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HomeMy WebLinkAbout2010-3162 Civil Term ANTHONY M. TODARO, SR. and : IN THE COURT OF COMMON PLEAS OF LORI TODARO, his wife, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFFS : : V. : : UPPER MIFFLIN TOWNSHIP : BOARD OF SUPERVISORS, VINCENT : ELBEL, INDIVIDUALLY AND AS : SEWAGE ENFORCEMENT OFFICER : DAWN M. SHUGHART, OAKTREE : ENVIRONMENT SERVICES, INC. : SUCCESSOR TO AND t/d/b/a : DEW & SONS, DUANE WERT, SR., : INDIVIDUALLY, LINDA WERT, : INDIVIDUALLY, DUANE WERT, JR., : DANNY WERT, INDIVIDUALLY AND : DUSTIN WERT, INDIVIDUALLY : DEFENDANTS : : AND : : COMMONWEALTH OF : PENNSYLVANIA, : STATE REAL ESTES COMMISSION AS: ADMINISTRATOR OF THE REAL : ESTATE RECOVERY FUND, : RESPONDENT : 10-3162 CIVIL TERM IN RE: PLAINTIFFS’ PETITION FOR PAYMENT FROM THE REAL ESTATE RECOVERY FUND OPINION AND ORDER OF COURT Masland, J., May 4, 2012:-- Before the court is the Petition for Payment from the Real Estate Recovery Fund filed by Plaintiffs, Anthony M. Todaro, Sr. and Lori Todaro, his wife. Respondent, Commonwealth of Pennsylvania, State Real Estate Commission as Administrator of the Real Estate Recovery Fund, opposes the Petition on several grounds. After a careful review of the record and the parties’ briefs, the court 10-3162 CIVIL TERM concludes that Plaintiffs’ Petition is not premature and is granted subject to a hearing scheduled to resolve the outstanding factual issues of the sum certain of the value of Plaintiffs’ judgment against Defendant, Dawn Shughart (Licensee), and the amount Plaintiffs are entitled to recover from the Real Estate Recovery Fund (Fund). I. Facts Licensee was a licensed real estate broker whose license is currently revoked and suspended. While licensed, she listed her own real property for sale with her real estate company. In the process of selling the property to the Plaintiffs, Licensee fraudulently misrepresented the condition of the property’s septic system. Based, in part, on Licensee’s representation that the septic system was in good working order, Plaintiffs purchased the property. Unfortunately, Plaintiffs would later learn the septic system was seriously out of compliance forcing them to expend significant funds to fix the problem after it was discovered. Plaintiffs subsequently filed suit against a number of parties, however, only Licensee was a licensed real estate broker. Licensee never responded to the complaint and a default judgment was entered against her on June 21, 2011. After obtaining this judgment, Plaintiffs filed the instant Petition for Payment from the Commonwealth of Pennsylvania Real Estate Recovery Fund. The Commonwealth of Pennsylvania State Real Estate Commission as Administrator of the Real Estate Recovery Fund (Respondent) opposes Plaintiffs’ petition on several grounds. -2- 10-3162 CIVIL TERM II. Discussion Respondent contends Plaintiffs’ petition is premature for several reasons. Specifically, (1) Plaintiffs have failed to demonstrate that they meet the requirement of a final judgment; (2) Plaintiffs have failed to demonstrate that the alleged judgment was based upon fraud, misrepresentation or deceit; (3) Plaintiffs have failed to demonstrate that the transaction was one for which a real estate license was required under the act; (4) Plaintiffs have failed to demonstrate that they meet the requirement that they exhaust collection efforts prior to applying to the Fund for payment; and (5) an Applicant for payment from the Fund cannot obtain recovery in excess of the statutory limit of $20,000 per claim. The Real Estate Recover Fund provides, in relevant part: (a) When any aggrieved person obtains a final judgment in any court of competent jurisdiction against any person licensed under this act, upon grounds of fraud, misrepresentation or deceit with reference to any transaction for which a license or registration certificate is required under this act … and which cause of action occurred on or after the effective date of this act, the aggrieved person may, upon termination of all proceedings, including reviews and appeals, file an application in the court in which the judgment was entered for an order directing payment out of the Real Estate Recovery Fund of the amount unpaid upon the judgment. (b) The aggrieved person shall be required to show: (1) That he is not a spouse of the debtor, or the personal representative of said spouse. (2) That he has obtained a final judgment as set out in this section. (3) That all reasonable personal acts, rights of discovery and such other remedies at law and in equity as exist have been exhausted in the collection thereof. … -3- 10-3162 CIVIL TERM [(4)](d) When there is an order of the court to make payment or a claim is otherwise to be levied against the fund, such amount shall be paid to the claimant in accordance with the limitations contained in this section. Notwithstanding any other provisions of this section, the liability of that portion of the fund allocated for the purpose of this act shall not exceed $20,000 for any one claim and shall not exceed $100,000 per licensee. … (e) Upon petition of the commission the court may require all claimants and prospective claimants against one licensee or registrant to be joined in one action, to the end that the respective rights of all such claimants to the Real Estate Recovery Fund may be equitably adjudicated and settled. 63 P.S. § 455.803 (emphasis added). A. Final Judgment Requirement Respondent first alleges Plaintiffs have failed to establish that they have obtained a final judgment in the underlying lawsuit against Licensee for two reasons: first, Plaintiffs have only obtained a final judgment against Licensee while the civil matter is ongoing against the other Defendants, and second, that a sum certain of damages has not yet been established. Thus, Plaintiffs claim for reimbursement from the fund is premature. The court disagrees. First, a review of the docket entries indicates the entry of a default judgment against Licensee on June 21, 2011. Second, though the court acknowledges that a final sum certain has not yet been determined for Plaintiffs’ damages, this is not fatal to the instant Petition as the court will schedule a hearing for the determination of the proper amount of damages and thus permit the matter to go forward. -4- 10-3162 CIVIL TERM B. Fraudulent Basis of Underlying Judgment Respondent next argues that Plaintiffs have failed to demonstrate that the judgment they obtained was based upon fraud, misrepresentation, or deceit. The court disagrees. A review of Plaintiffs’ Complaint reveals the following: [Licensee] failed to properly disclose a condition of the septic system on the Seller’s Disclosure form of which she had knowledge and which she knew would adversely affect the sale of the property. … [Licensee] in blatant and flagrant disregard of the existing improper septic system, sold the property to Plaintiffs knowing of this defect in the condition and habitability of the house. Compl. ¶¶109, 113. These averments, admitted to by Licensee in her failure to respond, clearly establish that the basis for the entry of judgment was fraud, misrepresentation, or deceit. C. License Requirement for Underlying Transaction Respondent next argues Plaintiffs have failed to demonstrate that the transaction was one for which a real estate license was required under the Act. The Act provides a remedy for Petitioners aggrieved by “any person licensed under this act, … with reference to any transaction for which a license or registration certificate is required under this act ….” 63 P.S. § 455.803. Respondent contends that despite her status as a licensee, Licensee was selling her own home and therefore the transaction was not one requiring a license rendering recovery from the fund unavailable. The court disagrees. Respondent’s suggested reading of the Act clearly frustrates the Act’s purpose of providing some amount of recovery for homebuyers who are the -5- 10-3162 CIVIL TERM victims of fraud committed by licensees. Further, this reading runs afoul of the 1 mission of the Department of State to “… promot[e] business excellence,” and that of the State Real Estate Commission, in particular, in granting and renewing licenses “to persons who bear a good reputation for honesty, trustworthiness, 2 integrity and competence.” Just as an attorney representing himself is not excused from adherence to the Code of Civility and the Rules of Professional Conduct neither is a realtor excused from the standards of her profession. Representing oneself does not give one the freedom to commit fraud with 3 impunity. In short, we will not fixate on “for which a license or registration certificate is required,” and prevent Plaintiffs’ recovery because Licensee sold her own home. This court will not countenance such an interpretation, nor should Respondent. D. Failure to Exhaust Collection Efforts Respondent next argues that Plaintiffs have failed to demonstrate they have exhausted collection efforts prior to applying to the Fund for payment. Respondent contends that litigation remains pending against Licensee’s codefendants and therefore the defendants’ relative liability has yet to be finally determined and judgment cannot possibly be final. The court disagrees. The Act requires an applicant to demonstrate, in relevant part: 1 Pennsylvania Department of State, www.dos.state.pa.us. 2 Mission Statement of the State Real Estate Commission at www.dos.state.pa.us. 3 To the extent Respondent has disciplined Licensee, we would not be surprised to find allegations of fraud with respect to the facts of this case in the Order to Show Cause. Even if it is not included among the litany of Licensee’s wrongs, we find no legitimate grounds to condone fraudulent behavior by a licensee in his or her own field. -6- 10-3162 CIVIL TERM (2) That he has obtained a final judgment as set out in this section. (3) That all reasonable personal acts, rights of discovery and such other remedies at law and in equity as exist have been exhausted in the collection thereof. 63 P.S. § 455.803. Here the record indicates that a final default judgment was entered against Licensee on June 21, 2011. Licensee has failed to petition to open or strike that judgment. As such Plaintiffs have obtained a final judgment and exhausted their collection efforts against Licensee. It is of no moment whether litigation remains outstanding against Licensee’s codefendants, because none of them are licensees under the Act. The Act provides a remedy for victims of fraud by licensees; recovery from the fund is not dependent upon whether other unlicensed parties may ultimately be jointly and severally liable in the underlying action. The court finds support for its holding in D.J. Malatesta Associates, Inc. v. Century 21 Reuter Inc., et al., 739 A.2d 1076 (Pa. Cmwlth. 1999). There, our Commonwealth Court addressed, in relevant part, whether a party seeking to recover from the Fund must first join all prospective claimants against a Licensee before he may proceed. The Court concluded they did not, reasoning as long as some “ aggrieved person who already has a final judgment is only required to begin the process of recovery from the [Fund].” Id. at 1081 (emphasis in original). Here, this court’s task is easier than in Malatesta as there are no outstanding claimants yet to be joined. Also, despite Respondent’s argument that other parties may yet be liable, none of those parties are licensees. As such, their conduct is not relevant to Plaintiffs’ eligibility to recover from the Fund. -7- 10-3162 CIVIL TERM The court views the matter as fairly straight forward – the Plaintiffs were the victims of fraudulent conduct by Licensee and may therefore proceed to determine the amount they may recover from the Fund. E. Statutory Limits to Recovery Finally, Respondent contends Plaintiffs seek payment from the fund in excess of the statutory limit. The Act limits the fund’s liability to not more than $20,000 per claim and not more than $100,000 per licensee. 63 P.S. § 455.803. The court need not yet reach this issue as the sum certain of the fund’s liability shall be determined at the hearing scheduled in accordance with this opinion and order of court. As such, Respondent’s contention does not prevent Plaintiffs from moving forward to determine the amount they are entitled to recover from the fund. III. Conclusion For all these reasons, Plaintiffs’ are entitled to obtain payment from the Fund. A hearing will be scheduled for the determination of the amount of Plaintiffs’ judgment against Licensee, and the amount Plaintiffs will recover from the Fund. ORDER OF COURT AND NOW, this day of May, 2012, the Petition for Payment GRANTEDIN PART from the Real Estate Recovery Fund filed by Plaintiffs is . In the absence of an agreement by the parties regarding scheduling, either party may petition the court to schedule a hearing to determine a sum certain of Dawn Shughart’s liability -8- 10-3162 CIVIL TERM to the Plaintiffs and to determine the amount Plaintiffs are entitled to recover from the Real Estate Recovery Fund. By the Court, Albert H. Masland, J. Sally J. Winder, Esquire For Plaintiffs Julie A. Feld Caralle, Esquire rd 2601 North 3 Street Harrisburg, PA 17105-2649 For Respondent Harold S. Irwin, III, Esquire For Duane Wert and Linda Wert :saa -9-