Gasbarre Prods., Inc. v. Smith

• Court: Pennsylvania Superior Court
• Writing for the Court: OPINION BY STABILE, J.
• Citation: Gasbarre Prods., Inc. v. Smith, 270 A.3d 1209 (Pa. Super. Ct. 2022)
• Decision Date: 07 February 2022
• Docket Number: 730 WDA 2020,No. 730 WDA 2020
• Parties: GASBARRE PRODUCTS, INC. v. Steven K. SMITH, a/k/a S.K. Smith, Appellant

270 A.3d 1209

GASBARRE PRODUCTS, INC.

v.Steven K. SMITH, a/k/a S.K. Smith, Appellant

No. 730 WDA 2020

Superior Court of Pennsylvania.

Argued: April 21, 2021

Filed: February 7, 2022

Carl John Zwick, DuBois, for appellant.

Matthew B. Taladay, DuBois, for appellee.

BEFORE: STABILE, J., KUNSELMAN, J., and PELLEGRINI, J.^*

OPINION BY STABILE, J.:

Appellant, Steven K. Smith ("Smith"), appeals from a July 21, 2020 judgment entered after a non-jury trial before the Court of Common Pleas of Clearfield County granting Appellee, Gasbarre Products, Inc. ("the Company"), specific performance of a document signed by both parties. The trial court concluded that the document was an enforceable contract between them. At issue is whether the trial court erred in finding an enforceable agreement between the parties and, if so, whether the trial court erred in its application of the parol evidence rule to find that the document resolved settlement of Appellant's loan shareholder account with the Company. After review, we affirm.¹

I. Factual & Procedural Background

Smith worked as a divisional president at the Company for 18 years. In 2017, he and CEO Thomas Gasbarre ("Gasbarre") entered into discussions regarding Smith's retirement from the Company and his withdrawal from the Company's board of directors. These talks included the process by which the Company would buy back Smith's stock and pay out money from his shareholder loan account. Smith retired at the end of 2017.

On January 11, 2018, Smith and Gasbarre met privately to negotiate further. At some point prior to the conclusion of the meeting, Gasbarre drafted a one-page document titled "Steve Smith/Gasbarre Products, Inc. Stock Buyout Structure Outline." The third paragraph addressed the buyback of Smith's stock in the company and provided, "Selling Price – ... 251 Shares at $895.92/share for a total of $224,875.92." Company Ex. 1 (emphasis in original). Also of relevance, the tenth paragraph provided:

Severance/Consulting – Steve agrees to remain available for consultation on an as-needed basis from January 7, 2018 through April 14, 2018. Compensation will be at Steve's departing salary for the consulting period (8 paychecks from January 25, 2018 through May 3, 2018). Total Net Pay for the consulting period will be $78,954 (number of paychecks to be adjusted as necessary).

Id. (emphasis in original). Gasbarre signed the bottom left-hand margin of the document with his full signature; Smith wrote "SK Smith" in the bottom right-hand margin. See id. The Company claimed the parties entered into a binding contract. Smith argued the outline merely identified issues to be resolved in future discussions.

"In the course of the following weeks, several e-mails were exchanged between the parties discussing potential changes, including date of payment for consulting/severance payments." Trial Court Opinion, 3/10/20, at 1. The Company's attorneys then prepared a formal document that included these changes in terms. "The agreement was to be signed on January 30, 2018; however, the agreement was never signed, and [Smith] did not surrender his stock to [the Company]." Id. at 1-2.

According to the Company, it sent Smith checks for $224,857.92 and $78,954.00, representing what it believed the Company owed Smith for the buyout of his stock and the money in his shareholder loan account, respectively. See Complaint at 4. The Company claimed Smith refused to cash those checks or to return his stock certificates. Smith "denied that [the Company] ever tendered this payment." Trial Court Opinion, 3/10/20, at 3. Furthermore, he "denied the existence of any binding contract." Id. Smith "also pleaded he is entitled to further payment and interest on the loan [he] made to his shareholder account." Id. at 4.

On August 2, 2018, the Company sued Smith for specific performance. The Complaint requested that the trial court order Smith to "tender his 251 shares of stock to [the Company] in consideration for the sum of $224,875.92" and decree "that the sum of $78,954.00 tendered by [the Company] to [Smith] constitutes full and final payment of all non-stock purchase money owed to [Smith] under the Agreement of January 11, 2018[.]" Id. at 5. The Company also requested an injunction. Following an injunction hearing, the trial court found no "disagreement between the parties over the value of [Smith's] stock or that [he] would indeed tender the stock back to [the Company]." Trial Court Opinion, 3/10/20, at 2. Also, "the parties agreed upon ... an order granting a preliminary injunction ordering [Smith] to surrender [his] shares of stock ... for the agreed upon price of $224,875.92 ... subject to oral stipulations entered on the record" by the parties. Id. "Accordingly, [Smith] tendered his stock, [the Company] made the payment to [him,] and the stock issue was settled." Id. at 3. One question remained unresolved: How much money, if any, did the Company owe Smith from his shareholder loan account?

On October 25, 2019, Smith moved for summary judgment. He contended that, even though the Company sought "as its sole remedy that the court direct specific performance of the Stock Buyout Structure Outline, it is clear that [the Company's] claim is based in assumpsit, resulting from [Smith's] alleged breach of the Stock Buyout Structure Outline." Smith's Motion for Summary Judgment at 6. Therefore, Smith contended that the company had an adequate remedy at law and the court lacked equitable jurisdiction. The trial court did not address the merits of Smith's motion for summary judgment. Instead, it dismissed the motion as untimely and in violation of Pa.R.C.P. 1035.2, which provides that a motion for summary judgment shall be filed "within such time as not to unreasonably delay trial." The trial court concluded it had "insufficient time available to correctly process [the motion]" in advance of the trial scheduled for November 6, 2019. Trial Court Order, 10/25/19, at 1.

Gasbarre and Smith both testified at the November 6, 2019 bench trial. Gasbarre explained how the parties arrived at the Stock Buyout Structure Outline (hereinafter referred to as "the Outline") and why it constituted a contract between the parties. Smith asserted that the document constituted a memorandum reflecting the issues a future contract should address and argued he simply initialed the document rather than sign it with his full signature.² Gasbarre also testified as to the true meaning and purpose of the language in the Outline, and in particular Paragraph 10, entitled "Severance/Consulting." Company Ex. 1.

The exchange between Gasbarre and his counsel was as follows:

Q: Now, let's go down to paragraph 10. That deals with severance consulting?

A: Yes.

Q: It's been pointed out on many occasions in [prior] cross examination that this paragraph says nothing about shareholder loan account?

A: That's correct.

Q: Is there any doubt in your mind that this paragraph, that you imposed, was intended to address Mr. Smith's Shareholder-Loan Account?

A: Absolutely not.

...

Q. So this is characterized as a severance/consulting agreement. Is there a reason why it's characterized as that?

A. Yes. We – again, we were negotiating the final terms, which included the loans from shareholders. Just as we negotiated the 60[-]month payments instead of 120-month payments [for the stock repurchase], we were also trying to facilitate the payout of that one-half of the loans from shareholders that we had agreed on. The easiest way to facilitate that, both in Mr. Smith's favor, as well as to the benefit of Gasbarre Products, was the fact that he was still on the payroll records. That we would pay it out as a severance/consulting fee, through the payroll process. It was simply to facilitate, that is the reason for the wording, which is exactly why it's one-half of the loans from shareholders account.

But not only that, more importantly, it was netted up, which you normally don't do through the payroll system. It was netted up, because the loans from shareholders is paid out tax free. If we simply paid it as a severance/consulting fee, it wouldn't have been netted out, and he'd have to pay taxes. So we netted it up so he got precisely one-half of the loan from shareholders. It's worded very carefully in that matter.

Notes of Testimony, 11/6/19, at 25-28. According to Gasbarre, the parties intended the words "severance/consulting" in the writing to mean one-half of Smith's shareholder loan account. They deliberately omitted any reference to their agreement on the shareholder loan account to avoid tax consequences that neither party desired.

By opinion and order entered March 10, 2020, the trial court granted the Company full relief. The court made a factual finding that "[a]n enforceable contract exists between Gasbarre Products, Inc. and Steven K. Smith as is set forth in the Outline of January 11, 2018." Trial Court Order, 3/10/20, at 1. It further ordered the parties "to follow the terms of the Outline from January 11, 2018." Id. Finally, the court directed Smith "to accept the amount of $78,954.00 by Gasbarre Products, Inc. as full and final payment for retirement compensation and/or any loan [Smith] made to his shareholder account." Id. In its opinion, the trial court explained its directive to accept payment, stating, "Clearly the remedy of specific performance was the only one available to [the Company] regarding ... the parties’ compromise that pursuant to paragraph 10 of the January 11, 2018 Agreement [the Company] would pay $78,854.00 to [Smith]." Trial Court Opinion, 3/10/20, at 7. The court determined that the amount stated in paragraph 10 of the writing "was clearly in full satisfaction of [Smith's] claim that he was owed on the loan to his shareholder account." Id.

On March 24, 2020, Smith filed a motion for post-trial relief and a notice of appeal to this Court. By order entered May 27, 2020, we quashed the appeal as prematurely filed. See Gasbarre Products, Inc. v. Smith , 431 WDA...