Court Opinion

ID: 4565997
Source: CourtListenerOpinion
Date Created: 2020-09-16 16:10:01.412406+00
Date Added: 2024-06-11T09:25:02.038172
License: Public Domain

J-A14038-20

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

JOHN R. FREY, ELAINE H. FREY,   :       IN THE SUPERIOR COURT OF
ROBERT G. FREY, SUE FREY, JAMES :            PENNSYLVANIA
MILLER, AND ROBIN MILLER        :
                                :
                                :
          v.                    :
                                :
                                :
BONNY GOLD, DENNIS GOLD,        :
SLURRY TECHNOLOGIES OPERATING, :
LLC, SLURRY TECHNOLOGIES        :
OPERATING, INC., PILGRIM ENERGY :
COMPANY, PILGRIM COAL COMPANY, :
CHARLES MUSE, A.C. MUSE, ESUM   :
PARTNERSHIP NO. 2, SLURRY       :
TECHNOLOGIES, INC., AGGREGATE   :
SOLUTIONS, INC., ALBERT C.      :
MUSE/REPRESENTATIVE OF THE      :
ESTATE OF CHARLES H. MUSE, JR., :
DECEASED, ALBERT C.             :
MUSE/REPRESENTATIVE OF THE      :
ESTATE OF CHARLES HOWARD MUSE, :
JR.                             :
                                :
                                :
          v.                    :
                                :
                                :
JAMES AND ROBIN FREY MILLER     :
                                :
                                :
APPEAL OF: BONNY GOLD, DENNIS   :
GOLD AND DEWATERING SERVICES,   :
LLC                             :       No. 1469 WDA 2019

          Appeal from the Order Entered September 6, 2019
          in the Court of Common Pleas of Venango County
                 Civil Division at No(s): 2002-00232

BEFORE: SHOGAN, J., McLAUGHLIN, J., and MUSMANNO, J.

MEMORANDUM BY MUSMANNO, J.:              FILED SEPTEMBER 16, 2020
J-A14038-20

       Dennis Gold (“Gold”), Bonny Gold, and Dewatering Services, LLC

(“Dewatering      Services”)       (sometimes    collectively   referred    to    as   the

“Appellants”), appeal from the September 6, 2019, Order finding Gold and

Dewatering Services in contempt of the trial court’s August 29, 2017,

Charging Order (the “Charging Order”), and ordering Gold to make

payments to John R. Frey, Elaine H. Frey, Robert G. Frey, Sue Frey, James

Miller, and Robin Miller (collectively, the “Plaintiffs”) for all distributions Gold

received from Dewatering Services after September 1, 2017. We affirm.

       On October 3, 2001, Plaintiffs filed a Complaint against Gold, Bonny

Gold, and other parties unrelated to this appeal, wherein they asserted

various causes of action related to business dealings between the parties. 1

Following a lengthy discovery period, a jury trial commenced on November

14, 2014, and concluded on November 24, 2014. The jury found, inter alia,

in favor of Plaintiffs as to their claims against Gold, and awarded Plaintiffs in

excess of two million dollars. On July 6, 2016, Judgment on the verdict was

entered.

       On May 22, 2017, Plaintiffs filed a “Motion for Supplementary Relief in

Aid   of   Execution    in   the    Form   of    a   Charging   Order”     (the   “Motion

____________________________________________

1  We note that Dewatering Services was not a party to the original action
filed by Plaintiffs.

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for a charging order”).2       Therein, Plaintiffs alleged that Gold was the sole

member of Dewatering Services, and requested that the trial court enter a

Charging Order against Gold’s transferable interest in Dewatering Services,

pursuant to 15 Pa.C.S.A. § 8853, to satisfy the approximately two million

dollar Judgment. Plaintiffs claimed that they were entitled to any current or

future distributions to which Gold was entitled from Dewatering Services,

and any contributions Gold had made to Dewatering Services.

       On August 29, 2017, the trial court granted Plaintiff’s Motion, in part,

and issued the Charging Order “with respect to whatever transferable

interest [Gold] has in Dewatering Services [].” The Charging Order further

stated,

              Any and all future distributions due to [Gold] by
       Dewatering [Services] shall be paid or otherwise turned over to
       Plaintiffs. No further distributions shall be made by Dewatering
       [Services] to [Gold] until Plaintiffs’ [J]udgment has been paid in
       full. [] [Gold] and Dewatering [Services] shall not divert any
____________________________________________

2 Prior to Plaintiffs’ filing of the Motion for a Charging Order, the Judgment
was appealed to this Court. Although a trial court lacks jurisdiction to take
action in a matter after an appeal is taken, Pa.R.A.P. 1701(a), the trial
court’s subsequent actions were permitted to preserve the status quo and
enforce the judgment. See Pa.R.A.P. 1701(b) (stating that “[a]fter an
appeal is taken … the trial court … may: (1) Take such action as may be
necessary to preserve the status quo … [and] (2) Enforce any order entered
in the matter….”); see also Forrester v. Hanson, 901 A.2d 548, 554 (Pa.
Super. 2006) (stating that “[t]his Court can raise the issue of jurisdiction sua
sponte.”).

This Court affirmed the July 6, 2016, Judgment on October 31, 2017. See
Frey v. Gold, 179 A.3d 622 (Pa. Super. 2017) (unpublished memorandum),
appeal denied, 187 A.3d 905 (Pa. 2018).

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      distributions due to [Gold] to any other individual or entity.
      Dewatering [Services] shall not amend, revise, or modify its
      operating agreement to allow for the diversion of any
      distributions to which [Gold] would or may be entitled.

Charging Order, 8/29/17, at 1-2 (unnumbered)

      On March 16, 2018, Plaintiffs filed a “Motion to Hold Dewatering

Services [] and [] Gold in Contempt of Court and/or to Enforce Charging

Order.” Therein, Plaintiffs alleged that subsequent to the trial court’s entry

of the Charging Order, Gold had received distributions from Dewatering

Services, totaling $30,100.00, in violation of the Charging Order. Plaintiffs

requested that the trial court (1) find Gold and Dewatering Services to be in

contempt of the Charging Order; (2) order Gold to pay Plaintiffs for any

distributions he received from Dewatering Services after entry of the

Charging Order; (3) order Gold and Dewatering Services to continue to

comply with the Charging Order; (4) award Plaintiffs reasonable counsel fees

for pursuing the Motion to enforce the Charging Order; and (5) impose a fine

of $500 against Dewatering Services and Gold for every day that they

continue to violate the terms of the Charging Order.

      Following a series of continuances, on August 1, 2018, the trial court

held a hearing on Plaintiffs’ Motion. Gold testified on behalf of Dewatering

Services and himself, and the parties stipulated to the admission into

evidence of the transcript from a deposition of Gold.

      On September 6, 2019, the trial court entered an Order granting in

part and denying in part Plaintiffs’ Motion to enforce the Charging Order.

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Specifically, the trial court (1) decreed that Gold and Dewatering Services

were in contempt of the Charging Order,3 and had violated the Charging

Order by “re-characterizing the monies [] Gold had previously received from

Dewatering Services[] as distribution payments as salary payments”; and

(2) ordered that Gold and Dewatering Services pay to Plaintiffs “all

distributions that have been made” following entry of the Charging Order,

and to otherwise comply with the Charging Order. Trial Court Order, 9/6/19,

at 1-2.4 Gold and Dewatering Services filed a timely Notice of Appeal. The

trial court did not order Gold and Dewatering Services to file a Pa.R.A.P.

1925(b) Concise Statement of matters complained of on appeal.

       Gold and Dewatering Services present the following claims for our

review:

       A. Whether the trial court abused its discretion or committed an
       error of law by finding, in the absence of any supporting
       evidence, that payments made by [Dewatering Services] to Gold
       before the entry of the Charging Order were prohibited
       distributions?

       B. Whether the trial court abused its discretion or committed an
       error of law by finding, in the absence of any supporting
____________________________________________

3 It is unclear whether 15 Pa.C.S.A. § 8853 grants a trial court authority to
hold in contempt a limited liability company in which the debtor holds a
transferable interest. See 15 Pa.C.S.A. § 8853. Nevertheless, because
neither party has questioned whether the court could hold Dewatering
Services in contempt, we will not address this potential issue herein.

4 Although Bonny Gold was a party to the original action, she was not
included in the Charging Order’s directives, and was not found in contempt
thereof.

                                           -5-
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      evidence, that payments made by [Dewatering Services] to Gold
      after the entry of the Charging Order were prohibited
      distributions?

Brief for Appellants at 5.     We will consider Appellants’ claims together as

they are related.

      Appellants    allege   that   the   trial court abused   its   discretion in

determining that the payments Gold received from Dewatering Services,

before and after entry of the Charging Order, were “distributions” as that

term is defined in the Pennsylvania Uniform Limited Liability Company Act of

2016, 15 Pa.C.S.A. §§ 8811-8898 (hereinafter, “the LLC Act”). See Brief for

Appellants at 21-36. Appellants claim that the payments Gold received from

Dewatering Services, which were labelled “draw[s] on company funds” prior

to the entry of the charging Order, were compensation for services he

rendered to Dewatering Services as an employee. Id. at 23-36. Appellants

argue that the definition of “distributions” explicitly excludes these salary

payments. Id. at 24.

      Both of Appellants’ arguments assert that the trial court incorrectly

applied the LLC Act. See 15 Pa.C.S.A. §§ 8811-8898.

      When reviewing a trial court’s interpretation of a statute, our
      standard of review is de novo, and our scope of review is
      plenary. The objective of all interpretation and construction of
      statutes is to ascertain and effectuate the intention of the
      legislature.   Generally, the best indication of the General
      Assembly’s intent is the plain language of the statute. When the
      words of a statute are clear and free from all ambiguity, they are
      presumed to be the best indication of legislative intent.

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Waldron Elec. Heating & Cooling, Inc. v. Caseber, 174 A.3d 1123, 1127

(Pa. Super. 2017) (quotation marks, citations, and brackets omitted).      To

the extent that Appellants’ arguments are based upon the trial court’s

findings of fact and credibility determinations, our review is limited to

determining whether the findings are supported by the record. See G & G

Inv’rs, LLC v. Phillips Simmons Real Estate Holdings, LLC, 183 A.3d

472, 478 (Pa. Super. 2018). “[T]his Court is not permitted to reexamine the

weight and credibility determinations or substitute our judgment for that of

the factfinder.”   Ruthrauff, Inc. v. Ravin, Inc., 914 A.2d 880, 888 (Pa.

Super. 2006).

      Section 8853 of the LLC Act states, in relevant part, as follows:

      (a) General rule.--On application by a judgment creditor of a
      member or transferee, a court may enter a charging order
      against the transferable interest of the judgment debtor for the
      unsatisfied amount of the judgment. … [A] charging order
      constitutes a lien on a judgment debtor’s transferable interest
      and requires the limited liability company to pay over to the
      person to which the charging order was issued any distribution
      that otherwise would be paid to the judgment debtor.

      (b) Available relief.--To the extent necessary to effectuate the
      collection of distributions pursuant to a charging order in effect
      under subsection (a), the court may:

                                       ***

            (2) make all other orders necessary to give effect to the
            charging order.

15 Pa.C.S.A. § 8853(a), (b).

      The LLC Act defines a “distribution” as

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     [a] direct or indirect transfer of money or other property or
     incurrence of indebtedness by a limited liability company to a
     person on account of a transferable interest or in the person’s
     capacity as a member. The term:

           (1) includes:

                 (i) a redemption or other purchase by a limited
                 liability company of a transferable interest; and

                 (ii) a transfer to a member in return for the
                 member’s relinquishment of any right to participate
                 as a member in the management or conduct of the
                 company’s activities and affairs or to have access to
                 records or other information concerning the
                 company's activities and affairs; and

           (2) does not include:

                 (i) amounts constituting reasonable compensation
                 for present or past service or payments made in the
                 ordinary course of business under a bona fide
                 retirement plan or other bona fide benefits program;

                 (ii) the making of, or payment or performance on, a
                 guaranty or similar arrangement by a company for
                 the benefit of any or all of its members;

                 (iii) a direct or indirect allocation or transfer effected
                 under Chapter 3 (relating to entity transactions) with
                 the approval of the members; or

                 (iv) a direct or indirect transfer of:

                       (A) a governance or transferable interest; or

                       (B) options, rights or warrants to acquire a
                       governance or transferable interest.

15 Pa.C.S.A. § 8812.

     The Official Note to Section 8853 provides relevant background

regarding charging orders:

                                     -8-
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            The charging order concept dates back to the English
      Partnership Act of 1890 and in the United States has been a
      fundamental       part  of law of   unincorporated    business
      organizations since 1914. As much a remedy limitation as a
      remedy, the charging order is the sole method by which a
      judgment creditor of a member or transferee can extract any
      value from the member’s or transferee’s ownership interest in a
      limited liability company.

             Under this section, the judgment creditor of a member or
      transferee is entitled to a charging order against the relevant
      transferable interest. While in effect, that order entitles the
      judgment creditor to whatever distributions would otherwise be
      due to the member or transferee whose interest is subject to the
      order. However, the judgment creditor has no say in the timing
      or amount of those distributions. The charging order does not
      entitle the judgment creditor to accelerate any distributions or to
      otherwise interfere with the management and activities of the
      limited liability company.

      ….

            Subsection      (a)--The    phrase     “judgment     debtor”
      encompasses both members and transferees. The lien pertains
      only to a distribution, which is defined in 15 Pa.C.S.[A.] § 8812
      to exclude “amounts constituting reasonable compensation for
      present or past service or payments made in the ordinary course
      of business under a bona fide retirement plan or other bona fide
      benefits program.” …

15 Pa.C.S.A. § 8853, Official Note.

      Notwithstanding,

      [u]nder subsection (b)(2), the court has the power to decide
      whether a particular payment is a distribution, because that
      decision determines whether the payment is part of a
      transferable interest subject to a charging order.

            EXAMPLE: Member A of ABC, LLC has for some years
            received distributions from the company. However, when
            a judgment creditor of A obtains a charging order against
            A’s transferable interest, the company ceases to make
            distributions to A and instead provides a salary to A

                                      -9-
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              equivalent to former distributions. A court might deem
              this salary a disguised distribution. …

15 Pa.C.S.A. § 8853, Official Note.

       Here, during the hearing on Plaintiffs’ Motion to enforce the Charging

Order, Gold testified that before Plaintiffs filed their Motion for a Charging

Order, he received payments that were “labeled by [Dewatering Services’]

CPA as a draw on the company. Draw on Company funds.” N.T., 8/1/18, at

18; see also N.T. (Gold’s Deposition), 6/30/18, at 12 (wherein Gold stated

that prior to Plaintiffs’ Motion for a Charging Order, he received “draws” from

Dewatering Services totaling $27,888). Gold stated that after Plaintiffs filed

the Motion for a Charging Order, there was a change in accounting at

Dewatering Services, and he started receiving payments that he would later

report on a W-2 federal tax form.5 N.T., 8/1/18, at 18-19; see also id. at

25, 29 (wherein Gold stated that the change in accounting occurred at or

about the time the Charging Order was entered by the trial court). Prior to

this change in accounting, Gold did not report the “draws” on a W-2. Id. at

18-19.; N.T. (Gold’s Deposition), 6/30/18, at 14.      Gold testified that the

amount of the payments did not change. N.T., 6/30/18 at 19. Gold stated
____________________________________________

5 The IRS’s website explains that “[e]very employer engaged in a trade or
business who pays remuneration, including non[-]cash payments of $600 or
more for the year (all amounts if any income, social security, or Medicare tax
was withheld) for services performed by an employee must file a Form W-2
for each employee.” About Form W-2, Wage and Tax Statement, Forms,
Instructions & Publications (August 12, 2020), https://www.irs.gov/forms-
pubs/about-form-w-2.

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that the only things that changed were how the payments were recorded in

Dewatering Services’ accounting books and how he reported the payments

to the federal government. Id. Gold stated that if the Charging Order had

not been entered, he would not have changed the way the payments were

characterized. Id. at 25. Gold further testified that prior to the Plaintiffs’

Motion for a Charging Order, the draws were issued in inconsistent amounts,

and depended on whether Dewatering Services had cash available after

paying its expenses. N.T. (Gold’s Deposition), 6/30/18, at 34-35.

      In its Order finding Gold in contempt and ordering him to pay the

Plaintiffs in accordance with the Charging Order, the trial court found that

Gold “willfully, deliberately, and knowingly” violated the Charging Order “by

re-characterizing   the   monies   []    Gold     had   previously   received   from

Dewatering Services [] as distribution payments [to] salary payments”

following entry of the Charging Order.           Trial Court Order, 9/6/19, at 1-2.

The trial court further found that Gold “intentionally changed the method by

which he received payments from Dewatering Services [] to avoid making

payments to [] Plaintiffs as directed by [the Charging Order].” Id.

      Upon review of the record, we conclude that the trial court did not

commit an error of law in determining that prior to entry of the Charging

Order, Gold received distributions from Dewatering Services, and that after

entry of the Charging Order, Gold disguised the distributions as salary

                                        - 11 -
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payments.6 See Waldron Elec. Heating & Cooling, supra; 15 Pa.C.S.A.

§ 8812; id. § 8853; see also id. § 8853, Official Note.           Accordingly,

Appellants’ claims fail, and we affirm the trial court’s Order.

       Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/16/2020

____________________________________________

6 We note that Gold testified that the payments he received from Dewatering
Services, both before and after the entry of the Charging Order, were salary
payments for services he provided to Dewatering Services, and that he
never received distributions from Dewatering Services. See N.T., 8/1/18, at
15-18. Nevertheless, from the verdict, it is apparent that the trial court
found this testimony incredible, and we will not substitute our judgment for
that of the factfinder. See Ruthrauff, Inc., supra.

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