183 A.3d 1015
Pa. Super. Ct.2018Background
- Brothers Howard (Appellant) and Kevin (Appellee) received two parcels (Farm Property and Rental Property) as joint tenants with right of survivorship in 2000; a third parcel (Elverson Property) is owned by an entity (50 West Conestoga Road, LP).
- Appellant filed a partition action (April 2016 writ; complaint Jan. 2017) seeking sale/equitable division of the Farm and Rental properties and reimbursement/charges for exclusive possession and payment of expenses.
- Appellee counterclaimed, alleging (inter alia) breach of a May 5, 2006 written Agreement that granted Appellee a 20% interest in the Elverson Property in exchange for signing a limited surety; the Agreement contains an arbitration clause covering disputes arising from the Agreement.
- Appellant filed preliminary objections under Pa.R.C.P. 1028(a)(6) to compel arbitration of the counterclaim as governed by the Agreement; the trial court overruled the objection, reasoning the Agreement implicated the Farm and Rental properties and could affect partition, so all claims should remain in court.
- The Superior Court considered whether a valid arbitration agreement existed and whether the counterclaim’s disputes fell within its scope, and whether partition issues could be separated from Agreement-based claims.
Issues
| Issue | Plaintiff's Argument (Appellant) | Defendant's Argument (Appellee) | Held |
|---|---|---|---|
| Whether the counterclaim must be sent to arbitration under the parties’ Agreement | The Agreement’s arbitration clause controls Appellee’s claims about the Elverson Property and related breaches; those issues are distinct from partition and must be arbitrated | The Agreement also governs operation and rights related to the Farm (and implicates the Rental) so disputes are intertwined and should be resolved together in court | The court reversed the trial court and held the arbitration agreement is valid and covers the disputes; all claims should proceed in arbitration to avoid conflicting resolutions |
| Whether partition of the Farm Property may proceed separately from arbitration | Partition claims concern only Farm and Rental and are distinct from Elverson-related contractual claims; bifurcation is appropriate | The Agreement ties the Farm to the Elverson financing (Farm used as collateral) and creates intertwined obligations, so partition cannot be safely adjudicated separately | The court concluded partition claims are sufficiently intertwined with the Agreement and Elverson issues that arbitration of all related claims is appropriate |
| Whether the arbitration clause is enforceable and must be favored over state procedural rules | The FAA/PA law favor enforcement of written arbitration agreements; clause is clear and should be enforced | Argued for consolidated judicial resolution to avoid multiplicity and to address property partition issues | Court applied federal/state strong policy favoring arbitration and enforced the arbitration clause for the related disputes |
| Whether trial court abused discretion in overruling preliminary objections to compel arbitration | Appellant argued the trial court erred by retaining counterclaim jurisdiction despite admitting the arbitration clause; appeal appropriate | Trial court argued potential overlap and impact on partition justified retaining jurisdiction | Superior Court reversed and remanded, directing arbitration of claims (subject to possible waiver by parties) |
Key Cases Cited
- Pisano v. Extendicare Homes, Inc., 77 A.3d 651 (Pa. Super. 2013) (threshold question of agreement to arbitrate is for the court; two-step test for arbitration: existence and scope)
- Provenzano v. Ohio Valley General Hosp., 121 A.3d 1085 (Pa. Super. 2015) (arbitration provisions construed under contract principles; doubts resolved in favor of arbitration)
- Salley v. Option One Mortg. Corp., 925 A.2d 115 (Pa. 2007) (Pennsylvania endorses a liberal policy favoring arbitration consistent with the FAA)
- Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490 (Pa. 2016) (limitations on arbitration where arbitration agreement cannot bind certain statutory claimants; distinguishes when bifurcation is required)