In re Estate of Mumma, 41 A.3d 41, 51-52 (Pa. Super. 2012); cf, In re Estate of Westin, 874 A.2d 139 (Pa. Super. 2005)

7. Hostility, per se, is not grounds for removal unless it is established that the ill-feeling endangers the estate. See, In re Estate of Croessant, 482 Pa. 188, 195, 393 A.2d 443, 446 (Pa. 1978) Dimarco Estate, 435 Pa. 428, 438, 257 A.2d 849, 854 (Pa. 1969). Estate of Camillo, 16 Pa. D. & C.5th 129 (C.P. Phila. 2010).

III. Discussion

The court does not believe that Anna Bower should be removed as administrator of the estate pursuant to the reasons set forth by John Bower Jr.; nor does the court elect to remove Anna Bower as administrator for other reasons sua sponte at this time. The court finds that John Bower Jr. petitioned to remove his mother as administrator of the estate primarily, if not exclusively, over a disagreement about whether NBT should pursue claims against Penelope and Matthew Bower and Mathew Bower’s trucking company. This is evidenced by the timing of his petition. Within days of learning that Anna Bower scheduled a shareholders meeting to discontinue the lawsuit against his siblings, John Bower Jr. petitioned for his mother’s removal and sought an injunction to prevent the shareholders from meeting. Up until that time, nothing had been filed to the estate case for over two years. The petition for removal focused on Anna Bower’s voting her shares to discontinue the lawsuit against his siblings for personal reasons at the expense of the estate. The court finds that the decision to discontinue the claims against Penelope Bower was sound considering the expense of the litigation, the difficulty in presenting evidence of those claims, the likelihood of success on the merits of those claims and the improbability that any recovery against Penelope Bower could be obtained even if a judgment was entered against her.

In addition to his primary contention that discontinuation of the lawsuit warranted removal of his mother, John Bower Jr. also raised concerns about hostility, bias and favoritism as a reason for his mother’s removal. A court should remove an administrator who has a direct conflict of interest with the estate or who exhibits hostility, bias and favoritism that endangers the estate. See, e.g., In re Estate of Andrews, 92 A.3d 1226 (Pa. Super. 2014); see also, In re Estate of Mumma, 41 A.3d 41, 51-52 (Pa. Super. 2012). To constitute a conflict of interest requiring removal, courts have typically looked at whether there is a dispute in ownership of property between the estate and the fiduciary. See, e.g., In re Estate of Mumma, 41 A.3d 41, 51-52 (Pa. Super. 2012). As to the hostility, the court notes that hostility alone is not grounds for removal. The hostility must endanger the estate. See, In re Estate of Mumma, 41 A.3d 41, 51-52 (Pa. Super. 2012); In re Estate of Croessant, 482 Pa. 188, 195, 393 A.2d 443, 446 (Pa. 1978) Dimarco Estate, 435 Pa. 428, 438, 257 A.2d 849, 854 (Pa. 1969). Estate of Camillo, 16 Pa. D. & C.5th 129 (C.P. Phila. 2010).

Despite evidence of hostility between John Bower Jr. and his mother, Anna Bower, the court does not believe that there is evidence at this time that such hostility has resulted in the administration of the estate being administered unfairly toward John Bower Jr. There was very little evidence provided about the assets of the estate. No inventory, accounting or proposed distribution has been provided. At this point, the evidence suggests that Anna Bower has been reluctant to pursue lawsuits against any of her children, regardless of the potential amount of the claims. Without an inventory, accounting or proposed distribution, the court concludes that there is insufficient evidence that hostility or favoritism will endanger the fairness of the administration of the estate. The estate appears to be insolvent. Although insufficient evidence exists, the court believes the insolvency is a result of mismanagement, poor record keeping, ignoring corporate structure and large criminal fines paid by the corporate entities rather than the by individual Bowers.

With that said, the court notes its concerns that Anna Bower has not yet fulfilled the primary duties of marshalling assets, providing an inventory, accounting and making a proposed distribution. Up until this point in time, it appears the estate has been focused on dealing with litigation among the parties but has not moved forward on the other duties of administration. The court is prepared to allow Anna Bower, a short period of time in which to show that she can diligently and equitably administer and close the estate.

A major reason supporting this court’s decision not to remove Anna Bower at this time is that, as widow of the deceased, Anna Bower has by far the greatest interest and percentage share coming from the estate than any one of her children. Furthermore, only one child has petitioned for her removal with no other child joining in the petition. The timing and content of the petition for removal evidences that it was based primarily, if not exclusively, upon a disagreement with the voting the estate’s NBT shares in favor of discontinue the lawsuit. The court agrees with the financial soundness and practicality of that decision. As far as favoritism, the court notes that there have been many potential claims against John Bower Jr., that have not been pursued which equal, if not exceed, the claims against Penelope Bower that were discontinued. Finally, and most practically, the evidence suggests that there are no liquid assets to pay a third-party administrator. As a result, it makes sense from a practical and financial standpoint to allow Anna Bower an opportunity to complete the administration of the estate.

Accordingly, the court enters the following order.

ORDER

And now, this 23rd day of September, 2014, following a hearing on the petition to remove the administrator of the estate, it is ordered and directed that the petition is denied.

      . John Bower Jr. filed this petition for removal of Anna Bower as administrator of estate on April 2,2014 and an amended petition on May 12,2014.

      . The court will consider the facts and procedural history arising from North Branch Transfer Inc., Anna Bower, as Administratrix of the Estate of John Bower, Sr., and John Bower Jr., v. Penelope Bower, Matthew Bower, and Matthew Bower Trucking, Inc., No. 09-03094, provided in the trial briefs submitted by counsel for John Bower Jr. and Anna Bower. Both counsel referred the court to their respective trial briefs and relied heavily on them in their closing statements. Neither party objected to the court considering the trial briefs. As a result, the court considers this as a de facto stipulation that the parties submitted those facts into evidence for the court’s consideration. This case involves similar parties with a common factual background.

      . Testimony indicated that Carolyn M. Stubler’s address is currently unknown and was unknown at the time the estate was opened.

      . The parties requested and agreed to a trial on the issue of ownership in the hopes that once that issue was determined, a settlement would follow.

      . At the meeting on April 13, 2014, the shareholders made resolutions including the following.
      There is insufficient evidence to prove that Penelope Bower embezzled, stole, misappropriated or otherwise misused monies belonging to North Branch Transfer, Inc. This resolution is made following consideration of all evidence that has been brought to light in the case of North Branch Transfer, Inc., et. al. v. Penelope Bower, et. al., docket no. 09-03,094 in the Lycoming County Court of Common Pleas, including but not limited to the deposition testimony of Lynn Resides.
      The sale of real estate situates at 100 Rose Street, Williamsport, Lycoming County, Pennsylvania, to Matthew Bower, was necessitated by the inability of North Branch Transfer, Inc., to satisfy the liens against the property. Matthew Bower’s assumption of those debts was sufficient and appropriate consideration for the transfer, as it prevented the taking of the property by one or more lienholder, [sic] The transfer of 100 Rose Street, Williamsport, Lycoming County, Pennsylvania, to Matthew Bower, is hereby fully and unconditionally approved.

      . John Bower Jr.’s trial brief indicates that that John Sr.’s tax liens are in the amount of $128,439.08. It further asserts that evidence in favor of removal exists in that Anna Bower incorrectly verified that the debts of the decedent had been paid when she completed vehicle assignment forms to the Pennsylvania Department of Transportation.

      . Since John Bower Sr. had no standing as an individual, the administrator withdrew him as a plaintiff. However, to date, no motion has been made to dismiss the sole remaining plaintiff in that case, John Bower Jr., for lack of standing.

      . John Bower Jr. testified that his father could not pay his legal bills and that the attorneys would not take further steps without payment. As a result, John Bower Jr. paid the legal fees.

      . This decision to deny the petition for removal is without prejudice to any party seeking removal at a later time should circumstances warrant it in the future. However, since the court believes that the decision to discontinue the lawsuit was sound, the decision to deny removal on that basis is with prejudice


author: MCINERNEY, J.,

text:
    USI MidAtlantic Inc. v. Wilson

      C.P. of Philadelphia County,
    July Term 2014,
    No. 2746; 2365 EDA 2014

      Paul Calvin Lantis and James Samuel Green, for appellant.

      Christopher P Leise, Peter Joseph Mooney and Vincent Nathaniel Barbera, for appellant.
    Sept. 26, 2014
   MCINERNEY, J.,

This appeal is relative to this court’s order dated August 8, 2014 and docketed on August 11, 2014 granting plaintiff USI MidAtlantic, Inc.’s (“USI”) petition for Special and Preliminary Injunction. Plaintiff USI is a licensed insurance producer and consulting firm which specializes in providing Property and Casualty Commercial Insurance and Employee Benefits products and related consulting services to its client. Howard G. Wilson (“Wilson”) joined USI as a producer focusing on USI’s Property & Casualty products lines on September 21, 2012 as part of an acquisition. At the time of the hiring, Wilson understood and contemplated that he would thereafter sign a formal employment agreement with USI. Upon joining USI, Wilson held himself out to the public as a Vice-President-Regional Market Producer for USI.

On April 1, 2013, Wilson executed an Employment Agreement with USI. The agreement set forth Wilson’s position, responsibilities and term. The agreement also provided for a non-solicitation and confidentiality provision which stated in part as follows:

6. NON-SOLICITATION AND NON INTERFERENCE
6.1. Non-Solicitation of Clients and Active Prospective Clients. On behalf of any Competitive Business, Producer [Wilson] shall not, without the Company’s [USI] prior written consent, for the benefit of Producer [Wilson] or another Person:
(a) Solicit, sell, or provide or accept any request to provide services to, consult for, sign or accept a broker of record letter, with, or induce the termination, cancellation or non-renewal of, any Company [USI] client, in each case, whose Client Account Producer [Wilson] managed or regularly serviced, and/or about which Producer [Wilson] obtained Confidential Information on behalf of the Company [USI] in the two (2) years prior to the termination of the Producer’s [Wilson] employment with the Company [USI]; and/or
(b) Solicit, sell, or provide or accept any request to provide services to, consult for, sign or accept a broker of record letter with, or induce the termination, cancellation or non-renewal of, any Active Prospective Client, in each case, which Producer [Wilson] solicited and/or about which Producer [Wilson] obtained Confidential Information on behalf of the Company [USI] in the six (6) months prior to the termination of the Producer’s [Wilson] employment with the Company [USI].
(c) The restrictions set forth in Section 6.1 (a), above, shall apply throughout the Term hereof and thereafter until two (2) years after the effective date on which Producer [Wilson] is no longer employed, for any reason, by the company, its successors or assigns. Producer [Wilson] agrees that (i) the duration of the non-solicitation obligations hereunder shall be extended by the period of time in which the Producer [Wilson] is in breach of those obligations and (ii) the extended duration shall be measured from the date of the court order granting injunctive relief.

By executing the Employment Agreement, Wilson represented and warranted to USI that he had no ownership rights to any Client Accounts and that he understood the purpose behind the Non-Solicitation and Confidentiality provisions. After executing the Agreement, Wilson was provided access to USI’s confidential, proprietary and trade secret information. The Employment Agreement provided and set forth compensation terms which provided Wilson with substantial financial consideration for the Non-Solicitation and Confidentiality provisions in the Employment Agreement. In addition to an annual base salary of $200,000 during his first two years with USI, Wilson received additional compensation in the form of a “Retention Bonus.”

As a Producer, Wilson had access to USI’s confidential and proprietary information. While still employed by USI and prior to his resignation, Wilson sought out and secured employment with defendant Lyons, a company that competes directly with USI within the Property & Casualty insurance space in which Wilson specializes in or around Philadelphia. On July 18, 2014, Wilson tendered his resignation to USI’s president and CEO, Philip Remig. Prior to submitting his letter of resignation, Wilson notified his long time clients that he would be leaving USI. On the same day the letter of resignation was tendered, USI received from three major USI clients, who were long time clients of Wilson, broker of record letters transferring their accounts to Lyons as their exclusive broker. Thereafter, several more USI clients were lost to Lyons.

On July 21, 2014, counsel for USI sent Wilson and Lyons letters demanding that they cease and desist their unlawful conduct. On July 24, 2014, USI filed a complaint and Petition for Special Injunction. The court issued an order requiring a response to the petition and scheduled a rule hearing for August 8, 2014. At the time of the hearing, seven of nine clients which were handled by Wilson submitted broker of record letters transferring their business from USI to Lyons. On August 8, 2014, the court heard oral argument and after taking into consideration the papers submitted by the parties as well as the arguments made by counsel, the court granted the petition for a Special Injunction. The order specifically provided as follows:

1. Wilson shall be prohibited from violating the restrictive covenants set forth in his Employment Agreement with USI;
2. Wilson and Lyons, and any other persons acting on their individual or collective behalf, shall be prohibited from using, utilizing, reviewing or copying any of USI’s confidential and proprietary information, including but not limited to its: a) customer lists and key-person contact information; b) client-specific data, such as client needs and insurance requirements and preferences; c) client policyholder information, including but not limited to policy numbers, expirations and carrier information, d) active prospective client lists, including contact and other pertinent information developed by USI to provide it with a competitive advantage when soliciting the prospective client’s business, and e) copies of various forms and business documents devolved and used by USI to conduct its business;
3. Wilson and Lyons shall, not later than ten (10) days from the date of this Order, return any and all originals and destroy and/or permanently delete any and all copies of USI’s confidential and proprietary information in their individual and/or collective possession;
4. Wilson shall, not later than ten (10) days from the date of this Order, contact each and every client of USI he contacted and advise each client that as a result of litigation that neither he nor Lyons may accept their business and that they may return to USI or engage any other broker of their choice, other than Lyons, until said issue is resolved.
5. This Special Injunction shall continue in effect until further Order of this Court.
6. A bond of One Thousand Dollars ($1,000.00) shall be posted by plaintiff and deposited with the Court of Common Pleas Philadelphia County’s Office of Judicial Records, formerly known as the Prothonotary.

On August 12, 2014, Wilson and Lyons appealed this court’s order dated August 8, 2014 and docketed August 11, 2014. On August 13, 2014, Wilson and Lyons filed a motion requesting the court to stay the August 8, 2014 order pending appeal. On August 21, 2014, the motion to stay was denied. Thereafter, Wilson and Lyons filed a motion to stay with the Superior Court which was ultimately denied on September 5, 2014.

For the reasons discussed below, the court’s order dated August 8, 2014 should be affirmed.

DISCUSSION

Restrictive covenants, of which non-disclosure and non-competition covenants are the most frequently utilized, are commonly relied upon by employers to shield their protectable business interests. The non-disclosure covenant limits the dissemination of proprietary information by a former employee, while the non-competition covenant precludes the former employee from competing with his prior employer for a specified period of time and within a precise geographic area.

In Pennsylvania, restrictive covenants are enforceable if they are incident to an employment relationship between the parties; the restrictions imposed by the covenant are reasonably necessary for the protection of the employer; and the restrictions imposed are reasonably limited in duration and geographic extent. Equitable enforcement of employee covenants not to compete is permitted in so far as reasonably necessary for the protection of the employer. However, restrictive covenants are not favored in Pennsylvania and have been historically viewed as a trade restraint that prevents a former employee from earning a living. Thus, the “presence of a legitimate, protectable business interest of the employer is a threshold requirement for an enforceable non-competition covenant.”

In the case sub judice, USI placed before the court the task of interpreting paragraph 6 of the Employment Agreement, specifically the Non Solicitation and Non Interference provision. Unlike traditional non-compete provisions, the Non Solicitation and Non Interference provision at issue here did not prohibit Wilson from competing with USI. Rather, this provision prohibits Wilson from soliciting and interfering with clients that had been with USI for two years prior to Wilson’s departure from USI and for a period of two years after Wilsons’ departure. Since Wilson is not prohibited from competing with USI, the Non Solicitation and Non Interference provision does not constitute a restraint on trade.

In light of the foregoing, the relevant question before this court was whether the equitable enforcement of the Non Solicitation and Non Interference provision was necessary to protect USI against wrongful appropriation of its customer relationships. In deciding the issue, this court balanced USI’s interest in protecting the customer relationship along with the confidential information within Wilson’s possession against Wilson’s ability to earn a living in his chosen profession.

The record evidence shows that Wilson had access to a great deal of confidential and proprietary information belonging to USI. Wilson began working for USI on September 21, 2012 when his previous employer was acquired by USI. At the time of the acquisition, Wilson provided services to clients which he claims were serviced by him for approximately twenty years. When Wilson decided to leave USI to join Lyons, Wilson notified his long time clients that he would be leaving USI. Seven of the nine clients contacted Lyons and arranged to have their insurance business moved to Lyons. Wilson’s contacting of the clients as well as acceptance of the broker of record letters constitutes a breach of the Non Solicitation and Non Interference provision of the Employment Agreement. The Employment Agreement clearly and unambiguously prohibits Wilson from soliciting, selling or providing or accepting any request to provide services to, consult for, sign or accept a broker of record letter with Company Clients. The seven clients that ultimately left USI for Lyons after Wilson contacted them about his resignation were Company Clients. Wilson’s longstanding relationship with these particular USI Company Clients caused him to be viewed as a leader in the industry, and USI has a legitimate business interest in ensuring that Wilson did not transfer that goodwill to Lyons, its direct competitor.

Wilson and Lyons argue that equitable relief was not necessary since USI has an adequate remedy at law in that it may sue for damages. This court did not agree. There are six “essential prerequisites” that a party must establish prior to obtaining preliminary injunctive relief. The party must show: 1) “that the injunction is necessary to prevent immediate and irreparable harm that cannot be adequately compensated by damages”; 2) “that greater injury would result from refusing an injunction than from granting it, and, concomitantly, that issuance of an injunction will not substantially harm other interested parties in the proceedings”; 3) “that a preliminary injunction will properly restore the parties to their status as it existed immediately prior to the alleged wrongful conduct”; 4) “that the activity it seeks to restrain is actionable, that its right to relief is clear, and that the wrong is manifest, or, in other words, must show that it is likely to prevail on the merits”; 5) “that the injunction it seeks is reasonably suited to abate the offending activity”; and, 6) “that a preliminary injunction will not adversely affect the public interest.” While an injunction is an extraordinary remedy which should not issue if the parties may be adequately compensated by damages, the injury caused by Wilson and Lyons’ violation of the non solicitation and non interference provision is particularly difficult to quantify for damage purposes. Here, USI suffered irreparable harm from the departure of seven clients as well as Wilson’s use of confidential and proprietary information to lure clients from USI to Lyons.

The clear balance of the equities weighs in favor of enforcing the Non Solicitation and Non Interference provision by entering the August 8, 2014 order. USI is likely to prevail on the merits based on Wilson’s breach of the provision which is clear and unambiguous. Moreover, greater harm will result to USI if the requested relief was not entered than any harm to Wilson and Lyons. Wilson is not prohibited from working and earning a living and may compete with USI.

The order entered is suited to abate Lyons’ acceptance of the broker of record letters and Wilson’s solicitation, interference and use of confidential information. This court’s order served to restore the status quo. Wilson was ordered to inform those clients that served broker of record letters to Lyons to either return to USI or locate another broker. The order preserves Wilson’s reputation and ensures that the affected clients would be given a choice to return to USI or find another broker. Defendants argue that those clients that already transferred to Lyons should remain with Lyons since these clients made a choice to move to Lyons and therefore would be most affected by this court’s order. However, defendants’ suggestion does not preserve the status quo. USI paid $100 million for the acquisition of TD Bank insurance business and acquired the book of business including the seven clients that transferred their business to Lyons. The status quo is for the seven clients to return to USI. This court is not in a position to order these clients to return to USI and therefore the best and most reasonable solution is to provide the clients with a choice, return to USI or find another insurance broker. Allowing the clients to remain with Lyons only serves to excuse Wilson’s breach of the Employment Agreement which was not privileged.

Based on the forgoing, this court’s order dated August 8, 2014 should be affirmed.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶ 3; defendants’ response ¶3.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶ 5; defendants’ response ¶5.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶ 6; defendants’ response ¶6.

      . The Employment Agreement defines the terms Company Client, Active Prospective Client and Client Account. Employment Agreement ¶1. See also, Employment Agreement ¶ 6.

      . Employment Agreement ¶ 9.7, ¶ 6:3; 8. See also, plaintiff ‘s petition for Special and Preliminary Injunction ¶11; Defendants’ response ¶11.

      . Confidential information was defined by the Employment Agreement to include “any business information of a USI Company, that is not already generally available to the public (unless such information has entered the public domain and become available to the public through fault on the part of the Party to be charged hereunder), including 1) the identity, authority and responsibilities of key contacts and decision-makers employed by the Company Clients and Active Prospective Clients; ii) the Company’s customers’ and active prospects’ types, terms and conditions of coverage and particularized insurance needs, requirements, risk specifications, preferences, expiration dates, claims and loss histories, and commission rates, fees and premiums; iii) the terms and conditions of the Company’s customers’ and active prospects’ benefits and compensation plans; iv) information furnished to the company in confidence by its customers and active prospects; and v) the Company’s and its corporate affiliates’ business plans, marketing strategies, and pricing structure, criteria and formulae for insurance and benefits products and claims management, and unpublished financial data and statements and vi) any and all other information that constitutes a trade secret under the governing trade secret law.” Employment Agreement ¶ 1.

      . Whether Wilson received additional consideration for agreeing to the Non Solicitation and Non Interference provision is not an issue. However, the additional compensation in the form of retention payments satisfies the requirement for additional consideration.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶14-15; Defendants’ response ¶14-15.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶19,22; Defendants’ response ¶ 19,22.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶23; Defendants’ response ¶ 23.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶ 24; Defendants’ response ¶ 24. Defendants argue the seven clients that migrated to Lyons were dissatisfied with USI and voluntarily left without any solicitation by Wilson. However, the undisputed evidence is that Wilson contacted his nine clients and provided them with the identity of his new employer Lyons. In addition to contacting the clients, Wilson accepted the broker of record letters in direct breach of the Employment Agreement.

      . Plaintiff’s petition for Special and Preliminary Injunction ¶27; Defendants’ response ¶27.

      . In the Employment Agreement, Wilson waived the requirement for the posting of a bond in paragraph 8, however, the court imposed a bond as required by Pa. R. Civ. 1531(b) (1) and (2). This requirement is mandatory and an appellate court must invalidate a preliminary injunction if a bond is not filed by the plaintiff. See Christo v. Tuscany, Inc., 308 Pa. Super. 564, 454 A.2d 1042 (1982).

        . Hess v. Gebhard & Co., 570 Pa. 148, 808 A.2d 912, 917 (2002) (citations and quotation marks omitted). See also, All-Pak, Inc. v. Johnston, 694 A.2d 347, 350 (Pa.Super.1997) (citations omitted).

      . WellSpan Health v. Bayliss, 869 A.2d 990, 997 (Pa.Super.2005).

      . Wilson affidavit ¶ 2 attached as Exhibit “B” to Defendants’ Response to plaintiff‘s petition.

      . Id. ¶ 6.

      . Warehime v. Warehime, 580 Pa. 201, 209-10, 860 A.2d 41, 46-47 (2004), citing Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount Inc., 573 Pa. 637, 828 A.2d 995, 1000 (2003).

      . As stated in Schwartz v. Laundry & Linen Supply Drivers, 339 Pa. 353, 14 A.2d 438 (1940): “The great weight of modem authority is to the effect that one who has been or will be injured [by violation of a covenant not to compete] is ordinarily entitled to the equitable remedy of injunction ....” The Pennsylvania Supreme Court has also stated that such covenants are prima facie enforceable in equity.


author: ANDERSON, J.,

text:
    Keta Gas & Oil Co. v. Proctor

      C.P. of Lycoming County,
    No. 50-00,571
    Oct. 2, 2014
   ANDERSON, J.,

Before the court is the Petition to Strike Default Judgment filed by Thomas E. Proctor Heirs (hereinafter “Petitioners”) on January 10, 2014. Argument on the petition was heard September 12, 2014, following which Petitioners requested the opportunity to file a supplemental brief. That brief was filed September 24, 2014, and the matter is now ripe for decision.

Plaintiff commenced the instant action on January 15, 1951, by the filing of a complaint - Action to Quiet Title, seeking to quiet title to certain subsurface rights in portions of the James Strawbridge Warrants 5665 and 5667, which subsurface rights had been reserved by Thomas E. Proctor in a deed to Elk Tanning Company in 1894. The complaint was accompanied by an affidavit averring that the whereabouts and identity of some of the defendants was unknown. Based on that affidavit, the court entered an order and decree on January 15, 1951, that notice of the institution of the action and filing of the complaint be given to the individual defendants by advertisement in a newspaper of general circulation and in the Lycoming Reporter once a week for four successive weeks. Such advertisement was accomplished and, none of the defendants having filed an Answer or other response, plaintiff moved for entry of judgment on March 13, 1951. A default judgment was entered by the court on March 14, 1951.

In the instant petition to strike, petitioners contend the default judgment must be stricken because a defect on the face of the record renders the entry of judgment void. Petitioners specifically attack the affidavit offered in support of the request to serve the complaint by publication.

The court agrees with petitioners that, if the affidavit was not in compliance with the Rules of Civil Procedure, it is defective on its face, rendering service improper. See Continental Bank v. Rapp, 485 A.2d 480 (Pa. Super. 1984)( standard for “defects” asks whether the procedures mandated by law have been followed). If service was improper, the court did not obtain personal jurisdiction over the defendants. See Sharp v. Valley Forge Medical Center & Heart Hospital, Inc., 221 A.2d 185 (Pa. 1966) (jurisdiction of the court over the person of the defendant is dependent upon proper service having been made). Without personal jurisdiction, the default judgment was void. See Wall v. Wall, 16 A. 598 (Pa. 1889) (judgment entered without jurisdiction over the person of the defendant is void). Thus, if a fatal defect in the judgment appears on the face of the record, that judgment is properly stricken. Gee v. Caffarella, 446 A.2d 956 (Pa. Super. 1982). See also Jones v. Seymore, 467 A.2d 878 (Pa. Super. 1983) (petition to strike, which does not appeal to the court’s equitable powers, must be granted if the record reflects a fatal defect), and City of Philadelphia Water Revenue Bureau v. Towanda Properties, Inc., 976 A.2d 1244 (Pa. Commw. 2009) (a petition to strike operates as a demurrer to the record). In this case, however, the court does not agree that the affidavit was not in compliance with the Rules of Civil Procedure.

Petitioners contend the affidavit contained two defects: (1) although plaintiff stated in its affidavit that it made a “diligent investigation,” it failed to specify what actions were undertaken to locate the individual defendants, and (2) although plaintiff stated in its Affidavit that the individual defendants’ whereabouts were unknown, “plaintiff did in fact have actual knowledge of the Proctor Heirs’ whereabouts.” Neither of these contentions supports the petition to strike, however: the first is not actually a defect, and the second does not appear from the face of the record.

In 1951, the Rule of Civil Procedure allowing for service by publication provided as follows:

(c) If a defendant is dead or his identity or whereabouts is unknown, and an affidavit to that effect is filed, the plaintiff may serve the defendant by publication in such manner as the court by local rule or special order shall direct.

Pa.R.C.P. 1064 (Rescinded June 20, 1985, effective Jan. 1, 1986). The rule thus required only an affidavit that the defendant was dead or that his identity or whereabouts was unknown; the rule did not require a statement regarding the extent of the investigation to determine that fact. Thus, the affidavit in the instant case is not defective for lack of such a statement, and cannot support the petition to strike.

With respect to the alleged actual knowledge of the Proctor Heirs’ whereabouts, Petitioners assert “plaintiff had actual knowledge of the Proctor Heirs’ whereabouts because plaintiff’s Action to Quiet Title listed Thomas E. Proctor’s address as Boston, Massachusetts.” Petitioners cite Colavecchi v. Knarr, 457 A.2d 111 (Pa. Super. 1983), for the proposition that “a default judgment rendered after service by publication is void when the plaintiff asserts that a defendant’s whereabouts are “unknown” though the plaintiff does have actual knowledge of plaintiff’s whereabouts.” There, the plaintiff included the defendants’ street address in the complaint and, although the sheriff was unable to personally serve the defendants at that address, the court said that fact did not convert the defendants into persons whose whereabouts were unknown. In addition to noting inclusion of the defendants’ address in the complaint, the court referred to arguments in the briefs that defendants were listed in the local telephone directory and in the voter’s registration records, and found that “appellee was well aware of appellants’ existence and whereabouts.” Id. at p. 113. The Colavecchi Court was addressing a petition to open, however, and not a petition to strike. Matters outside the record may not be considered in ruling on a petition to strike. See Myers v. Mooney Aircraft, Inc., 240 A.2d 505 (Pa. 1967)(As resolution of the question of effective service required evidence outside of the record, the Court rejected Mooney’s petition to strike a default judgment.). Therefore, to determine whether plaintiff had actual knowledge of the Proctor Heirs’ whereabouts, this court can consider only evidence of that fact which appears on the face of the record.

While plaintiff’s complaint does allege, in Paragraph 2, that “the plaintiff believes that Thomas E. Proctor, one of the defendants, diedpriorto September 17,1895, aresident of Boston, Massachusetts”, and names the heirs, legatees and devisees named in Thomas E. Proctor’s will, nowhere in the complaint (or in the will, which is referenced by Will Book and Page in the complaint), do any addresses for the descendants appear. The court does not accept the premise that knowledge of Thomas E. Proctor’s whereabouts at the time of his death in 1895 is equivalent to knowledge of the whereabouts of his devisees and all persons claiming under or through them in 1951. Since the allegations of paragraph 2 are the only evidence that appeared of record at the time of the order for service by Publication, the court cannot find that plaintiff had actual knowledge of defendants’ whereabouts such as would render the affidavit defective and the judgment void.

Accordingly, petitioners are not entitled to relief. The court enters the following:

ORDER

And now, this 2nd day of October 2014, for the foregoing reasons, the Petition to Strike is hereby denied.

      . Although the petition itself also seeks to open the default judgment, that portion of the petition was withdrawn at argument.

      . Plaintiff contended that the subsurface rights were lost by defendants in a tax sale in 1908.

      . Personal service was made on Massachusetts General Hospital and Brinker Hunting Club.

      . Other evidence of the Proctor Heirs’ whereabouts offered by Petitioners in their petition (the public records in Lycoming County and in Boston) was not part of the record when the request for service by publication was made. The same can be said for various allegations regarding the Proctor heirs contained in their supplemental brief.