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Home My WebLink About2007-5046 CivilLIBERTY EXCAVATORS, INC., Plaintiff V. ARTHUR FUNK & SONS, INC.,: Defendant and SCHNABEL ENGINEERING ASSOCIATES, INC., Additional Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION — LAW NO. 07-5046 CIVIL TERM IN RE: ADDITIONAL DEFENDANT'S PRELIMINARY OBJECTIONS TO DEFENDANT'S JOINDER COMPLAINT BEFORE HESS, OLER and GUIDO, JJ. OPINION and ORDER OF COURT OLER, J., June 16, 2008. In this civil case involving a construction project in Lancaster County, Pennsylvania, Defendant Arthur Funk & Sons, Inc. ("Funk" or "Defendant") seeks to join Schnabel Engineering Associates, Inc. ("Schnabel" or "Additional Defendant") as an additional defendant in a lawsuit brought by Plaintiff Liberty Excavators, Inc. ("Liberty" or "Plaintiff'), by filing a Joinder Complaint against Schnabel for negligent misrepresentation. Funk asserts that Schnabel is solely liable to Plaintiff, or, in the alternative, is liable to Defendant for contribution, indemnity, or reimbursement. Additional Defendant Schnabel has filed preliminary objections to Defendant Funk's Joinder Complaint. In its preliminary objections, Additional Defendant requests that the complaint be dismissed for (a) lack of jurisdiction over the person, (b) improper venue, (c) failure to state a cause of action and (d) failure to state with specificity the facts upon which the cause of action is premised. These issues were argued on February 27, 2008. For the reasons stated in this opinion, Additional Defendant's preliminary objections will be denied. STATEMENT OF FACTS The facts alleged in Defendant's Joinder Complaint may be summarized as follows: Defendant Funk, a Pennsylvania corporation located in Lebanon County, Pennsylvania, was the general contractor for a construction project undertaken by Westminster Presbyterian Church ("Westminster") in Lancaster, Pennsylvania.' Prior to construction, Westminster contracted with Schnabel, a Maryland Corporation, to perform a geotechnical analysis of the construction site and to provide a geotechnical report to Westminster.2 Accordingly, Schnabel performed the analysis and compiled its findings in a report submitted to Westminster on June 4, 2002.3 The report included an analysis of the subsurface conditions and construction considerations relating to the earth work .4 ' Defendant's Joinder Complaint, paras. 2, 6, 14, filed November 21, 2007 (hereinafter Joinder Complaint). 2 Joinder Complaint, para. 9. s Joinder Complaint, para. 11. 4 Id. 2 After receiving the report from Schnabel, Westminster provided it to Funk,5 and Funk, in its role as general contractor, provided the report to potential subcontractors .6 Plaintiff Liberty, a Pennsylvania corporation located in Cumberland County, Pennsylvania, is a site and excavation specialty contractor.' As a potential subcontractor on the Westminster project, Liberty received the Schnabel report from Funk and used the report to prepare its bid for the excavation and site work on the project.$ Funk accepted Liberty's bid and agreed to pay Liberty $761,900 to perform the work.9 Construction began on the property in October 2004.10 On or about August 23, 2007, Liberty filed the instant lawsuit against Funk alleging breach of contract and other related claims.11 In its suit, Liberty claims that it relied on the Schnabel report in preparing its bid and entering into the subcontract with Funk.12 Liberty asserts that the construction site's subsurface conditions as represented in Schnabel's report differed significantly from the conditions Liberty actually encountered. 13 Liberty therefore alleges that Schnabel provided false information which resulted in substantial additional costs to deal with the existing subsurface conditions and s Joinder Complaint, para. 13. 6 Joinder Complaint, paras. 12, 14, 15. Joinder Complaint, paras. 1; Plaintiff's Complaint, paras. 1, 4, filed August 23, 2007 (hereinafter Complaint). s Joinder Complaint, para. 15, 16; Complaint paras. 19, 58. 9 Joinder Complaint, para. 14. 10 Joinder Complaint, para. 17. " Joinder Complaint, para. 18; See Complaint, filed August 23, 2007. 'Z Joinder Complaint, para. 16, 29; Complaint, paras. 19, 58. 13 Joinder Complaint, para. 20, 31, 32, 33; Complaint, paras. 14, 15, 21. 3 remove rock. 14 Thus, Liberty claims, inter alia, that its reliance on Schnabel's report, as provided by Funk, caused Liberty to suffer significant financial harm and is seeking damages from Defendant Funk in excess of $573,329.15 In turn, Defendant Funk now seeks to join Schnabel as an additional defendant. Defendant Funk filed its Joinder Complaint against Schnabel on November 21, 2007.16 Funk alleges that if in fact Liberty's allegations are correct, then Schnabel should be found solely liable to Liberty, or, in the alternative, if Funk is found liable to Liberty, then Schnabel should be found liable to Funk for contribution, indemnity, or reimbursement. 17 On January 3, 2008, Schnabel filed preliminary objections to Schnabel's Joinder Complaint seeking dismissal of the complaint on grounds of lack of jurisdiction over the person, improper venue, failure to state a cause of action, and insufficient specificity.'8 Schnabel argues inter alia that, while it was a corporation organized under the laws of Maryland at the time it performed the analysis of the Westminster site, it now lacks the capacity to be sued because it was dissolved on February 6, 2007, as evidenced by Schnabel's Article's of Dissolution.19 Plaintiff Liberty initiated this case with the filing 14 Joinder Complaint, para. 21, 32; Complaint, paras. 20,21,52. is Joinder Complaint, para. 19. 16 See Joinder Complaint. 17 Joinder Complaint, para. 24. " See Additional Defendant's Preliminary Objections to the Joinder Complaint Filed by Arthur Funk & Sons, Inc., filed January 3, 2008 (hereinafter Preliminary Objections). 19 Preliminary Objections, paras. 7-9, 11. 11 of its complaint on or about August 23, 2007.20 Defendant Funk filed its Joinder Complaint on or about November 20, 2007.21 While Funk agrees that Schnabel is a nominally dissolved corporation, Funk argues that in certain circumstances Maryland law does allow a dissolved corporation to be sued.22 On January 11, 2008, Funk served upon Schnabel interrogatories aimed at obtaining the factual information necessary to determine the capacity of Schnabel to be sued as a dissolved corporation.23 Schnabel did not answer the interrogatories and instead filed a motion for protective order on February 13, 2008.24 On February 16, 2008, Funk filed a motion to compel responses to the interrogatories. The preliminary objections filed by Schnabel were argued before this court on February 27, 2008. DISCUSSION 1. Schnabel's Preliminary Objection I - Lack of Jurisdiction over the Person Whether a foreign corporation has the capacity to be sued following its dissolution depends upon the law of the state in which it was incorporated. Beaumont v. ETL Services, Inc., 27 Pa. D.&C. 4th 97, 105 (1995); Casselman v. Denver Transway Corp., 195 Colo. 241, 244, 577 P.2d 293, 295 (Colo. 1978). Therefore, in this case, the 20 See Complaint, filed August 23, 2007. 21 See Joinder Complaint, filed November 20, 2007. 22 Memorandum of Law in Opposition to Preliminary Objections of Schnabel Engineering Associates, Inc., 5 (hereinafter Defendant's Brief in Opposition to Preliminary Objections). 23 Id. at 6; See Defendant Arthur Funk & Sons, Inc's First Set of Interrogatories to Additional Defendant Schnabel Engineering Associates. 24 Defendant's Brief in Opposition to Preliminary Objections, 6; See Schnabel's Motion for Protective Order, filed February 13, 2008. 5 corporate law of Maryland applies. Statutes which set forth a dissolving corporation's capacity to be sued must be viewed as substantive since in effect the statutes "define whether there is an entity in existence available to be sued." Casselman v. Denver Transway Corp., 195 Colo. 241, 243, 577 P.2d 293, 295 (Colo. 1978). Maryland Code §3-408 provides that, even after the Maryland Department of State accepts a corporation's Articles of Dissolution for record, "[t]he corporation continues to exist for the purpose of paying, satisfying, and discharging any existing debts or obligations, collecting and distributing its assets, and doing all other acts required to liquidate and wind up its business and affairs." Accordingly, a Maryland corporation loses its capacity to be sued only after it is "effectually dissolved." Baltimore Luggage Co. v. Holtzman, 80 Md.App. 282, 301, 562 A.2d 1286, 1295 (1989); Mill & Lumber Co. v. Edward Keefer, 179 Md. 496, 500, 20 A.2d 178, 180 (Md. 1941). Effectual dissolution does not occur until a corporation has fulfilled all of its responsibilities under §3-408. Prior to effectual dissolution, a corporation may be regarded as essentially still existing, and, for that reason, may still have the capacity to be sued. See Singer & Talcott Co. v. Hutchinson, 176 I11.48, 51, 51 N.E. 622. Melrose Distillers v. United States, 359 U.S. 271, 273, 79 S.Ct. 763, 765 (1959) (holding that a dissolved corporation continues to exist to defend criminal indictment); Baltimore Luggage Co. v. Holtzman, 80 Md. App. 282, 562 A.2d 1286 (1989) (holding that a dissolved corporation's power to sue or be sued is not extinguished unless there has been an effectual legal dissolution); In Re Silver Bridge Disaster, 311 F.Supp. 1345 (J.P.M.L. 1970) (suit brought against dissolved 31 engineering corporation for injuries sustained when a bridge designed by the corporation collapsed). Thus, based upon the law of Maryland, a dissolved Maryland corporation may be sued if it has not yet been effectually dissolved through settling its business affairs in accordance with §3-408 by discharging all of its debts and distributing all of its assets. For that reason, although Schnabel filed articles of dissolution in 2007, this alone does not prevent it from being sued. If it has not yet been effectually dissolved, Schnabel can still be sued in Pennsylvania as it was a foreign corporation doing business in the Commonwealth; at this stage of the case, the record does not support a conclusion that Schnabel has been effectually dissolved. II. Schnabel's Additional Preliminary Objections In the event of a denial by this court of Schnabel's first preliminary objection, Schnabel requests dismissal of Funk's Joinder Complaint based on improper venue, failure to state a cause of action, and insufficient specificity. 25 a. Schnabel's Preliminary Objection 11— Improper Venue In the court's view, venue is proper in Cumberland County, Pennsylvania, for both the initial action brought by Liberty against Funk and Funk's action against Schnabel. Pursuant to Pennsylvania Rule of Civil Procedure §2179(a), an action may be brought against a corporation in: (1) the county where its registered office or principal place of business is located; (2) a county where it regularly conducts business; (3) the county where the cause of action arose; 25 See Preliminary Objections II, III, IV. 7 (4) a county where a transaction or occurrence took place out of which the cause of action arose, or (5) a county where the property or a part of the property which is the subject matter of the action is located provided that equitable relief is sought with respect to the property.26 In this case, venue is proper in Cumberland County based upon §2179(a)(4). Liberty filed a breach of contract claim against Funk by virtue of Funk's alleged failure to make payment under the Subcontract .27 In the absence of an agreement to the contrary, payment is due at the plaintiff's place of business and, in a breach of contract claim alleging failure to make payment, venue is proper in the county of the plaintiff's place of business. Duanne Morris, LLP v. Todi, 2002 WL 31053839 (C.P. Philadelphia 2002) (citing Lucas Enterprises, Inc. v. Paul C. Harman Co., 273 Pa. Super 422, 425, 417 A.2d 720, 721 (1980)). It follows that, in a breach of contract action alleging failure to make payment, the place where payment was due constitutes a place where "the transaction or occurrence took place out of which the cause of action arose." Pa.R.C.P. §2179(a)(4). Liberty alleges breach of contract for nonpayment for the labor and materials it provided to the Westminster project. 28 Payment allegedly was due at Liberty's place of business in Cumberland County.29 Accordingly, venue is proper in Cumberland County for Liberty's action against Funk. 26 Pa. R.C.P. 2179(a). 27 Complaint, paras. 41-43, 64-66. 2s Id. 29 See Complaint, paras. 61, 62 (referring to Exhibit E of Complaint). Venue is also proper in Cumberland County for Funk's joinder action against Schnabel. Pursuant to Pennsylvania Rule of Civil Procedure § 1006(c)(1), "an action to enforce a joint or joint and several liability against two or more defendants ... may be brought against all defendants in any county in which the venue may be laid against any one of the defendants ...."30 If Funk is found liable to Liberty, Funk seeks to hold Schnabel responsible to Funk with respect to Liberty's claims. Therefore, venue is proper in Cumberland County for the action against Schnabel since venue is proper there for the underlying suit. b. Schnabel's Preliminary Objection III — Failure of Joinder Complaint To State a Cause of Action In addition to its claims of lack of personal jurisdiction and improper venue, Schnabel also claims that Funk's Joinder Complaint fails to state a cause of action against Schnabel for negligent misrepresentation. 31 A preliminary objection in the form of a demurrer should be sustained only when, "on the facts averred, the law says with certainty that" the position challenged by the demurrer cannot prevail. Powell v. Drumheller, 539 Pa. 484, 489, 653 A.2d 619, 621 (1995). If any lingering doubt remains as to whether to sustain the demurrer, "this doubt should be resolved in favor of [the nonmoving party]." Presbyterian Medical Center v. Budd, 2003 PA Super. 323, ¶6, 832 A.2d 1066, 1070. Furthermore, in reviewing a preliminary objection in the nature of a demurrer, which challenges the legal sufficiency of a complaint, the court "must accept so Pa.R.C.P 1006(c)(1). 31 Preliminary Objections, para. 19. 9 all material facts set forth in the complaint[,] as well as all the inferences reasonably deducible therefrom as true." Powell v. Drumheller, 539 Pa. 484, 489, 653 A.2d 619, 621 (1995) (citations omitted). In this case, Funk's Joinder Complaint sufficiently formulates the issues and summarizes the material facts giving rise to Schnabel's potential liability for negligent misrepresentation. Funk's Joinder Complaint avers facts to support each element of a claim for negligent misrepresentation. A claim for negligent misrepresentation requires (a) misrepresentation of a material fact (b) made under circumstances in which the misrepresenter ought to have known is false (c) with the intent to induce another to act on it, and (d) which resulted in injury to a party acting in justifiable reliance on the misrepresentation. Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 466, 866 A.2d 270, 273 (2005). The misrepresenter does not need to have known that the "words [were] untrue, but must have failed to make a reasonable investigation." Id. Throughout its Joinder Complaint, Funk clearly asserts that Schnabel misrepresented material facts .32 First and foremost, Funk attached and incorporated Liberty's Complaint into its Joinder Complaint;33 therefore, all of the averments of the initial Complaint are expressly part of the Joinder Complaint. In addition to the averments of Liberty's Complaint, Funk claims that, if Liberty's allegations are true, Schnabel should have known the information it was providing was false. 34 Moreover, 32 See Joinder Complaint, paras. 15, 20, 28, 30; See Complaint, paras. 15, 21. " See Joinder Complaint, para. 18. 34 See Joinder Complaint, para. 35. 10 Funk alleges that, if the information included in the report was in fact false, then Schnabel failed to exercise reasonable care or competence in obtaining and communicating the information contained in its report. 35 Funk further alleges that Schnabel made the misrepresentations with the knowledge that others would rely on the misrepresentations. 36 Funk claims that Schnabel held itself out to the public as having specialized expertise in engineering and was in the business of providing geotechnical engineering analysis and reports .37 Funk argues that by virtue of the nature of Schnabel's services and the nature of the Schnabel report, Schnabel intended for others to rely on the information provided in its report. Moreover, Funk claims that it in fact relied on the information provided by Schnabel. Funk relied on the report in providing it to Funk's potential subcontracts for the subcontractors to use in preparing their bids .38 Thus, Funk provided the report to its subcontractor, Liberty, 39 and Liberty, in turn, relied on the report in developing its bid.40 Funk further claims that it suffered injury as a result of its reliance on Schnabel's alleged misrepresentations. As Funk states in its Joinder Complaint, Liberty alleges that the false information provided by Schnabel resulted in substantial additional costs to " See Joinder Complaint, para. 34. 36 Joinder Complaint, para. 35. 37 See Joinder Complaint, paras. 10, 11. " Joinder Complaint, paras. 12, 14, 15. 39 See Joinder Complaint, para. 15. 40 See Joinder Complaint, para. 16; See Complaint, paras. 19, 58. 11 Liberty to correct the actual subsurface conditions .4 1 Liberty now seeks to recover these costs from Funk because Funk provided Schnabel's report to Liberty. Throughout the Joinder Complaint, Funk specifically alleges that Schnabel's material misrepresentations of fact caused injury. 42 The well -pleaded facts in Liberty's Complaint which Funk has incorporated into its Joinder Complaint along with the reasonable inferences deductible therefrom and the documentary evidence attached to the Joinder Complaint support Funk's claim against Schnabel for negligent misrepresentation. Accepting these facts and documents as true, the court will deny Schnabel's preliminary objection for failure to state a cause of action. As a more complete record is developed, Schnabel's position that negligent misrepresentation is not a tenable theory upon which relief can be granted to Funk may become more evident. However, such a conclusion at this preliminary stage of the case would not be warranted. C. Schnabel's Preliminary Objection IV — Failure of Joinder Complaint to State with Specificity the Facts upon Which the Cause of Action Is Premised Finally, Schnabel asserts that Funk's Joinder Complaint fails to comply with the requirements of Rule 1019 of The Pennsylvania Rules of Civil Procedure for specificity of pleading. 43 41 See Joinder Complaint, paras. 21; See Complaint, paras. 20-21, 52. 42 Joinder Complaint, paras. 32-33, 36-37. 43 Preliminary Objections, para. 23; See Pa. R.C.P. 1019. 12 "The purpose of the pleadings is to place the defendants on notice of the claims upon which they will have to defend." Yacoub v. Lehigh Valley Medical Associates P.C., 2002 PA Super 251, ¶16, 805 A.2d 579, 588. In order for the court to determine whether the defendant has been put on adequate notice of the claim against which he must defend, the court must not simply focus upon one portion of the complaint. Id. at ¶17, 805 A.2d 579, 589. "Rather, in determining whether a particular paragraph in a complaint has been stated with the necessary specificity, such paragraph must be read in context with all other allegations in that complaint." Id. In addition, a preliminary objection based on lack of particularity may, in certain cases, be denied on the ground that discovery is a more appropriate vehicle to resolve the matter." See 2 Goodrich-Amram 2d §1017(b):24, at 268 (1991). Schnabel contends that Funk's Joinder Complaint failed to identify with particularity the information provided by Schnabel which Funk contends is false, and also failed to specify the date on which the events took place upon which Funk premised its claim. 44 However, when read in its entirety, it is evident that the Joinder Complaint identifies the allegedly false information provided in the Schnabel report and identifies the date Schnabel provided its report to Westminster as well as the approximate time period in which the report was thereafter provided to Funk. Furthermore, Funk's Joinder Complaint against Schnabel incorporates all of the averments of Liberty's Complaint against Funk, and both the Complaint and Joinder 44 Preliminary Objections, paras. 21-23. 13 Complaint incorporate the Schnabel report .45 The Schnabel report is the source of the false information which Funk alleges gives rise to the negligent misrepresentation claim. Ultimately, Funk has averred with the requisite degree of specificity the facts giving rise to its claims. The allegations are sufficient to place Schnabel on notice of the material facts necessary to prepare a defense and therefore this court must deny Preliminary Objection IV.46 For the foregoing reasons and based upon the early factual context of the record, Additional Defendant's Preliminary Objections cannot be sustained and the following order will be entered: ORDER OF COURT AND NOW, this 16th day of June, 2008, upon consideration of Additional Defendant's Preliminary Objections to Defendant's Joinder Complaint, and for the reasons stated in the accompanying opinion, the Preliminary Objections are denied. Additional Defendant is afforded a period of twenty days from the date of this order within which to file a responsive pleading to Defendant's Joinder Complaint. BY THE COURT, s/ J. Wesley Oler, Jr. J. Wesley Oler, Jr., J. 41 Joinder Complaint, paras. 4, 18. 46 Furthermore, it may be noted that dismissal of a pleading for lack of specificity is, as a general rule, not an appropriate remedy for the defect. "[A] claim should not be stricken or dismissed for mere lack of specificity." Garrett Electronics Corp. v. Conwell, 46 Cumberland L.J. 256, 260 (1997). 14 John W. Dornberger, Esq. 17 North Second Street, 12th Floor Harrisburg, PA 17101 Attorney for Plaintiff Timothy J. Woolford, Esq. Clara C. Young, Esq. Wheatland Place 941 Wheatland Avenue, Suite 402 Lancaster, PA 17603 Attorneys for Defendant James J. West, Esquire Suite 205 105 North Front Street Harrisburg, PA 17101 Attorney for Additional Defendant 15 16 LIBERTY EXCAVATORS, INC., Plaintiff u ARTHUR FUNK & SONS, INC.,: Defendant and SCHNABEL ENGINEERING ASSOCIATES, INC., Additional Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION — LAW NO. 07-5046 CIVIL TERM IN RE: ADDITIONAL DEFENDANT'S PRELIMINARY OBJECTIONS TO DEFENDANT'S JOINDER COMPLAINT BEFORE HESS, OLER and GUIDO, JJ. ORDER OF COURT AND NOW, this 16th day of June, 2008, upon consideration of Additional Defendant's Preliminary Objections to Defendant's Joinder Complaint, and for the reasons stated in the accompanying opinion, the Preliminary Objections are denied. Additional Defendant is afforded a period of twenty days from the date of this order within which to file a responsive pleading to Defendant's Joinder Complaint. BY THE COURT, J. Wesley Oler, Jr., J. John W. Dornberger, Esq. 17 North Second Street, 12th Floor Harrisburg, PA 17101 Attorney for Plaintiff Timothy J. Woolford, Esq. Clara C. Young, Esq. Wheatland Place 941 Wheatland Avenue, Suite 402 Lancaster, PA 17603 Attorneys for Defendant James J. West, Esquire Suite 205 105 North Front Street Harrisburg, PA 17101 Attorney for Additional Defendant