Midomo Co. v. Presbyterian Housing Dev. Co.
| Decision Date | 15 September 1999 |
| Citation | 739 A.2d 180 |
| Parties | MIDOMO COMPANY, INC. v. PRESBYTERIAN HOUSING DEVELOPMENT COMPANY, Presbyterian Homes, Inc., the Presbyterian Homes of New Jersey Foundation, Inc. and Keith LePrevost. Appeal of Presbyterian Housing Development Co., and Presbyterian Homes, Inc., Appellants, (at 1637) Midomo Company, Inc. v. Presbyterian Housing Development Co., Presbyterian Homes, Inc., the Presbyterian Homes of New Jersey Foundation, Inc. and Keith LePrevost. Appeal of the Presbyterian Homes of New Jersey Foundation, Inc. and Keith LePrevost, Appellants, (at 1638) |
| Court | Pennsylvania Superior Court |
Paula J. McDermott, Harrisburg, for Presbyterian Housing Development Co., and Presbyterian Homes, Inc.
Stephen W. Miller, Philadelphia, for Midomo Co., Inc.
Robert Rhoad, Princeton, NJ, for Presbyterian Homes of New Jersey Foundation, Inc., and Keith LePrevost.
Before McEWEN, President Judge, and FORD ELLIOTT and OLSZEWSKI, JJ.
¶ 1 In this appeal, we are asked to decide whether the trial court erred when it denied the preliminary objections of Presbyterian Housing Development Co. ("PHDC"); Presbyterian Homes, Inc. ("PHI"); and Presbyterian Homes of New Jersey Foundation, Inc. ("PHNJ") and Keith LePrevost, appellants herein, alleging alternative dispute resolution by reason of an arbitration agreement. Before reaching the merits of appellants' issues, however, we must ascertain whether the trial court's order is appealable.
¶ 2 "Denial of preliminary objections is ordinarily an interlocutory order not subject to immediate appeal." Hazleton Area School Dist. v. Bosak, 671 A.2d 277, 281 n. 8 (Pa.Commw.1996). Nevertheless:
Pennsylvania Rule of Appellate Procedure 311 provides that an interlocutory appeal may be taken as of right from any order which is made appealable by statute. Pa.R.A[pp].P. 311(a)(8). The Uniform Arbitration Act, 42 Pa.C.S.A. §§ 7301 et seq., states that an appeal may be taken from `[a] court order denying an application to compel arbitration....' 42 Pa.C.S.A. § 7320(a)(1).
Goldstein v. Depository Trust Co., 717 A.2d 1063, 1065 (Pa.Super.1998), appeal denied, ___ Pa. ___, 736 A.2d 605, 1999 Pa. Lexis 472 (1999).
¶ 3 We note first that the parties and the trial court proceed as if the arbitration provision in the Lease Agreement is an agreement to arbitrate pursuant to the Uniform Arbitration Act, 42 Pa.C.S.A. §§ 7301-7320 ("UAA"). (See PHDC's brief at 12; PHI's brief at 16; PHNJ's brief at 11; Midomo's brief at 12; trial court opinion, 9/25/98 at 4.) "In order for an agreement to arbitrate to fall within the Uniform Arbitration Act, two requirements must be met: first, the agreement must be in writing; and second, the agreement must expressly provide for arbitration under the Act." Dearry v. Aetna Life & Cas. Ins. Co., 415 Pa.Super. 634, 610 A.2d 469, 471 (1992); 42 Pa.C.S.A. § 7302(a). The Lease Agreement at issue in this case provides, however, for arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") or, if both parties agree in writing, the Construction Arbitration Rules of the AAA. (PHDC R.R. at 59a.) An agreement to arbitrate in accordance with the Rules of the AAA is an agreement pursuant to common law arbitration. Runewicz v. Keystone, Ins. Co., 476 Pa. 456, 461, 383 A.2d 189, 191 (1978); Smith v. Cumberland Group, Ltd., 455 Pa.Super. 276, 687 A.2d 1167, 1171 n. 5 (1997); Goral v. Fox Ridge, Inc., 453 Pa.Super. 316, 683 A.2d 931, 932 (1996).
¶ 4 The Lease Agreement also provides, however, that arbitration shall be governed by the substantive laws of Pennsylvania and by the Federal Arbitration Act ("FAA"), Title 9, U.S.Code. (PHI R.R. at 60a.) According to appellants, because the UAA is similar to the FAA, they have "expressly provide[d] for arbitration pursuant to ... any other similar statute," as required by 42 Pa.C.S.A. § 7302(a), thereby invoking the UAA.
¶ 5 We need not decide whether common law or statutory arbitration applies, however, in order to decide whether appellants' issues are properly before us because 42 Pa.C.S.A. § 7342(a), relating to common law arbitration, provides that several sections of the UAA, including § 7303, relating to the validity of an agreement to arbitrate; § 7304, relating to court proceedings to compel or stay arbitration; and § 7320, relating to appeals from court orders (except subsection (a)(4)) are applicable to common law arbitration.
¶ 6 In this case, however, unlike Goldstein, supra, appellants did not file a petition to compel arbitration. Instead, they filed preliminary objections pursuant to Pa.R.Civ.P. 1028(a)(6), 42 Pa.C.S.A.1 In their preliminary objections, PHDC and PHI requested the court to determine that a valid arbitration agreement existed and to order Midomo to seek its remedy in arbitration. (PHDC R.R. at 100a, 121a.) In contrast, PHNJ and LePrevost moved under Rule 1028(a)(6) for an order dismissing the counts in the complaint applicable to them based on their assertion that Midomo's exclusive remedy was through arbitration. (PHDC R.R. at 131a.)
¶ 7 In its order, the trial court dismissed the preliminary objections of the various defendants alleging alternative dispute resolution by reason of an arbitration agreement between the parties.2 (PHDC R.R. at 139a.)
¶ 8 While an order denying preliminary objections is generally not appealable, "[t]here exists ... a narrow exception to this oft-stated rule for cases in which the appeal is taken from an order denying a petition to compel arbitration." Shadduck v. Christopher J. Kaclik, Inc., 713 A.2d 635, 636 (Pa.Super.1998) (citations omitted). In this case, however, appellants' preliminary objections are not precisely in the form of a petition to compel arbitration. Nevertheless, we will not exalt form over substance. Olivetti Corp. of America v. Silia Property, Inc., 502 Pa. 538, 539-40, 467 A.2d 321, 322 (1983). We therefore find that the order denying the preliminary objections alleging alternative dispute resolution and requesting that the court order Midomo to arbitrate the dispute is an interlocutory order, appealable as of right pursuant to Pa.R.App.P. 311(a)(8), Pa.R.Civ.P. 1028(a)(6) and Note, and 42 Pa.C.S.A. §§ 7342(a), 7320(a)(1), and 7304(a). See Hazleton Area School Dist., 671 A.2d at 281 n. 8 ().3 As a result, we have jurisdiction to address the issues appellants raise in this appeal. The factual and procedural history of the case therefore follows.4
¶ 9 In 1994, PHI and PHNJ entered into a joint venture which became known as PHDC. (Transcript of oral argument, 10/26/98 at 3.) PHI is a Pennsylvania non-profit corporation which owns and/or operates personal care facilities for the elderly at several locations, but not in northeastern Pennsylvania. (PHI R.R. at 2a.) PHNJ is a New Jersey non-profit corporation which likewise owns and/or operates personal care facilities for the elderly at several locations, but not in northeastern Pennsylvania. Keith LePrevost ("LePrevost") was vice-president of development for PHNJ. PHDC, a Pennsylvania non-profit corporation, was formed to develop personal care facilities in northeastern Pennsylvania. LePrevost acted as agent and negotiator for PHDC.
¶ 10 In 1994, LePrevost informed Midomo's president, Dominick Ortolani ("Ortolani"), that PHNJ and PHI were forming a joint venture which would be interested in developing property owned by Midomo known as the "Hanover property" in Hanover Township, Luzerne County, Pennsylvania. LePrevost represented PHDC in its negotiations with Midomo. Midomo, a Pennsylvania corporation, is an experienced construction management and real estate development company. (Id. at 2a-3a.)
¶ 11 Over the next several years, the parties undertook extensive marketing and financial analyses of the area, retained an architect, and obtained township planning commission and PHDC board approval for the project. Based on assurances from LePrevost and from PHI's president Stephen Proctor that the Hanover property appeared to be an optimal site, Midomo incurred legal and other costs associated with developing the property. (Id. at 3a-9a.)
¶ 12 By December of 1996, counsel for PHDC and Midomo started work on reducing the parties' agreement to writing. By late May 1997, counsel had nearly completed a Lease Agreement and Development Agreement. The Lease Agreement provided that PHDC was to pay rent to Midomo for 20 years unless PHDC exercised a purchase option. Midomo was also to receive $100,000 per year for 20 years, plus 50 percent of the Hanover Project's net cash flow. (Id. at 10a.) At the end of May, however, counsel for PHI, John Killian, informed counsel for PHNJ, who was handling negotiations for PHDC, that he insisted on the addition of a contingency paragraph to the Lease Agreement. (Id.) That paragraph provides:
Section 44. Contingency Date. Tenant shall have until July 15, 1997 (the `Contingency Date') to provide written notice to Landlord of any matters shown by the Title Report, Survey, Environmental Report or Tenant's market studies that are not satisfactory to Tenant. Tenant in its sole discretion, shall have the right to either (a) terminate this Lease effective as of the date of the notice or (b) to specify the reason that such matters are not satisfactory and the curative steps that the Landlord must take to remove the basis for the Tenant's disapproval (the `Objection Notice'). If the Tenant chooses to provide the Objection Notice, then Landlord shall have until July 22, 1997 (the `Extended Contingency Date') to agree to take the curative steps or the Lease will be deemed to have been terminated as of the Contingency Date.
PHI R.R. at 67a. The parties executed the Lease Agreement, which included...
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