Intech Metals, Inc. v. Meyer, Wagner & Jacobs

J-A26027-16

2016 PA Super 299

INTECH METALS, INC., VALFORM, : IN THE SUPERIOR COURT OF
INC., AND DAVID J. HANLIN : PENNSYLVANIA
:
Appellants :
:
:
v. :
:
: No. 374 WDA 2016
MEYER, WAGNER & JACOBS, A :
PROFESSIONAL CORPORATION AND :
THOMAS WAGNER, ESQUIRE, AN :
INDIVIDUAL :

Appeal from the Order Entered February 8, 2016
In the Court of Common Pleas of Elk County
Civil Division at No(s): 1996-04

BEFORE: BENDER, P.J.E., RANSOM, J., and MUSMANNO, J.

OPINION BY RANSOM, J.: FILED DECEMBER 22, 2016

Intech Metals, Inc. (“Intech Metals”), Valform, Inc. (“Valform”), and

David J. Hanlin (“Hanlin”) (collectively, Appellants) appeal from the order

entered February 8, 2016, denying their petition to open a judgment of non

pros. We affirm.

The relevant facts and procedural history are as follows. Hanlin

retained Thomas Wagner, Esquire (“Attorney Wagner”) and the law firm of

Meyer, Wagner & Jacobs, P.C. (collectively, Appellees) to draft documents

regarding the formation of Intech Metals with Richard Phillips in December

1984. See Pl. Amended Compl., 8/19/1998, at ¶ 7-8; Notes of Testimony
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(“N.T.”), 3/9/2005, at 67.1 Hanlin and Phillips both signed Intech Metals’

articles of incorporation on December 31, 1984. See N.T., 3/9/2005, at

106. At that time, they had an oral agreement that Hanlin would supply

capital, while Phillips would operate the business on a daily basis and supply

technical knowledge, including patents that he held. See Pl. Amended

Compl. at ¶¶ 9-10.

Attorney Wagner acted as counsel for Intech Metals and represented

Hanlin in personal matters. See id. at ¶ 25. Shortly after the formation of

Intech Metals, Attorney Wagner assisted Hanlin in forming Valform, Inc. to

“compliment” Intech Metals’ business, and Hanlin was made principal

shareholder. See id. at ¶¶ 14-16, 59-60. Intech Metals helped Valform to

finance the purchase of a plant with the expectation of reimbursement. See

id. Hanlin instructed Attorney Wagner to draft a shareholder agreement,

issuing Phillips fifty percent of the shares of Intech Metals stock “to remain

non-vested; until such time as [Phillips] fulfilled the terms of the

agreement.” Id. at ¶¶ 10-11. Attorney Wagner also “presented an

employment agreement and/or pre-incorporation agreement to Phillips,

which Phillips failed to sign and return to the corporation.” Id. at ¶ 12.

Hanlin alleged that he invested additional capital into Intech Metals in
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1
According to Hanlin’s testimony, Richard Phillips came to him with a four-
or five-page business plan, contacts, and technology, which Phillips offered
in exchange for ownership in the company. See N.T., 3/9/2005, at 69-73,
75-76, and 77.

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reliance upon Attorney Wagner’s opinion letter that named Hanlin as sole

shareholder. See id. at ¶¶ 25- 26. Attorney Wagner failed to issue stock

that reflected Hanlin’s subsequent investments as a loan to Intech Metals.

Id. at ¶¶ 27-31.

When Phillips failed to deliver on several promises he made to Hanlin,

Phillips was removed from Intech Metals’ board of directors. See Pl.

Amended Compl., 8/19/1998, at ¶¶ 19-22. Thereafter, Phillips demanded

fifty percent of Intech Metals’ stock. Appellees represented all Appellants in

the resultant litigation (“Phillips Litigation”). See Appellees’ Mot. for Non

Pros, 7/12/2012, at 3. The issues in the Phillips Litigation were (1) whether

Phillips signed the shareholder agreement drafted by Wagner, which

reflected the oral agreement between Hanlin and Phillips, and (2) whether

Phillips was entitled to fifty percent of the stock of Intech Metals. See Pl.

Amended Compl., 8/19/1998, at ¶ 49. Counsel for Phillips called for

Attorney Wagner’s withdrawal from his representation of Hanlin and Intech

Metals. See id. at ¶ 44. Attorney Wagner did not consider his joint

representation of Hanlin and Intech Metals to pose a conflict of interest

despite his duty of loyalty to the corporation. See id. at ¶¶ 44-47. The

litigation resulted in a settlement. See id. at 53-54. Phillips received

$300,000, a furnace, and cleaning equipment. See id. As a result of the

litigation, Valform lost investments from Intech Metals, could not obtain

financing to cover its business ventures, defaulted on its loans, and lost

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collateral assets. See id. at ¶¶ 14-16, 59-60.

In January 1996, Appellants commenced this litigation by writ of

summons. See Trial Ct. Op., 12/18/2015. In January 1998, Appellants filed

a complaint and, following preliminary objections, filed an amended

complaint in August 1998. The underlying claims against Appellees sound in

professional negligence arising out of the Phillips Litigation, including: (1)

failure to file a successful motion to dismiss Valform from the Phillips

Litigation, (2) representation of Appellants while being their creditor for legal

fees, (3) failure to document Hanlin’s investments by issuing stock, (4)

failure to represent them in the Phillips Litigation competently, and (5)

breach of fiduciary duties to all Appellants. Pl. Amended Compl. at ¶¶ 62-

66.

The pleadings were closed in February 1999. Thereafter, the case

remained inactive until July 12, 2012, when Appellees filed a motion for

judgment of non pros. Argument on the motion was scheduled but was

continued to allow the parties ten days to resolve the matter via mediation.

See Trial Ct. Order, 10/17/2012. Finally, in November 2014, Appellees

notified the court that mediation was unsuccessful, and the court

rescheduled oral argument on Appellees’ motion for a judgment of non pros.

See Trial Ct. Order, 11/6/2014.

Initially, the trial court denied Appellees’ motion. See Trial Ct. Mem.,

1/28/2015, at 18. Upon Appellees’ request for reconsideration and following

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additional briefing, the court granted the motion, and a judgment of non

pros was entered. See Trial Ct. Revised Mem., 12/18/2015.

On January 19, 2016, the Elk County Prothonotary informed Appellants

of the entry of judgment. See Notice of Judgment of Non Pros, 1/19/2016.

On January 29, 2016, Appellants timely filed a petition to open the judgment

of non pros. See Trial Ct. Order, 2/8/2016, at 2. Appellants timely filed a

notice of appeal and court-ordered 1925(b) statement. The trial court filed a

responsive opinion. See Trial Ct. 1925(a) Op., 5/4/2016.2

Appellants raise the following issues with regard to the trial court’s

entry of a judgment of non pros:

I. WHETHER the trial court erred in granting [Appellees’] motion
for non pros where the [Appellees] have failed to establish
that the Plaintiffs have shown a want of due diligence by
failing to proceed with reasonable promptitude and where
there has been no period of inactivity in the case?

II. WHETHER the [Appellees] are entitled to the entry of a
judgment of non pros where, assuming there has been a
delay in the proceedings, there is a compelling reason for the
delay?

III. WHETHER the [Appellees] are entitled to the entry of a
judgment of non pros where, assuming there has been a
delay in the proceedings, the [Appellees] have not been
caused to suffer actual prejudice by the delay?

Appellants’ Br. at 6.
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2
With regard to Appellants’ first two issues, the trial court directs us to its
January 27, 2015 Memorandum Decision and Order. With regard to
Appellants’ third issue, the trial court directs us to its December 18, 2015
Revised Memorandum Decision and Order.

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In this case, the trial court denied Appellants’ petition to open for

failing to allege facts in support of a meritorious cause of action. See Trial

Ct. Order, 2/8/2016, at 2 (citing in support Stephens v. Messick; 799 A.2d

793 (Pa. Super. 2002)); Pa.R.C.P. 3051(c)(2). However, Appellants do not

challenge the denial of their petition to open. See, generally, Appellants’

Brief. Rather, Appellants contend that the trial court abused its discretion

by entering a judgment of non pros in the first place. Thus, Appellants

purport to challenge the propriety of the earlier, interlocutory order. For the

following reasons, we deem this contention waived.

The entry of a judgment of non pros and a subsequent request for

relief from such judgment are governed by different tests. See Stephens,

799 A.2d at 797.

To dismiss a case for inactivity pursuant to a defendant's motion
for non pros there must first be a lack of due diligence on the
part of the plaintiff in failing to proceed with reasonable
promptitude. Second, the plaintiff must have no compelling
reason for the delay. Finally, the delay must cause actual
prejudice to the defendant. As always, this determination is to
be made by the trial court, whose decision will not be disturbed
absent an abuse of discretion.

Jacobs v. Halloran, 710 A.2d 1098, 1103 (Pa. 1998); see James Bros.

Lumber v. Union Banking & Trust, 247 A.2d 587, 589 (Pa. 1968)

(“James-Jacobs” test).

In contrast, a petition to open a judgment of non pros is governed by

a different standard. Pennsylvania Rule of Civil Procedure 3051(c) provides

as follows:

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Rule 3051(c) Relief from Judgment of Non Pros

(c) If the relief sought includes the opening of the judgment of
non pros for inactivity, the petition shall allege facts showing
that
(1) the petition is timely filed,
(2) there is a meritorious cause of action, and
(3) the record of the proceedings granting the judgment of
non pros does not support a finding that the following
requirements for entry of a judgment of non pros for inactivity
have been satisfied:
(i) there has been a lack of due diligence on the part of the
plaintiff for failure to proceed with reasonable promptitude,
(ii) the plaintiff has failed to show a compelling reason for
the delay, and
(iii) the delay has caused actual prejudice to the
defendant.

Pa.R.C.P. No. 3051(c);3 Stephens, 799 A.2d at 798. Thus, in addition to

challenging the court’s application of the James-Jacobs test, a petitioner

must also timely file his petition and assert a meritorious cause of action.

Both standards are subject to the same abuse of discretion standard

of appellate review. Jacobs, 710 A.2d at 1101; Florig v. Estate of

O’Hara, 912 A.2d 318, 323 (Pa. Super. 2006). This Court “must assure

that the trial court did not abuse its discretion in balancing all of the

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3
The addition of subsection (c), Rule 3051 clarified the burden placed upon a
petitioner seeking to open a judgment of non pros granted for inactivity. It
“is intended to alter the ruling in Madrid [v. Alpine Mountain Corp., 24
A.3d 380 (Pa. Super. 2011)] by providing for the opening of a judgment of
non pros… upon a showing that the defendant did not meet each of the three
requirements for the entry of a judgment of non pros.” Pa.R.C.P. 3051,
Cmt. (2013). Previously, such petitions were subject to Rule 3051(b), which
did not require a petition to address the prejudice prong of the James-
Jacobs test.

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surrounding facts and circumstances present at the time of the entry.”

Valley Peat & Humus v. Sunnylands, Inc., 581 A.2d 193, 196 (Pa.

Super. 1990).

However, “[a]ny appeal related to a judgment of non pros lies not

from the judgment itself, but from the denial of a petition to open or strike.”

Madrid v. Alpine Motor Corp., 24 A.3d 380, 382 (Pa. Super. 2011). A

party seeking to open a judgment of non pros must show that its petition to

open satisfied the material elements of Pennsylvania Rule of Civil Procedure

3051(c). Florig, 912 A.2d at 326. The test requires the movant to

establish all three prongs. Id. (reaffirming Stephens, 799 A.2d at 800).

“[O]ne of the required elements of a Pa.R.C.P. 3051 petition is that facts

must be shown to exist which support a meritorious cause of action.”

Stephens, 799 A.2d at 800. Thus, the “failure to file a timely or rule-

compliant petition to open operates as a waiver of any right to address

issues concerning the underlying judgment of non pros.” Madrid, 24 A.3d

at 382.

For example, in Stephens, a petitioner filed a petition to open a

judgment of non pros four years after this Court had quashed her improper

direct appeal from the interlocutory order granting the judgment.

Stephens, 799 A.2d at 796. The trial court denied the petition, and this

Court affirmed on the ground that the petition was untimely. Id. at 799-

800. Moreover, in support of her appeal, the petitioner sought to challenge

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the underlying judgment rather than the trial court’s denial of her petition

to open. This court specifically rejected the plaintiff’s efforts, concluding

that:

[N]othing … relieved [petitioner] of her obligation to timely file a
proper petition to strike or open the judgment of non pros …
notwithstanding that she intended to argue on appeal that the
judgment should not have been entered in the first place.

Id. at 799. Thus, this Court concluded that the petitioner had waived all

issues concerning the entry of judgment. Id. at 801 (citing Pa.R.C.P. 3051).

In this case, the critical issue is whether failure to allege facts showing

a meritorious cause of action in a petition to open operates as a waiver of

issues concerning the underlying judgment of non pros. To show that a

cause of action is meritorious, under Rule 3051(c)(2), “facts must be shown

to exist which support a cause of action.” Madrid, 24 A.3d at 383 (quoting

Jung v. St. Paul’s Parish, 560 A.2d 1356, 1358 (Pa. 1989) (citations

omitted)). A petition that “merely repeats the averments from [the]

complaint” does not satisfy the meritorious cause of action requirement in

Rule 3051(c)(2). Stephens, 799 A.2d at 800.

As noted, the trial court determined that Appellants failed to plead any

facts in support of a meritorious cause of action in their petition to open.

See Trial Ct. Order, 2/8/2016, at 2. Further, Appellants fail to address this

deficiency in their arguments to this Court. Extending the reasoning from

Madrid, Florig, and Stephens, Appellants’ failure to “show facts to exist

that would support a meritorious cause of action” in their petition to open,

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operates as a waiver of the issues concerning the underlying interlocutory

order. See Stephens, 799 A.2d at 798; Pa.C.R.P. 3051(c)(2). On this

basis, we affirm the court’s order denying Appellant’s petition to open.

Notwithstanding Appellants’ failure to make an argument regarding an

integral element of their claim, the trial court’s decision to enter a judgment

of non pros in this case was clearly correct. Appellants contend that the

record does not support the court’s grant of the underlying judgment. They

begin by addressing the first two requirements of the James-Jacobs test in

tandem. First, Appellants claim that the trial court abused its discretion in

finding they failed to proceed with diligence. See Appellants’ Brief at 13.

They argue “the mere passage of time is not a dispositive factor upon which

the Court may enter a judgment of non pros.” Id. at 14-15 (citing Manson

v. First Nat’l Bank, 77 A.2d 399, 401 (Pa. 1951)). Second, Appellants

claim “significant non-docketed activities” and Hanlin’s death in 2011 are

compelling reasons for any delay caused by their lack of diligence.

Appellants’ Brief at 15 (citing in support Marino v. Hackman, 710 A.2d

1108, 1111 (Pa. 1998)).

Our Supreme Court has established that lack of due diligence should

be determined on a case-by-case basis; there is no presumptive amount of

time required to establish inactivity. See Jacobs, 710 A.2d at 1102-03

(holding that two-year presumption proved to be unworkable). Failure to

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provide a satisfactory explanation for a prolonged period of inactivity

supports a finding of lack of diligence. James Bros., 247 A.2d at 590.

The trial court may examine non-docket activity to decide whether

there exists a compelling reason for the delay. Marino, 710 A.2d at 1111.

For example, reasons for a delay, such as circumstances out of the party’s

control or ongoing depositions, discovery, changes in the law, etc., may

explain any lack of diligence in failing to proceed with reasonable

promptitude. See id. (citing Streidl v. Community Gen. Hosp., 603 A.2d

1011, 1012 (Pa. 1992)). In Marino, the Supreme Court recognized “an

unusual amount of activity [had] not entered on the docket … [including]

the taking of depositions of all parties.” Id. at 1111. Reversing the lower

court, the Supreme Court determined the case did not fall into “the category

of stale cases that the rules of judicial administration are designed to

eliminate from the system.” Id.

Here, Appellants concede that the docket was inactive from 2006

through 2012. See Appellants’ Brief at 14. However, they claim that any

apparent inactivity is explained by non-docket activity, including: a 2006

deposition, a 2008 letter to defense counsel, two 2010 letters to expert, one

expert report sent to client, June 2011 death of Appellant, January 2012

telephone call to inform defendant’s counsel of Appellant’s death, and June

2012 settlement demand conveyed by Appellants to Appellees. Id. at 14,

16-17.

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Appellants’ efforts do not compare to the significant non-docket

activity presented by plaintiffs in Marino, which revealed a case on a

trajectory toward a final disposition. See Marino, 710 A.2d at 1111. Here,

the non-docket activity does not justify the overwhelming lack of activity

between 2006 and 2012. As the trial court noted, the “vast majority of

these activities were inconsequential to the progress of the case” and were

“not events beyond [Appellants’] control.” Trial Ct. Mem., 1/28/2015, at 10.

We discern no abuse of discretion in this regard.

Moreover, Hanlin’s death is not a compelling reason for multiple,

prolonged periods of delay in a case based on operative facts that date back

over twenty years. See Appellees’ Brief at 14-15. Hanlin’s death occurred

11-12 years after the close of pleadings. Appellants did not notify Appellees

that Hanlin had died until six months after his death. Appellees waited

another six months before filing their first motion for non pros. In the

interim, Appellants did not attempt to move the case forward. We hold that

any delay caused by Hanlin’s death in 2011 does not excuse the preceding

decade of inactivity. Accordingly, Appellants’ argument is without merit.

Appellants also argue that the lower court failed to link delay in the

prosecution of their claims to actual prejudice suffered by Appellees. See

Appellants’ Brief at 8. In this regard, Appellants focus on the probative

value of Hanlin’s deposition, completed prior to his death, and the testimony

of several witnesses, also now deceased, which were preserved during the

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Phillips Litigation. Id. at 19. According to Appellants, Appellees had an

adequate opportunity to fully depose and cross-examine these witnesses.

Id. at 20. Appellants maintain that the combination of such depositions and

trial testimony is sufficient and relevant to go to trial on their claims in this

case. Id.. Thus, Appellants claim that these several witnesses’ deaths did

not impose actual prejudice on Appellees.4 Id. We disagree.

A judgment of non pros may be entered when “the delay has caused

some prejudice to the adverse party, such as the death of or unexplained

absence of material witnesses.” Stephens, 799 A.2d at 797; James Bros.,

247 A.2d at 589. Prejudice attaches based on “any substantial diminution of

a party’s ability to properly present its case at trial.” Jacobs, 710 A.2d at

1103; see also Metz Contracting v. Riverwood Builders, 520 A.2d 891,

893-94 (Pa. Super. 1987).

Upon reconsideration of Appellees’ motion for non pros, the trial court

ordered the parties to submit briefs on whether the deaths of material

witnesses would impose actual prejudice on Appellees’ ability to litigate.

See Trial Ct. Rev. Mem., 12/18/2015, at 2. The trial court examined 350
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4
In support of this argument, Appellants rely on the following: (1) a decision
of the court of common pleas, and (2) they quote Vanderhoff v.
Harleysville Insurance Company, 78 A.3d 1060, 1065 (Pa. 2013)
(holding that prejudice to the insurer in an uninsured motorist claim requires
a balancing test). Their arguments are unpersuasive because the former is
a decision by a lower court that is not authoritative or precedential in this
Honorable Court and the latter is entirely irrelevant to the “actual prejudice”
prong in support of a judgment of non pros.

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pages of testimony submitted by Appellants. See id. at 3. The lower court

concluded that this prior testimony was irrelevant and therefore would be

inadmissible in the current litigation. See id. at 4. The record supports the

court’s conclusion.

Appellants’ failure to take a proactive role in moving the case forward

divested Appellees of an opportunity to depose and cross-examine several,

essential witnesses, prior to their deaths, on the specific allegations made in

the amended complaint in this case. See Jacobs, 710 A.2d at 1103; James

Bros., 247 A.2d at 589. Therefore, Appellees incurred actual prejudice

caused by Appellants’ delay pursuant to Pa.C.R.P. 3051(c)(iii). Accordingly,

the trial court appropriately entered a judgment of non pros.

In conclusion, Appellants fail to plead facts in support of a meritorious

cause of action. This failure is dispositive. See Florig, 912 A.2d at 326;

Madrid, 24 A.3d at 382; Stephens, 799 A.2d at 798; Pa.C.R.P. 3051(c)(2).

Accordingly, the trial court did not err in denying Appellants’ petition to

open.

Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 12/22/2016

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