Weisman, J. v. Weisman, M. ( 2015 )

J-A09033-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JANE ELLEN WEISMAN IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
MICHAEL PAUL WEISMAN
Appellee Nos. 1471 EDA 2014, 1472
EDA 2014, 1473 EDA 2014,
1474 EDA 2014
Appeal from the Orders Entered May 15, 2013, August 8, 2013, and April 7,
2014, and from the Decree Entered March 26, 2014
In the Court of Common Pleas of Montgomery County
Domestic Relations at No: 99-08626
BEFORE: BOWES, DONOHUE, and STABILE, JJ.
MEMORANDUM BY STABILE, J.: FILED JULY 14, 2015
Appellant, Jane Ellen Weisman, appeals from the trial court’s March
26, 2014 divorce decree. That decree rendered final the trial court’s orders
of May 15, 2013, August 8, 2013, which also are on appeal. In addition,
Appellant appeals from the trial court’s April 7, 2014 order directing her to
pay counsel fees. We affirm in part, vacate in part, and remand.
Appellant, Jane Ellen Weisman, and Appellee, Michal Paul Weisman,
wed in 1968 and separated in 1999. Appellee filed a complaint in divorce in
May of 1999. The trial court offered the following summary of the pertinent
facts and procedural history:
In 1983, during the marriage, [Appellee] formed the
company PRN Healthcare Services (“PRN”), which included two
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separate entities to handle skilled nursing through Medicare and
unskilled custodial, companion care respectively. PRN was
located at 121 Coulter Avenue in Ardmore, Pennsylvania. In
2001, after the parties had separated and initiated divorce
proceedings, PRN defaulted on a business loan that has listed
the marital residence of the [parties] as collateral. This resulted
in the foreclosure sale and loss of the property, which at that
point, had been Appellant’s residence. [Appellee] later took out
a $100,000.00 loan from the Small Business Administration
(“SBA Loan”) and occasionally loaned personal funds to cover
the business costs of PRN.
In 2006, [Appellee], as president and sole shareholder,
ceased operations of PRN. Around this time, Harold Hutt
[(“Hutt”)] founded and incorporated [Reliance Home Healthcare,
Inc.], a company in the business of unskilled home health care.
While the eventual office location of Reliance was recovering
from a fire, Reliance initiated business in the same office as PRN.
Reliance hired all of PRN’s employees, including [Appellee] in the
role of administrator, and took on many of PRN’s service
providers and patients. Shortly thereafter, Reliance moved to 7
East Lancaster Avenue in Ardmore, Pennsylvania. [Appellee]
continues to work for Reliance in a part-time capacity.
The convoluted and contentious procedural history of this
case began in earnest on September 27, 2006 when Appellant
filed a Petition for Special Relief. After several years of amicable
support arrangements, this Court granted the petition and the
parties reached an agreement on September 20, 2007, requiring
[Appellee] to provide Appellant with monthly APL payments of
$2,400.00, health insurance, and reimbursement for medical
expenses up to $50.00 per month. In response to a petition for
bifurcation, this court issued its Order of May 1, 2008, which
continued the APL mandated in the prior order ‘without
reduction, until the final resolution of all equitable distribution,
alimony and related issues raised in the divorce action.’
After almost two years of lull in the litigation, Appellant
filed a motion for contempt […] alleging that [Appellee] was
failing to make adequate payments. In response, [Appellee]
filed a motion to modify the existing APL order on September 27,
2010 alleging a change in circumstances in relation to the
income of the parties. Subsequently, the Domestic Relations
Office (“DRO”) held a hearing, and the Support Conference
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Officer issued a report finding that [Appellee] had failed to meet
his obligations. This report also stated that the APL order of May
1, 2008 was ‘not modifiable’ on its face. Accordingly, in [an]
Order of February 10, 2012, this Court denied [Appellee’s]
petition to modify the APL order.
For [Appellee’s] failure to fulfill his obligations, this Court
issued a bench warrant for his arrest on October 11, 2011 and
held him in contempt[….] On June 6, 2012, the Support
Conference Officer in the DRO again found [Appellee] bound by
the original APL order.
The DRO then issued its Master’s Report and
Recommendation upon Equitable Distribution, Alimony, Counsel
Fees, and Costs of October 26, 2012, reporting its assessment of
the case at that stage of the litigation. Of note, the report
stated ‘[Appellant] claims that [Appellee] dissipated PRN.
However … there is no evidence [Appellee] dissipated this asset.
On the contrary, the overwhelming evidence suggests that the
business was failing, could not be sold and resulted in the parties
being left with significant debt.’ The DRO then considered ‘the
length of marriage and current earnings of the parties’ and
recommended ‘that [Appellee] pay alimony to [Appellant] in the
amount of $1,000.00 per month for a period of five years,’
noting that the duration of the award would not be modifiable,
but the amount would be, ‘based upon any change in the parties’
income.’ Additionally, the report recommended a denial of all
claims for counsel fees.
Undeterred, Appellant continued in her quest of discovery.
Accordingly, this Court issued orders for discovery on February
1, 2013, requiring documents related to PRN and Reliance; on
May 15, 2013, requiring, inter alia, testimony from [Appellee]
and [Hutt] for three hours and two hours, respectively; on May
24, 2013, requiring additional testimony from [Hutt] and Erica
Benning, another PRN and Reliance employee. This Court finally
concluded the fact finding of the case with the Order of March
26, 2014, finding no connection between PRN and Reliance.
Thus, on April 7, 2014, this Court ordered Appellant to pay
attorney’s fees for [Appellee] and Reliance.
Trial Court Opinion, 6/27/14, at 1-4.
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“We note that our standard in reviewing the propriety of equitable
distribution awards is broad: we will not disturb a trial court’s
determinations absent an abuse of discretion, that is, if the trial court failed
to follow proper legal procedures or misapplied the law.” Osial v. Cook,
803 A.2d 209, 213 (Pa. Super. 2002). “Nor will we usurp the trial court’s
duty as factfinder.” Id. “The test in any equity matter is not whether we
would have reached the same result on the evidence presented, but whether
the judge’s conclusions can be reasonably drawn from the evidence.” Id.The goal of equitable distribution is to “[e]ffectuate economic justice
between the parties[.]” 23 Pa.C.S.A. § 3102(a)(6). Section 3502(a) of the
Divorce Code sets forth factors relevant to achieving economic justice. 23
Pa.C.S.A. § 3502(a).
Appellant first asserts the trial court erred in finding no connection
between PRN and Reliance. Appellant believes Reliance and PRN are not
distinct companies, and that Reliance is the continuation of PRN under a
different name. As such, Appellant believes Reliance is marital property and
she is entitled to a portion of its assets. The trial court has discretion to
determine whether an asset is part of the marital estate and therefore
subject to equitable distribution. Fishman v. Fishman, 805 A.2d 576, 578
(Pa. Super. 2002). The goodwill of a business is a marital asset subject to
equitable distribution. Solomon v. Solomon, 611 A.2d 686, 691 (Pa.
1992); Baker v. Baker, 861 A.2d 298, 303 (Pa. Super. 2004), appeal
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denied, 918 A.2d 741 (Pa. 2007). In Gioia v. Gioia, 555 A.2d 1330, 1334-
35 (Pa. Super. 1989), this Court held that a husband’s 50% interest in a
corporate successor to his former partnership was a marital asset.
Appellant relies on the continuity of the employees, client base, and
services rendered by PRN and Reliance. Appellant also notes the business
immediately became profitable under Hutt, even though Hutt had no
experience in the industry. Such was not possible, according to Appellant,
absent the ongoing goodwill of PRN and its employees and caregivers.
On December 12, 2013, Appellee and Hutt testified at a hearing
concerning Appellant’s exceptions to the master’s report and
recommendations. Appellee testified that when PRN closed it had no assets,
no line of credit, and that its sales income was not sufficient to meet payroll.
N.T. Hearing, 12/10/13, at 52-53. State law prohibited PRN from leaving
patients without care, so PRN referred them to Reliance, a new company set
up by Hutt. Id. at 54. Friends Life Care, from which PRN received most of
its patient referrals, had a choice of referring PRN’s existing patients to
Reliance or any other appropriate organization. Id. at 53-54. Appellee
informed Friends Life Care that PRN was going out of business. Reliance
contacted PRN staff and gave them the option of joining Reliance, thus
creating continuity of care for the patients. Id. at 56. The caregivers were
independent contractors who often worked for several companies. Id. at
103. Reliance hired Appellee as an administrator, because his experience
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allowed Reliance to obtain a license to perform its work. Id. at 58. In
summary, Appellee testified that PRN was financially insolvent, and that the
transfer of most of its patients and staff to Reliance proved the most
advantageous way to treat the patients, who received continuity of care
from familiar caregivers.
Hutt testified that Reliance received its first patients as referrals from
Friends Life Care because PRN was going out of business and the patients
were in need of caregivers. Id. at 179. Hutt wanted to create a new
company with a new name because PRN was known for its skilled care
entity, which closed prior to PRN Healthcare Services. Id. at 182. In
several months during Reliance’s first two years of operation, Hutt did not
take a paycheck because the company could not afford it. Id. at 190-91.
Reliance was not profitable in 2007, its first full year of business. Id. at
198.
The trial court credited the testimony of Appellee and Hutt and on that
basis rejected Appellant’s theory that Reliance simply continued the business
of PRN under another name. We understand Appellant’s concerns, given the
substantial overlap of employees and clientele between the two companies.
The record supports Appellant’s assertions that Reliance maintained the
same telephone number as PRN, and that Reliance, at its inception,
advertised itself on its website as serving the local community for nearly
three decades—the length of time PRN had been in business.
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Regardless, our standard of review requires us to affirm the trial court
absent an abuse of discretion or misapplication of the law. The trial court
afforded Appellant a lengthy opportunity to take discovery in support of her
exception to the master’s report and recommendation. Despite this,
Appellant’s appellate argument amounts to an attack on the credibility of
Appellee and Hutt. We observe that an expert report on the valuation of
PRN—in particular its goodwill or going concern value—would have been
useful to the trial court and to this Court in assessing the legitimacy of
Appellant’s claim. See Butler v. Butler, 633 A.2d 148 (Pa. 1995).
Appellant did not procure the services of an expert witness. Absent such
evidence, we are left with facts, summarized above, indicating that PRN was
in debt, went out of business, and that Hutt created Reliance to serve a
clientele PRN left behind. We believe the trial court acted within its
discretion and did not commit legal error in finding that Reliance is not a
marital asset. Appellant’s first assertion of error does not merit relief.
Appellant next asserts that, after the parties separated, Appellee
received $427,000.00 from PRN in the form of loans repaid to shareholders.
Appellant further asserts that Reliance, as successor corporation, is liable for
this debt. Appellant argues Reliance assumed the liabilities of its
predecessor in this case because Reliance is simply a continuation of PRN.
The merit of Appellant’s second argument depends entirely on her success in
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the first. Since we have rejected Appellant’s first assertion of error, the
second one necessarily fails.
Appellant’s third argument is that the trial court erred in modifying a
non-modifiable alimony pendente lite (“APL”) order. According to Appellant,
the parties agreed to the trial court’s May 1, 2008 APL order, which required
Appellee to pay $2,400.00 per month “without reduction” and provide health
care coverage. Order, 5/1/08, at ¶ 1. Statutory law forbids court
modification of an APL agreement. 23 Pa.C.S.A. § 3105(c) (“In the absence
of a specific provision to the contrary appearing in the agreement, a
provision regarding […] alimony pendente lite […] shall not be subject to
modification by the court.”). Court-awarded APL, on the other hand, is
subject to modification if circumstances change. Childress v. Bogosian, 12
A.3d 448, 463 (Pa. Super. 2011).
The record reflects a September 20, 2007 order directing Appellee to
provide $2,400.00 in APL, $50.00 per month in unreimbursed medical
expenses, and health insurance. Order, 9/20/07, at ¶¶ 1-3. The court
entered that order without prejudice to a subsequent petition to modify. Id.
at ¶ 4. The May 1, 2008 order, as noted above, provided for the payments
specified in the September 20, 2007 order to continue “without reduction,
until the final resolution of all equitable distribution, alimony and related
issues raised in the divorce action are resolved by agreement or final order.”
Order, 5/1/08, at ¶ 1. The May 1, 2008 order also required Appellee to
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continue to provide health insurance to Appellant and to obtain insurance on
his life with a death benefit to Appellant of $100,000.00. Id. at ¶ 2-3.
Paragraph 4 provides as follows:
Upon providing documentation of compliance with
paragraphs 2 and 3 above to [Appellant’s] counsel, [Appellee]
may request entry of an order bifurcating the action in divorce
which shall be entered, unless [Appellant] files an objection to
same based on non-compliance with paragraphs 2 and 3.
Id. at ¶ 4. Appellant asserts Appellee agreed to entry of this order in
exchange for Appellant’s consent to his petition to bifurcate the divorce
proceeding. Appellant’s Brief at 36-37. Appellee’s Brief is silent on whether
he agreed to the order. The conference that preceded entry of the May 1,
2008 order is not of record.
The trial court addressed this issue as follows:
The parties stipulated on February 21, 2013 that
Appellant’s health insurance plan was canceled in May of 2011.
She obtained a new plan, which was terminated for non-
payment of premiums that December. On February 21, 2012,
this Court held [Appellee] in contempt and ordered him to pay
for the plan to be reinstated. This order further attached his
wages to cover the costs. Appellant’s health insurance plan was
again terminated for non-payment that June, and on July 9,
2013, this Court again held [Appellee] in contempt.
However, on August 8, 2013, this Court reversed the prior
order and found that [Appellee] had in fact been providing the
money for [Appellant’s] premiums, but Appellant had failed to
apply these funds to maintain coverage. This order credited
[Appellee] with the money that Appellant had failed to apply
toward health insurance.
Trial Court Opinion, 6/27/14, at 4. The trial court construed its order as a
credit for misapplied funds rather than a modification of the APL order.
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To summarize the foregoing, the record contains no direct evidence
that the parties agreed to the May 1, 2008 order. The order does not
expressly state that it was entered by consent. The order makes the
success of Appellee’s petition to bifurcate conditional on his compliance with
paragraphs 2 (provide health insurance) and 3 (obtain life insurance). The
court did not condition the grant of Appellee’s bifurcation motion on his
compliance with Paragraph 1, which includes the “without reduction”
language. Ultimately, we are left to speculate whether the terms of the May
1, 2008 order was the subject of a negotiated agreement or whether it was
of the trial court’s design. Under these circumstances, we do not believe
§ 3105(c), governing APL by agreement, is dispositive.
We further conclude the trial court did not violate the express terms of
its own order. The court did not devise a reduction to Appellant’s APL.
Rather, the trial court explained that the effect of its order “was to credit
[Appellee] for the payments he made to Appellant for health insurance while
she did not have premiums to pay.” Trial Court Opinion, 6/27/14, at 15 n.3.
In other words, the order required Appellee to provide health insurance in
addition to the $2,400.00 per month APL payment. To discharge that
obligation, Appellee provided money to Appellant to cover her insurance
premiums. Appellee failed to apply the money to the premiums and allowed
her coverage to lapse. The trial court therefore devised a way to
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compensate Appellee for misapplied funds. We discern no abuse of
discretion or error of law. Appellant’s third assertion of error fails.
In her fourth argument, Appellant argues the trial court erred in
awarding attorney’s fees to compensate Appellee for the discovery Appellant
conducted in her unsuccessful attempt to establish that Reliance was a
continuation of PRN under a new name.
Section 2503 of the Judiciary Code governs awards of counsel fees.
42 Pa.C.S.A. § 2503. A trial court may award fees to a party for an
opposing party’s “dilatory, obdurate or vexatious conduct during the
pendency of any matter.” 42 Pa.C.S.A. § 2503(7). Counsel fees are also
appropriate where “the conduct of another party in commencing the matter
or otherwise was arbitrary, vexatious or in bad faith.” 42 Pa.C.S.A.
§ 2503(9). The trial court also relied on Rule 4019 of the Rules of Civil
Procedure. Rule 4019 governs the imposition of sanctions for a party’s
failure to comply with discovery. Pa.R.C.P. 4019.
Matters of discovery rest within the trial court’s discretion. Octave v.
Walker, 103 A.3d 1255, 1266 (Pa. 2014). Trial courts have broad
discretion to craft sanctions for discovery violations. Id. The trial court
justified its ruling as follows:
Over the several years of the litigation of this case, this
[c]ourt found that Appellant was fishing for facts that were not
supported by the evidence. Accordingly, Appellant was ordered
to compensate [Appellant and Reliance] for their time spent in
discovery.
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Trial Court Opinion, 6/27/14, at 13.
We conclude the trial court lacked statutory authority to impose
attorney’s fees in this case. The trial court did not make any finding that
Appellant’s conduct was dilatory, obdurate or vexatious, pursuant to
§ 2503(7). Likewise, the trial court did not note any violation, on Appellant’s
part, of Rule 4019. Rule 4019 applies principally where the subject of
discovery fails to comply with a request from the party seeking discovery.
Rather than crafting sanctions to punish abusive behavior, the trial court in
this case punished Appellant because her discovery was unsuccessful. As we
explained above in connection with Appellant’s first argument, we believe
Appellant had good reason to examine closely the relationship between PRN
and Reliance. Her failure to establish a relationship sufficient to bring
Reliance within the marital estate is not, by itself, a sufficient basis for
imposing sanctions. Extensive but unsuccessful discovery is by no means
synonymous with dilatory, obdurate or vexatious behavior. The trial court
abused its discretion in concluding otherwise. We will therefore vacate the
April 7, 2014 order directing Appellant to pay counsel fees.
Appellant’s fifth argument is that the trial court erred in failing to find
husband responsible for spoliation of evidence and violation of various court
orders and discovery rules. Appellant cites no law in support of this
argument and therefore has waived it. Pa.R.A.P. 2119(b); Dalrymple v.
Kilishek, 902 A.2d 1275, 1281 (Pa. Super. 2007).
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Appellant’s sixth assertion of error is that the trial court erred in
limiting the depositions of Appellee and Hutt to three hours and two hours,
respectively.1 As we noted above, trial courts enjoy broad discretion in
managing discovery. Octave, 103 A.3d at 1266. In support of this
argument, Appellant reprises the facts set forth in her first argument,
whereby she attempted to establish that Reliance is simply the same
company as PRN. She argues that the total of five hours of deposition time
was woefully inadequate to examine the witnesses on a very complicated
issue.
Our review of the record convinces us that the trial court permitted
Appellant to conduct extensive discovery on this issue, in the form of
depositions and voluminous requests for document production. We believe
the trial court afforded Appellant more than sufficient opportunity to prove
her claims. We therefore discern no abuse of discretion in the deposition
time limitations.
In her penultimate argument, Appellant asserts the trial court erred in
awarding insufficient alimony of $367.00 per month for five years. The
Divorce Code provides: “Where a divorce decree has been entered, the
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1
This section of Appellant’s brief also includes no citation to authority,
though in an earlier portion of her brief she cited the abuse of discretion
standard applicable to discovery matters. We conclude Appellant did not
waive this argument, as the standard of review is dispositive of this
argument.
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court may allow alimony, as it deems reasonable, to either party only if it
finds that alimony is necessary.” 23 Pa.C.S.A. § 3701(a). Section 3701(b)
provides seventeen factors for trial courts to consider in fashioning an
alimony award. 23 Pa.C.S.A. § 3701(b). We will not reverse an award of
alimony absent an abuse of discretion. Middleton v. Middleton, 812 A.2d
1241, 1248 (Pa. Super. 2002).
Instantly, the trial court acknowledges an error in calculating
Appellee’s income. The trial court reduced Appellee’s income based on a
garnishment for a defaulted SBA loan. Garnishment is not among the
exclusive list of approved income reductions set forth in Pa.R.C.P. 1910.16-
2(c). In pertinent part, that Rule reads: “Unless otherwise provided in
these rules, the court shall deduct only the following items from monthly
gross income to arrive at net income.” Garnishment is not among the items
listed. Appellee disputes this point, but fails to provide any legal authority to
support his argument. In accord with the trial court’s request, we will
vacate the alimony award and remand for calculation of a new award.
Appellant’s eighth and final argument is that the trial court erred in
refusing to award her attorney’s fees for Appellee’s multiple alleged
violations of discovery rules, including delays, spoliation of evidence and
incomplete responses. Once again, we note that management of discovery
and imposition of sanctions, if necessary, rests within the discretion of the
trial court. Octave, 103 A.3d at 1266. The trial court found Appellee’s
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discovery responses adequate, and therefore declined to award counsel fees
to Appellant. Appellant, on the other hand, believes Appellee’s insufficient
responses prevented her from examining thoroughly the circumstances of
the closing of PRN and the subsequent opening of Reliance. Our review of
the record reveals no abuse of discretion on the part of the trial court. At
the December 10, 2013 hearing, Appellant examined Appellee and Hutt
extensively based on part on materials obtained from Appellee and Hutt
through discovery. The record does not support a conclusion that delayed
and incomplete discovery responses hindered Appellant’s ability to present
her case. Once again, we note our belief that expert review of voluminous
and intricate financial information would have been of great assistance to
Appellant in preparing her case and to this Court in conducting review.
In summary, we vacate the April 7, 2014 order directing Appellant to
pay counsel fees. We also vacate the alimony award set forth in the March
26, 2014 divorce decree and remand for entry of a new alimony award. We
affirm the remainder of the March 26, 2014 decree. We affirm the orders of
May 15 and August 8, 2013.
Decree affirmed in part and vacated in part. Order of April 7, 2014
vacated. Orders of May 15 and August 8, 2013 affirmed. Case remanded
for entry of a new alimony award. Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/14/2015
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