Chestnut v. Pediatric Homecare of America, Inc.

• Decision Date: 02 December 1992
• Citation: 420 Pa.Super. 598,617 A.2d 347
• Parties: Mary Ann CHESTNUT and Elmer Chestnut H/W v. PEDIATRIC HOMECARE OF AMERICA, INC., Appellant.
• Court: Pennsylvania Superior Court

Page 347

617 A.2d 347

420 Pa.Super. 598

Mary Ann CHESTNUT and Elmer Chestnut H/W v. PEDIATRIC HOMECARE OF AMERICA, INC., Appellant.

Superior Court of Pennsylvania.

Argued Oct. 20, 1992.

Filed Dec. 2, 1992.

Earl S. Lathrop, III, Philadelphia, for appellant.

William Salzer, Philadelphia, for appellees.

Before CIRILLO, MONTEMURO and TAMILIA, JJ.

TAMILIA, Judge:

Pediatric Homecare of America, Inc., appeals the Order entered March 26, 1992 denying its request for a conditional stay of judgment.

On June 8, 1989, appellant entered into a common stock put option agreement with appellee, Mary Ann Chestnut. Under the agreement, appellee had the right to require appellant to purchase all or part of her 212,000 shares of Pediatric common stock for a price of $2 per share. The agreement provided it was to be construed and governed according to Pennsylvania law. On June 6, 1991, appellee exercised her put option for all 212,000 shares, but appellant failed in its obligation to tender the payment. Among the numerous counts of a tort action filed by appellees against seven defendants was one count (Count VI) against Pediatric alone for breach of the common stock put option agreement. Following appellees' unopposed motion for partial summary judgment on that count, the motion was granted and the court ordered judgment in the amount of $424,000 plus interest. On January 8, 1992, appellees filed and served upon appellant's counsel its praecipe for writ of execution on the judgment and, on January 30, 1992, appellees filed a praecipe for writ of execution listing three Pennsylvania garnishees. After the judgment was entered, appellant filed a petition to conditionally stay the execution of judgment pursuant to Pa.R.C.P. 3121(b). ¹

As a preliminary matter, we address whether the Order is appealable. In Grimme Combustion, Inc. v. Mergentime Corp., 385 Pa.Super. 260, 560 A.2d 793 (1989), alloc. denied, 528 Pa. 611, 596 A.2d 157 (1989), this Court held an Order refusing to grant a stay is not an Order denying an injunction appealable as of right under Pa.R.A.P. 311(a)(4). However, in Philco Corp. v. Sunstein, 429 Pa. 606, 241 A.2d 108 (1968), the Supreme Court stated:

Whether or not a stay order should be considered final for appeal purposes depends to a large extent upon the practical effect and impact the stay order might have on the relief requested by the litigants. If the effect of the stay order is tantamount to a dismissal of the cause of action or amounts to a permanent denial of relief requested, the party aggrieved should undoubtedly be afforded the opportunity to appeal on the basis that such stay order is a final disposition of some, if not all, of the rights involved.

Id. at 609, 241 A.2d at 109 (footnote omitted). We find the Order is appealable under the rationale of Sunstein since the denial of the stay effectively allows appellees to execute on their judgment and forever prevents appellant from presenting its defense, which if adopted by the court would allow appellant to withhold payment on the judgment until its capital is no longer impaired.

On appeal, this Court will not disturb a trial court's denial of a petition to conditionally stay the execution of judgment "unless our review of the record reveals a clear abuse of discretion or error of law below." Anmuth v. Chagan, 336 Pa.Super. 216, 218, 485 A.2d 769, 771 (1984). "Whilst the power to stay execution of a judgment is necessary to prevent injustice, it should never be exercised unless the case is plain, and the equity of the party asking the interposition of the court is free from doubt or difficulty." Pennsylvania Company For Insurances, etc. v. Scott, 329 Pa. 534, 549, 198 A. 115, 122 (1938).

Appellant argues the court erred by refusing to apply the Delaware Corporations Law which prohibits a corporation from redeeming shares when its capital is impaired. ² Appellant contends application of this law would preclude the finding it breached its contract with appellee by not tendering payment and was appropriate because it did not conflict with Pennsylvania's public policies. In addition, appellant argues the Delaware law in question operates in the same manner as section 1551(b) of the Pennsylvania Business Corporation Law which prohibits distributions in redemption of stock when a corporation is insolvent.

The trial court found the case was not governed by conflict of laws principles because the Delaware law did not conflict with Pennsylvania laws governing the attachment of assets in possession of garnishees within the Commonwealth. In deciding not to exercise judicial comity in order to apply the Delaware law, the court stated as follows:

In view of this court's interest in protecting a Pennsylvania plaintiff who holds a Pennsylvania judgment which she wishes to use to attach assets in the possession of Pennsylvania garnishees, we determine that Delaware law should not be applied where its effect will be to deny a judgment holder the value of the judgment.

(Slip Op., Ott, J., 6/3/92, p. 7.) We agree with the trial court's reasoning and affirm its Order.

There is no dispute the value of appellant's capital would be impaired under the meaning of section 160 of the Delaware Code by forcing it to satisfy appellees' judgment. However, application of comity is a matter of judicial discretion. Smith v. Firemens Ins. Co. of Newark, 404 Pa.Super. 93, 590 A.2d 24 (1991), alloc. denied, 529 Pa. 669, 605 A.2d 334 (1992). This Court has previously exercised comity when application of another state's law contradicts no public policy of Pennsylvania and instead furthers a Pennsylvania policy. Id. Appellant contends exercising comity and applying the relevant Delaware statute would not contravene any public policy of Pennsylvania. We disagree. Pennsylvania has a great interest in protecting a Pennsylvania resident who has obtained a Pennsylvania judgment and has attached assets in possession of Pennsylvania garnishees. The laws of attachment in Pennsylvania are governed by the law of the forum and not the law of the state where the debt arose. Simkins Ind., Inc. v. Fuld & Co., Div. of Met. Gr., Inc., 392 F.Supp. 126, 129 (E.Dist.Pa.1975); Caddie Homes, Inc. v. Falic, 211 Pa.Super. 333, 235 A.2d 437 (1967). Moreover, "[e]very state has jurisdiction to determine for itself the liability of property within its territorial limits to seizure and sale under the process of its courts." Clark v. Williard, 294 U.S. 211, 55 S.Ct. 356, 79 L.Ed. 865 (1935). Application of the Delaware law would violate Pennsylvania's public policy or interest in protecting a Pennsylvania judgment holder. Although we agree with appellant that application of the Delaware law would not literally render the judgment a "nullity," granting the stay effectively would render the judgment meaningless due to appellant's financial problems and lack of signs pointing to alleviation therefrom.

A similar provision to the Delaware law is found in the Pennsylvania Business Corporation Law at 15 Pa.C.S. § 1551. ³ Under Pennsylvania's law, a stay could only be properly granted if purchasing the stock would render the corporation insolvent. Although section 1551 neither directly applies nor contradicts the Delaware Code, the Pennsylvania law effectively makes it easier for shareholders to redeem their shares at the corporation's expense. Therefore, one of the policies behind section 1551 would be compromised were we to apply the Delaware law.

We also agree with the trial court's adherence to a provision in the contract which stated Pennsylvania law controls. Section 187 of the Restatement (Second) of Conflict of Laws states:

§ 187. Law of the State Chosen by the Parties

(1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

(2) The law of the state chosen by the parties to govern...