Finkle Distributors v. Herzog, T.

J-S96032-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
FINKLE DISTRIBUTORS INC., N/K/A FDI IN THE SUPERIOR COURT OF
HOLDINGS INC. PENNSYLVANIA
Appellant
v.
TROY M. HERZOG, INDIVIDUALLY, AND
D/B/A THE HUB
Appellee No. 863 WDA 2016
Appeal from the Order Dated May 17, 2016
In the Court of Common Pleas of McKean County
Civil Division at No(s): 2009 AD 10148
BEFORE: BENDER, P.J.E., BOWES, J., and SOLANO, J.
MEMORANDUM BY SOLANO, J.: FILED FEBRUARY 23, 2017
Appellant, Finkle Distributors, Inc., now known as FDI Holdings, Inc.,
(“Finkle”) appeals a May 17, 2016 order of the Court of Common Pleas of
McKean County that found spoliation and entered a preclusion order as a
sanction. The trial court’s order is interlocutory, and we have no jurisdiction
to review it. We therefore quash the appeal.
This action seeks payment for the sale of merchandise. Appellee,
Troy M. Herzog, owned The Hub, a convenience store in Smethport, McKean
County. Compl., 2/4/09, at 2 ¶ 2; Answer to Compl. & New Matter,
10/28/09, at 2 ¶ 2. According to the trial court, Herzog “had managed it in
the past with the assistance of family members, and now, all management
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responsibilities are handled by New Horizon LTBS, believed to be a family
held entity.” Tr. Ct. Op., 7/26/16, at 1.
For several years, Finkle sold certain goods, wares and merchandise —
such as tobacco products, candies, snack foods, and novelty items — to
Herzog for resale to third parties. Compl., 2/4/09, at 2-3 ¶ 3; Answer to
Compl. & New Matter, 10/28/09, at 2 ¶ 3; Tr. Ct. Op., 7/26/16, at 1-2. The
trial court explained:
A sales representative for [Finkle] regularly took [Herzog]’s
orders and visited the store to suggest merchandise. After the
orders were accepted and processed, [Finkle]’s delivery drivers
would bring the goods to The Hub and take back unsold or
expired merchandise. [Finkle] also issued credits from time to
time for returned merchandise, coupons, etc.
Tr. Ct. Op., 7/26/16, at 1-2.
On February 4, 2009, Finkle commenced the current action by
complaint, alleging that Herzog failed to pay Finkle for merchandise that he
had purchased between May and June 2008. Compl., 2/4/09, at 2-3 ¶¶ 3-4
& Ex. B; Tr. Ct. Op., 7/26/16, at 2. Finkle sought a balance owed of
$83,989.12, plus $20,997.28 in counsel fees (an amount equal to 25% of
the outstanding balance), with interest calculated at a rate of 18% per
annum beginning on June 20, 2008. Compl., 2/4/09, at 3 ¶ 9, ad damnum
clause & Ex. B at 7.
After the complaint was amended, Herzog filed an answer and new
matter on October 28, 2009, in which he denied that the exhibits attached to
the complaint provided documentary evidence in support of Finkle’s claim
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and asserted that he might be entitled to credits against the amounts
claimed for returned merchandise, merchandise not actually delivered,
payments made, coupons, and promotional items. Answer to Compl. & New
Matter at 1-3 ¶¶ 3, 6-8, 12-16.
In 2010, during the pendency of this action, Finkle executed an “Asset
Purchase Agreement under which Core-Mark Midcontinent, Inc. purchased
almost all of Finkle’s assets. Tr. Ct. Op., 7/26/16, at 2. During discovery,
Finkle produced a July 28, 2014 affidavit from its former president, Dan
Finkle, that averred the following with respect to application of the Asset
Purchase Agreement to the Herzog receivable:
Troy M. Herzog d/b/a The Hub was an “Excluded Asset” from the
Asset Purchase Agreement with Core-Mark Midcontinent, Inc. As
a result, Finkle Distributors, Inc. and its successor FDI Holdings,
Inc. retained all of the records on The Hub account. Core-Mark
Midcontinent, Inc. has no records on The Hub file.
Upon review of the business records of FDI Holdings, Inc. which
contains the records of the “Excluded Assets” that were originally
part of Finkle Distributors, Inc., I have determined that there are
no existing collection notes on this file. There is a chance that
the records previously existed years ago but were lost in the
transfer of records to new storage facilities. I did not
intentionally destroy any records.
Br. in Supp. of Mot. for Summ. J., 8/25/14, Ex. 3, at 1 ¶¶ 3-4.
On August 25, 2014, Herzog moved for summary judgment. His
motion claimed that the Herzog receivable was not an “Excluded Asset”
under the Asset Purchase Agreement and that the affidavit from Dan Finkle
attesting to Finkle’s lack of any documents to support its claim to the
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receivable showed that the asset had been sold to Core-Mark. Herzog
argued that the sale meant that Finkle was not a real party in interest with
respect to any claim for repayment of the receivable and that Herzog
therefore was entitled to judgment on Finkle’s claim.
On October 10, 2014, Herzog filed a motion in limine seeking (1) to
exclude alleged parol evidence related to proof of ownership of the account,
Mot. in Limine, 10/10/14, at 2-3 ¶¶ 2-5, and (2) sanctions for alleged
spoliation of evidence by Finkle., id. at 3-5 ¶¶ 6-5. With respect to parol
evidence, Herzog argued that the language of the Asset Purchase Agreement
showed that the Herzog receivable had been sold to Core-Mark and that the
Agreement’s integration clause prevented use of parol evidence to contradict
that language. With respect to sanctions, Herzog argued that Dan Finkle
had admitted in depositions that computer files would have contained
documents, including records similar to invoices, that Finkle never produced
to Herzog, despite repeated requests and court orders to do so. Based on
Dan Finkle’s admission regarding those unproduced computer records and
his affidavit stating that the relevant records may have been lost, Herzog
argued that there had been a spoliation of evidence and that, as a sanction,
the court should enter summary judgment in favor of Herzog.
On December 22, 2014, the trial court granted Herzog’s motion in
limine and precluded parol evidence about the Asset Purchase Agreement.
With that evidence excluded, the trial court also granted Herzog’s motion for
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summary judgment on the ground that the sale of the receivable under the
Asset Purchase Agreement meant that Finkle was not a real party in interest
and could not sue Herzog on its claim. Finkle appealed to this Court, and,
on March 9, 2016, we vacated the trial court’s order. We held that the Asset
Purchase Agreement was ambiguous and that the trial court therefore erred
in excluding parol evidence that would bear on whether the Agreement
should be interpreted to convey the Herzog receivable to Core-Mark or to
include the receivable among assets being retained by Finkle. We remanded
for further proceedings in light of that ruling.1
On May 17, 2016, the trial court entered an order that, in compliance
with this Court’s ruling, denied Herzog’s motion in limine for preclusion of
parol evidence regarding the meaning of the Asset Purchase Agreement. At
the same time, however, the court granted Herzog’s spoliation motion,
concluding “that material documents, such as invoices, credit memos, and
collection notes were lost or destroyed.” Tr. Ct. Op., 7/26/16, at 6. Having
determined that spoliation had occurred, the court considered “[w]hether
dismissal of [Finkle’s] action is an appropriate remedy.” Id. The court
noted that Herzog’s motion “argued that Summary Judgment or a
preclusion of Appellant's presentation of evidence was warranted in
the form of sanctions.” Id. (emphasis added). Rather than entering
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1
Finkle Distributors, Inc. v. Herzog, No. 141 WDA 2015 (Pa. Super.,
Mar. 9, 2016) (unpublished memorandum).
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summary judgment, the court opted for the alternative sanction suggested
by Herzog and included the following paragraph in its May 17, 2016 order:
[Herzog’s2] Motion with respect to spoliation of evidence is
GRANTED. Plaintiff is prohibited from introducing into evidence
documentation of accounts receivable as Plaintiff had an
affirmative duty to preserve such evidence; Plaintiff failed to act
accordingly; and Plaintiff has failed to demonstrate sufficient
explanation as to why or how the records were lost. . . .
The order did not enter summary judgment. Accordingly, the docket does
not reflect any dismissal or entry of judgment ending the case.
On June 13, 2016, Finkle, through counsel, filed a notice of appeal.
The appeal seeks review of the following issues:
1. Whether dismissal of [Finkle]’s action is an appropriate
remedy.
2. Whether an evidentiary hearing should have been held by
the Court on the issue of spoliation of evidence.
3. Whether there is any evidence that any material
documents were lost or destroyed by [Finkle].
Finkle’s Brief at 4. However, we have no jurisdiction to hear Finkle’s appeal
because the May 27, 2016 order from which it seeks to appeal is
interlocutory and unappealable.3
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2
The order erroneously referred to the spoliation motion as having been
filed by “Plaintiff” (that is, Finkle), but it was Herzog’s motion.
3
On July 6, 2016, this Court issued upon Finkle an order to show cause as
to whether the appeal was properly before us. On July 15, 2016, Finkle
responded by a letter to this Court’s Prothonotary that stated, “although the
trial court's order did not technically put Appellant ‘out of court,’ the effect of
(Footnote Continued Next Page)
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Pennsylvania law makes clear that:
[A]n appeal may be taken from: (1) a final order or an order
certified as a final order (Pa.R.A.P. 341); (2) an interlocutory
order as of right (Pa.R.A.P. 311); (3) an interlocutory order by
permission (Pa.R.A.P. 312, 1311, 42 Pa.C.S.A. § 702(b)); or (4)
a collateral order (Pa.R.A.P. 313).
A final order is one that disposes of all the parties and all the
claims, is expressly defined as a final order by statute, or is
entered as a final order pursuant to the trial court's
determination. [T]he appealability of an order goes directly to
the jurisdiction of the Court asked to review the order.”
Veloric v. Doe, 123 A.3d 781, 784 (Pa. Super. 2015) (quoted citation and
quotation marks omitted).4
Based on Finkle’s discovery responses and admission to the loss of
relevant documents, Herzog argued that summary judgment or a preclusion
of Finkle’s presentation of certain evidence was warranted as a sanction.
The trial court chose to preclude Finkle’s presentation of evidence. It did not
grant summary judgment or dismissal, and did not otherwise preclude Finkle
from presenting its case. The order of May 17, 2016, therefore did not
dispose of any claims in this matter and is not a final appealable order.
_______________________
(Footnote Continued)
the order precludes Appellant from introducing evidence of the account
receivable and effectively prevents Appellant from litigating its claim at the
trial court level.” On July 19, 2016, we held that the order to show cause
was discharged, but added: “[t]his ruling, however, is not binding upon this
Court as a final determination as to the propriety of the appeal.”
4
The reference in Veloric to an order “expressly defined as a final order by
statute” relates to former Rule 341(b)(2), which was rescinded in April 2016.
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Veloric, 123 A.3d at 784.5 Finkle does not argue that there is any other
basis for appellate jurisdiction here. It does not assert that the trial court’s
order is appealable as of right under Pa.R.A.P. 311 or is a collateral order
under Pa.R.A.P. 313, and it does not request permission to take an
interlocutory appeal under Pa.R.A.P. 312. Thus, we conclude that we are
without jurisdiction to review the May 17, 2016 order. Veloric, 123 A.3d at
784.
Appeal quashed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/23/2017
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5
In responding to our order to show cause, Finkle quoted the statement in
Schaffer v. Litton Systems, Inc., 539 A.2d 360, 361 (Pa. Super. 1988),
that “[c]ertain orders which have not put a litigant ‘out of court’ or
completely terminated the litigation have nevertheless been held to possess
sufficient aspects of finality to be appealable because the effect of the order
has been to preclude the litigant from [presenting its claim].” Schaffer and
other cases expressing a similar view reflected the law prior to the
amendment of Appellate Rule 341(b) in 1992 to define a final order as one
that “disposes of all claims and of all parties.” Under the 1992 amendments,
orders that were appealable under those cases no longer qualify as final
appealable orders. See Noll ex rel. Noll v. Harrisburg Area YMCA, 643
A.2d 81, 83 & n.2 (Pa. 1993).
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