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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JANE B. O'MALLEY, AS : IN THE SUPERIOR COURT OF
ADMINISTRATOR - CTA OF THE : PENNSYLVANIA
ESTATE OF MICHAEL P. O'MALLEY, :
DECEASED :
:
Appellant :
:
:
v. : No. 193 WDA 2022
:
:
JOHN T. CONWAY, INDIVIDUALLY, :
AND DAVID T. CONWAY, AS :
ADMINISTRATOR - CTA OF THE :
ESTATE OF JEFFREY T. CONWAY, :
DECEASED, AND AS CO-PARTNERS :
TRADING AS CONWAY, CONWAY & :
O'MALLEY, REAL ESTATE :
PARTNERESHIP; AND CONWAY, :
CONWAY, & O'MALLEY REAL ESTATE :
PARTNERSHIP :
Appeal from the Judgment Entered January 14, 2022
In the Court of Common Pleas of Erie County Civil Division at No(s): No.
11297-2017
BEFORE: OLSON, J., DUBOW, J., and COLINS, J.*
MEMORANDUM BY DUBOW, J.: FILED: OCTOBER 31, 2022
Appellant, Jane B. O’Malley as administrator of the estate of her
deceased husband Michael P. O’Malley (“O’Malley”), appeals from the January
14, 2022 Order entered in the Erie County Court of Common Pleas granting
summary judgment in favor of Appellees John T. Conway, David T. Conway as
administrator of the estate of Jeffrey T. Conway (“the Conways”), and
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* Retired Senior Judge assigned to the Superior Court.
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Conway, Conway & O’Malley Real Estate Partnership (the “Partnership”) in this
contract dispute. After careful review, we affirm.
The relevant facts and procedural history are as follows. In January
1988, O’Malley and the Conways formed the Partnership. Each partner held
an equal 1/3 share in the Partnership.
In 1989, the partners agreed that the Partnership would provide
recurring distributions to the partners to fund a $200,000 life insurance policy
for each partner. The cost of the life insurance policy was $2,000 per year for
each partner. Thus, each year thereafter, each partner had the ability to
request a $2,000 distribution from the Partnership to fund the policy premium.
O’Malley regularly received the $2,000 distribution from the Partnership to
pay the premium on his policy. However, at some point, O’Malley allowed his
$200,000 life insurance policy to lapse due to non-payment.
On April 4, 1992, the partners entered into a “Restated General
Partnership Agreement of Conway, Conway & O’Malley Real Estate
Partnership” (the Agreement). Relevant to the instant appeal, Article 9.01(a)
of the Agreement, titled “Death of Partner,” outlined the procedure for transfer
of a partner’s interest in the Partnership upon death through sale to the
surviving partners. It provided as follows:
On the death of any Partner, the Partnership business shall
continue. At that time, the surviving partners shall have the
right to purchase the interest of the deceased partner from
the deceased partner’s estate by paying to said estate the
sum of one dollar ($1.00). The partners agree that this is the
fair method of purchasing said deceased Partner’s interest, based
upon various factors, including, but not limited to, the
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contemplation of the Partners to purchase life insurance for the
benefit of each Partner’s beneficiaries; in any event, each Partner,
intending to be legally bound, does hereby so agree to the
provisions of this Paragraph and this Agreement for himself, his
heirs, executors, administrators, and assigns.
Agreement, 4/2/92, at Art. 9.01(a) (emphasis added).
After the partners entered into the Agreement, they decided to purchase
another $200,000 life insurance policy for each partner, funded by the
partnership but purchased by the partners individually. From 1992, each
partner received quarterly distributions of over $500 to pay the policy
premiums.
O’Malley died on May 8, 2015. Following his death, and in accordance
with Article 9.01(a) of the Agreement, the Conways offered Appellant $1.00
to purchase O’Malley’s partnership interest. Appellant rejected the Conways’
offer.
On December 6, 2017, Appellant filed the instant lawsuit seeking an
accounting to establish the fair market value of O’Malley’s interest in the
Partnership and compel payment of that amount by the Conways to purchase
O’Malley’s interest. Appellant also asserted claims of Conversion, Unjust
Enrichment, and a demand for equitable relief.
On January 9, 2018, the Conways filed an Answer and New Matter. They
also filed a Counterclaim for Breach of Contract against Appellant for her
failure to sell O’Malley’s partnership interest for $1.00 as provided in Article
9.01(a) of the Agreement. Appellant filed a reply to the New Matter and
Counterclaim on February 28, 2018, denying, among other things, that the
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Agreement required that she sell O’Malley’s partnership interest to the
Conways for $1.00. Rather, she asserted that the Agreement only required
Appellant to sell O’Malley’s partnership interest to the Conways for $1.00 if
the Partnership provided O’Malley’s beneficiaries with the proceeds from
O’Malley’s life insurance policy that the Partnership had funded, which she
alleged it had not.
On August 2, 2021, the Conways filed a Motion for Summary Judgment.
The Conways argued that the plain language of the Agreement required
Appellant to sell O’Malley’s partnership interest to them for $1.00 and that,
therefore, they were entitled to judgment as a matter of law.
On August 23, 2021, Appellant filed an Answer to the motion arguing
that the Agreement is ambiguous and that, in order to ascertain the intent of
the parties, the court must interpret the “entirety of Article 9 [of the
Agreement] and the applicable terms of the entire contract [] along with the
Uniform Partnership Act of 1988.”1 She concluded that, after considering
Article 9 of the Agreement together with Article 12,2 she was entitled to “have
the value of [] O’Malley’s interest in the [P]artnership at the date of dissolution
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1 Answer to Motion for Summary Judgment, 8/23/21, at ¶ 26.
2 Article 12.03, titled “Procedure for Appraisal,” provides the procedure for
determining the purchase price to be paid for the interest of a partner when
“an appraisal of the value of an interest in the Partnership is required under
any provision of this agreement[.]” Agreement Art. 12.01 (emphasis added).
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valued and paid to her[.]”3 She also asserted that she did not receive any
insurance proceeds as contemplated by the Agreement and, thus she was not
required to sell O’Malley’s interest in the Partnership to the Conways for less
than fair market value and that the Conways’ interpretation of the Agreement
is “not fair.”4
Following a hearing, on January 14, 2022, the trial court granted the
Conways’ Motion for Summary Judgment and dismissed Appellant’s claims.
This appeal followed. Appellant complied with the trial court’s order to
file a Pa.R.A.P. 1925(b) statement. The trial court filed a statement in lieu of
a Rule 1925(a) opinion referring this Court to its January 14, 2022 opinion for
discussion of Appellant’s issues.
Appellant raises the following issue on appeal:
Does a genuine issue of material fact barring the grant of
summary judgment exist as to whether the partners intended
$1.00 to be the total compensation paid to [Appellant] for the
partnership of her deceased husband, [O’Malley]?
Appellant’s Brief at 4.
A.
Appellant challenges the trial court’s order granting summary judgment
in favor of the Conways. Our Supreme Court has clarified our role as the
appellate court as follows:
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3 Appellant’s Brief in Opposition to the Conways’ Motion for Summary
Judgment, 8/23/21, at 13.
4 Id. at ¶ 30.
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On appellate review[ ], an appellate court may reverse a grant of
summary judgment if there has been an error of law or an abuse
of discretion. But the issue as to whether there are no genuine
issues as to any material fact presents a question of law, and
therefore, on that question our standard of review is de novo. This
means we need not defer to the determinations made by the lower
tribunals. To the extent that this Court must resolve a question of
law, we shall review the grant of summary judgment in the
context of the entire record.
Summers v. Certainteed Corp., 997 A.2d 1152, 1159 (Pa. 2010) (citations
and quotation omitted).
A trial court may grant summary judgment “only in those cases where
the record clearly demonstrates that there is no genuine issue of material fact
and that the moving party is entitled to judgment as a matter of law.” Id.
(citation omitted); see also Pa.R.C.P. 1035.2(1). “When considering a motion
for summary judgment, the trial court must take all facts of record and
reasonable inferences therefrom in a light most favorable to the non-moving
party.” Summers, 997 A.2d at 1159. “In so doing, the trial court must
resolve all doubts as to the existence of a genuine issue of material fact
against the moving party, and, thus, may only grant summary judgment
where the right to such judgment is clear and free from all doubt.” Id.
(citation and internal quotation marks omitted).
B.
Appellant asserts that the trial court erred in granting summary
judgment in favor of the Conways because a genuine issue of material fact
exists as to whether the partners intended to require Appellant to sell
O’Malley’s partnership interest to the Conways for $1.00 upon O’Malley’s
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death, or whether the Agreement requires an assessment of O’Malley’s
interest’s fair market value. Appellant’s Brief at 17-18.
To resolve this dispute, we must interpret the Agreement between
O’Malley and the Conways to determine the parties’ intent. Because contract
interpretation is a question of law, our standard of review is de novo, and the
scope of review is plenary. Ragnar Benson Inc. v. Hempfield Twp. Mun.
Auth., 916 A.2d 1183, 1188 (Pa. Super. 2007).
Our Supreme Court has set forth the principles governing contract
interpretation as follows:
The fundamental rule in contract interpretation is to ascertain the
intent of the contracting parties. In cases of a written contract,
the intent of the parties is the writing itself. Under ordinary
principles of contract interpretation, the agreement is to be
construed against its drafter. When the terms of a contract are
clear and unambiguous, the intent of the parties is to be
ascertained from the document itself. . . . While unambiguous
contracts are interpreted by the court as a matter of law,
ambiguous writings are interpreted by the finder of fact.
Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 468-69
(Pa. 2006) (citations omitted).
Appellant provides three arguments in support of her claim that the trial
court erred in finding that she was not entitled to a fair market value appraisal
of O’Malley’s interest.
First, Appellant argues that the trial court failed “to give proper
deference to the Supreme Court’s decision” in Cerceo v. DeMarco, 137 A.2d
296 (Pa. 1958), which she asserts “mandates that the inference to be drawn
is that the partners did not intend to gamble their decades-long investment
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on which partner would enjoy the longest lifespan.” Appellant’s Brief at 11-
12. Analogizing the instant facts to those in Cerceo, Appellant argues that
because the partners here provided in the Agreement for “an insurance
arrangement by which fair compensation would be paid in exchange for the
transfer of [a] deceased partners’ interest,” and because Appellant did not
receive any proceeds from an insurance policy on O’Malley’s life, it is
“tantamount to forfeiture to the Conways of the entire value” of O’Malley’s
interest for her to sell O’Malley’s partnership interest for $1.00 as required by
the terms of Article 9.01. Appellant’s Brief at 24-25.
In Cerceo, two partners entered into a partnership agreement that
contained a provision providing that the partnership would pay the premiums
on life insurance policies purchased by the partners. Cerceo, 137 A.2d at
297. The agreement also provided that, in consideration for the partnership
making the premium payments, upon the death of either partner, the
deceased partner’s partnership interest would pass to the surviving partner.5
Id. The partners never took out insurance policies on each other’s lives as
provided in the agreement. Id. Upon the death of one partner, the executrix
of his estate demanded an accounting of the decedent’s interest in the
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5 The agreement in that case provided, inter alia, as follows: “Partners agree
that they will each take out insurance upon their respective lives . . . . The
premiums to carry said insurance shall be paid for by the partnership . . . .
It is hereby expressly agreed . . . that as consideration for the payment
of the premium by the partnership . . . upon the death of either partner .
. . the entire partnership business . . . shall go to and become the absolute
property of the survivor[.]” Id. (emphasis added).
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partnership. Id. The surviving partner refused, and the executrix brought
suit. Id.
In interpreting the partnership agreement, our Supreme Court
determined that the agreement unambiguously required the payment of the
life insurance premiums by the partnership as a precondition to the right of
the surviving partner to acquire the deceased partner’s interest. Id. at 298.
Therefore, because the partnership did not make the premium payments on
the deceased partner’s life insurance policy as required by the agreement, the
Court held that the surviving partner did not automatically acquire the
deceased partner’s interest and the surviving partner, thus, had a duty to
provide the executrix with an accounting. Id.
Here, the trial court determined that Cerceo is distinguishable from the
instant case, opining that, unlike the agreement in Cerceo, the Agreement
did not require the Partnership to purchase insurance or make premium
payments as a condition precedent to the purchase of O’Malley’s interest for
$1.00. Trial Ct. Op. 2/14/22, at 8. We agree. Further, we observe that, with
respect to life insurance, the Agreement merely noted that “the contemplation
of the Partners to purchase life insurance for the benefit of each Partner’s
beneficiaries” was one of numerous factors the partners considered in
determining that $1.00 was a “fair method of purchasing said deceased
Partner’s interest[.]” Agreement at Art. 9.01. The provision of life insurance
was not, as in Cerceo, a mandatory precondition to the Conways purchasing
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O’Malley’s interest for $1.00. Accordingly, Appellant’s claim that the trial court
erred in declining to apply the holding in Cerceo fails.
Next, Appellant argues that the provisions of the Agreement, in general,
including Article 4 (“Contributions to Partnership”), Article 5 (“Profits, Losses,
and Liabilities”), and Article 13 (“Termination of the Partnership”), and, in
particular, Article 12 (“Procedure for Appraisal”), when read “as a whole”
evidence the partners’ intent to pay fair compensation for the purchase of a
deceased partner’s interest. Appellant’s Brief at 22-25. She acknowledges
that the language of Article 9 reflects the partners’ agreement that a payment
of $1.00 to a deceased partner’s estate is the “fair method of purchasing said
deceased Partner’s interest,” but argues that this language is evidence only of
the partners’ concern for fairness and not of their intent to fix the purchase
price of $1.00. Id. at 24-25 (citing Agreement at Art. 9.01).
Last, Appellant argues that, pursuant to the Uniform Partnership Act,
she is entitled to the fair market value of O’Malley’s interest in the partnership.
Id. at 20 (citing, inter alia, 15 Pa.C.S. § 8341).6
The trial court explained that it granted the Conways’ motion for
summary judgment because the Agreement clearly and unambiguously
provided that the Partnership would continue on the death of any partner
following which the surviving partners had the right to purchase the deceased
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6 15 Pa.C.S § 8341 was in effect at the time the partners entered into the
Agreement and at the time of O’Malley’s death. In 2017, the legislature
repealed it and replaced it with 15 Pa.C.S. § 8441.
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partner’s interest for $1.00. Trial Ct. Op. at 5 (citing Agreement at Art. 9.01).
The trial court rejected Appellant’s argument that it must look beyond the
plain language of the Agreement to the “default rules” found in the Uniform
Partnership Act, aptly noting that the Act “applies only in the absence of a
partnership agreement addressing the effect of the death of a partner on
continuation of the business.” Id. at 5, 7. Here, Article 9 of the Agreement
clearly addresses the effect of O’Malley’s death on the continuation of the
Partnership.
Importantly, the court also found that the language of Article 9.01 was
clear and unambiguous as to the Conways’ right to purchase O’Malley’s
interest for $1.00. See id. at 7 (explaining that the “Partners agreed to the
terms for determining and purchasing a deceased Partner’s interest in Article
9.01 of the Partnership Agreement[.]”). We agree.
Following our de novo review, we likewise conclude that the plain
language of the Article 9.01 is clear and unambiguous as to the parties’ intent
with respect to the process of transferring the Partnership interest of a
deceased partner. In addition, our review confirms that the other articles of
the Agreement to which Appellant refers are irrelevant to any consideration of
this issue as they do not pertain in any way to this process. The Agreement,
therefore, clearly and unambiguously required Appellant to sell O’Malley’s
interest to the Conways for $1.00 as provided in Article 9.01. Accordingly, we
conclude that the trial court did not err in determining that no genuine issue
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of material fact existed and that the Conways were entitled to judgment as a
matter of law.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/31/2022
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