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United Environmental Group, Inc. v. GKK McKnight, LP

Superior Court of Pennsylvania

December 15, 2017

UNITED ENVIRONMENTAL GROUP, INC., Appellant
v.
GKK MCKNIGHT, LP, A PENNSYLVANIA LIMITED PARTNERSHIP, GKK CAPITOL, LLC, A PENNSYLVANIA LIMITED LIABILITY COMPANY, GOLDEN OIL COMPANY, A PENNSYLVANIA CORPORATION, AND KEHM OIL COMPANY, A PENNSYLVANIA CORPORATION UNITED ENVIRONMENTAL GROUP, INC., Appellant
v.
GKK MCKNIGHT, LP, A PENNSYLVANIA LIMITED PARTNERSHIP, GKK CAPITAL, LLC, A PENNSYLVANIA LIMITED LIABILITY COMPANY, GOLDEN OIL COMPANY, A PENNSYLVANIA CORPORATION, AND KEHM OIL COMPANY, A PENNSYLVANIA CORPORATION UNITED ENVIRONMENTAL GROUP, INC.,
v.
GKK MCKNIGHT, LP, A PENNSYLVANIA LIMITED PARTNERSHIP, GKK CAPITAL, LLC, A PENNSYLVANIA LIMITED LIABILITY COMPANY, GOLDEN OIL COMPANY, A PENNSYLVANIA CORPORATION, AND KEHM OIL COMPANY, A PENNSYLVANIA CORPORATION APPEAL OF: GOLDEN OIL COMPANY AND KEHM OIL COMPANY UNITED ENVIRONMENTAL GROUP, INC.,
v.
GKK MCKNIGHT, L.P., A PENNSYLVANIA LIMITED PARTNERSHIP, GKK CAPITAL, LLC A PENNSYLVNIA LIMITED LIABILITY COMPANY, GOLDEN OIL COMPANY, A PENNSYLVANIA CORPORATION, AND KHEM OIL COMPANY, A PENNSYLVANIA CORPORATION APPEAL OF: GKK MCKNIGHT, L.P. AND GKK CAPITOL, LLC

         Appeal from the Judgment Entered November 30, 2017 In the Court of Common Pleas of Allegheny County Civil Division at No(s): GD 10-010292

          BEFORE: BENDER, P.J.E., MOULTON, J., and SOLANO, J.

          OPINION

          SOLANO, J.

         This is an action by United Environmental Group, Inc. for damages relating to environmental remediation services that it performed at property on McKnight Road in Ross Township, Allegheny County, the former site of a gas station. There are two groups of defendants: (1) GKK McKnight, LP, a Pennsylvania limited partnership, and GKK Capital, LLC, a Pennsylvania limited liability company (together, "GKK"); and (2) Golden Oil Co., a Pennsylvania corporation, and Kehm Oil Co., a Pennsylvania corporation (together, "Golden"). Following a jury trial, United obtained a judgment in its favor against all defendants. At Docket Nos. 1956 WDA 2016 and 294 WDA 2017, United appeals from that judgment because it failed to include all of the elements of recovery that it sought. At Docket No. 55 WDA 2017, Golden cross-appeals from the judgment in favor of United. At Docket No. 82 WDA 2017, GKK cross-appeals from the rejection of its cross-claim against Golden. We vacate the judgment at Nos. 1956 WDA 2016 and 294 WDA 2017 and remand for further proceedings. We affirm the judgment at Nos. 55 WDA 2017 and 82 WDA 2017.

         Golden owned the gas station at the Ross Township property until 2007, when it sold the property to GKK. There were several underground tanks on the property that were used to store gasoline, and, prior to the sale, Golden asked United, a company that excavates tanks and does environmental cleanup for gas stations, to submit quotes for the removal of the tanks on the property.

         Golden and United had done business in the past. At trial, United's president, Stephen Klesic, testified to United's longstanding business relationship with Golden and its president, George Kehm:

[Q] . . . How long has [United] done work for Mr. Kehm and his companies? You said about 30 years?
A Over 30 years, it was in the early '70s - or late '70s early, '80s.
Q Do you recall how many projects or jobs you've done in that time period for him?
A From service calls to tank installations to tank removals, probably over a thousand.
Q And how did these jobs typically start? Who arranged them?
A We would either get a call from Mr. Kehm or his secretary, Kathy. If it was a service call, you know, usually in the morning between 6 and 7:00 a.m., we were in, George [Kehm] was in, Kathy was in. We'd get a call because he's checking with his stations and there was a problem at one of the stations that needed maintenance. If it was something other than a general maintenance issue, we may get a fax, hey, we have facility operations inspections which are required by PADEP [the Pennsylvania Department of Environmental Protection], they are to be done every three years. And we would get a fax, hey, these inspections are up for our facility and we need to do them and get them scheduled.
Q And how were you typically paid for these jobs?
A We were typically paid in 30 days or less.
Q From your invoice?
A From my invoices.
Q When you sent an invoice from [United], did it typically have an interest rate on it?
A Yes, our invoices were zero percent discount zero days, net ten, and then a one-and-a-half percent 30 days - or interest per month.

N.T., 5/11/15, at 56-57. Simply stated, after thirty days, United would charge 1.5% interest per month on the balance. Id. at 58.

         Kehm testified that United typically would invoice Golden for its services, and Golden would pay United and obtain reimbursement from Pennsylvania's Underground Storage Tank Indemnification Fund, a fund established by the Commonwealth to assist with the removal of underground petroleum storage tanks. See N.T., 5/11/15, at 102-03.[1] Since 1994, Kehm had been involved in about fifty remediations that involved the Tank Fund, and he testified that he had never had the Fund deny reimbursement. Id.

         Paragraph 10 of the August 2007 agreement for sale of the property from Golden to GKK provided as follows:

Seller's Expenses: Seller shall be responsible for cost of deed preparation and all matters of title clearance. Seller shall also be responsible for bringing the Property into compliance with the applicable Pennsylvania Department of Environmental Protection's Underground [Storage Tank] (UST) regulations for site closure.

         Ex. C. at ¶ 10 to United's Fourth Am. Compl., 2/29/12. Closing on the sale of the property occurred in August or September of 2008, and around that same time, Kehm directed United to submit its quote for removal of the tanks to Jonathon Kamin, GKK's manager. The quote estimated a cost of $13, 567 to remove the storage tanks and any contaminated material and to fill the resulting hole with uncontaminated soil. In pertinent part, the estimate provided, "This work will be handled on a Time & Material basis, while all costs associated with the removal of the contaminated material should be covered under [the Tank Fund] with a $5, 000 deductible per release, it is ultimately the owner[']s responsibility for these additional expenses." Ex. A to Fourth Am. Compl., 2/29/12. The estimate did not include an integration clause. GKK signed the estimate next to the word "Accepted." Id. Although the signature is not dated, GKK apparently signed on September 22, 2008. See N.T., 5/11/15, at 82.

         United began work the next day and almost immediately discovered contaminated soil. N.T., 5/11/15, at 83. United promptly notified GKK, Golden, the Pennsylvania Department of Environmental Protection ("DEP"), and the Tank Fund, in order to initiate a formal claim for reimbursement. Id. at 83. During the course of remediation, United discovered additional storage tanks that had to be removed. Id. at 87. According to United, GKK and Golden directed United to perform the work needed to remediate the contamination that it found and represented that its invoices would be paid. Id. at 70-72.

         In this connection, Golden's counsel cross-examined Klesic of United regarding the basis for its claim against Golden (which counsel personalized in his questions by referencing Golden's president, Kehm) and whether United contended that it was suing under the remediation contract that Klesic (for United) had signed with Kamin of GKK:

Q. Do you know what contract you are suing Mr. Kehm under?
A. It is my understanding that that contract, as it is there, was with Mr. Kamin. Mr. Kehm had guaranteed the cleanup of the site to Mr. Kamin, and then subsequently ordered me to, basically, do whatever is necessary to keep Mr. Kamin happy and clean up the property.
Q. Just to be clear, you are not suing Mr. Kehm under this contract?
A. It is a supplement to that contract.

N.T., 5/12/15, at 4-5. Klesic did not otherwise elaborate.

         United completed remediation in 2010, and the DEP approved United's remediation work in 2012. N.T., 5/11/15, at 118-19. United sent invoices for its remediation work to GKK, Golden, or (in most cases) both of them. The invoices totaled $350, 000. GKK tendered payment of $17, 390.55. GKK requested reimbursement from the Tank Fund, but because GKK failed to timely submit a claim, GKK's request for reimbursement was denied on June 10, 2009. N.T., 5/11/15, at 108-10.[2] GKK asked the Tank Fund's executive director to review the denial, but the Tank Fund reaffirmed its decision. Id. at 112. GKK missed the deadline to further appeal the Tank Fund's decision. N.T., 5/12-13/15, at 103.

         Meanwhile, on June 30, 2009, Golden paid United $100, 000 as partial payment for the cleanup of the property, which left approximately $230, 000 of unpaid invoices. N.T., 5/11/15, at 129. Golden's check included a notation that it was "paid under protest." When asked about this notation, Klesic (United's president) testified:

[Q:] What did you take the "paid under protest to mean"?
A [Golden] felt that the [Tank Fund] should be paying for the cost of cleanup on this as did I because per the regulations and the guidance, it should have been covered. We provided documentation to refute the claims.

N.T., 5/11/15, at 115. Klesic later explained:

A My understanding was [that the $100, 000 check] was a partial payment on the cleanup for the McKnight Road site. And that if [GKK] was successful in the appeal with the fund and the fund decided to pay, if they paid us for that work, we would reimburse the portion back to [Golden], or there was a letter written to [Golden] that he could submit[.]

Id. at 116. The last four invoices for the remediation were sent only to GKK because Golden indicated it would pay no more invoices. N.T., 5/11/15, at 101.

         At trial, however, Golden's president, George Kehm, testified that it was Golden's responsibility to pay for the remediation:

[Q. by GKK's counsel]. . . . Golden Oil entered into a contract with GKK McKnight for the purchase of the McKnight property; is that correct?
A. That is correct.
Q. And in a deposition you gave in this case, you stated it was Golden Oil's responsibility to pay for the cleanup costs?
A. That is correct.
Q. Is that still your understanding?
A. That is still correct. I'll tell you why. It was so that [the Tank Fund] paid these 50 other accounts or 50 odd accounts and always paid them. So why wouldn't they pay this one?

N.T., 5/12-13/15, at 146. Kehm stood by his deposition testimony in which, when asked, "what was your understanding of your responsibility with the underground storage tanks and transferring this property to GKK, " he responded: "I informed them that it was my responsibility. It is the law that I have to be responsible for it. . . ." Id. at 151-52.

         Eventually, United sued both GKK and Golden for the balance due on its invoices. In its fourth amended complaint ("Complaint"), it asserted claims for breach of contract, unjust enrichment, continuing services, and damages under the Contractor and Subcontractor Payment Act ("CASPA"), 73 P.S. §§ 501-516. The contract claim was based on the written contract between GKK and United (Exhibit A to the Complaint) and several invoices and other documents in which GKK or Golden authorized United's work. United's Fourth Am. Compl., at ¶ 29. United alleged:

Despite repeated demands for payment and repeated promises for payment, Defendants have failed and refused to pay the full amounts due on the contract as set forth on the invoices, and as summarized by the Statement of Past Due Account attached hereto as Exhibit "B", and there remains due and owing the amount of $180, 093, 40 plus interest of $40, 510.74 through May 11, 2010 for a total of $220, 804.14 as of May 11, 2010 plus further interest as provided by agreement and practice, and costs as provided by law.
WHEREFORE, Plaintiff demands joint and several judgment against all Defendants in the amount of Two Hundred Twenty Thousand Six Hundred Four Dollars and 14 Cents ($220, 604.14) plus further interest as provided by agreement and practice, and costs as provided by law.

Id. at ¶ 30 & Ad Damnum Cl. In Count IV, which alleged the CASPA claims, United averred that it was "a contractor that performed construction work in accordance with a contract with the Defendants, " but it did not specifically identify the contract. United alleged that its invoices for its work had not been paid. Id. at ¶¶ 46-52. United continued:

53. As a result of the Defendants' failure to timely pay Plaintiff for work performed and invoiced (less the prior amounts paid to Plaintiff by the Defendants and less the amounts paid to Plaintiff by USTIF), the Defendants owe interest at one percent (1%) per month as required by the agreement with Plaintiff, and a statutory penalty of one percent (1%) per month as required by the terms of the Pennsylvania Contractor and Subcontractor Payment Act ("CASPA")[, ] 73 P.S. §501, et[] seq.
54.As a result of the above averments, Plaintiff asserts its right to receive:
(a) Full payment of its invoiced amounts, less the prior partial amounts paid ...

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