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HomeMy WebLinkAbout93-2784 Civil SKG TOOLS, INC., : IN THE COURT 0F COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLV~iA V. : CIVIL ACTION - LAW BENJAMIN L. BIRD, JR., : Defendant : NO. 2784 CIVIL 1993 IN RE: DEFENDANT,S PRELIMINARY OBJECTIONS BEFORE HOFFER BAYLEY and OLER jj. QRDER OF COURT AND NOW, this Z~~4 day of February, 1994, upon careful consideration of Defendant,s preliminary objections, as well as the briefs and arguments presented on the matter, it is ORDERED as follows: (1) On the issue of whether venue properly lies in this Court, the parties are DIRECTED to submit further evidence on this issue in accordance with the accompanying Opinion; (2) All other relief requested by Defendant is DENIED. BY THE COURT, ,,,'~! ~We~ John McN. Cramer, Esq. 213 Market Street P.O. Box 11844 Harrisburg, PA 17108 Attorney for Plaintiff Francis M. Socha, Esq. 2201 North Second Street Harrisburg, PA 17110 Attorney for Defendant :re SKG TOOLS, INC., : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : CIVIL ACTION - LAW : BENJAMIN L. BIRD, JR., : Defendant : NO. 2784 CIVIL 1993 IN RE: DEFENDANT,S PRELIMINARY OBJECTIONS BEFORE HOFFER, BAYLEY and OLER, JJ. OPINION AND ORDER OF COURT Oler, J. The present case is currently before this Court for determination of the preliminary objections filed by Benjamin L. Bird, Jr. (Defendant), in response to a complaint filed by SKG Tools, Inc. (Plaintiff). More specifically, Plaintiff alleges liability on the part of Defendant, a corporate officer of Construction/Industrial Products Corporation (CIP), for conversion of goods and conversion of checks. Defendant has preliminarily objected to Plaintiff's Complaint, contending that (1) this Court lacks subject matter jurisdiction with respect to Plaintiff's action; that (2) venue does not properly lie in this Court; that (3) Plaintiff has failed to join an indispensable party; and that (4) Plaintiff,s action is stayed by the filing of a bankruptcy petition by CIP. For the reasons set forth in this Opinion, this Court is unable to make a determination as to the propriety of venue based upon the limited record before it. However, the remaining preliminary objections of Defendant are denied. ~tatement of facts. The facts, as set forth in Plaintiff's Complaint, may be summarized as follows: No. 2784 Civil 1993 Plaintiff is a South Carolina corporation~ which sells tools manufactured by Schurmann GMbH & Co., KG.2 Defendant is an individual who resides at 2465 The Haulover, John's Island, South Carolina,3 and is the "president, secretary, treasurer, and majority owner of [CIP], a Pennsylvania corporation ..., which at all relevant times had its principal place of business at 17 Brenneman Circle, Unit E, Mechanicsburg, Cumberland County, Pennsylvania."4 CIP was engaged in the business of providing warehouse and distribution services from its Mechanicsburg location,5 and it was in the course of this business that goods owned by Plaintiff were delivered to CIP and came under the control of Defendant.6 On August 20, 1992, Plaintiff requested that its goods, which were in the possession of CIP and under the control of Defendant, be delivered to it pursuant to its directions. However, Defendant "wrongfully and intentionally prevented the delivery" of these goods as directed by Plaintiff.7 Plaintiff,s Complaint, paragraph 1. Plaintiff,s Complaint, paragraph 5. Plaintiff's Complaint, paragraph 2. Plaintiff's Complaint, paragraph 3. Plaintiff's Complaint, paragraph 6. Plaintiff's Complaint, paragraph 7. Plaintiff's Complaint, paragraph 9. 2 No. 2784 Civil 1993 In Count I of its Complaint, Plaintiff avers that such conduct on the part of Defendant constituted the tort of conversion.8 As such, Plaintiff is demanding judgment in the amount of $121,648, the value of the goods, plus interest, delay damages, punitive damages, and costs. In Count II of its Complaint, Plaintiff avers that Defendant came into possession of checks from Plaintiff's customers which were made payable to Plaintiff.9 Plaintiff further avers that, beginning "at least as early as May, 1992, [Defendant] fraudulently converted [these] checks ... by endorsing them and depositing them into an account in the name of Construction/Industrial Products Corporation at Farmers Trust Bank in Pennsylvania...~0 Finally, in Count III of its Complaint, Plaintiff alleges liability on the part of Defendant as an "alter ego of CIP." In this regard, Plaintiff contends that "[i]n the event that it is determined as a factual matter that [Defendant] had authority to transfer the goods described in ... the complaint to CIP, ... then CIP is obligated in contract or quasi contract to pay SKG Tools for the goods.-~ Plaintiff further avers that "CIP has been Plaintiff's Complaint, paragraph 11. Plaintiff's Complaint, paragraph 14. Plaintiff,s Complaint, paragraph 15. Plaintiff's Complaint, paragraph 22. 3 No. 2784 Civil 1993 undercapitalized by [Defendant],..~2 that "[Defendant] and CIP have failed to observe corporate formalities,-~3 and that "[t]he income which CIP~ has received from the sale of goods obtained from [Plaintiff] has been used for the benefit of [Defendant].-~4 In attempting to establish Defendant's liability, Plaintiff contends that, "[i]n the event that it is determined that CIP is contractually or quasi contractually obligated to pay [Plaintiff] for the goods described in ... the complaint, then [Defendant] is also personally liable to pay [Plaintiff] for the goods because the business of CIP has been conducted by [Defendant] as the mere alter ego of [Defendant].-~s In response to Plaintiff's Complaint, Defendant filed four preliminary objections. Initially, Defendant contends that, since Plaintiff and CIP executed an "Agreement of Representation" which provides "that all disputes arising in connection with this Agreement shall be finally settled by arbitration in Charleston, South Carolina under the applicable rules of the American Arbitration Association,..~6 this Court does not have subject matter jurisdiction with respect to this case. Additionally, Defendant Plaintiff's Complaint, paragraph 23. Plaintiff's Complaint, paragraph 24. Plaintiff's Complaint, paragraph 25. Plaintiff's Complaint, paragraph 28. Defendant's Preliminary Objections, paragraph 6. 4 No. 2784 Civil 1993 contends that the cause of action set forth in Plaintiff's Complaint arose in South Carolina and not in Cumberland County. As such, Defendant contends that, since "no transaction or occurrence related to this action took place in Cumberland County, venue is ~, 17 not proper in this Court. Defendant further contends that Plaintiff's Complaint fails to join an indispensable party. In this regard, Defendant avers that Plaintiff's claim against him "is a claim imputed through CIP,,,~8 and since Plaintiff has failed to join CIP, an indispensable party to its action, this Court should enter judgment in favor of Defendant. Closely related to this issue is Defendant's fourth preliminary objection in which Defendant contends that, since CIP is an indispensable party to the action, and since CIP has filed a petition under Chapter 11 of the United States Bankruptcy Code, any claim against CIP is stayed by its filing of the bankruptcy petition,~9 and, thus, the action against Defendant should also be stayed. Statement of law. On the issue of whether the existence of an arbitration clause precludes a court from having subject matter jurisdiction over a dispute, the law in Pennsylvania is well settled. As the Superior Court of Pennsylvania has stated, "[o]ur Defendant's Preliminary Objections, paragraph 15. Defendant's Preliminary Objections, paragraph 22. See 11 U.S.C. S362. 5 No. 2784 Civil 1993 appellate courts ... have consistently and emphatically held that a contractual arbitration clause does not affect the subject matter jurisdiction of the trial court and, therefore, does not provide a~ proper basis for a preliminary objection." Wechsler v. Newman, 256 Pa. Super. 81, 88, 389 A.2d 611, 614 (1978). On the issue of whether venue properly lies in a court, Pennsylvania Rule of Civil Procedure 1006(a)(1) provides that "an action against an individual may be brought in and only in a county in which he may be served or in which the cause of action arose or where a transaction or occurrence took place out of which the cause of action arose." Additionally, Pennsylvania Rule of Civil Procedure 1028(a)(1) provides for the filing of a preliminary objection challenging the venue of an action. However, Rule 1028(c)(2) requires that, "[i]f an issue of fact is raised, the court shall consider evidence by depositions or otherwise." Additionally, the note following this rule states that "[p]reliminary objections raising an issue under (a)(1) ... cannot be determined from facts of record." In this regard, the Superior Court of Pennsylvania has observed that, "[f]requently, objections contained in the preliminary objection are apparent on [the] face of the record and will be readily determinable by the court without going outside the pleadings .... On the other hand, certain issues embraced in the preliminary objections will frequently be resolved only by the 6 No. 2784 Civil 1993 presentation of facts outside the record .... - Telstar Corp. v. Berman, 281 Pa. Super. 443, 448, 422 A.2d 551, 554 (1980). When faced with controverted facts, "[a] court may not reach a determination based upon its view of [those] facts, but must resolve the dispute b~ receiving evidence thereon." 3 Goodrich Amram 2d S1028(c):4, at 50 (1991).20 Additionally, "[t]he failure of the parties to an action to provide the evidence necessary for a proper determination of a factual issue raised by a preliminary objection does not excuse a court from further inquiry,-2~ and a court would be in error if it were to rule on such a preliminary objection without receiving additional evidence. Telstar Corp. v. Berman, 281 Pa. Super. 443, 422 A.2d 551, 554 (1980). On the issue of failure to join an indispensable party, the Commonwealth Court of Pennsylvania has stated that "[a]n indispensable party is one whose rights are so connected with the claim litigated that no relief can be granted without infringing upon those rights .... An indispensable party is one who has such an interest in the subject matter of the controversy that a final decree cannot be made without affecting it." Montgomery County 2o See also Schmitt v. Seaspray-Sharkline, Inc., 366 Pa. Super. 528, 532, 531 A.2d 801, 803 (1987) (holding that, when a court is faced with controverted facts when addressing a preliminary objection challenging personal jurisdiction, it "must resolve the dispute by receiving evidence thereon through interrogatories, depositions, or an evidentiary hearing"). ~ 3 Goodrich Amram 2d ~1028(c):4, at 51 (1991). 7 No. 2784 Civil 1993 Child Welfare Services v. Hull, 51 Pa. Commw. 1, 413 A.2d 757, 759 (1980). In connection with the issue of whether a corporation is an indispensable party to a lawsuit against an individual corporate officer thereof, it may be noted that "there is a strong presumption [under Pennsylvania law] against piercing the corporate veil .... There are, however, circumstances which will permit a court to disregard the corporate entity and hold individuals associated with a corporation personally liable for a wrong. Factors which may justify piercing the corporate veil include undercapitalization, failure to adhere to corporate formalities, substantial intermingling of corporate and personal affairs, and use of the corporate form to perpetrate a fraud." Longenecker v. Commonwealth of Pennsylvania, 142 Pa. Commw. 130, 133, 596 A.2d 1261, 1262 (1991), allocatur denied, 531 Pa. 656, 613 A.2d 561 (1992). In other words, "[u]nder the 'participation theory,' an agent or officer of a corporation may be held individually liable for personal participation in tortious acts." Shonberger v. Oswell, 365 Pa. Super. 481 485, 530 A.2d 112, 114 (1987).22 Application of law to fact~. With respect to Defendant's contention that the existence of an arbitration clause in an ~ See also Kaites v. Dept. of Environmental Resources, 108 Pa. Commw. 267, 273, 529 A.2d 1148, 1151 (1987). ("As a general rule, corporate officers are individually liable for their own tortious actions."). 8 No. 2784 Civil 1993 agreement between Plaintiff and CIP precludes this Court's exercise of subject matter jurisdiction over the present dispute, we believe that such a contention does not provide a proper basis for a preliminary objection in this case. Therefore, Defendant's requested relief must be denied on this ground. With reference to Defendant's preliminary objection that venue does not properly lie in this Court, we believe that the current state of the record does not permit us to make a determination on this issue at this time. Since there are controverted facts as to whether a transaction or occurrence out of which the cause of action arose actually occurred in Cumberland County, we find it necessary to require further evidence on this issue. Once such evidence has been received, this Court will then be in a position to dispose of this matter. Finally, with respect to Defendant's contention that Plaintiff has failed to join an indispensable party, this Court is of the opinion that CIP is not an indispensable party to Plaintiff's cause of action against Defendant. Plaintiff alleges that Defendant engaged in conversion of goods belonging to Plaintiff and fraudulent conversion of checks made payable to Plaintiff. Moreover, Plaintiff avers that CIP was undercapitalized by Defendant, and that Defendant has failed to observe corporate formalities. In light of the holding of our appellate courts, we believe that these allegations, if proven, could be sufficient to 9 No. 2784 Civil 1993 establish individual liability on the part of Defendant for his personal participation in tortious acts, and, thus, CIP would not be an indispensable party to this action.23 For the foregoing reasons, the following Order will be entered: ORDER OF COURT AND NOW, this Z~ ~ day of February, 1994, upon careful consideration of Defendant's preliminary objections, as well as the briefs and arguments presented on the matter, it is ORDERED as follows: (1) On the issue of whether venue properly lies in this Court, the parties are DIRECTED to submit further evidence on this issue in accordance with the accompanying Opinion; (2) All other relief requested by Defendant is DENIED. BY THE COURT, ~.s/ J. Wesley Oler, Jr. Wesley Oler, Jr., J. John McN. Cramer, Esq. 213 Market Street P.O. Box 11844 Harrisburg, PA 17108 Attorney for Plaintiff 2~ Given our holding that CIP is not an indispensable party to this cause of action, we need not address Defendant's contention that Plaintiff's action is stayed by CIP's filing of a bankruptcy petition. 10 No. 2784 Civil 1993 Francis M. Socha, Esq. 2201 North Second Street Harrisburg, PA 17110 Attorney for Defendant :rc 11