Court Opinion

ID: 2788141
Source: CourtListenerOpinion
Date Created: 2015-03-20 20:05:50.618714+00
Date Added: 2024-06-11T11:28:45.516071
License: Public Domain

J-A35038-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

CHRISTOPHER P. HENNESSEY, DINO R.              IN THE SUPERIOR COURT OF
RIZZA AND BRIAN L. SULLIVAN,                         PENNSYLVANIA

                        Appellees

                   v.

WILLIAM B. ROM,

                        Appellant

                   v.

OUTERCURVE TECHNOLOGIES, INC.,
OUTERCURVE INTERNATIONAL FZ, LLC
AND DEREK G. ROGA,

                        Appellees             No. 389 WDA 2014

           Appeal from the Judgment Entered February 10, 2014
            In the Court of Common Pleas of Allegheny County
                   Civil Division at No(s): GD 10-013259

BEFORE: BENDER, P.J.E., BOWES, and ALLEN, JJ.

MEMORANDUM BY BOWES, J.:                           FILED MARCH 20, 2015

     William Rom appeals from the February 10, 2014 judgment entered on

a verdict after the trial court’s February 5, 2014 denial of Rom’s post-trial

motion.    The jury entered a verdict in favor of Plaintiffs/Appellees,

Christopher P. Hennessey, Dino R. Rizza and Brian L. Sullivan, who were

members of an investment group that we will refer to as Hennessey Group,

in the amount of $2,000,000. We affirm.

     The evidence viewed in light most favorable to the verdict winner

follows. Hennessey Group, Rom, and Rom’s business associate, Derek Roga,
J-A35038-14

participated in business transactions whereby members of Hennessey Group

loaned $240,000 to two affiliated companies, Outercurve Technologies, Inc.

and Outercurve International FA, LLC (“Outercurve”).      Outercurve was to

conduct computer hardware and software business in the Middle East. The

funds were advanced by Hennessey Group by means of convertible

promissory notes.      In 2004, Outercurve received a loan from Hennessey

Group of $200,000.        Outercurve borrowed an additional $40,000 from

Hennessey Group in 2006.           Rom was an employee or consultant,

shareholder, and officer of Outercurve and personally benefitted from the

loans.

         During 2006, the members of Hennessey Group were unwilling to

provide the additional $40,000 in funding requested by Rom and Roga

unless Rom and Roga personally guaranteed both the 2004 loan, which was

in default, and the 2006 loan made to Outercurve. During the negotiations

for the additional funding in 2006, Rom and Roga therefore agreed to

personally guarantee the $240,000 funds advanced by Hennessey Group to

Outercurve. Under the guarantees, in the event of default by Outercurve,

Rom and Roga pledged four percent of their personal equity in Outercurve or

any company formed to conduct the proposed business of Outercurve.

         Members of Hennessey Group testified at trial that the 2006 personal

guarantees were integral to the second loan transaction and that Hennessey

Group would not have made the 2006 loan absent them. The assent of Rom

and Roga to personally guarantee both loans was memorialized in an email

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that pre-dated the funding of the 2006 loan by Hennessey Group, but the

guarantees were not actually executed until after disbursement of the loan

funds.

     Shortly after the funding of the 2006 loan, Rom and Roga abandoned

their operation of Outercurve and conducted the business that Outercurve

was designed to perform under another company, Emitac Mobile Solutions

(“EMS”).   Rom and Mr. Roga were both employees or consultants of EMS,

and each man owned eleven percent of EMS. Hennessey Group presented

proof demonstrating that EMS was formed to conduct the proposed business

of Rom and Roga in the Middle East that Outercurve was supposed to

perform.

     In 2007, Outercurve/EMS defaulted on the loans, and the personal

guarantees were activated under the loan default provisions. At that point,

Hennessey Group thus became entitled to receive the value of four percent

of Rom and Roga’s equity interest in EMS.           After Hennessey Group

demanded performance under the loan guarantees, Rom sold his eleven

percent interest in EMS for $302,500.

     Hennessey Group then instituted this action against Rom, Roga and

Outercurve seeking to recover, in accordance with the personal guarantees,

an amount equal to the 2007 value of four percent of EMS.        Hennessey

Group presented proof that four percent of EMS was worth between

$532,000 and $2,532,000 in 2007.        This proof was in the form of expert

testimony as well as an exhibit, which was introduced without objection,

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outlining that EMS was worth fifty million dollars in 2007. The jury awarded

Hennessey Group $2,000,000. Rom appealed and raises these contentions

for our disposition:

      A. Whether the testimony of Appellee's expert appraisal witness
      should have been excluded pursuant to Rule 702 or the
      Pennsylvania Rules of Evidence and the Frye standard.

      B. Whether Appellant was entitled to judgment notwithstanding
      the verdict because the "letters" upon which the Appellees claims
      were based lacked consideration.

      C. Whether the lower Court erred by failing to instruct the jury
      on the principle of "gratuitous promises."

      D. Whether the lower Court erred by failing to instruct the jury
      on the principle of "successor entity."

      E. Whether the lower Court erred by failing to mold or remit the
      verdict to conform to the evidence.

Appellant’s brief at 6.

      Appellant first suggests that Hennessey Group’s expert witness, Mark

Gleason, was improperly permitted to testify about the value of EMS stock.

Our standard of review is settled in this area:

             Admissibility of expert testimony is left to the sound
      discretion of the trial court, and as such, this Court will not
      reverse the trial court's decision absent an abuse of discretion.
      An abuse of discretion may not be found merely because an
      appellate court might have reached a different conclusion, but
      requires a result of manifest unreasonableness, or partiality,
      prejudice, bias, or ill-will, or such lack of support so as to be
      clearly erroneous.

Snizavich v. Rohm and Haas Company,. 83 A.3d 191, 194 (Pa.Super.

2013) (citations and quotation marks omitted). Additionally, “To constitute

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reversible error, an evidentiary ruling must not only be erroneous, but also

harmful or prejudicial to the complaining party.” McEwing v. Lititz Mut.

Ins. Co., 77 A.3d 639, 651 (Pa.Super. 2013).

    Rom maintains that that there is a Frye issue involved herein. See Frye

v. United States, 293 F. 1013 (D.C.Cir. 1923).

          As we held in Trach v. Fellin, 817 A.2d 1102 (Pa.Super.
      2003) (en banc), appeal denied, 577 Pa. 725, 847 A.2d 1288
      (2004), the Frye test sets forth an exclusionary rule of evidence
      that applies only when a party wishes to introduce novel
      scientific evidence obtained from the conclusions of an expert
      scientific witness. Trach, 817 A.2d at 1108–1109. Under Frye, a
      party wishing to introduce such evidence must demonstrate to
      the trial court that the relevant scientific community has reached
      general acceptance of the principles and methodology employed
      by the expert witness before the trial court will allow the expert
      witness to testify regarding his conclusions. Id., 817 A.2d at
      1108–1109, 1112.

Commonwealth v. Harrell, 65 A.3d 420, 430 (Pa.Super. 2013); see also

Pa.R.E. 702 (adopting the Frye standard in subsection (c) and stating “A

witness who is qualified as an expert by knowledge, skill, experience,

training, or education may testify in the form of an opinion or otherwise if ...

the expert's methodology is generally accepted in the relevant field.”).

      Mr. Gleason, a certified public accountant with more than forty years

of experience, was hired to place a 2007 value on EMS.         He had testified

over 100 times as an expert witness performing forensic accounting, which

places a value on economic damages. Mr. Gleason testified that, when he

was first approached by Hennessey Group, he was unable to perform an

evaluation of EMS due to a lack of financial data. N.T. Trial, 11/4-8/13 Vol.

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II, at 347.   After discovery was conducted herein, he performed another

analysis and arrived at a valuation based upon pleadings, documents

produced in discovery, and independent research from websites and other

professional sources.

      Mr. Gleason proffered his opinion on EMS’s value based upon a

number of factors. The first one was the amount gained by Rom from the

sale of his stock in 2007. Secondly, Mr. Gleason relied upon offers made by

“Mr. Roga on behalf of Mr. Roga and Mr. Rom to buy 60 percent of EMS that

was owned by”      Emitac Technology Company (“Emitac”), which was the

majority shareholder in EMS.     Id. at 350.   In documents produced during

discovery, it was established that two offers were made in the fall of 2006 by

Mr. Roga to purchase Emitac’s sixty percent interest in EMS.

      Mr. Roga was EMS’s chief operating officer and thus was acquainted

with its financial status. The first offer was “for $8 million for the 60 percent

interest that Emitac owned” and that offer “was rejected.” Id. “Then there

was an offer of $38 million for the 60 percent interest in Emitac, which was

also rejected.”   Id. at 350-51.   The initial offer indicated that the overall

value of the company was approximately thirteen million dollars with four

percent being worth $520,00, while the second offer valued EMS at sixty-

three million with four percent having a value of $2,520,00.

      In addition to considering these offers, Mr. Gleason reviewed a

business plan that EMS management developed in 2006.               Mr. Gleason

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reported that it was a “fairly extensive business plan where they indicated

what their business was, who they dealt with, and included in that they had

projections for the future.”                   Id. at 351.      The plan anticipated revenue for

EMS for years 2006 through 2008.                         Id.     Finally, Mr. Gleason read news

articles about EMS wherein it reported contracts that it obtained in the

Middle East.

        Rom’s        specific      argument         is   that    Mr.   Gleason’s   testimony   was

speculative since that witness admitted that he did not have some financial

information about EMS needed to value EMS in accordance with normal

business practices. As the trial court observed, while Mr. Gleason may have

been unable to obtain certain financial data about EMS, he had a solid

foundation for his valuation of its stock. The most important data consisted

of the two offers that Mr. Roga made to purchase Emitac’s interest in EMS

not long prior to the occurrence of default herein. 1 Mr. Gleason’s testimony

herein was amply supported and cannot be considered to contain a valuation

methodology that was novel. We therefore reject Rom’s first contention on

appeal.

____________________________________________
1
   The Hennessey Group also introduced Exhibit 44, which showed that EMS
had a fifty million dollar value in 2007 so that four percent of that company
was worth two million dollars, which was the amount of the verdict. That
exhibit was submitted into evidence without objection. While Hennessey
Group thus suggests that the introduction of Mr. Gleason’s testimony was
harmless error, it is impossible to ascertain with certainty the basis for the
jury’s decision, which may have been influenced by Mr. Gleason’s opinion.
Hence, we decline to employ a harmless error analysis.

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     Rom next maintains that judgment notwithstanding the verdict should

be entered in his favor in that the personal guarantee that he executed

lacked consideration. He asserts that he did not receive anything of value in

exchange for his guarantee. Appellant’s brief at 25.

           A JNOV can be entered upon two bases: (1) where the
     movant is entitled to judgment as a matter of law; and/or, (2)
     the evidence was such that no two reasonable minds could
     disagree that the verdict should have been rendered for the
     movant. Davis v. Berwind Corp., 547 Pa. 260, 690 A.2d 186
     (1997) (citing Moure v. Raeuchle, 529 Pa. 394, 604 A.2d
1003 (1992)). When reviewing a trial court's denial of a motion
     for JNOV, we must consider all of the evidence admitted to
     decide if there was sufficient competent evidence to sustain the
     verdict. Korn v. Epstein, 727 A.2d 1130 (Pa.Super. 1999),
     appeal denied, 743 A.2d 921 (Pa. 1999). In so doing, we must
     also view this evidence in the light most favorable to the verdict
     winner, giving the victorious party the benefit of every
     reasonable inference arising from the evidence and rejecting all
     unfavorable testimony and inference. Id. Concerning any
     questions of law, our scope of review is plenary. Davis, supra;
     Boutte v. Seitchik, 719 A.2d 319 (Pa.Super. 1998).
     Concerning questions of credibility and weight accorded the
     evidence at trial, we will not substitute our judgment for that of
     the finder of fact. Sewak v. Lockhart, 699 A.2d 755
     (Pa.Super. 1997). If any basis exists upon which the jury could
     have properly made its award, then we must affirm the trial
     court's denial of the motion for JNOV. Id. A JNOV should be
     entered only in a clear case. Nogowski v. Alemo-Hammad,
     456 Pa.Super. 750, 691 A.2d 950 (1997) (en banc), appeal
     denied, 550 Pa. 684, 704 A.2d 638 (1997) (citing Moure,
     supra).

Buckley v. Exodus Transit & Storage Corp., 744 A.2d 298, 304-05

(Pa.Super. 1999).

     Rom’s position ignores the proof submitted by the prevailing party

herein. Hennessey Group established that, even though executed after the

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loan distributions, the guarantees were integral to and negotiated in

connection with the 2006 loan and that Outercurve needed the 2006 loan.

The personal guarantees were supported by consideration flowing to Rom

since he was a consultant or employee and shareholder of Outercurve and

was financially benefited when it received funds to satisfy an urgently

outstanding debt.

      Brian Sullivan testified as follows about the circumstances leading to

the execution of the personal guarantees. He, Christopher Hennessey, and

Dino Rizza loaned $200,000 to Outercurve in 2004. In 2006, Rom and Roga

told him that they needed more money.        The 2004 loan to the company

“was past due at the time of the second loan[.]” N.T.Trial, 11/4-8/13 Vol I.,

at 86. Mr. Sullivan continued, “[O]bviously we said, if we’re going to loan

[Rom, Roga and Outcurve] more money, we’re going to want, you know

different terms.    We want, you know, . . . some sort of collateral on that

loan.” Id. The collateral demanded when Hennessey Group was “structuring

this second loan in 2006, in March of 2006,” was that Hennessey Group

wanted a personal guarantee that Rom and Roga would give Hennessey

Group “stock in this company or any successor entity in the region.” Id. at

87.   Mr. Sullivan testified that Rom and Roga agreed to the personal

guarantee.    Rom’s guarantee was executed after the loan was distributed

but backdated to reflect that it was part of the March 2006 loan transaction.

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      Christopher Hennessey, Mr. Sullivan’s business colleague, testified

consistently.   Mr. Hennessey, Mr. Sullivan, and Mr. Rizza agreed to loan

$200,000 to Outercurve in June 2004, and the full amount of the loan was

due one year later. That amount was not repaid, when, in March 2006, Rom

and Roga approached him for another $40,000 loan to Outercurve.

Outercurve needed the funds to satisfy a debt that it owed to Tech Edge,

which had been instrumental in introducing Outercurve to a solid client base

in Saudi Arabia. Mr. Hennessey explained, “There was a lot of urgency to

get [Tech Edge] paid.” Id. at 235.

      When Rom and Roga approached Mr. Hennessey for the $40,000 to

pay Tech Edge, he was unwilling to make the loan since Hennessey Group

had not “been paid on the first loan yet.”     Id. at 236.   Mr. Hennessey

explained, “So we’re not about to make a second loan without some sort of

backing to it, without some sort of guarantee to it, so that if we didn’t get

repaid, we would have some equity ownership in – to cover both loans that

have been made, both the first loan and the second loan.” Id.

      Mr. Hennessey communicated to Rom and Roga that his group would

not loan them the $40,000 absent personal guarantees from them.           Rom

and Roga agreed to execute the personal guarantees before the loan was

paid. Specifically, Mr. Hennessey delineated that, after Rom and Roga asked

for the $40,000 from Hennessey Group,

      we came back to them and said, yes, but first of all, we need to
      connect the two notes, the first note, and if we're going to make

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     a second loan, the second note, and secondly we need a
     guarantee. We need a guarantee that if this doesn't happen, we
     don't get repaid on either note, then some conversion -- we're
     going to get shares of stock, not a conversion, but we're going to
     get your shares of stock as a failsafe guarantee so that we have
     some value out of both loan transactions.

          All right. And did you mention that to Mr. Rom and Mr.
     Roga?

          A. We did.

          Q. And what was their reaction?

          A. They were agreeable to that.

          Q. Agreeing to include the --

           A. Including -- include language in the guarantee and the
     note that would cover successor entities.

           Q. Okay. And as far as the timing of when these
     discussions that you just mentioned and Mr. Rom and Mr. Roga
     agreeing to those terms, can you tell me what the time frame
     was --

          A. Sure.

          Q. -- when that was happening?

           A. This would have all been -- these discussions would
     have occurred in March of 2006, leading up [to the loan], and it
     was probably the last couple weeks of March, leading up,
     because remember there was a sense of urgency here, leading
     up to the actual note and the guarantee at the end of March of
     2006.

           Q. Now, who was creating this sense of urgency? Was it
     the Plaintiffs or was it somebody else?

          A. No. The sense of urgency was created by Mr. Rom and
     Mr. Roga. We need this money because we have to pay off this
     agent, Tech Edge.

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           Q. All right. And you communicated that to Mr. Rom and
     Mr. Roga?

           A. We did.

           Q. And what was their reaction?

           A. Well, their reaction was, yes, we can go ahead with
     that. We'll do a guarantee, and we'll get a second note, second
     promissory note, which will connect the first note to the second
     note, and the second note also would be broader, would not only
     be a loan that we're making to Outercurve International, but also
     to entities or successor companies, so that we could go after
     successor companies or entities.

           Q. And why was that important to you? Why did you feel
     that that was important?

           A. Well, all this period of time that had evolved, the
     companies were evolving. I mean, we had started in the United
     States with Outercurve Technologies, then it was Outercurve
     Delaware, and now there was Outercurve International, and then
     there was these other companies such as Emitac and Tech Edge.
     So we were concerned that at some point Outercurve
     International might evolve into another company, so we wanted
     to make sure if that happened we had protection.

N.T. Trial, 11/4-8/13 Vol. II, at 249-250.    The $40,000 was loaned to

Outercurve before the personal guarantees were executed in writing, but the

agreement concerning the guarantees was memorialized in emails.

     Based upon the above adduced proof from Hennessey Group, which

we are required to accept for purposes of deciding whether Rom is entitled

to judgment as a matter of law, it is abundantly clear that the personal

guarantees were supported by consideration in the form of a second loan

that was urgently needed. Rom assented to the personal guarantee during

negotiations and in order to secure the funds for his company, and he

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benefited from the loan. The fact that the personal guarantee was executed

after the loan disbursement is a red herring and Rom’s position on appeal is

lacking in merit. Hence, we decline to vacate the judgment entered in favor

of the Hennessey Group.

      Rom next suggests that the trial court should have instructed the jury

on the concept of a gratuitous promise.       Our standard of review of this

contention follows:

             Under Pennsylvania law, our standard of review when
      considering the adequacy of jury instructions in a civil case is to
      determine whether the trial court committed a clear abuse of
      discretion or error of law controlling the outcome of the case. It
      is only when the charge as a whole is inadequate or not clear or
      has a tendency to mislead or confuse rather than clarify a
      material issue that error in a charge will be found to be a
      sufficient basis for the award of a new trial.

Drew v. Work, 95 A.3d 324, 329 (Pa.Super. 2014) (citation omitted).

Moreover: “As a general rule, refusal to give a requested jury instruction

containing a correct statement of the law relating to the issues raised by the

evidence is grounds for a new trial unless the substance of that point has

been covered in the court's charge as a whole.” McManamon v. Washko,

906 A.2d 1259, 1270 (Pa.Super. 2006) (citation omitted; emphasis added).

      Rom maintains that the trial court erred in declining to give Rom’s

proposed point for charge as to the concept of gratuitous promise since the

law relating to gratuitous promise was crucial for the jury’s understanding of

whether   the   personal   guarantee    was    supported   by   consideration.

Appellant’s brief at 32. We conclude that the concepts of consideration and

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gratuitous promise were clearly and adequately conveyed by the instructions

disseminated by the trial court, which included the following:

            There must be consideration given by each party to a valid
      contract. That is, each party must have bargained to exchange
      their promise for another. The exchanged promises are either
      promises to perform or promises not to perform some act. The
      value or adequacy of the consideration given will not usually be
      examined, but the circumstances that surround -- that show that
      both parties were capable of bargaining will be examined. In that
      sense, competent people are free to contract, and even if one
      makes a bad deal, they are bound by the agreement.

            Now, one's promise to make a gift to another is not
      an enforceable promise since no consideration was given
      for that promise and thus no contract was created. There is,
      however, consideration where one promises to use his or her
      best efforts. Yet no consideration will be found upon which
      to base a contract if one party has promised to do
      something that they are already obligated to do, such as
      repay a preexisting debt.

N.T. Trial, 11/4-8/13 Vol. IV, at 760-61 (emphases added).           Since the

concept of gratuitous promise was adequately covered by the instructions,

Rom is not entitled to a new trial based upon the trial court’s refusal to give

Rom the precise instruction that he requested.

      Rom also maintains that the court improperly failed to charge the jury

on the definition of successor entity.   Rom references the legal definition of

successor entity under case law examining whether corporate successor

liability attaches to a corporation that has merged with or purchased the

assets of another corporation.     See Fizzano Bros. Concrete Products,

Inc. v. XLN, Inc., 42 A.3d 951 (Pa. 2012). Rom maintains that the jury

had to find that EMS was a successor entity to Outercurve, as defined by the

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case law on corporate successor liability, in order to find that the personal

guarantee applied to Rom’s stock in EMS.

      Rom’s position is untenable. The parties hereto executed a document.

The issue was whether the personal guarantee covered Rom’s equity interest

in EMS under the terms of that writing and not whether EMS was liable for

Outercurve’s debts under the doctrine of corporate successor liability.

Specifically, Rom executed a personal guarantee under which Hennessey

Group was entitled to four percent of Rom’s equity in Outercurve if there

was default under the loan. The guarantee additionally provided, “Pursuant

to your Promissory Note with Outercurve International, FZ-LLC dated March

27, 2006, . . . .we, Derek G. Roga and William B. Rom personally guarantee

you equity participation within Outercurve International, FZ-LLC or any

such entity formed to conduct the proposed business.”               Defendant’s

Exhibit 5A (emphasis added). The document also recited, “This guarantee of

equity is provided you in the event the existing promissory note with

Outercurve Technologies, Inc. dated on or about June 16, 2004 is defaulted

on, and we, under no obligation or responsibility for such note, agree to

make this equity allocation to you from our personal equity holdings in

Outercurve International, FZ-LLC or any successor entity.” Id. (emphasis

added).

      It is established that, “In the cases of a written contract, the intent of

the parties is the writing itself. If left undefined, the words of a contract are

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to be given their ordinary meaning.” Lenau v. Co-eXprise, Inc., 102 A.3d
423, 429 (Pa.Super. 2014).       The document in question was a contract.

Thus, the meaning of “successor entity” as well as “any entity formed to

conduct the proposed business” was to be given their ordinary meaning as

envisioned by the parties. The legal elements that define successor entity

for purposes of corporate successor liability had no application herein.

Hence, the trial court did not err in failing to instruct the jury on that

concept.   Drew, supra at 329 (citation omitted) (“The trial court may

charge only on the law applicable to the factual parameters of a particular

case and it may not instruct the jury on inapplicable legal issues.”).

      Finally, Rom seeks, based upon the fact that he sold his interest in

EMS for $302,400, to reduce the damages award. “[T]he decision on a

requested remittitur is addressed to the discretion of the trial court.”

Zauflik v. Pennsbury School Dist., 104 A.3d 1096,              (Pa. 2014). “A

remittitur or judicial reduction of a jury award is appropriate only when the

award is plainly excessive and exorbitant.      The question is whether the

award of damages falls within the uncertain limits of fair and reasonable

compensation or whether the verdict so shocks the sense of justice as to

suggest that the jury was influenced by partiality, prejudice, mistake, or

corruption.” Id. (citation and quotation marks omitted).        “The matter is

peculiarly within the discretion of the trial court and will not be reversed

unless an abuse of discretion or an error of law has been committed.” Id.

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(citation and quotation marks omitted).     The damages award in this case

was supported by the testimony of an expert witness and Exhibit 44 and

hardly fails to shock this Court’s sense of justice. Hence, we perceive of no

abuse of discretion.

      Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/20/2015

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