Amsler, J. v. Orchard House Prop. LLC ( 2016 )

J-A34006-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JEFFREY AMSLER, KAREN AMSLER, AND IN THE SUPERIOR COURT OF
KATHRYN CORRIGAN PENNSYLVANIA
Appellees
v.
ORCHARD HOUSE PROPERTIES LLC,
FRED R. AMSLER JR., FRED R. AMSLER
JR. LIVING TRUST, DONNA J. AMER, AND
CAMBRIDGE TRAINING PARTNERS L.P.
Appellants No. 1029 MDA 2015
Appeal from the Order May 14, 2015
In the Court of Common Pleas of Sullivan County
Civil Division at No(s): 2013-CV-253
BEFORE: PANELLA, J., OTT, J., and JENKINS, J.
MEMORANDUM BY PANELLA, J. FILED FEBRUARY 17, 2016
Appellants, Orchard House Properties LLC, Fred R. Amsler Jr., Fred R.
Amsler Jr. Living Trust, Donna J. Amer, and Cambridge Training Partners
L.P., appeal from the order entered May 14, 2015, in the Court of Common
Pleas of Sullivan County, which denied their preliminary objection to compel
arbitration. We vacate and remand this case for further proceedings.
By way of background, Appellant Fred R. Amsler is the father of
Appellees, Jeffrey Amsler and Karen Amsler. In 2010, Fred Amsler divorced
the siblings’ mother, Ilene Amsler, after more than 50 years of marriage.
Appellant Donna J. Amer is the purported paramour of Fred R. Amsler. The
entities at issue, Orchard House Properties, LLC and Cambridge Training
J-A34006-15
Partners, L.P., were formed to own and control various assets and income
belonging to Fred R. Amsler. The trial court summarized the relevant details
of this internecine familial dispute as follows.
A. The Orchard House Properties, LLC Operating
Agreement
On or about November 21, 2002, Orchard House
Properties, LLC was organized and established as a Nevada
limited liability company. An Operating Agreement was prepared
on November 5, 2002 establishing and delineating the company
purpose, scope, company interests, management, members,
applicable law, venue, etc. Said agreement was signed by the
following members with their signatures witnessed: Karen M.
Amsler, Kathryn A. Corrigan, Patricia M. Becknell and Jeffrey S.
Amsler. Exhibit A of the Operating Agreement set forth that
these four (4) members were listed with a capital percentage of
twenty five percent (25%) each and capital contributions of Ten
Dollars ($10.00) each.
On November 29, 2002[,] Jeffrey S. Amsler signed a
Certificate of Acknowledgement, wherein he acknowledged and
accepted his appointment as President of Orchard House
Properties, LLC and assented to “all provisions and stipulations
as herein imposed and expressed in the foregoing Limited
Liability Company Agreement.” Jeffrey S. Amsler’s signature was
witnessed and notarized. On or about November 29, 2002[,]
Karen M. Amsler signed a Certificate of Acknowledgement,
wherein she acknowledged and assented to “all provisions and
stipulations as herein imposed and expressed in the foregoing
Limited Liability Company Agreement.” Karen M. Amsler’s
signature is witnessed and notarized.
Article one Section 1.10 of the Operating Agreement states
“[v]enue for any dispute arising under this Operating Agreement
or any disputes among any members or the Limited Liability
Company shall be in the county of the Registered Office of the
Limited Liability Company.” See, Operating Agreement, p.6.
Article 1.07 states “the registered office of the Limited Liability
Company is 250 S. Center Street, Suite 500, Reno, Nevada
89501.”
-2-
J-A34006-15
Orchard House Properties, LLC held annual meetings in
accordance with the Operating Agreement wherein all officers
were present, the officers attended to the Limited Liability
Company’s business as delineated in the Operating Agreement
for approximately eleven (11) years until [Appellees] instituted
the instant action.
B. The Cambridge Trading Partners Limited Partnership
On or about October 15, 1991[, an] Agreement of Limited
Partnership [for] Cambridge Trading Partners was executed
among Fred. R. Amsler as General Partner and Fred R. Amsler
and Ilene A. Amsler each as a Limited Partner. On or about
November 5, 2002, an Amendment and Restatement was
executed in accordance with the Nevada Limited Partnership Act
“for purpose of forming and continuing a limited partnership (the
“Partnership”) in accordance with the provisions of the Nevada
Limited Partnership Act (the “Act”) and set forth by Fred R.
Amsler, as the General Partner and, the Fred R. Amsler Trust
and the Ilene A. Amsler Trust as Limited Partners.[”] (P.1 of
Cambridge Trading Partners Amendment and Restatement). The
Amended Restatement Agreement of Limited partnership (the
“Agreement”) consists of twenty[-]nine (29) provisions related to
the formation, scope, objective, partnership duties and
responsibilities. (See Paragraph 23, Misc. C). The Arbitration of
Disputes [provision] states “[a]ny dispute arising out of or in
connection with this Agreement, if not settled by mediation, shall
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
any decision rendered in such arbitration shall have the same
effect as if made by a court having proper jurisdiction.” (P. 55 of
the Agreement).
On or about October 18, 2010[,] an Assignment of fifty
percent (50%) of limited partnership interests held by the Ilene
A. Amsler Trust were assigned to the Fred R. Amsler Trust. The
Trustees of the Fred R. Amsler Trust then desired to assign five
percent (5%) of the limited partnership interests to Jeffrey S.
Amsler. On or about November 9, 2009[,] at the Annual Meeting
of the Members of the Cambridge Training Partners, LP, the
limited partners desired to transfer interests in Cambridge
Trading Partners, LP to reflect the above assignments. Members
Fred R. Amsler, Jeffrey S. Amsler and Ilene A. Amsler were
present at said meeting. At this Annual Meeting of the members
of the Cambridge Trading Partners, LLC the resolution was
-3-
J-A34006-15
adopted which confirmed “that on May 29, 2010, Ilene A. Amsler
transferred her 50% (fifty percent) Limited Partnership interest
to Fred R. Amsler, Jr. Following the transfer on the same date,
Fred R. Amsler, Jr. transferred 41% (forty[-]one percent) of his
Limited Partnership interest to the Fred R. Amsler, Jr. Trust and
5% (five percent) of his Limited Partnership [interest] to Jeffrey
S. Amsler.” See, Minutes of the 2010 Meeting of the Members.
Members Fred R. Amsler, Jr. and Jeffrey S. Amsler were present
at the meeting.
C. [Appellees’] Complaint
On or about October 16, 2013, [Appellees] filed a civil
action against Fred R. Amsler, Jr. and Orchard House Properties,
LLC. Thereafter on or about July 23, 2014, [Appellees] filed a
Complaint and Praecipe to Join Additional Defendants, namely
Cambridge Trading Partners, LP, Fred R. Amsler Revocable Living
Trust and Donna Amer. In their Complaint, [Appellees] assert
that Fred R. Amsler, Jr. was a fiduciary that dominated the
affairs of Cambridge Trading Partners, LP, in which Jeffrey
Amsler was the only limited partner, in comp[l]ete secrecy and
in breach of his confidential and fiduciary relationships between
he and the sibling Amsler. More specifically, the Complaint sets
forth the following causes of action:
Count I: Breach of the Operating Agreement
Plaintiffs against the Defendant LLC parties
Count II: Unjust Enrichment
Plaintiffs against the Defendant LLC parties
Count III: Conversion
Plaintiffs against the Defendant LLC parties
Count IV: Breaches of Fiduciary Duty
Plaintiffs against Fred Amsler
Count V: Breaches of the Partnership Agreement
Jeff Amsler against Fred Amsler and the
Defendant Partnership
Count VI: Unjust Enrichment
Jeffrey Amsler against the Defendant
Partnership Parties
Count VII: Conversion
Jeffrey Amsler against the Defendant
Partnership Parties
Count VIII: Breaches of Fiduciary Duty
Jeffrey Amsler against Fred Amsler
-4-
J-A34006-15
Count IX: Aiding and Abetting Breaches of Fiduciary
Duty
Plaintiffs against Donna Amer
Count X: Civil Conspiracy
Plaintiffs against Defendants
County XI: Equitable Accounting
Plaintiffs against Fred Amsler and the
Defendant Entities
Count XII: Declaratory Judgment
Plaintiffs against Defendants
Count XIII: Preliminary and Permanent Injunctive Relief
Plaintiffs against Fred Amsler and Donna
Amer
D. [Appellants’] Preliminary Objections
On or about September 8, 2014[,] [Appellants] filed
Preliminary Objections to [Appellees’] Complaint. …
[Appellants’] Preliminary Objections [maintain, inter alia,]
that [the trial court] lacked subject jurisdiction and that venue in
the Court of Common pleas of Sullivan County was improper.
Specifically, [Appellants] claimed that [the trial court] could not
properly assert subject matter jurisdiction over Counts V, VI,
VII, VIII, X, XI, and XII which related to [Appellee], Jeffrey S.
Amsler[’s] claims over [Appellants,] Fred A. Amsler, Jr. and
Cambridge Trading Partners, LP, since a valid arbitration
agreement existed. [Appellants] asserted that Jeffrey S. Amsler
accepted and agreed to the terms and conditions within the
Partnership Agreement which included the agreement to
arbitrate “[a]ny dispute arising out of or in connection with [the
Partnership] Agreement.” Furthermore, the Partnership
Agreement of Cambridge Trading Partners, LP (hereinafter
“Partnership Agreement”) required mediation and if the dispute
could not be settled, then arbitration. As such, [Appellants]
argued that counts V, VI, VII, VIII, X, XI, and XII must be
resolved under and in accordance with the commercial
arbitration rules of the American Arbitration Association since
that was specifically agreed to by the parties in the Partnership
Agreement and [the trial court] lacked subject matter
jurisdiction as a result.
Trial Court Opinion, 12/2/15 at 2-7.
-5-
J-A34006-15
After hearing argument on the Appellants’ preliminary objections, the
trial court issued an order on May 14, 2015, which summarily overruled the
preliminary objections to Appellees’ complaint in their entirety.
Appellants filed a timely appeal from the May 14, 2014, order denying
preliminary objections.1 Subsequent thereto, Appellees filed a motion to
quash the appeal as having been taken from an order that is interlocutory
and not appealable. Appellants filed an answer to that motion, asserting that
the subject order denied a request to compel arbitration. This Court issued
an order denying the application to quash to the extent the May 14 order
denied Appellants’ preliminary objection invoking the parties’ arbitration
agreement. To the extent that the May 14 order denied Appellants’
preliminary objections that raised issues unrelated to arbitration, we granted
the application to quash. This matter is now ripe for our review.
Appellants frame the limited issue on appeal as follows.
____________________________________________
1
On May 27, 2015, Appellants filed a motion for reconsideration of the trial
court’s May 14 order denying the preliminary objections to Appellees’
complaint. Argument was held on the motion on September 16, 2015, after
which, the trial court granted Appellants’ motion for reconsideration. In their
appellate brief, Appellees argue that the trial court’s order granting the
motion for reconsideration, issued after the thirty-day appeal period under
Pa.R.A.P. 903(a) expired, is void ab initio. See Appellees’ Brief at 3 n.4.
However, we note that our review in the instant appeal is limited solely to
the propriety of the trial court’s May 14 order denying the preliminary
objections invoking the parties’ arbitration agreement. As such, we do not
reach a determination as to the validity of the order granting
reconsideration.
-6-
J-A34006-15
Whether the trial court committed an error of law and/or an
abuse of discretion in denying Appellants’ Preliminary Objections
to compel arbitration since a valid arbitration clause was
contained in the Partnership Agreement and the dispute was
within the scope of the arbitration clause.
Appellants’ Brief at 4.
As a prefatory matter, we must address Appellees’ assertion that this
court is without jurisdiction to entertain the instant appeal. We note that
[o]ur jurisdiction to review the propriety of the trial court’s order
overruling preliminary objections in the nature of a motion to
compel arbitration is conferred by Pa.R.A.P. 311(a)(8), which
provides that an interlocutory appeal may be taken as of right
from any order made appealable by statute, and by 42 Pa.C.S. §
7320(a)(1) of the Uniform Arbitration Act, which authorizes an
appeal from [a] court order denying an application to compel
arbitration.
Collier v. National Penn Bank, --- A.3d ---, ---, 2015 WL 7444713 at *2
(Pa. Super, filed Nov. 24, 2015) (internal quotation marks and a citation
omitted).
A party may appeal directly from the order denying a preliminary
objection invoking an arbitration agreement; a separate petition to compel
arbitration is not required. See Stewart v. GGNSC-Canonsburg, L.P., 9
A.3d 215, 218 (Pa. Super. 2010). As the current appeal is properly before
us, we deny Appellees’ request to quash the appeal. We proceed to the
merits.
Our review of a claim that the trial court improperly denied the
Appellants’ preliminary objection in the nature of a petition to compel
arbitration is limited to determining whether the trial court’s findings are
-7-
J-A34006-15
supported by substantial evidence and whether the trial court abused its
discretion in denying the petition. See Walton v. Johnson, 66 A.3d 782,
787 (Pa. Super. 2013).
“We employ a two-part test to determine whether the trial court
should have compelled arbitration: 1) whether a valid agreement to arbitrate
exists, and 2) whether the dispute is within the scope of the agreement.”
Washburn v. Northern Health Facilities, Inc., 121 A.3d 1008, 1012 (Pa.
Super. 2015) (citation omitted). “Whether a claim is within the scope of an
arbitration provision is a matter of contract, and as with all questions of law,
our review of the trial court's conclusion is plenary.” MacPherson v.
Magee Memorial Hospital for Convalescence, --- A.3d ---, ---, 2015 WL
7571937 at *7 (Pa. Super., filed Nov. 25, 2015) (citation omitted) (en
banc).
The arbitration clause at issue provides as follows.
23. Miscellaneous
...
C. Arbitration of Disputes. Any disputes arising out of or in
connection with this Agreement, if not settled by mediation, shall
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
any decision rendered in such arbitration shall have the same
effect as if made by a court having proper jurisdiction.
Amendment and Restatement to Agreement of the Cambridge Trading
Partners, 11/5/02 at 55.
-8-
J-A34006-15
There appears to be no disagreement that the claims at issue, namely,
Counts V, VI, VII, VIII, X, XI and XII of the Complaint averring breach of the
partnership agreement, are within the scope of the agreement to arbitrate.
Therefore, we must determine whether a valid arbitration agreement exists.
In its opinion, the trial court revisited its earlier decision overruling
Appellants’ preliminary objection to enforce the arbitration agreement and
concluded that the arbitration provision should, in fact, be enforced. In so
finding, the court determined that all parties agreed to the terms of the
partnership agreement and that the arbitration clause was valid and
enforceable. See Trial Court Opinion, 12/2/15 at 10. The court further stated
that both parties had relied upon the terms of the Partnership Agreement
and “[t]o now ignore the … arbitration terms of the Partnership Agreement
would require this [c]ourt to enforce certain terms of the … Partnership
Agreement while ignoring others. To do so would be inconsistent with the
laws of the Commonwealth.” Id. at 10-11.
Appellees counter that the arbitration agreement is unenforceable for
numerous reasons. First and foremost, Appellees aver that a confidential
relationship existed between Appellant, Fred Amsler and his son, Jeffrey
Amsler, and that the arbitration agreement was not knowingly entered into.
See Appellees’ Brief at 10-11.
“A confidential relationship is marked by such a disparity in position
that the inferior party places complete trust in the superior party’s advice
and seeks no other counsel, so as to give rise to a potential abuse of power.”
-9-
J-A34006-15
Lenau v. Co-eXprise Inc., 102 A.3d 423, 443 (Pa. Super. 2014) (citation
omitted), appeal denied, 113 A.3d 280 (Pa. 2015). “[T]he existence of a
confidential relationship requires a fact-sensitive inquiry not to be disposed
rigidly as a matter of law.” Yenchi v. Ameriprise Financial Inc., 123 A.3d
1071, 1079 (Pa. Super. 2015).
A contract that is the product of a confidential relationship is
presumptively voidable “unless the party seeking to sustain the
validity of the transaction affirmatively demonstrates that it was
fair under all of the circumstances and beyond the reach of
suspicion.” Frowen v. Blank, 493 Pa. 137, 145, 425 A.2d 412,
416 (1981). More precisely, “the proponent of the contract must
prove by clear and convincing evidence ‘that the contract was
free, voluntary and an independent act of the other party,
entered into with an understanding and knowledge of its nature,
terms and consequences.’” Biddle v. Johnsonbaugh, 444
Pa.Super. 450, 456, 664 A.2d 159, 162 (1995) (quoting Kees v.
Green, 365 Pa. 368, 375, 75 A.2d 602, 605 (1950)). In
Frowen, the Supreme Court explained the basis for this
presumption:
When the relationship between the parties to an
agreement is one of trust and confidence, the normal
arm’s length bargaining is not assumed, and overreaching
by the dominant party for his benefit permits the
aggrieved party to rescind the transaction. This is so
because the presence of a confidential relationship negates
the assumption that each party is acting in his own best
interest. Frowen, 493 Pa. at 144, 425 A.2d at 416(citations omitted). Thus, “[o]nce a confidential
relationship is shown to have existed, it then becomes the
obligation of the party attempting to enforce the terms of
the agreement to establish that there has not been a
breach of that trust.” Id. at 144, 425 A.2d at 416; Iron
Worker's Sav. and Loan Ass'n v. IWS, Inc., 424
Pa.Super. 255, 270, 622 A.2d 367, 375 (1993) (citing
Frowen, 493 Pa. at 144, 425 A.2d at 416).
- 10 -
J-A34006-15
Paone v. Dean Witter Reynolds, Inc., 789 A.2d 221, 226 (Pa. Super.
2001).
Here, although Appellees alleged in response to Appellants’ preliminary
objections that a confidential relationship existed between Fred Amsler and
Jeffrey Amsler and that the arbitration agreement was a product of that
relationship, the trial court failed to conduct an inquiry into the existence of
the confidential relationship prior to ruling on the merits of the preliminary
objections.2 As previously noted, our judicial inquiry when determining the
validity of an arbitration agreement is limited to 1) whether a valid
agreement to arbitrate exists, and 2) whether the dispute is within the scope
of the agreement. See Washburn, supra. The fact-sensitive inquiry into
the existence of a confidential relationship clearly falls outside of this limited
scope of review.
Accordingly, we are constrained to vacate the trial court’s order
overruling Appellant’s preliminary objection to enforce the arbitration
agreement and remand this case for a hearing wherein the trial court must
determine whether the evidence supports the existence of a confidential
relationship. “If so, the trial court must determine whether the proponent of
the arbitration provision (presumably the stronger party) has met its burden
____________________________________________
2
Appellees raise the existence of a confidential relationship in Count VIII of
their Complaint. At this stage in the proceedings, we offer no opinion as to
the sufficiency with which Appellees allege the existence of the a confidential
relationship.
- 11 -
J-A34006-15
of showing that the provision is fair under all the circumstances, Frown, 493
Pa. at 145, 425 A.2d at 416, that it was entered into with knowledge of its
nature and consequences, Biddle, 664 A.2d at 162, and thus that the
provision was not itself a result of a violation of the trust reposed in the
confidential relationship.” Paone, 789 A.2d at 227. Where the evidence
suggests that a confidential relationship did not exist, then the arbitration
agreement is enforceable.
Order vacated. Motion to quash appeal denied. Case remanded for
proceedings consistent with this memorandum. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/17/2016
- 12 -