Kalkreuth Roofing & Sheet Metal, Inc. v. W. Jefferson Hills Sch. Dist.

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Kalkreuth Roofing and Sheet Metal, Inc. v. West Jefferson Hills School District and Gito, Inc. d/b/a Nello Construction

Appeal of: Gito, Inc. d/b/a Nello Construction Company

No. 751 C.D. 2022

Commonwealth Court of Pennsylvania

December 22, 2023

OPINION NOT REPORTED

Submitted: November 6, 2023

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE MICHAEL WOJCIK, Judge HONORABLE MARY H. LEAVITT, Senior Judge

MEMORANDUM OPINION

PATRICIA A. McCULLOUGH, Judge

Gito Inc. d/b/a Nello Construction Company (Nello) appeals from the June 15, 2022 order of the Court of Common Pleas of Allegheny County (trial court), which granted the Motion to Enforce Settlement Agreement (Motion) filed by Appellee Kalkreuth Roofing and Sheet Metal, Inc. (Kalkreuth). Upon review, we affirm.

I. FACTS AND PROCEDURAL HISTORY

Kalkreuth filed the underlying action on June 25, 2021. In its complaint, Kalkreuth averred that West Jefferson Hills School District (the School District) entered into a contract with Nello for the construction of a new high school (the "Project"). (Reproduced Record (R.R.) at 8a.) Kalkreuth subcontracted with Nello to provide roofing for the Project, including labor and materials, in exchange for payment from Nello in the amount of $2,670,000.00 (the "Subcontract"). Id. at 8a-9a. Kalkreuth alleged that errors made by Nello caused Kalkreuth to experience delays in completing its work on the Project, which caused it to incur additional costs. Id. at 9a-13a.

Kalkreuth further alleged that Nello approved approximately $30,000.00 in change orders, bringing the Subcontract value to approximately $2.7 million. Id. at 13a. Kalkreuth contended that, as of the filing of the complaint, Nello had paid approximately $2.4 million to Kalkreuth, leaving an outstanding Subcontract balance of approximately $300,000.00. Id. Kalkreuth accordingly brought claims against Nello for breach of contract and violations of the Commonwealth Procurement Code, 62 Pa. C.S. §§ 101 - 2311. Id. at 11a-12a. Kalkreuth also asserted an unjust enrichment claim against the School District. Id. at 13a.

Nello disputed the claims and asserted a breach of contract counterclaim against Kalkreuth and a cross-claim against the School District. See Answer, New Matter, Counterclaim, and Cross-Claim, R.R. at 79a-89a. On April 27, 2022, counsel for Nello offered Kalkreuth $300,000.00 to settle all claims. Id. at 94a. On April 28, 2022, counsel for Kalkreuth accepted the offer, subject to the additional conditions that payment be received within seven days and the parties execute mutual releases. Counsel for Kalkreuth offered to prepare the formal written settlement agreement and requested that counsel for Nello "please let [him] know if [they] have a settlement." Id. at 94a, 109a. The same day, Nello's counsel responded that Kalkreuth's counsel could "draft the agreement if [he'd] like." Nello's counsel further advised: "I'd say payment within [seven] days of[ ] all signatures, but [the School District] might take a week or so to sign (if prior experience with the [School District] holds true)[.]"^[1] Id. at 94a-95a, 117a.

Counsel for Kalkreuth thereafter drafted a Settlement Agreement and Mutual Release (the Settlement Agreement), dated May 4, 2022. Id. at 95a, 126a. The Settlement Agreement provides that, "[w]ithin seven (7) days of [the] execution of this [Settlement] Agreement, Nello will make payment to Kalkreuth in the amount of [$300,000.00 (Settlement Payment)]. Id. at 127a. It further provides that, "[w]ithin seven (7) days of the receipt and clearance of the Settlement Payment, Kalkreuth shall discontinue with prejudice the [l]awsuit." Id. The Settlement Agreement further requires that the parties "release, quit, and forever discharge each other . . . from any and all claims, demands, rights, causes of action, damages, losses, suits, judgments . . . of any nature whatsoever . . . in connection with the [l]awsuit, the Subcontract, or the Project." Id. at 127a-28a.

On May 4, 2022, counsel for Nello emailed counsel for Kalkreuth to notify him that Nello "is no[ ] longer going to be able to enter into the terms of the proposed [S]ettlement [A]greement as Kalkreuth [set forth on April 28, 2022]." Id. at 132a. On May 10, 2022, Kalkreuth filed the Motion, in which it contended that "[a]ll of the material terms of the settlement were agreed upon by all parties and the [S]ettlement [A]greement should be enforced as a valid contract in accordance with Pennsylvania law." Id. at 96a. In its response to the Motion, Nello denied that it committed to making payment within seven days, which period it contended was a material term of the Settlement Agreement. Id. at 163a. Nello further alleged that its bank had called in a loan and that it had several million dollars in outstanding debt it could not pay. Id. at 164a. For that reason, Nello contended that it could not make the Settlement Payment, never entered into a settlement agreement with Kalkreuth, and never signed the written Settlement Agreement. Id. at 164a-65a.

The trial court held a hearing on June 15, 2022. Kalkreuth did not present any witnesses, believing that the issue before the trial court was a purely legal question. Id. at 173a-74a. After argument on the record, the trial court entered an order granting the Motion and directing the School District and Nello to "work in good faith to finalize the terms of the Settlement Agreement [ ] . . ., execute the [Settlement] Agreement when finalized, and pay the $300,000.00 as required by the [Settlement] Agreement." Id. at 189a. The trial court did not award attorneys' fees. Id.

Nello filed the instant appeal on July 11, 2022, and the trial court issued its opinion pursuant to Pennsylvania Rule of Appellate Procedure (Pa. R.A.P.) 1925(a) (Trial Ct. Op.) on November 23, 2022. The trial court provided the following rationale for granting the Motion:

[Kalkrueth] and [Nello] engaged in various settlement negotiations and mediations throughout the course of this matter. At some point [Nello's] counsel emailed [Kalkreuth's counsel] that [Nello's] final offer [was] $300,000[.00], which was accepted by [Kalkreuth] with certain conditions. Additionally, [Kalkreuth] offered to prepare a settlement agreement. Shortly thereafter[, Nello] agreed to the suggested conditions and [Kalkreuth's] offer to prepare the [S]ettlement [A]greement. Subsequently, the [S]ettlement [A]greement was sent to [Nello] for execution but it would not execute [the Settlement Agreement], citing lack of financial resources.

The [a]ppellate [c]ourts have held that a court must enforce the terms of a settlement agreement when the agreement contains all the requirements of a valid contract including an offer, acceptance, and consideration. Mastroni-Mucker v. Allstate Ins[urance] Co., [ ] 976 A.2d 510, 518 (Pa. Super. [ ] 2009). Even if the agreement has not been reduced to writing, it is still an enforceable agreement if all the essential terms have been established. Id. at 518.

Given the definite terms of $300,000[.00] for the resolution of the case, the [trial c]ourt entered the [o]rder of June 15, 2022, granting [Kalkreuth's] [M]otion . . . .

(Trial Ct. Op. at 1-2 (unpaginated); R.R. at 197a-98a.)

II. ISSUES PRESENTED

There are three issues on appeal: (1) whether the trial court's June 15, 2022 order is appealable; (2) whether the Settlement Agreement is unenforceable due to Nello's inability to make the Settlement Payment; and (3) whether the parties reached a "meeting of the minds" and formed an enforceable contract.

III. DISCUSSION

A. Appealability

Although the parties did not initially raise the issue, this Court by Order exited March 22, 2023, directed the parties to address in their principal briefs the appealability of the trial court's June 15, 2022 order.^[2] Appealability implicates our subject matter jurisdiction, which "may be raised by the court sua sponte if necessary." LeFlar v. Gulf Creek Industrial Park No. 2, 515 A.2d 875, 879 (Pa. 1986). Subject matter jurisdiction "cannot be obtained by consent of the parties, or by waiver or estoppel." In re Borough of Valley-Hi, 420 A.2d 15, 17 (Pa. Cmwlth. 1980). Thus, "we are not only permitted, but required[,] to determine if the trial court's order is appealable." Brophy v. Philadelphia Gas Works & Philadelphia Facilities Management Corp., 921 A.2d 80, 86 (Pa. Cmwlth. 2007).

Nello argues that the trial court's June 25, 2022 order is appealable (1) as a final order disposing of all claims against all parties under Pa.R.A.P. 341(a) and (b)(1); and (2) as a qualifying collateral order under Pa.R.A.P. 313.

Pursuant to Pa.R.A.P. 341(a), "an appeal may be taken as of right from any final order of a . . . trial court." Pa.R.A.P 341(a). A "final order" is an order that "disposes of all claims and of all parties" or that is otherwise entered as a final order. See Pa.R.A.P. 341(b)(1), (3). Here, we conclude that the trial court's June 25, 2022 order is not a final order pursuant to Pa.R.A.P. 341(a) because it does not dispose of all claims against all parties. Rather, it directs that the parties work towards executing a final written settlement agreement, after the execution and performance of which Kalkreuth presumably will discontinue this litigation. This, therefore, is not a situation where litigants have executed a final, written settlement agreement and one of the parties to the agreement contends that another has breached it. Rather, the parties here arguably reached a settlement that was not reduced to a final writing. Until a written settlement agreement is executed and this action discontinued, the parties' claims remain pending. Thus, the trial court's order is not final under Rule 341(a). We are quick to note, however,...