Rearick, M. v. Elderton State
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Opinion
J-A27024-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MARK A. REARICK, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
v.
ELDERTON STATE BANK,
Appellee No. 1769 WDA 2014
Appeal from the Order Entered October 24, 2014 In the Court of Common Pleas of Armstrong County Civil Division at No(s): 1615-2012
MARK A. REARICK, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
Appellee No. 1770 WDA 2014
Appeal from the Order Entered September 24, 2014 In the Court of Common Pleas of Armstrong County Civil Division at No(s): 1615-2012
BEFORE: BOWES, OLSON & STABILE, JJ.
MEMORANDUM BY OLSON, J.: FILED NOVEMBER 19, 2015
Appellant, Mark A. Rearick, appeals from the orders entered on
September 24, 2014 and October 24, 2014, sustaining preliminary
objections complaint filed by Elderton State Bank (ESB) and dismissing
Appellant’s complaint. Upon review, we affirm. J-A27024-15
We briefly set forth the facts and procedural history of this case as
follows.1 This case concerns the development of a commercial real estate
venture, generally referred to as the Saltwork Project, in Elderton,
Pennsylvania. In 2006, Appellant secured a $205,000.00 loan from ESB,
secured by the property and guaranteed by Appellant. In July 2007, ESB
loaned Appellant an additional $443,000.00 to begin construction. Appellant
and ESB agreed to expand the Saltwork Project from approximately 11,000
square feet of rental space to just under 16,000 square feet. In January
2008, ESB agreed to lend Appellant a total of $1,200,000.00 and Appellant
secured the loan with several unrelated residential properties. Appellant
transferred these properties to ESB via deeds in lieu of foreclosure.2 By the
end of 2008, the Saltwork Project was two-thirds completed when Appellant
requested another $1,000,000.00 to finish construction. ESB would not lend
additional funds because Appellant had received the bank’s maximum credit
limit. In October 2008, ESB recommended an investor, Tom Smith, to
Appellant. Smith loaned Appellant $875,000.00 and the Saltwork Project
was completed.
____________________________________________
1 A more detailed account of this case may be found in this Court’s prior memorandum filed on July 23, 2014. See Rearick v. Elderton State Bank, 2014 Pa. Super. 157. 2 Appellant owned another residential property that he also used to secure the loans for the Saltwork Project. However, this property was not transferred through deeds in lieu of foreclosure. As discussed infra, ESB later filed a complaint against Appellant to foreclosure on this property.
-2- J-A27024-15
In September 2009, Appellant defaulted on his loans citing poor
economic conditions and low rental rates. Prior to default, however, on June
1, 2009, ESB executed the deeds in lieu of foreclosure on the residential
properties used by Appellant to secure the Saltwork Project loan. In
October 2010, Smith purchased the Saltwork Project at auction for
$450,000.00; the Saltwork Project was appraised at approximately
$1,450,000.00. Thereafter, in January 2011, ESB filed an action in
mortgage foreclosure on the residential property owned by Appellant, used
to secure the ESB loan, which was not one of the properties transferred
through deeds in lieu of foreclosure. In June 2012, the trial court granted
summary judgment for ESB in the mortgage foreclosure action. Appellant
did not appeal that decision.
On October 24, 2012, Appellant filed a complaint against ESB, alleging
claims for breach of the implied covenant of good faith and fair dealing,
breach of fiduciary duty, alter ego, and negligence. On December 13, 2012,
ESB filed preliminary objections to the complaint. In particular, ESB
demurred based on res judicata on the theory that Appellant should have
raised his claims in the earlier foreclosure action. The trial court agreed and
sustained ESB’s preliminary objection on res judicata grounds, concluding
that the substance of Appellant’s claims could, and therefore should, have
been raised in the earlier foreclosure action. The trial court dismissed ESB’s
remaining preliminary objections as moot. On appeal, after a lengthy
discussion regarding permissive counterclaims in a mortgage foreclosure
-3- J-A27024-15
action, we remanded the matter for the trial court to rule on Appellant’s
remaining preliminary objections or to allow Appellant to amend his
complaint.
On September 24, 2014, by order and accompanying opinion, the trial
court sustained ESB’s remaining preliminary objections and dismissed
Appellant’s complaint. On October 14, 2014, without leave of court,
Appellant filed an amended complaint. He then filed a motion for leave of
court and an amended complaint on October 24, 2014. The trial court
entered an order on October 24, 2014 denying Appellant’s request for leave
to file an amended complaint. This timely appeal followed.3
On appeal, Appellant presents the following issues for our review:
1. Whether the trial court erred when it, after sustaining ESB’s preliminary objections and dismissing [Appellant’s]
3 On October 24, 2014, Appellant filed a notice of appeal from the order entered on September 24, 2014 granting ESB’s preliminary objections and dismissing Appellant’s complaint. On that same date, Appellant also filed a notice of appeal from the order entered on October 24, 2014, denying Appellant’s motion to amend his complaint. On October 27, 2014, the trial court ordered Appellant to file a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b) for both matters. On November 14, 2014, Appellant filed separate Rule 1925(b) statements. The trial court issued an opinion pursuant to Pa.R.A.P. 1925(a) on December 11, 2014. In that opinion, the trial court addressed the issues pertaining to Appellant’s request to amend his complaint and relied upon its earlier decision, issued on September 24, 2014, for its rationale in sustaining preliminary objections and dismissing Appellant’s complaint. Appellant terms the instant proceedings as “consolidated appeals.” In fact, Appellant simply challenges two separate orders in the same case. Accordingly, we refer to these proceedings as a single appeal.
-4- J-A27024-15
[c]omplaint, did not allow [Appellant] to amend the [c]omplaint.
2. Whether the trial court erred when it denied [Appellant’s] request to file an amended complaint.
3. Whether in the course of disposing of ESB’s preliminary objections to count I of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that ESB owed [Appellant] a duty of good faith and fair dealing.
4. Whether in the course of disposing of ESB’s preliminary objections to count I of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that ESB could have breached a duty of good faith and fair dealing that it owed to [Appellant].
5. Whether in the course of disposing of ESB’s preliminary objections to count II of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that ESB owed [Appellant] a fiduciary duty.
6.
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J-A27024-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MARK A. REARICK, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
v.
ELDERTON STATE BANK,
Appellee No. 1769 WDA 2014
Appeal from the Order Entered October 24, 2014 In the Court of Common Pleas of Armstrong County Civil Division at No(s): 1615-2012
MARK A. REARICK, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
Appellee No. 1770 WDA 2014
Appeal from the Order Entered September 24, 2014 In the Court of Common Pleas of Armstrong County Civil Division at No(s): 1615-2012
BEFORE: BOWES, OLSON & STABILE, JJ.
MEMORANDUM BY OLSON, J.: FILED NOVEMBER 19, 2015
Appellant, Mark A. Rearick, appeals from the orders entered on
September 24, 2014 and October 24, 2014, sustaining preliminary
objections complaint filed by Elderton State Bank (ESB) and dismissing
Appellant’s complaint. Upon review, we affirm. J-A27024-15
We briefly set forth the facts and procedural history of this case as
follows.1 This case concerns the development of a commercial real estate
venture, generally referred to as the Saltwork Project, in Elderton,
Pennsylvania. In 2006, Appellant secured a $205,000.00 loan from ESB,
secured by the property and guaranteed by Appellant. In July 2007, ESB
loaned Appellant an additional $443,000.00 to begin construction. Appellant
and ESB agreed to expand the Saltwork Project from approximately 11,000
square feet of rental space to just under 16,000 square feet. In January
2008, ESB agreed to lend Appellant a total of $1,200,000.00 and Appellant
secured the loan with several unrelated residential properties. Appellant
transferred these properties to ESB via deeds in lieu of foreclosure.2 By the
end of 2008, the Saltwork Project was two-thirds completed when Appellant
requested another $1,000,000.00 to finish construction. ESB would not lend
additional funds because Appellant had received the bank’s maximum credit
limit. In October 2008, ESB recommended an investor, Tom Smith, to
Appellant. Smith loaned Appellant $875,000.00 and the Saltwork Project
was completed.
____________________________________________
1 A more detailed account of this case may be found in this Court’s prior memorandum filed on July 23, 2014. See Rearick v. Elderton State Bank, 2014 Pa. Super. 157. 2 Appellant owned another residential property that he also used to secure the loans for the Saltwork Project. However, this property was not transferred through deeds in lieu of foreclosure. As discussed infra, ESB later filed a complaint against Appellant to foreclosure on this property.
-2- J-A27024-15
In September 2009, Appellant defaulted on his loans citing poor
economic conditions and low rental rates. Prior to default, however, on June
1, 2009, ESB executed the deeds in lieu of foreclosure on the residential
properties used by Appellant to secure the Saltwork Project loan. In
October 2010, Smith purchased the Saltwork Project at auction for
$450,000.00; the Saltwork Project was appraised at approximately
$1,450,000.00. Thereafter, in January 2011, ESB filed an action in
mortgage foreclosure on the residential property owned by Appellant, used
to secure the ESB loan, which was not one of the properties transferred
through deeds in lieu of foreclosure. In June 2012, the trial court granted
summary judgment for ESB in the mortgage foreclosure action. Appellant
did not appeal that decision.
On October 24, 2012, Appellant filed a complaint against ESB, alleging
claims for breach of the implied covenant of good faith and fair dealing,
breach of fiduciary duty, alter ego, and negligence. On December 13, 2012,
ESB filed preliminary objections to the complaint. In particular, ESB
demurred based on res judicata on the theory that Appellant should have
raised his claims in the earlier foreclosure action. The trial court agreed and
sustained ESB’s preliminary objection on res judicata grounds, concluding
that the substance of Appellant’s claims could, and therefore should, have
been raised in the earlier foreclosure action. The trial court dismissed ESB’s
remaining preliminary objections as moot. On appeal, after a lengthy
discussion regarding permissive counterclaims in a mortgage foreclosure
-3- J-A27024-15
action, we remanded the matter for the trial court to rule on Appellant’s
remaining preliminary objections or to allow Appellant to amend his
complaint.
On September 24, 2014, by order and accompanying opinion, the trial
court sustained ESB’s remaining preliminary objections and dismissed
Appellant’s complaint. On October 14, 2014, without leave of court,
Appellant filed an amended complaint. He then filed a motion for leave of
court and an amended complaint on October 24, 2014. The trial court
entered an order on October 24, 2014 denying Appellant’s request for leave
to file an amended complaint. This timely appeal followed.3
On appeal, Appellant presents the following issues for our review:
1. Whether the trial court erred when it, after sustaining ESB’s preliminary objections and dismissing [Appellant’s]
3 On October 24, 2014, Appellant filed a notice of appeal from the order entered on September 24, 2014 granting ESB’s preliminary objections and dismissing Appellant’s complaint. On that same date, Appellant also filed a notice of appeal from the order entered on October 24, 2014, denying Appellant’s motion to amend his complaint. On October 27, 2014, the trial court ordered Appellant to file a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b) for both matters. On November 14, 2014, Appellant filed separate Rule 1925(b) statements. The trial court issued an opinion pursuant to Pa.R.A.P. 1925(a) on December 11, 2014. In that opinion, the trial court addressed the issues pertaining to Appellant’s request to amend his complaint and relied upon its earlier decision, issued on September 24, 2014, for its rationale in sustaining preliminary objections and dismissing Appellant’s complaint. Appellant terms the instant proceedings as “consolidated appeals.” In fact, Appellant simply challenges two separate orders in the same case. Accordingly, we refer to these proceedings as a single appeal.
-4- J-A27024-15
[c]omplaint, did not allow [Appellant] to amend the [c]omplaint.
2. Whether the trial court erred when it denied [Appellant’s] request to file an amended complaint.
3. Whether in the course of disposing of ESB’s preliminary objections to count I of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that ESB owed [Appellant] a duty of good faith and fair dealing.
4. Whether in the course of disposing of ESB’s preliminary objections to count I of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that ESB could have breached a duty of good faith and fair dealing that it owed to [Appellant].
5. Whether in the course of disposing of ESB’s preliminary objections to count II of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that ESB owed [Appellant] a fiduciary duty.
6. Whether in the course of disposing of ESB’s preliminary objections to count II of [Appellant’s] [c]omplaint, the trial court erred when it determined that for [Appellant] to advance a cause of action for breach of fiduciary duty, [Appellant] must plead facts sufficient to prove that Thomas Smith was ESB’s agent, expressly or implicitly authorized to make decisions and take actions binding on ESB.
7. Whether in the course of disposing of ESB’s preliminary objections to count II of [Appellant’s] [c]omplaint, the trial court erred when it determined that [Appellant] failed to plead facts sufficient to establish that Thomas Smith was ESB’s agent, expressly or implicitly authorized to make decisions and take actions binding on ESB.
8. Whether in the course of disposing of ESB’s preliminary objections to count III of [Appellant’s] [c]omplaint, the
-5- J-A27024-15
trial court erred in determining that the alter ego theory of liability is inapplicable to this case.
9. Whether in the course of disposing of ESB’s preliminary objection to count III of [Appellant’s] [c]omplaint, the trial court erred in determining that [Appellant] did not plead facts sufficient to establish a prima facie case for alter ego liability.
10. Whether in the course of disposing of ESB’s preliminary objections to count IV of [Appellant’s] [c]omplaint, the trial court erred in determining that [Appellant’s] claim for negligence is barred by the economic loss doctrine.
11. Whether in the course of disposing of ESB’s preliminary objections to count IV of [Appellant’s] [c]omplaint, the trial court erred in determining that [Appellant] did not plead facts sufficient to establish a prima facie case for negligence.
Appellant’s Brief at 4-5.
Our review of a challenge to a trial court's decision to sustain
preliminary objections is guided by the following standard:
Our standard of review of an order of the trial court overruling or [sustaining] preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer test the legal sufficiency of the complaint. When considering preliminary objections, all material facts set forth in the challenged pleadings are admitted as true, as well as all inferences reasonably deducible therefrom. Preliminary objections which seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally sufficient to establish the right to relief. If any doubt exists as to whether a demurrer should be sustained,
-6- J-A27024-15
it should be resolved in favor of overruling the preliminary objections.
Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011) (citation
omitted).
We have reviewed the certified record, the parties’ briefs, the relevant
law, and the trial court’s opinion entered on September 24, 2014. That
opinion thoroughly and accurately disposes of Appellant’s issues regarding
ESB’s preliminary objections. Thus, we adopt that decision as our own. We
briefly recount the trial court’s determinations here.
First, the trial court determined Appellant failed to present sufficient
allegations of fact to establish a claim for breach of the contractual duty of
good faith and fair dealing, relying upon this Court’s decisions in Creeger
Brick & Bldg. Supply Inc. v. Mid-State Bank & Trust Co., 560 A.2d 151,
153 (Pa. Super. 1989) and Cable & Associates Ins. Agency, Inc. v.
Commercial Nat. Bank of Pennsylvania, 875 A.2d 361, 362 (Pa. Super.
2005). The trial court noted that Appellant did not aver ESB violated the
terms of any executed loan documents, made specific misrepresentations, or
committed fraud. Moreover, the trial court determined that Appellant, not
ESB, decided to expand the Saltwork Project and requested additional
funding. Additionally, the trial court opined Appellant failed to set forth facts
that gave rise to ESB’s independent duty of good faith, based solely upon
Appellant’s unsubstantiated allegation that his family had done business with
ESB for more than 50 years. Thus, the trial court determined Appellant had
not set forth a viable claim for breach of the contractual duty of good faith
-7- J-A27024-15
and fair dealing as a matter of law and sustained ESB’s demurrer on this
count of Appellant’s complaint. We discern no legal error or abuse of
discretion.
Next, the trial court examined ESB’s preliminary objection to
Appellant’s breach of fiduciary claim. The trial court determined Appellant
failed to present facts showing that ESB directly controlled Appellant’s
business decisions or managed the funds used to finance the construction of
the Saltwork Project. It further concluded Appellant failed to plead facts
sufficient to establish an agency relationship between ESB and Smith.
Instead, Appellant only alleged that Smith acted as an independent investor
who rendered opinions regarding construction and possible tenants. The
trial court found there was no indication that ESB or Smith managed the
daily operations of the Saltwork Project. Thus, the trial court sustained
ESB’s demurrer to Appellant’s breach of fiduciary claim. Again, we discern
no error of law or abuse of discretion.
Regarding negligence, the trial court concluded Appellant’s claim was
barred by the economic loss doctrine, because no cause of action exists for
negligence that results solely in economic damages unaccompanied by
physical injury or property damage. Here, Appellant’s alleged damages
included only the loss of his economic investment in property. Moreover,
citing our decision on remand, the trial court held that Appellant’s claim that
ESB frivolously sold off Appellant’s properties, or that Smith subsequently
acquired properties improperly, should have been raised during the
-8- J-A27024-15
mortgage foreclosure action. Thus, the trial court determined Appellant’s
negligence claim was barred by the economic loss doctrine. We agree.
Finally, with regard to Appellant’s alter ego claim, the trial court found
that the claim was largely duplicative of Appellant’s fiduciary duty claim.
Moreover, it noted the alter ego theory is a means of piercing the corporate
veil and assessing liability for the acts of a corporation against an equity
holder in the corporation. The trial court opined that there were no
allegations that Appellant or the Saltwork Project were themselves corporate
entities or that Appellant claimed that ESB shareholders were responsible for
his damages. Thus, the trial court sustained ESB’s preliminary objection in
the nature of a demurrer to Appellant’s claim under the alter ego theory of
liability. Again, we discern no abuse of discretion or error of law.
We turn, now, to Appellant’s claims regarding the trial court’s denial of
his request to file an amended complaint. Recently, our Court has stated:
Even where a trial court sustains preliminary objections on their merits, it is generally an abuse of discretion to dismiss a complaint without leave to amend. There may, of course, be cases where it is clear that amendment is impossible and where to extend leave to amend would be futile.... However, the right to amend should not be withheld where there is some reasonable possibility that amendment can be accomplished successfully. In the event a demurrer is sustained because a complaint is defective in stating a cause of action, if it is evident that the pleading can be cured by amendment, a court may not enter a final judgment, but must give the pleader an opportunity to file an amended pleading....
Nevertheless, a defective pleading that cannot be cured by amendment is appropriately dismissed upon a demurrer.
-9- J-A27024-15
Juszczyszyn v. Taiwo, 113 A.3d 853, 856 (Pa. Super. 2015) (internal
citations omitted).
Here, in its December 11, 2014 opinion, the trial court determined
Appellant was not entitled to amend his complaint. First, the trial court
deduced that Appellant did not request leave of court prior to filing his first
amended complaint. Pursuant to Pa.R.Civ.P. 1028(e), the trial court
concluded that Appellant failed to file a motion for leave within 20 days of
the order dismissing his complaint and, thus, his request to amend was
untimely. The trial court further declared Appellant never presented a
proper and timely filed motion for leave. Instead, without advance notice,
Appellant presented a single motion to file the prior amended complaint at
the same time he filed a second amended complaint. Finally, and most
importantly, the trial court stated that on October 24, 2014, at motions
court, Appellant’s counsel specifically requested, with Appellant’s express
written consent, that the trial court deny the motion to amend. Thus, the
trial court concluded that Appellant could hardly complain about the entry of
an order that was requested and to which he consented. In sum, the trial
court concluded Appellant’s motion to amend his complaint was untimely,
procedurally defective, and denied at Appellant’s request with his express
consent. Upon review, we agree.
Therefore, we conclude there has been no error or abuse of discretion
in this case and that the trial court’s September 24, 2014 and December 11,
2014 opinions meticulously, thoroughly, and accurately dispose of
- 10 - J-A27024-15
Appellant’s issues on appeal. Therefore, we affirm on the basis of the trial
court’s opinions and adopt them as our own. Because we have adopted the
trial court’s opinions, we direct the parties to include the trial court’s
opinions in all future filings relating to our examination of the merits of this
appeal, as expressed herein.
Orders affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 11/19/2015
- 11 - Circulated 10/29/2015 01:27 PM
IN THE COURT OF COMMON PLEAS OF ARMSTRONG COUNTY, PENNSYLVANIA
MARK A. REARICK, Plaintiff,
vs. No. 2012-1615-CIVIL ELDERTON STATE BANK, Defendant.
MEMORANDUM Panchik, J.
Before the Court for disposition are the Preliminary
Objections filed by Defendant Elderton State Bank ("Defendantn
or "ESB") to the Complaint filed by Plaintiff Mark A. Rearick
{"Plaintiff" or "Rearick"). The Court originally held argument
on the preliminary objections on February 28, 2013. We then
entered a Memorandum and Order on May 9, 2013, sustaining ESB's
preliminary objection based on the doctrine of res judicata and
dismissing the remaining objections as moot. Rearick appealed
the Court's decision to the Superior Court, which reversed the
Court's decision on the res judicata issue. The Superior Court
directed that on remand this Court could either rule on ESB's
remaining preliminary objections or permit Rearick to amend his
complaint. Pursuant to the Superior Court's directives, we
herein rule on ESB's remaining objections. Circulated 10/29/2015 01:27 PM
Rearick v. Elderton State Bank No. 2012-1615-Civil
I. STANDARD OF REVIEW
In deciding preliminary objections in the nature of a
demurrer, we determine the legal sufficiency of the complaint.
Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. super. Ct. 2011}.
We accept as true all well-pleaded material facts set forth in
the complaint as well as all inferences reasonably induced
therefrom. However, we need not accept as true conclusions of
law, unwarranted inferences, allegations, or expressions of
opinion. Bayada Nurses, Inc. v. Comm., Dep't of Labor and
Industry, 8 A.3d 866, 884 (Pa. 2010}. Preliminary objections
should be sustained "only in cases in which it is clear and free
from doubt that the pleader will be unable to prove facts
legally sufficient to establish the right to relief." Feingold,
15 A.3d at 941. We consider the preliminary objections mindful
of a complaint's purpose: to "apprise the defendant of the
nature and extent of the plaintiff's claim so that the defendant
has notice of what the plaintiff intends to prove at trial and
may prepare to meet such proof with his own evidence." Weiss v.
Equibank, 460 A.2d 271, 274-75 (Pa. Super. Ct. 1983). Any
doubts regarding whether a demurrer should be sustained should
be resolved in favor of overruling it. Employers Ins. of Wausau
v. PennDOT, 865 A.2d 825, 830 n. 5 (Pa. 2005}.
2 Circulated 10/29/2015 01:27 PM
II. RELEVANT FACTUAL ALLEGATIONS
We accept as true the following material allegations of
fact pled in Rearick's complaint. We do not accept as true any
legal conclusions, unwarranted inferences, or expressions of
opinion.
In 2006, Rearick developed a plan to purchase an abandoned
commercial building in Elderton, Pennsylvania, and renovate it
to house retail and office space. In the Fall of 2006, Rearick
approached ESB, with whom his family had a long-standing
relationship of more than fifty years, to secure funding for
what came to be known as the "Saltwork Project.n On July 25,
2006, Rearick requested a $205,000,000 loan from ESB to purchase
the Saltwork Project property and to begin preparation work for
the development of the site. Rearick asked ESB whether it was
interested in participating in the United States Department of
Agriculture's Business and Industry Guaranteed Loan Program
("Loan Program"), pursuant to which the Department of
Agriculture would guarantee 80 percent of a bank's investment in
an approved development project. Rearick believed that ESB's
participation in the program would benefit all parties involved.
ESB was not interested in the Loan Program. Instead, ESB made a
loan to Rearick in the amount of $205,000.00, secured by the
Saltwork Project property and by a guaranty from Rearick.
3 Circulated 10/29/2015 01:27 PM
On July 17, 2007, ESB loaned Rearick an additional
$443,000.00 to begin construction at the Saltwork Project, which
at that point totaled 10,927 square feet. ESB previously had
approved the construction plans. Rearick then, with ESB's
approval, expanded the Saltwork Project from 10,927 square feet
first to 15,383 square feet and ultimately to 15,973 square
feet. To cover the construction costs for the increased space,
in January 2008, ESB increased the loan toiRearick to a total of
$1.2 million. Rearick secured the additional debt using several
of residential properties that were not part of the Saltwork
Project. By late 2008, the Saltwork Project was only 66 percent
completed, and Rearick needed another $1 million to complete
construction. However, ESB informed Rearick that it could not
increase the loan any further because it had reached its
internal limit for credit that could be extended to any single
borrower. ESB informed Rearick that he would have to secure
funding from another source.
On October 16, 2008, at ESB's request, an individual named
Tom Smith became an investor in the Saltwork Project. At the
time, Smith was an ESB shareholder. ESB had approached him
earlier about investing in the Project, but he had not been
interested. This time, however, he agreed. Smith loaned
Rearick a total of $875,000.00 that ESB agreed would be paid
back in full. Using these funds, the Saltwork Project was
4 Circulated 10/29/2015 01:27 PM
Rearick v. Blderton State Bank No. 2012-1615-Civil
completed. During the final planning and construction of the
Project, Smith controlled the Project in that he made decisions
relating to construction, build-out, and tenant selection. ESB
secured a guaranty from the Department of Agriculture's Loan
Program to ensure that Smith's investment would be repaid. The
guarantee amounted to 90 percent (90%) of the total debt used to
fund the Saltwork Project.
On May 8, 2009, Rearick and his real estate company, MKR
Rentals, Inc., executed loan documents pursuant to which they
agreed to pay ESB the principal sum of $3,415,000.00, secured by
the Saltwork Project and the additional properties owned by
Rearick. Because of its guaranty from the Loan Program, ESB's
outstanding risk exposure regarding the debt was approximately
$340,000.00, or about 10 percent of Rearick's total debt. In
September 2009, amid slow economic conditions and lower-than-
expected rental rates, Rearick defaulted on the loan.
Rearick initially approached ESB about utilizing $800,000
in tax credits to ease some of his debt burden, but ESB instead
directed Rearick to sell his rental properties. One month
later, ESB accelerated the loan, making the entire balance due
and payable immediately. On June 1, 2009, apparently prior to
Rearick's default, ESB executed deeds in lieu of foreclosure for
the ten parcels of property that had secured the Saltwork
Project loan, not including the saltwork Project property
5 Circulated 10/29/2015 01:27 PM
itself, which was appraised at approximately $1.45 million. ESB
did not list the properties with a real estate broker. Instead,
it advertised the properties in the local Horse Trader, which is
a weekly advertisement publication. The properties were not
able to be sold at their appraised values. One property, valued
at $450,000.00, ultimately was sold for $46,000.00, despite ESB
having previously received an offer of $360,000.00. The
Saltwork Project property was advertised by an auctioneer hired
by ESB. On October 29, 2010, Smith purchased the Saltwork
Project property for $450,000.
III. PROCEDUREAL HISTORY
ESB ultimately foreclosed on the properties that had
secured the Saltwork Project. This Court entered summary
judgment in ESB's favor on June 11, 2008, at Civil No. 2011-
0984. Rearick subsequently filed the instant action on October
24, 2012. He brings claims for Breach of Contract (Implied
Covenant of Good Faith and Fair Dealing) (Count I), Breach of
Fiduciary Duty (Count II), Alter Ego (Count III), and Negligence
(Count IV). ESB filed preliminary objections challenging all
counts of Rearick's complaint. With the exception of ESB's
first preliminary objection based on res judicata, we rule on
each of the objections as follows.1
1 Because the issue regarding whether ESB used commercially reasonable practices in its attempt to liquidate the properties that secured the Saltwork Project was raised and litigated in the prior mortgage foreclosure
6 Circulated 10/29/2015 01:27 PM
Rearick v. Elderton State Bank No. 2012·1615-Civil
IV. DISCUSSION
1. Preliminary Objection 2 - Demurrer (Count I)
ESB first demurs to Court I of Rearick's complaint for
breach of the contractual duty of good faith and fair dealing.
ESB contends that it did not owe Rearick a duty of good faith
and fair dealing merely because of the parties' lender-borrower
relationship. ESB further argues that even if such a duty did
exist, Rearick has not pled sufficient facts to establish that
it breached such a duty. Rearick counters that a contractual
duty of good faith was implied in the loan documents executed by
the parties and that he has pled facts showing that ESB breached
its duty by maneuvering to protect itself against the
increasingly debt-laden Saltwork Project.
In Creeger Brick and Building Supply, Inc. v. Mid-State
Bank and Trust Co., 560 A.2d 151 (Pa. Super. Ct. 1989), the
Superior Court confronted facts remarkably similar to those in
this case, addressing the issue of "whether a borrower has
stated a legally cognizable cause of action against a lending
institution which, although it has not violated the terms of its
loan agreement, has allegedly failed to deal with its borrower
in good faith." Id. at 152. Because the facts in Creeger are
action, Rearick is precluded in this case from seeking any damages allegedly arising from ESB's conduct in this regard. See Superior Ct. Op. at 21.
7 Circulated 10/29/2015 01:27 PM
so analogous to those alleged in this case, we will discuss
Creeger in some detail.
In Creeger, the plaintiff/appellant borrowers had purchased
a closed, apparently dilapidated factory property with the
intention of rehabilitating it and reopening a brick
manufacturing plant. Id. The project was financed principally
by a loan from the defendant/appellant bank in the amount of
$250,000.00. Id. The Small Business Administration guaranteed
ninety percent (90%} of this loan, which was further secured by
the factory property and additional residential properties owned
by the plaintiff borrowers. The plaintiff borrowers contributed
a substantial sum of their own money to the project, together
with funds that they borrowed from other entities. Id.
The plant initially did not become operational for several
months and was closed for several additional months in the
winter season. Id. at 153. This caused the plaintiffs to
suffer a cash shortage, and so they requested an additional line
of credit from the defendant bank. The bank denied their
request. Id. The plaintiffs then requested that the bank
release one of their residential properties so that it could be
sold for additional funds. The bank ultimately agreed to do so,
but on terms that plaintiffs could not meet. The plaintiffs
ultimately found another lender who was willing to purchase 90%
of the defendant bank's loan and make additional funds available
B Circulated 10/29/2015 01:27 PM
to the plaintiffs. The bank refused to assign the loan and
demanded payment under its guarantee from the Small Business
Administration. The plaintiffs thereafter suffered financial
collapse. Id.
The plaintiff borrowers filed suit against the bank,
alleging that, although it had not breached any specific terms
of the loan agreement with the plaintiffs, it failed to act in
good faith in the following respects: 1) failing to provide a
line of credit to plaintiffs; 2) unreasonably requiring the
plaintiffs to use borrowed funds to buy equipment and make
repairs; 3) failing to release a property from the loan so that
plaintiffs could secure additional capital; 4) failing to
cooperate with the plaintiffs to obtain supplemental financing;
5) over-collateralizing the loan; 6) failing to notify
plaintiffs of its demand for payment on the guarantee from the
Small Business Administration; and 7) taking the position that
the plaintiffs were not able to produce marketable product at
the plant and notifying the plaintiffs' other lenders of that
fact. Id. at 153. The defendant bank filed preliminary
objections to the complaint, demurring to the claim for breach
of the duty of good faith ·on the ground that such an action did
not exist in Pennsylvania. The trial court sustained the
preliminary objections and dismissed the claim. Id. at 152.
9 Circulated 10/29/2015 01:27 PM
On appeal, the Superior Court summarized as follows the law
of good faith as it applies to lender-borrower relationships:
Section 205 of the Restatement (Second) of Contracts suggests that "[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." A similar requirement has been imposed upon contracts within the Uniform commercial Code by 13 Pa.c.s. § 1203. The duty of "good faith" has been defined as "[h]onesty in fact in the conduct or transaction concerned." Where a duty of good faith arises, it arises under the law of contracts, not under the law of torts. In this Commonwealth the duty of good faith has been recognized in limited situations. Most notably, a duty of good faith has been imposed upon franchisors in their dealings with franchisees. It has also been imposed upon the relationship between insurer and insured.
Conversely, the Supreme Court of Pennsylvania has refused to impose a duty of good faith which would modify or defeat the legal rights of a creditor.
It seems reasonably clear from the decided cases that a lending institution does not violate a separate duty of good faith by adhering to its agreement with the borrower or by enforcing its legal and contractual rights as a creditor. The duty of good faith imposed upon contracting parties does not compel a lender to surrender rights which it has been given by statute or by the terms of its contract. Similarly, it cannot be said that a lender has violated a duty of good faith merely because it has negotiated terms of a loan which are favorable to itself. As such, a lender generally is not liable for harm caused to a borrower by refusing to advance additional funds, release collateral, or assist in obtaining additional loans from third persons. A lending institution also is not required to delay attempts to recover from a guarantor after the principal debtor has defaulted. Finally, if the bank in this case falsely represented appellants' financial circumstances to other creditors for the purpose of damaging appellants' ability to continue doing business, appellants may have causes of action in tort for slander, misrepresentation, or
10 Circulated 10/29/2015 01:27 PM
interference with existing or prospective contractual relations. There is no need in such cases to create a separate tort for breach of a duty of good faith.
Creeger, 560 A.2d at 153-54 (internal citations omitted}. Given
the nature of the plaintiffs' allegations, which essentially
claimed that that bank failed to extend them extra credit,
failed to work with them to obtain additional financing
elsewhere, and maneuvered to protect itself against the
plaintiffs' default, the Superior Court agreed with the trial
court that the plaintiffs had failed to plead facts sufficient
- to establish a claim for breach of the duty of good faith and
affirmed the trial court's decision. Id. at 155.
The Superior Court confirmed the Creeger decision in Cable
& Assocs. Ins. Agency, Inc. v. Commercial Nat'l Bank of Pa., 875
A.2d 361 (Pa. Super. Ct. 2005}. In Cable & Associates, the
plaintiff borrower brought claims for "Lender's liability" and
"Bad Faith" against the defendant bank, alleging that the bank
engaged in bad faith when it refused to release certain accounts
receivable from the security on the plaintiff's loan so that it
could obtain additional financing elsewhere. Id. at 362-63.
The plaintiff alleged that the bank intended to transfer the
money received from the accounts to an insurance business in
which it had an interest. Id. at 363. The bank demurred to
both claims, alleging that there existed no duty of good faith
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Rearick v. Elderton State Bank NO, 2012-1615-Civil
in the lender-borrower relationship, Id. The trial court
agreed, and sustained the preliminary objections. Id.
on appeal, the Superior Court, relying on Creeger, noted
that there does not exist a separate duty of good faith between
a borrower and lender outside of the general contractual duty of
good faith inherent in every contract. Id. at 364. But see
Corestates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1059 (Pa.
Super. Ct. 1999) ("due to the longstanding relationship between
the parties in this case, we cannot say that the parties have
not, as a matter of law, developed a relationship wherein the
Bank owes appellant [borrower] a duty of good faithll). The
Court reiterated that "a borrower may plead sufficient facts to
make out a claim that a lender violated its general duty of
1' "good faith" arising out of the law of contracts. Id.
However, the court was careful to note that a borrower must
demonstrate more than the fact that a lender negotiated terms of
a loan favorable to itself, adhered to and enforced its
contractual or statutory rights, or refused to advance
additional funds, release collateral, or assist the borrower in
obtaining additional financing from other lenders. Id. at 364.
The court affirmed the trial court's dismissal of the
plaintiff1s claim, holding that the bank's refusal to release
collateral on the plaintiff's loan was insufficient as a matter
12 Circulated 10/29/2015 01:27 PM
of law to establish a claim for breach of the duty of good
faith. Id. at 365.
Based on our readings of Creeger and Cable & Associates, we
find Count I of Rearick's complaint to be devoid of sufficient
allegations of fact that could establish a claim for breach of
the contractual duty of good faith and fair dealing. Examined
closely, and without regard to the colorful rhetoric and
conclusory allegations regarding ESB's intentions and state of
mind, the complaint indicates that Rearick's claim for breach of
the duty of good faith and fair dealing is based on the
following actions of ESB: 1) encouraging Rearick to expand the
Saltwork Project without sufficient financing; 2) selecting
Smith as an investor in the project and ensuring that the
investment would be repaid using Rearick's payments on the loan;
3) allowing Smith to control the Saltwork Project and make
construction and business decisions to benefit ESB ~nd Smith; 4)
requiring Rearick to increase the amount of his loan to cover
the funds advanced by Smith; 5) overburdening the Saltwork
Project with excessive debt and refusing to restructure the debt
to benefit Rearick; and 6) executing deeds in lieu of
foreclosure and then liquidating the properties in a
commercially unreasonable manner. (Complaint at~~ 26(a)-(f)).
These allegations are insufficient as a matter of law to
establish that ESB breached any general duty of good faith and
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fair dealing implicit in the loan documents. Rearick does not
allege that ESB violated any terms of any of the loan documents
executed among him, ESB, and Smith. Nor does he, outside of
generalized statements about ESB's alleged hidden intent and
scheming, plead that ESB made any specific misrepresentations or
committed any fraud in the parties' business relationship. See
Cable, 875 A.23d at 365 (plaintiff borrower alleging breach of
duty of good faith must "define the issues and every act or
performance essential to that end must be set forth in the
complaint"; plaintiff's complaint must contain facts to support
reasonable inferences as to defendant bank's state of mind or
improper behavior). Further, Rearick's own allegations indicate
that it was Rearick, and not ESB, that decided to expand the
Saltwork Project and request additional funding. The fact that
ESB protected its investment with a guarantee from the United
States Department of Agriculture, refused to directly advance
any further funding to Rearick, and executed loan documents that
protected its interests in the deal cannot form the basis of a
claim for breach of the duty of good faith and fair dealing.
Those facts are almost identical to those in Creeger, where the
Superior Court rejected the plaintiff's claim. It is noteworthy
that Rearick does not discuss the Creeger case anywhere in his
brief, most likely because it is fatal to Count I of his
14 Circulated 10/29/2015 01:27 PM
Rearick relies heavily on the fact that ESB allegedly hand-
picked Smith as an investor in the Saltwork Project. He
contends that ESB, instead of directly loaning more money to
Rearick, found an investor, who also was a shareholder of ESB,
to advance significant additional funds to the Project, to be
repaid via loan payments from Rearick. Pursuant to this
arrangement, Rearick alleges that ESB minimized its risk by
getting a guarantee from the Department of Agriculture (which
Rearick initially suggested) and leaving Rearick with the debt
burden. However, none of those facts, even if proven, could
amount to bad faith. ESB protected itself with the guarantee
and the funds from Smith. It also increased Rearick's debt
load, which would have increased in any event had ESB directly
loaned the funds to Rearick instead of employing an outside
investor. Finally, Rearick alleges that ESB forced the
expansion of the Saltwork Project and Rearick to incur more
debt, and then deviously failed to fund the project to
completion. However, Rearick himself admits in the complaint
that the Project was expanded at his request, that he desired
the additional funds to support the expansion, and that the
Project ultimately was funded to completion. Compare Complaint,
~ 26 with complaint, ~~ 4, 7, 8, 9, 16.
Moreover, we further find that Rearick has failed to plead
any facts to establish a duty of good faith separate and apart Circulated 10/29/2015 01:27 PM
from the general duty of good faith contained in the parties'
loan documents. A plaintiff borrower may establish the
existence of a separate duty of good faith owed by a lender if
it can establish that it and the lender's relationship is
longstanding and of a quality that would give rise to such a
duty. See Cutillo, 723 A.2d at 1059. In the instant case,
Rearick pleads a single allegation that his family and ESB had
been "doing business with ESB for more than 50 years."
(Complaint, ~ 4). He does not, however, allege any facts with
regard to the nature of the relationship, the types of
transactions that were involved, or, most importantly, the
specifics of the relationship between ESB and Rearick himself.
Without more, Rearick has failed to allege any facts that could
give rise to an independent duty of good faith outside of the
loan documents. Compare Cutillo, 723 A.2d at 1059.
In sum, even accepting as true all of the material facts
pled in the complaint, many of which are contradictory, we
cannot glean any set of circumstances that could support a
viable claim for breach of the contractual duty of good faith
and fair dealing. For all these reasons, and based on the
Superior Court's decisions in Creeger and Cable & Associates, we
conclude that Count I of Rearick's complaint fails as a matter
of law and must be dismissed.
16 Circulated 10/29/2015 01:27 PM
2. Preliminary Objection 3 - Failure to Conform (Count I)
ESB next argues that Count I of Rearick's complaint should
be dismissed pursuant to Pa. R. Civ. P. 1028(a) (2) and Pa. R.
Civ. P. 1019(i) because Rearick did not attach to his complaint
the loan documents that form the basis of his breach of contract
claim. Rearick counters that he is not required to attach any
of the loan documents because the breach of contract claim is
based on an \\implied" duty and not on any particular term of the
loan documents. He argues alternatively that he is under no
obligation to attach the loan documents because they are in
ESB's possession.
Rule 1019(i) of the Pennsylvania Rules of Civil Procedure
provides as follows:
(i) When any claim or defense is based upon a writing, the pleader shall attach a copy of the writing, or the material part t·hereof, but if the writing or copy is not accessible to the pleader, it is sufficient so to state, together wit~ the reason, and to set forth the substance in writing.
Pa. R. Civ. P. 1019(i). By its clear language, the Rule
requires a plaintiff to attach to the complaint the writings on
which the claims in the complaint are based. Although this
requirement may be waived or overlooked where the missing
documents are in the possession of the defendant, see 4 Standard
Pa. Prac. 2d § 21:80, Rearick has not argued any viable reason
why the requirement should be waived in this case. He does not
17 Circulated 10/29/2015 01:27 PM
argue that the loan documents are large and cumbersome or that
attaching them would incur significant cost. He further does
not argue that he is not in possession of the loan documents or
that he has demanded a copy from ESB and they were not produced.
Rearick instead merely relies on the fact that ESB is in
possession of the documents, and therefore he should not have to
attach them.
Because Count I of the complaint does not allege a specific
breach of any of the terms of the loan documents, and because
ESB no doubt is in possession of those documents, we will not
dismiss Count I solely on the basis of Rearick's failure to
attach them to the complaint. We note, however, that because
the documents are not attached, their contents do not become a
part of the allegations in the complaint, and we do not have the
benefit of reviewing them to better determine the relationship
between the parties. Nevertheless, we will overrule this
preliminary objection.
3. Preliminary Objection 4 - Demurrer (Count II)
ESB next demurs to Count II of Rearick's complaint for
breach of fiduciary duty. Rearick alleges that ESB owed a
fiduciary duty to Rearick created by ESB's exertion of control
over the Saltwork Project via its "proxy," Smith. ESB contends
that no fiduciary duty existed between ESB and Rearick because
Rearick has not pled facts sufficient to show the requisite
control necessary to create the duty. We agree.
For a fiduciary relationship to exist in a commercial
setting, there must be a special relationship between the
parties involving ~confidentiality, the repose of special trust
or fiduciary responsibilities." eToll, Inc. v. Elias/Savion
Advertising, Inc., 811 A.2d 10, 22 (Pa. Super. Ct. 2002) (citing
Valley Forge Convention & Visitors Bureau v. Visitor's Servs.,
Inc., 28 F. Supp.2d 947, 952-953 (E.D. Pa. 1998)). Such a
relationship "generally involves a situation where by virtue of
the respective strength and weakness of the parties, one has the
power to take advantage of or exercise undue influence over the
other." Id. The critical question is "whether the relationship
goes beyond mere reliance on superior skill, and into a
relationship characterized by 'overmastering influence' on one
side or 'weakness, dependence, or trust, justifiably reposed' on
the other side." eToll, 811 A.2d at 23 (quoting Basile v. H & R
Block, 777 A.2d 95, 101 (Pa. Super. Ct. 2001)).
Ordinarily, the relationship between a lender and a
borrower is contractual in nature and does not give rise to a
confidential relationship. See Fed. Land Bank of Baltimore v.
Fetner, 410 A.2d 344, 348 (Pa. Super. Ct. 1979); Buczek v. First
Nat'] Bank, 531 A.2d 1122, 1124 (Pa. Super. Ct. 1987); Temp-Way
Corp. v. Continental Bank, 139 B.R. 299, 318 (E.D. Pa. 1992).
19 Circulated 10/29/2015 01:27 PM
However, the ordinary lender-borrower relationship may be
transformed into a special or fiduciary relationship if the
lender gains substantial control over the borrower's business
affairs. Stainton v. Tarantino, 637 F. Supp. 1051, 1066 (E.D.
Pa. 1986) "Control over the borrower is demonstrated when
there is evidence that the lender was involved in the actual
day-to-day management and operations of the borrower or that the
lender had the ability to compel the borrower to engage in
unusual transactions." Temp-Way, 139 B.R. at 318. Generally,
courts have required a strong showing of control to establish a
fiduciary relationship. Blue Line Coal Co., Inc. v. Equibank,
683 F. Supp. 493, 496 (E.D. Pa. 1988). A lender's actions in
monitoring the borrower's operations, proffering of management
advice, or taking measures to minimize risk do not constitute
sufficient control to establish a fiduciary relationship. Temp-
Way, 139 B.R. at 318; Blue Line Coal, 683 F. Supp. At 496-97
(citing cases).
Rearick alleges in his complaint that: "[a]s a result of
ESB selecting the individual with whom Rearick would 'partner'
and by ESB, through its proxy, taking direct control of the
Saltwork Project, ESB's involvement with Rearick extended beyond
the traditional lender/borrower relationship to form a
confidential relationship giving rise to a fiduciary duty."
(Complaint, ~ 29); "ESB, acting through its proxy, exercised
20 Circulated 10/29/2015 01:27 PM
complete control over the Saltwork Project, going so far as to
make construction decisions and pass judgment on what kind of
business constituted an appropriate tenant" (Id., 130); and "the
Saltwork Project was completed with Smith, as ESB's surrogate,
assuming complete control of the Saltwork Project and making all
decisions relating to construction, build-out, tenant selection
and the like." (Complaint, 1 16). Rearick does not allege that
ESB or any of its employees directly controlled Rearick, his
business, his decisions, or the day-to-day operations of the
Saltwork Project, Nor does Rearick argue that ESB directly
managed the funds that were used to finance the construction of
the Saltwork Project. Rearick instead contends that ESB,
through a "proxy" or "surrogate," controlled the Saltwork
Project. Thus, as a preliminary matter, for Rearick's breach of
fiduciary duty claim to succeed, he must be able to show that
Smith was ESB's agent, expressly or implicitly authorized to
make decisions and take actions binding on ESB.
The Pennsylvania Supreme Court has summarized the
parameters of the principal-agent relationship as follows:
The law is clear in Pennsylvania that the three basic elements of agency are: the manifestation by the principal that the agent shall act for him, the agent1s acceptance of the undertaking and the understanding of the parties that the principal is to be in control of the undertaking. Agency results only if there is an agreement for the creation of a fiduciary relationship with control by the beneficiary. The burden of establishing an agency
21 Circulated 10/29/2015 01:27 PM
relationship rests with the party asserting the relationship. An agency relationship is a fiduciary one, and the agent is subject to a duty of loyalty to act only for the principal1s benefit. Thus, in all matters affecting the subject of the agency, the agent must act with the utmost good faith in furthering and advancing the principal1s interests, including a duty to disclose to the principal all relevant information.
The special relationship arising from an agency agreement, with its concomitant heightened duty, cannot arise from any and all actions, no matter how trivial, arguably undertaken on another's behalf. Rather, the action must be a matter of consequence or trust, such as the ability to actually bind the principal or alter the principal1s legal relations. Indeed, implicit in the long-standing Pennsylvania requirement that the principal manifest an intention that the agent act on the principal1s behalf is the notion that the agent has authority to alter the principal1s relationships with third parties, such as binding the principal to a contract.
Basile v. H & R Block, 761 A.2d 1115, 1120, 1121 (Pa.
2000) (internal citations and quotations omitted).
Considering these principles, we conclude that Rearick has
failed to plead facts sufficient to establish an agency
relationship between ESB and Smith that would operate to bind
ESB to Smith's actions with regard to the Saltwork Project.
Rearick alleges throughout his complaint that ESB selected
Smith, who was then a shareholder of ESB, to be an investor in
the Project, built into the loan documents a guarantee to
protect Smith's investment, and that Smith, after Rearick's
default, purchased the Saltwork Project property. These facts,
22 Circulated 10/29/2015 01:27 PM
even accepted as true and taken in the light most favorable to
Rearick, do not establish that ESB manifested its intention for
Smith to act on its behalf, to alter ESB's relationship with
Rearick or other third parties, or to bind ESB in its legal
dealings. The facts instead establish, at most, that Smith
acted as an investor in the Project and took actions for his own
benefit. There is no indication in the complaint that Smith
acted specifically for ESB's benefit or under its direction.
Further, the mere fact that Smith allegedly was a shareholder of
ESB does not, in and of itself, create an agency relationship.
A shareholder does not, by virtue of its ownership interest in a
corporation, become a de facto agent of the corporation in
dealing with third parties. MacBrine-McAdams Realty Co. v.
Morris, 196 A. 511, 512 (Pa. Super. Ct. 1938) (citing Puritan
Coal Mining Co. v. Pa. Railroad Co., 85 A.426, 432-33 (Pa.
1912)) .
Even assuming that Smith became ESB's agent, Rearick
nonetheless has failed to allege facts in his complaint that
would evidence the level of control necessary to create a
fiduciary relationship between ESB and Rearick. Rearick alleges
that Smith made construction decisions, determined what kinds of
tenants he thought would be appropriate, and made decisions
regarding \\build-out." He makes several conclusory allegations
that Smith took \\direct" and "complete" control of the Saltwork
23 Circulated 10/29/2015 01:27 PM
Project, but he alleges no facts to support those contentions.
He does not allege that either Smith or ESB entered into
contracts with builders, subcontractors, or tenants. He does
not allege that either ESB employees or Smith dealt with local
government agencies and municipalities in securing necessary
permitting, utilities, taxes, or the like. Most importantly,
with regard to the funds disbursed to Rearick, he does not
allege that ESB or Smith dictated how the funds would be
disbursed, managed payments to third parties, or in any other
way exercised dominating control over the funding, planning, or
management of the Saltwork Project. Other than making decisions
regarding construction matters and rendering opinions with
regard to who would be appropriate tenants on the premises,
Smith, and thereby ESB, did not exert the requisite level of
control over Rearick or the Saltwork Project that would create a
fiduciary duty.
Rearick relies heavily on the Superior Court's decision in
Garbish v. Malvern Federal Savings and Loan Ass'n, 517 A.2d 547
(Pa. Super. Ct. 1986) to support his argument that ESB owed
Rearick a fiduciary duty outside of their ordinary lender-
borrower relationship. We find Garbish to be markedly
distinguishable from the case at bar. In Garbish, the plaintiff
borrowers brought suit against the defendant bank in trespass
and assurnpsit, alleging that the bank misappropriated the
24 Circulated 10/29/2015 01:27 PM
disbursement of funds from a construction account over which the
bank retained complete control. Id. at 550. The plaintiffs in
Garbish argued that the bank owed the plaintiffs a fiduciary
duty as their agent in disbursing the construction funds, which
the bank breached. A jury agreed, and the bank appealed the
verdict. Id. at 550-51.
On appeal, the Superior Court agreed that the bank owed the
plaintiffs a fiduciary duty given the degree of control that the
bank exercised over the fund used to finance the construction of
the plaintiffs' new home. The court noted that the fund was
created at closing, where both the plaintiffs and the building
company were required to execute a building agreement, a
schedule of operations, and a description of materials. The
plaintiffs also were required to contribute $16,000 of their own
money at closing that ultimately would be controlled by the
bank. Id. at 549. The plaintiffs in Garbish were not permitted
to participate at all in the payments that the bank made to the
builder and generally were not advised of the nature and details
of the vouchers that were paid. The bank also expressly told
the plaintiffs that it was an expert in the disbursement of
construction fund money and utilized its own inspectors to
review the progress of the construction site. Id. at 549-50.
Based on those facts, the Superior Court concluded that the bank
had indeed exercised absolute and exclusive authority over the
25 Circulated 10/29/2015 01:27 PM
building project and the fund that was financing it. Id. at
551.
Such are not the facts pled in Rearick's complaint. There
are no indications that ESB or Smith managed the day-to-day
operations of the Saltwork Project. Rearick cannot merely state
that Smith exerted "complete" control over the Project without
showing how that occurred, particularly with regard to how funds
were used and who made financial decisions.
For these reasons, we will sustain ESB's preliminary
objection and dismiss Count II of Rearick's complaint.
4. Preliminary Objection 5 - Demurrer (Count IV)
ESB demurs to Count IV of Rearick's complaint for
negligence on several grounds. ESB argues first that the claim
is barred by Pennsylvania's "gist of the action doctrine." ESB
next argues that the negligence claim fails because Rearick has
failed to plead facts that would establish that ESB either owed
a duty of care to Rearick or that any breach of such a duty
caused Rearick's default. Finally, ESB argues that the
negligence claim is barred by the "economic loss doctrine." We
will address each argument in turn.
a. Gist of the Action
The "gist of the action" doctrine remains viable in
Pennsylvania, as it is used and addressed frequently by the
Superior Court and has not expressly been rejected by the
26 Circulated 10/29/2015 01:27 PM
Supreme Court. See Reardon v. Allegheny College, 926 A.2d 477,
486 & nn. 10,11 (Pa. Super. Ct. 2007). Generally, the doctrine
bars a plaintiff from re-casting ordinary breach of contract
claims into tort claims. Empire Trucking Co., Inc. v. Reading
Anthracite Coal Co., 71 A.3d 923, 931 n.2 (Pa. Super. Ct. 2013}.
In Reardon, the Superior Court summarized the doctrine as
follows:
The gist of the action doctrine acts to foreclose tort claims: 1) arising solely from the contractual relationship between the parties; 2) when the alleged duties breached were grounded in the contract itself; 3) where any liability stems from the contract; and 4) when the tort claim essentially duplicates the breach of contract claim or where the success of the tort claim is dependent on the success of the breach of contract claim. The critical conceptual distinction between a breach of contract claim and a tort claim is that the former arises out of breaches of duties imposed by mutual consensus agreements between particular individuals, while the latter arises out of breaches of duties imposed by law as a matter of social policy.
Reardon, 926 A.2d at 486-87 (internal quotations and citations
omitted). "A breach of contract may give rise to an actionable
tort where the wrong ascribed to the defendant is the gist of
the action, the contract being collateral." Hart v. Arnold, 884
A.2d 316, 339 {Pa. Super. Ct. 2005). In determining whether the
doctrine applies to bar a tort claim,' Pennsylvania courts employ
the following principles:
When a plaintiff alleges that the defendant committed a tort in the course of carrying out a contractual agreement, Pennsylvania courts examine the claim and
27 Circulated 10/29/2015 01:27 PM
determine whether the "gist" or gravamen of it sounds in contract or tort. The test is not limited to discrete instances of conduct; rather, the test is, by its own terms, concerned with the nature of the action as a whole.
Indalex Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 83 A.3d
418, 424 (Pa. Super. Ct. 2013) (quoting Erie Ins. Exchange v.
Abbott Furnace Co., 972 A,2d 1232, 1238 (Pa. Super. Ct. 2009))
We note first that the relationship between Rearick and ESB
essentially was contractual. Although Rearick generally alleges
that his family and ESB had a relationship lasting more than 50
years, such a relationship in and of itself does not give rise
to a special, social relationship that would create any duties
between them independent of their financial agreements. Rearick
argues in his brief that the duties underlying his negligence
claim arise from the "special relationship" between ESB and
Rearick, whereby ESB made Rearick's business decisions for him
and "took control" of the business. (Rearick Brief, at 12) .
Rearick alleges that ESB selected Smith as an investor and
forced Rearick to enter into a relationship with him so that the
Saltwork Project could be financed by Smith's funds. He further
alleges that ESB entered into a financing arrangement with
Rearick such that Smith would be paid back his investment via
Rearick's payments on the loan. Rearick contends that ESB
protected itself against a significant majority of the financial
risk of the Project by utilizing the Business and Industry
28 Circulated 10/29/2015 01:27 PM
Guaranteed Loan Program, which Rearick himself initially
suggested to ESB. ( Comp 1 a int , 1, 5, 12 - 1 7 ) .
We conclude that, as pled, the alleged duties giving rise
to Rearick's negligence claim are grounded in what Rearick
argues is a "special relationshipn that existed between the
parties outside the parameters of the loan documents. The
gravamen of Rearick's claims in this regard essentially sound in
tort and not in contract. This relationship is the very
relationship that forms the basis of Rearick's breach of
fiduciary duty claim, discussed infra. The only contractual
claim in Rearick's complaint is Count I, which is based on a
general duty of good faith and fair dealing. Rearick does not
allege any specific breaches of any of the several agreements
between himself and ESB. We therefore are constrained to
conclude that his action, taken as a whole, is grounded in what
he contends are duties arising out of social policy
considerations and not strictly contractual obligations. For
this reason, we conclude that the gist of the action doctrine
does not, in and of itself, bar Rearick's negligence claim. We
already have discussed, and will again discuss supra, whether
these alleged duties are in fact present in this case.
b. Economic Loss Doctrine
ESB contends that Rearick's negligence claim, which seeks
monetary damages in excess of $25,000, is barred by
29 Circulated 10/29/2015 01:27 PM
Pennsylvania's economic loss doctrine. The economic loss
doctrine, as adopted by the Pennsylvania Supreme Court, provides
that "no cause of action exists for negligence that results
solely in economic damages unaccompanied by physical injury or
property damage." Knight v. Springfield Hyundai, 81 A.3d 940,
952 (Pa. Super. Ct. 2013) {quoting Excavation Technologies, Inc.
v. Columbia Gas Co. of Pa, 985 A.2d 840, 841 (Pa. 2009)). See
also Id. at 952 n. 9 (noting alternative definitions of the
doctrine, which preclude recovery in tort of purely economic
losses that either arise exclusively from a contract or are
unaccompanied by physical harm to a plaintiff or his property).
Rearick does not specify the amount of damages that he
seeks in this action. It is unclear from the complaint whether
he seeks reimbursement of funds paid on the loans that financed
the Saltwork Project, the value of the properties that were
foreclosed upon in the mortgage foreclosure action, or another
amount. What is clear, however, is that any damages that
Rearick allegedly has suffered are purely economic and cannot be
recovered via his negligence claim. Rearick has not alleged any
personal injury or damage to property as a result of any of
ESB's actions. Instead, he claims that he seeks monetary
damages together with damages as a result of the "loss of his
properties which ESB frivolously disposed of through the Horse
Trader or unfairly bestowed upon its own agent." {Rearick
30 Circulated 10/29/2015 01:27 PM
Brief, at 14); (Complaint, ~1 19-22). The loss of the
properties and their value also is economic harm that cannot be
recovered in a negligence claim. Moreover, the loss of
Rearick's income-producing properties, which he argues came as a
result of ESB's "frivolous" manner of reselling them and unfair
bestowal of the properties on Smith, are damages that cannot be
recovered in this action. They directly are related to the
prior mortgage foreclosure action and permitting such a claim in
this action would undermine ESB's judgment in that case. See
Superior Court Op. at 21.
Accordingly, we conclude that Rearick's negligence claim is
barred by the economic loss doctrine, and we will sustain ESB's
preliminary objection in this regard.
c. Duty and Causation
To establish a claim for negligence, a plaintiff must
demonstrate that "the defendant owed a duty of care to the
plaintiff, the defendant breached that duty, the breach resulted
in injury to the plaintiff, and the plaintiff suffered an actual
loss or damage." Martin v. Evans, 711 A.2d 458, 461 (Pa. 1998).
Rearick alleges in his negligence claim that ESB owed him a
duty of care arising out of "its longstanding relationship with
him," its directive to him to contact other investors for the
Saltwork Project, and its "brokering" of the transaction between
him and Smith. (Complaint, ~~ 39-41) He then alleges that ESB
31 Circulated 10/29/2015 01:27 PM
breached those duties of care by selecting Smith as an investor
and colluding with him to place Rearick at a disadvantage.
These alleged duties are separate and apart from the duties that
undergird Rearick's breach of contract and breach of fiduciary
duty claims. The facts, however, do not as a matter of law give
rise to a duty of care running from ESB to Rearick that is
independent of the duties embodied in the loan documents between
the parties. Absent a special relationship that would give rise
to a potential fiduciary duty, a lending institution does not
owe a general duty of care to a borrower. See Rousseau v. City
of Phila., 514 A.2d 649, 652 {Pa. Commw. Ct. 1986). Rearick
argues in his brief that a duty of care arose because of the
"special role" that ESB took in Rearick's business by
controlling its business through its alleged agent, Smith. That
relationship, however, if it did indeed exist, would give rise
to a potential claim for breach of fiduciary duty and not one
for ordinary negligence, As we discussed above, no claim for
breach of fiduciary duty exists in this case.
Moreover, Rearick has not pled any facts to substantiate
his allegations that a duty arose from his prior relationship
with ESB. The mere fact that the relationship is alleged to
have been for a significant duration {50 years) does not create
a duty of care between ESB and Rearick. Nor do the facts that
ESB found an investor to fund the Saltwork project and organized
32 Circulated 10/29/2015 01:27 PM
the contractual arrangements to allow the investor to become
involved in the Project in and of themselves give rise to a duty
of care. Rearick has directed the Court to no legal authority
that would support such a duty, and we have not found any in our
own search. Thus, we find that Rearick has failed to plead
facts that, if true, would establish a duty to support his
negligence claim, which we will dismiss on this ground.
We further conclude the Rearick has failed to plead facts
sufficient to establish the causation element of his negligence
claim. Even assuming that Rearick has pled facts establishing a
duty of care and that ESB breached that duty by involving Smith
in the financing arrangement, over-leveraging the properties, or
organizing or exercising control over the Saltwork Project,
Rearick does not plead any facts showing how any of the Bank's
actions caused Rearick's default. Instead, he alleges that many
of the increases in financing were made at his own request, that
the Saltwork Project ultimately was completed, and that he paid
on the loan for several months before defaulting, at least in
part because of "a still floundering economy and tenant
occupancy rates that, as a result of a poor economy, were below
projections." (Complaint, ~1 4-9, 12, 16, 18}. Because Rearick
has failed to set forth sufficient facts to establish the
causation element of his negligence claim, we will sustain ESB's
preliminary objection on this additional ground as well.
33 Circulated 10/29/2015 01:27 PM
Rearick v. Elderton State Bank No. 2012·1615·Civil
5. Preliminary Objection 6 - Demurrer (Count III)
Lastly, ESB demurs to Rearick's "alter ego" claim on the
ground that such a claim does not exist in Pennsylvania.
Rearick alleges that ESB controlled Rearick and the Saltwork
Project to a degree that ESB, Rearick, and the Saltwork Project
essentially were the same economic entity. Rearick alleges that
11 ESB controlled the Sal twork Project chiefly through its \\proxy,
Mr. Smith. We conclude that the "alter ego" theory is
inapplicable to this case and, even if it were applicable,
Rearick has failed to plead facts that could prove the claim in
any event.
The Pennsylvania Superior Court recently has described the
nature of the "alter ego" theory of liability as follows:
Piercing the corporate veil is a means of assessing liability for the acts of a corporation against an equity holder in the corporation. The party seeking to establish personal liability through piercing the corporate veil must show the person in control of a corporation used that control, or used the corporate assets, to further his own personal interests. Pennsylvania law has a strong presumption against piercing the corporate veil. Any inquiry involving corporate veil-piercing must start from the general rule that the corporate entity should be recognized and upheld, unless specific, unusual circumstances call for an exception. One "exception" is the alter ego theory which requires proof (1) that the party exercised domination and control over corporation; and (2) that injustice will result if corporate fiction is maintained despite unity of interests between corporation and its principal.
34 Circulated 10/29/2015 01:27 PM
Allegheny Energy Supply Co. v. Wolf Run Min. Co., 53 A.3d 53, 58
(Pa. Super. Ct. 2012) (internal citations and quotations
omitted). Piercing-the-veil principles may be applied in the
context of a lender-borrower context, wherein a corporate lender
so controls and dominates a corporate borrower that that
corporate construct of the borrower should be set aside and the
lender held responsible for the borrower's debts. See Pearson
v. Component Tech. Corp., 80 F. Supp.2d 510, 521 (W.D. Pa.
1999); 12 Bumm. Pa. Jur.2d Bus. Rel. § 1:30 (2d ed.). Thus, in
a lender-borrower relationship, a corporate lender may so
dominate and control a corporate borrower that the borrower's
debts, incurred at the behest of the lender, must be ascribed to
the lender because the borrower's "separate existence was a mere
sham." Pearson, 80 F. Supp.2d at 523. See also 15 Am. Jur. 3d.
695, §4.
Even reading Rearick's complaint in the light most
favorable to him, we cannot conceive of how the alter ego theory
of piercing the corporate veil applies in this case. There are
no allegations that either Rearick or the Saltwork Project were
themselves corporate entities. There also are no allegations
even suggesting that Rearick is attempting to hold the
shareholders of ESB responsible for Rearick's debts. Although
Rearick has alleged, in somewhat conclusory fashion, that ESB,
via its "proxy," controlled and dominated his business dealings
35 Circulated 10/29/2015 01:27 PM
and the Saltwork Project operations, there simply are no facts
suggesting that Rearick seeks to disregard or set aside a
particular corporate form. Rearick's argument that ESB must be
held accountable for Rearick's debt because ESB dominated and
controlled Rearick essentially is duplicative of Rearick's
breach of fiduciary duty claim, which we addressed above. The
alter ego theory, even in the lender-borrower context, is a
child of corporate liability jurisprudence and simply cannot
apply in this case. After a diligent search, we have found no
authority, in Pennsylvania or any other jurisdiction, that would
support such a claim in these circumstances; neither has Rearick
provided the Court with any such authority.2 For these reasons,
we will sustain this preliminary objection and dismiss Count III
of Rearick's complaint.
V. CONCLUSION
For all the reasons stated above, we will sustain ESB's
preliminary objections that remain after remand and dismiss
Rearick's complaint.
An appropriate Order follows.
2 The alter ego theory typically is used in lender-borrower situations where a separate creditor of an insolvent borrower attempts to disregard the borrower's corporate form to reach the coffers of the lender to satisfy debts incurred by the borrower. We have found no reported cases where an individual borrower seeks to use the alter ego theory to hold a lender corporately responsible for his own debts serviced by that lender.
36 Circulated 10/29/2015 01:27 PM
IN THE COURT OF COMMON PLEAS OF ARMSTRONG COUNTY, PENNSYLVANIA
MARK A. REARICK, ) ) Plaintiff, ) ) vs. ) No. 2012-1615-CIVIL ) ELDERTON STATE BANK, ) } ··r) ...
Defendant. } . .. ":~-- -·.. :.-.:. - . . ) . ·- ~ ·- .. r ::.~ i
1925(a) OPINION
Panchik, J.
Plaintiff Mark A. Rearick ("Rearick") appeals from (1) this
Court's Memorandum and Order entered September 24, 2014, which
sustained those preliminary objections to Rearick's complaint that
remained undecided after remand from the Superior Court, and (2)
this Court's Order dated October 24, 2014, denying Rearick's "Mo-
tion for Leave to File Amended Complaint." For the reasons that
follow, and for the reasons set forth in the Court's Memorandum
entered September 24, 2014, I recommend affirmance in both ap-
peals.
I. PROCEDURAL HISTORY
This case has an unnecessarily protracted and confused proce-
dural history. Rearick filed his original complaint on October
24, 2012. That complaint asserted several contract and tort-
based claims against Defendant Elderton State Bank ("ESB") related
to the parties' business dealings from 2006 to 2009. ESB filed Circulated 10/29/2015 01:27 PM Rearick v. Elderton State Bank No. 2012-1615-Civil
preliminary objections to the complaint, one of which was sus-
tained by this Court on the ground of res judicata. The Court de-
clined to decide the remaining preliminary objections as moot.
Rearick appealed the Court's decision to the Superior Court, which
reversed this Court's decision and remanded with instructions to
either rule on ESB's remaining preliminary objections or permit
Rearick to amend his complaint. The Court thereafter ruled on the
remaining preliminary objections, all but one of which it sus-
tained.1 The Court therefore dismissed Rearick's complaint and did
not grant him leave to file an amended complaint.
On October 14, 2014, twenty days after the entry of the
Court's order dismissing his complaint, Rearick filed an amended
complaint without leave of court. The amended complaint includes
revisions to Counts I and II and also includes two new claims for
fraudulent/negligent misrepresentation and "constructive fraud."
Ten days later, on October 24, 2014, in motions court, on the last
day of the 30-day appeal period following the Court's dismissal of
his original complaint, Rearick presented a motion requesting that
the Court both "deem" the amended complaint properly filed and
permit Rearick to file a second amended complaint. Rearick did
not present to the Court or to ESB a proposed second amended com-
plaint prior to or at motions court on October 24, 2014. Nor was
1 The Court overruled ESB's preliminary objection based on the "gist of the ac- tion" doctrine. However, the Court sustained several other preliminary objec- tions regarding Rearick's negligence claim, making dismissal of the claim appro- priate in any event. 2 Circulated 10/29/2015 01:27 PM Rearick v. Elderton State Bank No. 2012-1615-Civil
Rearick's first amended complaint either attached to his motion or
presented to the Court for review prior to October 24, 2014. ESB
submitted a written opposition to Rearick's motion, in which it
argued that the filing of the amended complaint was improper, the
motion for leave was untimely, and that no proposed second amended
complaint was presented to the Court or ESB for review. ESB re-
quested that Rearick's motion be denied without prejudice and
Rearick be directed to file an appropriate motion for leave to-
gether with the amended pleading that he proposed to file.
Inexplicably, Rearick's counsel then requested that the Court
deny his motion for leave to file the first and second amended
complaints. The Court's order denying the motion clearly indi-
cates that the denial was entered at Rearick's counsel's request
and with his written consent. Rearick then filed, the same day,
notices of appeal from the Court's orders from both September 24,
2014 and October 24, 2014. The Court thereafter entered an order
directing Rearick to file Concise Statements of Errors Complained
of on Appeal pursuant to Pa. R. App. P. 1925(b) for each of his
two appea Ls, with which Rearick timely complied. We will address
each of his assertions of error in turn.
II. APPEAL REGARDING PRELIMINARY OBJECTIONS
Rearick makes nine assignments of error in his appeal from
the Court's order sustaining ESB's preliminary objections and dis-
missing his original complaint. All of the issues raised in
3 Circulated 10/29/2015 01:27 PM Rearick v. Elderton State Bank No, 2012-1615-Civil
Rearick's concise statement thoroughly are addressed in the
Court's September 24, 2014 Memorandum. The Court remains con-
vinced that its reasoning is sound and dismissal of Rearick's com-
plaint appropriate, Of note is the fact that Rearick's amended
complaint does not include claims for alter ego or negligence, and
his motion for leave acknowledges that, at the very least, Counts
I and II for breach of the duty of good faith and fair dealing and
breach of fiduciary duty are deficient. For these reasons, and
for the reasons set forth in the Memorandum entered September 24,
2014, I recommend affirmance on all issues raised in this appeal.
III. APPEAL REGARDING REARICK'S MOTION FOR LEAVE
The Court frankly is at a loss to fully understand the
grounds for this appeal. Rearick asserts in his concise statement
that the Court erred by (1) denying his motion to "allow as
properly filedll his amended complaint, filed without leave after
the Court dismissed his original complaint, and {2) denying
Rearick's motion for leave to file a second amended complaint.
The Court acknowledges the governing rule in Pennsylvania
that amendments to pleadings may be made at any time and should
liberally be permitted. See Chaney v. Meadville Med. Ctr., 912
A.2d 300, 303 (Pa. Super. Ct. 2006) (citing, in part, Pa. R. Civ.
P. 1033)). Amendment generally should be permitted when it will
not work "unduell prejudice on the opposing party. Id. Moreover,
although orders denying a party's motion for leave to amend a
4 Circulated 10/29/2015 01:27 PM Rearick v. Elderton State Bank No. 2012-1615-Civil
pleading generally are considered interlocutory and therefore non-
appealable, see Horowitz v. Universal Underwriters Ins. Co., 580
A.2d 395, 397 (Pa. Super. Ct. 1990), such orders are appealable if
they in essence put a plaintiff "out of court" or control the out-
come of the entire case. Id. Here, Rearick's motion for
leave to file both his amended and second amended complaints was
filed after the Court already had dismissed Rearick's original
complaint without leave to amend. Thus, the order dismissing the
original complaint was final and appealable. I will assume for
purposes of this appeal that, although Rearick already had been
put "out of court," the order denying his request to file amended
pleadings effectively worked the same result and should be treated
as final for purposes of this appeal.
However, the appealability of the Court's order being estab-
lished, I conclude that the appeal is without merit in any event
on several grounds. First, the Court did not have any opportunity
to rule upon the propriety of Rearick's amended complaint because
he did not request leave prior to filing it. Rule 1028(e) of the
Pennsylvania Rules of Civil Procedure provides that "if the filing
of an amendment, an amended pleading, or a new pleading is allowed
or required," it must be filed either within 20 days after the or-
der permitting the amendment or within a period fixed by the
court. Pa. R. Civ. P. 1028(e). In this case, the Court sustained
ESB's remaining preliminary objections and dismissed Rearick's
5 Circulated 10/29/2015 01:27 PM Rearick v. Elderton State Bank No. 2012-1615-Civil
complaint without leave to amend. Therefore, if Rearick desired
to file an amended complaint, he should have filed a motion for
leave to do so within 20 days of the Court's order. Rearick did
not file such a motion and did not present a proposed amended com-
plaint to the Court prior to filing it on October 14, 2014. Thus,
on its face, Rearick's motion appears to be untimely and therefore
was properly denied.
Second, with regard to Rearick's proposed second amended com-
plaint, neither the Court nor ESB was presented with a copy of the
amended pleading before, at, or since motions court on October 24,
2014. Indeed, the Court has never been presented with a proper
and timely filed motion for leave to file any amended pleadings.
Instead, and without notice, the Court was presented with a motion
to file both an amended complaint and a second amended complaint,
without having any prior opportunity to review proposed drafts of
either document. On that basis, Rearick's motion for leave to
file both proposed amended pleadings is inappropriate and was
properly denied by the Court.
Finally, and most importantly, Rearick's counsel requested at
motions court on October 24, 2014, that the Court not grant the
motion for leave to file either his amended or second amended com-
plaints (the latter to which ESB likely would have consented), and
instead enter an order, with his express, written consent, that
the motion be denied. Thus, the Court had no opportunity to
6 Circulated 10/29/2015 01:27 PM ~earick v. Elderton State Bank No. 2012-1615-Civil
schedule a separate time for argument on Rearick's motion, permit
the submission of a proposed second amended complaint, or permit
ESB to review the proposed filing and reconsider its opposition to
the motion, In short, Rearick hardly can be heard to complain
about an order the entry of which was requested and consented to
in writing by his counsel.
I remain convinced that Rearick's motion was untimely-filed,
was procedurally defective, and was entered as his request and
with his express consent. For those reasons, I recommend affir-
mance on this appeal.
By the Court:
Date : ~....u.lJ-·___,l"'---(-e.c)O=f+--
Related
Cite This Page — Counsel Stack
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