Court Opinion

ID: 4101336
Source: CourtListenerOpinion
Date Created: 2016-11-22 20:36:17.171981+00
Date Added: 2024-06-11T14:36:29.904142
License: Public Domain

J-A26030-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

PAUL J. BENEC                                  IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA
                            Appellant

                       v.

ARMSTRONG CEMENT & SUPPLY CORP.,
DENNIS C. SNYDER AND DAVID SNYDER

                                                    No. 139 WDA 2016

                 Appeal from the Order Entered January 6, 2016
                 in the Court of Common Pleas of Butler County
                       Civil Division at No(s): 2014-10943

BEFORE: BENDER, P.J.E., RANSOM, J., and MUSMANNO, J.

MEMORANDUM BY RANSOM, J.:                      FILED NOVEMBER 22, 2016

       Appellant, Paul Benec, appeals from the order entered January 6,

2016, which granted the preliminary objections in the nature of a demurrer

filed by Armstrong Cement & Supply Corp., Dennis C. Snyder, and David

Snyder. We affirm.

       The relevant facts and procedural history are as follows. Appellant is

the former executive vice president of marketing at Armstrong Cement &

Supply Corp. (“Armstrong”). Second Am. Compl. ¶¶ 16, 37. 1

       In 1983, Russ Haller, then president of Armstrong, approached

Appellant with an offer of employment. Second Am. Compl. ¶¶ 14-15. The
____________________________________________

1
  For purposes of this appeal and in light of the procedural posture of the
case, we accept as true the pleadings set forth in Appellant’s Second
Amended Complaint, 9/9/15, at 1-19.
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oral offer included a stock bonus.          Second Am. Compl. ¶ 15.          The

subsequent written offer of employment, however, included the term “stock

option.”   Second Am. Compl. ¶ 16. The relevant provision of the contract

read:

        5. Stock Options – will be offered in a non-voting class B stock
        that will be warranted at each anniversary date of this contract.
        The stock awarded will be equivalent to five percent of the total
        outstanding shares of the present class A voting stock and will
        be awarded on the basis of one-third of the five percent at the
        end of the first year, one-third of the five percent at the end of
        the second year, and one-third of the five percent at the end of
        the third year.

Second Am. Compl. ¶ 19; Ex. 2.

        Mr. Haller informed Appellant, verbally, that the terms “stock options”

and “stock bonuses” were intended synonymously.          Second Am. Compl. ¶

17. Prior to signing the contract, Appellant again inquired as to the meaning

of the term “stock option,” and Mr. Haller assured him that the agreement

provided a “stock bonus” rather than a stock option. Second Am. Compl. ¶

21. Appellant signed an employment contract on January 4, 1984. Second

Am. Compl. ¶ 18, Ex. 2. Appellant avers that pursuant to the agreement, he

is thus entitled to 2,213.23 shares of stock in Armstrong.         Second Am.

Compl. ¶ 23.

        Appellant attached to his complaint a copy of the original offer letter,

the employment contract, and a copy of the offer letter signed in 1987 by

the then-president of Armstrong, Wayne Sell. Second Am. Compl. ¶¶ 24-25,

Ex. 1-3.      The offer letter lists the total shares of Armstrong stock

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outstanding.   Second Am. Compl. ¶¶ 24-25, Ex. 3.        Appellant avers that,

over the thirty years of his employment, various Armstrong entities have

failed to pay him dividends or distribution of income. Second Am. Compl. ¶¶

35-38.

      Appellant filed a complaint in civil action on November 3, 2014.

Appellees filed preliminary objections by demurrer to the complaint.

Appellant filed a brief in opposition, and Appellees filed a reply in support of

their objections.   On April 2, 2015, by memorandum opinion, the court

sustained Appellees’ objections and        dismissed the    complaint without

prejudice.

      On April 21, 2015, Appellant filed an amended complaint. Appellees

filed preliminary objections by demurrer, Appellant filed an answer in

opposition, and Appellees filed a reply brief in support of their objections.

On August 18, 2015, the court granted Appellees’ preliminary objections and

by memorandum opinion, dismissed the complaint without prejudice.

      On September 9, 2015, Appellant filed his second amended complaint,

raising the following counts: contract reformation due to mutual mistake of

fact; reformation of contract by estoppel; minority shareholder oppression

common law cause of action; minority shareholder oppression pursuant to

18 P.S. § 1767; breach of fiduciary duty; breach of contract; detrimental

reliance; unjust enrichment; declaratory judgment pursuant to 42 Pa.C.S. §

7531; and shareholder derivative action.

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      Appellees filed preliminary objections by demurrer. Appellant filed an

answer in opposition, and Appellees filed a reply brief in further support of

their objections.   On January 6, 2016, the court issued a memorandum

opinion granting Appellees’ preliminary objections and dismissed Appellant’s

second amended complaint with prejudice.

      Appellant timely appealed and filed a court-ordered Pa.R.A.P. 1925(b)

statement. The trial court issued a 1925(a) statement incorporating its prior

memorandum opinions.

      Herein, Appellant raises the following issues for our review:

      1. Did the trial court err in sustaining preliminary objections on
      the contract reformation claims based upon a mutual mistake
      made by the parties regarding the meaning of the term “stock
      option”?

      2. Did the trial court err in sustaining preliminary objections on
      the contract reformation claims based upon a unilateral mistake
      made by Appellant regarding the meaning of the term “stock
      option”?

      3. Did the trial court err in sustaining preliminary objections on
      the breach of contract and declaratory judgment claims, since
      the term “stock option” was latently and patently ambiguous?

      4. Did the trial court err in sustaining preliminary objections on
      the detrimental reliance and unjust enrichment claims, since
      these claims were adequately plead?

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       5. Did the trial court err in sustaining preliminary objections to
       Counts I, II and III, since Appellant had standing as a
       shareholder?2

Appellant’s Brief at 2 (unnecessary capitalization omitted).

       Our standard of review is settled.

       [We must] determine whether the trial court committed an error
       of law. When considering the appropriateness of a ruling on
       preliminary objections, the appellate court must apply the same
       standard as the trial court.

       Preliminary objections in the nature of a demurrer test the legal
       sufficiency of the complaint.       When considering preliminary
       objections, all material facts set forth in the challenged pleadings
       are admitted as true, as well as all inferences reasonably
       deducible therefrom.      Preliminary objections which seek the
       dismissal of a cause of action should be sustained only in cases
       in which it is clear and free from doubt that the pleader will be
       unable to prove facts legally sufficient to establish the right to
       relief. If any doubt exists as to whether a demurrer should be
       sustained, it should be resolved in favor of overruling the
       preliminary objections.

Majorsky v. Douglas, 58 A.3d 1250, 1268-69 (Pa. Super. 2013) (quoting

Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011)).

       The instant appeal is essentially a contracts dispute.           Contract

interpretation is a question of law and our standard of review is de novo.

Kraisinger v. Kraisinger, 928 A.2d 333, 339 (Pa. Super. 2007).                When

interpreting a contract:
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2
  Appellant’s original complaint raised, as its first three counts, common law
and statutory claims for minority shareholder oppression, and breach of
fiduciary duty. Compl. at ¶¶ 33-46. In Appellant’s second amended
complaint, these claims appear as Counts III, IV, and V. Second Am.
Compl. at ¶¶ 52-68.

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       [t]he fundamental rule . . . is to ascertain and give effect to the
       intent of the contracting parties. The intent of the parties to a
       written agreement is to be regarded as being embodied in the
       writing itself. The whole instrument must be taken together in
       arriving at contractual intent. Courts do not assume that a
       contract's language was chosen carelessly, nor do they assume
       that the parties were ignorant of the meaning of the language
       they employed. When a writing is clear and unequivocal, its
       meaning must be determined by its contents alone.

Murphy v. Duquesne University Of The Holy Ghost, 777 A.2d 418, 429

(Pa.   2001)   (internal   citations   and    quotation   marks   omitted).   “In

ascertaining the intent of the parties to a contract, it is their outward and

objective manifestations of assent, as opposed to their undisclosed and

subjective intentions, that matter.” Espenshade v. Espenshade, 729 A.2d

1239, 1243 (Pa. Super. 1999).

       Several of Appellant’s arguments rely on the admission of parol

evidence, namely conversations between Appellant and various Armstrong

board members regarding the term “stock options.”            These conversations

are intrinsic to many of Appellant’s claims.        To the extent that we may

address these issues together, this Court will do so.

       Parol evidence is prior or contemporaneous oral representations or

agreements concerning a subject that is specifically covered by the written

contract, which purports to cover the entire agreement of the parties. See

Bowman v. Meadow Ridge, Inc., 615 A.2d 755, 758 (Pa. Super. 1992).

In the absence of fraud, accident, or mistake, or where the contract is

ambiguous, parole evidence is inadmissible. Yocca v. Pittsburgh Steelers

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Sports, Inc., 854 A.2d 425, 436 (Pa. 2004).       In the instant matter, the

contract, by its terms, is the final agreement between the parties. Second

Am. Compl. at Ex. 2.        Thus, unless one of the exceptions apply, the

conversations between Appellant and Mr. Haller constitute inadmissible parol

evidence.

      A patent ambiguity appears on the face of the instrument and arises

from the defective, obscure, or insensible language used.    Z & L Lumber

Co. of Atlasburg v. Nordquist, 502 A.2d 697, 699 (Pa. Super. 1985)

(citation omitted).   A latent ambiguity arises from extraneous or collateral

facts rendering the meaning of a written contract uncertain. Id. Such facts

must constitute objective indicia that the terms of the contract are

susceptible to different meanings.    Id. at 699; see also Krizovensky v.

Krizovensky, 624 A.2d 638, 643 (Pa. Super. 1993).          In either type of

ambiguity, the inquiry focuses on what the agreement manifestly expressed,

not what the parties may have silently intended.      Delaware County v.

Delaware County Prison Employees Independent Union, 713 A.2d

1135, 1138 (Pa. 1998).

      Appellant argues that the term “stock options” is patently ambiguous.

Appellant’s Brief, at 29-42.    According to Appellant, the term “awarded”

suggests a gift and therefore renders the contract patently ambiguous. This

argument is unavailing.    Both this Court and Black’s Law Dictionary have

defined the term “stock option” as “an option to buy or sell a specific

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quantity of stock at a designated price for a specified period regardless of

shifts in market value during the period.” MacKinley v. Messerschmidt,

814 A.2d 680, 682 (Pa. Super. 2002) (citing Black’s Law Dictionary 1431

(7th ed. 1999)).   Moreover, Pennsylvania courts have indeed used the term

“awarded” when dealing with stock options offered by an employer.         See

Fisher v. Fisher, 769 A.2d 1165, 1167 (Pa. 2001) (referring to the

“periodic award of stock options”), Marchlen v. Twp. of Mt. Lebanon, 746

A.2d 566, 567 (Pa. 2000) (referring to stock option awards). Both cases use

the language “award” to refer to the option to purchase stocks at a set price.

See Fisher, 769 A.2d at 1167 (referring to stock options awarded and

noting that husband routinely exercised the options when they vested); see

also Marchlen, 746 A,2d at 567 (referring to employees exercising options

to purchase stocks and that after the award of the option, employees must

remain with the company for one year).          Thus, there was no patent

ambiguity in the wording of the contract.

      Appellant’s argument that the contract is latently ambiguous is equally

unavailing.   According to Appellant, the lack of an option price and term

creates an ambiguity in the terms of the contract.        We disagree.     The

contract states solely that stock options “will be offered,” which indicates an

offer to purchase and not a gift. As noted by the trial court, this provision

contemplates a future offer of stock options, i.e, at the end of the terms

1985, 1986, and 1987, rather than a present offer.        Thus, the lack of a

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specified option price and term does not create a latent ambiguity.         As

Appellant has not identified an objective indication of ambiguity, the trial

court properly excluded extrinsic parol evidence.        See Krizovensky, 624

A.2d at 643.

       Appellant also asserts that the conversations should be admissible

because of a mutual mistake between the parties. Appellant’s Brief at 8-20.

According to Appellant, both parties mistakenly believed that the wording of

the contract provided for the award of a stock bonus.             Because this

constituted a mistake of fact, Appellant concludes that he is entitled to

reform the contract. Id. at 8-17.

       “Mutual mistake of fact may serve as a defense to the formation of a

contract and occurs when the parties 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.”         Voracek v.

Crown Castle USA Inc., 907 A.2d 1105, 1107–08 (Pa. Super. 2006).3 A

mutual mistake occurs when the instrument fails to set forth the true

agreement of the parties.          Id.   The language of the contract should be

interpreted in the light of the subject matter, apparent purpose of the

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3
  In Voracek, for example, the “mistake of fact” was a hiring manager
mistakenly sending the wrong employment agreement to be signed by the
new hire. See Voracek, 907 A.2d at 1108.

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parties, and conditions existing when executed.          Voracek, 907 A.2d at

1108.

        While a mutual mistake of fact may serve as a defense to the

formation of a contract, a mistake of law does not. See Betta v. Smith, 81

A.2d 538, 539 (Pa. 1951); see also Voracek, 907 A.2d at 1107. A mistake

of law is “a mistake as to the legal consequences of an assumed state of

facts.” Acme Markets, Inc. v. Valley View Shopping Center, Inc., 493

A.2d 736, 737 (Pa. Super. 1985). A mistake of law does not allow for

recovery.    Id. at 737.        Incorrect interpretations of legal documents are

considered mistakes of law. Id.

        In the instant case, Appellant’s attempt to establish a mutual mistake

of fact is without merit. Even accepting as true Appellant’s allegation that

Mr. Haller intended the phrase “stock options” to mean “stock bonuses,” the

issue remains the legal effect of the phrase rather than any concrete, mutual

mistake of fact. Appellant did not plead, as in Voracek, that he reviewed

and accepted a different form of the contract than the contract he eventually

signed.    He pleaded only that the parties intended the contract to have a

different effect than it did.

        Consequently, Appellant has not established the existence of any

exception that would require the admission of parol evidence, and, thus, the

conversations regarding the parties’ intent will not be considered when

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determining Appellant’s contract claims. With this background in mind, we

now turn to Appellant’s assertions of trial court error.

      First, Appellant claims that the trial court erred in sustaining

preliminary objections to his contract reformation claim based upon a mutual

mistake by the parties regarding the meaning of the term “stock options.”

Appellant argues that, because both parties intended to confer a stock bonus

rather than a stock option, this constituted a mistake of fact that should

allow for the reformation of a contract. Appellant’s Brief at 8-20.

      However, as discussed above, Appellant has not established a mutual

mistake of fact but, at best, a mutual mistake of law that does not constitute

a defense to the formation of a contract.     See Acme Markets, Inc., 493

A.2d at 737.   Additionally, Appellant’s cause of action cannot be cured by

further amendment, as his acceptance of employment was based upon his

erroneous interpretation of the contract. Id. at 738. Thus, we find no error

in the trial court’s dismissal of this cause of action. See Majorsky, 58 A.3d

at 1269.

      Second, Appellant claims that the trial court erred in sustaining

preliminary objections to his contract reformation claim based upon a

unilateral mistake.   Appellant’s Brief at 20-25. However, Appellant did not

raise this issue in his Pa.R.A.P. 1925(b) statement and, consequently, has

waived it for purposes of appeal.     See Commonwealth v. Castillo, 888

A.2d 775, 780 (Pa. 2005) (quoting Commonwealth v. Lord, 719 A.2d 306,

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309 (Pa. 1998) (“[a]ny issues not raised in a [Rule] 1925(b) statement will

be deemed waived.”)

      Third, Appellant claims that the trial court erred in sustaining

preliminary objections to his breach of contract and declaratory judgment

claims, since the term “stock option” was both latently and patently

ambiguous and parol evidence should have been admitted to determine the

parties’ intent. Appellant’s Brief at 29-42.

      The three elements needed to establish a breach of contract action are

the existence of a contract, a breach of duty imposed by the contract, and

damages.    Sullivan v. Chartwell Inv. Partners, LP, 873 A.2d 710, 716

(Pa. Super. 2005) (quoting J. F. Walker Co., Inc. v. Excalibur Oil Group,

Inc., 792 A.2d 1269 (Pa. Super. 2002)).         As we have noted above,

Appellant has not established a latent or patent ambiguity requiring the

admission of parol evidence to determine the parties’ intent. Thus, we may

look only to the terms of the employment contract itself, which provides that

stock options will be offered at certain intervals during his employment. See

Second Am. Compl. ¶ 19; Ex. 2.

      Appellant pleaded the existence of a valid contract of employment

providing for stock options. However, Appellant failed to plead that he was

not offered stock options at the appropriate intervals pursuant to the

employment contract, nor did he plead that he attempted or sought to

exercise said options.   Thus, Appellant is unable to establish a breach of

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contract action. See Sullivan, 873 A.2d at 716; see Majorsky, 58 A.3d at

1269.

        Similarly, Appellant’s arguments regarding the trial court’s dismissal of

his declaratory judgment count fail. The Declaratory Judgments Act provides

that:

        any person interested under a       . . . contract, or other writings
        constituting a contract . . . may   have determined any question of
        construction or validity arising    under the instrument . . . and
        obtain a declaration of rights,     status, or other legal relations
        thereunder.

42 Pa.C.S. § 7533.         In order to establish a right to relief through a

declaratory judgment, a plaintiff must establish a direct, substantial and

present interest. Bromwell v. Michigan Mut. Ins. Co., 716 A.2d 667, 670

(Pa. Super. 1998). Further, a plaintiff must demonstrate that an actual

controversy exists.       Id.   In the instant case, Appellant has established

standing, in that he has pleaded a valid contract of employment. Appellant

has established an actual controversy, namely, the interpretation of the term

“stock options.” However, based upon our previous discussion, Appellant is

not entitled to relief.    Thus, we discern no legal error in the trial court’s

dismissal of the claim. See Majorsky, 58 A.3d at 1269.

        Fourth, Appellant argues that the trial court erred in sustaining

preliminary objections to his claims of detrimental reliance and unjust

enrichment, as the claims were adequately pleaded. Appellant’s Brief at 42-

49.

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       “A cause of action under detrimental reliance or promissory estoppel

arises when a party relies to his detriment on the intentional or negligent

representations of another party, so that in order to prevent the relying

party from being harmed, the inducing party is estopped from showing that

the facts are not as the relying party understood them to be.” Rinehimer

v. Luzerne Cty. Cmty. Coll., 539 A.2d 1298, 1306 (Pa. Super. 1988).

       To establish a claim for promissory estoppel, a claimant must prove 1)

a promise, 2) which the promisor should reasonably expect to induce action

or forebearance of a definite and substantial character on the part of the

promisee, 3) which does induce such action or forbearance is binding, and 4)

injustice can be avoided only by the enforcement of the promise.           See

Weavertown Transport Leasing, Inc. v. Moran, 834 A.2d 119, 1174 (Pa.

Super. 2003).    The doctrine of promissory estoppel permits a claimant to

enforce a promise in the absence of consideration.      Sullivan, 873 A.2d at

717.    However, the doctrine cannot be loosely applied, or any promise,

regardless of the complete absence of consideration, would be enforceable.

Id.    Thus, where there is a valid contract, the question of a defendant’s

liability may be decided properly and finally on contractual principals of offer

and acceptance, and promissory estoppel does not apply. See, e.g., Lobar

v. Lycoming Masonry, Inc., 876 A.2d 997, 1000-01 (Pa. Super. 2005).

       In the instant case, there is a valid contract.     It is supported by

consideration.   See Greene v. Oliver Realty, Inc., 526 A.2d 1192, 1195

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(Pa. 1987) (noting that in an employment contract consideration may be any

bargained for exchange).          Appellee agreed to provide Appellant with a

number of benefits, specifically, a salary, company car, life insurance, bonus

plan, stock options, an expense account, country club membership, and

hospitalization and medical insurance.             In return, Appellant agreed to

provide Appellee services as an executive vice-president of marketing, which

he did for thirty years.          Thus, although Appellant disagrees with the

interpretation of the terms of the contract, he cannot recover based on a

claim for promissory estoppel. See Sullivan, 873 A.2d at 717.4

       Similarly, his claim for unjust enrichment must fail.           This Court has

held that where a written or express contract exists, as it does in the instant

matter, we may not make a finding of unjust enrichment. See Mitchell v.

Moore, 729 A.2d 1200, 1203 (Pa. Super. 1999).

       Finally, Appellant claims that the trial court erred in concluding that

Appellant    lacked    standing    to   pursue     claims   of   minority   shareholder

oppression and breach of fiduciary duty.            Appellant argues that he is not

required to attach a physical stock certificate to his complaint and that,

because he pleaded he is the owner of Armstrong stock, he has established

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4
  Although the trial court used a different analysis, we may affirm if it is
correct on any legal ground or theory, regardless of the reason adopted by
the trial court. Al Hamilton Contracting Co. v. Cowder, 644 A.2d 188,
190 (Pa. Super. 1994).

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a prima facie case of shareholder oppression and fiduciary duty. Appellant’s

Brief at 49.

      A trial court’s ruling regarding standing is subject to a de novo

standard of review and our plenary scope of review entitles us to examine

the entire contents of the record. See Rock v. Rangos, 61 A.3d 239, 250

(Pa. Super. 2013).     A party seeking judicial resolution of a controversy

“must establish as a threshold matter that he has standing to maintain the

action.” Johnson v. American Standard, 8 A.3d 318, 329 (Pa. 2010). A

party who is not adversely affected in any way by the matter he seeks to

challenge is not aggrieved by the matter and therefore has no standing to

obtain judicial resolution of his challenge. Id.   To establish standing,

      [a]n individual can demonstrate that he has been aggrieved if he
      can establish that he has a substantial, direct and immediate
      interest in the outcome of the litigation. A party has a substantial
      interest in the outcome of litigation if his interest surpasses that
      of all citizens in procuring obedience to the law. The interest is
      direct if there is a causal connection between the asserted
      violation and the harm complained of; it is immediate if that
      causal connection is not remote or speculative.

Fumo v. City of Philadelphia, 972 A.2d 487, 496 (Pa. 2009).

      Appellant seeks to establish a cause of action for breach of fiduciary

duty and minority shareholder oppression.      Pennsylvania courts have long

held that majority shareholders have a fiduciary duty to protect the interests

of the minority. Hill v. Ofalt, 85 A.3d 540, 550 (Pa. Super. 2014). Where

a majority shareholder acts oppressively towards a minority shareholder, the

majority shareholder breaches that fiduciary duty.      Id.; see also Ford v.

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Ford, 875 A.2d 894, 906 (Pa. Super. 2005).       The oppressed shareholder

thus has standing to assert a direct breach of fiduciary duty claim or may

pursue other remedies available under the Business Corporation Law. See

Ford, 878 A.2d at 904; see also 15 Pa.C.S. § 1767(a)(2).

     Appellant asserts, throughout his complaint, that he is entitled to

stocks.   This assertion is premised upon his interpretation of the contract.

However, entitlement is not the same as ownership. Appellant’s contract did

not confer automatic ownership of the stock but, instead, the option to

purchase stock. Appellant has not pleaded, and indeed cannot plead, that

he owns any stocks. Thus, the trial court properly dismissed this count.

     Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/22/2016

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