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J.J. Deluca Company, Inc v. Toll Naval Associates

October 12, 2012

J.J. DELUCA COMPANY, INC., APPELLANT
v.
TOLL NAVAL ASSOCIATES, TOLL PA GP CORP., INC., AND TOLL BROS., INC., APPELLEES J.J. DELUCA COMPANY, INC., APPELLEE
v.
TOLL NAVAL ASSOCIATES, TOLL PA GP CORP., INC., AND TOLL BROS., INC., APPELLANTS



Appeal from the Judgment Entered November 18, 2011 In the Court of Common Pleas of Philadelphia County Civil Division at No.: March Term, 2007, No. 00885

The opinion of the court was delivered by: Platt, J.

J-A21038-12

IN THE SUPERIOR COURT OF PENNSYLVANIA

Appeal from the Judgment Entered November 18, 2011 In the Court of Common Pleas of Philadelphia County Civil Division at No.: March Term, 2007, 00885

BEFORE: SHOGAN, J., LAZARUS, J., and PLATT, J.*fn1

OPINION BY PLATT, J.

Appellant/Cross-Appellee, J.J. DeLuca Company, Inc. (DeLuca), appeals from the order entered in favor of Appellees/Cross-Appellants, Toll Naval Associates, Toll PA GP Corp, Inc., and Toll Bros. Inc., (collectively, Toll), in these consolidated cross-appeals. DeLuca raises sixteen claims of error against the trial court. Toll raises nine counter-questions. We affirm.

This case is on appeal for the second time. The underlying suit arose out of the contractual relationship which began when Toll engaged DeLuca to be general contractor for the seventy-nine million dollar Naval Square Project for the construction of townhomes and condominiums on former Navy property in South Philadelphia, of which Toll was owner and developer. (See generally, Trial Court Rule 1925(a) Opinion, 1/10/12, at 1-3; see also Trial Ct. Op., 8/03/10, at 1-12, passim). In addition to other compensation, DeLuca received 3.5% of total billings to Toll as a management or administrative fee. (See Trial Ct. Op., 8/03/10, at 6).

Disagreements developed over Toll's delays in obtaining required permits, untimely delivery of essential shop drawings, and work which Tolldirected to be performed out of sequence to suggest greater than actual progress for marketing purposes. Toll had complaints about DeLuca's quality of workmanship and failure to meet the contract schedule. The trial court attributes most of the delays to Toll. (See id., at 7).

In any event, the parties decided to discontinue the arrangement, with Toll to become its own general contractor. After extensive negotiation they executed a Termination for Convenience Agreement (TCA), effective as of May 26, 2006, which, inter alia, allocated responsibilities for the turnover transition, and, notably for purposes of this appeal, limited the types of claims which could be brought.

On March 9, 2007, after mediation failed, DeLuca sued Toll for amounts held back by Toll under a 10% retainage arrangement. The complaint alleged breach of contract, unjust enrichment, quantum meruit, and violation of the Contractor and Subcontractor Payment Act (CASPA), 73 P.S. §§ 501-516. DeLuca originally sought damages in excess of four million dollars.

Toll counterclaimed for cost overruns, costs of completion, unanticipated personnel costs, and liquidated damages. Evidence developed by Toll during discovery depositions confirmed that subcontractors, including Brookside Construction, had been directed by DeLuca personnel to submit invoices to Toll for work not in fact performed at Naval Square, to compensate the subcontractors for other work for DeLuca at unrelated non- Toll worksites. Over DeLuca's objection, the trial court permitted Toll to amend its cross-complaint to include a counterclaim for fraud.

DeLuca apparently withdrew certain claims in its complaint associated with allegations of fraudulent billing. After a bench trial, the trial court issued its first order and opinion, awarding DeLuca $1,231,944.79. (See Order, 8/26/09).*fn2 After post-trial motions, the trial court, acknowledging "a clerical and mathematical error," entered a revised verdict which now awarded DeLuca $2,123,838.01. (Order, 3/09/10, at 1). The trial court denied all motions for attorneys' fees "because neither party is the 'substantially prevailing party' under [CASPA]." (Id. at unnumbered page 2). The court also denied claims for interest as not preserved under paragraph ten of the Termination for Convenience Agreement, finding "[a]ll claims not preserved in the TCA are waived." (Id.). Even though it acknowledged Toll's discovery of "pervasive significant fraud" by DeLuca, the trial court stated that "all such sums have been voluntarily withdrawn or ruled not owed." (Id.). It also denied Toll's punitive damages claim as waived. (See id.). Both parties appealed.

On appeal, a panel of this Court vacated the judgment and remanded the case, deciding that the trial court erroneously concluded that Toll's claim for punitive damages had been waived. (See J. J. DeLuca Company, Inc. v. Toll Naval Associates, Nos. 1054 EDA 2010 and 1063 EDA 2010, unpublished order at 3 (Pa. Super. filed May 12, 2011)).

On remand, after a hearing, argument, and briefs, the trial court entered a $4,500,000.00 verdict in favor of Toll on the punitive damages claim, resulting in a net award to Toll of $2,376,161.99, after deducting the $2,123,838.01 previously awarded to DeLuca. (See Order, 6/07/11).

Both parties filed post-trial motions, and the trial court vacated its order of June 7, 2011. After a hearing, the trial court denied all post-trial motions and reinstated its June 7, 2011 award in favor of Toll for the net amount of $2,376,161.99. (See Order, 11/16/11). In its companion opinion, the court incorporated its opinion of August 3, 2010, and reaffirmed its order and opinion of March 8, 2010, except as to punitive damages. (See Order and Opinion, 11/16/11). On praecipe of Toll, the prothonotary entered final judgment on November 18, 2011. Both parties timely crossappealed. The trial court filed an opinion pursuant to Pennsylvania Rule of Appellate Procedure 1925(a) on January 10, 2012.*fn3

On appeal, DeLuca raises sixteen issues.

1. Did the trial court commit clear error when it found that [Toll] paid $1,581,974.45 to [DeLuca] for fraudulent or improper billings?

2. Did the trial court commit clear error when it found that Toll is entitled to $4,500,000.00 in punitive damages?

3. Did the trial court make a finding of liability against DeLuca on a cause of action for fraud?

4. Did the trial court commit clear error when it found that Toll had not waived its claim for fraud?

5. Did the trial court commit clear error by not finding that Toll's claim for fraud is barred by the applicable statute of limitations?

6. Did the trial court commit clear error by not finding that the Gist of the Action Doctrine bars Toll's claim for fraud[?]

7. Did the trial court commit clear error by awarding punitive damages for a breach of contract claim?

8. Does the trial court's award of punitive damages violate the Due Process Clause of the Fourteenth Amendment of the United States Constitution?

9. Did the trial court commit clear error when it made a mathematical error in determining the amount of the judgment reduced on account of Brookside Construction?

10. Did the trial court err as a matter of law in denying DeLuca's requests for attorneys' fees and costs as the "substantially prevailing party" pursuant to [CASPA]?

11. Did the trial court err as a matter of law in finding that DeLuca is not entitled to attorneys' fees and costs pursuant to CASPA because Toll withheld payment from DeLuca in good faith?

12. Did the trial court err as a matter of law in holding that DeLuca is not entitled to interest pursuant to CASPA because Toll withheld payment from DeLuca in good faith?

13. Did the trial court err as a matter of law in finding that DeLuca is not entitled to interest pursuant to CASPA because DeLuca's right to interest was not preserved in paragraph ten of the parties' [TCA]?

14. Did the trial court err as a matter of law in finding that DeLuca is not entitled to interest pursuant to Restatement (Second) of Contracts § 354?

15. Did the trial court err as a matter of law in finding that DeLuca is not entitled to interest pursuant to 42 P.S. § 8101?

16. Did the trial court commit clear error by not awarding DeLuca all costs incurred by DeLuca on the Project?

(DeLuca's Brief, at 3-4).

In its brief, Toll raises nine questions, styled as a "counterstatement" of DeLuca's questions involved:

1. Whether, as a matter of law, the Trial Court properly awarded punitive damages in favor of Toll and against DeLuca in the amount of $4.5 Million?

2. Whether, by failing to raise timely challenges or objections to factual and legal findings by the Trial Court in the March 8, 2010 Order and Opinion and in the First Appeal, including those findings relating to fraud, DeLuca has waived its appellate rights with respect to those factual and legal findings, thereby barring any appeal as to those findings in this proceeding?

3. In addition to the waiver by DeLuca of its appellate rights, whether, on the merits, the Trial Court's finding that Toll paid $1,581,974.45 in fraudulent or improper billings to DeLuca was manifestly erroneous, arbitrary and capricious or flagrantly contrary to the evidence?

4. In addition to the waiver by DeLuca of its appellate rights, whether, on the merits, the Trial Court correctly rejected DeLuca's gist of the action argument and corollary argument that the damages awarded to Toll were for breach of contract?

5. In addition to the waiver by DeLuca of its appellate rights, whether, on the merits, the Trial Court correctly rejected DeLuca's statute of limitations argument with respect to Toll's fraud claim?

6. In addition to the waiver by DeLuca of its appellate rights, whether, on the merits, the Trial Court properly rejected DeLuca's claim that it had made a mathematical error in calculating that $560,000 of DeLuca's fraud was relating to Brookside Construction invoices?

7. Whether the Trial Court properly rejected DeLuca's claim that it should have been awarded "all costs" for the Project, where DeLuca failed to raise this argument on the First Appeal, thereby waiving it, and whether DeLuca has again waived this claim when DeLuca failed to present any argument in its Opening Brief in these proceedings to support this issue?

8. Whether the Trial Court properly refused to award attorneys' fees to DeLuca pursuant to [CASPA]?

9. Whether the Trial Court properly refused to award interest to DeLuca ...


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