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HomeMy WebLinkAbout2008-4299 LYNNEA HALL, : IN THE COURT OF COMMON PLEAS Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : NO. 08-4299 : DENNIS SEMANCIK, individually and : d.b.a. S&S REAL ESTATE, : CIVIL ACTION Defendant : : ANDREW SEMANCIK, individually : and d.b.a. S&S REAL ESTATE, : Defendant : : KEITH BOLASH, individually and : d.b.a. APPRAISER-LINK, : Defendant : : CODY FINANCIAL MORTGAGE : SERVICES, INC., : Defendant : : LAKESIDE ABSTRACT & : SETTLEMENT, LLC, : Defendant : : JOHN and JANE DOES 1-10 : Defendants : JURY TRIAL DEMANDED IN RE: PRELIMINARY OBJECTIONS OF DEFENDANT CODY FINANCIAL MORTGAGE SERVICES, INC., BEFORE BAYLEY, J. AND EBERT, J. ORDER OF COURT th AND NOW , this 10 day of July, 2009, upon consideration of the preliminary objections of Defendant Cody Financial Mortgage Services, Inc., to Plaintiff’s complaint, the briefs filed by the parties, and after argument; IT IS HEREBY ORDERED AND DIRECTED that: 1. As to Count 17, Defendant’s preliminary objection filed pursuant to Pa. R.C.P. GRANTED in 1028(a)(4) (Demurrer - Legal Insufficiency of Plaintiff’s Complaint) is part OVERRULED in part. andWith regard to Plaintiff’s Complaint alleging a 1 violation of the Unfair Trade Practices Act and Consumer Protection Law under 73 P.S. GRANTED §201-2(4)(iii) is . With respect to the alleged violations of 73 P.S. § 201- OVERRULED 2(4)(v)(vii) and (xxi) is . 2. As to Counts 18, 19, and 20, Defendant’s preliminary objections filed pursuant to Pa.R.C.P. 1028(a) (Demurrer – Legal Insufficiency of Plaintiff’s Complaint) are OVERRULED . 3. Defendant’s preliminary objection filed pursuant to Pa.R.C.P. 1028(a)(2) (Failure of OVERRULED Pleading to Conform to Law or Rule of Court) is . By the Court, M. L. Ebert, Jr., J. Laurence C. Kress, Esq. Scaringi & Scaringi, P.C. 2000 Linglestown Road, Suite 106 Harrisburg, PA 17110 (717) 657-7770 Attorney for Plaintiff James D. Hughes, Esq. Laura Rebecca Ables, Esq. Salzmann Hughes, P.C. 354 Alexander Spring Road Carlisle, PA 17015 (717) 249-6333 Attorneys for Defendant Cody Financial 2 LYNNEA HALL, : IN THE COURT OF COMMON PLEAS Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : v. : NO. 08-4299 : DENNIS SEMANCIK, individually and : d.b.a. S&S REAL ESTATE, : CIVIL ACTION Defendant : : ANDREW SEMANCIK, individually : and d.b.a. S&S REAL ESTATE, : Defendant : : KEITH BOLASH, individually and : d.b.a. APPRAISER-LINK, : Defendant : : CODY FINANCIAL MORTGAGE : SERVICES, INC., : Defendant : : LAKESIDE ABSTRACT & : SETTLEMENT, LLC, : Defendant : : JOHN and JANE DOES 1-10 : Defendants : JURY TRIAL DEMANDED IN RE: PRELIMINARY OBJECTIONS OF DEFENDANT CODY FINANCIAL MORTGAGE SERVICES, INC., BEFORE BAYLEY, J. AND EBERT J. OPINION and ORDER OF COURT EBERT, J., July 10, 2009 - STATEMENT OF FACTS This action arises out of a transaction for the purchase of the property located at 329 Salt Road, Enola, Cumberland County, Pennsylvania (the “property”). The property was purchased by Plaintiff Lynnea Hall (“Hall”) from Defendants Dennis and Andrew Semancik (the “Semanciks”), individually and doing business as S&S Real Estate, for a purchase price of $177,000. The Agreement of Sale (the “Agreement”) for the purchase of the property was 3 entered into on June 20, 2006. The Agreement signed by both parties purports to be an “as-is” sales agreement without any contingencies. On or about June 2, 2006, Defendant Cody Financial Services, Inc. (“Cody Financial”) pre-approved Plaintiff for purchase of the home at a sale price of $177,000. Hall engaged Cody Financial to obtain financing for her purchase of the property. Hall provided Cody Financial with all information necessary for securing a loan, including the Agreement of Sale. Cody Financial hired a real estate appraiser, Keith Bolash (“Bolash”) to determine the value of the property. On July 9, 2006, Bolash provided Cody Financial with his completed written appraisal report. On or about July 11, 2006, Cody Financial informed Hall that a mortgage loan on her behalf for $164,000 had been approved through Sovereign Bank. On July 17, 2006, Hall proceeded to close on the property. Shortly thereafter, Hall moved into the property. Hall allegedly discovered structural defects on the premises some time after moving into the property. On July 17, 2008, Hall initiated the instant action against the individuals and business from whom she purchased the property, her mortgage broker, the mortgage broker’s real estate appraiser, and the title insurance company as defendants. Hall stated four causes of action against Cody Financial in her complaint: Count 17, Violation of the Unfair Trade Practices Act and Consumer Protection Law; Count 18, Fraudulent Inducement; Count 19, Fraudulent Non-Disclosure, and Count 20, Negligent Non-Disclosure. On August 11, 2008, Cody Financial filed preliminary objections with this Court. 4 DISCUSSION A. Standard of Review A demurrer is an assertion that a complaint does not set forth a cause of action or a claim on which relief can be granted. Lerner v. Lerner, 954 A.2d 1229, 1234-35 (Pa.Super. 2008), citing Binswanger v. Levy, 457 A.2d 103, 104 (Pa.Super. 1983)). In ruling on a demurrer, the court may consider only matters that arise out of the complaint itself; it cannot supply a fact missing in the complaint. In evaluating a demurrer, all material facts set forth in the complaint and all inferences reasonably deducible therefrom must be admitted as true. Hess v. Fox Rothschild, LLP, 925 A.2d 798, 806 (Pa.Super. 2007). The question presented by a demurrer is whether, based on the facts averred, the law says with certainty that the contested pleading is legally insufficient and no recovery is possible. Schuylkill Navy v. Langbord, 728 A.2d 964, 968 (Pa.Super. 1999), citing Smith v. McDougall, 529 A.2d 20 (Pa.Super. 1987)). If there is any doubt as to whether a demurrer should be sustained, the doubt should be resolved in favor of overruling it. Lerner, 954 A.2d at 1234, citing Wawa Inc. v. Alexander J. Litwornia & Assocs., 817 A.2d 543, 544 (Pa.Super. 2003)). Therefore, a preliminary objection in the nature of a demurrer may be properly granted only where the contested pleading is legally insufficient. Hess, 925 A.2d at 806. B. Demurrer to Count 17, Violation of Unfair Trade Practices and Consumer Protection Law. Plaintiff’s first cause of action is for a violation of the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. §201-2. The general purpose of the UTPCPL is to protect the public from fraud and unfair or deceptive practices. This statute is the 5 Commonwealth’s principal protection against such practices. Feeney v. Disston Manor Personal . Care Home, Inc, 849 A.2d 590, 597 (Pa.Super. 2004). In order to state a claim under the UTPCPL, a plaintiff must allege one of the fraudulent, unfair, or deceptive practices set forth in 73 P.S. § 201-2(4)(i)-(xxi). Id. The Plaintiff alleges that Cody Financial violated 73 P.S. §201-2(4)(iii), (v), (vii) and (xxi). The Unfair Trade Practices and Consumer Protection Law states as follow: (4) “Unfair methods of competition” and “unfair or deceptive acts or practices” mean any one or more of the following: (iii) Causing likelihood of confusion or of misunderstanding as to affiliation, connection or association with, or certification by another; (v) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation or connection that he does not have; (vii) Representing that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another; (xxi) Engaging in any other fraudulent or deception conduct which creates a likelihood of confusion or of misunderstanding. 73 P.S. §201-2(4) (iii), (v), (vii), (xxi). In 1996, the UTPCPL was amended to cover deceptive practices in addition to fraudulent practices. After the 1996 amendments, the Superior Court continued to require that the elements of common law fraud be met in order to establish a violation of the UTPCPL. Id. To prove fraud, a plaintiff must demonstrate by clear and convincing evidence: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was 6 proximately caused by the reliance. Blumenstock v. Gibson, 811 A.2d 1029, 1034 (Pa.Super. 2002). However, the Federal Eastern District Court has ruled that following the enactment of the amendments, the common law fraud elements need not be met. Jefferies v. Ameriquest Mortg. , Co. 543 F.Supp.2d 368, 389 (E.D.Pa. 2008). The Pennsylvania Supreme Court, in several cases decided after enactment of the amendments, has required plaintiffs to at least prove the existence of one of the common law fraud elements, justifiable reliance, to establish a UTPCPL violation. Toy v. Metropolitan Life Ins. Co., 928 A.2d 186, 202-03 (Pa. 2007). The only allegation making reference to 73 P.S. § 201-2(4)(iii) is paragraph 232 of the complaint. In this paragraph, the Plaintiff avers, “Plaintiff believes, and therefore avers, that Defendant Cody Financial and Defendant Lakeside Abstract are affiliated or associated with each other. If true, this fact was not disclosed to Plaintiff.” It must be noted that on October 22, 2008, the Honorable Kevin Hess, granted Defendant Lakeside Abstract and Settlement, LLC’s thth Preliminary Objections and accordingly, the 15 and 16 counts, which were against Lakeside Abstract and Settlement, LLC, were dismissed with prejudice thereby eliminating them as a party to this litigation. A fair reading of section 201-2(4)(iii) shows that the purpose of this section is to address affirmative conduct or representations that someone is affiliated, connected, associated, or certified by another entity. See Com. V. Parisi, 873 A.2d 3 (Pa. Commw. 2005). The Plaintiff’s complaint does not allege that the Defendant made any affirmative misrepresentations as to any association. Furthermore, given the overall nature of the Plaintiff’s complaint that the house she purchased was defective and that the appraisal was overvalued does not in any way establish how Plaintiff was “confused” regarding Defendant Cody’s affiliation, association, or connection with any other entities. Accordingly, Defendant Cody’s Preliminary Objection with regard to a 7 violation of 73 P.S. § 201-2(4)(iii) is granted, and the claim arising under this section is dismissed. However, with regard to the claims under sections (4)(v)(vii) and (xxi), Hall set forth numerous allegations that support her claim that Cody Financial has violated the UTPCPL. Hall alleges that Cody Financial withheld the appraisal value from Hall, that they failed to inform Hall of the requirement of a Seller’s Disclosure Statement, and that by allowing the closing to proceed they represented to Hall that the property had a particular value that it did not have. Accordingly, Defendant’s Preliminary Objections to the claims arising under these sections are overruled. C. Counts 18 and 19, Fraudulent Inducement and Fraudulent Non-disclosure Plaintiff’s second cause of action (cause of action 18 of the Complaint) asserted against Cody Financial is for fraudulent inducement. The elements of fraudulent inducement are: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance. Eigen v. Textron Lycoming Reciprocating Engine Div., 874 A.2d 1179, 1185 (Pa.Super. 2005), (citing Skurnowicz v. Lucci, 798 A.2d 788, 793 (Pa.Super. 2002), quoting Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999)). Plaintiff’s third cause of action (cause of action 19 of the Complaint) asserted against Defendant Cody Financial is for fraudulent non-disclosure. One is liable for fraudulent non- disclosure if the party: (1) has a duty to the other party to exercise reasonable care to disclose the matter in question, and 8 (2) fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction. One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated: (a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them (b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading (c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so (d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and (e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts. R(S)T § 551 (1977). ESTATEMENT ECOND OF ORTS Pursuant to this section, one may only be held liable for fraudulent nondisclosure if that person is subject to one of the duties enumerated in subparagraphs (a) through (e). Youndt v. First Nat. Bank of Port Allegany, 868 A.2d 539, 550 (Pa. Super. Ct. 2005). Defendant Cody Financial argues that they had no fiduciary duty to Hall. It is established that in Pennsylvania, a mortgage broker owes a fiduciary duty to its customers. McGlawn v. Pennsylvania Human 9 Relations Com'n, 891 A.2d 757, 769 (Pa.Cmwlth. 2006) (citing In re Barker, 251 B.R. 250 (Bankr.E.D.Pa.2000)). Defendant argues that fraudulent inducement and fraudulent non-disclosure do not constitute separate causes of action. However, the Pennsylvania Superior Court has specifically recognized fraudulent non-disclosure as distinct from fraudulent inducement. In Youndt v. First Nat. Bank of Port Allegany, 868 A.2d 539, 546 (Pa. Super. Ct. 2002), the court noted that for a case of fraud in the inducement, a party makes affirmative fraudulent representations which induce the other party to enter into an agreement. Youndt, 868 A.2d at 546 (citing Blumenstock v. Gibson, 811 A.2d 1029, 1036 (Pa. Super. Ct. 2002)). The Pennsylvania Supreme Court has stated that “[t]he deliberate nondisclosure of a material fact amounts to culpable misrepresentation no less than does an intentional affirmation of a material falsity.” Neuman v. Corn Exchange Nat. Bank & Trust Co. 51 A.2d 759, 764 (Pa. 1947). This clearly indicates that Pennsylvania courts would consider an omission to be grounds for fraudulent non-disclosure, while an affirmative representation fraudulently made would be grounds for a fraudulent inducement claim. The Youndt Court further confirmed there are two separate torts that impose liability for fraud upon a vendor of real estate in a commercial or residential transaction even though the vendor made no affirmative misrepresentation: (1) Fraudulent Concealment; and (2) Fraudulent Nondisclosure. Youndt, 868 A.2d at 549 (citing R(S)T ESTATEMENT ECOND OF ORTS §§ 550, 551 (1977)). Furthermore, the Pennsylvania Rules of Civil Procedure permit causes of action to be pleaded in the alternative. Pa. R.C.P. No. 1020(c). Accordingly, Plaintiff is not required to combine the counts of fraudulent inducement and fraudulent non-disclosure, and may pursue them separately or as alternative pleadings. 10 Plaintiff has set forth facts in her complaint regarding her reliance on Cody Financial’s services in purchasing the property. As is required for the purposes of evaluating a demurrer, the facts set forth in the complaint are viewed as being true. Hall alleges that her reliance on Cody Financial’s services and representations induced her to complete the purchase of the property when, had she received accurate information that Cody Financial possessed prior to the closing, she would not have bought the property. Hall alleges that Cody Financial made false representations that it would handle all aspects of the sale and closing, that it failed to inform Hall of the need for a Seller’s Disclosure Statement, that it failed to inform Hall of the need for a home inspection, that it actively discouraged Hall from retaining the services of an attorney or real estate agent, and that it did not represent Hall at the closing. Hall alleges that Cody Financial withheld information from her that was material to her decision to complete the purchase of the property. Specifically, Hall alleges that Cody Financial inflated the sale price of the home and withheld the true value of the home from Hall. Hall also alleges that Cody Financial did not notify Hall of the appraisal value, and that had she reviewed the appraisal she would have seen the false/fraudulent entries and she would not have proceeded with closing. Defendant claims that the proximate cause required for the causes of action does not exist because the damages claimed by Hall relate to the condition and value of the property and not at all to the adequacy of the mortgage provided by Cody Financial. However, Hall claims that but for the services provided and actions taken by Cody Financial she would not have proceeded with closing on the property. Defendant did not review the Agreement of Sale, even though Hall provided them with a copy, nor did they discuss with Hall the requirement of a Seller’s Disclosure Statement or advise her to have a home inspection. Hall claims she was misinformed 11 about the accurate condition and value of the property because of her reliance on the information and services provided by Cody Financial. Hall has pleaded facts that, when accepted as true, could establish that Cody Financial directly made representations or misrepresentations to her, that Cody Financial withheld material information from Hall, that Cody Financial was aware that Hall would rely on their services for the purchase of the property, and that Hall in fact relied upon the alleged representations by Cody Financial. Hall alleges that she would not have purchased the property if not for the financing obtained through direct services provided by Cody Financial, and would not have completed the sale if she had known some of the information withheld by Cody Financial at the time of closing. Because Hall has set forth allegations in her complaint that support fraudulent non-disclosure and fraudulent inducement, Cody Financial’s preliminary objections to these counts are overruled. D. Count 20, Negligent Non-disclosure Plaintiff’s fourth cause of action (cause of action 20 of the Complaint) asserted against Defendant Cody Financial is for negligent non-disclosure. Defendant claims that negligent non- disclosure is not a recognized cause of action in Pennsylvania and therefore the claim should be dismissed or re-pleaded as negligent misrepresentation. There are no Pennsylvania Supreme Court case rulings on negligent non-disclosure. The Pennsylvania Superior Court has reviewed causes of action for negligent non-disclosure and has not ruled that such a cause of action does not exist. See Baribault v. Peoples Bank of Oxford, 714 A.2d 1040, 1042 (Pa. Super. 1997). A comment in the Restatement of Torts suggests that non-disclosure may be intentional or negligent. The comment to subsection (2)(d) of section 551 states that “in the great majority of cases the person owing the duty has so available an opportunity to make the required 12 or negligent disclosure that it is rare that the failure to give it can be other than intentional .” R(S)OT§ 551 cmt. on subsection 2 (emphasis added). In Destefano ESTATEMENT ECOND F ORTS & Associates, Inc. v. Cohen, the Philadelphia Court of Common Pleas distinguishes between intentional non-disclosure and negligent non-disclosure. The court notes that unlike claims based on intentional misrepresentation and concealment, claims for negligent misrepresentation and negligent non-disclosure require an independent duty between parties. See Destefano & Associates, Inc. v. Cohen, 2001 WL 1807790, *4 (Phila. Ct. Com. Pl. 2001). Given that a cause of action for negligent non-disclosure has not been ruled nonexistent in Pennsylvania, and that Hall has pleaded facts that support her allegations that she would not have completed the purchase of the property but for the negligent non-disclosure of material facts by Cody Financial, Defendant’s preliminary objection to this count is overruled. E. Pa.R.C.P. 1028(a)(2) Requirement – Failure of Pleading to Conform to Law or Rule of Court. Defendant Cody Financial asserts that Plaintiff’s complaint fails to comply with Pa.R.C.P. 1028(a)(2) because it fails to conform to Pa. R.C.P. 1019(i) – Claim Based Upon A Writing. Defendant asserts that Plaintiff fails to meet this requirement because the causes of action are based on writings which the Plaintiff failed to attach in their entirety. Specifically, Defendant Cody Financial maintains Plaintiff did not attach a true, correct, and complete copy of the Agreement of Sale to her complaint. Plaintiff’s complaint reveals that only page 4 of the sales agreement was missing. Page 4 appears to have only contained the signatures of the parties. While the Plaintiff admittedly failed to attach a “complete” copy of the Agreement, the Plaintiff did attach the material part of that writing. Plaintiff only omitted the signature page, 13 which was the fourth page of the four-page document. The substantive part of the Agreement was contained on the first three pages, all of which were attached to the complaint. The specific language of Pa.R.C.P. 1019(i) provides that: (i) When any claim or defense is based upon a writing, the pleader shall attach a copy of the writing, or the material part thereof, but if the writing or copy is not accessible to the pleader, it is sufficient so to state, together with the reason, and to set forth the substance in writing. Additionally, Pa.R.C.P. 126 states: The rules shall be liberally construed to secure the just, speedy and inexpensive determination of every action or proceeding to which they are applicable. The court at every stage of any such action or proceeding may disregard any error or defect of procedure which does not affect the substantial right of the parties. This Court finds that Hall’s complaint has substantially complied with Pa.R.C.P. 1019(i) and that any omissions from the writings attached to the complaint do not affect the substantial rights of the parties, and therefore Plaintiff has complied with Pa. R.C.P. 1028(a)(2). F. Conclusion. The facts pled by Hall and reasonable inferences from those facts indicate that Hall’s purchase of the property was dependent on Cody Financial’s services. This Court finds that there is sufficient evidence required to preserve Hall’s claim that she relied on Cody Financial’s services and trusted that they had reviewed and approved the relevant information such as the appraisal, purchase price, and terms of the sale agreement. Cody Financial specifically represented to Hall that they would handle all aspects of the sale and closing and actively discouraged her from obtaining the services of an attorney or real estate agent. Upon review and consideration of all material facts in the complaint, this Court finds that there is no doubt as to 14 the legal sufficiency of each of the four causes of action against Cody Financial. Therefore, this Court concludes that Defendant Cody Financial’s preliminary objections are overruled, with the exception of the claim under 73 P.S. § 201-2(4)(iii), which is granted. Accordingly, the following order shall be entered: ORDER OF COURT th AND NOW , this 10 day of July, 2009, upon consideration of the preliminary objections of Defendant Cody Financial Mortgage Services, Inc., to Plaintiff’s complaint, the briefs filed by the parties, and after argument; IT IS HEREBY ORDERED AND DIRECTED that: 1. As to Count 17, Defendant’s preliminary objection filed pursuant to Pa. R.C.P. GRANTED in 1028(a)(4) (Demurrer- Legal Insufficiency of Plaintiff’s Complaint) is part OVERRULED in part. andWith regard to Plaintiff’s Complaint alleging a violation of the Unfair Trade Practices Act and Consumer Protection Law under 73 P.S. GRANTED §201-2(4)(iii) is . With respect to the alleged violations of 73 P.S. § 201- OVERRULED 2(4)(v)(vii)(xxi) is . 2. As to Counts 18, 19, and 20, Defendant’s preliminary objections filed pursuant to Pa.R.C.P. 1028(a) (Demurrer – Legal Insufficiency of Plaintiff’s Complaint) are OVERRULED . 3. Defendant’s preliminary objection filed pursuant to Pa.R.C.P. 1028(a)(2) (Failure of OVERRULED Pleading to Conform to Law or Rule of Court) is . By the Court, M. L. Ebert, Jr., J. 15 Laurence C. Kress, Esq. Scaringi & Scaringi, P.C. 2000 Linglestown Road, Suite 106 Harrisburg, PA 17110 Attorney for Plaintiff James D. Hughes, Esq. Laura Rebecca Ables, Esq. Salzmann Hughes, P.C. 354 Alexander Spring Road Carlisle, PA 17015 Attorneys for Defendant Cody Financial Mortgage Services, Inc. 16