Von Sick, J. v. ANC Builders

J-S37019-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JASON B. VON SICK AND SAPNA P. : IN THE SUPERIOR COURT OF
VON SICK H/W : PENNSYLVANIA
:
:
v. :
:
:
ANC BUILDERS, INC. AND MAIN :
STREET DEVELOPMENT COMPANY : No. 391 EDA 2022
AND JUAN CARLOS CABRERA AND :
VALERI MUVDI AND CC PHILLY REAL :
ESTATE REALTY LLC D/B/A KELLER :
WILLIAMS REALTY D/B/A KELLER :
WILLIAMS PHILLY D/B/A KELLER :
WILLIAMS COMMERCIAL D/B/A THE :
MIKE MCCAN TEAM AND MIKE :
MCCANN D/B/A CC PHILLY REAL :
ESTATE REALTY LLC D/B/A KELLER :
WILLIAMS REALTY D/B/A KELLER :
WILLIAMS COMMERCIAL D/B/A THE :
MIKE MCCAN TEAM AND BEN :
HOOSON-JONES D/B/A CC PHILLY :
REAL ESTATE REALTY LLC D/B/A :
KELLER WILLIAMS REALTY D/B/A :
KELLER WILLIAMS COMMERCIAL :
D/B/A THE MIKE MCCAN TEAM AND :
NORTHWEST COMMERCIAL REALTY, :
INC.D/B/A ELFANT WISSAHICKON :
REALTORS F/D/B/A ELFANT :
WISSAHICKON AND KARRIE GAVIN :
D/B/A NORTHWEST COMMERCIAL :
REALTY, INC.D/B/A ELFANT :
WISSAHICKON REALTORS F/D/B/A :
ELFANT WISSAHICKON AND BPG :
INSPECTION, LLC D/B/A BPG :
INSPECTIONS :
:
:
APPEAL OF: BPG INSPECTION, LLC :
D/B/A BPG INSPECTIONS :
Appeal from the Order Entered January 19, 2022
J-S37019-22
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): 210501570
BEFORE: BOWES, J., LAZARUS, J., and OLSON, J.
MEMORANDUM BY LAZARUS, J.: FILED MAY 31, 2023
BPG Inspection, LLC, d/b/a BPG Inspections (“BPG”), appeals from the
order, entered in the Court of Common Pleas of Philadelphia County,
overruling its preliminary objection in the nature of an application to compel
arbitration.1 The trial court, the Honorable Jacqueline Allen, has requested
that the case be remanded for the entry of an order referring the matter to
arbitration. Upon careful review, we agree and remand accordingly.
Judge Allen set forth the underlying facts and procedural history of this
matter as follows:
Sometime between September 2020 and October 2020, [BPG]
orally agreed to conduct a home inspection for [plaintiff Jason B.
Von Sick] for a sum certain. The parties failed to produce any
evidence of any discussion and/or agreement for any other
additional terms.
Thereafter, [BPG] presented [Von Sick] with a contract
[(“Agreement”)], reducing the oral agreement to writing. The
[A]greement included additional provisions, including but not
limited to, a limitation of liability [provision] and an arbitration
provision.
The [A]greement specified that “This Agreement and the
inspection report are for the sole benefit of the named Client. This
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1 Pennsylvania Rule of Appellate Procedure 311(a)(8) permits an interlocutory
appeal as of right where the order is made appealable by statute. See
Pa.R.A.P. 311(a)(8). Section 7320(a)(1) of the Uniform Arbitration Act
provides that an appeal may be taken from an order denying an application
to compel arbitration. See 42 Pa.C.S.A. § 7320(a)(1).
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report is not intended to benefit any third party.” The
[A]greement further provided that, “This is NOT a contract of
adhesion. If you desire a change to the language of this document
you must contact our Client Relations Department no less than 24
hours before the start of your inspection to allow time for a review
of your request.” The contact information for the Client Relations
Department was provided in the Agreement.
Despite the above language, [Von Sick] declared that, “It was my
understanding that BPG would not provide the services of an
inspection unless and until I acquiesced to the Agreement and all
of its terms.” [Von Sick] signed the [Agreement] on October 9,
2020[.]
Brian Eisenman[, BPG’s corporate designee,] testified [at
deposition] that he possessed both knowledge and familiarity with
the [A]greement and the provisions contained therein. [] Mr.
Eisenman . . . testified that there were no changes to the terms
of the written agreement. No evidence was presented as to
whether a request to alter the [A]greement was made and/or
denied.
...
On October 11, 2021, [BPG] filed preliminary objections to the
plaintiffs’ third amended complaint. [BPG] sought to enforce [the
arbitration clause of the] Agreement. Additionally, [Von Sick]
ask[ed] the court to find the [A]greement void as one of adhesion.
On November 8, 2021, the Honorable Daniel Anders issued a rule
to show cause why the “preliminary objections should not be
granted as to the issue of the agreement for alternative dispute
resolution.” The [o]rder further provided that the court “will
accept affidavits, deposition testimony, and documentary
evidence relevant to the issue of the agreement for alternative
dispute resolution.” In response to the [o]rder, the [p]laintiffs
produced an affidavit from [Von Sick] dated November 29, 2021.
[] Eisenman[] was presented for deposition on December 12,
2021.
On January 5, 2022, the preliminary objections were reassigned
to this court for disposition. On January 14, 2022, [plaintiffs’]
preliminary objection[ as to the arbitration clause was] overruled.
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Trial Court Opinion, 6/28/22, at 1-3 (reordered for clarity; citations to record
omitted).
On January 24, 2022, BPG filed a timely notice of appeal. The trial court
did not order BPG to file a Rule 1925(b) concise statement of errors
complained of on appeal. On June 28, 2022, the trial court issued an opinion
in which it requested that we remand the case for the entry of an amended
order sustaining BPG’s preliminary objection in the nature of an application to
compel arbitration. BPG raises the following claim for our review:
Whether the trial court’s order overruling [BPG’s] preliminary
objection for arbitration should be reversed and [Von Sick’s]
breach of contract claim against BPG removed to arbitration
pursuant to the parties’ valid agreement?
Brief of Appellant, at 3 (unnecessary capitalization omitted).
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 clear. Our review 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.
In doing so, we employ a two-part test to determine whether the
trial court should have compelled arbitration. First, we examine
whether a valid agreement to arbitrate exists. Second, we must
determine whether the dispute is within the scope of the
agreement.
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.
Fineman, Krekstein & Harris, P.C. v. Perr, 278 A.3d 385, 389 (Pa. Super.
2022) (citation omitted).
Further, we are guided by the following principles:
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(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.
Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1273 (Pa. Super. 2004).
Here, the Agreement between Von Sick and BPG contained an
arbitration clause, providing in relevant part:
DISPUTE RESOLUTION/MANDATORY ARBITRATION
This provision constitutes an agreement to arbitrate disputes on
an individual basis. Any party may bring an individual action in
small claims court instead of pursuing arbitration.
Any claim, dispute[,] or controversy, regarding any contract, tort
statute, or otherwise (“Claim”), arising out of or relating to this
Agreement, any service provided pursuant to this [A]greement,
its issuance, a breach of any agreement provision, any
controversy or claim arising out of the transaction giving rise to
this Agreement, or the relationships among the parties hereto[,]
shall be resolved by one arbitrator through binding arbitration
administered by the American Arbitration Association (“AAA”),
under the AAA Commercial or Consumer, as applicable, Rules in
effect at the time the Claim is filed (“AAA Rules”).
Home Inspection Agreement, 10/9/20, at 2.
The parties do not dispute that Von Sick’s claim is within the scope of
the agreement to arbitrate. Rather, Von Sick posits two arguments against
arbitrability in this matter. First, Von Sick asserts that the arbitration
provision is not applicable because there are multiple defendants not subject
to the agreement whose crossclaims against BPG will be tried in court. Von
Sick asserts that arbitrating BPG’s claims, while litigating the other
defendants’ crossclaims against BPG in court, will result in “piecemeal,
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repetitive litigation in violation of Pennsylvania law.” Brief of Appellee, at 17.
In light of our Supreme Court’s decision in Taylor v. Extendicare Health
Facilities, Inc., 147 A.3d 490 (Pa. 2016), this argument is meritless.
“Pennsylvania has a well-established public policy that favors
arbitration, and this policy aligns with the federal approach expressed in the
Federal Arbitration Act, 9 U.S.C. §§ 1–16 (FAA).” Pisano v. Extendicare
Homes, Inc., 77 A.3d 651, 660 (Pa. Super. 2013). This policy applies to all
arbitration agreements. MacPherson v. Magee Mem’l Hosp. for
Convalescence, 128 A.3d 1209, 1219 (Pa. Super. 2015) (en banc).
Section 2 of the FAA binds state courts to compel arbitration of
claims subject to an arbitration agreement. 9 U.S.C. § 2(providing that arbitration agreements “shall be valid, irrevocable,
and enforceable”). This directive is mandatory, requiring parties
to proceed to arbitration on issues subject to a valid arbitration
agreement, even if a state law would otherwise exclude it from
arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc.,
514 U.S. 52, 58[] (1995).
The only exception to a state’s obligation to enforce an arbitration
agreement is provided by the [FAA’s] savings clause, which
permits the application of generally applicable state contract law
defenses such as fraud, duress, or unconscionability, to determine
whether a valid contract exists.
Taylor, 147 A.3d at 509.
Moreover,
[T]he prospect of inefficient, piecemeal litigation proceeding in
separate forums is no impediment to the arbitration of arbitrable
claims. Indeed, where a plaintiff has multiple disputes with
separate defendants arising from the same incident, and only one
of those claims is subject to an arbitration agreement, the [United
States Supreme] Court requires, as a matter of law, adjudication
in separate forums.
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Id. at 507.
Von Sick cites several pre-Taylor cases to support his assertion that the
existence of multiple parties with crossclaims not subject to the arbitration
agreement militates in favor of rejecting BPG’s efforts to compel arbitration.
However, as our Supreme Court made abundantly clear in Taylor, the
prospect of piecemeal, possibly duplicative litigation is no longer an
impediment to arbitrability where a valid agreement exists.
Von Sick also argues that the Agreement is a contract of adhesion with
unconscionable terms unreasonably favoring BPG. See Brief of Appellee, at
14-15. Von Sick asserts that, as a consumer in a weaker position than BPG,
he “was obligated to sign the contract with its terms, despite having little or
no choice about the terms of the contract with BPG.” Id. at 31. Von Sick
contends that, had he not signed the Agreement, “BPG would not [have]
inspect[ed] the home that he was under contract to purchase.” Id. at 33.
Accordingly, the contract is one of adhesion, requiring him “only . . . to show
that the terms of the contract ‘unreasonably favor[]’ BPG.” Id. He argues
that two specific provisions of the contract meet that standard: (1) a clause
requiring him to notify BPG of any defect for which it may be liable within 14
days of discovery; and (2) a clause limiting BPG’s liability to the lesser of
actual damages or the inspection fee.
BPG asserts that “it is highly unpersuasive for [Von Sick] to argue for
the invalidity of the contract, patently containing the agreement to arbitrate,
while seeking damages for breach of that very alleged unenforceable
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contract.” Brief of Appellant, at 11. BPG argues that the contract is not one
of adhesion and, in fact, the document included language providing Von Sick
the opportunity to request changes in the language of the contract by
contacting BPG’s customer relations department, which Von Sick did not do.
See Home Inspection Agreement, 10/9/20, at 4 (stating, “This is NOT a
contract of adhesion. If you desire a change to the language of this document
you must contact our Client Relations Department no less than 24 hours
before the start of your inspection to allow time for a review of your request.”).
BPG further asserts that the arbitration provision is not unconscionable, as it
applies equally to both parties. BPG argues that there is no record basis for
Von Sick’s claim that BPG “would not [have] inspect[ed] the property unless
and until he acquiesced to the terms of the inspection contract” and, in fact,
the inspection occurred the day before Von Sick signed the Agreement. Id.
at 20-21. Finally, BPG argues that, even if the two clauses Von Sick cites are
unconscionable, such a finding “would not legally operate to invalidate the
entire agreement, or the arbitration clause in particular, under the caselaw,”
id. at 22, and, moreover, the Agreement contains a severability clause.
As a matter of substantive federal arbitration law, an arbitration
provision is severable from the remainder of the contract. Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006). Unless the challenge
is to the arbitration clause itself, the issue of the contract’s validity is
considered by the arbitrator in the first instance. Id. at 445-46. Thus, “[t]he
courts may consider, in the first instance, only those challenges that are
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directed solely to the arbitration component itself.” Salley v. Option One
Mortgage Corp., 925 A.2d 115, 120 (Pa. 2007).
The doctrine of unconscionability has been applied in Pennsylvania as
both a statutory and a common-law defense to the enforcement of an
allegedly unfair contract or contractual provision. Id. at 119, citing 13
Pa.C.S.A. § 2302 (establishing the doctrine’s applicability pertaining to
contracts involving goods and services within the purview of the Pennsylvania
Commercial Code). A contract or term is unconscionable, and therefore
avoidable, where there was a lack of meaningful choice in the acceptance of
the challenged provision and the provision unreasonably favors the party
asserting it. Id. The burden of proof generally concerning both elements has
been allocated to the party challenging the agreement, and the ultimate
determination of unconscionability is for the courts. Id. at 119-20, citing
Bishop v. Washington, 480 A.2d 1088, 1094 (Pa. Super. 1984)
Here, Von Sick submitted no evidence in the trial court establishing that
the arbitration clause, itself, unreasonably favored BPG. Rather, he based his
unconscionability argument on other, unrelated clauses of the contract. See
Plaintiffs’ Supplemental Memorandum of Law in Support of Response to
Preliminary Objections, 1/3/22, at 12-14 (arguing clauses imposing limitation
on damages and 14-day time limit to notify BPG of defect unreasonably favor
BPG). However, as noted above, where the arbitration provision itself is valid,
any determination as to the validity of the remainder of the contract is for the
arbitrator to make. Buckeye Check Cashing, Inc., supra. Because Von
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Sick did not sustain his burden to prove the unconscionability of the arbitration
clause, Salley, supra, the trial court erred in overruling BPG’s preliminary
objection in the form of an application to compel arbitration.
Order vacated. Case remanded for entry of order consistent with the
dictates of this memorandum. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/31/2023
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