Opinion
J-A19008-13 No. 2391 EDA 2011
03-06-2014
ROY H. LOMAS, SR., D/B/A ROY LOMAS CARPET CONTRACTOR, Appellee v. JAMES B. KRAVITZ, ANDORRA SPRINGS DEVELOPMENT, INC., CHERRYDALE CONSTRUCTION CO., EASTERN DEVELOPMENT ENTERPRISES, INC. AND KRAVMAR, INC., Appellants
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Judgment Entered August 16, 2011
In the Court of Common Pleas of Montgomery County
Civil Division at No(s): 00-5929
BEFORE: BENDER, J., GANTMAN, J., and PANELLA, J. MEMORANDUM BY BENDER, J.
James B. Kravitz, Andorra Springs Development, Inc., Cherrydale Construction Co., Eastern Development Enterprises, Inc. and Kravar, Inc., (the "Kravitz Entities") appeal from the judgment entered on August 16, 2011, in favor of Roy H. Lomas, Sr., d/b/a/ Roy Lomas Carpet Contractor in the amount of $1,688,379.10. We affirm.
Appellants filed their appeal on August 26, 2011, from the denial of their post-trial motions on August 4, 2011. An order denying post-trial motions is interlocutory and generally not appealable. See Levitt v. Patrick, 976 A.2d 581, 584 n.2 (Pa. Super. 2009) (stating that appeal properly lies from the entry of judgment, not from order denying post-trial motions). However, since judgment was entered on August 16, 2011, we consider the appeal as taken from the entry of judgment.
The basis for this litigation began in November of 1994, when Cherrydale and Lomas entered into a contract for Lomas to supply and install flooring in homes being built by Cherrydale. One month later, Lomas stopped working due to Cherrydale's failure to pay for completed work, which at that point amounted to $30,913.00. In January of 1995, Lomas demanded submission to binding arbitration, which resulted in an interim award for Lomas. The arbitrators' final award was issued in September of 1998 and held that Lomas was due $200,601.61 in accordance with the Contractor Subcontractor Payment Act ("CSPA"), 73 P.S. § 501 et seq. Judgment was entered on September 10, 1998. After unsuccessfully securing payment on the judgment, Lomas filed the instant action on March 31, 2000, in order to execute on the judgment.
It is now 2013 and the matter is presently before this Court. The time from January 1995 until the present appeal was filed on September 15, 2011, covers a sixteen year period. This length of time, due significantly to the Kravitz Entities' delaying tactics, is almost incomprehensible, considering that this case began over a thirty-thousand dollar debt and has now resulted in a judgment assessing damages for $1,688,379.10.
When the Kravitz Entities filed their Pa.R.A.P. 1925(b) statement of errors complained of on appeal, they set forth 24 separate claims of error. The trial court wrote a fifty-page opinion responding to each claim raised by the Kravitz Entities. Now, in their brief to this Court, the Kravitz Entities raise seven issues, which essentially encompass most of the issues raised in the Rule 1925(b) statement submitted to the trial court. The Kravitz Entities state these issues as follows:
Whether, as a matter of law, the entire bench of the Montgomery County Court of Common Pleas should have been recused, and/or full, complete, and required discovery permitted, because of the irreparable appearance of impropriety created by the ongoing participation and financial interest in the litigation by a sitting member of that Court?Kravitz Entities brief at 2-3.
Whether, as a matter of law, the testimony of Appellee's expert should have been discredited and/or stricken, because Appellee's attorneys and a sitting member of the Montgomery County bench improperly altered, edited, and influenced the content of the expert's report[?]
Whether, as a matter of law, the corporate veil can be pierced to find James B. Kravitz individually liable, and all Appellants liable for fraudulent transfers, based on non-cash accounting adjustments and bookkeeping entries made by licensed professional accountants in the ordinary course of business pursuant to generally accepted accounting practices for the lawful purpose of minimizing tax liabilities[?]
Whether, as a matter of law, punitive damages may be awarded where the underlying arbitration award was based on the Contractor and Subcontractor Payment Act, which includes a provision authorizing the award of a statutory punitive penalty[?]
Whether, as a matter of law, punitive damages may be awarded where Appellants' conduct was motivated by generally accepted accounting and tax planning principles and was not outrageous, willful, wanton, or reckless, and where Appellants' conduct in
defending the litigation was within its due process rights and was not dilatory, obdurate, and/or vexatious?
Whether, as matter of law, a punitive damages award far exceeding a 1:1 ratio with the compensatory damages award violates Appellants' rights to due process under the United States Constitution?
Whether, as a matter of law, the trial court could award Lomas attorney's fees, interest, and penalties under the Contractor and Subcontractor Payment Act ("CASPA") when Lomas did not bring a claim under CASPA, the trial court was precluded from altering or adjusting the underlying arbitration award which did award certain damages under CASPA, and the trial court misapplied CASPA in its award of damages?
We have reviewed the certified record, the briefs of the parties, the applicable law, and Judge Rogers' thorough and well-crafted opinion, dated January 15, 2013. We conclude that Judge Rogers' extensive, well-reasoned opinion accurately disposes of the issues presented by the Kravitz Entities. Accordingly, we adopt his opinion as our own and affirm the judgment in Lomas' favor on that basis.
We are compelled to comment on the Honorable Judge Thomas C. Branca's involvement in this case. Although we conclude that the Honorable Judge Thomas P. Rogers properly resolved the issues concerning Judge Branca's actions, we suggest that this type of situation should be avoided in the future.
Judgment affirmed
Judge Gantman notes her dissent. Judgment Entered. __________
Joseph D. Seletyn, Esq.
Prothonotary
COURT OF COMMON PLEAS OF MONTGOMERY COUNTY,
PENNSYLVANIA
CIVIL ACTION - LAW
ROY H. LOMAS, SR., d/b/a
ROY LOMAS CARPET CONTRACTOR
vs. JAMES B. KRAVITZ, CHERRYDALE
CONSTRUCTION COMPANY,
ANDORRA SPRINGS DEVELOPMENT,
INC., KRAVMAR, INC., formerly
known as EASTERN DEVELOPMENT
ENTERPRISES, INC.
ROGERS, J.
SUPERIOR COURT
NO. 2391 EDA 2011
LOWER COURT
NO. 2000-05929
OPINION
I. INTRODUCTION
Appellants, James B. Kravitz ("Kravitz" or "Appellant") and Chenydale Construction Company ("Cherrydale"), Andorra Springs Development, Inc. ("Andorra Springs") and Kravmar, Inc., formerly known as Eastern Development Enterprises, Inc. ("Eastern") (collectively referred to as "the Kravitz Entities" or "Appellants"), have appealed to the Superior Court of Pennsylvania ("Superior Court") from this Court's August 4, 2011 Order denying their Motion for Post-Trial Relief, following the bifurcated portions of the trial in this matter on liability and, subsequently, on attorneys' fees and punitive damages. For the reasons set forth below, Judgment should be affirmed.
An order denying post-trial relief is interlocutory and generally not appealable. See Prime Medico Associates v. Valley Forge Insurance Company, 970 A.2d 1149, 1154 n.6 (Pa.Super. 2009) (citations omitted); Sovereign Bank v. Valentino, 914 A.2d 415, 419 n.6 (Pa.Super. 2006) (citation omitted). However, the Prothonotary entered final judgment in this matter upon praecipe and sent (he Rule 236 Notice on August 16, 2011. Accordingly, this appeal is timely.
II. FACTUAL and PROCEDURAL HISTORY
The relevant facts and tortured procedural history underlying this appeal are as follows. Appellee Roy H. Lomas, Sr., d/b/a Roy Lomas Carpet Contractors ("Lomas" or "Appellee") is a hardworking individual who owns a floor covering company that sells and installs floor coverings in residential communities, especially new construction homes, as well as engages in a retail and cash-and-carry business. (Notes of Testimony ("N.T.") January 16, 2007, at 40). Approximately seventy (70) to seventy-five (75) percent of Appellee's business consists of the installation of new floor covering in new construction houses. (7c?.).
On April 29, 2011, the undersigned issued two separate Orders setting forth detailed Findings of Fact and Conclusions of Law on Liability (Montgomery County 2000-05929 Docket No, 306) (''FOF-Liability" or "COL-Liability") and Findings of Fact and Conclusions of Law on Attorneys' Fees and Punitive Damages (Montgomery County 2000-05929 Docket No. 307) ("FOF-Fees and Punitive Damages" or "COL-Fees and Punitive Damages") following the bench trials on January 16-18, 2007, and September 4 and September 6, 2007, respectively. Those findings of fact and conclusions of law are incorporated herein.
Kravitz was the sole officer, director, and 100% shareholder of a group of companies, collectively known as The Andorra Group. The Andorra Group, which included Cherrydale, Andorra Springs and Eastern, was a fictitious name for all of Kravitz's companies, most of which were in the home building business during the years 1994-1998, and used by Kravitz to have one name for his developments for public recognition. (N.T. January 16, 2007, at 76-77, 97-98; N.T. January 17, 2007, at 267-68).
Kravitz also owned The Reserve at Lafayette Hill ("The Reserve"), a property in Whitemarsh Township, Montgomery County, which he intended to develop into a residential community. To that end, Kravitz divided The Reserve into six sections and set up Andorra Springs primarily for the puipose of owning the land and developing single-family housing in Sections I, II, and III. (N.T. January 16, 2007, at 68-69; N.T. January 17, 2007, at 270). Kravitz formed Cherrydale in approximately 1989. (Id. at 195).
Eastern served as the management and payroll company for The Andorra Group and other wholly owned Kravitz companies, including Cherrydale and Andorra Springs. (N.T. January 16, 2007, at 72, 97-98; N.T. January 17, .2007, at 267). Eastern employed Steven A. Braun ("Braun") from 1992 through January 1996 as their Chief Financial Officer. (Id. at 266). After Braun left his employment with Eastern and joined an accounting firm, Kravitz retained Braun to prepare the annual tax returns for The Andorra Group. (N.T. January 17, 2007, at 273).
In November 1993, Cherrydale entered into a written contact with Andorra Springs (the "Owner Contractor Agreement" or "Agreement") as the general contractor to build homes in Sections I and II, and III by separate agreement, and make site improvements to Sections IV, V and VI at The Reserve. (N.T. January 16, 2007, at 63, 65-66; N.T. January 17, 2007, at 195, 270; Plaintiff's Trial Exhibit ("P-") 1 - Owner Contractor Agreement). Kravitz executed the Owner Contractor Agreement on behalf of Cherrydale as well as on behalf of Andorra Springs. (N.T. January 16, 2007, at 63; P-1 - Owner Contractor Agreement).
The Agreement required Cherrydale to build houses for its only customer, Andorra Springs. (P-1 - Owner Contractor Agreement; N.T. January 17, 2007, at 195-197). The Agreement also required Cherrydale to submit payment applications to Andorra Springs to be paid for its work. Those payment vouchers were then submitted to the bank by Andorra Springs. Andorra Springs was to pay Cherrydale within five (5) days of the bank paying the voucher. (P-1 - Owner Contractor Agreement; January 16, 2007, at 125; January 17, 2007, at 197). Although the Owner Contractor Agreement required Andorra Springs to provide progress payments to Cherrydale so that Cherrydale could meet its obligations to pay subcontractors, Andorra Springs did not pay Cherrydale for its work in accordance with the Agreement so that by the end of December 1996, Andorra Springs owed Cherrydale $3.7 million for the homes Cherrydale had built. (P-31 - Andorra Springs Adjusting Journal Entries; P-25 - Andorra Group Intercompany Payable/Receivable Balance Summary; N.T. January 16, 2007, at 125-126). However, even though Cherrydale lacked sufficient cash to pay its creditors, the evidence showed that Cherrydale was always profitable. (See FOF-Liability Nos, 57-63).
On November 10, 1994, Cherrydale contracted with Lomas to supply and install floor coverings in the homes being built by Cherrydale. (N.T. January 16, 2007, at 42). Almost immediately, Cherrydale breached the Lomas contract by failing to make payments to Lomas according to the payment schedule for past due invoices. (Id.). Lomas stopped doing work for Cherrydale in December 1994 because Lomas was not being paid. At that point, Cherrydale owed Lomas $30,913.00. (P-2 - Final Award of Arbitrators).
In January 1995, Lomas demanded that Cherrydale submit his claim for non-payment to binding arbitration (the "Arbitration") pursuant to the terms of their contract. (N.T, January 16, 2007, at 43). Thomas C. Branca, Esquire represented Lomas at the Arbitration. On May 24, 1996, the panel of arbitrators issued an interim partial award which unanimously found that Cherrydale breached its contract with Lomas and violated the Contractor Subcontractor Payment Act ("CSPA"), 73 P.S. § 501, et seq. (N.T. January 16, 2007, at 44-45; P-2 - Interim Partial Award of Arbitrators).
Immediately thereafter, Kravitz began efforts to prevent Lomas from collecting his arbitration award. (P-44 - Civil Action No. 1996-11534). On June 21, 1996, Cherrydale filed its first petition seeking to have the interim award vacated (Collectively, Cherrydale's failed efforts to vacate the awards of the Arbitrators are referred to herein as the "Post-Award Proceedings"). (P-44 - Civil Action No, 1996-11534 at Docket No. 0). Although the Honorable William T. Nicholas ultimately denied that petition and confirmed the award as to liability on June 12, 1997, this part of the post-award proceedings delayed the Arbitration and the Arbitrator's assessment of damages for over a year. (P-44 - Civil Action No. 1996-11534 at Docket No. 14).
The post-ward proceedings are docketed, in part, as Civil Action No. 1998-18291. However, they are also fiilly reflected in No. 1996-11534. (See P-44).
On September 4, 1998, the AAA arbitrators entered a final award ("Final Award") in the amount of $200,601,61 in accordance with the CSPA, which is identified as the "Act" in the Final Award. (N.T. January 16, 2007, at 44-45; P-2 - Final Award of Arbitrators). The Final Award included compensatory damages, attorney's fees, costs and interest through August 7, 1998, determined as follows:
| Unpaid balance for work performed by Lomas: | $ 30,913.00 |
| Interest on the unpaid balance: | $ 13,302.00 |
| Lost profit for unperformed work on homes which were within the scope of the contract between the Parties but on which Lomas did not work because, of the improper termination of the contract: | $ 94,199.00 |
| Interest on the lost profit amount: | $ 14,872.00 |
| Attorney's fees and litigation costs | $ 41,834.78 |
| Reimbursement of Administrative fees and expenses: | $ 4,032.66 |
| Reimbursement of compensation and expenses of the arbitrators: | $ 1,448.17 |
(P-2- Final Award of Arbitrators).
The Final Award established that Comas' attorney's fees and litigation costs were recoverable under the Act and were computed based on two-thirds of Lomas' proven fees and costs. (P-2 - Final Award of Arbitrators). Additionally, the Final Award confirmed that interest would accrue on that portion of the Award stated in Section 1 (a) at the Act's interest rate of 1% per month; interest on that portion of the Award stated in Section 1(c) and 1(e) shall accrue, until paid, at the legal rate of 6% per annum. (P-2 - Final Award of the Arbitrators).
On September 10, 1998, the Prothonotary entered judgment upon praecipe against Cherrydale in the Court of Common Pleas in the amount of $200,601.61. (P-3 - Complaint, ¶14; P-4 - Answer, ¶14). On September 16, 1998, Cherrydale filed its second petition to strike the Lomas judgment. (P-44 . Civil Action No. 1996-11534 at Docket No. 76). Ultimately, on October 31, 2001, Judge Nicholas denied Cherrydale's second petition to strike the Lomas judgment, (P-44 - Civil Action No. 1996-11534 at Docket No. 73). However, during the post-award proceedings, Kravitz transferred all value out of Cherrydale, Andorra Springs and Eastern to himself and his other entities. (FOF-Liability Nos. 86-134).
As part of the post-award proceedings, Lomas conducted discovery in aid of execution, and in connection and furtherance thereof, on March 31, 2000, filed the instant action. (N.T. January 16, 2007, at 93-94; P-3 -Complaint, ¶15; P-4 - Answer, ¶15). Attorney Branca filed the Complaint on behalf of Lomas. (P-3 - Complaint). Following the Court's ruling on preliminary objections, Lomas proceeded on three (3) counts in a continued effort to collect the judgment Appellants owed to Lomas pursuant to the arbitration award: 1) piercing the corporate veil, 2) fraudulent transfer under the Uniform Fraudulent Transfer Act and 3) fraud. (P-3 - Complaint; P-4 - Answer).
Having been elected to the Montgomery County Court of Common Pleas in November 2001, Attorney Branca referred a number of his cases out before taking the bench. (N.T. September 6, 2007, at 3, 43-44). On January 4, 2002, Attorney Branca filed a withdrawal of appearance in the instant matter. (Docket No. 34). On March 1, 2002, attorneys Paul R. Rosen, Suzanne Schiller and Monica Mathews of Spector, Gadon & Rosen P.C. ("SGR") entered their appearance on behalf on Lomas. (Docket No. 38).
After the attorneys of SGR entered their appearance on behalf of Lomas and filed motions to compel the production of documents, Kravitz filed a frivolous petition to have SGR, and specifically Attorney Rosen, disqualified. (See Docket Nos. 55, 58, 72, 103, 104 and 105). Following an evidentiary hearing on June 6, 2002, Judge Nicolas denied Kravitz's Motion to Disqualify, unpersuaded that the subject matter of the instant litigation was "substantially related" to that of Attorney Rosen's representation of Kravitz eighteen (18) years prior, (See Docket No. 72).
As discovery proceeded, in early 2004, Kravitz's attorney sought to withdraw as counsel for Appellants. (See Docket Nos. 114 and 123). Counsel for Lomas appeared at the hearing and received assurances from Appellants that the matter would not be delayed by the substitution of counsel and that both sides were preparing motions for summary judgment, which would be filed because discovery was concluding.
Nonetheless, in July 2004, when Lomas filed his motion for .summary judgment, rather than responding .substantively, counsel for Appellants demanded sixty (60) additional days of discovery. (Docket No. 131). Then on the sixtieth (60th) day, Appellants propounded irrelevant requests, which-had nothing to do with the claims at issue, and, for the most part, sought information and documents already in .their possession. (See Docket No, 145). Appellants' .successful delay tactic forestalled the resolution of Lomas' motion for .summary judgment until June of 2005. (Docket No. 152).
Thereafter, instead of agreeing to sign a trial praecipe, which Appellants continued to refuse to do, Appellants filed their own motion for summary judgment, which completely disregarded their prior representation that questions of law existed which precluded summary judgment. (See Docket No. 153), Judge Nicholas denied the motion before the end of 2005. (Docket No. 165). Between that time and the start of the liability phase of the trial in this matter in January 2007, Appellants continued to delay trial by claiming their witnesses and experts were, on an alternating basis, unavailable for trial. (See Docket Nos. 174 and 175).
Finally, at the Pretrial Conference on January 12, 2007, all Counsel agreed to proceed before the undersigned in a bench trial. This Court discussed with Counsel, and specifically Steven Kapustin, Esquire on behalf, of Appellants, the issue of Judge Branca having previously represented Lomas. The undersigned gave assurances that he had never discussed the case with Judge Branca and that the undersigned had no reason to believe there were any issues in that regard. All Counsel unequivocally agreed to proceed before the undersigned without a jury. The trial commenced on Tuesday, January 16, 2007.
On Wednesday, January 17, 2007, Counsel agreed to bifurcate the case following the close of evidence and submission by Counsel of proposed findings of fact and conclusions of law on liability. (N.T. January 17, 2007, at 249-50). At the close of the presentation of evidence on Thursday, January 18, 2007, the parties agreed to waive Pennsylvania Rule of Civil Procedure 1038 and await the Court's determination on liability before proceeding with the next phase of the trial concerning Appellee's demand for attorneys' fees and punitive damages. (N.T, January 18, 2007, at 503). On July 30, 2007, this Court entered a Verdict and Order in favor of Lomas and against. Appellants. (Docket No. 193). The undersigned then scheduled the second phase of the bifurcated bench trial for September 4 and September 6, 2007.
In preparation for the attorney's fees and punitive damages phase of the trial, Lomas served requests for production of documents on Appellants seeking to identify Kravitz's and the Kravitz Entities' net worth. Appellee asserted that he received only a small number of the requested documents in response. Documents produced on the eve of trial consisted mainly of tax returns and joint statements of financial condition between Kravitz and his wife. Kravitz refused to produce many court-ordered documents and refused to answer many questions at trial concerning his assets and the transfer of those assets. (See FOF-Fees and Punitive Damages Nos. 55-74).
On September 5, 2007, the Honorable Thomas C. Branca testified concerning his role in the case and the arrangement with Lomas concerning his attorney fees. (N.T, September 6, 2007, at 3-49). At the close of the bench trial on September 6, 2007, Appellants complained that they did not have adequate time to review the invoices supporting Appellee's attorney fees and costs' claim and requested thirty (30) days to report to the Court whether they would retain a forensic accountant for such a review. (Id. at 121-22). Over the objection of Appellee's Counsel, the Court granted Appellants' request in this regard and the record remained open for a period of thirty days. Appellants' Counsel told the Court that he would advise the Court immediately if Appellants would not be retaining forensic services, However, Appellants' counsel never advised the Court regarding the issue. (See Memorandum and Order of December 31, 2008 at p. 7).
At a scheduling conference held on October 15, 2007, well after the record had been closed, Appellants appeared with newly retained counsel and submitted a Motion for Recusal, Transfer of Venue or Assignment to Out-of-County Judge (Docket No. 199) despite all of the Parties' prior approval of this Court proceeding as finder of fact in a bench trial as discussed before the start of the trial. (See Memorandum and Order of December 31, 2008, at 7-8). After initially granting the motion, on Plaintiff's Motion for Reconsideration, this Court heard argument on the recusal matter on November 9, 2007. On December 31, 2008, the undersigned denied Appellants' Motion for Recusal and entered a partial judgment in favor of Lomas and against all Appellants confirming the original judgment of $200,601.61. (Docket No. 240).
Subsequently, Appellants attempted to appeal the Court's interlocutory order dated December 31, 2008, to the Superior Court. (See Docket No. 241). On March 5, 2009, the Superior Court quashed Defendants' appeal. (See Docket No. 266). Nevertheless, Appellants pursued their appeal to the Supreme Court of Pennsylvania ("Supreme Court") and requested a stay of all proceedings from both this Court and the Supreme Court while Appellants' Application for Extraordinary Relief to the Supreme Court was pending. (See Docket Nos. 271 and 272).
At the same time, notwithstanding the fact that the record was closed, Appellants filed discovery motions demanding the production of documents previously produced at trial and the deposition of Appellee's Counsel. (See Docket Nos, 258 and 260). This Court denied Appellants' request for a stay. (See Docket No. 280). On June 3, 2009, the Supreme Court denied Appellants' Application for Extraordinary Relief. (See Docket No. 285). Undeterred, Appellants next sought reconsideration of this Court's denial of their Motion for Recusal, which this Court promptly denied. (See Docket No. 282). By this time, Kravitz had successfully deprived Lomas from collecting on his final judgment against Cherrydale for over ten years. (See P-2 - Final Award of Arbitrators dated September 4, 1998).
On Monday, July 19, 2010, the Court heard closing arguments on Appellee's claims for interest, attorney fees and punitive damages. After taking the matter under advisement, the undersigned issued the two orders referenced above with detailed findings of fact and conclusions of law on April 29, 2011. In a separate order dated April 29, 2011, the Court issued an assessment of damages against Appellants in the total amount of $1,688,379.10 as of April 30, 2011. (Docket No. 308). Appellants filed a Motion for Post-Trial Relief on May 9, 2011. (Docket No. 310).
On August 4, 2011, the undersigned denied Appellants' Motion for Post-Trial Relief. Upon praecipe, the Prothonotary entered final judgment and sent Notice of the Judgment pursuant to Rule 236 on August 16, 2011. (Docket Nos. 322 and 323). Appellants filed a Notice of Appeal on August 26, 2011, and a Statement of Errors Complained of on Appeal on September 19, 2011.
III. ISSUES
Appellants raise the following twenty-four (24) issues on appeal:
1. The Court erred in vacating its initial Order recusing the Bench of the Court of Common Pleas of Montgomery County from continuing to sit in this matter and by not thereafter recusing the Bench of Montgomery County because of the involvement and actions of The Honorable Thomas C. Branca in this matter, including his behind-the-scenes advocacy and participation in the case and ongoing direct financial interest in the outcome of the matter.(Defendants' Concise Statement of Errors Complained of on Appeal, filed September 19, 2011).
2. The Court erred when it failed to allow full, complete and required discovery into Judge Branca's continued participation and financial interest in the litigation.
3. The Court-erred in concluding that Defendants "agreed" to the Montgomery County Court of Common Pleas proceeding in the matter despite the fact that Judge Branca had previously represented the [Appellee] when [AppelleeJ's counsel failed to reveal that Judge Branca continued to be involved in the case while a sitting member of the Court and maintained a direct financial interest in the outcome of the matter.
4. The Court erred in admitting and crediting the testimony of [AppelleeJ's liability expert, Raymond Dovell, where the evidence showed that Judge Branca and [AppelleeJ's attorneys at Spector, Gadon & Rosen, P-.C. (the "Spector Firm") improperly altered, edited and influenced the content of Mr. Dovell's report.
5. The Court erred in piercing the corporate veil and finding [Appellant] James B. Kravitz liable where the evidence showed that he did not intermingle his affairs with those of any of the corporate [appellants] or use any corporate [appellant] as his alter ego or to perpetrate a fraud, and that each of the corporate [appellants] maintained proper corporate formalities and were adequately capitalized.
6. The Court erred in holding [Appellant] James B. Kravitz personally liable under a participation theory for [AppelleeJ's judgment against [Appellant] Cherrydale Construction Co. ("Cherrydale").
7. The Court erred in finding [Appellants] liable under the Uniform Fraudulent Transfer Act based on non-cash accounting adjustments and bookkeeping entries made by licensed professional accountants in the ordinary course of business pursuant to: generally accepted accounting practices for corporate entities legally formed separate and apart from [Appellant] Cherrydale, the alleged debtor under the Act.
8. The Court erred in finding [Appellants], James B. Kravitz, Andorra Springs Development, Inc. and Kxavmar/Eastern liable under the Uniform Fraudulent Transfer Act based on non-cash accounting adjustments and bookkeeping entries done in the ordinary course of business in accordance with generally accepted accounting practices and on the basis of the good faith advice of licensed professional accountants where the adjustments and bookkeeping entries were performed by the accountants for the lawful purpose of minimizing taxes and were not done for the purpose of harming or benefiting any creditor and did not restrict [Appellant] Cherrydale's ability to pay Plaintiff.
9. The Court erred in finding [Appellants], James B. Kravitz, Andorra Springs Development, Inc. and Kravmar/Eastern liable under the Uniform Fraudulent Transfer Act for financial transfers and accounting adjustments done in the ordinary course of business in accordance with generally accepted accounting practices and on the basis of the good faith advice of licensed professional accountants where the transfers and adjustments were performed by the accountants for lawful purposes, were not done to harm or benefit any creditor, and related to prior-existing matters, accounts, transactions and obligations.
10. The Court erred in finding [Appellants], James B. Kravitz, Andorra Springs Development, Jnc. and Kravmar/Eastern liable under the Uniform Fraudulent Transfer Act by failing to account for, consider, credit and otherwise recognize the prior lawful debts, obligations and liabilities owed by these entities to other creditors and lenders.
11. The Court erred in concluding that Cherrydale was profitable based on accrual-basis tax returns in which income revenues do not reflect actual cash receipts.
12. The Court erred in concluding that the necessary and rightful actions taken by [Appellants] to defend against this litigation constituted dilatory, obdurate, and/or vexatious conduct justifying the Court's award of attorney's fees and/or punitive damages.
13. The Court erred in awarding punitive damages where it based its award of punitive damages on the same allegedly fraudulent conduct which formed the basis of its compensatory damages award, and where [Appellants'] alleged actions were not outrageous, willful, wanton, or reckless.
14. The Court erred in awarding punitive damages in excess of a 1:1 ratio with the Court's compensatory damages award.
15. The Court erred in entering an award of attorney's fees because Pennsylvania follows the American Rule and there is no express statutory authorization, no agreement of the parties, and no other established exception permitting an award of attorney's fees.
16. The Court erred in entering an award of attorney fees, including fees allegedly previously paid by [Appellee] to Judge Branca and attorney Mark Haltzman, where it was impossible to determine based on the evidence introduced by [Appellee] if the fees claimed were reasonable and justified and related to necessary and proper legal services.
17. The Court erred in awarding [Appellee] interest for a period beginning prior to the Court's entry of judgment on December 31, 2008.
18. The Court erred in entering an award of attorney's fees under the Contractor and Subcontractor Payment Act
("CSPA") because [Appellee] did not plead a claim under the CSPA in his Complaint.
19. The Court erred in awarding [Appellee] interest at the rate of 1% per month penalty under the CSPA where [Appellee] did not plead in his Complaint a claim under the CSPA.
20. The Court erred in awarding [Appellee] a 1% per month penalty under the CSPA because [Appellee] did not plead in his Complaint a claim under the CSPA.
21. The Court erred in awarding interest at the rate of 1% per month under the CSPA on an award of $200,601.61, where the Court's own Conclusions of Law do not support such an award and the Final Award of Arbitrators expressly provided for interest to be calculated only on the unpaid balance due under the contract of $30,913.00.
22. The Court erred in awarding a 1% penalty per month under the CSPA where the Court's own Conclusions of Law do not establish that [Appellee] is entitled to a penalty of 1% per month and the Final Award of Arbitrators specifically precludes recovery of the 1% penalty,
23. The Court erred in denying [Appellants'] Motion to Recuse Paul R. Rosen, Esquire and the Spector Firm as counsel to [Appellee] because Paul R. Rosen, Esquire previously represented [Appellant] James B. Kravitz in a substantially related matter.
24. The Court erred in failing to issue findings of fact and conclusions of law when it issued its decision on liability and compensatory damages where the parties agreed on the record to waive the requirement that the Court render its decision within seven days of the conclusion of trial with the understanding that the Court would make findings of fact and conclusions of law prior to the trial on punitive damages and attorney's fees.
IV. DISCUSSION
In their first three issues on appeal, Appellants complain that it was incumbent upon the undersigned to recuse the entire Montgomery County Court of Common Pleas Bench from this matter because of the Honorable Thomas C. Branca's "continued involvement" after SGR took over the case on behalf of Appellee. Appellants are mistaken.
The now settled law of this Commonwealth provides as follows:
"A trial judge should recuse himself whenever he has any doubt as to his ability to preside Impartially ... or whenever he believes his impartiality can be reasonably questioned." Commonwealth v. Goodman, 454 Pa. 358, 311 A.2d 652, 654 (1973). It is presumed that the judge has the ability to determine whether he will be able to rule impartially and without prejxidice, and his assessment is personal, unreviewable, and final. Commonwealth v. Druce, 577 Pa. 581, 848 A.2d 104, 108 (2004). Where a jurist rules that he or she can hear and dispose of a case fairly and without prejudice, that decision will not be overturned on appeal but for an abuse of discretion. Commonwealth v. Abu-xJamal, 553 Pa. 485, 720 A.2d 79, 89 (1998). The party requesting recusal bears the burden of producing evidence that establishes bias, prejudice, or unfairness. Commonwealth v. White, 589 Pa. 642, 910 A.2d 648, 657 (2006). This evidence must raise a substantial doubt as to the jurist's ability to preside impartially. Id.In re Bridgeport Fire Litigation, 5 A.3d 1250, 1254 (Pa.Super. 2010); accord Commonwealth v. Hutchinson, ___ Pa. ___ 25 A.3d 277, 319 (2011) (citation omitted); Rohm and Haas Company v. Lin, 992 A.2d 132, 149 (Pa.Super. 2010), cert, denied, 132 S.Ct. 852 (U.S.Pa. 2011) (citing Vargo v. Schwartz, 940 A.2d 459, 471 (Pa.Super, 2007)). "The jurist must then consider whether his or her continued involvement in the case creates an appearance of impropriety and/or would tend to undermine public confidence in the judiciary. This is a personal and unreviewable decision that only the jurist can make." Rohm and Haas, supra (citing Overland Enterprise, Inc. v. Gladstone Partners, LP, 950 A.2d 1015, 1021 (Pa.Super. 2008)).
Guided by these considerations, a review of the facts in this matter supports the undersigned's decision to grant Appellee's Motion for Reconsideration, subsequently deny Appellants' Motion for Recusal and proceed as the jurist in the next phase of the trial. At oral argument on the motion, the following exchange occurred:
MR. ROSEN: Two days of testimony takes place in connection with the attorney's fees portion. Judge Branca testifies.(Notes from Oral Argument, November 9, 2007, at 7, 35-36, 40, 42-44, 47-48, 50-51, 56).
During the course of his testimony, he points out that from time to time, he stayed in contact with our firm, and from time to time, he would discuss matters with our firm. And during that period of time, he also volunteered that he has an interest in an outcome, ]f there is a positive outcome, he may get a percentage of fee, and then he had discussions of that and brings that all to the attention of the Court.
During the course of that testimony and after that testimony, nothing is said about any impropriety in connection with that. There is no issue raised. Nothing is raised at all.
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MR. KUPPERMAN: I think Your Honor understands the case law extremely well, and I think you know intimately and better than I do the facts and the history of this case.
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As Your Honor knows, at the time of the liability hearing, there was no knowledge and no information disclosed as to Judge Branca's involvement and continuing involvement in [sic] financial interest in this case.
THE COURT: That's true.
MR. KUPPERMAN; We have never claimed, never claimed in this ease that Your Honor is tainted in any way at all, You know that. We made that very clear in chambers. This is not a question where we're saying that there's been anything improper.
We brought our claim on the basis of the appearance of impropriety standard and the need for the Court to be above reproach.
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The other thing I point out, Judge, is that you know in chambers, we did raise this concern - this is now Mr. Leonard and my concern - that we frankly thought that there was an obligation that should have been pursued by plaintiff's counsel in this case because they knew, they knew, they're the only people that knew what happened. You did not know. Mr, Kapustin did not know. Nobody else knew. Nobody else knew of the reach and the involvement and the extent of the involvement of Judge Branca. Those facts did not come out until the liability phase had already been concluded.
There's [sic] preliminary findings on it, admittedly, there's no question. But there's been no final verdict, and, in fact, a lot more has to be done.
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MR. ROSEN: When this Court entered its general verdict on liability and moved this case over to the trial phase on punitives and attorney's fees, it wasn't aware of any involvement of Judge Branca. That came out at the trial with respect to the matter involving attorney's fees when Judge Branca was called to testify.
THE COURT: That's accurate.
MR. ROSEN: Therefore, there cotild never be in any form any prejudice to that decision in any way that could have ever been involved. That decision was made without any factual basis that anybody could claim was an appearance of impropriety, an existence of impropriety, or anything else.
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I know that in chambers IVe been told by both Shosh and everybody else that you made it clear that you never spoke to Judge Branca.
THE COURT: I didn't. . . . [T|he interesting part about this trial from my perspective is, as you know, that this was a bench trial, and, of course, in a bench trial, the judge becomes the judge of the facts in addition to the law. And one of the major things involving becoming a judge of the facts, as you know, is the determination of credibility. And 1 had absolutely no problems whatsoever with Judge Branca's credibility in this case.
If you read the notes, and you seem to suggest you did read the notes, this is, kind of, unusual, and I could self-authenticate his credibility because he testified - a question by Mr. Kapustin was did you ever have any discussion with me about the case. And there [are] two people that know the answer to that.
MR. ROSEN: He knew it and said no.
THE COURT: And I knew it. We never discussed the case. Judge Branca did nothing wrong in this case. Nothing. He's an honest, forthright judge.
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And that confirms what I said to counsel in the very beginning of this case that, you know, does anybody have a problem with me presiding over this case. There's four judges on civil. I drew it. That's the way it came down.
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MR. ROSEN: But one thing you have to understand, Your Honor, on the issue of attorney's fees section and punitive damages, in that particular situation, he was not
getting a piece of attorney's fees. If anything, the way his testimony comes out is that on the underlying award, which already happened in July, he had an interest at that point in time.
The fact of the matter is that that" doesn't change the attorney's fees claim. It doesn't move it up or down. If Mr. Lomas wants to take his award that he gets and give it to Tom for the years of service as a contingency phase and talk to me about it and agree with me that's okay, the fact of the matter is it doesn't change the amount of attorney's fees to be awarded by this Court. It doesn't give [Judge] Branca a dime more or a dime less, because the issue with respect to his entitlement had been already determined without anybody knowing about this issue.
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[Ajs far as we are concerned, the most important thing that we can point out to the Court is that whatever you decided in July, even whatever issues he raised, were decided without any impact and have already been decided as [a] genera] verdict under 1038 so that you have found that liability in a general verdict under 1038, and that can never be an appearance of impropriety on something that you didn't find out about until September.
The undersigned notes that Counsel for Appellants found it "disturbing" that the Court failed to acknowledge the length of time the undersigned took to decide this issue in the Court's Findings of Fact on Attorneys' Fees and Punitive Damages. (Appellants' Motion for Post-Trial Relief, Footnote 2, Docket No. 310). Counsels' implication that the undersigned included the time that the Court took to come to a well-reasoned decision in its computation of time attributed to Appellants' delay tactics, although certainly permissible, misses the mark. Rather, Appellant's tactics and those of his Counsel were sufficient on their own for the Court to find dilatory, obdurate, and vexatious conduct. The undersigned took Appellants' motion to recuse the entire Montgomery County Court of Common Pleas Bench seriously and after studied reflection, which admittedly took a fair amount of time given the circumstances, came to the correct conclusion. Moreover, in light of the fact that Counsel failed to object to the undersigned's continued involvement on September 6, 2007, and waited until October 15, 2007, to present their motion, the Court opines that the issue is waived for all intents and purposes.
From this exchange, three things become clear. The first is that the undersigned had absolutely no discussions about this case with Judge Branca before, during or after this Court had ruled on the issues raised from the liability portion of the trial, in fact, Appellants' recusal motion came after the undersigned found Appellants liable and they were facing the possibility of an award for punitive damages.
Second, this Court was unaware of any fee arrangement or communications between Judge Branca and Lomas or SGR until well after the undersigned rendered a general decision on liability on July 31, 2007, and Judge Branca testified to those communications on September 6, 2007. (See N.T., September 6, 2007, at 13-14, 18-49). Finally, Counsel for Appellants have never even suggested at any time that the undersigned was unable to rule impartially and without prejudice. Rather, Appellants' sole basis for their argument has been whether the entire Montgomery County Bench's continued involvement after the liability phase created an appearance of impropriety. (See Oral Argument, November 9, 2007, at 40). After arduous research and earnest reflection, based upon the facts of this case, the undersigned determined that no appearance of impropriety existed or was presumed to exist simply because a Judge on the Montgomery County Court of Common Pleas Bench had an interest in the underlying case. (See December 31, 2008 Memorandum and Order at Docket No. 238 and incorporated herein). Consequently, Appellants' first three issues on appeal merit no relief.
In their fourth issue on appeal, Appellants assert that the undersigned erred both in admitting and in crediting the testimony of Appellee's liability expert, Raymond Dovcll. Appellants claim that Judge Branca and the Spector firm improperly altered, edited and influenced the content of Mr. Dovell's report. As a prefatory matter, we note that although Appellants assigned fifty-seven (57) errors by the undersigned in their Motion for Post-Trial Relief, they failed to raise this particular issue.
It is bej'ond cavil that issues not argued "before the trial court are not preserved for appeal and may not be presented for the first time on appeal." Rabatin v. Allied Glove Corporation, 24 A.3d 388, 391 (Pa.Super. 2011) (citing Pa.R.A.P. 302(a); Erie Insurance Exchange v. Larrimore, 987 A.2d 732, 743 (Pa.Super. 2009)). "Even when a litigant files post-trial motions but fails to raise a certain issue, that issue is deemed waived for purposes of appellate review." Sovereign Bank v. Valentino, 914 A.2d 415, 426 (Pa.Super. 2006) (citation omitted). Accordingly, this issue is waived. Moreover, even if the Superior Court were to conclude that Appellants had preserved this issue, no relief is due.
As the Superior Court has previously made clear,
[a]dmission of evidence is within the sound discretion of the trial court and we review the trial court's determinations regarding the admissibility of evidence for an abuse of discretion. Smalls v. Pittsburgh-Corning Corp., 843 A.2d 410, 413 (Pa.Super.2004), appeal denied, 579 Pa. 704, 857 A.2d 680 (2004), To constitute reversible error, an evidentiary ruling must not only be erroneous, but also harmful or prejudicial to the complaining party. Bttinger v. Triangle-Pacific Corp., 799 A.2d 95, 110 (Pa.Super.2002), appealAmerican Future Systems, Inc. v. Better Business Bureau of Eastern Pennsylvania, 872 A.2d 1202, 1212 (Pa.Super. 2005). "Similarly, '[t]he admission of expert testimony is within the trial court's sound discretion and [the appellate courts] will not disturb that decision without a showing of manifest abuse of discretion."' Branham v. Rohm and Haas Company, 19 A.3d 1094, 1109 (Pa.Super. 2011) (citation omitted); accord Portside Investors, L.P. v. Northern Insurance Company of New York, 41 A. 3d 1, 12 (Pa.Super. 2011) (citation omitted).
denied, 572 Pa. 742, 815 A.2d 1042 (2003). For evidence to be admissible, it must be competent and relevant Ratti v. Wheeling Pittsburgh Steel Corp., 758 A.2d 695, 707 (Pa.Super.2000), appeal denied, 567 Pa. 715, 785 A.2d 90 (2001). Evidence is competent if it is material to the issue to be determined at trial. Id. Evidence is relevant if it tends to prove or disprove a material fact. Id. at 707-08, Relevant evidence is admissible if its probative value outweighs its prejudicial impact. Id. at 708. The trial court's rulings regarding the relevancy of evidence will not be overturned absent an abuse of discretion. Romeo v. Manuel, 703 A.2d 530, 532 (Pa.Super. 1997).
The Superior Court has also explained its role on review following a bench trial as follows:
"Our appellate role in cases arising from non-jury trial verdicts is to determine whether the findings of the trial court are supported by competent evidence and whether the trial court committed error in any application of the law." Baney v. Eoute, 784 A.2d 132, 135 (Pa.Super. 2001).Sovereign Bank, supra at 420; accord Health Care & Retirement Corporation of America v. Pittas, 2012 WL 157183 at *1 (Pa.Super. 2012) (citation omitted); Wyatt Incorporated v. Citizens Bank of Pennsylvania, 976 A.2d 557, 564 (Pa.Super. 2009).
The findings of the trial judge in a non-jury case must be given the same weight and effect on appeal as the verdict of a jury, and the findings will not be disturbed on appeal unless predicated upon errors of law or unsupported by competent evidence in the record. Furthermore, our standard of review demands that we
consider the evidence in a light most favorable to the verdict winner.Id. (internal citations omitted). Additionally, "the trial court, as factfinder, is free to believe all, part or none of the evidence presented...." Tumey Media Fuel, Inc. v. Toll Bros, Inc., 725 A.2d 836, 841 (Pa.Super. 1999). "[T]herefore, assessments of credibility and conflicts in evidence are for the trial court to resolve; this Court is not permitted to reexamine the weight and credibility determinations or substitute our judgment for that of the factfinder." Id.
As Appellants are raising this issue for the first time on appeal, the undersigned surmises that they refer to Judge Branca's testimony as well as the testimony of Attorney Monica Mathews Reynolds concerning a conversation the two had about Mr. Dovell's expert report. (N.T. September 6, 2007, at 21, 99-103). Attorney Kapustin first questioned Judge Branca as follows:
Q. Do you recall any discussion along the following lines: "Discussion with Judge Branca, K" - which I assume is Kravitz - "knew pursuing tax scheme with defraud credits, too. Thomas concerned that not clear motivation to the fraud is coming across. It is enough that" --(N.T. September 6, 2007 at 18-20, 21-22, 40, 45-46).
MS. SCHILLER: Objection, Your Honor.
MR. KAPUSTIN: -- "fraud was result."
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"Take out motivation entirely, motivation doesn't matter; proven by events; moving dollars not worth consideration in and of itself; fraud on creditors time line is important where dollars went and tax result is okay, dash, hut not motivation behind."
Do you recall that discussion?
A. Those notes do not reflect the discussion that I recall. That may be her notes to that extent. I do recall - I guess I should put it in proper perspective. Obviously, I dealt with this case a long time. I referred this case, and I would expect periodically that I might hear from counsel as to whether or not what was happening in terms of what they were doing was in accord with my recollection and understanding of the case when I had it.
I don't recall any significant substantive discussions whatsoever, I recall that I may have had a conversation, an off-the-cuff remark here and there about something, but it was nothing of any substance.
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Q. Let me amend the question, Judge Branca. Do you recall having - these notes indicate - appear to indicate a conversation with you concerning "K knew pursuing a tax scheme, defraud creditors, too. Tom is concerned that not clear motivation to defraud is coming across. It is enough that fraud was result."
Do you recall that conversation in any context?
A. I recall a conversation in context that at some point, I thought there was too much discussion about - too much emphasis on tax issues. But beyond that saying, I think, you know, what I recall of this case and when I had this case, I think that these tax issues were far from significant, and that would have been about the extent of my conversation. I don't recall any specifics like that and would not be in a position to discuss specifics like that.
Q. You mentioned you were given updates?
A. Yeah.
Q. And what were the reasons for these updates?
A. Because I had an interest in the case, I have a financial interest in the case, I have - I'm entitled to a referral fee, And so to the extent that I'm entitled to a referral fee, I'm entitled to know something about what's happening with the case, not only for my information but also for purposes of my disclosing whatever I might need to disclose if and when 1 got a fee.
* * * *
Q. You don't keep any notes of these conversations, do you?
A. No. Mr. Kapustin, I can tell you, as I told you before, they were very brief; they were mostly informative; they were not substantive in any significant way.
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Q. Do you recall any telephone calls with the Rosen firm where you discussed in any way Mr. Dovell?
A. Yes. The one call that I recall that my memory was refreshed on, I'm sure I had probably calls with the Rosen firm when I first referred the matter about Dovell, and I'm sure we discussed Dovell in significant substance then.
The only other conversation I had that I recall even at all, and it's only because Monica [Matthews] told me of her note to refresh my recollection, was that there was some discussion about too much tax discussion in DoveH's reports.
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The only conversation that I say I can recall was that an expert report was sent to me. . . . And my discussion simply at that point was that I thought there was too - in my view given my understanding of the case when I had it and where I was, I thought there was too much discussion about tax issues that wasn't relevant. That's the extent of it.
Later in the day, Mr. Kapustin questioned Attorney Matthews about the billing entry as follows:
Q. Now, there's a redacted portion which the Court has already reviewed, and it begins what appears on my version on the third page. Could you read what it says? It appears to say "T. Branca, dash, Lomas," and please read slowly to avoid doing what I do.(Id. at 99-104). Attorney Kapustin continued to question Attorney Matthews about conversations with Judge Branca regarding this case. (See id. at 105-11). As the transcript makes clear, there is no evidence to support an assertion that Judge Branca, or anyone else, improperly influenced the content of Mr. Dovell's report.
A. There's a phone number to the side which is 610-278-3000. It appears to say, "Two motivations, fraud of creditors, ampersand, personal benefit."
Q. And what was this in reference to?
* * * *
Does this refer to a conversation - this T. Branca, does that mean you had a conversation with T, Branca?
A. That page doesn't indicate that I did. But I believe the second page are my notes from a discussion with Judge Branca.
Q. Now, the reference in the first page, what you just read, that refers to. the conversation as well does it not? "Fraud of creditors and personal benefit"?
A. I'm not clear because I specifically start the next page by saying "Discussion with Branca." Typically, if I start notes on a conversation, I give myself a point of reference; so I would say, no, it's likely that those two items were not a part of our conversation,
* * * *
Q. Read what it says for the record, please. It starts off with K. What does K refer to?
A. K, I believe, in this case is Mr. Kravitz, "knew in your pursuing tax scheme would defraud creditors, too. Tom is concerned that not clear motivation to defraud is coming across. It's enough that fraud was result."
Q. What was Tom referring to here?
* * * *
A. Other than my notes of this conversation, I do not have any Independent recollection of the conversation itself. Until I reviewed these notes, I couldn't remember having this conversation.
My impression of the conversation is recorded here, and other than the notes themselves, T don't have an independent recollection of what was said.
Q. Do you recall talking with Tom Branca about the expert report.
A. Yes.
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Q. And number one says - what does it say on the right side of number one?
A. "take out motivation entirely."
Q. And Judge Branca asked you to do that?
A. No. I don't believe he asked us to do anything. I don't know if this was my impression of what was said during the conversation, but Tom would not have directed us to do anything with regard to the expert report.
Q. He did make certain suggestions, though didn't he?
A. He must have made some suggestion for me to put in my notes that he was concerned. I can't say exactly what his thoughts were other than I thought my impression of the conversation was that he was concerned just as the note said.
On appeal, Appellants attempt to argue that the undersigned erred in admitting Mr. Dovell's expert testimony based entirely upon speculation and innuendo. This Court did not abuse its discretion in admitting and crediting Mr. Dovell's expert report. Therefore, in addition to being waived, Appellant's fourth claim lacks any merit.
Appellants' Counsel also implied that Judge Branca may have improperly discussed a separate Kravitz case with the Honorable Thomas M. Del Ricci because Kravitz saw the two judges having lunch with other people he did not recognize at the Montgomery County Bar Association during the course of Kravitz's trial before Judge Del Ricci in the matter of IMC v. The Glen in Lafayette Hill. (See N.T. September 6, 2007, at 32-36, 112-13, 117-19). The case is docketed at 2000-21673 and captioned International Management Consultants, Inc. v. Andorra Glen Associates, LP. According to the verdict sheet, the matter settled on August 23, 2004.
In their fifth issue presented on appeal, Appellants assert that this Court erred in piercing the corporate veil and finding Kravitz liable. According to Appellants, the evidence showed that Kravitz "did not inter-mingle his affairs with those of any of the corporate (Appellants] or use any corporate [Appellant] as his alter ego or to perpetrate a fraud, and that each of the corporate [Appellants] maintained proper corporate formalities and were adequately capitalized." We wholeheartedly disagree.
"There is a strong presumption in Pennsylvania against piercing the corporate veil. Also the general rule is that a corporation shall be regarded as an independent entity even if its stock is owned entirely by one person." Advanced Telephone Systems, Inc. v. Corn-net Professional Mobile Radio, LLC, 846 A,2d 1264, 1277-78 (Pa.Super. 2004) (citing Lumax Industries, Inc. v. Aultman, 543 Pa. 38, 41-42, 669 A.2d 893, 895 (1995)). The courts should disregard the corporate form "only when the entity is used to defeat public, convenience, justify wrong, protect fraud or defend crime." Id. (citing Good v. Holstein, 787 A.2d 426, 430 (Pa.Super. 2001). "Nevertheless, a court will not hesitate to treat as identical the corporation and the individuals owning all its stocks and assets whenever justice and public policy demand and when the rights of innocent parties are not prejudiced thereby nor the theory of corporate entity made useless." Advanced Telephone Systems, supra (citing Good, supra).
In Ashley v. Ashley, 482 Pa. 228, 393 A.2d 637 (1978), the Pennsylvania Supreme Court set forth, in a formula familiar to the courts of that state, the following principles which are to be applied when a trial court disregards corporate forms and, "piercing the corporate veil," holds that one individual or corporation is the alter ego of another:Ragan v. Tri-County Excavating, Inc., 62 R.3d 501, 508 (3d Cir. 1995).
Th[e] legal fiction of a separate corporate entity was designed to serve convenience and justice ... and will be disregarded whenever justice or public policy demand and where rights of innocent parties are not prejudiced nor the theory of the corporate entity rendered useless.... We have said that whenever one in control of a corporation uses that control, or uses the corporate assets, to further his or her own personal interests, the fiction of the separate corporate entity may properly be disregarded.Id. 393 A.2d at 641 (citations omitted). Pennsylvania courts have largely embraced the flexible tenor of the Ashley standard, holding, for instance, that no finding of fraud or illegality is required before the corporate veil may be pierced, but rather, that the corporate entity may be disregarded "whenever it is necessary to avoid injustice." Rinck v. Rinck, 363 Pa.Super. 593, 526 A.2d 1221, 1223 (1987).
There is no clear test or well-settled rule stating exactly when the veil may be or may not be pierced. Advanced Telephone Systems, supra (citing Good, supra). Factors which may justify disregarding the corporate form include: 1) undercapitalization, 2) failure to adhere to corporate formalities, 3) substantial commingling of corporate and personal affairs, and 4) use of the corporate form to perpetrate a fraud. Advanced Telephone Systems, supra (citing Lumax Industries, supra). However, a specific showing of fraud is not required for the court to disregard the corporate existence. Village at Camelback Property Owners Assn. Inc. v. Can, 538 A.2d 528, 533 (Pa.Super. 1988).
Furthermore, the "alter ego" theory can be used to pierce the corporate veil when "the individual or corporate owner controls the corporation to be pierced and the controlling owner is to be held liable. The alter ego theory is available whenever one party seeks to hold the corporation owner liable for any claim or debt," Advanced Telephone Systems, supra (citing Good, supra).
In the case sub judice, after considering all of the evidence presented, the undersigned concluded as follows: 1) Cherrydale was undercapitalized (See COL-Liability Nos. 93-107); 2) Kravitz failed to adhere to corporate formalities and completely intermingled his and the Kravitz Entities' affairs (See COL-Liability Nos. 108-18), and 3) Kravitz utilized the corporate form to perpetrate fraud and injustice (See COL-Liability Nos. 119-21), Hence, this Court determined that the corporate veil must be pierced and that Lomas was entitled to have the monetary transfers avoided, to the extent of the judgment in this case (See COL-Liability Nos. 122-24). Accordingly, Appellants' fifth issue warrants no relief.
In their sixth issue, Appellants aver that the Court also erred in finding Kravitz liable under the participation theory. Appellants are again mistaken.
As our appellate courts have elucidated, liability may be imposed on an individual as an actor under the participation theory rather than as an owner of a corporation. Village at Camelhack Property Owners, supra at 533.
In Wicks v. Milzoco Builders, Inc., 503 Pa. 614, 470 A.2d 86 (1983), the Supreme Court both clarified the fundamental theory of "piercing the corporate veil" and distinguished that theory from the "participation theory," i.e. an attempt to assess direct liability in tort against a person acting as an officer or director of a corporation:Id. Accord Parker Oil Company v. Mico Petro and Heating Oil, LLC, 979 A.2d 854, 856-57 (Pa.Super. 2009) (declining to find misfeasance under circumstances); Shay v. Flight C Helicopter Services, Inc., 822 A.2d 1, 17-18 (Pa.Super. 2003) (distinguishing cases of misfeasance from those of nonfeasance).
There is a distinction between liability for individual participation in a wrongful act and an individual's responsibility for any liability-creating act performed behind the veil of a sham corporation. Where the court pierces the corporate veil, the owner is liable because the corporation is not a bona iide independent entity; therefore, its acts are truly his. Under the participation theory, the court imposes liability on the individual as an actor rather than as an owner. Such liability is not predicated on a finding that the corporation is a sham and a mere alter ego of the individual corporate officer. Instead, liability attaches where the record establishes the individual's participation in the tortious activity. See Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3d Cir.1978).
Id. at 621, 470 A.2d at 89-90. The Wilks Court also confirmed that Pennsylvania law recognizes the participation theory as a basis of liability, noting, however, that a corporate officer could be held liable under that theory only for misfeasance, not for mere nonfeasance. Id. at 621-22, 470 A.2d at 90; Bank of Landisburg v. Burruss, 362 Pa.Super. 317, 524 A,2d 896 (1987).
Instantly, the record is replete with evidence supporting this Court's determination that Kravitz is liable to Lomas as a participant in the torturous activity perpetrated by Appellants. (See COL-Liability Nos. 51-59). Therefore, Appellants' sixth issue must also fail.
In Appellants' seventh through tenth issues on appeal, they complain that the Court erred in finding Appellants liable under the Uniform Fraudulent Transfer Act and claim that their accounting and bookkeeping practices were all done in accordance with generally accepted practices and based upon good faith advice. Appellants' arguments are unpersuasive.
The Pennsylvania Uniform Fraudulent Transfer Act ("PUFTA") is "designed to protect creditors from debtors who might try to shelter assets by sham transactions, thereby depriving the creditor of his ability to collect from the debtor," United States v. Rocky Mountain Holdings, Inc., 2009 WL 564437 at *3 (E.D. Pa. 2009} (citation omitted). In pertinent part, the Act provides as follows:
§ 5104. Transfers fraudulent as to present and future creditors12 Pa.C.S.A. § 5104(a).
(a) General rule.—A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.
§ 5105. Transfers fraudulent as to present creditors12 Pa.C.S.A. § 5105.
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
Pursuant to its plain language, [Sjection 5104 covers two different types of fraudulent transfers, The first demands a showing of actual intent by the transferee to defraud. In reRocky Mountain Holdings, supra. "To set aside a transfer under [Sjection 5104(a)(2), one does not have to prove that the debtor intended to defraud the specific creditor bringing the fraudulent transfer claim." Id. at *9 (citing Tiab Communications Corporation v. Keymarket of Nepa, Inc., 263 F.Supp. 2d 925, 934 & n.4 (M.D. Pa. 2003)).
Total Containment, Inc., 335 B.R. 589, 612 (Bankr.E.D. Pa. 2005). The second presumes constructive fraud where plaintiff has established: (1) that the transferor did not receive a reasonably equivalent value in exchange for the debt; and (2) that the transferor's assets were unreasonably small to cover a past or imminent business transaction, or that the transferor believed or reasonably should have believed that it would incur debts beyond its ability to pay as they became due. 12 Pa.Cons.Stat. § 5104(a)(2); see also Total Containment, 335 B.R. at 613-14.
Rather, this section allows for the "assumption of fraudulent intent when the debtor makes a transfer or incurs an obligation without receiving a reasonably equivalent exchange, and the debtor is or is likely to become insolvent." Bratek v. Beyond Juice, LLC, Civ. A. No. 04-449, 2005 WL 3071750, at *6 (E.D. Pa. Nov. 14, 2005). More specifically, the elements of a constructive fraud cause of action under PUFTA consist of: (1) "proof that the transferee received less than reasonably equivalent value for the exchange at issue," and (2) "proof that the transferee (A) was insolvent on the date of the transfer or became insolvent thereby; (B) was engaged, or was about to engage, in a business or transaction for which its remaining assets represented unreasonably small capital; or (C) intended to incur, or believed that it would incur, debts that would be beyond the transferee's ability to pay as they matured," In re Xyan.Com, Inc., 299 B.R. 357, 363 (Bankr.E.D. Pa. 2003).Rocky Mountain Holdings, supra. Accord Fidelity Bond and Mortgage Company v. Brand, 37.1 B.R. 708, 715-16 (E.D. Pa. 2007) (citing 12 Pa.C.S.A. §§ 5104, 5105).
Upon review of the sum and substance of the evidence presented, the undersigned concluded without hesitation that Appellants had made fraudulent transfers to avoid their creditors in violation of the PUFTA. (See COL-Liability Nos. 1-50, 60-76). Moreover, this Court found the testimony of Appellants' expert witness, Leon LaRosa, incredible and his opinion based upon errors in both fact and law. (See COL-Liability Nos. 77-88). Hence, Appellants' seventh through tenth issues raised on appeal are devoid of merit.
Appellants submit in their eleventh issue on appeal that "the Court erred in concluding that Cherrydale was profitable based on accrual-basis tax returns in which income revenues do not reflect actual cash receipts." Appellants' assertion is unavailing.
Pennsylvania caselaw provides that assessments of credibility and conflicts in evidence are for the trial court to resolve as the factfinder in a non-jury trial. Health Care & Retirement Corporation of America v. Pittas, supra at *1.
Showalter v. Pantaleo, 9 A.3d 233, 235 (Pa.Super. 2010).When (the Superior] Court reviews the findings of the trial judge, the evidence is viewed in the light most favorable to the victorious party below and all evidence and proper inferences favorable to that party must be taken as true and all unfavorable inferences rejected.Shaffer v. O'Toole, 964 A.2d 420, 422 (Pa.Super.2009) (quoting Hart v. Arnold, 884 A.2d 316, 330-331 (Pa.Super.2005), appeal denied, 587 Pa. 695, 897 A.2d 458 (2006)) (citations omitted). Moreover,
[t]he trial court's findings are especially binding on appeal, where they are based upon the credibility of the
witnesses, unless it appears that the court abused its discretion or that the court's findings lack evidentiary support or that the court capriciously disbelieved the evidence. Conclusions of law, however, are not binding on an appellate court, whose duty it is to determine whether there was a proper application of law to fact by the lower court. With regard to such matters, our scope of review is plenary as it is with any review of questions of law.Shaffer, 964 A.2d at 422-423 (internal quotation marks and citations omitted).
At the trial of this case, the undersigned carefully listened to all of the evidence presented, including the testimony of Appellants' liability expert, Mr. LaRosa, Appellee's liability expert, Mr. Dovell, as well as that of Appellants' former employee and professional accountant, Mr. Braun. Following the trial, the undersigned reviewed voluminous documents and considered the findings and fact and conclusions of law submitted by all Parties. As a result, this Court determined that while Cherrydale lacked sufficient funds to pay its creditors, including Lomas, the evidence showed that Cherrydale was always profitable. (See FOF-Liability Nos, 57-63). This determination is fully supported by the record. Accordingly, Appellants' eleventh issue warrants no relief.
In their twelfth through fourteenth issues presented, Appellants maintain that the Court erred in awarding punitive damages because they contend that their "alleged actions were not outrageous, willful, wanton, or reckless." They also dispute this Court's finding of dilatory, obdurate, and/or vexatious conduct justifying the Court's award. And finally, they assert that any award greater than a 1:1 ratio with the compensatoiy damages award constitutes error. We emphatically disagree.
In clarifying the concept of punitive damages, the Pennsylvania Supreme Court stated long ago that Pennsylvania courts have
embraced the guideline of Section 908(2) of the Restatement (Second) of Torts regarding the imposition of punitive damages: "Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others." See Chambers v. Montgomery, 411 Pa. 339, 192 A.2d 355 (1963). Punitive damages must be based on conduct which is "'malicious' 'wanton,' 'reckless,' 'willful,' or 'oppressive' ..." Id. at 344-45, 192 A.2d at 358, citing Hughes v. Babcock, 349 Pa. 475, 37 A.2d 551 (1944).Feld v. Merriam, 506 Pa. 383, 395, 485 A.2d 742, 747-48 (1984). The actor's state of mind is vital. Weitey v. Albert Einstein Medical Center, 2012 WL 1889634 (Pa.Super. 2012) (citing Feld, supra). To award punitive damages, the act, or the failure to act, must be intentional, reckless or malicious. Id. "The determination of whether the defendant's actions constituted outrageous conduct is within the sound discretion of the trier of fact and will not be disturbed on appeal absent an abuse of that discretion." Lesoon v. Metropolitan Life Insurance Company, 898 A. 2d 620, 634 (Pa.Super. 2006) (citing Pestco, Inc. v. Associated Products, Inc., 880 A.2d 700 (Pa.Super. 2005)).
Further, one must look to "the act itself together with all the circumstances including the motive of the wrongdoers and the relations between the parties ..." Chambers v. Montgomery, supra, 411 Pa. at 345, 192 A.2d at 358. See also, Pittsburgh Outdoor Advertising Co. v. Virginia Manor Apartments Inc., 436 Pa. 350, 260 A.2d 801 (1970).
An abuse of discretion exists when the trial court has rendered a judgment that is manifestly unreasonable, arbitrary, or capricious, has failed to apply the law, or was motivated by partiality, prejudice, bias, or ill will. An abuse of discretion will not be found where an appellate court simply concludes that it would have reached a different result than the trial court. If the record adequately supports the trial court's reasons and factual basis, an appellate court may not conclude the court abused its discretion.Lesoon, supra (citations omitted).
Additionally, Pennsylvania law makes clear that
[t]he duty of assessing damages is for the fact-finder, whose decision should not be disturbed on appeal unless the record clearly shows that the amount awarded was the result of caprice, partiality, prejudice, corruption, or some other improper influence. Skurnowicz v. Lucci, 798 A.2d 788, 795 (Pa.Super. 2002). "In reviewing the award of damages, the appellate courts should give deference to the decisions of the trier of fact who is usually in a superior position to appraise and weigh the evidence." Ferrer v. Trustees of the University of Pennsylvania, 573 Pa. 310, 343, 825 A.2d 591, 611 (2002) (quoting Delahanty v. First Pennsylvania Bank, 318 Pa.Super. 90, 464 A.2d 1243, 1257 (1983)). The damage calculation need not be determined with complete accuracy, but it must be founded on a reasonable factual basis, not conjecture. Skurnowicz, supra.Lesoon, supra at 628. Our Supreme Court has rejected the idea that an award of punitive damages must be proportional to, or bear a reasonable relationship to, an award of compensatory damages. Vance v. 46 and 2, Inc., 920 A.2d 202, 206 (Pa.Super. 2007) (citing Kirkbride v. Lisbon Contractors, Inc., 521 Pa. 97, 555 A.2d 800 (1989)),
The record in the case sub judice is replete with evidence in support of an award of punitive damages. (See FOF-Fees and Punitive Damages Nos. 1-74; COL-Fees and Punitive Damages Nos. 18-39). The undersigned awarded punitive damages in an amount approximating three (3) times the amount of compensatory damages as was within this Court's discretion after weighing the factors set forth in the Restatement. See, e.g. Kirkbride, supra. Consequently, Appellants' complaints are unavailing.
In their fifteenth and sixteenth issues presented on appeal, Appellants aver that this Court erred in awarding attorney fees because of the American Rule and because Appellants found it impossible to determine whether the fees claimed were reasonable and justified. Appellants' contentions lack merit,
"The general rule within this Commonwealth is that each side is responsible for the payment of its own costs and counsel fees absent bad faith or vexatious conduct." Lucchino v. Commonwealth 570 Pa. 277, 809 A.2d 264, 267 (2002). This so-called "American Rule" holds true "unless there is express statutory authorization, a clear agreement of the parties or some other established exception." Mosaica Academy Charter School v. Com. Dept. of Educ., 572 Pa. 191, 813 A.2d 813, 822 (2002).McMullen v. Kutz, 603 Pa. 602, 612-13, 985 A.2d 769, 775 (2009). See generally, 42 Pa.C.S.A. § 2503(10) (stating a participant in circumstances as may be specified by statute shall be entitled to a reasonable counsel fee as part of the taxable costs). "[A] statutory provision must be explicit in order to allow for the recovery" of attorneys' fees. Sayler v. Skutches, 40 A.3d 135, 140 (Pa.Super. 2012) (citation omitted).
Instantly, Appellee has cited Pa.R.C.P. 3117 in support of a request for attorney's fees in the instant matter, As noted in this Court's April 29, 2011 Order Sur: Assessment, of Damages, however, the undersigned awarded attorney's fees and costs pursuant to 73 P.S. § 512 of the Contractor and Subcontractor Payment Act ("CSPA"). That subsection specifically provides:
That Rule provides as follows:
Rule 3117. Discovery in Aid of Execution
(a) Plaintiff at any time after judgment, before or after the issuance of a writ of execution, may, for the purpose of discovery of assets of the defendant, take the testimony of any person, including a defendant or a garnishee, upon oral examination or written interrogatories as provided by the rules relating to Depositions and Discovery. The prothonotary of the county in which judgment has been entered or of the county within this Commonwealth where the deposition is to be taken, shall issue a subpoena to testify.
(b) All reasonable expenses in connection with the discovery may be taxed against the defendant as costs if it is ascertained by the discovery proceedings that the defendant has property liable to execution.
§ 512. Penalty and attorney fee73 P.S. § 512 (emphasis added).
(a) Penalty for failure to comply with act.--If arbitration or litigation is commenced to recover payment due under this act and it is determined that an owner, contractor or subcontractor has failed to comply with the payment terms of this act, the arbitrator or court shall award, in addition to all other damages due, a penalty equal to 1% per month of the amount that was wrongfully withheld. An amount shall not be deemed to have been wrongfully withheld to the extent it bears a reasonable relation to the value of any claim held in good faith by the owner, contractor or subcontractor against whom the contractor or subcontractor is seeking to recover payment,
(h) Award of attorney fee and expenses.--Notwithstanding any agreement to the contrary, the substantially prevailing party in any proceeding to recover any payment under this act shall be awarded a reasonable attorney fee in an amount to be determined by the court or arbitrator, together with expenses.
Instandy, the Superior Court's decision in Zimmerman v. Harrisburg Fudd I, L.P. is dispositive. (See COL-Fees and Punitive Damages Nos. 1-17). Moreover, the record contains ample evidence in support of this Court's determination to award attorney's fees. As a result, Appellants' fifteenth and sixteenth issues fail to warrant relief.
984 A.2d 497 (Pa.Super. 2009), appeal denied, 606 Pa. 651; 992 A.2d 890 (2010).
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Appellants contend in issues seventeen through twenty-two raised on appeal that this Court erred in awarding attorney fees, interest and a one percent (1%) penalty under the CSPA when, inter alia, Appellee did not plead a claim under the CSPA in his Complaint. Appellants also find fault with the undersigned's award of a penalty where the arbitrators relied on penalty exclusion language in the contract upon which to base their decision not to award a penalty. (See P-2 - Final Award of Arbitrators), Appellants' contentions are unavailing.
Our legislature enacted the Contractor and Subcontractor Payment Act "in 1994 to cure abuses within the building industry involving payments due from owners to contractors, contractors to subcontractors, and subcontractors to other subcontractors." Zimmerman, 984 A.2d at 499; accord Sparrow v. Pace/CM, Inc. 2011 WL 1131487 at *8 (Lacka. Cty. 2011) (citing Zimmerman, supra).
"The underlying purpose of [CSPAJ is to protect contractors and subcontractors ... [and] to encourage fair dealing among parties to a construction contract." Ruthrauff, Inc. v. Ravin,Id. "Unlike the provision for interest, [§ 512] does not provide for the ability of parties to agree to no penalties." John B. Conomos, Inc. v. Sun Company, Inc., 831 A.2d 696, 710 (Pa.Super. 2003). Furthermore, the subsection provides that the one percent (1%) "penalty will apply 'in addition to all other damages due,' distinguishing penalties from any other damages awarded either under the construction contract or under the CSPA." Id.
Inc., 914 A.2d 880, 890 (Pa.Super.2006). The statute provides rules and deadlines to ensure prompt payments, to discourage unreasonable withholding of payments, and to address the matter of progress payments and rctainages. Under circumstances prescribed in the statute, interest, penalty, attorney fees and litigation expenses may be imposed on an owner, contractor or subcontractor who fails to make payment to a contractor or subcontractor in compliance with the statute.
In the present matter, the undersigned heard the evidence at trial, observed the witnesses and their testimony, reviewed all of the documents after receiving the Parties' proposed findings of fact and conclusions of law and meticulously set forth the Court's Findings of Fact pertaining to fees, costs and interest (FOF-Fees and Punitive Damages Nos. 1-54, COL-Fees and Punitive Damages 1-17, 40-43). This Court accorded the CSPA a liberal construction to effectuate its objects and to promote justice. See Zimmerman, supra at 502 n.8. Accordingly, Appellants' seventeenth through twenty-second issues on appeal afford no relief.
In Appellants' penultimate issue on appeal, they assert that the Court erred in denying their Motion to Disqualify Paul R. Rosen, Esquire, and the Law Firm of Spector, Gadon and Rosen as [Appellee]'s Replacement Counsel Appellants aver that Judge Nicholas should have granted their motion to disqualify in this case because of Attorney Rosen's prior representation of Kravitz in a "substantially related matter." The record belies Appellants' assertion.
"[A]n attorney's representation of a subsequent client whose interests are materially adverse to a former client in a matter substantially related to matters in which he represented the former client constitutes an impermissible conflict of interest actionable at law." Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241, 252, 602 A.2d 1277, 1282 (1992). The Pennsylvania Rules of Professional Conduct provide in pertinent part as follows:
Rule 1.9, Duties to Former ClientsPa.R.P.C. 1.9(a). "Matters are "substantially related" for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter." Pa.R.P.C. 1.9 Explanatory Comment [3].
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent.
The fact that the two representations involved similar or related facts is not, in itself, sufficient to warrant the finding of a substantial relationship so as to disqualify the attorney from the representation, but, rather the test is whether information acquired by an attorney in his former representation is substantially related to the subject matter of subsequent representation. Commonwealth Ins. Co. v. Graphix Hot Line, 808 F.Supp. 1200, 1204 (1992). If the attorney might have acquired confidential information related to the subsequent representation, Pennsylvania Rule of Professional Conduct 1.9 would prevent the attorney from representing the second client. Richardson v. Hamilton Int'l Corp., 469 P.2d 1382, 1385 (1972), cert, denied, 411 U.S. 986, 93 S.Ct. 2271, 36 L.Ed.2d 964 (1973). Confidential information gained by one member of a law firm is imputable to other members of the same law firm. See Maritrans v. Pepper, Hamilton & Scheetz, supra, 529 Pa. at 241, 602 A. 2d 1277. Therefore, a former client seeking to disqualify a law firm representing an adverse party on the basis of its past relationship with a member of the law firm has the burden of proving; (1) that a past attorney/client relationship existed which was adverse to a subsequent representation by the law firm of the other client; (2) that the subject matter of the relationship was substantially related; (3) that a member of the law firm, as attorney for the adverse party, acquired knowledge of confidential information from or concerning the former client, actually or by operation of law. City of Cleveland v. Cleveland Elec. Illuminating, 440 F.Supp. 193, 207 (1977), affirmed, 573 F.2d 1310 (1977), cert. denied, 435 U.S. 996, 98 S.Ct. 1648, 56 L,Ed.2d 85 (1978); 7A C.J.S. Attorney and Client § 164.Estate of Pew, 655 A.2d 521, 545-46 (Pa.Super. 1994).
After a thorough review of the record in this case following an evidentiary hearing on June 6, 2002, the Honorable William T. Nicholas issued an order denying Appellants' motion. In his July 9, 2002 Order, Judge Nicholas explained his decision as follows: "[s]imply put, the court is unpersuaded that a likelihood exits that confidences were exchanged between Mr. Kravitz and Mr. Rosen during the course of the prior representation which would be relevant to the instant litigation or which could now be employed by Mr. Rosen, in his representation of [Appellee] here, to Mr. Kravitz's detriment." (Order Sur Defendants' Motion to Disqualify Paul R. Rosen, Esquire, and the Law Firm of Spector, Gadon and Rosen as Plaintiff's Replacement Counsel, July 9, 2002, at 2; Docket No. 72). Judge Nicholas' findings and sound reasoning are incorporated herein. Thus, Appellants' twenty-third issue on appeal must fail.
In their final issue raised, Appellants posit that the Court erred by not issuing its findings of fact and conclusions of law on liability before proceeding with the next phase of the trial on attorney's fees and punitive damages. Appellants claim that they agreed to waive Pa.R.C.P. 1038, which would have required the Court to issue its Decision within seven (7) days of the trial on liability, based upon the Court's promise to issue its findings before proceeding to the next stage of the trial. First, the Court finds no objection placed on the record before proceeding to the next phase of the trial on September 4, 2007. Consequently, this issue is waived. See Rabatin v. Allied Glove Corporation, 24 A.3d at 391; Sovereign Bank v. Valentino, 914 A.2d at 426.
Moreover, the record belies Appellants' contention. At the close of the liability portion of the trial, the following discussion occurred;
THE COURT: All right. Thank you.(N.T. January 18, 2007, at 502-03).
Let's just establish some things that we talked about in our conference.
. . . . Rule 1038, under our Rules of Civil Procedure, provides that in a bench trial the judge as a finder of fact and finder of law, obviously, is to make his or her verdict within seven days of the date of the trial. The Rule speaks to some exceptions, they being the case of complexity, I believe the term is, as well as a protracted case.
And after speaking with counsel, it's my understanding that as part of my order, that the findings of fact and conclusions of law be presented. They want the notes of testimony transcribed to serve as an aid in that process.
So I asked counsel to discuss with their clients the recognition of Rule 1038 as well as, in an abundance of caution, that they understand that they will be waiving that rule for purposes of rendering a verdict within seven days.
MS. SCHILLER: Your Honor, we understand - it's been discussed with our client with the understanding that the findings of fact and conclusions of law will be presented to the Court within 20 days of the record.
THE COURT: That's right.
Is that your understanding?
MR. KAPUSTIN: That is my understanding, and my clients have been so advised.
THE COURT: The court reporter will be in touch with both counsel upon completion of the record so that you can make arrangements to pick up the record. She'll also notify me, obviously; and I'll generate an order to start the time period for purposes of submitting a memorandum of law, findings of fact and conclusions of law.
All right. Anything else then?
MR. KAPUSTIN: No, Your Honor.
As is clear from the above-cited exchange, the understanding with Counsel was that the Parties were waiving their right to a decision within seven (7) days pursuant to Pa.R.C.P. 1038 in order for Counsel to submit their respective parties' findings of fact and conclusions of law to this Court before the undersigned would render a decision. The agreement was not, as Appellants argue, for the Court to provide its findings of fact and conclusions of law on liability to the parties before proceeding to the next phase of the trial on attorney's fees and punitive damages. Thus, Appellants' twenty-fourth issue on appeal warrants no relief.
V. CONCLUSION
For all of tire reasons set forth above, this Court respectfully requests that the Judgment be affirmed.
BY THE COURT:
__________
THOMAS P. ROGERS, J.
Court of Common Pleas
Montgomery County, Pennsylvania
38th Judicial District
Copies sent on 01/15/13:
By First-Class Mail:
Paul R. Rosen, Esquire, Counsel for Plaintiff, Roy H. Lomas, Sr., d/b/a
Roy Lomas Carpet Contractor
Monica Mathews Reynolds, Esquire, Counsel for Plaintiff,
Roy H. Lomas, Sr., d/b/a Roy Lomas Carpet Contractor
Steven Kapustin, Esquire, Counsel for Defendants, James B. Kravitz,
Cherrydale Construction Company, Andorra Springs Development,
Inc. and Kravmar, Inc., formerly known as Eastern Development
Enterprises, Inc.
Thomas A. Leonard, Esquire, Counsel for Defendants, James B. Kravitz,
Cherrydale Construction Company, Andorra Springs Development,
Inc. and Kravmar, Inc., formerly known as Eastern Development
Enterprises, Inc.
Louis B. Kupperman, Esquire, Counsel for Defendants, James B. Kravitz,
Cherrydale Construction Company, Andorra Springs Development,
Inc. and Kravmar, Inc., formerly known as Eastern Development
Enterprises, Inc.
__________
Judicial Secretary
Pa.R.C.P. 3117.