Claudio v. Dean Machine Co.

• Decision Date: 11 February 2003
• Parties: Luis CLAUDIO and Sexta Claudio, Individually and as his Wife, v. DEAN MACHINE COMPANY, Incorporated; Burton Industries, American Steel Line, Inc.; North American Brass, Inc.; and Hannum Electric Co. Appeal of Dean Machine, Inc.
• Court: Pennsylvania Supreme Court

831 A.2d 140

574 Pa. 359

Luis CLAUDIO and Sexta Claudio, Individually and as his Wife, v. DEAN MACHINE COMPANY, Incorporated; Burton Industries, American Steel Line, Inc.; North American Brass, Inc.; and Hannum Electric Co.

Appeal of Dean Machine, Inc.

Supreme Court of Pennsylvania.

Argued October 22, 2002.

Decided February 11, 2003.

Reargument Denied April 11, 2003.

David E. Edwards, Joseph V. Pinto, John A. Orlando, Philadelphia, for Dean Machine Company, Inc.

John B. Day, James J. DeMarco, Philadelphia, for Claudio, Luis and Sexta Claudia, Individually and as his wife.

Before ZAPPALA, C.J., and CAPPY, CASTILLE, NIGRO, NEWMAN, SAYLOR and EAKIN, JJ.

OPINION

Justice NEWMAN.

We granted allocatur in this case to consider whether a trial court can, pursuant to Pennsylvania Rule of Civil Procedure 227.1 [relating to Post-Trial Relief], conduct a post-trial evidentiary hearing and grant post-trial relief to correct an error when the error alleged is attributable, not to the court, but to the party seeking relief. For the reasons discussed herein, we hold that Rule 227.1 is not a vehicle by which a trial court can correct an error of a party.

FACTS AND PROCEDURAL HISTORY

On December 22, 1997, Luis Claudio (Claudio) and Sexta Claudio (Sexta), his wife (collectively, "the Claudios"), filed suit against Dean Machine Company (DMC), as well as other defendants that are no longer parties to the action. The Claudios alleged that, on January 24, 1996, Luis was operating a coil slitter machine in the course of his employment at Williams & Co., located in Exton, Pennsylvania, when the machine malfunctioned, causing severe injuries to his hand, which led doctors to amputate four fingers. In their Complaint before the Court of Common Pleas of Philadelphia County (trial court), the Claudios averred that DMC, in conjunction with the other defendants, manufactured, designed, marketed, and sold the defective coil slitter machine to Williams & Co. The Claudios filed claims of negligence, breach of warranty, strict products liability, and loss of consortium.

On February 19, 1998, Dean Machine, Inc. (DMI) filed an Answer and New Matter, averring that it had been incorrectly designated as "Dean Machine Company" in the Complaint.¹ In its Answer and New Matter, DMI presented evidence of the following: George H. Dean owned DMC and changed the name of DMC to GHD, Inc. on August 22, 1988. On that same date, David Maynard (Maynard) and Paul Caito (Caito) entered into an equipment lease agreement with GHD, Inc., for certain machinery and equipment. On December 18, 1989, Maynard and Caito incorporated into DMI. DMI further averred that: (1) DMC had sold the subject coil slitter to Williams & Co. at least ten years before the inception of the lease agreement between Maynard and Caito and GHD, Inc.; (2) at no time did Maynard, Caito, or DMI ever agree to assume any assets or liabilities of DMC and never purchased the assets of DMC; and (3) neither Maynard, nor Caito, nor DMI ever assumed any ownership interests in any machinery or equipment owned by either DMC or GHD, Inc. As noted by the Superior Court, throughout the litigation, the law firm of Viletto, Bosniak & Ross filed pleadings on behalf of both DMI and DMC.

On October 4, 1999, DMI filed a Motion for Summary Judgment. The trial court denied the Motion for Summary Judgment on October 22, 1999. Shortly before trial was scheduled to commence, DMI filed a motion in limine to preclude the Claudios from presenting any evidence against DMI, on the ground that the Claudios had signed a stipulation to dismiss DMI from the case. The trial court denied this motion on February 18, 2000, the date on which the trial commenced. On February 16, 2000, two days earlier, the Claudios had filed a motion to amend the caption to substitute DMI for DMC. On February 18, 2000, the following exchange regarding that motion took place on the record:

The Court: There is a motion to amend the complaint to add as a defendant Dean Machine, Inc., which was filed when? Today, sir?

Counsel for the Claudios: I believe Wednesday, Your Honor.

The Court: Wednesday. That's denied as well.

Counsel for the Claudios: But the motion, Your Honor, was to change the caption, the name of the defendant.

The Court: Right. That's denied.

Notes of Testimony (N.T.), 2/18/2000, at 2.

Pursuant to a pre-trial stipulation, DMC had admitted liability, so trial proceeded on the issue of damages only.² On February 22, 2000, the Claudios submitted into evidence the portion of DMI's original Answer and New Matter that discussed the relationship between DMI and DMC, to indicate that DMI should be the party-defendant, not DMC. While DMI had originally submitted this information to establish that it had no liability for the incident, the trial court permitted the Claudios to move this material into evidence for the purpose of building a record to support the previously denied motion to amend the caption. At the request of counsel for DMC, the trial court admitted the entire Answer and New Matter filed by DMI into evidence.

On February 22, 2000, the jury entered a verdict for $2.5 million in favor of Luis and $150,000 in favor of Sexta. The jury rendered both verdicts against DMC. On February 24, 2000, the Claudios filed a post-trial motion to amend the caption and mold the verdict to enter judgment against DMI. On June 8, 2000, the trial court held oral argument on the motion to amend the caption, where the Claudios and DMC debated the issue of successor liability. The trial court granted a continuance to allow the parties to present evidence on this issue, during which period counsel for the Claudios traveled to Rhode Island to depose Albert Saunders, Esq. (Saunders), former counsel to DMC, and Maynard, one of the principals of DMI. On July 19, 2000, the trial court concluded the argument, granted the motion of the Claudios to substitute DMI for DMC as the "proper defendant," and molded the verdict to impose liability on DMI. The court reasoned that "the amendment does not add a new party because [DMI] is the successor corporation of [DMC]. Post-trial evidence has demonstrated that this case falls under the `continuity of enterprise' exception to the general rule of successor liability." Claudio v. Dean Machine Company, No. 3157 December Term 1997, slip op. at 4 (C.P.Pa. July 19, 2000) (Trial Court Opinion I). In its Rule 1925(a) opinion, the trial court stated that "it may have allowed" amendment of the caption before trial if the Claudios had presented the depositions of Saunders and Maynard at that time. Claudio v. Dean Machine Company, No. 3157 December Term 1997, slip op. at 2 (C.P.Pa. November 21, 2000) (Trial Court Opinion II).

Also on February 24, 2000, the Claudios filed a motion for delay damages against DMI. DMI filed an Answer and New Matter, contending that the verdict and any delay damages should be reduced because of a settlement agreement entered into by the Claudios and Hannum Electric Company (Hannum), one of the original defendants. The trial court denied the motion and added delay damages of $266,899.48 against DMI, reasoning as follows:

Here, [the Claudios] argue that if DMI is to obtain a reduction of the jury's verdict under the contractual agreement between [the Claudios] and Hannom [sic] then it was the responsibility of defense counsel to require the Court to submit that issue to the jury for factual determination in its verdict. However, DMI chose not to participate in the defense of this case and, in fact, stipulated as to liability. In accordance with that stipulation, this Court finds that DMI is responsible for 100% of the verdict as to both negligence and strict liability.

Trial Court Opinion I, slip op. at 16.

In a published opinion, Claudio v. Dean Machine Company, 786 A.2d 224 (Pa.Super.2001) (Claudio),

the Superior Court vacated the judgment of the trial court and remanded for a new trial. The Superior Court determined that the trial court acted properly when it amended the caption and molded the verdict to substitute DMI as the proper defendant. "[W]e see no abuse of discretion in the court's decision to hold an evidentiary hearing to determine whether DMI was the successor corporation to DMC. This hearing served the goals of correcting pretrial errors and allowing liberal amendment to the pleadings in order to ensure that the case proceeds against the proper party." Id. at 232. However, the Superior Court concluded that "[o]nce the trial court recognized that DMI should have been a party to the litigation as a successor to DMC, the proper course of action in the interest of justice would have been to grant a new trial." Id. The court reasoned that "molding the verdict after the hearing ... prejudiced DMI by imposing a substantial judgment on an entity which was not a party to the action and, therefore, had no opportunity to defend itself at trial." Id. (emphasis in original).

Judge Johnson dissented, arguing that the trial court overstepped its bounds when it conducted a post-trial evidentiary hearing. He stated that he would vacate the judgment of the trial court and reinstate the verdict of the jury, subject to application of the pro rata release executed between the Claudios and Hannum. This would have the effect of entering judgment against DMC and preventing the Claudios from collecting any portion of the judgment from DMI. Judge Johnson reasoned that the Rules of Civil Procedure only contemplate post-trial relief when the trial court has erred in an earlier decision; in this case, he opined, the error was attributable to the Claudios, who "failed to provide evidence sufficient to support a decision in their favor" before or during trial, even though they had the ability to do so. Id. at 236 (Johnson, J., in dissent) (emphasis in original omitted). "Error of a party is simply not cognizable as a basis for relief under Rule 227.1, and the trial court is not empowered to use the Rule...