Murray, H. v. Willistown Township , 169 A.3d 84 ( 2017 )

J-A04023-17
2017 Pa. Super. 265
HUGH J. MURRAY SR. IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
WILLISTOWN TOWNSHIP
Appellee No. 2319 EDA 2016
Appeal from the Order Entered June 12, 2017
In the Court of Common Pleas of Chester County
Civil Division at No(s): 14-12462
BEFORE: SHOGAN, J., SOLANO, J., and PLATT, J.*
OPINION BY SOLANO, J.: FILED AUGUST 17, 2017
Appellant Hugh J. Murray, Sr. appeals from the trial court’s June 12,
2017 order granting summary judgment in favor of Appellee Willistown
Township and reforming the parties’ contract. We affirm.
The trial court set forth the facts of this case as follows:
This dispute arises out of the voluntary retirement of plaintiff
Hugh Murray, Sr. from his position as Township Manager of
Willistown Township (the “Township”) in 2011 after eight (8)
years of employment. The material facts . . . are not in dispute.
Murray was appointed Willistown’s township manager in 2003.
Prior to that time, Murray held the position of Chief of Police for
the Township. Following Murray’s announcement of his intention
to retire, the Township and Murray came to terms on an
agreement whereby the Township agreed to provide Murray with
certain severance benefits. Murray and the Township entered
into an “Agreement and General Release of All Claims” (the
“Agreement”) on December 30, 2011. The Agreement, which
Murray had reviewed by counsel, provided for Murray to receive
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*
Retired Senior Judge assigned to the Superior Court.
J-A04023-17
some benefits in retirement, including dental, medical and life
insurance benefits.[ 1 ] The provision relating to Murray’s life
insurance benefits is what brings the parties before the court.
At the time of his retirement, Murray had group life insurance in
his capacity as Township Manager in the amount of $375,000.
The Agreement at Section 2(a) therefore provided as follows:
2. Severance Benefits. The Employer agrees to
provide the employee the following severance
benefits:
a. Employee shall be eligible to continue to
participate, at the Employer’s expense, in the
present group life insurance plan ($375,000)
offered by the Employer as may be carried from
time to time for all eligible employees on the
same terms and conditions that the Employee
currently participates.
Unbeknownst to either party, under the prevailing group plan an
employed township manager is considered a “Class 1 Member”
eligible for a $375,000 group life benefit. However, a retiree,
such as Murray, is only eligible for benefits in the amount of
$20,000, retirees being considered by the insurer as “Class 4
Members.” Upon learning of the policy’s restrictions, and
advising Murray of the same, the Township attempted to secure
an individual insurance policy for Murray for the amount
specified in the parties’ Agreement, but ultimately concluded
that it was unable to make such a purchase under its enabling
statute.[2]
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1
In exchange for these benefits, Murray agreed to “release[] and
discharge[] [the Township] . . . from all claims, liabilities, demands and
causes of action known or unknown, fixed or contingent, which [Murray]
may have against [the Township] as a result of this separation from
employment.” Agreement, ¶ 5.
2
As a township of the second class, Willistown is governed by the Second
Class Township Code, Section 1512(d) of which provides, in relevant part:
The board of supervisors may contract with any insurance
company, nonprofit hospitalization corporation or nonprofit
(Footnote Continued Next Page)
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Thereafter, the Township advised Murray that it could only
provide him with $20,000 in life insurance benefits under the
group policy and that it was not permitted to secure an
individual policy for him. Murray filed suit asserting claims for
breach of contract, specific performance, a claim under the Wage
Payment and Collection Law (which was later dismissed per
stipulation) and unjust enrichment.[3] The Township also filed
suit asserting a count for declaratory judgment which sought a
declaration that the Agreement’s life insurance provision in
Section 2(a) was invalid as a matter of law and, in the
alternative, a claim for contract reformation of Section 2(a),
replacing the amount listed therein with $20,000. The two
actions, Docket Nos. 2014-12462 and 2014-12086, were
consolidated under Docket No. 2014-12462.
Trial Ct. Order, 6/29/16, at 2-3 n.1 (citations to the record omitted).4
On March 15, 2016, the Township filed a motion for summary
judgment on all parties’ claims. After considering the briefs submitted by
the parties, the trial court granted the Township’s motion on June 29, 2016.
The court granted the Township’s request for reformation of the Agreement
_______________________
(Footnote Continued)
medical service corporation to insure its supervisors . . . ,
employe[e]s and their dependents under a policy or policies of
group insurance covering life, health, hospitalization, medical
service or accident insurance.
53 P.S. § 66512(d) (emphasis added). The Township construed this
provision to mean that it was authorized to purchase only group life
insurance. Murray does not contest that interpretation.
3
Murray sought damages in an amount that would enable him to purchase
$375,000 in life insurance or, alternatively, a court order requiring the
Township to purchase life insurance coverage for him in an amount not less
than $375,000. Murray did not seek contract reformation.
4
The trial court explained its order in a lengthy footnote. All citations to
pages of the June 29, 2016 order following page 1 are to the text of footnote
1 of that order.
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and reformed Section 2(a) to read: “Employee shall be eligible to continue to
participate, at the Employer’s expense, in the present group life insurance
plan ($20,000) offered by the Employer, as may be carried from time to
time for all eligible employees.” Order, 6/29/16, at 1.
The trial court found that there had been a mutual mistake of fact:
when they signed the contract, the parties mistakenly believed that Murray
would be eligible for life insurance in the amount of $375,000 under the
terms of the group plan. Trial Ct. Order, 6/29/16, at 4-5. The court held
that it had authority to reform the contract based on that mutual mistake.
Id. at 4 (citing Smith v. Thomas Jefferson Univ. Hosp., 621 A.2d 1030,
1032 (Pa. Super.), appeal denied, 631 A.2d 1009 (Pa. 1993)). The trial
court rejected Murray’s argument that he was entitled to $375,000 in
individual life insurance, reasoning that (1) the Township did not have the
statutory authority to purchase individual life insurance for any current or
former employee; and (2) the Township was not bound under the
Agreement to purchase individual life insurance for Murray. Id. at 3-4.
Murray filed a timely appeal on July 25, 2016.
In its June 29, 2016 order, the trial court did not expressly enter
summary judgment on the Township’s claim for a declaratory judgment or
on any of Murray's claims. Until the trial court “disposes of all claims and of
all parties,” there is no final order that is appealable to this Court. Pa.R.A.P.
341(b)(1). Therefore, on June 5, 2017, this Court ordered the trial court to
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“either amend the summary judgment order docketed on June 29, 2016 to
enter judgment on all of the claims by each party in the case, or . . . inform
this Court that it shall not now amend the order because some claims
remain outstanding.” In response, on June 12, 2017, the trial court
amended its June 29, 2016 order to (1) grant summary judgment in favor of
the Township on its contract reformation claim; (2) deny summary judgment
as to the Township’s declaratory judgment claim because it was moot; and
(3) grant summary judgment in favor of the Township on all of Murray’s
claims. Murray’s appeal is now properly before this Court. See Pa.R.A.P.
905(a)(5) (“A notice of appeal filed after the announcement of a
determination but before the entry of an appealable order shall be treated as
filed after such entry and on the day thereof”).5
On appeal, Murray raises the following issue:
Did the trial court err as a matter of law or abuse its discretion in
holding on summary judgment that [Murray] was only entitled to
$20,000 of life insurance coverage and no other relief when the
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5
Because the parties agree that Section 1512(d) of the Second Class
Township Code does not permit the Township to offer an individual policy of
insurance, this case does not “draw[] into question the application,
interpretation or enforcement” of that statute and therefore is not within the
jurisdiction of the Commonwealth Court. See 42 Pa.C.S. § 762(a)(4). Both
parties agree that this Court has jurisdiction. See Township’s Brief at 1;
see also 42 Pa.C.S. § 704(a) (“The failure of an appellee to file an objection
to the jurisdiction of an appellate court within such time as may be specified
by general rule, shall, unless the appellate court otherwise orders, operate
to perfect the appellate jurisdiction of such appellate court, notwithstanding
any provision of this title, or of any general rule adopted pursuant to section
503 (relating to reassignment of matters), vesting jurisdiction of such appeal
in another appellate court”).
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clear and undisputed intention of the parties was that [Murray]
was to receive $375,000 in life insurance coverage or, in the
alternative, equitable relief of equivalent value thereto[?]
Murray’s Brief at 5.
This Court’s standard of review is deferential:
Appellate 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 [the decree] will not be disturbed unless it is
unsupported by the evidence or demonstrably capricious.
Vautar v. First Nat’l Bank of Pa., 133 A.3d 6, 12 (Pa. Super. 2016) (en
banc) (brackets and citation omitted).
In his appellate brief, Murray does not dispute the trial court’s
conclusion that there was a mutual mistake of fact 6 or the trial court’s
holding that it had authority to reform the contract. See Murray’s Brief at
13, 16. Murray instead argues that the reformation ordered by the trial
court was inequitable.7 In Murray’s view, the trial court’s order should have
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6
In his response to the Township’s motion for summary judgment, Murray
had denied that there was a mutual mistake. See Murray’s Resp. to Mot. for
Summ. J. at ¶ 14. Murray no longer advances that position, and states in
his brief, “[t]he trial court was correct in determining that the Agreement
between the parties was based upon a mutual mistake.” Murray’s Brief at
13.
7
Murray also contends that the court erred in “imposing its relief without
any evidence before the court as to other available and reasonable option[s]
for relief,” Murray’s Brief at 16, and by “fail[ing] to hear evidence.” Id. at
13. However, Murray has identified no disputed issues of material fact that
should have precluded the entry of summary judgment. See Pa.R.Civ.P.
1035.3(a). No evidentiary hearing was required. See Molineux v. Reed,
532 A.2d 792, 793 (Pa. 1987).
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been based on some “other available and reasonable option,” such as
requiring the Township to pay (1) to Murray’s estate, $375,000 upon
Murray’s death; (2) to Murray, an amount equal to the sum of the annual
premiums on an individual policy for $375,000 in life insurance over some
reasonable number of years8; or (3) to Murray, an annual amount equal to
the premium on an individual policy for $375,000 in life insurance until his
death or until total premiums of $375,000 have been paid. See Murray’s
Brief at 16-17.
We begin with the threshold question of whether the trial court had the
authority to reform the contract after it determined that $375,000 in group
life insurance could not be provided to Murray. As noted, Murray’s appeal
does not challenge this authority and instead contends only that the specific
reformation ordered by the trial court was insufficient to satisfy his needs.
Both parties agree that contract reformation is an appropriate equitable
remedy in this case: the Township sought such reformation in its complaint;
and in his appellate brief, Murray insists that in the situation presented here,
“the court is to equitably ‘reform’ the contract so that the intentions of the
parties are achieved to the greatest extent possible.” Murray’s Brief at 13.
However, neither party has cited any case in which a Pennsylvania court has
“reformed” a contract in the way that was done here, and our own research
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8
Murray says the premiums would have been $15,750 per year in 2013, but
they increased as Murray aged. Murray’s Brief at 11.
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has uncovered no such authority. Before we can address Murray’s challenge
to the precise reformation relief that the trial court ordered, we must
determine the nature and propriety of the type of reformation remedy
employed by the trial court, since the legal basis for such relief necessarily
will bear on how we address Murray’s challenge to the scope of the trial
court’s contractual “reform.”
The trial court ordered reformation because the parties made a mutual
mistake about the availability of group insurance to cover Murray after he
retired. We have stated:
The doctrine of mutual mistake of fact serves as a defense to the
formation of a contract and occurs when the parties to the
contract have an erroneous belief as to a basic assumption of
the contract at the time of formation which will have a material
effect on the agreed exchange as to either party. A mutual
mistake occurs when the written instrument fails to set forth the
true agreement of the parties. The language on the instrument
should be interpreted in the light of subject matter, the apparent
object or purpose of the parties and the conditions existing when
it was executed.
Voracek v. Crown Castle USA Inc., 907 A.2d 1105, 1107-08 (Pa. Super.
2006) (quoted citation omitted), appeal denied, 919 A.2d 958 (Pa. 2007).
Mutual mistake regarding an essential term of a contract may provide a
basis for the contract’s rescission if (1) the mistake relates to “an essential
fact which formed the inducement to [the contract],” and (2) “the parties
[can be] placed in their former position with reference to the subject-matter
of [the contract].” See Vrabel v. Scholler, 85 A.2d 858, 860 (Pa. 1952);
Gocek v. Gocek, 612 A.2d 1004, 1006 (Pa. Super. 1992). Alternatively, if
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the same conditions are met, “[c]ourts can reform a contract entered under
mutual mistake.” Allen-Myland, Inc. v. Garmin Int'l, Inc., 140 A.3d 677,
693 (Pa. Super. 2016) (cited quotation omitted); RegScan, Inc. v. Con-
Way Transp. Servs., Inc., 875 A.2d 332, 340 (Pa. Super. 2005) (“If a
mistake is demonstrated, the contract may be reformed, or the injured party
may avoid his or her contractual obligations”); see also Smith, 621 A.2d at
1032 (“to obtain reformation of a contract because of mutual mistake, the
moving party is required to show the existence of the mutual mistake by
evidence that is clear, precise and convincing”).9
We most commonly have allowed reformation of mistaken contract
provisions in cases of “scriveners’ errors,” where the parties’ writing
mistakenly failed to record their agreed-upon intentions. See Daddona v.
Thorpe, 749 A.2d 475, 487 (Pa. Super.) (“[a] mutual mistake occurs when
the written instrument fails to . . . set forth the ‘true’ agreement among the
parties”), appeal denied, 761 A.2d 550 (Pa. 2000); see also Bollinger v.
Central Pa. Quarry Stripping & Constr. Co., 229 A.2d 741, 742 (Pa.
1967); Bugen v. New York Life Ins. Co., 184 A.2d 499, 500 (Pa. 1962).
In such situations, the court may reform the contract document so that its
language conforms to what the parties intended. Bollinger, 229 A.2d at
742. The error here, however, is not a drafting error; the written document
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9
Because the parties agree that there was a mutual mistake, we need not
consider whether the evidence is sufficient to prove a mistake under Smith.
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faithfully records what the parties intended. Rather, the error results from
the parties’ failure to understand that the insurance that they contemplated
and for which they provided in their written contract document was not
available under the Township’s group insurance arrangement. Reformation
of the contract therefore can be accomplished only by changing it to provide
for a different insurance benefit from what the parties intended when they
entered into their agreement. The parties have not cited and we have not
found any Pennsylvania case law authorizing a reformation of that type.
The American Law Institute’s Second Restatement of Contracts
suggests, however, that after discovery of a mistake, a remedy akin to
reformation may be available in some situations other than drafting errors
“on such terms as justice requires[,] including protection of the parties’
reliance interests.” Restatement (Second) of Contracts § 158(2) (1981).10
A comment explains:
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10
Sensitive to the rules relating to reformation in cases of scriveners’ errors,
the Restatement is careful to distinguish traditional reformation from the
ability to fix a mistaken contract term under Section 158. See Restatement
(Second) of Contracts § 155 cmt. b (“The discretionary relief authorized
under the rule stated in § 158 may involve some reshaping of the contract
duties by the court but is different from reformation”). Section 158 equates
the relief that it authorizes more closely to the necessary implication of an
implied, essential contract term under Section 204. Restatement (Second)
of Contracts § 158 cmt. c. We do not believe these technical distinctions
limit the availability of relief in this case. Because the trial court referred to
its remedy as “reformation,” we use that same term in this opinion to refer
both to traditional reformation and to the remedies discussed by Section
158(2) of the Second Restatement.
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Sometimes the party who is not adversely affected by a mistake
can, by assenting to a modification of the contract, eliminate the
effect of the mistake on the agreed exchange. He should
generally be allowed to do so and thereby to preclude avoidance
by the party who would otherwise be adversely affected. A court
may, under Subsection (2), grant the party who has not been
adversely affected what is, in effect, an option to enforce the
contract on new terms.
Id. § 158 cmt. c. 11 This Restatement provision has not previously been
12
considered by our appellate courts, but the American Law Institute
describes it as a “specific application” of principles under Section 204 of the
Second Restatement, which provides that a court may imply necessary
terms of a contract that have not been stated in the written document. See
id., Reporter’s Note; Restatement (Second) of Contracts § 204 & cmt a. The
idea is that if a mutual mistake voids an essential contract provision, a court
should be able to imply a new provision that will replace its essential terms,
so long as the party not adversely affected by the mistake assents to the
modification. See id. § 158 cmt. c. Pennsylvania courts have employed
Section 204’s “doctrine of necessary implication as a means of avoiding
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11
See also Restatement (Second) of Contracts § 152 cmt. d (“A party may
choose to seek relief by means of reformation even though it makes his own
performance more onerous when, absent reformation, the contract would be
voidable by the other party”).
12
Where, as here, the Supreme Court of Pennsylvania has neither adopted
nor rejected a Restatement provision, we are free to adopt it in an
appropriate case. See Newell v. Montana W., Inc., 154 A.3d 819, 824
n.7 (Pa. Super. 2017). We note that “Pennsylvania courts regularly employ
the Restatement (Second) of Contracts when resolving contract disputes.”
Hart v. Arnold, 884 A.2d 316, 333 (Pa. Super. 2005), appeal denied, 897
A.2d 458 (Pa. 2006).
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injustice by inferring contract provisions that reflect the parties’ silent
intent.” Stamerro v. Stamerro, 889 A.2d 1251, 1259 (Pa. Super. 2005)
(citation omitted); see Banks Eng’g Co. v. Polons, 752 A.2d 883, 886 n.4
(Pa. 2000) (plurality opinion); Hodges v. Pa. Millers Mut. Ins. Co., 673
A.2d 973, 974-75 (Pa. Super. 1995); Slater v. Pearle Vision Ctr., Inc.,
546 A.2d 676, 679 (Pa. Super. 1988).
Although the parties have focused on their mutual mistake regarding
the availability of insurance, the issue here more closely resembles one of
impracticability of performance resulting from the unavailability of the
desired coverage for Murray under the Township’s group insurance policy.
See generally Hart v. Arnold, 884 A.2d 316, 334-35 (Pa. Super. 2005),
(discussing impracticability of performance), appeal denied, 897 A.2d 458
(Pa. 2006).13 In this situation too, the Second Restatement provides that a
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13
Indeed, the parties’ “mistake” was in believing that group insurance in the
amount of $375,000 was available for Murray after he retired and, therefore,
in not realizing that performance of the contract’s provision for such
insurance was impracticable. Contractual impracticability usually results
from some supervening event after the parties entered the contract. See
Restatement (Second) of Contracts § 261; Hart, 884 A.2d at 334. It can
also result, however, from a condition existing at the time of the contract’s
formation. See Restatement (Second) of Contracts § 266; ALCOA v. Essex
Group, Inc., 499 F. Supp. 2d 53, 72 (W.D. Pa. 1980). Section 266 of the
Second Restatement, which has not been discussed in any reported
Pennsylvania appellate decision, states that such an impracticability excuses
performance of a contractual obligation if the obligor had no reason to know
of it and the condition was not the obligor’s fault. See id. § 266(1). The
trial court stated that the unavailability of $375,000 in life insurance for
Murray under the applicable group policy was “[u]nbeknownst to either
party,” Trial Ct. Order, 6/29/16, at 2, but it did not address whether either
(Footnote Continued Next Page)
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remedy akin to reformation is permissible to avoid injustice. Restatement
(Second) of Contracts § 272. The Restatement explains that this result is
merely another specific application of the principles of Section 204:
Under the rule stated in § 204, when the parties have not agreed
with respect to a term that is essential to a determination of
their rights and duties, the court will supply a term that is
reasonable in the circumstances. Since it is the rationale of this
Chapter that, in a case of impracticability or frustration, the
contract does not cover the case that has arisen, the court’s
function can be viewed generally as that set out in § 204 of
supplying a term to deal with that omitted case.
Id. § 272 cmt. c. We have previously cited Section 272 with approval,
although in support of restitutionary relief, not reformation. See Hart, 884
A.2d at 335.14
Upon consideration of these authorities, we hold that the trial court did
not err in reforming the parties’ Agreement. Specific performance of the
contract as written is not possible. Without reformation, the only remedy
would be to void the unenforceable life insurance provision, leaving Murray
_______________________
(Footnote Continued)
party had reason to know of the unavailability. The Township certainly
should have known of the policy’s terms, and, as Township Manager of the
Township from 2003 until he retired, it would seem that Murray should have
known of those terms as well. Because the question here is not whether
either party may avoid an obligation under the Agreement, but whether the
parties may have the Agreement reformed (a form of relief both parties
advocate), we do not believe the knowledge issue is determinative here.
14
In ALCOA, a federal district court, applying Indiana law, held that based
on mutual mistake, impracticability, and frustration of purpose, it could
modify the parties’ contract. 499 F. Supp. 2d at 78-80. The court explained
that a remedy modifying a term of the contract would “preserve the
purposes and expectations of the parties” better than any other remedy and
was “essential to avoid injustice.” Id. at 80.
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with no insurance relief at all; Murray has made clear that he opposes that
remedy. Neither party challenges the trial court’s ability to order
reformation, and, indeed, both parties advocate in favor of such relief.
Although the facts presented here may not fit within the traditional
framework of a mistake resulting from erroneous drafting, they do fit within
the broader parameters of the reformation remedies that have been
recognized under Sections 158(2) and 272 of the Second Restatement, both
of which derive from the power to imply contract terms under Section 204
when necessary to effectuate the parties’ intent. Exercise of that power is
consistent with Pennsylvania law. In light of these authorities, and
particularly in light of the parties’ mutual advocacy in favor of reformation to
restore an essential term of their agreement, we hold that, on these unique
facts, it was proper for the trial court to reform the contract.
The next question — and the nub of this case — is whether the trial
court properly exercised its discretion in formulating the reformation relief
that it ordered. Reformation is an equitable remedy. Potteiger v. Fid.-
Phila. Trust Co., 227 A.2d 864, 871 (Pa. 1967). “[A] court of equity has
broad discretion to decide what relief should be granted.” Jackson v.
Hendrick, 321 A.2d 603, 606 (Pa. 1974). Indeed,
Equitable remedies . . . are distinguished by their flexibility, their
unlimited variety, their adaptability to circumstances, and the
natural rules which govern their use. There is in fact no limit of
their variety and application; the court of equity has the power
of devising its remedy and shaping it so as to fit the changing
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circumstances of every case and the complex relations of all the
parties.
Id. at 606 n.8 (alteration in original) (citation omitted). However, “a court
of equity has no more right than has a court of law to act on its own notion
of what is right in a particular case and must be guided by the established
rules and precedents.” East Hempfield Twp. v. Brubaker, 828 A.2d
1184, 1188 (Pa. Cmwlth. 2003) (brackets and citation omitted). Equity
must follow the law. Bauer v. P.A. Cutri Co. of Bradford, 253 A.2d 252,
255 (Pa. 1969) (stating, “a court of equity follows and is bound by rules of
law, and does not use equitable considerations to deprive a party of his
rights at law”); Kapcsos v. Benshoff, ___ A.3d ___, No. 227 EDA 2016,
2017 WL 2806294, at *10 (Pa. Super., June 29, 2017) (“[E]quitable
discretion may not be exercised merely to negate a controlling rule of law.
‘Equity follows the law.’” (quoted citation omitted)). Murray argues that the
reformation ordered by the trial court did not conform to equitable principles
because it unfairly failed to provide for Murray to receive $375,000 in life
insurance. We disagree.
The trial court was faced with the task of trying to protect the parties’
reliance interests under a provision of the contract that could not be
implemented as written. In offering limited guidance on this task, Comment
c to Section 272 of the Second Restatement explains: “The question under
this Section is whether the court can salvage a part of the agreement that is
still executory on both sides. . . . The rule stated . . . makes it clear that it
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can do so by supplying a term which is reasonable in the circumstances
. . . .” Comment c to Section 158 contains similar language. This is a
sensitive undertaking. Normally, a court “will not reform a written contract
so as to make a contract for the parties that they did not make between
themselves.” New Charter Coal Co. v. McKee, 191 A.2d 830, 833 (Pa.
1963). That is why a traditional reformation remedy in Pennsylvania is
employed only to “make [the written contract document] correspond to the
understanding of the parties.” Bugen, 184 A.2d at 500; see also Allen-
Myland, 140 A.3d at 693 (requiring that the parties “be placed in their
former position regarding the subject matter of the contract”). Accordingly,
any effort to craft a remedy here must be guided by the need to adhere to
the parties’ original agreement to the maximum extent possible, and not to
substitute terms to which the parties never consented.
The unenforceable contract term at issue here provided:
Employee shall be eligible to continue to participate, at the
Employer’s expense, in the present group life insurance plan
($375,000) offered by the Employer as may be carried from time
to time for all eligible employees, on the same terms and
conditions that the Employee currently participates.
Agreement at ¶ 2(a). The trial court reformed this provision to state:
Employee shall be eligible to continue to participate, at the
Employer’s expense, in the present group life insurance plan
($20,000) offered by the Employer, as may be carried from time
to time for all eligible employees.
Trial Ct. Order, 6/29/16, at 1. Murray contends that the trial court erred
because reformation of the unenforceable provision should have assured
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that he (or his estate) will receive the $375,000 benefit that he expected,
and he argues that because group insurance coverage in that amount is not
available, the trial court should have reformed the contract to provide for an
equal benefit under an individual insurance policy. But such relief would not
have been reasonable on these facts.
First, as the trial court held, the provision to which the parties agreed
did not bestow a contractual right to a $375,000 benefit or a right to have
the Township purchase individual insurance for Murray. The trial court
explained:
The parties agreed to allow Murray to remain eligible to
participate in the present group life insurance plan at the
Township’s cost. The Township made no guarantees in this
section. It simply obligated itself to allow Murray to participate
in group life insurance, an obligation it satisfied. What Murray
remains eligible for under the group policy are benefits as [a]
“Class 4 Member,” not as a “Class 1 Member.”
Moreover, the language of the Agreement makes no
mention or promise of an individual life insurance policy for
Murray. No one has suggested the language is anything but
clear as to what benefits were contracted for by the parties. The
court therefore cannot and should not delve further than the
contractual language to determine the parties’ “intentions,” as
suggested by Murray.
Trial Ct. Order, 6/29/16, at 4.
The trial court correctly interpreted the parties’ agreement. The
contract provided that Murray “shall be eligible to continue to participate, at
the Employer’s expense, in the present group life insurance plan . . . offered
by the Employer,” and the court’s reformation order therefore properly
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preserved that same right to eligibility. The court changed only the
contract’s unenforceable parenthetical reference to the $375,000 benefit
that the parties incorrectly believed would apply to Murray and corrected
that number to specify the amount, $20,000, that actually is available to an
eligible person in Murray’s position. 15 The trial court thus reformed the
contract to adhere to the eligibility provision to which the parties agreed,
changing only that element of the agreement that was impracticable of
performance. The court’s effort to adhere closely to the original contract
was both reasonable and entirely appropriate.
Second, any reformation of the contract had to conform to the law
under which the Township must operate. Here, the governing law is the
Second Class Township Code, Willistown Township’s enabling statute.
“[M]unicipalities are created by the state and as such, may do only those
things which the state legislature has placed within their power in enabling
statutes.” White Deer Twp. v. Napp, 985 A.2d 745, 758 (Pa. 2009).
Section 1512(d) of the Second Class Township Code authorizes the Township
to purchase insurance “under a policy or policies of group insurance
covering life, health, hospitalization, medical service or accident insurance,”
53 P.S. § 66512(d) (emphasis added), and the parties agree that under this
provision the Township does not have authority to purchase individual life
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15
Of course, coverage of $20,000 was subsumed within the $375,000
coverage that the parties initially intended.
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insurance policies for its present or former employees. Cf., e.g., Bolduc v.
Bd. of Supervisors of Lower Paxton Twp., 618 A.2d 1188, 1191 (Pa.
Cmwlth. 1992) (holding that because Second Class Township Code did not
expressly give township the power to enter into an employment contract for
a fixed term, such a contract was void and unenforceable, and an employee
terminated before the end of his term could not recover damages for its
breach), appeal denied, 625 A.2d 1195 (Pa. 1993). The trial court’s
authority to provide Murray with equitable relief therefore did not extend to
ordering payment by the Township for an individual life insurance policy, as
the Township would be legally incapable of complying with such a term.
The contract terms sought by Murray thus would require the trial court
to depart from both the original agreement of the parties and the legal
restrictions under which one party, the Township, was required to operate.
Murray has cited no authority that would allow the trial court to award such
relief, and we are confident that he was not entitled to have the trial court
“reform” the contract to add the terms that he seeks. Murray’s suggestion
that the contract substitute a right to a direct payment of $375,000 by the
Township to his estate upon his death bears no resemblance to the original
contract, which did not call for such a payment by the Township. His
suggestion of a new contract term based on the amount of annual insurance
premiums needed to pay for an individual $375,000 policy would similarly
impose a new financial undertaking on the Township that finds no basis in
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the parties’ agreement; the Township agreed to include Murray under its
present group policy and did not agree to incur an additional expense to
provide Murray with a special insurance benefit. This is not a case where the
trial court was called upon to fashion compensatory relief for breach of the
contract’s insurance provision; it is a case where the court was asked to
salvage what it could of an unenforceable provision of the contract that
Murray did not want declared void. The trial court properly performed that
task, and we discern no abuse of its discretion in doing so. See Vautar,
133 A.3d at 12.
We are sympathetic to Murray’s argument that the unenforceability of
the current life insurance provision in his contract with the Township
deprives him of a significant financial benefit on which he relied, but that
argument does not provide a legal basis for relief. As the Supreme Court
stated in New Charter Coal, 191 A.2d at 833, “the law of contract does not
and cannot take heed of emotions; otherwise, the emotions of the judge
would ever be the deciding factor and chaos the result.” Murray is deprived
of his expected benefit because both he and the Township failed to conduct
the due diligence necessary to determine what group insurance benefits
actually were available in advance of entering their agreement. Nothing in
our decision precludes the parties from now negotiating a new or
supplemental agreement that provides Murray with additional relief if they
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are inclined to do so. But Murray may not obtain such relief from the trial
court or this Court under the guise of “reformation” of the Agreement.
Having discerned no error of law or abuse of discretion, we affirm the
trial court’s decision.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/17/2017
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