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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