Court Opinion

ID: 4327989
Source: CourtListenerOpinion
Date Created: 2018-11-05 17:37:43.081206+00
Date Added: 2024-06-11T14:47:45.725339
License: Public Domain

J. A12045/18

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37

MARYANNE GALLAGHER                       :     IN THE SUPERIOR COURT OF
                                         :           PENNSYLVANIA
                   v.                    :
                                         :
M. GALLAGHER & F. MANCUSO                :
PARTNERSHIP, ROBIN MANCUSO               :
DeLUNA, JAMIE MANCUSO,                   :
FRANK MANCUSO AND                        :
CROSS KEYS MANAGEMENT, INC.              :
                                         :
APPEAL OF: ROBIN MANCUSO                 :         No. 3533 EDA 2017
DeLUNA, JAMIE MANCUSO AND                :
FRANK MANCUSO                            :

               Appeal from the Order Entered October 12, 2017,
                in the Court of Common Pleas of Bucks County
                        Civil Division at No. 2016-07570

BEFORE: BOWES, J., OTT, J., AND FORD ELLIOTT, P.J.E.

MEMORANDUM BY FORD ELLIOTT, P.J.E.:             FILED NOVEMBER 05, 2018

      Robin    Mancuso   DeLuna,   Jamie     Mancuso,   and   Frank   Mancuso

(collectively, “appellants”) appeal from the October 12, 2017 order entered in

the Court of Common Pleas of Bucks County that overruled and dismissed

their preliminary objections to appellee Maryanne Gallagher’s second

amended complaint.1 After careful review, we affirm.

1 The record reflects that on April 3, 2017, appellee filed a complaint against
M. Gallagher and F. Mancuso Partnership and appellants. Appellee filed her
first amended complaint against the same defendants on May 22, 2017.
Subsequently, on July 7, 2017, appellee filed her second amended complaint
against these defendants, but erroneously titled the pleading as “First
Amended Complaint.”
J. A12045/18

     The trial court set forth the following:

           On or about June 1997, Maryanne Gallagher
           (hereinafter “[a]ppellee”) and Frank [Mancuso
           (“Frank”)] created a business partnership (hereinafter
           “the Partnership”) for the purpose of owning,
           managing, operating, and conducting a real estate
           brokerage         business        in       Levittown,
           Pennsylvania.[Footnote 1]      At the time of the
           Partnership’s formation, Frank was the sole owner of
           the    capital   stock     of   Hearthside     Realty,
           Inc.[Footnote 2]    Hearthside Realty, Inc. was a
           Coldwell Banker franchisee operating under the name
           “Coldwell Banker Hearthside Realty.”

                 [Footnote 1] The factual background is
                 gleaned from the parties’ respective
                 pleadings in this case.

                 [Footnote 2] At the time of the
                 Partnership’s creation, Hearthside Realty,
                 Inc. was known as “Hearthside Realtors,
                 Inc.”

           Under the terms of the Partnership, the Partnership
           was to operate as a branch of Coldwell Banker under
           the trade name “Coldwell Banker Hearthside
           Levittown Realty” pursuant to the Franchise
           Agreement in existence between Coldwell Banker as
           franchisor and Coldwell Banker Hearthside Realty
           (“CB Hearthside”) as franchisee. Under the terms of
           the Partnership Agreement, Frank covenanted that he
           would continue to permit the Partnership to operate
           as a branch office of Coldwell Banker. Of particular
           importance to the instant matter is that the
           Partnership Agreement, entered into by and between
           [a]ppellee and Frank, contained an arbitration
           provision, to wit:

                 If any controversy or claim arising out of
                 this Partnership Agreement cannot be
                 settled by the Partners the controversy or
                 claim shall be settled by arbitration in
                 accordance with the rules of the American

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J. A12045/18

                Arbitration Association then in effect, and
                judgment on the award may be entered in
                any court having jurisdiction.

          The Partnership Agreement provided that if Frank ever
          transferred by sale, gift or otherwise any of his capital
          stock of CB Hearthside without the consent of
          [a]ppellee, Frank was to be treated as a “withdrawing
          partner” under the Partnership Agreement. Pursuant
          to the Partnership Agreement, either Frank or
          [a]ppellee was permitted to withdraw from the
          Partnership at any time by giving one-hundred
          twenty (120) days advance written notice to the other
          of his/her intent to withdraw. Upon giving notice of
          withdrawal, the Partnership Agreement provided that
          the remaining partner would be given the option to
          purchase the withdrawing partner’s share in the
          Partnership.

          In or about 2013, Frank, who maintained a series of
          companies involved either directly or ancillary to the
          real estate industry, began restructuring many of his
          companies and business interests, including the
          Partnership.      According to the Second Amended
          Complaint, unbeknownst to [a]ppellee, at some point
          during 2014, Frank allegedly transferred or sold some
          or all of his interests in the Partnership business to his
          children, Robin [Mancuso DeLuna (“Robin”)] and
          Jamie [Mancuso (“Jamie”)]. In anticipation of this
          restructuring, Robin became president of a
          newly-formed entity, Cross Keys Management, Inc.
          (hereinafter, “CK Management”).             The Second
          Amended Complaint alleges that Frank never gave
          [a]ppellee written notice of his intention to withdraw
          from the Partnership. Appellee was also never given
          the opportunity to purchase Frank’s interests in the
          Partnership as the Partnership Agreement required.
          Appellee was never asked to consent to the transfer
          of any interests to Robin or Jamie.

          This corporate restructuring also substantially
          changed the operating dynamic of the Partnership.
          The restructuring removed so-called “Back Office
          Services” from all of the various Mancuso businesses

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J. A12045/18

          and their offices, and centralized those functions
          under the umbrella of CK Management, with Robin as
          President, Jamie as Vice President, and Frank as
          Secretary of the company. The restructuring also
          removed legal, accounting, financial, human relations
          and administrative functions from the Partnership,
          and     centralized    those     functions     within
          CK Management.

          Following this restructuring, instead of all gross
          commission revenues from real estate sales of the
          Partnership being deposited by CB Hearthside into the
          accounts of the Partnership, as had historically been
          the case, management fees and other expenses were
          deducted from the Partnership’s gross sales revenues
          and paid to CK Management before any net proceeds
          were released to the Partnership. The fees charged
          by CK Management for Back Office Services (the
          “Management Fee”) were calculated as a percentage
          applied to and deducted from the revenues of each
          sale that was concluded by each entity. On or about
          2013, [appellee] was informed by [appellants] that
          the Partnership would be charged a 15% Management
          Fee by CK Management, applied to the gross sales
          revenues for Back Office Services and other
          administrative costs.

          Unbeknownst to [a]ppellee, this practice of deducting
          management and other fees from the Partnership’s
          gross commission revenues began before the
          restructuring of CB Hearthside, under the stewardship
          of Robin. Despite being a 50% owner and general
          partner of the Partnership, [a]ppellee avers that she
          was given no information concerning what the costs
          and expenses of CK Management actually were or how
          those costs and expenses were being allocated among
          the various [businesses owned by appellants] and the
          Partnership. The Second Amended Complaint alleges
          that the costs and expenses of CK Management were
          grossly disproportionately assessed upon the
          Partnership.

          On April 3, 2017, [a]ppellee filed a Complaint to which
          [a]ppellants filed preliminary objections.      Shortly

                                   -4-
J. A12045/18

            thereafter, on May 22, 2017, [a]ppellee filed her First
            Amended      Complaint      to    which    [a]ppellants
            subsequently filed Preliminary Objections. On July 7,
            2017, [a]ppellee filed a Second Amended Complaint
            to which [a]ppellants also filed Preliminary Objections
            seeking to submit Counts I, II, and V of the Second
            Amended Complaint to arbitration. Pursuant to the
            Preliminary Objections to [a]ppellee’s Second
            Amended Complaint, on September 28, 2017, we held
            oral argument. On October 12, 2017, we issued an
            order    overruling   and      dismissing   [a]pellants’
            Preliminary Objections to [a]ppellee’s Second
            Amended Complaint.

            On October 26, 2017, [a]ppellants filed the instant
            appeal from this Court’s October 12, 2017 Order. By
            Order dated November 1, 2017, we directed
            [a]ppellants to provide the Court with a Statement of
            Matters Complained of on Appeal pursuant to
            Rule 1925(b) of the Pennsylvania Rules of Appellate
            Procedure. On November 16, 2017, [a]ppellants filed
            their [Rule 1925(b) statement].

Trial court opinion, 12/22/17 at 1-4.

      Appellants complain that the trial court erred in overruling and

dismissing their preliminary objections to appellee’s second amended

complaint because the arbitration provision contained in the partnership

agreement entered into between appellee and Frank Mancuso (“Partnership

Agreement”) requires that Counts I, II, and V be submitted to arbitration.2

2 In their statement of questions involved, appellants framed the issues as
follows:

            I.    Did the trial court err in overruling and
                  dismissing [a]ppellants’ preliminary objections
                  to [a]ppellee’s Second Amended Complaint and
                  in finding that there is not a valid agreement in
                  the Partnership Agreement [] for the

                                        -5-
J. A12045/18

                   M. Gallagher & F. Mancuso Partnership (the
                   “Partnership”) signed between [a]ppellee and
                   [a]ppellant Frank Mancuso to arbitrate Count I
                   of [a]ppellee’s Second Amended Complaint and
                   in finding that the claims asserted in Count I of
                   [a]ppellee’s Second Amended Complaint are not
                   within the scope of the arbitration provision in
                   the Partnership Agreement, and in failing to
                   transfer Count I of [a]ppellee’s Second
                   Amended Complaint to arbitration?

            II.    Did the trial court err in overruling and
                   dismissing [a]ppellants’ preliminary objections
                   to [a]ppellee’s Second Amended Complaint and
                   in finding that there is not a valid agreement in
                   the Partnership Agreement for the Partnership
                   signed between [a]ppellee and [a]ppellant
                   Frank Mancuso to arbitrate Count II of
                   [a]ppellee’s Second Amended Complaint and in
                   finding that the claims asserted in Count II of
                   [a]ppellee’s Second Amended Complaint are not
                   within the scope of the arbitration provision in
                   the Partnership Agreement, and in failing to
                   transfer Count II of [a]ppellee’s Second
                   Amended Complaint to arbitration?

            III.   Did the trial court err in overruling and
                   dismissing [a]ppellants’ preliminary objections
                   to [a]ppellee’s Second Amended Complaint and
                   in finding that there is not a valid agreement in
                   the Partnership Agreement for the Partnership
                   signed between [a]ppellee and [a]ppellant
                   Frank Mancuso to arbitrate Count V of
                   [a]ppellee’s Second Amended Complaint and in
                   finding that the claims asserted in Count V of
                   [a]ppellee’s Second Amended Complaint are not
                   within the scope of the arbitration provision in
                   the Partnership Agreement, and in failing to
                   transfer Count V of [a]ppellee’s Second
                   Amended Complaint to arbitration?

Appellants’ brief at 5.

                                      -6-
J. A12045/18

        At the outset, we note that “[w]hile an order denying preliminary

objections is generally not appealable, there exists . . . a narrow exception to

this oft-stated rule for cases in which the appeal is taken from an order

denying a petition to compel arbitration.” Midomo Co., Inc. v. Presbyterian

Hous. Dev. Co., 739 A.2d 180, 184 (Pa.Super. 1999) (citation omitted). An

order    denying preliminary objections that alleges alternative          dispute

resolution and requests that the trial court enter an order to arbitrate the

dispute is an interlocutory order appealable as of right pursuant to

Pa.R.A.P. 311(a)(8), Pa.R.Civ.P. 1028(a)(6) and Note, and 42 Pa.C.S.A.

§§ 7342(a), 7320(a)(1), and 7304(a).         Midomo Co., 739 A.2d at 184.

Therefore, the trial court’s October 12, 2017 order overruling and dismissing

appellants’ preliminary objections alleging that Counts I, II, and V of appellee’s

second amended complaint fall within the scope of the arbitration provision

contained in the Partnership Agreement and requesting an order to arbitrate

those counts is an interlocutory order appealable as of right.

        “Our standard of review of an order of the trial court overruling [or

granting] preliminary objections is to 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.” DeLage Landen Fin. Servs., Inc. v. Urban P’ship, LLC,

903 A.2d 586, 589 (Pa.Super. 2006) (citation omitted; brackets in original).

“When preliminary objections, if sustained, would result in the dismissal of an

                                      -7-
J. A12045/18

action, such objections should be sustained only in cases which are clear and

free from doubt.” Id. (citations omitted).

      To determine whether a trial court should have compelled arbitration,

this court employs a two-part test.     Elwyn v. DeLuca, 48 A.3d 457, 461

(Pa.Super. 2012).    We must first determine whether a valid agreement to

arbitrate exists. We must then determine whether the dispute is within the

scope of the agreement to arbitrate. Whether a claim falls “within the scope

of an arbitration provision is a matter of contract, and as with all questions of

law, our review of the trial court’s conclusion is plenary.”       Id. (citation

omitted). We determine the scope of arbitration by the intention of the parties

as ascertained pursuant to the rules governing contracts generally.          The

determination involves questions of law and our review is plenary. Id.

            [Moreover, a]rbitration is a matter of contract, and
            parties to a contract cannot be compelled to arbitrate
            a given issue absent an agreement between them to
            arbitrate that issue. Even though it is now the policy
            of the law to favor settlement of disputes by
            arbitration and to promote the swift and orderly
            disposition of claims, arbitration agreements are to be
            strictly construed and such agreements should not be
            extended by implication.

Id., quoting Cumberland-Perry Area Vocational-Technical Sch. v. Bogar

& Bink, 396 A.2d 433, 434-435 (Pa.Super. 1978).

      Generally, only parties to the arbitration agreement are subject to

arbitration. Elwyn, 48 A.3d at 461. A non-party, however, may fall within

the scope of an arbitration agreement if that is the parties’ intent. Id.

                                      -8-
J. A12045/18

      Here, the parties to do not dispute that a valid arbitration agreement

exists between appellee and Frank Mancuso.      The dispute is whether the

claims set forth in appellee’s second amended complaint alleging (1) breach

of contract (Partnership Agreement) against Frank Mancuso at Count I;

(2) unjust enrichment against appellants at Count II; and (3) breach of

fiduciary duty against appellants at Count V fall within the scope of the

arbitration provision contained in the Partnership Agreement.

      The record reflects that appellee and Frank Mancuso (“Partners”)

entered into the Partnership Agreement on June 15, 1997. (Appellee’s second

amended complaint, 7/7/17 at Exhibit A, p. 1, ¶ 1.) The arbitration clause

contained in that Partnership Agreement provides:

           If any controversy or claim arising out of this
           Partnership Agreement cannot be settled by the
           Partners, the controversy or claim shall be settled by
           arbitration in accordance with the rules of the
           American Arbitration Association then in effect, and
           judgment on the award may be entered in any court
           having jurisdiction.

Id.

      Appellee’s second amended complaint alleges, among other things, that

appellants restructured various companies that they owned; that appellants

created CK Management to centralize administrative functions of appellants’

companies; that appellants placed the Partnership formed between appellee

and Frank Mancuso under the CK Management umbrella; and that appellants

charged management fees to the Partnership without appellee’s knowledge or

                                    -9-
J. A12045/18

consent. (Appellee’s second amended complaint, 7/11/17 at 4-13, ¶¶ 17-81.)

Count I of appellee’s second amended complaint alleges that Frank Mancuso

breached the Partnership Agreement by failing to provide appellee with the

requisite notice of his withdrawal from the Partnership and his intention to

transfer his interest to Robin Mancuso-DeLuna and Jaime Mancuso. (Id. at

13-14, ¶¶ 82-92.) Count II alleges unjust enrichment against appellants in

that they charged management fees to the Partnership that caused the

Partnership and appellee to sustain financial damage. (Id. at 15-17, ¶¶ 93-

107.) Count V alleges that appellants breached the fiduciary duty that they

owed appellee by placing the Partnership under the CK Management umbrella

and charging it management fees without appellee’s knowledge or consent

which caused appellee to sustain financial damage. (Id. at 19-20, ¶¶ 122-

128.)

        A plain reading of the arbitration provision set forth in the Partnership

Agreement demonstrates that it restricts claims subject to arbitration to those

controversies or claims that “arise out of [the] Partnership Agreement.” In

determining that appellee’s claims set forth in Counts I, II, and V of her second

amended complaint fall outside of the scope of that arbitration provision, the

trial court found that the second amended complaint “makes clear that the

underlying controversy in this action arises not from a dispute limited to

[a]ppellee and Frank [Mancuso] concerning the Partnership, but rather from

the conduct of Frank [Mancuso] and third parties not subject to the original

                                      - 10 -
J. A12045/18

Partnership Agreement.” (Trial court opinion, 12/22/17 at 8.) Indeed, the

claims set forth in Counts I, II, and V arise out of appellants’ alleged conduct

in which they restructured their businesses, created CK Management, placed

the Partnership under the umbrella of CK Management, and charged

management fees to the Partnership without appellee’s knowledge or consent.

It is that alleged conduct of all three appellants – and not a dispute concerning

the Partnership Agreement between appellee and Frank Mancuso – that gives

rise to appellee’s claims.

      With   respect   to    appellee’s   breach   of   contract   claim   against

Frank Mancuso, the trial court “recognize[d] that Count I is a breach of

contract claim, which if it was the sole claim in this matter would be subject

to the arbitration provision.” (Trial court opinion, 12/22/17 at 7.) Although

appellants seize upon this language, neither that phrase nor Count I of the

second amended complaint can be read in a vacuum. A reading of the entire

second amended complaint reveals that the factual allegations giving rise to

all of appellee’s claims as set forth in paragraphs 1 through 81 and

incorporated into all counts, allege, among other things, that appellants

restructured their businesses, that appellants created CK Management, that

appellants placed the Partnership under CK Management’s umbrella, and that

appellants charged management fees to the Partnership without appellee’s

knowledge or consent.        In the breach of contract count, appellee further

alleges that Frank Mancuso secretly withdrew from the Partnership without

                                      - 11 -
J. A12045/18

providing appellee with the requisite notice and that he secretly transferred

all or some of his ownership interest to Robin Mancuso-DeLuna and

Jaime Mancuso which, “among other conduct, breached his duty of good faith

and fair dealing owed to [appellee.]” (Appellee’s second amended complaint,

7/7/17 at 13-14, ¶¶ 82-92.) In its opinion, the trial court properly concluded

that the claims set forth in appellee’s second amended complaint “are

inextricably linked to one another” because those claims arise from the alleged

conduct of appellants acting in concert with one another.        Because of this

inextricable link, the trial court also properly concluded that “bifurcat[ion of]

these proceedings would frustrate the public policy goals” of “swift and

efficient judicial decision making.” (Trial court opinion, 12/22/17 at 8, citing

Sch. Dist. of Philadelphia v. Livingston-Rosenwinkel, P.C., 690 A.2d
1321 (Pa.Commw.Ct. 2013) (finding that claims arising out of the same set of

occurrences and transactions are not subject to arbitration where entities

involved in the underlying action were not parties to the arbitration

agreement).)

      Therefore, the trial court did not commit an error of law when it

overruled and dismissed appellants’ preliminary objections to appellee’s

second amended complaint based on its finding that the claims set forth in

Counts I, II, and V fall outside of the scope of the arbitration provision because

the allegations clearly demonstrate that the “underlying controversy in this

action arises not from a dispute limited to [a]ppellee and Frank [Mancuso]

                                      - 12 -
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concerning the Partnership, but rather from the conduct of Frank [Mancuso]

and third parties not subject to the original Partnership Agreement.” (Trial

court opinion, 12/22/17 at 8.)

     Order affirmed.

     Ott, J. joins this Memorandum.

     Bowes, J. files a Concurring and Dissenting Memorandum.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/5/18

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