Gallagher, M. v. Gallagher, M.

J. A12045/18
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
MARYANNE GALLAGHER : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
v. :
:
M. GALLAGHER & F. MANCUSO :
PARTNERSHIP, ROBIN MANCUSO :
DeLUNA, JAMIE MANCUSO, :
FRANK MANCUSO AND :
CROSS KEYS MANAGEMENT, INC. :
:
APPEAL OF: ROBIN MANCUSO : No. 3533 EDA 2017
DeLUNA, JAMIE MANCUSO AND :
FRANK MANCUSO :
Appeal from the Order Entered October 12, 2017,
in the Court of Common Pleas of Bucks County
Civil Division at No. 2016-07570
BEFORE: BOWES, J., OTT, J., AND FORD ELLIOTT, P.J.E.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED NOVEMBER 05, 2018
Robin Mancuso DeLuna, Jamie Mancuso, and Frank Mancuso
(collectively, “appellants”) appeal from the October 12, 2017 order entered in
the Court of Common Pleas of Bucks County that overruled and dismissed
their preliminary objections to appellee Maryanne Gallagher’s second
amended complaint.1 After careful review, we affirm.
1 The record reflects that on April 3, 2017, appellee filed a complaint against
M. Gallagher and F. Mancuso Partnership and appellants. Appellee filed her
first amended complaint against the same defendants on May 22, 2017.
Subsequently, on July 7, 2017, appellee filed her second amended complaint
against these defendants, but erroneously titled the pleading as “First
Amended Complaint.”
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The trial court set forth the following:
On or about June 1997, Maryanne Gallagher
(hereinafter “[a]ppellee”) and Frank [Mancuso
(“Frank”)] created a business partnership (hereinafter
“the Partnership”) for the purpose of owning,
managing, operating, and conducting a real estate
brokerage business in Levittown,
Pennsylvania.[Footnote 1] At the time of the
Partnership’s formation, Frank was the sole owner of
the capital stock of Hearthside Realty,
Inc.[Footnote 2] Hearthside Realty, Inc. was a
Coldwell Banker franchisee operating under the name
“Coldwell Banker Hearthside Realty.”
[Footnote 1] The factual background is
gleaned from the parties’ respective
pleadings in this case.
[Footnote 2] At the time of the
Partnership’s creation, Hearthside Realty,
Inc. was known as “Hearthside Realtors,
Inc.”
Under the terms of the Partnership, the Partnership
was to operate as a branch of Coldwell Banker under
the trade name “Coldwell Banker Hearthside
Levittown Realty” pursuant to the Franchise
Agreement in existence between Coldwell Banker as
franchisor and Coldwell Banker Hearthside Realty
(“CB Hearthside”) as franchisee. Under the terms of
the Partnership Agreement, Frank covenanted that he
would continue to permit the Partnership to operate
as a branch office of Coldwell Banker. Of particular
importance to the instant matter is that the
Partnership Agreement, entered into by and between
[a]ppellee and Frank, contained an arbitration
provision, to wit:
If any controversy or claim arising out of
this Partnership Agreement cannot be
settled by the Partners the controversy or
claim shall be settled by arbitration in
accordance with the rules of the American
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Arbitration Association then in effect, and
judgment on the award may be entered in
any court having jurisdiction.
The Partnership Agreement provided that if Frank ever
transferred by sale, gift or otherwise any of his capital
stock of CB Hearthside without the consent of
[a]ppellee, Frank was to be treated as a “withdrawing
partner” under the Partnership Agreement. Pursuant
to the Partnership Agreement, either Frank or
[a]ppellee was permitted to withdraw from the
Partnership at any time by giving one-hundred
twenty (120) days advance written notice to the other
of his/her intent to withdraw. Upon giving notice of
withdrawal, the Partnership Agreement provided that
the remaining partner would be given the option to
purchase the withdrawing partner’s share in the
Partnership.
In or about 2013, Frank, who maintained a series of
companies involved either directly or ancillary to the
real estate industry, began restructuring many of his
companies and business interests, including the
Partnership. According to the Second Amended
Complaint, unbeknownst to [a]ppellee, at some point
during 2014, Frank allegedly transferred or sold some
or all of his interests in the Partnership business to his
children, Robin [Mancuso DeLuna (“Robin”)] and
Jamie [Mancuso (“Jamie”)]. In anticipation of this
restructuring, Robin became president of a
newly-formed entity, Cross Keys Management, Inc.
(hereinafter, “CK Management”). The Second
Amended Complaint alleges that Frank never gave
[a]ppellee written notice of his intention to withdraw
from the Partnership. Appellee was also never given
the opportunity to purchase Frank’s interests in the
Partnership as the Partnership Agreement required.
Appellee was never asked to consent to the transfer
of any interests to Robin or Jamie.
This corporate restructuring also substantially
changed the operating dynamic of the Partnership.
The restructuring removed so-called “Back Office
Services” from all of the various Mancuso businesses
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and their offices, and centralized those functions
under the umbrella of CK Management, with Robin as
President, Jamie as Vice President, and Frank as
Secretary of the company. The restructuring also
removed legal, accounting, financial, human relations
and administrative functions from the Partnership,
and centralized those functions within
CK Management.
Following this restructuring, instead of all gross
commission revenues from real estate sales of the
Partnership being deposited by CB Hearthside into the
accounts of the Partnership, as had historically been
the case, management fees and other expenses were
deducted from the Partnership’s gross sales revenues
and paid to CK Management before any net proceeds
were released to the Partnership. The fees charged
by CK Management for Back Office Services (the
“Management Fee”) were calculated as a percentage
applied to and deducted from the revenues of each
sale that was concluded by each entity. On or about
2013, [appellee] was informed by [appellants] that
the Partnership would be charged a 15% Management
Fee by CK Management, applied to the gross sales
revenues for Back Office Services and other
administrative costs.
Unbeknownst to [a]ppellee, this practice of deducting
management and other fees from the Partnership’s
gross commission revenues began before the
restructuring of CB Hearthside, under the stewardship
of Robin. Despite being a 50% owner and general
partner of the Partnership, [a]ppellee avers that she
was given no information concerning what the costs
and expenses of CK Management actually were or how
those costs and expenses were being allocated among
the various [businesses owned by appellants] and the
Partnership. The Second Amended Complaint alleges
that the costs and expenses of CK Management were
grossly disproportionately assessed upon the
Partnership.
On April 3, 2017, [a]ppellee filed a Complaint to which
[a]ppellants filed preliminary objections. Shortly
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thereafter, on May 22, 2017, [a]ppellee filed her First
Amended Complaint to which [a]ppellants
subsequently filed Preliminary Objections. On July 7,
2017, [a]ppellee filed a Second Amended Complaint
to which [a]ppellants also filed Preliminary Objections
seeking to submit Counts I, II, and V of the Second
Amended Complaint to arbitration. Pursuant to the
Preliminary Objections to [a]ppellee’s Second
Amended Complaint, on September 28, 2017, we held
oral argument. On October 12, 2017, we issued an
order overruling and dismissing [a]pellants’
Preliminary Objections to [a]ppellee’s Second
Amended Complaint.
On October 26, 2017, [a]ppellants filed the instant
appeal from this Court’s October 12, 2017 Order. By
Order dated November 1, 2017, we directed
[a]ppellants to provide the Court with a Statement of
Matters Complained of on Appeal pursuant to
Rule 1925(b) of the Pennsylvania Rules of Appellate
Procedure. On November 16, 2017, [a]ppellants filed
their [Rule 1925(b) statement].
Trial court opinion, 12/22/17 at 1-4.
Appellants complain that the trial court erred in overruling and
dismissing their preliminary objections to appellee’s second amended
complaint because the arbitration provision contained in the partnership
agreement entered into between appellee and Frank Mancuso (“Partnership
Agreement”) requires that Counts I, II, and V be submitted to arbitration.2
2 In their statement of questions involved, appellants framed the issues as
follows:
I. Did the trial court err in overruling and
dismissing [a]ppellants’ preliminary objections
to [a]ppellee’s Second Amended Complaint and
in finding that there is not a valid agreement in
the Partnership Agreement [] for the
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M. Gallagher & F. Mancuso Partnership (the
“Partnership”) signed between [a]ppellee and
[a]ppellant Frank Mancuso to arbitrate Count I
of [a]ppellee’s Second Amended Complaint and
in finding that the claims asserted in Count I of
[a]ppellee’s Second Amended Complaint are not
within the scope of the arbitration provision in
the Partnership Agreement, and in failing to
transfer Count I of [a]ppellee’s Second
Amended Complaint to arbitration?
II. Did the trial court err in overruling and
dismissing [a]ppellants’ preliminary objections
to [a]ppellee’s Second Amended Complaint and
in finding that there is not a valid agreement in
the Partnership Agreement for the Partnership
signed between [a]ppellee and [a]ppellant
Frank Mancuso to arbitrate Count II of
[a]ppellee’s Second Amended Complaint and in
finding that the claims asserted in Count II of
[a]ppellee’s Second Amended Complaint are not
within the scope of the arbitration provision in
the Partnership Agreement, and in failing to
transfer Count II of [a]ppellee’s Second
Amended Complaint to arbitration?
III. Did the trial court err in overruling and
dismissing [a]ppellants’ preliminary objections
to [a]ppellee’s Second Amended Complaint and
in finding that there is not a valid agreement in
the Partnership Agreement for the Partnership
signed between [a]ppellee and [a]ppellant
Frank Mancuso to arbitrate Count V of
[a]ppellee’s Second Amended Complaint and in
finding that the claims asserted in Count V of
[a]ppellee’s Second Amended Complaint are not
within the scope of the arbitration provision in
the Partnership Agreement, and in failing to
transfer Count V of [a]ppellee’s Second
Amended Complaint to arbitration?
Appellants’ brief at 5.
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At the outset, we note that “[w]hile an order denying preliminary
objections is generally not appealable, there exists . . . a narrow exception to
this oft-stated rule for cases in which the appeal is taken from an order
denying a petition to compel arbitration.” Midomo Co., Inc. v. Presbyterian
Hous. Dev. Co., 739 A.2d 180, 184 (Pa.Super. 1999) (citation omitted). An
order denying preliminary objections that alleges alternative dispute
resolution and requests that the trial court enter an order to arbitrate the
dispute is an interlocutory order appealable as of right pursuant to
Pa.R.A.P. 311(a)(8), Pa.R.Civ.P. 1028(a)(6) and Note, and 42 Pa.C.S.A.
§§ 7342(a), 7320(a)(1), and 7304(a). Midomo Co., 739 A.2d at 184.
Therefore, the trial court’s October 12, 2017 order overruling and dismissing
appellants’ preliminary objections alleging that Counts I, II, and V of appellee’s
second amended complaint fall within the scope of the arbitration provision
contained in the Partnership Agreement and requesting an order to arbitrate
those counts is an interlocutory order appealable as of right.
“Our standard of review of an order of the trial court overruling [or
granting] preliminary objections is to determine whether the trial court
committed an error of law. When considering the appropriateness of a ruling
on preliminary objections, the appellate court must apply the same standard
as the trial court.” DeLage Landen Fin. Servs., Inc. v. Urban P’ship, LLC,
903 A.2d 586, 589 (Pa.Super. 2006) (citation omitted; brackets in original).
“When preliminary objections, if sustained, would result in the dismissal of an
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action, such objections should be sustained only in cases which are clear and
free from doubt.” Id. (citations omitted).
To determine whether a trial court should have compelled arbitration,
this court employs a two-part test. Elwyn v. DeLuca, 48 A.3d 457, 461
(Pa.Super. 2012). We must first determine whether a valid agreement to
arbitrate exists. We must then determine whether the dispute is within the
scope of the agreement to arbitrate. Whether a claim falls “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.” Id. (citation
omitted). We determine the scope of arbitration by the intention of the parties
as ascertained pursuant to the rules governing contracts generally. The
determination involves questions of law and our review is plenary. Id.
[Moreover, a]rbitration is a matter of contract, and
parties to a contract cannot be compelled to arbitrate
a given issue absent an agreement between them to
arbitrate that issue. Even though it is now the policy
of the law to favor settlement of disputes by
arbitration and to promote the swift and orderly
disposition of claims, arbitration agreements are to be
strictly construed and such agreements should not be
extended by implication.
Id., quoting Cumberland-Perry Area Vocational-Technical Sch. v. Bogar
& Bink, 396 A.2d 433, 434-435 (Pa.Super. 1978).
Generally, only parties to the arbitration agreement are subject to
arbitration. Elwyn, 48 A.3d at 461. A non-party, however, may fall within
the scope of an arbitration agreement if that is the parties’ intent. Id.
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Here, the parties to do not dispute that a valid arbitration agreement
exists between appellee and Frank Mancuso. The dispute is whether the
claims set forth in appellee’s second amended complaint alleging (1) breach
of contract (Partnership Agreement) against Frank Mancuso at Count I;
(2) unjust enrichment against appellants at Count II; and (3) breach of
fiduciary duty against appellants at Count V fall within the scope of the
arbitration provision contained in the Partnership Agreement.
The record reflects that appellee and Frank Mancuso (“Partners”)
entered into the Partnership Agreement on June 15, 1997. (Appellee’s second
amended complaint, 7/7/17 at Exhibit A, p. 1, ¶ 1.) The arbitration clause
contained in that Partnership Agreement provides:
If any controversy or claim arising out of this
Partnership Agreement cannot be settled by the
Partners, the controversy or claim shall be settled by
arbitration in accordance with the rules of the
American Arbitration Association then in effect, and
judgment on the award may be entered in any court
having jurisdiction.
Id.
Appellee’s second amended complaint alleges, among other things, that
appellants restructured various companies that they owned; that appellants
created CK Management to centralize administrative functions of appellants’
companies; that appellants placed the Partnership formed between appellee
and Frank Mancuso under the CK Management umbrella; and that appellants
charged management fees to the Partnership without appellee’s knowledge or
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consent. (Appellee’s second amended complaint, 7/11/17 at 4-13, ¶¶ 17-81.)
Count I of appellee’s second amended complaint alleges that Frank Mancuso
breached the Partnership Agreement by failing to provide appellee with the
requisite notice of his withdrawal from the Partnership and his intention to
transfer his interest to Robin Mancuso-DeLuna and Jaime Mancuso. (Id. at
13-14, ¶¶ 82-92.) Count II alleges unjust enrichment against appellants in
that they charged management fees to the Partnership that caused the
Partnership and appellee to sustain financial damage. (Id. at 15-17, ¶¶ 93-
107.) Count V alleges that appellants breached the fiduciary duty that they
owed appellee by placing the Partnership under the CK Management umbrella
and charging it management fees without appellee’s knowledge or consent
which caused appellee to sustain financial damage. (Id. at 19-20, ¶¶ 122-
128.)
A plain reading of the arbitration provision set forth in the Partnership
Agreement demonstrates that it restricts claims subject to arbitration to those
controversies or claims that “arise out of [the] Partnership Agreement.” In
determining that appellee’s claims set forth in Counts I, II, and V of her second
amended complaint fall outside of the scope of that arbitration provision, the
trial court found that the second amended complaint “makes clear that the
underlying controversy in this action arises not from a dispute limited to
[a]ppellee and Frank [Mancuso] concerning the Partnership, but rather from
the conduct of Frank [Mancuso] and third parties not subject to the original
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Partnership Agreement.” (Trial court opinion, 12/22/17 at 8.) Indeed, the
claims set forth in Counts I, II, and V arise out of appellants’ alleged conduct
in which they restructured their businesses, created CK Management, placed
the Partnership under the umbrella of CK Management, and charged
management fees to the Partnership without appellee’s knowledge or consent.
It is that alleged conduct of all three appellants – and not a dispute concerning
the Partnership Agreement between appellee and Frank Mancuso – that gives
rise to appellee’s claims.
With respect to appellee’s breach of contract claim against
Frank Mancuso, the trial court “recognize[d] that Count I is a breach of
contract claim, which if it was the sole claim in this matter would be subject
to the arbitration provision.” (Trial court opinion, 12/22/17 at 7.) Although
appellants seize upon this language, neither that phrase nor Count I of the
second amended complaint can be read in a vacuum. A reading of the entire
second amended complaint reveals that the factual allegations giving rise to
all of appellee’s claims as set forth in paragraphs 1 through 81 and
incorporated into all counts, allege, among other things, that appellants
restructured their businesses, that appellants created CK Management, that
appellants placed the Partnership under CK Management’s umbrella, and that
appellants charged management fees to the Partnership without appellee’s
knowledge or consent. In the breach of contract count, appellee further
alleges that Frank Mancuso secretly withdrew from the Partnership without
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providing appellee with the requisite notice and that he secretly transferred
all or some of his ownership interest to Robin Mancuso-DeLuna and
Jaime Mancuso which, “among other conduct, breached his duty of good faith
and fair dealing owed to [appellee.]” (Appellee’s second amended complaint,
7/7/17 at 13-14, ¶¶ 82-92.) In its opinion, the trial court properly concluded
that the claims set forth in appellee’s second amended complaint “are
inextricably linked to one another” because those claims arise from the alleged
conduct of appellants acting in concert with one another. Because of this
inextricable link, the trial court also properly concluded that “bifurcat[ion of]
these proceedings would frustrate the public policy goals” of “swift and
efficient judicial decision making.” (Trial court opinion, 12/22/17 at 8, citing
Sch. Dist. of Philadelphia v. Livingston-Rosenwinkel, P.C., 690 A.2d
1321 (Pa.Commw.Ct. 2013) (finding that claims arising out of the same set of
occurrences and transactions are not subject to arbitration where entities
involved in the underlying action were not parties to the arbitration
agreement).)
Therefore, the trial court did not commit an error of law when it
overruled and dismissed appellants’ preliminary objections to appellee’s
second amended complaint based on its finding that the claims set forth in
Counts I, II, and V fall outside of the scope of the arbitration provision because
the allegations clearly demonstrate that the “underlying controversy in this
action arises not from a dispute limited to [a]ppellee and Frank [Mancuso]
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concerning the Partnership, but rather from the conduct of Frank [Mancuso]
and third parties not subject to the original Partnership Agreement.” (Trial
court opinion, 12/22/17 at 8.)
Order affirmed.
Ott, J. joins this Memorandum.
Bowes, J. files a Concurring and Dissenting Memorandum.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/5/18
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