Court Opinion

ID: 4577255
Source: CourtListenerOpinion
Date Created: 2020-10-15 17:11:06.308634+00
Date Added: 2024-06-11T13:32:28.479797
License: Public Domain

J-A25024-19

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

DEBRA K. CHILLAS, LORI A.                          IN THE SUPERIOR COURT
MCNAUGHTON AND MICHELE S. ACHEY                       OF PENNSYLVANIA

                            Appellees

                      v.

MICHAEL B. REEDY

                            Appellant                  No. 548 MDA 2019

               Appeal from the Order Entered March 13, 2019
              In the Court of Common Pleas of Lebanon County
                      Civil Division at No: 2015-01290

BEFORE: STABILE, J., McLAUGHLIN, J., and MUSMANNO, J.

DISSENTING MEMORANDUM STATEMENT BY STABILE, J.:

                                                 FILED OCTOBER 15, 2020

       The trial court and the Majority have concluded that a Lease (the

“Lease”), originally executed between Michael Reedy (“Appellant”), and the

parties’ deceased parents (“Decedents”), governing the use of property at

4601    Stiegel   Pike,    Newmanstown   Pennsylvania    (the   “Property”),   is

procedurally and substantively unconscionable. They reach this conclusion

despite the fact the agreement reflects precisely what the parties to it desired,

because Appellees, not parties to the agreement, do not like its terms. I find

this result to be without precedent. Here, because Appellees, Debra K. Chillas,

Lori A. McNaughton, and Michele S. Achey, were not parties to the Lease, and

because they were entitled to disclaim their interest in the 2010 Trust (the
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“Trust”)1 by which they succeeded to Decedents’ interest in the Property as

governed by the Lease, I would reverse the order granting Appellee’s request

for declaratory relief.

       As nonparties to the Lease, Appellees had standing to sue thereunder

only if they could establish that they were third party beneficiaries.

              In order for a third party beneficiary to have standing to
       recover on a contract, both contracting parties must have
       expressed an intention that the third party be a beneficiary, and
       that intention must have affirmatively appeared in the contract
       itself. Furthermore […] to be a third party beneficiary entitled to
       recover on a contract it is not enough that it be intended by one
       of the parties to the contract and the third person that the latter
       should be a beneficiary, but both parties to the contract must
       so intend and must indicate that intention in the contract; in other
       words, a promisor cannot be held liable to an alleged beneficiary
       of a contract unless the latter was within his contemplation at the
       time the contract was entered into and such liability was
       intentionally assumed by him in his undertaking.

PA Energy Vision, LLC v. S. Avis Realty, Inc., 120 A.3d 1008, 1015 (Pa.

Super. 2015) (emphasis in original), appeal denied, 138 A.3d 6 (Pa. 2016).

Appellees never claimed to be third-party beneficiaries under the Lease, and

any such claim would have failed under the foregoing standard, as there was

no indication in the Lease that Appellant and Decedents intended Appellees to

be third party beneficiaries under the Lease.        Appellees’ interest in the

Property arises out of the terms of the Trust under which they were to gain

____________________________________________

1 The Majority’s memorandum thoroughly and accurately sets forth the terms
of the Trust and Lease.

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ownership interests in the Property upon death of both Decedents. The terms

of the Trust are not at issue here.

       Likewise, the doctrine of unconscionability focuses on the parties2 to

an agreement: “[a] determination of unconscionability requires a two-fold

determination: 1) that the contractual terms are unreasonably favorable to

the drafter, and 2) that there is no meaningful choice on the part of the other

party regarding the acceptance of the provisions.” MacPherson v. Magee

Mem'l Hosp. for Convalescence, 128 A.3d 1209, 1221 (Pa. Super. 2015)

(en banc), appeal denied, 161 A.3d 789 (Pa. 2016), cert. dismissed, 138

S.Ct. 354 (2017).       Because a finding of unconscionability will obtain only

where the complaining party lacked meaningful choice as to acceptance of the

objectionable terms, it is clear that unconscionability is measured as of the

execution of the contract. Restatement (Second) of Contracts § 208 (1981).

See also, Parilla v. IAP Worldwide Services VI Inc., 368 F.3d 269 (3rd.

Cir. 2004) (a contract or term is unconscionable at the time the contract is

made).

       Appellant and Decedents, the original parties to the Lease, agreed upon

its terms.    The terms of the Lease were not unusual, and merely reflect

Decedent’s desire for the farming of the Property to continue. Appellant was

____________________________________________

2  See, e.g. Pagosa Oil and Gas, L.L.C. v. Marrs and Smith P’ship, 323
S.W.3d 203, 212 (Tex. Ct. App. 2010) (a non-party to a contract had no
standing to challenge it as unconscionable).

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willing to undertake the farming of the Property, and Decedents performed

their obligations under the Lease without incident or dispute until their

passing, at which point Appellees succeeded to Decedents’ position as

landlords under the Lease. I have found no law supporting the proposition

that a person not originally a party to a contract has standing to void the

contract as unconscionable. Nor did the Majority or the trial court cite any.

Moreover, I have found no supporting law for the trial court’s conclusion that

Appellees as future landlords were entitled to claim they had no meaningful

choice as to the terms of the Lease Agreement when it was negotiated

between Decedents and Appellant.       Trial Court Opinion, 3/13/19 p. 19.

Embracing such a proposition would create an untenable obligation upon a

trust’s settlors to consult with and secure agreement with all intended

beneficiaries before creating and executing a trust agreement. The law does

not so provide.

      Furthermore, even if Appellees could claim the Lease is unconscionable,

an unconscionability challenge would necessarily fail. There is no suggestion

the terms of the Lease were unreasonably favorable to Decedents as the Lease

drafters.   To the contrary, both the trial court and Appellees persuasively

argue that the Lease terms favor Appellant as the tenant. The claim would

fail on this basis alone. The claim also would fail as both the Decedents and

Appellant had a meaningful choice. The Lease was negotiated at arms-length

and provided precisely what each party desired. Decedents were willing to

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enter into a lease agreement with Appellant with certain financial incentives,

so long as he agreed to continue to farm the Property.

      To the extent Appellees can claim they had no meaningful choice in

succeeding as landlords to the Property and to assuming the Lease obligations,

this argument fails as well. If they did not wish to succeed to Decedents’

interest in the Property they could have disclaimed any such interest. The

right of disclaimer is governed by statute:

             A person to whom an interest in property would have
      devolved by whatever means, including a beneficiary under a will,
      an appointee under the exercise of a power of appointment, a
      person entitled to take by intestacy, a joint tenant with right of
      survivorship, a donee of an inter vivos transfer, a donee under a
      third-party beneficiary contract (including beneficiaries of life
      insurance and annuity policies and pension, profit-sharing and
      other employee benefit plans), and a person entitled to a
      disclaimed interest, may disclaim it in whole or in part by a written
      disclaimer which shall:

            (1) describe the interest disclaimed;

            (2) declare the disclaimer and extent thereof; and

            (3) be signed by the disclaimant.

             The right to disclaim shall exist notwithstanding any
      limitation on the interest in the nature of a spendthrift provision
      or similar restriction.

20 Pa.C.S.A. § 6201.

      Instead of disclaiming, Appellees have accepted their succession in

interest to the Property and have attempted to defeat Decedents’ intent by

having the Lease declared unconscionable. I do not believe the law permits

this result. As stated, to hold otherwise, as the Majority does, is to impose

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upon a trust settlor a duty to investigate at the time of trust formation whether

potential successors under a trust instrument are satisfied with the terms of

their potential future interests. Or, upon failing to do so, risk that successors

in interest can defeat the settlor’s intent in forming the trust. Appellees do

not contend that Appellant engaged in any wrongdoing, nor do they contend

that Decedents were unable to understand their rights and obligations under

the Lease.3

       Decedents, during their lifetime, were free to plan for the succession of

the Property within the bounds of the law, and they were under no obligation

to leave anything to Appellees. Appellees, if dissatisfied with the terms of

their succession in interest to the Property and Lease, were free to disclaim

those interests. This is not a Hobson’s choice. Rather, it is the choice faced

by anyone who stands to receive a testamentary gift. If the intended recipient

deems the gift advantageous, they may accept it on the testator’s terms; if

not, they may disclaim it. Mere dissatisfaction with the testamentary scheme

is not grounds for rewriting it.

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3 The trial court concludes under its substantive unconscionability analysis that
the Lease fails for lack of further consideration from Appellant to the landlord.
Trial Court Opinion 3/17/19 p. 24. I respectfully take issue with this
conclusion as well, since the quid pro quo under the Lease was Appellant’s
continuing promise to farm the property in exchange for financial incentives.
Moreover, the Lease provides that the parties were "intending to be legally
bound[.]" Under the Uniform Written Obligations Act, an agreement is not
rendered unenforceable in the absence of consideration when this statement
is made a part of the contract. See Act of May 13, 1927, P.L. 985, No. 475,
§ 1, 33 P.S. § 6.

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     Appellees received benefits under the Trust and Lease, including

$65,000.00 each and an ownership interest in the Property as tenants in

common with each other and Appellant. Likewise, the Lease imposed certain

obligations upon Appellees, including payment of taxes and extraordinary

repairs. If Appellees deemed these rights and obligations more burdensome

than beneficial, they were under no legal obligation to accept them. Because

Appellees accepted, I would hold that they are bound by the Lease.

     For the foregoing reasons, I would conclude the trial court erred in

declaring the Lease unconscionable.

     I respectfully dissent.

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