Court Opinion

ID: 3164806
Source: CourtListenerOpinion
Date Created: 2015-12-22 19:07:35.407013+00
Date Added: 2024-06-11T11:59:56.486940
License: Public Domain

J. A25031/15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

GLENN DISTRIBUTORS CORP.,                   :     IN THE SUPERIOR COURT OF
                                            :          PENNSYLVANIA
                          Appellant         :
                                            :
                    v.                      :
                                            :
RECKITT BENCKISER, LLC                      :
                                            :
                                            :     No. 140 EDA 2015

               Appeal from the Order Entered December 15, 2014
              In the Court of Common Pleas of Philadelphia County
                        Civil Division No(s).: 121201574

BEFORE: DONOHUE, MUNDY, and FITZGERALD,* JJ.

MEMORANDUM BY FITZGERALD, J.:                     FILED December 22, 2015

        Plaintiff/Appellant, Glenn Distributors Corp., appeals from the order

entered in the Philadelphia County Court of Common Pleas denying its

motion      for   summary     judgment     and    granting     the    motion   of

Defendant/Appellee, Reckitt Benckiser, LLC, for summary judgment. In this

breach of contract matter, Appellant argues the trial court erred in finding

the parties’ course of performance modified their agreements. We affirm.

        The trial court summarized the underlying facts as follows.

              [Appellant and Appellee] had a business relationship
           between 2000 and 2012. [Appellant] purchased closeout
           goods from [Appellee], a distributor of various retail
           products. This is the process by which the goods were
           purchased: [Appellee] would send an email to [Appellant]

*
    Former Justice specially assigned to the Superior Court.
J.A25031/15

         (and frequently to other would-be purchasers at the same
         time) notifying them of the availability of closeout
         products. [Appellant] would respond with a bid, including
         price and quantity. [Appellee] would respond notifying
         [Appellant] that it won the bid, sometimes noting that the
         quantity available had changed. [Appellant] would then
         send a purchase order.       [Appellee] would then send
         [Appellant] an invoice or invoices (depending on whether
         the goods were to be sent in different shipments),
         [Appellant] would pay the amounts listed in the invoices,
         and [Appellee] would ship the goods. The quantities listed
         on the invoices often did not match the quantities in the
         purchase orders. In dispute in the instant case are forty-
         six transactions between 2008 and 2012[.]

Trial Ct. Op., 4/27/15, at 1-2.

      On December 12, 2012, Appellant commenced the instant breach of

contract suit against Appellee.     Appellant averred each of the purchase

orders were express and binding contracts, Appellee failed to provide all the

quantity of items set forth in them, and these “[s]hortages . . . cost”

Appellant more than $2 million in profits.1 Appellant’s Second Am. Compl.,

3/6/13, at ¶¶ 17, 18, 24. Appellant “did not allege that it paid for product

that it did not receive.” Trial Ct. Op., 4/27/15, at 2.

      On July 11, 2014, both parties filed motions for summary judgment.

The court heard oral arguments on December 1, 2014, and on December

12th, entered the instant order granting Appellee’s motion for summary

judgment and denying Appellant’s motion.        The trial court first found the

1
 Specifically, Appellant claimed $2,086,749.06 in lost profits.     Appellant’s
Second Am. Compl. at ¶ 24.

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purchase orders were contracts.2 However, it found these “contracts were

clearly   modified   by   the   parties’   course   of   dealing   and   course   of

performance.” Trial Ct. Op., 12/11/14, at 3. It reasoned:

             It is undisputed that over the parties’ multi-year
          business relationship, [Appellee] would sometimes remove
          some products from the list of products offered to
          [Appellant], after [Appellant] submitted purchase orders
          but before the products were shipped.

              In the transactions at issue, many of the emails
          between [Appellant’s] representative and [Appellee’s]
          representative show that [Appellant] never raised an
          objection to receiving less product . . . than were listed on
          the purchase orders. It did not respond with demands for
          fulfillment, merely with questions, acceptance, or mild
          expressions of disappointment.             [Appellant] would
          sometimes offer to buy the same product in future bids,
          indicating that it did not believe it was owed the remainder
          listed in the purchase orders.

             It is clear that this was the parties’ course of
          performance, in which quantities may be pulled without
          warning to sell at retail. If [Appellant] were going to
          change the course of performance, it would have needed
          to give reasonable notice to [Appellee], which it did not do.
          [Appellant’s] behavior constituted a modification of the
          agreements, and therefore it could not later maintain an
          action for breach of contract against [Appellee] based on
          modifications that it agreed to.

Id. at 3-4.

2
 The trial found the purchase orders memorialized two types of agreements
as follows. In some cases, Appellee accepted Appellant’s “bid on a certain
quantity at a certain price,” and “a contract was formed with a definite price
and quantity term, memorialized in the purchase order.” Trial Ct. Op.,
4/27/15, at 2-3. In other cases, Appellant bid and Appellee “responded by
changing the quantity term.” Id. at 3. These responses were counteroffers,
and Appellant’s “purchase order constituted an acceptance.” Id.

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     Appellant filed a motion for reconsideration and then this timely

appeal. Subsequently, the trial court denied the motion for reconsideration.

     For ease of disposition, we first set forth the standard of review and

general   principles   concerning   summary   judgment    and   the     Uniform

Commercial Code (“UCC”). This Court has stated:

          Summary judgment properly is granted after the close of
          the relevant pleadings “whenever there is no genuine issue
          of any material fact as to a necessary element of the cause
          of action or defense which could be established by
          additional discovery or expert report” and the moving
          party is entitled to judgment as a matter of law. Pa.
          R.C.P. 1035.2(1). The standard of our review of an order
          granting or denying a motion for summary judgment
          pursuant to Rule 1035.2 is well established. In reviewing
          an order granting summary judgment, an appellate court
          must examine the record in the light most favorable to the
          non-moving party. We will reverse only if there has been
          an error of law or a clear abuse of discretion.

Morningstar v. Hallett, 858 A.2d 125, 128-29 (Pa. Super. 2004) (some

citations omitted). A contract for the sale of goods is governed by Article 2

of the UCC, which has been adopted in Pennsylvania.       Allegheny Energy

Supply Co., LLC v. Wolf Run Mining Co., 53 A.3d 53, 62 (Pa. Super.

2012) (citing 13 Pa.C.S. § 2101 et seq.), appeal denied, 69 A.3d 599 (Pa.

2013).

     At this juncture, we consider whether the case sub judice implicates a

course of dealing or course of performance.       Section 1303 of the UCC

defines these terms as follows:

             (a)    Course of performance.—A “course of
          performance” is a sequence of conduct between the parties

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         to a particular transaction that exists if:

               (1) the agreement of the parties with respect to the
            transaction involves repeated occasions for performance
            by a party; and

               (2) the other party, with knowledge of the nature of
            the performance and opportunity for objection to it,
            accepts the performance or acquiesces in it without
            objection.

            (b) Course of dealing.— A “course of dealing” is a
         sequence of conduct concerning previous transactions
         between the parties to a particular transaction that is fairly
         to be regarded as establishing a common basis of
         understanding for interpreting their expressions and other
         conduct.

13 Pa.C.S. § 1303(a)-(b) (emphasis added). The comment to Section 1303

states in pertinent part: “‘Course of dealing’ . . . is restricted, literally, to a

sequence of conduct between the parties previous to the agreement.               A

sequence of conduct after or under the agreement, however, is a ‘course of

performance.’”3 13 Pa.C.S. § 1303, cmt. 2.

      The trial court issued nearly identical opinions, one on December 12,

2014, contemporaneously with the order granting summary judgment in

favor of Appellee, and a Pa.R.A.P. 1925(a) opinion on April 27, 2015. The

December 2014 opinion stated, “[T]he contracts were clearly modified by

the parties’ course of dealing and course of performance” and

3
  See also J.W.S. Delavau v. E. Am. Transp. & Warehousing, 810 A.2d
672, 684 (Pa. Super. 2002) (“‘Course of dealing’ ‘may supplement or qualify
terms of an agreement,’ 13 Pa.C.S.A. § 1205(c), whereas ‘course of
performance’ may be used only to interpret a contract.”).

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concluded, “It is clear that this was the parties’ course of dealing,” and “If

[Appellant] were going to change the course of dealing, it would have

needed to give reasonable notice to [Appellee], which it did not do.” Trial

Ct. Op., 12/11/14, at 3, 4 (emphases added).                     The corresponding

statements in the April 2015 opinion, however, differed: “[T]he contracts

were clearly modified by the parties’ course of performance,” “It is clear

that this was the parties’ course of performance,” and “If [Appellant] were

going to change the course of performance, it would have needed to give

reasonable notice to [Appellee], which it did not do.” Trial Ct. Op., 4/27/15,

at 3, 4 (emphases added).           Neither opinion addressed the distinction

between course of dealing and course of performance, and the latter opinion

did not discuss why “course of performance” was substituted for “course of

dealing.”

      In its brief, Appellant avers that a course of dealing is “inapt in this

case,” as that term pertains to conduct prior to the parties’ transaction.

Appellant’s Brief at 30.    We agree, as the court’s analysis focused on the

parties’ conduct after each purchase order.                  Thus, we proceed on

Appellant’s   argument     that   the   court   erred   in    finding   a   course   of

performance that modified the parties’ purchase orders. See 13 Pa.C.S. §

1303(a)(1)-(2).

      The definition of “course of performance” under Section 1303(b) is set

forth above. Section 1303(f) provides:

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           (f) Waiver or modification.–Subject to section 2209
        (relating to modification, rescission and waiver), a course
        of performance is relevant to show a waiver or
        modification of any term inconsistent with the course of
        performance.

13 Pa.C.S. § 1303(f). Section 2209, in turn states in pertinent part:

           (b)       Writing    excluding     modification    or
        rescission.—A    signed   agreement     which   excludes
        modification or rescission except by a signed writing
        cannot be otherwise modified or rescinded, but except as
        between merchants such a requirement on a form supplied
        by the merchant must be separately signed by the other
        party.

           (c) Compliance of modified contract with statute
        of frauds.—The requirements of section 2201 (relating to
        formal requirements; statute of frauds) must be satisfied if
        the contract as modified is within its provisions.

           (d)     Ineffective modification or rescission as
        waiver.—Although an attempt at modification or
        rescission does not satisfy the requirements of subsection
        (b) or (c) it can operate as a waiver.

See 13 Pa.C.S. § 2209(b)-(d).

     Sections 2209(b) through (d) are identical—with exception in the

numbering of the subsections—to Sections 2209(2) through (4) of the UCC.

The official comments to UCC’s Section 2209 explain in pertinent part:

          3. Subsections (2) and (3) are intended to protect
        against false allegations of oral modifications.” . . .

           The Statute of Frauds provisions of [the UCC] are
        expressly applied to modifications by subsection (3).

                                 *    *    *

           4. Subsection (4) is intended, despite the provisions of
        subsections (2) and (3), to prevent contractual provisions

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         excluding modification except by a signed writing from
         limiting in other respects the legal effect of the parties’
         actual later conduct.

Unif. Commercial Code § 2-209, cmts. 3-4.

      On appeal, Appellant agrees with the trial court’s finding that the

purchase orders were contracts.     See Appellant’s Brief at 7.   However, it

avers the trial court erred in: (1) finding the parties’ course of performance

modified their contracts and (2) granting summary judgment in favor of

Appellee.4 We address its arguments seriatim.

      First, Appellant avers “[m]odification subject to 2209(d) must always

begin with a legally insufficient (under 2209(b)/(c)) ‘attempt at modification’

to operate as a waiver.” Appellant’s Brief at 22 (citing 13 Pa.C.S. § 2209(b)-

(d); Inwood Knitting Mill Co. v. Budge Mfg. Co., 29 Pa. D. & C.2d 462,

463 (Pa. Com. Pl. 1962)).5     It asserts that in the instant case, however,

“[t]here were no attempts at modification” and “no record evidence of

[Appellee] affirmatively requesting a change to the terms of the parties’

4
  Although Appellant’s statement of questions involved presents three issues,
the argument section sets forth two issues, the first of which is divided into
five sub-issues. See Pa.R.A.P. 2119(a) (requiring argument section to “be
divided into as many parts as there are questions to be argued”).
Nevertheless, all of Appellant’s issues overlap and thus we consider them
together.
5
 “[W]hile appellate courts are not bound by the decisions of the Courts of
Common Pleas, they may be considered for their persuasive authority.”
Sysco Corp. v. FW Chocolatier, LLC, 85 A.3d 515, 520 n.2 (Pa. Super.
2014).

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contracts before shipping [the] products,” and instead, “the typical pattern

was for [Appellee] to simply ship nonconforming products to [Appellant]

without ever informing [Appellant] that no further shipments of contracted

for products would be made.”6       Appellant’s Brief at 22-23.    Appellant’s

second and third arguments are that in the alternative, (1) “[a]ny purported

modification of the parties’ contracts, or waiver of [Appellee’s] obligations,

fail the good faith test imposed by the UCC;” and (2) there is no evidence

that Appellee “reasonably relied on” any modification. Id. at 26 (citing 13

Pa.C.S. § 1201(19), 29). We find no relief is due.

      First, we disagree with Appellant that Subsection 2209(d) and findings

of modification or waiver are applicable in this case. While the trial court’s

opinion quoted Subsection 2209(d), it made no further mention of it, or

waiver, in its analysis.   Instead, its holding was based solely on a finding

that Appellant’s “behavior constituted a modification of the [parties’]

agreements.”    Id. at 3-4.     Additionally, the UCC comment states that

Subsection 2209(4) “is intended . . . to prevent contractual provisions

excluding modification—except by a signed writing—from limiting . . . the

parties’ actual later conduct.”    Unif. Commercial Code § 2-209, cmt. 4

6
  Appellant further argues, “At the very least, the issue should be sent to a
jury.” Appellant’s Brief at 24. This contention, along with other arguments
that other factual issues should be heard by a jury, ignore or overlook the
fact that Appellant itself had filed a motion for summary judgment. See
Morningstar, 858 A.2d at 128 (stating summary judgment is proper when
there is no genuine issue of any material fact).

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(dashes added). Thus, Section 2209(d) is not applicable in this case for the

additional reason that the purchase orders did not include any term

excluding modification.   We hold Appellant’s reliance on Section 2209 is

misplaced.

     We next consider Appellant’s argument concerning the parties’ conduct

following the issuance of a purchase order. Appellant alleges the following.

When it “inquired about undelivered products,” Appellee “misled [Appellant]

into believing [it] was attempting to rectify [Appellant’s] grievances.” 7

Appellant’s Brief at 26-27. When Appellant sent “a more formal demand[,

Appellant] received a vague response [and] did not receive a clear

statement [from Appellee] repudiating its obligation to ship the purchase

order quantities.” Id. at 27. Appellee “act[ed] this way” because it “knew”

“it had power in [this] relationship [and] that [Appellant] needed [Appellee]

more than [Appellee] needed [Appellant].”     Id. at 27.   Furthermore, both

parties “knew” that if Appellant were “forceful in its demands” or accused

Appellee of “breach[ing] its contract,” Appellee “would have ended the

parties’ business relationship immediately.” Id. at 28; see also id. at 25

(“Davids must tread carefully around Goliaths.”).

7
  Appellant asserts, “There were very rare occasions where, in response to
[Appellant’s] inquiry, [Appellee] admitted . . . that contracted for products
would not be shipped[. O]n those rare instances, the parties expressly
modified the contract by [Appellee] submitting a ‘new’ purchase order[.]”
Appellant’s Brief at 23.

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       A careful review of Appellant’s argument reveals it does not dispute

the court’s finding that when Appellee shipped a quantity of goods different

from what was indicated in the purchase orders, Appellant failed to “respond

with   demands    for    fulfillment,    [and     instead]   merely   with    questions,

acceptance, or mild expressions of disappointment.” See Trial Ct. Op. at 3-

4.   Indeed, Appellant’s explanations—for why it did not act “forceful in its

demands” and assert Appellee “breached its contract”—corroborates the

court’s finding. See Appellant’s Brief at 28.

       Before considering Appellant’s final claim, we reiterate the court’s

summary     of   the    sequence    of    parties’    transactions:   after   Appellant

transmitted a purchase order, Appellee sent Appellant an invoice with

quantities that “often did not match the quantities in the purchase orders,”

Appellant paid “the amounts listed in the invoices,” and Appellee shipped the

goods. Trial Ct. Op., 4/27/15,a at 1-2.

       On appeal, Appellant asserts “[t]he trial court misconstrued the facts

in the record” in finding it “waited for the invoices and paid [Appellee] in

response to those.”      Appellant’s Brief at 31-32.         Appellant maintains that

instead, it “did not pay based on the invoices in every instance.” Id. at 32.

It claims Appellee admitted Appellant paid “based on what had been

communicated” and Appellant “paid in advance of [Appellee] shipp[ing]

products.” Id. Furthermore, some invoices had an “invoice date” which fell

after the “shipped date.” Id. We find no relief is due.

                                         - 11 -
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         Appellant does not aver that it refused to pay for any order or that it

ever declared any purchase order or invoice void or breached. Instead, on

appeal, Appellant merely states that in some orders, it did not pay according

to the invoice. We hold this argument does not overcome the court’s finding

that Appellant failed to challenge Appellee’s shipments of goods and failed to

demand Appellee to correct the quantity of goods.

         For the foregoing reasons, we do not disturb the court’s finding that

Appellant’s conduct, in forty-six transactions over a period of four years, was

a course of performance that modified the parties’ contracts.       The parties’

“transaction[s] involve[d] repeated occasions for performance by” Appellee,

and Appellant, “with knowledge of the nature of the performance and

opportunity for objection . . . , accept[ed] the performance or acquiesce[d]

in it without objection.” See 13 Pa.C.S. § 1303(a)(1)-(2).       We affirm the

order of the trial court granting Appellee’s motion for summary judgment

and denying Appellant’s motion for summary judgment.

         Order affirmed.

         Judge Mundy joins the memorandum.

         Judge Donohue files a concurring memorandum in which Judge Mundy

joins.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 12/22/2015

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