HomeMy WebLinkAbout2012-549
GNANACHANDRA CHINNIAH, : IN THE COURT OF COMMON PLEAS
SUGANTHINI CHINNIAH, : OF CUMBERLAND COUNTY,
Plaintiffs, : PENNSYLVANIA
:
v. :
: CIVIL ACTION - LAW
AMERICAN CHOICE FEDERAL CREDIT :
UNION AND DALLAS J. ZULLI, :
Defendants. : No. 2012-549
IN RE: DEFENDANTS’ PRELIMINARY OBJECTIONS TO
PLAINTIFF’S AMENDED COMPLAINT
BEFORE HESS, P.J. and PLACEY, J.
OPINION and ORDER
Before the court are the Preliminary Objections of the Defendants AmeriChoice Federal
Credit Union (hereinafter “AmeriChoice”) and Dallas J. Zulli (hereinafter “Zulli”) (collectively
“Defendants”) to the First Amended Complaint filed by the pro se Plaintiffs, Gnanachandra and
Suganthini Chinniah. (Prelim. Objs. to Pl’s. Am. Compl., filed Apr. 1, 2013). Plaintiffs’ First
Amended Complaint contains three counts: at Count I, a claim of breach of contract; at Count II,
a claim of fraud; and at Count III, a claim for violation of the Unfair Trade Practices and
Consumer Protection Law (hereinafter “UTPCPL”). (First Am. Compl., filed Mar. 12, 2013). In
their preliminary objections, the Defendants seek to have Counts II and III dismissed for failure
of a pleading to conform to law or rule of court or inclusion of scandalous or impertinent matter
pursuant to Pa.R.C.P. 1028 (a)(2) and legal insufficiency pursuant to of Pa.R.C.P. 1028 (a)(4); in
the alternative, to the extent Counts II and III are not dismissed, seek a more specific pleading
for Counts II and III pursuant to of Pa.R.C.P. 1028 (a)(2) and (a)(3); to have Defendant Zulli
dismissed for legal insufficiency pursuant to of Pa.R.C.P. 1028 (a)(4); and to have Paragraphs
four through six of the Plaintiffs’ First Amended Complaint stricken and Plaintiffs sanctioned for
the inclusion of scandalous or impertinent matter pursuant to Pa.R.C.P. 1028 (a)(2). (Prelim.
Objs. to Pl’s. Am. Compl., filed Apr. 1, 2013).
Plaintiffs’ First Amended Complaint can be summarized as follows: Plaintiffs,
Gnanachandra and Suganthini Chinniah are adult individuals residing at 506 Erford Road, Camp
Hill, Cumberland County, Pennsylvania 17011. (First Am. Compl., ¶ 1). AmeriChoice Federal
Credit Union is a credit union operating at 2175 Bumble Bee Hollow Road, Mechanicsburg,
Cumberland County, Pennsylvania 17055, among other locations. (First Am. Compl., ¶ 2).
Dallas J. Zulli was vice president of business lending for AmeriChoice at all relevant times.
(First Am. Compl., ¶ 3). In June of 2012, Plaintiffs submitted a proposal for a $400,000 loan to
Defendant AmeriChoice. (First Am. Compl., ¶ 7). Subsequently, Plaintiffs completed
AmeriChoice’s credit application for a $400,000 loan with three residential rental properties that
the Plaintiffs owned serving as collateral. (First Am. Compl., ¶ 8). On June 22, 2012, after issues
arose about the loan meeting AmeriChoice’s requirements, Defendant Zulli sent the Plaintiffs an
email that discussed modifying the loan by increasing the loan amount and including additional
properties as collateral. (First Am. Compl., ¶ 9). On June 25, 2012, Defendant Zulli emailed the
Plaintiffs a spreadsheet that outlined a loan for $1,400,000 that included fifteen of the Plaintiffs’
properties as collateral. (First Am. Compl., ¶ 10). On July 9, 2012, Plaintiffs submitted a new
“Member Business Credit Application” for a $1,400,000 loan with those fifteen properties
serving as collateral. (First Am. Compl., ¶12, Ex. 3).
On July 10, 2012, Defendant Zulli furnished a commitment letter, which listed several
terms and conditions, to the Plaintiffs for a $1,400,000 loan with the stated purpose of
refinancing existing debt. (First Am. Compl., ¶ 14). Regarding appraisals, the commitment letter
stated:
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Complete appraisals of the Property, performed by a certified appraiser approved
by Lender, will be required for this Loan; The appraised value must equal or
exceed $1,750,000, otherwise this Commitment may become null and void at the
Lender’s sole discretion; If the appraised value of the Property is lower than
$1,750,000 than lender may lower the loan amount to equal 80% of the appraised
value at its sole discretion; The loan amount will not exceed 80% of the appraised
value of the Property; The appraisals must be satisfactory to Lender and Property
must [sic] in a condition acceptable to Lender; If reappraisal of the Property
should be required by Lender in the future Borrower agrees to pay for the
appraisal; Borrower is responsible for the cost of the appraisals, $6,300; Borrower
may pay the appraisal cost to Lender in installments of $2,100; The first
installment must be paid to Lender at acceptance of the Commitment; The second
installment must be paid to Lender when the appraiser’s physical inspection of the
Property is complete; the final installment must be paid to Lender at settlement or
delivery of appraisals to Borrower(s)
(First Am. Compl., Ex. 4). The above cited portion of the commitment letter gives AmeriChoice
discretion to lower the loan amount in the event that the appraisals would come in below the
target of $1,750,000; however, the Plaintiffs seem to aver that Defendant Zulli represented that
the loan would automatically be adjusted to a lower amount if the appraisals came in below
$1,750,000 and that they were assured all fifteen appraisals would be completed before any
decision was made on the loan. (First Am. Compl., ¶ 28). Regardless, the Plaintiffs signed the
loan commitment letter and provided a check for $2,100 as the first installment of appraisal fees
on July 20, 2012. (First Am. Compl., ¶ 15). Between July 30, 2012 and August 2, 2012, a real
estate appraiser inspected the fifteen properties that were to be used as collateral for the loan; as
a result, Plaintiff paid a second installment of $2,100 towards the appraisal fee. (First Am.
Compl., ¶¶ 20, 21). On August 27, 2012, Defendant Zulli informed the Plaintiffs that ten
appraisal reports were complete, the value of the properties that had reports completed were
lower than expected, and the final installment of $2,100 needed to be paid so that the remaining
reports could be completed and it could be determined if the target of $1,750,000 in value would
be reached. (First Am. Compl., ¶ 22). The loan process was not continued, the Defendants did
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not offer to lower the loan amount, and the final installment of $2,100 was not paid to the
Defendants. (First Am. Compl., ¶ 24).
On August 30, 2012, on behalf of the Defendants, Darrell C. Dethlefs, Esq. mailed the
Plaintiffs and Gregory R. Reed, Esq., who was handling title work for the Plaintiffs, a letter that
included copies of the first ten appraisals and stated that AmeriChoice intended to issue a formal
declination of credit. (First Am. Compl., Ex. 5). The letter indicated that all completed appraisals
came in at a value less than the value stated on the application, but that the key to AmeriChoice’s
decision not to lend to the Plaintiffs was that the appraisals revealed issues with regard to the
condition of the properties that were to serve as collateral. (First Am. Compl., Ex. 5). The letter
provided examples of the deficiencies that were stated in the appraisal reports. (First Am.
Compl., Ex. 5). Additionally, the letter stated that Defendants would not be refunding the
Plaintiffs the money they paid for the appraisals. (First Am. Compl., Ex. 5).
Plaintiffs initially filed a Complaint on September 4, 2012. (Compl., filed Sept. 4, 2012).
After which, this court dismissed the Complaint as legally insufficient and ordered that
scandalous and impertinent language not be included in any amended pleadings. (Order of Court,
filed Feb. 13, 2013). In their First Amended Complaint, Plaintiffs now seek reimbursement for
$4,200 paid for appraisals, $1,685 spent on title searches and tax certificates, punitive damages,
interest, and costs. (First Am. Compl., ad damnum clauses).
Pursuant to Pennsylvania Rule of Civil Procedure 1028(a), preliminary objections may be
filed by any party to any pleading on several limited grounds, including the following:
(2) Failure of a pleading to conform to law or rule of court or inclusion of
scandalous or impertinent matter;
(3) Insufficient specificity in a pleading;
(4) Legal insufficiency of a pleading (demurrer);
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Pa.R.C.P. 1028(a)(2), (3), (4). The standard of review for preliminary objections in this
Commonwealth is well-settled. Preliminary objections are properly granted only when, “based
on the facts pleaded, it is clear and free from doubt that the complainant will be unable to prove
facts legally sufficient to establish a right to relief.” Mazur v. Trinity Area School Dist., 599 Pa.
232, 240-41, 961 A.2d 96, 101 (2008) (internal citations omitted). In considering preliminary
objections, “all well-pleaded allegations and material facts averred in the complaint, as well as
all reasonable inferences deducible therefrom, must be accepted as true.” Wurth by Wurth v. City
of Philadelphia, 136 Pa. Cmwlth. 629, 638, 584 A.2d 403, 407 (1990). However, the trial court
“need not accept as true conclusions of law, unwarranted inferences from fact, argumentative
allegations, or expressions of opinion.” Penn Title Insurance Co. v. Deshler, 661 A.2d 481, 483
(Pa. Cmwlth. 1995).
Initially, Defendants seek the dismissal of Count II, fraud, and Count III, violation of the
UTPCPL, based on the “gist of the action” doctrine. The doctrine seeks to maintain the
conceptual differences between breach of contract and tort claims. eToll, Inc. v. Elias/Savion
Advertising, Inc., 2002 Pa. Super. 347, ¶ 14, 811 A.2d. 10, 14. “Tort actions lie for breaches of
duties imposed by law as a matter of social policy, while contract actions lie only for breaches of
duties imposed by mutual consensus agreements between particular individuals….” Bash v. Bell
Tel. Co, 411 Pa. Super. 347, 356, 601 A.2d 825, 829 (1992) (citing Iron Mountain Sec. Storage
Corp. v. American Specialty Foods, Inc., 457 F. Supp. 1158, 1165 (E.D. Pa. 1978)). “[A]lthough
mere non-performance of a contract does not constitute a fraud, it is possible that a breach of
contract also gives rise to an actionable tort. To be construed in tort, however, the wrong
ascribed to the defendant must be the gist of the action, the contract being collateral.” Id. at 355,
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601 A.2d at 829 (internal citations omitted). More specifically, when applied to allegations of
fraud:
[w]here fraud claims are intertwined with breach of contract claims and the duties
allegedly breached are created and grounded in the contract itself, the gist of the
action is breach of contract. Thus, claims of fraud in the performance of a contract
are generally barred under the gist of the action doctrine.
Hart v. Arnold, 2005 Pa. Super. 328, ¶ 43, 884 A.2d 316, 340 (internal citations and quotations
omitted).
Likewise, claims are commonly barred if the contract at issue is fully integrated.
The rationale for this rule of law is “that a party cannot justifiably rely upon prior
oral representations” and then sign a contract containing terms that refute the
alleged prior oral representations. Thus, when prior fraudulent oral
misrepresentations are alleged regarding a subject that was specifically dealt with
in a written contract, the party alleging such representations must, under the parol
evidence rule, also aver that the representations were fraudulently or by accident
or mistake omitted from the integrated written contract.
Id. at ¶ 44, 884 A.2d at 340.
We start our discussion with the Defendants’ gist of the action argument as it applies to
Plaintiffs’ fraud claim. The commitment letter that the Plaintiffs signed goes into detail regarding
the contingencies related to the appraisals. It is clear that the properties used as collateral must be
“in a condition acceptable to the Lender.” Furthermore, the commitment letter states that if the
appraised value is less than $1,750,000 the commitment becomes void and the Defendants have
the sole discretion to approve the loan at a lower loan amount. It appears the Plaintiffs are
alleging that representations were made to them that are contrary to the language of the
commitment letter; specifically, that the work regarding all fifteen appraisals would be
completed before a decision was made and that the loan would be still be approved, just for a
lower amount, if the appraisals came in below $1,750,000. It is clear that the duties that are
alleged to have been broken are grounded in the commitment letter itself. In the commitment
letter, condition nine, titled “Appraisal,” addresses the relevant agreement and duties. As such,
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the essence of the claim lies in the commitment letter that governs the parties’ relationship.
Furthermore, while the duties concerning the alleged misrepresentations are specially dealt with
in the commitment letter, Plaintiffs make no averment that the Defendant Zulli’s alleged contrary
representations were fraudulently, accidently, or mistakenly omitted from the commitment letter.
As such, we find that the Plaintiffs’ fraud claim is subsumed by their breach of contract claim,
the relevant duties being grounded in the commitment letter itself. For these reasons,
Defendants’ first preliminary objection will be sustained as to Count II, fraud.
Defendants would also have this court dismiss Plaintiffs’ UTPCPL claim under the gist
of the action doctrine. We agree with Defendants that the UTPCPL’s underlying foundation is
fraud prevention. Commonwealth v. Monumental Properties, Inc., 459 Pa. 450, 459, 329 A.2d
812, 816 (1974). However, we have found no Pennsylvania court that has barred a UTPCPL
claim on the basis of the gist of the action doctrine. See Spruce Street Properties, Ltd. v.
Noblesse, 2011 WL 4368398, 11 (W.D. Pa.) (Recognizing no precedential support for applying
gist of action doctrine to UTPCPL and declining to do so since claim was barred on other
grounds). Finding no authority on the issue, and because we will dismiss the claim on other
grounds, the first preliminary objection as it applies to Count III, UTPCPL is overruled.
Thus, we turn to Defendants’ preliminary objection that Count III should be dismissed
pursuant to Pa.R.C.P. 1028(a)(2) and (a)(4) since the loan in question was a business loan and
the UTPCPL only applies to personal, family, or household goods and services. The UTPCPL
states:
Any person who purchases or leases goods or services primarily for personal,
family or household purposes and thereby suffers any ascertainable loss of money
or property, real or personal, as a result of the use or employment by any person
of a method, act or practice declared unlawful by section 3 of this act, may bring a
private action to recover actual damages….
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Unfair Trade Practice and Consumer Protection Law, 73 PA. STAT. ANN. §201-9.2(a)
(emphasis added). When considering whether a purchase was primarily for personal, family or
household purposes, “the act addresses itself solely to the purpose of the purchase, not the type
of product purchased.” Valley Forge Towers South Condominium v. Ron-Ike Foam Insulators,
Inc., 393 Pa. Super, 339, 352, 574 A.2d 641, 648 (1990), order aff’d 529 Pa. 512, 605 A.2d 798
(1992).
Here, the Plaintiffs make the general averment that the loan was intended for personal or
family purposes. In support of which, in their brief, Plaintiffs claim that they planned on using
the loan to consolidate consumer credit card debts, that the rental properties that were used as
collateral were owned “personally,” and that one of the properties used as collateral was their
primary residence. (Pls.’ Mem. in Opp’n to Defs.’ Prelim. Objs. to Pl’s First Am. Compl., filed
May 3, 2013). The pleadings, however, belie this representation. The Plaintiffs themselves
acknowledge that the AmeriChoice representative that they dealt with, Defendant Zulli, was the
vice president of business lending. In addition, the application that the Plaintiffs attached as an
exhibit to their First Amended Complaint unambiguously states that it is a “business credit
application.” (First Am. Compl., Ex. 3). Also, directly above the portion of the commitment
letter that the Plaintiffs’ signed it states, “The proceeds of the loan(s), if any, made under this
letter will be used exclusively for business purposes.” (First Am. Compl., Ex. 3). We are not
persuaded that the Plaintiffs inclusion of their primary residence as collateral, along with several
rental properties, somehow transforms the loan to a personal one. Accordingly, we will sustain
Defendants’ second preliminary objection to the UTPCPL claim.
Next, Defendants seek by way of a demurrer, to have Defendant Zulli removed for the
failure to state a cause of action against him. A demurrer is “an assertion that a complaint does
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not set forth a cause of action or a claim on which relief can be granted.” Lerner v. Lerner, 2008
Pa. Super. 183, ¶ 11, 954 A.2d 1229, 1234 (internal citations omitted). If any theory of law will
support the claim raised by the complaint, dismissal is improper. Slaybaugh v. Newman, 330 Pa.
Super. 216, 220, 479 A.2d 517, 519 (1984).
Upon finding that Counts II and III should be dismissed, only Count I, breach of contract,
remains. In establishing their breach of contract claim, Plaintiffs maintain that Defendant
AmeriChoice stopped the loan process and refused to offer a loan for a smaller amount.
Additionally, in the ad damnum clause for the breach of contract count, Plaintiffs only seek
damages from Defendant AmeriChoice. Since no claims are made against Defendant Zulli, and
no averments are alleged supporting any, we order Defendant Zulli be dismissed from the action.
Finally, we turn to the Defendants’ preliminary objection for the inclusion of scandalous
or impertinent matter. “To be scandalous and impertinent, a complaint's allegations must be
immaterial and inappropriate to the proof of the cause of action.” Commonwealth Dep't of Envtl.
Res. v. Peggs Run Coal Co., 55 Pa. Cmwlth. 312, 320, 423 A.2d 765, 769 (1980).
In this Court’s previous order concerning the Plaintiffs’ original Complaint, it was noted
that certain paragraphs were scandalous and impertinent, and it was ordered that such language
was not to be used in any amended pleadings. Included in those paragraphs were averments
concerning Defendant’s Zulli’s connection to East Pennsboro Township and allegations
concerning a resulting conflict of interest. Similar information and allegations are contained in
Plaintiffs First Amended Complaint in paragraphs four through six. We reaffirm our previous
Order and sustain Defendants’ preliminary objection that paragraphs four through six be
stricken. However, we decline to impose sanctions at this time.
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Furthermore, since preliminary objections have been granted dismissing Counts II and III
there is no need to discuss Defendant’s alternate theories at this time.
ORDER
th
AND NOW, this 24 day of June, 2013, upon consideration of Defendants’ Preliminary
Objections to Plaintiffs’ Amended Complaint, and any response thereto, Defendants’ Preliminary
Objections are hereby sustained as follows:
1.Counts II and III of Plaintiffs’ Amended Complaint are hereby dismissed with
prejudice;
2.Dallas J. Zulli is dismissed with prejudice as a defendant in this matter;
3.Paragraphs 4 – 6 of the Amended Complaint are stricken with prejudice; and
4.The Prothontary is hereby directed to amend the caption to reflect the dismissal of
Dallas J. Zulli as a defendant.
BY THE COURT,
___________________________
Kevin A. Hess, P.J.
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GNANACHANDRA CHINNIAH, : IN THE COURT OF COMMON PLEAS
SUGANTHINI CHINNIAH, : OF CUMBERLAND COUNTY,
Plaintiffs, : PENNSYLVANIA
:
v. :
: CIVIL ACTION – LAW
AMERICAN CHOICE FEDERAL CREDIT :
UNION AND DALLAS J. ZULLI, :
Defendants. : No. 2012-549
IN RE: DEFENDANTS’ PRELIMINARY OBJECTIONS TO
PLAINTIFF’S AMENDED COMPLAINT
ORDER
th
AND NOW, this 24 day of June, 2013, upon consideration of Defendants’ Preliminary
Objections to Plaintiffs’ Amended Complaint, and any response thereto, Defendants’ Preliminary
Objections are hereby sustained as follows:
1.Counts II and III of Plaintiffs’ Amended Complaint are hereby dismissed with
prejudice;
2.Dallas J. Zulli is dismissed with prejudice as a defendant in this matter;
3.Paragraphs 4 – 6 of the Amended Complaint are stricken with prejudice; and
4.The Prothontary is hereby directed to amend the caption to reflect the dismissal of
Dallas J. Zulli as a defendant.
BY THE COURT,
___________________________
Kevin A. Hess, P.J.
Gnanachandra & Suganthini Chinniah
506 Erford Road
Camp Hill, Pa 17011
Plaintiffs
James J. Franklin, Esq. & Elizabeth S. Karnezos, Esq.
100 Pine Street
P.O. Box 1166
Harrisburg, PA 17108
For the Defendants