J-A25043-14


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

FREY LUTZ CORPORATION,                            IN THE SUPERIOR COURT OF
                                                        PENNSYLVANIA
                            Appellant

                       v.

E.R. STUEBNER, INC.,

                            Appellee                  No. 883 EDA 2014


                Appeal from the Order Entered February 18, 2014
                 in the Court of Common Pleas of Chester County
                       Civil Division at No.: 2013-03233-CT


BEFORE: DONOHUE, J., WECHT, J., and PLATT, J.*

MEMORANDUM BY PLATT, J.:                              FILED APRIL 07, 2015

        Appellant, Frey Lutz Corporation, appeals from the order sustaining

the preliminary objections of Appellee, E. R. Stuebner, Inc., and dismissing

Appellant’s complaint with prejudice. Appellant, an HVAC 1 contractor, claims

as a third party beneficiary to a contract provision making Appellee, the

general contractor, financially responsible to other prime contractors on the

same project for undue delay, notwithstanding a separate definitional

provision disclaiming the creation of any contractual relationship except

between the school district and the general contractor.      We vacate and

remand.
____________________________________________


*
    Retired Senior Judge assigned to the Superior Court.
1
    Heating, ventilating, and air conditioning.
J-A25043-14


       This is a contract dispute between two prime contractors for the

construction of an elementary school in the Kennett Consolidated School

District (sometimes referred to in the contract documents as the Owner).

Appellant executed a contract as of January 12, 2010, with the School

District to provide HVAC construction for the New Bancroft Elementary

School.    Appellee executed a similar contract as of the same date, for

general construction of the same project. Both contracts were executed on

a model form contract, with additional specific information inserted.2

Appellant alleges Appellee is liable for delays on the project.

       Two provisions of the Stuebner contract are at issue in this appeal.

For clarity and completeness we present both provisions in their entirety:

       § 1.1.2 THE CONTRACT

       The Contract Documents form the Contract for Construction.
       The Contract represents the entire and integrated agreement
       between the parties hereto and supersedes prior negotiations,
       representations or agreements, either written or oral.      The
       Contract may be amended or modified only by a Modification.
       The Contract Documents shall not be construed to create a
       contractual relationship of any kind (1) between the Architect
       and Contractor, (2) between the Construction Manager and
       Contractor, (3) between the Architect and Construction Manager,
       (4) between the Owner and a Subcontractor or Sub-
       subcontractor or (5) between any persons or entities other than
       the Owner and Contractor.      The Construction Manager and
       Architect shall, however, be entitled to performance and
____________________________________________


2
  Both contracts used the same form: the AIA [American Institute of
Architects] Document A101/CMa ─ 1992, “Standard Form of Agreement
Between Owner and Contractor where the basis of the payment is a
STIPULATED SUM” (Construction Manager-Adviser edition).



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     enforcement of obligations under the Contract intended to
     facilitate performance of their duties.

                                 *    *    *

     §3.10.2 [CONTRACTOR’S CONSTRUCTION SCHEDULE]

                                 *    *    *

           .3: The Contractors [sic] shall cooperate and consult with
     other Prime Contractors during the construction of this Project.
     The Contractor shall schedule and execute his Work so as to
     avoid delay to other contractors. The Contractor is financially
     responsible to the other prime contractors for undue
     delay caused by him to other prime contractors on the
     Project. The Contractor shall indemnify and hold harmless the
     Owner, Architect, and Construction Manager for any claims,
     losses or delays of any kind made by other contractors.

(E.R. Stuebner, Inc. Contract with Kennett Consolidated School District,

dated as of January 12, 2010, §§ 1.1.2; 3.10.2.3) (emphasis added).

     On April 9, 2013, Appellant filed a complaint against Appellee under

section 3.10.2.3 of the contract between the Owner/School District and

Appellee. (See Complaint, 4/09/13, at 3-4).

     Appellee filed preliminary objections, maintaining that Appellant could

not recover as a third party beneficiary because under § 1.1.2 of the General

Conditions, both parties, Appellee and the School District, disclaim the

intention to create a contractual relationship of any kind between various

enumerated entities. (See Preliminary Objections, 5/22/13, at 4).




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       The trial court agreed, sustained the preliminary objections, and

dismissed the complaint with prejudice.             (See Order, 2/18/14; Trial Court

Opinion, 5/05/14, at 1). This timely appeal followed.3

       Appellant raises two questions for our review on appeal.

             1. Whether the Court of Common Pleas erred when it
       sustained the Preliminary Objections of E.R. Stuebner, Inc.
       because Section 3.10.2.3. of the General Conditions establishes
       Frey Lutz Corporation as a third party beneficiary?

             2. Whether the Court of Common Pleas erred when it
       sustained the Preliminary Objections of E.R. Stuebner, Inc.
       because Section 1.1.2 of the General Conditions does not
       expressly disclaim Frey Lutz Corporation’s third party beneficiary
       rights?

(Appellant’s Brief, at 4).

       Appellant argues that the trial court’s exclusionary reading of the “no

contractual    relationship”     language      of   section   1.1.2(5)   would   render

“superfluous” the “financially responsible to the other prime contractors”

language of section 3.10.2.3. (Appellant’s Brief, at 9). We agree.

       Our standard of review when the trial court sustains preliminary

objections is well-settled:

          Our standard of review of an order of the trial court
          overruling or granting preliminary objections is to
          determine whether the trial court committed an error of
          law. When considering the appropriateness of a ruling on

____________________________________________


3
  Appellant filed a timely statement of errors on April 25, 2014.                  See
Pa.R.A.P. 1925(b). The trial court filed an opinion on May 5, 2014.                See
Pa.R.A.P. 1925(a).



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J-A25043-14


       preliminary objections, the appellate court must apply the
       same standard as the trial court.

       Preliminary objections in the nature of a demurrer test the
       legal sufficiency of the complaint.       When considering
       preliminary objections, all material facts set forth in the
       challenged pleadings are admitted as true, as well as all
       inferences reasonably deducible therefrom. Preliminary
       objections which seek the dismissal of a cause of action
       should be sustained only in cases in which it is clear and
       free from doubt that the pleader will be unable to prove
       facts legally sufficient to establish the right to relief. If
       any doubt exists as to whether a demurrer should be
       sustained, it should be resolved in favor of
       overruling the preliminary objections.

                                *    *    *

       It is also well[-]established that under the law of contracts,
       in interpreting an agreement, the court must ascertain the
       intent of the parties.

       In the cases of a written contract, the intent of the parties
       is the writing itself. If left undefined, the words of a
       contract are to be given their ordinary meaning. When the
       terms of a contract are clear and unambiguous, the intent
       of the parties is to be ascertained from the document
       itself. When, however, an ambiguity exists, parol evidence
       is admissible to explain or clarify or resolve the ambiguity,
       irrespective of whether the ambiguity is patent, created by
       the language of the instrument, or latent, created by
       extrinsic or collateral circumstances.

          With specific reference to what constitutes “ambiguity” in
     the context of contract interpretation, our Supreme Court has
     opined as follows:

       Contractual language is ambiguous if it is reasonably
       susceptible of different constructions and capable of being
       understood in more than one sense. This is not a question
       to be resolved in a vacuum. Rather, contractual terms are
       ambiguous if they are subject to more than one reasonable
       interpretation when applied to a particular set of facts. We
       will not, however, distort the meaning of the language or

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J-A25043-14


         resort to a strained contrivance in order to find an
         ambiguity.

      Additionally, [i]t is axiomatic that contractual clauses must be
      construed, whenever possible, in a manner that effectuates all
      of the clauses being considered. It is fundamental that one
      part of a contract cannot be so interpreted as to annul another
      part and that writings which comprise an agreement must be
      interpreted as a whole.

Lenau v. Co-eXprise, Inc., 102 A.3d 423, 428-30 (Pa. Super. 2014)

(citations   and   internal   quotation    marks    omitted)   (emphases   added).

Similarly,

      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.

                                    *      *    *

      Moreover, when the language of a contract is clear and
      unequivocal, courts interpret its meaning by its content alone,
      within the four corners of the document.

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

665 (Pa. Super. 2014) (internal quotation marks and citations omitted).

      [W]e accept as true the material facts set forth in [a]ppellee’s
      complaint along with any reasonable inferences therefrom. The
      question presented by the demurrer is whether, on the facts
      averred, the law says with certainty that no recovery is possible.




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J-A25043-14


Shafer Elec. & Const. v. Mantia, 96 A.3d 989, 994 (Pa. 2014) (citations

and internal quotation marks omitted). Furthermore, it is well-settled that

“[a]n agreement or instrument which reduces legal rights which would

otherwise exist is strictly construed against the party asserting it and must

spell out with the utmost particularity the intention of the parties.”

Maloney v. Valley Medical Facilities, Inc., 946 A.2d 702, 707 (Pa. Super.

2008), affirmed, 984 A.2d 478 (Pa. 2009) (citation omitted). “Pennsylvania

contract law prescribes that, ‘an interpretation will not be given to one part

of the contract which will annul another part of it.’” Id. (citing Capek v.

Devito, 767 A.2d 1047, 1050 (Pa. 2001)).

      Here, in its Rule 1925(a) opinion, the trial court concluded that

Appellant offered “a tortured interpretation” of the definitional language in

section 1.1.2. (Trial Ct. Op., at unnumbered page 4). We are constrained

to disagree.

      Preliminarily, we note that the trial court’s reasoning reads more into

the definitional section than the context, or any controlling authority,

requires or permits. Section 1.1.2, in relevant part, says no more than that

the contract documents “shall not be construed to create a contractual

relationship of any kind,” with five relationships enumerated.     (Stuebner

Contract, at § 1.1.2).

      However, Appellant is not claiming as a contracting party under the

Stuebner contract. It is claiming as a third party beneficiary. A contracting


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J-A25043-14


party and a third party beneficiary to a contract are mutually exclusive

positions; neither Appellee nor the trial court offers any legal authority in

support of their assumed equivalence.       The trial court erred by accepting

Appellee’s argument and reading them as equivalent.

      The legal principles controlling third party beneficiary status are well-

settled.

              “In order for a third party beneficiary to have standing to
      recover on a contract, both contracting parties must have
      expressed an intention that the third party be a beneficiary, and
      that intention must have affirmatively appeared in the contract
      itself.” Scarpitti v. Weborg, 530 Pa. 366, 609 A.2d 147, 149
      (1992). Furthermore,

           to be a third party beneficiary entitled to recover on a
           contract it is not enough that it be intended by one of the
           parties to the contract and the third person that the
           latter should be a beneficiary, but both parties to the
           contract must so intend and must indicate that intention
           in the contract; in other words, a promisor cannot be held
           liable to an alleged beneficiary of a contract unless the
           latter was within his contemplation at the time the contract
           was entered into and such liability was intentionally
           assumed by him in his undertaking.

      Spires v. Hanover Fire Ins. Co., 364 Pa. 52, 70 A.2d 828,
      830–31 (1950) (emphasis in original).          While Spires was
      overruled by Guy v. Liederbach, 501 Pa. 47, 459 A.2d 744
      (1983), it was only overruled “to the extent that it states the
      exclusive test for third party beneficiaries.” Id. at 751; accord
      Burks v. Fed. Ins. Co., 883 A.2d 1086, 1088 (Pa. Super.
      2005).

            In Guy, our Supreme Court established a “narrow class of
      third party beneficiaries.” Scarpitti, 609 A.2d at 151. This
      narrow exception established a “restricted cause of action” for
      third party beneficiaries by adopting Section 302 of the
      Restatement (Second) of Contracts (1979). Scarpitti, 609 A.2d
      at 151. Section 302 involves a two-part test to determine

                                      -8-
J-A25043-14


      whether one is a third party beneficiary to a contract, which
      requires that (1) the recognition of the beneficiary’s right must
      be appropriate to effectuate the intention of the parties, and (2)
      the performance must satisfy an obligation of the promisee to
      pay money to the beneficiary or the circumstances indicate that
      the promisee intends to give the beneficiary the benefit of the
      promised performance. Guy, 459 A.2d at 751 (quotation marks
      omitted); accord Burks v. Fed. Ins. Co., 883 A.2d 1086, 1088
      (Pa. Super. 2005). Thus, even when the contract does not
      expressly state that the third party is intended to be a
      beneficiary, the party may still be a third party beneficiary under
      the foregoing test. Burks, 883 A.2d at 1088. “But Guy did not
      alter the requirement that in order for one to achieve third party
      beneficiary status, that party must show that both parties to the
      contract so intended, and that such intent was within the parties’
      contemplation at the time the contract was formed.” Id.

Kirschner v. K & L Gates LLP, 46 A.3d 737, 762 (Pa. Super. 2012), appeal

denied, 65 A.3d 414 (Pa. 2013).

      Here, on review, we conclude that both of the parties (Appellee

Stuebner and the school district), expressly intended that the other prime

contractors be third party beneficiaries under the plain meaning of the

“financially responsible to the other prime contractors for undue delay”

language of section 3.10.2.3.     The trial court’s exclusionary reading of

section 1.1.2 annuls the protection of the financial responsibility clause, in

violation of the contract interpretation principles set forth in Lenau, supra

at 430.   The trial court erred in interpreting the contract by ignoring the

plain unambiguous meaning of the financial responsibility clause.           See

Kirschner, supra at 762; Maloney, supra at 707.

      The trial court also posits that Appellant has an indirect remedy

because it could sue the school district. (See Trial Ct. Op., at unnumbered

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J-A25043-14


page five). However, the relevant provision of the contract only says that

that the School District has a right to reimbursement from Appellee

Stuebner.     The trial court offers no controlling authority for its inferential

interpretation that Appellant Frey Lutz can claim indirectly through the

School District. Furthermore, the trial court offers no authority in support of

its assumption that the School District’s right of indemnification against

Stuebner includes a contractual obligation of reimbursement to Appellant.

(See id.).

       Moreover, as noted by Appellant, section 8.3.2 of the Stuebner

contract (as well as the Frey Lutz contract) expressly prohibits claims

against the School District for delays “from any cause whatsoever . . .

including . . . the actions or inactions of other contractors[.]”     (Stuebner

Contract, at § 8.3.2) (emphasis added). The trial court’s assumption of an

alternative available remedy is contradicted by the plain language of the

contracts.4

____________________________________________


4
  Appellee also maintains in a footnote that Appellant Frey Lutz was not
intended to be a beneficiary of the Stuebner contract under the Separation
Act, (71 P.S. § 1618). (See Appellee’s Brief, at 22 n.2). Appellee asserts,
correctly, that the Separation Act applies to public school building
construction contracts. (See id., (citing Mechanical Contractors Ass'n of
E. Pa., Inc. v. Commonwealth, Dept. of Educ., 934 A.2d 1262, 1271 (Pa.
2007))).   However, here there is no dispute that the Separation Act,
(mandating separate contracts), was complied with in the contract under
review.   Further, the specific claim of waiver at issue in Mechanical
Contractors, supra, is not present in this appeal.        We conclude the
argument based on the Separation Act is undeveloped and without merit.
(Footnote Continued Next Page)


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J-A25043-14


         We are constrained to conclude that the trial court erred in its

interpretation of the contract, in sustaining the preliminary objections, and

in its dismissal of the complaint with prejudice.

         Order vacated.      Case remanded to the trial court for disposition in

accordance with this decision.

         Judge Wecht joins the Memorandum.

         Judge Donohue files a Concurring Memorandum in which Judge Wecht

joins.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 4/7/2015




                       _______________________
(Footnote Continued)

On independent review, we find nothing in the Separation Act which
mandates a result contrary to our disposition.



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