Court Opinion

ID: 4113195
Source: CourtListenerOpinion
Date Created: 2017-01-04 20:13:39.417264+00
Date Added: 2024-06-11T14:47:39.900282
License: Public Domain

J-A26011-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

AKATOR CONSTRUCTION, LLC,                      IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA
                            Appellee

                       v.

LAGOM, LLC,

                            Appellant               No. 1548 WDA 2015

              Appeal from the Order Entered September 10, 2015
              In the Court of Common Pleas of Allegheny County
                     Civil Division at No(s): GD-15-012694

BEFORE: BENDER, P.J.E., RANSOM, J., and MUSMANNO, J.

MEMORANDUM BY BENDER, P.J.E.:                    FILED JANUARY 04, 2017

       Appellant, Lagom, LLC (“Lagom”), appeals from the trial court’s

September 10, 2015 order granting Appellee’s, Akator Construction, LLC

(“Akator”), petition for preliminary injunction.1    For the reasons stated

herein, we vacate the trial court’s order and remand the case for further

proceedings.

       The trial court has summarized the factual background and procedural

history of this case as follows:
             Akator and Lagom are parties to a Joint Venture
       Agreement dated August 5, 2011, pursuant to which the parties
       agreed to acquire, rehabilitate and resell properties located in
       the City of Pittsburgh and surrounding areas. The parties each
       hold a fifty (50%) percent interest in the Joint Venture[,] and
____________________________________________

1
 The trial court’s order granting Akator’s petition for preliminary injunction
was dated September 9, 2015, and filed on September 10, 2015.
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      profits and losses are distributed in accordance with those
      percentage interests.

            A dispute arose between the parties in early 2015 when
      alleged financial discrepancies were discovered within the
      financial records of the Joint Venture maintained by Akator and
      its accountants.     In April[] 2015, Lagom entered into an
      agreement to sell one of the Joint Venture properties. Since the
      property was titled in Lagom’s name only, the proceeds from the
      sale of the property were paid to Lagom. Despite requests by
      Akator, Lagom refused to pay Akator its share of the proceeds
      from the sale or to demonstrate [that] the funds were held in a
      bank account.

            On or about July 23, 2015, Akator filed a Petition for Rule
      to Show Cause as to its Petition for Preliminary Injunction.
      Akator’s petition seeks to have its share of the profits from the
      sale of the property (i.e., $185,000) placed into an escrow
      account not reachable by either party pending resolution of the
      disputes between Akator and Lagom in arbitration.

             Lagom filed preliminary objections in opposition to Akator’s
      Petition for Preliminary Injunction.      The primary argument
      offered by Lagom was that this [c]ourt did not have the ability to
      grant the relief requested by Akator because the Joint Venture
      Agreement contained an arbitration provision.
            During a hearing on Lagom’s preliminary objections, the
      parties argued the issue of whether a set fund of money could be
      subject to injunctive relief in the form of an escrow given the
      parties’ arbitration agreement.      This [c]ourt, after hearing
      argument, denied Lagom’s preliminary objections and ordered
      Lagom to pay $185,000 into an escrow account in the name of
      the Joint Venture requiring joint signatures for disbursement.
      This [c]ourt’s Order was intended to preserve the status quo and
      to ensure the funds would not be dissipated while the parties go
      through the arbitration process.

Trial Court Opinion (TCO), 12/16/2015, at 1-2 (unnumbered pages).

      Following   the   trial   court’s   order   granting   Akator’s   petition   for

preliminary injunction, Lagom timely appealed.          On appeal, Lagom raises

four issues for our review:

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        1. In granting the preliminary injunction, did the trial court
           err in that the preliminary injunction was issued without
           notice when the status conference and the hearing on the
           injunction was scheduled for September 24, 2015 before a
           different judge?

        2. Did the trial court err when it impropery [sic] issued a
           preliminary injunction without a hearing as required by
           Pa.R.C.P. 1531(d)?

        3. Did the trial court err when it failed to require Akator to
           post a bond in accordance with Pa.R.C.P. 1531(b) when it
           granted the prepiminary [sic] injunction?

        4. Was there a showing that immediate and irreparable injury
           would result to Akator if the injunction was not granted
           without a hearing?

Lagom’s Brief at 4 (unnecessary capitalization and emphasis omitted).

     In reviewing whether a preliminary injunction was properly granted,

this Court has explained:
           A trial court has broad discretion to grant or deny a
     preliminary injunction. When reviewing a trial court's grant or
     refusal of a preliminary injunction, an appellate court does not
     inquire into the merits of the controversy, but rather examines
     only the record to ascertain whether any apparently reasonable
     grounds existed for the action of the court below. We may
     reverse if the trial court's ruling amounted to an abuse of
     discretion or a misapplication of law.

            A trial court may grant an injunction only if the plaintiff
     seeking that extraordinary remedy establishes a clear right to
     the requested relief.      Furthermore, the moving party must
     satisfy the following essential prerequisites: (1) that relief is
     necessary to thwart immediate and irreparable harm which could
     not be remedied by damages; (2) that greater injury will result
     by refusing the injunction than by granting it; (3) that the
     injunction will restore the parties to their status as existing prior
     to alleged wrongful conduct; and (4) that the injunction is
     reasonably suited to abate such activity.

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WPNT Inc. v. Secret Communication Inc., 661 A.2d 409, 410 (Pa.

Super. 1995) (internal citations omitted; emphasis added).

       First, Lagom asserts that the trial court erred by issuing the

preliminary injunction without providing it with written notice and a hearing.2

Specifically, it contends that the trial court “improperly ruled on the

preliminary injunction contrary to the order of court scheduling the matter

for September 24, 2015[,] and failed to satisfy the procedural requirements

and safeguards set forth in Pa.R.C.P. 1531[.]”       Lagom’s Brief at 18.    We

agree.

       Pennsylvania Rule of Civil Procedure 1531 sets forth the following, in

pertinent part:
       (a)    A court shall issue a preliminary or special injunction only
              after written notice and hearing unless it appears to the
              satisfaction of the court that immediate and irreparable
              injury will be sustained before notice can be given or a
              hearing held, in which case the court may issue a
              preliminary or special injunction without a hearing or
              without notice. In determining whether a preliminary or
              special injunction should be granted and whether notice or
              a hearing should be required, the court may act on the
              basis of the averments of the pleadings or petition and
              may consider affidavits of parties or third persons or any
              other proof which the court may require.

       (b)    Except when the plaintiff is the Commonwealth of
              Pennsylvania, a political subdivision or a department,
              board, commission, instrumentality or officer of the
____________________________________________

2
 For ease of disposition, we address Lagom’s first and second issues, stated
supra, together. These issues pertain to the notice and hearing required by
our Rules of Civil Procedure before a preliminary injunction can be issued
and continued.

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             Commonwealth or of a political subdivision, a preliminary
             or special injunction shall be granted only if

           (1)   the plaintiff files a bond in an amount fixed and with
                 security approved by the court, naming the
                 Commonwealth as obligee, conditioned that if the
                 injunction is dissolved because improperly granted or
                 for failure to hold a hearing, the plaintiff shall pay to
                 any person injured all damages sustained by reason
                 of granting the injunction and all legally taxable
                 costs and fees, or

           (2)   the plaintiff deposits with the prothonotary legal
                 tender of the United States in an amount fixed by
                 the court to be held by the prothonotary upon the
                 same condition as provided for the injunction bond.

                                        ***

     (d)     An injunction granted without notice to the defendant shall
             be deemed dissolved unless a hearing on the continuance
             of the injunction is held within five days after the granting
             of the injunction or within such other time as the parties
             may agree or as the court upon cause shown shall direct.

Pa.R.C.P. 1531 (internal notes omitted).

     Based on this Rule, our Court has explained:
     [A] court will ordinarily issue a preliminary injunction only after
     written notice and hearing. A preliminary injunction may be
     granted without notice and a hearing only when there exists a
     need for unusual haste so that a clear right may be protected
     from immediate and irreparable injury. In that event, the court
     must make a finding that relief is necessary and must be
     awarded before the defendant can be notified. If the court then
     fails to conduct a hearing within five days, the injunction is
     deemed dissolved.

WPNT Inc., 661 A.2d at 410-11 (citations omitted; emphasis added).

     In WPNT Inc., the trial court “granted [the] appellee’s request for a

preliminary injunction solely on the basis of the pleadings and arguments of

counsel.    The issuing court refused to conduct a hearing either before or

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after entering the decree.”        Id. at 411.   On appeal, this Court explained

that, although there is “no absolute right” to a hearing, “our rules and our

case law clearly indicate that a hearing is the preferred procedure. It is the

rare preliminary injunction that can correctly be denied without a hearing

and no preliminary injunction can be granted and continued without

a hearing, whether before or after the initial grant.”            Id. (citations,

quotations, and footnote omitted; emphasis in original).          Our review of

relevant case law reveals that the weight of authority supports the position

that a hearing should take place in order to establish the factual basis for the

preliminary injunction.3
____________________________________________

3
  See, e.g., Pubusky v. D.M.F. Inc., 239 A.2d 335, 336-37 (Pa. 1968)
(“We frequently have said that a preliminary injunction should not issue at
least until the rights of the plaintiff are clearly established. It also is
fundamental that all of the parties are entitled to a hearing before such an
injunction should issue.”) (citations and footnote omitted); Bell Fuel
Corporation v. Cattolico, 544 A.2d 450, 455 (Pa. Super. 1988) (“There are
numerous cases where the trial court has utilized a procedure …, cutting
short a previously scheduled hearing on a preliminary injunction and
refusing the injunction as a matter of law, where our appellate courts have
found the decision to be premature and have reversed and remanded for a
full evidentiary hearing.”); Beck Computing Services Inc. v. Anderson,
524 A.2d 990, 992 (Pa. Super. 1987) (determining that the trial court “erred
in failing to hold a hearing on the [a]ppellant’s request for a preliminary
injunction” and that it “lacked a sufficient factual basis for determining
whether or not the other prerequisites for injunctive relief were present”);
Boyd v. Cooper, 410 A.2d 860, 862 (Pa. Super. 1979) (“Thus we conclude
that the trial judge erred in not completing its scheduled hearing on [the]
appellants’ request for the purpose of developing a factual basis for the
requested relief.”). But see Walter v. Stacy, 837 A.2d 1205, 1210 (Pa.
Super. 2003) (“A hearing simply is not required under the law. We are
satisfied that the trial court's reliance on the pleadings and the arguments of
counsel was sufficient to support its determination in this case.”).

                                           -6-
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      Further, our Supreme Court has clarified what constitutes a sufficient

preliminary injunction hearing: “While the testimony at a hearing for a

preliminary injunction which seeks only to preserve the status of the parties

until the issue is finally determined need not always be as extensive as that

at a final hearing, the litigants should not be deprived of their right to

fully cross-examine all adverse witnesses, nor of the opportunity to

present testimony which is relevant to the question of whether or

not the injunction should issue.” Pubusky, 239 A.2d at 337 (emphasis

added).   See also Ogontz Controls Company v. Pirkle, 477 A.2d 876,

879 (Pa. Super. 1984) (acknowledging that “the hearing on the preliminary

injunction motion must be one at which both parties are given the

opportunity   to   fully   cross-examine   witnesses   and   present   relevant

testimony”) (emphasis in original). We have also stated that “[t]he question

to be determined at this hearing is whether there is an urgent necessity for

interim relief before the case can be heard on the merits.”            Soja v.

Factoryville Sportsmen’s Club, 522 A.2d 1129, 1131 (Pa. Super. 1987)

(citation omitted).

      Here, Lagom argues that it was not afforded written notice and a

hearing, as required by Pa.R.C.P. 1531. In short, Lagom avers that “[t]he

parties walked in for a preliminary objections argument and – unbeknownst

to them – walked out with a preliminary injunction.” Lagom’s Brief at 21. It

states:
             [] Akator filed its Petition for Rule to Show Cause and its
      Petition for a Preliminary Injunction on July 23, 2015. It also

                                     -7-
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       gave notice indicating that it would appear in Motions Court on
       August 3, 2015, to seek the Rule to Show Cause why the
       preliminary injunction should not be issued. On August 3rd, the
       parties entered into a consent order of court, whereby it
       scheduled deadlines for pleadings and briefs, a date for
       argument on the preliminary objections, in addition to scheduling
       a status-conference before the preliminary injunction [], and
       then ultimately, the hearing date on the preliminary injunction
       request itself.

             September 9th was the scheduled day for argument on the
       preliminary objections. Both parties appeared and presented
       their positions solely on the preliminary objections. The record
       does not support any finding that arguments were made and
       evidence [was] presented on the issue of the preliminary
       injunction.   Judge Marmo did not issue a ruling from the
       bench[;] thus[,] the parties had to wait to receive a court order
       in the mail. In spite of the court order scheduling a status
       conference and then the hearing on the preliminary injunction,
       Judge Marmo – on the same day – entered the equivalent to an
       ex parte preliminary injunction against Lagom.        This order
       neither required Akator to post a bond nor scheduled a date for a
       hearing on the continuance of the injunction.

             Lagom submits that the arguments on the preliminary
       objections did not meet any criteria for that of a “hearing” ….

Id. at 18-19 (emphasis in original).4

       Indeed, the consent order of court, entered on August 3, 2015, sets

forth the following schedule:
           AND NOW, to-wit, this 3rd day of August, 2015, it appearing
       that a hearing has been set in the captioned matter regarding a
       Petition for Injunctive Relief on 9-24-15 at 1:45 p.m., in order to
       wisely use the scarce time available, it is hereby ORDERED as
       follows:

          -   Preliminary Objections to be filed by August 14, 2015[;]
____________________________________________

4
  We cannot present Akator’s recitation of these events as it did not file a
brief.

                                           -8-
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          -   Response to Preliminary Objections to be filed by
              August 19, 2015[;]

          -   Hearing on Preliminary Objections to be held on
              September 9, 2015 at 10:45 [a.m.].

          -   Petitioner’s brief on the applicable law must be filed
              with the Motions Clerk within one week of the date
              hereof, i.e., 9-14-2015.

          -   Respondent’s brief on the applicable law must be filed
              with the Motions Clerk no later than one week before
              the hearing date indicated above, i.e. 9-22-15.

          -   Petitioner must draft proposed stipulations of those
              material facts or evidentiary matters which Movant
              believes are not disputed by Respondent and deliver
              them to Respondent no later than one week before the
              aforesaid hearing date. The proposed stipulations are
              not to be filed with the [c]ourt.

          -   The Respondent may submit additional proposed
              stipulations, if any, to the Petitioner no later than three
              working days before the hearing date. Again, these
              proposed stipulations are not to be filed with the
              [c]ourt.

             The attorneys for the parties shall meet with the Motions
       Judge then sitting, on 9-24-15 at 11:15 [a.m.], for a brief Status
       Conference to discuss possibilities of settlement, evidentiary
       stipulations, scope of the hearing, allocation of available hearing
       time among the parties, and other such matters. Clients need
       not be present. No testimony will be taken on the day of the
       Status Conference.

Trial Court Order, 8/3/2015.5 Accordingly, our review of the record does not

uncover written notice that the hearing on the preliminary injunction would

____________________________________________

5
  The trial judge that presided over the September 9, 2015 hearing on the
preliminary objections also entered this scheduling order.

                                           -9-
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occur on September 9, 2015; instead, that hearing was explicitly scheduled

to take place on September 24, 2015.6

       Moreover, we are compelled to also conclude that Lagom was similarly

deprived of a proper hearing on the preliminary injunction.        By granting

Akator’s petition for preliminary injunction during the September 9, 2015

argument, the trial court explained that “it was readily apparent [that] the

only real issue in dispute was whether this [c]ourt could issue a preliminary

injunction to preserve the status quo considering the arbitration provisions

of the Joint Venture Agreement.” TCO at 3. It reasoned that “[s]ince this

[c]ourt concluded it was within its powers to issue the injunction, and the

parties were afforded ample opportunity to argue their positions, which they

willingly did at the September 9, 2015 hearing, there was no need for an

additional hearing on the matter.” Id. at 4.

       Lagom, on the other hand, insists that “[n]o testimony was taken nor

was any evidence presented.           There was no argument on the preliminary
____________________________________________

6
  In response to Lagom’s claim that it did not have notice, the trial court
explains that “it was clear to both parties that a hearing would be held on
September 9, 2015[,] and both parties appeared with counsel on such date.
Also, Lagom had long known that an injunction hearing would occur since
Akator filed its preliminary injunction petition on July 23, 2015.” TCO at 3.
We note that such circumstances have not established sufficient notice in
other cases. See Rosenzweig v. Factor, 327 A.2d 36, 37 (Pa. 1974)
(determining that preliminary injunction was issued without notice even
though a complaint had been filed seeking injunction months earlier); In re
D.G., Jr., 894 A.2d 1290, 1291 (Pa. Super. 2006) (vacating provision that
was added to an order during a post-hearing discussion without a party and
his counsel present).

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injunction.     Lagom was arguing preliminary objections challenging the

sufficiency of Akator’s pleadings.” Lagom’s Brief at 13. It further contends

that “[a]rguments on preliminary objections cannot be treated as a hearing

for a preliminary injunction[,]” and “[t]he practical effect of this would

require that any party should be prepared to bring witnesses and any other

evidence to any court proceeding on the chance that the [j]udge might

decide the ‘real issue in dispute.’”7 Id. at 16-17.

       Usually in cases where there are such discrepancies about what

transpired at a hearing, we would look to the relevant transcript to ascertain

exactly what occurred.        However, no transcript of the September 9, 2015

____________________________________________

7
  Lagom does not specifically identify the evidence or testimony it planned to
proffer at the preliminary injunction hearing, but instead argues that
Akator’s petition for a preliminary injunction — on which the trial court relied
in granting the requested relief — “did not indicate how it calculated the
$185,000 which it believed it was entitled. This petition did not include any
discussion of the expenditures of the [Joint Venture], which are required
under the [Joint Venture] for determining whether there were profits or
losses. Lastly, this petition did not plead that Lagom was going to be
insolvent or judgment proof.” Lagom’s Brief at 7; see also TCO at 4.
Lagom further asserts that Akator did not file its Rule to Show Cause and
Petition for Preliminary Injunction until “approximately eleven (11) months
after the complained of conduct occurred[,]” which suggests that Akator
would not have faced immediate and irreparable injury if the preliminary
injunction had not been granted. See Lagom’s Brief at 9. Presumably,
these factual issues would have been addressed and determined at the
preliminary injunction hearing. We also note, pursuant to the scheduling
order cited supra, that the parties had not yet submitted briefs on the
applicable law surrounding preliminary injunctions. See Trial Court Order,
8/3/2015.

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hearing exists.8      Given the rules and case law cited supra, the differing

accounts of the arguments made at the September 9, 2015 hearing, and the

lack of transcript from that proceeding, we are constrained to vacate the

trial court’s order and remand this matter for the trial court to conduct a

hearing regarding the preliminary injunction.

       Second, Lagom argues that “the trial court erred when it failed to

require Akator to post a bond in accordance with Pa.R.C.P. 1531(b) when it

granted the preliminary injunction.”           Lagom’s Brief at 22 (unnecessary

emphasis and capitalization omitted).              Again, we agree.   The trial court

must require the posting of a bond.                 This Court has determined that

“[before a preliminary injunction may be granted, the plaintiff must file a

bond with the prothonotary. This requirement is mandatory and an

appellate court must invalidate a preliminary injunction if a bond is

not filed by the plaintiff.”         Soja, 522 A.2d at 1131 (citations omitted;

emphasis added). To be sure, “even if the trial court’s order was otherwise

proper, its failure to require the posting of a bond would mandate our

reversal of its decision.” Id. See also Mamula v. United Steelworkers

____________________________________________

8
  Lagom asserts that it “ordered a transcript pursuant to Pa.R.A.P. 1922(a)
together with the deposit, but was informed by the Court Reporter that she
was not present for the preliminary objections argument, so the proceeding
was not recorded and obviously there is nothing to be transcribed.” Lagom’s
Brief at 15 n.1. In an abundance of caution, our Court’s Prothonotary’s
office contacted the Allegheny County Court of Clerks and verified that there
was no record made of the September 9, 2015 argument.

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of America, 185 A.2d 595, 597 (Pa. Super. 1962) (“The injunction … was

issued without the filing of a bond and hence was a nullity.         No power

resided in the court below to issue an injunction where the party applying for

it had not filed an appropriate bond.”).

       In the case sub judice, the trial court reasoned that no bond was

necessary because “[t]he funds will be held in escrow pending resolution of

the dispute and then released to the appropriate party and, thus, the bond

would serve no purpose in this case. With the Order restricting the release

of the escrow, Lagom has a similar security that a bond would provide.” 9

TCO at 6. This Court, however, has previously rejected this rationale.10
____________________________________________

9
  We have explained that “[t]he requirement of a bond exists for the specific
purpose of protecting a defendant by supplying a fund to pay damages if this
relief is granted erroneously.”   Goodies Olde Fashion Fudge Co. v.
Kuiros, 597 A.2d 141, 144 (Pa. Super. 1991). It is unclear to this Court
how Lagom is afforded protection by being required to deposit $185,000
into an escrow account.
10
   In Walter, after a plaintiff filed a civil action against the defendants, she
sought a preliminary injunction against them, requesting that “any
proceedings from the sale of [the defendants’] property were to be
deposited into an escrow account from which the [defendants] could not
make a withdrawal without a court order.” Walter, 837 A.2d at 1207.
Upon granting the requested preliminary injunction, the trial court chose not
to require a bond, but instead added a provision to its order granting the
injunction that stated “IF the defendants prevail …, the [p]laintiff is
ORDERED to pay to the [d]efendants the court filing fee and reasonable
attorney fee associated with the [d]efendants’ request for a [c]ourt [o]rder
authorizing release of the house proceeds.... Otherwise, [the d]efendant[s’]
request for [the p]laintiff to post a bond … is hereby DENIED.” Id. at 1208.
On appeal, this Court determined that it had “no choice but to vacate the
order of the trial court due to its failure to require a bond.” Id. In doing so,
it noted that “[a]lthough the trial court attempted to fashion an alternative
(Footnote Continued Next Page)

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Accordingly, we must vacate the trial court’s order on this basis as well.11

      Order vacated. Remanded for further proceedings consistent with this

memorandum. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 1/4/2017

                       _______________________
(Footnote Continued)

to [Pa.R.C.P.] 1531(b), the law does not allow the trial court to act in this
manner.” Id. See also Rosenzweig, 327 A.2d at 38 (concluding that
injunction ordering the defendant to place disputed funds into an escrow
account was “defective and subject to being vacated” because it was issued
without the requisite bond being filed by the plaintiff) (citation omitted).
11
  Because we dispose of this matter on the above-stated grounds, we need
not determine the remaining issue raised by Lagom in its brief.

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