Glomar Holding, L.P. v. Eastern Metal Recycling ( 2017 )


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  • J   -A04039-17
    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
    GLOMAR HOLDING, L.P.,                                  1   IN THE SUPERIOR COURT OF
    PENNSYLVANIA
    Appellant
    v.
    EASTERN METAL RECYCLING -TERMINAL,
    LLC,
    Appellee                          No. 1939 EDA 2016
    Appeal from the Order May 25, 2016
    in the Court of Common Pleas of Delaware County
    Civil Division at No.: 15-10942
    BEFORE:     SHOGAN, J., SOLANO, J., and PLATT, J.*
    MEMORANDUM BY PLATT, J.:                                         FILED MAY 08, 2017
    Appellant, Glomar Holding, L.P., appeals from the order sustaining the
    preliminary objections in the nature of         a   demurrer of Appellee, Eastern Metal
    Recycling -Terminal, L.L.C., and dismissing Appellant's amended complaint
    with prejudice. We affirm.
    We take the following background from our independent review of the
    certified record.    On April 18, 2013, Appellee entered into a due diligence
    and     option   agreement    (the     Option       Agreement)   with   Eddystone   Rail
    Company, LLC (Eddystone), that granted Eddystone exclusive rights to
    conduct due diligence of the property (Property) and the option to purchase
    *   Retired Senior Judge assigned to the Superior Court.
    J   -A04039-17
    it.    On March 26, 2015, Eddystone assigned its rights under the Option
    Agreement to Canopy Prospecting, Inc. (Canopy).        On March 31, April 28,
    and May 27, 2015, pursuant to the Option Agreement's terms, Canopy made
    payments to Appellee to extend the deadline for exercising the option to
    purchase the Property. The option deadline was continued to July 15, 2015,
    with any other extension required to be submitted fifteen days prior.
    However, only one day before, on July 14, 2015, Canopy assigned its rights,
    title and interest   in the Option   Agreement to Appellant.   The same day,
    although it had conducted no due diligence, Appellant sent Appellee       a     letter
    exercising its option to purchase the Property pursuant to the Option
    Agreement's terms.     Pursuant to section 6(d) of the Option Agreement, the
    closing was to occur not less than sixty nor more than ninety days after the
    option's exercise, unless otherwise agreed to by the parties. (See Amended
    Complaint, Exhibit A, Due Diligence and Option Agreement, at unnumbered
    page 4 ¶ 6(d)).   Section 14 of the Option Agreement stated that   "[t]ime           is
    of the essence as to the performance of all of the terms and
    conditions of this Agreement."              (Id. at unnumbered page   8       '11   14)
    (emphasis added).
    The new closing date was scheduled for October 15, 2015.              On or
    about October 11, 2015, Appellant became aware of damage and vandalism
    on the Property   that had been the subject of police reports. On October 14,
    2015, Appellant notified Appellee that it intended to proceed with closing in
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    spite of the on -going casualty, but subject to                a   purchase price adjustment
    consistent with the Option Agreement's terms.                        Appellant requested an
    extension of the closing date for an insurance adjuster to assess the damage
    cost.        Appellee granted Appellant           a    thirty -day extension, and set   a   new
    closing date for November 13, 2015.                    Appellee memorialized the extension
    in a    letter to Appellant that stated, in pertinent part:
    .   .   .  interest of avoiding unnecessary disputes, [Appellee]
    in the
    has agreed to provide an extension of the closing date for the
    purchase and sale of the Property, which closing date shall occur
    on or before November 13, 2015, time being of the essence
    with respect thereto.  [Appellee] shall not extend the
    closing date beyond November 13, 2015 for any reason.
    (Preliminary Objections to Amended Complaint, at Exhibit                      B,   Modification
    Letter, 10/14/15).
    On October 20, 2015, Appellant identified Michael Simpson, of Sphere
    Risk Partners, as the insurance adjuster, and Appellee agreed to him on
    October 26, 2015.                 Mr. Simpson inspected the Property on October 29 and
    30, 2015.             On November 12, 2015, Mr. Simpson provided a preliminary
    estimate of repair costs of at least seven to fifteen million dollars, and stated
    that he required              a   minimum of four more weeks to complete his review.
    (See Amended Complaint, at Exhibit                F,   Simpson Letter, 11/12/15).
    On November 13, 2015, Appellant appeared at closing, and advised
    that it was willing to proceed with the purchase, but requested that Appellee
    either provide it with              a   credit toward the purchase price pursuant to the
    preliminary extimate, or grant an extension to allow Mr. Simpson time to
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    complete the inspection. Appellee offered             a   credit on the purchase price at
    the capped amount of $100,000.00, and denied                          a   request for another
    extension to complete the evaluation, on the ground that such is not an
    appropriate       remedy    under        section   6(d)    of       the   Option   Agreement.
    Thereafter, believing Appellant to be in default, with no further contractual
    rights, Appellee continued to market the Property to other prospective
    buyers.
    On January 11, 2016, Appellant filed a complaint against Appellee                    for
    breach of contract, specific performance, and             a   declaratory judgment on the
    basis of Appellee's alleged failure to keep the Property secure and avoid
    waste and to extend the closing date to allow further inspection. Appellant
    also filed   a   praecipe to index   a   /is pendens on the Property, and          a   motion to
    compel Appellee to allow Mr. Simpson to perform                 a   further inspection.
    On February 1, 2016, Appellee filed a response to the motion to
    compel and preliminary objections to the complaint on the bases of (1)
    Appellant's lack of standing for its failure to attach either                  a   copy of the
    actual assignment from Eddystone to Canopy or the agreement to extend
    the closing date to November 13, 2015, and (2) Appellant's failure to state                    a
    claim on which relief could be granted because Appellee was under no duty
    to extend the closing date again where time was of the essence.                            (See
    Appellee's Preliminary Objections to Appellant's Complaint, 2/01/16, at 6-
    15).
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    On February 22, 2016, Appellant filed an amended complaint, but did
    not remedy any of the issues raised in the preliminary objections.              (See
    Amended Complaint, 2/22/16, at pages 2-15, Exhibits A -G).            On March 14,
    2016, Appellee filed   a   petition to strike the praecipe to index   a   /is pendens
    and preliminary objections to the amended complaint in which it raised the
    same issues it had claimed in its prior pleading, in addition to claims that
    Appellant failed to state      a   claim for equitable relief.     (See Appellee's
    Preliminary Objections to Appellant's Amended Complaint, 3/14/16, at 7-
    27).
    The trial court held oral argument on the preliminary objections on
    April 18, 2016.      On May 25, 2016, the court sustained the             preliminary
    objection in the form of a demurrer on the basis that the amended complaint
    was legally insufficient to state any cognizable claims against Appellee. The
    court dismissed Appellant's amended complaint, denied Appellant's motion
    to    compel, and granted Appellee's petition to strike the /is pendens.
    Appellant timely appealed.'
    Appellant raises four questions for this Court's review:
    1. Did the trial court err when it sustained preliminary objections
    based on its determination that a condition that "time is of the
    essence" effectively nullified [Appellant's] express right to a
    credit for damage to the property it sought to purchase and
    'On July 11, 2016, Appellant filed a concise statement of errors complained
    of on appeal, pursuant to the court's order. See Pa.R.A.P. 1925(b). The
    court filed an opinion on August 23, 2016. See Pa.R.A.P. 1925(a).
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    precluded [its] claim for breach of contract and/or specific
    performance?
    2. Did the trial court err when it sustained preliminary objections
    based on its determination that [Appellant] did not establish
    entitlement to an equitable exception to any contractual timing
    condition?
    3. Did the trial court err in sustaining preliminary objections
    based on its determination that [Appellant] failed to meet the
    requirements of Pennsylvania Rules of Civil Procedure 2002(a)
    and 1019(i) because [it] did not attach a copy of a prior third -
    party assignment of the Option Agreement to its Amended
    Complaint even though Appellee          ratified the assignment
    .   .   .
    through its actions negotiating with, and accepting payment
    from, the prior assignee?
    4. Did the trial court err when it sustained preliminary objections
    based on its determination that the assignment of the Option
    Agreement to [Appellant] was invalid because the assignment
    did not reference [Appellant's] acceptance of its predecessor's
    contractual obligations?
    (Appellant's Brief, at 2-3) (questions reordered for ease of disposition).
    Our standard of review for      a    court's order sustaining preliminary
    objections in the nature of   a   demurrer   is   well -settled:
    A  preliminary objection in the nature of a
    demurrer is properly granted where the contested
    pleading is legally insufficient. Preliminary objections
    in the nature of a demurrer require the court to
    resolve the issues solely on the basis of the
    pleadings; no testimony or other evidence outside of
    the complaint may be considered to dispose of the
    legal issues presented by the demurrer. All material
    facts set forth in the pleading and all inferences
    reasonably deducible therefrom must be admitted as
    true.
    In determining whether the trial court properly
    sustained preliminary objections, the appellate court
    must examine the averments in the complaint,
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    together with the documents and exhibits attached
    thereto, in order to evaluate the sufficiency of the
    facts averred.      The impetus of our inquiry is to
    determine the legal sufficiency of the complaint and
    whether the pleading would permit recovery if
    ultimately proven. This Court will reverse the trial
    court's decision regarding preliminary objections only
    where there has been an error of law or abuse of
    discretion. When sustaining the trial court's ruling
    will result in the denial of claim or a dismissal of suit,
    preliminary objections will be sustained only where
    the case is free and clear of doubt.
    Thus, the question presented by the demurrer
    is whether, on the facts averred, the law says with
    certainty that no recovery is possible. Where a
    doubt exists as to whether a demurrer should be
    sustained, this doubt should be resolved in favor of
    overruling it.
    Where the complaint fails to set forth a valid cause of
    action, a preliminary objection in the nature of a demurrer is
    properly sustained. The complaint need not identify specific
    legal theories, but it must provide essential facts to support the
    claim. Assertions of legal rights and obligations in a complaint
    may be construed as conclusions of law, which have no place in
    a pleading.
    412 North Front Street Assoc., LP. v. Spector Gadon & Rosen, P.C.,
    
    151 A.3d 646
    , 656 (Pa. Super. 2016) (citations and quotation marks
    omitted).
    In its first issue, Appellant maintains that "any condition that time was
    of the    essence should     not be    interpreted to abrogate [its]      express
    contractual rights."    (Appellant's Brief, at 34) (unnecessary capitalization
    and internal quotation marks omitted). We disagree.
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    The amended complaint states claims against Appellee for specific
    performance, breach of contract, and declaratory judgment. (See Amended
    Complaint, at 11-15).                 Each of these counts is premised on Appellee's
    alleged breach of the Option Agreement. (See 
    id.
     at 12-14                         1111   61, 65, 70).
    In     its   preliminary objections, Appellee           maintained           that "the
    Amended Complaint fails to allege facts showing that [Appellee] breached
    the [Option] Agreement-a central element of each of [Appellant's] three
    claims   .    .    .   against [Appellee]-because [Appellee] was under no obligation to
    extend the existing                 November    13,       2015 closing date."             (Preliminary
    Objections to Amended Complaint, at 19                      ¶   91) (citing Amended Complaint,
    at 12-14          1111   61, 65, 70). The trial court sustained this preliminary objection,
    finding that "[Appellant's] amended complaint fails as                        a   matter of law to
    state any cognizable claims against [Appellee] and to establish any claim for
    equitable relief[.]"               (Trial Court Opinion, 7/11/16, at 34) (unnecessary
    capitalization omitted). We agree.
    "It       is well -established    that three elements are necessary to plead                    a
    cause of action for breach of contract: (1) the existence of                               a    contract,
    including its essential terms[;] (2)                  a    breach of the contract; and, (3)
    resultant damages." See 412 North Front Street Assoc., supra at 657
    (citation omitted).
    "The fundamental rule in contract interpretation is to ascertain the
    intent of the contracting parties. In cases of                  a   written contract, the intent of
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    the parties    is   the writing itself."                        Lesko v. Frankford Hospital-Bucks
    County,     
    15 A.3d 337
    , 342 (Pa. 2011) (citation                          omitted).
    Here, the relevant sections of the Option Agreement stated that
    Appellee gave Appellant exclusive rights to conduct due diligence on the
    Property, which included "investigat[ing] at its own expense the condition,
    quality,    and     suitability of the                         [Property.]"     (Option   Agreement,          at
    unnumbered page         1     '11    1(b)). The Agreement also provided Appellant with
    the option to purchase the Property. (See 
    id.
     at unnumbered page                                   2   '11   2).
    Once Appellant exercised the option, closing was to occur within sixty to
    ninety days, unless the parties otherwise agreed in writing.                                  (See 
    id.
     at
    unnumbered page 4           '11     6(d)). All risk of loss was on Appellee prior to closing.
    (See 
    id.
     at unnumbered page 6                            '11   6(i)(ii)). Section 6(i)(ii) further provided
    that, in the event of casualty involving the Property:
    [Appellant] may either (i) continue to closing, but [Appellee] will
    give [Appellant] a credit against the Purchase Price equal to the
    cost to repair the damage from such casualty as determined by
    an insurance adjuster engaged by [Appellant] and reasonably
    acceptable to [Appellee]      , or (ii) terminate this Agreement
    .   .     .
    and this Agreement shall be null and void and of no force or
    effect.
    (Id.).
    Importantly, section 14 expressly stated: "Time is of the essence                                    as
    to the performance of all of the terms and conditions of this Agreement."
    (Id. at unnumbered page                8   '11   14) (emphasis added).
    Based on the Option Agreement's language, the trial court found:
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    The law is settled in this Commonwealth that time is always of
    the essence in an option contract whether or not it is expressly
    provided unless the parties stipulate otherwise which    .  is not
    .   .
    the case sub judice.      Further, [Appellant's] failure to attach
    [Appellee's] Modification Letter[2] extending the closing to no
    later than November 1[3], 2015[;] with the express warning that
    "time is of the essence" in that regard to the Complaint and
    Amended Complaint suggests that [Appellant] believed that this
    Due Diligence and Option Agreement differed in no way from any
    other contract surrounding the sale of land.
    This inference is reinforced by [Appellant] erasing all signs
    that time was of the essence from the wording of its pleadings
    and the lack of the Modification Letter from [Appellee] and its
    timing advisory being appended thereto. Because time was
    intrinsically of the essence when [Appellant] attended the closing
    on November 13, 2015, but did not perform its obligation to
    provide a damages estimate through which the sale price for this
    Property could be adjusted, the Agreement was terminated and
    voided by [Appellant] whose responsibility alone was to assure
    that the sale was consummated in a timely fashion. Simply put,
    [Appellant] could not obfuscate or erase this fact and escape its
    own burden by eliminating altogether any mention of the
    existence of that clause from its pleadings and the exhibits
    appended thereto.
    (Trial Ct. Op., at 29) (citations omitted).     We agree with the trial court's
    reasoning that Appellant's failure to perform its obligations at closing
    2 Appellant did not attach this letter as an exhibit to the amended complaint.
    However, the amended complaint pleaded that Appellee agreed to extend
    the closing date to November 13, 2015. This is a material fact on which
    Appellant's claim is based and, pursuant to the terms of the Option
    Agreement, any extension of the closing date had to be by agreement of the
    parties and in writing. (See Option Agreement, at unnumbered page 4 ¶
    6(d)). Therefore, Appellant should have pleaded that the agreement to
    extend was in writing and attached it to the amended complaint. See
    Pa.R.C.P. 1019(i).
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    violated the time        is   of the essence requirement and terminated the Option
    Agreement.
    It   is   well -settled that "Winne is always of the essence in an option
    contract." New Eastwick Corp. v. Phil. Builders Eastwick Corp., 
    241 A.2d 766
    , 769 (Pa. 1968) (citations omitted).              "[I]t   is a sound legal   principle
    that unless an option is exercised within the time fixed it necessarily
    expires[.]"           Western Say. Fund Soc. of Phil. v. Southeastern Pa.
    Transp. Auth., 
    427 A.2d 175
    , 178 (Pa. Super. 1981) (citations omitted)
    (emphasis added).
    Here, Appellant agreed             to accept the assignment of the Option
    Agreement from Canopy on July 14, 2015, although the option termination
    date was scheduled for the next day.              (See Amended Complaint, at page 4
    1111   12-13). In spite of first having no opportunity to conduct due diligence
    on the Property, Appellant immediately exercised the option to purchase it.
    (See 
    id.
     at page 4             ¶   18).   Closing was scheduled for October 15, 2015.
    (See 
    id.
     at page         7 ¶   28). On October 11, 2015, Appellant "became aware"
    of damage to the Property. (Id. at page             5 ¶   20). Appellee agreed in writing
    to extend closing to enable Appellant the opportunity to inspect this damage,
    stating, the "closing date shall occur on or before November 13, 2015, time
    being of the essence with respect thereto.                          [Appellee] shall not
    extend the closing date beyond November 13, 2015 for any reason."
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    (Modification Letter, 10/14/15, at 1) (emphasis added); (see also Option
    Agreement, at unnumbered page 8            11   14).
    On October 20, 2015, Appellant identified Michael Simpson, AIC as an
    insurance adjuster pursuant to section 6(i)(ii) of the Option Agreement, and
    Appellee agreed to the selection on October 26, 2015.                     (See Amended
    Complaint, at page     7   III 30-31).    On November 12, 2015, Simpson provided
    a   preliminary damage estimate, but stated              he required a minimum of four
    more weeks to inspect the Property.                    (See 
    id.
     at page 8 III 32-33).
    Appellant    did     not    provide      Appellee      with    an   insurance   adjuster's
    determination on the extended closing date of November 13, 2015, but
    demanded that Appellee either provide it with             a   credit on the purchase price
    based on the preliminary estimate or extend the closing date, although
    neither of the two remedies was provided in the Agreement. (See 
    id.
     at III
    35-36). However, contrary to Appellant's assertion, Appellee was under no
    duty to extend the closing deadline further where the Option Agreement
    expressly stated that time was of the essence and Appellee reiterated this
    fact in its October 14, 2015 letter granting Appellant an extension of the
    closing date.      In fact, Appellee specifically advised Appellant that no more
    extensions would be granted for any reason.
    Therefore, based on the foregoing facts, as pleaded in the amended
    complaint, because time was of the essence and Appellant did not fulfill
    its obligation to provide an insurance adjuster's determination pursuant to
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    section 6(i)(ii) of the Option Agreement, the Agreement terminated and the
    trial court properly found that Appellee      is   unable to state   a   claim for which
    relief can be granted. See 412 North Front Street Assoc., supra at 656.
    Appellant's first issue lacks merit.3
    In Appellant's second issue, it argues that, "[e]ven if          a   'time   is   of the
    essence' condition     is   found   to   apply, equitable      factors        preclude its
    enforcement." (Appellant's Brief, at 39) (emphasis omitted).                   Specifically,
    Appellant asserts that it "was innocent with regard to the delay in closing"
    and that it "acted reasonably and diligently in its efforts to assess the
    damage and finalize the purchase." (Id. at 40). Appellant's claim does not
    merit relief.
    Anything short of the utmost good faith and diligence
    on the   part of the party seeking to be relieved from the
    consequences of a failure to conform strictly to the terms of [an
    option] contract will not be regarded as sufficient; but where it
    appears that by the act of the other party, or by unavoidable
    3   Moreover, although Appellant maintains that Appellee breached the
    Agreement by "failing to keep the Property safe and secure[ and] allowing
    waste and diminution in value to the Property[,]" the amended complaint
    fails to identify any duty imposed by the Agreement in this regard.
    (Amended Complaint, at page 12 ¶ 61). In fact, it would not have been in
    Appellee's interest to allow damage to the Property where it bore "all risk of
    loss prior to any closing." (Id. at page 6 ¶ 25 (quoting Option Agreement,
    at unnumbered page 6 ¶ 6(i)(ii))). The plain language of the Option
    Agreement provides that Appellant had the duty to conduct due diligence
    and, had it conformed to the express terms of the Agreement by appearing
    at closing with the insurance adjustor's determination, Appellee, which bore
    the risk of any casualty, would have had the duty to provide a credit in the
    purchase price equal to the cost of the damage. (See Amended Complaint,
    at page 7 ¶ 27; Option Agreement, at unnumbered page 6 ¶ 6(i)(ii)).
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    accident of such character as could not be foreseen and guarded
    against, the performance of the contract, with the exercise of
    due diligence was rendered impossible, and the other party
    at the earliest opportunity performed his part of the contract, the
    court will enforce it.
    Western Say. Fund Soc. of Phil., supra at 195 (citation omitted)
    (emphasis added).
    In this case, Appellant did not plead that it exercised any due
    diligence after being assigned the Option Agreement and before exercising
    its option to purchase.       (See Amended Complaint, at page 4 ¶¶ 13-18).
    Appellant pleaded that it accepted the assignment of the Option Agreement
    from Canopy one day before the option period expired, even though,
    pursuant to its express terms, this precluded it from extending the option
    term to conduct due diligence.         (See Option Agreement, at unnumbered
    page 3 ¶ 4 (granting optionee leave to extend the option term upon written
    notice provided to optionor fifteen days before term's expiration); Amended
    Complaint, at page 4 ¶¶ 12-13).         The amended complaint does not allege
    that Appellee    in   any way interfered with Appellant's opportunity to conduct
    due diligence before closing, let alone that it rendered it impossible.       See
    Western Say. Fund Soc. of Phil., supra at 195.                  In fact, Appellee
    extended the closing date to allow Appellant the opportunity to assess any
    damage to the Property to enable it to provide       a   determination of costs at
    closing. (See Modification Letter, 10/14/15, at 1).
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    Therefore, based on the foregoing, we conclude that the trial court
    properly found that Appellant failed to exercise "the utmost good faith and
    diligence" where, as pleaded in the amended complaint, it accepted the
    assignment of the Option Agreement one day before the termination of the
    due diligence period, and then failed to insure that          a   complete inspection
    was     performed before the extended closing date, which was granted
    specifically for that purpose.   Western Say. Fund Soc. of Phil., supra at
    195 (citation omitted).   Hence, Appellant has failed to establish its right to
    be "relieved from the consequences of a failure to conform                 strictly to the
    terms of [an option] contract[.]" Id. (citation omitted).                Accordingly, the
    trial court properly found that Appellant was not entitled to equitable
    considerations to relieve it of its duties under the time           is    of the essence
    provision. Appellant's second issue does not merit relief.
    In summary, because we conclude that the trial court properly found
    that Appellant's violation of the time   is   of the essence provision of the Option
    Agreement rendered it unable to state            a   claim on which relief could be
    granted, we affirm its order sustaining Appellee's preliminary objections and
    dismissing Appellant's amended complaint where, "on the facts averred, the
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    law says with certainty that no recovery is possible."     412 North Front
    Street Assoc., LP., supra at 656 (citation omitted).4
    Order affirmed.
    Judge Shogan joins the Memorandum.
    Judge Solano concurs in the result.
    Judgment Entered.
    J    seph D. Seletyn,
    Prothonotary
    Date: 5/8/2017
    4 Because we conclude that the trial court properly sustained the preliminary
    objections on the basis of Appellant's failure to state a claim on which relief
    can be granted we need not reach its second two issues challenging the trial
    court's findings regarding the effect of Appellant's failure to attach
    documents to the amended complaint or the sufficiency of Canopy's
    assignment.
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Document Info

Docket Number: Glomar Holding, L.P. v. Eastern Metal Recycling No. 1939 EDA 2016

Filed Date: 5/8/2017

Precedential Status: Precedential

Modified Date: 5/8/2017