Gehris Family Trust v. Bowlorama, Inc. ( 2018 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GEHRIS FAMILY TRUST, JOHN : IN THE SUPERIOR COURT OF
GEHRIS, ANN SERFASS, AND MARK : PENNSYLVANIA
GEHRIS :
:
Appellants :
:
:
v. :
: No. 1370 MDA 2017
:
BOWLORAMA, INC., PERKIOMEN :
GRILL CORPORATION, DAVID :
BOYER, JOANNE SNYDER, MARTIN :
BOYER, AND BROOKE BOYER :
Appeal from the Order Dated August 28, 2017
In the Court of Common Pleas of Berks County Civil Division at No(s): 17-
05104
BEFORE: SHOGAN, J., DUBOW, J., and FORD ELLIOTT, P.J.E.
MEMORANDUM BY DUBOW, J.: FILED MAY 31, 2018
The Gehris Family Trust, John Gehris, Ann Serfass, and Mark Gehris
(the “Individual Plaintiffs”) (collectively, “Appellants”), appeal from the
August 28, 2017 Order sustaining the Preliminary Objections in the nature of
a demurrer filed by defendants Bowlorama, Inc. and Perkiomen Grill
Corporation (the “Corporations”), David Boyer, Joanne Snyder, Martin Boyer,
and Brooke Boyer (the “Individual Defendants”) (collectively, “Appellees”)
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and dismissing Appellants’ Complaint. After careful review, we vacate and
remand.1
The facts and procedural history, as gleaned from this Court’s review
of the record, including the trial court’s October 13, 2017 Opinion, are as
follows. In the 1950’s a father and two brothers formed the Corporations.
The three original owners are now deceased. Upon their deaths, their
ownership interests passed to their heirs. Currently there are twelve
shareholders in the Corporations.2
Many of the shareholders are now elderly and are not involved in the
business. Thus, the majority shareholders sought to sell the business assets
and property. In early 2015, over Appellants’ objection, the shareholders
listed the businesses for sale with a realtor. BT Management, LLC made an
offer to purchase the property in December 2015, and on January 11, 2016,
the Corporations and BT Management, LLC entered into an agreement of
sale. Pursuant to the agreement of sale, settlement was to occur within
fifteen days of March 20, 2017.
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1We refer to this appeal as “Bowlorama II” for reasons explained infra. The
appeal of “Bowlorama I” is docketed at No. 1369 MDA 2017.
2 The Individual Plaintiffs averred that they are three of the twelve
shareholders, owning 14% of the Corporations’ shares in both this action
and the related action (“Bowlorama I”) in which an appeal is also pending.
See No. 1369 MDA 2017.
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In an effort to prevent the sale from occurring, on February 21, 2017,
the instant Appellants filed a Complaint at a separate docket, Docket No. 17-
2294, against the Corporations only (“Bowlorama I”). In Bowlorama I, the
Corporations filed a Motion to Approve Sale of Real Estate and Assets and
Preliminary Objections to Appellants’ Complaint. The trial court granted the
Corporations’ Motion on March 30, 2017, thus, permitting the sale of the
corporate assets to proceed.3 After a brief stay while Appellants appealed
the court’s March 30, 2017 Order,4 the court also sustained the
Corporations’ Preliminary Objections and dismissed the Bowlorama I
Complaint.5
Following the court’s approval of the Corporations’ sale of real estate
and assets to BT Management, LLC, Appellants initiated this action as a
shareholder derivative suit (“Bowlorama II”). On April 20, 2017, Appellants
filed a Complaint and a Motion for Preliminary Injunction,6 seeking to
relitigate the issue of the sale of the Corporations’ real estate and assets.
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3 The record indicates that the sale has not yet occurred.
4This Court quashed Appellants’ appeal as interlocutory on July 19, 2017.
See Gehris Family Trust, et al. v. Bowlorama, Inc., et al., No. 607 MDA
2017 (order filed July 19, 2017).
5Appellants’ appeal from that Order is pending before this Court at No. 1369
MDA 2017.
6The trial court denied Appellant’s Motion for a Preliminary Injunction on
April 27, 2017.
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The Bowlorama II Complaint at issue here is, in large part, identical to the
Bowlorama I Complaint. In the Bowlorama II Complaint, Appellants named
as defendants the Corporations, as well as the Individual Defendants, who
are shareholders in the Corporations and some of the Corporations’ officers.
Appellants alleged in the Bowlorama II Complaint that they are,
collectively, the “legal and/or equitable owners of 285 shares of Bowl-A-
Rama[]” and the “legal and/or equitable owners of 2993 shares of
Perkiomen Grill.” Complaint, 4/20/17, at ¶¶ 4, 10. Appellants attached to
the Bowlarama II Complaint a verification signed by the Individual Plaintiffs;
however, they did not identify the trustee of the Gehris Family Trust, and
the trustee of the Gehris family trust did not sign or verify the Complaint.
As in the Bowlorama I Complaint, Appellants sought: (1) the appointment of
a receiver authorized to continue the business operations of the
Corporations, and to prepare an accounting; (2) unfettered access to the
Corporations’ books and records; (3) an injunction enjoining the sale or
dissipation of the Corporations’ assets; and (4) monetary damages.
On May 15, 2017, Appellees filed Preliminary Objections to Appellants’
Complaint. Appellees objected to the Bowlorama II Complaint as having
failed to state a claim upon which Appellants could be entitled to relief, and
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on the basis of Appellants’ lack of capacity to sue.7 Appellees averred that
“none of the three [I]ndividual Plaintiffs have any legal ownership
whatsoever in either Corporate Defendant.” Preliminary Objections,
5/15/17, at ¶ 15 (emphasis in original). Appellees also averred that the
evidence, including the Gehris Family Trust indenture, which Appellants had
only recently produced, demonstrated that “the Gehris Family Trust is the
only shareholder of the Corporate Defendants’ stock, and the surviving
settlor of [t]he Gehris Family trust, Barbara Gehris, is both the current
trustee and the only beneficiary of the Trust[.]” Id. at 16 (emphasis in
original).8 Citing Appellants failure to plead the facts upon which their
“ownership” interest in the Corporate Defendants is based, and their failure
to attach stock certificates or other instruments underlying their alleged
“ownership,” Appellees argued that the Individual Plaintiffs lacked standing
to “pursue alleged claims held by the record owner of the Corporate
Defendants’ stock, which is only [t]he Gehris Family Trust.” Id. at 23
(emphasis in original). Appellees concluded, therefore, that the “Complaint
on its face fails to demonstrate any ownership interest of any Individual
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7 The Pennsylvania Rules of Civil Procedure provide in relevant part,
“[p]reliminary objections may be filed by any party to any pleading and are
limited to [inter alia] lack of capacity to sue.” No. Pa.R.C.P. 1028(a)(5).
8 Article Seven of the trust indenture indicates that the Individual Plaintiffs
are contingent beneficiaries of the trust assets entitled to distribution of the
trust assets, if any remain, upon the death of their mother, Barbara Gehris.
See Trust Indenture, 12/9/98, Article 7.1.
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Plaintiff in either Corporate Defendant; fails to support the existence of any
breach of any legal duty owed to them upon the transactions and
occurrences set forth therein; and fails to demonstrate that any Individual
Plaintiff has standing to participate as a party-plaintiff in this matter.” Id. at
25. Thus, Appellees requested that the court strike the Individual Plaintiffs
as named plaintiffs on the Complaint.
With respect to the Gehris Family Trust as a Plaintiff in this matter, the
Corporations aptly noted that the Trust neglected to verify the Bowlorama II
Complaint as required by Pa.R.C.P. No. 1024,9 and that the Appellants failed
to plead any foundational assertion that the Trust is the record shareholder
of the Corporations, failed to identify the current trustee of the Trust, and
failed to attach a copy of the Trust indenture as required by Pa.R.C.P. No.
1019(i). Preliminary Objections, 5/15/17, at 29, 32-34, 36. Appellees
noted that “the Complaint fails to plead any fact demonstrating that the
Trustee of the Gehris Family Trust authorized or otherwise consented to the
initiation of this lawsuit on behalf of the Trust or that the actual Trustee is
even aware these lawsuits were filed in the name of the trust.” Id. at 35.
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9 Rule 1024 requires every pleading to be verified by a party. See Pa.R.C.P.
No. 1024. Here, the individual plaintiffs verified the Bowlorama II
Complaint. However, Appellees argued that because the individual plaintiffs
lacked standing and capacity to sue, the Complaint does not contain a
verification signed by a proper party-plaintiff. See Brief in Support of
Preliminary Objections, 5/15/10, at 10 n8.
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Appellees, thus, concluded that the court must strike the claims purportedly
brought by the Trust. Id. at 37.
On August 1, 2017, Appellants filed a Memorandum of Law in
Opposition to the Appellees’ Preliminary Objections. In their Memorandum
of Law, Appellants argued that Appellees “improperly attempted to interject
into the court’s adjudication of the Preliminary Objections testimony and
documentary evidence created through ancillary hearings.” Memorandum of
Law, 8/1/17, at 6-9, (unpaginated). Appellants urged the trial court not to
consider this extra-pleadings evidence in its ruling. In the alternative,
Appellants requested the right to amend its Complaint.
On August 28, 2017, the court entered an Order sustaining Appellees’
Preliminary Objections concluding that: (1) the Individual Plaintiffs lacked
capacity to sue; (2) the Trust is also an improper plaintiff as it did not verify
the Complaint and Appellants did not plead that the trustee was aware of or
consented to the suit;10 and (3) Appellants had failed to plead any legally
cognizable causes of action. Appellants filed this timely appeal. Both
Appellants and the trial court complied with Pa.R.A.P. 1925.
Appellants raise the following issue in this Bowlorama II appeal:
Did the [t]rial [c]ourt, in its [O]rder of August [28], 2017, err in
sustaining [P]reliminary [O]jections in the nature of a demurrer
without granting leave to amend Appellants’ complaint?
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10 Appellants’ have not presented any argument challenging this conclusion
in their Brief to this Court.
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Appellants’ Brief at 3.
In its sole issue, Appellants claim that the trial court erred in
sustaining Appellees’ Preliminary Objections by neglecting to accept as true
the facts Appellants pleaded in the Bowlorama II Complaint and by relying
on “facts” not found on the face of the Complaint. Id. at 14-19.
Specifically, Appellants argue that the status of the Individual Defendants as
shareholders turns on issues of fact that the court was prohibited from
considering at the preliminary objections stage. Id. at 15. Appellants also
claim the court erred in sustaining the Preliminary Objections on the merits
and in not granting Appellants leave to amend their Complaint. Id. at 13-
15, 18-27.
This Court reviews an order sustaining preliminary objections to
determine whether the trial court committed an error of law. Richmond v.
McHale, 35 A.3d 779, 783 (Pa. Super. 2012). “In determining whether the
court properly sustained preliminary objections, the appellate court must
examine the averments in the complaint, together with the documents and
exhibits attached thereto, in order to evaluate the sufficiency of the facts
averred.” Clemleddy Const., Inc. v. Yorston, 810 A.2d 693, 696 (Pa.
Super. 2002) (citation omitted).
When considering preliminary objections, all material facts set
forth in the challenged pleadings are admitted as true, as well as
all inferences reasonably deducible therefrom. Preliminary
objections which seek the dismissal of a cause of action should
be sustained only in cases in which it is clear and free from
doubt that the pleader will be unable to prove facts legally
sufficient to establish the right to relief. If any doubt exists as to
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whether a demurrer should be sustained, it should be resolved in
favor of overruling the preliminary objections
Richmond, 35 A.3d at 783 (citation omitted).
Preliminary Objections Challenging the Individual
Plaintiffs’ Capacity to Sue
Where a defendant files preliminary objections challenging the
plaintiff’s capacity to sue, the trial court shall develop a factual record “by
depositions or otherwise” and make credibility determinations to determine
this issue. See American Housing Trust, III v. Jones, 696 A.2d 1181,
1183-85 (Pa. 1997) (remanding to the trial court to develop a factual record
on which to determine whether, for the purposes of surviving preliminary
objections, the plaintiff “did business” in Pennsylvania). See also Pa.R.C.P.
No. 1028(c)(2). “In such a situation the court may not reach a
determination based upon its view of the controverted facts, but must
resolve the dispute by receiving evidence thereon through interrogatories,
depositions[,] or an evidentiary hearing.” Delaware Valley Underwriting
Agency, Inc. v. Williams & Sapp, Inc., 518 A.2d 1280, 1283 (Pa. Super.
1986) (citation and quotation marks omitted). This “procedure is
fundamentally different from what happens on a demurrer[,]” which tests
“only, whether, as a matter of law, the pleaded allegations may entitle the
pleader to relief.” C.G. v. G.H., 172 A.3d 43, 54 (Pa. Super. 2017).
“[O]n preliminary objections that require a factual hearing, the
plaintiff’s factual allegations no longer are presumed to be true and there is
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no longer any need to give the plaintiff the benefit of any doubt about its
case.” Id. at 55.
Here, with respect to the Individual Plaintiffs, Appellees filed a
Preliminary Objection pursuant to Pa.R.C.P. No. 1028(a)(5), challenging
their capacity to sue. Because this objection raised a question of fact, Rule
1028(c)(2) required the trial court develop a factual record and “consider
evidence by depositions or otherwise.”
The trial court, in its Rule 1925(a) Opinion, first addressed Appellees’
claim that the Individual Plaintiffs lacked capacity to sue Appellees because
they are not shareholders in the Corporations; rather they are merely
beneficiaries of the Gehris Family Trust. In considering this claim, the trial
court evaluated the arguments raised by Appellees in their Preliminary
Objections and the trust indenture annexed thereto, and made findings of
fact that led it to conclude that the Individual Plaintiffs lacked standing.
We observe, however, that, notwithstanding that Appellants contested
the objections set forth by Appellees’ in the Preliminary Objections, there is
no indication that the trial court attempted to develop a sufficient factual
record by holding an evidentiary hearing, or instructing the parties to take
depositions or serve interrogatories to establish the veracity of Appellees’
allegations.11 Thus, we conclude that there are inadequate facts in the
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11 See Delaware Valley Underwriting Agency, supra at 1283.
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record from which this Court could consider the propriety of the trial court’s
conclusion that the Individual Plaintiffs’ lacked capacity to bring this suit.
The absence of facts of this kind in the record require this Court to
vacate the trial court’s order insofar as it struck the Individual Plaintiffs’
claims, and remand the matter to the court to develop a factual record to
enable it to determine whether the Individual Plaintiffs had standing. 12 See
American Housing Trust, 696 A.2d at 1185; Schmitt v. Seaspray-
Sharkline, Inc., 531 A.2d 801, 803-04 (Pa. Super. 1987) (explaining that
“if an issue of fact is raised, the court shall take evidence by deposition or
otherwise,” and remanding for the lower court to determine the contested
issue of fact by “take[ing] evidence by depositions, interrogatories[,] or an
evidentiary hearing.”).
Leave to Amend the Complaint
Appellants also posit that if the trial court found deficient their
pleadings as to the ownership of the Corporations’ stock, it should have
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12 Appellants also argue in their Brief that the trial court erred in sustaining
Appellees’ Preliminary Objections in the nature of a demurrer. However,
because standing is a “threshold matter,” we cannot reach the merits of that
argument. See Johnson v. American Standard, 8 A.3d 318, 329 (Pa.
2010) (explaining that “a person who is not adversely affected in any way by
the matter he seeks to challenge is not aggrieved thereby and has no
standing to obtain a judicial resolution to his challenge”). See also
Pittsburgh Palisades Par, LLC. v. Commonwealth of Pennsylvania,
888 A.2d 655, 659 (Pa. 2005) (considering preliminary objections
challenging standing and noting that, “[p]rior to judicial resolution of a
dispute, an individual must as a threshold matter show that he has standing
to bring the action”).
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permitted Appellants’ to amend their Complaint. Appellants’ Brief at 15.
Appellants, however, never sought leave to amend.
Rule 1033 provides as follows:
A party, either by filed consent of the adverse party or by leave
of court, may at any time change the form of action, correct the
name of a party, or otherwise amend the pleading. The amended
pleading may aver transactions or occurrences which have
happened before or after the filing of the original pleading, even
though they give rise to a new cause of action or defense. An
amendment may be made to conform the pleading to the
evidence offered or admitted.
Pa.R.C.P. No. 1033. Thus, it is a plaintiff’s responsibility to take steps
to obtain an amendment. See Werner v. Zazyczny, 681 A.2d 1331, 1338
(Pa. 1996) (“Here, petitioner's claim fails because he never requested that
the Commonwealth Court allow him leave to amend. Appellant fails to cite
to any case law, and we can find none, requiring a court to sua sponte order
or require a party to amend his pleading. Moreover, a court is not required
to allow amendment of a pleading if a party will be unable to state a claim
on which relief could be granted. Thus, appellant's claim must fail.”)
(internal citation omitted).
We reject Appellants’ argument. There is nothing of record to suggest
that Appellants sought Appellees’ consent to amend the Complaint;
moreover, Appellants never sought leave of court to amend the Complaint.
Appellants also neglected to file an Amended Complaint in lieu of an Answer
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to Appellees Preliminary Objections.13 For these reasons, Appellants’
argument fails.
Order vacated. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 05/31/18
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13 We further note that Appellants did not indicate either in their
Memorandum of Law in Opposition to the Appellees’ Preliminary Objections
or in their Brief to this Court how they would have amended the Complaint
to cure the deficiencies outlined by the trial court.
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