Opinion
J-S73041-19 No. 453 MDA 2019
03-24-2020
MARY MALINOWSKI, EXECUTRIX OF THE ESTATE OF STANLEY MALINOWSKI, Appellant v. EDWARD T. SWINNERTON, INDIVIDUALLY AND AS A GENERAL PARTNER OF T&R PAYMENT PROCESSING
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Judgment Entered March 1, 2019 in the Court of Common Pleas of Luzerne County
Civil Division at No(s): 3263-C-2005 BEFORE: SHOGAN, J., LAZARUS, J., and MUSMANNO, J. MEMORANDUM BY MUSMANNO, J.:
Mary Malinowski, Executrix of the Estate of Stanley Malinowski ("the Estate"), appeals from the Judgment awarding the Estate $8,954.28, in the partnership dissolution case originally filed by the decedent, Stanley Malinowski ("Malinowski") against Edward T. Swinnerton ("Swinnerton"). We affirm.
The trial court set forth the Findings of Fact underlying the instant appeal, in relevant part, as follows:
4. T&R [Payment Processing ("T&R")] was formed in 1997 as a general partnership between Malinowski and Swinnerton. Both Malinowski and Swinnerton owned 50% [] of the partnership.
5. There were no restrictive covenants executed by either Malinowski or Swinnerton in favor of T&R or each other.
6. A letter dated July 8, 2004 ("the Letter") was sent at the direction of Malinowski by Attorney Anthony Lupas to Swinnerton stating Malinowski's intent to retire.
7. The Letter was sent at Malinowski's direction to Swinnerton to "notify [Swinnerton] that he is retiring from the partnership of T&R [] ... effective sixty (60) days from [Swinnerton's] receipt of this letter."
8. Swinnerton received the Letter sometime in July 2004.
9. T&R was in the business of selling credit card processing services to merchants.
10. T&R paid a commission to Malinowski and Swinnerton for equipment[-]related sales and leases. The commissions were based on actual sales and were not split evenly.
11. Swinnerton received $10,000 in commissions in 2004.
12. Residuals on credit and transactions received from the processing company or bank, as non-commissions, were split evenly between Malinowski and Swinnerton.
13. The partnership income in favor of Swinnerton for the year 2004 equaled $203,100.[FN1, FN2]
[FN1] Malinowski records this amount as $213,000, while Swinnerton records this amount as $203,000. The difference results from Malinowski's inclusion of $10,000 in commissions [that] Swinnerton earned in 2004. As the commissions were not included in the partnership's evenly[-]split profits, $203,000 is the proper principal income figure.
[FN2] The calculation breaks down as follows: $144,000 (Distributions to Swinnerton) - $11,000 (Distribution to Malinowski) + $236,000 (Guaranteed payments to Swinnerton) - $166,000 (Guaranteed payments to Malinowski).
14. In August 2003, Malinowski personally borrowed $360,000 from Fifth Third Bank [("the Fifth Third Loan")].
15. The Fifth Third Loan was guaranteed by T&R. The Fifth Third Loan payments were paid by automatic withdrawal[s] from the T&R account at the rate of $8,400 per month.
16. Malinowski made no payments on the Fifth Third Loan and all payments were made by T&R or Swinnerton.
17. T&R and Swinnerton's 2004 payments of the Fifth Third Loan debt totaled $100,800.
18. Swinnerton owes Malinowski 50% (fifty percent) of his excess partnership income.
19. Swinnerton charged expenses on an American Express card through T&R ("AMEX Card") that were personal expenses.
20. Malinowski did not hold an American Express card that he used for business purposes.
21. Swinnerton charged $71,208.84 on the AMEX Card in the year 2004.
22. Swinnerton owes Malinowski 50% [] of his 2004 AMEX Card charges.
23. Malinowski used the resources of the T&R call center for a real estate business that he operated apart from T&R.
24. The parties agreed that Malinowski would pay Swinnerton 50% of the cost of operating the call center to account for Malinowski's real estate business.
25. Both parties believe the value of Malinowski's use of the call center for the real estate business equals approximately $40,000.[FN3]
[FN3] Swinnerton provides the more specific number of $40,309. [The trial court] generally finds Malinowski less credible than Swinnerton. Even so, Malinowski's assessment of the T&R call center usage value is an approximation close to the more specific value Swinnerton offers.
....Trial Court Opinion, 10/12/17, at 2-4.
27. Swinnerton's year 2004 payment on the Fifth Third Loan, in the amount of $100,800, was already included in the year 2004 partnership income in favor of Swinnerton.
28. Both Malinowski and Swinnerton apply a 6% [] non-compounded interest rate to a 12.66[-]year period [in] their interest calculations.
29. Malinowski passed away on August 26, 2017, and his counsel subsequently filed a Praecipe to Amend Caption and Substitute Party on August 28, 2017[,] reflecting Mary Malinowski, Executrix of the Estate of Stanley Malinowski [(the Estate, Executrix and Malinowski are sometimes jointly referred to as "Malinowski")], as [p]laintiff for Stanley Malinowski, deceased.
On April 1, 2005, Malinowski filed a Civil Complaint alleging a dissolution of the partnership, and demanding an accounting. Swinnerton filed an Answer, New Matter and Counterclaim. Swinnerton's Counterclaim did not seek damages for the payments made on the Fifth Third Bank Loan by Swinnerton or T&R. At trial, Malinowski claimed $1,263,251.32 in damages from 2004 through 2006. Swinnerton counterclaimed for $228,895 for 2004 or, alternatively, $25,495 for 2005. On October 12, 2017, following a bench trial, the trial court entered an Opinion and Order awarding Malinowski $147,222.95. Swinnerton and Malinowski both filed post-trial Motions.
On July 25, 2018, following the scheduling and rescheduling of oral argument, the trial court entered an Amended Final Decision and Order ("the 2018 Order") awarding Malinowski $227,596.28. Swinnerton filed a Motion for Reconsideration/Clarification on August 8, 2018. The trial court granted the Motion for Reconsideration/Clarification. Following a telephone conference with the parties, and upon further review of the record, the trial court entered an amended Memorandum and Order ("the Amended Order") awarding Malinowski $8,954.28. Following the entry of Judgment, Malinowski filed the instant timely appeal, followed by a court-ordered Pa.R.A.P. 1925(b) Concise Statement of matters complained of on appeal.
Malinowski presents the following claims for our review:
[1.] Whether the [t]rial [c]ourt erred by refusing to allow [Malinowski] to testify [as] to the value of the partnership?Brief for Appellant at 4.
[2.] Whether the [trial c]ourt erred in allowing [Swinnerton] a[] $317,200.00 credit for personal expenses charged to the partnership?
[3.] Whether the [trial c]ourt erred in allowing loan payments made by the partnership to be deducted from [Malinowski's] share of partnership income[,] when the partnership accountant testified that all distributions made to the partners were "met" [as to] the loan payments?
[4.] Whether the [trial c]ourt erred in allowing [Swinnerton] to retain all of the partnership property and income for the year 2006 without surcharge?
We begin our analysis with our standard of review. When reviewing an adjudication in equity,
"our standard of review is limited. We will reverse only where the trial court was palpably erroneous, misapplied the law or committed a manifest abuse of discretion. Where there are any apparently reasonable grounds for the trial court's decision, we must affirm it." Viener v. Jacobs , 834 A.2d 546, 554 (Pa. Super. 2003) (citations omitted). Moreover,
The function of this Court on an appeal from an adjudication in equity is not to substitute [our] view for that of the lower tribunal; our task is rather to determine whether "a judicial mind, on due consideration of all the evidence, as a whole, could reasonably have reached the conclusion of that tribunal."
Nebesho v. Brown , 846 A.2d 721, 725-26 (Pa. Super. 2004).
Hess v. Gebhard & Co., Inc., 570 Pa. 148, 808 A.2d 912, 920 (2002) (quoting Aiken Indus., Inc. v. Estate of Wilson , 477 Pa. 34, 383 A.2d 808, 810 (1978)). ... "When reviewing the results of a non-jury trial, we are bound by the trial court's findings of fact, unless those findings are not based on competent evidence." Viener , 834 A.2d at 554.
Malinowski first claims that the trial court improperly refused to allow him to testify regarding the value of the partnership. Brief for Appellant at 16. Specifically, Malinowski argues that the trial court improperly disallowed him from testifying about the value of the partnership based upon Plaintiff's Exhibit 6, i.e., the USB Buyout Report. Id. According to Malinowski, the USB Buyout Report summarized T&R's residuals for the relevant time period. Id. at 17. Malinowski directs our attention to his testimony regarding the methodology and information used to make the calculations set forth in Defendant's Exhibit 6, which include the monthly averages for the residuals. Id. at 17-18. However, when asked whether Plaintiff's Exhibit 6 accurately reflected the value of the residual stream of T&R during 2004, Swinnerton lodged an objection, which the trial court sustained. Id. at 20. Malinowski argues that the trial court improperly excluded this testimony, as an owner of property may testify regarding its value. Id. at 19-20. Malinowski contends that, because he had testified regarding the methodology and information used in the calculations without objection, the trial court erred in excluding this testimony. Id. at 20.
In its Opinion, the trial court deemed this claim waived, based upon the misidentification of the exhibit number in the Pa.R.A.P. 1925(b) Concise Statement, and Malinowski's failure to identify where, in the record, Malinowski preserved this claim prior to filing the Concise Statement. Trial Court Opinion, 7/23/19, at 4. We agree with the sound reasoning of the trial court, and discern no error or abuse of discretion in this regard. We therefore affirm on the basis of the reasoning set forth in the trial court's Opinion with regard to this claim. See id. at 3-4.
Even if Malinowski had properly preserved this claim, we would conclude that it lacks merit. "Questions concerning the admissibility of evidence lie within the sound discretion of the trial court[.]" Parr v. Ford Motor Co., 109 A.3d 682, 690 (Pa. Super. 2014) (en banc) (citation omitted). "An abuse of discretion may not be found merely because an appellate court might have reached a different conclusion, but requires a manifest unreasonableness, or partiality, prejudice, bias, or ill-will, or such lack of support so as to be clearly erroneous." Id.
At trial, Malinowski testified that T&R received monthly reports from their present bank setting forth its "residuals." N.T., 6/29/17, at 143. Malinowski identified Plaintiff's Exhibit 8 as an actual residual report, and Plaintiff's Exhibit 6 as a summary of Plaintiff's Exhibit 8. Id. at 143-44. Swinnerton's counsel objected to Malinowski's testimony regarding these documents as hearsay. Id. at 142-43. When Malinowki's counsel represented that he would lay a proper foundation for the testimony, the trial court permitted Malinowski to continue with his testimony regarding these exhibits. Id. at 144.
Relevant to our analysis, Malinowski testified that "Mike Jenrette" prepared Plaintiff's Exhibit 6. Id. After Malinowski testified regarding his personal knowledge of the certain accounts identified in Plaintiff's Exhibit 8, the following discussion transpired:
Q. [Malinowski's counsel:] ... [B]ased upon your experience with Credit Card Merchant Servicing and the reports that you would get from the sponsoring banks, and specifically Plaintiff's Exhibit No. 6, do you believe that that accurately reflects the value of the residual stream of T&R during the Summer of 2004?Id. at 157 (emphasis added). At this time, Swinnerton's counsel objected, and the trial court sustained the objection. Id. at 157, 169. In particular, the trial court excluded the testimony based upon Pa.R.E. 701, which addresses opinion testimony by lay witnesses. Id. at 169. While we agree with the trial court's determination that the evidence was inadmissible, we would have affirmed the trial court's determination for a different reason. See In re A.J.R.-H., 188 A.3d 1157, 1175-76 (Pa. 2018) (stating that the "right-for-any-reason" doctrine "allows an appellate court to affirm the trial court's decision on any basis that is supported by the record.").
Here, Malinowski sought to render an opinion regarding the accuracy of values assigned to the residual stream summarized in Plaintiff's Exhibit 6. See N.T., 6/29/17, at 160. However, the person who prepared that exhibit was not presented as a witness, and could not be cross-examined as to the methodology used to assign a value to the residual stream. Because the evidentiary value of Malinowski's valuation testimony rested not only upon his own credibility, but that of the person who prepared Plaintiff's Exhibit 6, Malinowski's testimony attesting to the accuracy of Exhibit 6 constituted impermissible hearsay. See Pa.R.E. 801(c) (defining hearsay as an out-of-court statement offered to prove the truth of the matter asserted). Our review further discloses that Malinowski failed to provide a sufficient basis to offset the hearsay character of this evidence. Consequently, we conclude that the trial court did not abuse its discretion by excluding this testimony.
In his second claim, Malinowski argues that the trial court improperly failed to surcharge Swinnerton with $317,200 in charges that Swinnerton made on the AMEX Card. Brief for Appellant at 21. Relying on the testimony of the partnership's accountant, Malinowski contends that the charges were not a "business expense," but a personal expenditure not deducted as a business expense...." Id. at 21-22. According to Malinowski, the testimony of the partnership's accountant was unequivocal that the charges were not a business expense, and that the presumption with regard to handling the partnership's funds is against Swinnerton, as he had exclusive control of that property. Id. at 22.
In its Opinion, the trial court addressed this claim, and properly concluded that it lacks merit. See Trial Court Opinion, 7/23/19, at 4-5. We agree with the sound reasoning of the trial court, and affirm on this basis with regard to Malinowski's second claim. See id.
Our review of the record discloses no evidence presented at trial regarding individual charges on the AMEX Card, and whether those charges were personal or business expenses.
In his third claim of error, Malinowski argues that the trial court improperly allowed Swinnerton to retain partnership property and profits without imposing a penalty or surcharge. Brief for Appellant at 22. Malinowski asserts that Swinnerton retained all of the partnership's property and income "after Malinowski was wrongfully excluded in 2004[.]" Id. at 24. According to Malinowski, Swinnerton then converted all of the T&R accounts by "rewriting them" into an entity controlled by Swinnerton, "B." Id. Malinowki cites only one legal authority to support his argument, our Supreme Court's decision in Bracht v. Connell , 170 A. 297 (Pa. 1933). According to Malinowski, Swinnerton wrongfully excluded Malinowski from partnership income, and Swinnerton breached his fiduciary duty to Malinowski. Brief for Appellant at 15. Malinowski claims that Swinnerton provided no information regarding the partnership, made no distributions to him, and provided him with no financial records regarding T&R. Id. at 15-16.
In its Opinion, the trial court addressed Malinowski's claim and concluded that it lacks merit. See Trial Court Opinion, 7/23/19, at 5-6. We affirm on the basis of the trial court's Opinion with regard to Malinowski's claim, with the following addendum. See id.
Our review of the record discloses that Malinowski ignores evidence regarding his own actions with T&R's property, which supports the trial court's determination not to impose a surcharge or penalty on Swinnerton. For example, Swinnerton testified at trial that, on November 30, 2004, he found that Malinowski had locked him out of T&R's call center in Pittston, Pennsylvania. N.T., 6/29/17, at 89. Upon gaining entrance to the facility, Swinnerton discovered that "[t]he office was vacant, empty that day, vacant of employees." Id. On the telemarketers' desks, Swinnerton discovered a marketing script soliciting business for Credit Card Merchant Services, a competing business owned and operated by Malinowski. Id. at 90. Further, Swinnerton found contracts indicating that Credit Card Merchant Services had employed T&R's employees from the T&R's call center. Id. at 91. Swinnerton testified that, upon this discovery, he repeatedly and unsuccessfully attempted to reach Malinowski for an explanation. Id. at 93. Thus, the record reflects no abuse of the trial court's discretion in not assessing a surcharge or penalty on Swinnerton.
The employees had tendered their resignations to Swinnerton sometime after signing employment contracts for Credit Card Merchant Services. Id. at 92.
In his fourth claim, Malinowski argues that the trial court improperly deducted from its award certain Fifth Third Loan payments. Brief for Appellant at 24. Malinowski states that T&R never "wound up its partnership affairs." Id. at 26. According to Malinowski, "[l]oans[,] guaranteed payments and distributions made to the partners were net of the monies spent by the partnership for the repayment of loans that were made to the individual partners and guaranteed by the partnership." Id. at 27. Malinowski contends that, regarding any lack of clarity in this regard, "every presumption should be made against Swinnerton and in favor of Malinowski." Id. Malinowski also challenges the trial court's failure to award partnership income or property for the year 2006. Id. Malinowski contends that the earnings made by Swinnerton in 2006 came "exclusively from the accounts 'rewritten' by Swinnerton from T&R to Birchwood." Id.
In its Opinion, the trial court addressed Malinowski's claim and concluded that it lacks merit. See Trial Court Opinion, 7/23/19, at 6-8. We agree with the sound reasoning and conclusions reached by the trial court, as set forth in its Opinion, and affirm on this basis as to Malinowski's fourth claim of error. See id.
Judgment affirmed. Judgment Entered. /s/_________
Joseph D. Seletyn, Esq.
Prothonotary Date: 03/24/2020
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