Somers v. Somers

• Decision Date: 13 October 1992
• Citation: 418 Pa.Super. 131,613 A.2d 1211
• Parties: Joseph V. SOMERS, Appellant, v. Paul SOMERS and Somers Construction Co., Inc., Appellees.
• Court: Pennsylvania Superior Court

Page 1211

613 A.2d 1211

418 Pa.Super. 131

Joseph V. SOMERS, Appellant, v. Paul SOMERS and Somers Construction Co., Inc., Appellees.

Superior Court of Pennsylvania.

Argued Jan. 30, 1992.

Filed July 28, 1992.

Reargument Denied Oct. 13, 1992.

James D. Crawford, Philadelphia, for appellant.

Cliff Russell, Fort Washington, for appellees.

Before CIRILLO, DEL SOLE and KELLY, JJ.

DEL SOLE, Judge:

This is an appeal from an order of the Court of Common Pleas of Montgomery County sustaining preliminary objections and dismissing counts I and II of plaintiff/appellant Joseph V. Somers's complaint. We reverse.

Joseph V. Somers and Paul Somers, uncle and nephew, respectively, entered into a stock purchase agreement on August 15, 1985. Pursuant to that agreement, uncle sold to nephew a portion of his stock in the Somers Construction Company, Inc. (SCC), and surrendered to the corporation for redemption the remainder of his outstanding shares. Thus, nephew became the company's sole stockholder, holding the offices of president and director of SCC as well.

In conjunction with the stock transfer agreement, the parties entered into an employment agreement whereby uncle was employed by SCC as a "consultant respecting general corporate matters, and ... with authority to act with [nephew] for the Corporation respecting completion of the Wallkill project." The employment agreement specified no term, but provided for a monthly consulting fee. In addition, the agreement stated:

In the event of net profits from the Wallkill project, ascertained by Joseph [uncle] and by the firm of accountants regularly employed by the Corporation at the time of resolution of claims with the Office of General Service or other office having jurisdiction, the Corporation shall pay Joseph [uncle] as additional compensation for his services as consultant 50% of such net profits at the time such determination is made.

The Wallkill project, on which SCC acted as general contractor, involved the construction of a correctional facility in New York. A determination of net profits would follow the resolution of all claims between SCC and the New York Office of General Services [OGS], as well as a resolution of the claims between all subcontractors and OGS.

During negotiations with OGS, SCC sought additional compensation for its work on the Wallkill project. Nephew and uncle disagreed over the handling of this claim, and, prior to its resolution, the parties reached an impasse in their business relationship. As a result, nephew terminated uncle's employment. Uncle filed a complaint in equity which was dismissed. The court allowed amendment, and uncle filed a second amended complaint seeking damages. Nephew filed preliminary objections, and the trial court dismissed counts I and II of uncle's complaint. This appeal followed.

In an appeal from an order sustaining preliminary objections in the nature of a demurrer, the appellate court applies the same standard employed by the trial court: all material facts set forth in the complaint as well as all inferences reasonably deducible therefrom are admitted as true for purposes of review. The question presented by the demurrer is whether, on the facts averred, the law says with certainty that that no recovery is possible. Where any doubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the demurrer. Guinn v. Alburtis Fire Co., 134 Pa.Cmwlth. 270, 577 A.2d 971 (1990); Kyle v. McNamara & Criste, 506 Pa. 631, 634, 487 A.2d 814, 815 (1985).

In reviewing preliminary objections, only facts that are well pleaded, material, and relevant will be considered as true, together with such reasonable inferences that may be drawn from those facts, and preliminary objections will be sustained only if they are clear and free from doubt. Ohio Casualty Group Ins. Co. v. Argonaut Ins. Co., 92 Pa.Cmwlth. 560, 500 A.2d 191 (1985). A preliminary objection should be sustained only where it appears with certainty that, upon the facts averred, the law will not allow the plaintiff to recover. International Union of Operating Engineers, Local No. 66, AFL-CIO v. Linesville Construction Co., 457 Pa. 220, 322 A.2d 353 (1974).

Under the Pennsylvania system of fact pleading, the pleader must define the issues; every act or performance essential to that end must be set forth in the complaint. See Pa.R.C.P. 1019; 4 Standard Pennsylvania Practice § 21:32; see also Pike County Hotels Corporation v. Kiefer, 262 Pa.Super. 126, 396 A.2d 677 (1978) (at a minimum, the pleader must set forth facts upon which his cause of action is based). When ruling on preliminary objections, a court must generally accept as true all well and clearly pleaded facts, but not the pleader's conclusions or averments of law. See 5 Standard Pennsylvania Practice § 25:8. See also Keirs v. Weber National Stores, Inc., 352 Pa.Super. 111, 507 A.2d 406 (1986).

In count I of his complaint, entitled "Settlement with OGS," uncle avers that nephew and SCC breached the contract and the fiduciary duties with respect to SCC's and nephew's implied and express obligations to negotiate, arbitrate or settle in good faith the claims between SCC and OGS, and the claims between SCC and the subcontractors. Uncle alleged that nephew and SCC accepted from OGS, with no justification, a settlement regarding the Wallkill project claim in the amount of $3,558,828.00, and failed to pursue additional claims of $400,000.00 for concrete work and $50,000.00 for caulking work.

In count II, entitled "Action for an Accounting, The Settlements with the Subcontractors," uncle alleged that nephew and SCC refused to allow him access to the litigation and claim files with respect to the subcontractors, and refused to allow him to participate in the settlements or litigation. Uncle avers, therefore, that the subcontractors were overpaid and he is entitled to an accounting in order to determine the amount due him. See Pa.R.C.P. 1021.

Pursuant to the employment contract, uncle was entitled to 50% of the net profits from the Wallkill project. In Somers v. Somers, 390 Pa.Super. 664, 561 A.2d 827 (1989), this court, by memorandum decision, affirmed the Honorable Stanley R. Ott's determination that the consulting agreement between the parties should be construed as an employment agreement terminable at will.

In the trial court, Uncle did not again allege that defendants breached their agreement by terminating his employment as consultant, but instead alleges that nephew breached duties implied in the agreement. The trial court analyzed Appellant's claim under the law pertaining to the duties of corporations and their directors and officers, and concludes that the defendant corporation and owner owed no duty to Appellant who was only an employee. However, this misconstrues Appellant's argument. Furthermore, we hold that Appellant has stated a claim for relief under Pennsylvania contract law, and is therefore entitled to a trial in order to attempt to prove that Paul Somers and the Somers Construction Company, [SCC], breached their duty of good faith arising from the contract between the parties.

The general duty of good faith and fair dealing in the performance of a contract as found in The RESTATEMENT (SECOND) OF CONTRACTS § 205, has been adopted in this Commonwealth in Creeger Brick & Building Supply Inc. v. Mid-State Bank & Trust Co., 385 Pa.Super. 30, 35, 560 A.2d 151, 153 (1989), and Baker v. Lafayette College, 350 Pa.Super. 68, 84, 504 A.2d 247, 255 (1986), aff'd, 516 Pa. 291, 532 A.2d 399 (1987). A similar requirement has been imposed upon contracts within the Uniform Commercial Code by 13 Pa.C.S. § 1203. The duty of "good faith" has been defined as "[h]onesty in fact in the conduct or transaction concerned." See 13 Pa.C.S. § 1201.

The obligation to act in good faith in the performance of contractual duties varies somewhat with the context, Baker, supra, 350 Pa. Superior Ct. at 84, 504 A.2d at 255, and a complete catalogue of types of bad faith is impossible, but it is possible to recognize certain strains of bad faith which include: evasion of...