Court Opinion

ID: 4196908
Source: CourtListenerOpinion
Date Created: 2017-08-17 18:12:33.934719+00
Date Added: 2024-06-11T07:47:29.902660
License: Public Domain

J-A04023-17

                                  2017 Pa. Super. 265

HUGH J. MURRAY SR.                                  IN THE SUPERIOR COURT OF
                                                          PENNSYLVANIA
                            Appellant

                       v.

WILLISTOWN TOWNSHIP

                            Appellee                     No. 2319 EDA 2016

                  Appeal from the Order Entered June 12, 2017
                In the Court of Common Pleas of Chester County
                        Civil Division at No(s): 14-12462

BEFORE: SHOGAN, J., SOLANO, J., and PLATT, J.*

OPINION BY SOLANO, J.:                                 FILED AUGUST 17, 2017

        Appellant Hugh J. Murray, Sr. appeals from the trial court’s June 12,

2017 order granting summary judgment in favor of Appellee Willistown

Township and reforming the parties’ contract. We affirm.

        The trial court set forth the facts of this case as follows:

        This dispute arises out of the voluntary retirement of plaintiff
        Hugh Murray, Sr. from his position as Township Manager of
        Willistown Township (the “Township”) in 2011 after eight (8)
        years of employment. The material facts . . . are not in dispute.

        Murray was appointed Willistown’s township manager in 2003.
        Prior to that time, Murray held the position of Chief of Police for
        the Township. Following Murray’s announcement of his intention
        to retire, the Township and Murray came to terms on an
        agreement whereby the Township agreed to provide Murray with
        certain severance benefits. Murray and the Township entered
        into an “Agreement and General Release of All Claims” (the
        “Agreement”) on December 30, 2011. The Agreement, which
        Murray had reviewed by counsel, provided for Murray to receive
____________________________________________
*
    Retired Senior Judge assigned to the Superior Court.
J-A04023-17

       some benefits in retirement, including dental, medical and life
       insurance benefits.[ 1 ] The provision relating to Murray’s life
       insurance benefits is what brings the parties before the court.

       At the time of his retirement, Murray had group life insurance in
       his capacity as Township Manager in the amount of $375,000.
       The Agreement at Section 2(a) therefore provided as follows:

              2. Severance Benefits. The Employer agrees to
              provide the employee the following severance
              benefits:

                 a.   Employee shall be eligible to continue to
                 participate, at the Employer’s expense, in the
                 present group life insurance plan ($375,000)
                 offered by the Employer as may be carried from
                 time to time for all eligible employees on the
                 same terms and conditions that the Employee
                 currently participates.

       Unbeknownst to either party, under the prevailing group plan an
       employed township manager is considered a “Class 1 Member”
       eligible for a $375,000 group life benefit. However, a retiree,
       such as Murray, is only eligible for benefits in the amount of
       $20,000, retirees being considered by the insurer as “Class 4
       Members.”      Upon learning of the policy’s restrictions, and
       advising Murray of the same, the Township attempted to secure
       an individual insurance policy for Murray for the amount
       specified in the parties’ Agreement, but ultimately concluded
       that it was unable to make such a purchase under its enabling
       statute.[2]
____________________________________________
1
   In exchange for these benefits, Murray agreed to “release[] and
discharge[] [the Township] . . . from all claims, liabilities, demands and
causes of action known or unknown, fixed or contingent, which [Murray]
may have against [the Township] as a result of this separation from
employment.” Agreement, ¶ 5.
2
 As a township of the second class, Willistown is governed by the Second
Class Township Code, Section 1512(d) of which provides, in relevant part:

       The board of supervisors may contract with any insurance
       company, nonprofit hospitalization corporation or nonprofit
(Footnote Continued Next Page)

                                           -2-
J-A04023-17

      Thereafter, the Township advised Murray that it could only
      provide him with $20,000 in life insurance benefits under the
      group policy and that it was not permitted to secure an
      individual policy for him. Murray filed suit asserting claims for
      breach of contract, specific performance, a claim under the Wage
      Payment and Collection Law (which was later dismissed per
      stipulation) and unjust enrichment.[3] The Township also filed
      suit asserting a count for declaratory judgment which sought a
      declaration that the Agreement’s life insurance provision in
      Section 2(a) was invalid as a matter of law and, in the
      alternative, a claim for contract reformation of Section 2(a),
      replacing the amount listed therein with $20,000. The two
      actions, Docket Nos. 2014-12462 and 2014-12086, were
      consolidated under Docket No. 2014-12462.

Trial Ct. Order, 6/29/16, at 2-3 n.1 (citations to the record omitted).4

      On March 15, 2016, the Township filed a motion for summary

judgment on all parties’ claims.          After considering the briefs submitted by

the parties, the trial court granted the Township’s motion on June 29, 2016.

The court granted the Township’s request for reformation of the Agreement
                       _______________________
(Footnote Continued)
      medical service corporation to insure its supervisors . . . ,
      employe[e]s and their dependents under a policy or policies of
      group insurance covering life, health, hospitalization, medical
      service or accident insurance.

53 P.S. § 66512(d) (emphasis added).         The Township construed this
provision to mean that it was authorized to purchase only group life
insurance. Murray does not contest that interpretation.
3
  Murray sought damages in an amount that would enable him to purchase
$375,000 in life insurance or, alternatively, a court order requiring the
Township to purchase life insurance coverage for him in an amount not less
than $375,000. Murray did not seek contract reformation.
4
  The trial court explained its order in a lengthy footnote. All citations to
pages of the June 29, 2016 order following page 1 are to the text of footnote
1 of that order.

                                            -3-
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and reformed Section 2(a) to read: “Employee shall be eligible to continue to

participate, at the Employer’s expense, in the present group life insurance

plan ($20,000) offered by the Employer, as may be carried from time to

time for all eligible employees.” Order, 6/29/16, at 1.

      The trial court found that there had been a mutual mistake of fact:

when they signed the contract, the parties mistakenly believed that Murray

would be eligible for life insurance in the amount of $375,000 under the

terms of the group plan. Trial Ct. Order, 6/29/16, at 4-5. The court held

that it had authority to reform the contract based on that mutual mistake.

Id. at 4 (citing Smith v. Thomas Jefferson Univ. Hosp., 621 A.2d 1030,

1032 (Pa. Super.), appeal denied, 631 A.2d 1009 (Pa. 1993)). The trial

court rejected Murray’s argument that he was entitled to $375,000 in

individual life insurance, reasoning that (1) the Township did not have the

statutory authority to purchase individual life insurance for any current or

former employee; and (2) the Township was not bound under the

Agreement to purchase individual life insurance for Murray.         Id. at 3-4.

Murray filed a timely appeal on July 25, 2016.

      In its June 29, 2016 order, the trial court did not expressly enter

summary judgment on the Township’s claim for a declaratory judgment or

on any of Murray's claims. Until the trial court “disposes of all claims and of

all parties,” there is no final order that is appealable to this Court. Pa.R.A.P.

341(b)(1). Therefore, on June 5, 2017, this Court ordered the trial court to

                                      -4-
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“either amend the summary judgment order docketed on June 29, 2016 to

enter judgment on all of the claims by each party in the case, or . . . inform

this Court that it shall not now amend the order because some claims

remain outstanding.”         In response, on June 12, 2017, the trial court

amended its June 29, 2016 order to (1) grant summary judgment in favor of

the Township on its contract reformation claim; (2) deny summary judgment

as to the Township’s declaratory judgment claim because it was moot; and

(3) grant summary judgment in favor of the Township on all of Murray’s

claims. Murray’s appeal is now properly before this Court.                See Pa.R.A.P.

905(a)(5) (“A notice         of appeal         filed   after   the   announcement of a

determination but before the entry of an appealable order shall be treated as

filed after such entry and on the day thereof”).5

       On appeal, Murray raises the following issue:

       Did the trial court err as a matter of law or abuse its discretion in
       holding on summary judgment that [Murray] was only entitled to
       $20,000 of life insurance coverage and no other relief when the
____________________________________________
5
    Because the parties agree that Section 1512(d) of the Second Class
Township Code does not permit the Township to offer an individual policy of
insurance, this case does not “draw[] into question the application,
interpretation or enforcement” of that statute and therefore is not within the
jurisdiction of the Commonwealth Court. See 42 Pa.C.S. § 762(a)(4). Both
parties agree that this Court has jurisdiction. See Township’s Brief at 1;
see also 42 Pa.C.S. § 704(a) (“The failure of an appellee to file an objection
to the jurisdiction of an appellate court within such time as may be specified
by general rule, shall, unless the appellate court otherwise orders, operate
to perfect the appellate jurisdiction of such appellate court, notwithstanding
any provision of this title, or of any general rule adopted pursuant to section
503 (relating to reassignment of matters), vesting jurisdiction of such appeal
in another appellate court”).

                                           -5-
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       clear and undisputed intention of the parties was that [Murray]
       was to receive $375,000 in life insurance coverage or, in the
       alternative, equitable relief of equivalent value thereto[?]

Murray’s Brief at 5.

       This Court’s standard of review is deferential:

       Appellate review of equity matters is limited to a determination
       of whether the chancellor committed an error of law or abused
       his discretion. The scope of review of a final decree in equity is
       limited and [the decree] will not be disturbed unless it is
       unsupported by the evidence or demonstrably capricious.

Vautar v. First Nat’l Bank of Pa., 133 A.3d 6, 12 (Pa. Super. 2016) (en

banc) (brackets and citation omitted).

       In his appellate brief, Murray does not dispute the trial court’s

conclusion that there was a mutual mistake of fact 6 or the trial court’s

holding that it had authority to reform the contract. See Murray’s Brief at

13, 16.    Murray instead argues that the reformation ordered by the trial

court was inequitable.7 In Murray’s view, the trial court’s order should have

____________________________________________
6
   In his response to the Township’s motion for summary judgment, Murray
had denied that there was a mutual mistake. See Murray’s Resp. to Mot. for
Summ. J. at ¶ 14. Murray no longer advances that position, and states in
his brief, “[t]he trial court was correct in determining that the Agreement
between the parties was based upon a mutual mistake.” Murray’s Brief at
13.
7
  Murray also contends that the court erred in “imposing its relief without
any evidence before the court as to other available and reasonable option[s]
for relief,” Murray’s Brief at 16, and by “fail[ing] to hear evidence.” Id. at
13. However, Murray has identified no disputed issues of material fact that
should have precluded the entry of summary judgment. See Pa.R.Civ.P.
1035.3(a). No evidentiary hearing was required. See Molineux v. Reed,
532 A.2d 792, 793 (Pa. 1987).

                                           -6-
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been based on some “other available and reasonable option,” such as

requiring the Township to pay (1) to Murray’s estate, $375,000 upon

Murray’s death; (2) to Murray, an amount equal to the sum of the annual

premiums on an individual policy for $375,000 in life insurance over some

reasonable number of years8; or (3) to Murray, an annual amount equal to

the premium on an individual policy for $375,000 in life insurance until his

death or until total premiums of $375,000 have been paid.        See Murray’s

Brief at 16-17.

       We begin with the threshold question of whether the trial court had the

authority to reform the contract after it determined that $375,000 in group

life insurance could not be provided to Murray. As noted, Murray’s appeal

does not challenge this authority and instead contends only that the specific

reformation ordered by the trial court was insufficient to satisfy his needs.

Both parties agree that contract reformation is an appropriate equitable

remedy in this case: the Township sought such reformation in its complaint;

and in his appellate brief, Murray insists that in the situation presented here,

“the court is to equitably ‘reform’ the contract so that the intentions of the

parties are achieved to the greatest extent possible.” Murray’s Brief at 13.

However, neither party has cited any case in which a Pennsylvania court has

“reformed” a contract in the way that was done here, and our own research

____________________________________________
8
  Murray says the premiums would have been $15,750 per year in 2013, but
they increased as Murray aged. Murray’s Brief at 11.

                                           -7-
J-A04023-17

has uncovered no such authority. Before we can address Murray’s challenge

to the precise reformation relief that the trial court ordered, we must

determine the nature and propriety of the type of reformation remedy

employed by the trial court, since the legal basis for such relief necessarily

will bear on how we address Murray’s challenge to the scope of the trial

court’s contractual “reform.”

      The trial court ordered reformation because the parties made a mutual

mistake about the availability of group insurance to cover Murray after he

retired. We have stated:

      The doctrine of mutual mistake of fact serves as a defense to the
      formation of a contract and occurs when the parties to the
      contract have an erroneous belief as to a basic assumption of
      the contract at the time of formation which will have a material
      effect on the agreed exchange as to either party. A mutual
      mistake occurs when the written instrument fails to set forth the
      true agreement of the parties. The language on the instrument
      should be interpreted in the light of subject matter, the apparent
      object or purpose of the parties and the conditions existing when
      it was executed.

Voracek v. Crown Castle USA Inc., 907 A.2d 1105, 1107-08 (Pa. Super.

2006) (quoted citation omitted), appeal denied, 919 A.2d 958 (Pa. 2007).

Mutual mistake regarding an essential term of a contract may provide a

basis for the contract’s rescission if (1) the mistake relates to “an essential

fact which formed the inducement to [the contract],” and (2) “the parties

[can be] placed in their former position with reference to the subject-matter

of [the contract].” See Vrabel v. Scholler, 85 A.2d 858, 860 (Pa. 1952);

Gocek v. Gocek, 612 A.2d 1004, 1006 (Pa. Super. 1992). Alternatively, if

                                     -8-
J-A04023-17

the same conditions are met, “[c]ourts can reform a contract entered under

mutual mistake.” Allen-Myland, Inc. v. Garmin Int'l, Inc., 140 A.3d 677,

693 (Pa. Super. 2016) (cited quotation omitted); RegScan, Inc. v. Con-

Way Transp. Servs., Inc., 875 A.2d 332, 340 (Pa. Super. 2005) (“If a

mistake is demonstrated, the contract may be reformed, or the injured party

may avoid his or her contractual obligations”); see also Smith, 621 A.2d at

1032 (“to obtain reformation of a contract because of mutual mistake, the

moving party is required to show the existence of the mutual mistake by

evidence that is clear, precise and convincing”).9

       We most commonly have allowed reformation of mistaken contract

provisions in cases of “scriveners’ errors,” where the parties’ writing

mistakenly failed to record their agreed-upon intentions. See Daddona v.

Thorpe, 749 A.2d 475, 487 (Pa. Super.) (“[a] mutual mistake occurs when

the written instrument fails to . . . set forth the ‘true’ agreement among the

parties”), appeal denied, 761 A.2d 550 (Pa. 2000); see also Bollinger v.

Central Pa. Quarry Stripping & Constr. Co., 229 A.2d 741, 742 (Pa.

1967); Bugen v. New York Life Ins. Co., 184 A.2d 499, 500 (Pa. 1962).

In such situations, the court may reform the contract document so that its

language conforms to what the parties intended.      Bollinger, 229 A.2d at

742. The error here, however, is not a drafting error; the written document
____________________________________________
9
 Because the parties agree that there was a mutual mistake, we need not
consider whether the evidence is sufficient to prove a mistake under Smith.

                                           -9-
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faithfully records what the parties intended. Rather, the error results from

the parties’ failure to understand that the insurance that they contemplated

and for which they provided in their written contract document was not

available under the Township’s group insurance arrangement. Reformation

of the contract therefore can be accomplished only by changing it to provide

for a different insurance benefit from what the parties intended when they

entered into their agreement. The parties have not cited and we have not

found any Pennsylvania case law authorizing a reformation of that type.

       The American Law Institute’s Second Restatement of Contracts

suggests, however, that after discovery of a mistake, a remedy akin to

reformation may be available in some situations other than drafting errors

“on such terms as justice requires[,] including protection of the parties’

reliance interests.”     Restatement (Second) of Contracts § 158(2) (1981).10

A comment explains:

____________________________________________
10
   Sensitive to the rules relating to reformation in cases of scriveners’ errors,
the Restatement is careful to distinguish traditional reformation from the
ability to fix a mistaken contract term under Section 158. See Restatement
(Second) of Contracts § 155 cmt. b (“The discretionary relief authorized
under the rule stated in § 158 may involve some reshaping of the contract
duties by the court but is different from reformation”). Section 158 equates
the relief that it authorizes more closely to the necessary implication of an
implied, essential contract term under Section 204. Restatement (Second)
of Contracts § 158 cmt. c. We do not believe these technical distinctions
limit the availability of relief in this case. Because the trial court referred to
its remedy as “reformation,” we use that same term in this opinion to refer
both to traditional reformation and to the remedies discussed by Section
158(2) of the Second Restatement.

                                          - 10 -
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       Sometimes the party who is not adversely affected by a mistake
       can, by assenting to a modification of the contract, eliminate the
       effect of the mistake on the agreed exchange.           He should
       generally be allowed to do so and thereby to preclude avoidance
       by the party who would otherwise be adversely affected. A court
       may, under Subsection (2), grant the party who has not been
       adversely affected what is, in effect, an option to enforce the
       contract on new terms.

Id. § 158 cmt. c. 11       This Restatement provision has not previously been
                                               12
considered by our appellate courts,                 but the American Law Institute

describes it as a “specific application” of principles under Section 204 of the

Second Restatement, which provides that a court may imply necessary

terms of a contract that have not been stated in the written document. See

id., Reporter’s Note; Restatement (Second) of Contracts § 204 & cmt a. The

idea is that if a mutual mistake voids an essential contract provision, a court

should be able to imply a new provision that will replace its essential terms,

so long as the party not adversely affected by the mistake assents to the

modification.    See id. § 158 cmt. c.          Pennsylvania courts have employed

Section 204’s “doctrine of necessary implication as a means of avoiding
____________________________________________
11
  See also Restatement (Second) of Contracts § 152 cmt. d (“A party may
choose to seek relief by means of reformation even though it makes his own
performance more onerous when, absent reformation, the contract would be
voidable by the other party”).
12
  Where, as here, the Supreme Court of Pennsylvania has neither adopted
nor rejected a Restatement provision, we are free to adopt it in an
appropriate case. See Newell v. Montana W., Inc., 154 A.3d 819, 824
n.7 (Pa. Super. 2017). We note that “Pennsylvania courts regularly employ
the Restatement (Second) of Contracts when resolving contract disputes.”
Hart v. Arnold, 884 A.2d 316, 333 (Pa. Super. 2005), appeal denied, 897
A.2d 458 (Pa. 2006).

                                          - 11 -
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injustice by inferring contract provisions that reflect the parties’ silent

intent.” Stamerro v. Stamerro, 889 A.2d 1251, 1259 (Pa. Super. 2005)

(citation omitted); see Banks Eng’g Co. v. Polons, 752 A.2d 883, 886 n.4

(Pa. 2000) (plurality opinion); Hodges v. Pa. Millers Mut. Ins. Co., 673
A.2d 973, 974-75 (Pa. Super. 1995); Slater v. Pearle Vision Ctr., Inc.,

546 A.2d 676, 679 (Pa. Super. 1988).

       Although the parties have focused on their mutual mistake regarding

the availability of insurance, the issue here more closely resembles one of

impracticability of performance resulting from the unavailability of the

desired coverage for Murray under the Township’s group insurance policy.

See generally Hart v. Arnold, 884 A.2d 316, 334-35 (Pa. Super. 2005),

(discussing impracticability of performance), appeal denied, 897 A.2d 458

(Pa. 2006).13 In this situation too, the Second Restatement provides that a

____________________________________________
13
   Indeed, the parties’ “mistake” was in believing that group insurance in the
amount of $375,000 was available for Murray after he retired and, therefore,
in not realizing that performance of the contract’s provision for such
insurance was impracticable. Contractual impracticability usually results
from some supervening event after the parties entered the contract. See
Restatement (Second) of Contracts § 261; Hart, 884 A.2d at 334. It can
also result, however, from a condition existing at the time of the contract’s
formation. See Restatement (Second) of Contracts § 266; ALCOA v. Essex
Group, Inc., 499 F. Supp. 2d 53, 72 (W.D. Pa. 1980). Section 266 of the
Second Restatement, which has not been discussed in any reported
Pennsylvania appellate decision, states that such an impracticability excuses
performance of a contractual obligation if the obligor had no reason to know
of it and the condition was not the obligor’s fault. See id. § 266(1). The
trial court stated that the unavailability of $375,000 in life insurance for
Murray under the applicable group policy was “[u]nbeknownst to either
party,” Trial Ct. Order, 6/29/16, at 2, but it did not address whether either
(Footnote Continued Next Page)

                                          - 12 -
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remedy akin to reformation is permissible to avoid injustice.            Restatement

(Second) of Contracts § 272.           The Restatement explains that this result is

merely another specific application of the principles of Section 204:

      Under the rule stated in § 204, when the parties have not agreed
      with respect to a term that is essential to a determination of
      their rights and duties, the court will supply a term that is
      reasonable in the circumstances. Since it is the rationale of this
      Chapter that, in a case of impracticability or frustration, the
      contract does not cover the case that has arisen, the court’s
      function can be viewed generally as that set out in § 204 of
      supplying a term to deal with that omitted case.

Id. § 272 cmt. c.         We have previously cited Section 272 with approval,

although in support of restitutionary relief, not reformation. See Hart, 884
A.2d at 335.14

      Upon consideration of these authorities, we hold that the trial court did

not err in reforming the parties’ Agreement.              Specific performance of the

contract as written is not possible.             Without reformation, the only remedy

would be to void the unenforceable life insurance provision, leaving Murray
                       _______________________
(Footnote Continued)
party had reason to know of the unavailability. The Township certainly
should have known of the policy’s terms, and, as Township Manager of the
Township from 2003 until he retired, it would seem that Murray should have
known of those terms as well. Because the question here is not whether
either party may avoid an obligation under the Agreement, but whether the
parties may have the Agreement reformed (a form of relief both parties
advocate), we do not believe the knowledge issue is determinative here.
14
  In ALCOA, a federal district court, applying Indiana law, held that based
on mutual mistake, impracticability, and frustration of purpose, it could
modify the parties’ contract. 499 F. Supp. 2d at 78-80. The court explained
that a remedy modifying a term of the contract would “preserve the
purposes and expectations of the parties” better than any other remedy and
was “essential to avoid injustice.” Id. at 80.

                                           - 13 -
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with no insurance relief at all; Murray has made clear that he opposes that

remedy.     Neither party challenges the trial court’s ability to order

reformation, and, indeed, both parties advocate in favor of such relief.

Although the facts presented here may not fit within the traditional

framework of a mistake resulting from erroneous drafting, they do fit within

the broader parameters of the reformation remedies that have been

recognized under Sections 158(2) and 272 of the Second Restatement, both

of which derive from the power to imply contract terms under Section 204

when necessary to effectuate the parties’ intent. Exercise of that power is

consistent with Pennsylvania law.         In light of these authorities, and

particularly in light of the parties’ mutual advocacy in favor of reformation to

restore an essential term of their agreement, we hold that, on these unique

facts, it was proper for the trial court to reform the contract.

      The next question — and the nub of this case — is whether the trial

court properly exercised its discretion in formulating the reformation relief

that it ordered.   Reformation is an equitable remedy.       Potteiger v. Fid.-

Phila. Trust Co., 227 A.2d 864, 871 (Pa. 1967). “[A] court of equity has

broad discretion to decide what relief should be granted.”           Jackson v.

Hendrick, 321 A.2d 603, 606 (Pa. 1974). Indeed,

      Equitable remedies . . . are distinguished by their flexibility, their
      unlimited variety, their adaptability to circumstances, and the
      natural rules which govern their use. There is in fact no limit of
      their variety and application; the court of equity has the power
      of devising its remedy and shaping it so as to fit the changing

                                     - 14 -
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      circumstances of every case and the complex relations of all the
      parties.

Id. at 606 n.8 (alteration in original) (citation omitted). However, “a court

of equity has no more right than has a court of law to act on its own notion

of what is right in a particular case and must be guided by the established

rules and precedents.”     East Hempfield Twp. v. Brubaker, 828 A.2d
1184, 1188 (Pa. Cmwlth. 2003) (brackets and citation omitted).            Equity

must follow the law. Bauer v. P.A. Cutri Co. of Bradford, 253 A.2d 252,

255 (Pa. 1969) (stating, “a court of equity follows and is bound by rules of

law, and does not use equitable considerations to deprive a party of his

rights at law”); Kapcsos v. Benshoff, ___ A.3d ___, No. 227 EDA 2016,

2017 WL 2806294, at *10 (Pa. Super., June 29, 2017) (“[E]quitable

discretion may not be exercised merely to negate a controlling rule of law.

‘Equity follows the law.’” (quoted citation omitted)). Murray argues that the

reformation ordered by the trial court did not conform to equitable principles

because it unfairly failed to provide for Murray to receive $375,000 in life

insurance. We disagree.

      The trial court was faced with the task of trying to protect the parties’

reliance interests under a provision of the contract that could not be

implemented as written. In offering limited guidance on this task, Comment

c to Section 272 of the Second Restatement explains: “The question under

this Section is whether the court can salvage a part of the agreement that is

still executory on both sides. . . . The rule stated . . . makes it clear that it

                                     - 15 -
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can do so by supplying a term which is reasonable in the circumstances

. . . .”     Comment c to Section 158 contains similar language.          This is a

sensitive undertaking. Normally, a court “will not reform a written contract

so as to make a contract for the parties that they did not make between

themselves.” New Charter Coal Co. v. McKee, 191 A.2d 830, 833 (Pa.

1963).        That is why a traditional reformation remedy in Pennsylvania is

employed only to “make [the written contract document] correspond to the

understanding of the parties.” Bugen, 184 A.2d at 500; see also Allen-

Myland, 140 A.3d at 693 (requiring that the parties “be placed in their

former position regarding the subject matter of the contract”). Accordingly,

any effort to craft a remedy here must be guided by the need to adhere to

the parties’ original agreement to the maximum extent possible, and not to

substitute terms to which the parties never consented.

           The unenforceable contract term at issue here provided:

                 Employee shall be eligible to continue to participate, at the
           Employer’s expense, in the present group life insurance plan
           ($375,000) offered by the Employer as may be carried from time
           to time for all eligible employees, on the same terms and
           conditions that the Employee currently participates.

Agreement at ¶ 2(a). The trial court reformed this provision to state:

                 Employee shall be eligible to continue to participate, at the
           Employer’s expense, in the present group life insurance plan
           ($20,000) offered by the Employer, as may be carried from time
           to time for all eligible employees.

Trial Ct. Order, 6/29/16, at 1. Murray contends that the trial court erred

because reformation of the unenforceable provision should have assured

                                         - 16 -
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that he (or his estate) will receive the $375,000 benefit that he expected,

and he argues that because group insurance coverage in that amount is not

available, the trial court should have reformed the contract to provide for an

equal benefit under an individual insurance policy. But such relief would not

have been reasonable on these facts.

      First, as the trial court held, the provision to which the parties agreed

did not bestow a contractual right to a $375,000 benefit or a right to have

the Township purchase individual insurance for Murray.         The trial court

explained:

      The parties agreed to allow Murray to remain eligible to
      participate in the present group life insurance plan at the
      Township’s cost. The Township made no guarantees in this
      section. It simply obligated itself to allow Murray to participate
      in group life insurance, an obligation it satisfied. What Murray
      remains eligible for under the group policy are benefits as [a]
      “Class 4 Member,” not as a “Class 1 Member.”

            Moreover, the language of the Agreement makes no
      mention or promise of an individual life insurance policy for
      Murray. No one has suggested the language is anything but
      clear as to what benefits were contracted for by the parties. The
      court therefore cannot and should not delve further than the
      contractual language to determine the parties’ “intentions,” as
      suggested by Murray.

Trial Ct. Order, 6/29/16, at 4.

      The trial court correctly interpreted the parties’ agreement.        The

contract provided that Murray “shall be eligible to continue to participate, at

the Employer’s expense, in the present group life insurance plan . . . offered

by the Employer,” and the court’s reformation order therefore properly

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preserved that same right to eligibility.              The court changed only the

contract’s unenforceable parenthetical reference to the $375,000 benefit

that the parties incorrectly believed would apply to Murray and corrected

that number to specify the amount, $20,000, that actually is available to an

eligible person in Murray’s position. 15           The trial court thus reformed the

contract to adhere to the eligibility provision to which the parties agreed,

changing only that element of the agreement that was impracticable of

performance.      The court’s effort to adhere closely to the original contract

was both reasonable and entirely appropriate.

       Second, any reformation of the contract had to conform to the law

under which the Township must operate.                Here, the governing law is the

Second Class Township Code, Willistown Township’s enabling statute.

“[M]unicipalities are created by the state and as such, may do only those

things which the state legislature has placed within their power in enabling

statutes.”    White Deer Twp. v. Napp, 985 A.2d 745, 758 (Pa. 2009).

Section 1512(d) of the Second Class Township Code authorizes the Township

to purchase insurance “under a policy or policies of group insurance

covering life, health, hospitalization, medical service or accident insurance,”

53 P.S. § 66512(d) (emphasis added), and the parties agree that under this

provision the Township does not have authority to purchase individual life

____________________________________________
15
   Of course, coverage of $20,000 was subsumed within the $375,000
coverage that the parties initially intended.

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insurance policies for its present or former employees. Cf., e.g., Bolduc v.

Bd. of Supervisors of Lower Paxton Twp., 618 A.2d 1188, 1191 (Pa.

Cmwlth. 1992) (holding that because Second Class Township Code did not

expressly give township the power to enter into an employment contract for

a fixed term, such a contract was void and unenforceable, and an employee

terminated before the end of his term could not recover damages for its

breach), appeal denied, 625 A.2d 1195 (Pa. 1993).           The trial court’s

authority to provide Murray with equitable relief therefore did not extend to

ordering payment by the Township for an individual life insurance policy, as

the Township would be legally incapable of complying with such a term.

     The contract terms sought by Murray thus would require the trial court

to depart from both the original agreement of the parties and the legal

restrictions under which one party, the Township, was required to operate.

Murray has cited no authority that would allow the trial court to award such

relief, and we are confident that he was not entitled to have the trial court

“reform” the contract to add the terms that he seeks. Murray’s suggestion

that the contract substitute a right to a direct payment of $375,000 by the

Township to his estate upon his death bears no resemblance to the original

contract, which did not call for such a payment by the Township.         His

suggestion of a new contract term based on the amount of annual insurance

premiums needed to pay for an individual $375,000 policy would similarly

impose a new financial undertaking on the Township that finds no basis in

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the parties’ agreement; the Township agreed to include Murray under its

present group policy and did not agree to incur an additional expense to

provide Murray with a special insurance benefit. This is not a case where the

trial court was called upon to fashion compensatory relief for breach of the

contract’s insurance provision; it is a case where the court was asked to

salvage what it could of an unenforceable provision of the contract that

Murray did not want declared void. The trial court properly performed that

task, and we discern no abuse of its discretion in doing so.   See Vautar,
133 A.3d at 12.

     We are sympathetic to Murray’s argument that the unenforceability of

the current life insurance provision in his contract with the Township

deprives him of a significant financial benefit on which he relied, but that

argument does not provide a legal basis for relief. As the Supreme Court

stated in New Charter Coal, 191 A.2d at 833, “the law of contract does not

and cannot take heed of emotions; otherwise, the emotions of the judge

would ever be the deciding factor and chaos the result.” Murray is deprived

of his expected benefit because both he and the Township failed to conduct

the due diligence necessary to determine what group insurance benefits

actually were available in advance of entering their agreement. Nothing in

our decision precludes the parties from now negotiating a new or

supplemental agreement that provides Murray with additional relief if they

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are inclined to do so. But Murray may not obtain such relief from the trial

court or this Court under the guise of “reformation” of the Agreement.

      Having discerned no error of law or abuse of discretion, we affirm the

trial court’s decision.

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 8/17/2017

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