Brosky, W. v. MJC Industries, Inc.

• Court: Superior Court of Pennsylvania
• Decided: May 24, 2017
• Docket: Brosky, W. v. MJC Industries, Inc. No. 2138 EDA 2016
• Status: Unpublished

Opinion

J-A06022-17

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

WILLIAM AARON BROSKY, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellee

v.

MJC INDUSTRIES, INC.,

Appellant No. 2138 EDA 2016

Appeal from the Order June 21, 2016 In the Court of Common Pleas of Bucks County Civil Division at No(s): 2013-03355

BEFORE: PANELLA, SHOGAN, and RANSOM, JJ.

MEMORANDUM BY SHOGAN, J.: FILED MAY 24, 2017

Appellant, MJC Industries, Inc., appeals from the order entered June

21, 2016, in the Court of Common Pleas of Bucks County, granting the

praecipe of Appellee, William Aaron Brosky (“Brosky”) to withdraw Counts I,

IV, and V of his complaint, following the trial court’s previous order granting

Brosky’s motion for partial summary judgment as to counts II and III. We

affirm.

The trial court, partially quoting its prior opinion, summarized the

factual and procedural history of this case as follows:

In 2001, [Brosky] was approximately twelve (12) years old when he met Michael Mesko [an adult]. Sometime thereafter, Mesko became sexually involved with [Brosky]. [Brosky] eventually reported these incidents leading to Mesko’s arrest by the Allentown Police Department in February 2010. Mesko was charged with involuntary deviate sexual J-A06022-17

intercourse pursuant to 18 Pa. C.S. § 3123. On October 13, 2010, Mesko pled guilty to this charge and was sentenced to 5-15 years of incarceration.

Prior to his incarceration, Mesko owned and operated a landscaping business, Mesko Landscaping, Inc., which used for its operations certain real estate owned by Mesko personally. On October 12, 2010, the day before Mesko’s guilty plea, he signed a deed transferring his fee simple ownership of real property located at 3268 Route 212, Springtown, PA 18081 (hereinafter “the Route 212 property”) to Appellant, MJC Industries, Inc., in exchange for $1.00. In addition, on the same date, Mesko signed a deed transferring his ownership of approximately 36 acres of real estate located at 1515 Woodcock Road, Kintnersville, PA 18930 (hereinafter “the Woodcock Road property”) to Appellant in exchange for $1.00. Mesko also transferred stock in Mesko Landscaping, Inc. to Glenn Jackson, CEO of Appellant, MJC Industries, Inc. Other than the assets transferred, Mesko only retained a cabin in the Poconos, which he valued between $25,000 and $40,000. This cabin was subsequently sold at sheriff’s sale because Mesko was unable to pay the real estate taxes thereon. Mesko admitted that he did not retain any other valuable assets. The 1515 Woodcock Road property was unencumbered by any mortgage, tax lien or other liability at the time of transfer. Both Mesko and Jackson admitted that they believed the value of this property was approximately $200,000. [Brosky’s] appraiser valued the property to be $250,000 in October 2010. The 3268 Route 212 property was encumbered by a $200,000 line of credit. [Brosky’s] appraiser valued this property to be $265,000 in October 2010.

On April 1, 2011, [Brosky] filed a civil suit against Mesko in the Lehigh County Court of Common Pleas, Docket No. 2011-C-1300, which resulted in a stipulated judgment against Mesko in the principal amount of $500,000.00. The judgment

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was indexed in the Lehigh County Court of Common Pleas on December 14, 2012.

On May 13, 2013, [Brosky] filed the instant action in order to collect upon said judgment. At the time this suit was brought, [Brosky] had not collected any sum towards the $500,000 judgment. On June 26, 2013, Appellant filed an Answer to [Brosky’s] Complaint. Thereafter, the parties engaged in discovery, and various motions and responses were filed by the parties. On December 26, 2013, [Brosky] filed a Motion for Summary Judgment claiming that the allegations of the Complaint were uncontroverted and therefore, no genuine issue of material fact existed. On January 28, 2013, Appellant filed his Response to [Brosky’s] Motion for Summary Judgment as well as a “Motion to Dismiss Complaint with Prejudice for Failure to Join Indispensable Party and Lack of Jurisdiction.” The parties filed additional supporting memoranda thereafter.

Trial Court Opinion, 06/30/14, pp. 1-3.

[The trial court] granted [Brosky’s] Motion for Summary Judgment on February 20, 2014. Appellant filed an initial Notice of Appeal to Superior Court in response to [the] Order, and this Court’s Opinion in support of our Order was docketed on July 2, 2014. On May 18, 2015, [the] Superior Court filed a Memorandum Opinion quashing Appellant’s Appeal due to lack of jurisdiction, remanding the case for [the trial court] to make an express determination as to whether an indispensable party was absent from the litigation, as well as to resolve [Brosky’s] remaining claims that [the] partial summary judgment Order did not specifically address.

On June 30, 2015, Appellant filed a “Motion to Vacate Order Granting Summary Judgment and Rule on Superior Court’s Order of Remand and Instruction to Rule on Defendant MJC’s Motion to Dismiss for Failure to Name Indispensable Parties.” [The trial court] heard oral argument on said Motion on July 22, 2015, whereupon [it] ordered both parties to brief their arguments. Upon the arguments presented at oral argument and a review of the filings of record and the allegations therein,

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[the trial court] determined that Appellant’s Motion was without merit and issued an Order denying the Motion on September 14, 2015.

Appellant filed a Notice of Appeal of this Court’s Order on October 8, 2015, however, [the] Superior Court Quashed the Appeal sua sponte as it was interlocutory in light of the fact that Counts I, IV, and V of [Brosky’s] Complaint were still undecided. [Brosky] filed a Praecipe to Withdraw said Counts on June 9, 2016, which [the trial court] granted in a June 21, 2016 Order. Appellant filed a timely Notice of Appeal from that Order to the Superior Court on July 5, 2016.

Trial Court Opinion, 8/4/16, at 1-3 (internal citations omitted). The trial

court and Appellant complied with Pa.R.A.P. 1925.

Appellant presents the following issues for our review:

1. Did the trial court err as a matter of law in failing to Vacate its Order granting Summary Judgment after remand by the Superior Court when it:

a) failed to recognize the material issues of fact in dispute that should be presented to a jury concerning consideration for the transfer of real property as pointed out by the Superior Court;

b) violated the fundamental rule that “the Court is not to decide issues of fact when resolving a motion for summary judgment, but merely to determine whether any such issues exist”;

c) failed to recognize that genuine issues of material facts in dispute can be and are established by depositions of the parties; the trial court, despite being presented with the actors testimony by deposition in which they clearly indicate their belief that the transaction was a legitimate and necessary complex transaction between them which included critical non-monetary consideration, the court ignored these factors when granting summary judgment[;]

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d) In granting summary judgment based on the trial court’s own determination of facts and law the trial court erred as a matter of law and fact by not allowing a jury to ascertain the credibility, demeanor and veracity of the witnesses and draw their own conclusions from testimony given and further the trial court violated the “Nanty-Glo Rule[.]”

2. Did the trial court err as a matter of law in failing to grant [Appellant’s] Motion to Dismiss for failure to Name Indispensable Parties and then in proceeding with this case despite having no subject matter jurisdiction in this matter:

a) [A]ppellee failed to name as a party the debtor who sold the property in question and who would have to be proven to be in violation of the Uniform Fraudulent Transfer Act;

b) [A]ppellee failed to name as a party the individual who as sole shareholder, sole director, sole officer and sole negotiator for the shell corporation in whose name the real property was placed and who has right and interest related to the claim in the cause of action[;]

c) [A]ppellee failed to name as a party Mesko Landscaping, Inc., [a] jointly owned company of Jackson and Mesko that has over $400,000.00 worth of trees growing on the real property and [whose] assets were not allowed to be considered due to the trial judge granting summary judgment, is also an essential unnamed party as defined by Mechanicsburg Area School District.

3. The trial court failed as a matter of law and fact in ignoring the clear defense of Latches [sic]. The issue of Latches [sic] constitutes a separate defense from the alleged failure of consideration and it constitutes a separate and viable genuine issue of material fact in dispute tha[t] would defeat the motion for summary judgment. Further, had the proper parties been named as defendants they would have joined said issue[.]

Appellant’s Brief at 3-4.

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We must first address Appellant’s second issue in which it asserts that

the trial court erred in failing to grant the motion to dismiss the complaint

due to Brosky’s failure to join indispensable parties because such claim

implicates our jurisdiction. “Under Pennsylvania law, the failure to join an

indispensable party implicates the trial court’s subject matter jurisdiction.”

Orman v. Mortgage I.T., 118 A.3d 403, 406 (Pa. Super. 2015) (citation

omitted). This issue may be raised sua sponte. Id.

Appellant argues that three indispensable parties were not named in

the Complaint. Appellant’s Brief at 21. First, Appellant posits that Michael

Mesko, as the debtor who sold the property in question and “who would

have to be proven to be in violation of the Uniform Fraudulent Transfer Act,”

was an indispensable party. Id. at 21. Second, Appellant identifies Glenn

Jackson as an indispensable party and explains that Jackson is “the

individual who as sole shareholder, sole director, sole officer and sole

negotiator for the shell corporation in who’s [sic] name the real property was

placed and who has right and interest related to the claim in the cause of

action.” Id. at 21, 27-28. Third, Appellant asserts that Mesko Landscaping

is an indispensable party, and in support of such claim maintains that

“Mesko Landscaping, as a property of Mr. Mesko and Mr. Jackson and a[n]

occupier of the real property in question also has a stake in this matter. It

has a crop of trees growing on the property and meets the criteria [for an

indispensable party].” Id. at 29.

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Pennsylvania Rule of Civil Procedure 1032 provides as follows:

Rule 1032. Waiver of Defenses. Exceptions. Suggestion of Lack of Subject Matter Jurisdiction or Failure to Join Indispensable Party

(a) A party waives all defenses and objections which are not presented either by preliminary objection, answer or reply, except a defense which is not required to be pleaded under Rule 1030(b), the defense of failure to state a claim upon which relief can be granted, the defense of failure to join an indispensable party, the objection of failure to state a legal defense to a claim, the defenses of failure to exercise or exhaust a statutory remedy and an adequate remedy at law and any other nonwaivable defense or objection.

(b) Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter or that there has been a failure to join an indispensable party, the court shall order that the action be transferred to a court of the Commonwealth which has jurisdiction or that the indispensable party be joined, but if that is not possible, then it shall dismiss the action.

Pa.R.C.P. 1032.

An indispensable party is one whose “rights are so connected with the

claims of the litigants that no decree can be made without impairing or

infringing upon those rights.” Sprague v. Casey, 550 A.2d 184, 189 (Pa.

1988) (citations omitted). See also Commercial Banking Corp. v. Culp,

443 A.2d 1154 (Pa. Super. 1982) (“A person is a necessary and

indispensable party only when his rights are so connected with the claims of

the litigants that no decree can be made without impairing his rights.”). As

this Court has explained: “[i]f no redress is sought against a party, and its

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rights would not be prejudiced by any decision in the case, it is not

indispensable with respect to the litigation.” Orman, 118 A.3d at 406.

In evaluating this issue, the following factors must be considered:

1. Do absent parties have a right or an interest related to the claim?

2. If so, what is the nature of that right or interest?

3. Is that right or interest essential to the merits of the issue?

4. Can justice be afforded without violating the due process rights of absent parties?

Martin v. Rite Aid of Pennsylvania, Inc., 80 A.3d 813, 814 (Pa. Super.

2013) (citation omitted) (quoting Mechanicsburg Area Sch. Dist. v.

Kline, 431 A.2d 953 (Pa. 1981)).

A previous panel of this Court remanded this matter and in so doing

specifically directed the trial court to address the issue of whether Mesko,

Jackson, and Mesko Landscaping were indispensable parties to this action.

Brodsky v. MJC Industries, Inc., 760 EDA 2014, 122 A.3d 451 (Pa.

Super. filed May 18, 2015).1 Per this Court’s directive, the trial court

conducted a thorough analysis regarding each party. Following its cogent

and detailed analysis, which spans seven pages, the trial court concluded

that none of the three named parties constituted indispensable parties. Trial

Court Opinion, 8/4/16, at 16-22. The trial court’s determinations are

____________________________________________

1 We note that in the appeal previously before this Court, Appellee’s name was spelled “Brodsky”.

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supported by the evidence of record. We agree with the trial court’s well-

reasoned analysis and conclusions and adopt them as our own. Id. Thus,

having determined that there were no indispensable parties not named, we

conclude that we have jurisdiction over this matter and consider Appellant’s

remaining issues.

Appellant next argues that the trial court erred as a matter of law in

failing to vacate its order granting summary judgment after remand by a

previous panel of this Court. Appellant’s Brief at 12. As outlined previously

in presenting Appellant’s issues on appeal, Appellant presents four sub-

issues in support of this claim. Id. at 3, 12. We repeat them here:

[The trial court:]

a) failed to recognize the material issues of fact in dispute that should be presented to a jury concerning consideration for the transfer of real property as pointed out by the Superior Court;

b) violated the fundamental rule that “the Court is not to decide issues of fact when resolving a motion for summary judgment, but merely to determine whether any such issues exist”;

c) failed to recognize that genuine issues of material facts in dispute can be and are established by depositions of the parties; the trial court, despite being presented with the actors testimony by deposition in which they clearly indicate their belief that the transaction was a legitimate and necessary complex transaction between them which included critical non-monetary consideration, the court ignored these factors when granting summary judgment;

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d) In granting summary judgment based on the trial court’s own determination of facts and law the trial court erred as a matter of law and fact by not allowing a jury to ascertain the credibility, demeanor and veracity of the witnesses and draw their own conclusions from testimony given and further the trial court violated the “Nanty-Glo Rule.”

Appellant’s Brief at 3, 12.

An order granting summary judgment is subject to the following scope

and standard of appellate review:

Our standard of review on an appeal from the grant of a motion for summary judgment is well-settled. A reviewing court may disturb the order of the trial court only where it is established that the court committed an error of law or abused its discretion. As with all questions of law, our review is plenary.

In evaluating the trial court’s decision to enter summary judgment, we focus on the legal standard articulated in the summary judgment rule. Pa.R.C.P. 1035.2. The rule states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered. Where the nonmoving party bears the burden of proof on an issue, he may not merely rely on his pleadings or answers in order to survive summary judgment. Failure of a non-moving party to adduce sufficient evidence on an issue essential to his case and on which he bears the burden of proof establishes the entitlement of the moving party to judgment as a matter of law. Lastly, we will review the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party.

Shepard v. Temple University, 948 A.2d 852, 856 (Pa. Super. 2008)

(quoting Murphy v. Duquesne University, 777 A.2d 418, 429 (Pa. 2001)).

As explained previously, on February 20, 2014, the trial court granted

Brosky’s motion for summary judgment as to counts II and III of his

complaint. Count II of the complaint alleged that the transfers of the Route

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212 property and the Woodcock Road property to Appellant were fraudulent

transfers pursuant to Pennsylvania’s Uniform Fraudulent Transfer Act

(“UFTA”), 12 Pa.C.S. § 5104. Specifically, Brosky raised his claim under 12

Pa.C.S. § 5104(a)(2)(ii) which states:

(a) General rule.--A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

***

(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

12 Pa.C.S. § 5104(a)(2)(ii).

Count III of the complaint alleged that the transfers were fraudulent

pursuant to UFTA, 12 Pa.C.S. § 5105. Section 5105 provides that:

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

12 Pa.C.S. § 5105.

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After conducting a thorough analysis based on the evidence presented

as to the required elements of these two claims, the trial court concluded

that there were no genuine issues of material fact as to any of the elements.

Trial Court Opinion, 8/4/16, at 7-14. The trial court opined that: Brosky’s

claim arose before the transfers; Mesko did not receive reasonably

equivalent value in exchange for the properties; Mesko reasonably should

have believed he would incur debts beyond his ability to pay; and, Mesko

became insolvent as a result of the transfers. Id. The certified record

supports the determinations of the trial court. Accordingly, we adopt its

well-reasoned analysis as our own. Id. Thus, we conclude that the trial

court did not abuse its discretion in granting Brosky’s motion for summary

judgment as to Counts II and III of his complaint.

Furthermore, we conclude that Appellant’s fourth sub-issue, wherein it

asserts that the trial court violated the Nanty-Glo2 rule, lacks merit.

Appellant’s Brief at 13. Appellant contends that “[u]nder Nanty-Glo, the

party moving for summary judgment may not rely solely upon its own

testimonial affidavits or depositions, or those of its witnesses, to establish

2 Borough of Nanty–Glo v. American Surety Co. of New York, 163 A. 523 (Pa. 1932). The Nanty–Glo rule prohibits summary judgment “where the moving party relies exclusively on oral testimony, either through testimonial affidavits or deposition testimony, to establish the absence of a genuine issue of material fact except where the moving party supports the motion by using admissions of the opposing party or the opposing party’s own witness.” Lineberger v. Wyeth, 894 A.2d 141, 149 (Pa. Super. 2006).

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the non-existence of genuine issues of material fact.” Appellant’s Brief at

13. Appellant avers that the trial court violated this rule by relying on the

testimony provided by Mesko and Jackson. Id. Appellant maintains that

because Brosky called Mesko and Jackson as witnesses and failed to identify

them as defendants in this matter, they were his witnesses, and under

Nanty-Glo, Brosky could not succeed on his motion for summary judgment

based upon their testimony. Id.

Our review of Appellant’s answer to [Brosky’s] motion for summary

judgment reveals that Appellant failed to timely raise this issue. While

Appellant argued that the trial court should not grant Brosky’s motion for

partial summary judgment, it failed to mention the Nanty-Glo rule in its

response. [Appellant’s] Answer to [Brosky’s] Motion for Summary Judgment

as to Counts II and III of [Brosky’s] Complaint, 1/28/14. It appears that

Appellant raised this issue for the first time in its February 24, 2014 motion

for reconsideration. Motion for Reconsideration of Order Granting [Brosky’s]

Motion for Summary Judgment as to Counts II and III of [Brosky’s]

Complaint, 2/24/14, at ¶ 5. This Court has held that “a non-moving party’s

failure to raise grounds for relief in the trial court as a basis upon which to

deny summary judgment waives those grounds on appeal.” Devine v.

Hutt, 863 A.2d 1160, 1169 (Pa. Super. 2004); see also Rabatin v. Allied

Glove Corp., 24 A.3d 388, 391 (Pa. Super. 2011) (holding issues raised in a

motion for reconsideration filed after entry of summary judgment are

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“beyond the jurisdiction of this Court and thus may not be considered by this

Court on appeal”). This includes the failure to raise a Nanty-Glo issue.

Lineberger, 894 A.2d at 149. Additionally, Appellant failed to raise this

issue in its Pa.R.A.P. 1925(b) statement. “An appellant’s failure to include

an issue in his Rule 1925(b) statement waives that issue for purposes of

appellate review.” Id. Accordingly, Appellant is not entitled to relief on this

claim.

Even if Appellant had not waived its Nanty–Glo argument, the claim

still fails on the merits. The trial court did not rely solely on the testimony of

Mesko and Jackson in granting partial summary judgment.3 Appellant’s

Motion for Summary Judgment, 12/26/13; Complaint, 5/13/13; Trial Court

Opinion, 8/4/16, at 6-14; see also Rosenberry v. Evans, 48 A.3d 1255,

1262 (Pa. Super. 2012) (where the trial court did not rely solely upon oral

testimony in support of summary judgment, Nanty–Glo was not triggered.).

Additionally, as is clear from the facts in this case and the argument

presented by Appellant, Mesko and Jackson were adverse parties to Brosky.

See id. at 1261-1262 (where an individual’s legal interests in a given

context are adverse to a moving party, that individual is deemed an adverse

3 Evidence relied upon in addition to testimony included, inter alia, the deeds transferring the properties, Complaint, 5/13/13, at Exhibits A and B; stock transfer of Mesko Landscaping to Jackson, Motion for Summary Judgment, 12/26/13, at Exhibit 3; and appraisal reports of the properties, id. at Exhibits 6 and 7.

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party for purposes of the Nanty-Glo rule.). Thus, the trial court did not

violate the Nanty-Glo rule in granting Brosky’s partial motion for summary

judgment.

Finally, Appellant argues that the trial court failed as a matter of law

and fact in ignoring the defense of laches.4 Appellant’s Brief at 29.

Appellant argues that the “issue of latches [sic] constitutes a separate

defense from the alleged failure of consideration and it constitutes a

separate and viable genuine issue of material fact in dispute tha[t] would . .

. defeat the motion for summary judgment.” Id. Appellant also asserts that

“had the proper parties been named as defendants they would have joined

said issue.” Id. Apart from setting forth legal tenets regarding the doctrine

of laches, Appellant includes the following single statement in support of this

argument: “Mr. Brosky in allowing the claim he had to lay fallow for such an

extended period played a role in belief that they could safely go forward with

this transaction.” Id. at 30.

This Court has explained: “[t]he doctrine of laches is an equitable bar

to the prosecution of stale claims and is the practical application of the

maxim that those who sleep on their rights must awaken to the consequence

4 Although Appellant refers to this defense in its brief as “Latches,” we presume from the context of the brief that it is referring to the defense of laches.

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that they have disappeared.” Fulton v. Fulton, 106 A.3d 127, 131 (Pa.

Super. 2014) (quoting Jackson v. Thomson, 53 A. 506, 506 (Pa. 1902)).

The doctrine of laches bears these requirements:

Laches bars relief when the complaining party is guilty of want of due diligence in failing to promptly institute the action to the prejudice of another. Thus, in order to prevail on an assertion of laches, respondents must establish: a) a delay arising from petitioner’s failure to exercise due diligence; and, b) prejudice to the respondents resulting from the delay. Moreover, the question of laches is factual and is determined by examining the circumstances of each case.

Fulton, 106 A.3d at 132 (quoting Estate of Scharlach, 809 A.2d 382, 383

(Pa. Super. 2002)). The doctrine of laches is not subject to a statute of

limitations; indeed, laches may bar a suit in equity when a legal claim

involving the same matter is still within a statute of limitations. Id.

Here, Appellant has failed to allege the requirements for application of

the doctrine of laches. Moreover, Appellant has failed to establish a delay

arising from Brosky’s failure to exercise due diligence or prejudice resulting

to Appellant from the delay. Fulton, 106 A.3d at 132. Thus, Appellant has

failed to establish that the doctrine of laches is applicable in this case.

Additionally, we note that the $500,000 stipulated judgment obtained

by Brosky in the underlying civil action was not indexed in the Lehigh County

Court of Common Pleas until December 14, 2012. Trial Court Opinion,

8/4/16, at 14. Approximately five months later, Brosky initiated the instant

action in order to collect upon said judgment. Thus, without further

evidence to the contrary, it does not appear that a delay resulted from

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Brosky’s failure to exercise due diligence. Accordingly, we cannot conclude

that the trial court erred in failing to apply the doctrine of laches. Thus,

Appellant is not entitled to relief on this claim.

Order affirmed.5

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 5/24/2017

5 The parties are directed to attach a copy of the August 4, 2016 trial court opinion in the event of further proceedings in this matter.

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r- •, •'· . .. . . ' .. :, . Circulated 04/24/2017 04:15 PM

IN TIIE COURT OF COMMON PLEAS OJl BUCKS COUNTY, PENNSYLVANIA . . CIVIL ACTION - LAW .

WILLIAM AARON BROSKY No. 2013-03355 . v. MJC INDUSTRIES, INC •. . . ·• '111:t-ll ·. c,.,&#:2013,-0~ .Q()g 11285&1l6

cede· 5214 Judge:34 pa111~;,L. Baeh!le, Buclas County Pra!MnOla,Y OPINION Rq,t Z1531724 8/4/2016 3:Ul:32 P~. . .. . .. . i I I ~-·- MJC Industries, Inc. (hereinafter "Appellant") has appealed this 'Court's June 21, 2016

Order Withdrawing Counts I, IV, and V of William Aaron Brosky's (hereinafter "Appellee")

Complaint1• Pursuant to Pennsylvania Rule of Appellate Procedure l 925(a), we file this Opinion

in support of'this Court's ruling.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY l The facts of this case were detailed in this Court's prior Opinion, dated June 30, 2014,

and are set forth herein: CJ In 2001, Appellee was approximately twelve (12) years old when he met Michael Mesko. Sometime thereafter, Mesko became sexually involved with Appellee. Appellee eventually reported these incidents leading to Mesko's arrest by the Allentown Police Department in February 2010. Mesko was charged with involuntary deviate sexual intercourse pursuant to' 18 Pa C.S. § 3123. On October 13, 2010, Mesko pled guilty to this charge and was sentenced to 5-1;5 years of incarceration. Appellee's Complaint, ml 3-7; Appellant's Answer, ,i,r 3..;7_ Prior to his incarceration, Mesko owned and operated a landscaping business, Mesko Landscaping, Inc., which used for its operations certain real estate owned by Mesko personally. On October 12, 2010, the day before Mesko's guilty plea, he signed a deed transferring his fee simple ownership of real property located at 3268 Route 212, Springtown, PA 18081 (hereinafter "the Route 212 property") to Appellant, MJC Industries, Inc., in exchange for $1.00. Appellee's Complaint, Ex. A. In addition, on the same date, Mesko signed a deed transferring· his ownership of approximately 36 acres ofreal estate located at 1515 Woodcock Road, Kintnersville, PA l8930 (hereinafter "theWoodcock Road property") to Appellant in exchange. for $1.00. Appellee's Complaint, Ex. B. Me~ko also transferred stock I Previously, this Court issued an Order on Febniary 7, 2014 granting Summary Judgment on Counts II and m of . . Appel}~' s Complaint. Considering that our June 21, 2016 Order granted the withdrawal of each of the remaining of Counts Appellee's Complaint, it was ·a fina], appealable Order. · · · · ·· · ·

I (<:>' ,' I .: .. : :~ ; •,• • .. :l, "' '• : . . ~ ·.. . .:.,;.',,. '•· If\. ~ p ,· .... h' •• ··.,! .•.. •• •• ,\ • •• ·:, •• ~i.. •

,-'\ / ) in Mesko Landscaping, Inc. to Glenn Jackson, CEO of Appellant, MJC Industries, \ /

Inc. Mesko Deposition Transcrtpt (unlabeled exhibit to Appellee's Motion for Summary Judgment). pp. 54-57. Other than the assets transferred, Mesko only retained a cabin in the Poconos, which he valued between $25,000 and $40,000. This cabin was subsequently sold at sheriffs sale because Mesko was unable to pay the real estate taxes· thereon. Mesko admitted that he did not retain any other valuable assets. Mesko Deposition Transcript, pp. 64-65. The 1515 Woodcock Road property was unencumbered by any mortgage, tax lien or other liability at the time of transfer. Both Mesko .and Jackson admitted that they believed the value of this property was approximately $200,000. Appellee's appraiser valued the property to be $250,000 in October 2010. The 3268 Route 212 property was encumbered by a $200,000 line of credit. Appellee's appraiser valued this property to be $265,000 in October 2010. Appellee's Motion/or Summary Judgment, 1134- 35. . . On April 1, 2011, Appellee filed a civil suit against Mesko in the Lehigh County Court of Common Pleas, Docket No. 2011-C-1300, which resulted in a stipulated judgment against Mesko in the principal amount of $500,000.00. The judgment was indexed in the Lehigh County Court of Common Pleas on December 14, 2012. Appellee 's Complaint 11 11-12; Appellant's Answer, 1~1. 11-12. On May 13, 2013, Appellee filed the instant action in order to collect upon said judgment. At the time this suit was brought, Appellee had not collected any sum towards the $500,000judgment. On June 26, 2013, Appellant filed an Answer to Appellee's Complaint. Thereafter, the parties engaged in-discovery, and various motions andresponses were filed by the parties. On December-26, 2013, Appellee filed a Motion for Summary Judgment claiming that the allegations of the () Complaint were uncontroverted and therefore, no .genuine issue of material fact existed. On January 28, 2013, Appellant filed his Response-to Appellee's Motion forSummary Judgment as well as a "Motion to Dismiss Complaint with Prejudice for Failure to Join Indispensable Party and Lack of Jurisdiction." The parties filed additional supporting memoranda thereafter. · ·

This Court granted Appellee's Motion for Summary Judgment on February 20, 2014.

Appellant filed an-initial Notice of Appeal to Superior Courtin response to our Order, and this

Court's Opinion in support of our Order was docketed on July 2, 2014. On May 18, 2015,

Superior Court filed a Memorandum Opinion quashing Appellant's Appeal due to lack of

jurisdiction, remanding the case for this Court to make an express determination as to whether an

indispensable party was absent from the litigation, as well as to resolve Plaintiff's remaining

: . claims that our partial summary judgment Orderdid not specifically address. / \ \_/ ·2 •• ... • • • J. • .t:: ... 1, .... ' ~. ·.·. . ':.;. . -~·--·~ •.

On June 30, 2015, Appellant filed a "Motion to Vacate Order.Granting Summary () Judgment and Rule on Superior Court's Order of Remand and Instruction to Rule on Defendant

MJC's Motion to Dismiss for Failure to Name Indispensable Parties," This Court heard oral

argument on said Motion on July 22, 2015, whereupon we ordered both parties to brief their .arguments, Upon the arguments presented at oral argument and a review of the filings of record

and the allegations therein, we determined that Appellant's Motion was without merit and issued

an Order denying the Motion on September 14, 2015.

Appellant filed a Notice of Appeal of this Court's Order on October 8., 2015, however,

Superior Court Quashed the Appeal sua sponte as it was interlocutory in light of the fact that Counts I, IV, and V of Appellee's Complaint were still undecided. Appellee filed a Praecipe to

Withdraw said Counts on June 9, 2016, which this Court granted in a June 21, 2016 Order.

Appellant filed a.timely "Notice of Appeal from that Order to the SuperiorCourt on July 5, 2016.

STATEMENT OF MATTERS COMPLAINED OF ON APPEAL .. On July 7, 2016, this Court issued ·an Order pursuant to PaR.A;P. § 1925{b) requiring

Appellant to file a Concise Statement of Errors Complained of on Appeal no later than twenty.

one (21) days after entry of the Order. Appellant filed such a Statement on July 26, 2016, which raised the following issues, verbatim:

1. The court erred as a matter of law in failing to V acate its' [sic] Order Granting Summary Judgment, after remand by the Superior Court, by failing to recognize or appreciate the fact that material issues of fact are disputed and that there are issues to present to the jury regarding the consideration for the transfer of the real property in question as pointed out by the Superior Court in its' [sic] Opinion.

2. The court erred as a matter of law in violating the rule that the "Court is not to decide issues of fact when resolving a motion for summary judgment, but merely to determine whether any such issues exist". [sic] ·

3. 'The court erred as a matter oflaw when it failed to recognize that genuine issues of · materialfactsin dispute are establishedby the depositionsof theparties tothe

3 \ __ / \ / 'u1 ,.l,-,,' ,:,• •:,.oL'., , ··~ .. · ..· ', -.::~-.. . .

transaction that is the core issue that, as plaintiff avers, is subject to the Fraudulent (J Transfer Act. Thus [sic] despite being presented with the actors [sic] testimony from depositions {sic] which clearly indicate a legitimate and necessary complex transaction between the parties that included critical non-monetary consideration to support said transaction [sic] the court ignored these factors· in determining that there are no issues of material fact thus [sic] granting the Motion for Summary Judgment

4. The court erred as a matter of law in·granting summary judgment in that it failed to consider the defense that there is a genuine issue of material fact because the cause of action is dependent upon the credibility and demeanor of the witnesses who will testify at trial. By granting Summary Judgment [sic] .the trial court.ailed to allow a jury to draw their conclusions from testimony as given.

5. The court erred as a matter of law and fact in ignoring and failing to address or consider the clear defense of Latches [sic] presented by the defendant Latches constituted a separate defense from the alleged failure of consideration by the.court. The. question of latches [sic] presents a separate avenue of a genuine issue of material · fact that is sufficient to defeat a motion for summary judgment independent of the other issues presented.

6. The trial court erred as a matter of law in that it ruled on the Motion for Summary Judgment despite having no jurisdiction over the matter. The plaintiff failed to name as a party the individual who owned the properties that are alleged to have been · :fraudulently transferred. Thus, an essential absent party who has a right or interest related to the claim of the cause of action remains an unnamed party and therefore ( ) .{sic] the court was_deprived of jurisdiction.

7. The· court erred as a matter of law in that it ruled on a Motion .for Summary Judgment despite having no jurisdiction over the matter, due to the fact that The "[sic] plaintiff failed to name as a party the individual who was the sole shareholder of the defendant company, Glenn Jackson, to whom the properties were transferred and, who had invested in the properties that are alleged to have been· fraudulently transferred, prior to the transfer. ·

8. The court erred as a matter oflaw in that it ruled on a Motion for Summary Judgment despite having no jurisdiction over the matter, due to the fact that The [sic] plaintiff failed to name as a party the Company, Mesko Landscaping, Inc., which was an essential party to the litigation in that the company stores over $400,000 "in inventory, ie. [sic] Trees [sic] needed for its' [sic] business, on the property. Thus, another essential absent party who has a tight-or interest related to the claim of the cause of action remains an unnamed party and therefore [sic] the court was deprived on jurisdiction. ·

9. The trial court erred as a matter oflaw in its failure to name essential parties to the · action, to wit: the transferor, Michael.Mesko; the individual stockholder of the transferee, Glenn Jackson; and the corporation, Mich_ael Mesko, Inc., __which uses the

·4 () .. 't'... , , ..... -\,:• ·-·-··· .. •. . . : · ... :-...:· "• •.. ,:.. H. •'· ,...,;,.·, .. : J,·,,~ ·~-·- .... :,1, •• ,_ •

l.·-) property transferred and acquired by the Plaintiff for storage of its' [sic] inventory, to wit: trees planted for landscaping purposes. As a result of failing to name _ indispensable parties, the court lacked jurisdiction over-the matter and the Monon to Dismiss should have been granted.

ANALYSIS.'

I. This Court appropriately granted partial summary judgment given that there existed no genuine ·issue-of material fact. 2

A. Summary Judgment Standard

The scope of review of an order grantingor denying summary judgment is plenary.

Universal Teleservices, Arizona. LLC v. Zurich American Ins. Co .• ·879 A.2d 230, 232 (Pa. Super. 2005). Toe well-established standard of review demonstrates that "the trial court's order

will be reversed only where it is established that the court committed an error of law or abused

its discretion." Universal Health Services~ Inc. v. PIG.A, 884 A.2d .889, 892 (Pa. Super. 2005).

"An abuse of discretion exists when the trial court has rendered a judgment that is manifestly · .

unreasonable, arbitrary, or capricious, has failed to.apply the law, or was motivated by partiality,

prejudice, bias, or ill will." Chaney v.·Meadville Medical Center, 912 A.2d 300, 306 (Pa. Super.

2006) (citing Hannan v. Borah, 756 A.2d 1116~ 1123 (Pa. 2000)).

Under Pennsylvania Rule of Civil Procedure 1035.2, summary judgment may be rendered as a matter of law:

(1) whenever there is no genuine issue of material fact as-to a necessary element of the cause of action or defense which could be established by additional discovery or expert report; or

(2) if after the completion of discovery relevant to the motion ... an adverse party who will bear the burden of proof at trial has .failed to produce evidence of facts

2 The below section of analysis (I.).has been duplicated in its entirety from this Court's June 30, 2014 Opinion in . this ~~~~- ~PP.ellant's (irst fiye (5) ~tters Complained of on Appeal are identical in nature to those. raised. in his previous Appeal, and our analysis of these claims remains the same. TheSuperior Court correctly observed that . Appellant's.prior Appeal was interlocutory in.nature and, therefore, .dJd noJ render adecjslon upc;,rt the claims of App'ellant ci this Court's reasoning as expressed in our Opinion.~ Trial Court Opinion, 06/30/14, pp. 4-15. .( ) 5 "--··' essential to the cause of action or defense which in ajury trial would require the () issues to be submitted to a jury.

Summary judgment is appropriate when the moving party establishes that the case is free

and" clear of doubt, that there are no genuine issues of material fact, and the moving party is

entitled to relief . as a matter oflaw. Summers v. Certainteed Coro .• 997 A.2d . 1152 (Pa. 2010).

The function of the Court is to examine the record in the light most favorable to the non-moving

party and accept as true all well-pleaded facts in the pleadings together with all reasonable

inferences there from favoring the non-moving party. :Ryan v. Asbestos Corp. Ltd., 829 A.2d 686

(Pa. Super. 2003). The burden is on the moving party, but it has long been recognized that

summary judgment should be granted to the movant unless the opposing party offers competent

evidence, which would be admissible at trial, showing that there is a genuine issue as to a

material fact that would warrant submitting the case to the trier· of fact." Community Medical

Services of Clearfield, Inc. v. Local 2665, 437 A.2d 23, 27 (Pa. Super. i981). (. . ....')· B. Summary Judgment was-Appropriately-Granted

Appellant's Statement of Matters Complained of numbers 1 through 5 ail pertain to this

Court's grant of summary judgment to Appellee on Counts II and Ill of Appellee's Complaint.

Therefore, we discuss these matters jointly herein. This Court neither erred as a matter of law nor

abused its discretion in granting summary judgment in favor of Appellee because no material

facts are at issue.

Count II of the Complaint alleges that the transfers of 3268 Route 212 and 1515

Woodcock Road (hereinafter "the properties'') to Appellant were fraudulent transfers pursuant to

Pennsylvania's Uniform Fraudulent Transfer Act ("UFTA"), 12 Pa.C.S. §5104. Section 5104

a provides several alternatives for finding transfer fraudulent. Appellee raised his claim unde! 12

p~~.s. §?1Q4(a)(2)(ii) which states:

6 (_) • . !.ll ... . . ·: ..• ~ v . ,f!:!_ ... , ''1 .~I, ' t';' .... ,,• 'ti '!"4 • " • -·· ·... ~.=·.. . . . . :,. . .U;;.h; . ... ~.. . . ••• . ·-r. , ••.

A transfer made or. obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred . . . without receiving a reasonably equivalent value. in exchange for the transfer or obligation, and the debtor ... intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.3

Count Ill of the Complaint alleges that the transfers were fraudulent pursuant to UFT A, 12

Pa.C.S. §5105. Similarly, Section 5105 provides that:

.A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or ·the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent. value in exchange for the transfer or obligation and the · debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

No genuine issue of material fact was present as to any of the elements requiredby 12

Pa.C.S. §_51.04(a)(2)(ii) or 12 Pa.C.S. §5105.

1.) Appellee's Claim Arose Before the Transfers

Although Section 51°04(a) allows for claims that arose before or after an allegedly

fraudulent transfer, Section 5105 requires·that the claim have arisen before the transfer: In this

case, Appellee's claim arose at the time of the conduct which led to the liability, Mesko's sexual

acts with Appellee. These acts occurred well before the transfer of the properties.

A "creditor" is a "person who bas a claim" and a "debtor" is a "person who [s liable on a

claim." 12 Pa.C.S. . §5101.. A "claim" is generally defined as a "right to payment, whether or. not

the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,

clisp~ted, undisputed, legal, equitable, secured or unsecured." 12 Pa.C.S. §510l(b). Legal

· liability "when read together with the word Claim, ... cannot mean only liability which exists

3 _12 Pa. C.S. § 5104(a)(l) requires that the debtor have acted "with actual intent to hinder, delay or defraudany .... creditor of the debtor.." Since Appellee bas raised thesecond option pursuant to 12 Pa, C.~. § 5104(a)(2), actual intent to defraud was not required on the part of Mesko. · ·

7 '... , .-·.r. :::, :,. . . '~. •,,,•' .;::.;.,:.

after a verdict following a trial." Baker v. Geist1 321 A.2d 634, 636~37 (Pa. 1974). In Baker,

liability was based on the debtor's conduct, her negligence in a motor vehicle collision, which

occurred before the alleged fraudulent transfers. Although a jury verdict was obtained against

debtor subsequent to the alleged fraudulent transfers, the Court found that a claim arose before

the transfers. See id.; see also Melat v·. Melat. 602 A.2d 380, 386 (Pa. Super. 1992). ' The creditor in this case was Appellee Brosky, who had obtained a $500,000.00 judgment

by stipulation in the Lehigh County Court of Common Pleas. The judgment was obtained against

the debtor, 'Michael Mesko, and was indexed on the docket on December l 4, 2012. Toe transfer

of the properties occurred more than two (2) years prior, on October 12, 2010. Similar to the

Baker case, although Appellee did not obtain the stipulated judgment until December 2012,

Mesko's conduct from approximately 2001 until sometime before February.4010, when.he was

arrested, established Appellee as.a creditor with a claim against Mesko well before the October ( ) •,., J

2010 transfers. Thus, this element is satisfied under both Sections 5104(a)(2) and 5105 ..

2.) Meskodid not Receive Reasonably Equivalent Value

Sections 5104(a) and 5105 require that the allegedly fraudulent transfers be made by a

debtor that does not receive reasonably equivalent value. There is no genuine issue of fact that

Appellant failed to provide reasonably equivalent value to Mesko in exchange for the properties.

First, we look . to the instruments transferring ownership of the properties . from Mesko to

Appellant, MJC Industries, Inc. The second paragraph of the instrument transferring ownership

of the Route 212 property states that "the said Grantor(s) for and in consideration of thesum of

One Dollar ($1.00) lawful money of the United States of America ... has granted ... unto the

said Grantee(s), its'lbis/her/the~ heirs and Assigns." Appellee's Compl.aint, Ex. A. On the first

· page of the instrument which purports to convey the Woodcock Road property, it states "[t]bat in ..

/ \

\ ) 8 ........ ~J · ··· . ~ .. . ...: .. 11:. ·.;,•·: ;. 1' • .... ~ ,~ ••• ,.~: • .! .. ,,. ......

consideration of the-sum of One ($1.00) Dollar, in hand paid, ... the said Grantor does hereby

grant and convey to the said Grantee .... " Appellee's Complaint, Ex. B. Mesko admits that he

was paid $1.00 by Appellant. Mesko Deposition-Transcript, pp. 30-31.

Appellant argued that additional consideration, not named in the deeds, was provided to

Mesko in exchange for the properties. We shall address-each claim of additional consideration

individually. Moreover.we note that the-Woodcock Road property was appraised by Appellee to

have equity in the amount $250,000 at the time of transfer. Further, the 3268 Route 212 property

was appraised to have 'equity in the amount ·of $265,000 and was subject to a $200;000 line of

credit, leaving equity of approximately $65,000.

In First Nat. Bank of Marietta v. Hoflin~ the Pennsylvania Supreme Court rejected the . . . contention that past services rendered by a wife to her husband over several years constituted

"fair consideration." See First Nat. Bank of Marietta v. Hoffines; 239 A.2d 458, 463 (1968); see c .. ,) ··· also Coscia v. Hendrie, 629 A.2d l 024, 1027 (Pa. Super.' 1993). The case at hand presents very ·

similar circumstances. Appellant argues that Glenn Jackson, Appellant's CEO, had invested

several years of time, money and effort into the operation of Mesko Landscaping, Inc., the

landscaping company Mesko and Jackson, neighbors and family friends, were jointly involved

in. The company was later transferred to Jackson in addition to the properties. Appellant claims ·

the parties deemed these past services rendered as part of the purchase price instead of

repayment and salary for the years of work Jackson provided. First, we note that the conveyance

documents never mentioned Jackson's past services. Appellee' s· Complaint, Ex. A and B.

Further, Jackson stated that he did not keep track of the hours he worked for the landscaping

. company, and could not provide an hourly rate for his services. Jackson Deposition Transcrjpt

(unlabeled exhibit to Appellee's Motion for Summary Judgment), p. 38. Appellant failed to

( ) \. .i 9 '.-) provide sufficient evidence to support that reasonably equivalent value was provided in the fonn ~ .. /

of services for these properties, estimated to be worth $250,000 and $265,000.

. Appellant next claimed that Jackson guaranteed Mesko employment and a place to live .

upon his release from prison, and that Mesko received an option to buy back all or part of the

business at the time he was released. Jackson Deposition Transcript, p. 39, lines 13-23. Appellant

claims this as additional consideration to support the property transfers. However, consideration

in the form of a promise to support a grantor in the future is invalid "if by the conveyance the

granter renders himself unable to pay his .debts, the theory being that a conveyance whereby a

debtor puts his ·property beyond the reach of his creditors under an agreement that it shall be

devoted in any way to his own use is constructively fraudulent." Commonwealth. v. Smith. 25

A.2d 694, 696 (Pa. 1942); see also Com. Trust Co. of Pittsburgh v. Cirigliano, 41 A.2d 863, 864.

65 (Pa. 1945) (Pennsylvania Supreme Court held that a son promising to support his mother for

the rest of her life was invalid consideration). Assuming Appellant's statements are true, Mesko,

the grantor, rendered himself unable to pay his debtsby making the transfers, and the transfers

were devoted to his own future use and benefit This would be constructively fraudulent

Appellant further. argues consideration in the form of a conservation easement on the

Route 212 property assumed by Appellant as part of the.transfer, The Conservation Easement is

noted on the deed, which states that the easement ''runs with the land and ... was granted to

Heritage Conservancy." Appellee1s Complaint, Ex. B. This easement was given in exchan~e for

$204,000, which was deposited· into the business checking account of Mesko Landscaping, Inc.,

a company whose assets were also acquired by Glenn Jackson, CEO of Appellant, MJC

Industries, Inc. Mesko Deposition Tran.scrim, pp. 22-25. Appellant.fails tostate how an easement

.:tha{ runs.with the land andls assumed by a grantee would constitute reasonably equivalent valuev

, ) 10 •• Appellant merely states that the easement prevented any development on the land. Inaddition,

Appellant's CEO possessed the business account in which the proceeds from the grant of the

easement were deposited. Appellant failed to present any evidence to suggest the easement on

the land constituted valuable consideration.

Finally, Appellant argues that its assumption of a $200,000 line of credit on the Route

212 property constituted reasonably equivalent value. We first note that Appellee's estimate, the

only estimate submitted to this· Court for this property, was $265,000.· Further, the Woodcock

Road property, estimated to be worth $250,000, was unencumbered. Assumption.of a mortgage

or other encwnbrance on a property by a grantee could be regarded as "fair consideration" as it

gives a beriefit to the granter. Sec Cont'l Bank v. Marcus, 363 A.2d 1318, 1320-21 (Pa. Super.

1976). However, the Court must consider the entire fabric of the dealings between the parties. Id.

First, the line of credit and the encumbrance on the property was in the amount of $200,000, ( ) <., .... whereas the property was estimated to be worth $265,000, rendering a significant $65,000 of

equity obtained by Appellant for essentially no -additional consideration as discussed above.

Further, Mesko stated that some of the· proceeds from the grant of the· conservation easement

were used to pay down the line of credit. He estimated approximately $50,000 was used for this

purpose, Mesko Deposition Transcript pp. 22-24. Thus, the equity in the property acquired by

Appellant is likely higher than $65,000. Moreover, both properties were transferred from Mesko

to Appellant on exactly the .same day, October 12, 2010, the day before he pled guilty to his

criminal charge. The Woodcock Road property, estimated to be worth $250,000, was

unencumbered, and therefore acquired along with the 3268 Route 212 property for essentially nothing. These two properties hastily transferred to Appellant theday before Mesko's guilty plea.

had a combined value of $515,000. Therefore, viewing the entirety of the dealings .between th~

) 11 parties, there can be' no doubt that reasonably equivalent value was not provided by Appellant ( ) even assuming the. $200,000. line of credit constitutes consideration. Thus, reasonably equivalent

value was not provided toMesko, satisfying the·element required by Sections S104(a) and 5105.

3.) Mesko Reasonably Should Have BehevedHe would Incur Debts Beyond His Ability to Pay

12 Pa.C.S. §5104(a)(2)(ii) requires that the debtor have "believed or reasonably should

have believed that the debtorwould incur, debts beyond the debtor's ability to pay as they

became due."

First, Mesko made the transfers of the property the day before he was pleading guilty to a

criminal charge that ultimately led to his imprisonment for a term of 5-15 years. A reasonable

person in Mesko's circumstances would have believed that he faced potential civil liability to the

victim of his crimes. Appellee initiated his civil suit in April 2011 ~ approximately six months

after Mesko's guiltyplea and two months after his incarceration. ('') Furthermore, Mesko stated that he had no savings accounts and last had a checking

account prior to his incarceration in February 201.1. This checking account was transferred to

Appellant. Mesko Deposition Transcript, pp. 8-9, 25. Additionally, after the transfer of the

properties to Appellant, Mesko was left with only a cabin located in Pike County. Mesko

Deposition Transcript, pp. 64-65. Aside from the debts Mesko reasonably could have believed he

would incur from the victim of his crimes, Mesko also had taxes and other fees associated with

the cabin which was still retained in his name. Nonetheless, Mesko. retained no bank accounts

nor any interest in his landscaping business. Thus, Mesko either knew or reasonably should have

believed that he would be unable to pay these costs associated with the cabin. In fact, the cabin

was ultimately sold at sheriff's sale because Mesko failed to pay the property taxes. Mesko

Deposition Transcript p. 65.

12 l) Therefore, Mesko reasonably should have believed that he would incur debts beyond his

ability to pay as they became due, and nonetheless, he made the property transfers to Appellee,

satisfying this element of Section 5104(a)(2)(ii).

4.) Mesko Became Insolvent as a Result of the Transfers

Similar to Section 5104's requirement that the debtor believed or reasonably should have

believed he would incur debts beyond his ability to pay as they became due, 12 Pa.C.S. §5105

requires that the debtor was insolvent at the time of the transfer or the debtor became insolvent.as a result of the transfer. "A debtor is insolvent if, at fair valuations, the sum of the debtor's debts

is greater than all of the debtor's assets." 12 PaC.S. §5102(a). Further, adebtorispresumed to ·

be insolvent where the debtor ''is generally not paying the debtor's debts as they become due ...

. This presumption shall impose on the ·party against whom the presumption 'is directed the

burden of proving that the nonexistence of insolvency is more probable than its existence." 12

Pa.C.S. §5102(b).

Mesko's debts included his personal liability to Appellee, a $500,000 stipulated

judgment. Mesko admitted that after the transfers, he had no valuable assets in his name. He

possessed no saving or checking accounts, sold his interest in his landscaping company toGlenn

Jackson, and the only property he retained after the transfer of the twoproperties to Appellant

was the cabin in Pike County. Mesko Deposition Transcript, pp. 8-9, 64-65. Mesko's $500,000

debt to Appellee was greater than all of the assets Mesko owned subsequent to the transfer of the

properties. Furthermore, Mesko was unable to pay the tax liability of the cabin property, which

led to the loss of the property through sheriff's sale. Thus, Mesko paid neither the $500,000,

judgment nor the taxes on the cabin property as they became due. This created a preswnption of

. insolvency .requiring the .party against whom it was directed, Appellant in this matter.~ the. third

13 C.) party recipient of the transferred property, to prove the nonexistence of insolvency was more

probable than its existence. Appellant failed to present any evidence to prove the nonexistence of

insolvency. Furthermore, the two transferred properties, valued at acombined $515,000, bad

sufficient value to compensate Appellee for the $500,000 judgment. Thus, Mesko's insolvency

was the result of the transfers of the two properties satisfying the final element of Section 5105.

5.). Appellant Failed to Provide Support for the Defense of Laehes

Appellant's Statement of Matters Complained of Number 5 .raises the defense of laches

as adefense to Appellee's cause of action. Appellant failed to present thebasis for its claim to

this Court. We note however that UFTA, 12 Pa.C.S. §5109(2)provides that a cause ofaction

with respect to a fraudulent transfer is extinguished unless the action is brought "under section

5104(a)(2) or 5105 (relating to transfers fraudulent as to present creditors), within four years

after the transfer was made or the obligation was incurred." The transfers of the properties in this

matter occurred on October 12, 2010 and Plaintiff initiated the cause of action via writ of

summons on May 3, 2013. Therefore, the cause of action was timely filed pursuant to the

statutory four (4) year standard.

Furthermore, the equitable defense oflaches "requires not only an unjustified delay, but

also that the opposing party's position or rights be prejudiced as a result of that delay." Class of

Two Hundred Admin. Faculty Members of State· Colleges in Com., by Reeser v. Scanlon, 466

A.2d 103, 105 (Pa._ 1983). The $500,000 stipulated judgment obtained by Appellee in the

underlying civil action was not indexed in the Lehigh County Court of Common Pleas until

December 14, 2012. Approximately five (5) monthslater, Appellee initiated the instant action to

collect upon said judgment. Appellant failed to present evidence to support a meritorious defense

through the laches doctrine,

14 (\ ) . . !···

C. The Money Judgment Remedy was Proper under the UFTA

This Court's February 7, 2014 Order granted Appellee's Motion for Summary Judgment

as to Counts II and III of Appellee's Complaint and directed the Prothonotary to enter judgment . . against Appellant in the principal amount of $315,000. Appellant argues that the UFTA does not

permit the recovery-of money judgments. We address Appellant's contention herein.

12 Pa.C.S. §5107 provides various remedies available to creditors if a transfer is proved

fraudulent These include avoidance of the transfer, attachment of the assetinjunction against . . further disposition by a debtor or transferee, appointment of a receiver, and.any other relief the

circumstances may require. We also note that 12 Pa.C.S. '§5108(b) and (c) permit the recovery of

a j~ent for the value of an asset(s) transferred against the first transferee of the asset. Thus,

Appellant's contention that the UFTA does not permit the recovery of money judgments is

incorrect. Furthermore, the UFTA under Section 5 l07(a)(3)(iiiJ provides the court with the (\, J discretion to award any relief.the circumstances require. See Kraisinger v. Kraisinger, 34 A.3d ... ,/

168, 175 (Pa. Super: 2011) (finding no abuse of discretion where the trial court awardeddebtor's

former counsel $40,026.13 in satisfaction of a judgment after finding the underlying property

transfer to be fraudulent).

Although not specifically raised as anissue, we offer some reasoning in regards to the

$315.000 amount awarded to Appellee. 12 Pa.C.S, §5108(c) states that a money judgment "must

be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment

as the equities may require." The Woodcock Road property was valued to have equity in the

amount of$250,000 at the time of transfer. The Route 212 property was valued in the amount of

. at the time of transfer and encumbered $265,000 . by a $200:000 line of credit.Ieaving a

15 ( <.. ) remainder of $65,000 in equity. Thus, the combined equity value of the properties, $315,000, () was awarded to Appellee.

II.. This Court properly ruled upon Appellee's Motion for Summary Judgment and Appellant's Motion to Vacate considering that all essential parties to the action were named by Appellee. .

Appellant argues in his sixth through ninth Matters Complained· of on Appeal that this

Court erred in holding that Michael Mesko, Glenn Jackson, and Mesko Industries were not

indispensable parties. These contentions will be discussed collectively below,

:Pa.R.C.P. § l 032 dictates that "whenever it appears by suggestion of the parties or

otherwise that ... there has been a failure to join an indispensable party, the court shall order •..

that the indispensable party be Joined, but if that is not possible, then 'it shall dismiss the action."

Generally, this Court will find that a party isindispensable to an equity action when:

... he has such an interest that a final decree cannot be made without affecting it, or leaving the controversy in such a condition that a fiaal determination may be wholly inconsistent with equity and good-conscience. That is to say, his· presence (') as a party is indispensable where his rights are so connected with the claims of the litigants that no decree can be made between them. without impairing such rights.

Mechanicsburg Area Sch. Dist. v.'K.line, 431 A.2d 953., 956 (Pa. 1981).

· The Pennsylvania Supreme Court has offered at least four factors that a court should

consider before making a determination as to the existence of an indispensable party. These

'include (1) whether an absent party has a right/interest related to the claim, (2) identifying that

right/interest, (3) establishing whether that right/interest is essential to the merits of the case, and

(4) ensuring that justice can be done without violating the due process rights of the absent party.

Id. "All [these] considerations ... are themselves conclusions of law to be made by the court

after due consideration. Bare factual allegations of a party arc not dispositive for. the issues

underlying the indispensable party question." I~ at 958. n.8.

16' To establish whether a right or interest is essential to the merits of the case requires a

court to conduct a further inquiry. An absent party's asserted right must be "so essential to the

merits of the question,' such that it must be 'so much affected by the decree, that the court cannot

proceed to a final decision of the cause, until they are parties." lg, at 97, citing RusseUv. Clark's

Ex'rs, 11 U.S. 69, 98 (1812). The Pennsylvania Supreme Court has further interpreted this

question of essentialness to revolve around the directness of the connection between the asserted

right and the particular case. In Columbia Gas Trans,portation Corp. v. Diamond Fuel Co., the

Court held that "an indispensable party. is one whose rights are so directly connected with and

affected ~Y litigation that he must be a party of record to protect such rights, and his absence

renders any order or decree of court null and void for want of jurisdiction.'.' 346 A.2d 788, 789

(Pa 1975). The rights and interests asserted by Michael Mesko, Glenn Jackson, and Mesko

Industries donot meet the abovementioned standard.

A. Michael Mesko () In his deed conveying the properties at issue to.Appellant,· Michael Mesko did not retain.

any legal interest in those properties. Appellant alternatively claims that, as evidenced in

Mesko' s deposition testimony, Mesko did retain an option to repurchase the properties as well as

the promise-of future employment on the properties after his eventual release from incarceration.

However, Pennsylvania law regarding contract interpretation is well-settled 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 .... When the terms of a contract are clear and unambiguous, the . intent of the parties is to be ascertained from the document itself. Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 468 (Pa. 2006) (citations . omitted).

Mesko transferred . . each of the. properties at issue to MJC Industries,. Inc. in exchange ' .• for. . · . ·

· $1.00-by deeds dated October·12, 2010! :whereupon hedid not retain any interest to the . 17 •• properties. The terms of the contract are clear and unambiguous. There is no clause or any other

indication that Mesko reserved a right for himself in the properties. As such; Mesko cannot

satisfy even the first factor laid out by the Pennsylvania Supreme Court, that he has an existing

right or interest. ,·· Appellant further offers that Mesko is an indispensable party due to his status as the

transferor of the properties in this fraudulent transfer, claiming that a transferor must always be

named in any action by a creditor. However, there is no support for this position in Pennsylvania

law. In Temtex Products. Inc. v. Kramer, 479 A.2d 500 (Pa. Super. 1984) the SuperiorCourtwas

presented with a situation where a creditor attempted to seek relief from a fraudulent transfer

engaged in by a debtor. The debtor, who was the :fraudulent transferor, sought a stay of the action

as a result of his pending bankruptcyproceeding; however, Superior Court denied bis motion.

The Court reasoned that "[t]he BankruptcyCode does·not bar proceedings in a case in which the·

bankruptcy debtor has no interest-in the property at issue." Id. at 509. We find this reasoning persuasive,' as Superior Court implicitly held that the transferor in a fraudulent transfer action has

no interest in transferred property after completion · of the transfer.

We finally look to the Fraudulent Transfer Act itself to find support for our ruling that

Mesko is not an-indispensable party. 12 Pa.C.$. § 5107(a) spec~fically provides, "[i]n an action

for relief against a transfer or obligation under this chapter, a creditor ... may obtain:

(1) · Avoidance of the transfer or obligation to the extent necessary to ·satisfy the creditor's claim. (2) An attachment or other provisional remedy against the asset transferred or other . property of the transferee in accordance with the procedure prescribed by applicable law. · (3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure: . (i) an injunction against further disposition by the debtor or a transferee, or ~~th,of~heasset transferred or.ofother ~roperty; . ·

18 (ii) appointment of a receiver to take charge of the asset transferred or of other () property of the transferee; or (iii) any other relief the circumstances may require." (emphasis added).

The statute clearly authorizes a creditor to seek damages from the original transferor OR the

transferee OR the asset transferred. The statute does not mandate that a transferor must be-named

in a recovery action, and on its face, seems to suggest otherwise,

Additionally, and perhaps more significantly, the Comments to the statute offer further

insight. In particular, Comment (4) r~ ' "As under the Uniform Fraudulent Conveyance Act, a

creditoris not required to obtain ajudgment.against the debtor-transferor or to have a matured

claim in order to proceed under subsection (a)." We observe that if a transferor were a necessary

party to a fraudulent transfer action, it would be superfluous for the legislature to authorize a

creditor t~ proceed without a judgment against ~ party that must be joined in the underlying

action, Appellant's main argument for Mesko being an indispensable party would create a· logical

incongruity within the statute itself: and therefore, it is without merit By allowing a creditor to

proceed under the Act without obtaining a prior judgment against the transferor, the legislature

asserts that such a party is not indispensable to the action. As a result of this finding, Mesko is.

not an indispensable party.

B. Glenn Jackson

Glenn Jackson likewise fails to meet the standard to be considered an indispensable party

as he does not have a direct right implicated in this litigation. Appellant stresses to this Court that

as the owner and sole shareholder ofMJC Industries, Jackson has a corresponding interest in the

outcome of this case. Appellant further claims that this right stems from the losses that Jackson

stands to bear as. a result of this Court's potential entry of summary judgment against MJC

Industries, his company. However, even if we accept Appellant's arguments, this right does not

19 l.) satisfy the third factor provided by the Pennsylvania Supreme Court, that any right must be

essential to the merits of the case.

Inorder to be.essential, Jackson's right must be so "directly connected with and affected

by litigation that he must be a party of record to protect such.rights." The Superior Court, in

deciding a case involving a shareholder's derivative action against the directors of its wholly

owned subsidiary, provided the following in dicta: "An injury to a corporation may, to be sure, .

result in injury to the corporation's stockholders. Such injury, however, is regarded· as "indirect",

and insufficient to give rise to a direct cause of action by the stockholder," Burdon v. Erskine,

401 A.2d 369, 370 (Pa. Super. 1979). While the case at bar involves a different factual scenario

than Burdon, any injury that Jackson may suffer as a result of the present litigation would

necessarily result from injury to MJC Industries. f',.s such, Jackson's interest would be derivative

of his holdings in MJC Industries, which stands in stark contrast to having a direct interest

implicated in the litigation. (:) Furthermore, we observe that the Superior Court directly addressed Jackson's potential

status as an indispensable party in its May 18, 2015 Memorandum Opinion, writing:

It would be unusual, to say the least, that Jackson would be an indispensable party solely based upon his ownership of MJC. On its face, this would run counter to one of the purposes of the corporate form: To create a separatelegal entity conferring upon its owner(s) the substantial benefit of protection from personal liability. Moreover, one need ponder only a moment to recognize that, were we to treat owners of corporate parties to litigation as indispensable to any litigation affecting the corporation, we would wreak havoc on the roles of shareholders in corporations subject to suit.

Super. Ct. Memorandum Opinion, 05/1&/15, p. 15. In remanding the case to this Court, the

Superior Court qualified its view, adding:

However, we cannot say with certainty that factual matters not of record would ·· · · · · · reveal complications to this general.truth such that Jackson or Mesko.would emerge as indispensable. .,.,parties.. to this litigation. . .. ... . .. .. . . . . ... Tb.is ..is especially .. . . .. true. inasmuch . . . . .. the . as . .... / \_ ' )'

20 ... '.

parties' personal and professional connections clearly colored the series of transactions underlying this dispute. Moreover, the parties squarely contest consideration in any dispute under the FTA, including assertingthat Jackson's allegedly uncompensated work with and orfor Mesko for over a 'year before the transfers, itself: constituted consideration well in excess of the documented $1. 00 sale price of the two parcels at issue .... We direct the trial court to evaluate this issue in the first instance.

Super. Ct. Memorandum Opinion, 05/18/15, p. 16.

We follow the Superior Court's guidance in declaring Jackson an indispensable party to

the action, and we further· find that the factual matters particular to this case do not reveal

sufficient complications to justify this Court reaching a different conclusion. At oral argument

and in its pleadings, Appellant argued that Jackson performed uncompensated services for

Mesko that amounted to consideration in excess of the $1.00 listed on each deed to the

transferred properties. However, a closer look at the facts of record reveal no specific evidence in

support of this claim. Jackson avers that he performed such uncompensated work in his

depositionyet is unabletoconfirm any of the exact services performed or the estimated value of () such services. Additionally, Appellant's counsel discussed these services at oral argument, but

no supporting evidence was ever placed in the record. As such, there is nothing in the record that

can lead this Court to depart from the guidelines provided by the Pennsylvania Supreme Court,

guidelines that result in Jackson not having a right essential to the merits of the case such that he

would need to be a party to protect them. Therefore, Jackson is not an indispensable party4•

C. Mesko Landscaping

Mesko Landscaping also does not meet the standards necessary to be an indispensable

party in the case. Appellant alleges that the sole interest belonging to Mesko Landscaping that is

4 We. .~ot ignore the glaring conflict within Appellant's counsel's argument presented at oral argument, where he .'. advocated that another ·of-his c lients,' Glenn Jackson. "is an· essential patty who should be joined inthis l.µ:igatioil. · . · While seated beside Jackson at ~W1Scl table, counsel attempted to justify the facially apparent conflict by claiming that Jackson was not his "client 'durijg"oral argument; y.,hich we fmcl" to be perplexlhg, .. . . . . . · ··· .. . .. ". . .

21 (_) implicated in this litigation stems from the fact that its inventory is located on the property. Even

taking Appellant's avennents as true, this interest is not.essential to the merits of the claim.

Essentialness necessarily involves the interest in question being so directly connected to the case

that the party must be present to protect those interests. However, Appellee does not seek relief

from the inventory belonging to Mesko Landscaping, but rather, solely from the property itself.

The property, per the October 12, 2010 deed, belongs entirely to MJC Industries. Mesko

Landscaping has no right or interest in this property, and any inventory that it may have that is

present on the property is not implicated in"this litigation. Therefore, Mesko Landscaping is not

an indispensable party to this action.

CONCLUSION

For the foregoing reasons, this Court perceives that the issues of which Appellant has

complained in this appeal are without merit, and that this Court's June 21, 2016 Order was

supported by both. the law and the record in this case. We respectfully request the· Superior . Court . e.-.) to affirm this Court's decision.

BY THE COURT:

~ WA~EH.BATE,JR. J.

.... ,·.

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