Benton Student Housing v. Lion Construction ( 2018 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
BENTON STUDENT HOUSING, LLC : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
LION CONSTRUCTION, LLC, LION :
CONSTRUCTION MANAGEMENT, :
LLC, SEAN SCHELLENGER, AND : No. 2609 EDA 2017
MICHAEL STILLWELL :
:
Appellants :
Appeal from the Order Entered July 17, 2017
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): August Term, 2016 No. 000749
BEFORE: LAZARUS, J., OTT, J., and PLATT*, J.
MEMORANDUM BY LAZARUS, J.: FILED MARCH 20, 2018
Lion Construction, LLC, Lion Construction Management, LLC, Sean
Schellenger, and Michael Stillwell (collectively, “Defendants” or “Lion
Construction”) appeal from the trial court’s order denying their emergency
petition to strike and/or open the $95,000.00 stipulated judgment entered
against them in the underlying action.1 After careful review, we reverse and
remand.
Benton, a student-housing development company, entered into a
construction contract with Streamline Solutions, LLC, for work on one of its
student-housing developments. When Streamline breached its contract with
Benton, Benton filed an action against Streamline that resulted in a
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1Pursuant to Pa.R.A.P. 311(a)(1), an appeal may be taken as of right from an
order refusing to open, vacate, or strike off a judgment.
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* Retired Senior Judge assigned to the Superior Court.
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$115,245.45 arbitrator’s award in favor of Benton, dated October 16, 2015.
On October 22, 2015, the owners of Streamline, Schellenger and Stillwell,
formed Lion Construction, LLC and Lion Construction Management, LLC. The
Streamline award was reduced to judgment on January 13, 2016; however,
Benton was unsuccessful in collecting against it. As a result, on August 5,
2016, Benton instituted the “underlying action” against Lion Construction
seeking to impose successor liability and to pierce Streamline’s corporate veil
with respect to Schellenger and Stillwell in order to recover its Streamline
judgment.
In the midst of discovery in the underlying action, the parties agreed to
settle the case. To that end, the parties executed a settlement agreement
(the “Agreement”) on May 22, 2017, wherein they agreed to settle their
respective claims relating to the Streamline judgment and to dismiss the Lion
Litigation. The Agreement provided the following relevant terms:
 Lion Construction would pay Benton $65,000.00 as the settlement
amount;
 Lion Construction would pay $35,000.00 as an initial payment, on or
before the execution of the agreement or by May 19, 2017, whichever
is earlier;
 The balance of $30,000.00 shall be payment in equal monthly
installments of $6,000.00 on the 15th day of each month,
commencing on June 15, 2017, and continuing until paid in full. No
interest shall accrue on any such payments.
Parties’ Settlement Agreement, 5/22/17, at ¶¶ C(2)(a) & (b) (emphasis
added). As security for payment of the settlement amount, Defendants
executed and delivered a stipulated judgment in the amount of $130,000.00;
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the judgment would be filed in the event of an “uncured” default under the
Settlement Agreement. Id. at ¶ C(3).
In the event of a default, the Agreement provides that:
[If the] Defendants fail to make any of the payments set forth in
paragraph 2, above, on the date which payment is due (a
“Default”), Benton may: (a) seek to enter the Stipulated
Judgment in the face amount thereof, with a credit for any
payments made thereunder; and/or (b) pursue any further rights
and/or remedies against the Defendants under applicable law. No
such Default shall have occurred if, prior to the due date of such
payment, Defendants provide proof to Benton of the overnight
delivery of such payment, together with a tracking number for
said delivery. If such tracking number evidences that payment
was picked up for delivery before the due date, then that shall
constitute timeliness of delivery. If the Defendants’ payment is
either lost or not delivered, Defendants shall provide a
replacement check upon notice from Benton, or its counsel, by the
next business day following receipt of such notice. For purposes
of this paragraph, notice shall be deemed proper if given by
electronic mail, fax, or other form of mail producing a receipt of
mailing, addressed to counsel for the Defendants[.]
Id. at ¶ C(6).
Defendants made the initial $35,000.00 payment under the Agreement.
However, Defendants defaulted on the first $6,000.00 installment payment by
failing to make the scheduled payment by June 15, 2017, or provide proof,
pursuant to paragraph C(6) of the Agreement, that such payment was
delivered. Accordingly, Benton filed a praecipe for a stipulated judgment.
Thereafter, on June 19, 2017, Benton received a $6,000.00 check dated June
13, 2017, from Lion Construction, LLC; the postage Lion used to mail the
payment did not bear a postmark. Defendants also attempted to hand-deliver
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a check to Benton on June 20, 2017, but counsel for Benton refused the
delivery.
On June 20, 2017, Lion’s counsel received a notice, by email, from the
trial court indicating that Benton had filed a “Praecipe to Enter Stipulated
Judgment” in the amount of $95,000.00;2 the court entered judgment against
Lion on that same date. On June 21, 2017, Defendant filed a petition to open
and/or strike3 the stipulated judgment alleging that it mailed the installment
check on June 13, 2017, and that Benton’s counsel did not contact them or
their attorney to notify them that payment was not received. Defendants’
Petition to Open and/or Strike Off Judgment, 6/21/17, at ¶¶ 8, 12.
On July 17, 2017, the trial court denied Defendants’ petition to strike
and/or open the stipulated judgment. The Honorable Gary Glazer explained
his reason for denying Lion Construction’s petition as follows:
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2This accounted for a credit of $35,000.00, the initial payment Defendants
made as per paragraph C(2)(a) of the Agreement.
3 A petition to strike a judgment differs from a petition to open a judgment.
A petition to strike operates as a demurrer to the record and will not be
granted unless a fatal defect in the judgment appears on the face of the
record. Matters dehors the record will not be considered, and if the record is
self-sustaining, the judgment will not be stricken. Kophazy v. Kophazy, 421
A.2d 246, 247 (Pa. Super. 1980), citing Cameron v. Great Atlantic and
Pacific Tea Co., 266 A.3d 715 (Pa. 1970). A petition to open, on the other
hand, appeals to the court’s equitable powers and is a matter of judicial
discretion. McCoy v. Public Acceptance Corp., 305 A.2d 698 (Pa. 1973).
Although Defendants titled their petition in the alternative, on appeal they
only argue the standard for a petition to open. Thus, we will confine our
review to that standard as well.
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[C]ontrary to Defendants’ assertions, the Settlement Agreement
provides Defendants with no right to cure a default. The language
in section 6 permits Defendants to replace a check that was timely
picked up for overnight shipping if it went astray, if a tracking
number and overnight shipping were provided. It is not argued
that Defendants provided Plaintiffs with a tracking number for
overnight shipping. There is no language in the Agreement
requiring notice and opportunity to cure. Accordingly, the Petition
is denied.
Trial Court Rule 1925(a) Order, 7/17/17, at 1 n.1.
Defendants filed a motion for reconsideration and request for an
evidentiary hearing on July 21, 2017. The court denied the motion on July
28, 2017.4 This timely appeal follows,5 in which Defendants present the
following issues for our consideration:
(1) Whether the trial court abused its discretion and/or erred as
a matter of law in finding that the judgment should not have
been stricken and/or opened because Benton filed the
judgment after the default was cured.
(2) Whether the trial court abused its discretion and/or erred as
a matter of law in finding that the judgment entered should
not have been stricken and/or opened where Benton
Student Housing, LLC was in possession of the payment
due.
(3) Whether the trial court abused its discretion and/or erred as
a matter of law in finding that there was no right to cure a
default under the settlement agreement.
(4) Whether the trial court abused its discretion and/or erred as
a matter of law in finding the parties did not intend to
include a right to cure a default.
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4 On August 3, 2017, the trial court denied Benton’s ex parte Emergency
Petition to Stay Execution of the judgment.
5 The trial court did not order Defendants to file a Pa.R.A.P. 1925(b) concise
statement of errors complained of on appeal.
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(5) Whether the trial court abused its discretion and/or erred as
a matter of law by denying Lion the discovery it requested
of Benton in its Petition[.]
(6) Whether the trial court abused its discretion and/or erred as
a matter of law by denying Lion’s request for [a] hearing
and/or trial to present evidence and testimony in violation
of its due process rights.
(7) Whether the trial court abused its discretion and/or erred as
a matter of law in finding that the “uncured default” was an
unambiguous term.
(8) Whether the trial court abused its discretion and/or erred as
a matter of law by relying on settlement communications
prohibited by Pa.R.[E.]. 408.
Appellant’s Brief, at 3-4.
Defendants argue that since Benton received the check, dated June 13,
2017, before Benton filed its praecipe for a stipulated judgment, it was
required to notify them that it had not received the check by the June 15,
2017 due date and give them an attempt to cure the default under the
Agreement by accepting a replacement check.
Our review of an order denying a petition to open a default judgment is
well-settled:
A petition to open a default judgment is an appeal to the equitable
powers of the court. The decision to grant or deny a petition to
open a default judgment is within the sound discretion of the trial
court, and we will not overturn that decision absent a manifest
abuse of discretion or error of law.
Green Acres Rehab. & Nursing Ctr. v. Sullivan, 113 A.3d 1261, 1270 (Pa.
Super. 2015) (quotation omitted). Generally, a trial court will open a default
judgment if the defendant has:
(1) promptly filed a petition to open the default judgment, (2)
provided a reasonable excuse or explanation for failing to file a
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responsive pleading, and (3) pleaded a meritorious defense to the
allegations contained in the complaint.
US Bank N.A. v. Mallory, 982 A.2d 986, 994-95 (Pa. Super. 2009). “When
determining a petition to open a judgment, matters dehors the record filed by
the party in whose favor the warrant is given, i.e., testimony, depositions,
admissions, and other evidence, may be considered by the court.”
Resolution Trust Corp. v. Copley Qu-Wayne Assocs., 683 A.2d 269, 273
(Pa. 1996).
Here, Defendants unquestionably timely filed their petition. Thus, we
must next turn our analysis as to whether Defendants set forth a meritorious
defense.
First, we note that Benton was not required under the Agreement to
accept the Defendants’ replacement check or to notify Benton that it received
the check after the due date. The language in the default paragraph of the
Agreement does not require Benton to either accept a replacement check
under the facts of the case or require it to notify Defendants that it did not
receive the check by the due date.
Specifically, the Agreement provides that:
[If the] Defendants fail to make any of the payments set forth in
paragraph 2, above, on the date which payment is due (a
“Default”), Benton may: (a) seek to enter the Stipulated
Judgment in the face amount thereof, with a credit for any
payments made thereunder; and/or (b) pursue any further rights
and/or remedies against the Defendants under applicable law. No
such Default shall have occurred if, prior to the due date of
such payment, Defendants provide proof to Benton of the
overnight delivery of such payment, together with a
tracking number for said delivery. If such tracking number
evidences that payment was picked up for delivery before
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the due date, then that shall constitute timeliness of
delivery. If the Defendants’ payment is either lost or not
delivered, Defendants shall provide a replacement check
upon notice from Benton, or its counsel, by the next
business day following receipt of such notice. For purpose
of this paragraph, notice shall be deemed proper if given
by electronic mail, fax, or other form of mail producing a
receipt of mailing, addressed to counsel for the
Defendants[.]
Parties’ Settlement Agreement, 5/22/17, at ¶ C(6) (emphasis added). The
language clearly states that a default is defined as failing to make any of the
installment payments “on the date which payment is due.” In addition the
Agreement will excuse a payment picked up for delivery before the due date,
only if Defendants provide Benton proof of overnight delivery of that
payment, together with a tracking number for the delivery. Moreover, in the
event that that overnight delivery is either lost or not delivered, Defendants
may provide a replacement check by the next business day upon notice from
Benton (based on the proof of payment and tracking number) that said
delivery was lost or stolen. Under the latter circumstance, i.e., overnight
delivery, it is not considered a default under the Agreement.
The following email exchange, which occurred just prior to execution of
the Agreement, also supports the conclusion that Benton was not required to
notify Defendants that it did not receive the check and permit them to issue a
replacement check:
This shall confirm that we’ll make the following changes to the
agreement, which I will circulate either today or over the
weekend.
1. Section 2(b) will be revised to read “The balance of Thirty
Thousand Dollars ($30,000.00) (the “Balance”) shall be
payable in equal monthly installments of Six Thousand
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Dollars ($6,000) on the fifteenth day of each month,
commencing on June 15, 2017, and continuing until paid
in full. No interest shall accrue on any such payments.
For purposes of this paragraph, in the event that the due
date of a payments falls on a Saturday, Sunday, or legal
holiday, then such payment shall be due on the next
business day following such due date.
2. Paragraph 6, entitled “Default” will be revised to read “in
the event that Defendants fail to make any of the
payments set forth in paragraph 2, above, on the date
which payment is due (a “Default”), Benton may: (a)
seek to enter the Stipulated Judgment in the face amount
thereof, with a credit for any payments made hereunder;
and/or (b) pursue any further rights and/or remedies
against the Defendants under applicable law. No such
default shall have occurred if, prior to the due date
of such payment, Defendants provide proof to
Benton of the overnight delivery of such payment,
together with a tracking number for said delivery.
As we agreed, Benton will hold the $35,000 check and not deposit
it until after the agreement is signed on Monday.
Email from Harry J. Giacometti, Esquire, to Paul Bucco, Esquire (May 19, 2017,
4:24 PM) (emphasis added). In response to these revised sections of the
Agreement, Anthony E. Maras, Esquire, attorney for Streamline Group LLC,
sent the following email approving the Agreement, further clarifying
paragraph 6:
This is approved subject to:
If we send it via FedEx, and provide you a tracking number,
which tracking number sho[w]s pickup on or before the due
date, then that shall constitute compliance. If the package
is lost or not delivered we will provide a replacement
check upon notice from you the next business day.
Email from Anthony E. Maras, Esquire, to Harry Giacometti, Esquire (May 19,
2017, 5:00 PM) (emphasis added).
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Based on the above-quoted email exchanges, which we may consider in
a petition to open, Resolution Trust, supra, the parties intended a
replacement check to apply only to situations where Defendants chose to use
an overnight delivery service (such as FedEx) and where that package is
subsequently lost or stolen. This is supported by the fact that the way Benton
would be able to notify Defendants that a package had not arrived as
scheduled (i.e., late or stolen) would have been after it received Defendant’s
proof of payment for overnight delivery, with an accompanying tracking
number.
Under such circumstances, Defendants have not shown a meritorious
defense where their payment, sent via regular mail, did not arrive by the due
date and where they did not use an overnight delivery service and provide
Benton with proof of payment and an accompanying tracking number. Only
under the latter circumstances would a lost or stolen check have triggered the
option of sending a timely replacement check. It was not Benton’s duty to
notify Defendants that their check was received late under the facts of this
case.
There is no question that Defendants defaulted under the Agreement
where, under the terms of the Agreement, Benton was not required to accept
Defendants’ check, dated July 13, 2017, if it received it prior to filing a
praecipe for a stipulated judgment. Rather, paragraph 2 of the parties’
Agreement clearly specified that the balance of $30,000.00 “shall be payable
. . . on the fifteenth day of each month,” Agreement, 5/22/17, at ¶ C(2)(b)
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(emphasis added), and that it is considered a default under the Agreement
“[i]n the event that Defendants fail to make any of the payments set forth in
paragraph 2 . . on the date which payment is due.” Id. at ¶ (C)(6)
(emphasis added). Thus, despite the fact that Defendants may have dated
and mailed the check prior to the payment due date, the check was never
alleged nor proven to have been received by Benton prior to or on the actual
due date. In fact, Defendants aver in their motion for reconsideration that
Benton received their check on June 19, 2017—four days after the due date.
Defendants’ Motion for Reconsideration/Request for Hearing, 7/21/17, at ¶ 8.
Thus, Defendants technically defaulted under the parties’ Agreement.
We note that:
“The enforceability of settlement agreements is determined
according to principles of contract law. Because contract
interpretation is a question of law, this Court is not bound by the
trial court’s interpretation. Our standard of review over questions
of law is de novo and to the extent necessary, the scope of our
review is plenary as [the appellate] court may review the entire
record in making its decision.” Mastroni-Mucker v. Allstate
Ins. Co., [] 976 A.2d 510, 517-18 ([Pa. Super.] 2009)[.] “With
respect to factual conclusions, we may reverse the trial court only
if its findings of fact are predicated on an error of law or are
unsupported by competent evidence in the record.” Id. at 518.
Step Plan Servs. v. Koresko, 12 A.3d 401, 408 (Pa. Super. 2010).
Moreover,
The fundamental rule in interpreting the meaning of a contract is
to ascertain and give effect to the intent of the contracting parties.
The intent of the parties to a written agreement is to be regarded
as being embodied in the writing itself. The whole instrument must
be taken together in arriving at contractual intent. Courts do not
assume that a contract’s language was chosen carelessly, nor do
they assume that the parties were ignorant of the meaning of the
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language they employed. “When a writing is clear and
unequivocal, its meaning must be determined by its contents
alone.”
Only where a contract’s language is ambiguous may extrinsic or
parol evidence be considered to determine the intent of the
parties. A contract contains an ambiguity “if it is reasonably
susceptible of different constructions and capable of being
understood in more than one sense.” This question, however, is
not resolved in a vacuum. Instead, “contractual terms are
ambiguous if they are subject to more than one reasonable
interpretation when applied to a particular set of facts.” In the
absence of an ambiguity, the plain meaning of an agreement will
be enforced. The meaning of an unambiguous written instrument
presents a question of law for resolution by the court.
Ferrer v. Trs. Of the Univ. of Pa., 825 A.2d 591, 608 (Pa. 2002) (citation
omitted).
Defendants next contend that their “default was cured by Benton’s
possession of the check prior to [] Benton’s filing of the Praecipe.” Appellant’s
Brief, at 10. To support this argument, Defendants refer to a sentence in
paragraph 3 of the Agreement, which states, “The Stipulated Judgment shall
not be filed of record unless and until the occurrence of an uncured Default
hereunder.” See Parties’ Agreement, 5/22/17, at ¶ C(3) (emphasis added).
On April 20, 2107, the parties put the material terms of the settlement
agreement on the record. At that meeting, Benson’s counsel indicated that
the parties agreed “to a reasonable cure period in the event of a late payment.
We said ten days. The judgment would not be filed of record until default.”
Settlement Meeting, 4/20/17, at 5. While prior versions of the Agreement
included this 10-day right to cure provision in the default paragraph, the
parties final May 22, 2017 Agreement did not contain such a provision.
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Benton maintains that the parties removed the “cure period” in prior
versions of the Agreement in exchange for changing the due date of the initial
monthly payment from June 1st to June 15th.6 However, we find that further
discovery in the matter and/or testimony at a hearing is required to determine
the true intent of the “uncured” language in the Agreement. 7 Without a
hearing or additional evidence, the “uncured Default” language is ambiguous
in the context of the entire Agreement and, specifically, the default provision.
See also Ragnar Benson, Inc. v. Hempfield Tp. Mun. Authority, 916 A.2d
1183, 1189 (Pa. Super. 2007) (where parties, without any fraud or mistake,
deliberately put engagements in writing, law declares the writing to be not
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6 See Tony Maras Email to Harry Giacometti, Esquire (May 19, 2017 at 2:27
PM) (“I told everyone when you put the outside date that I didn’t want a 2[-
]week window between the initial check and the first payment, and everyone
nodded.”). Compare Agreement, Exhibit G to Plaintiff’s Memorandum of Law
in Opposition to Defendant’s Petition to Open and/or Strike off Judgment,
5/18/17, at ¶ C(6) (“In the event that Defendants fail to make any of the
payments set forth in paragraph 2, above, which failure is not cured within
ten (10) days of notice thereof as provided below (a “Default”), . . . Benton
may seek to enter the Stipulated Judgment . . . and/or pursue any further
rights and/or remedies[.]”) with Parties’ Settlement Agreement, 5/22/17, at
¶ C(6) (“[If the] Defendants fail to make any of the payments set forth in
paragraph 2, above, on the date which payment is due (a “Default”), Benton
may: (a) seek to enter the Stipulated Judgment in the face amount thereof,
with a credit for any payments made thereunder; and/or (b) pursue any
further rights and/or remedies against the Defendants under applicable law.”).
7 Paragraph C(3) is not the only portion of the Agreement that contains the
“uncured Default” language. See Parties’ Agreement (Transfer of Interests),
¶ (7) (“Upon the occurrence of an uncured Default, in the event . . . Lion
Construction or Lion Management, or either of them, ceases operations,
and/or transfers any of their assets outside the ordinary course of business,
such actions shall be deemed to be presumptively fraudulent as to
Benton[.]”).
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only best, but only evidence of their agreement; however, court may consider
extrinsic or parole evidence to determine parties’ intent where language of
agreement is ambiguous).
Defendants raise a meritorious issue regarding whether their default
was cured by the delivery of the check prior to Benton filing the stipulated
judgment. US Bank N.A., supra. Accordingly, we reverse the court’s order
denying Defendants’ petition to open and/or strike the stipulated judgment
and remand for further proceedings consistent with the dictates of this
memorandum. See Willits v. Fryer, 734 A.2d 425 (Pa. Super. 1999) (where
Court found language of promissory note was unclear, Appellants alleged
meritorious defense and reversed court’s order denying their petition to open
and/or strike judgment).
Order reversed. Case remanded. Jurisdiction relinquished.8
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/20/18
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8 Defendants list several issues in their statement of questions involved.
However, they have abandoned them on appeal by failing to argue them in
the argument section of their brief. Specifically, we find issues five, six and
eight have been waived on appeal. Purple Orchid, Inc. v. Pa. State Police,
813 A.2d 801, 804 (Pa. 2002) (issue included in “statement of questions”
waived by failure to address and develop in appellate brief).
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