Kelly v. Carman Corp.

229 A.3d 634

Ronald KELLY and Patrice Kelly, as Assignees of BBK Tavern, Inc. d/b/a the Princeton Tavern, by and Through Its Authorized Representative John Bell

v.The CARMAN CORPORATION and Sergius B. Carman

Appeal of: the Carman Corporation

Ronald Kelly and Patrice Kelly, as Assignees of BBK Tavern, Inc., d/b/a the Princeton Tavern, by and Through Its Authorized Representative, John Bell Appellant

v.The Carman Corporation and Sergius B. Carman

No. 2273 EDA 2018

No. 2274 EDA 2018

Superior Court of Pennsylvania.

Argued January 8, 2020

Filed February 12, 2020

Brian R. Elias, Blue Bell, for appellant.

Steven M. Mezrow, Philadelphia, for appellee.

BEFORE: NICHOLS, J., MURRAY, J., and COLINS, J.^*

OPINION BY COLINS, J.:

Ronald Kelly and Patrice Kelly (collectively, "the Kellys"), as assignees of BBK Tavern, Inc. ("BBK"), doing business as The Princeton Tavern, by and through its authorized representative John Bell, appeal from the order of June 26, 2018, that: entered a judgment notwithstanding the verdict ("JNOV") in favor of The Carman Corporation ("CC") and Sergius B. Carman ("Mr. Carman") (collectively, "Carman") as to negligence; and ordered a new trial to determine the amount of damages to be awarded for the sole remaining claim of breach of contract by CC only. CC cross-appeals from the same order, which also denied all other issues and claims raised in Carman's post-trial motions. We affirm.

CC "was an insurance broker. BBK obtained insurance through [CC] beginning in 2007. John Bell was the manager of BBK from 2007 through 2010." Trial Court Opinion ("TCO"), No. 2274 EDA 2018, filed March 6, 2019, at 4 (citations to the record omitted).

[In] 2009, the Kellys ... filed a civil complaint against numerous defendants averring that, on May 23, 2007, Michael Siuma, while driving under the influence of alcohol, collided with the Kellys' vehicle, thus seriously injuring the driver, Mr. Kelly. The Kellys averred that, prior to driving, Mr. Siuma consumed alcohol at the Princeton Tavern and, in fact, he was served alcohol after he was visibly intoxicated. The Kellys presented negligence claims against Mr. Siuma with regard to his operation of the motor vehicle, negligent entrustment claims with regard to [Marie] Siuma, and claims under "the Dram Shop Act"³ with regard to all remaining defendants, including BBK[ ("the Dram Shop Action").]

³ 47 P.S. §§ 4–493, 4–497.

Kelly v. Siuma , 34 A.3d 86, 87 (Pa. Super. 2011) (some footnotes omitted).

Bell sat with Mr. Carman and showed him the paperwork from the [D]ram [S]hop [Action] sometime in 2009, not long after Mr. Bell received the papers. N.T., 2/13/2018, at 175-76....

Mr. Bell mentioned the [D]ram [S]hop [Action] to attorney David Lehman, who was doing tax work for BBK. [Id. ] at 185-86. Mr. Bell communicated to Mr. Lehman that he had[ not] heard anything and he wished for Mr. Lehman to call [CC] "as an attorney to make sure that everything was okay." [Id. ] at 186. In June of 2010, Mr. Lehman spoke with [Sherry] Sapienza[, an employee of CC]. N.T., 2/12/2018, at 221. Ms. Sapienza informed Mr. Lehman that [CC] was in receipt of the formal complaint against BBK in the [D]ram [S]hop [Action]. [Id. ] at 222-23. Mr. Lehman informed Mr. Bell of his communication with [CC]; Mr. Bell's understanding was that "everything was okay, and that the coverage was fine, and that it was being taken care of." N.T., 2/13/2018, at 186.

TCO, No. 2274 EDA 2018, filed March 6, 2019, at 4 (some formatting).

"On July 26, 2010, Attorney Gregory Kowalski, who represented the Kellys in the [D]ram [S]hop [A]ction, spoke with Ms. Sapienza regarding the unanswered complaint[.]" TCO, No. 2273 EDA 2018, filed May 8, 2019, at 5. Having received no answer from BBK in the Dram Shop Action, "on August 4, 2010, the Kellys provided an Important Notice of Intent to Enter Default Judgment against them. On August 25, 2010, the Kellys filed [a] praecipe[ ] to enter judgment by default against BBK[.]" Kelly , 34 A.3d at 87.

"On September 14, 2010, twenty days after the Entry of Default Judgment, [the Kellys'] counsel faxed to [CC] a filed copy of the Complaint in [the Dram Shop Action but] did not advise [CC] that a default judgment had been entered." Id. at 88. "On or about September 15, 2010, [CC] forwarded the [Kellys'] Complaint to RCA Insurance Group, the third party administrator for State National Insurance Company, Inc. [ ("SNIC") ], the insurance company for [BBK[ ]]." Id. "On September 23, 2010, while beginning the process of opening a file on behalf of [BBK[ ]], [RCA Insurance Group] pulled a copy of the Civil Docket Report and discovered the entry of the default judgment against [BBK[ ]]." Id.

On October 8, 2010, BBK[ ] filed a petition to open the default judgment ... In its petition to open, BBK[ ] ... specifically denie[d] serving alcoholic beverages to Michael Siuma while visibly intoxicated on or about May 23, 2007....

By order entered on December 9, 2010, the trial court denied BBK[ ]'s petition to open the default judgment.

Id. at 87-88, 91.

On December 20, 2010, Mr. Bell signed an affidavit12 which indicated that Mr. Bell did not know of or understand the nature of the default judgment from the [Dram Shop Action] until late September 2010. N.T., 2/13/2018, at 227, 239. Mr. Bell's affidavit indicated that Mr. Bell was aware that SNIC intended to withdraw their coverage for the [D]ram [S]hop [Action] through a declaratory judgment action. Mr. Bell's affidavit also indicated that Mr. Bell was aware that BBK would likely be left with no insurance coverage if the [D]ram [S]hop [Action's] default judgment remained and SNIC won their declaratory judgment action.

¹² Defense Exhibit D-26.

[The Kellys'] expert Barbara Sciotti [later] testified as an insurance claims professional with respect to the reporting of insurance claims. N.T., 2/14/2018, at 123. Ms. Sciotti testified that the injury in the instant case resulted from the stipulated default judgment entered against BBK. N.T., 2/12/2018, at 172-73.

* * *

On March 29, 2012, BBK's attempt to open the default judgment in the [D]ram [S]hop [Action] was exhausted. [ Kelly , 34 A.3d 86 (affirming denial of BBK's petition to open the default judgment); Kelly v. Siuma , 42 A.3d 294 (Pa. filed March 29, 2012) (denying petition for allowance of appeal).] On September 18, 2012, BBK's insurer, SNIC, obtained a declaratory judgment that it owed no duty to defend or indemnify BBK in the [D]ram [S]hop [Action]. According to [the Kellys'] counsel [in the current action], on November 9, 2012, a damages hearing was held before the Honorable Sandra Mazer Moss regarding a stipulated judgment in the [D]ram [S]hop [A]ction. N.T., 2/13/2018, at 15-17. On January 10, 2013, the Kellys, as plaintiffs in the [Dram Shop Action], stipulated with BBK that judgment should be entered against BBK for $5,000,000 (five-million dollars). On January 17, 2013, Judge Moss entered a $5,000,000 (five-million dollar) judgment against BBK in the [Dram Shop Action]. BBK then assigned its rights in the instant matter against [Carman] to the Kellys. N.T., 2/12/2018, at 15[,] 18.

* * *

On August 2, 2013, [the Kellys] initiated this negligence and breach of contract action by a writ of summons against [CC], The Carman Group, Inc., The Carman Group, LLC, and [Mr.] Carman.

TCO, No. 2274 EDA 2018, filed March 6, 2019, at 1, 3-5 (some footnotes omitted) (some additional formatting).

On November 5, 2013, the Kellys filed their original complaint in the instant case, and, on January 9, 2014, they filed an amended complaint, averring as follows:

19. As a result of the careless, negligence, breach of contract and other culpable conduct of the Defendants, ... [SNIC] refused to indemnify BBK ... for liability resulting from the [Dram Shop Action]....

Count I

Plaintiffs v. Defendants

...

24. The Defendants negligently failed to timely notify [SNIC] of the [Dram Shop Action] and BBK['s] request for indemnity and defense....

27. As a result of the negligence of the Defendants, a default judgment was entered in the [Dram Shop Action].

28. By reason of the aforesaid carelessness, negligence and/or recklessness of the Defendants as hereinbefore alleged, BBK ... suffered financially to its detriment as the insurance coverage which it had paid for did not cover indemnity and defense in the [Dram Shop Action] and forced BBK ... to enter into a stipulated judgment with [the Kellys] in the amount of Five Million Dollars for which it is liable....

Count II

Plaintiffs v. Defendants

...

34. As a direct and proximate result of the Defendants' aforesaid material breach, BBK ... suffered financially to its detriment as the insurance coverage which it had paid for did not cover indemnity and defense in the [Dram Shop Action] and forced BBK ... to enter into a stipulated judgment with [the Kellys] in the amount of Five Million Dollars for which it is now liable.

Amended Complaint, 1/9/2014, at ¶¶ 19, 24, 27-28, 34.

[O]n March 23, 2015, the Honorable Marlene Lachman denied Defendants' motion for summary judgment which asserted [the Kellys'] claims were time-barred by the statute of limitations. ... The Superior Court granted a motion to quash Defendants' appeal of Judge Lachman's denial of summary judgment. Kelly v. Carman Corporation , No. 1276 EDA 2015, order (Pa.Super., July 1, 2015) (order granting application to quash appeal).

TCO, No. 2273 EDA 2018, filed May 8, 2019, at 2 n.4.

On August 1, 2016, the first trial in the instant case commenced before the Honorable Kenneth Powell. N.T., 8/1/2016, at 1. [The Kellys'] counsel, Steven Mezrow, represented to Judge Powell that Judge Moss found [the Kellys'] $5,000,000 (five-million dollar) default judgment "reasonable and appropriate." [Id. ] at 14. [The Kellys'] counsel argued to Judge Powell that damages were already set in the instant case at $5,000,000 (five-million dollars) due to the judgment from the underlying case:

MR. MEZOW [sic]: I don't quite understand.... This case is one in which there has been, as a

...