Court Opinion

ID: 4689088
Source: CourtListenerOpinion
Date Created: 2021-05-21 17:16:19.147595+00
Date Added: 2024-06-11T08:04:52.024054
License: Public Domain

J-S43016-20

                              2021 PA Super 104

CHRISTINE BIROS, AN INDIVIDUAL                      IN THE SUPERIOR COURT
                                                       OF PENNSYLVANIA
                          Appellee

                     v.

U LOCK INC., A PENNSYLVANIA
CORPORATION

                          Appellant                   No. 1841 WDA 2019

             Appeal from the Judgment Entered January 6, 2020
           In the Court of Common Pleas of Westmoreland County
                      Civil Division at No: 17 CJ 04886

BEFORE: SHOGAN, J., STABILE, J., and KING, J.

OPINION BY STABILE, J.:                                 FILED: MAY 21, 2021

      Appellant, U Lock Inc., appeals from the January 6, 2020 judgment

entered in favor of Appellee, Christine Biros. We affirm.

      The record reflects that, in 2014, Erik Martin agreed with the Estates of

Nicholas Schur, Anne Sarris, Alex Schur, and Michael Schur (the “Estates”) for

the purchase of real property (the “Property”) for $325,000. The agreement

of sale listed the buyer as Erik Martin, incorporator of ULock, Inc. Martin failed

to appear at the scheduled closing. A subsequent closing was scheduled for

July 16, 2015. One day prior, on July 15, 2015, Appellant filed articles of

incorporation.
J-S43016-20

       At the closing, Appellee appeared with four cashier’s checks worth

approximately $309,000.00 in total.1           In a brief, handwritten note which

provided for repayment on terms to be set by August 16, 2015, Appellant

agreed to treat the funds as a loan from Appellee. Appellee testified that she

made the loan at the behest of her brother, John Biros, and that she never

intended the money to be an investment in Appellant and she did not intend

to own shares in Appellant. Kash Snyder signed the handwritten agreement

on behalf of Appellant. The parties ultimately never agreed to the terms of

repayment, though Appellant does not dispute its outstanding debt to

Appellee.

       At the closing, Appellee remitted the funds directly to the Estates. The

Estates issued a settlement statement listing the buyer of the Property as

ULock, Inc.     Kash Snyder signed the settlement statement as director of

Appellant. His brother George Snyder, also of Appellant, accepted delivery of

the deeds (the “2015 Deeds”). George Snyder believed Appellee and John

Biros would be partners in the business venture; he did not expect Appellee

to request a repayment agreement on the day of the closing.

       On July 17, 2015, the day following the closing, the Pennsylvania

Secretary of State issued a letter rejecting Appellant’s articles of incorporation

because of an error in the docketing statement.          The letter provided that

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1 The Estates had already received the remainder of the balance in hand
money.

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Appellant could retain the July 15, 2015 date of incorporation so long as it

corrected the error within thirty days.          Appellant failed to make a timely

correction, but later refiled its articles of incorporation. The Secretary of State

accepted the new articles of incorporation on September 4, 2015.                On

February 13, 2018, while this action was pending, the Estates issued new

deeds to Appellant (the “2018 Deeds”). Appellant filed the 2018 Deeds with

the recorder of deeds on March 1, 2018.2

       On May 5, 2017, Appellee sent a letter to George Snyder designating

the outstanding balance of the loan as $385,939 and demanding, among other

things, repayment at 9% interest with a balloon payment of the outstanding

balance by June 1, 2022. On October 4, 2017, Appellee filed a complaint

against Appellant and the Estates alleging and seeking a declaratory judgment

that the July 2015 Deeds were void ab initio, and alleging equitable causes of

action to convey title, quiet title, and for an accounting. The Estates were

later dismissed from the action with the agreement to place blank deeds to

the Property in the court registry. Appellant filed an answer and new matter,

followed by several amended answers in response to Appellee’s preliminary

objections.

       On April 1, 2019, Appellee filed a praecipe to schedule trial.         Trial

commenced on April 29, 2019, and the trial court entered a declaration that

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2 According to Appellee’s opening argument, the 2018 Deeds were “subject
by the language of the deeds to Lis Pendens[.]” N.T. Trial, 4/29/19, at 16.

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the 2015 Deeds were void ab initio. The court also entered judgment favor of

Appellee on her action to compel conveyance of title. The court found that

Appellant would be unjustly enriched by maintaining its ownership in the

Property with no ability to repay Appellee the money she lent for its purchase.

Thus, the court found that Appellant held the property in constructive trust,

and it directed conveyance of the Property to Appellee.3

       In its post-trial motions, Appellant argued that Appellant’s declaratory

judgment action as to the 2015 Deeds was moot, given the 2018 Deeds and

the lack of any challenge as to their efficacy.    Appellant also argued that

indispensable parties were absent, given Appellee’s assertions: (1) that the

2015 Deeds were void ab initio, and (2) that Appellant was not the valid owner

of the Property.        Also, Appellant argued that Appellee did not plead

constructive trust and unjust enrichment in her complaint and did not argue

for it until the proposed conclusions of law she submitted at the conclusion of

trial. Appellant argued that Appellee’s unsecured loan did not entitle her to

any of the remedies the trial court granted, and that she had an adequate

remedy at law.

       The trial court conducted a hearing on the post-trial motions on

November 8, 2019. The trial court denied Appellant’s post-trial motions by

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3 The trial court also held that the quiet title action was moot, and that entry
of an accounting was not appropriate in an action at equity.

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order of December 9, 2019. The verdict was reduced to judgment on January

6, 2020. We now turn to the issues Appellant raises in this timely 4 appeal.

       On appeal from a non-jury trial, we are mindful of the following:

       Our appellate role in cases arising from non-jury trial verdicts is
       to determine whether the findings of the trial court are supported
       by competent evidence and whether the trial court committed
       error in any application of the law. The findings of fact of the trial
       judge must be given the same weight and effect on appeal as the
       verdict of a jury. We consider the evidence in a light most
       favorable to the verdict winner. We will reverse the trial court
       only if its findings of fact are not supported by competent evidence
       in the record or if its findings are premised on an error of law.
       However, [where] the issue ... concerns a question of law, our
       scope of review is plenary.

       The trial court’s conclusions of law on appeal originating from a
       non-jury trial are not binding on an appellate court because it is
       the appellate court’s duty to determine if the trial court correctly
       applied the law to the facts of the case.

Stephan v. Waldron Elec. Heating & Cooling LLC, 100 A.3d 660, 664–65

(Pa. Super. 2014)

       The first three of Appellant’s six assertions of error are related, and we

consider them together.

       I.     Whether the court lacked jurisdiction to grant declaratory
              and equitable relief as to the moot issue regarding the [2015
              Deeds] considering the new [2018 Deeds]?

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4 Appellant filed its notice of appeal prematurely before the entry of judgment.
We will treat Appellant’s premature appeal as one from the January 6, 2020
judgment and entertain jurisdiction. See Johnston the Florist v. TEDCO
Constr. Corp., 657 A.2d 511, 514-15 (Pa. Super. 1995) (holding that this
Court will entertain an appeal where the notice of appeal predates the entry
of judgment).

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       II.    Whether the court lacked jurisdiction as a result of the
              failure to join indispensable parties?

       III.   Whether the court erred by finding that filing mistake as to
              [Appellant’s] corporation papers warranted finding deeds
              void ab initio and transferring property to an unsecured
              creditor? ‘

Appellant’s Brief at 5.

       As set forth above, Appellant filed its articles of incorporation the day

before the 2015 closing, but the Commonwealth Secretary of State rejected

them. Appellant failed to cure the defect in time, and so its official date of

incorporation, September 4, 2015, postdates the transaction in which the

Estates transferred the Property to Appellant. On that basis, Appellee asked

the trial court to declare the 2015 Deeds void ab initio, and the court did so.

Appellant argues that any defect in the 2015 Deeds was cured and rendered

moot when the Estates issued the 2018 Deeds. Appellant also argues that

either 1) it was a de facto corporation pursuant to 15 Pa.C.S.A. § 5045 on July

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5   That section provides:

       Where heretofore or hereafter any act has been or may be done
       or any transfer or conveyance of any property has been or may
       be made to or by any corporation created or intended to be
       created under any statute supplied or repealed by this part, in
       good faith, after the approval of the articles or application for a
       charter or issuance of letters patent but without the actual
       recording of the original papers with the endorsements thereon,
       or a certified copy thereof, in the office of any recorder of deeds,
       as provided in such statutes then in force, the acts, transfers and
       conveyances shall nevertheless be deemed and taken to be valid
       and effectual for all purposes, regardless of the omission to record

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15, 2015, the date of transfer of the 2015 Deeds, or 2) Appellee failed to join

indispensable parties—namely the officers, directors, and/or shareholders of

the corporation to be.

       “An issue before a court is rendered moot when a determination is

sought in a matter which, when rendered, cannot have any practical effect on

the existing controversy.” Printed Image of York, Inc. v. Mifflin Press,

Ltd., 133 A.3d 55, 59 (Pa. Super. 2016). On consideration of the facts before

us, we conclude that the efficacy of the 2015 Deeds can have no effect on the

ultimate outcome of this case. Appellant has not challenged the efficacy of

the 2018 Deeds. Appellant cites no legal authority preventing the Estates from

issuing the 2018 Deeds subject to Lis Pendens. Furthermore, the trial court

accepted the legitimacy of the 2018 Deeds: “Even accounting for the void ab

initio status of the [2015 Deeds], the corrective [2018 Deeds], show legal title

in the [Property] belonging to U Lock, Inc.      Certainly, U Lock has had full

possession and control of the [Property] since July 16, 2015 […].” Trial Court

Opinion, 8/23/19, at 5. The 2018 Deeds did not prejudice Appellant’s cause

of action. In some ways, they facilitated it. Because of the 2018 Deeds, there

____________________________________________

       the original papers with the endorsements thereon, or a certified
       copy thereof, as heretofore required by such statutes. Every such
       corporation shall be deemed and taken to have been incorporated
       on the date of approval of its articles or application for a charter
       or on the date of issuance of its letters patent, whichever event
       shall have last occurred.

15 Pa.C.S.A. § 504.

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can be no dispute that Appellant is the proper party in interest, and therefore

the trial court had jurisdiction over Appellant’s action for conveyance of title.

Likewise, we have no need to determine whether Appellant, as of the July 15,

2015 closing, met the definition of a de facto corporation.       In short, the

efficacy—or lack thereof—of the 2015 Deeds has no bearing on the relief the

trial court ultimately ordered—imposing a constructive trust on the Property

and ordering its conveyance to Appellee. Thus, we come to Appellant’s fourth

assertion of error, and the heart of the matter:

      IV.   Whether the court erred in granting judgment and
            transferring ownership of the [P]roperty through a
            constructive trust when: (a) No allegations, facts, or
            theories or demand for for [sic] establishing a constructive
            trust were contained in the complaint or at trial; (b) No
            setting of the terms and conditions of the loan occurred by
            the trial court; (c) Transferring the [P]roperty under a
            constructive trust created an unjust enrichment and
            windfall; (d) Ordinary causes of action and a money
            judgment would have resolved the controversy?

Appellant’s Brief at 5.

      The following law governs the imposition of a constructive trust:

            A constructive trust arises when a person holding title to
      property is subject to an equitable duty to convey it to another on
      the ground he would be unjustly enriched if he were permitted to
      retain it.    The necessity for such a trust may arise from
      circumstances evidencing fraud, duress, undue influence or
      mistake.     The controlling factor in determining whether a
      constructive trust should be imposed is whether it is necessary to
      prevent unjust enrichment.

Nagle v. Nagle, 799 A.2d 812, 819 (Pa. Super. 2002) (citations omitted),

appeal denied, 820 A.2d 162 (Pa. 2003).

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      “There is thus no rigid standard for determining whether the facts of a

particular case require a court of equity to impose a constructive trust; the

test is whether or not unjust enrichment can thereby be avoided.” Stauffer

v. Stauffer, 351 A.2d 236, 241 (Pa. 1976). “This Court has repeatedly cited

with approval the oft-quoted language of Justice (then Judge) Cardozo in

Beatty v. Guggenheim Exploration Co., 122 N.E. 378, 380-81 (N.Y. 1919):

      A constructive trust is the formula through which the conscience
      of equity finds expression. When property has been acquired in
      such circumstances that the holder of the legal title may not in
      good conscience retain the beneficial interest equity converts him
      into a trustee … A court of equity in decreeing a constructive trust
      is bound by no unyielding formula. The equity of the transaction
      must shape the measure of relief.

Id. “To introduce the issue of a constructive trust a plaintiff must allege that

the putative trustee had legal title to the property, and that were he to retain

it, he would be unjustly enriched.” Buchanan v. Brentwood Fed. Sav. and

Loan Ass’n, 320 A.2d 117, 127 (Pa. 1974).

      Appellant argues that the trial court’s imposition of a constructive trust

must fail because Appellee did not specifically request the imposition of a

constructive trust in her complaint. We disagree. In her complaint, Appellee

alleges that she paid for the Property and that deeds were delivered to

Appellant.   Complaint, 10/4/17, at ¶¶ 10-11.      In her cause of action for

declaratory judgment, Appellee asked for a declaration that she was the

equitable owner of the property. Id. at ¶ 21(v). Further, in her cause of

action for equitable conveyance of title, Appellee alleged that she paid the

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Estates for the Property, that Appellant paid no money toward the purchase

of the Property, that Appellant never reimbursed Appellee for the payment,

and that Appellee, therefore, was entitled to own the Property in fee simple.

Id. at ¶¶ 22-29. Thus, while the words “unjust enrichment” and “constructive

trust” are absent from Appellee’s complaint, she very clearly pled the elements

of a constructive trust in accord with Buchanan, and the parties litigated

those elements at trial.6 Indeed, Appellant concedes that Appellee paid for

the Property; that she deserves to be repaid; and that Appellant has not repaid

her.

       Further, the record supports the trial court’s finding that Appellant lacks

the financial wherewithal to repay Appellee, as evidenced in this exchange

between Appellant’s counsel and George Snyder:

       Q.     Do you agree that you still owe this money, or U Lock, or
              someone, owes this money to [Appellee]?

       A.     Yes, I do.

       Q.     Are you attempting to try and make arrangements to pay
              that back?

       A.     Well, yes. We could at any time that the Lis Pendens – the
              deed makes it difficult.

       Q.     Okay. Are you willing to attempt to get that money together
              to pay her?

       A.     Absolutely.

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6  See also, Marion v. Bryn Mawr Tr. Co., ___ A.3d ___ (Pa. Super. 2021)
(looking at the substance of a cause of action, rather than its title, to
determine whether the plaintiff alleged a valid cause of action).

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       Q.     Do you have people that want to become involved in your
              corporation, after this lawsuit is over, that would give you
              money to be able to pay her off?

       A.     A whole list of people are very interested.

N.T. Trial, 4/29/19, at 49 (emphasis added). The trial court could reasonably

find from the bolded portion of this passage that Appellant could not, without

alienating the Property, repay Appellee. At other times during trial, the trial

court heard evidence that Appellant had limited resources, that it was not run

in accordance with applicable corporate law, and that it had never filed a

corporate tax return.7        From this, the trial court could reasonably reject

George Snyder’s self-serving testimony about his “whole list” of wiling

investors waiting for this litigation to go away.

       In summary, the record supports the following conclusions: 1) Appellee

paid for the Property on behalf of Appellant; 2) Appellee expected repayment

from Appellant; 3) Appellant never repaid Appellee; 4) Appellee had no

adequate remedy at law because Appellant lacked resources, other than the

Property, with which to compensate Appellee.            There was no dispute that

Appellee was entitled to repayment.            Thus, the trial court faced a choice

between imposing a constructive trust and awarding the Property to Appellee

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7 George Snyder testified that Appellant never filed tax returns. N.T. Trial,
8/29/19, at 52.      He was unsure whether Appellant ever issued stock
certificates to its 800 shareholders, and Appellant never sent an Internal
Revenue Service Form 1099 to any shareholder. Id. at 51-52. Appellant
maintained no insurance on the Property. Id. at 52. George Snyder believed
Appellant had corporate bylaws and minutes, but Appellant was unable to
produce them in discovery. Id. at 54.

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or entering judgment for Appellant and trusting that the conclusion of this

litigation would result in an influx of cash to Appellant with which it would,

finally, repay its debt. The trial court chose the former, and we conclude that

it acted well within the appropriate bounds for a court sitting as fact finder.

      That Appellant alleged causes of action for a declaratory judgment

(including a declaration that she is the owner of the Property) and equitable

conveyance of title, rather than for a constructive trust, does not alter our

result. As we have explained, the relief the court imposed is in accord with

the facts alleged in the complaint, the relief sought in the complaint, and the

issues litigated at trial.

      For all the foregoing reasons, we discern no error in the trial court’s

imposition of a constructive trust on the Property and its direction that

ownership thereof be transferred to Appellee.

      In its fifth assertion of error, Appellant claims the trial court erred in

scheduling a “snap trial” before the completion of discovery, and in denying

Appellant’s motion to continue the trial. Appellant’s Brief at 5. The trial court

acknowledges that its decision to schedule the trial was not in accord with the

Westmoreland County Rules of Civil Procedure. The court reasoned, however,

that Appellant suffered no prejudice from its action. The trial court cited Rule

126 of the Pennsylvania Rules of Civil Procedure, which permits it to “disregard

any error or defect of procedure which does not affect the substantial rights

of the parties.” Pa.R.C.P. No. 126. In its brief, Appellant complains that it

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was deprived of the opportunity to test Appellee’s claims through discovery,

but Appellant fails to specify any additional discovery it would have sought.

Likewise, Appellant does not explain precisely how the scheduled order

hampered its ability to defend itself in this case. For these reasons, Appellant

is not entitled to relief on this issue.

      In its sixth and final assertion of error, Appellant claims the trial court

erred in sustaining Appellee’s preliminary objection to scandalous and

impertinent material set forth in Appellant’s answer and new matter to

Appellee’s complaint. Appellant alleged that the funds Appellee used to pay

for the property were derived from illicit gambling activity. Rule 1028(a)(2)

permits a preliminary objection for “failure of a pleading to conform to law or

rule of court or inclusion of scandalous or impertinent matter[.]” Pa.R.C.P.

No. 1028(a)(2). “In order to be scandalous or impertinent, ‘the allegation

must be immaterial and inappropriate to the proof of the cause of action.’”

Breslin v. Mountain View Nursing Home, Inc., 171 A.3d 818, 822 (Pa.

Super. 2017) (quoting Common Cause/Pennsylvania v. Commonwealth

of Pennsylvania, 710 A.2d 108 (Pa. Commw. 1998)). We will reverse an

order sustaining a preliminary objection only if the trial court committed an

error of law or abuse of discretion. Id. at 822.

      The trial struck the allegation as immaterial and inappropriate to this

case of action. We agree. Whatever the source of Appellee’s funds, she pled

and proved that she paid for the Property expecting repayment, and that

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Appellant has remained in possession and enjoyment of the Property ever

since, without any apparent ability to make repayment. Thus, the source of

Appellee’s funds has no obvious bearing on the equities between the parties

to this case. We discern no error of law or abuse of discretion in the trial

court’s decision.

      For all the foregoing reasons, we affirm the trial court’s judgment in

favor of Appellee.

      Judgment affirmed.

      Judge King joins the opinion.

      Judge Shogan concurs in the result.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 5/21/2021

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