HomeMy WebLinkAbout2006-4691 CivilDAVID NEUMAN,
Plaintiff
u
AFC WASHCO-
CARLISLE CROSSING,
LP, AFC CARLISLE,
LLC, and AFC CARLISLE:
LIMITED PARTNER, LP,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION—LAW
NO. 06-4691 CIVIL TERM
IN RE: DEFENDANTS' PRELIMINARY OBJECTIONS
TO PLAINTIFF'S FOURTH AMENDED COMPLAINT
BEFORE OLER and EBERT, JJ.
OPINION and ORDER OF COURT
OLER, J., December 22, 2008.
In this two-year old civil action which has not progressed beyond the
complaint stage, an individual plaintiff has sued several business entities in
connection with his non -receipt of an ownership interest in one of the defendants.
For disposition at this time are preliminary objections filed by Defendants to
Plaintiffs fourth amended complaint.
Defendants' preliminary objections were argued on October 22, 2008. For
the reasons stated in this opinion, the preliminary objections will be sustained in
part and denied in part.
STATEMENT OF FACTS
For present purposes, the allegations of Plaintiffs fourth amended
complaint may be summarized as follows: Plaintiff is an adult individual residing
in New York State.' Defendant Washco-Carlisle Crossing, L.P., is a limited
partnership2 that owns a shopping center project in Cumberland County,3 and the
' Plaintiff's Fourth Amended Complaint, para. 1.
2 Plaintiff's Fourth Amended Complaint, para. 2.
' Plaintiff's Fourth Amended Complaint, para. 38-39.
two other defendants—AFC Carlisle, LLC, and AFC Carlisle Limited Partner, LP,
are general and limited partners thereof respectively.4
To effect the ownership of the shopping center project by Defendant AFC
Washco-Carlisle Crossing, LP, Plaintiff gave up various rights, and expended
certain efforts, based upon an understanding that he would have a 12.5%
ownership interest in said Defendant.5
The partnership agreement, entered into orally on January 24, 2005,
provided for no capital calls, interests would be non-dilutable, and, on top
of his partnership share, the Plaintiff would receive a Two Hundred Fifty
Thousand Dollar ($250,000.000) annual developer's fee and health
insurance to bring the project through construction, opening, and full
tenant occupancy ....6
Plaintiff's understanding in this regard was confirmed by the following e-
mail sent to him by a representative of the AFC defendants:
This will confirm that you will hold a 12.5% interest in the partnership
owning Carlisle Crossing in accordance with the memorandum of
understanding dated May 5th and with the full terms which will be set
forth in a partnership agreement being prepared.
As you know we have asked Fred Masters of Buchanan Ingersoll to
prepare the partnership agreement, which I hope we will receive a draft
just after Labor Day.'
The memorandum of understanding referred to in the e-mail' spoke of the
"establish[ment of] a business relationship for the purpose of acquiring,
developing and redeveloping commercial real estate properties throughout North
America."9 Among other things, it indicated that "[o]n a going -forward basis (and
not including the Carlisle Crossing project) ... [Plaintiff] will ... have no less
than a twelve and one-half percent (12.5%) equity interest in the next retail real
estate project[] we put together ... , and we will mutually agree on the amount of
4 Plaintiff's Fourth Amended Complaint, paras. 3-4.
s Plaintiff's Fourth Amended Complaint, paras. 30, 33-35, 37.
6 Plaintiff's Fourth Amended Complaint, para. 25.
Plaintiff's Fourth Amended Complaint, Ex. `B."
'See Plaintiff's Fourth Amended Complaint, paras. 46-52.
9 Plaintiff's Fourth Amended Complaint, Ex. "A."
2
our equity percentage for the third and subsequent projects."10 It was the
understanding of Plaintiff that the absence of a reference to his partnership interest
with respect to the Carlisle Crossing project in the memorandum of understanding
was attributable to the fact that this arrangement was already part of the parties'
working hypothesis."
Ultimately, Plaintiff did not receive the said interest in Defendant AFC
Washco-Carlisle Crossing, LP, 12 and Defendants, having received the benefits of
Plaintiff's labors, 13 ceased to provide health insurance for Plaintiff and his
family, 14 failed to pay the full developer's fee promised Plaintiff," failed to
provide an accounting as to his share of partnership -related income and
expenses, 16 and continued to operate, and assert exclusive ownership rights to, the
shopping center. 17
Plaintiff's fourth amended complaint contains six counts. Count 1, against
all three defendants, for "breach of contract," seeks redress for the failure to
recognize his interest in the partnership; Count 11, against all three defendants, for
"breach of contract," seeks damages arising out of the failure to pay his
developer's fee in full and failure to provide the aforesaid health insurance; Count
111, against all three defendants, for "unjust enrichment," seeks reimbursement for
the uncompensated benefits conferred upon them by Plaintiff under the aforesaid
circumstances; Count IV, against Defendants AFC Carlisle, LLC, and AFC
Carlisle Limited Partner, LP, for "quantum meruit," also seeks reimbursement for
10 Plaintiff's Fourth Amended Complaint, Ex. "A."
" Plaintiff's Fourth Amended Complaint, para. 49.
12 Plaintiff's Fourth Amended Complaint, para. 70.
13 Plaintiff's Fourth Amended Complaint, para. 57.
14 Plaintiff's Fourth Amended Complaint, para. 60.
15 Plaintiff's Fourth Amended Complaint, para. 55.
16 Plaintiff's Fourth Amended Complaint, paras. 63-65.
17 Plaintiff's Fourth Amended Complaint, para. 62.
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the aforesaid uncompensated benefits; Count V, in "equity" and against
Defendants AFC Washco-Carlisle Crossing, LP, and AFC Carlisle, LLC, seeks an
accounting; and Count VI, against Defendant AFC Washco-Carlisle Crossing LP,
seeks a dissolution of the partnership.
Defendants' preliminary objections to Plaintiff's fourth amended complaint
are reflected in the following issues as expressed in Defendants' brief:
A. Should the court sustain the preliminary objection filed by
Defendant AFC Washco-Carlisle Crossing, LP to Counts I and II of
Plaintiff's fourth amended complaint based on legal insufficiency of
pleading?
B. Should the court sustain the preliminary objection filed by
Defendants AFC Carlisle, LLC and AFC Carlisle Limited Partner LP to
Counts I and 11 of Plaintiff's fourth amended complaint based on legal
insufficiency of pleading?
C. Should the court sustain Defendants' preliminary objection to
counts III and IV of Plaintiff's fourth amended complaint where there is a
full and complete adequate non -statutory remedy at law?
D. Should the court sustain Defendants' preliminary objection filed
by Defendant AFC Carlisle, LLC to count V of Plaintiff's fourth amended
complaint based on legal insufficiency of pleading?
E. Should the court sustain the preliminary objection filed by
Defendant, AFC Washco-Carlisle Crossing, LP to count VI of Plaintiff's
fourth amended complaint based on legal insufficiency of pleading?18
DISCUSSION
With respect to Defendants' preliminary objections to Counts I and 11 of
Plaintiff's fourth amended complaint as they relate to Defendant AFC Washco-
Carlisle Crossing, LP, Defendants argue that these breach of contract counts fail to
state a claim upon which relief can be granted,19 because the terms of the written
memorandum of understanding attached to the complaint conflict with a purported
18 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 5.
19 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 6.
11
oral agreement that Plaintiff would have a 12.5% interest in the partnership. 20 In
this regard, Defendants note:
The document is clear. By its very terms, [the memorandum of
understanding] does not apply to "the Carlisle Crossing Project" as alleged
[by] Plaintiff and expressly excludes the Carlisle Crossing Project.
Plaintiff's reliance on this document as "memorializing the original oral
agreement," as alleged, is completely futile and unavailing.
Pennsylvania law is clear that when there is a conflict between the
averments of a pleading and the exhibits which are attached to the
pleading, the latter control. See Brownley v. Gettysburg College, 68 Pa.
D&C2d. 288 (C.C.C. Adams 1973). Moreover, and assuming arguendo,
that Plaintiff's Exhibit "A" is evidence of a contractual agreement (which
Defendants do not concede), the law is equally clear that where a contract
contains the entire agreement, its terms will be binding as a matter of law.
HCB Contractors v. Liberty Place Hotel Associates, 652 A.2d 1278 (Pa.
1995).'
However, in reviewing a preliminary objection in the nature of a demurrer,
which challenges the legal sufficiency of a complaint, a court "must accept all
material facts set forth in the complaint[,] as well as all the inferences reasonably
deducible therefrom as true." Powell v. Drumheller, 539 Pa. 484, 489, 653 A.2d
619, 621 (1995). A preliminary objection in the nature of a demurrer should be
sustained only when, "on the facts averred, the law says with certainty no recovery
is possible." Id.
A fair reading of Plaintiff s fourth amended complaint as it relates to breach
of contract claims against Defendant AFC Washco-Carlisle Crossing, LP,
indicates that a factual issue exists as to whether the exclusionary language in the
memorandum of understanding as to Plaintiff s partnership interest with respect to
the Carlisle Crossing project represented a negation of any such interest or a
recognition that his interest in that regard had previously been negotiated. If true,
the subsequent explicit acknowledgment of that interest in an e-mail, as pled by
Plaintiff, would tend to lend to support to Plaintiff s interpretation.
20 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 6-7.
21 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 7.
E
Consequently, the court is not in a position on the basis of Plaintiff's
pleading to conclude that no recovery on a breach of contract claim by Plaintiff
against Defendant AFC Washco-Carlisle Crossing, LP, is possible. For this reason,
Defendants' preliminary objections in the nature of a demurrer to Counts I and 11
of Plaintiff's fourth amended complaint as they relate to Defendant AFC Washco-
Carlisle Crossing, LP, will be denied.
With respect to Defendants' preliminary objections to Counts I and 11 of
Plaintiff's fourth amended complaint as they relate to Defendants AFC Carlisle,
LLC, and AFC Carlisle Limited Partner, LP, Defendants argue that these breach of
contract counts fail to state a claim upon which relief can be granted ,22 because
"[i]n order for Plaintiff to be able to recover on his breach of contract claim[s]
against these Defendants, Plaintiff must be able to demonstrate that there was in
fact an agreement between Plaintiff and AFC Carlisle, LLC and AFC Carlisle
Limited Partner, LP, ...."23 In this regard, Defendants state as follows:
It is a fundamental principle of law that a party asserting a breach of
contract claim must establish that privity existed between the contracting
parties. Phillips v. Cricket Lighters, 841 A.2d 1000, 1006 (Pa. 2003).
Privity of contract does not exist when there has been no direct transaction
between the plaintiff and the defendant. Global Payments Direct v. EVS
Holdin _g Co., No. 1373, 2005 WL 2100102, at (Pa. Com. P1. 2005).24Co., No. 1373 2005 WL 2100102 at (Pa. Com. Pl. 2005).24
However, it is apparent from Plaintiff's pleading that Defendants AFC
Carlisle, LLC, and AFC Carlisle Limited Partner, LP, are being sued in their
capacities as partners of Defendant AFC Washco-Carlisle Crossing, LP, on the
basis of the liability of the partnership for a contractual breach. Under
Pennsylvania Rule of Civil Procedure 2128(a) (actions against partnerships and
liquidators), "[a]n action against a partnership may be prosecuted against one or
zz Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 8-9.
23 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 8.
24 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 8.
0
more partners ... trading as the partnership ... or against the partnership in its
firm name."
Furthermore, certain parties, describable as indispensable or necessary,
must or may be joined in an action:
A party is indispensable when his rights are so connected with the
claims of the litigants that no order can be made without impairing such
rights. Necessary parties are those whose presence, while not
indispensable, is essential if the Court is to completely resolve the
controversy before it and render complete relief.
York -Adams County Constables Ass'n v. Court of Common Pleas of York County,
81 Pa. Commw. 566, 569, 474 A.2d 79, 81 (1984). Where the effect of a favorable
outcome of a plaintiff's action against a partnership would be to decrease the
ownership interests of other alleged partners, it is obviously arguable that such
other alleged partners would be either indispensable or necessary parties.
Accordingly, although Plaintiff's fourth amended complaint could have been more
artfully worded with respect to the claims against Defendants AFC Carlisle, LLC,
and AFC Carlisle Limited Partner, LP '25 a dismissal of the claims for breach of
contract against these defendants for that reason alone would not be proper .26
Based on the foregoing, Defendants' preliminary objections in the nature of
a demurrer to Counts I and 11 of Plaintiff's fourth amended complaint as they
relate to Defendants AFC Carlisle, LLC, and AFC Carlisle Limited Partner, LP,
will be denied.
With respect to Defendants' preliminary objections to Counts III and IV of
Plaintiff's fourth amended complaint, based upon an adequate remedy at law,
Defendants argue that counts for unjust enrichment and quantum meruit are
equitable in nature, that Plaintiff has an adequate remedy at law based upon his
breach of contract claims, and that these quasi -contract counts should be
25 See Pa. R.C.P. 2128(a), 2127(a).
26 Pa. R.C.P. 2127(c).
7
"certif[ied] to the law side of the court. ,27
For several reasons, Defendants'
position can not be sustained.
First, the premise for Defendants' position—that a claim founded upon a
contract implied -in-law is necessarily in equity—is not correct. See Meehan v.
Cheltenham Township, 410 Pa. 446, 189 A.2d 593 (1963) (lower court's
application of equity jurisdiction to unjust enrichment claim held erroneous) cf.
Misisco v. La Maita, 150 Conn. 680, 684, 192 A.2d 891, 893 (1963) ("Although
the right of recovery [in quasi -contract] is based on equitable principles, it is
nevertheless an action at law, the purpose of which is to prevent unjust
enrichment..."). Plaintiff's quasi -contract claims in the present case do not
purport to be in equity. Second, "[t]he Pennsylvania Rules of Civil Procedure
have ... virtually made the doctrine of election of remedies procedurally
irrelevant ...." Larry Pitt & Associates v. Long, 716 A.2d 695, 703 (Pa. Commw.
1998) (holding that claimant "not restricted to an election of either a remedy for
breach of contract or a remedy by way of quantum meruit"); see Pa. R.C.P.
1001(b)(1) (generally abolishing procedural distinctions between actions in
assumpsit, trespass and equity).
Finally, under Pennsylvania Rule of Civil Procedure 1020(c), "[c]auses of
action ... may be pleaded in the alternative." In this context, the Honorable
Edward E. Guido of this court, in a moment of lucidity, has stated as follows:
[In their preliminary objection,] Defendants' only argument is that
quantum meruit relief is not available where the parties' relationship is
founded on an express agreement. They have cited numerous cases which
stand for this proposition. However, not one of those cases involves an
objection to the pleadings. The reason is clear. Pennsylvania Rule of Civil
Procedure 1020(c) unequivocally provides that causes of action may be
pleaded in the alternative. It has long been the law of this Commonwealth
that "... plaintiffs should not be forced to elect a particular theory in
pursuing a claim" at the pleadings stage. Schreiber v. Republic Intermodal
Corp., 473 Pa. 614, 375 A.2d 1285 (1977). There is not one scintilla of
doubt that Defendants' preliminary objection should be denied.
27 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 10-11.
'3
Humbert v. Gates, 47 Cumberland L.J. 186, 187 (1998), aff'd, 760 A.2d 437 (Pa.
Super. 2000).
For these reasons, Defendants' preliminary objections to counts III and IV
of Plaintiff's fourth amended complaint will be denied.
With respect to Defendants' preliminary objection to Count V of Plaintiff's
fourth amended complaint as it relates to Defendant AFC Carlisle, LLC, seeking
an accounting, Defendants argue that the Limited Liability Company Law of
199428 does not contemplate a right to an accounting on behalf of a plaintiff who is
not a member of the company.29 In this regard, Defendants state the following:
In Count V of his Fourth Amended Complaint, Plaintiff requests an
accounting for the following entities: AFC Was[hc]o-Carlisle Crossing, LP
and AFC Carlisle, LLC. Plaintiff however, is not a member of AFC
Carlisle, LLC, nor has he alleged in his Fourth Amended Complaint that
he is a member of this entity.
As Plaintiff is not a member in AFC Carlisle, LLC Plaintiff does not
have standing to request an accounting against this entity under the
Limited Liability [Company] Law of 1994.. "30
Defendants' response to this position in its entirety is as follows:
The Plaintiff pled causes of action for an accounting and dissolution,
which are remedies available to him in the event he proves he is the
rightful holder of a partnership interest. Because, as the Plaintiff
respectfully argues, he has stated a legally sufficient claim for breach of an
agreement to issue to him a partnership interest in Defendant AFC
Washco-Carlisle Crossing, L.P., the Plaintiff seeks an accounting in order
to be able to determine the value of the partnership interest.
In the alternative, the Plaintiff seeks dissolution and winding up of the
partnership, which is the Plaintiff's right as a partner. This is the right of a
partner under 15 Pa.C.S.A. § 8572, which provides: "On application by or
for a partner, the court may order dissolution of a limited partnership
whenever it is not reasonably practicable to carry on the business in
conformity with the partnership agreement." The Plaintiff's allegations,
which are presumed to be true, would establish that the general partner has
no regard for its duties to the Plaintiff, which makes it not reasonably
28 Act of December 7, 1994, P.L. 703, §4, as amended, 15 Pa. C.S. §§8901 et seq.
29 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 11.
so Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 11.
0
practicable to carry on the business in conformity with the partnership
agreement .31
Plaintiff's response to Defendants' position relates to the right of Plaintiff
as a purported partner in Defendant AFC Washco-Carlisle Crossing, LP, to an
accounting by that entity, and does not argue the issue of his right to an accounting
by a company in which he does not claim membership. Accordingly, Defendants'
preliminary objection in the nature of a demurrer to count V of Plaintiff's fourth
amended complaint as it relates to Defendant AFC Carlisle, LLC, will be
sustained .32
With respect to Defendants' preliminary objection to count VI of Plaintiff's
fourth amended complaint, seeking by its terms a dissolution of Defendant AFC
Washco-Carlisle Crossing, LP, Defendants suggest that the count also seeks a
dissolution of the other two defendants.33 Defendants argue, further, that
... Plaintiff however is not a member of the LLC referenced in his Fourth
Amended Complaint, nor is he a partner in either AFC-Washco Carlisle
Crossing, LP or AFC Carlisle Limited Partner, LP....
As Plaintiff is not a member of AFC Carlisle, LLC he does not have
standing to bring a claim for dissolution against this entity under the
Limited Liability Law of 1994, 15 Pa. C.S. 8971 et seq. Likewise, Plaintiff
does not have standing to bring a claim for dissolution against Defendants
AFC Washco-Carlisle Crossing, LP or AFC Carlisle Limited Partner, LP
under the Uniform Partnership Act, 15 Pa.C.S.§8301 et seq. Accordingly,
the Court should sustain Defendants' preliminary objection and dismiss
Count VI of Plaintiff's Fourth Amended Complaint. 34
Defendants' position in this regard is not tenable. First, the pleading in
question does not seek a dissolution of any defendant except Defendant AFC-
Washco Carlisle Crossing, LP. Second, to the extent that Plaintiff prevails on his
31 Plaintiff's Brief in Support of His Answer to Defendants' Preliminary Objections to Plaintiff's
First Amended Complaint, at 7.
32 See C.C.R.P. 1028(c)(6) (issues not briefed deemed waived). Nothing in this opinion, and
accompanying order, is intended to represent a ruling as to the extent of discovery which will be
permitted against any of the defendants.
33 Defendants' Brief in Support of Preliminary Objections to Plaintiff's Fourth Amended
Complaint, at 12.
34 Defendants' Brief in Support of His Answer to Defendants' Preliminary Objections to
Plaintiff's First Amended Complaint, at 12.
10
claim that he is entitled to a partnership share of that defendant, his right to
judicial dissolution in appropriate circumstances is provided for in the
Pennsylvania Revised Uniform Limited Partnership Act35 and, as noted
previously, the court must assume that he will do so. For these reasons,
Defendants' preliminary objection in the nature of a demurrer to count VI of
Plaintiff's fourth amended complaint will be denied.
Based upon the foregoing, the following order will be entered:
ORDER OF COURT
AND NOW, this 22'd day of December, 2008, upon consideration of
Defendants' preliminary objections to Plaintiff's fourth amended complaint, and
for the reasons stated in the accompanying opinion, it is ordered and directed as
follows:
1. Except as provided in paragraph 2, Defendants'
preliminary objections to Plaintiff's fourth amended complaint
are denied; and
2. Defendants' preliminary objection in the nature of a
demurrer to count V of Plaintiffs' fourth amended complaint as
it relates to Defendants AFC Carlisle, LLC, is sustained, and
the count is dismissed as to those defendants.
BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
James S. Tupitza, Esq.
212 West Gay Street
West Chester, PA 19380
Attorney for Plaintiff
" Act of December 21, 1988, P.L. 1444, §103, 15 Pa. C.S. §8572.
11
Paige Macdonald-Matthes, Esq.
2060 Linglestown Road
Suite 201
Harrisburg, PA 17110
Attorney for Defendants
12
13
DAVID NEUMAN,
Plaintiff
u
AFC WASHCO-
CARLISLE CROSSING,
LP, AFC CARLISLE,
LLC, and AFC CARLISLE:
LIMITED PARTNER, LP,
Defendants
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION—LAW
NO. 06-4691 CIVIL TERM
IN RE: DEFENDANTS' PRELIMINARY OBJECTIONS
TO PLAINTIFF'S FOURTH AMENDED COMPLAINT
BEFORE OLER and EBERT, JJ.
ORDER OF COURT
AND NOW, this 22nd day of December, 2008, upon consideration of
Defendants' preliminary objections to Plaintiff's fourth amended complaint, and
for the reasons stated in the accompanying opinion, it is ordered and directed as
follows:
1. Except as provided in paragraph 2, Defendants'
preliminary objections to Plaintiff's fourth amended complaint
are denied; and
2. Defendants' preliminary objection in the nature of a
demurrer to count V of Plaintiffs' fourth amended complaint as
it relates to Defendants AFC Carlisle, LLC, is sustained, and
the count is dismissed as to those defendants.
BY THE COURT,
J. Wesley Oler, Jr., J.
15
James S. Tupitza, Esq.
212 West Gay Street
West Chester, PA 19380
Attorney for Plaintiff
Paige Macdonald-Matthes, Esq.
2060 Linglestown Road
Suite 201
Harrisburg, PA 17110
Attorney for Defendants