Kunz, E. v. Toll Brothers, Inc. ( 2018 )

J. A12040/18
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
ERIC AND SIGRID KUNZ, H/W, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellants :
:
v. :
:
TOLL BROTHERS, INC., :
TOLL PA II, L.P., TOLL PA GP CORP., :
BROAD RUN ASSOCIATES, L.P., : No. 3107 EDA 2017
TOLL ARCHITECTURE, INC., AND :
TOLL ARCHITECTURE I, P.A. :
Appeal from the Order August 14, 2017,
in the Court of Common Pleas of Chester County
Civil Division at No. 2016-01218-MJ
BEFORE: BOWES, J., OTT, J., AND FORD ELLIOTT, P.J.E.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED JULY 16, 2018
Eric and Sigrid Kunz, husband and wife, appeal from the August 14,
2017 order entered in the Court of Common Pleas of Chester County denying
their motion for reconsideration of the trial court’s December 12, 2016 order
granting the petition of appellees Toll Brothers, Inc.; Toll PA II, L.P.; Toll PA
GP Corp.; Broad Run Associates, L.P.; Toll Architecture, Inc.; and Toll
Architecture I, P.A. (collectively, “Toll Brothers”), to compel arbitration and
reinstating the December 12, 2016 order. We quash this appeal.
The trial court set forth the following:
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Procedural History
On July 19, 2016, [appellants] filed their complaint
because of what they contend are “substantial
construction defects” and because of [Toll Brothers’]
[“]misrepresentations regarding the quality of the
construction” of their home. [Appellants’] complaint
assert[s] claims against [Toll Brothers] for violation of
Pennsylvania’s Unfair Trade Practices and Consumer
Protection Law (Count I), breach of express warranty
(Count II), breach of implied warranty (Court III),
negligence (Count IV), negligent supervision
(Count V), and civil conspiracy (Count VI).
On August 31, 2016, [Toll Brothers] filed a petition to
compel arbitration pursuant to arbitration language
within the documents related to the purchase of
[appellants’] home. [Appellants] opposed the petition
arguing that the arbitration provisions in the
governing documents were unenforceable “as they
are indefinite[,] vague and contradictory.” Following
briefing by the parties, on December 12, 2016, the
court entered an order granting [Toll Brothers’]
petition to compel arbitration.
On December 22, 2016, [appellants] filed an
emergency motion asking the court to reconsider its
decision or amend its order for immediate appeal. On
January 3, 2017, the court entered a new order
striking its December 12th order compelling arbitration
pending further consideration by the court. The
parties also were given additional time to conduct
discovery on the issue of the allegedly “different”
arbitration provisions.
On January 12, 2017, [Toll Brothers] then filed their
own motion to vacate, requesting that the court
reinstate its original order compelling arbitration. On
February 24, 2017, the court denied [Toll Brothers’]
motion to vacate and clarified for the parties the
issues that were the subject of the reconsideration
order. After additional briefing and oral argument
held on July 25, 2017, [appellants’] motion for
reconsideration is now ripe for decision.
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The Relevant Arbitration Provisions
There are two documents at issue in this dispute. The
first is an “Agreement of Sale” (“AOS”) between
[appellants] and [appellee] Broad Run [Associates,
L.P. (“Broad Run”)]. The second document is a limited
warranty entitled “Toll Brothers Limited Warranty”
(“Limited Warranty”). Both documents contain
arbitration provisions.
The arbitration clause in the AOS executed by
[appellants] and Broad Run reads as follows:
ARBITRATION : Buyer . . . hereby agrees
that any and all disputes with Seller,
Seller’s parent company or their
subsidiaries or affiliates arising out of the
Premises, this Agreement, the Home
Warranty, any other agreements,
communications or dealings involving
Buyer, or the construction or condition of
the Premises including, but not limited to,
disputes concerning breach of contract,
express and implied warranties, personal
injuries and/or illness, mold-related
claims, representations, and/or omissions
by Seller, on-site and off-site conditions
and all other torts and statutory causes of
action (“Claims”) shall be resolved by
binding arbitration in accordance with the
rules and procedures of Construction
Arbitration Services, Inc. or its successor
or an equivalent organization selected by
Seller. If CAS is unable to arbitrate a
particular claim, then that claim shall be
resolved by binding arbitration pursuant
to the Construction Rules of Arbitration of
the American Arbitration Association or its
successor or an equivalent organization
selected by Seller. In Addition, Buyer
agrees that Buyer may not initiate any
arbitration proceeding for any Claim(s)
unless and until Buyer has first given
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Seller specific written notice of each claim
(at 3103 Philmont Avenue, Huntingdon
Valley, PA 19006, Attn: Warranty Dispute
Resolution) and given Seller a reasonable
opportunity after such notice to cure any
default, including the repair of the
Premises, in accordance with the Home
Warranty. The provisions of this
paragraph shall be governed by the
provisions of the Federal Arbitration Act,
9 U.S.C. §§ 1, et seq. and shall survive
settlement.
The arbitration clause in the Limited Warranty
between [appellants] and [appellee] Toll Brothers,
Inc., reads as follows:
Any disputes between YOU and US related
to or arising from this LIMITED
WARRANTY will be resolved by binding
arbitration. Disputes subject to binding
arbitration include but are not limited to:
A. WE do not agree with YOU
that a DEFICIENCY or
DEFINED STRUCTURAL
ELEMENT FAILURE is covered
by the LIMITED WARRANTY;
B. WE do not correct a
DEFICIENCY or DEFINED
STRUCTURAL ELEMENT
FAILURE to YOUR satisfaction
or in a manner that YOU
believe this LIMITED
WARRANTY requires;
C. WE fail to respond to YOUR
written notice of a
DEFICIENCY or DEFINED
STRUCTURAL ELEMENT
FAILURE;
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D. Disputes related to COMMON
Elements;
E. Alleged breach of this
LIMITED WARRANTY[;]
F. Alleged violations of
consumer protection, unfair
trade practices, or other
statutes;
G. Disputes concerning the
issues that should be
submitted to binding
arbitration;
H. Disputes concerning the
timeliness [to] binding
arbitration requests.
Any binding arbitration proceeding will be
conducted by an independent arbitration
organization by the WARRANTY PROGRAM
ADMINISTRATOR. The rules and
procedures followed will be those of the
designated arbitration organization. A
copy of the applicable rules and
procedures will be delivered to YOU upon
request.
Trial court opinion, 8/14/17 at 1-3 (record citations omitted).
Following oral argument, the trial court entered its August 14, 2017
order denying appellants’ motion for reconsideration of its December 12, 2016
order granting Toll Brothers’ petition to compel arbitration and reinstating its
December 12, 2016 order. On September 12, 2017, appellants filed a notice
of appeal to this court. The trial court then ordered appellants to file a concise
statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b).
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Appellants timely complied. In response, the trial court entered an order
stating that “[t]he present appeal seeks review of an order directing this
matter to arbitration [; however,] [u]nder Pennsylvania law, such an order is
not final and appealable.”1 (Order of court, 10/4/17 at 1.)
On October 23, 2017, this court ordered appellants to show cause within
ten days as to the basis of our jurisdiction over this matter. (Order of court,
10/23/17.) Appellants timely complied by filing a “brief in support of
jurisdiction over this appeal.” On November 16, 2017, this court discharged
the show-cause order, referred the appealability issue to this merits panel,
and directed the parties to be prepared to address the issue in their briefs and
at oral argument. (Id.).
We must, therefore, determine the appealability of the order that
appellants wish to appeal from because “[t]he appealability of an order goes
directly to the jurisdiction of the [c]ourt asked to review the order.” N.A.M.
v. M.P.W., 168 A.3d 256, 260 (Pa.Super. 2017) (citation omitted). With
respect to appealability,
[t]his Court may address the merits of an appeal
taken from “(a) a final order or an order certified as a
final order; (2) an interlocutory order [appealable] as
of right; (3) an interlocutory order [appealable] by
permission; or (4) a collateral order.” Commerce
Bank v. Kessler, 2012 Pa. Super. 100, 46 A.3d 724,
728 (Pa. Super. 2012), quoting Stahl v. Redcay,
1 The trial court further noted that “[e]ven if the present appeal were
considered to be proper, the [trial] court believes that its [o]rder of August 14,
2017, adequately explains the basis for the court’s decision.” (Trial court
opinion, 10/4/17 at 2.)
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2006 Pa. Super. 55, 897 A.2d 478, 485 (Pa. Super.
2006) (citations omitted); see also Pa.R.A.P. 341(b).
“As a general rule, only final orders are appealable,
and final orders are defined as orders disposing of all
claims and all parties.” Am. Indep. Ins. Co. v. E.S.,
2002 Pa. Super. 289, 809 A.2d 388, 391 (Pa. Super.
2002); see also Pa.R.A.P. 341(a) (“[A]n appeal may
be taken as of right from any final order of a
government unit or trial court.”).
Havalind v. Kline & Specter, P.C., 182 A.3d 488, 492 (Pa.Super. 2018).
Preliminarily, we note that “[t]he law is clear that an order that has the
effect of directing the parties to arbitrate a matter is interlocutory and not
appealable.” Niemiec v. Allstate Ins. Co., 721 A.2d 807, 808 (Pa.Super.
1998) (citation omitted). Therefore, the interlocutory order compelling
arbitration from which appellants seek to appeal is not appealable as a final
order. Additionally, an interlocutory order compelling arbitration is not
appealable as of right pursuant to Pennsylvania Rule of Appellate
Procedure 311. Pa.R.A.P. 311 (enumerating those interlocutory orders from
which an appeal may be taken as of right). Further, the order is not
appealable as an interlocutory order by permission under Pa.R.A.P. 312
because appellants never petitioned the trial court for permission to appeal
the interlocutory order as required under Pa.R.A.P. 1311 and the trial court
never granted permission.
Here, appellants maintain that this court has jurisdiction over this appeal
pursuant to the collateral order doctrine set forth in Pa.R.A.P. 313. Rule 313
defines a collateral order as “an order separable from and collateral to the
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main cause of action where the right involved is too important to be denied
review and the question presented is such that if review is postponed until
final judgment in the case, the claim will be irreparably lost.”
Pa.R.A.P. 313(b).
[T]he collateral order doctrine is a specialized,
practical application of the general rule that only final
orders are appealable as of right. Thus, Rule 313
must be interpreted narrowly, and the requirements
for an appealable collateral order remain stringent in
order to prevent undue corrosion of the final order
rule. To that end, each prong of the collateral order
doctrine must be clearly present before an order may
be considered collateral.
Price v. Simakas Co., 133 A.3d 751, 755 (Pa.Super. 2016) (internal citations
and quotation marks omitted).
“With regard to the first prong of the collateral order doctrine, an order
is separable from the main cause of action if it can be resolved without an
analysis of the merits of the underlying dispute and if it is entirely distinct
from the underlying issue in the case.” Shearer v. Hafer, 177 A.3d 850, 858
(Pa. 2018) (citation and internal quotation marks omitted). Here, the issue
of whether the trial court erred when it entered its order compelling arbitration
is separate and distinct from the allegations of misrepresentation, violations
of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, breach
of express warranty, breach of implied warranty, negligence, negligent
supervision, and civil conspiracy that appellants set forth in their complaint.
Therefore, appellants satisfy the first prong of the collateral order doctrine.
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With respect to the second prong of the collateral order doctrine, which
is the importance prong, “a right is important if the interests that would go
unprotected without immediate appeal are significant relative to the efficiency
interests served by the final order rule. Further, the rights involved must
implicate interests deeply rooted in public policy and going beyond the
particular litigation at hand.” Id. at 858-859 (citations, brackets, and internal
quotation marks omitted).
Here, appellants claim that the order compelling arbitration “implicates
important rights that are too important to be denied immediate review.”
(Appellant’s brief at 4.) Specifically, appellants claim that the order violates
their due process right to be heard by the tribunal that has jurisdiction over
the matter, which, appellants assert, is the trial court. (Id.) Appellants
further contend that “the rights at stake are not limited to appellants[, as
appellants] are one family out of many against whom Toll Brothers has
attempted to subject to the contradictory provisions in the [a]greement of
[s]ale and [l]imited [w]arranty.” (Id. (emphasis in original).) In so arguing,
appellants rely on Commonwealth v. Philip Morris, Inc., 128 A.3d 334
(Pa.Commw. Ct. 2015).
In that tobacco litigation case, 52 states and territories, including the
Commonwealth of Pennsylvania (“Commonwealth”), entered into a master
settlement agreement (“MSA”) with certain tobacco manufacturers to settle
tobacco-related health-care costs. Id. at 338-339. The MSA provided that
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“[a]ny dispute, controversy or claim arising out of or relating to calculations
performed by, or any determinations made by, the Independent Auditor . . .
shall be submitted to binding arbitration.” Id. at 339. A calculation dispute
arose as to whether certain states qualified for payment adjustments for the
years 1999 to 2002, but was settled. The same calculation dispute then arose
for the year 2003. In that dispute, tobacco manufacturers and most states,
including the Commonwealth, agreed to multi-state arbitration. The dispute
once again arose for the 2004 calendar year. Id. at 340. The Commonwealth
filed a motion to compel single-state arbitration, and the tobacco
manufacturers filed a motion to compel multi-state arbitration. The trial court
granted the manufacturers’ motion to compel multi-state arbitration.
The Commonwealth appealed claiming that the order compelling
multi-state arbitration was appealable as a collateral order. Id. With respect
to the second prong of the collateral order doctrine, the Commonwealth
contended that the order raised important issues with respect to its sovereign
rights in that it would not be permitted to select an independent arbitrator
that would apply Pennsylvania law but would be compelled to jointly decide
the appointment of the arbitrator with all of the states and territories subject
to multi-state arbitration and that the arbitrator would apply generic legal
principles. Id. at 341. The Commonwealth Court agreed finding that the
Commonwealth satisfied the second prong of the collateral order doctrine
because “[t]he issue is important not only to the parties of the MSA, but to
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the public at large because the sovereign power in our government belongs
to the people.” Id. at 346.
Here, in their “brief in support of jurisdiction over this appeal,”
appellants contend that they satisfy the second prong of the collateral order
doctrine because:
the August 14 [o]rder implicates important due
process interests that cannot go unprotected. At
stake is whether [appellants] are required to arbitrate
their construction defect claims in an arbitration forum
that [appellants] did not agree to, or whether
[appellants] are entitled to proceed in the Court of
Common Pleas, which has jurisdiction over this
matter. As set forth in [Philip Morris], the right to
have claims heard by the tribunal with jurisdiction is
a per se due process right, and due process rights are
generally “too important to be denied review.”
[Philip Morris, 128 A.3d] at 344. Accordingly, on
this basis alone, the second prong of the collateral
order doctrine is met.
Appellant’s brief in support of jurisdiction over this appeal, 11/2/17 at 19.
In their brief, appellants reiterate that position, but fail to explain how
their voluntary and mutual agreement to arbitrate their disputes with
Toll Brothers denies them due process and implicates interests deeply rooted
in public policy that go beyond the litigation they initiated against
Toll Brothers. This is not a case where the trial court ordered arbitration
absent an agreement to arbitrate or in the absence of a rule of law requiring
arbitration. See Gilyard v. Redevelopment Auth. of Philadelphia., 780
A.2d 793 (Pa.Commw.Ct. 2001) (reversing order remanding appeal to
arbitration where trial court had no legal basis to transfer matter to a panel of
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arbitrators for a hearing). Additionally, this case is not analogous to
Philip Morris wherein the order to compel multi-state arbitration, as opposed
to single-state arbitration, implicated the Commonwealth’s sovereign rights
that ultimately belong to the citizens of the Commonwealth. Philip Morris,
128 A.3d at 346. In this case, appellants entered into an agreement of sale
for the construction of a home that included a limited warranty. Both the
agreement of sale and the ancillary limited warranty contained arbitration
provisions that appellants do not wish to abide by. Therefore, the issue here
does not concern a right that implicates interests deeply rooted in public policy
that go beyond appellants’ litigation against Toll Brothers. The issue here
concerns appellants’ unhappiness with the arbitration provisions in their
contractual agreements with Toll Brothers. Additionally, the only deeply
rooted public policy involved in this case is the well-established public policy
that Pennsylvania favors arbitration because it relieves parties of expensive
litigation and eases court congestion. Cardinal v. Kindred Healthcare,
Inc., 155 A.3d 46, 52 (Pa.Super. 2017).
In an attempt to demonstrate that the right involved goes beyond the
particular litigation at hand, appellants claim that they are “one family out of
many against whom Toll Brothers has attempted to subject to the
contradictory arbitration provisions in the [a]greement of [s]ale and [l]imited
[w]arranty.” (Appellant’s brief at 4 (emphasis in original).) This contention
is equally unavailing and fails to implicate interests deeply rooted in public
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policy because it merely raises the possibility that other individuals who may
have voluntarily entered into home-construction contracts with Toll Brothers
that contain arbitration provisions may not want to abide by those arbitration
provisions in the event that a dispute arises. Clearly, appellants fail to satisfy
the second prong of the collateral order doctrine.
Finally, even if we determined that appellants satisfied the second
prong, appellants concede that their claim will not be irreparably lost if
appellate review is postponed until after arbitration, as follows:
If the August [o]rder is not immediately appealable,
in the best case scenario, [a]ppellants – who are
senior citizens – will be forced to expend substantial
amounts of money and time over the course of years
before obtaining appellate review of the August
[o]rder, only to start the litigation from beginning in
the Chester County Court of Common Pleas.
Appellant’s brief at 7. Therefore, even assuming that appellants satisfied the
second prong of the collateral order doctrine, by their own admission,
appellants would not satisfy the third prong.
Appeal quashed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/16/18
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