author: NANO VIC, P.J.,

text:
    Keystone Pellet Inc. v. CT Pellet LLC

      Pro se plaintiff.

      Gretchen L. Geisser, for defendant.
    May 1, 2014
   NANO VIC, P.J.,

PROCEDURAL AND FACTUAL BACKGROUND

Defendant, CT Pellet LLC (“defendant”), is a limited liability company organized under the laws of Connecticut. Its sole owner and member is Scott Olson. Mr. Olson is not licensed to practice law in Pennsylvania, or elsewhere.

On August 29, 2013, the plaintiff, Keystone Pellet Incorporated, d/b/a Great American Pellets (“plaintiff’), commenced suit against the defendant in the Carbon County Court of Common Pleas with the filing of its complaint for breach of contract and unjust enrichment. Therein, plaintiff claimed defendant defaulted on the payment of $24,416.60 it owed plaintiff for the purchase of wood pellets. Defendant attempted to file an answer to the complaint on September 30, 2013, which answer was returned by the Carbon County Prothonotary’s office for want of the requisite filing fee. Subsequently, a default judgment in the amount of $24,664.05 was taken on October 16, 2013. This amount included the unpaid principle balance claimed in the complaint, together with service fees of $70.00 and filing fees of $177.45.

On December 17, 2013, defendant filed a pro se motion to vacate default judgment prepared and signed by Mr. Olson in his capacity as the sole owner of defendant wherein defendant claimed to have filed an answer to the complaint, as evidenced by a time-stamped copy of the answer it received from the prothonotary, which answer, defendant contended, precluded plaintiff from taking a default judgment. In response to this motion, plaintiff denied the filing of any answer to the complaint before default judgment was taken.

A hearing on defendant’s motion was originally scheduled for March 10, 2014. At this hearing, Mr. Olson appeared on defendant’s behalf. As a preliminary matter, plaintiff, through counsel, objected to Mr. Olson’s representation of defendant, claiming he was not a licensed attorney or admitted to practice law in this Commonwealth. Plaintiff argued that to allow Mr. Olson to represent defendant would countenance the unauthorized practice of law and that the motion to vacate, as well as any answer allegedly filed by Mr. Olson on defendant’s behalf, was a legal nullity and should be dismissed with prejudice.

Mr. Olson acknowledged he was not an attorney and was unsure how to respond to plaintiff’s objection. Because this issue had not been raised earlier, we granted Mr. Olson’s request for a continuance to allow defendant an opportunity to obtain counsel and respond to plaintiff’s request that defendant’s motion and answer be dismissed. We also advised Mr. Olson that he would not be allowed to serve as counsel for the defendant at the rescheduled hearing.

The hearing on defendant’s motion was rescheduled for April 21, 2014. At this hearing neither Mr. Olson nor anyone else appeared on defendant’s behalf. Accordingly, we granted plaintiff’s motion to dismiss defendant’s motion to vacate the default judgment for defendant’s failure to proceed on its motion. Because of the importance and recurring nature of the authority of a corporate or company representative, or its principal owner, to act as counsel for the business in a judicial proceeding, we have elected to file this memorandum opinion addressing the issue.

DISCUSSION

In Walacavage v. Excell 2000, Inc., the Pennsylvania Superior Court held that a corporation may not be represented in court by a corporate officer or shareholder who is not an attorney. 480 A.2d 281, 282 (Pa. Super. 1984). In Walacavage, two separate actions between the same parties were consolidated on appeal. In the first, following a non-jury trial on a collection matter, the trial court entered a verdict in favor of plaintiff and against the defendant corporation. In the second, the trial court granted plaintiff’s request to strike preliminary objections filed by the defendant corporation to plaintiff’s complaint. In each case, both before the trial court and on appeal, the defendant corporation was represented by a non-attorney corporate officer and shareholder.

The Superior Court affirmed the non-jury verdict and quashed the appeal from the trial court’s dismissal of defendant’s preliminary objections, both on procedural grounds. In addition, the court, as an issue of first impression, also addressed whether the trial court erred in denying defendant corporation the right to be represented in court by a non-lawyer who was a corporate officer. In holding that “a corporation may appear and be represented in our courts only by an attorney duly admitted to practice law,” the court explained the reasoning for this rule: “[A] corporation can do no act except through its agents and that such agents representing the corporation in court must be attorneys at law who have been admitted to practice, are officers of the court and subject to its control.” Id. at 284 (quoting MacNeil v. Hearst Corp., 160 F.Supp. 157, 159(D.Del. 1958)); see also Estate of Rowley, 84 A.3d 337 (Pa.Cmwlth. 2013) (holding that a non-attorney administrator of a decedent’s estate could not represent the estate in court on the estate’s challenge to a judicial tax sale of estate property).

The court further stated that “the purpose of the rule was not for the protection of stockholders but the protection of the courts and the administration of justice, and that a person who accepts the advantages of incorporation for his or her business must also bear the burdens, including the need to hire counsel to sue or defend in court.” Walacavage, 480 A.2d at 284 (internal quotation marks and citation omitted). In addition, the court observed that pleadings, motions and briefs drawn by laypersons are often awkwardly drafted and inarticulable, thereby demonstrating the wisdom of the rule. Id. at 284.

The Walacavage Court identified two exceptions to the rule which had been adopted by other states: (1) in “special small claims courts with informal rules of procedure in which corporate as well as individual litigants are permitted or even required to appear without an attorney”; and (2) in stockholder’s derivative actions where the “non-lawyer individual stockholder plaintiff may proceed pro se on the theory that it is the stockholder’s own action even though brought for the corporation’s benefit.” Id. at 284. Since Walacavage was decided, Pennsylvania has recognized the exception for small claims and before some administrative agencies. See Pa.R.C.P.M.D.J. 207 (A)(3) (allowing corporate officers to represent corporations in proceedings before magisterial district judges); Harkness v. Unemployment Compensation Bd. of Review, 920 A.2d 162 (Pa. 2007) (plurality opinion) (allowing non-attorney representative to represent an employer in unemployment compensation proceedings before a referee). In Walacavage both exceptions were found inapplicable, as they are here.

In The Spirit of the Avenger Ministries v. Commonwealth of Pennsylvania, the Commonwealth Court went one step further holding, sua sponte, that the court was without jurisdiction to consider the claims made in an appeal by the appellant’s pastor, a non-lawyer, on behalf of a nonprofit association claiming tax-exempt status as a charitable organization under the institutions of purely public charity act, 10 P.S. §§ 371-385. 767 A.2d 1130 (Pa.Cmwlth. 2001). The court further cited with approval the Commonwealth Court decision in McCain v. Curione, 527 A.2d 591, 594 (Pa.Cmwlth. 1987) for the proposition that “proceedings commenced by persons unauthorized to practice law are a nullity.” 767 A.2d at 1131. See also Commonwealth v. Woodland Trust, 2008 WL 9408011 *2 (Pa.Cmwlth. 2008) (holding that the Commonwealth Court was without jurisdiction to consider the merits of an appeal filed by a non-attorney trustee on behalf of a trust).

What constitutes the practice of law must be determined on a case-by-case basis. Harkness, 920 A.2d at 166. In Harkness, the court considered various factors before deciding that a non-attorney representative of a corporate employer could represent the employer in proceedings before an unemployment compensation referee. These included the informal nature of the proceedings, the amount in controversy, and the complexity of the legal issues involved. Ultimately, the court found that “in determining what constitutes the practice of law, [the court] must keep the public interest of primary concern, both in terms of the protection of the public as well as ensuring that the regulation of the practice of law is not so strict that the public good suffers.” Id. at 167.

“While the public interest is certainly served by the protection of the public, it is also achieved by not burdening the public by too broad a definition of the practice of law, resulting in the overregulation of the public’s affairs.” Id.

There are times, of course, when it is clearly within the ken of lay persons to appreciate the legal problems and consequences involved in a given situation and the factors which should influence necessary decisions. No public interest would be advanced by requiring these lay judgments to be made exclusively by lawyers. Where, however, a judgment requires the abstract understanding of legal principles and a refined skill for their concrete application, the exercise of legal judgment is called for. While at times the line between lay and legal judgments may be afine one, it is nevertheless discernible. Each given case must turn on a careful analysis of the particular judgment involved and the expertise that must be brought to bear on its exercise.

Dauphin County Bar Ass ’n v. Mazzacaro, 351 A.2d 229, 233 (Pa. 1976) (citation omitted). See, e.g., Shortz v. Farrell, 193 A. 20, 23 (Pa. 1937) (holding that the preparation and filing of workmen’s compensation pleadings does not constitute the practice of law because the forms are prepared by the workmen’s compensation board, are elementary in character, and do not rise to the dignity of “pleadings” as that term is understood in other judicial proceedings).

Returning to the undisputed facts in this case, the defendant, CT Pellet LLC, has been sued by the plaintiff; the plaintiff has taken a default judgment; and Scott Olson, a representative of the defendant, has filed on its behalf a motion seeking to either strike or open the default judgment which, given the nature of the procedural history preceding the entry of that judgment, requires a hearing and the development of an evidentiary record. Mr. Olsen is not authorized to practice law in this Commonwealth or before this court. CT Pellet LLC is a legal entity separate and apart from Mr. Olson.

These facts alone evidence the unauthorized practice of law by Mr. Olson. Kohlman v. Western Pennsylvania Hospital, 652 A.2d 849, 852 (Pa. Super. 1994) (citing 7 Am.Jur.2d Attorneys at Law § 1 (1980) (“practice of law...embraces the preparation of pleadings and other papers incident to actions and special proceedings, the management of such actions and proceedings on behalf of clients before judges and courts”)); see also Shortz, 193 A. at 23 (noting that for the proper development of a record upon which the ultimate rights of the parties are to be decided legal knowledge and training is highly requisite). The fact that he is the sole owner and member does not alter this conclusion. See Walacavage, 480 A.2d at 284 (citing Shamey v. Hickey, 433 A.2d 1111 (D.C.App. 1981)); see also Concilio DelGlesias Ministetio Marantha Pentecostal, Inc. v. Zoning Hearing Board of the City of Scranton, 2012 WL 8681514 (Pa.Cmwlth. 2012) (holding that even though there is no relevant distinction between representation by a non-lawyer sole proprietor, which is allowed, and representation by a non-lawyer sole shareholder of a corporation who, like the sole proprietor, risks only his own interests should he forego adequate counsel, as a policy determination, the rule in Walacavage, that a corporation may appear in court only through licensed counsel, must be followed).

CONCLUSION

Under this state’s constitution, our Supreme Court is vested with the exclusive power to regulate the practice of law, which includes the power to define what constitutes the practice of law, (Pa.Const. Art.V, § 10 (c)), and by statute, 42 Pa.C.S.A. § 2524 (a), the practice of law by a person who is not a member of the bar is a misdemeanor. Harkness, 920 A.2d at 166 nn. 3, 4. Unfortunately, defining the exact boundaries of what is the “practice of law” is an elusive, complex task “more likely to invite criticism than to achieve clarity.” Shortz, 193 A. at 21. “This is so because the practice of law may well be used in a different sense for various purposes.” Kohlman, 652 A.2d at 851.

Instead, as construed by our Supreme Court, the determination must be made on a case-by-case basis, “considering the character of the activities engaged in, as well as the nature of the proceedings at issue.” Harkness, 920 A.2d at 167. Under this standard, the preparation and filing of pleadings and motions on behalf of one litigant against another, and the in-court representation of a party at a hearing before a trial court, are core functions of an attorney-at-law for which the exercise of legal judgment quintessential to the “practice of law” is at the forefront — a judgment requiring an abstract understanding of legal principles melded with the knowledge and skill necessary for their application to the concrete facts of any given claim. Kohlman, 652 A.2d at 851-52.

To have allowed Mr. Olson to represent CT Pellet LLC at the hearing scheduled for August 10, 2010, to overlook conduct before the court which is made criminal by the laws of this Commonwealth, and to acquiesce in such conduct by overruling plaintiff’s objection, cannot be countenanced by a court of law. This we would not do and, therefore, we sustained plaintiff’s objection to defendant’s representation by its sole owner and member, a non-attorney.

1. In determining what constitutes the practice of law, the court must keep the public interest of primary concern, both in terms of the protection of the public to ensure competent professional representation is provided in matters which require the exercise of legal judgment, as well as ensuring that the regulation of the practice of law is not so strict that the public good suffers.
2. Because the practice of law may well be used in a different sense for various purposes, what constitutes the unauthorized practice of law requires a case-by-case determination, taking into consideration the character of the activities engaged in and the nature of the proceedings at issue.
3. The unlicensed, in-court representation of another constitutes the practice of law within the meaning of Pennsylvania’s statute proscribing the unauthorized practice of law and making such conduct criminal.
4. A corporation or similar business entity (e.g., a limited liability company) may appear in court only through an attorney-at-law admitted to practice before the court.
5. A corporate or company representative, or its principal owner, may not act as counsel for the business in a judicial proceeding.
6. A court is without jurisdiction to consider claims made by the owner or representative of a corporation or similar business entity who is not an attorney licensed to practice law in this Commonwealth.
7. Motions and pleadings filed by a non-attorney on behalf of a corporation or similar business entity engaged in litigation before the courts of common pleas of this Commonwealth are a legal nullity.
8. As the defendant, a limited liability company, appeared in court without counsel, the court properly precluded defendant from being represented by a non-attorney at a hearing scheduled on defendant’s motion to vacate a default judgment previously entered by plaintiff against defendant for want of an answer to the complaint.

      . At the time of this hearing, plaintiff’s counsel provided the court with a memorandum of law opposing defendant’s motion to vacate the default judgment. In this memorandum, counsel noted that upon investigation with the prothonotary’s office, plaintiff learned that the prothonotary prematurely time stamped an answer it received to the complaint which was not accompanied by the required filing fee. Upon realizing this error, plaintiff claimed the prothonotary crossed out the time stamp and returned the answer to defendant with instructions that the answer could not be accepted without payment of the filing fee. We further note that this answer was never docketed of record by the prothonotary.

      . According to the Superior Court’s opinion, at the non-jury trial, the trial court neither granted the corporate officer permission to conduct the corporation’s defense nor prevented him from doing so, but did advise this officer that if he cross-examined witnesses or called any witness on the corporation’s behalf, he would expose himself to the risk of criminal prosecution for the unauthorized practice of law. 480 A.2d at 283. See also 42 Pa.C.S.A. § 2524 (a) (penalty for unauthorized practice of law). This statute provides:
      [A]ny person...who within this Commonwealth shall practice law... without being an attorney at law...commits a misdemeanor of the third degree upon a first violation. A second or subsequent violation of this subsection constitutes a misdemeanor of the first degree.
      42 Pa.C.S.A. § 2524 (a) (Supp. 2014). In consequence, the officer remained silent at the trial except for making a few generalized objections to the proceedings.

      . In Estate of Rowley, quoting Williams v. USP-Lewisburg, No. 3: CV-09-1715, 2009 WL 4921316 (M.D. Pa. 2009), the court explained:
      Like a corporation, an estate can only act through an agent; in this case, an administrator. An estate by its very nature cannot represent itself and, therefore, must be represented by a licensed attorney, regardless of the relation between the administrator and the decedent. To permit an unlicensed lay administrator to appear pro se would be to permit the unauthorized practice of law.
      84 A.3d 337, 341 (Pa.Cmwlth. 2013). Similar principles apply to a limited liability company. See, e.g., 15 Pa.C.S.A. §§ 8991 (parties to actions), 8992 (authority to sue); Pa.R.C.P. 2176 (defining the term “corporation or similar entity” to include a limited liability company). Cf. In re Lawrence County Tax Claim Bureau, 998 A.2d 675 (Pa.Cmwlth. 2010) (holding that a general partner in a partnership was allowed to represent the partnership pro se in court proceedings, in part because, as a general partner, he was in effect protecting his own interests, and in part because, as a general partner, he was expressly authorized by the Pennsylvania Rules of Civil Procedure to prosecute a partnership matter in his own name or in the name of the partnership).

      . In the instant case, the answer proffered by defendant to plaintiff’s seventeen paragraph complaint consisted of one sentence: “All paragraphs of plaintiff’s complaint are denied by defendant.” The effect of this answer, had it been accepted by the prothonotary’s office, would have resulted almost wholly in deemed admissions. See Pa.R.C.P. 1029 (b) (“[a]verments in a pleading to which a responsive pleading is required are admitted when not denied specifically or by necessary implication”).

      . In Harkness, the court explained:
      [T]he unemployment compensation system must operate quickly, simply, and efficiently. The proceedings are by design, brief and informal in nature.... Thus, the claims for benefits are not intended to be intensely litigated. Unemployment compensation proceedings are not trials. The rules of evidence are not mandated; there is no prehearing discovery; the parties have no right to a jury trial; indeed there is no requirement that the referee be a lawyer. Also, and importantly, there are only minimal amounts of money in controversy.... Issues arising in these matters are generally questions of fact not requiring complex legal analysis. Requiring employers to be represented by counsel will not only undermine the informal, speedy and low cost nature of these proceedings, it may dissuade many employers from defending claims for benefits leading to the possibility of an unwarranted drain on the system.
      920 A.2d 162, 168 (Pa. 2007) (citations omitted).

      . In Harkness, the court identified three broad categories of activities that may constitute the practice of law:
      (1) The instruction and advising of clients in regard to the law so that they may pursue their affairs and be informed as to their rights and obligations; (2) the preparation of documents for clients requiring familiarity with legal principles beyond the ken of ordinary laypersons; and (3) the appearance on behalf of clients before public tribunals in order that the attorney may assist the deciding official in the proper interpretation and enforcement of the law.
      920 A.2d at 167.

      . The need for competent legal representation by licensed counsel to protect the public was expounded upon by the Pennsylvania Supreme Court in Dauphin County Bar Ass ’n v. Mazzacaro as follows:
      When a person holds himself out to the public as competent to exercise legal judgment, he implicitly represents that he has the technical competence to analyze legal problems and the requisite character qualifications to act in a representative capacity. When such representations are made by persons not adequately trained or regulated, the dangers to the public are manifest:
      ‘A layman who seeks legal services often is not in a position to judge whether he will receive proper professional attention. The entrustment of a legal matter may well involve the confidences, the reputation, the property, the freedom, or even the life of the client. Proper protection of members of the public demands that no person be permitted to act in the confidential and demanding capacity of a lawyer unless he is subject to the regulations of the legal profession.’ EC 3-4, code of professional responsibility, adopted by the Supreme Court of Pennsylvania, February 27, 1974, 455 Pa. — (1974).
      Indeed, ‘the bar itself actually arose out of a public demand for the exclusion of those who assume to practice law without adequate qualifications therefor.’ Vom Baur, An Historical Sketch of the Unauthorized Practice of Law, 26 Unauthorized Practice News 1, 2 (Fall 1958). To practice law a person must demonstrate a reasonable mastery of legal skills and principles, be a person of high moral character and maintain a continuing allegiance to a strict code of professional conduct. See, e.g., Rules 7, 8, 9, 12, 14 and 17-3 of the Rules of the Supreme Court of Pennsylvania. It is to guard against the impairment of this interest that the practice of law by persons who are not authorized to do so is forbidden.
      351 A.2d 229, 232-33 (Pa. 1976).


source: Caselaw Access Project

author: TUNNELL, J.,

license: Public Domain

text:
    Beaners Restaurant, Inc. v. Commonwealth, Liquor Control Board

      Michael Dautrich, for plaintiff.

      Peter Yoon, for defendant.
    May 6, 2014
   TUNNELL, J.,

— On November 20, 2013, the Pennsylvania Liquor Control Board (hereinafter “PLCB” or “Board”) refused to renew the restaurant liquor license and attendant amusement permit of Beaners Restaurant, Inc. (hereinafter “Beaners” or “Licensee”) and Beaners filed a timely appeal to this court. Upon consideration of the evidence presented at the hearing on April 17, 2014, which included the record from the administrative hearing, the court finds that Beaners’ licensing history and related difficulties do not amount to an abuse of the licensing privilege requiring non-renewal of its licenses and makes the following:

FINDINGS OF FACT

1. Beaners Restaurant, Inc. is a Pennsylvania corporation located at 212 Bridge Street in Phoenixville, Pennsylvania. (R. 4 at 229). Restaurant Liquor License No. R-927 and its attendant amusement permit have been issued for the premises located at 208-212 Bridge Street, Phoenixville, Pennsylvania (“the licensed premises”). (R. 6 at 1.)

2. Beaners, as the licensed premises is known, opened in June, 2009. (R. 4 at 229.)

3. Zachary Hoffman (“Hoffman”) is the president of Beaners. Hoffman purchased the liquor license at issue, the real estate and the rights to Beaners, the shares of Beaners Restaurant Incorporated in June, 2011. (Id.)

4. Two establishments, owned by the same corporation, make up Beaners. It serves alcohol under one liquor license. (R. 4 at 233.)

5. The first floor houses a restaurant known as Bistro on the Bridge (“Bistro”). Bistro has a formal dining area for approximately seventy (70) people. It also has a sports bar area with high top tables, televisions and a shuffleboard table. (Id.)

6. The lower level’s total capacity is approximately three hundred twenty-five (325) people. (R. 4 at 247.)

7. The kitchen and restrooms are also located on the first floor. (Id.)

8. Patrons access the first floor through the front door located on Bridge Street, one of the main thoroughfares in downtown Phoenixville.

9. Bistro has an outdoor eating area on Bridge Street for patrons. (Id. at 239.)

10. Bistro operates Monday through Thursday from 4 pm until closing and Friday, Saturday and Sunday from 11:30 am until closing. (Id. at 234.) Hoffman testified that closing time was 2:00 am.

11. The second floor of the licensed premises houses Club 212. One can access Club 212 from stairs located at the rear of the first level or from a back door on Prospect Street. (Id.)

12. The maximum capacity of the upstairs club is between four hundred (400) and five hundred (500) people. (R. 4 at 247.)

13. Club 212 is open to the public on Friday and Saturday nights only. (Id. at 236). It opens on Thursday nights for patrons who wish to participate in salsa lessons for a fee. (Id.)

14. At one time, on an occasional Sunday evening, Club 212 hosted “teen nights.” On those nights, it would open its doors to individuals ages fourteen (14) to nineteen (19). Companies that had relationships with groups such as MADD, SADD and Drug Free America organized the events. (Id. at 234-35.)

15. Hoffman testified that because of problems that developed during teen nights, Beaners voluntarily discontinued the program. Teen nights have not been held at the licensed premises for over a year.

16. Beaners is located in the heart of downtown Phoenixville in the 200 block of Bridge Street. It is the largest restaurant on Bridge Street. (Id. at 242.)

17. E. Jean Krack, the Borough Manager for Phoenixville, testified that Beaners is the one of the largest businesses in the Borough of Phoenixville, second to the Colonial Theater.

18. William Mossman, Chief of Police for Phoenixville, testified that the downtown area (Bridge Street) where Beaners is located has five (5) other licensed establishments.

19. Chief Mossman testified that on a given night there may be as many as one thousand people exiting the various establishments along Bridge Street and within the surrounding area.

20. Mr. Krack, Chief Mossman and Jessica Capistrant, the Director of the Phoenixville Chamber of Commerce, each testified that Hoffman has a well run establishment and works well with Phoenixville’s civic leaders as part of an overall effort to improve his establishments and the downtown Phoenixville area.

21. Beaners employs between forty-five (45) and sixty (60) employees. Approximately twelve (12) to fourteen (14) of its employees are security personnel. (R. 4 at 229-230.)

22. On Friday and Saturday nights, it staffs between eight (8) and twelve (12) security employees in conspicuous uniforms. {Id. at 230.)

23. Beaners has a written security policy, and it has signage throughout the premises notifying patrons of its house rules. {Id. at 232; Ex. L-l.)

24. Beaners enforces a dress code for patrons entering its nightclub. {Id. at 233; Ex. L-2.)

25. Beaners has sixteen (16) security cameras at the establishment, fourteen (14) of those are inside. The cameras were installed in 2010. (R. 4 at 299-300.)

26. Club 212 uses DJ entertainment on Friday and Saturday nights. Bistro has acoustic performers a few times per month. (R. 4 at 325.)

27. On February 6, 2013, Beaners filed an untimely application for the renewal of Restaurant Liquor License No. R-927 beginning April 1, 2013 and ending March 31, 2015. (R. 6 at 2, R. 4 at Ex. B-l.)

28. By letter dated March 18, 2013, the PLCB informed Beaners that a preliminary review of its history of operation indicated a potential abuse of the licensing privilege and that a hearing would be held to determine whether the following objections warranted nonrenewal of the license for the license period effective April 1,2013:

1. It is alleged that you have abused your licensing privilege, and pursuant to Section 470 of the Liquor Code (47 P.S. § 4-470), you may no longer be eligible to hold a license based upon:
a) [Violations of the Liquor Code relative to Citation Numbers 12-1002, 11-1829, 11-1062 and 10-0402.
b) The improper conduct of your licensed establishment as there have been approximately twenty-three (23) incidents of disturbances at or immediately adjacent to your licensed establishment during the time period April 2011 to present reported to the Phoenixville Police Department. This activity includes but is not limited to minors, fights, assaults, weapons, drugs, visibly intoxicated patrons, loud music/noise and disorderly operations.
2. The Bureau of Licensing has rejected the late-filed renewal application pursuant to Section 470(a) of the Liquor Code (47 P.S. § 4-470(a)).

(R. 4 at 5; Ex. B-2).

29. Furthermore, the PLCB objected to the renewal of its amusement permit based upon the following:

1. It is alleged that pursuant to Section 478 of the Liquor Code [47 P.S. § 4-478], you have abused your privilege by permitting the use of speakers or similar devices causing loud music to emanate from the licensed premises in violation of Section 5.32(a) [of the Board’s Regulations (40 Pa. Code § 5.32(a))], resulting in Citation Numbers 12-1002, 11-1829, 1-1062 and 10-0402.
2. The operating history of the licensed premises in that there have been approximately three (3) incidents of loud music during the time period April 2011 to present reported to the Phoenixville Police Department.

{Id.)

30. By letter dated April 15, 2013, the PLCB informed Beaners that a hearing was scheduled for April 30, 2013, for the purpose of taking testimony about the aforementioned objections. The hearing was rescheduled for June 4, 2013. {Id.)

31. Following the hearing, the examiner recommended non-renewal of Beaners’ restaurant license and amusement license. (R. 3.)

32. The PLCB concurred with that recommendation and by Order dated November 20,2013, the PLCB refused Licensee’s renewal application. (R. 6.) Beaners timely appealed the matter to this court.

33. A de novo hearing was held on April 17, 2013.

34. Prior to June, 2013, Beaners had been the subject of four (4) adjudicated citations relating to fourteen (14) violations of the Liquor Code spanning four (4) years. (R. 6 at 4-6.)

35. More than half of those violations occurred prior to Floffman’s ownership, which began in June, 2011. All but one (1) of the citations related to excessive noise from the establishment; none of the violations involved acts of violence. {Id.)

36. The incidents for which Beaners received citations after Hoffman’s ownership occurred during one weekend in September, 2011 and May, 2012 and two days in April, 2012. {Id.) There were no citations after May 19, 2012 introduced into evidence at the administrative hearing.

37. Hoffman testified consistent with the testimony of Officer Bryan at the administrative hearing, that following complaints about noise in April 2012, Beaners closed the windows to Club 212 and worked to secure them so that in the future patrons could not open the windows from inside Club 212.

38. This action improved noise levels in the surrounding area. Neighbors Edward Koch and Stephen Baker testified that noise levels had improved at Beaners and they did not recall making further calls to the police for noise related issues after mid-2012.

39. Hoffman testified that Beaners also initiated changes to Club 212’s speaker system and the manner in which guests were admitted and discharged from Club 212 as part of an overall effort to control noise in and around the establishment.

40. The PLCB also introduced evidence that from October, 2011 until October 2012, there were eighteen (18) instances at or nearby Beaners that resulted in a call or report to the Phoenixville Police Department. (R. 4.)

41. Two (2) of the incidents involved noise complaints. Three (3) incidents involved underage drinking. These occurred in November, 2011 (2 instances) and September, 2012. The remaining incidents involved individual fights or public drunkenness. (Id.).

42. Hoffman testified that in response to such episodes, during the relevant time period, he increased the frequency with which security personnel patrolled the rear of Club 212, closed off the rear of the building to patrons to prevent persons congregating at closing time and to help patrons move along more quickly to their final destination, and required additional Beaners personnel at private parties. He testified that he communicates frequently with Phoenixville police officers on patrol in the area and during community meetings to ensure that his establishment is doing those things necessary to comply with applicable regulations.

43. The PLCB did not offer into evidence any police incidents related to activity at or near Beaners after November 1,2012.

DISCUSSION

I. LEGAL STANDARD

The Pennsylvania Liquor Code, 47 P.S. § 4-464, governs hearings upon refusal of licenses, renewals, or transfers. Section 464 provides that following an administrative hearing, any applicant who is aggrieved by the refusal of the Board to issue any such license or to renew or transfer any such license may appeal to the court of common pleas of the county in which the premises, or permit applied for, is located. The section continues:

The court shall hear the application de novo on questions of fact, administrative discretion and such other matters as are involved ... The court shall either sustain or over-rule the action of the board and either order or deny the issuance of a new license or the renewal or transfer of the license or the renewal of an amusement permit to the applicant.

47 P.S. § 464 (emphasis added).

In appeals arising under Section 464 of the Liquor Code, the trial court may make its own findings and reach its own conclusions based upon those findings, even when the evidence it hears is substantially the same as the evidence presented to the Board. Pennsylvania Liquor Control Bd. v. Richard E. Craft Amer. Legion Home Corp., 553 Pa. 99, 718 A.2d 276 (1998). De novo review contemplates an independent evaluation of the evidence that has already been presented. In essence, “de novo review” means that the reviewing court will examine the evidence in the record and has the authority, in the exercise of its statutory discretion, to make independent findings of fact and conclusions of law. Pennsylvania State Police, Bureau of Liquor Control Enforcement v. Cantina Gloria’s Lounge, 536 Pa. 254, 265-66, 639 A.2d 14, 20 (1994). The reviewing court has the authority to sustain, alter, change, modify or amend a decision of the Board, even if that court does not make findings of fact that are materially different from those found by the Board. Id.; Adair v. Pennsylvania Liquor Control Bd., 519 Pa. 103, 546 A.2d 19 (1988). The trial court is not restricted to a review of the established record and may hear new evidence. See Craft Amer. Legion, 553 Pa. at 102, 718 A.2d at 277 (1998)(noting the “trial court conducted a de novo hearing at which the new president of the appellant’s board testified”); Pennsylvania State Police, Bureau of Liquor Control Enforcement v. Kelly’s Bar, Inc., 536 Pa. 310, 314, 639 A.2d 440, 442 (1994)(stating court must make its own findings of fact and conclusions based upon the “record submitted by the Board and the additional evidence it received during the de novo hearing”); Cantina Gloria’s Lounge, 536 Pa. at 258, 639 A.2d at 16 (acknowledging additional testimony was heard by the trial court). To proceed otherwise would be to ignore the statutory language in Section 464, which expressly provides that “the court shall hear the application de novo on questions of fact, administrative discretion and such other matters as are involved.” 47 P.S. §4-464.

II. DISCUSSION

A. Beaners’ Prior Adjudicated Citations Do Not Preclude Renewal of Its License.

Under the Liquor Code, renewal of a liquor license is not automatic. 47 P.S. §4-470. Section 470(a)(1) of the Liquor Code provides that the Board “may” refuse to renew a liquor license for several reasons, including the fact that a licensee has one or more adjudicated citations. The use of the term “may,” however, gives the Board discretionary authority to decide whether to grant or deny a properly filed renewal application. U.S.A. Deli, Inc. v. Pa. Liquor Control Bd., 909 A.2d 24, 28 (Pa. Cmwlth. 2006), appeal denied, 593 Pa. 736, 929 A.2d 647 (2007). The Board has the discretion to renew a license even where the licensee has several adjudicated violations. A court may find that steps taken by a licensee to ensure that it would operate in accordance with the liquor laws justifies renewal of its license. Goodfellas, Inc. v. PLCB, 921 A.2d 559, 565 (Pa. Cmwlth. 2007), appeal denied, 594 Pa. 700, 934 A.2d 1279 (2007).

Upon consideration of the evidenceoffered at the hearing, the court does not agree with the Board that Beaners has a significant citation history such that a refusal to renew its application for license renewal is warranted. Beaners’ current owner testified that in response to the citations it received regarding noise from loudspeakers, Beaners began implementing changes to ensure that it would operate in accordance with the liquor laws. Hoffman testified that Beaners (1) secured the windows to Club 212 so that patrons could not open the windows, (2) closed the back door during operating hours to dampen the sound emanating from the club and (3) required patrons to leave the premises though the front door to avoid crowds congregating in the back of the establishment near the residential apartments. Beaners also made a number of changes to the speaker system in the Club that were implemented to assist with noise reduction. Neighbors Koch and Baker testified that between the date of their last noise complaints in late 2011 and early 2012 until the administrative hearing in June, 2013, they had seen improvements with the noise and an improved working relationship with Beaners. Koch and Baker testified that they believed there was now an open line of communication with Hoffman and that the earlier problems with noise had been and still were being addressed by Beaners. Beaners at Baker’s request, changed the manner and direction in which patrons stood in line while waiting to enter Club 212 and the change worked well. (R. 4 at 124.)

These steps made a difference in the operation of Licensee as there was only one (1) reported incident during Hoffman’s tenure in 2011, that being the weekend of September 3 and 4th, 2011. There was not another problem with noise until nearly six months later in April, 2012, when Beaners received citations for noise on consecutive weekends — April 15 and 21 st, 2012. The last noise citation came one month later during the weekend of May 18 and 19th. This is in stark contrast to the citations issued in 2009 and 2010, which occurred nearly monthly from September 2009 until January 2010. Although not perfect, the steps taken by Beaners to quell the noise from its establishment were helpful in reducing the noise complaints and were directed to ensuring that it operated its business in accordance with the liquor laws. The court finds that Beaners’ efforts taken to avoid future violations were appropriate and support renewal of its liquor license.

B. Alleged Disturbances At or Surrounding Beaners in 2012 Do Not Require Non-Renewal of Its License.

Section 4-471 of the Liquor Code permits, in addition to specific instances listed, revocation or suspension of a liquor license “upon other sufficient cause shown.” 47 P.S. §4-471. Violations of a law other than the Liquor Code may constitute sufficient cause for revocation or suspension of a liquor license. PLCB v. Althouse, 503 A.2d 90, 91 (Pa. Cmwlth. 1986). A licensee may be held accountable for non-Liquor Code violations if it can be established that there was a pattern of illegal activity on the licensed premises about which the licensee knew or should have known and the licensee failed to take substantial steps to prevent such activity. Philly Int’l Bar, Inc. v. Pa. Liquor Control Bd., 973 A.2d 1, 3 (Pa. Cmwlth. 2008), appeal denied, 602 Pa. 668, 980 A.2d 609 (2009).

The evidence presented at the hearing does not suggest that there was a relationship between the activity in- and outside of Beaners and the manner in which it operated its business. Although the PLCB introduced evidence relating to eighteen (18) “instances” of police activity at or surrounding the premises, the court does not find that these examples establish a pattern of illegal activity occurring at this establishment that needed to be remediated.

As an initial matter, it did not go unnoticed by the court that each of the civic leaders that testified, while not condoning any violation of this Commonwealth’s liquor laws, did not view this establishment as a public nuisance or source of criminal activity. Borough Manager E. Jean Krack testified that as someone charged with protecting and looking out for the interests of Phoenixville and its residents, including the neighbors in and around Beaners, he did not take issue with the manner in which the premises was operated. More significant, Chief of Police William Mossman testified that Hoffman operated Beaners like a “tight ship” and he too did not consider the establishment to be a nuisance or problem for the Phoenixville area or his officers.

Having considered each of the incidents, the court does not find that they signal an abuse of the licensing privilege. The incidents do not involve the same complainants or incidents of illegal activity. Furthermore, not all of the incidents resulted in any affirmative action having to be taken by police. Finally, not all of the incidents were shown to be connected to this licensee or the manner in which its business is conducted. The evidence regarding these incidents indicated the following.

Three (3) incidents of underage drinking were attributed by the PLCB to Beaners. Two (2) incidents occurred in November, 2011 within a week of each other. In both cases, it was Beaners personnel who identified the individuals and removed them from the establishment. The individual involved in the first incident was not served alcohol at Beaners, but had consumed alcohol elsewhere prior to admittance to Beaners. (R. 4 at 8.) The third incident did not occur until almost a year later. It involved a private sweet sixteen birthday party that was held in the Club 212 facilities. In that case, again it was Beaners that identified the problem after observing party guests acting in a manner that suggested that alcohol had been consumed. They proactively notified the police department, who arrived at the scene and processed the juveniles.

The PLCB also introduced into evidence four (4) instances involving complaints of noise at or near the licensed premises. On March 25,2012, Edward Koch, a resident of the apartments located behind Club 212 and near the municipality’s public lot, complained to the PLCB and the police department about noise coming from people yelling in the back of Club 212. Two (2) female patrons had become involved in an altercation at Club 212 and were being escorted out of the back of Club 212. In April 8,2012, Mr. Koch again called police — this time about loud music emanating from Club 212. At the request of the responding officer and in response to the complaint, Beaners closed the windows and the officer has not seen them open since. (R. 4 at 15.) Mr. Koch called police on April 29, 2012 and again in September, 2012. The first call related noise in the rear of Club 212 and the second call was to report the sound of glass breaking. Police responded to both calls, but did not identify any problems and did not issue any citations or take any further action.

The remaining instances of police activity involved altercations or incidents of disorderly conduct. In three (3) of the cases, patrons complained to police about events that allegedly occurred inside of the licensed premises but did so only after they had left Beaners. In one (1) of the cases, the complainant never told anyone at Beaners about the events in question. Two (2) of the instances were initiated by Beaners with a call to the police department to report an unruly patron and a request for officer assistance made to police officers on regular patrol in the area. In these cases, the security personnel at Beaners were present and proactive. Chief Mossman testified that involving police in such matters is exactly the kind of response he wants to see from licensed establishments. To now hold such actions against the licensee would thwart the efforts of police to control this highly populated entertainment area of Phoenixville’s downtown.

Six (6) other instances of police activity at or near Beaners involved altercations. The evidence offered with regard to several of these instances failed to establish that the occurrences involved patrons of Beaners or stemmed from its operation. The area where Beaners is located is home to several other licensed establishments. Because officers need an address to put in a report, if an incident involves anyone at or near the large real estate owned by Beaners, that address is given. (R. 4 at 196.) It does not necessarily follow, however, that the resulting altercation and/or problem began at Beaners or resulted from the manner in which it operates its business. Moreover, located just behind Beaners is a municipal lot where patrons headed to/from any of the numerous downtown establishments or the surrounding area can park. Police Chief Mossman testified that his department patrols that area during weekends because of the hundreds of people that leave the various downtown establishments at the same time on those nights. He did not testify that any of his officers are required or needed at that location or at Beaners because of any regular problem with Beaners’ patrons or that establishment. The evidence does not demonstrate a pattern of ongoing criminal activities at this location and thus the first prong for a nonrenewal based upon “other activities” at or around the licensed premises has not been met.

Even if one concluded differently, following these incidents Beaners instituted reasonable and timely measures aimed at preventing the reoccurrence of such events in the future. In consultation with the police department, Beaners restricted patrons from using its back exit at closing time and directed patrons out the front door onto Bridge Street. Beaners also made a change to the manner in which patrons lined up for entrance to Club 212. Hoffman testified that Beaners has done away with “teen night.” Additionally, Beaners has increased the regularity with which its security patrols the back of its establishment to avoid any problems and reduce the noise stemming from patrons congregating in that area. Although the administrative hearing occurred in June, 2013, the last reported incident introduced at that hearing took place in November, 2012. The record demonstrates that Beaners was, and is, committed to improving its establishment. The court further concludes that the corrective measures taken by Beaners in response to the problems that occurred in late 2011-2012 have been timely and appropriate.

C. Beaners’ Late Application for Renewal Does Not Require Denial of the Application

Finally, included within the PLCB’s objections to the application was an objection based upon the application’s untimeliness. Beaners’ application for renewal of its license should have been filed before the end of January, 2013 for the renewal period beginning on April 1, 2013. It was filed on or about February 6, 2013. Upon filing its application, Beaners included the required late fee and stated its reason for the delay.

Section 4-470 of the Liquor Code permits an application to be accepted by the PLCB out of time. The Court, as discussed above, disagrees with the PLCB that Beaners’ conduct evidences a disregard for the privilege of holding a license. Taking those issues out of the equation, the court finds that the late filing by less than a month of Beaners’ application does not justify non-renewal.

CONCLUSIONS OF LAW

1. Section 470(a)(1) of the Liquor Code provides that the Board “may” refuse to renew a liquor license for several reasons, including the fact that a licensee has one or more adjudicated citations.

2. The use of the term “may,” however, gives the Board, and therefore the court, discretionary authority to decide whether to grant or deny a properly filed renewal application.

3. A court may find that steps taken by a licensee to ensure that it will operate in accordance with the liquor laws justify renewal of its license.

4. Beaners’ citation history did not require rejection of its license renewal or demonstrate an abuse of the licensing privilege. Furthermore, Beaners enacted changes to ensure that it would operate in accordance with the liquor laws.

5. Beaners’ history, and the reported incidents introduced into evidence by the PLCB, do not establish a pattern of illegal activity on the licensed premises.

6. Even though some incidents of illegal activity occurred at or near Beaners in 2012, the instances did not evidence “ongoing criminal activity” about which Beaners knew or should have known and Beaners undertook substantial and timely remedial measures to prevent such activity from occurring in the future.

For all of the foregoing reasons, Beaners’ request for renewal of its restaurant liquor license and amusement license for the period beginning April 1,2013 is granted.

An appropriate Order follows.

ORDER

And now, this 6th day of May, 2014, following a hearing on April 17, 2014 on the appeal of Beaners Restaurant, Inc. to the Order of the Pennsylvania Liquor Control Board dated November 20, 2013, the appeal is granted and it is hereby ordered that the Pennsylvania Liquor Control Board renew Restaurant Liquor License No. R-297, and its attendant amusement permit, for the premises located at 208-212 Bridge Street, Phoenixville, Pennsylvania for the period beginning April 1, 2013 and ending March 31, 2015, upon payment of any applicable fees and fulfillment of any other licensing requirements.

      . At the de novo hearing, the PLCB introduced the notes of testimony from the administrative hearing in June, 2013, which were marked as exhibit R-4. Unless noted otherwise, references herein to “testimony” by witnesses refers to the testimony offered to this court at the April 14, 2014 hearing.


author: GRAY, J.,

text:
    Wickersham Construction and Engineering, Inc. v. Williamsport Sanitary Authority

      Theodore A. Adler, for plaintiff.

      DianM. TokarskyandMichaelH. Collins, for defendant.
    May 7, 2014-
   GRAY, J.,

OPINION AND ORDER

And now, this 7th day of May, 2014, following oral argument on the plaintiff’s motion for summary judgment, and after review of the argument, pleadings, motion, response and briefs, the court finds that summary judgment is not warranted. The court enters the following opinion and order.

Procedural and Factual Background

This matter arises from a contract dispute. The plaintiff, Wickersham Construction and Engineering, Inc. (“Wickersham”) was the successful bidder and awarded a contract by defendant Williamsport Sanitary Authority (“WSA”) for “Contract C2-Combined Sewer Overflow compliance.” The parties entered into that construction contract (“contract”) with an effective date of November 24, 2009. The contract pertained to the first in a series of construction projects that were required for WSA to comply with a consent decree entered with the Pennsylvania Department of Environmental Protection (DEP) and United States Environmental Protection Agency (EPA). Regulations required the WSA to reduce the nutrients discharged into the Susquehanna River. The time requirements set forth in the contract were crucial because they were set up for the WSA to avoid severe financial penalties under the consent decree. As the first of the construction projects, Wickersham’s failure to meet time the requirements would likely backlog the subsequent contractors who were required to build upon the foundations constructed by Wickersham.

On November 26, 2013, Wickersham filed for summary judgment under Count I, Breach of Contract (Failure to Pay Wickersham its Contract Balance), asserting an unpaid balance of $784,260. Wickersham avers in Count I that the value of the contract with approved change orders was $9,006,056. WSA paid Wickersham $8,221,796. Wickersham claims payment in full was due on or about August 11, 2011. WSA avers that “[f]rom the inception of the project, Wickersham failed to perform its work in a timely fashion and in accordance with the contract documents and project schedule prepared by Wickersham.” Defendant’s new matter, ¶ 113. The substantial completion date for the contract was extended from February 24, 2011 to March 21, 2011. Nonetheless, Wickersham did not reach substantial completion until June 17,2011. The final completion for the contract was May 20, 2011. However, the final completion of the contract was not achieved until July 11,2011.

WSA withheld liquidated damages in the amount of $556,000 and contractual and special damages (relating to additional engineering and inspection costs) in the amount of $205,907.43. Malcolm Pirnie, Inc. (Pirnie) served as engineer for the project. By letters dated April 11, 2011, May 5, 2011, June 3, 2011, July 20, 2011 (copied to Wickersham), Pirnie advised WSA about its recommendation for the withholding of liquidated damages. WSA withheld liquidated and special damages in accordance with Pirnie’s recommendations. The final amount withheld was $789,259.75. No party filed a “claim” with respect to the liquidated or special damages. Wickersham did not assert that the WSA was required to file a claim to withhold damages at the time of the withholding of damages by WSA.

The contract consists of more than a hundred pages. The contract includes thefirstpart called the “agreement,” consisting of 9 pages and 10 articles, with Article 9 incorporating the following documents as “contract documents:” the agreement, performance bond (2 pages), payment bond (3 pages) stipulation against liens (1 page), general conditions (54 pages), supplementary conditions (17 pages and attachments), specifications, as listed in the table of contents of the project manual, set of drawings, addenda numbered 1 through 3, exhibits, notice to proceed, work change directives and change orders that have or may be issued.

The first part of the contract is labeled the “agreement.” It consists of 9 pages and was signed by both parties. It includes Article 4 entitled “CONTRACT TIMES.” Article 4.01 provides that “[a]ll time limits for Milestones, if any, Substantial Completion and completion and readiness for final payment as stated in the Contract Documents are of the essence of the Contract.” (emphasis added) Article 4.02A sets forth the contract times and specifically references paragraph 2.03 of the general conditions with respect to the commencement of contract times and paragraph 14.07 of the general conditions which outlines the procedures for application for final payment.

Article 4.03 of the contract provides for liquidated damages as follows.

Owner and Contractor recognize that time is of the essence of this agreement and owner will suffer financial loss, apart from the costs described in Paragraph 4.04A, if the work is not substantially completed within the time specified in Paragraph 4.02A for Substantial Completion, plus any extensions thereof allowed in accordance with Article 12 of the General Conditions. Owner and Contractor also recognize the delays, expense and difficulties involved in proving in a legal or arbitration proceeding the actual loss suffered by Owner if the Work is not substantially completed on time. Accordingly, instead of requiring any such proof, Owner and Contractor agree that as liquidated damages for delay (but not as a penalty) Contractor shall pay Owner $5,500.00 for each day that expires after the time specified in Paragraph 4.02.A for Substantial Completion (adjusted for any changes thereof made in accordance with Article 12 of the General Conditions) until the Work is Substantially Complete. Subsequent to achieving Substantial Completion (adjusted for any changes thereof made in accordance with Article 12 of the General Conditions) until the Work is Substantially Complete. Subsequent to achieving Substantial Completion, Owner and Contractor agree that as liquidated damages for delay (but not as penalty) Contractor shall pay Owner $3,000.00for each day that expires after the time specified in Paragraph 4.02.A for final payment (adjusted for any changes thereof made in accordance with Article 12 of the General Conditions) until the Work associated with final payment is complete, (emphasis added)

Article 4.04A of the contract provides for special damages as follows.

In addition to the amount provided for liquidated damages, Contractor shall pay Owner the actual costs reasonably incurred by owner for engineering and inspection forces employed for the Work for each day that expires after the time specified in Paragraph 4.02A for Substantial Completion (adjusted for any changes thereof made in accordance with Article 12 of the General Conditions until the Work is substantially complete)(emphasis added).

Article 4.05 of the contract provides that the “owner may deduct liquidated damages and special damages as determined by the provisions of this article 4 from progress payments due Contractor under this Agreement.” Article 4 does not make any reference to filing of claims or Article 10 of the General Conditions which outlines the procedures for filing claims.

Article 9 of the Agreement incorporates the document entitled General Conditions. The General Conditions document consists of 54 pages and was adapted from “Standard General Conditions of the Construction Contract, EJCDC No. C-700 (2002 Edition).” That document is not signed or initialed. Article 1, Section 1.01 of the General Conditions sets forth defined terms. Section 1.01 A. 10 defines “Claim” as a “demand or assertion by Owner or Contractor seeking an adjustment of Contract Price or Contract Times, or both, or other relief with respect to the terms of the Contract. A demand for money or services by a third party is not a Claim.” Section 1.01. A. 13 of the General Conditions of the contract defines contract price as: “The monies payable by Owner to Contractor for completion of the Work in accordance with all Contract Documents as stated in the Agreement (subject to the provisions of 11.03 in the case of Unit Price Work).” (emphasis added). Section 1.01 does not define liquidated or special damages.

Section 10.05 of the general conditions is entitled “CHANGES IN THE WORK; CLAIMS.” Section 10.05.A provides the following.

Engineer’s Decision Required: All Claims, except those waived pursuant to Paragraph 14.09 (inapplicable to the instant case), shall be referred to the Engineer for a decision. A decision by Engineer shall be required as a condition precedent to any exercise by Owner or Contractor of any rights or remedies either may otherwise have under the Contract Documents of by laws and regulations in respect of such claims.”

Section 10.05.B of the General Conditions requires written notice of each claim be submitted to the engineer and the other party promptly (but in no event later than thirty days) after the start of the event giving rise thereto. Section 10.05 B. further provides as follows.

The Responsibility to substantiate a Claim shall rest with the party making the claim. Notice of the amount or extent of the Claim, with supporting data shall be delivered to the Engineer and the other party to the Contract within 60 days after the start of such event (unless Engineer allows additional time for claimant to submit additional or more accurate data in support of such Claim). A Claim for an adjustment in Contract Price shall be shall be prepared in accordance with the provisions of Paragraph 12.01.B. A claim for an adjustment in Contract Times shall be prepared in accordance with the provisions of Paragraph 12.02.B. Each Claim shall be accompanied by claimant’s written statement that the adjustment claimed is the entire adjustment to which the claimant believes it is entitled as a result of said event. The opposing party shall submit any response to Engineer and the claimant within 30 days after receipt of the claimant’s last submittal (unless Engineer allows additional time).

Section 10.05 C-E provide for the engineer to review each claim and take action. The engineer’s written action or denial is final and binding unless a party timely invokes the dispute resolution procedure set forth in Article 16. Section 10.05 F. provides that “No Claim for an adjustment in Contract Price or Contract Times will be valid if not submitted in accordance with this Paragraph 10.05.” Liquidated or special damages are not mentioned in Section 10.05 or in Article 10.

Conclusions of Law

Summary Judgment

1. Pursuant to Pa. R.C.P. 1035.2, the court may grant summary judgment at the close of the relevant proceedings if there is no genuine issue of material fact or if an adverse party has failed to produce evidence of facts essential to the cause of action or defense. Keystone Freight Corp. v. Stricker, 31 A.3d 967, 971 (Pa. Super. Ct. 2011).

2. A non-moving party to a summary judgment motion cannot rely on its pleadings and answers alone. Pa. R.C.P. 1035.2; 31 A.3d at 971.

3. When deciding a motion for summary judgment, the court must view the record in the light most favorable to the non-moving party, with all doubts as to whether a genuine issue of material fact exists being decided in favor of the non-moving party. 31 A.3d at 971.

4. If a non-moving party fails to produce sufficient evidence on an issue on which the party bears the burden of proof, the moving party is entitled to summary judgment as a matter of law. Keystone, 31 A.3d at 971 (citing Young v. Pa. Dep’t of Transp., 744 A.2d 1276, 1277 (Pa. 2000)).

Contract

5. “The task of interpreting a contract is generally performed by a court rather than by a jury. The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument.” Humberston v. Chevron U.S.A., Inc., 75 A.3d 504, 510 (Pa. Super. Ct. 2013), quoting, Maguire v. Ohio Casualty Ins. Co., 602 A.2d 893, 894 (Pa. Super. 1992).

6. “When construing agreements involving clear and unambiguous terms, this court need only examine the writing itself to give effect to the parties’ understanding. This court must construe the contract only as written and may not modify the plain meaning under the guise of interpretation. Humberston v. Chevron U.S.A., Inc., 75 A.3d 504, 510 (Pa. Super. Ct. 2013), quoting Szymanowski v. Brace, 987 A.2d 717, 722 (Pa. Super. 2009) (quoting Abbott v. Schnader, Harrison, Segal & Lewis, LLP, 805 A.2d 547, 553 (Pa. Super. 2002) (internal citations omitted)).

7. “[W]here a contract refers to and incorporates the provisions of another, both shall be construed together. Trombetta v. Raymond James Fin. Servs., 907 A.2d 550, 560 (Pa. Super. Ct. 2006), citing, Shehadi v. Northeastern Nat’l. Bank, 378 A.2d 304, 306 (1977) (citations omitted).

8. It is well-settled that clauses in a contract should not be read as independent agreements thrown together without consideration of their combined effects. Brown v. Cooke, 707 A.2d 231, 233 (Pa.Super. 1998), quoting In re Binenstock’s Trust, 190 A.2d 288 (1963). Terms in one section of the contract, therefore, should never be interpreted in a manner which nullifies other terms in the same agreement. Id.]

9. “[T]he specific controls the general when interpreting a contract.” Trombetta v. Raymond James Fin. Servs., 907 A.2d 550, 560 (Pa. Super. Ct. 2006), citing, Baltic Dev. Co. v. Jiffy Enterprises, Inc., 257 A.2d 541, 543 (1969), citing, In re Alloy Mfg. Co. Employees Trust (Minotte Appeal), 192 A.2d 394 (1963).

10. “[W]here specific or exact terms seem to conflict with broader or more general terms, the former is more likely to express the meaning of the parties with respect to the situation than the general language.” Pbs Coal v. Hardhat Mining, 632 A.2d 903, 906 (Pa. Super. Ct. 1993), citing, Restatement (Second) of Contracts § 203(c) (1981); and Spatz v. Nascone, 424 A.2d 929 (1981).

11. “[CJourse of performance is always relevant in interpreting a writing.” Pennsylvania Engineering Corp. v. McGraw-Edison Co., 459 A.2d 329, 332 (Pa. 1983), quoting, Atlantic Richfield Co. v. Razumic, 390 A.2d 736, 741 n. 6 (1978), referencing, Accord, Restatement (Second) of Contracts § 202(4) and Comment a (1981). n6.

12. “Under Pennsylvania law, this court is required to give words their ordinary and popular meaning. As the Supreme Court of Pennsylvania has noted, “[t]he standard for the interpretation of words is their natural meaning to the parties who have contracted at the time and place where the contract is made, considering all the circumstances surrounding it.”” G&T Conveyor Co. v. Allegheny County Airport Auth., 2011 U.S. Dist. LEXIS 123156 (W.D. Pa. Oct. 25, 2011), quoting, Urian v. Scranton Life Ins. Co., 165 A. 21, 22 (1933)

13. “It is a rule of construction of contracts, as well as statutes, that the express mention of one thing implies the exclusion of all others.” Trainer v. Wolfe, 21 A. 391 (Pa. 1891)

Discussion

The crux of the issue is whether the WSA was required to file a “Claim” under Article 10 of the General Conditions of the contract in order to withhold liquidated and special damages from payment to Wickersham under Article 4 of the agreement in the contract when viewing the record in the light most favorable to the non-moving party. The court concludes that, when viewing the record in the light most favorable to the non-moving party, WSA was not required to file a “Claim” in order to withhold payments for liquidated and special damages and issues of fact exist. Therefore, summary judgment is denied.

Wickersham asserts that when WSA withheld liquidated and special damages it was seeking an adjustment in contract Price and therefore is subject to the claims procedure under Article 10. This court does not agree that seeking liquidated or special damages constitutes seeking an adjustment in contract price as those terms are defined in the contract or under their plain meaning. The contract defines contract price as “[t]he monies payable by owner to contractor for completion of the work.” The contract defines liquidated and special damages as amounts that the “contractor shall pay owner.” See, Article 4.03 (liquidated) and 4.04A (special) of the agreement. Since neither liquidated nor special damages constitute money payable by the owner to the contractor, the collection of such damages does not constitute an adjustment in contract price which would require the filing of a claim.

This court further notes that Article 4 of the agreement provides for a specific remedy of deducting liquidated and special damages from progress payments. Article 4.05 provides that the “owner may deduct liquidated damages and special damages as determined by the provisions of Article 4 from progress payments due contractor under this agreement.” To the extent that such deductions conflict with the claims procedure in Article 10, this court believes that the more specific provisions of Article 4 control. See, Pbs Coal v. Hardhat Mining, 632 A.2d 903, 906 (Pa. Super. Ct. 1993) (“[W]here specific or exact terms seem to conflict with broader or more general terms, the former is more likely to express the meaning of the parties with respect to the situation than the general language.)(citations omitted).

Moreover, the failure of Article 4 and Article 10 to reference each other supports the conclusion that Article 4.05 is not subject to the filing of a claim under section 10.05 of the General Conditions. Neither one of these provisions references the other or appears to invoke the other’s procedures. At the same time, both contract provisions reference other provisions in the contract as to procedures that should be followed. For example, Article 4.02A specifically references Paragraph 2.03 of the General Conditions with respect to the commencement of contract Times. It also references Paragraph 14.07 of the General Conditions for the procedures for application for final payment. Article 4.03 references Article 12 of the General Conditions with respect to the allowance of extensions for Substantial Completion and adjustments for changes made in accordance with Article 12. Similarly, Article 10 of the General Conditions notes that one of its provisions is “subject to the provisions of 11.03 in the case of Unit Price Work.” It also references Paragraph 14.09. Article 10 also specifically states that the engineer’s resolution is “binding unless a party timely invokes the dispute resolution procedure set forth in Article 16.” The court believes that the express reference to provisions being subject to other provisions in both Article 4 of the agreement and in Article 10 in the General Conditions, coupled with the absence of any such reference in Article 4.05, means that 4.05 is not subject to the filing of a claim. See, e.g., Trainer v. Wolfe, 21 A. 391 (Pa. 1891)(“It is a rule of construction of contracts, as well as statutes, that the express mention of one thing implies the exclusion of all others.”)

Lastly, the court believes that summary judgment is not warranted because fact issues exist. Specifically, if the withholding of liquidated or special damages was subject to Article 10, a fact issues exists as to whether the course of performance or course of dealing between the parties establishes that the parties agreed that the filing of claims was not required for the withholding of liquidated and special damages. “[Cjourse of performance is always relevant in interpreting a writing.” Pennsylvania Engineering Corp., supra (further citations omitted). In addition, had WSA been required to follow the claims procedure of 12.05, a fact issues exists as to whether WSA substantially complied with its requirements.

The court enters the following order.

ORDER

And now, this 7th day of May, 2014, it is ordered and directed that summary judgment is denied.

      . This matter was commenced by a writ of summons filed April 1, 2011. Wickersham fi led a complaint on August 31, 2012 and an amended complaint on October 18, 2012. WSA filed an answer with new matter on December 13, 2012. Wickersham filed a reply to new matter on January 28, 2013. Wickersham served a request for admissions on October 11, 2013. No response to those requests was filed within thirty days.

      . WSA avers in its answer that the value of the contract with approved change orders was $9,006,055.89.

      . The court does not believe that in In RCR Building Corp. v. Pinnacle Hospitality Partners, 2012 WL 5830587 (Tenn. Ct. App. Nov. 15, 2012) (cited by plaintiff in support of summary judgment) is persuasive in this matter because it is distinguishable from the instant case. In RCR Building Corp. involved an owner seeking liquidated damages for missing a deadline. The contractor blamed the owner for delays. The owner did not deduct any amounts for liquidated damages for several months after the missed deadline. After the missed deadline, but upon completion of the contract, the parties agreed to the amount of final payment on December 10, 2008. On March 26, 2009, after the parties had already agreed to the final payment, the owner notified the contractor for the first time of its intent to seek liquidated damages for the passing of the deadline that occurred in May 2008. In the present case, by contrast, the owner timely notified the contractor of its withholding of liquidated damages from progress payments. The withholding occurred from progress payments. The parties did not agree upon an amount of final payment after the missed deadlines and then seek damages as it did in In RCR Building Corp. Furthermore, the delays in this case must be viewed as solely caused by the contractor and not by the owner.
      In deciding that seeking liquidated damages was a claim, the court of appeals of Tennessee focused on the contractual definition of claim which turned on whether the owner sought a payment of money when seeking liquidated damages. In that case, claim was defined as a “demand ... by one of the parties seeking, as a matter of right, ... payment of money [or] adjustment of the contract sum...” The court concluded that since the owner sought a payment of money when it sought to deduct liquidated damages, it fell within the contract’s definition of claim. Notably, the court did not state that seeking liquidated damages would meet the definition of seeking an adjustment in contract price. By contrast, in the present case “claim” is a “demand or assertion by owner or contractor seeking an adjustment of contract price or contract times, or both, ...” Contract price is “[t]he monies payable by owner to contractor for completion of the work.” Both this court and the court in In RCR Building Corp. concluded that seeking liquidated damages is a demand by the owner for money to be paid by the contractor to the owner. Under the contract in In In RCR Building Corp., that made the liquidated damages fall within the definition of a claim, subject to the claims process. In the instant case, it does not.


author: ANDERSON, J.,

text:
    Pennlyco, Ltd. v. International Development Corp.

      J. David Smith, for plaintiff.

      Marc S. Drier and Jeffrey Malak, for defendants.
    April 8, 2014
   ANDERSON, J.,

— Before the court are cross motions for summary judgment filed by all parties pursuant to this court’s order of September 20, 2013, which memorialized the parties’ agreement that liability in these matters could be resolved by way of such motions. Argument was heard March 18, 2014.

Plaintiff has brought the instant actions based on a transfer of certain mineral rights from its former tenant in common (with respect to those rights) to defendant IDC, and IDC’s lease of those rights to defendant Southwestern. According to the complaints, transfer of the rights was subject to a right of first refusal and since the transfer took place without notice to plaintiff and the opportunity for plaintiff to purchase the rights, such violated the right of first refusal. Plaintiff seeks specific performance of the right of first refusal, imposition of a constructive trust on the mineral rights, an accounting of any profits resulting from ownership of the rights since the transfer, damages for breach of the right of first refusal, a declaratory judgment that the lease between IDC and Southwestern is void, and damages for what it deems to be a cloud on its title.

In the motions for summary judgment, the defendants each posit numerous reasons why plaintiff is not entitled to any relief. The court finds the statute of limitations bars relief, however, and therefore will address only that issue, assuming for purposes of that argument that the right of first refusal applies to the transaction at issue.

To fully explain its reasoning, the court must begin with what might otherwise seem to be “ancient history,” but which, in the world of gas rights contests, is actually relatively recent. In 1966, the subject right of first refusal (hereinafter “ROFR”) was created by several companies which, at that time, had interests in the subject oil and gas rights. In 1983, one Clarence Moore became owner of 100% of those oil and gas rights. At that time, Mr. Moore was represented by Kenneth Yates, Esquire. In 1984, Mr. Moore transferred an undivided interest (the particular percentage is not entirely clear) in those rights to Mr. Yates, retaining the remaining interest. In 1992, Mr. Yates transferred his interest to a company of which he was the sole owner, Pennlyco, Ltd., plaintiff herein.

The contested transfer took place in August 2000, when the Moore Estate (Mr. Moore having died) entered an agreement with defendant IDC whereby eight properties (which included the property at issue here) were to be transferred to IDC in settlement of claims made by IDC against Moore. The Moore Estate was represented by Mr. Yates. A deed to the property was recorded by IDC on November 26,2007, and a real estate transfer tax statement of value filed with the deed listed the value of the property at issue here at $55,001. Once plaintiff became aware of this statement of value several years later, the instant suit was filed.

A suit to specifically enforce a right under a right of first refusal is subject to a five-year statute of limitations. 42 Pa.C.S. Section 5526. Thus, the offending transfer having taken place in August 2000, suit should have been brought by August 2005. The instant suit was filed on November 8, 2012. Plaintiff argues it is not time-barred, however, because although it was aware of the transfer, it was not aware of the “price” until the deed was recorded in 2007. Plaintiff claims the statute was tolled until that time.

The court finds applicable the following language from Weik v. Brown, 794 A.2d 907, 909 (Pa. Super. 2002), quoting and/or citing Cappelli v. York Operating, Inc., 711 A.2d 481, 484-85 (Pa. Super. 1998):

The statute of limitations begins to run as soon as the right to institute and maintain a suit arises; lack of knowledge, mistake or misunderstanding do not toll the running of the statute of limitations. It is the duty of the party asserting a cause of action to use all reasonable diligence to properly inform himself of the facts and circumstances upon which the right of recovery is based and to institute suit within the prescribed period.
The limitations period begins to run when the injured party possesses sufficient critical facts to put him on notice that a wrong has been committed and that he need investigate to determine whether he is entitled to redress.
The party invoking the discovery rule has the burden of proving that it applies. Id. In order to establish his entitlement to its application, the party must establish that he acted with reasonable diligence in determining the fact of injury but was unable to ascertain it.

In the instant case, Mr. Yates testified in his deposition that in helping draft the settlement agreement between IDC and Moore, he was under the impression that the property was being transferred in consideration of $550,000, that the option price would thus be $550,000, and that he (as Pennlyco) had no interest in purchasing it for that price. Pennlyco now argues that apparently it was mistaken, that the “price,” as evidenced by the statement of value, was actually $55,001, and that since it did not know that until the deed was recorded, the statute was tolled until that time. There are two flaws in this argument. First, the statement of value may be evidence of value, but it is not definitive as to “price.” IDC may be able to show that the property was indeed worth $550,000 at the time of transfer. Second, Pennlyco must establish that it acted with reasonable diligence in determining the price. As noted above, lack of knowledge, mistake or misunderstanding do not toll the running of the statute of limitations. Once Mr. Yates became aware of the intended transfer, he had a duty to investigate.

Pennlyco counters that it would have been futile to inquire as until the statement of value was filed, no price was established and thus Moore could not have provided an answer to that inquiry. This argument ignores the evidence that the statement of value was filed in order to satisfy the tax assessor and record the deed and was not IDC’s estimate of the value. There is no evidence to support Pennlyco’s assertion that an inquiry would have been futile. And, there is no evidence that Pennlyco made any attempt whatsoever to verify that its understanding regarding the $550,000 value was or was not correct. In fact, as Mr. Yates was counsel for Mr. Moore, and helped draft the agreement, he had peculiar access to that information. Clearly, Pennlyco has failed to prove it exercised reasonable diligence in learning the facts necessary for it to have determined whether it had a cause of action for breach of the ROFR, and the five-year statute of limitations prevents Pennlyco’s pursuit of the matter further.

ORDER

And now, this 8th day of April 2014, for the foregoing reasons, Pennlyco’s motions for summary judgment are hereby denied. The motions for summary judgment filed by IDC and Southwestern are hereby granted.

Judgment in both above-captioned matters is hereby entered against plaintiff and, in No. 12 — 02,326, in favor of defendant International Development Corporation, and in No. 12 — 02,428, in favor of Defendant Southwestern Energy Production Company.

      . Defendants argue, inter alia, that the right of first refusal did not apply to the contested transfer.

      . The parties to that matter considered that the claims and the settlement were worth one million dollars. No value was placed on any particular property, however.

      . Plaintiff admits that since Mr. Yates helped draft the Moore-IDC settlement agreement, he was aware of the transfer, and that Pennlyco was thus also aware of the transfer.

      . Apparently, plaintiff concedes that recording of the deed served as constructive notice of the statement of value.

      . See exhibit 13 of Southwestern’s motion for summary judgment, Yates deposition at p. 98-99.

      . See deposition of C. David Rainey, p. 52, exhibit I to Pennlyco’s motion for summary judgment.