Opinion
J-A28037-15 No. 304 EDA 2015
11-24-2015
GMW ORGANIZATION, LLC, Appellant v. STEVEN B. ATLASS, PENNSYLVANIA BANCSHARES, INC., HOWELL ACQUISITION PARTNERS, L.P., AND KREBS PARTNERS, LLC, Appellees
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Judgment Entered February 19, 2015
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): 01597 August Term, 2012 BEFORE: GANTMAN, P.J., PANELLA, and SHOGAN, JJ. MEMORANDUM BY SHOGAN, J.:
This is a contract dispute between Appellant, GMW Organization, LLC ("GMW"), an organization that provides strategic advisory services and business advice that is owned by Gregory Weinberg ("Weinberg"), and Appellees, Steven B. Atlass ("Atlass") and his related entities, Pennsylvania Bancshares, Inc. ("Bancshares"), Howell Acquisition Partners, L.P. ("Howell"), and Howell's general partner, Krebs Partners, LLC ("Krebs") (also collectively "Appellees"). We affirm.
The trial court summarized the factual and procedural history of the case as follows:
On August 16, 2012, GMW . . . commenced the instant action by way of a complaint against . . . Atlass, . . . Bancshares,
. . . Howell, and . . . Krebs . . .; businesses which were all alleged to be affiliated with Atlass. The complaint asserted a number of causes of action against [Appellees] related to a written compensation agreement [("Agreement")] . . . [the] parties entered into after Atlass approached GMW's President and owner, Gregory Weinberg . . . in early April 2011 regarding GMW finding funding for two hospital projects [that] Atlass was involved in.
On July 16, 2014, [GMW's] causes of action for breach of contract and declaratory relief proceeded to bench trial before this court.1
1[GMW's] cause of action for unjust enrichment, which was asserted in the alternative, also proceeded to trial.
Trial Court Opinion, 4/21/15, at 1-2 (internal citations omitted).
At trial, the following facts were adduced and arguments were made.
On July 20, 2011, GMW and Atlass, Bancshares, and Atlass's "affiliates," which were collectively referred to as "Atlass," entered into the [Agreement] whereby GMW would provide "investment banking services to Atlass with regards to capital raising events ('Transaction(s)')" for two hospitals, the two hospitals being: (1) Northeastern Hospital, which Atlass had recently purchased through certain entities and (2) St. Agnes Hospital, which Atlass was planning to purchase through another entity, Howell. Atlass' idea was to raise capital with the goal of ultimately converting the hospitals into medical office buildings.
On or about December 16, 2010, Northeastern Hospital, also known as City Center at Northeastern Hospital, was purchased by Haskell Acquisitions Partners I, L.P., Haskell Acquisitions Partners II, L.P., and Haskell Acquisitions Partners III, L.P. (collectively "Haskell"). On or about July 29, 2011, Saint Agnes Hospital was purchased by Howell. Atlass formed Howell to purchase Saint Agnes Hospital. Howell is owned and/or controlled by entities in which Atlass and Atlass' immediate family members have a majority ownership stake, including, but not limited to, its general partner Krebs, which is 100% owned and controlled by Atlass. Haskell, Howell, and Krebs are all Atlass "affiliates" within the meaning of the [Agreement].
GMW contracted with Atlass to assist with raising funds for a joint venture concept that Weinberg "believed would be effective for funding development of the [h]ospital [p]rojects that Atlass had described to Weinberg" at a prior meeting. Complaint, 8/16/12, at ¶ 11. Weinberg allegedly explained to Atlass that the joint venture concept likely would provide Atlass and the Atlass affiliates "with liquidity, would enable Atlass to buy out his partner at Northeastern Hospital, . . . could enable Atlass and the Atlass affiliates to share in operational profits and profits from refinancing . . . and would allow them to earn a management fee and an asset management fee." Id. at ¶ 12.
The parties exchanged drafts of a compensation agreement, Complaint, 8/16/12, at ¶ 30, negotiated terms over several days, id. at 33, and ultimately entered into the Agreement on July 20, 2011. Id. The terms of the Agreement are relevant herein, and it is reproduced infra.
GMW's claims for breach of contract and a declaratory judgment were based on its contention that the Agreement entitled it to $250,000 and twenty-five percent interest in the entity that owned or controlled St. Agnes Hospital. The case proceeded to a two-day bench trial on July 16 and 17, 2014. On September 26, 2014, the trial court found for GMW, awarding it $0.00 and a twenty-five percent interest in Krebs, per the Agreement.
On October 8, 2014, GMW filed a post-trial motion, which the trial court denied by order filed on December 18, 2014. GMW filed a notice of appeal on January 8, 2015. Both GMW and the trial court complied with Pa.R.A.P. 1925.
Because judgment had not been entered on the docket as required by Pa.R.A.P. 301, we directed GMW to praecipe the trial court to enter judgment. Judgment was entered on February 19, 2015, and the previously filed notice of appeal was treated as filed after the entry of judgment. See Pa.R.A.P. 905(a).
GMW presents the following issues, which are identical to the issues raised in GMW's Pa.R.A.P. 1925(b) statement:
I. Whether the Trial Court erred in failing to enter a specific declaration concerning Plaintiff's rights and interest in the carried interest/profit share (also known as the "Promote" or the "Carry") with respect to a real estate investment transaction know[n] as the St. Agnes Transaction (both "St. Agnes" and the "St. Agnes Transaction" are defined below), where: (a) the Court recognized the importance of the Promote to the parties; (b) undisputed extrinsic evidence existed to support Plaintiff's interest in the Promote; and (c) the Court only awarded Plaintiff an interest in Krebs Partners, LLC ("Krebs") without any declaration concerning Plaintiff's rights to the Promote, thereby permitting Defendant to manipulate the disbursement of Promote money (including but not limited to altering the entity types in the St. Agnes Transaction) such that Krebs receives only a minimal amount and Defendant avoids having to pay Plaintiff his share of the Promote money.
II. Whether the Trial Court erred in ruling that the terms of parties' [A]greement concerning Plaintiff's entitlement to $250,000 from the St. Agnes Transaction was clear and unambiguous, where Plaintiff satisfied the conditions precedent to its receiving the $250,000, and, in construing
such terms, the Court was required to borrow and insert clauses from other inapplicable sections of the [A]greement to support its conclusion that Plaintiff was not entitled to receive $250,000 from the St. Agnes Transaction.GMW's Brief at 4-6.
III. Whether the Trial Court erred in failing to award Plaintiff $250,000 based on the "amount" received by Defendants in the St. Agnes Transaction (i.e. $2,500,000), where: (a) all "debt" considerations were irrelevant to the St. Agnes Transaction because the provisions in the [A]greement relating to Plaintiff's payment entitlements from the St. Agnes Transaction did not contain a term allowing for "debt" to reduce Plaintiff's entitlements, and the Court found that a capital-raising event (i.e. a "Transaction" (as defined in the parties[' A]greement)) took place; (b) even the inapplicable "debt" terms which the Court borrowed from other provisions in the [A]greement not relating to the St. Agnes Transaction called for using pre-existing debt of which the St. Agnes Transaction had none since all existing debt was eliminated in the St. Agnes Transaction and the $2,500,000 was net of such debt (as admitted by Atlass at trial); and (c) there was no genuine debt from the St. Agnes Transaction which could be used to reduce Plaintiff's $250,000 payment entitlement.
IV. Whether the Trial Court erred in construing the [A]greement of the parties against Plaintiff contrary to the doctrine of contra proferentem such that it failed to award Plaintiff $250,000 and the Promote pursuant to the St. Agnes Transaction where the [A]greement was drafted by the Defendants with the assistance of counsel[,] and Plaintiff had no counsel.
The Agreement provides as follows:
Compensation Letter Agreement
July 20, 2011
Gregory Weinberg, President
GMW Organization, LLC
1650 Market Street, 53rd Floor
Philadelphia, PA 19103
Dear Greg,
This letter agreement ("Agreement"), dated July 20, 2011 (the "Effective Date"), confirms the terms and conditions between GMW Organization, LLC ("GMW") and Pennsylvania Bancshares, Inc., myself, and/or my affiliates (collectively "Atlass") whereby GMW will be providing investment banking services to Atlass with regards capital raising events ("Transaction(s)") for North East Hospital located at 2301 East Allegheny Avenue, Philadelphia, PA 19134 ("NE Hospital") and St. Agnes Hospital located at 1930 South Broad Street, Philadelphia, PA 19145 ("St. Agnes"). Atlass and GMW are hereinafter referred to individually as a "Party" and together as the "Parties."
This Agreement is an exclusive engagement for a period of 120-days commencing on the Effective Date. All GMW prospective sources of capital for a Transaction shall be identified by GMW and listed on Schedule "A" attached hereto, as such schedule will be updated from time-to-time by the Parties. Additions and updates to Schedule "A" shall be discussed and agreed to by the Parties, and such updates and additions shall be submitted in the form of electronic mail, and Atlass' receipt and confirmation (by way of electronic mail) of the updates and additions set forth in such electronic mail submission constitutes acceptance of any such addition and update to Schedule "A". Expiration of this Agreement shall not affect GMW's right to receive compensation (as described below) if a Transaction takes place with a GMW prospective source of capital, and takes place subsequent to, but within a period of 24-months (the "Tail Period") from the end of the term of this Agreement.
GMW shall:
1) Assist Atlass on structuring the Transaction;
2) Assist in the preparation and creation of appropriate documentation (e.g. teaser and information memorandum ("Sales Materials")); Sales Materials for NE Hospital shall [be] prepared by GMW on or
before twenty-one days from the Effective Date;
3) Initiate contact with prospective investors and arrange introductions with prospective investors by way of teleconference, in-person meetings and/or email communication;
4) Assist Atlass in its evaluation of a Transaction proposal;
5) Assist in negotiations.
COMPENSATION
NE HOSPITAL
1) 3% of a NE Hospital Transaction (irrespective of who identifies the source of capital; i.e. GMW or Atlass);
2) 10% of any funds Atlass receives from an NE Hospital Transaction (net of debt and costs) (to be paid only if a Transaction effects with a GMW prospective source (or sources) of capital, or if a Transaction effects by way of the new general partner of NE Hospital, and Atlass receives funds from such Transaction); and
3) 25% of the general partnership ("GP") of the entity controlling NE Hospital (to be granted only if a Transaction effects with a GMW prospective source (or sources) of capital[)].
By way of example, should GMW raise $20 million dollars in a joint venture ("JV") structure for NE Hospital from a prospective source of capital, GMW's compensation will be as follows:
1) 3% of $20 million (i.e. $600,000.00);
2) 10% of what Atlass receives (e.g. $20,000,000 less debt of $12 million, less $2 million buyout of partners, less expenses); the net amount of $6
million would equal a $600,000 fee payable to GMW; and
3) 25% of the GP of the entity controlling (e.g. JV) of NE Hospital.
ST AGNES HOSPITAL
Upon closing of the initial St. Agnes Transaction (e.g. $2 million bridge financing), irrespective of who identifies the source of capital, GMW will receive $30,000.00.
Upon the closing of a subsequent St. Agnes Transaction, GMW will receive:
1) 3% of the Transaction amount (irrespective of who identifies the source of capital; i.e. GMW or Atlass);
2) 10% of the amount Atlass would receive from a St. Agnes Transaction (see above example) (to be paid only if a Transaction effects with a GMW prospective source (or sources) of capital); and
3) 25% of the GP in the entity that controls St. Agnes (to be granted only if a Transaction effects with a GMW prospective source (or sources) of capital).
GMW is affiliated (GMW's President is a registered representative) with Grant Williams, LP ("GWLP"), a Philadelphia, Pennsylvania broker-dealer who is a member of FINRA and the Securities Investor Protection Corporation ("SIPC"). GMW, through GWLP, will comply with all applicable laws, rules, and regulations of the Securities and Exchange Commission (the "SEC"), the conduct rules of FINRA, and any state securities laws and regulations.
Neither Party shall have the right to assign its rights or delegate its obligations under this Agreement without the prior written consent of the other Party; provided however, that GMW may assign its rights or obligations hereunder to GWLP or any other FINRA broker-dealer that GMW may associate with during the
Term, Tail Period, and any extension thereof, without the prior written consent of Atlass.Complaint, 8/16/12, at Exh. A.
This Agreement shall be binding on the Parties and their successors, assignees, designees or acquired businesses.
If you agree with the terms and conditions of this Agreement, please sign and return. It is understood that you will prepare a more formal document as soon as practicable.
Sincerely,
PENNSYLVANIA BANCSHARES, INC
Steven B. Atlass
President
Accepted: Signature of Steven B. Atlass
Date: July 20, 2011
Accepted and agreed as of this 20th day of July, 2011
GMW Organization, LLC
By: Signature of Gregory Weinberg
Gregory Weinberg
President
In reviewing a decision after a nonjury trial, "we will reverse the trial court only if its findings are predicated on an error of law or are unsupported by competent evidence in the record." Deutsche Bank Nat. Trust Co. v. Gardner , 2015 PA Super 219, slip op. at 2 (Pa. Super. filed October 14, 2015) (citing Boehm v. Riversource Life Ins. Co., 117 A.3d 308, 321 (Pa. Super. 2015)). We may interfere with the trial court's conclusions only if they are unreasonable in light of its findings. Zappile v. Amex Assur. Co., 928 A.2d 251, 254 (Pa. Super. 2007).
GMW's issues relate to the trial court's interpretation of the Agreement. "[T]he ultimate goal [of contract interpretation] is to ascertain and give effect to the intent of the parties as reasonably manifested by the language of their written agreement." Southwestern Energy Production Co. v. Forest Resources , LLC , 83 A.3d 177, 187 (Pa. Super. 2013). "In cases of a written contract, the intent of the parties is the writing itself." Lesko v. Frankford Hosp.-Bucks Cnty., 15 A.3d 337, 342 (Pa. 2011). "[I]n determining the intent of the contracting parties, all provisions in the agreement will be construed together and each will be given effect." LJL Transp., Inc. v. Pilot Air Freight Corp., 962 A.2d 639, 647 (Pa. 2009). We have made clear:
Determining the intention of the parties is a paramount consideration in the interpretation of any contract. The intent of the parties is to be ascertained from the document itself when the terms are clear and unambiguous. However, as this Court stated in Herr Estate , 400 Pa. 90, 161 A.2d 32 (1960), "[W]here an ambiguity exists, parol evidence is admissible to explain or clarify or resolve the ambiguity, irrespective of whether the ambiguity is created by the language of the instrument or by extrinsic or collateral circumstances."
We first analyze the contract to determine whether an ambiguity exists requiring the use of extrinsic evidence. A contract is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. The court, as a matter of law, determines the existence of an ambiguity and interprets the contract whereas the resolution of conflicting parol evidence relevant to what the
parties intended by the ambiguous provision is for the trier of fact.Keystone Dedicated Logistics , LLC v. JGB Enterprises , Inc., 77 A.3d 1, 6-7 (Pa. Super. 2013).
GMW first argues that the trial court erred in failing to enter a specific declaration concerning GMW's rights and interest "in the carried interest/profit share (also known as the "Promote" or the "Carry")" with respect to the St. Agnes Transaction. GMW's Brief at 4. The trial court defined "promote" as "'a carried interest . . . or what's also known as a profit share whereby . . . a person who's putting a deal together can share in the upside as the property or the entity becomes successful' and the limited partners have been paid back with interest." Trial Court Opinion, 4/21/15, at 16-17 (citing N.T. Volume I, 7/16/14, at 68-69). Appellees assert that the term "promote," as utilized by GMW, is not contained in the Agreement; rather, the Agreement addressed GMW's compensation "without any reference to a 'promote.'" Appellees' Brief at 7-8. The trial court agreed that the Agreement made no mention of a "promote"; rather, the Agreement provided that GMW would be entitled to twenty-five percent of the general partnership in the entity that controls St. Agnes Hospital. Trial Court Opinion, 4/21/15, at 17.
The trial court concluded that Howell controlled St. Agnes Hospital within the meaning of the Agreement. Thus, GMW was entitled to twenty-five percent interest in Howell's general partner, Krebs. While acknowledging that GMW argued that it was entitled to twenty-five percent of Howell, the trial court concluded that the Agreement's terms are clear and unequivocal. Therefore, the precept that a court may examine the surrounding circumstances to ascertain the intent of the parties when the words used in a contract are ambiguous, see , e.g., Keystone Dedicated Logistics , 77 A.3d at 6, never came into play. Even if the provision in the Agreement was ambiguous, the trial court found that the undisputed extrinsic evidence did not support GMW's interest in the promote. Trial Court Opinion, 4/21/15, at 18. After careful review, we conclude that the trial court did not err in its determination.
The second issue concerns the trial court's conclusion that GMW was not entitled to $250,000, or ten percent of the $2.5 million Howell received as part of the St. Agnes Hospital transaction because the $2.5 million was debt; the Agreement excluded debt from funds to which GMW's ten percent compensation was applicable. GMW argues that the trial court erred in determining that the Agreement was clear and unambiguous, yet it utilized clauses from other sections of the Agreement to support its conclusion that GMW was not entitled to $250,000. GMW's Brief at 36. GMW alleges the trial court "supplied a term that was intentionally excluded from the St. Agnes compensation terms." Id. at 39. GMW maintains that the trial court should have examined the St. Agnes Hospital provision in isolation, without reference to any other language of the Agreement. Thus, GMW avers that the trial court erred in its interpretation of the Agreement.
The trial court rightly concluded that it was obligated to view the Agreement as a whole and not "in discrete units." Bethlehem Steel Corp. v. MATX , Inc., 703 A.2d 39, 42 (Pa. Super. 1997). The trial court looked to the entire Agreement and correctly determined there was no ambiguity. Moreover, the trial court found that Weinberg's testimony that the $2.5 million was structured as a loan at his suggestion for tax reasons was not credible. Trial Court Opinion, 4/21/15, at 24. See Prieto Corp. v. Gambone Const. Co., 100 A.3d 602, 609 (Pa. Super. 2014) ("Concerning questions of credibility and weight accorded the evidence at trial, we will not substitute our judgment for that of the finder of fact."). Therefore, this issue lacks merit.
GMW's third claim is that the trial court misconstrued the debt terms of the Agreement, maintaining that the trial court erred in finding that "because Iron Point provided Howell with a loan, that loan was debt that should have been deducted from the 'amount' received by [Appellees] in calculating what [GMW] was due under the Compensation Agreement." GMW's Brief at 40. Thus, GMW posits that the debt referred to in the Agreement was only pre-existing debt. The trial court found that GMW did not identify any evidence that the terms "net of debt" and "less debt" used in the Agreement referred only to existing debt paid off through a hospital transaction rather than funds received by Atlass or an affiliate as new debt. The trial court determined that Iron Point dictated the "$2.5 million would be structured as a loan in order to provide itself with more protection." Trial Court Opinion, 4/21/15, at 24. The trial court's conclusions are well supported by the record.
Iron Point Partners, LLC is a private equity company that was interested in investing in both Northeastern Hospital and St. Agnes Hospital but ultimately invested solely on St. Agnes Hospital. Trial Court Opinion, 4/21/15, at 5.
Finally, GMW asserts that the trial court should have applied the doctrine of contra proferentem. Under that rule, "any ambiguous language in a contract is construed against the drafter and in favor of the other party if the latter's interpretation is reasonable." Municipal Authority of Borough of Midland v. Ohioville Borough Municipal Authority , 108 A.3d 132, 139 (Pa. Cmwlth. 2015). This issue has been discussed in the context of the first and second issues; we have noted that the trial court's conclusion that the Agreement lacked ambiguity has record support. Thus, the ambiguity issue has no merit. Moreover, the doctrine has no application herein because the evidence of record supports the conclusion that the Agreement was a freely negotiated instrument. See Kozura v. Tulpehocken Area Sch. Dist., 791 A.2d 1169, 1175 n.8 (Pa. 2002) ("The principle that a contractual ambiguity is to be construed against the drafter does not apply where, as here, the contract is the result of the joint efforts of negotiators.").
In summary, the trial court provided an exhaustive analysis and correct disposition of all of the issues raised by GMW. Accordingly, we affirm the judgment, and we do so on the basis of the comprehensive April 21, 2015 opinion of the Honorable Patricia A. McInerney.
The parties are directed to attach a copy of that opinion in the event of further proceedings in this matter.
Judgment affirmed. Judgment Entered. /s/_________
Joseph D. Seletyn, Esq.
Prothonotary Date: 11/24/2015
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