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HomeMy WebLinkAbout98-2526 civilCLIFTON H. HENDERSON and : IN THE COURT OF COMMON PLEAS OF SUSAN G. HENDERSON, : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiffs : V. DETWEILER ENTERPRISES, INC. : and EDWARD W. SEIK, Sr. t/a : TRINDLE SPRING DEVELOPMENT COMPANY, C.M. DETWEILER : REALTY, CARLIA LENKER, and FIRST AMERICAN FLOOD DATA : NO. 98-2526 CIVIL SERVICES, INC., Defendants : : ROBERT G. HARTMAN, Jr., HARTMAN & ASSOCIATES, INC., : ROBERT G. HARTMAN & ASSOCIATES, INC. and WHITTOCK-HARTMAN, Additional Defendants : IN RE: DEFENDANT FIRST AMERICAN FLOOD DATA SERVICES, INC.'S PRELIMINARY OBJECTIONS Before HOFFER, P.J., OLER, J. and GUIDO, J. AND NOW, ,1998, pursuant to the opinion filed on this date, Defendant's Preliminary Objections are denied. By the Court, David W. DeLuce, Esquire Johnson, Duffle, Stewart & Weidner 301 Market Street P.O. Box 109 Lemoyne, PA 17043-0109 For the Plaintiffs Marcus A. McKnight, III, Esquire Irwin, McKnight & Hughes West Pomfret Professional Building 60 West Pomfret Street Carlisle, PA 17013-3222 For Defendant First American Flood Data Services, Inc. Jeff Foreman, Esquire 3207 North Front Street Harrisburg, PA 17110 For Defendants Detweiler Enterprises, Inc. and Edward W. Seik, Sr., t/a Trindle Spring Development Co. C.M. Detweiler, Inc. t/d/b/a Howard Hanna Detweiler Realty 3310 Market Street Camp Hill, PA 17011 Carlia Lenker 3310 Market Street Camp Hill, PA 17011 Robert G. Hartman, Jr., Hartman & Associates, Inc., Robert G. Hartman & Associates, Inc. and Whittock-Hartman 2101 Orchard Road Camp Hill, PA 17011 CLIFTON H. HENDERSON and : IN THE COURT OF COMMON PLEAS OF SUSAN G. HENDERSON, : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiffs : Vo DETWEILER ENTERPRISES, INC. : and EDWARD W. SEIK, Sr. t/a : TRINDLE SPRING DEVELOPMENT : COMPANY, C.M. DETWEILER : REALTY, CARLIA LENKER, and : FIRST AMERICAN FLOOD DATA NO. 98-2526 CIVIL SERVICES, INC., : Defendants : ROBERT G. HARTMAN, Jr., : HARTMAN & ASSOCIATES, INC., : ROBERT G. HARTMAN & : ASSOCIATES, INC. and · WHITTOCK-HARTMAN, : Additional Defendants : IN RE: DEFENDANT FIRST AMERICAN FLOOD DATA SERVICES, INC.'S PRELIMINARY OBJECTIONS Before HOFFER, P.J., OLER, J. and GUIDO, J. OPINION HOFFER, P.J.: In this opinion, we address Defendant First American Flood Data Services Inc.'s preliminary objections in the form of a demurrer to Plaintiffs Clifton and Susan Henderson's complaint. Plaintiffs asserted a series of claims against the Defendant. Defendant has demurred to each claim. On May 1, 1998, Plaintiffs filed a complaint alleging fraudulent misrepresentation, negligent misrepresentation, breach of contract, negligence and 98-2526 CIVIL TERM violations of Pennsylvania law regarding unfair trade practices on the part of several defendants? Claims of breach of contract, negligence and unfair trade practices were filed against Defendant First American Flood Services, Inc. Defendant has filed preliminary objections to the complaint. In determining preliminary objections in the form of a demurrer, a court must accept as true all well pleaded facts, and reasonable inferences taken therefrom, set forth in a plaintiff's complaint. Scarpitti v. Webor~j, 530 Pa. 366, 368, 609 A.2d 147, 148 (1992). Where any doubt exists, a demurrer should not be granted. Scarpitti at 147, 609 A.2d at 148-49. The facts upon which we base this opinion are as follows: on October 13, 1994, Plaintiffs entered into a agreement of sale to purchase a lot and a home to be constructed in the Trindle Spring development, Cumberland County, Pennsylvania. In order to obtain the necessary financing Plaintiffs' lender, Source One Mortgage Service Corporation (hereinafter, "Source One"), required a flood certification to determine if the property was located in a special flood hazard area and would require flood insurance. On December 5, 1994, Defendant certified that Plaintiffs' land was not in a special flood hazard area and flood insurance was not ~ On June 26, 1998, a third party joinder complaint was filed by Defendants Detweiler Enterprises, Inc. and Edward W. Seik, Sr. joining Robert G. Hartman, Jr., Hartman & Associates, Inc., Robert G. Hartman & Associates, Inc. and Whittock-Hartman as additional defendants. 2 98-2526 CIVIL TERM required. The record reflects that the flood certification was certified to Source One and it referred to Plaintiffs as borrowers for the subject property. A second certification, dated October 25, 1995, once again certified to Source One that the property owned by the Plaintiffs did not require flood insurance and was not located in the special flood hazard area. Plaintiffs signed and dated this certification on November 13, 1995. Subsequent to Plaintiffs' purchase of the property, Plaintiffs attempted to refinance their loan in order to finish their basement and construct an in-ground pool. Source One required another flood certification. On July 16, 1996, Defendant issued a revised flood certification which determined that Plaintiffs' property was within the special flood zone hazard area. Plaintiffs were required to purchase flood insurance and forced to cancel their plans for a finished basement and an in-ground pool. Plaintiffs allege that they can no longer use their property as they had intended. Based upon the facts, as pled by the Plaintiffs, Plaintiffs may be characterized as third party beneficiaries under Pennsylvania law and therefore a grant of a demurrer is improper. The Pennsylvania Supreme Court expressly adopted Restatement (Second) of Contracts § 302 (1979) as the standard for analysis of third party beneficiaries. See Guy v. Liederbach, 501 Pa. 47, 59-60, 459 A.2d 744, 751 (1983)(granting third party beneficiary status to a devisee under 3 98-2526 CIVIL TERM a will whose intended legacy was lost due to failure of an attomey to properly draft the instrument). Section 302 of the Restatement, titled "Intended and Incidental Beneficiaries", states: (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. Restatement (Second) of Contracts § 302 (1979). The court in Guy concluded that Pennsylvania would apply a two part test to determine if one is an intended third party beneficiary. Guy at 60, 459 A.2d at 751. In order to assert a claim under a contract as a third party beneficiary, both parts of the following test must be satisfied: (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." Id. 4 98-2526 CIVIL TERM The Guy test was applied in Scarpitti v. Weborg, 530 Pa. 366, 609 A.2d 147 (1992), a case dealing with contracts between parties involved in residential development. In Scarpitti, plaintiffs were purchasers of residential lots in a subdivision which contained deed restrictions, including one which said homes could have no larger that a two and one-half car garage. Scarpitti at 369, 609 A.2d at 149. Defendant was an architect, under an implied contract with the developer of the subdivision only, who reviewed the plans of plaintiffs and other purchasers to determine if the plans conformed with the deed restrictions. Scarpitti at 368, 609 A.2d at 149. The case arose because the defendant rejected the plaintiffs' plans which included three car garages then later approved other homeowners' plans with three car garages. Scarpitti at 369, 609 A.2d at 149. The court in Scarpitti held that: a party becomes a third party beneficiary only where both parties to the contract express an intention to benefit the third party, in the contract itself, unless, the circumstances are so compelling that recognition of the beneficiary's right is appropriate to effectuate the intention of the parties, and the performance satisfies 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. Scarpitti at 372-73, 609 A.2d at 150-51(citations omitted). The court applied the test and found that the plaintiffs were intended third party beneficiaries. Scarpitti 5 98-2526 CIVIL TERM at 373, 609 A.2d at 151. The court found that the third party beneficiary relationship was within the contemplation of the parties to the contract because the purpose of the agreement between the architect and the developer was to make the lots more attractive to future purchasers because they would be assured that the homeowners would abide by the deed restrictions. Id. Although plaintiffs were not parties to the agreement, they had a recognizable right to uniform enforcement of the deed restrictions. Id._.~. At argument in the case at bar, Judge Guido brought to the attention of the Court an unpublished opinion in the case Welsh v. Wood, et al. (98-0613 Civil), written by Judge Bayley. In Welsh, plaintiffs sued a termite inspection company and its employee, a real estate agency and its agent and an appraiser after they discovered substantial termite damage to their home two months after they purchased it. The appraiser demurred, claiming that she owed no duty to the plaintiffs because she did the appraisal for FHA purposes and owed a duty to the federal government only. The court agreed and granted the demurrer. Although the facts in Welsh are comparable to those in the case at bar, Welsh does not control the outcome sub judice. Welsh. can not be extended beyond its application to FHA loans and appraisals. In the case at bar, Defendants undertook the flood certification, knowing that it would control the Plaintiffs' use of their property. Although Defendant contracted 6 98-2526 CIVIL TERM with Source One, the purpose of the certification was to determine whether Plaintiffs would get a loan or be required to purchase flood insurance. The certification form reflected that Plaintiffs were the borrowers. Clearly, the benefits of the flood certification went beyond Source One and gave the Plaintiffs a right to an accurate flood certification. In applying the two part test, generated under Restatement (Second) of Contracts § 302 (1979), the Court is compelled to recognize that the Plaintiffs obtained rights under the contract between Defendant and Source One and that Defendant intended to give the benefit of the promised performance to the Plaintiffs. Both parts of the test are satisfied and Plaintiffs can be characterized as third party beneficiaries to the contract. As third party beneficiaries to the contract between Source One and the Defendant, Plaintiffs can (1)sue under the contract; (2) assert a claim in negligence for they were owed a duty of care; and (3) go forward with their case against Defendant for violation of Pennsylvania law related to unfair trade practices because they became purchasers of goods or services. Therefore, Defendant's Preliminary Objections are denied? 2 With the denial of Defendant's Preliminary Objections, in the form of a demurrer, Defendant is now compelled to answer Plaintiffs' Complaint and has the opportunity to offer any affirmative defenses to the claim that may apply. 7