Gavco Materials v. Brayman Construction ( 2016 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GAVCO MATERIALS, INC. IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
BRAYMAN CONSTRUCTION
CORPORATION
Appellant No. 697 WDA 2015
Appeal from the Order Entered April 9, 2015
In the Court of Common Pleas of Fayette County
Civil Division at No(s): 173 of 2015 GD
BEFORE: BOWES, J., MUNDY, J., and JENKINS, J.
MEMORANDUM BY MUNDY, J.: FILED JUNE 21, 2016
Appellant, Brayman Construction Corporation (Brayman), appeals from
the April 9, 2015 order denying its motion to compel arbitration. 1 After
careful review, we reverse and remand.
The trial court summarized the facts and procedural history of this
case as follows.
On February 4, 2015, Gavco Materials Inc.
(hereinafter “Gavco”) filed a complaint for breach of
contract against Brayman alleging failure to furnish
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1
An order denying a motion to compel arbitration filed pursuant to Section
7304 of the Pennsylvania Uniform Arbitration Act, 42 Pa.C.S.A. §§ 7301-
7362, is immediately appealable as of right. See 42 Pa.C.S.A. § 7320
(providing that an appeal may be taken from an order denying an
application to compel arbitration under Section 7304); Pa.R.A.P. 311(a)(8)
(stating that an appeal may be taken as of right from an order that is made
appealable by statute).
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payment for several deliveries of concrete supplied
by Gavco. Brayman was the prime contractor on a
Pennsylvania Department of Transportation
(hereinafter [“]PENNDOT”) project involving
construction of the Masontown Bridge carrying PA
Route 21 over the Monongahela River (hereinafter
“the Project”) in Fayette County, Pennsylvania.
In November of 2011, Gavco delivered pricing
information to Brayman for various mixes of redi-mix
concrete that would be needed for the Project, and
Brayman used that information when submitting its
bid to PENNDOT. Brayman was selected by
PENNDOT as the Prime Contractor on the Project,
and Brayman ordered concrete for the Project from
Gavco beginning in 2012. In January 2012, Gavco
and Brayman signed a purchase order, hereafter
[sic] “Brayman PO”, which included the agreed-upon
prices for the material expected to be supplied by
Gavco. The parties intentionally omitted the
quantity of materials supplied and agreed that the
quantity of the materials supplied would be defined
on a rolling basis pursuant to each delivery.
Upon delivery of the concrete, a representative
of Brayman would sign a Delivery Ticket containing
the Terms and Conditions of the sale and providing
acknowledgement of the receipt of the concrete.
Gavco would then prepare and deliver invoices for
each concrete delivery to Brayman, who paid these
invoices for a short time. From July 16, 2013
through December 30, 2013, a group of invoices
totaling $77,212.82 were not paid by Brayman.
When Gavco demanded payment, Brayman
communicated that payment was being withheld
based on problems Brayman had experienced with
concrete installed at “Pier 5” of the Project. Upon
Brayman’s suspension of payment, Gavco suspended
deliveries of the concrete.
On January 9, 2015 Brayman filed a Demand
for Arbitration with the American Arbitration
Association seeking $3,000,000.00 plus ongoing
damages as a result of Gavco’s alleged delivery of
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non-conforming concrete. Gavco answered
Brayman’s Demand for Arbitration on February 6,
2015, after filing the underlying complaint with [the
trial court] on February 4, 2015. In its complaint
Gavco is alleging breach of contract by Brayman,
and is requesting relief in the amount [of]
$77,212.82 plus twelve percent (12%) per annum
and reasonable costs and attorneys’ fees incurred by
Gavco. Gavco’s answer to Brayman’s Demand for
Arbitration denies the existence of a valid arbitration
agreement. On March 4, 2015, Brayman filed a
Motion to Compel Arbitration and Stay Judicial
Proceedings. Gavco subsequently filed a cross-
motion to Stay Arbitration and Compel Judicial
Proceedings on March 12, 2015. [The trial court]
heard oral arguments in this matter on March 13,
2015 and denied Brayman’s motion [on April 9,
2015]. Brayman thereafter filed this timely
[2]
appeal.
Trial Court Opinion, 6/26/15, at 1-3.
On appeal, Brayman presents the following question for our review.
1. Whether the trial court erred in denying
Brayman’s motion to compel arbitration and stay
the litigation pursuant to the Pennsylvania
Arbitration Act, and granting Gavco’s motion to
stay arbitration because the contract applicable to
Gavco’s concrete deliveries for the project
contains an enforceable arbitration agreement,
and Gavco’s breach of contract claim fails [sic]
within the scope of the arbitration agreement[?]
Brayman’s Brief at 5.
Our scope and standard of review are as follows.
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2
Brayman and the trial court have complied with Pennsylvania Rule of
Appellate Procedure 1925.
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[A]rbitration is a matter of contract and, as such, it
is for the court to determine whether an express
agreement between the parties to arbitrate exists.
Because the construction and interpretation of
contracts is a question of law, the trial court’s
conclusion as to whether the parties have agreed to
arbitrate is reviewable by this Court. Our review is
plenary, as it is with any review of questions of law.
Midomo Co., Inc. v. Presbyterian Housing Dev. Co., 739 A.2d 180, 187
(Pa. Super. 1999).
We review a trial court’s denial of a motion to compel
arbitration for an abuse of discretion and to
determine whether the trial court’s findings are
supported by substantial evidence. In doing so, we
employ a two-part test to determine whether the
trial court should have compelled arbitration. The
first determination is whether a valid agreement to
arbitrate exists. The second determination is
whether the dispute is within the scope of the
agreement.
Burkett v. St. Francis Country House, 133 A.2d 22, 27 (Pa. Super. 2016)
(citation omitted).
Accordingly, we first address whether an agreement to arbitrate exists.
See id. Brayman contends that a valid purchase order (PO) governs the
contractual relationship of the parties, and it contains an arbitration
provision. Brayman’s Brief at 23-24. In particular, the PO contains a page
of terms and conditions, including the following arbitration provision.
9. … At Buyer’s option, if Buyer so elects in its sole
discretion with regard to any particular dispute, any
dispute arising in connection with this Purchase
Order shall be resolved by arbitration in Butler, PA in
accordance with the rules of the American Arbitration
Association; and all disputes shall otherwise be
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resolved in and only in the Court of Common Pleas of
Butler County, PA as the exclusive judicial forum and
in accordance with the substantive laws of the
Commonwealth of Pennsylvania without giving effect
to Pennsylvania’s choice of law principles. SUPPLIER
WAIVES ITS RIGHT TO A JURY TRIAL REGARDING
ANY DISPUTE OF THIS PURCHASE ORDER.
Brayman PO, 12/5/11, at Terms and Conditions, ¶ 9 (capitalization in
original). Brayman argues that the trial court erred in denying its motion to
compel arbitration based on the trial court’s finding that the purchase order
was not a valid and enforceable contract and did not control the parties’
relationship. Id. at 21, 24-25.
The Pennsylvania Uniform Commercial Code, Article 2, Sales, 13
Pa.C.S.A. §§ 2101-2725 (UCC), applies in this case because the purchase
order involved sales of concrete, which are transactions in goods.3 13
Pa.C.S.A. § 2102. Section 2204 of the UCC provides that “[a] contract for
sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a
contract.” Id. § 2204(a).
Under Section 2204(a), the PO is a valid written contract because the
parties agreed to the essential terms for the sale of concrete. The PO is
dated December 5, 2011 and numbered 11-0005-18. Brayman PO,
12/5/11, at 1. It contains the agreed upon pricing and delivery fees for a
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3
The parties agree that the UCC applies in this case. Gavco’s Brief at 13;
Trial Court Opinion, 6/26/15, at 4.
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list of materials. Id. It further provides that the prices are valid through
June 1, 2014, that the material will meet PennDOT specifications, and that
payment is due within 30 days from the date of the invoice. Id. Gavco,
through its representative, signed and dated a signature line indicating that
it accepted the purchase order. Id. Brayman’s representative also signed
it. Id. Further, the PO is valid because after Gavco and Brayman signed it,
the parties performed over 100 sales according to its terms, which evidences
their recognition of the contract. 13 Pa.C.S.A. § 2204(a).
The PO, however, does not specify the quantity of the materials that
Brayman was ordering; instead, it lists the quantity as “TBD.” Id. On this
basis, the trial court concluded that “[b]ecause the quantity term was
omitted from the Brayman PO, and only included after communication
between agents of each party, the Brayman PO is illusory as it does not
obligate Brayman to procure materials from Gavco.” Trial Court Opinion,
6/26/15, at 7. Gavco agrees with the trial court that the failure to specify
the quantity renders the agreement illusory. Gavco’s Brief at 23-26.
Brayman asserts that the contract is valid because a contract may leave
some terms open under the UCC. Brayman’s Brief at 22.
Section 2306 of the UCC permits “requirements contracts” that contain
“[a] term which measures the quantity by the output of the seller or the
requirements of the buyer[.]” 13 Pa.C.S.A. 2306(a). Moreover, Section
2204 of the UCC provides “[e]ven though one or more terms are left open[,]
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a contract for sale does not fail for indefiniteness if the parties have intended
to make a contract and there is a reasonably certain basis for giving an
appropriate remedy.” 13 Pa.C.S.A. 2204(c). Here, the parties’ intent to
enter into a contract is clear from their performance pursuant to the PO by
ordering and delivering concrete, and the “TBD” quantity of concrete was
determined by Brayman’s requirements. Accordingly, the PO is a valid
requirements contract under the UCC and it not illusory for failure to specify
the precise quantity of concrete to be supplied.
The trial court also concluded that the contract was illusory because it
contained a clause permitting Brayman to terminate the PO at any time, so
“it does not obligate Brayman to procure materials from Gavco.” Trial Court
Opinion, 6/26/15, at 7. Paragraph 12 of the PO provides that “[b]uyer
[Brayman] in its sole discretion and without cause, may terminate this
Purchase Order, in whole or in part, at any time[.]” Brayman PO, 12/5/11,
at Terms and Conditions, ¶ 12. Under Section 2309 of the UCC,
“[t]ermination of a contract by one party except on the happening of an
agreed event requires that reasonable notification be received by the other
party.” 13 Pa.C.S.A. § 2309. Accordingly, Section 2309 of the UCC permits
one party to unilaterally terminate a contract, but requires the party provide
reasonable notice of termination. Id. Based on this provision allowing for
unilateral termination, and the fact that Brayman never attempted to
actually terminate the PO and so was not required to provide any notice of
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termination, the PO is not illusory due to the clause in paragraph 12 of the
PO permitting unilateral termination. See id.
The trial court also concluded that “Gavco’s self-inclusive Terms and
Conditions on the Delivery Ticket are indicia that Gavco desired to be bound
by those terms, and those terms were assented to by Brayman upon signing
the Delivery Ticket.” Trial Court Opinion, 6/26/15, at 7. However, the PO
provides that it is the “entire contract” between the parties, as follows.
1. The following terms and conditions, together with
the terms set forth in the purchase order form
incorporates by reference any plans, specifications,
Prime Contract between Owner and General
Contractor, contracts and subcontracts (“Contract
Documents”) to the extent that those Contract
Documents involve, relate to, or are affected by any
and all goods, materials, products, software and/or
services (“Supplies”) being supplied under this
Purchase Order or other documents as are
incorporated by reference, as amended in any
subsequent authorized writing from Buyer, shall
constitute the entire contract (“Purchase Order”)
between Brayman [] (“Buyer”) and Supplier,
Supplier shall assume as to Buyer all obligations of
Buyer to Owner, and/or higher tier contractors under
the Contract Documents. If this Purchase Order is
construed as an offer, this offer expressly limits
acceptance to the terms of this offer and notice of
objection to any different, additional or prior terms is
hereby given. If this Purchase Order is construed as
an acceptance of an offer, this acceptance is
expressly conditioned upon the offeror’s assent to
any different or additional terms contained or
referenced in this Purchase Order. If this Purchase
Order is construed as a confirmation of an existing
contract, the parties agree that this confirmation
states the exclusive terms of any contract between
the parties. This Purchase Order shall be deemed to
have been accepted by the Supplier upon receipt by
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the Buyer of any writing, including a writing
transmitted by fax or other means of electronic
transmission, indicating acceptance or by the
commencement of performance or shipment of any
Supplies or any portion thereof.
Brayman PO, 12/5/11, at Terms and Conditions, ¶ 1. Based on this
provision, and the parties’ performance under the PO of ordering and
delivering concrete, the PO is the entire agreement between the parties and
their agreement does not include any subsequent, additional terms in the
delivery slips.
Thus, the PO is not illusory and it governs the parties’ relationship.
Because the PO is valid and enforceable, the arbitration clause contained
therein is a valid agreement to arbitrate. See Midomo, supra.We next address whether the parties’ dispute is within the scope of the
arbitration clause. The arbitration clause provides that “any dispute arising
in connection with this Purchase Order shall be resolved by arbitration[.]”
Brayman PO, 12/5/11, at Terms and Conditions, ¶ 9. Gavco’s complaint,
sounding in breach of contract, indicates that it is seeking payment for a
group of invoices totaling $77,212.82. Gavco’s Complaint, 2/4/15, at 2.
Gavco also noted that Brayman was withholding payment based on alleged
problems Brayman experienced with some of the concrete. Id. Those
disputes arise in connection with the PO because the parties agreed that
Gavco would supply material meeting PennDOT standards, and Brayman
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would submit payment for that concrete within 30 days of delivery.
Brayman PO, 12/5/11, at 1. Therefore, the PO’s arbitration clause applies.
For the foregoing reasons, we conclude that the trial court erred by
denying Brayman’s motion to compel arbitration based on its finding that the
PO was illusory. Accordingly, we reverse the trial court’s April 9, 2015 order
and remand for further proceedings consistent with this memorandum.
Order reversed. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/21/2016
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