Fellerman, S. v. PECO Energy Co.

J-A27030-16
2017 Pa. Super. 86
STANLEY FELLERMAN AND IN THE SUPERIOR COURT OF
CAROL FELLERMAN PENNSYLVANIA
Appellees
v.
PECO ENERGY CO., COMCAST OF
SOUTHEAST PENNSYLVANIA, LLC,
HISTORIC HOME INSPECTION, LP, D/B/A
WIN HOME INSPECTION, ADDISON
WOLFE REAL ESTATE AND LISA JAMES
OTTO PROPERTIES
APPEAL OF: HISTORIC HOME
INSPECTION, LP, D/B/A WIN HOME
INSPECTION
No. 3409 EDA 2015
Appeal from the Order Dated October 21, 2015
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): July Term, 2014, No. 2640
BEFORE: PANELLA, J., LAZARUS, J., and FITZGERALD, J.*
OPINION BY LAZARUS, J.: FILED MARCH 30, 2017
Historic Home Inspection, LP, d/b/a WIN Home Inspection (“Historic”),
appeals from the order entered in the Court of Common Pleas of Philadelphia
County overruling its preliminary objections, which sought to enforce an
agreement for alternative dispute resolution. Upon review, we reverse and
remand for proceedings consistent with the dictates of this opinion.
____________________________________________
*
Former Justice specially assigned to the Superior Court.
J-A27030-16
Appellees, Stanley and Carol Fellerman (“Fellermans”), retained
Historic to perform a home inspection in connection with their purchase of
6858 Upper York Road in New Hope, Bucks County (“Property”). In
conjunction therewith, Stanley Fellerman executed an “Inspection
Agreement” (“Agreement”), outlining, inter alia, the scope of the inspection,
exclusions, and limitations of liability. The Agreement also contained an
arbitration clause, which provided as follows:
DISPUTE RESOLUTION AND REMEDY LIMITATION
...
Binding Arbitration – The undersigned parties below agree
that any dispute between the parties, except those for
nonpayment of fees, that in any way, directly or indirectly,
arising out of, connected with, or relating to the interpretation of
this Agreement, the inspection service provided, the report or
any other matter involving our service, shall be submitted to
binding arbitration conducted by and according to the
Accelerated Arbitration Rules and Procedures of Constructive
Dispute Resolution Services, LLC. You may recommend an
alternative arbitration provider for our consideration. The
arbitration decision shall be final and binding on all parties, and
judgment upon the award rendered may be entered into any
court having jurisdiction. In any dispute arising under this
Agreement, Our Inspection or the Inspection Report, the costs of
the arbitration shall be the sole responsibility of the client up to
and including the arbitration hearing. As part of the arbitration
award, the arbitrator shall award to the prevailing party any or
all costs of the arbitration process as he or she deems to be
appropriate. Expenses related to personal attorneys, experts,
engineers, witnesses, engineering reports or other inspection
reports or similar individuals or documents shall be the direct
responsibility of the parties and shall not be considered as part
of the arbitration award. The arbitration award shall be limited
in scope to the issues and terms as specified in the Inspection
Agreement. No legal action or proceeding of any kind, including
those sounding in tort or contract, can be commenced against
-2-
J-A27030-16
us, or our officers, agents or employees more than one year
after the date of the subject inspection. Time is expressly of the
essence herein. THIS TIME PERIOD IS SHORTER THAN
OTHERWISE PROVIDED BY LAW.
LIMITATION OF LIABILITY – IF WE, OUR EMPLOYEES,
INSPECTORS, OR ANY OTHER PERSON YOU CLAIM TO BE OUR
AGENT, ARE CARELESS OR NEGLIGENT IN PERFORMING THE
INSPECTION AND/OR PREPARING THE REPORT AND/OR
PROVIDING ANY SERVICES UNDER THIS AGREEMENT, OUR
LIABILITY IS LIMITED TO THE FEE YOU PAID FOR THE
INSPECTION SERVICE. AND YOU RELEASE US FROM ANY
ADDITIONAL LIABILITY. WE HAVE NO RESPONSIBILITY FOR
THE POSSIBILITY YOU LOST AN OPPORTUNITY TO
RENEGOTIATE WITH THE SELLER. THERE WILL BE NO
RECOVERY FOR SECONDARY OR CONSEQUENTIAL DAMAGES BY
ANY PERSON.
Inspection Agreement, 1/21/13, at 1-2.
The Property contained four utility poles, which supported, inter alia,
PECO power lines, Comcast cable lines and a PECO transformer. On
December 2, 2013, the Fellermans discovered that the pole closest to their
residence, supporting the PECO transformer, had fallen to the ground in
their “heavily wooded and leaf-covered front yard” near their home. Brief of
Appellees, at 6. The Fellermans assert that the pole fell due to “severe rot,
decay and deterioration.” Id. at 6. The Fellermans notified PECO of the
incident; however, prior to PECO’s arrival, Stanley Fellerman noticed that the
fallen transformer, power and cable lines had started a fire. Stanley
attempted to extinguish the fire and, in doing so, was shocked, burned and
severely injured, allegedly by the PECO power line.
The Fellermans filed suit by writ of summons on July 23, 2014. In
their second amended complaint, they named as defendants PECO, Comcast,
-3-
J-A27030-16
Historic, Addison Wolfe Real Estate and Lisa James Otto Country Properties.
The Fellermans asserted that Historic failed to discover or disclose the
deteriorated condition of the utility pole, in breach of the Agreement, and
asserted causes of action for negligent misrepresentation, fraud, violations
of the Uniform Trade Practices and Consumer Protection Law, 73 P.S. §§
201-1-201-9.3 (UTPCPL), and breach of contract.
On September 22, 2015, Historic filed preliminary objections,
asserting, inter alia, that the Fettermans’ suit was barred by the terms of the
arbitration clause contained in the Agreement. The trial court overruled
Historic’s preliminary objections by order dated October 20, 2015 and
ordered it to file an answer to the Fettermans’ complaint within twenty days.
Historic filed a timely notice of appeal, followed by a court-ordered
statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b).
In its Rule 1925(a) opinion, the trial court found that its order was neither
an appealable “final order” within the meaning of Pa.R.A.P. 341(b), nor was
it an interlocutory order appealable as of right under Pa.R.A.P. 311.
Accordingly, the court recommended quashal.
Historic raises the following issue for our review:
Is it error to overrule preliminary objections raising an
agreement for alternative dispute resolution when the parties
signed and executed an agreement to arbitrate all disputes
arising out of breach of the [A]greement and that [A]greement is
the gist of the action?
Brief of Appellant, at 5.
-4-
J-A27030-16
Prior to considering the merits of Historic’s claim, we address the trial
court’s assertion that its order denying Historic’s preliminary objection in the
nature of a motion to compel arbitration is interlocutory and not immediately
appealable. In short, the trial court is incorrect. Pennsylvania Rule of
Appellate Procedure 311(a)(8) provides, in relevant part:
(a) General rule.--An appeal may be taken as of right and
without reference to Pa.R.A.P. 341(c) from:
...
(8) Other cases.--An order that is made final or appealable by
statute or general rule, even though the order does not dispose
of all claims and of all parties.
Pa.R.A.P. 311(a)(8). Applicable here, section 7320 of the Judiciary Code
provides, in relevant part:
(a) General rule.--An appeal may be taken from:
(1) A court order denying an application to compel arbitration
made under section 7304 (relating to proceedings to compel or
stay arbitration).
42 Pa.C.S.A. § 7320(a)(1). See also MacPherson v. Magee Mem'l Hosp.
for Convalescence, 128 A.3d 1209, 1213 n.4 (Pa. Super. 2015), appeal
denied, 700 EAL 2015 (Pa. Nov. 17, 2016) (order refusing to compel
arbitration is threshold, jurisdictional question appealable as exception to
general rule that order overruling preliminary objections is interlocutory and
not appealable as of right). Historic’s sole claim on appeal addresses the
trial court’s refusal to compel arbitration pursuant to the terms of the
Agreement. Accordingly, Historic’s appeal is properly before this Court.
-5-
J-A27030-16
We now turn to the substance of Historic’s claim. We begin by noting:
Our standard of review of a claim that the trial court improperly
overruled preliminary objections in the nature of a petition to
compel arbitration . . . “is limited to determining whether the
trial court’s findings are supported by substantial evidence and
whether the trial court abused its discretion in denying the
petition.” Pisano v. Extendicare Homes, Inc., 77 A.3d 651,
654 (Pa. Super. 2013), [] (quoting Walton v. Johnson, 66 A.3d
782, 787 (Pa. Super. 2013)).
“In doing so, we employ a two-part test to determine
whether the trial court should have compelled arbitration.”
Elwyn [v. DeLuca ], 48 A.3d [457], 461 [ (Pa. Super.
2012)][, ]quoting Smay v. E.R. Stuebner, Inc., 864 A.2d
1266, 1270 (Pa. Super. 2004)). First, we examine
whether a valid agreement to arbitrate exists. Second, we
must determine whether the dispute is within the scope of
the agreement. Pisano, 77 A.3d at 654–[]55.
“Whether a claim is within the scope of an arbitration provision is
a matter of contract, and as with all questions of law, our review
of the trial court’s conclusion is plenary.” Elwyn, 48 A.3d at
461.
MacPherson, 128 A.3d at 1218–19.
This Court has explained the interpretation of arbitration
agreements as follows: (1) arbitration agreements are to be
strictly construed and not extended by implication; and (2) when
parties have agreed to arbitrate in a clear and unmistakable
manner, every reasonable effort should be made to favor the
agreement unless it may be said with positive assurance that the
arbitration clause involved is not susceptible to an interpretation
that covers the asserted dispute. To resolve this tension, courts
should apply the rules of contractual construction[], adopting an
interpretation that gives paramount importance to the intent of
the parties and ascribes the most reasonable, probable, and
natural conduct to the parties. In interpreting a contract, the
ultimate goal is to ascertain and give effect to the intent of the
parties as reasonably manifested by the language of their written
agreement.
-6-
J-A27030-16
Callan v. Oxford Land Dev., Inc., 858 A.2d 1229, 1233 (Pa. Super. 2004)
(citations and quotation marks omitted).
We first determine whether a valid agreement to arbitrate exists
between Historic and the Fellermans. Elwyn, 48 A.3d at 461. The
Fellermans argue that the arbitration agreement is invalid because it is
unconscionable. Specifically, they claim that the agreement is illegible and
not conspicuous and, as a result, they were not put on adequate notice of
the rights they were waiving. They also assert that the agreement
unreasonably favors the drafter, Historic.1
Historic argues that, although the agreement is “not easy to read,”
Stanley Fellerman signed it without asserting that it was illegible. Citing
Hinkal v. Pardoe, 133 A.3d 738 (Pa. Super. 2016) (en banc), Historic
____________________________________________
1
In contesting the validity of the Agreement, the Fellermans also argue that,
because there are multiple other defendants with regard to whom they have
indisputably not waived their right to a jury trial, forcing them to arbitrate
would deprive them of their constitutional right to a jury trial. In this
regard, the Fellermans also invoke notions of judicial economy, arguing that
“arbitrating only the claims against Historic [], and preserving the right to a
jury against the other entities, would require separate proceedings, separate
discovery, enormous expense for all involved, and delay the ultimate
resolution of the matter.” Brief of Appellants, at 13. This argument is
meritless. Recently, our Supreme Court decided Taylor v. Extendicare
Health Facilities, Inc., 147 A.3d 490 (Pa. 2016), in which it addressed
nearly identical arguments aimed at invalidating an agreement to arbitrate in
the context of a wrongful death and survival action. The Court rejected
those arguments, concluding that the mandate of the Federal Arbitration
Act, 9 U.S.C. § 1, et seq., favoring arbitration, trumps notions of judicial
economy and efficiency and requires that otherwise valid arbitration
agreements be enforced, even where enforcement results in related disputes
with multiple defendants being adjudicated in separate forums.
-7-
J-A27030-16
asserts that parties to a contract have a duty to read the document before
signing it, and the failure to do so is not an excuse or defense. Historic also
argues that, because both parties must arbitrate, the agreement does not
favor the drafter. Moreover, Historic notes that the Fellermans “do not
allege they could not negotiate the arbitration clause out of the agreement,
or that they were unable to hire one of the many other home inspection
companies in business in southeastern Pennsylvania.” Brief of Appellants, at
13.
Based on our review, we conclude that the parties entered into a valid
agreement to arbitrate. The Fellermans base their unconscionability
argument primarily on their assertion that the agreement was inconspicuous
and difficult to read. Our review of a copy of the document included in the
reproduced record reveals that, while it is not the clearest document, it is
legible and capable of being understood. “As a general principle, minimum
conspicuity standards are not a requirement to establish the formation of a
contract.” Hinkal, 133 A.3d at 745. “[C]onspicuity per se is not an
essential element of contract formation.” Id.
Moreover, the agreement contains a conspicuous statement at the
very top, written in bold, capital letters and surrounded by a text box, which
reads as follows:
PRIOR TO THE INSPECTION, PLEASE READ CAREFULLY BEFORE SIGNING
-8-
J-A27030-16
If, as the Fellermans argue, the agreement was “smudged, blurry, [in] small
print [and] incomplete,” Mr. Fellerman could have requested that he be
provided with a legible copy prior to signing. There is nothing in the record
to suggest that he ever did so.
The Fellermans also argue that Historic actually intended, by virtue of
the physical characteristics of the document, “to dissuade the signor from
even reading the document, let alone understanding and questioning it.”
Brief of Appellees, at 16. This argument is unavailing. First, the Fellermans
present no proof to support that assertion. Second, it is “well established
that, in the absence of fraud, the failure to read a contract before signing it
is ‘an unavailing excuse or defense and cannot justify an avoidance,
modification or nullification of the contract’; it is considered ‘supine
negligence.’” In re Estate of Boardman, 80 A.3d 820, 823 (Pa. Super.
2013), quoting Germantown Sav. Bank v. Talacki, 657 A.2d 1285, 1289
(Pa. Super. 1995). Accordingly, the consequences of any failure to actually
read the document – or request a more legible copy – prior to signing must
be borne by the Fellermans.
The Fellermans also assert that the agreement is void because it
unreasonably favors Historic by seeking to limit damages to $780.00, the
amount paid by the Fellermans for the inspection fee. In so arguing, the
Fellermans rely upon this Court’s decision in Carll v. Terminix
International Co., L.P., 793 A.2d 921 (Pa. Super. 2002), in which we held
-9-
J-A27030-16
to be unconscionable an arbitration agreement containing a limitation of
damages on the basis of public policy concerns.
In Carll, homeowners sued Terminix, a pest control company, alleging
they sustained severe and permanent injuries as a result of negligent
application of pesticides in and around their home. The contract signed by
the homeowners contained an arbitration agreement as well as a limitation
of liability provision, providing that, notwithstanding any claim of negligence
on the part of Terminix, the company’s sole responsibility was to “re-treat”
the homeowners’ property. The Court found that the limitation of liability
provision was incapable of being severed from the arbitration clause.
Emphasizing that Terminix was “in the business of applying insecticides in a
residential setting,” the Court concluded that the clause limiting liability for
injury to the person was unconscionable and unenforceable as against public
policy. Id. at 925. While not explicitly relying on it, the Court noted the
UCC’s limitation of consequential damages provision, recognizing that a
provision limiting consequential damages for injury to the person in the case
of consumer goods is prima facie unconscionable, finding that it lent support
to its conclusion. See 13 Pa.C.S.A. § 2719(c). We find Carll to be
distinguishable.
The phrase “public policy” has been used in a general sense to
mean that in certain egregious circumstances a contract will be
declared void if it is “so obviously for or against the public
health, safety, morals or welfare that there is virtual unanimity
in regard to it, that a court may constitute itself the voice of the
community.”
- 10 -
J-A27030-16
Carll, 793 A.2d at 924, quoting Jeffrey v. Erie Ins. Exch., 621 A.2d 635,
640 (Pa. Super. 1993).
In Carll, the Court emphasized the hazardous nature of Terminix’s
business, i.e., the application of insecticidal chemicals in a residential
setting, and concluded that public policy considerations would not permit the
limitation of damages where severe and permanent injuries resulted. Here,
however, the service Historic performed for the Fellermans was not, by its
very nature, dangerous. While providing a general overview of the safety
and stability of a potential residence is arguably one aspect of a home
inspection, the task of a home inspector is not to guarantee the safety of the
premises. Rather, it is to provide the homebuyer with a non-invasive
examination of the structure and the systems contained therein in order to
enable the buyer to make a more informed purchasing decision.2
Accordingly, Carll does not compel a finding that the contract at issue here
is void as against public policy.
____________________________________________
2
According to the website of the American Society of Home Inspectors, a
home inspection is “an objective visual examination of the physical structure
and systems of a house, from the roof to the foundation.”
http://www.homeinspector.org/FAQs-on-Inspection#1. A standard home
inspector’s report covers: (1) the heating system; (2) the central air
conditioning system; (3) interior plumbing and electrical systems; (4) the
roof, attic and visible insulation; (5) walls, ceilings, floors, windows and
doors; and (6) the foundation, basement and structural components. Id. A
home inspection may identify the need for major repairs or builder
oversights, as well as the need for maintenance. Id.
- 11 -
J-A27030-16
Indeed, we need not reach the issue of whether the limitation of
liability clause is valid, as, unlike in Carll, we find the provision to be
severable from the arbitration agreement itself. Again, this case is
distinguishable from Carll. In Carll, the arbitration provision was
inextricably intertwined with the liability limitation. As the Court noted,
The arbitration provision not only provides for arbitration but at
the same time limits the arbitrator’s authority. The limitation of
liability language is not independent of the agreement to
arbitrate. These provisions are not distinct. The same
contractual provision that directs arbitration limits the authority
of the individual conducting that arbitration.
Carll, 793 A.2d at 926.
Conversely, here, the arbitration provision is separate and distinct
from the damage limitation portion of the agreement, both location-wise and
functionally. As such, the damage limitation may be stricken from the
agreement without affecting the parties’ agreement to arbitrate. Moreover,
unlike the agreement in Carll, the agreement between the Fellermans and
Historic contains an explicit severability clause. Thus, the remainder of the
contract remains enforceable even if the limitation clause is ultimately
deemed void. However, because we need not reach the validity of the
limitation of liability clause, we leave that determination to the arbitrator.
See Shannon v. Pennsylvania Edison Co., 72 A.2d 564, 567 (Pa. 1950)
(unless restricted by agreement, arbitrators possess authority to determine
questions of both law and fact).
- 12 -
J-A27030-16
For the foregoing reasons, we conclude that Historic and the
Fellermans entered into a valid agreement to arbitrate. We must now
determine whether the instant dispute falls within the scope of the
agreement.
In its brief, Historic claims that the trial court erred in denying its
request to arbitrate because the Fellermans’ claims all arise from the
Agreement, which contains a broadly worded arbitration clause. Given the
breadth of the arbitration clause, Historic argues that it encompasses the
tort claims asserted by the Fellermans.
In response, the Fellermans argue that the bodily injury claims they
assert in their complaint are not within the scope of the agreement. They
assert that, “as evidenced by the damages limitation provision, the
Agreement merely contemplated the Fellermans having to secure a new
home inspection for the claimed failures of [Historic].” Brief of Appellees, at
19.
This Court has explained the interpretation of arbitration agreements
as follows:
(1) arbitration agreements are to be strictly construed and not
extended by implication; and (2) when parties have agreed to
arbitrate in a clear and unmistakable manner, every reasonable
effort should be made to favor the agreement unless it may be
said with positive assurance that the arbitration clause involved
is not susceptible to an interpretation that covers the asserted
dispute.
- 13 -
J-A27030-16
Callan, 858 A.2d at 1233, quoting Highmark Inc. v. Hospital Service
Ass'n. of Northeastern Pennsylvania, 785 A.2d 93, 98 (Pa. Super.
2001). “To resolve this tension, courts should apply the rules of contractual
construction[], adopting an interpretation that gives paramount importance
to the intent of the parties and ascribes the most reasonable, probable, and
natural conduct to the parties.” Callan, 858 A.2d at 1233. In interpreting a
contract, the ultimate goal is to ascertain and give effect to the intent of the
parties as reasonably manifested by the language of their written
agreement. Id.
Where a contract dispute arises between parties to a contract
containing an unlimited arbitration clause, the parties must
resolve their dispute through arbitration. Unless the parties
impose some limitation on the arbitrator’s authority, the
arbitrator may decide all matters necessary to dispose of any
disputed claims subject to arbitration and, the court may not
impose any restrictions sua sponte. Accordingly, “all” contract
disputes does mean “all” contract disputes unless otherwise
agreed by the parties.
An agreement to arbitrate disputes arising from a contract
encompasses tort claims where the facts which support a tort
action also support a breach of contract action. A claim’s
substance, not its styling, controls whether the complaining
party must proceed to arbitration or may file in the court of
common pleas.
Callan, 858 A.2d at 1233 (citations omitted).
Here, the arbitration clause at issue provides that the parties
agree that any dispute between [them], except those for
nonpayment of fees, that in any way, directly or indirectly,
arising out of, connected with, or relating to the interpretation of
this Agreement, the inspection service provided, the report or
- 14 -
J-A27030-16
any other matter involving our service, shall be submitted to
binding arbitration[.]
Inspection Agreement, 1/21/13, at 1-2.
The Fellermans’ claims against Historic are all grounded in Historic’s
alleged failure to properly provide services, in breach of its contract with the
Fellermans. See Second Amended Complaint, 5/22/15, at ¶¶ 95-96.
(“Pursuant to [the] contract, [Historic] agreed to provide certain services
and performed certain duties in connection with the inspection of the real
property[.] . . . [Historic] failed to properly provide those services and duties
and, as such, breached the subject contract.”). The Fellermans claim that
they sustained injuries as a result of Historic’s alleged failure to disclose
certain information regarding the power pole, in breach of its obligation
under the contract. They also assert that Historic made negligent and
intentional misrepresentations with regard to the power pole, also in
violation of their contractual obligations. In short, the Fellermans’ tort
claims all arise from duties they claim were owed them by Historic pursuant
to the inspection agreement. Accordingly, “the facts which support a tort
action also support a breach of contract action,” Callan, supra, and the tort
claims are therefore subject to the arbitration clause contained within the
agreement.
Order reversed. Case remanded for proceedings consistent with the
dictates of this opinion. Jurisdiction relinquished.
Judge Panella joins the Opinion.
Justice Fitzgerald concurs in the result.
- 15 -
J-A27030-16
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/30/2017
- 16 -