Kalkreuth Roofing & Sheet Metal, Inc. v. W. Jefferson Hills S.D. ~ Appeal of: Gito, Inc. d/b/a Nello Construction Co. ( 2023 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Kalkreuth Roofing and Sheet Metal, Inc. :
:
v. : No. 751 C.D. 2022
:
West Jefferson Hills School District and : Submitted: November 6, 2023
Gito, Inc. d/b/a Nello Construction :
:
Appeal of: Gito, Inc. d/b/a Nello :
Construction Company :
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL WOJCIK, Judge
HONORABLE MARY H. LEAVITT, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: December 22, 2023
Gito, Inc. d/b/a Nello Construction Company (Nello) appeals from the
June 15, 2022 order of the Court of Common Pleas of Allegheny County (trial court),
which granted the Motion to Enforce Settlement Agreement (Motion) filed by Appellee
Kalkreuth Roofing and Sheet Metal, Inc. (Kalkreuth). Upon review, we affirm.
I. FACTS AND PROCEDURAL HISTORY
Kalkreuth filed the underlying action on June 25, 2021. In its complaint,
Kalkreuth averred that West Jefferson Hills School District (the School District)
entered into a contract with Nello for the construction of a new high school (the
“Project”). (Reproduced Record (R.R.) at 8a.) Kalkreuth subcontracted with Nello to
provide roofing for the Project, including labor and materials, in exchange for payment
from Nello in the amount of $2,670,000.00 (the “Subcontract”). Id. at 8a-9a. Kalkreuth
alleged that errors made by Nello caused Kalkreuth to experience delays in completing
its work on the Project, which caused it to incur additional costs. Id. at 9a-13a.
Kalkreuth further alleged that Nello approved approximately $30,000.00 in change
orders, bringing the Subcontract value to approximately $2.7 million. Id. at 13a.
Kalkreuth contended that, as of the filing of the complaint, Nello had paid
approximately $2.4 million to Kalkreuth, leaving an outstanding Subcontract balance
of approximately $300,000.00. Id. Kalkreuth accordingly brought claims against
Nello for breach of contract and violations of the Commonwealth Procurement Code,
62 Pa. C.S. §§ 101 – 2311. Id. at 11a-12a. Kalkreuth also asserted an unjust enrichment
claim against the School District. Id. at 13a.
Nello disputed the claims and asserted a breach of contract counterclaim
against Kalkreuth and a cross-claim against the School District. See Answer, New
Matter, Counterclaim, and Cross-Claim, R.R. at 79a-89a. On April 27, 2022, counsel
for Nello offered Kalkreuth $300,000.00 to settle all claims. Id. at 94a. On April 28,
2022, counsel for Kalkreuth accepted the offer, subject to the additional conditions that
payment be received within seven days and the parties execute mutual releases.
Counsel for Kalkreuth offered to prepare the formal written settlement agreement and
requested that counsel for Nello “please let [him] know if [they] have a settlement.”
Id. at 94a, 109a. The same day, Nello’s counsel responded that Kalkreuth’s counsel
could “draft the agreement if [he’d] like.” Nello’s counsel further advised: “I’d say
payment within [seven] days of[ ] all signatures, but [the School District] might take a
week or so to sign (if prior experience with the [School District] holds true)[.]”1 Id. at
94a-95a, 117a.
1
On September 29, 2021, Nello and the School District executed a settlement agreement
regarding a separate lawsuit filed by Nello against the School District in the trial court. Pursuant to
that agreement, Nello agreed to “indemnify, defend and hold [the School District] harmless from any
of the claims asserted against [the School District]” by Kalkreuth in this litigation. (Motion, ¶ 2;
Response to Motion, ¶ 2; R.R. at 93a, 163a.) Thus, pursuant to that agreement, any liability for any
of Kalkreuth’s claims against either Nello or the District in this action ultimately would be assessed
against Nello.
2
Counsel for Kalkreuth thereafter drafted a Settlement Agreement and
Mutual Release (the Settlement Agreement), dated May 4, 2022. Id. at 95a, 126a. The
Settlement Agreement provides that, “[w]ithin seven (7) days of [the] execution of this
[Settlement] Agreement, Nello will make payment to Kalkreuth in the amount of
[$300,000.00 (Settlement Payment)]. Id. at 127a. It further provides that, “[w]ithin
seven (7) days of the receipt and clearance of the Settlement Payment, Kalkreuth shall
discontinue with prejudice the [l]awsuit.” Id. The Settlement Agreement further
requires that the parties “release, quit, and forever discharge each other . . . from any
and all claims, demands, rights, causes of action, damages, losses, suits, judgments . .
. of any nature whatsoever . . . in connection with the [l]awsuit, the Subcontract, or the
Project.” Id. at 127a-28a.
On May 4, 2022, counsel for Nello emailed counsel for Kalkreuth to notify
him that Nello “is no[ ] longer going to be able to enter into the terms of the proposed
[S]ettlement [A]greement as Kalkreuth [set forth on April 28, 2022].” Id. at 132a. On
May 10, 2022, Kalkreuth filed the Motion, in which it contended that “[a]ll of the
material terms of the settlement were agreed upon by all parties and the [S]ettlement
[A]greement should be enforced as a valid contract in accordance with Pennsylvania
law.” Id. at 96a. In its response to the Motion, Nello denied that it committed to
making payment within seven days, which period it contended was a material term of
the Settlement Agreement. Id. at 163a. Nello further alleged that its bank had called
in a loan and that it had several million dollars in outstanding debt it could not pay. Id.
at 164a. For that reason, Nello contended that it could not make the Settlement
Payment, never entered into a settlement agreement with Kalkreuth, and never signed
the written Settlement Agreement. Id. at 164a-65a.
3
The trial court held a hearing on June 15, 2022. Kalkreuth did not present
any witnesses, believing that the issue before the trial court was a purely legal question.
Id. at 173a-74a. After argument on the record, the trial court entered an order granting
the Motion and directing the School District and Nello to “work in good faith to finalize
the terms of the Settlement Agreement [ ] . . . , execute the [Settlement] Agreement
when finalized, and pay the $300,000.00 as required by the [Settlement] Agreement.”
Id. at 189a. The trial court did not award attorneys’ fees. Id.
Nello filed the instant appeal on July 11, 2022, and the trial court issued
its opinion pursuant to Pennsylvania Rule of Appellate Procedure (Pa. R.A.P.) 1925(a)
(Trial Ct. Op.) on November 23, 2022. The trial court provided the following rationale
for granting the Motion:
[Kalkrueth] and [Nello] engaged in various settlement
negotiations and mediations throughout the course of this
matter. At some point [Nello’s] counsel emailed
[Kalkreuth’s counsel] that [Nello’s] final offer [was]
$300,000[.00], which was accepted by [Kalkreuth] with
certain conditions. Additionally, [Kalkreuth] offered to
prepare a settlement agreement. Shortly thereafter[, Nello]
agreed to the suggested conditions and [Kalkreuth’s] offer to
prepare the [S]ettlement [A]greement. Subsequently, the
[S]ettlement [A]greement was sent to [Nello] for execution
but it would not execute [the Settlement Agreement], citing
lack of financial resources.
The [a]ppellate [c]ourts have held that a court must enforce
the terms of a settlement agreement when the agreement
contains all the requirements of a valid contract including an
offer, acceptance, and consideration. Mastroni-Mucker v.
Allstate Ins[urance] Co., [ ] 976 A.2d 510, 518 (Pa. Super. [
] 2009). Even if the agreement has not been reduced to
writing, it is still an enforceable agreement if all the essential
terms have been established. Id. at 518.
4
Given the definite terms of $300,000[.00] for the resolution
of the case, the [trial c]ourt entered the [o]rder of June 15,
2022, granting [Kalkreuth’s] [M]otion . . . .
(Trial Ct. Op. at 1-2 (unpaginated); R.R. at 197a-98a.)
II. ISSUES PRESENTED
There are three issues on appeal: (1) whether the trial court’s June 15,
2022 order is appealable; (2) whether the Settlement Agreement is unenforceable due
to Nello’s inability to make the Settlement Payment; and (3) whether the parties
reached a “meeting of the minds” and formed an enforceable contract.
III. DISCUSSION
A. Appealability
Although the parties did not initially raise the issue, this Court by Order
exited March 22, 2023, directed the parties to address in their principal briefs the
appealability of the trial court’s June 15, 2022 order.2 Appealability implicates our
subject matter jurisdiction, which “may be raised by the court sua sponte if necessary.”
LeFlar v. Gulf Creek Industrial Park No. 2, 515 A.2d 875, 879 (Pa. 1986). Subject
matter jurisdiction “cannot be obtained by consent of the parties, or by waiver or
estoppel.” In re Borough of Valley-Hi, 420 A.2d 15, 17 (Pa. Cmwlth. 1980). Thus,
“we are not only permitted, but required[,] to determine if the trial court’s order is
appealable.” Brophy v. Philadelphia Gas Works & Philadelphia Facilities
Management Corp., 921 A.2d 80, 86 (Pa. Cmwlth. 2007).
Nello argues that the trial court’s June 25, 2022 order is appealable (1) as
a final order disposing of all claims against all parties under Pa.R.A.P. 341(a) and
(b)(1); and (2) as a qualifying collateral order under Pa.R.A.P. 313.
2
Nello addressed the appealability of the trial court’s order in its principal brief. Kalkreuth
did not, which omission we interpret as Kalkreuth’s concession that the order is appealable.
5
Pursuant to Pa.R.A.P. 341(a), “an appeal may be taken as of right from
any final order of a . . . trial court.” Pa.R.A.P. 341(a). A “final order” is an order that
“disposes of all claims and of all parties” or that is otherwise entered as a final order.
See Pa.R.A.P. 341(b)(1), (3). Here, we conclude that the trial court’s June 25, 2022
order is not a final order pursuant to Pa.R.A.P. 341(a) because it does not dispose of all
claims against all parties. Rather, it directs that the parties work towards executing a
final written settlement agreement, after the execution and performance of which
Kalkreuth presumably will discontinue this litigation. This, therefore, is not a situation
where litigants have executed a final, written settlement agreement and one of the
parties to the agreement contends that another has breached it. Rather, the parties here
arguably reached a settlement that was not reduced to a final writing. Until a written
settlement agreement is executed and this action discontinued, the parties’ claims
remain pending. Thus, the trial court’s order is not final under Rule 341(a). We are
quick to note, however, that we do not herein decide that all orders enforcing settlement
agreements are not final under Rule 341. We conclude only that the language of this
order and the unresolved circumstances of this litigation preclude a finding of finality.
See Baumbach v. Lafayette College, 272 A.3d 83, 88 (Pa. Super. 2022) (trial court order
approving settlement agreement not final where agreement provided that parties would
file a praecipe to settle and discontinue the action after receiving settlement
payments).3
Nevertheless, we agree with Nello that the trial court’s order qualifies as
an appealable collateral order pursuant to Pa.R.A.P. 313(a). Under that rule, “[a]n
appeal may be taken as of right from a collateral order of an administrative agency or
3
Superior Court decisions are not binding on this Court, but may be cited for their persuasive
value. Lerch v. Unemployment Compensation Board of Review, 180 A.3d 545, 550 (Pa. Cmwlth.
2018).
6
lower court.” Pa.R.A.P. 313(a). Rule 313(b) defines a “collateral order” as one that (1)
is separable from and collateral to the main cause of action; (2) involves a right that is
too important to be denied review; and (3) presents a question such that if review is
postponed until final judgment, the claim will be irreparably lost. Pa.R.A.P. 313(b).
In determining first whether an order is separable from and collateral to
the main cause of action, we must determine whether review of the order implicates
the merits of the main cause of action. Commonwealth v. Wright, 78 A.3d 1070, 1077
(Pa. 2013). In other words, we examine “whether the issues appealed can be addressed
without analysis of the underlying claims on the merits.” Brophy, 921 A.2d at 87.
Where review of the order in question does not implicate or affect the merits of the
underlying dispute, it is separable from and collateral to the main cause of action.
Wright. As for the second prong, “[a]n issue is important if the interests that would
potentially go unprotected without immediate appellate review of that issue are
significant relative to the efficiency interests sought to be advanced by the final
judgment rule.” Geniviva v. Frisk, 725 A.2d 1209, 1213 (Pa. 1999) (quoting In re Ford
Motor Co., 110 F.3d 954, 959 (3d Cir. 1997)). “[I]t is not sufficient that the issue be
important to the particular parties. Rather[,] it must involve rights deeply rooted in
public policy going beyond the particular litigation at hand.” Id. at 1214. Finally,
under the third prong, we ask “whether a right is ‘adequately vindicable’ or ‘effectively
reviewable.’” Geniviva, 725 A.2d at 1213 (quoting Digital Equipment Corp. v. Desktop
Direct, Inc., 511 U.S. 863, 878-79 (1994)). This question “cannot be answered without
a judgment about the value interests that would be lost through rigorous application of
a final judgment requirement.” Id.We conclude that the trial court’s order satisfies all three collateral order
prerequisites. First, the trial court’s order enforcing the Settlement Agreement clearly
7
is separate from and collateral to the underlying breach of contract claims among the
parties. Second, there are at least two important rights or interests involved here: (1)
the parties’ mutual loss of the right to litigate their claims and/or defenses; and (2) the
judicial policies favoring both the settlement of legal disputes and, absent fraud or
mistake, the enforcement of settlement agreements. Health Care and Retirement Corp.
v. Department of Public Welfare, 632 A.2d 964, 969 n.5 (Pa. Cmwlth. 1993). Third,
the enforcement of this Settlement Agreement effectively ends the litigation between
the parties and precludes any further discovery or development of Nello’s claims.
Given Nello’s current and apparently distressed financial situation, waiting until after
final judgment to permit an appeal could ultimately preclude Nello from either
pursuing its contract claims or challenging the trial court’s ruling on the Motion.
Thus, although this is a close case, we conclude that the trial court’s order
is an appealable collateral order. See Vignetti v. Borough of Munhall (Pa. Cmwlth.,
No. 571 C.D. 2016, filed June 9, 2017), 2017 WL 2536509, slip op. at 6-11 (unlike an
order declining to enforce a settlement agreement, a trial court order enforcing a
settlement agreement is an appealable collateral order because (1) it is separable from
and collateral to the main cause of action; (2) forfeiture of the right to pursue a legal
claim is of sufficient import to warrant immediate appellate review; and (3) if review
is denied, plaintiffs’ right to pursue relief from multiple defendants in a single
proceeding would be lost.). 4 We accordingly have subject matter jurisdiction over this
appeal and will proceed to consider Nello’s substantive issues.5
4
Unreported opinions of this Court issued after January 15, 2008, may be cited for their
persuasive value. See Section 414(a) of the Commonwealth Court’s Internal Operating Procedures
(IOP), 210 Pa. Code § 69.414(a).
5
“When reviewing a trial court’s decision to enforce a settlement
agreement, our scope of review is plenary as to questions of law, and
(Footnote continued on next page…)
8
B. Validity of Agreement
To maintain logical consistency, we address Nello’s substantive
arguments in reverse order. Nello argues that the trial court erred in finding that an
enforceable settlement agreement existed because the parties did not finalize the terms
governing the timing of payment. Nello contends that, because timing of payment was
a material term, its absence from the parties’ “meeting of the minds” precludes a
finding that an agreement was reached and is enforceable. We disagree.
Under Pennsylvania law, a contract exists when parties exhibit mutual
assent to the terms of an agreement. Shovel Transfer & Storage, Inc. v. Pennsylvania
Liquor Control Board, 739 A.2d 133, 136 (Pa. 1999). Further,
[i]f a settlement contains all of the requisites for a valid
contract, a court must enforce the terms of the agreement,
even if the terms are not yet formalized in writing. The intent
of the parties to a written contract is contained in the writing
itself. Moreover, after the parties reach a meeting of the
minds as to the essential terms of their agreement, the
existence of gaps in the contract will not vitiate it. Thus, the
law in this Commonwealth makes clear that if parties agree
upon essential terms and intend them to be binding, a
contract is formed even though they intend to adopt a formal
document with additional terms at a later date.
we are free to draw our own inferences and reach our own conclusions
from the facts as found by the [trial] court. However, we are only bound
by the trial court’s findings of fact which are supported by [substantial]
evidence. The prevailing party is entitled to have evidence viewed in
the light most favorable to its position. Thus, we will only overturn the
trial court’s decision when [its] factual findings . . . are against the
weight of the evidence or its legal conclusions are erroneous.”
Bennett v. Juzelenos, 791 A.2d 403, 406 (Pa. Super. 2002) (internal citations omitted).
9
Davis-Haas v. Exeter Township Zoning Hearing Board, 166 A.3d 527, 535-36 (Pa.
Cmwlth. 2017) (internal citations and quotations omitted). Agreements to settle are
favored under Pennsylvania law. Mastroni-Mucker, 976 A.2d at 518.
We conclude that the parties agreed to the material terms of a settlement
agreement, which included Nello’s payment to Kalkrueth of $300,000.00 within seven
days of the execution of the written Settlement Agreement, together with the mutual
release of claims. Although Nello’s counsel did not initially agree to payment within
seven days of the date of a written agreement, he nevertheless agreed to all other
proposed terms and suggested that payment be required within seven days of execution
of a written agreement. Kalkreuth’s counsel thereafter drafted the Settlement
Agreement in accordance with that proposal. Thus, both the amount and timing of the
Settlement Payment were terms proposed by Nello’s counsel and accepted by
Kalkreuth’s counsel. The parties therefore agreed on material terms and entered into a
valid and enforceable settlement agreement.
Further, even if the parties did not reach a “meeting of the minds”
regarding the timing of payment, where all other material terms are agreed upon, as
they were here, a reasonable time for payment will be implied. See Hutchinson v.
Pennsylvania State Employes’ Retirement Board, 738 A.2d 7, 16 (Pa. Cmwlth. 1999).6
Any lack of a time-of-payment term thus would not preclude enforcement. As the trial
court noted, it is clear in the record that the parties reached a settlement agreement and
that Nello, after payment became inconvenient, sought to renege. See R.R. at 183a.
The trial court did not err in finding that a valid and enforceable Settlement Agreement
exists.
It also is noteworthy that, during settlement negotiations, Nello’s counsel suggested that
6
Nello could make a settlement payment within a short time. See R.R. at 99a.
10
C. Impracticability of Performance/Frustration of Purpose
Nello secondly argues that, even if the parties entered into a valid
Settlement Agreement, the Agreement cannot be enforced because Nello no longer has
adequate funds to make the Settlement Payment. Nello contends that its financial woes
both frustrate the purpose of such an agreement and render its performance
impracticable. We again disagree.
The Restatement (Second) of Contracts addresses “impossibility” of
performance due to impracticability and/or the frustration of a contract’s purpose.
Section 261 addresses discharge of performance due to impracticability:
§ 261. Discharge By Supervening Impracticability
Where, after a contract is made, a party’s performance is
made impracticable without his fault by the occurrence of an
event the non-occurrence of which was a basic assumption
on which the contract was made, his duty to render that
performance is discharged, unless the language or the
circumstances indicate the contrary.
Restatement (Second) of Contracts § 261 (Am. Law. Inst. 1981). “Impossibility of
performance” means “not only strict impossibility but impracticability because of
extreme and unreasonable difficulty, expense, or loss involved.” In re Busik, 759 A.2d
417, 423 n.9 (Pa. Cmwlth. 2000) (quoting West v. Peoples First National Bank & Trust
Co., 106 A.2d 427, 432 (Pa. 1954)). “Impossibility of performance,” however, does
not include mere inconvenience, even though it may work a hardship. Id. (citing
International Brotherhood of Firemen & Oilers, Local 1201, AFL-CIO v. Board of
Education of School District of Philadelphia, 457 A.2d 1269 (Pa. 1983)). “Nor does
it include a party’s financial inability to perform.” Id. (citation omitted).
Section 265 of the Restatement (Second) of Contracts further provides for
discharge of performance by supervening frustration:
11
§ 265. Discharge By Supervening Frustration
Where, after a contract is made, a party’s principal purpose
is substantially frustrated without his fault by the occurrence
of an event the non-occurrence of which was a basic
assumption on which the contract was made, his remaining
duties to render performance are discharged, unless the
language or the circumstances indicate the contrary.
Restatement (Second) of Contracts § 265 (Am. Law Inst. 1981). “Thus, a court can
excuse performance under a contract upon the occurrence of a truly unexpected event
that thwarts the purpose or performance of a contract.” Step Plan Services, Inc. v.
Koresko, 12 A.3d 401, 412 (Pa. Super. 2010) (citation omitted). The Pennsylvania
Supreme Court has summarized the principle of frustration as follows:
When people enter into a contract which is dependent for the
possibility of its performance on the continual availability of
a specific thing, and that availability comes to an end by
reason of circumstances beyond the control of the parties, the
contract is prima facie regarded as dissolved. . . . A court can
and ought to examine the contract and the circumstances in
which it was made, not of course to vary, but only to explain
it, in order to see whether or not, from the nature of it the
parties must have made their bargain on the footing that a
particular thing or state of things would continue to exist.
And if they must have done so, then a term to that effect will
be implied, though it be not expressed in the contract.
Greek Catholic Congregation of Borough of Olyphant v. Plummer, 12 A.2d 435, 439
(Pa. 1940) (internal citations and quotation marks omitted). See also Hart v. Arnold,
884 A.2d 316, 334-35 (Pa. Super. 2005).
Here, Nello cites only to its own financial peril to justify the discharge of
its performance under the Settlement Agreement, the material terms of which it
proposed. Even assuming that Nello’s financial troubles are as Nello alleges them to
be, they do not qualify as a valid “frustration of purpose” or “impracticability” that
12
justifies nonperformance. In re Busik, 759 A.2d at 423 n.9; see also Step Plan Services,
12 A.3d at 413; Felix v. Giuseppe Kitchens & Baths, Inc., 848 A.2d 943, 948 (Pa.
Super. 2004) (“It is well settled that that financial inability of a party to complete
obligations under a settlement is not a basis for voiding the settlement.”). Thus, the
intervening “event” of Nello’s alleged insolvency does not frustrate the purpose of the
Settlement Agreement, which is to end the litigation without further expense to either
party. That purpose remains legitimate and is not eliminated by the fact that Nello now
argues that it is not financially capable of performing. Frustration of purpose and
impracticability simply do not apply in this scenario, and for that reason, the trial court
did not err in enforcing the Settlement Agreement.
IV. CONCLUSION
For the reasons set forth above, the trial court’s June 15, 2022 order is
affirmed.
________________________________
PATRICIA A. McCULLOUGH, Judge
13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Kalkreuth Roofing and Sheet Metal, Inc. :
:
v. : No. 751 C.D. 2022
:
West Jefferson Hills School District and :
Gito, Inc. d/b/a Nello Construction :
:
Appeal of: Gito, Inc. d/b/a Nello :
Construction Company :
ORDER
AND NOW, this 22nd day of December, 2023, the June 15, 2022 order
of the Court of Common Pleas of Allegheny County hereby is AFFIRMED.
________________________________
PATRICIA A. McCULLOUGH, Judge