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A.E.V., Inc. v. M.L. Harrold, Inc.
Superior Court of Pennsylvania
March 3, 2014
A.E.V., INC., TRADING AS SAVE ON BEER, AND NELLO DESANTES, Appellants
M.L. HARROLD, INC. TRADING AS SAVE ON BEER, AND MARY LYNN HARROLD, Appellees
Appeal from the Order entered December 21, 2012 in the Court of Common Pleas of Allegheny County Civil Division at No(s): GD-10-009062
BEFORE: PANELLA, ALLEN, and STRASSBURGER, [*] JJ.
A.E.V., Inc. (Save On Beer I) and Nello DeSantes (Appellants, collectively) appeal from the order entered December 21, 2012, dismissing their complaint with prejudice upon the grant of preliminary objections filed by M.L. Harrold, Inc. (Save On Beer II) and Mary Lynn Harrold (collectively Appellees). We affirm.
The underlying facts, taken from the complaint at issue, are as follows.
Mr. DeSantes, after a career in retail grocer[y] management focusing on large stores operating as part of a consolidated group, or chain, of stores, began to work in the beer distribution industry in the late 1980s. He apprenticed as a manager in a beer distributorship that was among those introducing modern sales and marketing practices to an industry that continued to rely on small, independent stores long after nearly every other retail segment had developed chains of stores.
Mr. DeSantes in 1990 opened Save On Beer I, which featured a large selling floor with wide isles, shopping carts, and prominently displayed prices; an unusually extensive selection of beers; a broad inventory of sodas, snacks, utensils, and other party-related items; a prominent location along a busy arterial roadway; and other distinctive elements.
After observing the success of Save On Beer I and refining his business concept, Mr. DeSantes concluded that the "Save On Beer" concept would be successful in the growing and demographically desirable community comprising northern Allegheny County and southern Butler County. Mr. DeSantes was aware that other beer distributorships had begun to form chains in which groups of individual stores -- almost invariably owned by family members or friends -- engaged jointly in advertising, purchasing, pricing, management (sometimes through shared consultants) and other elements of operation.
Mr. DeSantes approached his lawyer, Louis Caputo Sr., in 1993 to obtain legal advice concerning lawful expansion of the implementation of his Save on Beer business concept by development of a Save On Beer distributorship in northern Allegheny County or southern Butler County. Mr. Caputo advised his clients, Save On Beer I and Mr. DeSantes, that state regulatory provisions made Mr. DeSantes personally ineligible to own a second beer distributorship, but that Mr. DeSantes could introduce his business concept and name to another community through a distributorship that reported different ownership.
Mr. DeSantes suggested his sons [ ] as candidates for ownership of the second Save On Beer distributorship, to be located in southern Butler County or northern Allegheny County. Mr. Caputo advised Mr. DeSantes that [his] sons should not become stockholders, officers, or directors of Save On Beer II. Mr. Caputo advised Mr. DeSantes that a second Save On Beer distributorship should be owned by someone unrelated to Mr. DeSantes.
After discussion, and relying on Mr. Caputo's legal advice, Mr. DeSantes and Mr. Caputo determined that Ms. Harrold, an entry-wage retail cashier at Save On Beer I with whom Mr. DeSantes had developed an intimate relationship, would be a suitable candidate to be proposed to the Pennsylvania Liquor Control Board ([LCB]), as owner of the second Save On Beer distributorship Mr. DeSantes proposed to establish. Ms. Harrold and Mr. DeSantes agreed, under Mr. Caputo's legal guidance, that Ms. Harrold would serve as stockholder, officer, director and [LCB]-approved manager of Save On Beer II; that Ms. Harrold would be proposed to the [LCB] as owner, officer, director and manager of Save On Beer II; that Mr. DeSantes and/or Save On Beer I would fund the development of Save On Beer II; and that Mr. DeSantes would be co-owner (on a "50-50" basis) of Save On Beer II.
While traveling in an automobile in or toward the Town of McCandless after departing Mr. Caputo's law office in 1993, Mr. DeSantes and Ms. Harrold formed an oral agreement with respect to the development, funding, and operation of Save On Beer II. Mr. DeSantes and Ms. Harrold agreed that Mr. DeSantes would provide management services and substantial funding enabling Ms. Harrold to develop and operate Save On Beer II while Ms. Harrold would work at [Save On Beer II] on a day-to-day basis under Mr. DeSantes' guidance and provide additional funding. Mr. DeSantes and Ms. Harrold agreed that they would own Save On Beer II in equal shares and share in any profits equally. Mr. DeSantes and Ms. Harrold shook hands in the automobile to confirm their "50-50" deal, then visited the Shadowood Lounge along McKnight Road in the Town of McCandless to celebrate their agreement and to toast their new business venture.
After agreeing to terms for development and operation of Save On Beer II, Mr. DeSantes and Ms. Harrold met with Mr. Caputo to arrange incorporation of Save On Beer II, naming Ms. Harrold as stockholder, officer[, ] and director of the corporation.
Mr. DeSantes and/or Save On Beer I (at Mr. DeSantes' direction) invested hundreds of thousands of dollars and substantial effort and skill in Save On Beer II…. In particular, Mr. DeSantes and/or Save On Beer I (at Mr. DeSantes' direction) provided payments or things of value to [Ms.] Harrold and/or Save On Beer [II] that included, [inter alia, an extensive list of cash or check payments to Appellees or their creditors, as well as provision of equipment, inventory, and services].
It was commonly known among vendors, professional advisors, employees, and competitors of Save On Beer I and Save On Beer II, and among others, that Mr. DeSantes was the principle [sic] investor, organizer and operator of Save On Beer II. Ms. Harrold chafed against statements or conduct by vendors and others that reflected the perception that Mr. DeSantes was the sole decision-maker for and owner of Save On Beer II. She responded to those circumstances by telling people that ["]half of this store is mine.["] Ms. Harrold regularly instructed vendors to send to Save On Beer I for payment invoices relating to inventory delivered to and services performed for Save On Beer II. Ms. Harrold and Mr. DeSantes referred to one another as "partner" when discussing the business of Save On Beer II. [However, d]uring and after years of providing capital and other things of value worth hundreds of thousands of dollars to Save On Beer II and/or Ms. Harrold, Mr. DeSantes neither requested nor received any repayment, dividend, return of capital or other thing of value from Ms. Harrold or Save On Beer II.
Beginning in the mid-2000s, Save On Beer I experienced a business decline (consequent in part to the demographic trends that had inclined Mr. DeSantes to diversify the Save On Beer concept's footprint by establishing a location in Marshall Township). Throughout 2007 and 2008, Mr. DeSantes informed Ms. Harrold of Save On Beer I's business decline and requested payments, associated with Mr. DeSantes' economic interest in Save On Beer II, from Ms. Harrold and/or Save On Beer II for the purpose of improving Save On Beer I's finances and operations.
In early 2008, Ms. Harrold and/or Save On Beer II paid at least [$17, 000.00] ("Partial Repayment") to Mr. DeSantes and/or Save On Beer I consequent to Mr. DeSantes' request for payments. Responding to Ms. Harrold's request, Mr. DeSantes and or Save On Beer I provided an information and inexhaustive accounting reflecting investment by Mr. DeSantes and/or Save On Beer I in Ms. Harrold and/or Save On Beer II, which investment was greater by multiples than the amount of the Partial Repayment[ ]. Ms. Harrold claimed that the then-current financial circumstances of Ms. Harrold and/or Save On Beer II made it difficult or impossible to provide any additional payments beyond the Partial Repayment to Mr. DeSantes and/or Save On Beer I[ ].
Throughout 2008 and 2009, Mr. DeSantes and/or Save On Beer I continued to request from Ms. Harrold and/or Save On Beer II payments arising from his ownership interest in Save On Beer II and an accounting of Save On Beer II's business and accounts. While continuing to discuss the relevant issues with Mr. DeSantes and his son Timothy, Ms. Harrold and Save On Beer II failed to provide additional payments or the requested accounting. … Ms. Harrold and Save On Beer ...
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