N. E. Educ. Assocs., Inc. v. Killer Interactive, LLC, J. A11005/15

NORTH EAST EDUCATIONAL ASSOCIATES, INC.,D/B/A BRIDGEWAY ACADEMY, Appellant v. KILLER INTERACTIVE, LLC, AND JASON PIJUT

J. A11005/15

No. 1182 EDA 2014

SUPERIOR COURT OF PENNSYLVANIA

JUNE 3, 2015

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

Appeal from the Judgment Entered June 18, 2014, in the Court of Common Pleas of Northhampton County

Civil Division at No. C48-CV2013-3583

BEFORE: FORD ELLIOTT, P.J.E., OLSON AND WECHT, JJ.

MEMORANDUM BY FORD ELLIOTT, P.J.E.:

Appellant brings this appeal from the judgment entered June 18, 2014, which found in favor of appellees regarding appellant's lawsuit against appellees which sounded in breach of contract, fraud, unjust enrichment, and which sought to pierce the corporate veil. Appellees were also partially victorious on a counterclaim. Finding no error below, we affirm.

Appellant, North East Educational Associates, Inc., doing business as Bridgeway Academy ("Bridgeway"), is a company that markets programs and support to parents who wish to home school their children. Jessica Parnell ("Parnell") is the president of North East Educational Associates, Inc. Killer Interactive, LLC ("Killer"), is a company that createscustom software and internet websites. Jason Pijut ("Pijut") is the chief operating officer of Killer.

On November 8, 2011, Bridgeway and Killer entered into a written contract for Killer to design a custom internet website for Bridgeway. The work was to be completed in six phases with the following completion dates: Phase 1 -- January 1, 2012; Phase 2 -- April 2, 2012;¹ Phase 3 -- April 20, 2012; Phase 4 -- April 20, 2012; Phase 5 -- August 1, 2012; and Phase 6 -- September 21, 2012. Moreover, the parties viewed the completion of Phase 2, the customer relationship management software, as the most crucial piece of the new system.

The written contract also contained the following termination terms:

Termination can occur at any point during the project. The CLIENT reserves the right to terminate this Agreement upon thirty (30) days written notice to Killer for any cause. Killer shall, at its option, have the right to terminate this agreement with retention of all fees paid as of the date of termination, in the event that CLIENT breaches any of its obligations under this agreement.

In the event of any termination or cancellation of this agreement by CLIENT, CLIENT shall be liable to Killer for only the pro rata portion of the fee, at the discretion of Killer up to a $1,000.00 cancellation fee and expenses set forth in this Agreement.

Agreement, Termination Clause.

Finally, the contract obligated Bridgeway to make an initial payment of $8,600 to Killer, followed by nine additional monthly payments of $8,600, for a total payment of $86,000. (Agreement, Payment Schedule and Timeline Clause.)

At trial, the parties were in dispute as to Killer's performance under the contract. According to Pijut, the website was live but had simply not been activated, while Parnell testified that none of the six phases had been completed. (Notes of testimony, 3/11/14 at 26-27, 72-74, 79; 130-131.)² What the parties apparently did agree upon is the misrepresentation of Killer employee Jonathan Koray Girton ("Girton") to Bridgeway.

Girton was Killer's primary project developer for the Bridgeway project. (Id. at 36, 248.) Indeed, it was Girton who initially "sold" Parnell on hiring Killer, because Girton had "the vision." (Id. at 125.) Ultimately, Pijut discovered that Girton had fallen badly behind in the development of the Bridgeway project, especially in regard to the critical Phase 2. (Id. at 79-80.) Pijut also discovered that Girton had actually created a sham search engine program as part of Phase 2 in order to deceive Parnell and Bridgeway as to his progress. (Id. at 227-228, 236, 261-262.) As a result, Pijut fired Girton on June 19, 2012. (Id. at 250.)

Pijut claimed that he informed Parnell of Girton's deception during a telephone conversation at that time. (Id. at 77.) Pijut also stated that he had a sit-down meeting with Parnell and Bridgeway on June 20, 2012, where he again informed them about Girton's deception including his fabrication of the fake search engine. (Id. at 82, 226-228, 236.) At the time, Pijut informed Parnell and Bridgeway that he believed that Killer could still meet its obligations, stating that they "should be on target or very close on the rest of the phases." (Id. at 81.) However, when Pijut and his other employees subsequently reviewed Girton's computer code, they discovered that it was going to take more time and effort to fix than they had first thought. (Id. at 82, 237.)

For her part, Parnell denied that she was informed in June as to Girton's deception. (Id. at 128.) Rather, she claimed that the deception did not come to her knowledge until November 2012. (Id. at 128-129.) On or about November 30, 2012, Bridgeway informed Killer that they were done making payments on the contract. (Id. at 130.) Bridgeway had, in fact, not made a payment to Killer since May 2012. (Id. at 146.) Sometime in mid-December of 2012, Bridgeway told Killer that they were no longer to work on the project. (Id. at 66.) Finally, Parnell admitted that after Girton was fired from Killer, she hired him to create a warehouse management system that would "talk the same language" as the system Killer was creating under Phase 2. (Id. at 146-147.)

Bridgeway filed its Complaint on April 18, 2013. As noted, it sounded in breach of contract, fraud, unjust enrichment, and sought to pierce the corporate veil in order to hold Pijut personally liable. Killer and Pijut filed their Answer, New Matter, and Counterclaim on May 30, 2013. The Counterclaim sought the $22,650 that was still owing on the contract, plus compensation for additional work that had been performed, and the $1,000 wrongful cancellation charge described in the termination clause. Both sides also sought counsel fees.

Following a bench trial on March 11, 2014, the trial court rendered its decision on March 13, 2014. The court found in favor of Killer on all counts of both the Complaint and the Counterclaim except that count of the Counterclaim seeking the $22,650 that Killer claimed was still owing. The court found that Killer was owed $60,586 for the contract work performed, $2,000 for additional work, and $1,000 for the wrongful termination charge, for a total of $63,586. The court further found that Bridgeway had overpaid this amount, having made payments to Killer totaling $66,500. Therefore, the court awarded Bridgeway the difference between the sums, $2,914. No counsel fees were awarded. Following post-trial motions, Bridgeway filed this timely appeal.

On appeal, Bridgeway raises the following issues:

A. Did the lower court err in asserting that it was compelled to enforce specific terms of the written contract against the Plaintiff when, as a matter of law, Defendants admitted fraudulentmisrepresentations to Plaintiff voided the terms of the contract which the lower court construed against Plaintiff?

B. Did the lower court err in denying the Plaintiffs' claim for damages arising from Defendants' material breach of the contract and/or from Defendants' unjust enrichment when the lower court conceded and/or the evidence adduced at trial demonstrated (a) Plaintiff paid $66,500.00 to Defendants on a contract for the installation of a software system, (b) that Defendants failed to install the software system pursuant to the contract, and (c) that Defendants' failure to install the software system was the result of Defendants' wrongful and intentional conduct?

C. Did the lower court err in failing to pierce the corporate veil despite (a) Defendants' admissions that the corporation was severely undercapitalized, (b) Defendants' admission that Jason Pijut comingled his personal funds and debts with those of the LLC, and (c) The fact that the Defendants were involved in the perpetration of a fraud?

Bridgeway brief at 7.

We begin our analysis with our standard of review:

Our review in a non-jury case is limited to whether the findings of the trial court are supported by competent evidence and whether the trial court committed error in the application of law. We must grant the court's findings of fact the same weight and effect as the verdict of a jury and, accordingly, may disturb the non-jury verdict only if the court's findings are unsupported by competent evidence or the court committed legal error that affected the outcome of the trial. It is not the role of an appellate court to pass on the credibility of witnesses; hence we will not substitute our judgment for that of the fact[-]finder. Thus, the test we applyis not whether we would have reached the same result on the evidence presented, but rather, after due consideration of the evidence which the trial court found credible, whether the trial court could have reasonably reached its conclusion.

Agostinelli v. Edwards, 98 A.3d 695, 704 (Pa.Super. 2014), appeal denied, ___ A.3d ___, (Pa. Apr 01, 2015) (NO. 698 MAL 2014), quoting Lynn v. Pleasant Valley Country Club, 54 A.3d 915, 919 (Pa.Super. 2012).

Bridgeway first complains that the trial court erred in enforcing the obligations of the contract because the contract was rendered void by Girton's misrepresentation.

In order to void a contract due to a fraudulent misrepresentation, the party alleging fraud must prove, by clear and convincing evidence: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) resulting injury proximately caused by the reliance. Bortz v. Noon, 556 Pa. 489, 499, 729 A.2d 555, 560 (1999); Gibbs v. Ernst, 538 Pa. 193, 207, 647 A.2d 882, 889 (1994). All of these elements must be present to warrant the extreme sanction of voiding the contract.

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