Shannon, L. v. Pride Health Care, Inc. ( 2016 )

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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
LEO J. SHANNON T/D/B/A : IN THE SUPERIOR COURT OF
SHANNON REAL ESTATE CO., : PENNSYLVANIA
:
Appellant :
:
v. : No. 1221 MDA 2015
:
PRIDE HEALTH CARE, INC. :
Appeal from the Order Entered June 4, 2015,
in the Court of Common Pleas of Luzerne County
Civil Division at No. 2012-10886
BEFORE: FORD ELLIOTT, P.J.E., PANELLA, J., AND STEVENS, P.J.E.*
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED APRIL 21, 2016
Leo J. Shannon t/d/b/a Shannon Real Estate Co. (“Shannon”) appeals
from the order of June 4, 2015, sustaining defendant/appellee, Pride Health
Care, Inc.’s (“Pride”) preliminary objections and dismissing Shannon’s
amended complaint. After careful review, we affirm.
We have gleaned the following facts from the record. In 1994, Pride
agreed to buy a tract of land in Exeter, Pennsylvania, from Gruen Marketing
Corporation (“Gruen”), a watch manufacturing company. Pride is a
manufacturer of high-end wheelchairs. The agreement of sale, dated
November 23, 1994, contained the following provisions:
6.6 Brokers. Buyer [(Pride)] represents to the
Seller [(Gruen)] that no Broker was
instrumental in bringing about this sale and
that all negotiations with respect to the terms
* Former Justice specially assigned to the Superior Court.
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of this Agreement were conducted directly
between Buyer and Seller. Buyer agrees that
should any claim be made for [a] Broker’s
commission through or on account of any acts
of the Buyer or its representatives, including,
but without limitation, a claim by Leo J.
Shannon and/or Shannon Real Estate
Company, the Buyer will defend and hold the
Seller free and harmless from any and all
liabilities and expenses therewith, including
attorney’s fees and costs of suit, subject to
Buyer’s right, upon notice of such claim by
Seller, which notice shall be promptly provided
by Seller, to select and engage counsel of its
choosing. The provisions of this paragraph
shall survive the delivery of the Deed.
6.7 Right of First Refusal. As further consideration
to induce Buyer to purchase the Property,
Seller grants Buyer a right of first refusal to
purchase that portion of the tract and
improvements which Seller is retaining, which
right of first refusal shall continue as long as
Seller owns the remaining tract. In
furtherance of the foregoing, in the event
Seller receives a bona fide offer to purchase
the remaining tract and improvements or any
portion thereof from a reputable arms-length
third party prospective Purchaser with the
reasonable capacity to complete the
acquisition, Seller shall, within three days of
receipt of such written offer, provide a copy of
same to Buyer. Within three (3) days of
receipt of such offer, Buyer shall either elect to
purchase the remaining tract and make a
written offer to purchase on the identical terms
proposed by the third party prospective
Purchaser, or decline, in which case this right
of first refusal shall lapse. If Buyer fails to
respond within the three (3) day period
afore-referenced, this provision shall lapse.
Agreement of sale, 11/23/94 at 10.
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The question of whether or not Shannon is entitled to a broker’s
commission on the 1994 sale is the subject of pending litigation at case
number 1996-C of 1997. In 1998, four years later, Pride purchased an
adjacent tract of land from PNC Bank. The property had previously been
owned by Gruen. Shannon claimed that it was also entitled to a broker’s
commission on the 1998 sale, because of the right of first refusal contained
in Section 6.7 of the original sales agreement. Shannon brought suit against
Pride and Gruen at case number 3263 of 2002, and obtained a default
judgment against Gruen in the amount of $156,130.92. Gruen has not
appealed that judgment.
On July 18, 2011, Shannon and Pride appeared before the Honorable
Kenneth D. Brown, S.J., on Shannon’s motion to confirm indemnification and
enforce judgment against Pride. Shannon sought to enforce the
indemnification provision in Section 6.6 of the sales agreement. Shannon
argued that Pride was responsible for paying the default judgment entered
against Gruen. Shannon also noted that, “just for procedural purposes, we
filed a motion to bifurcate the issues against Gruen versus Pride for the sole
purpose of coming here today to enforce the judgment.” (Notes of
testimony, 7/18/11 at 14.)
In response, Pride argued that the right of first refusal was not
exercised. (Id. at 17.) According to Pride, a bona fide offer was made to
Gruen for the second parcel and Pride refused to exercise its option to
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purchase it at that time. (Id.) Pride did not purchase the second parcel
from PNC Bank until 1998, and another broker was involved in that
transaction. (Id. at 17-18.) Pride denied that the 1998 sale was
consummated pursuant to Section 6.7 of the 1994 sales agreement. (Id. at
18.) Therefore, Pride argued that it had no duty to indemnify Gruen for
Shannon’s broker’s commission. (Id.)
In addition, Pride argued that Shannon was not a party to the 1994
sales agreement and, in fact, was specifically excluded by Section 6.6. (Id.
at 17.) The contract was only between Pride and Gruen. (Id.) Pride also
argued that Shannon was not an intended third-party beneficiary. (Id.)
Therefore, Shannon would lack standing to enforce the indemnification
clause. (Id. at 19.)
According to Shannon, it was a third-party beneficiary and the
judgment against Gruen allowed it to proceed to levy against Pride under the
indemnification clause. (Id. at 6.) Shannon pointed out that it was
specifically referenced in Section 6.6 by name and the parties clearly
contemplated that Shannon was going to attempt to collect a broker’s
commission from the sale. (Id. at 15.) Regarding the application of
Section 6.7 to the second sale, Shannon argued that Section 6.7 did not
place any time restriction on the right of first refusal. (Id. at 22.) The right
of first refusal remains in effect as long as the seller owns the remaining
tract. (Id. at 22-23.)
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Counsel for Pride suggested that perhaps the matter should be
litigated in a separate action, rather than as a motion to confirm
indemnification in the case before Judge Brown:
[JOSEPH L. VULLO, ESQ.]: My thought would be
that it would have to be a third -- another action that
would have to be litigated based upon the facts of
this. Sort through the facts, whether this
indemnification clause applies to the second four-
year-later sale.
THE COURT: Would it potentially behoove both
parties to treat this matter as a declaratory
judgment issue that requires an evidentiary hearing?
MR. VULLO: If the Court would allow some period of
discovery, yes, that would not -- I don’t think Pride
would be opposed to that.
THE COURT: It just appears to me offhand that it
seems like it’s a declaratory judgment because the
Plaintiff is asking the Court to declare these rights
and resolve an issue.
Id. at 20-21.
Counsel for Shannon disagreed that the indemnification issue could not
be litigated as part of the case pending before Judge Brown:
[WILLIAM E. VINSKO, JR., ESQ.]: While we don’t
believe it’s premature at this point because we have
a judgment, we believe that we can enforce this
indemnification. For judicial economy sake, I don’t
believe that a full declaratory judgment action is
necessary only because the facts and the issues of
how much is owed were actually litigated with
counsel present for Pride. And when we had this
hearing --
THE COURT: In your judgment against Gruen?
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MR. VINSKO: Judgment against Gruen; I apologize.
So any issues that could have been raised could
have been raised at that time, and they were not.
So, therefore, the evidentiary work, you know, is
addressed.
Id. at 23-24. Counsel for Pride disagreed that there were no evidentiary
issues outstanding:
And as far as counsel’s claim that the evidentiary
issues have been resolved by virtue of the default
judgment against Gruen, the only evidentiary issues
that were resolved there were the amount of
damages against Gruen, not whether Pride has any
obligation to indemnify Gruen relative to that second
sale.
Id. at 25.
On August 8, 2011, Judge Brown denied Shannon’s “Motion to Confirm
Indemnification and Enforce Judgment Against Pride Health Care, Inc.,”
without prejudice, “because the relief sought by [Shannon] should more
properly be considered in the context of a separate and distinct cause of
action rather than in the context of the instant motion.” (Order, 8/8/11 at 1
¶1; RR at 97.) Shannon brought the instant declaratory judgment action by
filing a complaint against Pride on July 2, 2012, alleging that pursuant to
Section 6.6 of the 1994 sales agreement between Pride and Gruen, Pride is
responsible for the liability created by the judgment entered against Gruen.
Shannon sought a declaratory determination by the court that the 1994
sales agreement requires Pride to pay the liability established through the
judgment against Gruen in the amount of $156,130.92 plus interest and
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costs; and that Shannon may immediately commence execution on said
judgment against Pride.
Pride filed preliminary objections to the complaint, and on
February 20, 2015, Pride’s preliminary objections were sustained and
Shannon’s complaint was dismissed, with leave to file an amended complaint
within 25 days. An amended complaint was filed on March 16, 2015. Pride
again filed preliminary objections on April 6, 2015, together with a brief in
support, arguing, inter alia, that Shannon lacked standing to sue under the
1994 sales agreement and also failed to join an indispensable party (Gruen).
Shannon filed an answer to Pride’s preliminary objections on May 1, 2015.
On June 4, 2015, the Honorable Michael T. Vough sustained Pride’s
preliminary objections and dismissed Shannon’s complaint with prejudice.
Judge Vough attached a memorandum opinion explaining his reasons for
sustaining Pride’s preliminary objections in the nature of a demurrer.
Initially, Judge Vough determined that Shannon lacked standing to sue
under the 1994 sales agreement where it was neither a party to that
agreement, nor a third-party beneficiary. (Trial court opinion, 6/4/15 at 2.)
Judge Vough also found that Shannon failed to join an indispensable party.
(Id.) Gruen clearly had an interest related to Shannon’s claim, and no
decree could be entered without impairing that interest. (Id. at 3.)
Therefore, Shannon’s failure to join Gruen as a defendant deprived the court
of jurisdiction. (Id.)
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A timely notice of appeal was filed on July 6, 2015. On August 3,
2015, Shannon was ordered to file a concise statement of errors complained
of on appeal pursuant to Pa.R.A.P. 1925(b) within 21 days; Shannon
complied on August 25, 2015, asserting that this declaratory judgment
action was filed as a direct consequence of the directive of Judge Brown.
(Rule 1925(b) statement, 8/25/15 at 2.) On September 8, 2015,
Judge Vough issued a statement in lieu of opinion pursuant to
Pa.R.A.P. 1925(a)(1), relying on his June 4, 2015 memorandum.
Shannon has raised the following issue for this court’s review:
WHETHER THE TRIAL COURT COMMITTED AN ERROR
OF LAW OR ABUSED ITS DISCRETION IN
SUSTAINING THE PRELIMINARY OBJECTIONS AND
DISMISSING THE AMENDED COMPLAINT IN THE
INSTANT CASE WHEN THE HONORABLE SENIOR
JUDGE KENNETH BROWN DIRECTED THIS COURSE
OF ACTION IN A COLLATERAL MATTER?
Shannon’s brief at 3.
Our scope of review is plenary when reviewing a trial
court’s order sustaining preliminary objections in the
nature of a demurrer. See Glassmere Fuel Serv.,
Inc. v. Clear, 900 A.2d 398, 401 (Pa.Super. 2006).
“In order to determine whether the trial court
properly sustained Appellee’s preliminary objections,
this court must consider as true all of the well-
pleaded material facts set forth in the complaint and
all reasonable inferences that may be drawn from
those facts.” Id. at 402. In conducting appellate
review, preliminary objections may be sustained by
the trial court only if the case is free and clear of
doubt. See Knight v. Northwest Sav. Bank, 747
A.2d 384, 386 (Pa.Super. 2000).
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Wheeler v. Nationwide Mut. Fire Ins. Co., 905 A.2d 504, 505 (Pa.Super.
2006), appeal denied, 916 A.2d 1103 (Pa. 2007).
The Declaratory Judgments Act provides: “When declaratory relief is
sought, all persons shall be made parties who have or claim any interest
which would be affected by the declaration, and no declaration shall
prejudice the rights of persons not parties to the proceeding.” 42 Pa.C.S.A.
§ 7540(a).
Section 7540(a)’s requirement that all who have an
interest in the declaration be made parties to the
action is mandatory. Konidaris v. Portnoff Law
Assocs., Ltd., 884 A.2d 348 (Pa.Cmwlth.2005),
appeal granted, 588 Pa. 760, 903 A.2d 539
(2006); Allegheny County v. Commonwealth, 71
Pa.Cmwlth. 32, 453 A.2d 1085 (1983). A party is
indispensable when his rights are so connected with
the claims of the litigants that no decree can be
made without impairing those rights. Sprague v.
Casey, 520 Pa. 38, 550 A.2d 184 (1988). Failure to
join or serve parties as required by the statute is a
jurisdictional defect, and may be raised by a court on
its own motion at any time, even on appeal.
Konidaris; Polydyne, Inc. v. City of Phila., 795
A.2d 495 (Pa.Cmwlth.2002). Where the defect
exists, dismissal is appropriate. Konidaris.
Pilchesky v. Doherty, 941 A.2d 95, 101 (Pa.Cmwlth. 2008). “The burden
of proving that all interested persons have been made parties to the action,
or have received reasonable notice, is on the petitioner.” Moraine Valley
Farms, Inc. v. Connoquenessing Woodlands Club, Inc., 442 A.2d 767,
769 (Pa.Super. 1982).
In Mechanicsburg Area School District v. Kline,
494 Pa. 476, 481, 431 A.2d 953, 956 (1981), our
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Supreme Court set forth the following guidelines for
determining whether a party is to be considered
indispensable in pending litigation:
1. Do absent parties have a right or interest
related to the claim?
2. If so, what is the nature of that right or
interest?
3. Is that right or interest essential to the
merits of the issue?
4. Can justice be afforded without violating
the due process rights of absent parties?
It has been held that an inquiry into whether a party
is indispensable is to be from the prospective [sic] of
protecting the rights of the absent party, not from
the view of whether the joinder or nonjoinder of a
party would make the matter more difficult to
litigate. See E-Z Parks, Inc. v. Philadelphia
Parking Authority, 103 Pa.Cmwlth. 627, 521 A.2d
71 (1987), appeal denied, 517 Pa. 610, 536 A.2d
1334 (1987).
Grimme Combustion, Inc. v. Mergentime Corp., 595 A.2d 77, 81
(Pa.Super. 1991), appeal denied, 607 A.2d 254 (Pa. 1992).
In this case, even assuming Shannon has standing to enforce the
indemnification provision between Pride and Gruen, we agree with the trial
court that Gruen is an indispensable party. Gruen’s rights relative to the
default judgment entered against it will be affected by the outcome of this
case. Clearly, Gruen has an interest related to Shannon’s claim, and no
decree can be entered without impairing that interest. Therefore, Shannon’s
failure to join Gruen as a defendant deprived the trial court of jurisdiction.
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Shannon complains that Judge Brown denied its motion to confirm
indemnification and enforce judgment against Pride and indicated that
Shannon should re-raise the issue in a separate declaratory judgment
action, as it has done. However, Judge Brown’s decision in a separate case
would not excuse Shannon’s failure to join an indispensable party.
Moreover, nothing in Judge Brown’s order would excuse the failure to include
an indispensable party in the declaratory judgment action.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/21/2016
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