Court Opinion

ID: 5175645
Source: CourtListenerOpinion
Date Created: 2022-01-03 17:11:11.463355+00
Date Added: 2024-06-11T08:26:16.940126
License: Public Domain

J-A26002-21

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    NICHOLAS BRACCIA                           :   IN THE SUPERIOR COURT OF
                                               :        PENNSYLVANIA
                                               :
                v.                             :
                                               :
                                               :
    ARG CA2PSLB001, LLC., FIRST                :
    NATIONWIDE TITLE AND VISITEL               :
    ENTERPRISES CORP                           :   No. 1456 EDA 2020
                                               :
                                               :
    APPEAL OF: VISITEL ENTERPRISES             :
    CORP                                       :

                  Appeal from the Order Entered July 22, 2020
     In the Court of Common Pleas of Bucks County Civil Division at No(s):
                                No. 2018-04758

BEFORE: BOWES, J., STABILE, J., and McCAFFERY, J.

MEMORANDUM BY BOWES, J.:                              FILED JANUARY 03, 2022

        Visitel Enterprises Corp (“Visitel”) appeals from the order denying

Visitel’s preliminary objections concerning alternative dispute resolution of the

underlying action, which was filed by Nicholas Braccia (“Braccia”) against

Thaddeus Pryor, James Perretty, Joseph Letzelter,1 Visitel, World Wide Child

Care (“WWCC”), Silverberg and Weiss, PA, Paul K. Silverberg, Esquire, Marcus

& Millichap Capital Corporation, First Nationwide Title, and ARG CA2PSLB001,

LLC.2 We affirm.

____________________________________________

1   Pryor, Perretty, and Letzelter were senior executives of Visitel.

2   We observe that
(Footnote Continued Next Page)
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       In 2004, Braccia and Visitel formed Braccia/Visitel, LLC (“BV”) and

Braccia/Visitel 2, LLC (“BV2”) as co-equal members.3 They established BV

and BV2 to own and develop property in New Britain and Warminster,

respectively, and construct a building thereon for use by Children of America

Child Care Center (“COA”), a Florida corporation of which Pryor, Perretty, and

Letzelter were senior executives.              Both BV and BV2 were governed by

operating agreements, which provided that “each LLC matter shall be decided

by unanimous vote of the members.”               BV Operating Agreement at 3; BV2

Operating Agreement at 3.           The operating agreements also included the

following arbitration provision:
____________________________________________

       “[a]s a general rule, an order [overruling] a party’s preliminary
       objections is interlocutory and, thus, not appealable as of right.”
       Callan v. Oxford Land Development, Inc., 858 A.2d 1229,
       1232 (Pa.Super. 2004). Rule 311 of the Pennsylvania Rules of
       Appellate Procedure, however, allows an interlocutory appeal as
       of right from any order which is made appealable by statute.
       Pa.R.A.P. 311(a)(8).     The Uniform Arbitration Act permits an
       immediate appeal from a “court order denying an application to
       compel arbitration made under section 7304 (relating to
       proceedings to compel or stay arbitration).”          42 Pa.C.S.
       § 7320(a)(1). Section 7304 of the Uniform Arbitration Act is
       applicable by way of 42 Pa.C.S. 7342(a) (incorporating specified
       sections of Uniform Arbitration Act in common law arbitration).

Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d 1085, 1089 n.1
(Pa.Super. 2015).       Here, the subject operating agreements contained
arbitration provisions, which Visitel relied upon in filing preliminary objections
to compel arbitration. Thus, the order appealed from is an interlocutory order
appealable as of right.

3 Subsequently, Visitel merged and transferred its ownership in BV to WWCC,
a Delaware corporation of which Pryor, Perretty, and Letzelter were also senior
executives.

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      11.1 Mandatory arbitration of certain disputed matters. Any
      dispute between or among the parties under or relating to this
      Agreement shall be exclusively and finally resolved by arbitration
      by a single arbitrator (the “Arbitrator”); PROVIDED, that matters
      relating to the routine business of the LLC shall be subject to
      arbitration or litigation by any member.

BV Operating Agreement at 8; BV2 Operating Agreement at 8.

      In 2018, Braccia initiated this action, alleging that several parties,

including Visitel, via Pryor, Perretty, and Letzelter, conspired to sell BV and

BV2 without Braccia’s knowledge or permission.        In his Second Amended

Complaint, Braccia raised claims of fraud, aiding and abetting fraud, civil

conspiracy, piercing the corporate veil, breach of contract, unjust enrichment,

fraudulent transfer, conversion, accounting, and contempt against Visitel. In

response, Visitel filed preliminary objections to transfer the dispute to

arbitration based upon the abovementioned arbitration clauses. On July 20,

2020, the trial court overruled Visitel’s preliminary objections. Specifically,

the trial court determined that because the suit involved voting rights and

decision-making surrounding the sale of the properties, the arbitration clauses

permitted Braccia to initiate the contract claim in arbitration or litigation

pursuant to the “routine business” carveout, and that the arbitration clauses

did not encompass the tort claims because those did not concern the operation

of the properties.

      This timely filed appeal followed. The trial court did not order Visitel to

file a concise statement pursuant to Pa.R.A.P. 1925(b), and none was filed.

The trial court, however, authored an opinion pursuant to Rule 1925(a).

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      Visitel presents a single question for our review: “Should the agreement

to arbitrate be enforceable in a dispute between the members of an LLC over

the distribution of proceeds from the sale of real property owned by that LLC?”

Visitel’s brief at 3.

      Our review of this issue is guided by the following principles:

      Our standard of review for an order overruling preliminary
      objections in the nature of a petition to compel arbitration is:

             [L]imited to determining whether the trial court’s
             findings are supported by substantial evidence and
             whether the trial court abused its discretion in denying
             the petition. Where a party to a civil action seeks to
             compel arbitration, a two-part test is employed. First,
             the trial court must establish if a valid agreement
             to arbitrate exists between the parties. Second, if the
             trial court determines such an agreement exists, it
             must then ascertain if the dispute involved is within
             the scope of the arbitration provision.       If a valid
             arbitration agreement exists between the parties, and
             the plaintiff’s claim is within the scope of the
             agreement, the controversy must be submitted
             to arbitration.

      Callan v. Oxford Land Development, Inc., 858 A.2d 1229,
      1233 (Pa.Super. 2004) (internal citations omitted). In making
      these determinations, courts must bear in mind:

             (1) arbitration agreements are to be strictly construed
             and not extended by implication; and (2) when parties
             have agreed to arbitrate in a clear and unmistakable
             manner, every reasonable effort should be made to
             favor the agreement unless it may be said with
             positive assurance that the arbitration clause involved
             is not susceptible to an interpretation that covers the
             asserted dispute.

             To resolve this tension, courts should apply the rules
             of   contractual     constructions,    adopting     an

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            interpretation that gives paramount importance to the
            intent of the parties and ascribes the most reasonable,
            probable, and natural conduct to the parties. In
            interpreting a contract, the ultimate goal is to
            ascertain and give effect to the intent of the parties as
            reasonably manifested by the language of their
            written agreement.

     Id. (internal citations and quotation marks omitted).

            [T]he court may take into consideration the
            surrounding circumstances, the situation of the
            parties, the objects they apparently have in view, and
            the nature of the subject-matter of the agreement.
            The court will adopt an interpretation that is most
            reasonable and probable bearing in mind the objects
            which the parties intended to accomplish through the
            agreement.

     Laudig v. Laudig, 624 A.2d 651, 653 (Pa.Super. 1993).

     ....

     “The existence of an [arbitration] agreement and whether a
     dispute is within the scope of the [arbitration] agreement are
     questions of law and our review is plenary.” Warwick Tp. Water
     and Sewer Authority v. Boucher & James, Inc., 851 A.2d 953,
     955 (Pa.Super. 2004).

Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d 1085, 1094–95

(Pa.Super. 2015) (cleaned up).

     Preliminarily, there is no real dispute that a valid arbitration agreement

exists between the parties. The issue, rather, is whether Braccia’s contract

and tort claims fall within the scope of the arbitration agreement. As noted

supra, the arbitration clause in the instant case provided for exclusive

arbitration of “[a]ny dispute between or among the parties under or relating

to” the operating agreement. BV Operating Agreement at 8; BV2 Operating

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Agreement at 8. However, “matters relating to the routine business of the

LLC shall be subject to arbitration or litigation by any member.” Id.

      We first examine whether the contract claim falls within the scope of the

arbitration clauses. Visitel argues that because “the substance of Braccia’s

claims center on the sale of subject real estate and distribution of the funds

thereof, Braccia’s claims are covered by the broad language of the arbitration

clauses and th[e] matter should be referred to arbitration.” Visitel’s brief at

19. Visitel further argues that the sale of the properties cannot fall under the

routine business carveout:

      Routine is defined [by Merriam-Webster dictionary] as “of a
      commonplace or repetitious character.” The sale of the Properties
      which BV and BV2 sought to own, develop, and lease, cannot, by
      definition, be of a common place or repetitious character. It can
      be done only once. The routine business of BV and BV2 would
      immediately cease upon such their sale of the Properties.

Visitel’s brief at 21-22 (cleaned up).

      Braccia, on the other hand, contends that the routine business carveout

applies to the contract claim:

      As a 50% member in BV and BV2, Mr. Braccia had voting rights
      relating to the Properties. Article 3.1 of the operating agreements,
      entitled “Matters on which members may vote,” provides that,
      “Except as otherwise expressly provided in this Agreement, each
      member may vote on all LLC matters.” Article 3.3 of the operating
      agreements, entitled “Number of votes necessary to decide LLC
      matters,” provides that, “Except as otherwise provided in this
      Agreement, each LLC matter shall be decided by unanimous vote
      of the members.” As the Properties were sold without Mr.
      Braccia’s knowledge or authorization, [Visitel] clearly violated Mr.
      Braccia’s right to vote under the operating agreements. As LLC
      voting is routine business of the LLC, Mr. Braccia was permitted
      to pursue his contract claim in arbitration or litigation.

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            [Visitel] again misses the mark as it relies on the definition
      of “routine” as it pertains to “routine problems.” However, as it
      relates to “routine business,” routine is defined [by Merriam-
      Webster dictionary] as “of, relating to, or being in accordance with
      established procedure.” The operating agreements clearly outline
      the established procedure for the members’ voting rights pursuant
      to LLC matters.

             The substance of Mr. Braccia’s contract claim is that he was
      not afforded his voting rights relating to the Properties. The
      operating agreements do not discuss the sale of the Properties.
      [Visitel], therefore, breached the operating agreements when it
      did not afford Mr. Braccia the opportunity to vote on whether the
      LLCs should sell the Properties . . . .

            Accordingly, Mr. Braccia properly exercised his right under
      the operating agreements to pursue his contract claim relating to
      the LLCs’ routine business through litigation.

Braccia’s brief at 20-22 (cleaned up).

      Visitel counters that

      [p]ermitting such a tactic would effectively destroy the arbitration
      clause as any dispute relating to the Operating Agreements could
      arguably boil down to one party voting for an act and another
      party voting against that act, or not having the opportunity to vote
      without any consideration of character of the act or if it is a
      common or repetitious matter for the company. Such a result is
      contrary to the clearly stated intent of the parties to resolve any
      dispute between or among the parties under or relating to the
      Operating Agreements to be resolved by arbitration, with the sole
      limited exception of matters relating to the routine business of BV
      or BV2.

Visitel’s brief at 22.

      Instantly, Braccia’s contract claim is based on the contention that Visitel

violated the voting procedures outlined in the operating agreements by selling

the properties without first soliciting Braccia’s vote. As noted by the parties,

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the purpose of BV and BV2 was to operate two properties. Nothing in the

operating agreements precluded the parties from selling the properties.

Accordingly, any decision to sell the properties would have been subject to the

voting procedures outlined in the operating agreements, i.e., a unanimous

vote to sell by both members. We agree with Braccia and the trial court that

the operating agreements’ voting procedures constitute routine business. See

TCO, 6/16/21, at 4.     As such, pursuant to the routine business carveout,

Braccia was permitted to bring suit in either private arbitration or in court for

this claim. Braccia chose litigation. Thus, we conclude that the trial court’s

findings are supported by substantial evidence and it did not abuse its

discretion in overruling Visitel’s preliminary objections as to the contract claim.

      Finally, we examine whether Braccia’s tort claims fall within the scope

of the arbitration clauses. As noted, the subject arbitration clauses provide

that “[a]ny dispute between or among the parties under or relating to [the

operating agreement] shall be exclusively and finally resolved by

arbitration[,]” subject to the routine business carveout.          BV Operating

Agreement at 8; BV2 Operating Agreement at 8 (emphasis added). “A broad

arbitration clause in a contract is one that is unrestricted, contains language

that encompasses all disputes which relate to contractual obligations, and

generally includes all claims arising from the contract regardless of whether

the claim sounds in tort or contract.” Provenzano, supra at 1096 (cleaned

up). In other words,

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      [a]n agreement to arbitrate disputes arising from a contract
      encompasses tort claims where the facts which support a tort
      action also support a breach of contract action. A claim’s
      substance, not its styling, controls whether the complaining party
      must proceed to arbitration or may file in the court of common
      pleas.

Callan, supra at 1233 (cleaned up).

      Visitel argues that because “the substance of Braccia’s [contract and

tort] claims center on the sale of subject real estate and distribution of funds

thereof, Braccia’s claims are covered by the broad language of the arbitration

clauses and this matter should be referred to arbitration.” Visitel’s brief at 19.

Braccia, on the other hand, contends that the “fraudulent and deceptive

conduct” underlying the tort claims do “not in any form arise under or relate

to the operation of the Properties and therefore [fall] outside the scope of the

applicable arbitration provisions.” Braccia’s brief at 18 (citation omitted). The

trial court agreed with Braccia, concluding that because the tort claims did not

pertain to the operation of BV or BV2, they were not subject to the arbitration

provisions.

      Visitel relies on this Court’s decision in Shadduck v. Christopher J.

Kaclik, Inc., 713 A.2d 635 (Pa.Super. 1998). In Shadduck, the Shadducks

entered a building contract with Christopher J. Kaclik, Inc. (“Builder”) to build

the Shadducks’ home.         The contract included a provision mandating

arbitration for all disputes arising out of the contract.     Subsequently, the

Shadducks filed a complaint against Builder for fraudulent misrepresentation

and violations of the Uniform Trade Practices and Consumer Protection Law

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(“UTPCPL”) regarding the construction of the home. The Shadducks also filed

a demand for arbitration based on the allegation that Builder’s faulty

construction of the Shadducks’ home constituted a breach of the parties’

contract and warranty obligations.      In response, Builder, inter alia, filed

preliminary objections in the nature of a motion to compel arbitration, arguing

that the parties’ agreement contemplated arbitration for all disputes and

claims, whether in tort or contract. The trial court denied Builder’s preliminary

objections and Builder appealed to this Court.

      On appeal, Builder argued the arbitration provision within the building

contract “was broadly worded and, by its plain language, contemplated that

all disputes, whether styled in tort or contract language, be submitted to

arbitration.” Id. at 637. The Shadducks conversely argued the arbitration

provision “was limited to causes of action sounding in contract and that they

were permitted, therefore, to file the . . . tort claims in the court of common

pleas.” Id.

      Upon review of the arbitration provision, which contained no limiting

language that would imply only contract claims fell within the purview of the

provision, we determined that all claims arising out of the building contract

would be subject to the mandatory arbitration provision. Id. at 637-38. Thus,

this Court next considered whether the claims at issue actually arose from the

building contract or the breach thereof. The Shadducks cited Nealy v. State

Farm Mut. Auto. Ins. Co., 695 A.2d 790 (Pa.Super. 1997), for the

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proposition that tort-based statutory claims are separate from claims arising

under a contract and therefore should not be subject to a mandatory

arbitration provision. This Court found Nealy distinguishable. In Nealy, we

concluded that due to the unique nature of bad faith claims, and because the

behavior underpinning the bad faith claim was “temporally and factually

distinct from any behavior that would impact upon the outcome of the

damages and liability disposition of the contract claim,” our courts of common

pleas held original jurisdiction over the bad faith claim. Shadduck, 713 A.2d

at 638 (quoting Nealy, supra at 794).

      In Dodds v. Pulte Home Corp., 909 A.2d 348, 350-51 (Pa.Super.

2006), this Court concluded, based upon Shadduck, that plaintiffs’ addition

of fraud charges did not remove the action from the scope of the arbitration

agreement therein because there was “no separate time period or facts” for

the fraud charges, and all claims were related to the agreement or purchase

of the home, and the arbitration agreement explicitly covered disputes arising

out of or related to the agreement or purchase of the home.

      In Fellerman v. PECO Energy Co., 159 A.3d 22, 24 (Pa.Super. 2017),

this Court applied the above principles to determine whether claims of

negligent misrepresentation, fraud, violations of the [UTPCPL], and breach of

contract against defendant Historic Home Inspection, LP (“Historic”) fell within

an agreement to arbitrate “any dispute between the parties. . . that in any

way, directly or indirectly, aris[es] out of, [is] connected with, or relat[es] to

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the interpretation of” the inspection agreement. The Fellermans’ claims all

were premised upon Historic’s alleged failure to provide proper services, in

breach of the inspection agreement. Since the tort claims arose from duties

allegedly owed under the inspection agreement, and thus the facts in support

of the tort action also supported a breach of contract action, we held that the

tort claims were subject to the agreement to arbitrate. Id. at 30-31 (citing

Callan, supra).

      Stated plainly, the foregoing case law distills to the following: Generally,

a tort claim will fall within the scope of an agreement to arbitrate disputes

arising out of or relating to a contract where the facts supporting the tort claim

also support a breach of contract claim. However, a tort claim will fall outside

such an agreement to arbitrate if the facts supporting the tort claim are

different from the facts supporting the breach of contract claim, and the

different behaviors complained of happened during separate time periods.

      Despite this general rule, the routine business carveout in the subject

arbitration clauses provides a unique wrinkle. Here, if the facts supporting

the tort claims also support the breach of contract claim herein, i.e., that

Visitel violated the voting procedures outlined in the operating agreements by

selling the properties without first soliciting Braccia’s vote, then Braccia would

be permitted to bring suit in either private arbitration or in court for those

claims pursuant to the routine business carveout.

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      Instantly, Braccia’s tort claims against Visitel are based upon Pryor,

Perretty, and Letzelter

      devis[ing] a plan and conspir[ing] among themselves and with
      others to sell the BV and BV2 properties out from underneath Mr.
      Braccia. Indeed, they negotiated the sale of the properties
      without Mr. Braccia’s knowledge, intentionally withheld material
      information relating to the sale from Mr. Braccia, forged the
      companies’ original resolutions for sale by removing Mr. Braccia’s
      signature block in order to push the sale through without Mr.
      Braccia’s knowledge or consent, misrepresented their authority to
      sell the properties on behalf of BV and BV2, and then quickly
      transferred and hid the proceeds of the sale in various accounts
      they controlled so Mr. Braccia could not find or recover the portion
      of the proceeds that are rightfully his.

Second Amended Complaint, 6/3/19, at 3. At their essence, these claims can

be divided into two categories. The first category of tort claims is based upon

the fraudulent sale of the properties. See Second Amended Complaint at 23-

24 (fraud), 25 (aiding and abetting fraud), 26 (civil conspiracy), 26-27

(piercing the corporate veil), 28 (unjust enrichment), 28-31 (fraudulent

transfer), and 31 (conversion). The second category of tort claims is based

upon Visitel hiding the proceeds from the sale. See id. at 23-24 (fraud), 25

(aiding and abetting fraud), 26 (civil conspiracy), 26-27 (piercing the

corporate veil), 28 (unjust enrichment), 28-31 (fraudulent transfer), 31

(conversion), 36-37 (accounting), and 37-38 (contempt).

      The facts underlying the first category of tort claims, i.e., those based

upon Visitel’s fraudulent circumvention of Braccia’s voting rights in selling the

property, also support Braccia’s breach of contract claim. Generally, under a

broad arbitration provision, those claims would then be subject to an

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agreement to arbitrate. Here, however, as with the breach of contract claim,

those claims fall within the routine business carveout. Braccia therefore was

permitted to bring suit in either private arbitration or in court for those claims.

He chose litigation. Accordingly, the trial court did not abuse its discretion in

overruling Visitel’s preliminary objections as to those tort claims.

      The second category of tort claims, those based upon Visitel hiding the

proceeds of the fraudulent sale, are factually and temporally distinct from

Braccia’s contract claim that Visitel failed to comply with the voting procedures

of the operating agreements prior to selling the properties. Specifically, hiding

the proceeds was temporally distinct from Braccia’s contract claim because it

occurred during a separate time period, i.e., after the allegations relevant to

breaching the operating agreements’ voting procedures ended. Additionally,

the acts supporting the allegations pertaining to hiding the proceeds do not

also support the breach of contract claim. We therefore agree with the trial

court that those tort claims fall outside the scope of the arbitration clauses as

they do not arise under or relate to the operating agreements. Accordingly,

the trial court did not abuse its discretion in overruling Visitel’s preliminary

objections as to those tort claims.

      Based on the foregoing, we affirm the order overruling Visitel’s

preliminary objections.

      Order affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 1/3/2022

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