Court Opinion

ID: 3206474
Source: CourtListenerOpinion
Date Created: 2016-05-24 23:08:18.208632+00
Date Added: 2024-06-11T14:28:48.106677
License: Public Domain

J. A09006/16

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37

DAVID AULT                               :    IN THE SUPERIOR COURT OF
                                         :          PENNSYLVANIA
                   v.                    :
                                         :
ETHEL H. AND THOMAS E. AULT,             :         No. 1818 MDA 2015
                                         :
                        Appellants       :

           Appeal from the Judgment Entered October 16, 2015,
             in the Court of Common Pleas of Centre County
                      Civil Division at No. 2014-2108

BEFORE: FORD ELLIOTT, P.J.E., JENKINS AND PLATT,* JJ.

MEMORANDUM BY FORD ELLIOTT, P.J.E.:                    FILED MAY 24, 2016

      Ethel1 H. Ault and Thomas E. Ault (collectively, “appellants”) appeal

the order of the Court of Common Pleas of Centre County that entered

judgment in favor of David Ault in the amount of $35,506.

      On September 25, 2001, Harland E. Ault, Ethel H. Ault, Thomas E.

Ault, Clint Frazier, in his individual capacity and as trustee of the J.H. Ault

Trust, Jaime Ault, and David Ault, in his individual capacity and as trustee

for Dillon Ault, a minor (collectively, referred to as the “Partnership”)

entered into a limited partnership agreement (“Partnership Agreement”) for

* Retired Senior Judge assigned to the Superior Court.
1
  Curiously, Ethel Ault’s first name is spelled “Ethyl” in certain documents
and in the trial court caption even though she testified she spelled her name
as “Ethel.”      (Notes of testimony, 6/24/15 at 4.)          The trial court
acknowledged that her name was spelled incorrectly in the caption there.
J. A09006/16

the purpose of the ownership and management of real estate. Harland E.

Ault and Ethel H. Ault were the general partners as well as limited partners.

Upon the death of Harland E. Ault, Ethel H. Ault became the sole general

partner. Each limited partner currently has an interest of 14.8221 percent.

     The Partnership entered into an agreement with S & A Homes for the

sale of some real property owned by the Partnership. Under the terms of

the agreement, S & A Homes made an initial payment to the Partnership and

then annual payments for several years. In June 2013, S & A Homes made

the last payment to the Partnership in the amount of $238,802.         In July

2013, Ethel H. Ault wrote distribution checks to each limited partner. The

check for David Ault, Ethel Ault’s grandson, was made payable to David Ault

or Thomas [E.] Ault.   Thomas E. Ault is Ethel Ault’s son and David Ault’s

father. Thomas E. Ault deposited the check into a Uniform Gifts to Minors

custodial account for the benefit of David Ault’s three children. David Ault

did not receive the check in the amount of $35,506.00. He learned of the

distribution when he received the Partnership’s K-1 form in 2014.

     On or about June 4, 2014, David Ault commenced an action in the trial

court and alleged that appellants violated the terms of the Partnership

Agreement when the check was issued to Thomas Ault but deposited into the

account for the benefit of David Ault’s children.     David Ault filed suit for

$46,062 plus interest from July 2, 2013 plus costs.

                                    -2-
J. A09006/16

      In answer and new matter, appellants alleged that Thomas E. Ault and

David Ault discussed the 2013 distribution and that David Ault agreed that

his distribution should be put in a Uniform Gifts to Minors Act custodial

account with David Ault’s siblings, Nichole M. Mansell or Jaime J. Ault,

appointed as custodians for the benefit of David Ault’s three children.

Appellants requested that the complaint be dismissed.

      Initially, the case proceeded to a panel of arbitrators due to the

amount in dispute. The arbitrators awarded judgment in favor of David Ault

in the amount of $10,556. Appellants appealed to the trial court.

      On June 24, 2015, the trial court conducted a non-jury trial. Ethel H.

Ault testified on cross-examination that as general partner she was the only

person in charge of making disbursements. (Notes of testimony, 6/24/15 at

5.) When asked why she made the July 2, 2013 distribution check payable

to Thomas or David, she replied, “I guess that’s the way I wanted it.” (Id.

at 6.) She further testified that she gave the check to Thomas E. Ault and

did not tell David Ault that she wrote the check to Thomas or David. (Id. at

6.) Although the K-1 showed a distribution of $46,062 to David Ault, Ethel

Ault explained that the actual amount was approximately $35,000. (Id. at

7.)

      David Ault testified that in February or March of 2014 his father,

Thomas E. Ault, informed him that there was a distribution and that he had

“Put it into a certificate of deposit for [David Ault’s] three children, and it

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J. A09006/16

turns out [David Ault’s] brother and sister were named. It was their CD and

benefit of the children.”    (Id. at 10.)   David Ault had to pay tax on this

distribution even though he did not receive it. (Id. at 10-11.) He testified

that he did not authorize Ethel H. Ault to distribute the funds for which he

was entitled in the manner that she chose to distribute them.          (Id. at

11-12.)   On cross-examination, David Ault denied that he reached an

agreement with his father to place his distribution into an account for the

benefit of his children and then forgot that he made such an authorization.

(Id. at 17-18.)

      Thomas E. Ault testified on cross-examination that he directed Ethel H.

Ault to issue the distribution check to him or David Ault.      Thomas E. Ault

admitted that he deposited the check based on an oral agreement with

David Ault.     He admitted that he was estranged from his son.        (Id. at

21-22.)   Thomas E. Ault explained how he reached the alleged oral

agreement with David Ault:

              Well, I talked to him in May of 2013, because the
              payment was coming in June, and I said to him
              about this payment coming, you know, and I
              suggested it be put in for his children.

              He said, well, I didn’t know we had another payment
              coming.

              I said, yeah. I said, this is the final payment from
              S&A.

              He said, well, I didn’t know it was coming so it’s not
              like I’m going to miss it.

                                      -4-
J. A09006/16

Id. at 22.

          Thomas E. Ault explained that he took his son’s statement that he was

not going to miss the payment as his agreement with Thomas E. Ault’s plan

to set up an account for his grandchildren, David Ault’s children.      (Id. at

23.) Thomas E. Ault did not inform David Ault after he opened the account

for the minor children. (Id. at 25.) Thomas E. Ault admitted that he had no

authority to direct Ethel H. Ault to issue the check to David Ault or

Thomas E. Ault.       (Id. at 26.)    On direct examination, Thomas E. Ault

testified that David Ault’s ex-wife agreed to the opening of the account for

the children as she normally received a portion of David Ault’s distribution as

a result of the divorce agreement. (Id. at 31.)

          On August 19, 2015, the trial court entered judgment in favor of

David Ault in the amount of $35,506.2

          On August 31, 2015, appellants moved for post-trial relief and moved

to modify the verdict. They asserted that David Ault was equitably estopped

from seeking judgment against them because David Ault induced Thomas E.

Ault to place the funds in the custodial account when he said that he would

not miss the money and failed to object to the placement of the funds.

          On October 6, 2015, the trial court denied the motion for post-trial

relief:

2
 Although the total amount withdrawn and distributed according to the K-1
was $46,062, the parties apparently agreed that the actual distribution from
S & A Homes was $35,506.

                                       -5-
J. A09006/16

                   Here, [appellants] argue [David Ault] induced
            Defendant Thomas Ault to place [David Ault’s]
            distribution in a custodial account by stating that he
            would not miss the money and by failing to object to
            such placement of the funds.        The conversation
            regarding the 2013 distribution, however, did not
            rise to the level of agreement or consent. The
            conversation was not sufficiently clear as to place an
            obligation on [David Ault] to further act or speak in
            opposition to the proposal. There was conflicting
            testimony regarding the conversation, and there was
            no testimony regarding a discussion about the
            manner in which the custodial account would be
            created.    Merely stating he would not miss the
            money was insufficient to induce [appellants’]
            actions.

                   Further, [appellants] were not justified in
            relying on the conversation.          The Partnership
            Agreement states “[c]ash, when available, shall be
            distributed by the general partners to all partners in
            the same ratio as profits and losses are allocated.”
            Agreement § 3.05.            Under the partnership
            agreement, Defendant Thomas Ault is a limited
            partner and does not have the authority to alter the
            distribution or to direct Defendant Ethel Ault to alter
            the distribution.     Defendant, Ethel Ault, as the
            general partner, had a duty to follow the Limited
            Partnership Agreement and dispense [David Ault’s]
            portion of the funds to him. As such, [appellants]
            were not justified in relying on the conversation with
            [David Ault].

Trial court opinion, 10/6/15 at 2-3.

      Appellants raise the following issues for this court’s review:

            1.    Whether the trial court erred as a matter of
                  law when it held that the law required an
                  agreement or consent for [David Ault’s] actions
                  to satisfy the element of inducement[?]

            2.    Whether the trial court abused its discretion in
                  holding that [appellants] were not justified

                                       -6-
J. A09006/16

                   under the circumstances in relying on the
                   words and actions of [David Ault][?]

Appellants’ brief at 4.

      This court’s review of a trial court’s denial of a motion for post-trial

relief is limited to determining whether the trial court abused its discretion or

committed an error of law.      Paliometros v. Loyola, 932 A.2d 128, 132

(Pa.Super. 2007).

      Initially, appellants contend that the trial court erred when it held that

the law required an agreement or consent for David Ault’s actions to

constitute inducement in order to satisfy the requirements of equitable

estoppel.

                  Equitable estoppel is a doctrine that prevents
            one from doing an act differently than the manner in
            which another was induced by word or deed to
            expect. A doctrine sounding in equity, equitable
            estoppel recognizes that an informal promise implied
            by one’s words, deeds or representations which leads
            another to rely justifiably thereon to his own injury
            or detriment, may be enforced in equity. [Citations
            omitted.]

                  The two essential elements of equitable
            estoppel are inducement and justifiable reliance on
            that inducement. The inducement may be words or
            conduct and the acts that are induced may be by
            commission or forbearance provided that a change in
            condition results causing disadvantage to the one
            induced.    See generally, Funds for Business
            Growth, Inc. v. Woodland Marble and Tile
            Company. . . 278 A.2d 922 ([Pa.] 1971); Ham v.
            Gouge . . . 257 A.2d 650 ([Pa.Super.] 1969).

                 The elements of equitable estoppel and the
            burden of proof required to support such a claim are

                                      -7-
J. A09006/16

              well stated in Blofsen v. Cutaiar . . . 333 A.2d 841
              ([Pa.] 1975).

                           Equitable   estoppel    applies    to
                    prevent a party from assuming a position
                    or asserting a right to another’s
                    disadvantage inconsistent with a position
                    previously taken . . . the person inducing
                    the belief in the existence of a certain
                    state of facts is estopped to deny that
                    the state of facts does in truth exist, over
                    a different or contrary state of facts as
                    existing at the same time, or deny or
                    repudiate     his    acts,    conduct     or
                    statements.

                    ....

                    It is well established . . . that the burden
                    rests on the party asserting the estoppel
                    to establish such estoppel by clear,
                    precise and unequivocal evidence.

              Blofsen, 333 A.2d at 844.

Novelty Knitting Mills, Inc. v. Siskind, 457 A.2d 502, 503-504 (Pa.

1983).

      Here, appellants argue that David Ault’s statement that he would not

miss the distribution because he did not know it was coming induced them

to make the check payable to Thomas Ault or David Ault and to establish the

account for David Ault’s minor children. Further, the fact that David Ault did

not object to the idea contributed to the inducement, according to

appellants.

      The trial court determined that David Ault’s statement that he would

not   miss    the   money   was   insufficient   to   induce   appellants’   actions.

                                       -8-
J. A09006/16

Appellants failed to convince the trial court that they met their burden to

establish that David Ault was equitably estopped from challenging the

transfer of the distribution to which he was entitled to an account for his

children. This court is satisfied after reviewing the record that there is no

basis upon which to disturb the trial court’s conclusions. This court agrees

with the trial court that David Ault did not induce appellants to act.

      Appellants also contend that the trial court abused its discretion when

it found that they could not rely on the words and actions of David Ault to

follow the course of action they did because the Partnership Agreement

required that the general partner distribute available cash to the limited

partners and that any change regarding the distribution was required to be

in writing.   Because this court determines that the trial court did not err

when it found that David Ault did not agree to the placement of his share in

an account for his children, this court need not address in detail the

Partnership Agreement.      However, this court notes that the trial court

accurately stated that the Partnership Agreement required Ethel H. Ault as

general partner to pay the distribution to David Ault, a limited partner. The

Partnership Agreement also states that any amendment to it requires the

written consent of all partners. Thomas E. Ault did not have authority under

the Partnership Agreement to direct Ethel H. Ault to take David Ault’s

distribution and make a check in the amount of the distribution to Thomas

                                      -9-
J. A09006/16

Ault or David Ault. Further, Ethel H. Ault did not have the authority to make

that decision herself.

      Judgment affirmed.

Judgment Entered.

JosephD.Seletyn,Esq.
Prothonotary

Date: 5/24/2016

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