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Home My WebLink About2006-5759 Civil DAVID A. YOUNG AND : IN THE COURT OF COMMON PLEAS OF SALLY ANN YOUNG, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFFS : : V. : : FRANCIS C. MCNAUGHTON AND : PETER J. RESSLER, INDIVIDUALLY : AND t/d/b/a MIDPENN ESTATES, : DEFENDANTS : 06-5759 CIVIL TERM IN RE: PRELIMINARY OBJECTION OF DEFENDANTS TO PLAINTIFFS’ COMPLAINT BEFORE BAYLEY, J. AND EBERT, J. OPINION AND ORDER OF COURT Bayley, J., September 14, 2007:-- On October 4, 2006, plaintiffs, David A. Young and Sally Ann Young, filed a complaint against defendants, Francis C. McNaughton and Peter J. Ressler, individually and t/d/b/a Midpenn Estates. Plaintiffs allege in Count I a breach of contract and in Count II fraudulent misrepresentation. Defendants filed a preliminary objection pursuant to Pa. Rule of Civil Procedure 1028(a)(6), seeking a stay and an order directing the parties to submit their dispute to arbitration. In their complaint, plaintiffs make the following averments. On January 5, 2005, plaintiffs and defendants entered into an Agreement for plaintiffs to purchase from defendants real estate at 3461 Market Street, Camp Hill, Cumberland County, Pennsylvania for $2,100,000.00. The sale was completed on January 31, 2005. The real estate contained Beazer Phenolic foam roof insulation, which is a toxic material that corrodes metal and is a health hazard. Prior to the sale, defendants were notified 06-5759 CIVIL TERM by Phenolic Consulting, a court appointed tort claims administrator, of the presence of Beazer Phenolic foam roof insulation on their property and of multi-party litigation against the manufacturer of the insulation due to the tendency of the insulation to destroy metal roofing components like those on the property in Camp Hill. Defendants were invited to participate in the litigation but declined. Defendants did not disclose to plaintiffs the existence of the litigation against Beazer nor did they inform plaintiffs of the existence of the faulty insulation. After defendants sold the property to plaintiffs, Phenolic Consulting again contacted defendants in an effort to convince them to join the litigation against Beazer. Defendants informed Phenolic Consulting that they had sold the property and refused to disclose the identity of the new owners (plaintiffs). The parties entered into an arbitration agreement that contains the following provisions: “Buyer and Seller agree to arbitrate any dispute between them . . . ,” and the “agreement to arbitrate disputes arising from this Agreement will survive settlement.” Plaintiffs maintain that this case should not be ordered to arbitration because the conduct they allege against defendants constitutes both breach of contract and tortious acts that continued after the contract was completed. Where a valid arbitration agreement exists between the parties and the dispute Callan v. falls within the scope of the agreement, it must be submitted to arbitration. Oxford Land Development, Inc. , 858 A.2d 1229 (Pa. Super. 2004). When an arbitration provision does not contain language that would suggest only contract claims fall within the purview of the agreement, any claims arising out of or relating to the -2- 06-5759 CIVIL TERM Shadduck v. Christopher J. Kaclik, Inc. agreement must be submitted to arbitration. , Shadduck 713 A.2d 635 (Pa. Super. 1998). In , the plaintiffs and defendants entered into a building contract, which contained an arbitration provision, for the construction of a residence in Fox Chapel, Pennsylvania. After the residence was completed, the plaintiffs filed a complaint for breach of contract, false representations regarding defendants’ ability, or willingness, to construct [the plaintiffs’] home in a workmanlike fashion, and violations of the Unfair Trade Practices and Consumer Protection Law. The defendant filed a preliminary objection to compel arbitration. The Superior Court stated the issue as follows: [The defendant] argues that the arbitration agreement at issue was broadly worded and, by its plain language, contemplated that all disputes, whether styled in tort or contract language, be submitted to arbitration. Conversely, [the plaintiffs] aver that the parties’ agreement to arbitrate was limited to causes of action sounding in contract and that they were permitted, therefore, to file the instant tort claim in the court of common pleas. The arbitration agreement stated, in part, that “[a]ll claims or disputes between the Contractor and the Owner arising out of, or relating to, this Contract or the breach thereof shall be decided by arbitration . . . .” The Court stated: the parties intended to submit all of their grievances to arbitration, regardless of whether the claims sounded in tort or contract. . . . Indeed, given the agreement’s expansive terms, the only reasonable conclusion is that a claim’s substance, not its styling, is to control whether the complaining party must proceed to arbitration or may file in the court of common pleas. That is, if the claim arises out -3- 06-5759 CIVIL TERM of, or relates to, the building contract or the purported breach thereof, the moving party’s sole forum is compulsory arbitration. Nealy v. State Farm Mut. Auto. Ins. Co. Relying on , 695 A.2d 790 (Pa. Super. 1997), the plaintiffs maintained that their claim for fraudulent misrepresentation was distinct from any claims arising out of the building contract and, therefore, must be Nealy litigated in court. In , which involved a statutory bad faith claim pursuant to 42 Pa.C.S. § 8371, the Superior Court held that “because the behavior complained of is temporally and factually distinct from any behavior that would impact upon the outcome of the damages and liability disposition of the contract claim,” the bad faith claim brought by the plaintiffs should be litigated in court rather than sent to arbitration. In Shadduck , the Superior Court concluded that the facts were distinguishable from those Nealy in because the misrepresentations complained of occurred before, during, and Nealy after construction of the Fox Chapel residence, whereas the conduct in that gave rise to the bad faith claim occurred only after the conduct from which the dispute arose, a contractual insurance claim, and was temporally and factually distinct from that claim. The Court stated that “the same factual averments underlie both [the plaintiff’s] tort and breach of contract claims,” and the underlying tort claim arose out of the building contract and was not temporally and factually distinct from the behavior averred in the breach of contract claim. Therefore, all of the claims had to be submitted to arbitration. Shadduck In the present case, like in , there are counts for fraudulent misrepresentation and breach of contract. Paragraph 29 states that “Buyer and Seller -4- 06-5759 CIVIL TERM any agree to arbitrate dispute between them . . .,” and the “agreement to arbitrate will survive settlement disputes arising from this Agreement .” (Emphasis added.) As Shadduck in , where the arbitration provision encompassed “[a]ll claims and disputes,” there is no limiting language in Paragraph 29 that would lead one to believe that only contract claims fall within the purview of the agreement. In rejecting the plaintiffs’ Nealy attempt to bring their false representation claim within the exception by arguing that it was “temporally and factually” distinct from their breach of contract claim, the Shadduck Superior Court in noted that the behavior complained of occurred before, during, and after construction of the plaintiffs’ residence by the defendants, and the averments underlying the breach of contract claim were the same as those underlying sub judice the fraudulent misrepresentation claim. In the case , plaintiffs aver that defendants’ concealment of the Beazer Phenolic foam roof insulation and refusal to reveal plaintiffs’ identity to the tort claims administrator occurred prior to and subsequent to the sale of the property. The fraudulent misrepresentation claim is not “temporally and factually” distinct from the breach of contract claim. Therefore, the following order is entered. ORDER OF COURT IT IS ORDERED: AND NOW, this day of September, 2007, (1) The dispute between plaintiffs and defendants shall be submitted to arbitration. ARE STAYED. (2) The proceedings in this case, -5- 06-5759 CIVIL TERM By the Court, Edgar B. Bayley, J. David J. Lanza, Esquire For Plaintiffs Michael Reed, Esquire For Defendants :sal -6- DAVID A. YOUNG AND : IN THE COURT OF COMMON PLEAS OF SALLY ANN YOUNG, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFFS : : V. : : FRANCIS C. MCNAUGHTON AND : PETER J. RESSLER, INDIVIDUALLY : AND t/d/b/a MIDPENN ESTATES, : DEFENDANTS : 06-5759 CIVIL TERM ORDER OF COURT IT IS ORDERED: AND NOW, this day of September, 2007, (1) The dispute between plaintiffs and defendants shall be submitted to arbitration. ARE STAYED. (2) The proceedings in this case, By the Court, Edgar B. Bayley, J. David J. Lanza, Esquire For Plaintiffs Michael D. Reed, Esquire For Defendants :sal