Court Opinion

ID: 4171825
Source: CourtListenerOpinion
Date Created: 2017-05-25 16:16:05.126894+00
Date Added: 2024-06-11T14:13:05.853601
License: Public Domain

J. A03042/17
                             2017 PA Super 161

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

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

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

OPINION BY DUBOW, J.:                                 FILED MAY 25, 2017

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

2016 Judgment entered by the Lebanon County Court of Common Pleas

after a bench trial. We reverse.

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

Mark Hershey Farms, Appellee, manufactures, sells, and delivers feed for

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

a dairy farm and purchased feed from Appellee for several years.       Lonnie

placed the ownership interests for the land and business operations in
J. A03042/17

various corporate entities. Lonnie purchased feed from Appellee through the

entity known as Meadow Valley Dairy, Inc. (“Meadow Valley”).

      On February 13, 2009, Lonnie died with an outstanding debt owed to

Appellee of approximately $118,741.31 for previously delivered feed.

Appellant was designated as the Executor of Lonnie’s Estate in Lonnie’s Will.

Lonnie’s Will was probated in the Orphan’s Court of York County and Letters

Testamentary were issued to Appellant on February 19, 2009.         Appellant

was the sole beneficiary of the Estate.

      The trial court described the ownership situation of Meadow Valley as

follows:

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

Trial Court Opinion, 2/8/16, at 5.

      After Lonnie’s death, Appellant exercised control over the farm and its

operations as Executor of Lonnie’s Estate and as an employee of Meadow

Valley.    Appellant continued to order feed from Appellee through Meadow

Valley. He failed to pay $294,448.98, and by October 2010, Meadow Valley

owed Appellee a total of $413,190.29.

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

Complaint against Appellant individually, Appellant as Executor of Lonnie’s

Estate, Meadow Valley Dairy, Inc., 915 Galen Hall Road Associates, Jessica

Cow II, LLC, Med O Valley Farms, and Meadow Valley Dairy Farm.

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

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

unjust enrichment based on the feed deliveries to the farm from which

Appellant benefited.     For a remedy, Appellee sought specific money

damages.     Appellee did not request equitable relief.          Appellee never

amended or sought leave to amend the Complaint.

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

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

amount of $413,190.29, except Appellant individually. As a result, the only

issue remaining for trial was Appellant’s individual liability based upon the

two counts described above.

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

favor of Appellee in the amount of $413,190.29. The trial court pierced the

corporate veil to find Appellant liable individually for the debts incurred by

Meadow     Valley    Farm,    Inc.,   despite    his   failure    to   “[attain]

membership/ownership status with regard to the corporate entity.”          Trial

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

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court also found Appellant individually liable on this alternative basis. Trial

Court Opinion, 6/14/16, at 6-8.

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

Order amending the verdict award to $294,448.98 and entering Judgment.1

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

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

Rule 1925(b) Statement.

      Appellant presents the following issues for our review:

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

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

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

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

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

                                     -4-
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      personal, estate, and corporate funds is irrelevant to our
      determination of whether the corporate form should be
      disregarded.”

Appellant’s Brief at 4 (reordered).

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

in mind:

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

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

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

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

subject matter jurisdiction over this matter, which Appellant characterizes as

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

4.

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

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

relevant part, to exercise jurisdiction over the following matters:

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

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

                                 *     *     *

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

20 Pa.C.S. § 711.

      In addition to the mandatory exercise of jurisdiction over matters such

as those outlined above, the orphans’ court is also vested with the authority

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

disposition of any case where there are substantial questions concerning

matters enumerated in section 711 and also matters not enumerated in that

section.” 20 Pa.C.S. § 712.

      In addressing the issue of subject matter jurisdiction at the preliminary

objection stage, the trial court in the instant case concluded as follows:

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

                                     -6-
J. A03042/17

                                 *       *    *

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

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

the trial court and conclude that the trial court properly exercised subject

matter jurisdiction over this matter.

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

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

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

been applied almost exclusively to hold an equity holder liable for the debts

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

      Pennsylvania carries a strong presumption against piercing the

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

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

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

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

      Further:

      [T]he general rule is that a corporation shall be regarded as an
      independent entity even if its stock is owned entirely by one
      person... In deciding whether to pierce the corporate veil, courts
      are basically concerned with determining if equity requires that
      the shareholders’ traditional insulation from personal liability

                                        -7-
J. A03042/17

     be disregarded and with ascertaining if the corporate form is a
     sham, constituting a facade for the operations of the dominant
     shareholder. Thus, we inquire, inter alia, whether corporate
     formalities have been observed and corporate records kept,
     whether officers and directors other than the dominant
     shareholder himself actually function, and whether the
     dominant shareholder has used the assets of the corporation
     as if they were his own.

Fletcher-Harlee Corp., supra at 95-96 (emphasis added).            In light of

these principles of law, only a shareholder of the corporation may be

assessed liability for the acts of a corporation. See Village at Camelback

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

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

corporation when piercing the corporate veil).

     The trial court addressed Appellant’s arguments regarding his lack of

ownership interest as follows:

     While it is true that [Appellant] himself never actually came into
     a position of direct ownership, we believe that he was capable of
     holding an equitable interest in the corporation and that he did
     hold an indirect interest in the corporation by virtue of his status
     as the sole beneficiary of Lonnie’s Estate. His failure to attain an
     ownership position was due to his own failure to carry through
     with the administration of Lonnie’s Estate and his desire to shield
     himself from liability while he incurred additional substantial debt
     in the name of the corporation.

Trial Court Opinion, 2/8/16, at 10-11.

     Here, Lonnie’s ownership interests in the various corporate entities,

including Meadow Valley, passed into his Estate after his death. Appellant

did not possess or exercise ownership interests as a shareholder of any of

the various corporate entities, including Meadow Valley.     We acknowledge

                                    -8-
J. A03042/17

that Appellant was Executor of his father’s estate, acted as an employee,

and exercised sole control over Meadow Valley, but such realities do not

transform Appellant’s status into shareholder or equity holder.

      The trial court cited no supporting authority for piercing the corporate

veil to impose liability on a non-owner or non-shareholder. We can find no

support in our case law for such a novel theory of piercing the corporate veil

in order to assess liability on someone “capable of holding an equitable

interest in the corporation” or “hold[ing] an indirect interest […] as the sole

beneficiary[.]” Trial Court Opinion, 2/8/16, at 10. Such a broad rule would

be contrary to the limited nature of this narrow exception to the strong

presumption against piercing the corporate veil.

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

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

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

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

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

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

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

                                     -9-
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corporation[…] in total disregard of the rights of creditors[.]”    Trial Court

Opinion, 2/8/16, at 10-11.2

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

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

a non-shareholder and non-equity holder operating the corporation as an

employee and Executor of the Estate holding the sole ownership interest.

We reverse the June 14, 2016 Judgment.3

      Order reversed. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 5/25/2017

2
  We note that the proper mechanism to address the failure of an executor
to administer an estate properly is a surcharge or petition to remove the
Appellant.
3
  Based on our resolution above, we need not address Appellant’s remaining
issues on appeal.

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