Dugan, J. v. Gallo, D. ( 2023 )

J-A11028-23
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37
JOSEPH DUGAN AND WATER : IN THE SUPERIOR COURT OF
TRANSFER SOLUTIONS, LLC : PENNSYLVANIA
:
:
v. :
:
:
DONALD M. GALLO :
: No. 983 WDA 2022
Appellant :
:
----------------------------------------- :
----------------------------------------- :
DONALD M. GALLO :
:
Appellant :
:
:
v. :
:
:
JOSEPH DUGAN, WATER TRANSFER :
SOLUTIONS, LLC, AND BLUE :
GROUND MINING, LLC :
Appeal from the Judgment Entered July 18, 2022
In the Court of Common Pleas of Allegheny County Civil Division at
No(s): GD-19-013359
BEFORE: BENDER, P.J.E., STABILE, J., and PELLEGRINI, J.*
MEMORANDUM BY BENDER, P.J.E.: FILED: JUNE 26, 2023
Appellant, Donald M. Gallo, appeals from the July 18, 2022 judgment
entered in favor of Appellees, Joseph Dugan and Water Transfer Solutions,
LLC (“WTS”), following a non-jury trial. We affirm.
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* Retired Senior Judge assigned to the Superior Court.
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The trial court summarized the factual and procedural background of
this matter as follows:
This appeal arises from this [c]ourt’s entry of a non-jury verdict …
in favor of [Appellees] on their declaratory judgment action. The
effect of the judgment was to declare null and void a purported
Operating Agreement (“Agreement” or “Purported Agreement”),
allegedly executed by both parties. The Agreement purported to
create an ownership interest for … Gallo … in [WTS], a
Pennsylvania Limited Liability Company, owned by … Dugan….
After considering the evidence presented in a single-day[,] non-
jury trial, this [c]ourt found the Purported Agreement to be
inauthentic and Gallo to have no ownership interest in WTS. The
effect of the judgment was also to permanently enjoin [Gallo]
from proceeding against [Appellees] in arbitration proceedings
relating to disputes arising from the Purported Agreement.
On August 29, 2019, Gallo initiated arbitration proceedings in the
American Arbitration Association [(“AAA”)] against [Appellees],
pursuant to the Purported Agreement, which provided for
arbitration of disputes. [Appellees] initiated the instant case on
September 20, 2019, by requesting an injunction against Gallo
from proceeding in arbitration and seeking a declaratory judgment
that the Agreement upon which Gallo relied to make his claims
was invalid. [Appellees’] theory is, essentially, that the Purported
Agreement proffered by Gallo was procured by forgery or some
other improper means, and that Dugan had not executed any such
document.
On August 26, 2020, this [c]ourt granted [Appellees’] preliminary
injunction to enjoin the arbitration proceedings. As a result, Gallo
ended the arbitration proceedings and filed a complaint in the
Washington County Court of Common Pleas at docket no. 2020-
5131. By [o]rder dated January 5, 2021, this [c]ourt transferred
the Washington County case to Allegheny County to be
consolidated with the instant case. Importantly, for purposes of
this appeal, … Gallo demanded a jury trial for his claims against
[Appellees] in the consolidated action. The jury would have sat
as the fact[-]finder of, inter alia, whether the Purported
Agreement was valid and binding upon Dugan. However, by
[o]rder dated July 1, 2021, this [c]ourt severed [Appellees’]
declaratory judgment claims from the rest of the jury trial to be
tried non-jury with this [c]ourt sitting as fact[-]finder. The non-
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jury trial was tried on February 14, 2022, about a month before
the jury trial was scheduled to begin. As a result of this [c]ourt’s
severance of the declaratory judgment action and its entry of
verdict in favor of [Appellees], [Gallo] appealed.
Trial Court Opinion (“TCO”), 9/14/22, at 1-2.
Following Gallo’s appeal, the trial court directed Gallo to file a Pa.R.A.P.
1925(b) concise statement of errors complained, and he timely complied. 1
Presently, Gallo raises the following seven questions for our review:
1. Did the trial [c]ourt commit an error of law or abuse its
discretion when it kept the issue of whether or not a contract
existed and … Gallo [was] an owner of [WTS] away from the jury
[sic], thereby deprive [sic] Gallo of his Pennsylvania Constitutional
right to a trial by jury on his claims?
2. Did the trial [c]ourt commit an error of law or abuse it’s [sic]
[discretion] when it retained jurisdiction of Dugan’s third claim,
i.e.[,] “Declaration of Non-Liability,” which improperly asked the
[c]ourt as fact[-]finder to decide factual defenses to Gallo’s claims
that were pending in a case scheduled for a jury trial?
3. Did the trial [c]ourt commit an error of law or abuse its
discretion when it retained jurisdiction of the claims made in the
Declaratory Judgment action where all three claims related to
barring an arbitration that had been terminated, and where all of
Gallo’s claims were instead pending in the same court and
scheduled for trial, and therefore the issue was moot?
4. Did the trial [c]ourt commit an error of law or abuse its
discretion by sua sponte severing two previously[-]consolidated
cases, scheduling them for two trials a month apart, and thus
depriving Gallo of a trial by jury on his claims?
5. Were the [t]rial [c]ourt’s findings supported by substantial
evidence?
6. Did the trial [c]ourt commit an error of law or abuse of
discretion in denying by [o]rder or sub silentio[] Gallo’s Motion to
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1We note that Gallo filed his notice of appeal at GD-19-013359, the docket
pertaining to Appellees’ action at which the July 18, 2022 judgment was
entered.
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Dismiss, Motion to Dismiss Pursuant to Rule 1032(b), and Motion
for Summary Judgment, where there was no case or controversy
regarding arbitration, and where the only other claim was to pre-
judge Dugan and [WTS’s] defenses to Gallo’s claims pending in
the companion case that was scheduled for a trial by jury?
7. Did the trial [c]ourt commit an error of law or abuse its
discretion when it failed to grant Gallo’s Motion for Compulsory
Non-Suit, where the issue of arbitration was moot, and where
[Appellees] had failed to produce evidence to establish a prima
facie case for their claims?
Gallo’s Brief at 11-13 (some italics omitted).
Though Gallo raises seven questions for our review in the Statement of
Questions Involved section of his brief, he does not divide the Argument
section of his brief into seven corresponding parts. Instead, he divides it into
five parts. We admonish Gallo for his lack of compliance with Pa.R.A.P.
2119(a). See Pa.R.A.P. 2119(a) (“The argument shall be divided into as many
parts as there are questions to be argued; and shall have at the head of each
part—in distinctive type or in type distinctively displayed—the particular point
treated therein, followed by such discussion and citation of authorities as are
deemed pertinent.”); Donaldson v. Davidson Bros., Inc., 144 A.3d 93, 99
n.9 (Pa. Super. 2016) (determining that the appellant failed to comply with
Rule 2119(a) where the appellant’s brief did not “present and develop eight
arguments in support of the eight questions raised”). Nevertheless, Gallo’s
noncompliance does not preclude our review, and we will address the five
questions he raises in the Argument section of his brief.
First Issue
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In Gallo’s first issue, he contends that he is entitled to have a jury decide
the factual dispute between the parties. Gallo’s Brief at 34. He explains that
he “demanded a jury trial[,] and the defense of whether the Operating
Agreement was executed by both men and whether Gallo is an owner of WTS
… should have been decided by a jury.” Id. at 39. He advances that the facts
in dispute are classic jury questions, and says that there is no question that
his “asserted claims[,] i.e., breach of contract, conversion, breach of fiduciary
duty, voidable transfer, and intentional interference with contractual
relations[,] … are decided by juries.” Id. at 35-36 (citing cases in support).
He also claims that Pennsylvania’s constitutional history extends heightened
protection to the right to a trial by jury. Id. at 36-39. Gallo asserts that the
trial court erred, abused its discretion, and violated his constitutional right to
a jury trial by removing the fact issues from determination by a jury. Id. at
43.
No relief is due on this basis. Initially, while Gallo maintains that the
type of claims he asserted have properly proceeded to jury trials in other
cases, see id. at 35-36, he proffers no similar authority supporting his right
to a jury trial for Appellees’ specific claims, which seek an injunction precluding
arbitration, a declaration of non-arbitrability, and a declaration of non-liability
for the claim set forth by Gallo in his demand for arbitration or any similar
claim. See also Petrecca v. Allstate Ins. Co., 797 A.2d 322, 325 (Pa.
Super. 2002) (“Article I, Section Six of the Pennsylvania Constitution
guarantees the right to a jury trial in all matters in which a right to a jury trial
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was recognized at the time the Constitution was written or later granted by
statute.”) (citation omitted). We decline to search for such authority for him
and craft an argument on his behalf. See Commonwealth v. Hardy, 918
A.2d 766, 771 (Pa. Super. 2007) (“When briefing the various issues that have
been preserved, it is an appellant’s duty to present arguments that are
sufficiently developed for our review. … This Court will not act as counsel and
will not develop arguments on behalf of an appellant.”) (citations omitted).
Thus, Gallo has not convinced us that Appellees’ claims should have proceeded
to a jury trial.
Further, to the extent Gallo complains that a jury should decide his
claims, Appellees and the trial court both persuasively point out that, if the
Operating Agreement were valid, it would mean that Gallo had agreed to
forego a jury trial on his claims. See Appellees’ Brief at 22 (“Gallo’s claims
that the [c]ourt erred in severing the actions and that he was robbed of his
right to trial by jury are nothing more than red herrings on appeal as[,] if the
purported Operating Agreement had been found valid at the bench trial and
[a] ruling [been] issued in favor of Gallo, it would have implied a finding that
Gallo had voluntarily agreed to waive his right to such jury trial….”); see also
TCO at 8 (“[Gallo’s] initial chosen forum was arbitration without a jury,
suggesting that his subsequent move to civil court and demand for a jury trial
are disingenuous and designed to delay the adjudication of [Appellees’]
declaratory action.”). As such, his present insistence that we must protect
and uphold his right to a jury trial comes across as incredible.
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Finally, as the trial court noted, under Pennsylvania Rule of Civil
Procedure 213(b), “[t]he court, in furtherance of convenience or to avoid
prejudice, may, on its own motion or on any motion of any party, order a
separate trial of any cause of action, claim, or counterclaim, set-off, or cross-
suit, or of any separate issue, or of any number of causes of action, claims,
counterclaims, set-offs, cross-suits, or issues.” Pa.R.Civ.P. 213(b); see also
TCO at 7. “The decision whether to sever or bifurcate under Rule 213(b) is
entrusted to the discretion of the trial court, which is in the best position to
evaluate the necessity for taking measures the rule permits.” Ball v. Bayard
Pump & Tank Co., Inc., 67 A.3d 759, 767 (Pa. 2013) (citation omitted).
Here, the trial court explained its reasoning for severing Appellees’ action,
opining that, “[b]ecause the threshold issue in this case was whether the
proffered Agreement was authentic and valid, the trying of all related issues
at a jury trial would have been a waste of judicial resources in the event that
the Agreement was, in fact, invalid.” TCO at 7. We discern no abuse of
discretion in this respect. Therefore, based on the foregoing, we reject Gallo’s
claim that he is entitled to have a jury decide Appellees’ claims.
Second Issue
In Gallo’s second issue, he claims that the “trial court violated controlling
law in retaining jurisdiction of a declaratory judgment action whose purpose
was to prejudge Gallo’s jury claims.” Gallo’s Brief at 45 (unnecessary
capitalization and emphasis omitted). Gallo says that, “[o]nce Dugan and
WTS became aware that Gallo was asserting claims against them[,] they filed
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the instant [c]omplaint under the Declaratory Judgment Act for the purpose
of avoiding Gallo’s claims based on what is an affirmative defense….” Id.Further, he adds that, “[a]fter Gallo terminated the arbitration in favor of a
civil [c]omplaint, Dugan and WTS asserted that the [t]rial [c]ourt should still
decide whether or not they had any liability to Gallo’s nine claims.” Id. at 45-
46. Gallo insists that “[d]eclaratory relief should be withheld when the request
for relief is an attempt to adjudicate the validity of a defense to a potential
future lawsuit.” Id. at 46 (quoting OSRAM Sylvania Products, Inc. v.
Comsup Commodities, Inc., 845 A.2d 846, 848 (Pa. Super. 2004)). He also
states that our Supreme Court has denied declaratory relief where it was
sought to establish in advance the validity of an affirmative defense. Id. at
47 (citing Com., Dept. of General Services v. Frank Briscoe Co., Inc.,
466 A.2d 1336, 1340-41 (Pa. 1983)).
We disagree with Gallo that the trial court should not have retained
jurisdiction of Appellees’ declaratory judgment action in this matter. At the
outset, we recognize that “[a] declaratory judgment is not obtainable as a
matter of right. Whether a trial court should exercise jurisdiction over a
declaratory judgment action is a matter of sound judicial discretion.” OSRAM,
845 A.2d at 848 (citations omitted).
Here, the trial court aptly distinguished the OSRAM and Dep’t of Gen.
Servs. cases relied on by Gallo, and explained why it exercised jurisdiction
over Appellees’ action, as follows:
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Under the Declaratory Judgment Act, “[a]ny person interested
under a … written contract … may have determined any question
of construction or validity arising under the … contract, and obtain
a declaration of rights, status, or other legal relations thereunder.”
42 Pa.C.S.[] § 7533. [Appellees] initiated this declaratory action
to determine the validity of the Purported Agreement, under the
auspices of which [Gallo] had commenced arbitration proceedings.
Importantly, though, [Gallo] does not contend that [Appellees’]
initial[] filing of the declaratory action to stay the arbitration
proceedings was improper. It was only thereafter that [Gallo]
terminated arbitration and filed a civil action in the Washington
County Court of Common Pleas, demanding a trial by jury. [Gallo]
contends that, under these circumstances, [Appellees] cannot
circumvent [Gallo’s] civil action under the Purported Agreement
by seeking a declaratory judgment regarding the Agreement.
[Gallo] cites OSRAM … and De[pt.] of General Services … for
this proposition. However, these cases are inapplicable to the
instant case.
In De[pt.] of General Services, the Supreme Court considered
whether a declaratory judgment claim regarding several contracts
could proceed in anticipation of litigation over those contracts,
where any such contract dispute was committed by statute to the
jurisdiction of the Board of Claims, an administrative agency. The
Court held that “the declaratory judgment procedure may not be
used to prejudge issues that are committed for initial resolution
to an administrative forum, any more than it may be used as a
substitute to establish in advance the merits of an appeal from
that forum.” The Court’s concern was that[, through] the
declaratory judgment[, the] plaintiff would be seeking an advance
adjudication of its defense in a different forum from the forum
to which initial jurisdiction of that issue was committed.
OSRAM presents a similar concern.[2] In that case, the Superior
Court held, more broadly than the De[pt.] of General Services
____________________________________________
2By way of further background, in OSRAM, two corporations — OSRAM and
Comsup — were involved in a contract dispute. Comsup filed an action in
California against OSRAM for breach of contract. A month later, OSRAM filed
an action in Bradford County, Pennsylvania, seeking a declaration that no
contract existed between OSRAM or Comsup or, in the alternative, that any
contract they had was barred by the Statute of Frauds. The Bradford County
(Footnote Continued Next Page)
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Court, that “declaratory relief should be withheld when the
request for relief is an attempt to adjudicate the validity of a
defense to a potential future lawsuit.” Despite the apparent
expanding of that holding, the Superior Court articulated the same
concern that “the defendant could defeat the plaintiff’s choice of
forum by winning the race to the courthouse and filing a
declaratory judgment action.”
Importantly, neither case addresses whether a declaratory
judgment claim may be adjudicated in advance of the underlying
contract dispute when both actions are consolidated and
committed to the same forum. Instead, both cases are primarily
concerned with a situation where a potential defendant can
prejudge its claims in its own choice of forum, rather than the
plaintiff’s choice of forum or an agency forum to which the issues
are committed. Here, both the declaratory judgment claim and
[Gallo’s] claims are being adjudicated in the same judicial
proceeding. Thus, the concerns of OSRAM and De[pt.] of
General Services are not present here. Additionally, … Gallo
made his choice of forum; he chose arbitration.
Moreover, neither case addresses a situation where, as here, a
declaratory judgment action was initiated in response to, rather
than in anticipation of, the filing of a contract claim in
arbitration. … Gallo does not, and cannot, contend that this
[c]ourt was unable to entertain [Appellees’] declaratory action in
response to Gallo’s initiation of arbitration proceedings. See Ross
Development Co. v. Advance Bldg. Development, Inc., 803
A.2d 194, 196-97 (Pa. Super. 2002) (court may entertain
declaratory judgment action to determine whether a valid
agreement to arbitrate exists). Instead, Gallo refiled his action in
a civil court, demanding a jury trial, in what amounts to a
disingenuous attempt to stall [Appellees’] declaratory action that
was properly brought before this [c]ourt. Indeed, and contrary to
____________________________________________
court declined to exercise jurisdiction over OSRAM’s declaratory judgment
action, ascertaining that the Bradford County action was “merely a tactical
maneuver designed to test the validity of a defense to a future lawsuit and to
deprive Comsup of its choice of forum.” OSRAM, 845 A.2d at 848. On appeal,
this Court affirmed the Bradford County court’s decision to dismiss the
declaratory judgment action. In doing so, we determined that OSRAM was
not seeking clarification with respect to its legal rights, status, or other legal
relationships, but instead was forum shopping and trying to preempt
Comsup’s right to file a lawsuit. Id. at 849.
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[Gallo’s] position, the purpose of declaratory judgment is “to
speedily determine issues that ‘would … be delayed, to the
possible injury of those interested if they were compelled to wait
the ordinary course of judicial proceedings.’”
TCO at 5-7 (emphasis in original; internal citations omitted).
We agree with the trial court that OSRAM and Dept. of General
Services are distinguishable. As such, Gallo fails to persuade us that the trial
court violated controlling law in retaining jurisdiction of Appellees’ action, and
we discern no abuse of discretion.
Third Issue
In Gallo’s third issue, he argues that “the trial court erred in deciding
the moot issue of whether Gallo could arbitrate his claims.” Gallo’s Brief at
48 (unnecessary capitalization and emphasis omitted). He explains that he
terminated the arbitration proceedings in the fall of 2020, and subsequently
filed a complaint in the Washington County Court of Common Pleas. See id.In seeking favorable rulings in litigation, he suggests that he has waived his
right to arbitration. Id. (citing DiDonato v. Ski Shawnee, Inc., 242 A.3d
312 (Pa. Super. 2020); O’Donnell v. Hovnanian Enterprises, Inc., 29 A.3d
1183 (Pa. Super. 2011)). Consequently, Gallo advances that, “[s]ince there
was no case or controversy regarding whether Gallo could arbitrate his claims,
the issue was moot.” Id. at 49. Based on mootness, Gallo says that the trial
court should have dismissed Appellees’ action and allowed the jury trial to
proceed on the merits of his claims. Id.
Again, we disagree. Initially, Gallo’s argument ignores that Appellees
sought a declaration of non-liability. Specifically, in addition to enjoining the
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arbitration and seeking a declaration of non-arbitrability, Appellees sought a
declaration that the Operating Agreement is null and void as it is a forgery or
otherwise a product of fraud, that Gallo had no ownership interest in WTS,
and that they have no liability to Gallo for the claim set forth in his demand
for arbitration, or any other similar claim asserted by him. See Complaint,
9/20/19, at 10. Gallo does not explain how his terminating the arbitration
proceedings eliminated the controversy of whether the Agreement was valid.
See In re D.A., 801 A.2d 614, 616 (Pa. Super. 2002) (“As a general rule, an
actual case or controversy must exist at all stages of the judicial process, or
a case will be dismissed as moot. … An issue before a court is moot if in ruling
upon the issue the court cannot enter an order that has any legal force or
effect.”) (cleaned up).
Moreover, we are not convinced that Appellees’ issues pertaining to
arbitration were completely moot. Though Gallo withdrew his initial arbitration
action and subsequently availed himself of the judicial process, he does not
articulate why a controversy did not remain pertaining to whether he could
submit disputes arising from the Agreement to arbitration. See Appellees’
Brief at 29-30 (“Appellees presented competent evidence in their case in chief
to support a finding that … Gallo should be permanently enjoined from taking
any action to enforce [the purported Agreement] to claim an ownership
interest in WTS.”) (citation omitted). Indeed, following the non-jury trial, the
trial court entered an order permanently enjoining Gallo “from proceeding
against [Appellees] in American Arbitration Association proceedings relating
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to disputes arising from the Purported Operating Agreement.” See Trial Court
Order, 3/3/22, at 1.
In addition, the trial court reasonably viewed Gallo’s refiling his action
in a civil court and demanding a jury trial, as a disingenuous attempt to stall
Appellees’ declaratory judgment action, which was properly brought before it.
See TCO at 6, 8. Appellees similarly posit that Gallo’s civil suit was designed
to undermine their declaratory judgment action, stating:
Despite the preliminary injunction expressly precluding Gallo from
taking any further action in connection with the arbitration, Gallo
intentionally disregarded a [c]ourt [o]rder and withdrew his
demand for arbitration in an attempt to defeat Dugan and WTS[’s]
claims for declaratory relief. Gallo was not entitled to summary
judgment merely because he violated the preliminary injunction
and withdrew the arbitration proceeding. Instead, [Appellees]
were properly permitted to pursue their permanent injunction
against Gallo and obtain judicial declaration of the parties’ rights
and arbitrability of the claim. The fact that the prior arbitration
proceeding was withdrawn and that no party was seeking to
arbitrate at the time of the bench trial was not dispositive of the
issues underlying the two counts of declaratory relief and was
actually done by Gallo in violation of a valid [o]rder of [c]ourt.
Appellees’ Brief at 28; see also Trial Court Order, 8/26/20 (preliminarily
enjoining Gallo “from taking any further action or making any further
submissions in connection with the AAA Arbitration as described in [Appellees’
m]otion, and from continuing with said arbitration pending further order of
court”). Gallo’s attempts to interfere with Appellees’ action should not be
rewarded. As such, for the above-stated reasons, Gallo’s third issue fails.
Fourth Issue
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In Gallo’s fourth issue, he complains that the trial court erred in denying
him a compulsory non-suit after the close of Appellees’ case. Gallo’s Brief at
50. Gallo explains that he moved for a compulsory non-suit on the basis that
Appellees failed to adduce evidence of a prima facie case for any of their
claims, as he says their claims all required that Gallo be seeking to arbitrate
his claims against them. See id.; Gallo’s Reply Brief at 10.
We need not address this issue further as it is moot. “Once [the
a]ppellant chose to present its evidence, the trial court’s ruling on the
compulsory non[-]suit was rendered moot.” Northeast Fence & Iron
Works, Inc. v. Murphy Quigley Co., Inc., 933 A.2d 664, 668 (Pa. Super.
2007). This Court has previously elaborated:
If the defendant elects to proceed, the non-suit stage is over
and the correctness of the court’s ruling is moot. [The
d]efendant in this case elected to proceed and placed its
entire case into evidence after [the] plaintiffs rested.
Therefore, we do not rule on the correctness of the denial of
the motion for compulsory non-suit as such.
Id. (cleaned up). Accordingly, Gallo’s fourth issue is moot and warrants no
relief.
Fifth Issue
In Gallo’s fifth and final issue, he argues that we should reverse the trial
court’s verdict as it is not supported by substantial evidence. Gallo’s Brief at
51. He contends that Appellees did not prove their claims since arbitration
was no longer at issue, and he attacks numerous findings made by the trial
court, including, inter alia, that Dugan never signed the Operating Agreement
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and that Gallo did not hold himself out as a partner of the business. See id.
at 52-59.
In assessing Gallo’s argument, we remain mindful that,
[w]hen reviewing the decision of the trial court in a declaratory
judgment action, our scope of review is narrow. Consequently,
we are limited to determining whether the trial court’s findings are
supported by substantial evidence, whether an error of law was
committed or whether the trial court abused its discretion….
The test is not whether we would have reached the same result
on the evidence presented, but whether the trial court’s conclusion
can reasonably be drawn from the evidence. Where the trial
court’s factual determinations are adequately supported by the
evidence[,] we may not substitute our judgment for that of the
trial court.
Ross Development Co., 803 A.2d at 195-96 (cleaned up).
Here, the trial court recounted its findings as follows:
At trial, both parties presented sharply conflicting accounts of the
facts, and the circumstances surrounding the Purported
Agreement and Gallo’s involvement with WTS and Dugan are far
from clear. Dugan and Gallo have known each other for about 30
years. In 2016, Dugan’s company, WTS, was short on capital and
sought additional capital investments. Dugan and WTS sought to
elicit an investment from Robert McMillian (“McMillian”). McMillian
apparently had a business relationship with Lola Energy, from
whom WTS sought to obtain new work. In order to entice
McMillian’s investment in WTS, Dugan also offered [for] Gallo to
invest in WTS. In exchange for both investments, McMillian and
Gallo would each receive 10% of the profits generated from any
work from Lola Energy. In furtherance of this plan, Dugan and
Gallo opened bank accounts at PNC and Chrome Federal Credit
Union into which Gallo deposited $25,000 each. The full $50,000
was eventually transferred to Chrome. These accounts were
separate from WTS’s main operating account at a different bank.
In order to use the Chrome account, Chrome required certain
documents about the LLC to be submitted with them. Although
WTS was able to make withdrawals from the account, internal
communications from Chrome suggest that they were still missing
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some required documents, such as an operating agreement. Gallo
was notified of this deficiency, and he testified that it fell upon him
to correct it. Gallo contacted his personal attorney, Hagen Starz,
to draft the Purported Agreement. There was seemingly no input
in the drafting of this document from Dugan or his attorneys, as
the Purported Agreement that Gallo proffers as executed is
unchanged from the draft drawn up from Attorney Starz, despite
that Attorney Starz himself communicated that a few changes
would be necessary. The document also contains numerous errors
and inconsistencies that would have likely been corrected during
the negotiation and preparation of such an important document.
For example, the document lists WTS’s place of business as Gallo’s
home address and incorrectly identifies it as a Pennsylvania,
rather than a Delaware, LLC. Dugan credibly testified to never
having signed this document, but somehow a photocopy of the
Purported Agreement was given to Chrome for its records.
Ultimately, McMillian never invested in WTS[,] and no new work
was received from Lola Energy. As such, the deal involving Gallo
fell through and was never consummated by Dugan.
Consequently, in late 2016[,] Dugan offered to return Gallo’s
$50,000. The evidence presented some doubt about Dugan’s
ability to return the $50,000 immediately, given WTS’s poor
financial state at the time and the fact that a good portion of the
money had already been spent on materials and equipment for a
possible Lola Energy job. However, owing to Dugan and Gallo’s
friendly relationship, Gallo expressed that he did not need Dugan
to return the money immediately.
The money was eventually returned in 2018, which Gallo
accepted. Gallo’s acceptance of the money is inconsistent with his
position that he owned 20% of the company beginning in 2016,
but is consistent with the understanding that the money was
returned because the precondition to the arrangement, McMillian’s
investment, had not been met. Gallo’s attempts to avoid this
conclusion by characterizing the $50,000 — the exact amount
Gallo paid into the bank accounts — as a membership distribution.
However, Gallo did not report it as a distribution on his tax returns,
again inconsistent with his position. In the two years prior to
receiving the money, Gallo did not hold himself out as a member
of WTS, did not participate in WTS’s business, and did not keep
abreast of WTS’s happenings. Gallo only took an interest in WTS
when he learned of its eventual profitability. Thus, Gallo’s
behavior is inconsistent with an ownership interest.
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Despite this, Gallo still contends that he has an ownership interest
in WTS and proffered the Purported Agreement as evidence.
However, Gallo has failed to convince this [c]ourt of the Purported
Agreement’s authenticity, thus severely hampering his credibility
and the weight of his testimony. Most significantly, Gallo is unable
to proffer an original copy of the agreement. As the proponent of
the document, Gallo has the burden of proving its authenticity.
Although Gallo contends that Chrome has the original, there is no
explanation for why Chrome has not provided the original. It
seems that Chrome made a photocopy of the original document
for its own records, but that Gallo left the original with Chrome
rather than take it back for WTS’s records. Presumably the
original, if it exists, was discarded. The handwriting experts
disagreed as to the authenticity of the signature on the copy.
Although it seemed to match Dugan’s signature, one expert
supposed that an image of Dugan’s signature could have been
transposed on a digital copy of the agreement. The problem is
that, without an original, it is impossible to say whether ink was
ever put to paper.
Gallo points to much evidence adduced at trial that he contends
would prove the validity of the Purported Agreement. This
evidence has already been recited above, including the amounts
that Gallo paid into PNC and Chrome[,] and the fact that Chrome
required an operating agreement to use the account. At most,
however, this evidence points to the fact that an agreement was
contemplated and perhaps set in motion, but it cannot prove that
it was ever fully consummated by the execution of the document
that Gallo proffers. As such, this [c]ourt’s finding that the
Purported Agreement creates no ownership interest for Gallo in
WTS is not contrary to the substantial evidence.
TCO at 9-11.
In reflecting on its findings, the trial court noted that its “ultimate verdict
… is based upon its determination of the credibility of the witnesses and is
supported by substantial evidence.” Id. at 12. It explained that, “[b]ecause
the facts in the case are far from clear, it was incumbent upon this [c]ourt to
weigh the conflicting evidence and make credibility determinations.” Id. The
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trial court stated that, “[s]imply put, this court believed Dugan and did not
believe Gallo.” Id.
Based on our careful reading of the trial transcript, we determine that
the trial court’s factual determinations are supported by substantial evidence,
and that its conclusions are reasonably drawn from such evidence. The trial
court chose to credit Dugan’s testimony, and we may not substitute our
judgment for that of the trial court. As such, no relief is due on Gallo’s last
issue.
In sum, all of Gallo’s issues lack merit. Accordingly, we affirm the trial
court’s July 18, 2022 judgment.
Judgment affirmed.
Judge Pellegrini joins this memorandum.
Judge Stabile concurs in the result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/26/2023
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