Trizechahn Gateway LLC v. Schnader Harrison Segal ( 2021 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
TRIZECHAHN GATEWAY, LLC, A : IN THE SUPERIOR COURT OF
DELAWARE LIMITED LIABILITY : PENNSYLVANIA
COMPANY :
:
Appellant :
:
:
v. :
: No. 1174 WDA 2020
:
SCHNADER, HARRISON, SEGAL & :
LEWIS, LLP, PAUL H. TITUS, AND :
THOMAS D. ARBOGAST :
Appeal from the Judgment Entered October 26, 2020
In the Court of Common Pleas of Allegheny County
Civil Division at No: GD 07-008527
BEFORE: LAZARUS, J., MURRAY, J., and COLINS, J.*
MEMORANDUM BY MURRAY, J.: FILED: August 6, 2021
Trizechahn Gateway LLC (Trizec) appeals from the judgment entered
against them and in favor of Schnader, Harrison, Segal & Lewis, LLP
(Schnader) Paul H. Titus (Titus), and Thomas D. Arbogast (Arbogast)
(collectively Appellees), in this action under Pennsylvania’s former Uniform
Fraudulent Transfers Act of 1993 (PUFTA), 12 Pa.C.S.A. § 5101 et seq.1 For
the second time, we are constrained to vacate and remand.
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* Retired Senior Judge assigned to the Superior Court.
1 PUFTA was replaced by the Uniform Voidable Transfer Act of 2014, 12
Pa.C.S.A. § 5101 et seq.
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In our prior decision (Remand Decision), Trizechahn Gateway, LLC v.
Schnader Harrison Segal & Lewis, 2019 WL 5858227 (Pa. Super. Nov. 8,
2019) (unpublished memorandum), we fully recited the facts and procedural
history, which we incorporate in this decision.
In 2007, Trizec filed this action to collect a judgment it obtained against,
among others, Appellees Titus and Arbogast, for breach of a commercial lease
resulting from the dissolution of their law firm. Titus and Arbogast
subsequently joined Appellee Schnader as partners. They retained Schnader
in the unsuccessful appeal of the judgment. To pay for the appeal, Titus and
Arbogast resigned from Schnader and allowed Schnader to place a lien on
their capital accounts. The accounts were assets in the bankruptcies filed by
Titus and Arbogast, but the trustee had abandoned them. By transferring the
funds to Schnader, Titus and Arbogast ensured the funds were unavailable to
pay the judgment obtained by Trizec.
Following a bench trial on May 24, 2018, the Honorable Judith L.A.
Friedman found in favor of Appellees. Trizec appealed. In our Remand
Decision, we described the trial judge’s opinions as “brief . . . [and] all but
devoid of citation to the record, to pertinent legal authority, and analysis of
the statute at issue.” Trizechahn, 2019 WL 5858227 at *3. We found the
trial judge’s decision “to treat claims that Trizec brought under three separate
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sections of the PUFTA[2] as if Trizec brought them as one count makes parsing
its reasoning all but impossible.” Id. We ultimately held the trial judge made
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2 Trizec brought claims under Sections 5104(a)(1), 5104(a)(2), and 5105 of
PUFTA. Section 5104 provides in pertinent part:
(a) General rule.—A transfer made or obligation incurred by a
debtor is fraudulent as to a creditor, whether the creditor’s claim
arose before or after the transfer was made or the obligation was
incurred, if the debtor made the transfer or incurred the
obligation:
(1) with actual intent to hinder, delay or defraud any
creditor of the debtor; or
(2) without receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a business
or a transaction for which the remaining assets of the
debtor were unreasonably small in relation to the
business or transaction; or
(ii) intended to incur, or believed or reasonably should
have believed that the debtor would incur, debts
beyond the debtor's ability to pay as they became
due.
12 Pa.C.S.A. § 5104(a)(1) and (2). Part b of Section 5104 provides a list of
eleven factors the trial court must consider in determining “actual intent”
under subsection (a)(1). 12 Pa.C.S.A. § 5104(b). Section 5105 provides:
A transfer made or obligation incurred by a debtor is fraudulent
as to a creditor whose claim arose before the transfer was made
or the obligation was incurred if the debtor made the transfer or
incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor
was insolvent at that time or the debtor became insolvent as a
result of the transfer or obligation.
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multiple errors of law in the statutory analysis, all in favor of Appellees, and
affirmed a single credibility determination. Id. at *5-*7.3 We therefore
vacated the judgment and remanded, with detailed instructions for the
issuance of a new opinion. Id. at *7.
Following our Remand Decision, Appellees sought reargument en banc,
which this Court denied. They then sought leave to appeal to the Pennsylvania
Supreme Court, which was also denied.
On October 5, 2020, the trial judge issued the opinion following remand,
reaffirming the prior decision. Judgment was entered on October 26, 2020.
This timely appeal followed. Trizec filed a concise statement of errors
complained of on appeal, and in response the trial judge issued a
“Supplemental Opinion on Remand.” See Opinion, 12/16/20.
Trizec presents four questions for our review:
1. Whether, contrary to the Superior Court’s instructions,
the Trial Court erred by failing to consider the factors set forth in
12 Pa.C.S.A. § 5104(b) in determining whether Trizec has shown
[Appellees] Paul H. Titus and Thomas D. Arbogast made the
transfer of their respective partnership accounts to [Appellee]
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12 Pa.C.S.A. § 5105. Section 5108 provides a defense for claims pursuant to
Section 5104(a)(1) for third parties who “took in good faith and for a
reasonably equivalent value.” 12 Pa.C.S.A. § 5180(a). While this defense
does not apply to §§ 5104(a)(2) or 5105, there is a common law defense of
reasonably equivalent value. Pertinently, “reasonably equivalent value” as a
defense for any of the claims is defined from the point of view of the creditor,
“[c]onsideration having no utility from a creditor’s viewpoint does not satisfy
the statutory definition.” 12 Pa.C.S.A. § 510 cmt. (2).
3 Our Remand Decision fully addresses the errors with analysis of pertinent
caselaw. Trizechahn, 2019 WL 5858227, at **3-7.
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Schnader Harrison “with actual intent to hinder, delay or defraud
any creditor of the debtor[?]”
2. Whether Trizec has proven the fraudulent intent of
[Appellees] Paul H. Titus and Thomas D. Arbogast as a matter of
law pursuant to 12 Pa.C.S.A. § 5104(a)(1) and 12 Pa.C.S.A. §
5104(b) and the Trial Court should be directed to enter judgment
in favor of Trizec with respect to Count I of the Complaint[?]
3. Whether, contrary to the Superior Court’s instructions,
the Trial Court erred by failing to address the claims set forth in
Trizec’s Complaint pursuant to 12 Pa.C.S.A. § 5104(a)(2) and §
5105, including, but not limited to, whether reasonably equivalent
value was received in exchange for the said transfer[?]
4. Whether Trizec proved that reasonably equivalent value
was not provided in exchange for the transfers according to the
standard set forth by the Superior Court and the Trial Court should
be directed to enter judgment in favor of Trizec with respect to
Counts II and III of the Complaint[?]
Trizec’s Brief at 4-5.
We begin by recognizing:
In prior matters involving review of alleged fraudulent
conveyances, we have stated that our standard of review of a
decree in equity is particularly limited and that such a decree will
not be disturbed unless it is unsupported by the evidence or
demonstrably capricious. The findings of the chancellor will not
be reversed unless it appears the chancellor clearly abused the
court’s discretion or committed an error of law. The test is not
whether we would have reached the same result on the evidence
presented, but whether the chancellor’s conclusion can reasonably
be drawn from the evidence.
Mid Penn Bank v. Farhat, 74 A.3d 149, 153 (Pa. Super. 2013) (citation
omitted).
The essence of Trizec’s argument in each issue is that the trial judge
failed to comply with this Court’s Remand Decision. Trizec therefore requests
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we reverse the entry of judgment in favor of Appellees and “remand this case
to the Trial Court with directions to enter judgment in favor of Trizec on Counts
I, II and III of its Complaint and for such further proceedings as may be
required[.]” Trizec’s Brief at 45-46.
In support, Trizec asserts the trial judge,
again failed to remedy its deficiencies in those rulings that were
called out by this Court in its Remanding Decision. In both its
Opinion on Remand and its Supplemental Opinion on Remand, the
Trial Court still fails to undertake a thorough analysis of any
applicable law whatsoever despite the clear instructions provided
by the Remanding Decision to consider (a) the enumerated factors
of fraud set forth in § 5104(b) of the PUFTA and (b) whether
reasonably equivalent value as provided in exchange for the
transfers.
Trizec’s Brief at 15 (italics in original).
Appellees do not address the trial judge’s compliance with our Remand
Decision. Instead, they counter:
[A]s commonly required for legal and other types of services, at
Schnader’s request, the debtors provided a modest retainer for
that work. Far from constituting fraud, is [sic] a matter of routine
for law firms to request a retainer before providing legal work for
a potential judgment debtor. Trizec’s position would essentially
preclude a potential judgment debtor from seeking legal help in
challenging the potential judgment or in appealing once the
judgment is entered, and therefore, is unreasonable on its face
and contrary to the PAUFTA.
Appellees’ Brief at 10 (italics in original).
Upon review, we find the trial judge’s opinions to be unsupported by
evidence, legally erroneous, and capricious. In addition, and as argued by
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Trizec, the trial judge’s failure to comply with this Court’s Remand Decision
compels us to vacate the judgment. See Mid Penn Bank, 74 A.3d at 153.
The applicable Rule of Appellate Procedure provides:
(a) General rule. On remand of the record the court or other
government unit below shall proceed in accordance with the
judgment or other order of the appellate court and, except as
otherwise provided in such order, Rule 1701(a) (effect of appeals
generally) shall no longer be applicable to the matter.
(b) Enforcement of appellate court orders. At any time, upon
its own motion or upon application, an appellate court may issue
any appropriate order requiring obedience to or otherwise
enforcing its judgment or other order.
Pa.R.A.P. 2591. The Supreme Court has stated, “it has long been the law in
Pennsylvania that following remand, a lower court is permitted to proceed only
in accordance with the remand order.” Commonwealth v. Sepulveda, 144
A.3d 1270, 1280 n. 19 (Pa. 2014). Further, “where a case is remanded for a
specific and limited purpose, issues not encompassed within the remand order
may not be decided on remand.” Id. (citation omitted).
A trial court has an obligation to comply scrupulously,
meticulously, and completely with an order of the [appellate
court] remanding a case to the trial court. This Court [has
stated]: It is well-settled that a trial court must strictly comply
with the mandate of the appellate court. . . . [we] held that the
trial court exceeded the scope of the mandate of the Supreme
Court by considering an issue not included in the mandate. We
concluded: Accordingly, the trial court could not consider this
issue on remand. It is axiomatic that the court below, on remand,
must comply strictly with the mandate of the higher court.
Commonwealth v. Williams, 877 A.2d 471, 474-75 (Pa. Super. 2005)
(quotation marks, citations, and emphasis omitted). “It is well-settled that
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following remand, the trial court must comply strictly with this Court’s
mandate and has no power to modify, alter, amend, set aside or in any
measure disturb or depart from this Court’s decision as to any matter decided
on appeal.” Commonwealth v. McCauley, 199 A.3d 947, 949 n. 4 (Pa.
Super. 2018) (citation omitted).
In our Remand Decision, we concluded the trial judge “failed to
undertake the proper analysis under 12 Pa.C.S.A. § 5104(a)(1) and failed to
undertake any analysis of ‘reasonably equivalent value’ from the creditor’s
point of view, when it presumably applied Section 5108, [and thus,] we are
constrained to vacate the judgment in favor of Schnader.” Trizechahn, 2019
WL 5858227, at *7. We also determined the trial judge “should not have
analyzed [the] claims pursuant to 12 Pa.C.S.A. § 5104(a)(2) and 5015
concordantly with its analysis of Section 5104(a)(1).” Id. Moreover, we held
the trial judge should not have applied the good faith defense contained in 12
Pa.C.S.A. § 5108 to claims brought under Sections 5104(a)(2) and 5015, and
that it did not correctly analyze the defense of reasonably equivalent value.
Id. We summarized our disposition as follows:
Accordingly, for the reasons discussed supra, we vacate the
judgment of November 19, 2018. Further, we remand with the
following instructions. The trial court is to issue a new decision,
which contains a thorough analysis[4] of the factors contained in
12 Pa.C.S.A. § 5104(b) and an analysis of the intent of Titus and
Arbogast under 12 Pa.C.S.A. § 5104(a)(1). If the trial court
determines there was a fraudulent transfer under 12 Pa.C.S.A. §
5104(a)(1), it can then determine whether 12 Pa.C.S.A. § 5108
applies, in so doing, it must analyze “reasonably equivalent value”
from the point of view of Trizec. The trial court must also
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undertake a separate analysis of the claims under 12 Pa.C.S.A.
§§ 5104(a)(2) and 5105, without consideration of 12 Pa.C.S.A. §
5108. In making any determination of “reasonably equivalent
value” the court must consider the definitions of value and
reasonably equivalent value in accordance with 12
Pa.C.S.A. §§ 5103(a) and (b) and the Bar Association
comment.
[4] We direct the trial court’s attention to the analyses
provided by the trial courts in Fell v. 340 Associates,
125 A.3d 75 (Pa. Super. 2015) and Mid Penn Bank
v. Farhat, 74 A.3d 149 (Pa. Super. 2013).
Id. (bold emphases added).
The trial judge did not comply with this Court’s instructions. It authored
an October 5, 2020 opinion which focused on distinguishing case law this Court
found applicable. Trial Judge Opinion, 10/5/20, at 3-6.4 The opinion lacks
detailed findings of fact, with the few factual findings in the opinion conflicting
with factual findings in the trial judge’s earlier opinions. See id. at 1-2. For
example, in the May 24, 2018 opinion, the trial judge implied Titus and
Arbogast had the intent to defraud, but found in favor of Appellees by
incorrectly applying the Section 5108 defense to all claims, and by
misinterpreting the defense of reasonably equivalent value. The May 24, 2018
opinion states:
The unavoidable suggestion . . . was that, at the time the liens
were granted, Mr. Titus, Mr. Arbogast and Schnader had acted to
defeat [Trizec’s] right to collect the judgment that would surely be
entered against the former [law firm] partners. This would have
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4 The pages are not numbered; for ease of discussion, we assigned each page
a corresponding number.
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been in keeping with Mr. Titus’s blithe handling of the winding up
of the partnership’s rental obligation, and it is not surprising that
[Trizec] was highly skeptical of the legitimacy of the transfer. The
subsequent discharges in bankruptcy of Mr. Titus and Mr.
Arbogast’s substantial obligations to Schnader would only have
confirmed [Trizec’s] view of the transactions.
Trial Judge Opinion, 5/24/18, at 2-3. The trial judge found in favor of
Appellees after crediting the testimony of Schnader’s witnesses.5 Id. at 3.
On remand, the trial judge — without citing any evidence — found Titus
and Arbogast did not act fraudulently, but “properly hired appellate counsel to
assist in the preparation and briefing of [appellate work,] and they had no
moral or legal obligation not to contract for those legal services with
Schnader.” Trial Judge Opinion, 10/5/20, at 6. Again, without reference to
the record, explanation, or discussion of the Section 5104(b) factors as
ordered by this Court, the trial judge found Titus’ “intent was simply to start
the legally and morally permissible appeal of the eventual judgment[.]” Id.
at 7.
In addition to contradicting findings in earlier opinions, the trial judge
misapplied the law. The judge stated Trizec could only prevail under Section
5104(a)(1) if it proved intent to defraud. Id. at 6-7. However, a plaintiff may
prevail under Section 5104(a)(1) if it proves intent to hinder or delay, not just
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5 “Schnader did not aid and abet Mr. Titus or Mr. Arbogast in a scheme to
deprive [Trizec] of assets to seize. . . . Despite all appearances to the contrary,
the conduct of Schnader . . . had a good faith basis[.]” Trial Court Opinion,
5/24/18, at 5 (emphases added).
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defraud. 12 Pa.C.S.A. § 5104(a)(1). There is no discussion of these two
elements.
Also, while the trial judge discussed claims pursuant to Sections
5104(a)(2) and 5105, she conflates those sections with Section 5104(a)(1),
holding that Trizec cannot prevail because it did not prove intent to defraud.
Id. at 7-8. A plain reading of Sections 5104(a)(2) and 5105 demonstrates
that neither requires proof of intent to defraud. See id.; see also 12
Pa.C.S.A. §§ 5104(a)(2) and 5105.
As noted above, the trial judge issued a “Supplemental Opinion on
Remand” in response to Trizec’s Rule 1925(b) statement. See Trial Judge
Opinion, 12/16/20. This opinion contradicted three prior decisions insofar as
the trial judge decided, sua sponte, that the disputed transfer did not fit within
the confines of the PUFTA. Id. at 5-8. Appellees argued against PUFTA’s
applicability at both preliminary objections and summary judgment stages of
the litigation but the trial judge decided the issue against them. See
Preliminary Objections, 6/11/07, at ¶¶ 7-12; Preliminary Objections,
7/10/2007, at 3; Preliminary Objections, 7/16/07, at ¶¶ 9-11; Order
Overruling Preliminary Objections 4/2/09; Motion for Summary Judgment,
10/30/17, at 3; Order Denying Summary Judgment, 2/6/18, at 1-2. Thus,
this issue was settled well before trial, and was not before the trial judge on
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remand.6 Further, the finding following remand contradicts earlier findings
that there was a transfer but it was not fraudulent. See Decision, 5/24/18,
at 5-6; Opinion, 12/3/18, at 6; Opinion on Remand, 10/5/20, at 5-8. The trial
judge does not provide any legal support for this later finding, or attempt to
reconcile it with 12 Pa.C.S.A. § 5101, which includes liens within the scope of
the Act. Lastly, it bears repeating that the finding exceeds the scope of the
remand, which was for a determination of whether there was a fraudulent
transfer within the meaning of the Act, not for a belated and unsupported
conclusion that Trizec fails to state a claim upon which relief can be granted.
See Sepulveda, 144 A.3d at 1280 n. 19; Williams, 877 A.2d at 474-75.
In sum, the October 5, 2020 and December 16, 2020 opinions did not
“comply strictly with this Court’s mandate.” McCauley, 199 A.3d at 949 n.
4. Rather, the trial court distinguished caselaw it was directed to apply; failed
to make detailed findings of fact; made errors of law; sua sponte decided the
case in favor of Appellees based on an issue that had been decided against
them; and issued two capricious opinions. See Mid-Penn, 74 A.3d at 153.
Accordingly, the trial judge failed “to comply scrupulously, meticulously, and
completely” with this Court’s Remand Decision. Williams, 877 A.2d at 474.
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6 Under the law of the case doctrine, “a court involved in the later phases of
a litigated matter should not reopen questions decided by another judge of
that same court or by a higher court in the earlier phases of the matter.”
Commonwealth v Starr, 664 A.2d 1326, 1331 (Pa. 1995).
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Trizec requests remand for entry of judgment in its favor. Trizec’s Brief
at 45-46. However, we are not a fact-finding Court, and in the absence of the
detailed factual findings we previously ordered, we decline to do so. See
Commonwealth v. Grant, 813 A.2d 726, 734 (Pa. 2002) (appellate courts
do not act as fact finders); Burke ex rel. Burke v. Independence Blue
Cross, 128 A.3d 223, 229 (Pa. Super. 2015) (the Superior Court “is not a
fact-finding tribunal.”).
Consistent with the foregoing, we vacate the judgment and remand for
further proceedings. As the trial judge is no longer on the bench, the jurist
assigned on remand shall adhere to and fully comply with this Court’s Remand
Decision and the instant decision, and issue a new opinion with thorough
analysis and adherence to pertinent law. See Trizechahn, 2019 WL
5858227, at *7. Accordingly, we incorporate the order paragraph from our
Remand Decision, and direct the Prothonotary to attach a copy of the Remand
Decision to this decision.
Judgment vacated. Case remanded. Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/6/2021
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