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In re Foremost Industries, Inc.

Superior Court of Pennsylvania

February 16, 2017

IN RE: FOREMOST INDUSTRIES, INC.
v.
GLD FOREMOST HOLDINGS, LLC AND DANIEL GORDON Appellants RALPH C. MICHAEL

         Appeal from the Order Entered April 1, 2016 In the Court of Common Pleas of Franklin County Civil Division at No(s): 2016-00109

          BEFORE: LAZARUS, J., STABILE, J., RANSOM, J.

          OPINION

          RANSOM, J.

         Appellants, GLD Foremost Holdings, LLC and Daniel Gordon (collectively "GLD"), appeal from the April 1, 2016 Order denying GLD's Emergency Motion to Strike Lis Pendens on real estate owned by Petitioner, Foremost Industries, Inc. (hereinafter "Foremost Industries"). For the following reasons, we reverse and remand with instructions.

         Appellee, Ralph C. Michael (hereinafter "Michael"), is a former owner of Foremost Industries. In May 2015, GLD and Michael entered into a Stock Purchase Agreement ("SPA") wherein GLD agreed to purchase Foremost Industries from Michael. Trial Ct. 1925(a) Op., 6/13/2016, at 2.

         On November 30, 2015, Michael filed a complaint in federal court against GLD claiming breach of contract, fraud, and unjust enrichment. See Michael v. GLD Foremost Holdings, LLC et al., No. 15-2230, Pl. Compl., EDF No. 1, at 11-16 (M.D. Pa. Nov. 20, 2015). In his complaint, he avers that GLD failed to remit two million dollars of the purchase price stated in the SPA. See id. at 9. Michael complains that GLD received all of Michael's rights, titles, and interests in the Company upon execution of the agreement without delivering the full purchase price at closing. Id. at 10. Thus, Michael asks for expectation damages in the form of a monetary judgment.

         On the same day, GLD filed its own complaint in federal court against Michael, asserting multiple claims arising out of the SPA. See GLD Foremost Holdings, LLC v. Ralph C. Michael, Don E. Myers, and Laurie A. Myers, No. 15-2234, Pl. Compl., EDF No. 1, at 12 (M.D. Pa. Nov. 20, 2015). Inter alia, GLD claims a possessory interest in property identified by Uniform Parcel Number 01-0A16.-126.-000000. Id. at 25 ¶ 102. According to GLD, Michael fraudulently transferred this property without consideration to his daughter, Laurie Myers, in April 2015, contrary to an SPA provision that expressly precluded Michael from selling any of Foremost Industries' assets after January 1, 2015. See id. at 25-26.[1]

         In January 2016, Michael filed two praecipes for lis pendens on three different tracts of land owned by Foremost Industries, tax parcel nos. 01-0A16-027, 18-0K30-029, and 17-0J09-008 (collectively, "Greencastle") in the Court of Common Pleas of Franklin County, certifying that the federal actions concerned real property located in Franklin County.[2] At that time, GLD was negotiating a sale of Foremost Industries' Corporate Offices, specifically tract no. 01-0A16-027, located at 2375 Buchanan Trail West, to Greencastle-Antrim School District.[3] Thus, GLD filed an emergency petition to strike the lis pendens. See Emergency Petition to Strike Lis Pendens, 3/2/2016. Michael filed an Answer to GLD's Petition to strike, arguing that title was involved in the pending federal litigation and denying that GLD is the owner of Foremost Industries. See Michael's Answer, 3/28/2016, at 2. Despite Michael's representations in his Answer, his federal complaint does not seek a change in title, but rather mere money damages. See Michael v. GLD Foremost Holdings, LLC et al., No. 15-2230, Pl. Compl., EDF No. 1, at 12, 15, 16 (M.D. Pa. Nov. 20, 2015). Following a hearing, the trial court denied GLD's emergency motion to strike the lis pendens and issued an opinion. See Trial Ct. Op., 4/1/2016. GLD timely filed a court-ordered 1925(b) statement in May 2016. Thereafter, the trial court issued an additional, responsive opinion. See Trial Ct. 1925(a) Op., 6/13/2016.

         Upon initial review, this Court issued an order to show cause why the appeal should not be quashed as taken from an unappealable order. See Order to Show Cause, 5/18/2016. Upon receipt of GLD's reply, the show-cause order was discharged, and the issue was referred to the merits panel. See Order, 7/8/2016.

         GLD asserts that the order denying their petition is a final, appealable order because it resolved the only claim at issue in their petition. See Appellants' Response to Rule to Show Cause Order, 5/26/2016, at 4. The order effectively enables the lis pendens to exist as a cloud on Foremost Industries' title to the Greencastle property, which casts a shadow over any purchase and sale negotiations for the Office Building property and calls into doubt the ability of GLD to convey marketable title. See GLD's Br. at 6. The order denying GLD's emergency petition to strike effectively put GLD "out of court" with respect to their ability to remove the cloud on title to Greencastle. See McCahill v. Roberts, 219 A.2d 306, 308 (Pa. 1966) (overruling a motion to quash where the lower court's lis pendens decision effectively eliminated Appellant's claim of property ownership); Pa.R.A.P. 341(b)(1). Accordingly, we have jurisdiction to review the order denying their petition to strike.

         On appeal, GLD raises the following issues:

1. Did the trial court err in concluding that 42 Pa.C.S. § 4302 permits a lis pendens to be filed in any case where real estate is 'involved, ' even if the title to the real estate is not at issue in the underlying case?
2. Did the trial court abuse its discretion when it determined that it was irrelevant to the lis pendens analysis whether a party is seeking title to the property as a remedy in the underlying dispute, even though Pennsylvania law indicates otherwise?
3. Did the trial court err when it ignored the harsh and arbitrary effect of its decision on Appellants, which significantly outweighed any negative impact on Appellee, who is not now, ...

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