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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

BRUNO J. PASCERI,                            IN THE SUPERIOR COURT
                                                       OF
                                                  PENNSYLVANIA
                        Appellee

                   v.

MICHAEL A. KARP,

                        Appellant                No. 68 EDA 2018


           Appeal from the Order Entered November 28, 2017
          In the Court of Common Pleas of Philadelphia County
             Civil Division at No(s): July Term, 2015 No. 798


MICHAEL A. KARP,                             IN THE SUPERIOR COURT
                                                       OF
                                                  PENNSYLVANIA
                        Appellee

                   v.

BRUNO J.PASCERI,

                        Appellant                No. 288 EDA 2018


           Appeal from the Order Entered November 28, 2017
          In the Court of Common Pleas of Philadelphia County
             Civil Division at No(s): July Term, 2015 No. 798

BRUNO J. PASCERI,                            IN THE SUPERIOR COURT
                                                       OF
                                                  PENNSYLVANIA
                        Appellant

                   v.

MICHAEL A. KARP,

                        Appellee                 No. 651 EDA 2018
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                Appeal from the Order Entered January 24, 2018
              In the Court of Common Pleas of Philadelphia County
                Civil Division at No(s): July Term, 2015 No. 0798


BEFORE: BENDER, P.J.E., NICHOLS, J., and STEVENS, P.J.E.*

MEMORANDUM BY BENDER, P.J.E.:                          FILED FEBRUARY 05, 2019

        Appellant/Cross-Appellee,       Bruce    J.   Pasceri,   and   Appellee/Cross-

Appellant, Michael A. Karp, appeal from the trial court’s November 28, 2017

order entering judgment in favor of Pasceri in the molded amount of

$1,243,194.70. In addition, Pasceri appeals from the trial court’s January 24,

2018 order denying without prejudice his petition for additional counsel fees.1

After careful review, we reverse the trial court’s November 28, 2017

judgment, and dismiss Pasceri’s appeal from the trial court’s January 24, 2018

order as moot.

        The trial court summarized the procedural history and factual

background of this case as follows:
        [Pasceri] prevailed in an action for breach of contract and for
        violation of the Pennsylvania Wage Payment and Collection Law
        ([“]WPCL[”]), 43 Pa.C.S.[] § 2601 et seq.

        Pasceri, the former president of a mortgage bank owned by Karp,
        sued to recover money owed to him under a provision of his
        employment contract that provided for payment of 10% of the
____________________________________________


*   Former Justice specially assigned to the Superior Court.

1We sua sponte consolidate the parties’ appeals as they concern related issues
and parties. See Pa.R.A.P. 513. With respect to the November 28, 2017
order, Karp’s appeal is docketed at 68 EDA 2018, and Pasceri’s appeal at 288
EDA 2018. Pasceri’s appeal from the trial court’s January 24, 2018 order is
docketed at 651 EDA 2018.

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     sale price of the business when the business was sold. The locus
     of the controversy was the language of said employment contract
     that provided for certain deductions to be made prior to making
     payment to Pasceri. [Karp] refused to make any payment to
     [Pasceri] under the contract, arguing he was entitled to take
     several deductions that would reduce the amount owed [to
     Pasceri] to zero. [Pasceri] filed suit to recover the money owed
     and for additional damages under the WPCL for withholding
     wages.

     The matter was tried before the [c]ourt sitting without a jury for
     three days beginning on June 12, 2017. On August 10, 2017, the
     [c]ourt found in favor of [Pasceri] and against [Karp]. Findings of
     fact and conclusions of law were issued. In its findings[,] the
     [c]ourt awarded [Pasceri] $857,892.60 in compensatory
     damages. The [c]ourt also found [Pasceri] was entitled to
     damages under the WPCL. Pasceri and Karp each filed post-trial
     motions[,] which were denied on November 28, 2017.

     Pasceri also filed a motion to mold the verdict to include pre[-
     ]judgment interest and damages under the WPCL in the form of
     attorneys’ fees and liquidated damages. The [c]ourt granted this
     motion in part and denied it in part, finding [Pasceri] was entitled
     to pre[-]judgment interest as the result of [Karp’s] breach of the
     contract and attorneys’ fees under the WPCL, but not liquidated
     damages. On November 28, 2017, judgment was entered on the
     molded finding in the amount of $1,243,194.70.
                                      …

     In short[,] the facts are as follows: In 1994, … Karp formed a
     mortgage bank, Gateway Funding Diversified Mortgage Services,
     LP (“Gateway”)[,] as a Pennsylvania limited partnership. By
     2008[,] Karp was the 99% limited partner in Gateway, with the
     remaining 1% general partnership interest owned by Gateway
     Funding, Inc.

     [] Pasceri became an employee of Gateway in 1998. He was hired
     to manage Gateway’s retail sales division and was very successful.
     In the spring of 2006[,] Pasceri and Karp began negotiating for
     Pasceri to assume the position of president and chief executive
     officer of Gateway. Pasceri requested a 10% limited partnership
     interest in Gateway, fearing a situation where the company [was]
     sold and he [was] terminated. Karp did not agree but negotiations
     continued.


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     On or shortly before July 21, 2006, Pasceri received a request
     from Karp’s office that he provide to Karp a draft of a proposed
     employment agreement. On July 21, 2006, Pasceri sent an e-mail
     to Kristen Koenigsbauer (“Koenigsbauer”), Karp’s assistant, which
     contained his draft of the proposed agreement (“Pasceri Draft
     Agreement”). The Pasceri Draft Agreement contained all the
     terms of Pasceri’s existing employment arrangement with
     Gateway, but added two material terms: (1) a “sale clause” that,
     in exchange for Pasceri’s agreement to take on the president and
     chief executive officer role at Gateway[,] provided that in the
     event that Karp ever sold Gateway, Pasceri would be paid 10% of
     the gross sale price of Gateway and (2) a covenant not to
     compete, which Karp had requested.

     Later that evening, Pasceri received a phone call at his home from
     Koenigsbauer and was advised that his employment agreement
     with Gateway had to be signed that night. He was directed to
     meet … Koenigsbauer in the parking lot of the Holiday Inn in Fort
     Washington in order to sign the agreement.             Pasceri met
     Koenigsbauer as requested.

     Pasceri’s original draft agreement had been changed. The sale
     clause at Paragraph 6 no longer provided that Pasceri receive 10%
     of the gross sale price in the event that Gateway [was] sold.
     Pasceri understood Paragraph 6 to provide that he would receive
     10% of the net increase in value of the company[,] measured from
     the date he began his new role as president and chief executive
     officer[,] less any cash contributions that Karp had made to
     Gateway and not extracted before the date that Gateway was
     sold.

     Pasceri was not happy with this change[,] which was made
     without his consultation[,] but [he] still signed the agreement
     because he believed it provided him protection in the event that
     Gateway [was] sold and would reward him for the increase in
     value that Gateway might achieve during his tenure. In general,
     the contract was signed under hurried circumstances.

     Paragraph 6 of the Employment Agreement (“Paragraph 6”) read
     as follows:

       6. Sale Clause: Upon the sale of Gateway Funding or any of
       its related companies, Bruno J. Pasceri will be entitled to
       10% of the actual net cash, stock, or equity profits actually
       received by the partners after deducting the partners’ equity
       in Gateway as of July 31, 2006, and after deducting all

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          loans, advances to, or payments or investments for the
          benefit of, the partnership, along with interest thereon, and
          further deducting all loans, debts, expenses, transaction
          fees, taxes, obligations, and liabilities of Gateway.

       Pasceri understood the intent of Paragraph 6 to be to provide him
       with a financial reward in the event he [was] successful in growing
       the value of Gateway from August 1, 2006, until the time Gateway
       was sold.

       When Pasceri assumed the role as president and chief executive
       officer of Gateway, the partners’ equity in the company was
       $12,594,554.00. On May 31, 2015, Karp sold Gateway for
       $30,607,952.00.

       At trial[,] the parties agreed for the purposes of calculating the
       10% due Pasceri on the “actual net cash, stock, or equity profits
       actually received by the partners[,]” a deduction would first have
       to be taken for “partners’ equity in Gateway as of July 31, 2006[,]”
       totaling $12,594,554.00. The parties further agreed a deduction
       must be taken for Karp’s capital contributions since July 31, 2006,
       totaling $5,534,472.

       After making these deductions, a balance of $12,478,926.00
       remains. Pasceri’s position at trial and in this appeal is that this
       is the figure from which his 10% share should have been
       calculated.

       Karp for his part believed three additional deductions should be
       taken: (i) Gateway’s Accumulated Profits[2] of $15,370,488.00
       from August 1, 2006 to May 31, 2015; (ii) [l]oss on loans
       transferred from Gateway to Karp in 2008 in the amount of
       $5,700,000.00     ($3,900,000.00    incurred    to   date   plus
       $1,800,000.00 projected at some future time); and (iii) interest
       from August 1, 2006 to May 31, 2015 on Karp’s net contributions
       to Gateway, in the amount of $4,264,048.00….


____________________________________________


2 According to Pasceri’s expert, David Duffus, “another term for accumulated
profits is retained earnings.” N.T. Trial, 6/14/2017, at 168. Karp’s expert,
Joseph Lesovitz, explained that accumulated profits are “retained earnings
that are held in the partner’s capital account of Mr. Karp. So Mr. Karp’s
partner’s capital account contains the accumulated profits or reinvested
profit.” N.T. Trial, 6/19/2017, at 17.

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     The [c]ourt concluded Karp was not entitled to a deduction for
     accumulated profits. These profits were [the] property of the
     partnership, Gateway, and not Karp. Furthermore[,] it was
     necessary for those accumulated profits to remain in the
     partnership and not be distributed so Gateway could remain in
     compliance with its loan covenants with its warehouse lenders.
     Paragraph 6 was ambiguous with respect to Karp’s entitlement to
     deduct his accumulated profits, and therefore the language of the
     contract must be construed against the drafter, Karp. The [c]ourt
     also found that interpreting Paragraph 6 to allow this deduction,
     which would inevitably lead to a pay-out under the contract of
     zero dollars, would lead to an unfair result.

     The [c]ourt also found the contract was ambiguous with respect
     to which kinds of interest were deductible by Karp and[,]
     construing this ambiguity against him as drafter[,] declined to
     allow a deduction for interest on net contributions. According to
     the testimony of [Pasceri’s] expert, charging interest on net
     contributions is not a typical practice.

     The [c]ourt further found [Karp] was entitled to a deduction for
     his losses on non-performing loans he repurchased from Gateway
     to preserve its solvency. In 2008[,] Karp, on the advice of his
     auditors and Pasceri, repurchased $8,400,000.00 in non-
     performing loans in order to keep Gateway from sustaining a
     major loss that could lead to Gateway’s warehouse lenders to
     cease providing loans.

     These repurchases by Karp were in essence capital contributions
     to the firm. The [c]ourt found Karp ultimately lost $3,900,000.00
     on these loans. Claims by Karp of an additional $1,800,000.00 in
     future losses were too speculative.

     The [c]ourt also found [Pasceri] was an employee of [Karp] within
     the meaning of the WPCL, and thus the WPCL applied to
     [Pasceri’s] damages. Under the statute[, Pasceri] was entitled to
     attorneys’ fees pursuant to 43 P.S. § 260.9a(f)[,] but not
     liquidated damages under 43 P.S. §[] 260.10.          Liquidated
     damages are inappropriate in a case where there is a good faith
     dispute over payment.

Trial Court Opinion (TCO), 2/21/2018, at 1-6.




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      On December 21, 2017, Karp filed a timely notice of appeal from the

court’s November 28, 2017 judgment. On January 3, 2018, Pasceri filed a

timely cross-appeal.     Each party timely complied with the trial court’s

instruction to submit concise statements of errors complained of on appeal

pursuant to Pa.R.A.P. 1925(b).     Moreover, on December 11, 2017, Pasceri

filed a petition for a supplemental award of attorneys’ fees, which the trial

court denied without prejudice on January 24, 2018. On February 22, 2018,

Pasceri filed a notice of appeal from the trial court’s January 24, 2018 order.

The docket does not indicate that the trial court directed Pasceri to file a Rule

1925(b) statement for this appeal.

      For ease of disposition, we will first address the following issues raised

by Karp in his appeal docketed at 68 EDA 2018:
      1. Did the [c]ourt err in finding and concluding that the profits
      generated by Gateway from its operations (the “accumulated
      profits”) belonged to Gateway and not to Karp[?]

      2. Did the [c]ourt err in finding and concluding that Karp could not
      deduct the accumulated profits he had invested in Gateway for the
      benefit of Gateway pursuant to the Paragraph 6 phrase “after
      deducting all loans, advances to, or payments or investments for
      the benefit of, the partnership[”?]

      3. Did the [c]ourt err in finding and concluding that this Paragraph
      6 phrase was ambiguous with respect to Karp’s entitlement to
      deduct the accumulated profits he had invested in Gateway for the
      benefit of Gateway[?]

      4. Did the [c]ourt err in finding and concluding that, if Karp was
      entitled to deduct his accumulated profits he had invested in
      Gateway for the benefit of Gateway pursuant to Paragraph 6, such
      a deduction would lead to an absurd result and would render
      Paragraph 6 meaningless[?]



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     5. Did the [c]ourt err in finding and concluding that, because
     Karp’s interpretation of Paragraph 6 would result in Pasceri[’s] not
     receiving a recovery thereunder, such an interpretation would lead
     to an absurd result and would render Paragraph 6 meaningless[?]

     6. Did the [c]ourt err in finding and concluding that Karp could not
     deduct any interest pursuant to the Paragraph 6 phrase “after
     deducting all loans, advances to, or payments or investments for
     the benefit of, the partnership, along with interest thereon[”?]

     7. Did the [c]ourt err in finding and concluding that this Paragraph
     6 phrase was ambiguous with respect to Karp’s entitlement to
     deduct his interest on the net contributions he had indisputably
     invested in Gateway for the benefit of Gateway[?]

     8. Did the [c]ourt correctly find and conclude that Karp was
     entitled to a loan loss deduction pursuant to Paragraph 6, but
     err[ed] in limiting Karp’s deduction to $3,900,000 instead of the
     $5,700,000 claimed by Karp[?]

     9. Did the [c]ourt err in finding and concluding that the
     negotiations of Paragraph 6 and circumstances surrounding the
     execution of Paragraph 6 were relevant when the Paragraph 6
     phrase “after deducting all loans, advances to, or payments or
     investments for the benefit of, the partnership, along with interest
     thereon” was not ambiguous[?]

     10. Did the [c]ourt err in finding and concluding that Pasceri’s
     understanding of Paragraph 6 was relevant when the Paragraph 6
     phrase “after deducting all loans, advances to, or payments or
     investments for the benefit of, the partnership, along with interest
     thereon” was not ambiguous[?]

     11. Did the [c]ourt err in finding and concluding that Paragraph 6,
     Pasceri and Pasceri’s rights under Paragraph 6 were covered by
     the WPCL[?]

     12. Did the [c]ourt err in finding and concluding that Pasceri was
     entitled to attorneys’ fees pursuant to the WPCL because Pasceri
     was not entitled to any recovery under Paragraph 6, because
     Pasceri’s request for attorneys’ fees included time and costs
     expended for issues Pasceri lost at trial and on his post-trial
     motions and because, even if he was entitled to a recovery, his
     right thereunder was not covered by the WPCL[?]




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      13. Did the Court err in finding and concluding that Pasceri was
      entitled to pre[-]judgment interest because Pasceri was not
      entitled to any recovery under Paragraph 6, because Pasceri's
      counsel never proffered any cause — much less “good cause” —
      for his untimely request for pre[-]judgment interest, because
      Pasceri’s request for pre[-]judgment interest was untimely and
      because the Pennsylvania Supreme Court has never clarified or
      decided its split [j]udgment of the Court in Kurtas v. Kurtas, 555
      A.2d 804 (Pa. 1989)[?]

Karp’s Brief at 5-8.

      At the outset, we point out that Karp raises thirteen issues in his

statement of the questions involved.       However, Karp does not divide the

argument section of his brief into thirteen corresponding parts; instead, he

divides it into six, incongruous sections. We admonish Karp for his lack of

compliance with Pa.R.A.P. 2119(a). See Pa.R.A.P. 2119(a) (“The argument

shall be divided into as many parts as there are questions to be argued; and

shall have at the head of each part—in distinctive type or in type distinctively

displayed—the particular point treated therein, followed by such discussion

and citation of authorities as are deemed pertinent.”); Donaldson v.

Davidson Bros., Inc., 144 A.3d 93, 99 n.9 (Pa. Super. 2016) (determining

that the appellant failed to comply with Rule 2119(a) where the appellant’s

brief did not “present and develop eight arguments in support of the eight

questions raised”). Notwithstanding, Karp’s noncompliance does not preclude

our review.

      As we address Karp’s issues, we keep in mind our standard of review:
      Our appellate role in cases arising from non-jury trial verdicts is
      to determine whether the findings of the trial court are supported
      by competent evidence and whether the trial court committed
      error in any application of the law. The findings of fact of the trial

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        judge must be given the same weight and effect on appeal as the
        verdict of a jury. We consider the evidence in a light most
        favorable to the verdict winner. We will reverse the trial court
        only if its findings of fact are not supported by competent evidence
        in the record or if its findings are premised on an error of law.
        However, [where] the issue … concerns a question of law, our
        scope of review is plenary.

        The trial court’s conclusions of law on appeal originating from a
        non-jury trial are not binding on an appellate court because it is
        the appellate court’s duty to determine if the trial court correctly
        applied the law to the facts of the case.

Stephan v. Waldron Elec. Heating and Cooling LLC, 100 A.3d 660, 664-

65 (Pa. Super. 2014) (citation omitted). Further, we recognize:
        The interpretation of any contract is a question of law and this
        Court’s scope of review is plenary. Moreover, we need not defer
        to the conclusions of the trial court and are free to draw our own
        inferences. In interpreting a contract, the ultimate goal is to
        ascertain and give effect to the intent of the parties as reasonably
        manifested by the language of their written agreement. When
        construing agreements involving clear and unambiguous terms,
        this Court need only examine the writing itself to give effect to the
        parties’ understanding. This Court must construe the contract
        only as written and may not modify the plain meaning under the
        guise of interpretation.

Id. at 665 (citation omitted).

        As Karp’s first five issues challenge the trial court’s determination that

Karp had no right to deduct accumulated profits, we examine them together.3

In sum, Karp argues that the trial court erred in concluding that “Karp’s

accumulated profits belonged to Gateway and were not therefore a capital

investment in Gateway.” Karp’s Brief at 49. Karp also contests the trial court’s

assessment that “[t]he contract was ‘ambiguous as to the right of Karp to

____________________________________________


3   Karp also addresses these five issues together in his brief.

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deduct accumulated profits’ because the parties’ two experts ‘disagreed on

whether accumulated profits should be considered an investment.’” Id. at 49-

50 (some internal quotation marks omitted). Finally, Karp challenges the trial

court’s observation that “if Karp were permitted a deduction for his

accumulated profits, it ‘would lead to an unfair result’ for Pasceri, since he

would not receive a ‘payout upon the sale of the company.’” Id. at 50. In

rejecting Karp’s accumulated profit deduction, it appears that the trial court

relied on all of these considerations.

      First, in determining that the accumulated profits did not constitute an

investment made by Karp, the trial court reasoned,
      Gateway’s profits derived from its business activities were
      undoubtedly acquired in the name of the partnership and were
      thus partnership property. The reservation of these profits in the
      [limited partnership] was in fact necessary to the carrying on of
      the business. Had Karp chosen to withdraw[] them[,] Gateway
      would not have been able to secure the financing vital to
      Gateway’s operation.     These profits were not available for
      distribution and were therefore not a capital contribution.

TCO at 7. We disagree.

      Despite its emphasizing that Gateway existed as a limited partnership

— an entity separate and distinct from Karp — the trial court contradictorily

notes that Karp could have chosen to withdraw the accumulated profits from

Gateway. See id. at 7, supra (“Had Karp chosen to withdraw[] them….”).

Indeed, Pasceri even acknowledged at trial that Karp chose to leave his

accumulated profits in the business:
      [Karp’s attorney:] Now, is it your position that Mr. Karp did not
      leave his accumulated profits in the business?


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     [Pasceri:] They’re the company’s accumulated profits, not Mr.
     Karp’s.

     [Karp’s attorney:] He’s 100 percent owner; correct?

     [Pasceri:] He is 99 -

     [Karp’s attorney:] Well, that was as a limited partner. He was
     also the general partner; correct?

     [Pasceri:] There was a 1 percent general partnership above that
     in the holding company, yes.

     [Karp’s attorney:] And, so, he owned all 100 percent; correct?

     [Pasceri:] Correct.

     [Karp’s attorney:] And he left his profits in this business from 2006
     to 2015; correct?

     [Pasceri:] I would say from 1994 to 2016, if you want to be
     accurate.

     [Karp’s attorney:] All right. And – but, certainly, he did it from
     2006 to 2015; correct?

     [Pasceri:] Sure.

     [Karp’s attorney:] And he did that to sustain the operations and
     for the benefit of the business; correct?

     [Pasceri:] To build the business, sure.

N.T. Trial, 6/12/2017, at 120-21.

     Neither the trial court nor Pasceri can ignore the reality that, although

structured as a limited partnership, Gateway’s only limited partner and the

sole owner of Gateway’s corporate general partner was Karp. Pasceri argues

that “the decision about whether to make distributions belongs to the

partnership…[,]” but he overlooks that Karp is the sole decision maker in the

partnership. See Pasceri’s Reply Brief at 11. Karp controlled the partnership

and, consequently, its accumulated profits, regardless of whether he actually

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received a distribution. As Karp’s attorney persuasively asserted at trial, as

the 100 percent owner, Mr. Karp “didn’t have to leave the profits in. The

business could have gone down, could have folded. He didn’t have to leave

them in.    He chose to leave them in.    That was his decision.”   N.T. Trial,

6/19/2017, at 142.      Thus, we disagree with the trial court that the

accumulated profits did not constitute an investment made by Karp merely

because Gateway did not distribute them to him.

      Second, the trial court ascertained that the contract was ambiguous

because the two experts that testified on behalf of the parties “disagreed on

whether accumulated profits should be considered an ‘investment.’” TCO at

7-8. The trial court stated that “[t]he evidence was clear that the phrase

‘investments’ was susceptible of multiple interpretations.     Therefore, this

language must be construed against the drafter.”        Id. at 8.   Again, we

disagree.

      Initially, we observe that “[t]he fact that the parties have different

interpretations of a contract does not render the contract ambiguous.” Tuthill

v. Tuthill, 763 A.2d 417, 420 (Pa. Super. 2000) (citation omitted). Instead,

“[a] contract will be found to be ambiguous only if it is fairly susceptible of

different constructions and capable of being understood in more than one

sense. It is the function of the court to decide, as a matter of law, whether

the contract terms are clear or ambiguous.” Id. (citations omitted).

      Although Pasceri proffers a different interpretation of the contract than

Karp, we view Pasceri’s interpretation as contrived and unconvincing. At trial,

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Pasceri’s expert, Duffus, gave the following explanation as to why the

accumulated profits were not an ‘investment for the benefit of the partnership’

under Paragraph 6:

      [Pasceri’s attorney:] [D]o you disagree with Mr. Lesovitz’s[, Karp’s
      expert,] interpretation of [P]aragraph 6, with respect to the
      accumulated profits deduction?

      [Duffus:] I do. As I mentioned a few moments ago, I think it’s an
      attempt to shoehorn accumulated profits into one of the four
      terms that are set forth in [P]aragraph [S]ix, and I just don’t
      believe that accumulated profits are any of those.

      If we look at some of the terms that were set out there for
      deductions, loans, advances to, payments or investments, those
      are all actions. We look at the concept of an investment in the
      context of, let’s say, a shareholder making a contribution to a
      company. That’s an action where they contribute an asset, say
      it’s cash, and in return get a change or an increase in their equity.

      When we look at accumulated profits, first of all, those are profits
      that are generated by the company and that are retained in the
      company for its use – for its operational use going forward, so
      that’s not an action, it’s kind[] of a passive activity if you’re going
      to try to fit it into one of those categories.

                                       ***

      [Pasceri’s attorney:] Let’s move on to the word “investment” then,
      that does not appear anywhere as a defined term in this
      agreement, either; does it?

      [Duffus:] No, it does not.

      [Pasceri’s attorney:] Define “investment”?

      [Duffus:] Well, I think there can be many ways to use the term
      “investment.” So think about the context of where somebody
      makes an investment in a stock[,] right? They buy an ownership
      interest in a company. That may be considered an investment.

      You know, that word is oftentimes used – think about buying a
      car, a lot of people will say, well, here’s your investment in your
      new car, or here’s your investment in your house. So, generally,

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      what it is, is, the outlay of an asset, again, cash in most cases, for
      an ownership interest in something.

N.T. Trial, 6/14/2017, at 88-89, 92-93. Later, on cross-examination, Duffus

further testified to distinguish accumulated profits from Karp’s contributions:
      [Karp’s attorney:] Did you say in your testimony on direct that the
      reason you did not think accumulated profits were an investment
      was because it was [sic] left in passively?

      [Duffus:] I think I used the word passively in my testimony, if I
      recall. But I think, conceptually, what I was discussing is that,
      again, distinguishing between the components of book value or
      partner’s equity in looking at net contributions as being an action.

      And I think I testified that, in my mind, it meets the criteria of an
      investment, because there’s a transfer of an asset, cash, for
      instance, in return for an increase in equity.

      When I talk about accumulated profits, I don’t view that as any
      one of those four action words, loans, advances, payments or
      investments, and the reason why I don’t is because, first of all,
      those are profits – the accumulated profits represent the profits
      generated by the company and retained in the company. And, so,
      there’s not an action, if you will, taken in this case by Mr. Karp
      with respect to those accumulated profits. They are generated by
      the company and they’re retained by the company.

      [Karp’s attorney:] So is the word “passive” that you use really
      irrelevant to this consideration? I’m just trying to understand
      where that fits into your opinion.

      [Duffus:] Yeah, I don’t know that we necessarily need that word -
      I only use the word “passive” because I think it distinguishes an
      action from how I characterized accumulated profits.

      [Karp’s attorney:] Well, if Mr. Karp took out $2 million in profits
      and then put it back in 30 days later, would you regard that as an
      investment?

      [Duffus:] It may be. I mean, I don’t know if it’s the same funds
      that are going in, so on and so forth. But, certainly, if he puts $2
      million back into the company, I would consider that an
      investment.

Id. at 134-35.

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      Relying on Duffus’s testimony, Pasceri argues that “‘investment’

connotes an ‘active effort’ through the ‘outlay of an asset.’” Pasceri’s Reply

Brief at 11 (citations omitted). Pasceri insists that “the profits that Gateway

accumulated required no action from Karp.” Id. at 12. However, based on

our review of the record, leaving the accumulated profits in the partnership

was not a passive or thoughtless matter. To be sure, Pasceri acknowledges

that “Gateway kept profits for the benefit of the partnership instead of

distributing them. The reason Gateway did not make distributions … was to

satisfy the covenant requirements under Gateway’s warehouse loans for

partner’s capital.” Id. (citation omitted); see also N.T. Trial, 6/14/2017, at

89 (setting forth testimony by Duffus that accumulated profits are retained in

the company for “its operational use going forward”).      The trial court also

found that “[a]s Gateway’s business grew, Gateway’s lines of credit would

increase, and Gateway’s warehouse lenders would require Gateway to retain

higher levels of accumulated profits.” See Trial Court’s Findings of Fact and

Conclusions of Law, 8/9/2017, at 7. Thus, Karp — who controlled Gateway —

deliberately chose to keep the accumulated profits in Gateway to sustain the

business and keep it growing.     We consider these accumulated profits to

constitute, unambiguously, an investment for the benefit of the partnership.

      Finally, the trial court determined that “the interpretation urged by Karp

would lead to an unfair result.” TCO at 8. It reasoned that:
      [Pasceri] testified credibly that Paragraph 6 resulted from
      negotiations between himself and [Karp] over the means of
      compensating [Pasceri] for his efforts in growing the company and


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       to protect him in the event the company were sold. [Pasceri] in
       fact originally sought an ownership stake in Gateway as a means
       of accomplishing this purpose.      Instead[,] Pasceri accepted
       Paragraph 6, which was drafted by Karp and signed at an unusual
       place and time and under hurried circumstances, which instead
       provided a payout upon the sale of the company.

       The [c]ourt found that allowing a deduction for accumulated
       profits prior to calculating Pasceri’s 10% would lead to a payout
       to him of zero dollars, under all circumstances.[4] This would
       render Paragraph 6 in the contract entirely superfluous and
       nugatory.

Id. (emphasis in original). Again, we disagree that Pasceri is due relief on

this basis.

       This Court has explained:
       Contracting parties are normally bound by their
       agreements, without regard to whether the terms thereof
       were read and fully understood and irrespective of whether
       the agreements embodied reasonable or good bargains.
       Once a person enters into a written agreement[,] he builds around
       himself a stone wall, from which he cannot escape by merely
       asserting he had not understood what he was signing. It should
       not be assumed that the parties were ignorant of the meaning of
       the language employed.

Nicholas v. Hofmann, 158 A.3d 675, 693 (Pa. Super. 2017) (citations and

internal quotation marks omitted; emphasis added); see also Karp’s Brief at

58.

____________________________________________


4 In making this statement, the trial court appears to have found that
“[c]ompanies in the mortgage lending industry sell for book value, which is
equal to accumulated profits and the partners’ net contributions.” Pasceri’s
Brief at 21; see also Karp’s Brief at 56 (“The trial court’s premise was
predicated on trial testimony that mortgage origination companies were
customarily sold for ‘book value’….”) (emphasis in original). Karp, however,
contends that, “before the global financial crisis, both Karp and Pasceri hoped
that they could grow the Gateway business so it could be sold for a multiple
of its book value.” Karp’s Brief at 56-57 (citation omitted).

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       Here, Karp observes that “despite the hurried circumstances, [Pasceri]

did not ask for any delay before signing his Employment Agreement to discuss

it with an attorney and, most importantly, no one made him sign it.” Id. at

57 (citations omitted).         Moreover, Karp points out that, “to evidence

[Pasceri’s] understanding of what he was signing, he signed his name

immediately below Paragraph 6 as well as at the end of the Employment

Agreement.” Id. Although the contract may not have been a good bargain

for Pasceri or fully understood by him, we decline to override the express

language of the agreement in order to save Pasceri from facing an ‘unfair

result.’ As discussed above, we view the contract as allowing Karp to deduct

his investments — specifically accumulated profits — which would entitle

Pasceri to no recovery under Paragraph 6.5 Accordingly, we reverse the trial

court’s judgment entered in favor of Pasceri.

       As a result of our disposition, we need not address the remaining issues

raised by the parties in their appeals docketed at 68 EDA 2018 and 288 EDA

2018.6 Moreover, we deem Karp’s pending application to remand to the trial
____________________________________________


5 As Karp notes, “[s]ince Karp’s accumulated profits deduction [$15,370,488],
… would exceed the agreed upon balance of $12,478,926, Pasceri would not
be entitled to any recovery pursuant to Paragraph 6 on his breach of contract
claim.” Karp’s Reply Brief at 1 (footnote omitted; some brackets added).

6 Namely, we need not address Karp’s issues pertaining to whether the trial
court erred in determining that Karp was not entitled to any interest deduction
and erred by reducing Karp’s loan loss deduction from $5.7 million to $3.9
million. See Karp’s Brief at 5-9. Further, as this Court has reversed the trial
court’s decision in favor of Pasceri, Karp’s issues pertaining to the WPCL and



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court for further proceedings on newly-discovered evidence as irrelevant in

light of our disposition and, thus, we deny it as moot. See Karp’s Application

to Remand, 9/6/2018, at 1.7 Finally, with respect to Pasceri’s appeal docketed

at 651 EDA 2018, we similarly dismiss it as moot.


____________________________________________


prejudgment interest are moot. Id. Likewise, we need not reach the issues
Pasceri raises in his appeal, relating to the loan loss deduction as well as
attorneys’ fees and liquidated damages under the WPCL. See Pasceri’s Brief
at 3.

7 Therein, Karp claims that — after trial in June of 2017 and the parties’ filing
of appeals in December of 2017 and January of 2018 — the purchaser of
Gateway made a claim for indemnification in the amount of $14,500,000. See
Karp’s Application to Remand, 9/6/2018, at ¶ 4.             Karp explains that,
“[e]ffective May 30, 2015, Gateway was sold … to UFG Holdings LLC …, which
assigned its rights to Gateway to its member, Finance of America Holdings,
LLC (‘FOAH’)[,]” and “[a]s part of the Purchase Agreement, Karp agreed to
indemnify FOAH for ‘any [l]osses related to the operation of the [c]ompany
prior to the [c]losing’….” Id. at ¶¶ 14, 16 (citations omitted). In short, Karp
avers that — from approximately 2016 through 2018 — FOAH had cooperated
with an investigation by the Department of Housing and Urban Development
(“HUD”) that “focused exclusively on the certification of [Federal Housing
Administration (‘FHA’)] loans originated between 2008-2014 by Gateway —
the exact time period when Pasceri served as President and CEO of Gateway
and was in charge of all of Gateway’s mortgage originations.” See id. at ¶ 22
(citations and internal quotation marks omitted). According to Karp, “FOAH
believed that, as a result of … HUD’s investigation, the United States may
pursue claims under the False Claims Act against [it.]” Id. at ¶ 21 (internal
quotation marks omitted). Ultimately, Karp says, FOAH and the Department
of Justice reached a $14,500,000 settlement of HUD’s claims related to
Gateway’s FHA mortgage origination business prior to its sale. Id. at ¶ 23
(citation and internal quotation marks omitted). Karp has allegedly agreed to
indemnify FOAH in that same amount. Id. at ¶ 24 (citation omitted).
Consequently, Karp requests that we remand this case to the trial court for
further proceedings to consider this newly-discovered evidence, as he asserts
“[t]his indemnity obligation either reduces the funds actually received by Karp
for the sale of Gateway or was an existing liability of Gateway under Paragraph
6.” Id. at ¶ 32.

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     Judgment entered on November 28, 2017 reversed. Appeal docketed

at 651 EDA 2018 dismissed as moot. Jurisdiction relinquished.

     President Judge Emeritus Stevens joins this memorandum.

     Judge Nichols files a concurring and dissenting statement.
Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 2/5/19




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