Alumisource Corp. v. Iron

279 A.3d 1270 (Table)

ALUMISOURCE CORPORATION, Appellant

v.KANTNER IRON & STEEL, INC. and John M. Toth

Alumisource Corporation

v.Kantner Iron & Steel, Inc. and John M. Toth, Appellants

No. 764 WDA 2021

No. 807 WDA 2021

Superior Court of Pennsylvania.

Filed May 23, 2022

Reargument Denied August 2, 2022

MEMORANDUM BY MURRAY, J.:

At 764 WDA 2021, Alumisource Corporation (Appellant) appeals from the denial of post-trial motions challenging the $300,000 verdict favor of John M. Toth (Toth or Mr. Toth) for Appellant's breach of its consulting agreement (CA) with Toth.¹ At 807 WDA 2021, Toth and Kantner Iron & Steel, Inc. (Kantner) (collectively, Defendants), appeal the $341,869.07 judgment entered in favor of Appellant for Defendants’ breach of a right-of-first-refusal agreement (ROFRA) involving Defendants’ sale of scrap aluminum to Appellant. Toth has filed a cross-appeal at that docket number. Upon careful review, we affirm the judgments at both dockets.

Factual History

Appellant operates an aluminum processing facility in Monessen, Pennsylvania. Appellant purchases scrap aluminum, and after processing and purifying the aluminum, sells the resulting shredded aluminum to aluminum product producers. N.T., 6/22/20, at 21-23. At all relevant times, Toth owned Kantner and EMF Development Corp. (EMF), two businesses that sell scrap metal. N.T., 6/25/20, at 610.

During the fall of 2010, Appellant's president, Gabriel Hudock (Hudock or Mr. Hudock), sought to purchase an aluminum shredder (shredder) to meet increased demand for aluminum. N.T., 6/22/20, at 23-32, 34-35, 63. After receiving a quote of $1,450,000.00 for a new American Pulverizer shredder, Appellant entered into negotiations with Toth for the purchase of a used model of the same shredder. Id. at 33-35.

The trial court explained:

Between April and June of 2011, Mr. Hudock and Mr. Toth negotiated for the sale of the shredder, in addition to a proposed agreement in which Mr. Toth would offer [Appellant] a right of first refusal to purchase aluminum scrap from his two scrapyards. The initial agreed price to be paid by [Appellant] was [ ] 2 million dollars.

After seeking financing[, Appellant] was only able to finance 75% of the purchase price, leaving a deficit of $500,000.00 of financing; Mr. Toth offered to finance the remaining balance. Mr. Toth and Mr. Hudock met on April 11, 2011 to discuss the agreements further; Mr. Hudock presented Mr. Toth with a draft [ROFRA], a draft Bill of Sale encompassing the two million dollar agreement, and a draft [CA]. Mr. Hudock testified to his belief that the [CA] was designed to provide the $500,000 in financing by Mr. Toth. Mr. Hudock further testified that upon receiving the drafts and discussing them with his counsel, Mr. Toth requested a $500,000 judgment note or loan schedule in place of the consulting agreement.

Upon further negotiations with PNC Bank, PNC agreed to finance the entire two million-dollar transaction. As the entire agreement was financed, Mr. Toth agreed to drop the purchase price to $1,900,000.00. As negotiations continued, Mr. Toth requested a copy of the proposed ROFRA on April 14, 2011, from Tom Adamek, [Appellant's] Chief Operations Officer. Mr. Toth returned the draft to Mr. Adamek with changes made by counsel on May 5, 2011. Mr. Toth sent Mr. Hudock an email stating, "Gabe, I cleaned up the changes you wanted and took off the draft wording. I will get it signed and sent to you Thursday. Thanks, John." The revised ROFRA was attached. A further June 9, 2011, email from Mr. Toth to Mr. Hudock stated, "Gabe, the envelope will be at the office at Johnstown with originals. You or Keith can pick up. Please get me one signed copy back. Thanks, John." Attached to that email was a copy of the ROFRA agreement, executed by Mr. Toth and witnessed.

Upon receiving this email, Mr. Hudock emailed Mr. Toth on June 9, 2011, as follows: "John, as you know, we agreed that the right of refusal would apply to all the yards owned by you, not just Kantner Iron Metal. I would like the agreement to reflect our intentions. Thanks, Gabe." Mr. Toth replied: "Gabe, you're getting a bit paranoid. Read paragraph 1. It gives you the right of refusal for all of John Toth's existing facilities. I can't give you any more than that. John." Mr. Hudock subsequently signed the ROFRA on June 13, 2011, witnessed by Tom Adamek, and Mr. Adamek sent him a copy of the executed ROFRA.

Approximately one week later, Mr. Toth indicated to Mr. Hudock that he had not received the executed copy from [Appellant], and Mr. Hudock assured Mr. Toth that he would send an employee with a physical copy. Gray Gallo, an [employee of Appellant], testified that Mr. Hudock gave him an envelope to give to Mr. Toth and that he recalls doing so. Testimony from Mr. Toth indicates that he did not bring up the executed agreement again after this time, and an email to Mr. Toth dated March 15, 2012, included a copy of the executed ROFRA.

... [T]he ROFRA period extended for a term of thirty-six (36) months, from June 9, 2011, to June 9, 2014. [Appellant] is the identified buyer and [ ] Toth and Kantner are defined as "seller." Under the ROFRA, [Appellant] is provided the right of first refusal to purchase "aluminum materials" from "any and all of Seller's existing facilities." Specifically, Seller agrees to provide [Appellant] with any third-party bona fide offer to purchase aluminum materials, at which time [Appellant] is provided four (4) hours to accept or reject the offer.

Mr. Hudock testified that for the first two (2) years of the contract term, the parties apparently complied with the ROFRA as written, and each consummated purchase was documented in a Purchase Order. Mr. Hudock also described a summary of documents received from Defendants which showed sales records to other companies, including competitors of [Appellant,] during the period of the ROFRA. He testified that these sales were not offered to [Appellant] and [Appellant] would have been interested in these sales if they had been offered pursuant to the ROFRA.

* * *

Regarding the [CA], ... Mr. Hudock testified that he never requested that Mr. Toth actually become a consultant for [Appellant]. [Mr. Hudock] testified, however, that he did sign the [CA] at Exhibit D. He stated he believed the contract was aborted by oral agreement and/or the final agreement of sale for the shredder.

Trial Court Opinion, 1/15/21, at 2-6 (citations omitted, emphasis added). At trial, Hudock further testified that in a December 12, 2012, email, Toth offered to sell Appellant "irony" aluminum. See N.T., 6/22/20, at 83; Exhibit 11. According to Hudock, this was the first offer under the ROFRA from Toth to Appellant. Id. at 84.

Procedural History

On November 14, 2014, Appellant filed a complaint against Defendants in Westmoreland County, Pennsylvania, alleging breach of the ROFRA (the ROFRA case). Complaint, Westmoreland County Docket No. 5664 of 2014.

On April 6, 2018, in Somerset County, Pennsylvania, Toth filed a complaint alleging breach of his consulting agreement with Appellant and for unjust enrichment (the CA case).² Complaint, Somerset County Docket No. 188 of 2018. Appellant filed an answer and new matter demurring to Toth's complaint in the CA case, and further asserting Toth's contract action is barred by the statute of limitations. On July 17, 2018, Appellant filed a motion for judgment on the pleadings in the CA case. Motion, 7/17/18. On November 9, 2018, the Somerset court granted in part and denied in part Appellant's motion. The court concluded Toth sufficiently pled a prima facie cause of action for breach of the CA. Somerset Court Opinion, 11/9/18, at 9. The Somerset court further stated:

[The court] find[s] the [CA] is an installment contract that contemplates periodic payments of $100,000.00 on April 15 of the years 2012, 2013, 2014, 2015 and 2016. Following this, it is apparent that, applying the four-year statute of limitations for causes of action based on contracts, the payments for the years 2012 and 2013 are outside the limitations period and are time-barred. The payments due in 2014, 2015, and 2016 are actionable if the [CA ] was still in effect during those times . It is this point [Appellant] address[es] in [its] second argument, discussed below.

[Appellant] dedicated much of its Reply ... [to] discussing the doctrine of "continuous contracts" and how, due to the fixed date of periodic payments in the Agreement, the doctrine is inapplicable in the instant matter. [The court] generally agree[s] with [Appellant] on this limited point. However, from [Toth's] Brief, and from representations made at oral argument on the [motion for judgment on the pleadings, the court] believe[s Toth's] primary argument is rather that the [CA] is an installment contract, which invokes a distinct set of principles, namely that each failure to pay an installment is a separate breach and cause of action, with a separate, concomitant, four-year limitations period.

[Appellant] asserts, and [Toth] admits, that the parties did not communicate after July 2013. Answer and New Matter ¶ 32; Reply to New Matter ¶ 32. [Appellant] argues that, because all communication, and thus all possibility of service, ceased in July 2013, the contract should be treated as terminated as of that date, and the limitations period would have begun then, ending in July 2017. [Appellant's] Rely Brief [at] 5-7. ...

Somerset Court Opinion, 11/9/18, at 6-7 (footnote and quoted citations in original, some citations omitted).

Applying our Supreme Court's decision in Crouse v. Cyclops Industries , 745 A.2d 606 (Pa. 2000), the Somerset court concluded:

[T]aking [Toth's] allegation that "[he] has performed for and provided [ ] all required services to [Appellant]" as true, under our standard of review, and that a provision in the [CA] states that "[t]he services ... may be rendered by [Toth] without any direct supervision by the Company," [the court] do[es] not find, as a matter of

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