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Home My WebLink About95-4003 CivilMATT CORPORATION, Plaintiff V. : : DOMINGO T. ALVEAR, M.D. : and VENERANDA B. ALVEAR, M.D.,: Defendants · V. : : CHARLES R. DAVIS, : Additional Defendant : IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 95-4003 CIVIL TERM IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANTS' COUNTERCLAIM BEFORE HESS and OLER, JJ. ORDER OF COURT %~ day of March, 1996, after careful Benjamin C. Dunlap, Jr., Esq. 200 North Third Street P.O. Box 840 Harrisburg, PA 17108 Attorney for Plaintiff Ronald M. Lucas, Esq. are DENIED. BY THE COURT, J.~sley Oler~., AND NOW, this consideration of Plaintiff's preliminary objections to Defendants' counterclaim, and for the reasons stated in the accompanying opinion, the portion of Count II of Defendants' counterclaim alleging conversion of proceeds of sales of assets of Geneva Properties, Inc., is DISMISSED, unless Defendants join Geneva Properties, Inc., as a counterclaim plaintiff within 30 days of the date of this order; Plaintiff's remaining preliminary objections Anthony J. Nestico, Esq. 10 S. Market Square, Suite 500 P.O. Box 1265 Harrisburg, PA 17108-1265 Attorney for Defendants Charles R. Davis 1200 Camp Hill Bypass P.O. Box 901 Camp Hill, PA 17001-0901 Additional Defendant : rc MATT CORPORATION, Plaintiff Ve · DOMINGO T. ALVEAR, M.D. : and VENERANDA B. ALVEAR, M.D.,: Defendants : V. CHARLES R. DAVIS, Additional Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW NO. 95-4003 CIVIL TERM IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANTS' COUNTERCLAIM BEFORE HESS and OLER, JJ. OPINION and ORDER OF COURT Oler, J. In this case Plaintiff has filed preliminary objections to Defendants' counterclaim, contending that Defendants failed to join an indispensable party. For the reasons stated in this opinion, the preliminary objections will be sustained in part and denied in part. STATEMENT OF FACTS Plaintiff is Matt Corporation, a company which provides property management services.~ Defendants are Domingo T. Alvear, M.D., and Veneranda B. Alvear, M.D., both adult individuals.2 Plaintiff has brought suit against Defendants for reimbursement of ~ Plaintiff's Complaint, paragraphs 1, 7; Defendants' Amended Answer with New Matter and Counterclaim, paragraphs 1, 7. 2 Plaintiff's Complaint, paragraphs 2-3; Defendants' Amended Answer with New Matter and Counterclaim, paragraphs 2-3. NO. 95-4003 CIVIL TERM certain payments Plaintiff allegedly made on Defendants' behalf.3 Defendants have filed a counterclaim containing five counts. Count I is for fraud, contending that Plaintiff misrepresented to Defendants the financial prospects of a company named Geneva Properties, Inc., while serving as manager of Geneva's development project, as a result of which Defendants made unwise loans to Geneva. Count II is for conversion, maintaining that Plaintiff misappropriated proceeds from sales of Geneva property and misappropriated funds which Defendants had intended to be loans from them to Geneva. Count III is for breach of fiduciary duty, asserting that Plaintiff breached a fiduciary duty to Defendants by misappropriating the aforesaid loans. Count IV is for negligent misrepresentation, contending that Plaintiff negligently misrepresented to Defendants the financial prospects of Geneva, as a result of which Defendants made an unwise cash contribution to Geneva. Count V is for breach of contract, maintaining that Plaintiff breached an agreement between it and Geneva, whereby Plaintiff was to use a portion of funds loaned by Defendants to Geneva to service debts of Defendants (who were allegedly third-party beneficiaries). 3 Plaintiff's Complaint. Specifically, Plaintiff contends that it made payments to a bank in the amounts of (a) $4,013.44 on a debt of both Defendants and (b) $7,003.25 on a debt of Defendant Veneranda B. Alvear, M.D. Id. NO. 95-4003 CIVIL TERM Plaintiff has filed preliminary objections to Counts II (conversion), III (breach of fiduciary duty) and V (breach of contract) of Defendants' counterclaim, based upon Defendants' failure to join Geneva Properties, Inc., an allegedly indispensable plaintiff on the counterclaim. Argument on Plaintiff's preliminary objections was held on December 6, 1995. STATEMENT OF THE LAW Two rules of civil procedure are pertinent to this issue. Pennsylvania Rule of Civil Procedure 2227(a), relating to compulsory j~inder, provides as follows: "Persons having only a joint interest in the subject matter of an action must be joined on the same side as plaintiffs or defendants."4 This rule requires the dismissal of an action brought without the joinder of a necessary party,s Rule 1032 provides that a party waives all defenses and objections which are not raised either by preliminary objection, answer or reply except, inter alia, "that whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter or that there has been a failure to join an indispensable party, the court shall ... dismiss the action." In Pennsylvania, an indispensable party is one whose rights 4 Pa. R.C.P. 2227(a) (emphasis added). ~ Grimme Combustion, Inc. v. Mergentime Corp., 406 Pa. Super. 620, 629, 595 A.2d 77, 81 (1991). 3 NO. 95-4003 CIVIL TERM are so directly connected with and affected by litigation that he or she must be a party of record to protect such rights, and his or her absence renders any order or decree of court null and void for want of jurisdiction.6 In Mechanicsburg Area School District v. Kline,? the Pennsylvania Supreme Court set forth the following guidelines for determining whether a party is to be considered indispensable in pending litigation: 1. Do absent parties have a right or interest related to the claim? 2. If so, what is the nature of that right or interest? 3. Is that right or interest essential to the merits of the issue? 4. Can justice be afforded without violating the due process rights of absent parties? Another factor to be considered is whether a final adjudication of the controversy without joining that party would leave the defendant at risk of incurring multiple or inconsistent obligations with respect to the same liability.8 Finally, the focus of an inquiry into whether a party is indispensable is to be upon the protection of the rights of the absent party, rather than the effect of joinder upon litigation difficulties. Grimme ~ Columbia Gas Transmission Corp. v. Diamond Fuel Co., 464 Pa. 377, 379, 346 A.2d 788, 789 (1974). 494 Pa. 476, 481, 431 A.2d 953, 956 (1981). ~ Fiore v. Oakwood Plaza Shopping Center, Inc., 401 Pa. Super. 446, 463, 585 A.2d 1012, 1020 (1991) (emphasis added). NO. 95-4003 CIVIL TERM Combustion, Inc. v. Mergentine Corp., 406 Pa. Super. 620, 629, 595 A.2d 77, 81 (1991), citing E-Z Parks, Inc. v. Philadelphia Parking Authority, 103 Pa. Commw. 627, 521A.2d 71, appeal denied, 517 Pa. 610, 536 A.2d 1334 (1987). Pennsylvania Rule of Civil Procedure 2227 provides for compulsory joinder in "very limited situations .... [It] is not predicated upon some administrative benefit to be gained by joinder but upon the unity and identity of the interests of the co-owners who are to be joined." Kelly v. Carborundum Co., 307 Pa. Super. 361, 368-69,~453 A.2d 624, 628, aff'd, 504 Pa. 238, 470 A.2d 969 (1982). By way of example of the limited application of the compulsory joinder rule, it has been noted that "[a] third party beneficiary has a distinct right which entitles him to sue individually without joining the obligee of the original contract." 4 Anderson, Pennsylvania Civil Practice ~2227.6, at 125 (1991 Supp.), citing Manor Shopping Center Merchants Ass'n v. Ever Fast Fabrics, Inc., 59 Lancaster L.R. 341, 36 Pa. D. & C.2d 401 (1964). APPLICATION OF LAW TO FACTS In this case, the portion of count II of Defendants' counterclaim alleging a conversion of proceeds of sales of assets of Geneva Properties, Inc., by Plaintiff seems to the court to involve an interest of Defendants which is, at most, only a joint interest with Geneva (if it can be said to be an interest of Defendants at all). For this reason, Plaintiff's preliminary 5 NO. 95-4003 CIVIL TERM objections will be sustained with respect to that portion of count II alleging conversion of proceeds of sales of property of Geneva Properties, Inc. The balance of count II, alleging conversion of loans made by Defendants, count III, alleging breach of a fiduciary duty to Defendants by misappropriation of their loans, and count V, alleging breach of a contractual duty to Defendants as third party beneficiaries, do not appear to involve "only" joint interests of Defendants, but rather distinct rights on the part of Defendants, independent of corresponding or related interests of Geneva. For this reason, the balance of Plaintiff's preliminary objections will be denied. ORDER OF COURT AND NOW, this 1st day of March, 1996, after careful consideration of Plaintiff's preliminary objections to Defendants' counterclaim, and for the reasons stated in the accompanying opinion, the portion of Count II of Defendants' counterclaim alleging conversion of proceeds of sales of assets of Geneva Properties, Inc., is DISMISSED, unless Defendants join Geneva Properties, Inc., as a counterclaim plaintiff within 30 days of the 6 NO. 95-4003 CIVIL TERM date of this order; Plaintiff's remaining preliminary objections are DENIED. BY THE COURT, s/ J. Wesley Oler, Jr. J. Wesley Oler, Jr., J. Benjamin C. Dunlap, Jr., Esq. 200 North Third Street P.O. Box 840 Harrisburg, PA 17108 Attorney for Plaintiff Ronald M. Lucas, Esq. Anthony J. Nestico, Esq. 10 S. Market Square, Suite 500 P.O. Box 1265 Harrisburg, PA 17108-1265 Attorney for Defendants Charles R. Davis 1200 Camp Hill Bypass P.O. Box 901 Camp Hill, PA 17001-0901 Additional Defendant :re 7