Linde, E. v. Linde, S.

J-A01044-19

2019 PA Super 160

ERIC R. LINDE : IN THE SUPERIOR COURT OF

: PENNSYLVANIA

:

v. :

:

:

SCOTT F. LINDE, :

:

Appellant : No. 451 EDA 2018

Appeal from the Judgment Entered April 2, 2018, 2018

In the Court of Common Pleas of Wayne County Civil Division at No(s):

167-CIVIL-2016

BEFORE: OTT, J., STABILE, J., and McLAUGHLIN, J.

OPINION BY McLAUGHLIN, J.: FILED MAY 21, 2019

Scott F. Linde appeals from the judgment entered in favor of Eric R.

Linde and against Scott following a non-jury trial in this action to enforce a

settlement agreement. We affirm.

Eric filed a Complaint in March 2016 alleging a breach of contract claim

based on a June 2014 Settlement Agreement between Eric and Scott. Eric

sought specific performance of the Settlement Agreement. Scott filed an

Answer, with new matter and counterclaims. His counterclaims included a

breach of contract claim alleging that Eric breached the Settlement

Agreement. The trial court conducted a non-jury trial.

Eric and Scott are brothers. They have a sister, Barbara, who is not a

party to this litigation. Their father started a construction company known as

Linde Enterprises, Inc. (“LEI”), and gave his children shares of LEI common

stock. Initially, Eric and Scott each owned 300 shares of stock and Barbara

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owned 100 shares. Eric still owns 300 shares of stock. Scott placed his shares

into the Scott F. Linde Family S Corporation Trust (“Scott Trust”). Scott is not

only the settlor of the Scott Trust, but also the sole trustee and the sole

beneficiary during his lifetime. Barbara placed her shares into the Barbara J.

Linde Family S Corporation Trust (“Barbara Trust”).

From 1999 until the present, the siblings have been involved in multiple

lawsuits, including a 1999 shareholder derivative action filed by Eric against

Scott and Barbara. A trial in the action was scheduled to begin June 9, 2014.

However, on the morning of trial, Scott and Eric informed the court that they

had reached a settlement agreement for that action and all other disputes.1

They executed the Settlement Agreement. The parties appeared in court and

acknowledged that they understood and accepted the settlement terms. The

Settlement Agreement provided, in part, that, in exchange for Eric’s stock in

two companies, Scott would pay an initial payment of $1,000,000 and five

installment payments of $200,000 and would transfer to Eric his partnership

interests in Cloverleaf Partners, Golf Hill Partners, CWERSF Partnership, and

his interest as a tenant in common in land in Texas Township. Specifically, it

provided:

Eric Linde sells his 300 shares of Linde Enterprises, Inc.,

(LEI) (the “Stock”) and all his shares of stock in Lackawanna

Land and Energy, Inc. (LLE stock) to Scott F. Linde for the

consideration of Two Million ($2,000,000.00) Dollars plus

____________________________________________

1 Barbara filed a counterclaim in the Equity Action. She was given an

opportunity to present evidence as to this claim, and chose not to. Her

counterclaim was dismissed with prejudice.

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the conveyance of Scott’s Partnership Interest in three (3)

partnerships and his 50% interest as a tenant in common of

land in Texas Township, Wayne County as follows:

A. One Million ($1,000,000.00) Dollars 31 days after

the requirements for the sale of Eric’s stock is

completed in accordance with Article [3] of the

LEI Shareholders Agreement (the “Settlement

Date”).

B. One Million ($1,000,000.00) Dollars without interest

(0%) in five (5) equal installments of $200,000.00 each

with the first payment being due and payable one (1)

year after the Settlement Date (First Payment Date) and

each yearly payment thereafter in the amount of

$200,000.00 being due and payable on the second,

third, fourth and fifth payment dates.

C. Scott will convey his partnership interest in the following

Partnerships to Eric on the Settlement Date:

1. His one third (1/3) Partnership Interest in Cloverleaf

Partners

2. His full Partnership Interest in Golf Hill Partners being

42.859%

3. His full Partnership Interest in CWERSF Partnership

being 42.859%

4. His 50% interest as a tenant in common of 17 acres

of land in Texas Township

D. On the Settlement Date, as a condition of Settlement Eric

and Gary Linde shall resign as Officers and Directors of

LEI (effective at the time of Settlement).

Plaintiff’s Trial Exh. 3 (emphasis added). During the negotiations, the parties

did not discuss the Scott Trust purchasing any of Eric’s stock shares and did

not discuss purchase of the stock by Scott at terms other than those set forth

in the Settlement Agreement. Trial Court Opinion, filed Apr. 20, 2018, at ¶¶

21, 29.

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Under the terms of the Settlement Agreement, Eric was required to

comply with Article 3 of the LEI Shareholders Agreement, which required that

he provide notice to LEI and the remaining stockholders before he could sell

his 300 shares of LEI stock to Scott. Specifically, Article 3(a) of the LEI Stock

Purchase Agreement, which was executed on March 7, 1990, provides:

If any Stockholders desire to dispose of any of their voting

common stock of the Corporation during his or her lifetime,

whether by sale, gift, pledge, transfer voluntarily or by

operation of law, except for gifts which may be made to the

children of the Stockholder, or by any other means, he or

she shall first give written notice to that effect to the

Corporation and to the other remaining Stockholders. The

Corporation shall have ninety (90) days after receipt of such

notice to purchase all of such stock at the price established

in paragraph 2[2] of this Agreement provided that reference

in that paragraph to date of death shall here refer to the

date written notice is received by Corporation. If all of such

____________________________________________

2 Paragraph 2 provides:

2. Purchase Price

(a) Upon the death of any Stockholder, the purchase price

of his stock of the Corporation shall be its book value as of

December 31, of the last calendar year prior to the death of

the Stockholder, according to the books and accounts of the

Corporation as of that date prepared by the Corporation’s

accountant, unless a value for purposes of this Agreement,

and specifically referred thereto, shall have been

established between December 31, of the last calendar year

prior to the death of the Stockholder and the date of death

of the Stockholder. The purchase price to be paid for the

purchase and sale pursuant to this Agreement of each share

of stock owned by the deceased Stockholder, shall be the

book value of the Corporation as here before determined

divided by the number of issued and outstanding shares.

Defendant’s Trial Exh. 1, Stock Purchase Agreement, at ¶ 2(a).

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shares are not purchased within the above period by the

Corporation, all of the shares not purchased by the

corporation shall be offered to the other remaining

Stockholders at the price established in paragraph 2 of this

Agreement, each of whom shall have the right within thirty

(30) days from their notification to purchase such portion of

the stock to be disposed of as the numbers of shares owned

by him at such time shall bear to the total number of shares

owned by all of the other remaining Stockholders; provided,

however, that if any Stockholder does not purchase his full

proportionate allotment of the stock, the unaccepted stock

may be purchased by the other remaining Stockholders. If

all of the stock to be disposed of is not purchased by the

Corporation or the Stockholders before the expiration of the

second period above, Stockholder may dispose of any

remaining unsold shares in, any lawful manner; provided

that no disposition may occur to any person or entity who

would not qualify as a shareholder of a Corporation electing

Subchapter S treatment under the Internal Revenue Code.

Defendant’s Trial Exh. 1, Stock Purchase Agreement, at ¶ 3(a).

In a letter dated August 20, 2014, Eric provided LEI, the Scott Trust,

and the Barbara Trust written notice of his intent to dispose of his three

hundred shares of common stock of LEI. Plaintiff’s Trial Exh. 4. That same

day, LEI elected not to purchase any of the stock. Eric then sent written notice

to the Scott Trust and Barbara Trust of LEI’s decision to not purchase the stock

and of his intent to sell the shares. Plaintiff’s Trial Exh. 5. 3 The Barbara Trust

elected not to purchase the stock.

The Scott Trust sent a letter to Eric on September 10, 2014, notifying

Eric that it intended to purchase its pro rata share of Eric’s LEI stock pursuant

____________________________________________

3The letters were addressed to “Scott F. Linde[,] [Scott Trust],” at a James

Street address and “Barbara Linde[,] [Barbara Trust],” at a Golf Hill Road

address.

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to the Stock Purchase Agreement, which was three shares. Plaintiff’s Trial Exh.

6. On September 24, 2014, Eric sent a letter to counsel for Scott informing

him that, as “Scott F. Linde” was the only shareholder who agreed to purchase

the stock, Eric was “now free to convey his stock in any lawful manner” and

therefore, under the Settlement Agreement, Scott’s initial payment of

$1,000,000 was due on October 20, 2014. Plaintiff’s Trial Exh. 7. On

September 26, 2014, more than 30 days after the initial letter from Eric, the

Scott Trust informed Eric it would purchase under the Stock Purchase

Agreement the 209 shares of LEI stock that the Barbara Trust declined to

purchase. Plaintiff’s Trial Exh. 8.

The Scott Trust initiated a civil action in Luzerne County against Eric and

LEI requesting the court order Eric to sell and deliver 212 shares4 of LEI stock

to the Scott Trust (“Trust Action”). The Trust Action claimed the Scott Trust

was able to purchase the Barbara Trust’s shares even though it informed Eric

after the 30-day window. The Action was transferred to Wayne County and,

as of the time of trial in the instant action, was still pending.

Eric then initiated this action seeking specific performance of the

Settlement Agreement.

____________________________________________

4 The 212 shares consisted of the 209 shares that the Scott Trust elected to

purchase after the Barbara Trust declined and the Scott Trust’s pro rata share

of 3 shares that it elected to purchase.

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After the parties had rested in the trial for this action, the trial court

called Scott as a witness. The court questioned Scott, including questions

about the Scott Trust, and required him to produce the trust document, which

he did. N.T., 5/1/17, at 55-63.

The trial court made findings of fact, including that “Scott never intended

to purchase Eric’s LEI or LLE stock as per the terms of the Settlement. Rather,

Scott’s deceptive conduct in that regard was only a pretext to avoid the trial

of Eric’s 1999 [Derivative] Action.” Trial Ct. Op. at ¶ 30. The trial court found

that Eric completed the requirements for the sale of the LEI stock under the

Stock Purchase Agreement on September 19, 2014, 30 days from the date of

the letter Eric sent to the stockholders. Id. at ¶ 32. Therefore, the settlement

date under the Settlement Agreement was October 20, 2014, and Scott owed

Eric $1,000,000 on or before October 20, 2014. Id. at ¶¶ 32-33. Further,

Scott would have owed two of the five $200,000 payments by the time of trial.

Id. at ¶ 34. Scott did not make these payments.

At trial, Scott raised various defenses including claiming that the Stock

Purchase Agreement required a three-step process: offering stock to LEI,

offering stock to remaining shareholders, and offering to the shareholders the

stock declined by other shareholders. He argued Eric breached the Settlement

Agreement by not fulfilling his obligations to Scott and LEI in the Stock

Purchase Agreement. He further claimed that Eric did not obtain Barbara’s

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consent for the transfer of Scott’s interest in three Wayne County real estate

partnerships and the interest in the Texas Township, Wayne County property.

The trial court found Scott’s arguments lacked merit. Specifically, it

concluded that the Stock Purchase Agreement did not have a three-step

process. Trial Ct. Op. at ¶ 36. Rather, it required a two-step process before

an LEI shareholder could sell all or a portion of the stock to a third party. Id.

When Eric offered the stock to LEI, and LEI declined to purchase it, Eric was

required to offer it to the other shareholders, which Eric did. Id. at ¶ 38. The

shareholders had 30 days to purchase the stock. Id. The only shareholder

who timely expressed interest was the Scott Trust, and it expressed interest

in its pro rata share of Eric’s stock, which was three shares. Id. at ¶ 39. The

court concluded Eric could then sell his 300 LEI shares on or after September

19, 2014, in any lawful manner as long as the purchaser was qualified to

receive Subchapter S treatment under the Internal Revenue Code. Id. at 40.

The court further found Eric did not breach the Settlement Agreement

by any act or omission either before or after Scott’s October 20, 2014

repudiation. Id. at ¶ 41. The documents that required preparation and

execution at the closing were not prepared or executed because Scott and his

counsel refused to participate in the preparation and execution of the

documents. Id. at ¶ 43. It also found that if anyone had to notify Barbara of

the partnership transfers it was Scott, and he failed to do so. Id. at ¶ 44.

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The trial court therefore found in favor of Eric on his breach of contract

claim. For the same reasons outlined above, the trial court found against Scott

and in favor of Eric as to Scott’s counterclaim.

Scott filed a timely notice of appeal, and raises the following issues:

1. The lower Court committed an abuse of discretion and

erred as a matter of law in entering a non-jury verdict in

favor of Eric and Ordering Specific Performance of the

Settlement Agreement when Eric was in breach of the terms

of the Settlement Agreement.

2. The lower Court committed an abuse of discretion and

erred as a matter of law in entering a non-jury verdict

against Scott on Count II of his Counterclaim against Eric

when the evidence established that Eric was in breach of the

terms of the Settlement Agreement.

3. The lower Court committed an abuse of discretion and

erred as a matter of law:

a) In Ordering that Eric and Scott shall complete all

transactions set forth in the Settlement Agreement and

Scott shall pay Eric $1.4 million in accordance with

Sections 1A and IB of the Settlement Agreement when

Eric never complied with Article 3(a) of the Linde

Enterprises, Inc. Stock Purchase Agreement which was

required by Article IA of the Settlement Agreement

before a Settlement Date could be established; and

b) In awarding Eric simple interest at six (6%) percent

on the payments to be made under the Settlement

Agreement from October 20, 2014 until the date of

payment when no Closing was ever held because Eric was

in breach of the Settlement Agreement.

4. The lower court committed an abuse of discretion and

erred as a matter of law by calling Scott as a witness and

Ordering Scott to produce the Scott F. Linde Family S

Corporation Trust Agreement after both parties had rested

and the record was closed.

Scott’s Br. at 9-10.

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Scott’s first two issues claim the trial court erred in finding that Eric did

not violate the terms of the Settlement Agreement. He claims the court erred

when it ordered specific performance of the Settlement Agreement because

Eric did not complete the required steps set forth in the Stock Purchase

Agreement, which was a condition precedent to Scott’s obligation to pay the

$1,000,000. He maintains Eric did not complete the requirements of the Stock

Purchase Agreement because there was no closing to transfer any of the stock

from Eric to the Scott Trust. He further claims Eric failed to draft any of the

documentation for transfer of the partnerships.

Scott also claims the trial court erred in finding against Scott on his

counterclaim because the Scott Trust purchased the share on the pro rata

basis, not Scott. He argues the trial court ignored the alleged 3-step process

contained in the Stock Purchase Agreement. He further claims that until the

separate action filed by Scott Trust is decided it is unknown whether the Scott

Trust purchased 3 shares or 212 shares. He again claims that a closing with

Scott Trust never occurred and Eric did not draft any of the required

documents.

We apply the following standard of review:

Our appellate role in cases arising from non-jury trial

verdicts is to determine whether the findings of the trial

court are supported by competent evidence and whether the

trial court committed error in any application of the law. The

findings of fact of the trial judge must be given the same

weight and effect on appeal as the verdict of a jury. We

consider the evidence in a light most favorable to the verdict

winner. We will reverse the trial court only if its findings of

fact are not supported by competent evidence in the record

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or if its findings are premised on an error of law. However,

where the issue concerns a question of law, our scope of

review is plenary.

The trial court’s conclusions of law on appeal originating

from a non-jury trial are not binding on an appellate court

because it is the appellate court’s duty to determine if the

trial court correctly applied the law to the facts of the case.

Bank of N.Y. Mellon v. Bach, 159 A.3d 16, 19 (Pa.Super. 2017) (quoting

Stephan v. Waldron Elec. Heating and Cooling LLC, 100 A.3d 660, 664–

65 (Pa.Super. 2014)).

To establish a breach of contract occurred, the party must prove: “(1)

the existence of a contract, including its essential terms; (2) a breach of the

contract; and (3) resultant damages.” Meyer, Darragh, Buckler, Beenek &

Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C., 137 A.3d 1247,

1258 (Pa. 2016).5 “Specific performance is an equitable remedy that permits

the court ‘to compel performance of a contract when there exists in the

contract an agreement between the parties as to the nature of the

performance.’” Lackner v. Glosser, 892 A.2d 21, 31 (Pa.Super. 2006)

(quoting Geisinger Clinic v. Di Cuccio, 606 A.2d 509, 521 (Pa.Super. 1992))

(emphasis omitted). “Specific performance should only be granted where the

facts clearly establish the plaintiff’s right thereto, where no adequate remedy

at law exists, and where justice requires it.” Id. (quoting Clark v.

Pennsylvania State Police, 436 A.2d 1383, 1385 (Pa. 1981)).

____________________________________________

5 It is undisputed that the Settlement Agreement is a valid contract.

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The trial court applied the doctrine of necessary implication to find that

the Settlement Agreement included a term precluding the Scott Trust from

purchasing Eric’s LEI stock under the terms of the Stock Purchase Agreement.

The doctrine of necessary implication provides:

[I]n the absence of an express provision, the law will apply

an agreement by the parties to a contract to do and perform

those things that according to reason and justice they

should do in order to carry out the purpose for which the

contract was made and to refrain from doing anything that

would destroy or injure the other party’s right to receive the

fruits of the contract.

Glassmere Fuel Serv., Inc. v. Clear, 900 A.2d 398, 402-03 (Pa.Super.

2006) (quoting Kaplan v. Cablevision of Pa., Inc., 671 A.2d 716, 720

(Pa.Super. 1996)(en banc)). A court should imply a missing term “only when

it is necessary to prevent injustice and it is abundantly clear that the parties

intended to be bound by such term.” Id. at 403 (quoting Solomon v. U.S.

Healthcare Sys. Of Pa., Inc., 797 A.2d 346, 350 (Pa.Super. 2002))

(emphasis omitted). Further, “[a] court should only imply a term into a

contract where it is clear that the parties contemplated it or that it is necessary

to imply it to carry out the parties intentions.” Id. (quoting Slater v. Pearle

Vision Ctr., Inc., 546 A.2d 676, 679 (Pa.Super. 1988))

The trial court found “ample evidence in the Settlement [Agreement]

that these parties may well have contemplated and intended that Scott, as

sole beneficiary of the Scott Trust, would be prohibited from purchasing Eric’s

LEI stock under the terms of the [Stock Purchase Agreement].” 1925(a) Op.

at 12. The court noted that the Settlement Agreement provided that Scott

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would pay Eric $2,000,000 and convey his partnership interest in three

partnerships and his 50% interest as a tenant in common of land in Texas

Township, Wayne County in exchange for Eric’s LEI and LLE stock. In contrast,

under the terms of the Stock Purchase Agreement, “Scott, as sole beneficiary

of the Scott Trust, could purchase Eric’s LEI stock for a price considerably less

than that bargained for in the Settlement [Agreement]. Failure to imply this

missing term would clearly destroy or injure Eric’s right to receive the fruits

of the contract.” Id. at 12-13. It found that “[a]lthough the Settlement

[Agreement] does not specifically prevent Scott from acquiring Eric’s LEI stock

through the Scott Trust, that term is implicit in the Settlement [Agreement].

The implication of this missing term is necessary to prevent injustice and it is

abundantly clear that the parties intended to be bound by such term.” Id. at

13.

We conclude the trial court did not err in applying the doctrine of

necessary implication. As the trial court noted, it is clear the parties intended

that Scott purchase the 300 shares through the Settlement Agreement, not

through the Stock Purchase Agreement, and that implication of the provision

is necessary to prevent injustice.

The court also concluded that Scott breached the agreement. “When

performance of a duty under a contract is due, any nonperformance is a

breach.” McCausland v. Wagner, 78 A.3d 1093, 1101 (Pa.Super. 2013). “If

a breach constitutes a material failure of performance, the non-breaching

party is relieved from any obligation to perform; thus, a party who has

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materially breached a contract may not insist upon performance of the

contract by the non-breaching party.” Id.

Here, the court found:

Pursuant to Section I(A) of the Settlement [Agreement],

once Eric completed the requirements under Article 3(a) of

the [Stock Purchase Agreement], Scott had thirty-one (31)

days to pay Eric one million ($1,000,000.00) dollars.

According to the Settlement [Agreement], this date would

also be considered the “settlement date.” As discussed

previously, the deadline to purchase Eric’s LEI stock would

have been September 19, 2014, which would also have been

the date the requirements for the sale of Eric’s stock was

completed. Therefore, the settlement date would have been

October 20, 2014. Scott was obligated under section I(B) of

the Settlement to pay two hundred thousand ($200,000.00)

dollars to Eric one (1) year after the settlement date. One

(1) year after the settlement date would have been October

20, 2015. Scott was also obligated under section I(B) of the

Settlement to pay four (4) more yearly installments of two

hundred thousand ($200,000,00) dollars to Eric. The second

installment would have been due October 20, 2016. Scott is

in breach of the Settlement by failing to make payments on

these dates and by failing to convey his partnership

interests on the settlement date, October 20, 2014.

1925(a) Op. at 13. The record supports the trial court’s findings of fact and it

did not err in finding that Scott breached the Settlement Agreement and that

Eric did not breach it.

Scott’s claim that the court could not determine breach until the Trust

litigation has ended lacks merit. The trial court was tasked with interpreting

the Settlement Agreement and found that Scott breached the Agreement and

that Eric did not. Its findings were supported by the record, and its legal

conclusions were not error.

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Scott next claims the trial court erred in ordering the parties to complete

the transactions set forth in the Settlement Agreement and directing Scott to

pay $1,400,000 before a settlement date could be established. He claims that

to order specific performance, the court would have to determine whether Eric

breached Article 3(a) of the Stock Purchase Agreement. He maintains that

interpretation of this provision “is the core issue which must be decided in the

Trust Complaint before it can be determined whether Eric has fully complied

with Article 3(a) of the [Stock Purchase Agreement].” Scott’s Br. at 54. Scott

claims that the Scott Trust purchased, at a minimum, three shares and

“because a closing was never held,” Eric was in breach of the Settlement

Agreement. Id.

We conclude the trial court did not err in ordering specific performance.

The court found that the Settlement Agreement had an implied term that the

Scott Trust would not purchase any of the stock under the terms of the Stock

Purchase Agreement. Because, under the terms of the Settlement Agreement,

the Scott Trust could not purchase the stock under the Stock Purchase

Agreement, the court did not err in ordering specific performance of the

Settlement Agreement.

Scott also argues that the trial court erred in awarding six percent

interest. It claims this was error because the court erred in finding Scott

breached the Agreement.

As we concluded the trial court did not err in finding Scott breached the

Settlement Agreement, we find the trial court did not err in awarding six

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percent interest on the definite sum of money. See TruServ Corp. v.

Morgan’s Tool & Supply Co., Inc., 39 A.3d 253, 263 (Pa. 2012) (citing

Restatement (Second) of Contracts § 354) (interest recoverable for definite

sum of money from time for performance); 41 P.S. § 202 (“Reference in any

law or document enacted or executed heretofore or hereafter to ‘legal rate of

interest’ and reference in any document to an obligation to pay a sum of

money ‘with interest’ without specification of the applicable rate shall be

construed to refer to the rate of interest of six per cent per annum.”).

In his last issue, Scott argues that the trial court abused its discretion

and erred as a matter of law when the trial court called Scott as a witness and

ordered him to produce the Scott Trust after both parties had rested.

“[A] trial judge may in the exercise of a sound discretion call and

examine witness of [its] own accord.” Commonwealth v. DiPasquale, 230

A.2d 449, 450 (Pa. 1967); see also Pa.R.E. 614. We have explained:

[A] trial judge has the right if not the duty to interrogate

witnesses in order to clarify a disputed issue or vague

evidence. Unless the complaining party can establish the

judge’s questioning constituted an abuse of discretion,

resulting in discernible prejudice, capricious disbelief, or

prejudgment, a new trial will not be granted.

Jordan v. Jackson, 876 A.2d 443, 453–54 (Pa.Super. 2005) (quoting

Mansour v. Linganna, 787 A.2d 443, 446 (Pa.Super. 2001)).

The court required that Scott produce the Scott Trust and questioned

Scott about the Trust. The trial court determined that it needed to see the

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Scott Trust to confirm that Scott was the sole beneficiary, which would clarify

a disputed issue. We conclude that this was not an abuse of discretion.

Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 5/21/19

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