In Re: Estate of Peter J. Caruso ( 2022 )

J-A18038-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: ESTATE OF PETER J. : IN THE SUPERIOR COURT OF
CARUSO, III : PENNSYLVANIA
:
GERALDINE CARUSO :
:
:
v. :
:
: No. 1406 WDA 2021
SANDRA CARUSO, EXECUTRIX OF :
THE ESTATE OF PETER J. CARUSO, :
III :
:
:
APPEAL OF: SANDRA A. CARUSO :
Appeal from the Order Entered October 28, 2021
In the Court of Common Pleas of Allegheny County Orphans' Court at
No(s): 3623 of 2015
BEFORE: STABILE, J., MURRAY, J., and McLAUGHLIN, J.
MEMORANDUM BY McLAUGHLIN, J.: FILED: NOVEMBER 15, 2022
Sandra Caruso, as executrix of the estate of Peter J. Caruso, III (“the
Estate”) appeals from the order directing specific performance of a buy-back
provision contained in a partnership agreement. We affirm.
This factually and procedurally complex case is before this Court for a
second time. We glean the facts and procedural history from the trial court’s
Pa.R.A.P. 1925(a) opinion and from the certified record. This case stems from
a general partnership known as the Hays Land Company (“HLC”) entered into
via a partnership agreement executed in 1983 by Mary Ann Caruso (“Mary
Ann”) and her two adult sons, John Caruso (“John”) and Peter Caruso (“Peter”)
J-A18038-22
(“1983 Partnership Agreement”). HLC is in the business of the purchase and
development of real estate and has owned several separate parcels in
Allegheny County.
Mary Ann sold her shares in HLC to John and Peter, in equal amounts,
prior to her death in 1997. In 2003, John passed away and was survived by
his Wife Geraldine Caruso (“Geraldine”). The 1983 Partnership Agreement
contains a buy-back provision in the event of the death of a partner:
If the partnership is dissolved by the death of a Partner, the
remaining partners shall have the obligation within 90 days from
the date of death of the deceased Partner to purchase the interest
of the deceased Partner in the partnership and to pay to the
personal representative of such deceased partner the value
thereof as provided in paragraph 13 of this Agreement. During
such 90-day period following the death of a Partner, the remaining
Partners may continue the business of the Partnership, but the
estate or personal representative of the deceased Partner shall
not be liable for any obligations incurred in the Partnership
business beyond the amount included in the estate of the
deceased Partner already invested or involved in the Partnership
on the date of the deceased Partner’s death. The estate of the
deceased Partner shall be obligated to sell as provided herein and
shall be entitled, at the election of the personal representative of
the deceased partner, to either [a calculation of profits or interest
from 90-day wind-up period]
1983 Partnership Agreement, ¶14.
After John’s death, Peter, the remaining original HLC partner, did not
exercise the buy-back provision. Instead, Peter and Geraldine continued to
operate the business under the HLC name until April 2015, when Peter
unilaterally drew up documents to merge HLC into a limited liability company,
Hays Land Company-Pittsburgh, LLC.
-2-
J-A18038-22
In May 2015 Peter died, survived by his wife Sondra, who serves as the
executrix of the Estate. Shortly thereafter, Geraldine attempted to execute
the buy-back provision and calculated that she would owe Peter’s estate
$117,762.50, based upon the book value of HLC, which is allegedly lower than
the actual value. Sondra, as executrix of the Estate, would not accept payment
and instead asserted that the 1983 Partnership Agreement was not in effect
at the time of Peter’s death because the partnership had ended with John’s
death in 2003.
Geraldine filed suit (“First Case”) claiming that the 1983 Partnership
Agreement, and thus the buy-back provision, was still in effect, and Peter’s
attempt to unilaterally form a limited liability company was invalid without her
written consent. The trial court ultimately granted the Estate’s summary
judgment motion, ruling that Geraldine could not prove her case due to the
Dead Man’s Act.1 Essentially, the trial court held that because Geraldine could
not testify about her dealings with Peter, she could not prove that she and
Peter intended to continue to be governed by the 1983 Partnership Agreement
nor could she show that she opposed the formation of a new limited liability
company. This Court, in a published opinion, reversed and remanded. See In
____________________________________________
1 See 42 Pa.C.S.A. § 5930 (“in any civil action or proceeding, where any party
to a thing or contract in action is dead, . . . and his right thereto or therein
has passed, either by his own act or by the act of the law, to a party on the
record who represents his interest in the subject in controversy, neither any
surviving or remaining party to such thing or contract, nor any other person
whose interest shall be adverse to the said right of such deceased . . . shall
be a competent witness to any matter occurring before the death of said
party”).
-3-
J-A18038-22
re Estate of Caruso, 176 A.3d 346 (Pa.Super. 2017). We held that the Estate
failed to prove that Peter successfully executed a merger of HLC into a limited
liability company. Id. at 351. Further, we concluded that there was ample
evidence, even without Geraldine’s testimony about conversations with Peter,
that Geraldine and Peter continued HLC after John’s death and knew they were
still governed by the 1983 Partnership Agreement. Significantly here, in the
First Case, this Court specifically concluded:
It is undisputed that the 1983 Partnership Agreement governed
the HLC partnership of John and Peter. Although Executrix
contends that the Partnership dissolved as a matter of law upon
John’s death, the language of the Agreement suggests the
contrary. The Agreement provided that the Partnership “shall
continue until dissolved by mutual agreement of the parties or
terminated as herein provided.” Partnership Agreement, at ¶ 3.
The financial documents do not reflect that there was a settlement
or liquidation of John’s interest as outlined in Paragraph fourteen
of the Partnership Agreement.
***
We find support in the record for Geraldine’s contention that
dissolution of the Partnership was not automatic upon John’s
death. The Partnership was not terminated in accordance with the
[1983 Partnership Agreement] following John’s death, i.e., there
was no buy-out of John’s share that would have been mandatory
following dissolution due to death of a partner. Partnership
Agreement, ¶ 14. Such a course of conduct is compelling evidence
that the parties intended to continue the partnership.
This inference is bolstered by the tax returns from 1998
through 2014, signed by Peter, that recite that HLC was formed
in 1979, and reflect the same employer identification number for
HLC for more than three decades. In addition, Peter’s admissions
-4-
J-A18038-22
in the prior case[2] that he and Geraldine were partners in the
Hays Land Company, a Pennsylvania General Partnership, formed
on or before December 12, 1983, which was the same partnership
formed by John, Peter, and Mary Ann, is powerful evidence that
the original partnership continued. While technically these are
extra-judicial admissions, rather than judicial admissions that
would eliminate the need for proof of these facts, they were
unequivocal and made in circumstances where they were legally
binding.
Id. at 353-55 (footnote omitted).
On remand, Geraldine sought an order holding, among other things,
that she was entitled to specific performance of the 1983 Partnership
Agreement’s buy-back provision. The Estate countered that the original
partnership had ceased and had been replaced by the limited liability
company. Following argument, the court on October 26, 2021 entered an
order in favor of Geraldine finding that the 1983 Partnership Agreement
governed and directing specific performance of the buy-back provision. The
Estate timely appealed, and both it and the trial court complied with Pa.R.A.P.
1925.
The Estate raises the following issues:
1. Whether the trial court erred in determining that Geraldine
Caruso had a clear right to enforce a written contract between her
late husband, John D. Caruso, and her brother-in-law, Peter J.
Caruso, III in the absence of clear evidence of fundamental
contractual precepts of mutual assent, consideration, and intent
by Peter J. Caruso, III to be bound to such an agreement with
Geraldine?
____________________________________________
2 Geraldine and Peter had been involved in previous litigation including the
referenced equity case Geraldine filed against Peter, HLC, and related
defendants.
-5-
J-A18038-22
2. Whether the trial court erred in concluding that Geraldine
Caruso became a partner in a general partnership between her
late husband, John D. Caruso, and her brother-in-law, Peter J.
Caruso, III and had a clear right to enforce a written partnership
agreement between her husband and her brother-in-law where
Geraldine had not signed the agreement and did not claim to be a
party or third party beneficiary thereunder, but instead claimed to
have “stepped into the shoes” of her late husband?
3. Whether the trial court erred in concluding that the partnership
between the decedent Peter J. Caruso, III and John D. Caruso did
not dissolve as a matter of law on the death of the penultimate
partner and, because the 1983 Partnership continued, the 1983
Partnership Agreement was enforceable by Geraldine?
4. Whether the trial court erred in granting specific performance
to Geraldine Caruso in the absence of evidence of (i) a clear right
to enforce a contract, including that she was party to a partnership
agreement or a third party beneficiary thereunder; (ii) that she
had no adequate remedy at law; and (iii) that justice so required?
5. Whether the trial court erred in finding that the Executrix had
the burden of disproving elements of Geraldine Caruso’s claims
that included the nonexistence of an enforceable contract, that
justice did not require specific performance, and the absence of
an adequate remedy at law?
Estate’s Br. at 5-6.
In its first two issues, the Estate argues that the trial court erroneously
determined that Geraldine’s partnership interests were governed by the 1983
Partnership Agreement because she never signed it. It further contends that
there was no evidence that Geraldine and Peter entered into an oral or written
agreement that she was to become a party to the 1983 Partnership
Agreement. The Estate maintains that there is no authority in Pennsylvania
law that one can “step into the shoes” of a signatory to a contract. Further,
the Estate avers that Geraldine offered no evidence of offer, mutual assent,
-6-
J-A18038-22
or any consideration between her and Peter to support her claim that she
became a de facto partner in HLC after her husband’s death.
“The findings of a judge of the orphans’ court division, sitting without a
jury, must be accorded the same weight and effect as the verdict of a jury,
and will not be reversed by an appellate court in the absence of an abuse of
discretion or a lack of evidentiary support.” In re Jackson, 174 A.3d 14, 23
(Pa.Super. 2017) (citation omitted). This Court’s “task is to ensure that the
record is free from legal error and to determine if the [o]rphans’ [c]ourt’s
findings are supported by competent and adequate evidence and are not
predicated upon capricious disbelief of competent and credible evidence.” Id.(citation omitted). Regarding questions of law, our standard of review is de
novo, and the scope of review is plenary. In re Fiedler, 132 A.3d 1010, 1018
(Pa. Super. 2016) (en banc).
“For a contract to be enforceable, the nature and extent of the mutual
obligations must be certain, and the parties must have agreed on the material
and necessary details of their bargain.” Lackner v. Glosser, 892 A.2d 21, 30
(Pa.Super. 2006). Further, consideration is required. Id. at 31.
As this Court noted in the First Case:
Under the Uniform Partnership Act (“UPA”),[3] whether a
partnership exists depends upon whether the parties intended to
be partners. No formal or written agreement is required. Murphy
____________________________________________
3The Pennsylvania Uniform Partnership Act, 15 Pa.C.S. §§ 8301-8365, was in
effect at all relevant times herein but was repealed by the Act of Nov. 21,
2016, P.L. 1328, No. 170 § 24, effective February 21, 2017. The new Uniform
Partnership Act of 2016 is codified at 15 Pa.C.S. §§ 8411-8486.
-7-
J-A18038-22
v. Burke, 454 Pa. 391, 311 A.2d 904 (1973). A partnership may
be found to exist by implication from the circumstances and
manner in which the business was conducted. DeMarchis v.
D'Amico, 432 Pa.Super. 152, 637 A.2d 1029 (1994).
Furthermore, under Pennsylvania’s UPA, a partnership was not a
legal entity separate from its partners and had no residence or
domicile distinct from that of its partners. “It is rather a relation
or status between two or more persons who unite their labor or
property to carry on a business for profit.” Svetik v. Svetik, 377
Pa.Super. 496, 547 A.2d 794, 797–798, (1988) (quoting Tax
Review Board of the City of Philadelphia v. D.H. Shapiro Co.,
409 Pa. 253, 185 A.2d 529, 533 (1962)).
In re Caruso, 176 A.3d at 349-50 (footnote omitted).
Further, under the UPA, “a person admitted as a partner into an existing
partnership is liable for the obligations of the partnership arising before his
admission as though he had been a partner when the obligations were incurred
except that his liability shall be satisfied only out of partnership property.” 15
Pa.C.S.A. § 8329. (repealed).4 As noted by the trial court, a partnership may
continue, even upon the death of a partner, if an agreement exists between
the partners to continue. Underdown v. Underdown, 124 A. 159, 161-62
(Pa. 1924). An “agreement not to dissolve the partnership can be made by
the deceased partner’s legal representative.” 13 Summ. Pa. Jur. 2d Business
Relationships §16:14. (2d. ed.).
In this case, the trial court aptly concluded that the circumstances
around both Geraldine’s and Peter’s course of conduct, following John’s death,
established that Geraldine essentially “stepped into the shoes” of her Husband
John, in regards to HLC. The parties do not dispute that the partnership
____________________________________________
4 Section 8329 was in force at all relevant times.
-8-
J-A18038-22
between John and Peter was governed by the 1983 Partnership Agreement.
However, Peter did not exercise the 1983 Partnership’s buy-back provision
following John’s death. Instead, Peter and Geraldine continued to operate HLC
together. In addition, compelling evidence of the continuing existence of the
partnership would be HLC’s tax returns utilizing the same employer
identification number throughout, signed by Peter from 1998 through 2014,
which state that HLC was formed in 1979. Further, as this Court noted, Peter’s
admission in a prior case that he and Geraldine were partners in HLC, a
Pennsylvania General Partnership formed on or before December 12, 1983,
was unequivocal evidence that the parties believed that the 1983 Partnership
Agreement remained in effect. Indeed, the trial court specifically noted that
Geraldine testified credibly that she relied on Peter’s pattern of conduct to
believe that HLC and the 1983 Partnership Agreement endured. Tr. Ct. Rule
1925(a) Op., 1/26/22 at 7.
In light of the forgoing evidence, we conclude that the trial court did not
abuse its discretion when concluding that the Estate and Geraldine were
subject to the 1983 Partnership Agreement. See Jackson, 174 A.3d at 23.
Peter and Geraldine’s conduct, after John’s death, indicated that they intended
to continue HLC as partners, subject to the 1983 Partnership Agreement. See
Murphy, 311 A.2d at 906-07; DeMarchis, 637 A.2d at 1034-35; 15 Pa.C.S.A.
§ 8329. In addition, we also find the Estate’s argument regarding insufficient
contract formation between Geraldine and Peter to be of no moment. The
course of conduct of both Geraldine and Peter indicates that the parties
-9-
J-A18038-22
intended Geraldine to continue as a partner in HLC, subject to the 1983
Partnership Agreement. As such, no additional consideration was necessary.
Accordingly, the Estate’s first two issues do not warrant relief.
In its third issue, the Estate argues that after Peter died, the 1983
Partnership Agreement was no longer in effect as the “penultimate” or last
remaining partner had died. The Estate avers that Peter was the last remaining
partner of HLC and therefore the partnership ended with his death. However,
it cites no Pennsylvania precedent to this effect. In addition, the Estate cites
the concept of “delectus personarum” for the proposition that original partners
should be able to decide with whom they will associate and thus the death of
a partner does not allow for an interest to pass to heirs or beneficiaries. Thus,
the Estate maintains that HLC ended upon the death of John because Peter
did not elect to be partners with Geraldine. The Estate cites case law for this
concept dating from the late 1800s, as well as from other jurisdictions. See
Carter v. Producers’ Oil Co., 38 A. 571 (Pa. 1897)(delectus personarum
exists to allow partners to be associated only with partners of their choosing).
In addition, the Estate cites a Common Pleas Court decision for the proposition
that the trial court should have simply liquidated the assets of the partnership
upon the death of Peter. See Wisocki v. Howell, 37 Pa.D & C. 2d 666 (Pa.
Com. Pl. 1965).
The Estate’s arguments are once again unavailing. In Wisocki, one of
three partners in a restaurant business died. The trial court emphasized that
“[i]t is well known that a partnership is dissolved by the death of one of the
- 10 -
J-A18038-22
partners, unless there is an agreement among them to the contrary.” Id. at
670. Thus, the court in Wisocki concluded that because the partnership there
at issue was entirely silent on matters of dissolution, the death of a partner
required dissolution of the partnership. Conversely in the instant case, the
language of the 1983 Partnership Agreement speaks to the event of a death
of a partner by specifying that “if” the partnership was to be dissolved by the
death of a partner, then the buy-out provision would apply. Thus, the 1983
Partnership Agreement was not silent as to the effect of a death of a partner,
and dissolution was not required. See id; Underdown, 124 A. at 161-62.
Further, the Estate’s arguments regarding the legal precepts, most often
based on decisions of other jurisdictions, of the penultimate partner and
delectus personarum are not applicable here. In this case, as discussed above,
Peter and Geraldine, via their conduct in continuing the partnership after
John’s death, evinced their decision to continue HLC and thereby be governed
by 1983 Partnership Agreement. See 15 Pa.C.S.A. § 8329 (repealed). Thus,
Peter was not alone in HLC as the lone or “penultimate” partner after John’s
death nor was he forced to associate with Geraldine as a partner as the Estate
claims. If Peter did not wish to be partners with Geraldine, he could have
executed the buy-back provision to buy her share of HLC following John’s
death. Hence, the Estate’s third issue also lacks merit.
In its fourth and fifth issue, the Estate contends that the court erred by
ordering specific performance of the buy-back provision of the 1983
Partnership Agreement. The Estate asserts that Geraldine failed to establish
- 11 -
J-A18038-22
that there was no adequate remedy at law such that the court should not have
ordered specific performance of the buy-back provision. The Estate claims that
specific performance is additionally improper because it will cause injustice by
causing Peter’s widow Sondra to receive a reduced inheritance. Lastly, the
Estate claims that the trial court erroneously placed the burden of proof on
the Estate to disprove Geraldine’s claim for specific performance. It argues
that the court failed to make appropriate findings of fact and improperly
insisted that Geraldine should have presented any concerns in a post-trial
conference.
Specific performance is only appropriate where a plaintiff can establish
the right to enforce a contract, and justice demands specific performance of
the contract because there is no adequate remedy at law. Oliver v. Ball, 136
A.3d 162, 166 (Pa.Super. 2016). “An action for damages is an inadequate
remedy when there is no method by which the amount of damages can be
accurately computed or ascertained.” Clark v. Pa. State Police, 436 A.2d
1383, 1385 (Pa. 1981).
In this case, we conclude that the trial court properly ordered specific
performance of the buy-back provision. Having found the 1983 Partnership
Agreement enforceable, the trial court was well within its purview when
deciding that the only accurate assessment of damages could be obtained by
effectuating the buy-back provision. Oliver, 136 A.3d at 167; Clark, 436 A.2d
at 1385.
- 12 -
J-A18038-22
Moreover, a review of the record reveals that the trial court did not
erroneously place the burden of proof on the Estate to essentially disprove
Geraldine’s claim for specific performance. The Estate points to the trial court’s
statement in its Rule 1925(a) opinion that the Estate could “have presented
that concern [regarding Geraldine’s alleged failure to establish the need for
specific performance] by a request for post-trial conference or hearing.” Tr.
Ct. Rule 1925(a) Op. at 8. That statement alone does not establish that the
court erroneously put the burden on the Estate to establish that specific
performance was improper. Moreover, the Estate failed to include this burden
shifting claim within its Rule 1925(b) statement of matters complained of on
appeal and thus the claim is waived in any event. See Pa.R.A.P.
1925(b)(4)(vii). Therefore, the Estate’s last two issues also must fail.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/15/2022
- 13 -