Court Opinion

ID: 4513176
Source: CourtListenerOpinion
Date Created: 2020-03-05 17:12:47.528865+00
Date Added: 2024-06-11T09:40:43.165181
License: Public Domain

J-S74017-19

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    JOSEPH S. SHARP                             :   IN THE SUPERIOR COURT OF
                                                :        PENNSYLVANIA
                                                :
                v.                              :
                                                :
                                                :
    JAMES CASTRO, RACHEL CASTRO,                :
    AND SPECTRUM ENTERPRISES, LLC,              :
                                                :   No. 1121 EDA 2019
                       Appellants               :
                                                :
                                                :
                                                :
                                                :
                v.                              :
                                                :
                                                :
    JOSEPH S. SHARP AND KAREN                   :
    SHARP

                Appeal from the Judgment Entered April 15, 2019
      In the Court of Common Pleas of Montgomery County Civil Division at
                              No(s): 2013-13865

BEFORE:      BENDER, P.J.E., MURRAY, J., and STEVENS, P.J.E.*

MEMORANDUM BY MURRAY, J.:                                FILED MARCH 05, 2020

        James    Castro,    Rachel    Castro,   and   Spectrum   Enterprises,   LLC

____________________________________________

*   Former Justice specially assigned to the Superior Court.
J-S74017-19

(collectively, Appellants), appeal from the judgment1 entered against them

and in favor of Joseph S. Sharp (Appellee). We affirm.

        The trial court set forth the relevant factual and procedural history as

follows:

        The instant matter commenced when [the] underlying
        Plaintiff/Seller, … Appellee[], issued Complaint in Civil Action
        alleging, inter alia, breach of contract claims against …
        Appellants[]. The underlying facts which resulted in the instant
        civil action began in 2009 when Appellee wanted to retire from
        and sell his business known as Dependable Auto Service (“the
        Business”), located on 230 Tanner Avenue in Hatboro,
        Montgomery Country, Pennsylvania (“the Property”). Appellee
        entered into an agreement with Appellant[s] to purchase the
        Business, lease the Property with an option to purchase, and
        signed a consulting/employment arrangement for Appellee in the
        Business.[2]

               The trial court scheduled this matter for a two (2) day bench
        trial to be heard on October 29, 2018. Ultimately, the trial lasted
        three (3) days. The trial court’s findings in this matter, relevant
        to the instant appeal, are summarized as follows: On January 15,
        2010, Appellee and Appellants entered into an Agreement of Sale
        for the Business. Simultaneously with the entry of the Agreement
        of Sale, the parties adopted the J&R Option, which elaborated on
        the provisions on the Agreement of Sale and a Lease Purchase

____________________________________________

1 Appellants purport to appeal from the Order denying their post-trial motion,
in which they challenged the non-jury verdict against them. “An appeal from
an order denying post-trial motions is interlocutory. Pa.R.A.P. 301(a), (c),
and (d)[.] Once that judgment is entered however, our jurisdiction is
perfected.” Keystone Dedicated Logistics, Inc. v. JGB Enters., 77 A.3d
1, 2 n.1 (Pa. Super. 2013) (brackets, ellipses, internal quotation marks and
citations to case law omitted). Here, the trial court’s docket reflects that
judgment was entered against Appellants on April 15, 2019. Accordingly, we
amended the caption to reflect that the appeal properly lies from the April 15,
2019 judgment.

2   The parties drafted the agreements without the benefit of counsel.

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     Option Agreement (“Lease Purchase Option”) for the purchase of
     the Property.

           Both parties acknowledged that the agreements, as drafted,
     were ambiguous. Additionally, both parties testified that they
     viewed the sale of the [B]usiness, the consulting agreement, the
     lease and the option[,] as a single transaction, intended to
     transfer the [B]usiness, provide Appellee a consulting contract,
     lease the Property and eventually transfer the business property.

                        A. The Agreement of Sale

           Under the Agreement of Sale for Dependable Auto (“[t]he
     Agreement”), Appellants were to acquire the assets of the
     Business for a purchase price of $85,000. Appellants provided
     Appellee with a $34,250 down payment for the purchase of the
     Business at the time of closing[,] with a $50,750 balance plus
     interest of 7.5% remaining. The Agreement is silent as to the
     time period for payment of this balance, but does provide January
     16, 2010, as the closing date for Appellee to deliver possession of
     the assets. Appellants were responsible for payment of bills,
     including insurance related to business operations. Moreover, if
     Appellants breached the [A]greement, Appellee had the right to
     void the [A]greement and repossess the Business.

                       B. The Lease Purchase Option

           The Lease Purchase Option provided Appellants with an
     option to purchase the Property for the sum of $465,000 at the
     end of a six-year lease period. Appellants had an obligation to
     provide Appellee with $39,600 annually for rent for a period of six
     years, equating to a monthly rental obligation of $3,300. Provided
     rent was paid in full each month, $1,150 from each month’s
     rent[,] beginning January 2010 through the execution of the
     option to purchase, would be applied to the purchase price. If
     Appellants defaulted on their obligations, Appellee could terminate
     the option to purchase by giving written notice of the termination.
     If terminated, Appellants would lose [their] entitlement to any
     refund of rent or the option to purchase.

           The Lease Purchase Option clearly established that rent was
     $3,300 per month. The parties agreed that for six years[,] $1,150
     of the rental amount would be applied to the purchase price of the
     [Business,] and there was no allowance for a decrease in rental

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     payments. Appellants’ initial lease agreement ended on January
     31, 2016. Upon expiration [of] the initial lease term, Appellee
     increased the rent amount. Appellee presented no evidence of
     the market rate for rental of the [P]roperty after the expiration of
     the lease term, nor did Appellee provide any evidence that
     Appellants received notice of the rental increase. Appellants did
     not pay the increased rental payments but[,] instead[,]
     unilaterally reduced the [monthly] rental amount by $1,150.

           Appellee filed [a] Complaint on June 6, 2013, prior to the
     expiration of the initial lease agreement, alleging that Appellants
     violated and overstayed their lease, wrongfully terminated
     Appellee’s consulting contract, destroyed tools and wrongfully
     prohibited Appellee from entering the [P]roperty.         With the
     underlying litigation ongoing, Appellants completed their six years
     of lease payments and business install payments in December
     2015 and demanded that Appellee sell the [P]roperty.

                       C. Consulting Agreement

            The Agreement also included a provision which provided
     that Appellee would work, as an independent contractor, for a six-
     year period. The provision required Appellee to work 25-30 hours
     per week of consulting, sales and light mechanical work from 8:30
     a.m. until 2:00/3:00 p.m. each weekday. There is nothing in the
     Agreement regarding payment for Appellee’s work. The J&R
     Option provided for payment to Appellee of 25% of the gross
     profits [of the Business], not to exceed $6,000 per week and
     capped at $35,000 per year. It was the expressed intention of the
     parties that Appellee would receive an additional $35,000 per year
     from the gross profits.

           Despite the fact that no document connects this payment
     requirement from Appellee to his work, both parties testified that
     this payment plan was for the work Appellee was to perform for
     Appellants. Appellee was, in fact, paid $35,000 each year, which
     was the maximum provided by the [A]greement for the years
     2010, 2011 and 2012, and a weekly payment totaling $8,077 in
     2013[,] until his termination.

            By early 2013, the business relationship between Appellants
     and Appellee was untenable, and a cohesive working relationship
     was unable to be maintained because of both parties’ personality
     conflicts. Appellee’s employment was terminated by Appellants

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       on March 26, 2013. Appellants gave a variety of reasons for the
       termination, stemming from [Appellee’s alleged] poor work
       performance, bad attitude and refusal to provide [Appellee’s]
       social security number to enable Appellants to provide Appellee
       with a 1099.[3] Appellants documented three instances over three
       years of Appellee’s non-compliance with their internal regulations.

              After the trial, the trial court ordered both parties to submit
       findings of fact and conclusions of law. On March 12, 2019, the
       trial court issued its decision, wherein the trial court ordered, inter
       alia, the following:

            1. Judgment shall be entered in favor of [Appellee] and
               against [Appellants] in the amount of $141,168.46.

                  i. [Appellee] is owed $26,923.20 for 2013,
                  $35,000 each year for 2014 and 2015, and
                  $3,365.40 2016 for breach of contract as a
                  result of the wrongful termination of the
                  business relationship[,] totaling $96,482.

                  ii. [Appellee] is owed rent, in the amount of
                  $3,300 per month since the expiration of the
                  initial lease term. [Appellants] paid $2,150 per
                  month, as such, [Appellee] is owed $42,550 in
                  back rent.

       (Decision p. 10, 3/12/19 (#135) (emphasis in original).)

Trial Court Opinion, 7/26/19, at 1-5 (footnotes added, footnotes in original

and most citations to record omitted).

       Appellants timely filed a post-trial motion, which the trial court denied

on March 22, 2019. Appellants then filed a timely notice of appeal, followed

____________________________________________

3A “1099” is an Internal Revenue Service (IRS) tax record that an entity or
person paid an independent contractor certain sums of money during the tax
year, copies of which are sent to the IRS and the contractor.

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by a court-ordered Pennsylvania Rule of Appellate Procedure 1925(b) concise

statement of errors complained of on appeal.

     Appellants present the following issues for our review:

     1. In a dispute over whether [Appellants] wrongfully terminated
        [Appellee] as their consultant in breach of his contract, or
        instead [Appellee] refused to perform his duties (i.e. quit),
        should the Trial Court have excluded from evidence a letter
        from [Appellee’s] attorney expressing [Appellee’s] refusal to
        come back to work unless certain changes were made to
        [Appellee’s] contract, upon the basis that said letter was a
        settlement communication barred by Pa.R.E. 408?

     2. In a dispute over whether [Appellants] wrongfully terminated
        [Appellee] as their consultant in breach of his contract, or
        instead [Appellee] refused to perform his duties (i.e. quit), was
        there competent evidence upon which to conclude that
        [Appellants] wrongfully terminated [Appellee] when – prior to
        the date of the perceived termination – [Appellee]
        communicated to [Appellants] a refusal to come back to work
        unless certain changes were made to [Appellee’s] contract?

     3. In a landlord-tenant dispute arising out of a lease-to-purchase
        contract, where (a) the Trial Court found that [Appellants] had
        not so materially violated the lease that their right to purchase
        [Appellee’s] property at the conclusion of the lease was forfeit,
        (b) [Appellee’s] refusal to allow [Appellants] to purchase said
        property involuntarily forced [Appellants] to become holdover
        tenants, and (c) [Appellants] nonetheless continued paying
        [Appellee] the same amount of rent that the lease provided,
        less a credit toward purchasing the property that the lease no
        longer allowed [Appellants] to earn, should the Trial Court have
        concluded that [Appellants] owed [Appellee] the no-longer-
        applicable purchase credit portion of rent for every month
        [Appellants] continued to occupy the [P]roperty as holdover
        tenants while they were wrongly denied the right to purchase
        the [P]roperty?

Brief for Appellants at 3-5 (answers to questions omitted).

          Our standard of review in non-jury trials is to assess
     whether the findings of facts by the trial court are supported by

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       the record and whether the trial court erred in applying the law.
       Upon appellate review the appellate court must consider the
       evidence in the light most favorable to the verdict winner and
       reverse the trial court only where the findings are not supported
       by the evidence of record or are based on an error of law. Our
       scope of review regarding questions of law is plenary.

Century Indem. Co. v. OneBeacon Ins. Co., 173 A.3d 784, 802 (Pa. Super.

2017) (citations omitted).

       In their first issue, Appellants argue that the trial court committed

reversible error when it excluded from evidence a letter, dated April 3, 2013

(the Letter), that Appellee’s counsel sent to counsel for Appellants regarding

the dispute.4 See Brief for Appellants at 28-35. We disagree.

       Our standard of review follows:

       Questions concerning the admissibility of evidence lie within the
       sound discretion of the trial court, and we will not reverse the
       court’s decision absent a clear 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 manifest

____________________________________________

4 In the Letter, Appellee’s counsel addressed Appellants’ firing Appellee from
the Business one week earlier, as well as outstanding payments that Appellee
claimed he was owed. The Letter stated, in relevant part, that “[i]n light of
the recent developments and acrimony that developed between our clients,
[Appellee] is willing to continue working for the [Business], on modified terms
as discussed below.” Letter, 4/3/13, at 2; see also id. at 2-3 (explaining the
modifications and conditions that Appellee would require to resume his
employment). The Letter explained that if the parties were unable to agree
upon the proposed modifications, Appellee would “exercise his rights to
remedies under the Agreement of Sale.” Id. at 2. Additionally, in response
to Appellants’ request and allegation that Appellee may have engaged in
improper tax activity, Appellee enclosed with the Letter a copy of his
completed “W-9” IRS form. This form is used to report certain information
about independent contractors, so that their annual earnings can be reported
for tax purposes.

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      unreasonableness, or partiality, prejudice, bias, or ill-will, or such
      lack of support so as to be clearly erroneous.

      In addition, to constitute reversible error, an evidentiary ruling
      must not only be erroneous, but also harmful or prejudicial to the
      complaining party.

Parr v. Ford Motor Co., 109 A.3d 682, 690-91 (Pa. Super. 2014) (en

banc) (citations and quotation marks omitted).

      The trial court excluded the Letter, upon Appellee’s objection, pursuant

to Pennsylvania Rule of Evidence 408 (governing the admissibility of

settlement communications), which provides in relevant part:

      Evidence of the following is not admissible – on behalf of any party
      – either to prove or disprove the validity or amount of a disputed
      claim or to impeach by a prior inconsistent statement or a
      contraction:

         (1) furnishing, promising, or offering – or accepting,
         promising to accept, or offering to accept – a valuable
         consideration in compromising or attempting to compromise
         the claim; and

         (2) conduct or a statement made during compromise
         negotiations about the claim.

Pa.R.E. 408(a); see also Pa.R.E. 408(b) (setting forth exceptions to the

general rule).

      We conclude that the trial court correctly ruled that the Letter contained

settlement negotiations, and thus properly excluded it under Rule 408(a).

Appellee stated in the Letter that he was willing to settle the dispute between

the parties, and return to work, if Appellees agreed to certain modifications to

the parties’ agreement. Moreover, contrary to Appellants’ assertion, the mere

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fact that a settlement offer also includes a provision that the offer will be

accepted only if certain conditions are agreed to does not make such offer

admissible under Rule 408(a), nor does it meet any of the exceptions

contained in Rule 408(b).

       Finally, we note that Appellants assert, for the first time on appeal, that

the trial court should have admitted the Letter as a declaration against

interest.    See Brief for Appellants at 30, 33; see also Pa.R.E. 804(b)(3)

(providing that an acknowledgment by a party that it was he or she who was

at fault is an exception to the rule against hearsay and is admissible). It is

well established that a new theory of relief may not be advanced for the first

time on appeal, as “before appellate review can be had, [] the grounds relied

upon [must] be raised sometime during the lower court proceedings.”

McCloud v. McLaughlin, 837 A.2d 541, 544 (Pa. Super. 2003); see also

Pa.R.A.P. 302(a). Because Appellants did not raise this theory of relief before

the trial court, we will not entertain it on appeal.5 Accordingly, Appellants’

first issue does not merit relief.

       Appellants next contend that the trial court erred in finding that their

failure to re-employ Appellee following his termination was a breach of

contract, where Appellee had communicated to Appellants, via the Letter, that

he   would    resume      employment       only   if   Appellees   agreed   to   certain

____________________________________________

5Nevertheless, even if Appellants had properly preserved this claim, we would
determine that it lacks merit.

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conditions/modifications. See Brief for Appellants at 36-40. Appellants assert

that the conditions in the Letter required Appellants to “agree[] to materially

alter [Appellee’s] consulting agreement[,]” and “would have constituted an

‘anticipatory breach of contract[.]’” Id. at 36-37. Appellants contend that an

anticipatory breach of contract occurs where, as here, the party expresses an

unequivocal “intention not to perform except on conditions which go beyond

the contract[.]” Id. at 37 (quoting Lane Enters. v. L.B. Foster Co., 700

A.2d 465, 473 (Pa. Super. 1997)); see also Brief for Appellants at 38

(averring that the Letter “laid out several new terms that, inter alia, reduced

[Appellee’s] working hours, eliminated [Appellee’s] duty to perform ‘light

mechanical work,’ and reduced the benefit to [Appellants] of their lease to

purchase option[.]”).

      We discern no error or abuse of the trial court’s discretion in determining

that Appellants’ terminating Appellee’s employment constituted a breach of

contract where (1) Appellee did not repudiate the entire contract; and (2)

Appellee provided Appellants with his W-9 tax form, pursuant to their demand,

but Appellants never permitted him to return to work. Moreover, we disagree

with Appellants that the conditions that Appellee included in the Letter

constituted an anticipatory breach of contract, particularly where Appellee

neither refused to return to work nor repudiated the contract. See, e.g., Oak

Ridge Constr. Co. v. Tolley, 504 A.2d 1343, 1347 (Pa. Super. 1985) (where

counsel for defendants (homeowners) sent a letter to plaintiff (construction

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contractor) disputing the amount defendants owed plaintiff under the terms

of the contract for plaintiff’s well drilling work, in response to which plaintiff

ceased work and claimed anticipatory breach of contract, rejecting plaintiff’s

claim where “[t]he letter merely stated that the charges for work performed

under … the contract’s specifications were ‘in dispute or disagreement[,]’ and

… [t]he letter did not contain an unequivocal refusal to pay the drilling charges

or a repudiation of the entire contract.”).6 Accordingly, Appellants’ second

issue lacks merit.

       In their third and final issue, Appellants argue that the trial court erred

in ruling that they were responsible, as hold-over tenants, to pay Appellee

unpaid rent of $1,150.00 per month for a period of approximately 2½ years,

following the expiration of the initial 6-year lease term.         See Brief for

Appellants at 40-45. According to Appellants:

       When the time to purchase [the] [P]roperty arrived, [Appellants]
       provided the requisite notice of their intention to move forward,
       and [Appellee] refused to allow the purchase to move forward[.]
       [Appellants] were involuntarily reduced from would-be owners to
       holdover tenants. In this scenario, with the lease expired and the
       $1,150.00-per-month purchase credit no longer being earned,
       [Appellants] reduced their monthly rental payments to [Appellee]
       by the same amount[.]

____________________________________________

6 We are also persuaded by Appellee’s contention that the offer in the Letter
to “resolve the matter on new settlement terms, which, if not complied with[,]
will force the non-breaching party to assert their legal rights, is not a breach.
It is merely an attempt to resolve.” Brief for Appellee at 14.

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Id. at 41 (citations to record and emphasis omitted). Appellants contend that

“[a]lthough the agreed-upon rent in the parties’ lease was $3,300.00 per

month, [Appellants] only agreed to this arrangement when they rightfully

expected that $1,150.00 of this amount would be set aside and saved toward

the eventual purchase of the [P]roperty.”        Id. at 45 (internal citations

omitted).

      The trial court opined that it did not err in ordering Appellants to pay

unpaid rent, and detailed its reasoning:

             The trial court did not err in determining that Appellee was
      entitled to judgment against Appellants for $1,150.00 per month
      in unpaid rent. It is uncontested that the agreements are
      ambiguous. When an ambiguity in [a] contract exists, parol
      evidence is admissible to explain, clarify or resolve the ambiguity,
      irrespective of whether the ambiguity is patent, created by the
      language of the contract, or latent, created by extrinsic or
      collateral circumstances. See Miller v. Poole, 45 A.3d 1143[,
      1146] (Pa. Super. 2012). Further, both parties testified that they
      viewed the sale of the [B]usiness, the consulting agreement, the
      lease and the option as a single transaction, intended to transfer
      a business, provide Appellee a consulting contract, lease the
      Property and ultimately transfer the [B]usiness property.

            Under Pennsylvania contract law, where several instruments
      are made as part of one transaction[,] they will be read together,
      and each will be construed with reference to the other; and this is
      so although the instruments may have been executed at different
      times and do not in terms refer to each other. Huegel v. Mifflin
      Const. Co., 796 A.2d 350, 354-55 (Pa. Super. 2002) (See also
      Int’l Milling Co. v. Hachmeister, Inc., 110 A.2d 186[, 191] (Pa.
      1955) [(stating that] [t]here is no [“]requirement that a contract
      be evidenced by a single instrument[,”] and, [“i]f contracting
      parties choose, they may express their agreement in one or more
      writings, and, in such circumstances, the several documents are
      to be interpreted together, each one contributing … to
      ascertainment of the true intent of the parties[.”)]; Black v. T.M.
      Landis, Inc., 421 A.2d 1105, 1107 (Pa. Super. 1980) [(stating

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     that] when two or more contractual documents are executed at
     the same time and involve the same transaction, they should be
     construed as a whole, even when the parties are not the same.)
     Accordingly, the trial court considered parol evidence, and read
     the several instruments together.

            While the collective agreements are [i]nartfully written and
     ambiguous, the provision regarding rent is clear. The J&R Option
     clearly provides for “$3,300 rent a month” with “$1150 of monthly
     rent goes towards the $465,000 of building cost (at the end of 6
     years this will accrue to $82,800).” This agreement is further
     established under the Lease Purchase Option, under which
     Appellants had an obligation to provide Appellee with $39,600
     annually for rent for a period of six years, equating to a monthly
     rental obligation of $3,300. Provided [that] rent was paid in full
     each month, $1,150 from each month’s rent[,] beginning January
     2010 through the execution of the option to purchase[,] would be
     applied to the purchase price. If Appellants default[ed] on their
     obligations, Appellee had the right to terminate the option to
     purchase by giving written notice of the termination.             If
     terminated, Appellants would lose entitlement to any refund of
     rent or option.

           Appellants assert that they []would have become owners of
     the [P]roperty but for Appellee’s wrongful failure to complete the
     sale and despite Appellants continuing to pay the prior effective
     rent of $2,150.00.[] Appellants, however, asserted their intent to
     purchase the Property after Appellee filed his Complaint claiming
     breach of contract and asserting his right to terminate the
     agreement. It is uncontroverted that the sale of the [P]roperty
     was never consummated and that after the expiration of the six-
     year lease period, Appellants unilaterally reduced the rental
     amount by $1,150. There were no provisions in any of the
     agreements which provided for the increase or decrease in rent.

            When a lease for [a] term of years expires, and lessee
     remains in possession, landlord may, at its option, treat lessee as
     [a] hold-over tenant, which implies that possession of hold-over
     is subject to same terms, conditions, and covenants as [the] old
     lease. Clairton Corp. v. Geo-Con, Inc., 635 A.2d 1058[, 1059]
     (Pa. Super. 1993). Though Appellee, as owner of the [P]roperty,
     may have been entitled to change the rent after the lease expired,
     he failed to present evidence of such to the trial court. The trial
     court concluded that the monthly rent is $3,300. Thus, Appellee

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      is owed back rent in the amount of $1,150 per month since the
      expiration of the initial six-year lease term.

Trial Court Opinion, 7/26/19, at 7-9 (citations to record omitted). As the trial

court’s rationale is supported by the record and the law, and we agree with its

determination, we affirm on this basis in rejecting Appellants’ final issue. See

id.

      Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/5/20

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