Michael, R. v. GLD Foremost Holdings, LLC , 156 A.3d 318 ( 2017 )


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  • J-S80037-16
    
    2017 Pa. Super. 37
    IN RE:    FOREMOST INDUSTRIES, :            IN THE SUPERIOR COURT OF
    INC.                           :                 PENNSYLVANIA
    RALPH C. MICHAEL               :
    :
    :
    v.                  :
    :
    :
    GLD FOREMOST HOLDINGS, LLC :                No. 686 MDA 2016
    AND DANIEL GORDON              :
    :
    Appellants
    Appeal from the Order Entered April 1, 2016
    In the Court of Common Pleas of Franklin County
    Civil Division at No(s): 2016-00109
    BEFORE: LAZARUS, J., STABILE, J., RANSOM, J.
    OPINION BY RANSOM, J.:                           FILED FEBRUARY 16, 2017
    Appellants,   GLD   Foremost    Holdings,    LLC   and   Daniel   Gordon
    (collectively “GLD”), appeal from the April 1, 2016 Order denying GLD’s
    Emergency Motion to Strike Lis Pendens on real estate owned by Petitioner,
    Foremost Industries, Inc. (hereinafter “Foremost Industries”).         For the
    following reasons, we reverse and remand with instructions.
    Appellee, Ralph C. Michael (hereinafter “Michael”), is a former owner
    of Foremost Industries. In May 2015, GLD and Michael entered into a Stock
    Purchase Agreement (“SPA”) wherein GLD agreed to purchase Foremost
    Industries from Michael. Trial Ct. 1925(a) Op., 6/13/2016, at 2.
    On November 30, 2015, Michael filed a complaint in federal court
    against GLD claiming breach of contract, fraud, and unjust enrichment. See
    Michael v. GLD Foremost Holdings, LLC et al., No. 15-2230, Pl. Compl.,
    J-S80037-16
    EDF No. 1, at 11-16 (M.D. Pa. Nov. 20, 2015). In his complaint, he avers
    that GLD failed to remit two million dollars of the purchase price stated in
    the SPA. See 
    id. at 9.
    Michael complains that GLD received all of Michael’s
    rights, titles, and interests in the Company upon execution of the agreement
    without delivering the full purchase price at closing.    
    Id. at 10.
      Thus,
    Michael asks for expectation damages in the form of a monetary judgment.
    On the same day, GLD filed its own complaint in federal court against
    Michael, asserting multiple claims arising out of the SPA.        See GLD
    Foremost Holdings, LLC v. Ralph C. Michael, Don E. Myers, and Laurie
    A. Myers, No. 15-2234, Pl. Compl., EDF No. 1, at 12 (M.D. Pa. Nov. 20,
    2015). Inter alia, GLD claims a possessory interest in property identified by
    Uniform Parcel Number 01-0A16.-126.-000000. 
    Id. at 25
    ¶ 102. According
    to GLD, Michael fraudulently transferred this property without consideration
    to his daughter, Laurie Myers, in April 2015, contrary to an SPA provision
    that expressly precluded Michael from selling any of Foremost Industries’
    assets after January 1, 2015. See 
    id. at 25-26.1
    In January 2016, Michael filed two praecipes for lis pendens on three
    different tracts of land owned by Foremost Industries, tax parcel nos. 01-
    0A16-027, 18-0K30-029, and 17-0J09-008 (collectively, “Greencastle”) in
    the Court of Common Pleas of Franklin County, certifying that the federal
    1
    In December 2015, GLD filed a notice of lis pendens with respect this
    property. See Exhibit B to GLD’s Emergency Petition to Strike Lis Pendens,
    3/2/2016 (Notice of Lis Pendens filed in No. 15-2234, EDF No. 12 (Dec. 21,
    2015)).
    -2-
    J-S80037-16
    actions concerned real property located in Franklin County.2      At that time,
    GLD was negotiating a sale of Foremost Industries’ Corporate Offices,
    specifically tract no. 01-0A16-027, located at 2375 Buchanan Trail West, to
    Greencastle-Antrim School District.3 Thus, GLD filed an emergency petition
    to strike the lis pendens.       See Emergency Petition to Strike Lis Pendens,
    3/2/2016. Michael filed an Answer to GLD’s Petition to strike, arguing that
    title was involved in the pending federal litigation and denying that GLD is
    the owner of Foremost Industries. See Michael’s Answer, 3/28/2016, at 2.
    Despite Michael’s representations in his Answer, his federal complaint does
    not seek a change in title, but rather mere money damages. See Michael
    v. GLD Foremost Holdings, LLC et al., No. 15-2230, Pl. Compl., EDF No.
    2
    Michael’s praecipe stated:
    Pursuant to 42 Pa.C.S. § 4304, authorizing the filing of notice of
    federal actions concerning real property, and 42 Pa.C.S. 4302,
    kindly index a Lis Pendens against property owned by Foremost
    Industries, Inc. located in Franklin County known as Tax Parcel
    No. 01-0A16-027. […] I certify that actions concerning real
    property located in Franklin County are currently pending before
    the United States District Court for the Middle District of
    Pennsylvania at Docket Nos. 1:15-CV-02230-YK and 1:15-CV-
    02234-YK.
    Praecipe, Docket No. 2016-109, 1/11/2016. Michael filed a second Praecipe
    requesting lis pendens be indexed on Tax Parcel Nos. 18-0K30-029 and 17-
    0J09-008, also owned by Foremost Industries. See Praecipe, Docket No.
    2016-110, 1/11/2016.
    3
    See Exhibit D to GLD’s Emergency Petition to Strike Lis Pendens: Letter
    from Ronald Finck, Atty. for Ralph C. Michael, to Sean P. McConnell, Sean J.
    Bellew and Catherine B. Heizenrater, Attys. for GLD Foremost Holdings, LLC
    and Daniel Gordon (Feb. 19, 2016).
    -3-
    J-S80037-16
    1, at 12, 15, 16 (M.D. Pa. Nov. 20, 2015). Following a hearing, the trial
    court denied GLD’s emergency motion to strike the lis pendens and issued
    an opinion. See Trial Ct. Op., 4/1/2016. GLD timely filed a court-ordered
    1925(b) statement in May 2016.        Thereafter, the trial court issued an
    additional, responsive opinion. See Trial Ct. 1925(a) Op., 6/13/2016.
    Upon initial review, this Court issued an order to show cause why the
    appeal should not be quashed as taken from an unappealable order.        See
    Order to Show Cause, 5/18/2016. Upon receipt of GLD’s reply, the show-
    cause order was discharged, and the issue was referred to the merits panel.
    See Order, 7/8/2016.
    GLD asserts that the order denying their petition is a final, appealable
    order because it resolved the only claim at issue in their petition.      See
    Appellants’ Response to Rule to Show Cause Order, 5/26/2016, at 4. The
    order effectively enables the lis pendens to exist as a cloud on Foremost
    Industries’ title to the Greencastle property, which casts a shadow over any
    purchase and sale negotiations for the Office Building property and calls into
    doubt the ability of GLD to convey marketable title. See GLD’s Br. at 6. The
    order denying GLD’s emergency petition to strike effectively put GLD “out of
    court” with respect to their ability to remove the cloud on title to
    Greencastle.   See McCahill v. Roberts, 
    219 A.2d 306
    , 308 (Pa. 1966)
    (overruling a motion to quash where the lower court’s lis pendens decision
    effectively eliminated Appellant’s claim of property ownership); Pa.R.A.P.
    -4-
    J-S80037-16
    341(b)(1).    Accordingly, we have jurisdiction to review the order denying
    their petition to strike.
    On appeal, GLD raises the following issues:
    1. Did the trial court err in concluding that 42 Pa.C.S. § 4302
    permits a lis pendens to be filed in any case where real estate
    is ‘involved,’ even if the title to the real estate is not at issue
    in the underlying case?
    2. Did the trial court abuse its discretion when it determined that
    it was irrelevant to the lis pendens analysis whether a party is
    seeking title to the property as a remedy in the underlying
    dispute, even though Pennsylvania law indicates otherwise?
    3. Did the trial court err when it ignored the harsh and arbitrary
    effect of its decision on Appellants, which significantly
    outweighed any negative impact on Appellee, who is not now,
    and never was the owner of the subject property?
    GLD’s Br. at 5-6.
    “Our standard of review of equity cases is a narrow one.
    ‘[A]ppellate review of equity matters is limited to a
    determination of whether the chancellor committed an error
    of law or abused his discretion. The scope of review of a
    final decree in equity is limited and will not be disturbed
    unless it is unsupported by the evidence or demonstrably
    capricious.’”
    Rosen v. Rittenhouse Towers, 
    482 A.2d 1113
    , 1116 (Pa. Super. 1984)
    (quoting Sack v. Feinman, 
    413 A.2d 1059
    , 1066 (Pa. 1980) (citations
    omitted), aff’d 
    432 A.2d 971
    , 973 (Pa. 1981)).              “Pursuant to these
    standards, we must examine whether the lower court abused its discretion
    or committed an error of law” in refusing to strike the lis pendens. 
    Rosen, 482 A.2d at 1116
    .
    -5-
    J-S80037-16
    This appeal arises out of the lower court’s denial of GLD’s emergency
    petition to strike lis pendens on properties owned by Foremost Industries.
    See Notes of Testimony (N.T.), 3/30/2016, at 5, 8.               “Lis pendens is
    construed to be the jurisdiction, power, or control which courts acquire over
    property involved in a suit, pending the continuance of the action, and until
    final judgment.” Dorsch v. Jenkins, 
    365 A.2d 861
    , 863 (Pa. Super. 1976)
    (citation omitted).   Lis pendens may be imposed when the property “is
    subject to litigation and that any interest acquired by the third party will be
    subject to the result of the litigation.” Vintage Homes v. Levin, 
    554 A.2d 989
    , 994 (Pa. Super. 1989) (citing Psaki v. Ferrari, 
    546 A.2d 1127
    , 1128
    (Pa. Super. 1988)).
    “[T]he doctrine of lis pendens is based in common law and equity
    jurisprudence, rather than in statute, and is wholly subject to equitable
    principles.” Dorsch , 
    365 A.2d 861
    , 863-64 (Pa. Super. 1976) (citing Dice
    v. Bender, 
    117 A.2d 725
    (Pa. 1955)).         “[T]he doctrine does not establish
    an actual lien on the affected property.” 
    McCahill, 219 A.2d at 309
    . “Its
    purpose is merely to give notice to third persons that the real estate is
    subject to litigation and ‘that any interest which they may acquire in the real
    estate will be subject to the result of the action.’” 
    Psaki, 546 A.2d at 1128
    (quoting 
    Dice, 117 A.2d at 727
    ); see also 
    McCahill, 219 A.2d at 309
    .
    If title to the property is not subject to the result of the litigation, then
    there is no reason to provide notice to a third party about the litigation. See
    -6-
    J-S80037-16
    Vintage 
    Homes, 554 A.2d at 994
    (citing 
    Psaki, 546 A.2d at 1128
    ).             To
    impose lis pendens in such a case would prove to be an arbitrary application
    of the doctrine and, “equity can and should refuse to give it effect, and,
    under its power to remove a cloud on title can and should cancel a notice of
    lis pendens which might otherwise exist.” 
    Dice, 117 A.2d at 727
    .
    Thus, a two-part analysis emerges from the common law that the
    courts should apply to determine whether exerting the court’s control over
    real property is appropriate. The first step is to ascertain whether title is at
    issue in the pending litigation. See 
    Psaki, 546 A.2d at 1128
    ; 
    Dorsch, 365 A.2d at 863-64
    . The second step is an equitable inquiry:
    [T]he lower court must balance the equities to determine
    whether the application of the doctrine is harsh or arbitrary and
    whether the cancellation of the lis pendens would result in
    prejudice to the non-petitioning party.
    
    Rosen, 482 A.2d at 1116
    ; see also 
    McCahill, 219 A.2d at 309
    (noting that
    the lower court should ordinarily ascertain “the exact nature and extent of
    any possible prejudice that could result from the cancellation of lis pendens”
    so that “the balancing of the equities can be more accurately resolved”).
    As GLD’s first and second issues are related, we shall address them
    together.   Essentially, GLD asserts the trial court erred by ignoring the
    threshold requirement that title to real estate be at issue. GLD’s Br. at 11,
    13-17. Further, GLD asserts, the court abused its discretion when it deemed
    irrelevant the relief sought by Michael in his federal claims. 
    Id. at 12,
    17-
    19. According to GLD, the threshold requirement to maintain a lis pendens
    -7-
    J-S80037-16
    is not met here because Michael does not claim he is the rightful owner of
    Greencastle, nor does he seek the return of real estate assets transferred
    pursuant to the SPA. 
    Id. at 12,
    15, 17. Thus, GLD concludes, Michael may
    not maintain a lis pendens on Greencastle. We agree.4
    Here, it was necessary for the lower court to determine if title is at
    issue in Michael’s federal claims before determining whether Michael had an
    equitable right to index a lis pendens on the property.          In Psaki, for
    example, our analysis was clear:
    Lis pendens has no application except in cases involving the
    adjudication of rights in specific property. Thus, a party is not
    entitled to have his case indexed as lis pendens unless title to
    real estate is involved in litigation. Lis pendens may not be
    predicated upon an action seeking to recover a personal
    demand. When a personal demand is reduced to judgment, of
    course, it becomes a lien, without more, on real estate which is
    owned by the judgment debtor. In such event, the filing of the
    lis pendens is unnecessary.
    
    Psaki, 546 A.2d at 1128
    (citations omitted).
    4
    In response, Michael asserts that the lis pendens were properly filed in
    accordance with the plain language of Section 4304(b), which does not
    expressly limit the indexing of federal actions to those affecting title to real
    property. See Michael’s Br. at 11 (noting use of the term, “concerning real
    property,” not “title,” as in Section 4302). According to Michael, Section
    4304(b) altered the common law doctrine of lis pendens, at least as it
    applies to federal actions. 
    Id. at 9.
    Thus, Michael concludes, he was
    entitled to give notice to potential buyers of his dispute with GLD.
    Michael cites no precedent in support of his assertion, and we reject it.
    There is no statutory right to lis pendens. “In Dice, [the Pennsylvania
    Supreme Court] laid to rest the argument that lis pendens is a statutory
    right and that the court lacks power to rescind its operation.” 
    McCahill, 219 A.2d at 309
    . Determining whether a lis pendens is proper requires
    application of the common law doctrine; it cannot be satisfied by satisfying
    the merely procedural requirements laid out in 42 Pa.C.S. § 4304(b).
    -8-
    J-S80037-16
    In this case, the lower court erred by rejecting the significance of the
    threshold inquiry. See Trial Ct. Op., 4/1/2016, at 3 (concluding that title to
    Greencastle was “not a relevant inquiry”). According to Michael’s complaint,
    “[a]s a result of Michael’s execution of the [SPA] and accompanying
    documents, GLD received all of Michael’s rights, titles, and interests in
    [Foremost Industries].” Michael v. GLD Foremost Holdings, LLC et al.,
    No. 15-2230, Pl. Compl., EDF No. 1, at 9 (M.D. Pa. Nov. 20, 2015).
    Importantly, Michael does not dispute that GLD now owns Foremost
    Industries’ rights, titles and interests.   Rather, Michael contends that GLD
    failed to pay a substantial portion of the contract price incident to the SPA.
    See 
    id. at 12.
    The outcome of the underlying contractual dispute will not
    affect who has title to Greencastle.        Rather, Michael demands money
    damages. See 
    id. at 12,
    15, 16.
    Michael’s lis pendens is premised on the erroneous averment in the
    answer to GLD’s petition to strike, in which he claims to be the equitable and
    legal owner of Foremost Industries until the balance of the purchase price is
    paid by GLD. See Michael’s Answer, 3/28/2016, at 2. “However, it is well-
    established law here that when the Agreement of Sale is signed, the
    purchaser becomes the equitable or beneficial owner through the doctrine of
    equitable conversion. The vendor retains merely a security interest for the
    payment of the unpaid purchase money.”         DiDonato v. Reliance Stand.
    -9-
    J-S80037-16
    Life Ins. Co., 
    249 A.2d 327
    , 329 (Pa. 1969) (citing Payne v. Clark, 
    187 A.2d 769
    (Pa. 1963)).
    To be clear, we reject Michael’s contention that he has equitable or
    legal ownership of Foremost Industries. Michael transferred any interest in
    Foremost Industries to GLD on the Closing Date. See SPA, art. 4.10, at p.
    12-13 (specifying title and condition of property to be transferred).
    The policy-based implications of our ruling in Psaki explicate that lis
    pendens has no application in “an action seeking to recover a personal
    demand.”     
    Psaki, 546 A.2d at 1128
    .        To permit a party to maintain a
    praecipe for lis pendens based on a pending suit for money damages only
    would be to permit a party to place a cloud on the title to real estate
    whenever a breach of contract suit arises. As noted in Psaki, “[t]his is not
    the law.” 
    Id. Thus, Michael
    may not maintain a lis pendens on Greencastle.
    In light of the foregoing, it is unnecessary to discuss in detail GLD’s
    third issue, in which it asserts that the court erred in weighing the equities
    present in this case. See GLD’s Br. at 19-22. Because Michael has failed to
    establish the threshold requirement for lis pendens, a lis pendens on
    Foremost Industries’ properties would prove “harsh [and] arbitrary” in this
    case. 
    Rosen, 482 A.2d at 1116
    . Accordingly, “equity can and should refuse
    to give it effect.” 
    Id. We hold
    that the trial court erred when it ignored the threshold
    requirement necessary to maintain a lis pendens. Further, the court abused
    - 10 -
    J-S80037-16
    its discretion by weighing the equities without determining that Michael
    asserts no right to title in Greencastle and seeks only money damages as
    compensation for his federal claims.    Accordingly, we reverse the order of
    court and remand with instructions that the trial court shall cancel the
    notices of lis pendens on the Greencastle subject properties. See 
    Dice, 117 A.2d at 727
    ; 
    Psaki, 546 A.2d at 1128
    .
    Order     reversed;   case   remanded   with   instructions;   jurisdiction
    relinquished.
    Judgment Entered.
    Joseph D. Seletyn, Esq.
    Prothonotary
    Date: 2/16/2017
    - 11 -
    

Document Info

Docket Number: Michael, R. v. GLD Foremost Holdings, LLC No. 686 MDA 2016

Citation Numbers: 156 A.3d 318

Filed Date: 2/16/2017

Precedential Status: Precedential

Modified Date: 1/12/2023