author: TUNNELL, J.,

text:
    Lincoln General Insurance Co. v. Gracie Corp. of N.J.

      C.P. of Chester County,
    No. 2008-06251

      Paul T. DeVlieger, for plaintiff

      Holly E. Smith, for defendants
    March 6,2013
   TUNNELL, J.,

This case involves the law of principal and surety. Because of the operation of the “prima facie evidence clause” contained in the parties’ agreement, the court is able to enter judgment as a matter of law.

Lincoln General Insurance Company (“LGIC”) filed a complaint against the several defendants for breach of an express contract, a “General Indemnity Agreement” dated July 28, 2003. The agreement recites that Gracie Corporation, as “the Principal”, may be required to provide surety bonds, and may request LGIC, as the “Surety”, to execute such bonds, providing however that the Principal and the individual defendants as “Indemnitors” indemnify LGIC for any losses and expenses arising out of the same. The defendants have admitted that they signed this agreement. All of the terms and conditions adhere to each of them.

More specifically, the agreement provides as follows:

“1. INDEMNITY. The Undersigned [Gracie and the individual Indemnitors] shall indemnify and keep indemnified the Surety against any and all liability for losses and expenses of whatsoever kind or nature, including attorney fees and costs, by reason of having executed or procured the execution of Bonds, or by reason of the failure of the Principal or Indemnitors to perform or comply with the covenants and conditions of this agreement.”

LGIC has asserted that, at Gracie’s request, it proceeded to issue a series of bonds for numerous projects in Pennsylvania and New Jersey. Defendants have admitted this too. Because LGIC asserts that it has not been fully indemnified for the expenses arising out of these bonds, the matter found its way into court in 2008, and is now ripe for determination by means of plaintiff’s motion for summary judgment.

Contract cases, because of their nature, often lend themselves to disposition upon a motion for summary judgment. The evidence will often be documentary, and the main piece of that evidence is the contract itself. As with the insurance policy issues, the scope and limitation of the contract may be resolved when the terms are clearly spelled out in the contract.

In responding to plaintiff’s motion, the defendants have, by and large, mimicked their responses to the original complaint of five years ago; they sufficed to assert general denials and other averments which appear to evade rather than meet, confront and explain. Otherwise the chief defense to liability is the allegation, repeated in nearly every paragraph of the response, that “an Oral Agreement was made between defendants and Paul Alongi whereby LGIC would receive any monies due and owing from the City of Philadelphia in full and final satisfaction of any claims settled by LGIC on behalf of the defendants.” (Defendants’ response to plaintiff’s motion for summary judgment, §§4, 5, 6, 8, 9, 10, 12).

There are several problems with this. First, an oral modification of an express written contract is undoubtedly an affirmative defense which must be raised pursuant to Pa. R.C.P. 1030 as part of new matter. This is because an oral modification, like the defenses of rescission, substituted contract and novation, effects an immediate change in the legal relations between the parties and discharges the original duty in whole or in part, whereby following a breach the other party is foreclosed from enforcing the original duty. See Refuse Management Systems, Inc. v. Consolidated Recycling and Transfer Systems, Inc., 448 Pa. Super. 402, 671 A.2d 1140 (Pa. Super. 1996). Defendants never raised this defense in new matter, nor sought leave to do so later. It is waived.

Even if it were not waived, there are additional problems. A party in defendants’ position would have to demonstrate with sufficient factual evidence that the pre-existing duty rule is not offended, and that there was consideration for the amendment.

This agreement contains the following term:

“19. MODIFICATION. The rights and remedies of the Surety under this Agreement may not be waived or modified except by written amendment signed by the Surety.”

A party in the defendants’ position would also have to show that there was an intent to waive this clause, and that by clear and convincing evidence, Brinich v. Jencka, 757 A.2d 388, 399 (Pa. Super. 2000). Finally, the authority of the individual purportedly modifying the agreement on behalf of the surety would have to be demonstrated.

None of this occurred.

The law of principal and surety is ancient and in some respects peculiar. The surety under an express indemnification contract is entitled to stand upon the letter of that contract. Fidelity & Deposit Co. of Maryland v. Bristol Steel and Iron Works, Inc., 722 F.2d 1160, 1163 (4th Cir. 1983) (applying Pennsylvania law).

Defendants do not agree with the amounts claimed as due by plaintiff under the agreement. The agreement however contains what is known as a “prima facie evidence clause”, within paragraph 1, which states as follows: Prima facie evidence clauses, also known as “good faith clauses” in this context, have been upheld by and enforced by the courts. See, e.g. Fidelity & Deposit Co., supra, 722 F.2d 1160, 1163; United States Fidelity & Guaranty Co. v. Feibus,15 F. Supp. 2d. 579, 588 (M.D. Pa. 1998). Moreover, courts have granted summary judgment in favor of a surety based on such a provision and the evidence provided thereunder. See, Gundle Lining Construction Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 210 (5th Cir. 1996), Curtis T. Bedwell & Sons, Inc. v. International Fidelity Insurance, 1989 W.L. 55388 (E.D. Pa. 1989).

“The Surety may pay or compromise any claim, demand, suit, judgment, or expense arising out of the bonds, and any such payment or compromise made by the Surety in the reasonable belief that it was liable for the amount paid or that it was expedient under all the circumstances to make such payment or compromise, shall be binding upon the Undersigned as a loss or expense covered by this indemnity, whether or not such liability actually existed. An itemized statement of the payment or compromise, sworn to by an officer or the Surety, or the voucher or vouchers or other evidence of the payment or compromise; shall be prima facie evidence of the fact and the amount of the liability of the Undersigned under this agreement.” (emphasis added)

So, as a matter of law, the principal is liable for the payments made by a surety, even where there may be no actual liability, provided only that the surety have paid in good faith. As has been observed:

“However, the court notes that such good faith clauses, while harsh, are typical in surety agreements and have routinely been upheld, (citations omitted)
Sureties enjoy such discretions to settle claims because of the important function they serve in the construction industry. The purpose of good faith clauses is to facilitate the handling of settlements by sureties and protect them from unnecessary and costly litigation, (citation omitted). It is believed that ‘the expense, delay, trouble and risk of loss to the [surety] is a sufficient safeguard against an unwarranted payment’.” US. Fidelity & Guaranty Co. v. Feibus, supra at 585.

Pursuant to Rule 1035.2 of the Pennsylvania Rules of Civil Procedure, summary judgment is appropriate:

(2) If, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at the trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury.

As noted, the opposing party, the defendants here, may not rest upon the mere allegations in their pleadings, but must instead set forth with specificity facts showing that a genuine dispute exists for the jury to determine at trial. Tom Morrello Construction Co., Inc. v. Bridgeport Federal Savings & Loan Association, 421 A.2d 747 (Pa. Super. 1980). The non-moving party may not avoid summary judgment by bald allegations or denials in his pleadings. O’Neill v. Checker Motor Corp., 567 A.2d 690 (Pa. Super. 1989).

As explained above, the defense of oral modification was waived as a consequence of its not having been raised as part of new matter. Pa. R.C.P. 1032(a). No sufficient facts were averred in the first instance such as would properly make out the defense. Even if this main defense had not been waived, the deposition testimony presented by the defendants as part of their response in opposition to the motion for summary judgment would be insufficient to go to a jury on the issue. At most, the deposition testimony of Stayce Hawthorne simply describes a decision by LGIC to pay the outstanding balances of what Grade already owed in an attempt to have Grade get the remaining work done. This is wholly consistent with the terms of the General Indemnity Agreement and is hardly a “modification” of the same. Moreover, the defendant was already required to indemnify LGIC against any and all liability for such losses and expenses. It is hornbook law that a promise to carry out an existing contract with the promisee provides no consideration because one is doing no more than he was already obliged to do. Nicolella v. Palmer, 432 Pa. 502, 509, 248 A.2d 20, 24 (1968). Nor was there any satisfactory showing that a Mr. Alongi had any authority to alter or change the written words of the parties’ agreement. The court does not read the additional deposition excerpt of LGIC’s officer, John Northrop as bolstering the defendants’ theory. On page 54, he was asked the following:

Q. Were you aware of any agreement between Alongi, Sr. and Grade Corporation that the funds received from the contract funds would be sufficient to cover any payments that Lincoln General paid on its behalf?
Mr. DeVlieger: Objection to form.
A. I’m not aware of any specific conversations.
Q. Did you ever speak to Mr. Alongi regarding any agreement that was made where Lincoln General would receive outstanding contract funds in satisfaction of payments made on Grade’s behalf?
Mr. DeVlieger: Same objection.
A. I don’t recall specifics of the conversation, but yes, I would have.
Q. Yes, you would have?
A. Spoke to Mr. Alongi in regards to receiving the remaining contract funds.

This testimony would scarcely be sufficient to go to a jury as evidence of a modification with any contractual significance. Yet it was all that was offered by defendants from an LGIC officer. For all the foregoing reasons, the defense of oral modification has failed.

On the issue of damages, an itemized statement from LGIC was reproduced by both parties as part of their submissions. The statement had clearly been the focus of their discovery depositions as well. The “bottom line” figure was $142,596.90, being the arithmetic total of all the various entries.

Under the agreement, this “shall be prima facie evidence of the fact and the amount of the liability of the undersigned under this agreement.” Defendants did not articulate any issue with the document as being the equivalent to the “itemized statement” called for under the agreement. Instead, their complaint was that “the accounting provided by LGIC is replete with errors and miscalculation, and defendant disputes that such accounting accurately reflects any alleged liability of defendants, if such liability even exists.” (Defendants’ response to plaintiff’s motion for summary judgment, ¶21). This was repeated verbatim in the last paragraph of the accompanying brief.

Nowhere do defendants bother to show where or how the document is “replete with errors”, nor is there any demonstration of any “miscalculations”. If ever there were a time for the defendants to come forward and produce evidence to support these bald allegations, the summary judgment stage was it. The defendants did not avail themselves of that opportunity.

The court struggled to find any further reference that might aid defendants in this regard. True, the defendants’ copy of the itemized statement, which bears a deposition sticker of “Northrop-7” contains highlighting and some handwritten notes. Defendants did attach a single page of Mr. Northrop’s deposition for the court, where the following exchange appears:

Q. Why are certain payees highlighted on this spreadsheet?
A. The red highlights were claim payments to subcontractors suppliers, et cetera.
The light green/yellow highlights are representative of the remaining contract funds.
The blue highlights were monies advanced to Gracie from Lincoln General.
Q. Why would those funds be advanced?
A. If I remember correctly, at Grade’s request, to help pay some of their subcontractors and/or supplier.
Q. Were these highlighted in preparation for this deposition or was that highlighted previously?
A. I did it prior to the deposition, not specifically for the deposition, but to make it easier to identify certain payments on that spreadsheet.

(Northrop Deposition, pp. 55-56).

The court remains totally unedified as to how this helps the defendants, and thus this defense cannot succeed.

Due to the operation of the “prima facie evidence clause”, the defendants cannot escape liability unless they meet the two exceptions the courts have recognized to the enforcement of a principal’s liability for the surety’s disbursements, namely bad faith, or fraudulent payment. United States Fidelity & Guaranty Co. v. Feibus supra, 15 F. Supp. 2d at 585.

Defendants did produce evidence that Mr. Northrop of LGIC released certain payments to a subcontractor after receiving Grade’s instruction not to do so. By letter dated July 8,2005, Grade’s President, Stayce Hawthorne, wrote to Mr. Northrop at LGIC telling him to “discontinue any future payments to RPM Contractors and Riddick & Riddick.” Gracie complained that LGIC made a payment to Riddick & Riddick on September 21, 2005 against that direction. The court has searched the parties’ agreement in vain for any provision that explicitly permits the Principal to so direct its Surety. The defendants do not characterize this conduct as “bad faith” but the court will proceed with its analysis as though the defendants had.

“Bad faith” is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. Polselli v. Nationwide Mutual Fire Insurance Co., 23 F.3d 747, 751 (3d. Cir. 1994). Thus, a lack of diligence or negligence is not the equivalent of bad faith; indeed, even gross negligence cannot support a finding of bad faith. Terletsky v. Prudential Property & Casualty Insurance Co., 437 Pa. Super. 108, 125, 649 A.2d 680, 688 (1994). Bad faith requires a showing of recklessness or improper motive such as self-interest or ill will. Polselli, 23 F.3d at 751. Defendants, however, do not offer any evidence that LGIC was motivated by ill will or self-interest or anything of that kind in making this payment. The court reiterates the fact that the express language of the parties’ agreement permits the plaintiff to settle claims based on its reasonable belief that it was liable for the amount paid, or that it was expedient under all the circumstances, and such payment “shall be binding upon the Undersigned as a loss or expense covered by this indemnity, whether or not such liability actually existed.” (General Indemnity Agreement, ¶1). Accord, United States Fidelity & Guaranty Co. v. Feibus, supra, 586-587.

Consequently, defendants have not met their burden. The finding of liability by the court rests on no credibility determinations whatsoever, and upon no more than on the operation of the parties’ agreement. Consequently, the Nanty-Glo rule is not offended. See, Nanty-Glo v. American Surety Co., 309 Pa. 236, 163 A. 523 (1932) [summary judgment may not be granted when based solely upon the oral testimony of the moving party].

The defendants in the present case have utterly failed to create a genuine issue of material fact for trial. An order granting summary judgment to the plaintiff shall be entered:

ORDER

And now, March 6, 2013, upon consideration of plaintiff’s motion for summary judgment and defendants’ response thereto, it is hereby ordered that the motion is granted.

Judgment is entered in favor of plaintiff, Lincoln General Insurance Company, and against defendants, Gracie Corporation of New Jersey, t/a Gracie Corporation, Enrohtwah Enterprises, Inc., Judson Hawthorne, inc., Judson Hawthorne and Stayce Hawthorne, and each of them, in the principal amount of $142,596.90.

Plaintiff shall file a motion for award of counsel fees and cost, with affidavit, within ten (10) days of this order, as well as its calculation of any pre-judgment interest claimed. Defendants may file any response thereto within ten (10) days thereafter.


source: Caselaw Access Project

author: FORD, J.,

license: Public Domain

text:
    Herman v. Russo

      C.P. of Lehigh County,
    No. 2011-C-0912.

      Mary Herman, pro se plaintiff.

      Donald Russo, for defendant.
    March 13, 2013
   FORD, J.,

This is a legal malpractice action brought by plaintiff, Mary Herman, against defendant, Donald Russo, Esquire, in which Ms. Herman alleges that attorney Russo negligently represented her in an earlier suit that she filed. Before the court is a motion for summary judgment filed by attorney Russo. I enter an order today granting summary judgment as to all malpractice claims against attorney Russo except those which relate to his not having named retired Carbon County President Judge Richard Webb as a defendant in the earlier lawsuit.

The plaintiff was employed for 18 years as Jury Clerk of Carbon County. In this full-time position, she served as an employee of the Carbon County Jury Selection Commission. The Jury Commission was composed of three members, Brenda Ellis, William Poluka and Judge Webb.

During an October 27, 2003, meeting of the Jury Commission, Judge Webb proposed that the full-time position of jury clerk, which Ms. Herman occupied at that time, be eliminated and replaced with a newly created part-time position of Jury Selection Commission Clerk. During the meeting, Judge Webb voted to approve his recommendation while Jury Commissioners Ellis and Poluka voted against the recommendation. Despite the vote, Judge Webb advanced a recommendation to the Carbon County Salary Board that the position of jury clerk be eliminated and replaced with the part-time position.

On December 12, 2003, plaintiff sent a letter to the Carbon County Commissioners requesting that they decline to implement Judge Webb’s recommendation. She also openly supported Jury Commissioners Ellis and Poluka when they spoke with the media about the issues which existed on the Jury Commission. Ms. Herman appeared in a newspaper photograph with Ellis and Poluka under which the caption had the words, “they are complaining.” Ellis and Poluka also filed a complaint against Judge Webb with the Judicial Conduct Board. Ms. Herman contends that she “supported” the filing of the complaint.

The Carbon County Commissioners, acting in accord with the recommendation of the Carbon County Salary Board and Judge Webb, voted in favor of implementing Judge Webb’s proposal, eliminated the full-time position of jury clerk and replaced it with the part time-position. This was done despite the efforts of Ms. Herman. Ms. Herman claims that Judge Webb told her that her position was changed to part-time in retaliation for the actions taken against him by Jury Commissioners Ellis and Poluka. Many of Ms. Herman’s duties as Jury Clerk were transferred to a woman who was younger than she.

Based on these occurrences, Ms. Herman brought a civil suit in the United States District Court for the Middle District of Pennsylvania (district court) against Carbon County, Carbon County Court Administrator Roberta Brewster, Carbon County Commissioner WilliamO’Gurek, Commissioner Wayne Nothstein and Commissioner Charles Getz. In her complaint, she alleged that, by eliminating her full-time position, the parties she sued: (1) violated her first amendment rights; (2) violated her due process rights; (3) violated Pennsylvania’s Whistleblower Law, 43 Pa.C.S. §§ 1421-1428; and (4) violated the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634. Attorney Russo represented Ms. Herman in that suit.

When discovery was completed in the district court case, the defendants there filed motions for summary judgment with supporting briefs. Attorney Russo, acting on behalf of Ms. Herman, failed to file a brief in opposition to the motions despite being ordered by the district court to do so. The district court subsequently granted the motions and entered judgment in favor of defendants.

After entry of the order granting summary judgment, attorney Russo filed a motion for reconsideration. In the motion, he explained that his failure to file a brief resulted from staffing problems in his office and a family emergency. The district court granted attorney Russo’s motion for reconsideration and ordered him to file a brief in opposition to the motions for summary judgment and a statement of facts under to District Court Local Rule 56.1. Local Rule 56.1 requires a party moving for summary judgment to submit a list of undisputed facts and to cite the record to corroborate the list. Under the rule, the party opposing summary judgment must submit a responsive itemized list of disputed facts with citations to the record.

Attorney Russo filed a brief. He also filed a statement of facts under Local Rule 56.1. However, the district court noted that Attorney Russo’s statement of facts did not adhere to the rule in several respects. First, Attorney Russo’s statement did not specifically respond to each of the numbered paragraphs of the statement of facts by the parties seeking summary judgment. Second, the statement failed to include citations to portions of the record. Third, the statement of facts was nearly a verbatim recitation of the allegations in the complaint.

On May 5, 2009, the district court entered an order granting the motions for summary judgment and dismissing all of Ms. Herman’s claims. Ms. Herman filed an appeal to the United States Court of Appeals for the Third Circuit (circuit court). On September 14, 2010, the circuit court affirmed the district court’s order granting the motions for summary judgment.

Ms. Herman began the present legal malpractice suit by filing a praecipe for writ of summons against attorney Russo on March 3, 2011, and, on May 15, 2012, she filed the current complaint. The complaint has the following counts: count I (professional negligence), count II (breach of contract/covenant of good faith and fair dealing), and count III (breach of fiduciary duty). In the complaint, Ms. Herman alleges that attorney Russo was negligent in his representation of her in the district court case as a result of which her claims in that case were dismissed by summary judgment. The complaint also contains breach of contract and breach of fiduciary duty claims, but these claims are premised on attorney Russo’s alleged professional negligence.

Ms. Herman says that attorney Russo was negligent in three separate ways. First, she alleges that attorney Russo’s failure to adhere to District Court Local Rule 56.1 resulted in that court’s only considering defense evidence in ruling on the summary judgment motions. Next, she argues that attorney Russo failed to engage in adequate discovery and develop a factual record that could withstand summaiy judgment. Third, she contends that attorney Russo should have named Judge Webb as a defendant in the district court case because she had a valid first amendment retaliation claim against the judge.

Attorney Russo filed a motion for summary judgment on November 14, 2012, which is now before the court. Ms. Herman filed an answer in opposition. For the reasons that follow, I grant the motion for summary judgment as to malpractice by attorney Russo based on his alleged mishandling of the district court suit against the defendants named therein who were Carbon County Court Administrator Roberta Brewster and Commissioners William O’Gurek, Wayne Nothstein and Charles Getz. However, I deny summary judgment on this malpractice suit for the claim related to attorney Russo’s failure to name Judge Webb as a defendant in the district court case.

To succeed in a legal malpractice action, the Pennsylvania Supreme Court has held that,

a plaintiff must prove a case within a case since he must initially establish by a preponderance of the evidence that he would have recovered a judgment in the underlying action.... It is only after the plaintiff proves he would have recovered a judgment in the underlying action that the plaintiff can then proceed with proof that the attorney he engaged to prosecute or defend the underlying action was negligent in the handling of the underlying action and that negligence was the proximate cause of the plaintiff’s loss since it prevented the plaintiff from being properly compensated for his loss.

Kituskie v. Corbman, 552 Pa. 275, 282, 714 A.2d 1027, 1030 (1998).

Was attorney Russo’s decision not to name Judge Webb as a defendant in the district court suit malpractice? Before that earlier suit was brought, plaintiff and attorney Russo discussed naming Judge Webb as a defendant on a first amendment retaliation theoiy. Here is attorney Russo’s summary of that discussion:

She (Ms. Herman) asked me what I thought about it (joining Judge Webb as a party in the earlier suit). And my response was that suing a judge would completely change the complexion of the case. First of all, the sympathy level that we would expect to receive from the trier of fact, from other judges, would be minimized and I think would have a deleterious effect on the strength of her case, on the thrust of our case. So I argued against it. She, at least from what I could tell, appeared to accept my argument that it would not be a good idea.

Deposition of attorney Donald Russo, (10/4/12), p. 35 (attached to “plaintiff’s response in opposition to defendant’s motion for summary judgment” as Exhibit A).

The Honorable James M. Munley was the judge on the United States District Court for the Middle District of Pennsylvania who granted the motions for summary judgment in the district court case. In the opinion that he drafted accompanying the order by which the motions for summary judgment were granted that case, he gave a summary of the law of first amendment retaliation, memorandum, (5/6/09), pp. 8-10, Herman v. County of Carbon, et al. (3:04cv614). I incorporate that portion of Judge Munley’s opinion into this opinion. On the other hand, I do not rely on the following dictum which Judge Munley stated in his earlier opinion: “Plaintiff (Ms. Herman) has therefore produced evidence by which a jury could conclude that Judge Webb sought to reduce her hours in retaliation for her support of the jury commissioners in their dispute with him. Judge Webb, however, is not a defendant in this case (the earlier district court case).” memorandum, (5/6/09), p.12. Rather, my independent inquiry leads me to the conclusion that suit may proceed against attorney Russo for failing to join Judge Webb on the earlier first amendment retaliation claim.

Although there are many facts to be sorted out in the next discovery period and at trial, there are sufficient facts to support each element of a retaliation claim. In Brennan v. Norton, 350 F.3d 399 (3d Cir. 2003), the United States Court of Appeals for the Third Circuit explained that a public employee bringing a first amendment retaliation claim had to demonstrate the following: (1) the employee engaged in speech that involved a matter of public concern; (2) the employee’s interest in the speech outweighs the potential harm the speech may cause to the public employer’s ability to provide efficient services; and (3) the speech was a substantial or motivating factor for the employer taking a retaliatory action against the employee. Id. at 412-414.

The record before Judge Munley demonstrated that plaintiff served as an employee of the Carbon County Jury Selection Commission, which was composed of Brenda Ellis, William Poluka and Judge Webb. After Ellis and Poluka voted against Judge Webb’s recommendation to eliminate plaintiff’s position, plaintiff openly supported Ellis and Poluka when they spoke with the media about jury selection commission issues which could be considered matters of public concern. Plaintiff then appeared in the newspaper photograph with Ellis and Poluka which had in the caption, “they are complaining.” Plaintiff also “supported” the filing of the complaint by Ellis and Poluka with the Judicial Conduct Board. Finally, plaintiff claimed that Judge Webb told her that her position was changed to part-time in retaliation for her support of the actions taken by Ellis and Poluka. Accepting all of these contentions as true, plaintiff could have maintained a First Amendment retaliation claim against Judge Webb.

In defense to the claim that he committed malpractice by not naming Judge Webb as a defendant in the district court suit, attorney Russo cites Muhammad v. Strassburger, 526 Pa. 541, 587 A.2d 1346 (1991), for the proposition that the determination of who should be joined in a lawsuit is an issue of legal strategy which cannot form the basis of a legal malpractice action. The Pennsylvania Supreme Court makes no such sweeping statement in its Muhammad decision. Rather, under Muhammad, unless fraud can be shown, a legal malpractice action will not be sustained which is brought by a dissatisfied plaintiff against his attorney for a settlement to which the plaintiff agreed. Muhammad has a narrow application which is not pertinent to this case.

One may question whether suit may proceed against a judge in the face of the concept of judicial immunity. Immunity was not raised in the present case and, perhaps, for good reason. It has been observed that “administrative, legislative or executive functions” of a judge, even if he is required to perform those in his official capacity, are not “purely judicial acts” entitled to judicial immunity. Langella v. Cercone, 34 A.3d 835, 839 (Pa.Super. 2011).

In sum, plaintiff can pursue her malpractice claim against attorney Russo based on the failure to sue Judge Webb in the district court case. Further, because plaintiff’s breach of contract and breach of fiduciary duty claims against attorney Russo are also premised on the attorney’s alleged negligence in failing to sue Judge Webb, plaintiff may also pursue those claims at trial.

Summary judgment must be granted for attorney Russo on all claims for legal malpractice in regard to the earlier suit that he brought against Carbon County, the court administrator and the commissioners (hereafter, “the county defendants”). Judge Munley ruled as a matter of law that the various theories Russo stated against the county defendants in the district court action were meritless. But plaintiff says, in the present case, that all of the facts were not properly developed and presented to Judge Munley by attorney Russo. Had he done so, according to the plaintiff, summary judgment would not have been granted by Judge Munley and plaintiff would have eventually had a favorable result in the earlier suit. This has not been shown with the record presented to me for disposition of the present motion for summary judgment. There is nothing new in the present case to indicate that Judge Munley was insufficiently informed in ruling on summary judgment.

The parties must consider the fashion in which Judge Munley handled attorney Russo’s Local Rule 56.1 statement of facts. Refer to footnote 1 of the memorandum in which Judge Munley stated the facts that he would consider in deciding the earlier motions for summary judgment. Footnote I reads:

These facts are taken from the plaintiff’s ... complaint. The plaintiff has never filed with the court a statement of material facts that references the relevant portions of the record, as required by Local Rule 56.1. In the relevant portions of the opinion, however, the court will address the relevant facts cited by all parties.

Memorandum, (5/6/09), p. 1. It would appear from this that Judge Munley used a factual scenario stating plaintiff’s best case as stated in the complaint in deciding the motions for summary judgment.

Additionally, the present legal malpractice action provided plaintiff with the opportunity to develop a record to show what facts attorney Russo failed to develop in the earlier district court case. Despite the provision of months for plaintiff to develop this additional record, plaintiff has presented nothing beyond what Judge Munley knew. The only effort at supplementing the record was done with the filing of exhibits on November 14, 2012, by defendant attorney Russo. There were no new facts in these exhibits. Thus, there is no showing that Judge Munley’s dismissing the county defendants was improper. Since his ruling was made as a matter of law, there is no basis now for a legal malpractice action against attorney Russo related to the county defendants.

Defendant also asks for summary judgment because plaintiff failed to produce expert testimony to support her malpractice action against attorney Russo. It is understandable that plaintiff would interpret Paragraph 1 of the June 21, 2012, order as not compelling expert discovery by October 1, 2012. Paragraph 1 left open the possibility of further discovery after disposition of the present motion for summary judgment. Fairness requires that plaintiff be provided time after today’s ruling to secure expert testimony. Accordingly, the Lehigh County court administrator will be scheduling this case for another status conference before the presently assigned judge for him to determine the appropriate expert discovery deadline and for whatever other action he deems appropriate.


author: JOHNSON, J.,

text:
    Investors Savings Bank v. Hillside Valley, L.P.

      C.P. of Lehigh County,
    No. 2011-C-0912.

      Cheryl A. Garber, for plaintiffs.

      Joel B. Wiener, for defendants.
    March 20, 2013
   JOHNSON, J.,

I. Introduction

Before the court are two consolidated cases. The first is an action in mortgage foreclosure brought by Investors Savings Bank, (“Investors”), against Hillside Valley L.P., (“borrower”), in which a confessed judgment was entered on December 21,2010. The second action was instituted on February 23,2011 against Defendants David M. Connolly (“Connolly”) and Richard Colasuonno (“Colasuonno”) (collectively “defendants”) for breach of the Guaranty of Payment (“guaranty”) that the defendants executed. The issues before the court are: 1) the standing of DRA Hillside L.P. (“DRA”) in this case; 2) the amount due on the construction and permanent note between borrower and DRA (“note”); 3) the fair market value of the subject property located at 301-699 River Drive (a/k/a River Road) lot 003, block 004, PIN number 6407914595401, Allentown PA (“property”) as of January 27, 2012, which includes the sub-issues of the cost to complete construction and the developer’s discount incentive rate; 4) the deficiency, if any, owed by the defendants; and 5) the set-off, if any, to which the defendants are entitled as against any deficiency.

II. Findings

We find that, on S eptember 30,2011, Investors assigned all of its right, title and interest in and to the guaranty, note, mortgage and related loan documents to DRA pursuant to the bill of sale and assignment of note, mortgage and other loan documents. Plaintiff’s exhibit 1. Pursuant to section 19 of the guaranty, the guaranty is “binding upon and shall inure to the benefit of Lender...and [its] respective heirs, personal representatives, successors and assigns. This Guaranty may be assigned by lender with respect to all or any portion of the obligations guaranteed hereby, and when so assigned Guarantor shall be liable under this Guaranty to the assignee(s) of the portion(s) of the obligations guaranteed hereby so assigned...” Plaintiff’s Exhibit 9 at ¶ 19. Although the actual agreement between DRA and investors was not provided to the court, the bill of sale clearly assigns all rights to DRA as evidenced by the phrase “without limitation” preceding the list of instruments assigned as set forth in the bill of sale. Therefore, DRA stands in the shoes of investors for the purposes of this case and is the proper plaintiff to bring suit to enforce both the guaranty and the note.

We find that, on or about December 21, 2010, a confession of judgment was entered in favor of investors and against borrower in the amount of $15,551,479.97 in the Lehigh County Court of Common Pleas, in the action captioned as Investors Savings Bank v. Hillside Valley, L.P., No. 2010-N-1259 (“confession of judgment”). Jonathan Stein (“Stein”), after first testifying that the balance due was approximately $16,500,000.00, had his recollection refreshed upon being presented with a piece of paper, which was simply a listing of figures and which was not admitted into evidence, testified that the balance due on the note is sixteen million five hundred forty-nine thousand nine hundred thirty-three dollars and twenty-one cents ($16,549,933.21). Plaintiff fails to present satisfactory documentary evidence of this figure, when it is readily available and is the best evidence of the balance due on the note. A simple bank statement or account ledger from the bank should show the proper balance due. While this court finds Stein’s testimony credible, the fact that he asserts that his company’s agreement with investors is confidential does not relieve DRA, as a plaintiff, of its burden to present sufficient evidence to prove its claims. The confession of judgment is the most credible and reliable, and thus the best, evidence that the plaintiff has provided and, thus, this court finds that $15,551,479.97 is the balance due on the note.

We find the expert testimony of Linda Dietrick (“Dietrick”) credible in all respects and as to her determination of the fair market value of the property as of January 27, 2012, the date of the sheriff’s sale. According to Dietrick’s testimony, the fair market value as of January 27, 2012 was $7,280,000.00. We find that this valuation is properly supported by facts, reasons and basis for Dietrick’s opinion. We find that the cost to complete construction, which is used in determining fair market value, is $8,742,419, as testified to by Dietrick. We also accept her finding as to construction costs in determining fair market value. Further, we accept 20% as the developer discount rate, as testified to by Dietrick. Defendant presented no expert witness to contradict Dietrick’s testimony. Thus, we find that the fair market value of the property as of January 27, 2012 is $7,280,000.00.

We find that the deficiency due under the guaranty is $8,271,479.97. We arrive at this figure by starting with the amount due on the note, as stated in the confession of judgment, $15,551,479.97, and subtracting the fair market value at the time of the sheriff’s sale, $7,280,000.00.

We find that no setoff can be awarded in favor of the defendants and against the plaintiff to decrease the deficiency they owe to DRA. The defendants testified only as to general figures, testified that they spent “approximately” $980,000.00 in payments on the note and for improvements to the property, and failed to provide any specific information or documentation to support those figures. In addition, the court does not find the testimony of the defendants credible; in part, because of its lack of specificity and, in part, because of their manner of testifying and, as to Connolly, in part, because of his criminal conviction for securities fraud and money laundering.

III. Conclusion

Based on the findings set forth above, Connolly and Colasuonno signed a valid guaranty along with the other related documents to the subject loan. Upon default, a confession of judgment was entered in the amount of $ 15,551,479.97. The fair market value of the property as of January 27, 2012 was $7,280,000.00. The defendants are not entitled to any set-off against the amount owed. The result of these findings is that the defendants, Connolly and Colasuonno, owe DRA a deficiency under the guaranty of $8,271,479.97.

ORDER

And now, this 20th day of March, 2013, after conducting a non-jury trial on February 5, 6, and 7, 2013, and for the reasons set forth in the accompanying opinion;

It is hereby ordered that a verdict is entered in favor of the plaintiff, DRA Hillside L.R, and against defendants, David M. Connolly and Richard Colasuonno, in the amount of $8,271,479.97.


text:
    Dotterer v. School District of the City of Allegheny

      C.P. of Lehigh County,
    No. 2012-C-3804.

      Thomas L. Kelly, for plaintiff

      Brian J. Taylor, for defendants
    April 17, 2013
   JOHNSON, J.,

Before this court for consideration is the joint defendants’ preliminary objections and motion to dismiss. The defendants seek demurrer for lack of jurisdiction under Pa.R.C.P. 1028(a) (1) and, in the alternative, demurrer for legal insufficiency under Pa.R.C.P. 1028(a)(4). In order for the defendants to prevail on either of these arguments they must show that, viewing the evidence in a light most favorable to the plaintiff, the plaintiff cannot sustain a cause of action.

The first issue to be addressed is whether this court may exercise jurisdiction over this case. The defendants raise the issue of subject matter jurisdiction. After extensive briefing and argument by both parties, the issue presented is whether a claim for previous salary and benefits in retirement brought by a former assistant principal against his former school district and school board can be heard in the court of common pleas. The defense argues that, under the Public School Code of 1949, 24 P.S. 1-101 et. seq. (“code”), there is an administrative process in place to deal with issues relating to school employees, including demotion. The defense claims that it is improper to allow plaintiff to circumvent this statutory procedure. Briefly, the process laid out by the statute entitles a professional employee, which includes assistant principals and therefore the plaintiff in this case, the right to a hearing before the school board. Decisions of the school board, including the failure to conduct a hearing, may be appealed to the Pennsylvania Secretary of Education (“Secretary”). The Secretary’s decision may be appealed to the Commonwealth Court of Pennsylvania. The plaintiff argues that he should not be subject to this process for two reasons. First, the school board was dilatory in holding a hearing on his demotion and, therefore, the plaintiff was forced to seek an alternative remedy. Second, the plaintiff officially retired before a demotion hearing was held and once the plaintiff was no longer an employee of the school district, he was not subject to a hearing under the code.

First, this court will address the issue the plaintiff raises that the hearing before the school board was dilatory. This issue is not relevant for proving the subject matter jurisdiction of this court. The fact that the school board’s demotion hearing is not conducted for a lengthy period of time does not excuse a party from following the statutory process and give a party the right to bring his complaint in any forum he pleases. The proper procedure is for the plaintiff to demand a demotion hearing with the school board, and then, if the school board denies the plaintiff that hearing, or holds that hearing and demotes the plaintiff, the plaintiff has the right to appeal to the secretary.

By way of further explanation as to why the plaintiff’s argument is unconvincing, the plaintiff admits that the school board had scheduled a demotion hearing for August 18, 2011, slightly over a month after plaintiff requested a hearing. This hearing was postponed because plaintiff’s counsel and the solicitor for the school district were in discussions for a prospective settlement. There is no explanation as to why the hearing was not rescheduled for almost a year. However, that fact is irrelevant, as the plaintiff was still employed for that entire year and receiving a lower demoted salary. At any point in that year, the plaintiff could have appealed his demotion to the Secretary as prescribed in the code. The plaintiff, upon turning 55, submitted his letter for retirement in August 2012. Shortly thereafter, the school board notified plaintiff that his hearing was scheduled for September 19, 2012. Plaintiff then filed this mandamus action and petitioned for a preliminary/permanent injunction on September 17, 2012. At an emergency hearing on September 17, 2012 this court denied plaintiff’s request for a temporary restraining order and scheduled a hearing for preliminary injunction on September 27, 2012. The plaintiff inexplicably withdrew his request for the demotion hearing that plaintiff had been seeking for almost a year. There is nothing in the evidence or the case law that requires a hearing to be held within a certain amount of time or indicates that, if scheduling of the hearing takes too long, the plaintiff is entitled to circumvent the entire statutory process and file an action with the court of common pleas.

The second issue raised by the plaintiff as a reason this case properly before the court of common pleas, is that the plaintiff retired before his demotion hearing took place, and that the case law submitted by defendants holds that only current employees are subject to the statutory process. The plaintiff’s interpretation of the defendants’ case law is incorrect. In a Commonwealth Court case, a psychologist was fired from her position with a school district and sought to bring her case in the court of common pleas because the school board denied her a hearing on her termination. Wolff v. Board of School Directors of Chichester School District, 59 Pa. Cmwlth. 196, 429 A.2d 129 (1981). In that case, a former employee claimed she was a professional employee under the code and was denied a hearing by the school board and, therefore, filed a complaint in the court of common pleas. Id. The facts of Wolff are very similar to those of the case at bar, especially the fact that Wolff was, as plaintiff is here, a professional employee. In Wolff, the Commonwealth Court held that the school board’s refusal to grant a hearing should have been appealed to the Secretary. Id. at 199-200. Wolff clearly sets forth the procedure that the plaintiff in the case at bar should have followed. As a matter of public policy, it would undermine the integrity of the code to allow issues which arise under the code to be brought in a manner not permitted by the code every time an employee retires. If this court were allow this case to continue in the court of common pleas, it would establish a precedent that any every school district employee in Pennsylvania who is demoted after the age of fifty-five (55) may immediately retire and, thus, to circumvent the code to which they subjected themselves when they accepted employment and by which they have been governed and protected for their entire career.

We find that this court is precluded from exercising jurisdiction over the issue of the previous salary owed to and retirement benefits of a professional employee as defined by the code.

Therefore, the preliminary objection of the joint defendants’ is sustained.

ORDER

And now, this 17th day of April, 2013, upon consideration of the joint defendants’ preliminary objections and motion to dismiss filed on October 8,2012, the plaintiff’s response thereto, oral arguments and for the reasons set forth in the accompanying memorandum opinion;

It is hereby ordered that the preliminary objections are sustained and plaintiff’s complaint is dismissed.


author: PICCIONE, J.,

text:
    US Bank National Association v. Iwanejko

      C.P. of Lawrence County,
    No. 10686.

      Craig A. Himeisen, for plaintiff

      Louis Pomerico, for defendant
    March 5, 2013
   PICCIONE, J.,

Before this court for disposition are the plaintiff’s, US Bank National Association, as trustee for CitiGroup Mortgage Loan Trust 2006-WFHE3, Asset-Backed Pass-Through Certificates, Series2006-WFHE3 (hereinafter, “plaintiff’), preliminary objection to the defendant’s, Robert R Iwanejko (hereinafter, the “defendant”), counterclaim and cross-claim. The current action was commenced on June 6, 2012 when the plaintiff filed a complaint in mortgage foreclosure against the defendant for allegedly defaulting on a mortgage encumbering property he owns in Lawrence County, Pennsylvania. After the defendant filed preliminary objections to the plaintiff’s complaint, the plaintiff filed an amended complaint in mortgage foreclosure (hereinafter, the “amended complaint”) on October 4, 2012.

In the amended complaint, the plaintiff asserts that the defendant executed a note in favor of Wells Fargo Bank, N.A. (hereinafter, “Wells Fargo”) in the original amount of $42,320.00. As security for payment of the note, the defendant executed a mortgage for the above amount on the premises he owns located at 1408 East Washington Street, New Castle, Pennsylvania 16101-4418. Such mortgage was recorded in the Office of the Recorder of Deeds of Lawrence County the following day, on July 27, 2006. The mortgage was assigned by Wells Fargo to the plaintiff pursuant to an assignment of mortgage dated August 11, 2011, which was recorded in the Office of the Recorder of Deeds of Lawrence County on August 15, 2011. The plaintiff asserts that the defendant is in default under the terms of the mortgage for failing to pay the monthly installments of the principal and interest due for May 2011. After providing the defendant with written notice of the default, the plaintiff asserts the entire principal balance and accrued interest due under the mortgage has been accelerated. On July 3, 2011, the plaintiff mailed to the defendant a combined Notice of Homeowners’ Emergency Mortgage Assistance Act of 1983 and written notice of the plaintiff’s intention to foreclose the mortgage pursuant to 41 P.S. § 403. Finally, the plaintiff asserts that as of August 15, 2012, the amount due and owing to the plaintiff is $52,493.76 plus interest and all other additional amounts authorized under the mortgage and Pennsylvania law actually and reasonably incurred by the plaintiffs.

On November 5, 2012, the defendant filed the answer to amended complaint and new matter and counter-claim and cross-claim pursuant to Pa.R.C.P. 1031 andPa.R.C.P. 1031.1. In his answer, the defendant admits the plaintiff’s assertions; although, he asserts that he did not “refuse” to make payments but was “unable” to make payments under the time frame set by the plaintiff. Additionally, the defendant does not agree with the amount due as asserted by the plaintiff. In the defendant’s new matter, the defendant asserts that he was mislead by the plaintiff because the plaintiff led him to believe the bank was “working with him” to work out a payment plan to cure the delinquent mortgage payments. On July 9, 2012, the defendant asserts the plaintiff filed a 10-day notice, in pursuing to go forward with the foreclosure. The defendant claims the plaintiff fraudulently acted as if they were willing to work with him in order to help him save his home from foreclosure while continuing with the foreclosure. He asserts the plaintiff fraudulently induced the defendant not to make payments. In the defendant’s counter-claim, he avers the plaintiff fraudulently induced the defendant not to make payments; and as a result, the plaintiff is liable for damages in excess of $50,000.00. Finally, in the defendant’s cross-claim, he asserts Wells Fargo assigned rights and remedies to the plaintiff but not the liabilities and responsibilities. The defendant avers Wells Fargo is therefore liable for damages due to the fraud alleged in the new matter to the defendant in excess of $50,000.00. In the cross-claim, the defendant refers to Wells Fargo as the “additional defendant”.

On December 14, 2012, the plaintiff filed preliminary objections to defendant’s counter-claim and cross-claim. The plaintiff’s first preliminary objection is in the nature of a demurrer, which asserts the counter-claim is legally insufficient for the following three reasons: (1) because it seeks to assert a claim that is not part of or incidental to the creation of the mortgage; (2) because a counterclaim for affirmative in personam money damages cannot be asserted in an in rem mortgage foreclosure action; and (3) defendant has failed to state a cause of action for fraud against the plaintiff. The plaintiff’s next preliminary objection asserts the defendant improperly joined Wells Fargo as an additional defendant to the action in violation of Pennsylvania Rule of Civil Procedure 2252. Next, the plaintiff asserts that the defendant’s counter-claim and cross-claim fail to allege sufficient facts to support each claim. Finally, the plaintiff’s last preliminary objection alleges insufficient specificity in the counter-claim and cross-claim in violation of Rule 1028(a)(3).

On December 27,2012, the plaintiff filed a praecipe for disposition on written briefs requesting that this court rule on the plaintiff’s preliminary objections on briefs alone. On January 4, 2013, this court ordered the each party to file briefs and ordered the preliminary objections to be decided without oral argument.

When a court is presented with preliminary objections to a complaint, all material facts averred in the complaint, as well as all reasonable inferences deducible therefrom, must be accepted as true. Hess v. Fox Rothchild, LLP, 925 A.2d 798, 805 (Pa. Super. 2007); Tucker v. Philadelphia Daily News, 757 A.2d 938, 941-42 (Pa. Super. 2000). The court must further determine, as a matter of law, whether, based on the facts averred in the complaint, the plaintiff may be entitled to recovery. Wiernik v. PHH U.S. Mortg. Corp., 736 A.2d 616 (Pa. Super. 1999). preliminary objections should only be sustained when the court determines with certainty that, upon the facts averred, the law will not permit the recovery sought by the plaintiff. R. W. v. Manzek, 888 A.2d 740, 749 (Pa. 2005); Bourke v. Kazara, 746 A.2d 642, 643 (Pa. Super. Ct. 2000).

Preliminary objections to a complaint may be filed on the grounds of legal insufficiency of that complaint. Pa.R.C.P. 1028(a)(4). The standard of review for a preliminary objection in the nature of a demurrer is as follows:

A preliminary objection in the nature of a demurrer admits as true all well-pled material, relevant facts and every inference fairly deducible from those facts. The pleader’s conclusions or averments of law are not considered to be admitted as true by a demurrer. Since the sustaining of a demurrer results in a denial of the pleader’s claim or a dismissal of his suit, a preliminary obj ection in the nature of a demurrer should be sustained only in cases that clearly and without a doubt fail to state a claim upon which relief may be granted. If the facts as pleaded state a claim for which relief may be granted under any theory of law, there is sufficient doubt to require the preliminary objection in the nature of a demurrer to be rejected.

Baker v. Central Cambria School Dist., 24 A.3d 488, 492 n.6 (Pa. Cmwlth. 2011) (citing Palmer v. Bartosh, 959 A.2d 508, 512 n.2 (Pa. Cmwlth. 2008) (internal citations omitted)).

First, the plaintiff argues that the defendant’s counterclaim should be dismissed because it seeks to assert a claim that is not part of or incidental to the creation of the mortgage. Pennsylvania Rule of Civil Procedure 1148 provides, “A defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which plaintiff’s cause of action arose.” This rule must be narrowly construed. Cunningham v. McWilliams, 714 A.2d 1054, 1057 (Pa. Super. 1998). “Thus, a counterclaim in a foreclosure action is cognizable if it alleges fraud in the inducement to the mortgage^]” Here, the defendant’s counter-claim asserts that Wells Fargo fraudulently induced the defendant not to make payments. The defendant avers that although the plaintiff filed a complaint in mortgage foreclosure on June 6, 2012, the plaintiff fraudulently acted as if they were willing to work with him in order to help him save his home from foreclosure. The mortgage itself was executed in 2006. The facts alleged by the defendant in his counterclaim occurred after the creation of the mortgage and after he was in default of the mortgage. Therefore, the defendant’s counter-claim is not part of or incident to the creation of the mortgage. The plaintiff’s first preliminary objection is sustained; and the defendant’s counter-claim is dismissed.

The plaintiff’s next preliminary objection alleges the defendant improperly joined Wells Fargo as an additional defendant to the action in violation of Pennsylvania Rule of Civil Procedure 1031.1. In the cross-claim, the defendant avers Wells Fargo assigned its rights and remedies to the plaintiff but not the liabilities and responsibilities. Because of this, the defendant avers Wells Fargo is liable for damages due to the alleged fraudulent inducement of payments described supra. The defendant also addresses Wells Fargo as an “additional defendant” in the cross-claim.

Pennsylvania Rule of Civil Procedure 1031.1 provides in relevant part, “Any party may set forth in the answer or reply under the heading ‘cross-claim’ a cause of action against any other party to the action[.]” (emphasis added). Wells Fargo is not an existing party to the action. Similarly, the defendant has not attempted to join Wells Fargo as an additional defendant. Without considering the merits of the defendant’s cross-claim, because Wells Fargo is not an existing party to the action, nor has the defendant attempted properly to join it as an additional defendant, the plaintiff’s preliminary objection is sustained. The defendant’s cross-claim is therefore dismissed.'

Based upon the foregoing, the plaintiff’s preliminary objections in the nature of a demurrer and improperly joining an additional defendant are sustained, and the defendant’s counter-claim and cross-claim are dismissed.

ORDER OF COURT

And now, March 05, 2013, the court having decided the issue regarding plaintiff’s preliminary objections to defendant’s counter-claim and cross-claim on briefs alone, with Craig A. Himeisen, Esquire, representing the plaintiff, and Louis Pomerico, Esquire, representing the defendant, and after a complete and thorough review of the applicable record, the court finds, and it is hereby ordered and decreed as follows:

1. The plaintiff’s preliminary obj ection in the nature of a demurrer is sustained pursuant to the attached opinion.

2. The defendant’s counter-claim is hereby dismissed.

3. The plaintiff’s preliminary objection alleging misjoinder of an additional defendant is sustained pursuant to the attached opinion.

4. The defendant’s cross-claim is hereby dismissed.

5. The defendant is permitted to file an amended answer to the plaintiff’s amended complaint within twenty (20) days of the date of this order.

6. The prothonotary shall properly serve notice of this order and attached opinion upon counsel of record; and if a party has no counsel, then upon said party at their last known address as contained in the court’s file.

      . The mortgage was assigned by Wells Fargo to the plaintiff pursuant to an assignment of mortgage dated August 8,2011 and recorded August 17, 2011. This assignment of mortgage was inadvertently prepared and recorded twice.

      . Because this court finds the defendant’s counter-claim is legally insufficient because it violates Pa.R.C.P. 1148, the court will not address the plaintiff’s other arguments alleging its legal insufficiency.

      . Because court has dismissed the defendant’s counter-claim and cross-claim, it will not address the plaintiff’s remaining preliminary objections that neither the counter-claim nor the cross-claim allege sufficient facts to support the claims contained therein.


text:
    Rice v. Taves

      C.P. of Lehigh County,
    No. 2011-C-4252

      Stephen J. Margolis, for plaintiff

      Kimberly G. Krupka, for defendants
    March 14, 2013
   JOHNSON, J.,

Before this court is the plaintiffs, William E. Rice, Jr., executor of the estate of Jo Anne Rice, deceased, and William E. Rice, Jr., individually, motion to compel compete (sic) answers To interrogatories and request for production of documents from defendants, Judith Taves, HHA, CAN, Lehigh Valley Home Care, Lehigh Valley Hospice, Lehigh Valley Hospital, Inc., and Muhlenberg Hospital Center (“plaintiff’s motion”) filed on November 13, 2012. In a previous order, this court made a decision relating to the interrogatories. We now address the second part of the said motion seeking to compel the defendants to produce a report which has been referred to as an “investigative report,” “incident report,” and “patient safety report.” This court finds that all of these references refer to the same report which the court reviewed in camera, which we will refer to as the patient safety report (“PSR”). The defendants have claimed that the PSR is privileged under the Peer Review Protection Act (“PRPA”), 63 P.S. § 425.1-425.4, and the Medical Care Availability and Reduction of Error Act (“MCARE”), 40 P.S. § 1303.101-1303.910. When a party claims privilege of a document, the burden is on the party claiming that privilege to prove they are entitled to refrain from producing it.

The defendants have shown that the PRPA and MCARE both have provisions which create confidential documents to be used in the peer review process in an effort to improve the health care system by encouraging honesty in self-correction. To prove compliance with PRPA and MCARE, the defendants provided the testimony of Georgene Saliba, Judith Taves, and Brian LaSalle.

The plaintiff claims that, even if there was no breach of confidentiality, she is entitled to the facts Ms. Taves disclosed in the PSR because those facts are otherwise available from original sources as discuss in 40 P.S. § 1303.311(a). The plaintiff also claims that the defendants must prove that the PSR was actually reviewed by the Patient Safety Committee or governing board of a medical facility as outlined in 40 P.S. §1303.311(a).

The plaintiff’s first argument about original sources misinterprets MCARE. The purpose of the original sources exception under MCARE appears to be that a hospital cannot attach other documents and reports which are used in the normal course of treatment to a report created for the Patient Safety Committee in order to make those original documents confidential. The court here finds that the PSR at issue in this case was created for the purpose of compliance with PRPA and MCARE and, therefore, even the factual statements contained in it are not original source documents which are discoverable under PRPA and MCARE.

The court finds that there was no breach in the confidentially of the PSR. Neither counsel, nor any witness presented, had seen the PSR and the in camera review showed no sign that the PSR was ever accessed by a department other than the patient safety department. The court was unable to identify all the positions of every individual on the PSR but, based on the departments that accessed the PSR, according to the report, it was kept confidential consistent with the requirements of PRPA and MCARE.

The other issue raised by the plaintiff is the claim that the PSR is not protected as confidential under PRPA and MCARE because the defendants have not shown that the PSR was ever actually used in peer review. This claim is based on the language of MCARE:

“Any documents, materials or information solely prepared or created for the purpose of compliance with section 310(b) or of reporting under section 304(a)(5) or (b), 306(a)(2) Or (3), 307(b)(3), 308(a), 309(4), 310(b) (5) or 313 which arise out of matters reviewed by the patient safety committee pursuant to section 310(b) or the governing board of a medical facility pursuant to section 310(b)... ”40 P.S.§ 1303.311(a).

This language has been interpreted in Treible v. Lehigh Valley Hospital Inc., 2005 WL 3947166, 75 Pa. D. & C. 4th 22 (2005). In that case, Judge Black held that the confidentiality protections of PRPA and MCARE did not apply when there was no proof that the report was ever peer reviewed. Ms. Saliba also testified in the Treible case. The facts in Treible are similar to the instant case on the issue of confidentiality except that the report at that point in time was called a Quality Assurance Review Form, which Ms. Saliba now testifies is no longer used. Judge Black, citing Atkins v. Pottstown Memorial Medical Center, 430 Pa. Super. 279, 283, 634 A.2d 258, 260 (1993), held that the hospital has the burden of proving the reports were used by a peer review committee. Treible, at 27 (2005). Although the form name and process may have changed, this court finds that the same burden still applies to a hospital seeking to claim privilege. The burden to show privilege lies with the party claiming privilege. Ms. Taves and Mr. LaSalle did not testify that the PSR was actually peer reviewed. Ms. Saliba testified that she is a member of the patient safety council, although not the board, and that she cannot recall if this PSR was ever reviewed by herself or anyone else. While Ms. Saliba explained in great detail the extensive process Lehigh Valley Hospital has in place to comply with MCARE, she did not state that this PSR was ever in front of a peer review committee.

Therefore, we are compelled to reach the same conclusion as the court in Treible that the defendants have failed to prove that the PSR is privileged under PRPA or MCARE because they have failed to prove that it was ever reviewed by a peer review committee.

Therefore, the plaintiff’s motion to compel the production of the Patient Safety Report is granted.

ORDER

And now, March 14, 2013, upon consideration of the plaintiffs, William E. Rice, Jr., executor of the estate of Jo Anne Rice, deceased, and William E. Rice, Jr., individually, motion to compel compete (sic) answers to interrogatories and request for production of documents From defendants, Judith Taves, HHA, CAN, Lehigh Valley Home Care, Lehigh Valley Hospice, Lehigh Valley Hospital, Inc., and Muhlenberg Hospital Center filed on November 13,2012, after arguments heard on January 18, 2013 and March 8, 2013, and for the reasons set forth in the accompanying memorandum opinion;

It is hereby ordered that plaintiff’s motion to compel defendants to produce the patient safety report is granted.

It is further ordered that the defendants shall have ten (10) days from the date of this order to mail a copy of the patient safety report to opposing counsel and to this court.

      . This report has been referred to as several documents throughout the arguments and briefs including investigative report, incident report, and patient safety report. It appears that all the references have been to one (1) document which this court reviewed in camera.


author: COX, J.,

text:
    Gwin v. Gwin

      C.P. of Lawrence County,
    No. 10923 of 2012.

      Richard A. Harper, for plaintiff

      Phillip L. Clark, Jr., for defendant
    March 18, 2013
   COX, J.,

Before the court for disposition are the preliminary objections to counterclaim filed on behalf of the plaintiff John D. Gwin, executor of the estate of Ellen Mae Gwin, deceased, which argue that the defendant’s counterclaim for breach of contract is legally insufficient as the defendant has failed to adequately aver an express contract giving rise to a duty to pay for services rendered during the decedent’s lifetime. The plaintiff also contends that the counterclaim lacks specificity regarding the contract between the defendant and the decedent for services rendered during the decedent’s lifetime.

The facts as averred in the complaint are as follows: The plaintiff and the defendant Barry E. Gwin are the sons of Ellen Mae Gwin (hereinafter “decedent”), who is deceased. The plaintiff was appointed as the executor of the estate of Ellen Mae Gwin as evidenced by letters testamentary issued by the Register of Wills of Lawrence County on February 9, 2012. The defendant received several loans from the decedent during her lifetime. On November 2, 2003, the decedent loaned the defendant $30,000.00, but the defendant did not make the necessary payments on that debt. The defendant and decedent entered into a loan repayment agreement on February 4, 2009, in which the defendant agreed to monthly payments of $500.00 on the loan that accrued interest making the total amount owed $44,000.00. The decedent loaned the defendant an additional $10,000.00 in 2008, which the defendant agreed to repay.

The plaintiff avers that the defendant currently owes $2,500.00 on the 2008 loan and the entirety of the $44,000.00 debt stated in the loan repayment agreement. The plaintiff filed suit August 2, 2012, seeking to recover those amounts from the defendant. On August 22,2012, the defendant filed an answer to complaint and counterclaim. In his counterclaim, the defendant averred that he provided the decedent with substantial services, including food and other sustenance, for a period of 26 years at the decedent’s insistence. He is seeking reimbursement in the amount of $48,260.00 for those services and expenditures. In response, the plaintiff filed these preliminary objections to counterclaim arguing that the defendant failed to state a claim for breach of contract as he failed to allege facts establishing there was an express contract in which the decedent agreed to pay for the alleged services and the counterclaim lacks specificity because it fails to specify the dates, times and value of the alleged services provided to the decedent.

“A preliminary objection in the nature of a demurrer is properly granted where the contested pleading is legally insufficient.” Cooper v. Frankford Health Care System, Inc., 960 A.2d 134, 143 (Pa. Super. 2008) (citing Cardenas v. Schober, 783 A.2d 317, 321 (Pa. Super. 2001)). A demurrer must be resolved based solely on the pleadings, no testimony or evidence outside of the complaint may be considered to dispose of the legal issue presented, Id. “All material facts set forth in the pleading and all inferences reasonably deducible therefrom must be admitted as true.” Hess v. Fox Rothschild, LLP, 925 A.2d 798, 805 (Pa. Super. 2007) (citing Cardenas, 783 A.2d at 321). A demurrer will only be sustained in cases where the complaint fails to set forth a valid cause of action. Lerner v. Lerner, 954 A.2d 1229, 1235 (Pa. Super. 2008) (citing McArdle v. Tronetti, 426 Pa. Super. 607, 627 A.2d 1219, 1221 (1993)). If a doubt exists regarding whether a demurrer should be sustained, the doubt must be resolved in favor of overruling the demurrer. R.W. v. Manzek, 585 Pa. 335, 351, 888 A.2d 740, 749 (2005)(citations omitted). Fact-based defenses are irrelevant when ruling on a preliminary objection in the nature of a demurrer. Werner v. Plater-Zyberk, 799 A.2d 776, 783 (Pa. Super. 2002) (citing Orner v. Mallick, 515 Pa. 132, 135, 527 A.2d 521, 523 (1987)). “A ‘speaking demurrer’ is defined as ‘one which, in order to sustain itself, requires the aid of a fact not appearing on the face of the pleading objected, or in other words, which alleges or assumes the existence of a fact not already pleaded, and which constitutes the ground of objection and is condemned both by the common law and the code system of the pleading.” Regal Indus. Corp. v. Crum and Forster, Inc., 890 A.2d 395, 398 (Pa. Super. 2005) (quoting Black’s Law Dictionary 299 (6th ed. 1991)). The court is not permitted to consider a speaking demurrer in rendering its decision on preliminary objections. Id.

There is no recovery for services provided by a child and parent in the absence of an express contract to pay for those services. Appeal of Miller, 100 Pa. 568 (Pa. 1882) see also In re Shadle’s Estate, 30 Pa. Super. 151 (1905). There is no implied contract unless there is direct, clear and positive proof of an express contract where a child takes his parents into his house and supports them. Id. “Thus the rule that for services rendered a parent cannot recover from a child, or a child from a parent, in the absence of an express contract to pay for them, even though the child is of full age and lives in a home of his own.” Young v. Hipple, 273 Pa. 439, 447, 117 A. 185, 188 (1922) (citations omitted). “The law implies no promise on the part of a parent to pay for services rendered, or support or attendance given, by the child as such, even after the child has become of age, and in the absence of clear and distinct proof of an expressed contract, no allowance can be made or recovery had from a parent’s estate on such a claim.” In re Dettenmaier’s Estate, 13 Pa. Super. 170 (1899) (citing Appeal of Candor, 1843 WL 5086 (Pa. 1843); Murphy v. Corrigan, 161 Pa. 59, 28 A. 947 (1894)). This type of contract is treated with disfavor under Pennsylvania law, so to establish a contract in these circumstances the proof must be clear, distinct and satisfactory. Id. “The terms of such a contract must appear, from the evidence, to have been definite and certain. Mere loose declarations of the decedent are not sufficient.” Id. (citations omitted).

It is apparent that the well-established law in Pennsylvania does not favor implying a contract in a situation where a parent cares for a child or a child cares for a parent. This is a situation in which the law implies that these acts were performed gratuitously without clear evidence of an intention on behalf of the parent or child to pay for those services. However, that does not mean that a child cannot recover money spent while caring for a parent. It is incumbent upon that child to demonstrate that his or her parent agreed to reimburse the child for those expenditures. In the current case, the defendant has failed to adequately aver that the decedent agreed to pay for the services rendered during her lifetime. Absent such allegations, there is no basis in Pennsylvania law for the defendant to recover any expenses he may have incurred. Although a cause of action may exist if an express agreement was stated in the counterclaim, the defendant has failed to aver that any agreement to pay for the services rendered by the defendant was expressed by the decedent. Therefore, the court sustains the plaintiff’s first preliminary objection and the defendant is granted leave to amend his counterclaim.

Next, the plaintiff claims that the defendant’s counterclaim lacks specificity as he failed to aver with specificity the time, extent or value of the each service rendered and there are no specific allegations regarding the decedent’s agreement to pay for those services.

The specificity of a pleading is governed by Pa.R.C.P. No. 1019, which states “(a) The material facts on which a cause of action or defense is based shall be stated in a concise and summary form.” Pennsylvania is a fact-pleading jurisdiction, which requires the plaintiff to provide the defendant with notice of what the plaintiff’s claim is and the grounds for the claim. Unified Sportsmen of Pennsylvania v. Pennsylvania Game Com’n (PGC), 950 A.2d 1120, 1134 (Pa. Cmwlth. 2008) (quoting Sevin v. Kelshaw, 417 Pa. Super. 1, 611 A.2d 1232, 1235 (1992)). Additionally, the plaintiff must summarize the facts essential to support the claims. Id. “The rule requires a plaintiff to plead all the facts that he must prove in order to achieve recovery on the alleged cause of action. The pleading must be sufficiently specific so that the defending party will know how to prepare his defense.” Commonwealth ex rel. Pappert v. TAP Pharmaceuticals Products, Inc., 868 A.2d 624, 635 (Pa. Cmwlth. 2005) (citing Department of Transportation v. Shipley Humble Oil Co., 29 Pa. Cmwlth. 171 370 A.2d 438 (1977)). The purpose behind the rules of pleading is to enable parties to ascertain, by utilizing their own professional discretion, the claims and defenses that are asserted in the case. Krajsa v. Keypunch, Inc., 424 Pa. Super. 230, 236, 622 A.2d 355, 357 (1993). “The pleadings must adequately explain the nature of the claim to the opposing party so as to permit him to prepare a defense, and they must be sufficient to convince the court that the averments are not merely subterfuge.” In re Estate of Schofield, 505 Pa. 95, 477 A.2d 473 (1984) (citing Sokoloff v. Strick, 404 Pa. 343, 172 A.2d 302 (1961); Hornsby v. Lohmeyer, 364 Pa. 271, 72 A.2d 294 (1950); Rice v. Braden, 243 Pa. 141, 89 A. 877 (1914)). “A more specific complaint will not be required where the details requested are evidentiary in nature.” Hock v. L. B. Smith, Inc., 69 Pa. D. & C. 2d 420, 423 (Pa. Com. PI. Columbia 1974) (citing General Acceptance Corp. v. Wilson, 40 Northumb. L. N. 54).

In the case sub judice, the defendant’s counterclaim lacks the requisite specificity as it merely sets forth that the defendant provided the decedent with substantial services, food and sustenance. The counterclaim also avers that the decedent requested those services throughout her lifetime. However, the counterclaim does not establish a valid contract between the defendant and the decedent, nor does it state that the decedent agreed to pay for the aforementioned services. Moreover, the defendant has failed to adequately aver specific details of the services rendered, including the type of services, the date of those services and the amount owed for each service rendered. As the previously cited case law indicates, the defendant was required to provide direct, clear and positive proof of an express contract to pay for those services. The defendant has failed to aver that the decedent expressly agreed to pay for those services and did not adequately explain the specific details of the services provided. Therefore, the court sustains the plaintiff’s second preliminary objection and the defendant is granted leave to amend his counterclaim to plead the same with more specificity.

For the reasons set forth in this opinion, the plaintiff’s preliminary objections are sustained and the defendant is granted leave to amend his counterclaim.

ORDER OF COURT

Now this March 18, 2013, this case being before the court on February 25, 2013, for oral argument on the preliminary objections to counterclaim filed by the plaintiff, with both parties appearing through their counsel, the plaintiff represented through, counsel, Richard A. Harper, Esquire, and the defendant represented through counsel, Phillip L. Clark, Jr., Esquire and after consideration of the arguments and briefs presented and submitted by counsel and a complete and thorough review of the applicable record, the court enters the following order and it is hereby ordered, adjudged and decreed as follows:

1. In accordance with the attached opinion, the preliminary obj ections to counterclaim filed by the plaintiff are hereby sustained.

2. The counterclaim filed by the defendant is hereby dismissed, without prejudice.

3. The defendant shall have twenty (20) days from the date of receipt of this order of court to file an amended counterclaim.

4. The prothonotaiy is directed to serve a copy of this order of court upon counsel of record, Richard A. Harper, Esquire and Phillip L. Clark, Jr., Esquire.


text:
    Lanigan v. T.H.E. Insurance Co.
    C.P. of Lawrence County,
    No. 11250 of 2010, C.A.

      Paul R. Robinson, for plaintiff

      John T. Pion, for defendants
    March 28, 2013
   PICCIONE, J.,

Before the court for disposition are competing motions for summary judgment filed on behalf of the plaintiff, William Michael Lanigan (hereinafter, “plaintiff’), and the defendant, T.H.E. Insurance Company (hereinafter, “defendant”). The current action arises from an insurance claim submitted by plaintiff to defendant following a motor vehicle accident involving the plaintiff at the Mercer Raceway Park on March 31,2007.

Plaintiff was driving a race car at the Mercer Raceway Park on March 31, 2007. While plaintiff was participating in a race on that date, the throttle of his race car stuck causing plaintiff’s car to strike the catch fence along the race track. Samuel Ketcham and Steven W. Guthrie, Jr. were standing on the opposite side of the catch fense when plaintiff lost control of his race car. Mr. Ketcham suffered serious injuries and Mr. Guthrie died as a result of the accident.

Mr. Ketcham and the estate of Steven W. Guthrie, Jr. filed personal injury lawsuits against plaintiff and Mercer Raceway Park. Plaintiff contacted defendant and requested defendant provide plaintiff with insurance liability coverage, including a defense against the estate of Steven Guthrie, Jr., and Mr. Ketcham under insurance policies that defendant issued to Mercer Raceway Park. Defendant declined coverage for plaintiff. On August 18, 2010, plaintiff initiated the present action against defendant, asserting breach of contract and bad faith claims in his complaint. Defendant subsequently filed an answer and new matter, followed by a reply and new matter from plaintiff. Defendant filed a motion for judgment on the pleadings on March 31, 2011, which was denied by order of court and opinion dated July 8, 2011. A subsequent motion for judgment on the pleadings filed by plaintiff was also denied by order of court dated August 11, 2011.

Defendant filed a motion for summaiy judgment on November 26, 2012. On January 22, 2013, Plaintiff also filed a motion for summary judgment. The two motions for summary judgment were consolidated for argument on February 25, 2013, and are presently before the court for a determination.

Under Pennsylvania law, the standard for summary judgment is set forth by Rule 1035.2 of the Pennsylvania Rules of Civil Procedure. The Rule states:

After the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law
(1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or
(2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury.

Pa.R.C.P. 1035.2. The moving party bears the burden of proving that no genuine issue of material fact exists. Rush v. Philadelphia Newspapers, Inc., 732 A.2d 648, 650 (Pa. Super. 1999). In determining whether summary judgment is appropriate, the trial court is required to view the record in a light most favorable to the non-moving party, and “all doubts as to the existence of a genuine issue of material fact must be resolved in favor of the nonmoving party.” P.J.S. v. Pennsylvania State Ethics Comm’n, 732 A.2d 174 (Pa. 1999) (citing Kapres v. Heller, 640 A.2d 888 (Pa. 1994)). Summary j udgment is proper only when the uncontroverted allegations of record and submitted affidavits demonstrate that no genuine issue of material fact exists, and that the moving party is entitled to judgment as a matter of law. Potter v. Herman, 762 A.2d 1116, 1117 (Pa. Super. 2000).

The crux of the issue presently before the court is based on whether Mr. Guthrie and Mr. Ketcham were “participants” at the time of the accident. The parties do not dispute that plaintiff was a participant in the race on March 31,2007. Plaintiff argues that defendant had a duty to defend plaintiff in the personal injuiy actions initiated by Mr. Ketcham and the estate of Steven W. Guthrie, Jr. based upon the facts asserted in their respective complaints against plaintiff. Defendant alternatively asserts that it had sufficient information at the time the complaints were initiated to establish that plaintiff, Mr. Guthrie and Mr. Ketcham were all “participants” in the race when the accident occurred. Defendant contends that, as a result, plaintiff is not owed coverage under the language of the policies issued to Mercer Raceway Park for this reason.

An insurer’s duty to defend is broader than its duty to indemnify. Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006); General Acc. Inc. Co. of America v. Allen, 692 A.2d 1089, 1095 (Pa. 1997). It is a distinct obligation, separate and apart from the insurer’s duty to provide coverage. Erie Ins. Exch. v. Transamerica Ins. Co., 533 A.2d 1363 (Pa. 1987). An insurer is obligated to defend its insured if the factual allegations of the complaint on its face encompass an injury that is actually or potentially within the scope of the policy. Id. at 1368 (describing the duty to defend as arising “whenever the complaint filed by the injured party may potentially come within the coverage of the policy.” (emphasis in original)); Gedeon v. State Farm Mut. Auto. Ins. Co., 188 A.2d 320 (Pa. 1963); Cadwallader v. New Amsterdam Cas. Co., 152 A.2d 484, 488 (Pa. 1959) (“It is clear that where a claim potentially may become one which is within the scope of the policy, the insurance company’s refusal to defend at the outset of the controversy is a decision it makes at its own peril.”). As long as the complaint “might or might not” fall within the policy’s coverage, the insurance company is obliged to defend. Casper v. Am. Guar. & Liab. Ins. Co., 184 A.2d 247, 249 (Pa. 1962) (quoting Judge Learned Hand’s assertion in Lee v. Aetna Casualty & Surety Company, 178 F.2d 750, 752 (2d Cir. 1949)). Accordingly, it is the potential, rather than the certainty, of a claim falling within the insurance policy that triggers the insurer’s duty to defend.

The question of whether a claim against an insured is potentially covered is answered by comparing the four comers of the insurance contract to the four comers of the complaint. See Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 290 (Pa. 2007) (“The language of the policy and the allegations of the complaint must be construed together to determine the insurers’ obligation.”). An insurer may not justifiably refuse to defend a claim against its insured unless it is clear from an examination of the allegations in the complaint and the language of the policy that the claim does not potentially come within the coverage of the policy. See Allen, 692 A.2d at 1094 (“[T]he obligation to defend an action brought against the insured is to be determined solely by the allegations of the complaint in the action....”); Gene’s Restaurant, Inc. v. Nationwide Ins. Co., 548 A.2d 246, 246-47 (Pa. 1988) (“[I]n determining the duty to defend, the complaint claiming damages must be compared to the policy...the language of the policy and the allegations of the complaint must be construed together to determine the insurer’s obligation.”); Springfield Tp. et al. v. Indemnity Ins. Co. of North America, 361 Pa. 461, 64 A.2d 761 (Pa. 1949) (“It is not the actual details of the injury, but the nature of the claim which determines whether the insurer is required to defend.”). In making this determination, the “factual allegations of the underlying complaint against the insured are to be taken as true and liberally construed in favor of the insured.” Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742 (3d Cir.1999). Indeed, the duty to defend is not limited to meritorious actions; it even extends to actions that are “groundless, false, or fraudulent” as long as there exists the possibility that the allegations implicate coverage. Transamerica, 533 A.2d at 1368.

Whether a complaint raises a claim against an insured that is potentially covered is a question to be answered by the insurer in the first instance, upon receiving notice of the complaint by the insured. American and Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 2 A.3d 526, 541-42(Pa. 2010). Although the question of whether the claim is covered may be difficult, it is the insurer’s duty to make that decision. Id. The insurer’s duty to defend exists until the claim is confined to a recovery that the policy does not cover. Id. at 542. If the insurer believes there is no possibility of coverage, then it should deny its insured a defense because the insurer will never be liable for any settlement or judgment. This would allow the insured to control its own defense without breaching its contractual obligation to be defended by the insurer. If, on the other hand, the insurer is uncertain about coverage, then it should provide a defense and seek declaratory judgment about coverage. Id.

Turning to the case sub judice, the court will first address the merits of plaintiff’s bad faith claim. Transactions between an insurance company and the insured require “the utmost fair dealing” and good faith. Berg v. Nationwide Mut. Ins. Co., 44 A.3d 1164 (Pa. Super. 2012) (quoting Dercoli v. Pennsylvania Nat. Mut. Ins. Co., 554 A.2d 906, 909 (1989)). Further, an insurance company is obligated to act in good faith at all times and treat the insured in a fair manner. Id. Under Pennsylvania law, recovery for bad faith “requires clear and convincing evidence of bad faith, rather than mere insinuation, and a showing by the insured that the insurer did not have a reasonable basis for denying benefits.” Bergman v. United Svc. Automobile Assoc., 742 A.2d 1101, 1106 (Pa. Super. 1999). Furthermore, an insurer is not required to show that its investigation “yielded the correct conclusion or even that its conclusion was more likely than not accurate... rather an insurance company must show it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action.” Empire Fire & Marine Ins. Co. v. Jones, 739 F. Supp.2d 746, 767 (E.D. Pa. 2010) (quoting Cantor v. Equitable Life Assurance Soc’y, 1999 WL 219786 (E.D. Pa. 1999).

The applicable provisions of defendant’s commercial general liability insurance policy with Mercer Raceway Park states as follows:

II. Exclusions: The following exclusions are in addition to those already set forth:
This insurance does not apply to any loss on any premises owned by, rented to, or controlled by any insured for any of the follow:
(8) bodily injury or property damage to any participant against another participant while practicing for or participating in a racing program, which is sponsored by the insured.
III. PERSON INSURED: Form CG0001, Section II WHO IS AN INSURED is amended to include as an insured, any automobile owner, sponsor, or participant(s) while participating in a Covered Program, however no owner, sponsor, or participant is insured for bodily injury to another owner, sponsor or participant or property damage to the property of another owner, sponsor or participant.
IV. ADDITIONAL DEFINITIONS: For purposes of this endorsement, “participant” shall be defined as individuals who have registeredto and actually do engage in the racing activity provided under the INSURED’S PROGRAM-including drivers, mechanics, pitmen, race officials, flagmen, announcers, ambulance crews, newsmen, photographers, gate workers, and all other person bearing duly and officially signed credentials and/or guest pit passes for the program.

While the court was confined only to consider the pleadings when this case was previously before the court on defendant’s motion for judgment on the pleadings, the court can now properly consider facts obtained during the discovery process. Those facts clearly establish that on March 31, 2007, Mr. Guthrie and Mr. Ketcham purchased a pit pass, signed a release form, and wore an arm band designating their right to access the pit area of the Mercer Raceway. A strict interpretation of the insurance policy issued to Mercer Raceway characterizes Mr. Guthrie and Mr. Ketcham as “participants” at the time of the accident on March 31,2007 based upon these facts and the language contained in the insurance policy as set forth above.

The court concludes that based upon the evidence available to defendant immediately following the March 31, 2007 accident, defendant made a reasonable determination that plaintiff was not entitled to a defense or coverage under the existing policy issued to Mercer Raceway. The record demonstrates that defendant investigated the facts underlying plaintiff’s claims prior to the commencement of the personal injury actions against plaintiff and reasonably concluded that there was no coverage for those claims under that policy. Accordingly, the court finds that defendant did not violate the insurance policy issued to Mercer Raceway by refusing to defend Plaintiff. Therefore, plaintiff’s motion for summary judgment is denied.

Based upon the foregoing conclusions, this court must grant defendant’s motion for summary judgment and find that defendant was not obligated to defendant plaintiff in the underlying personal injury lawsuits initiated against him. Defendant’s motion for summary judgment is therefore granted.

ORDER OF COURT

And now, March 28, 2013, with this matter being before the court on February 25, 2013 for argument on competing motions for summary judgment, filed on behalf of the parties, with Paul R. Robinson, Esquire, appearing and representing the plaintiff, and with Aaron M. Ponzo, Esquire, appearing and representing the defendant, and after having considered the arguments made by counsel as well as their respective briefs, it is hereby ordered and decreed as follows:

1. Plaintiff’s motion for summary judgment is hereby denied, pursuant to the attached opinion.

2. Defendant’s motion for summary judgment is granted, pursuant to the attached opinion.

3. The prothonotary shall properly serve notice of this order of court and attached opinion upon counsel of record for the parties.