Court Opinion

ID: 4206758
Source: CourtListenerOpinion
Date Created: 2017-09-27 19:18:14.262127+00
Date Added: 2024-06-11T14:40:52.446738
License: Public Domain

J. A03042/17
                             2017 Pa. Super. 306

MARK HERSHEY FARMS, INC.,         :            IN THE SUPERIOR COURT OF
                                  :                 PENNSYLVANIA
                      Appellee    :
                                  :
                v.                :
                                  :
SCOTT T. ROBINSON, AS EXECUTOR OF :
THE ESTATE OF LONNIE L. ROBINSON; :
SCOTT T. ROBINSON, INDIVIDUALLY;  :
MEADOW VALLEY DAIRY, INC.; 915    :
GALEN HALL ROAD ASSOCIATES, L.P.; :
JESSICA COW II, LLC, AND MED O    :
VALLEY FARMS, A PENNSYLVANIA      :
PARTNERSHIP                       :
                                  :            No. 1070 MDA 2016
APPEAL OF: SCOTT T. ROBINSON      :

               Appeal from the Judgment Entered June 14, 2016
               In the Court of Common Pleas of Lebanon County
                       Civil Division at No.: 2010-02612

BEFORE: LAZARUS, J., STABILE, J., and DUBOW, J.

OPINION BY DUBOW, J.:                         FILED SEPTEMBER 27, 2017

     Appellant, Scott T. Robinson, individually, appeals from the June 14,

2016 Judgment entered by the Lebanon County Court of Common Pleas

after a bench trial. We reverse.

     The relevant facts, as gleaned from the certified record, are as follows.

Mark Hershey Farms, (“Appellee”), manufactures, sells, and delivers feed for

dairy cattle to individual farms.     Appellant’s father, Lonnie Robinson

(“Lonnie”), operated a dairy farm.     Various corporate entities, of which

Lonnie was the sole shareholder, not only owned the land on which the dairy
J. A03042/17

farm operated, but also operated the business itself.          One of these

corporations, Meadow Valley Dairy, Inc. (“Meadow Valley”) operated the

farm and purchased feed from Appellee.

      On February 13, 2009, Lonnie died. At this point, Meadow Valley owed

Appellee approximately $118,741.31 for previously delivered feed.

      Lonnie’s Will named Appellant to be the executor of his estate.

Appellant probated Lonnie’s Will in Orphans’ Court in York County, which

issued Letters Testamentary on February 19, 2009. Appellant was the sole

beneficiary of the estate.

      As a result of Lonnie’s death, Lonnie’s shareholder interest in Meadow

Valley, as well as other assets, transferred to the estate. Thus, it was the

estate that owned the shareholder interest in Meadow Valley.

      The trial court found that Lonnie, when alive, paid the operating

expenses of Meadow Valley from his personal account and the estate paid

the operating expenses from the estate’s funds after Lonnie died:

      Lonnie L. Robinson is the owner of 100 percent of the stock of
      this corporation, which is the operating corporation for the dairy
      farm located at 915 Galen Hall Road. All of the operating
      expenses of Meadow Valley Dairy, Inc. were paid directly
      by Lonnie L. Robinson from his personal accounts during
      his lifetime, and after his death, by the estate in order to
      continue the operation of the dairy farm at 915 Galen [Hall]
      Road [] until such time as the milk market improves and this
      asset can be liquidated by the estate.

Trial Court Opinion, 2/8/16, at 5 (emphasis added).

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      After Lonnie’s death, Appellant, in his capacity as executor of the

estate and employee of Meadow Valley, continued operating the dairy farms.

In such a capacity, Appellant ordered feed from Appellee. Appellee delivered

the feed to Meadow Valley, but Meadow Valley did not pay Appellee because

of a difficult business climate.    By October 2010, Meadow Valley owed

Appellee a total of $413,190.29.         Appellant also made to Meadow Valley

substantial personal loans to keep the farm afloat and thus, became a

creditor of Meadow Valley.

      It should be emphasized that Appellant as the executor had the

authority to transfer the assets of Lonnie’s Estate, including the shareholder

interest in Meadow Valley, to himself as the estate’s beneficiary. Appellant,

however, chose not to distribute the assets and Appellee never filed a

Surcharge requesting that a court order Appellant to do so. Consequently,

during the time of this litigation, it was the Estate of Lonnie, and not

Appellant, who owned the shareholder interest in Meadow Valley.

      On October 21, 2010, Appellee initiated the instant action by filing a

Complaint   against   the    following    individuals   and   entities:   Appellant

individually, Appellant as Executor of Lonnie’s Estate, Meadow Valley Dairy,

Inc., 915 Galen Hall Road Associates, Jessica Cow II, LLC, Med O Valley

Farms, and Meadow Valley Dairy Farm.

      Appellee’s two counts against Appellant individually were (1) breach of

contract based on a handwritten letter that Appellant gave Appellee, and (2)

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unjust enrichment based on the feed deliveries to Meadow Valley from which

Appellee alleged that Appellant personally benefited. For a remedy, Appellee

sought specific money damages.

      Prior to trial, the parties submitted a Joint Pre-Trial Stipulation on

February 16, 2015. The Stipulation held all defendants liable for the entire

amount of $413,190.29, except Appellant in his individual capacity.         As a

result, the only issue remaining for trial was Appellant’s personal liability for

the feed that Meadow Valley purchased based upon the two counts described

above.

      Following a bench trial, the trial court rendered its written verdict in

favor of Appellee and against Appellant individually in the amount of

$413,190.29. Although it was the Estate of Lonnie, and not Appellant, who

was a shareholder of Meadow Valley, the trial court extended the principle of

piercing the corporate veil to hold Appellant in his capacity as the sole

beneficiary of Lonnie’s Estate personally liable for Meadow Valley‘s debt.

Trial Court Opinion, 2/8/16, at 10. After the filing of Post-Trial Motions, the

trial court also found Appellant individually liable on the alternative basis of

unjust enrichment. Trial Court Opinion, 6/14/16, at 6-8.

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      On June 14, 2016, following Post-Trial Motions, the trial court filed an

Order amending the verdict award to $294,448.98 and entering Judgment in

that amount.1

      On June 29, 2016, Appellant filed a timely Notice of Appeal. The trial

court filed a Pa.R.A.P. 1925(a) Opinion, but did not order Appellant to file a

Rule 1925(b) Statement.

      Appellant presents the following issues for our review:

      [1.] Whether the [t]rial [c]ourt erred in thrice concluding that it
      had subject matter jurisdiction over questions concerning the
      administration of an estate.

      [2.] Whether the [t]rial [c]ourt erred in concluding that a
      defendant exercising control of business entities solely in his
      capacity as executor of an estate can be held personally liable
      for breach of contract under a theory of piercing the corporate
      veil in light of Section 3333.1 of the Probate Estates and
      Fiduciaries Code, 20 Pa.C.S. § 3333.1.

      3. Whether the [t]rial [c]ourt erred in finding that the Appellant’s
      failure to close the Estate and distribute to himself the equitable
      interests of the [b]usiness [d]efendants to himself was based on
      “his desire to shield himself from liability while he incurred
      substantial debt in the corporation” where no evidence of record
      was presented which would support such a conclusion.

      4. Whether the [t]rial [c]ourt erred in declining to consider
      factors relevant to the ultimate determination of whether
      upholding the corporate identity would lead to unjust results,
      holding instead that “the existence of any possible justification
      for his disregard of corporate formalities and intermingling of
      personal, estate, and corporate funds is irrelevant to our

1
  The reduction accounted for $118,741.31, which Appellee conceded was
“the value of the feed delivered [before Appellant] assumed control of the
dairy business.” Trial Court Opinion, 6/14/16, at 6.

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      determination   of   whether   the   corporate   form   should   be
      disregarded.”

      [5. [Whether the] [l]ower [c]ourt [e]rred in finding that
      [Appellant] had been unjustly enriched as a result of [Appellee’s]
      shipment of feed to Meadow Valley[?]]

Appellant’s Brief at 4 (reordered and supplemented).2

      We review an order following a bench trial with the following principles

in mind:

      Our review in a nonjury case is limited to whether the findings of
      the trial court are supported by competent evidence and whether
      the trial court committed error in the application of law. We
      must grant the court’s findings of fact the same weight and
      effect as the verdict of a jury and, accordingly, may disturb the
      nonjury verdict only if the court’s findings are unsupported by
      competent evidence or the court committed legal error that
      affected the outcome of the trial. It is not the role of an
      appellate court to pass on the credibility of witnesses; hence we
      will not substitute our judgment for that of the factfinder. Thus,
      the test we apply is not whether we would have reached the
      same result on the evidence presented, but rather, after due
      consideration of the evidence which the trial court found
      credible, whether the trial court could have reasonably reached
      its conclusion.

Hollock v. Erie Insurance Exchange, 842 A.2d 409, 413–14 (Pa. Super.

2004) (en banc) (citations and quotation marks omitted).

      In his first issue, Appellant challenges the trial court’s exercise of

subject matter jurisdiction over this matter, which Appellant characterizes as

2
  In his Brief, Appellant omitted pages 5 and 6, which apparently included
his fifth question presented on appeal concerning the unjust enrichment
claim, as well as the first page of the Summary of the Case. Appellant
included the fifth question presented in his table of contents, as well as in
the Argument section of his Brief. As a result, we decline to find waiver and
we will address the merits of this fifth claim on appeal.

                                     -6-
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“questions concerning the administration of an estate.” Appellant’s Brief at

4.

      The orphans’ court’s jurisdiction is purely a creature of statute. In re

Shahan, 631 A.2d 1298, 1301 (Pa. Super. 1993). That court is required, in

relevant part, to exercise jurisdiction over the following matters:

      Except as provided in section 712 (relating to nonmandatory
      exercise of jurisdiction through the orphans’ court division) … the
      jurisdiction of the court of common pleas over the following shall
      be exercised through its orphans’ court division:

         (1) Decedents’ estates.           The administration and
         distribution of the real and personal property of decedents’
         estates and the control of the decedent’s burial.

                                 *     *     *

         (12) Fiduciaries. The appointment, control, settlement
         of the accounts of, removal and discharge of, and
         allowance to and allocation of compensation among, all
         fiduciaries of estates and trusts, jurisdiction of which is
         exercised through the orphans’ court division, except that
         the register shall continue to grant letters testamentary
         and of administration to personal representatives as
         heretofore.

20 Pa.C.S. § 711.

      In addition to the mandatory exercise of jurisdiction over matters such

as those outlined above, Orphans’ Court is also vested with the authority to

exercise non-mandatory jurisdiction, in relevant part, over “[t]he disposition

of any case where there are substantial questions concerning matters

enumerated in section 711 and also matters not enumerated in that

section.” 20 Pa.C.S. § 712.

                                     -7-
J. A03042/17

      In addressing the issue of subject matter jurisdiction at the preliminary

objection stage, the trial court in the instant case concluded that because

this was a contract claim and not related to the administration of the estate,

Orphans’ Court lacked jurisdiction:

      Defendant contends because one of the named Defendants is the
      Executor of an estate, that this action must be brought in the
      Orphans’ Court division. This case, however, is a contract
      claim and not necessarily related to the administration of
      Decedent’s estate.

                                 *     *     *

      Because this action involves claims not enumerated in [S]ection
      711 and, if we were to agree with Defendant, claims that are
      enumerated in [S]ection 711, [S]ection 712 provides for
      concurrent jurisdiction in either the Orphans’ Court Division or
      the Civil Division. Accordingly, we find that this Court has
      jurisdiction to hear this controversy. Plaintiff brought suit in the
      Civil Division where it was entitled to do so. We will not disturb
      this choice of law.

Trial Court Opinion, 9/6/11, at 3-4 (emphasis added and in original).        We

agree with the trial court that because Appellee filed the Complaint that was

based upon a breach of contract and did not directly raise any issues

regarding the administration of an estate, the trial court properly exercised

subject matter jurisdiction over this matter.3

      In his second issue, Appellant avers that the trial court erred as a

matter of law “in finding [Appellant] liable for breach of contract on a

3
   If this litigation involved Appellee’s attempt to require Appellant to
distribute the estate’s ownership interest in Meadow Valley by filing a
Surcharge, Orphans’ Court may have had jurisdiction. Appellee never filed
for a Surcharge and this case solely involves a breach of contract.

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J. A03042/17

piercing the corporate veil theory[]” because “[t]his theory of liability has

been applied almost exclusively to hold [a shareholder] liable for the debts

of a business entity.” Appellant’s Brief at 10, 13 (citation omitted). In other

words, the issue in this case is whether the trial court properly extended the

concept of piercing the corporate veil to hold a beneficiary of an estate

personally liable for the debts of an estate. We agree with Appellant that

there is no legal authority to extend the theory of piercing the corporate veil

and the trial court erred in doing so.

      Pennsylvania carries a strong presumption against piercing the

corporate veil. Fletcher-Harlee Corp. v. Szymanski, 936 A.2d 87, 95 (Pa.

Super. 2007).     The corporate entity should be upheld unless specific,

unusual circumstances call for an exception.    See Lumax Indus., Inc. v.

Aultman, 669 A.2d 893, 895 (Pa. 1995).

      Further, when it is appropriate to pierce the corporate veil, it is the

shareholder, and not some other entity, who is held liable:

      [T]he general rule is that a corporation shall be regarded as an
      independent entity even if its stock is owned entirely by one
      person... In deciding whether to pierce the corporate veil,
      courts are basically concerned with determining if equity
      requires that the shareholders’ traditional insulation from
      personal liability be disregarded and with ascertaining if the
      corporate form is a sham, constituting a facade for the
      operations of the dominant shareholder. Thus, we inquire, inter
      alia, whether corporate formalities have been observed and
      corporate records kept, whether officers and directors other than
      the dominant shareholder himself actually function, and whether
      the dominant shareholder has used the assets of the corporation
      as if they were his own.

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Fletcher-Harlee Corp., supra at 95-96 (emphasis added). See Village at

Camelback Property Owners Assn. Inc. v. Carr, 538 A.2d 528, 532 (Pa.

Super. 1988) (explaining that only shareholders may be liable for the acts of

a corporation when piercing the corporate veil).

      The trial court, without citing any legal authority, held Appellant

personally liable as a beneficiary of the estate even though it was the estate

that owned the shares of Meadow Valley:

      While it is true that [Appellant] himself never actually came into
      a position of direct ownership, we believe that he was capable of
      holding an equitable interest in the corporation and that he did
      hold an indirect interest in the corporation by virtue of his status
      as the sole beneficiary of Lonnie’s Estate.

Trial Court Opinion, 2/8/16, at 10.

      There is, however, no legal basis to apply the concept of piercing the

corporate veil to a beneficiary of an estate and hold a beneficiary of an

estate liable for debts of the estate. Such a broad rule would be contrary to

the limited nature of this narrow exception to the strong presumption

against piercing the corporate veil.

     The trial court erroneously focuses on the fact that Appellant’s “failure

to attain an ownership position was due to his own failure to carry through

with the administration of Lonnie’s Estate and his desire to shield himself

from liability while he incurred additional substantial debt in the name of the

corporation.” Trial Court Opinion, 2/8/16, at 10-11. There is, however, a

process for forcing Appellant to transfer the ownership interest in Meadow

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Valley from the estate to Appellee by filing a Surcharge or petition to remove

the executor.   Appellee failed to do so and the trial court, especially after

rejecting any subject matter jurisdiction in Orphan’s Court, cannot treat the

transfer as occurring.

      The trial court was particularly disturbed by Appellant’s actions and, at

least in part, “pierced the corporate veil in order to rectify this unjust

situation.” Trial Court Opinion, 2/8/16, at 11. We find ample support in the

certified record for the trial court’s factual findings regarding Appellant’s

utterly irresponsible actions and his “failure to carry through with the

administration of Lonnie’s Estate and [Appellant’s] desire to shield himself

from liability while he incurred additional substantial debt in the name of the

corporation[…] in total disregard of the rights of creditors[.]”   Trial Court

Opinion, 2/8/16, at 10-11.    However, it is Appellee who had a remedy to

force Appellant to distribute the assets of the estate by filing a Surcharge or

Petition to Remove the Executor.

      After careful review, we conclude that the trial court erred as a matter

of law in piercing the corporate veil to assess personal liability on Appellant

who was not a shareholder of Meadow Valley, but merely a beneficiary of the

estate.4

4
  As a result of our holding that the trial court erred in applying the concept
of piercing the corporate veil to a beneficiary of an estate, we need not
address the issue of whether the trial court properly applied the elements of

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      In his fifth claim on appeal, Appellant avers that the trial court erred

as a matter of law in finding him liable under a theory of unjust enrichment

because Appellant “appreciated no benefit from the delivery of feed” and

because “a valid and enforceable contract existed for the delivery of feed to

Meadow Valley.” Appellant’s Brief at 21.

      “An action based on unjust enrichment is an action which sounds in

quasi-contract or contract implied in law.”   Discover Bank v. Stucka, 33
A.3d 82, 88 (Pa. Super. 2011) (citation omitted). “The elements of unjust

enrichment are [(1)] benefits conferred on defendant by plaintiff, [(2)]

appreciation of such benefits by defendant, and [(3)] acceptance and

retention of such benefits under such circumstances that it would be

inequitable for defendant to retain the benefit without payment of value.”

Id.    “Whether the doctrine applies depends on the unique factual

circumstances of each case[.]” Id. (citation omitted).

      “To sustain a claim of unjust enrichment, a claimant must show that

the party against whom recovery is sought either wrongfully secured or

passively received a benefit that it would be unconscionable for her to

retain.”   Gutteridge v. J3 Energy Group, Inc., ___ A.3d ___, 2017 PA

Super 150 at *6 (Pa. Super. filed May 17, 2017) (en banc) (citation

omitted). “The doctrine does not apply simply because the defendant may

the concept of piercing the corporate veil to the facts of this case. We also
need not address Appellant’s related third and fourth issues.

                                    - 12 -
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have benefited as a result of the actions of the plaintiff.”    Id. (citation

omitted).

      “A quasi-contract imposes a duty, not as a result of any agreement,

whether express or implied, but in spite of the absence of an agreement,

when one party receives unjust enrichment at the expense of another.”

Discover Bank, supra at 88 (internal quotation marks omitted). This Court

has previously held that “[t]he doctrine of unjust enrichment is clearly

inapplicable when the relationship between the parties is founded on a

written agreement or express contract.” Roman Mosaic & Tile Co., Inc. v.

Vollrath, 313 A.2d 305, 307 (Pa. Super. 1973) (citations and quotation

marks omitted).    See also Telwell Inc. v. Grandbridge Real Estate

Capital, LLC, 143 A.3d 421, 428 (Pa. Super. 2016) (recognizing the same

principle).

      Here, Appellee failed to demonstrate that it was Appellant himself, and

not Meadow Valley, who directly received the benefits of the feed that

Appellee delivered to Meadow Valley.     The trial court found that: (1) an

agreement existed between Appellee and Meadow Valley for the delivery of

feed; (2) Appellant appreciated the benefits of the feed for the cows “as an

important corporate asset”; and (3) Appellant “was solely in the position to

benefit from [Appellee’s] delivery of the feed for the protection of the

corporate assets[.]” Trial Court Opinion, 6/14/16, at 8.

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         In other words, and consistent with the trial court’s conclusions above,

Appellee delivered the feed directly to Meadow Valley, and the feed became

Meadow Valley’s corporate asset—not Appellant’s personal asset—upon

delivery. Meadow Valley utilized the feed and derived the resulting benefits.

There was no evidence that Appellant used the feed for another farm that he

owned or any other personal use.

         By imposing liability on Appellant, the trial court ignored the fact that

there is no evidence in the record demonstrating that Appellant, as opposed

to Meadow Valley, personally benefited from the feed.         To the extent that

Appellant benefitted, it was as a result of Appellant’s position of beneficiary

of the estate and potential shareholder of Meadow Valley and thus, an

indirect and potential benefit.

         Moreover, the trial court’s conclusions contradict its own previous

findings of fact, namely, that Appellant “took over the operation of [his

father’s] dairy business and continued to order deliveries of feed through

[Meadow Valley]. Bills were placed in the name of [Meadow Valley].” Trial

Court Opinion, 2/8/16, at 3. Given that it was Meadow Valley who directly

benefited from the deliveries of the feed, and not Appellant personally, the

record does not support the trial court’s finding that only Appellant

personally benefited from the feed delivery. Rather, it was Meadow Valley

who benefited from the feed deliveries and used the feed as a corporate

asset.

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     After careful review, we hold that the trial court erroneously concluded

that Appellant was enriched unjustly under these particular circumstances

since he did not personally and directly receive the benefit of the feed

deliveries. For this independent reason, we must reverse the June 14, 2016

Judgment on this ground as well.

     Order reversed. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/27/2017

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