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HomeMy WebLinkAbout2004-4173 Civil MICHAEL DUBAICH And TARA DAWN HAZEN, Plaintiffs IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA v. CIVIL ACTION - LAW RE/MAX REALTY ASSOCIATES, INC., KIRK L. NACE, and EK VENTURES, INC., Defendants NO. 04-4173 CIVIL TERM IN RE: DEFENDANTS' PRELIMINARY OBJECTIONS TO PLAINTIFFS' COMPLAINT BEFORE HESS, OLER and EBERT, JJ. OPINION and ORDER OF COURT OLER, 1., August 3,2006. This case arises out of Plaintiffs' purchase and subdivision of certain realty in Perry County, Pennsylvania. Plaintiffs' complaint contains counts against Defendants (who were not the sellers) for "tort" (Count 1),1 breach of contract (Count 11),2 fraud (Count 111),3 negligent or intentional infliction of emotional distress (Count IV),4 "personal injury" (Count V),5 punitive damages (Count VI),6 violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law (Count VII),7 and violation of the federal Real Estate Settlement Procedures Act (Count VIII). 8 1 Plaintiffs' Complaint, filed March 17, 2006 ("Complaint") para. 7-11. 2 Id., para. 13-14. 3 Id., para. 101-08. 4 Id., para. 16-19. SId., para. 19-20. 6 Id., para. 15-16. 7 Id., para. 20-22. 8 Id., para. 22-23. In substance, Plaintiffs allege that Defendants fraudulently induced Plaintiffs to purchase a tract of land and subject a portion of it to an exclusive listing agreement with the unstated intention of forcing Plaintiffs to sell that portion below market value to one of the Defendants when the listing agent's duties under the agreement were not performed. 9 For disposition at this time are preliminary objections filed by Defendants to Plaintiffs' complaint. Defendants' preliminary objections consist of (1) a motion to dismiss Plaintiff Tara Dawn Hazen as a party to the action on the basis of a "lack of capacity to sue,,,lO (2) a demurrer as to all claims against Defendant EK Ventures, Inc., on the basis of an absence of any allegations of wrongdoing on its part,l1 (3) a demurrer as to all tort claims against all Defendants on the basis of the incompatibility of such claims with the "gist-of-the-action doctrine,,,12 (4) a demurrer as to Plaintiffs' claims for breach of contract against Defendants EK Ventures, Inc., and Kirk L. Nace on the basis of an absence of allegations of their being parties to any contract breached,13 (5) a demurrer as to Plaintiffs' claims for attorney's fees except as they relate to Plaintiffs' claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law, on the basis of an absence of statutory or contractual authority therefor,14 (6) a motion to strike as without legal foundation Plaintiffs' claims for punitive damages to the extent that they are asserted as an independent cause of action or as a remedy for breach of contract, 15 (7) a demurrer as to Plaintiffs' claims for negligent or intentional infliction of emotional distress in the absence of allegations of outrageous conduct or bystander 9 See generally Complaint. 10 Defendants' Preliminary Objections to Plaintiffs' Complaint, filed May 5, 2006 ("Preliminary Objections") para. 1-3. 11 Id., para. 4-9. 12 Id., para. 10-16. 13 Id., para. 17-19. 14 Id., para. 21-23.15 Id., para. 24-28. 2 status and physical harm,16 (8) a demurrer as to Plaintiffs' claim for "personal injury," on the basis of the nonexistence in law of an independent tort of this nature,17 (9) a demurrer as to Plaintiffs' claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Act on the basis of the absence of the element of personal, family or household purpose requisite to such a cause of action, 18 (10) a demurrer as to Plaintiff s claim under the federal Real Estate Settlement Procedures Act on the basis of the absence of the elements of a "federally related mortgage loan," "settlement services," and non-business purpose loan requisite to such a cause of action,19 and (11) a demurrer as to those portions of Plaintiffs' complaint seeming to request damages for the dissolution of Plaintiffs' marriage, on the basis of the legislative abolition of alienation-of-affection suits?O Argument on Defendants' preliminary objections was held on May 17,2006. For the reasons stated in this opinion, the preliminary objections will be sustained in part and denied in part. STATEMENT OF FACTS The allegations of Plaintiffs' complaint will be summarized in the succeeding paragraphs. This summary of the allegations is, of course, in no way intended to represent an endorsement by the court of their factual accuracy. Plaintiffs Michael Dubaich and Tara Dawn Hazen, formerly husband and wife, are adult individuals residing at 188 Equitation Way, Millerstown, Perry County, Pennsylvania? 1 Defendant RE/MAX Realty Associates, Inc., is "a corporation and a franchise which is privately owned [and maintains] a business 16 Id., para. 29-36. 17 Id., para. 37-41. 18 Id., para. 42-48. 19 Id., para. 49-56. 20 Id., para. 57-61. 21 Plaintiffs' Complaint, para. 1. 3 address of 3425 Market Street, Camp Hill, Cumberland County, Pennsylvania.,,22 Defendant Kirk L. Nace is an adult individual having a business address of 3425 Market Street, Camp Hill, Cumberland County, Pennsylvania.23 Defendant EK Ventures, Inc., is a Pennsylvania corporation having an address of One South Market Street, Duncannon, Perry County, Pennsylvania?4 At all times pertinent to the action, Defendant N ace was an agent of Defendant RE/MAX25 and president of Defendant EK Ventures.26 All Defendants were linked in a common "business relationship.,,27 On October 13, 2001, Plaintiffs entered into an agreement of sale with B. Bruce Boyer and Wanda L. Boyer (the Boyer Agreement) for the purchase of property in Tuscarora Township, Perry County, Pennsylvania, by Plaintiffs from the Boyers for $250,000.00?8 Defendant RE/MAX was the listing broker as to the property, Defendant Nace was the "designated agent" in this regard, and "the terms of the Boyer Agreement were suggested and/or promoted by the Defendants and such actions and representations were instrumental in Plaintiffs' decision to not only purchase the Property but also in Plaintiff s decision to accept the terms of the Boyer Agreement. ,,29 Under the agreement, Plaintiffs were to pay the Boyers $125,000.00 at settlement and $125,000.00 within one year thereafter.3o "Closing" occurred on 22 Id., para. 2. 23 Id., para. 4. 24Id., para. 7. 25 Id., para. 5. 26 Id., para. 10 and Exhibit D. 27 Id., para. 11. 28 Id., para. 14 and Ex. A. 29 Id., para. 15. 30 Id., paras. 16-17. 4 December 14,2001,31 and a mortgage in favor of the Boyers securing payment of the balance of the purchase price in the amount of $125,000.00 was executed?2 In connection with this transaction, Defendants had recommended that Plaintiffs subdivide the property purchased into four parcels: a fifty-acre tract which would contain Plaintiffs' home and business; a ten-acre tract containing an existing house and barn; and two one-and-a-half acre tracts.33 Based upon representations by Defendant RE/MAX (a) that the ten-acre tract could be sold within a year for more than the $125,000.00 balance which Plaintiffs owed to the Boyers34 and (b) that Defendant RE/MAX would buy the property for $125,000.00 if it did not sell,35 this tract was immediately subjected to an exclusive listing agreement signed by Plaintiff Michael Dubaich on behalf of the sellers, wherein Defendant RE/MAX was identified as the broker and Defendant N ace was identified as the "licensee.,,36 This listing agreement was executed by Defendant Nace.37 Pursuant to a prearranged plan among Defendants,38 the property was not marketed with a view toward selling it to a third party,39 as a result of which Defendants successfully forced a distress sale below market value to Defendant EK Ventures, Inc.4o In the process, Defendants attempted to enlist Plaintiffs' assistance III defrauding the lender that financed the purchase by Defendant EK Ventures by 31 Id., para. 16. 32 Id., para. 14 and Ex. A. 33 Id., para. 18. 34 Id., paras. 18,22. 35 Id., paras. 18,24. 36 Id., para. 23; See also paras. 20-21 regarding the other three listing agreements. 37 Id., para. 46 and Ex. F. 38 Id., para. 38. 39 Id., paras. 28-30. 40 Id., paras. 36-37,40. 5 inflating the purchase price to support a larger loan commensurate with the property's market value41 and in the process forged Plaintiffs' signatures on certain documents.42 A revised listing agreement dated December 12, 2002, with Defendant RE/MAX identified as the broker and Defendant N ace identified as the "licensee," for the inflated price was signed on behalf of the sellers by Plaintiff Michael Dubaich, with the omission of Plaintiff Tara Dawn Hazen's signature in this instance being intended to signal her displeasure with the deception.43 This listing agreement was also executed by Defendant Nace.44 Ultimately, the device of an inflated realtor's commission was utilized as part of the deception.45 The aforesaid conduct of Defendants resulted in financial loss to Plaintiffs, an aggravation of a preexisting illness in Plaintiff Michael Dubaich, and emotional distress leading to the Plaintiffs' divorce.46 Punitive damages are demanded as to each claim asserted in the complaint,47 and attorney's fees are expressly demanded as to the claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law48 and impliedly requested on several other claims.49 As noted, Defendants have filed preliminary objections to Plaintiffs' complaint, raising numerous Issues. DISCUSSION General. In considering a preliminary objection to a complaint in the nature of a demurrer, a court is to "accept all material facts set forth in the complaint[,] as well as all the inferences reasonably deducible therefrom[,] as 41 Id., paras. 41-42. 42 Id., para. 47. 43 Id., para 53. 44 See Ex. G. 45 Complaint, para 45. 46 Id., para. 56. 47 Id., para. 129. 48 Id., para. 145. 49 Id., paras. 76, 100, 108. 6 true." Powell v. Drumheller, 539 Pa. 484, 489, 653 A.2d 619, 621 (1995). A preliminary objection to a complaint in the nature of a demurrer should be sustained only when, "on the facts averred, the law says with certainty that no recovery is possible." Id If any doubt exists as to whether a demurrer should be sustained, "this doubt should be resolved in favor of the "non-moving party." Presbyterian Medical Center v. Budd, 2003 PA Super 347, ,-r6, 832 A.2d 1066, 1070. Incapacity of Plaintiff Tara Dawn Hazen. Nothing in Plaintiffs complaint would lead to a conclusion that Plaintiff Tara Dawn Hazen lacks capacity to sue in the usual sense of that term. To the extent that Defendant's request that she be dismissed from the action is based upon the absence of her signature on certain documents, it is premature to conclude that her interest was not understood by the parties to have been represented by her husband's execution of the documents. See generally Guy v. Liederbach, 501 Pa. 47, 459 A.2d 744 (1983); Davin v. Davin, 842 A.2d 469 (Pa. Super. 2004). Accordingly, Defendants' preliminary objection based upon Plaintiff Hazen's alleged lack of capacity to sue will be denied. Demurrer As to All Claims against Defendant EK Ventures. The gist of Plaintiffs' complaint is that Defendants successfully conspired to force Plaintiffs to sell property at a distress price through the instrumentality of the nonperformance of an exclusive listing agreement. Given this allegation, it would be premature to dismiss the complaint against a given defendant on the theory that no cause of action could exist against it. Demurrer to Tort Claims Based upon Gist-o.fthe-Action Doctrine. The purpose of the gist-of-the-action doctrine is to maintain the distinction between contract and tort claims. Etoll, Inc. v. Elias/Savion Advertising, Inc., 2002 P A Super 347, ,-r14, 811 A.2d 10, 14. Even though tort and contract claims derive from the common law, distinct differences exist between the two causes of action. Id (noting that tort actions arise from duties imposed by law for public policy 7 reasons and that contract claims arise from duties created by agreement of the parties ). Under this doctrine, for a breach of contract claim to constitute an actionable tort, the wrong "ascribed to the defendant must be the gist of the action, the contract being collateral." Id "[T]he gist of the action is contractual where the parties' obligations are defined by the terms of the contract, and not by the larger social policies embodied by the law of torts." Air Products and Chemicals, Inc. v. Eaton Metal Products Co., 256 F. Supp. 2d 329, 342 (E.D. Pa. 2003) (citation omitted). Courts applying the gist-of-the-action doctrine have found the gist of the action to be contractual where fraud in the performance of a contract defines the claim and to be tortious where fraud in the inducement of the contract characterizes it. See, e.g., id In the present case, where (a) the non-performance of a listing agreement is alleged to have been one aspect of a conspiracy to defraud and (b) this conspiracy is alleged to have preceded the execution of a series of contracts by Plaintiffs, it can not be said that the tort of fraud is merely incidental to Plaintiffs' contractual claim. Contract Claims against Defendant EK Ventures and Defendant Nace. In general, "[i]n Pennsylvania, a person who is not a party to a contract cannot be held liable for a breach by one of the parties to a contract. Fleetway Leasing Co. v. Wright, 697 A.2d 1000, 1003 (Pa. Super. 1997). In addition, "[i]t is a basic tenet of agency law that an individual acting as an agent for a disclosed principal is not personally liable on a contract between the principal and a third party unless the agent specifically agrees to assume liability." Casey v. GAF Corp., 828 A.2d 362, 369 (Pa. Super. 2003). Where fraud is involved, however, this general rule is not always applied. Testerman v. Buck, 340 Md. 569,667 A.2d 649 (1995). In the present case, with respect to Defendant EK Ventures, Plaintiffs' complaint is devoid of allegations which would warrant a finding of breach of contract; accordingly, this aspect of Plaintiffs' complaint will be dismissed. On 8 the other hand, with respect to Defendant N ace, it can not be said with certainty that no recovery is possible on a contract theory; accordingly, the request for dismissal of this claim will not be granted. Attorney's fees. In Pennsylvania, attorney's fees associated with litigation are recoverable by a successful party only on the basis of (1) the existence of a clear agreement between the parties providing for their recovery, (2) express statutory authorization, or (3) some otherwise established exception. Merlino v. Delaware County, 556 Pa. 422, 425, 728 A.2d 949, 951 (1999). Although statutory authority exists for a recovery of attorney's fees under Pennsylvania's Unfair Trade Practices and Consumer Protection Law,50 such an award is not authorized for other claims in Plaintiffs' complaint where they seem to be requested, and the request for this form of relief as to those claims will accordingly be stricken. Punitive Damages. Punitive damages, as a general rule, are not recoverable for breach of contract. Thorsen v. Iron and Glass Bank, 328 Pa. Super. 135,143, 476 A.2d 928, 932 (1984). Nor is there an independent cause of action for punitive damages. Kirkbride v. Lisbon Contractors, Inc., 521 Pa. 97, 101, 555 A.2d 800, 802 (1989); Cumberland County Children & Youth Services, 802 A.2d 1239, 1252 (Pa. Commw. 2003). Accordingly, Plaintiffs' independently-stated claim for punitive damages will be dismissed, and Plaintiffs' demands for punitive damages as they relate to their breach of contract claims will be stricken. Negligent or Intentional Infliction of Emotional Distress. Section 313 of the Restatement (Second) of Torts provides, in pertinent part, as follows: (1) If [an] actor unintentionally causes emotional distress to another, he is subject to liability to the other for resulting illness or bodily harm if the actor (a) should have realized that his conduct involved an umeasonable risk of causing the distress, otherwise than by knowledge of the harm or peril of a third person, and 50 See 73 P.S. ~ 201-9.2(a). 9 (b) from facts known to him should have realized the distress, if it were caused, might result in illness or bodily harm. (2) The rule stated in Subsection (1) has no application to illness or bodily harm of another which is caused by emotional distress arising solely from harm or peril to a third person, unless the negligence of the actor has otherwise created an umeasonable risk of bodily harm to the other. It is apparent that an essential element of any claim for negligent infliction of emotional distress is negligence. Brown v. Philadelphia College of Osteopathic Medicine, 760 A.2d 863, 868 (Pa. Super. 2000). Such negligence is conduct that "violat[ es] a duty of care designed to protect another from a fright or other emotional disturbance which the actor should recognize as involving an umeasonable risk of bodily harm. . .." Restatement (Second) of Restatement of Torts, 9346(1); see Crivellaro v. Pennsylvania Power & Light Co., 341 Pa. Super. 173, 178, 491 A.2d 207, 209 (1985). In the case sub judice, while it may be argued that Defendants violated a duty toward Plaintiffs by the commission of fraud, breach of contract, or other economic wrong, the aspect of an umeasonable risk of bodily harm characteristic of negligent infliction of emotional distress cases is not present. For this reason, Defendants' preliminary objection to this claim will be granted. The type of outrageous or extreme conduct requisite for a claim of intentional infliction of emotional distress is conduct that exceeds "all possible bounds of decency, and [is] regarded as atrocious, and utterly intolerable in a civilized society." Hoy v. Angelone, 554 Pa.. 134, 151, 720 A.2d 745, 754 (1998). In this regard, it has been observed that [i]t has not been enough that the defendant has acted with intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by "malice," or a degree of aggravation that would entitle the plaintiff to punitive damages for another tort. Id 10 In the present case, the alleged perpetration of an economic fraud upon Plaintiffs, in the form and of the magnitude asserted, does not rise to the level of conduct fairly described as exceeding "all possible bounds of decency" and "utterly intolerable in a civilized society." Accordingly, Plaintiffs' claim for intentional infliction of emotional distress will also be dismissed. "Personal injury" claim. "Personal injury" may be a compensable item of damage with respect to a given cause of action, but, like punitive damages, it is not itself an independent cause of action. F or this reason, Plaintiffs' count for "personal injury" will be dismissed. Alleged violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law. Under Section 9.2(a) of Pennsylvania's Unfair Trade Practices and Consumer Protection Law, the circumstances under which a private action may be brought for a violation of the act are limited as follows: 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 or one hundred dollars ($100), whichever is greater. . .. The court may award to plaintiff, in addition to other relief provided in this section, costs and reasonable .c 51 attorney ~ees. Pennsylvania's Unfair Trade Practices and Consumer Protection Law is intended, as the name suggests, to be protective in nature. Limiting its application in an overly restrictive way is not to be encouraged. Valley Forge Towers South Condominium v. Ron-Ike Roam Insulators, Inc., 393 Pa. Super. 339, 345, 574 A.2d 641, 646 (1990). In the present case, it would be premature to conclude that the transactions of which Plaintiffs complain, arising out of a purchase of land intended, in part, 5173 P.S. ~ 201-9.2(a). 11 for a personal residence, were not entered into by Plaintiffs primarily for personal family or household purposes. For this reason, Defendants' preliminary objection to Plaintiffs' claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law will be denied. Alleged violation of federal Real Estate Settlement Procedures Act. The federal Real Estate Settlement Procedures Act is intended, inter alia, to effect "significant reforms in the real estate settlement process... to insure that consumers through the Nation are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country." 12 U.S.C. s2601(a). The act prohibits various practices, 52 and has reference to "federally related mortgage loans"53 and "settlement services,,,54 both of which are broadly defined. 55 The act does not apply to loans "primarily for business. ,,56 In the present case, Plaintiffs' complaint alleges generally that their claim against Defendants is encompassed by this federal law. 57 The particulars of this contention, with respect to the statutory areas raised by Defendants in their preliminary objections, are neither confirmed nor refuted by more specific allegations of the pleading. As a result, it can not be said at this point, with certainty, that no recovery by Plaintiffs is possible on their federal claim. For this reason Defendants' demurrer to the claim will not be granted. 58 52 See e.g., 12 U.S.c. ~~ 2603, 2607. 5324 CFR ~3500.5(a); 12 U.S.c. 2601(1). 54 12 USC 2602(3). 55 See eg., 12 U.S.c. ~~ 2603, 2607. 5624 CFR 2500.5(b)(2); 12 CFR 226.3(a). 57 Complaint, para. 146-52. 58 A demurrer is not, of course, a substitute for a motion for a more specific pleading. Cf McNally v. Eynoyer, 1 Pa. D. & C.4th 372,375 (Lancaster Co. 1988); see also Goodrich Amram 2d 1017(b): 12, at 256 (1991). 12 Dissolution of parties' marrzage. Plaintiffs' response in their brief to Defendants' preliminary objection to a reference in Plaintiffs' complaint to the dissolution of Plaintiffs' marriage is that it represents a mere pleading of evidence as opposed to a demand for relief for alienation of affections. 59 It is well settled, however, that "evidence from which material facts may be inferred should not be alleged in a pleading." 2 Goodrich Amram 2d s1019(a):6, at 257 (2001) (citations omitted). Accordingly, this "evidentiary" reference will be stricken. F or the foregoing reasons, the following order will be entered. ORDER OF COURT AND NOW, this 3rd day of August, 2006, upon consideration of Defendants' preliminary objections to Plaintiffs' complaint, and for the reasons stated in the accompanying opinion, it is ordered and directed as follows: 1. Plaintiffs' requests for attorney's fees are stricken with the exception of the request contained in Count VII (claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law); 2. Count II (breach of contract) IS dismissed as to Defendant EK Ventures, Inc.; 3. The demand for punitive damages in Count II (breach of contract) is stricken; 4. Count V (claim for "personal injury") is dismissed; 5. Count VI (claim for punitive damages) is dismissed; 6. The reference to the Plaintiffs' divorce is stricken; and 7. In all other respects, Defendant's preliminary objections are denied. 59 Brief in Opposition to Defendants' Preliminary Objections, submitted May 12,2006, at 17-19. 13 BY THE COURT, s/ 1. Wesley Oler, Jr. 1. Wesley Oler, Jr., 1. Richard P. Mislitsky, Esq. One West High Street P.O. Box 1290 Carlisle, P A 17013 Attorney for Plaintiffs Jonathan H. Rudd, Esq. 100 Pine Street P.O. Box 1166 Harrisburg, P A 17108-1166 Attorney for Defendants 14 15 MICHAEL DUBAICH And TARA DAWN HAZEN, Plaintiffs IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA v. CIVIL ACTION - LAW RE/MAX REALTY ASSOCIATES, INC., KIRK L. NACE, and EK VENTURES, INC., Defendants NO. 04-4173 CIVIL TERM IN RE: DEFENDANTS' PRELIMINARY OBJECTIONS TO PLAINTIFFS' COMPLAINT BEFORE HESS, OLER and EBERT, JJ. ORDER OF COURT AND NOW, this 3rd day of August, 2006, upon consideration of Defendants' preliminary objections to Plaintiffs' complaint, and for the reasons stated in the accompanying opinion, it is ordered and directed as follows: 1. Plaintiffs' requests for attorney's fees are stricken with the exception of the request contained in Count VII (claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law); 2. Count II (breach of contract) IS dismissed as to Defendant EK Ventures, Inc.; 3. The demand for punitive damages in Count II (breach of contract) is stricken; 4. Count V (claim for "personal injury") is dismissed; 5. Count VI (claim for punitive damages) is dismissed; 6. The reference to the Plaintiffs' divorce is stricken; and 7. In all other respects, Defendant's preliminary objections are denied. BY THE COURT, 1. Wesley Oler, Jr., 1. Richard P. Mislitsky, Esq. One West High Street P.O. Box 1290 Carlisle, P A 17013 Attorney for Plaintiffs Jonathan H. Rudd, Esq. 100 Pine Street P.O. Box 1166 Harrisburg, P A 17108-1166 Attorney for Defendants