author: BIESTER, JR.

text:
    Filter v. McCabe

      C.P. of Bucks County,
    no. 96-8836.

      Stewart Jay Eisenberg, for plaintiff.

      John T Carty and Francis John Deasy, for defendant.
    September 10, 1998
   BIESTER, JR.

— On June 26, 1998, we sustained the defendant’s preliminary objections to the plaintiff’s third amended complaint and dismissed that third amended complaint with prejudice. The plaintiff has taken a timely appeal, and we write this opinion to explain our reasons for having sustained the preliminary objections and dismissing the complaint.

That complaint alleges that Mr. Filter, on December 29, 1995, was a guest in the defendant’s home, the two being neighbors, and that during the evening, the plaintiff and the defendant were alone together in the basement of Mr. McCabe’s residence. We know from earlier complaints that the parties had been drinking. Apparently, at that time, they were the only two people who remained after the party. The complaint further alleges that the defendant was two feet away from the plaintiff when the defendant witnessed the plaintiff fall to the floor and hit his head extremely hard on the bare concrete, and that as a result of that fall, the plaintiff was rendered unconscious. The complaint further alleges that the defendant decided to come to the aid of the plaintiff and tried to wake the plaintiff by tapping him on the face, and when this was unsuccessful, the defendant got a glass of water and splashed it into Mr. Filter’s face.

Again, according to the complaint, after the water was splashed in Mr. Filter’s face, he opened his eyes, and the defendant, taking hold of the plaintiff’s arm, helped him up off the floor and aided him to a nearby couch. The defendant asked certain questions of the plaintiff to which the plaintiff was unable to respond, and the defendant was unable to communicate with the plaintiff at that time. The defendant then decided to take Mr. Filter upstairs and place him in an empty bed in the defendant’s home. The defendant then left him in the bed and went to sleep himself. The complaint further alleges that Mr. McCabe did not call an ambulance or call 911 or call the plaintiff’s wife or other family members in order to get medical assistance for Mr. Filter. The complaint further alleges that the fall caused a subdural hematoma to form in the plaintiff’s brain which gradually grew to the point of requiring emergency brain surgery later that day and resulting in permanent brain damage to the plaintiff.

The complaint further alleges that the defendant, by discontinuing his efforts with respect to the plaintiff, without notifying anyone of Mr. Filter’s need for medical assistance, thereby delayed necessary medical treatment for the plaintiff and thereby placed the plaintiff in a worse position than when he originally came to Mr. Filter’s aid. The complaint nowhere alleges that the defendant was in any way aware of a subdural hematoma having begun to form in the plaintiff’s brain. Nowhere in the complaint is there any allegation specifying any special emergency medical training or medical training of any kind on the part of the defendant.

Apparently, and we know from previous complaints, the plaintiff later left the defendant’s home in the early morning on his own without notifying the defendant, and was in his own home when the defendant called at approximately 9:30 a.m. on December 30,1995, telling the plaintiff’s wife that he was worried about whether her husband had made it home. During that telephone call, the defendant did not inform the plaintiff’s wife that her husband had hit his head or had been rendered unconscious, or about the throwing of water on his face, or that he had helped him off the floor or placed him in bed. At 10:35 a.m., on December 30, 1995, the plaintiff’s wife received a second call from the defendant. On this call, the defendant elaborated on his further conversation to say that he was worried about her husband because Mr. Filter hit the back of his head really hard the night before. As a result of that second call, the plaintiff’s wife attempted to wake her husband but could not do so. She noted that her husband’s pupils were fixed and dilated, and she contacted 911.

The plaintiff relies upon section 323 and section 324 Restatement (Second) of Torts. Section 323 reads as follows:

“One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of the other’s person or things, is subject to liability to the other for physical harm resulting from his failure to exercise reasonable care to perform his undertaking, if (a) his failure to exercise such care increases the risk of such harm, or (b) the harm is suffered because of the other’s reliance upon the undertaking.”

Section 324 reads as follows:

“One who, being under no duty to do so, takes charge of another who is helpless adequately to aid or protect himself is subject to liability to the other for any bodily harm caused to him by (a) the failure of the actor to exercise reasonable care to secure the safety of the other while within the actor’s charge, or (b) the actor’s discontinuing his aid or protection, if by so doing he leaves the other in a worse position than when the actor took charge of him.”

Our appellate courts have addressed the underlying philosophy of these sections of the Restatement (Second) of Torts, and have approached them cautiously. An early consideration of section 324 occurred in Karavas v. Poulos, 381 Pa. 358, 113 A.2d 300 (1955). In that case, a patron in a bar slipped and fell in some fashion onto the floor, and the bartender came to his assistance. The bartender picked him up and placed him on a chair beside a table. The plaintiff testified that he suffered pain and cried, “I am hurt. Take me to the hospital.” Apparently, a son-in-law, pursuant to a telephone call received by his wife around 12 o’clock, went to the establishment and found his father-in-law sitting on a chair leaning on the table. The plaintiff was then taken by the son-in-law by truck to the son-in-law’s home. Sometime later that day, he was taken to a hospital where it was discovered his hip was fractured. It appears that the bartender, when he heard the noise of the fall, saw the plaintiff lying on the floor, and he picked up the plaintiff, who was “white as a ghost,” and sat him on a chair. A waitress called the daughter who said someone would come for her father. The bartender then resumed his customary duties. Inter alia, the plaintiff relied upon section 324 of the Restatement (Second) of Torts, arguing that although the bartender had no duty to come to his aid, having volunteered assistance, he failed to exercise the reasonable care required in administering such assistance.

Considering section 324, the Pennsylvania Supreme Court, after noting that the Good Samaritan incurs a responsibility avoided by those who pass by on the other side, stated,

“If accepted as a correct statement of the law, it should not be extended in its application and we do not think the rule pronounced would permit the imposition of liability under the circumstances here presented.”

The Supreme Court further noted that it was not discovered that the plaintiff had suffered a fracture of his hip until he was hospitalized the next day. The Supreme Court emphasized that “due care in any case is the care usually exercised by men of ordinary prudence in like cases and under like circumstances.” The Supreme Court held that “we cannot find that the bartender’s action was other than that which would have been undertaken by a reasonably prudent man.”

Obviously, the Karavas case is distinguishable in many particulars from the case before us. In Karavas, there was an early contact to the plaintiff’s family. But even after that contact, the actual extent of the plaintiff’s injury was not appreciated until he was taken by the family to a hospital some seven or eight hours after the fall had occurred. What is important to note from the Supreme Court’s opinion in that case is, first of all, that section 324 should not be stretched in its application even if accepted as a correct statement of the law. And, further, that consistent with section 324, it emphasized the basic rule of due care, and that due care in any case is the care usually exercised by persons of ordinary prudence in like cases and under like circumstances.

We should interpolate at this point that while it is not included in the third amended complaint, it was alleged under verification in previous complaints that the plaintiff had been drinking, and drinking to a considerable extent while at the defendant’s home. Obviously, that comes into play as one considers the fact that the plaintiff went down spontaneously without being pushed onto the floor of the defendant’s home. The evaluation made of all of the circumstances of the plaintiff by the defendant must be taken in light of the fact that the plaintiff had been drinking heavily and that he went down without any external causative event.

Our Supreme Court visited section 324A in Cantwell v. Allegheny County, 506 Pa. 35, 483 A.2d 1350 (1984). Our Supreme Court in that case held that a complaint must contain factual allegations sufficient to establish the legal requirement that the defendant has undertaken “to render services to another which he should recognize as necessary for the protection of a third person.” That is distinguished from our case. But the mental standard implicitly remains the same for section 323 as for 324A. Our Supreme Court held what amounted essentially to a requirement of foreseeability. We believe that even if a defendant has undertaken to render a service to another and the plaintiff was the person to whom those services are rendered has suffered physical harm, if there was no reason that the defendant should have foreseen that his actions were necessary for the protection of the plaintiff, no cause of action will lie.

Once again, the case of Cantwell v. Allegheny County is radically distinguishable from the circumstances of the instant case, but nonetheless, the rules which are enunciated by our Supreme Court seem rather clear and applicable to section 323. As one addresses the issue of foreseeability, one engages in the analysis of what is meant by the phrase “which he should recognize as necessary for the protection of a third person.” Again, we believe that what is implicated is the level of comprehension in the totality of the circumstances available to this defendant with respect to the potential degree of harm and risk experienced by the plaintiff.

We have also looked at section 321 of the Restatement (Second) of Torts which provides as follows:

“Section 321. Duty to act when prior conduct is found to be dangerous

“(1) If the actor does an act, and subsequently realizes or should realize that it has created an unreasonable risk of causing physical harm to another, he is under a duty to exercise reasonable care to prevent the risk from taking effect.

“(2) The rule stated in subsection (1) applies even though at the time of the act the actor has no reason to believe that it will involve such a risk.”

While conceivably section 321 might be implicated by the circumstances in the instant case, we would note that our appellate courts have either never adopted section 321 as the law of Pennsylvania or have declined to do so. The Pennsylvania Superior Court in the case of Glick v. Martin and Mohler Inc., 369 Pa. Super. 428, 535 A.2d 626 (1987) was not satisfied with the phrase “unreasonable risk” as being too vague. We would also note that section 321 in its strict application would force a court to ignore the state of mind of the defendant at the time that the original physical contact with the plaintiff took place. Again, that engages the process of foreseeability and the conduct of a reasonable person under such circumstances.

We also have noted an early case of our colleague, the Honorable Isaac S. Garb, now president judge, in the case of Reilly v. A. Duie Pyle, 20 Bucks Co. L. Rep. 288 (1970). In that case, which addressed a set of very unusual foreseeability issues, Judge Garb noted that “conduct is negligent only if the harmful consequences thereof could reasonably have been foreseen and prevented.” We believe that the point made in that sentence is that foreseeability must be taken into account as one measures the extent of the duty imposed upon a particular actor.

We have reviewed the application by Pennsylvania appellate courts with respect to sections 323 and 324. With respect to section 323, there are 104 Pennsylvania cases applying that section. Not one applies the section to a normal, lay individual under any circumstance. Forty-three of them involve medical malpractice or hospital liability cases; 12 of them involve workers’ compensation and employer and employee responsibilities; three of them involve municipal liability as the result of governmental or police negligence; and four of them involve landlord and tenant. With respect to section 324, eight cases have applied section 324 in Pennsylvania, and in no instance is a normal layperson held responsible. They include a prisoner caught in a fire, a manufacturer’s defect, a failure of proper meat inspection, failure to carry out a promise to pay for a student with a broken neck, an engineering firm hable for the collapse of a trench, and a city sued for a certain depression near a bridge and failure to warn or divert traffic.

Our courts have consistently taken into account the human and social consequences of the application of various rules of liability. We believe that as one considers the potential for transformation of normal conduct between and among laypeople which might occur in light of application of sections 323 and 324 to their efforts of help in normal relationships, there is a high potential for thoroughly unpleasant consequences.

We believe the foregoing explains our reasoning with respect to the issues raised in the preliminary objections and explains our basis for dismissing the third amended complaint.


source: Caselaw Access Project

author: HOOVER, J.,

license: Public Domain

text:
    Potami v. Frankel

      C.P. of Dauphin County,
    no. 5006 S 1996.

      Robin J. Marzella, for Potami.

      Evan Black, for Harrisburg Hospital and Pinnacle Health Hospital.

      Steven D. Snyder, for Keystone Health Plan Central Inc.

      S. Walter Foulkrod III, for Sharon Frankel M.D.
    BEFORE: KLEINFELTER AND HOOVER, JJ.

    June 24, 1998

      . The Honorable Richard A. Lewis recused himself and did not participate in this decision.

   HOOVER, J.,

— This matter is presently before the court on the defendants’ preliminary objections. Argument was heard by an en banc panel of this court and the relevant facts and procedural history are outlined as follows:

On the evening of October 24, 1994, Katherine R. Potami went to the emergency room at Harrisburg Hospital complaining of severe mid-sternal chest pain that radiated into her back. Mrs. Potami was a participating member of Keystone Health Plan Central Inc. through her employer. Mrs. Potami was not examined by a physician, and the triage nurse at Harrisburg Hospital sent her home because the HMO physician refused her admission. Dr. Frankel, the HMO physician, attributed her symptoms to stress and anxiety and prescribed an antidepressant. The following morning, Mrs. Potami returned to Harrisburg Hospital and complained of excruciating pain. She was admitted to the emergency room for evaluation and treatment of her symph ms and was diagnosed as suffering from an acute myocardial infarction. A complaint was filed which alleges medical malpractice on the part of Dr. Frankel. The complaint alleges counts of vicarious liability, negligence, fraud and misrepresentation and breach of contract against Keystone. The complaint alleges that Harrisburg Hospital is vicariously liable for negligence of the emergency room personnel in failing to properly assess and treat the plaintiff’s condition. The plaintiffs also assert a claim for corporate negligence against Harrisburg Hospital for failing to enact policies and procedures concerning the denial by an HMO of medical care.

PRELIMINARY OBJECTIONS OF HARRISBURG HOSPITAL AND PINNACLE HEALTH HOSPITALS

Defendants Harrisburg Hospital and Pinnacle Health Hospitals contend that the plaintiffs have not alleged sufficient facts to support a claim for punitive damages. We conclude that sufficient facts have been alleged in the complaint to defeat the defendants’ preliminary objections. This is not to say that the court will not entertain a challenge to the claim for punitive damages at a later stage of the proceedings.

PRELIMINARY OBJECTIONS OF KEYSTONE HEALTH PLAN CENTRAL INC.

First, the defendant argues that Counts V through VII and parts of Count IV must be dismissed because the claims constitute a non-justiciable challenge to the legislative structure underlying Pennsylvania’s managed health care. The defendant focuses on the allegations that the physicians acted negligently because of financial incentives in their contracts with Keystone. The defendant argues that these allegations attack the concept of managed care and the financial structure of Keystone’s participating physician contracts. Keystone argues that its plan and provider contracts were established according to the specific mandates of the legislature, and that the courts are without jurisdiction to hear the claims raised in Counts V through VII and parts of Count IV.

The plaintiffs maintain that the defendant has misunderstood the basis for the allegations and reiterate that the complaint does not attack the concept of managed health care in the abstract but simply attacks the way that Keystone and its doctor handled Mrs. Potami’s case. We find that the defendant’s preliminary objection in this regard is without merit.

The defendant next contends that the state law claims stated in Counts IV and VII are preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§1001-1461 (ERISA). We find that based on McClellan v. Health Maintenance, 413 Pa. Super. 128, 604 A.2d 1053 (1992) and Pappas v. Asbell, 450 Pa. Super. 162, 675 A.2d. 711 (1996), allocatur granted, 546 Pa. 682, 686 A.2d 1312 (1996), these allegations are not preempted by ERISA. In Pappas, suit was brought against the doctor and hospital for causing an inordinate delay in transferring the patient to a hospital that was equipped to address a neurological emergency. The hospital joined the HMO as a party defendant for its refusal to authorize the transfer of Mr. Pappas to the hospital selected by the Haverford physicians. The issue of preemption was raised by the HMO, and the Superior Court determined that the negligence claims are not preempted by ERISA because the court did not believe that Congress intended to foreclose recovery to plan beneficiaries injured by negligent medical decisions. Id. at 175, 675 A.2d at 718. We find that the plaintiffs’ breach of contract, fraud and misrepresentation, negligence and the vicarious liability claims are not preempted by ERISA.

The defendant argues that the allegations of gross negligence, reckless disregard, wanton misconduct and outrageous conduct must be dismissed because the facts do not warrant an award of punitive damages. As was stated above, sufficient facts have been alleged to defeat the preliminary objections in this regard.

The defendant next contends that Mr. Potami’s claim in paragraph 78 for medical expenses incurred for the care of his wife must be dismissed. The treatment was provided to Mrs. Potami. The plaintiffs included a claim for Mrs. Potami’s medical benefits in Mr. Potami’s loss of consortium claim. The defendant argues that medical expenses are not an element of a loss of consortium claim. The plaintiffs stipulate that they are not trying to seek a double recovery for medical expenses. Therefore, we will grant the defendant’s request for a demurrer as far as the request for medical benefits contained in the loss of consortium claim.

The defendant argues that the claims for fraud and misrepresentation contained in Count IV are not specific and should be stricken. We have reviewed the averments in question and conclude that sufficient facts have been alleged to defeat the demurrer.

The defendant contends that Count VI must be dismissed because it is really an attempt to impose the doctrine of informed consent on Keystone, which is not a doctor. Count VI claims that Keystone failed to communicate its incentive and reimbursement systems to Mrs. Potami, and that this was vital information necessary in her decision to choose Keystone as her health care insurance. We agree with the plaintiffs that the defendant has mischaracterized these allegations. The plaintiffs are not arguing that the doctrine of informed consent is involved in any way. The plaintiffs are suggesting that Keystone had a duty to disclose its reimbursement and incentive programs so that an educated decision could be made as to whether Keystone met Mrs. Potami’s health insurance needs.

Finally, Keystone objects to Count VII (breach of contract) because the plaintiffs did not attach a copy of the agreement to the complaint. We agree that the defendant is in possession of the agreements and any literature, and we will overrule this preliminary objection as well.

Accordingly, we enter the following:

ORDER

And now, June 24, 1998, the preliminary objections filed on behalf of Harrisburg Hospital and Pinnacle Health Hospitals are hereby overruled. The preliminary objections filed on behalf of Keystone Health Plan Central Inc. are overruled with the exception that the claim for medical expenses found in paragraph 78 is stricken. All defendants shall file their answers to the complaint within 20 days from the date of this order.


author: STALLONE, /.,

text:
    Swarmer v. Mitchell

      C.P. of Berks County,
    no. 97-3063.

      Ronald E. Cirba and Lee E. Sapira, for plaintiff.

      Brett A. Huckabee, for defendant Mitchell.

      John W. Roland, for defendants Green and Albright College.
    August 26, 1997
   STALLONE, /.,

— This action arises out of a claim by the plaintiff, Tammy L. Swarmer, that defendant, Miguel Mitchell, a former chemistry professor at defendant, Albright College, engaged in sexual harassment and discrimination toward her. The plaintiff is a student at defendant Albright College. Defendant Ronald Green is the Academic Dean and Vice-President of Academic Affairs at defendant Albright College whom the plaintiff has named as a defendant on the basis that he allegedly “trivialized” the whole situation by his comments to the plaintiff about it. The plaintiff has also named Albright College as a defendant on the basis that it did not take sufficient disciplinary action against either Doctor Mitchell or Doctor Green and it did not publicize the results of its investigation or any disciplinary action taken against either Doctor Mitchell or Doctor Green.

The plaintiff asserts the following causes of action against the defendants in her amended complaint:

Count 1 — Sex discrimination in violation of title IX of the United States Code by defendant Albright College;

Count 2 — Battery by defendant Miguel Mitchell;

Count 3 — Assault by defendant Miguel Mitchell;

Count 4 — Intentional infliction of emotional distress by defendant Miguel Mitchell;

Count 5 — Negligent infliction of emotional distress by defendant Miguel Mitchell;

Count 6 — Intentional infliction of emotional distress by defendant Ronald Green;

Count 7 — Negligent infliction of emotional distress by defendant Ronald Green; and

Count 8 — Vicarious liability of defendant Albright College for alleged title IX violations and tortious conduct by defendants Miguel Mitchell and Ronald Green.

Defendants Ronald Green and Albright College have filed preliminary objections to the plaintiff’s amended complaint claiming that:

(1) Count 1 should be dismissed for lack of subject matter jurisdiction inasmuch as such a claim can only be brought in federal court and not in state court; and

(2) The plaintiff has failed to state legally cognizable claims for relief against the defendants in Counts 1, 6, 7 and 8.

We shall address each of the moving defendants’ arguments seriatim.

They first contend that this court lacks subject matter jurisdiction over the plaintiff’s title IX claim contained in Count 1. We disagree. At the outset, we note that the Courts of Common Pleas of Pennsylvania are courts of “unlimited original jurisdiction except as may otherwise be provided by law.” Pennsylvania Constitution, Article 5, Section 4. Accordingly, there is a presumption under Pennsylvania law that state courts have concurrent jurisdiction with federal courts over actions arising under a federal statute unless federal law provides otherwise. Johnson v. Mobil Oil Corporation, 522 Pa. 105, 560 A.2d 124 (1989). Here, the defendants have failed to provide this court with any authority showing that “federal law provides otherwise” for the plaintiff’s title IX claim in Count 1.

Defendants also make a second, related argument that plaintiff cannot pursue a private title IX claim in this state court because a private title IX claim already exists for her in the federal court. Again we must disagree. Although the cases that the defendants cite in support of this argument clearly demonstrate that the federal courts have recognized a private cause of action under title IX for plaintiffs in federal court, the federal courts did not hold in those cases that a plaintiff is thereby precluded from asserting such a claim in state court. Without clear authority provided by the defendants to do so, we will not dismiss the plaintiff’s title IX claim for this reason, particularly at this preliminary stage of the proceedings.

The defendants next contend that the plaintiff has failed to state a claim upon which relief can be granted in Counts 1, 6, 7 and 8 of the amended complaint. Without further discussion, we agree with the defendants’ arguments relative to Counts 1, 6 and 7 and will grant leave to the plaintiff to amend them. However, the defendants’ argument relative to Count 8 requires further analysis.

The issue relative to Count 8 is whether, even assuming arguendo that the plaintiff has a cognizable claim for sexual harassment and discrimination against defendants Miguel Mitchell and Ronald Green, defendant Albright College can be held vicariously liable for their conduct. Under Pennsylvania law, a principal can be held liable for the tortious or negligent conduct of its agent if it can be established that the agent was acting within the scope of his or her employment or apparent authority. Atkinson v. Haug, 424 Pa. Super. 406, 622 A.2d 983 (1993). If, however, an agent acts in his or her own interest and commits a tortious act on his own behalf in a matter which is beyond the scope of his employment, the principal cannot be held liable for the agent’s tortious act as long as the principal does not derive any benefit from that tortious act. Id. at 411, 622 A.2d at 986.

In this court’s opinion, there is no doubt that, even assuming arguendo that the plaintiff can establish the alleged misconduct set forth in her amended complaint at trial by the preponderance of the credible evidence, defendants Miguel Mitchell and Ronald Green could not, as a matter of law, be found to have been acting within the scope of their employment.

Furthermore, in Rosa H. v. Sam Elizario Independent School District, 106 F.3d 648 (5th Cir. 1997), the Fifth Circuit Court of Appeals made it clear that an educational institution can be held liable for “teacher-student” sexual harassment only under very limited circumstances which are not present here:

“We hold that a school district can be liable for teacher-student sexual harassment under title IX only if a school official who had actual knowledge of the abuse was invested by the school board with the duty to supervise the employee and the power to take action that would end such abuse and failed to do so. This inquiry circumscribes those school employees in the chain of command whom the school board has appointed to monitor the conduct of other employees and, as distinguished from reporting to others, remedy the wrongdoing themselves. At the same time, it locates the acts of subordinates to the board at a point where the board’s liability and practical control are sufficiently close to reflect its intentional discrimination. It does so by omitting the bulk of employees, such as fellow teachers, coaches, and janitors, unless the district has assigned them both the duty to supervise the employee who has sexually abused a student and also the power to halt the abuse.”

Accordingly, we conclude that defendant Albright College cannot be held vicariously liable even assuming that the plaintiff prevails at trial on her sexual harassment and discrimination claim against defendants Miguel Mitchell and Ronald Green.

And so, in accordance with the foregoing, we enter the following attached order.

ORDER

And now, August 26, 1997, after hearing oral argument on the defendants’ preliminary objections to the plaintiff’s amended complaint, it is hereby ordered as follows:

(1) The preliminary objections to Count 2 of the amended complaint in the nature of a motion to dismiss for lack of subject matter jurisdiction are overruled;

(2) The preliminary objections in the nature of a demurrer to Counts 1,6 and 7 of the amended complaint are sustained and the plaintiff shall have 30 days from the date of this order to file a second amended complaint relative to these counts. It is suggested to the plaintiff that, when she does so, she plead her causes of action in separate counts against separate individuals with specificity and not merely incorporate prior paragraphs into these counts relating to either different theories for recovery and/or different defendants; and

(3) The preliminary objections in the nature of a demurrer to Count 8 are sustained and said count is hereby dismissed with prejudice.

      . The plaintiff filed this amended complaint in response to preliminary objections filed by all of the defendants to her original complaint.

      . In response to preliminary objections filed by defendant Miguel Mitchell, the plaintiff has withdrawn Count 9 of her complaint in which she claimed that the three named defendants engaged in a civil conspiracy to deprive her of her civil rights under title IX in violation of title 42, 42 U.S.C. §1983 (Supp. 1997).

      . In addition thereto, on pages 26 and 27 of her brief of argument in opposition to the defendants’ preliminary objections, the plaintiff makes reference to section 317 of the Restatement (Second) of Torts claiming the negligent hiring, supervision and retention of employees Miguel Mitchell and Ronald Green. However, the plaintiff makes no such claim anywhere in her amended complaint against defendant Albright College.


author: SOLOMON, /.,

text:
    Rack v. Anu Steel Wire Co. Inc.
    C.P. of Fayette County,
    no. 711 of 1997.

      Mark D. Feczko, for plaintiff.

      Ira B. Coldren, for defendant.
    August 20, 1997
   SOLOMON, /.,

— Presently before the court is the motion of the defendant to dismiss the petition for dissolution filed by the plaintiff. A hearing was held on June 16, 1997, and briefs of both parties have been submitted and considered.

BACKGROUND

On April 16, 1997, the plaintiff, John Terry Rack, brought suit against the defendant, Anu Steel Wire Company Inc., a Pennsylvania corporation, seeking to dissolve the corporation. The plaintiff had been employed by Anu as president and chief operating officer since it was organized by the plaintiff and Ernest Bolish, leaving Anu in 1997. Anu was incorporated for the purpose of producing and selling wire baling ties.

At a special meeting held on April 5,1997, the board of directors voted to cancel the 310 shares of stock which had been issued to the plaintiff at the time of incorporation, alleging that these shares had been issued without any consideration. The plaintiff was informed of this decision by letter and directed to surrender the certificate for his shares. The plaintiff then filed a petition for dissolution of corporation alleging corporate waste and mismanagement.

The defendant filed a motion to dismiss the petition for dissolution alleging that the plaintiff does not have standing to bring this action because he was never a legal shareholder of Anu since he never gave any consideration for the shares. The position of the plaintiff is that he gave services as consideration for the stock, and therefore does have standing to file a petition for dissolution of corporation. We agree with the petitioner.

DISCUSSION

Initially, the court must determine if the petitioner gave consideration for the 310 shares of Anu stock issued to him. Under the Pennsylvania Business Corporation Law section 1524(a)(1), consideration for shares of stock “[m]ay consist of money, obligation (including an obligation of a shareholder), services performed whether or not contracted for, contracts for services to be performed ... or any other tangible or intangible property or benefit to the corporation.” 15 Pa.C.S. § 1524(a)(1).

Hence, services, as well as any other tangible or intangible property or any benefit to the corporation, can serve as consideration for stock.

Where one person is rendering service to another which he is under no legal obligation to perform, and the party receiving the benefit makes an express promise that the service shall be paid for, there is sufficient consideration to support the promise to pay for the services. Szusta v. Krawiec, 144 Pa. Super. 530, 19 A.2d 495 (1941). Here, although the plaintiff did not pay money for his shares of stock, the testimony established that he did give consideration for the stock.

The plaintiff worked at Cavert Wire Company for over 22 years in the business of producing and selling wire products. (H.T., at p. 29.) While there, the plaintiff held a variety of positions, including chief engineer and general manager of all operations. Id. The plaintiff then formulated the idea of developing a bale tie machine and starting a new business. (H.T., at p. 30.) At the hearing, the plaintiff testified that his consideration for the stock was his business experience, customer contacts, design ideas and working knowledge which he brought to Anu and would get the company started. (H.T., at p. 32.) These items qualify as legal consideration for stock under both section 1524 and Szusta v. Krawiec, supra, since they are all benefits to the corporation. Therefore, the plaintiff gave sufficient consideration for the 310 shares of Anu stock issued to him.

We turn now to the issue of whether the petitioner has standing to file a petition for dissolution of corporation. Under the Pennsylvania Business Corporate Law section 1981, “[u]pon application filed by a shareholder or director of a business corporation, the court may entertain proceedings for the voluntary winding up and dissolution of the corporation.” 15 Pa.C.S. §1981(a). Since we have determined that the petitioner gave sufficient consideration for his stock, the petitioner is a shareholder of Anu. As a shareholder of Anu, he has standing to file a petition for dissolution of corporation.

Wherefore, the court must deny the respondent’s motion to dismiss petition for dissolution and will enter the following order.

ORDER

And now, August 20, 1997, it is hereby ordered and directed that the motion of the defendant to dismiss the petition for dissolution filed by the plaintiff is denied.


author: LOWE, S.J.,

text:
    Jefferson v. Hallas

      C.P. of Montgomery County,
    no. 94-23256.

      Jay Richard Levenberg, for plaintiff.

      Andrew J. Kramer, for defendant.
    August 5, 1997
   LOWE, S.J.,

FACTS AND PROCEDURAL HISTORY

Plaintiff Theresa Jefferson initiated this action by complaint on December 7, 1994 to recover damages allegedly sustained in a motor vehicle accident. Specifically, plaintiff claims that on August 10,1993, while acting as an agent for and operating the vehicle of defendant George Pocock, defendant Mark Hallas drove in such a negligent manner as to cause a collision with the vehicle operated by herself.

On May 3, 1996, a board of arbitrators found in favor of plaintiff and against defendants in the amount of $30,000; following said award, defendants filed an appeal, and a jury trial was held before the undersigned on February 12 and 13, 1997. At trial, the parties stipulated to the fact that plaintiff had selected the limited tort option at the time she purchased her automobile insurance policy, and thus, in order for her to recover noneconomic losses, she would have to prove that she suffered a permanent, serious disfigurement.

Plaintiff’s case consisted of her own testimony, as well as the testimony of her treating physician, Peter P. Giammanco D.O., and defendants presented the testimony of defendant Mark Hallas and another treating physician of the plaintiff, Gwendolyn J. Liang M.D. After hearing all of the evidence and the charge by the court, the jury returned a verdict in favor of the plaintiff and against defendants in the amount $57,500.

Thereafter, on February 24, 1997, defendants filed post-trial motions requesting either a new trial or a judgment n.o.v., and, following oral argument thereon, said motions were denied in an order dated April 28, 1997. On the same date, this court entered another order granting plaintiff’s petition for delay damages and molding the verdict accordingly.

On May 27,1997, defendants filed a notice of appeal from the order denying their post-trial motion, and in a concise statement of matters complained of on appeal, raised the following issues:

(1) Whether the trial court erred by denying defendants’ request for a directed verdict.

(2) Whether the trial court erred by instructing the jury that they could consider compensating the plaintiff for embarrassment and humiliation.

(3) Whether the trial court erred by denying defendants’ request that a special interrogatory be added to the verdict sheet.

(4) Whether the trial court erred by not allowing defendants to explain to the jury the plaintiff’s selection of limited tort.

DISCUSSION

I. The Trial Court Properly Denied Defendants’ Motion for Judgment n.o.v. As There Is Sufficient Evidence To Sustain the Jury’s Verdict

A judgment n.o.v. may be granted only in clear cases where, viewing the evidence in a light most favorable to the verdict winner and granting the verdict winner every reasonable inference, there is insufficient evidence to sustain the verdict. Sundlun v. Shoemaker, 421 Pa. Super. 353, 358, 617 A.2d 1330, 1333 (1992). Instantly, as stipulated by the parties, plaintiff was required to prove that she sustained a serious, permanent disfigurement in order for her to recover noneconomic losses. As the verdict plainly indicates, the jury found that plaintiff met this burden.

Upon reviewing the record in a light most favorable to the plaintiff and granting plaintiff every reasonable inference, there is clearly sufficient evidence to sustain the jury’s verdict, and accordingly, defendants’ motion for judgment n.o.v. was properly denied by this court. Specifically, evidence indicating that plaintiff’s injury resulted in serious, permanent disfigurement included testimony of plaintiff as well as the testimony of two of her treating physicians.

Plaintiff herself testified that, as a result of the accident which totaled her pickup truck, she sustained injuries to her left shoulder, her low back, and her right eye; she also stated that she suffered from intermittent headaches in addition to some phobia about driving a motor vehicle. Plaintiff underwent four months of physical therapy for her shoulder and back, and consulted with a psychologist with regard to her driving phobia. Plaintiff testified that her most serious injury was the laceration to her right eyelid, which required the services of a plastic surgeon.

In a videotaped deposition which was presented to the jury, Dr. Giammanco testified within a reasonable degree of medical certainty that the laceration sustained in the accident caused permanent scarring to plaintiff’s eyelid. He also stated that the accident caused plaintiff to suffer from a permanent condition known as ptosis, or drooping of her right eyelid. Dr. Liang, the physician called by defendants, similarly testified, via videotaped deposition, that the scar on plaintiff’s eyelid was permanent, and she agreed with Dr. Giammanco’s finding that plaintiff’s condition of ptosis was permanent as well. Dr. Liang further stated that ptosis can obstruct one’s vision, give one an unnatural appearance, and affect the ability to perform one’s job.

Based upon this same evidence, it is clear that defendants’ argument that this court erred by not granting their motion for a directed verdict must also fail. A trial court may enter a directed verdict only where the evidence clearly and unambiguously supports a judgment in favor of the moving party. Pennsylvania Human Relations Commission v. School District of Philadelphia, 681 A.2d 1366 (Pa. Commw. 1996). As the above facts indicate, such was not the situation in the instant case.

II. The Trial Court Properly Denied Defendants’ Motion for a New Trial As the Jury’s Verdict Was Not Against the Weight of the Evidence

A trial court may grant a new trial only when the jury’s verdict is so contrary to the evidence that it “shocks one’s sense of justice.” Neison v. Hines, 539 Pa. 516, 520, 653 A.2d 634, 636 (1995) (citing Kiser v. Schulte, 538 Pa. 219, 225, 648 A.2d 1, 4 (1994); Burrell v. Philadelphia Electric Co., 438 Pa. 286, 289, 265 A.2d 516, 518 (1970)). Noting plaintiff’s burden of proof in addition to the evidence discussed above, it is clear that a jury could properly return a verdict in plaintiff’s favor, and that such a verdict would certainly not “shock one’s sense of justice.”

One argument made by the defendants in their motion for a new trial and in the instant appeal is that the court erred by instructing the jury that, if they found that plaintiff had met her burden of proof, they could consider awarding her compensation for embarrassment and humiliation. Defendants maintain that there was no trial testimony to support that particular point for charge. We disagree. In addition to medical testimony that ptosis causes one’s eyelids to look asymmetrical and gives one an unnatural appearance, plaintiff specifically testified that the “drooping and extra sag of skin in the corner” of her right eye make her feel “uncomfortable” and worry about how she’s being viewed by others. Such testimony provides direct support for this court’s charge on embarrassment and humiliation.

Another argument raised by the defendants is that this court improperly denied their request for a special interrogatory to be added to the standard jury verdict sheet. Specifically, defendant claims that a question should have been added to the verdict sheet asking whether the plaintiff had, in fact, met her burden of proof, i.e., that she suffered a permanent, serious disfigurement. As support for their argument that such an interrogatory was essential, defendants cite Century 21 Heritage Realty v. Bair, 386 Pa. Super. 373, 563 A.2d 114 (1989), a case clearly distinguishable from that at bar. In Century 21 Heritage Realty, the Superior Court of Pennsylvania found that in light of the fact that the trial judge had provided erroneous instructions to the jury, it was error for the trial court to deny the appellant’s request for special interrogatories “which if given would have eliminated any confusion” that was created by the jury instructions.

In the instant case, it was not error for the court to deny defendants’ request for a special interrogatory as such an interrogatory was not necessary to eliminate confusion, but would merely have restated in question form plaintiff’s burden of proof, which burden was emphasized by defendants’ counsel throughout the trial, and which was specifically articulated by the trial judge in his charge to the jury.

Finally, defendants claim that it was error for this court not to permit defendants’ counsel to inquire into the plaintiff’s selection of limited tort. In response to this argument, this court merely notes that such inquires would have been irrelevant to this case as there was no dispute that plaintiff had selected the limited tort option in her automobile insurance policy, a fact which the parties stipulated to prior to trial. Accordingly, there was also no dispute as to the burden of proof which plaintiff had to meet in order to recover noneconomic losses in this case, and, as stated above, this burden of proof was thoroughly explained to the jury by defendants’ counsel as well as by the undersigned.

For all of the foregoing reasons, defendants’ appeal is without merit, and this court’s order of April 28, 1997, denying their motion for post-trial relief, should be affirmed.


author: TURGEON, /.,

text:
    Erwin v. Clark

      C.P. of Dauphin County,
    no. 5383 Equity 1996.

      Jonathan Crist, for plaintiff.

      David Smith, for defendant.

      EN BANC, TURGEON, LEWIS AND HOOVER, JJ.

    August 1, 1997
   TURGEON, /.,

— Defendants William H. Clark Jr. Esq. and the law firm of Klett Lieber Rooney and Schorling PC. filed preliminary objections in the nature of a demurrer to all three counts contained in the complaint. In the absence of a complete dismissal, the defendants requested a stay pending the outcome of two related Berks County cases. For the following reasons, defendants’ demurrer to Count II is sustained, and a stay of the remainder of this action is granted.

FACTS

The complaint alleges plaintiff Erwin owned 40 percent of LC1 stock, a Pennsylvania subchapter S corporation formed to develop and operate a mobile home park in Berks County. Pursuant to tax advice from LCl’s accountant, the shareholders formed a second corporation, LC2. While Erwin understood only LCl’s sales activities were to be transferred to LC2 for income tax purposes, LC2 was treated as though it owned the real estate and conducted the leasing activities even though the real estate had not been transferred.

In July 1994, LC1 and LC2 retained attorney Clark and his law firm to advise them regarding federal income tax issues. Clark and the law firm advised transferring ownership of the real estate to LC2 to conform with the previously filed tax returns and drafted documents and corporate minutes necessary to effectuate the transfer.

In November 1994, the LC2 shareholders and directors voted to recapitalize LC2, resulting in a dilution of plaintiff’s shares in the corporation. According to the allegations in related lawsuits by Erwin, the purpose of transferring the real estate interests to LC2 was to work around provisions of the charter or shareholders’ agreement for LC1, which prohibited such dilution of interest.

Erwin filed two lawsuits in Berks County. One is an attempt to “undo” the transactions and the second seeks damages resulting therefrom. In the case at bar, Erwin alleges in Count I that Clark and the law firm negligently advised, or failed to advise LC1 and/or LC2 concerning various tax and property transfer matters. He claims $280,000 in damages for allegedly owed but unpaid federal taxes. Erwin also seeks punitive damages. Count II is a derivative action in which Erwin seeks, on behalf of the corporations, the same damages alleged in Count I.

In Count III, on behalf of both corporations, Erwin seeks damages for realty transfer taxes paid and additional realty transfer taxes allegedly owed as a result of defendants’ negligence. Additionally, Erwin seeks, on behalf of both corporations, counsel fees incurred as a result of defending the actions brought by Erwin in Berks County.

LEGAL DISCUSSION

“A demurrer should not be sustained if there is any doubt as to whether the complaint adequately states a claim for relief under any theory of law.” Ham v. Sulek, 422 Pa. Super. 615, 623, 620 A.2d 5, 9 (1993) (citing Kyle v. McNamara & Criste, 506 Pa. 631, 634, 487 A.2d 814, 816 (1985)). The benefit of any inferences that could be fairly deduced from the facts as stated in the complaint must be given to Erwin. Id. (citing Mazzagatti v. Everingham, 512 Pa. 299, 516 A.2d 672 (1986). The question “is whether, on the facts averred, the law says with certainty that no recovery is possible.” Id. at 622, 620 A.2d at 9.

In order to state a claim of legal malpractice, the following elements must be met:

“(1) The employment of the attorney or other basis for duty;

“(2) The failure of the attorney to exercise ordinary skill and knowledge; and

“(3) That such negligence was the proximate cause of damage to the plaintiff.” Curran v. Stradley, Ronon, Stevens & Young, 361 Pa. Super. 17, 24, 521 A.2d 451, 454 (1987) (citing Schenkel v. Monheit, 266 Pa. Super. 396, 399, 405 A.2d 493, 494 (1979)).

The defendants claim that Erwin does not state a cause of action for malpractice under Count I because they were representing the corporations, not Erwin, and had no “other basis for duty” to him. Erwin claims the defendants had a duty to the individual shareholders because of the “flow through” tax treatment of chapter S corporations. While there is no Pennsylvania legal precedent for this proposition, contractual liability to a third party can be fairly inferred from the facts alleged in Erwin’s complaint. Erwin alleges LC1 and LC2 hired the defendants “to render advice to LC#1 and its shareholders with regard to the structure of LC#1 and LC#2 and the reporting of the corporate affairs on the federal income tax returns by the said accountant Raymond Bucks.” (Complaint ¶19.) (emphasis added) The Pennsylvania Supreme Court has adopted the standard for determining liability to third parties under the Restatement (Second) of Contracts, which provides:

“Section 302. Intended and incidental beneficiaries

“(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either

“(a) ... or

“(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.” Guy v. Liederbach, 501 Pa. 47, 59, 459 A.2d 744, 751 (1983). (Adopting Restatement (Second) of Contracts §302).

While we acknowledge that such a basis for duty to shareholders of a corporation would be novel under current Pennsylvania law, we cannot say for certain that no duty exists and recovery is not possible. See Ham v. Sulek, supra.

The defendants also assert that the damages claimed by Erwin are “impermissibly speculative.” It is true that “speculative harm, or the threat of future harm do not provide a basis for a cause of action.” Veneri v. Pappano, 424 Pa. Super. 394, 398, 622 A.2d 977, 979 (1993). Defendants argue “if the IRS never assesses additional taxes [on Erwin] or if the Berks County lawsuits result in a judgment ‘undoing’ and/or compensating Erwin for the transactions, then Erwin has not been damaged at all.” The Tax Code, however, provides that the taxpayer has an affirmative duty to report additional taxes due:

“If a taxpayer ascertains that an item should have been included in gross income in a prior taxable year, he should, if within the period of limitation, file an amended return and pay any additional tax due.” Treasury Regulation §1.45-l(a), 26 C.F.R. §1.451-l(a).

Such self-reporting is essential to our system of federal income taxation. We are not willing to hold as a matter of law that tax liability does not exist until taxes are assessed or until a taxpayer is audited.

Defendants’ demurrer to Count II is based upon their contention that all damages claimed are personal to Erwin and not to the corporation. We agree. Indeed, the complaint refers to the damages as “his damages,” and as “plaintiff Erwin’s damages.” There is no allegation incorporated into Count II that alleges any damage suffered by the corporation. A derivative action brought by a shareholder must be based on an injury to the corporation. Zinman v. Federal Deposit Insurance Corp. 567 F. Supp. 243 (E.D. Pa. 1983).

Defendants demur to Count III because the damages sought are speculative and therefore not recoverable. Additionally, they claim the realty transfer tax resulted from the majority shareholders’ decision to transfer the real estate, and that the complaint is devoid of any allegations that the defendants’ actions had any effect on the amount of realty transfer tax paid or owed. It is fair to infer from the facts alleged in the complaint that the defendants’ actions had an effect on the amount of realty tax paid. In paragraph 36(g) of the complaint, Erwin alleges the defendants failed to advise and/or properly advise LC1 with regard to the taxability of transferring the real estate from LC1 to LC2. Erwin also alleges in paragraph 20 that the real estate transfer took place pursuant to attorney Clark’s advice. In paragraph 19, it is alleged that the defendants were retained to render advice with regard to the structure of the corporations. It can reasonably be inferred from these allegations that absent the alleged negligent advice, the real estate transfer would not have occurred and plaintiff would not have paid real estate transfer taxes.

As to additional real estate transfer taxes allegedly owed but not yet paid, we do not find the alleged damages to be impermissibly speculative. Pennsylvania law requires:

“If any person shall fail to pay any tax imposed by this article for which he is liable, the department is hereby authorized and empowered to make a determination of additional tax and interest due by such person based upon any information within its possession or that shall come into its possession.” 72 PS. §8111-C(a).

As is the case of federal income taxes, the system of taxation at issue relies upon self-reporting. The failure of the authorities to assess the taxes up to this point does not preclude liability for the taxes.

Defendants argue plaintiff’s derivative claim in Count III for counsel fees relating to the two Berks County lawsuits is premature and speculative. We agree. See Pashak v. Barish, 303 Pa. Super. 559, 562, 450 A.2d 67, 69 (1982). The claims for counsel fees and expenses are entirely dependent upon the outcome of the Berks County lawsuits. They are distinguishable from the alleged tax-related damages in that those damages may be proven to exist. Until the Berks County lawsuits are resolved, this court will be unable to determine whether the corporation’s decision to defend against the lawsuits resulted in injury. At such time as those lawsuits are resolved, a determination can be made.

In the absence of complete dismissal of this action, defendants request a stay of this action pending resolution of the Berks County lawsuits. The defendants claim these matters “in all likelihood could be fully addressed in one forum,” and that the simultaneous proceedings “would create the unseemly spectacle of a race to judgment in the courts of two counties of this Commonwealth.” Norristown Automobile Club v. Hand, 386 Pa. Super. 269, 276-77, 562 A.2d 902, 905 (1989). We recognize that the proper determination of the nature and amount of damages in this case hinges upon the outcome of the Berks County cases. Plaintiff concedes, despite the present existence of tax liability, such liability may be alleviated if that court finds the transaction void ab initio.

Accordingly, we enter the following:

ORDER

And now, August 1, 1997, defendants’ demurrer to Count II of the complaint is sustained. All other preliminary objections are hereby overruled. This action is stayed pending the outcome of Erwin v. Laurel Commons Inc., Laurel Commons Mfd. Hs. Com. Inc., Oliver Rosenberg and Marjery Grove, no. 6539 Equity 1994 (Berks Cty. Ct. Common Pleas) and Erwin v. Laurel Commons Inc., no. 477-950 (Berks Cty. Ct. Common Pleas).

      . Erwin v. Laurel Commons Inc., Laurel Commons Mfd. Hs. Com. Inc., Oliver Rosenberg and Marjery Grove, no. 6539 Equity 1994 (Berks Cty. Ct. Common Pleas) and Erwin v. Laurel Commons Inc., no. 477-950 (Berks Cty. Ct. Common Pleas).


author: Me ANDREWS, /.,

text:
    Walsh v. Phillips
    C.P. of Bucks County,
    no. 95-01453-16-2.

      J. Davy Yockey, Randall C. Flagex and Steven M. Koloski, for plaintiffs Michael P. and Veronica Ann Walsh.

      Stephen A. Corr, for defendants Richard A. and R.A. Phillips.

      James T. Moughan, for defendant Veronica Ann Walsh.

      July 24, 1997
   Me ANDREWS, /.,

— This matter is before the court on the plaintiffs’ motion for post-trial relief pursuant to Pa.R.A.P. 227.1. This court granted defendants’ motion for summary judgment on March 19, 1997.

The case involves a claim for personal injury arising out of a motor vehicle collision on February 26, 1993. The matter was called for trial on March 19, 1997. At a conference immediately prior to trial, defense counsel raised the issue of whether plaintiff Michael P. Walsh was entitled to seek noneconomic damages, since it was agreed that plaintiff had elected the limited tort option. The issue had been raised in a motion for summary judgment which remained outstanding at the time of trial.

Liability in this case is not disputed. Plaintiff Michael P. Walsh was a passenger in a motor vehicle operated by plaintiff Veronica Ann Walsh. The vehicle collided with a vehicle operated by defendant, Richard A. Phillips, causing plaintiff Michael P. Walsh to suffer lacerations about the face.

The facts relating to the injury were also undisputed. The plaintiff suffered lacerations to his right eyelid, temple, and forehead, requiring sutures and surgery. According to his plastic surgeon, the laceration to the right temple area was approximately 7 cm; the forehead, 3.5 cm; and the right upper eyelid, 2.5 cm. The plastic surgeon described the scars as permanent.

It was also agreed that at the time of the collision, the plaintiffs were insured under the limited tort option provided for by the Pennsylvania Motor Vehicle Financial Responsibility Law. In exchange for lowered premiums, individuals who make the limited tort election may not recover for noneconomic losses such as pain and suffering except upon a showing of “serious injury.” 75 Pa.C.S. §1705. The PMVFRL defines “serious injury” as “[a] personal injury resulting in death, serious impairment of body function or permanent serious disfigurement.” 75 Pa.C.S. §1702. In the instant case, the plaintiff alleges that he suffered permanent serious disfigurement as a result of the collision, and thus, has made a showing of “serious injury” and is entitled to seek noneconomic recovery.

Prior to trial, defendants filed a motion for summary judgment contending that the Superior Court’s decision in Dodson v. Elvey, 445 Pa. Super. 479, 665 A.2d 1223 (1995), mandated that the trial court make a threshold determination, as a matter of law, with respect to whether the plaintiff suffered a serious injury.

The Dodson case established the appropriate procedural standard in Pennsylvania for determining whether, as a matter of law, the plaintiff who has selected the limited tort option has suffered serious injury. Under Dodson, “the court must determine initially, (1) whether the plaintiff as moving party has established that he or she has suffered serious impairment of a body function; (2) whether the defense as moving party has established that plaintiff has not suffered serious impairment of a body function; or (3) whether there remains a genuine issue of material fact for the jury to decide.” Id. at 494, 665 A.2d at 1231. Although the issue before the Dodson court was whether the plaintiff suffered “serious impairment of a bodily function,” the court specifically noted that the procedure outlined would apply to the statutory standard involving “permanent serious disfigurement” as well. Id. at 484, 665 A.2d at 1226.

In order for the court to make this determination, it was necessary for the court to closely examine the plaintiff’s face to ascertain whether the scars rose to the level of serious permanent disfigurement. This was done in open court prior to trial. The court concluded that the scars were hardly discernible.

In the court’s view, there was no evidence that plaintiff suffered permanent serious disfigurement as intended by the legislature when enacting the PMVFRL. In such a case, the appearance of the plaintiff furnishes the best evidence of permanent and serious disfigurement. At the time of the court’s observation, the scars had well healed over the four years since the accident. After twice closely examining the plaintiff, this court was barely able to discern the scars about which plaintiff complained. Thus, because plaintiff failed to adduce either sufficient evidence to establish he had, indeed, suffered permanent serious injury in the form of permanent serious disfigurement, the court granted defendants’ motion for summary judgment and dismissed the case.

Plaintiff contends the Dodson case stands for the proposition that any evidence the plaintiff introduces is sufficient to raise a material issue of fact such that the case must go to a jury. Were that the situation, the trial judge’s role in making a threshold determination would be eviscerated, because every plaintiff can introduce some evidence to bolster his or her case. Instead, Dodson mandates that the trial judge examine the evidence presented, and make a determination whether that evidence is sufficient, as a matter of law, to raise a material issue of fact for a jury to decide. In fact, in Dodson, the plaintiff presented evidence including an affidavit with two supporting medical reports and his own deposition testimony, which the court found insufficient to raise a triable issue of fact with respect to whether the plaintiff sustained serious injury. Id. at 487, 665 A.2d at 1227.

This case appears to present an issue of first impression under Pennsylvania law. Under the holding in Murray v. McCann, 442 Pa. Super. 30, 36, 658 A.2d 404, 407 (1995) (holding that because Pennsylvania modeled the MVFRL on Michigan law, the trial court could properly turn to Michigan’s body of case law for guidance) the court reviewed Michigan case law for guidance. For example, in Petaja v. Guck, 178 Mich. App. 577, 444 N.W.2d 209-210 (1989), the trial court granted the defendant’s motion for summary judgment, noting that he observed only a “small, hardly discernible tissue scar immediately below the plaintiff’s lip.” The appellate court upheld that determination, holding that a “hardly discernible” scar is not the type of injury for which the legislature intended to allow recovery when it established the threshold of permanent serious disfigurement. Id., 444 N.W.2d at 210. In Nelson v. Myers, 146 Mich. App. 444, 381 N.W.2d 407-408 (1983), the court observed that the seriousness of a scar is a matter of common knowledge and experience of the trial bench, at least initially. The court, in fact, held that this is precisely the sort of case which the trial bench must review and initially decide in order to further the legislative policy of removing cases of lesser injuries from the court systems. Likewise, the Pennsylvania Legislature enacted the PMVFRL in an effort to reduce litigation and the costs of insurance. Dodson, supra at 494, 665 A.2d at 1231.

Plaintiff’s complaint that the trial court made a sua sponte determination on the threshold issue is without merit. Prior to trial, the defendant had filed a motion for summary judgment on precisely the issue the court determined. Thus, under Dodson, the issue had been raised by a pretrial motion.

Finally, contrary to plaintiff’s assertion, the court did consider all relevant evidence in making the determination that, as a matter of law, the plaintiff could not pass the legislative threshold and establish permanent serious disfigurement. The best evidence with respect to permanent serious disfigurement is the appearance of the plaintiff. Photographs taken shortly after the accident cannot establish the seriousness, nor the permanency. Four years have passed since the accident and it is clear from the appearance of plaintiff that the lacerations have healed, and no serious disfigurement resulted. Plaintiff fails to pass the threshold for permanent serious disfigurement. See Nelson v. Myers, supra (upholding trial court’s determination that plaintiff’s permanent scar failed to constitute a permanent serious disfigurement). Likewise, the plaintiff’s subjective complaint that he experienced some “stinging” in one scar fails to establish serious injury. Dodson, supra at 501, 665 A.2d at 1235 (finding subjective complaints of pain insufficient to establish serious injury where the record showed no interference with plaintiff’s daily activities).

Finally, plaintiff contends his scars become more pronounced in the summer when his skin sunburns. Plaintiff provided no evidence to substantiate that contention. Moreover, such a result would appear to be easily remedied by taking rudimentary and commonplace precautions such as applying sunscreen. Kanaziz v. Rounds, 153 Mich. App. 180, 395 N.W. 278, 281 (1986) (finding no serious injury where plaintiff suffered a small scar, considered permanent, which physician recommended be treated with sunscreen if exposed to prolonged sun exposure).

For the above stated reasons, the court enters the attached order denying plaintiffs’ motion for post-trial relief.

ORDER

And now, July 24,1997, upon consideration of plaintiffs’ motion for post-trial relief, the memorandum of law and responses thereto, it is hereby ordered and directed that said motion be and is hereby denied.


author: VALASEK, /.,

text:
    American States Insurance Co. v. State Auto Insurance Co.

      C.P. of Armstrong County,
    no. 1994-1161-Civil.

      Daniel P. McDyer, for plaintiff.

      John K. Heisey, for defendant Motorist Mutual Insurance Co.
    July 18, 1997
   VALASEK, /.,

— Before the court for disposition is plaintiff American States Insurance Company’s motion for summary judgment against defendant Motorists Mutual Insurance Company.

FACTUAL BACKGROUND

A complete history of this case was stated by the court in its opinion of October 18, 1996. It need not be recited again. By virtue of said opinion and its accompanying order, a motion for summary judgment filed by Motorists against American States was dismissed. Motorists then filed a motion for reconsideration on November 1, 1996, which this court granted. Following oral argument on the matter, the court affirmed its prior holding in a memorandum and order dated February 5,1997. American States filed its present motion on April 10, 1997.

DISCUSSION

The primary issue before the court may be stated as follows: Is Motorists obligated to reimburse American States for moneys paid by American States on behalf of Ronald and Helen Mclntire in settlement of the underlying tort claim? A host of secondary issues must be addressed and resolved in order to determine if Motorists is under such an obligation. These secondary issues revolve around the applicability of the doctrine of equitable subrogation and around the duty of Motorists to indemnify Mclntire under the terms of its commercial motor vehicle policy.

EQUITABLE SUBROGATION

The Superior Court of Pennsylvania applied the doctrine of equitable subrogation in F.B. Washburn Candy Corp. v. Fireman’s Fund, 373 Pa. Super. 479, 541 A.2d 771 (1988). In that case, Washburn leased a truck owned by Philip Packard for the purpose of shipping some of its own goods. Packard’s insurer at the time was Fireman’s Fund. During the course of the delivery of the goods there was a collision between Packard’s truck, being driven at the time by one of Packard’s employees, and another vehicle. The occupants of the other vehicle sustained injuries and subsequently brought a tort action against Washburn, Packard and the truck driver.

Upon receiving notice of the suit, Washburn tendered the defense of the action to Fireman’s Fund, claiming that it was an omnibus insured under the liability insurance policy it had issued to Packard. Fireman’s Fund disagreed, however, and refused to defend Washburn. As a result, Washburn tendered the defense of the action to its own general liability insurer, Zurich Insurance Company. Following a jury trial, a plaintiff’s verdict was returned against the defendants.

Washburn and Zurich subsequently commenced a declaratory judgment action against Fireman’s Fund for the purposes of having the trial court determine the rights of the parties under the Fireman’s Fund policy, and to recoup the costs associated with Zurich’s defense of Washburn. The trial court found that Fireman’s Fund was the primary insurer and that Zurich was an excess insurer. The trial court held that Fireman’s Fund should have defended Washburn in the underlying tort action, but the trial court also held that Fireman’s Fund was not liable to Zurich for the legal fees that it incurred in defending Washburn in the underlying action or in the declaratory judgment action.

On appeal, the Superior Court reversed the trial court’s decision in part, and held that Fireman’s Fund was indeed liable to Zurich for the legal fees that it incurred in defending Washburn in the underlying action, despite the fact that Fireman’s Fund had no contractual obligation to Zurich. In refuting the trial court’s conclusion that Fireman’s Fund as the primary insurer owed no legal duty to Zurich as the excess insurer, the Superior Court applied the doctrine of equitable subrogation: “[i]t is well established that the action for subrogation is one based on considerations of equity and good conscience. The goal is to place the burden of the debt upon the person who should bear it. The right of subrogation may be contractually declared or founded in equity, but even if contractually declared, it is to be regarded as based upon and governed by equitable principles ... It has often been said that the equitable doctrine of subrogation places the subrogee in the precise position of the one to whose rights and disabilities he is subrogated. Allstate Insurance Co. v. Clarke, 364 Pa. Super. 196, 527 A.2d 1021, 1023-24 (1987). (citations omitted) Based on this principle, we are of the opinion that Zurich stands in the same place as Washburn had Washburn been forced to retain private counsel in the underlying action.” Washburn, supra at 484, 541 A.2d at 774. (emphasis added)

The Superior Court recognized that the interests of Zurich as the excess carrier were very much affected by the actions taken by Fireman’s Fund as the primary insurer — especially when those actions amounted to wrongfully refusing to defend its insured.

Although the Superior Court in Washburn did not address the issue, there appears to be no logical reason why the doctrine of equitable subrogation should not also apply to payments made in settlement of the underlying claim.

In ruling that the doctrine potentially applies to the case at bar, this court is expressing its willingness to place the burden of the “settlement debt” upon the person who should properly bear it. Of course, the court’s analysis has not yet progressed far enough for it to state that Motorists is the person who should properly bear the “settlement debt” in the instant matter.

Having concluded that the doctrine of equitable subrogation can potentially apply to a case of this general nature, the court must necessarily go on to determine if the concrete facts and circumstances present here call for its application.

Accordingly, the next issue to be addressed is whether Motorists would be under a duty to now indemnify Mclntire if he (rather than American States) had paid the moneys that settled the underlying tort claim. This is a critical issue because American States, as a subrogee, stands in the same position as Mclntire, its subrogor. If Mclntire could not recover such settlement moneys from Motorists, neither can American States.

CONDITIONAL DUTY TO INDEMNIFY

American States asserts that the duty to indemnify “follows” the duty to defend, and that a breach of the latter activates or triggers the former under the circumstances of this case. American States relies on Pacific Indemnity Co. v. Linn, 766 F.2d 754 (1985), in support of its assertion that Motorists was under a duty to indemnify Mclntire. In Linn, the plaintiff insurer brought a declaratory judgment action to determine which other insurers had a duty to defend and indemnify claims against a physician (Dr. Linn) for injuries suffered by some readers of a book written by him and setting forth a diet program injurious to those readers. Liability was asserted against Dr. Linn for malpractice, professional negligence, breach of warranty and products liability. Pacific agreed to defend Dr. Linn under a reservation of rights in cases falling within its policy period, while the other insurers refused to defend him against any of the claims.

While the court was rendering its decision on Pacific’s declaratory action, all but one of the underlying claims had been terminated by settlement or by verdicts in favor of Dr. Linn. After finding that several of the insurers, including Pacific, had a duty to defend Dr. Linn in the underlying claims, the court, applying Pennsylvania law, held that, with regard to the claims that were settled, the duty of the sundry insurers to indemnify necessarily had to follow their duty to defend because settlement made it impossible to determine on what theories of liability, if any, the underlying claimants would have prevailed:

“Unlike the duty to defend, the duty to indemnify, ‘cannot be determined merely on the basis of whether the factual allegations of [the underlying] complaint potentially state a claim against the insured.’ Rather, there must be a determination that the insurer’s policy actually covers the claimed incident. . . . Thus, the duty to defend in effect carries with it the conditional obligation to indemnify until such time as it becomes clear that there can be no recovery within the insuring clause.” Linn, supra, 590 F. Supp. at 650-51. (citations omitted)

According to the court, since all of the relevant underlying cases were settled, leaving no factual findings to establish which claims, if any, the underlying plaintiffs would have prevailed on, the insurers were unable to confine potential claims to those clearly outside the scope of coverage. Thus, the court held them all responsible for any payments made in settling the underlying claims.

On appeal, with regard to the issue of the duty to indemnify, the U.S. Court of Appeals affirmed the district court’s holding that the duty to defend carries with it the conditional obligation to indemnify until it becomes clear that there can be no recovery within the insuring clause.

With regard to American States’ assertion that Motorists was under a conditional duty to indemnify Mclntire, Motorists first contends that it did not breach its duty to defend Mclntire in the underlying tort action. We disagree. That issue was decided by this court in its opinion of October 18, 1996. In that opinion, we held that Motorists had a duty to defend based on the averments contained in the underlying tort complaint and on certain provisions in its insurance policy. We will not further address the issue in this opinion.

Motorists’ second contention is that, even if it breached its duty to defend, the duty to defend and the duty to indemnify are separate and distinct, and that a breach of the duty to defend has no implications with regard to the duty to indemnify. In support of this, Motorists relies on Gedeon v. State Farm Mutual Automobile Insurance Co., 410 Pa. 55, 188 A.2d 320 (1963). In Gedeon, the insurer refused to defend its insured in a wrongful death suit arising from an automobile accident. The insured did not hire substitute counsel or spend other funds in defense of the suit. A jury verdict was rendered against him. The insured thereafter sued his insurer for the amount of the verdict, claiming the insurer had breached its duty to defend. The Supreme Court affirmed the lower court’s holding that, even if the insurer did breach its duty to defend, the insured had shown no damages resulting from the breach since he incurred no defense costs. In reaching its decision, the court described three duties associated with automobile insurance coverage:

“Under a typical automobile liability insurance policy, such as the one before us, the insurer undertakes three distinct types of obligations, each of which involves different elements of proof to establish breach thereof, and from the breach of which different measures of recovery result. In the first place, the insurer agrees to indemnify against liability for personal or property damage and to indemnify against certain kinds of property damage to the automobile itself. In order to establish breach of this promise to indemnify, the insured must demonstrate that the policy covers the particular risk in question. The amount of recovery for breach of this obligation is usually determined by the terms of the policy.

“Secondly, the insurer agrees to defend the insured against any suits arising under the policy ‘even if such suit is groundless, false, or fraudulent.’ Since the insurer thus agrees to relieve the insured of the burden of defending even those suits which have no basis in fact, our cases have held that the obligation to defend arises whenever the complaint filed by the injured party may potentially come within the coverage of the policy. . . . Consequently, there may be an obligation to defend although no obligation to indemnify. . . . Based on the usual contract rule for determining damages, the recovery for breach of the covenant to defend will ordinarily be the cost of hiring substitute counsel and other costs of the defense. This recovery may be in addition to any other obtained against the insurer.

“Thirdly, by asserting in the policy the right to handle all claims against the insured, including the right to make a binding settlement, the insurer assumes a fiduciary position towards the insured and becomes obligated to act in good faith and with due care in representing the interests of the insured. . . . Once again there can be a breach of this fiduciary duty without a breach of either the covenant to indemnify or the covenant to defend.” Gedeon, supra at 58-60, 188 A.2d at 321-22. (footnotes omitted) (citations omitted)

According to Motorists, Gedeon stands for the proposition that an insurer who breaches its duty to defend is not liable to the insured for anything other than the costs the insured spends to defend himself. Therefore, says Motorists, even if it did breach its duty to defend Mr. Mclntire, it is responsible for no more than costs of defense incurred by him.

A proper reading of Gedeon reveals that it does indeed stand for the proposition that the duty to defend, the duty to indemnify, and the duty to act in good faith are all separate and distinct duties, each carrying its own measure of damages in the event of breach. A close reading of Gedeon also reveals that it says nothing else about the duty to indemnify since, of course, the plaintiff did not sue for a breach of the duty to indemnify. Even more specifically, Gedeon does not stand in opposition to Linn, as there the federal court ruled that, under certain circumstances, an insurer’s breach of the duty to defend can activate or trigger an insurer’s duty to indemnify.

It can rightly be concluded, therefore, that nothing in Gedeon precludes the application of the principles enunciated in Linn to the case at bar. But the question still remains of whether Linn applies to the facts and circumstances of the instant matter, i.e., whether Motorists’ breach of its duty to defend activated its duty to indemnify. The court believes it did not.

The critical distinguishing factor between Linn and the present case is that in Linn, the determination of which insurance company was under a contractual duty to indemnify was precluded by the settlement of the underlying actions. The federal court held that, with regard' to the claims that were settled, the duty to indemnify necessarily had to follow the duty to defend because settlement made it impossible to determine on what theories of liability, if any, the underlying claimants would have prevailed had each claim gone to trial, thereby precluding a determination of which insurer’s policy coverage applied.

However, in the .present case, the settlement of the underlying tort claim has not made it impossible to determine if the Motorists policy provided coverage. The issue of whether the vehicle being driven by Kimmel at the time of the accident was a “temporary substitute auto” under the terms of the Motorists policy is one that would not have been resolved in the tort litigation, even if it had gone to trial. The issue would not have been relevant to the tort plaintiffs in their proving liability or damages; nor would it have been relevant to anyone’s defense. It would not have been a proper subject of a special interrogatory answerable by the jury. Indeed, Mclntire’s tort trial counsel would have been precluded from introducing facts which would have defeated his claim of coverage, since doing so would have constituted a violation of counsel’s obligation to zealously represent the interests of his client. In short, the settlement of the underlying tort claim in the instant matter has not made it impossible to determine if the Motorists policy provided Mclntire with coverage, and the rationale for applying the “duty to indemnify follows the duty to defend” rule enunciated in Linn simply is not present. Therefore, it should still be possible for Motorists to demonstrate that the underlying tort claim was one outside the scope of its policy coverage.

EXPLICIT CONTRACTUAL DUTY TO INDEMNIFY

The court’s ruling that Motorists was not under a conditional duty to indemnify Mclntire, of course, defeats American States ’ claim that it is entitled to summary judgment on the issue of liability. The court’s ruling, however, does not answer the question of whether indeed the Kimmel vehicle was a “temporary substitute auto” under the Motorists policy. If it was, Motorists could still possibly be under a duty to indemnify Mclntire. If it was not, Motorists could be under no such duty.

Mclntire has filed affidavits with the court in connection with the current summary judgment motion. The affidavits are admissions by Mclntire that the Kimmel vehicle was not a “temporary substitute auto” within the meaning of the Motorists policy. In effect, Mclntire admits that the Motorists policy provided him no coverage for the accident of April 3, 1990.

However, Motorists has not filed a motion for summary judgment and, accordingly, the court may not enter a judgment in its favor.

An appropriate order will be entered denying American States’ motion for summary judgment.

ORDER

And now, July 18, 1997, for reasons stated in the foregoing opinion, it is hereby ordered, adjudged and decreed that the motion for summary judgment filed by plaintiff American States Insurance Company be denied and dismissed.

      . The opinion and order also dealt with several other motions for summary judgment filed by several other parties.

      . The insureds under the terms of the Motorists policy were Ronald Mclntire and DI-MAC Enterprises Inc., collectively referred to as “Mclntire.”

      . See American States Insurance Co. v. Maryland Casualty Co., 427 Pa. Super. 170, 628 A.2d 880 (1993), affirming, 39 P.L.J. 316 (1991), where the Superior Court and the dial court (Judge Wettick) were apparently willing to apply the doctrine to a case where a primary insurer allegedly breached its duty to act in good faith.

      . The district court’s opinion can be found at 590 F. Supp. 643 (1984). It is helpful to also read this lower court opinion.

      . If Motorists’ contention is correct, then it could not have been under a conditional duty to indemnify.

      . On pages 31-32 of our opinion, we stated as follows:
      “In the case at bar, it is not discernible from the allegations of the underlying complaint whether Kimmel’s vehicle was a ‘covered auto.’ The parties have merely stipulated that the Kimmel vehicle was not one of the six specifically described autos on the declarations page. It is possible that the Kimmel vehicle came within the definition of a ‘covered auto’ because of the above quoted policy language concerning ‘temporary substitute autos.’
      “Therefore, Motorists was under a duty to defend until such time as it could be judicially established that the Kimmel vehicle was not a ‘covered auto’ under any definition of ‘covered auto’ found in the policy.”

      . Importantly, the insured did not sue for a breach of the insurer’s duty to indemnify or its duty to act in good faith.

      . It will be recalled that liability was asserted against Dr. Linn on a number of claims, including malpractice, professional negligence, breach of warranty and products liability, each involving policy coverages issued by different insurers.

      . In its reply brief, American States relies upon American States, supra, note 3, in addition to Linn, as authority for the proposition that this court may not now make a post-settlement determination of the coverage of the Motorists policy insofar as it relates to Motorists’ duty to indemnify Mclntire. A reading of American States, however, reveals that it concerned an insurer’s duty to defend, not indemnify. The Superior Court affirmed the trial court’s decision to overrule a prior partial summary judgment entered in the same case by a different trial judge, who declared that an exclusion in Maryland Casualty’s liability policy did not apply to the tort plaintiff’s claim. The Superior Court ruled that such a post-settlement judicial determination was not relevant in determining whether Maryland Casualty had a duty to defend. Instead, the court held that Maryland Casualty’s duty to defend (not duty to indemnify) was determinable by the allegations of the tort plaintiff’s complaint. This, of course, is the principle of law applied by this court to the instant matter in its opinion and order dated October 18, 1996. Lastly, the court notes that the summary of American States set forth in American States’ reply brief is not factually accurate.

      . One has been executed by Ronald and Helen Mclntire. The other has been executed by officers of DI-MAC Enterprises Inc. The affidavits were made part of the record on June 20, 1997. Until said date, Mclntire’s position had been that the Motorists policy did provide coverage and that it was under a duty to indemnify him. See paragraphs 34 and 35 of American States’ complaint and Mclntire’s answer thereto.