author: TURGEON, J.,

text:
    In re Dauphin County Tax Sale

      C.P. of Dauphin County,
    no. 3924-1-S-1999.

      David DeLuce, for petitioner.

      Norman Yoffe, for respondent.

      F.R. Martsolf, for Tax Claim Bureau.

      Michael Sedor and William J. Peters, for Authority.
    February 18, 2000
   TURGEON, J.,

Currently before the court is Patricia Latham’s petition to set aside an upset tax sale involving a parking lot sold to Vincent Bianchi September 24, 1999. The issues presented are whether a person whose property is subject to a condemnation proceeding has standing to seek to set aside a subsequent tax sale involving the property, and if so, whether the sale should be set aside for lack of proper notice.

FACTS AND PROCEDURAL BACKGROUND

Since 1972, petitioner had been joint owner with her mother, and after her mother died in 1982, sole owner of a Harrisburg city parking lot designated as 138 Cranberry Street. For many years it was leased to First Federal Savings and Loan Association which was responsible for paying all real estate taxes under the lease. First Federal used the unimproved lot to provide employee parking, which was located behind its offices at 234 North Second Street. The lease was later assumed by Harris Savings Bank when it merged with First Federal in April 1996.

On February 3,1999, the Harrisburg Parking Authority filed a declaration of taking (no. 496-S-1999) whereby it condemned the subject property for the purpose of constructing a parking garage thereon. Notice of the condemnation was recorded in the Dauphin County Recorder of Deeds office. The authority properly notified petitioner at her Florida address. She filed timely preliminary objections to the declaration of taking on March 12,1999, which are currently pending. While pursuing settlement of the condemnation action with the authority, petitioner discovered the tax claim bureau had sold her property to respondent at a September 24, 1999 tax sale.

The facts relevant to the tax sale proceeding are as follows: Historically, all real estate tax bills were sent in petitioner’s and/or her mother’s name in care of First Federal at 234 North Second Street which paid the taxes through 1996. Petitioner, who became a Florida resident in 1994, never received any tax notices. In March 1997, the tax collector (City of Harrisburg) informed the Dauphin County tax assessment office of a mailing address change from 234 North Second Street to 138 Cranberry Street. The tax assessment office was also informed by a “mortgage company” in March 1998 to remove reference to First Federal from the address.

Presumably, the tax collector then sent the 1997 tax bill to 138 Cranberry Street care of First Federal. The record did not disclose whether that bill was received by the bank. Nevertheless, real estate taxes were not paid that.year. On March 9, 1998, tax claim bureau sent notice of this tax delinquency by certified mail to petitioner and her mother, care of First Federal, at the 138 Cranberry Street address. The notice was accepted by an unknown person who signed a return receipt. The tax claim bureau also allegedly posted a tax claim notice on the parking lot September 2, 1998. None of these notices were effective in alerting petitioner or Harris Savings Bank and the 1997 taxes were unpaid.

Consequently, the tax claim bureau listed the property for tax sale in 1999, and on August 23, 1999 sent petitioner the required tax sale notice by certified mail to the parking lot address, which was returned “no such number.” The tax claim bureau attempted to find petitioner’s correct address by researching the Harrisburg area phone book, the Harrisburg city directory and Harrisburg city computer tax records. They found none and thus mailed a second notice on September 13, 1999 to the Cranberry Street address which was also returned and stamped “attempted, not known.” The tax claim bureau also claimed to have posted the tax notice on the property September 2, 1999. On September 24, 1999, the property was sold to respondent Bianchi for $14,344.71.

On October 22, 1999, shortly after becoming aware of the tax sale, petitioner filed her petition to set aside, claiming she was not provided proper notice of the sale. Both respondent Bianchi and the tax claim bureau answered the petition, claiming the tax sale proceeding was accomplished in accordance with the law. Furthermore, respondent alleged he purchased the property without notice of the condemnation. He asserts that his title search on the property failed to reveal the recorded condemnation because it was not indexed by the recorder of deeds office as required by law and that this failure was attributable to the authority.

LEGAL DISCUSSION

Petitioner argues the tax sale must be set aside since the tax claim bureau failed to adhere to the notice requirements set forth under the Real Estate Tax Sale Law. 72 P.S. §5860.101 et seq. Respondent argues, however, that petitioner lacks standing to raise this issue since only the owner of the property sold may petition to set a tax sale aside, and the authority, not petitioner, was the owner at the time of the tax sale.

Petitioner’s Standing

The Eminent Domain Code provides that upon filing a declaration of taking, title passes from the condemnee to condemnor. 26 P.S. §l-402(a). Respondent thus argues that when title transferred to the authority, petitioner lost both her ownership and possessory rights to the parking lot and cannot subsequently contest the tax sale. Petitioner responds that even though a condemnor obtains title under the Eminent Domain Code, where preliminary objections have been filed, the condemnee maintains her possessory interest during their pendency. 26 P.S. §1-406. Since her preliminary objections are still pending, petitioner argues she maintains standing to challenge the tax sale by virtue of her possessory interest. We reject both arguments.

This action is before us in the guise of a petition to set aside a tax sale under the Tax Sale Law and, thus, petitioner’s standing must be defined under its terms. See Farro v. Tax Claim Bureau of Monroe County, 704 A.2d 1137, 1141 (Pa. Commw. 1997), appeal denied, 555 Pa. 715, 724 A.2d 936 (1998). The Commonwealth Court has noted that in fashioning the Tax Sale Law, “the legislature clearly and without equivocation” has provided that only owners of real estate subject to a tax sale are required to be given all notices under the Tax Sale Law and that if an owner is missing from a suit, the court lacks jurisdiction. Appeal of Yardley, 166 Pa. Commw. 596, 602, 646 A.2d 751, 754 (1994). Because petitioner is attacking the tax sale’s validity on the basis of lack of notice, she must be an “owner” under the Tax Sale Law or else she lacks standing. See Plank v. Monroe County Tax Claim Bureau, 735 A.2d 178, 181 (Pa. Commw. 1999). The Tax Sale Law defines “owner” as: “[1] the person in whose name the property is last registered, if registered according to law, or, if not registered according to law, [2] the person whose name last appears as an owner of record on any deed or instrument of conveyance recorded in the county office designated for recording and [3] in all other cases means any person in open, peaceable and notorious possession of the property, as apparent owner or owners thereof, or the reputed owner or owners thereof, in the neighborhood of such property; ....”72 P.S. §5860.102.

The first clause defining an owner as “the person in whose name the property is last registered” does not apply here. “The term ‘registered’ refers to the process of establishing and maintaining a current record of all real estate transactions in the office of the county commissioners so that the current ownership can be ascertained without burdensome and time-consuming searches.” Farro at 1140. (citation omitted) Only counties of the first and second class are required under the law to maintain such offices; Dauphin County is a county of the third class.

The second clause defines “owner” as “the person whose name last appears as an owner of record on any deed or instrument [of conveyance] recorded in the county office designated for recording.” Id. at 1141. The evidence established that at the time of the tax sale, petitioner and her late mother were the last recorded owners by deed. The deed conveying the property to petitioner and her mother was recorded December 28, 1972, and indexed in the recorder of deeds office.

However, under the Tax Sale Law, ownership can also be conferred by other “instruments of conveyance.” While we found no applicable appellate law, a declaration of taking filed in a condemnation proceeding could be such an instrument because it acts to convey title. Furthermore, the notice thereof must be recorded in the recorder of deeds office and the recording must be indexed to indicate the condemnee as grantor and the condemnor as grantee. 26 P.S. §§l-402(a), 1-404. Thus, if the notice of declaration of taking was properly recorded, it would be the most recent instrument of conveyance and the authority would qualify as the parking lot “owner” under the Tax Sale Law. However, we find the declaration was not properly recorded.

We necessarily infer into the tax sale “owner” definition that the instrument of conveyance — here, the declaration of taking — be properly recorded. The primary object of recording is to give public notice in whom title resides so that no one may be defrauded by deceptious appearance of title. Mancine v. Concord-Liberty Savings & Loan Association, 229 Pa. Super. 260, 445 A.2d 744 (1982). Here, while the authority’s “Notice of filing of declaration of taking” was recorded February 3, 1999 in the recorder of deeds office at deed book 3323, page 127, it was not, according to respondent Bianchi, indexed. (Answer to petition to set aside, ¶17.) We deem this factual averment admitted for the purpose of this proceeding.

The recorder of deeds office is under a duty, pursuant to Eminent Domain Code section 404, as well as under all relevant recording laws, to record and index instruments of conveyance (and other relevant documents affecting real property interests). See 21 P.S. §351; 16 P.S. §§9851, 9852. See generally, 16 P.S. §§9751-9757; 21 P.S. §§381-410. A recorded instrument, which is not indexed, cannot be searched and is ineffective to provide public notice, which is the purpose of recording. Mancine, supra. See 16 P.S. §9853; Mid-State Bank and Trust Co. v. Globalnet International Inc., 557 Pa. 554, 735 A.2d 79 (1999) (quoting Lund v. Heinrich, 410 Pa. 341, 346, 189 A.2d 581, 584 (1963)) (“[a] party is on constructive notice of another’s interest in real property where the party ‘could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds’ ”).

Furthermore, we note that in proceeding with an upset tax sale, the tax claim bureau was under a duty to provide notice “to each owner as defined by this Act.” 72 P.S. §5860.602(e)(1). As defined, the tax claim bureau could only have concluded that petitioner was the “owner” because it could not have discovered the improperly recorded declaration of taking. The tax claim bureau cannot be charged with notice of recording failures occurring in the recorder of deeds office. Brown v. Barnes Real Estate Co., 44 Pa. Commw. 439, 443-44, 404 A.2d 437, 439 (1979). Thus, petitioner was the “owner” and entitled to all notices required under the Tax Sale Law.

Respondent erroneously argues petitioner lacked standing because, following the authority’s declaration of taking, she was divested of title. As set forth above, however, ownership is not determined by who owns legal title but by who is the statutory owner under the Tax Sale Law. This concept was addressed in Farro, supra. There, the Farros’ property was sold for delinquent taxes at a 1991 tax sale to a purchaser who promptly recorded the deed. However, that tax sale was later set aside by order of court because the Farros had not received proper notice. In 1994, the property was again subject to a tax sale and sold, through a straw purchase, to the original purchaser. The Farros again sought to set aside the sale for lack of notice, since the county tax claim bureau had sent all bills and notices to the purchaser, based on his recorded deed from the first tax sale. The Farros claimed they maintained title to their property, including full ownership interest and rights therein, as a result of the court’s order setting aside the 1991 tax sale, and, thus, were due to receive proper notice under the Tax Sale Law. The court rejected the argument as follows:

“This contention, however, dramatizes the difference between two concepts of ownership, the feudal concept of ownership derived from seisin and the later concept of ownership derived from official recordation, and ignores the concept of ownership as defined in the Act. Nevertheless, the fact remains that [the purchaser] was the last owner of record because he properly recorded his ownership interest in the subject property when he acquired the property at the first tax sale. The Act expressly states, as does this court’s opinion in Grace, that the latest owner of record prior to the tax sale is the owner for purposes of the Act and, therefore, for purposes of receiving notice under section 602, 72 P.S. §5860.602. Id. Under the plain meaning of the relevant statutory provisions, the Farros were not the record owners under the Act and, therefore, they were not entitled to notice of the second tax sale.” Id. at 1141 (citing Grace Building Co. Inc. v. Lanigan, 15 Pa. Commw. 643, 328 A.2d 919 (1974)).

Thus, while the authority acquired legal title under the Eminent Domain Code pursuant to the declaration of taking, under the Real Estate Tax Law, petitioner nevertheless qualified as the statutory “owner.”

Tax Sale Notice

As an “owner” under the Tax Sale Law, petitioner was entitled to proper notice of the impending tax sale as required under section 602. 72 P.S. §5860.602. Section 602 sets forth three methods of notice: publication at least 30 days prior to sale, notification by certified/first-class mail and posting of the property at least 10 days prior to the sale. Ban v. Tax Claim Bureau of Washington County, 698 A.2d 1386, 1388 (Pa. Commw. 1997). The burden of proving compliance with statutory notice provisions rests with the tax claim bureau. Id. These notice provisions are to be strictly construed, and strict compliance with them is necessary to guard against deprivation of property without due process. Id. If any one is defective, the sale is void. Id. Petitioner claims both the posting and the mailed notice(s) were deficient.

1. Posting

The Tax Sale Law requires that “[e]ach property scheduled for sale shall be posted at least 10 days prior to the sale.” 72 P.S. §5860.602(e)(3). Petitioner claims the sheriff wrongly posted an adjacent property. The deputy sheriff who posted the notice filed an affidavit that he posted the property at 138 Cranberry Street on September 2,1999. Respondent Bianchi notes there is a presumption of regularity of the acts of public officers and therefore the court must presume the tax claim bureau posted the property as attested in the affidavit. Thomas v. Montgomery County Tax Claim Bureau, 123 Pa. Commw. 371, 374, 553 A.2d 1044, 1046 (1989). However, the evidence presented rebutted this presumption and established that the tax claim bureau indeed posted the wrong property and, thus, the tax sale must be set aside.

This evidence included testimony from Sherman Lett, an employee of Harris Savings Bank, who regularly parked in the 138 Cranberry Street lot. He testified that he never observed any type of notice posted on the premises in August and September 1999. He did, however, observe a tax sale notice posted along a concrete curb located on an adjacent parking lot. Mr. Lett glanced at the notice but did not recall what property it referenced. He claimed that had he observed a notice for the lot where Harris Savings employees parked, he would have informed his employer.

William McCarthy, the general manager of nearby Pennsylvania Garages Inc., also testified that in August or September 1999, he observed a tax sale notice posted on the same concrete curb on property owned by Pennsylvania Garages. Mr. McCarthy testified the posting concerned him since he was responsible for managing the posted property. Accordingly, he read the posting and recalled that it referred to an owner “Latham.” He testified the notice so piqued his interest that he surveyed all the other nearby lots for posted notices, including the lot at issue here, but observed none.

Unquestionably, the posting of the Pennsylvania Garages property observed by Lett and McCarthy, naming Latham, was the one which the tax claim bureau claimed it had posted on Latham’s property. As such, the sale must be invalidated. In re Upset Price Tax Sale, 150 Pa. Commw. 191, 194, 615 A.2d 870, 872 (1992).

2. Mail Notification

We alternatively find that the tax claim bureau failed to meet its obligation under the mailing requirement. The tax claim bureau was required, at least 30 days before the sale date, to send the owner notification by certified mail, return receipt requested. 72 P.S. §5860.602(e)(l). The tax claim bureau arguably complied by mailing the required notice August 23,1999. However, since the first tax sale notice was returned indicating there was “no such number” for 138 Cranberry Street, the tax claim bureau was required to comply with additional statutory notice requirements.

First, under section 602(e)(2), because petitioner failed to acknowledge the first notice, the tax claim bureau was required to mail her a second notice first-class mail, proof of mailing, at least 10 days prior to the sale, to her last known post office address based on information it knew from its own records, from the tax collector(s) of the districts in which taxes were delinquent and from county assessment office records. 72 P.S. §5860.602(e)(2).

Second, the county tax claim bureau was required to undertake reasonable “additional notification efforts” to discover petitioner’s whereabouts under section 5860.607a which states as follows:

“(a) When any notification of a pending tax sale is required to be mailed to any owner,..., and such mailed notification is... returned without the required receipted personal signature of the addressee . . ., then before the tax sale can be conducted or confirmed, the bureau must exercise reasonable efforts to discover the whereabouts of such person or entity and notify him. The bureau’s efforts shall include, but not necessarily be restricted to, a search of current telephone directories for the county and of the dockets and indices of the county tax assessment offices, recorder of deeds office and prothonotary’s office, as well as contacts made to any apparent alternative address or telephone number which may have been written on or in the file pertinent to such property. When such reasonable efforts have been exhausted, regardless of whether or not the notification efforts have been successful, a notation shall be placed in the property file describing the efforts made and the results thereof, and the property may be rescheduled for sale or the sale may be confirmed as provided by the Act.” 72 P.S. §5860.607a(a).

The tax claim bureau failed to undertake reasonable additional notification efforts. The testimony established that the tax claim bureau merely researched the Harrisburg area phone book, the Harrisburg city directory and city computer tax records. Section 607a(a) requires that the tax claim bureau’s efforts include, at the least, “a search of current telephone directories for the county and of the dockets and indices of the county tax assessment offices, recorder of deeds office and prothonotary’s office, as well as contacts made to any apparent alternative address or telephone number which may have been written on or in the file pertinent to such property.” 72 P.S. §5860.607a(a). The tax claim bureau failed to meet its burden of proving compliance with these requirements and, thus, the sale must be set aside.

Accordingly, we enter the following:

ORDER

And now, February 18, 2000, the petition of Patricia Latham to set aside the September 24, 1999 upset tax sale of property located at 138 Cranberry Street, Harrisburg, PA (tax parcel no. 4-30-15), is hereby granted.

      . At the location of the parking lot, Cranberry Street is basically an alley between several contiguous parking lots in downtown Harrisburg.

      . It would appear that the notice was delivered to Harris Savings, because within a week or so thereof, the tax assessment office was informed by a “mortgage company” to remove First Federal’s name from the mailing address. The tax claim bureau asserted in its pleadings that it was First Federal which informed it to remove its name, however, at that time, First Federal had already merged with Hams Savings.

      . In addition, on September 29, 1999, the tax claim bureau sent notice via certified/first-class U.S. mail to the parking lot address, that the property had been sold and advising petitioner she could file objections and exceptions to the tax sale no later than 30 days after the trial court’s confirmation nisi of the tax claim bureau’s consolidated return. Of course, that mailing too was returned and stamped “no such number.”

      . In so finding, we are merely acknowledging that respondent’s verified answer is deemed admitted under petition and answer practice, as follows:
      “(c) If an answer is filed raising disputed issues of material fact, the petitioner may take depositions on those issues, or such other discovery as the court allows, within the time set forth in the order of the court. If the petitioner does not do so, the petition shall be decided on petition and answer and all averments of fact responsive to the petition and properly pleaded in the answer shall be deemed admitted for the purpose of this subdivision.” Pa.R.C.P. 206.7(c).
      We need not find whether the notice of declaration of taking was indeed not indexed, that the authority had any responsibility in causing the purported non-indexing nor ultimately whether respondent was a bona fide purchaser.

      . Clearly, petitioner’s Florida address was ascertainable since the authority served her without any difficulty.


source: Caselaw Access Project

author: SMITH, P.J.,

license: Public Domain

text:
    Kappas v. Andritz Inc.

      C.P. of Lycoming County,
    no. 98-01,938.

      John Mihalik, for plaintiff.

      Jason Wolfgang, for defendant Andritz.

      James Wilson, for defendant HATS.
    March 17, 2000
   SMITH, P.J.,

This case arises out of injuries Nicholas Kappas sustained while working at the Muncy facility of Andritz Inc. a/k/a Andritz Sprout-Bauer Inc. Mr. Kappas was placed at the Andritz foundry through HATS, Howe About Temps Inc., a temporary employment agency. Although Mr. Kappas received workers’ compensation for his injuries, he is now attempting to sue both Andritz and HATS for negligence. Both companies filed motions for summary judgment, each claiming that as Mr. Kappas’ employer, it is immune from suit under the Workers’ Compensation Act.

This case presents two matters for the court to decide. The first issue is easy: which company or companies, if any, is Mr. Kappas’ employer for workers’ compensation immunity purposes? Under Pennsylvania case law, Andritz is the employer and HATS is not. Therefore, HATS may be sued but Andritz may not. The second question is much more difficult, and is a matter of first impression in Pennsylvania: Does a temporary employment agency have a duty to its applicants, and if so, what is that duty?

DISCUSSION

Andritz and HATS have both filed for summary judgment, asking this court to dismiss the case against them. A motion for summary judgment may be granted when there is no genuine issue of material fact regarding a necessary element of the cause of action or if, after completion of discovery, the plaintiff has failed to produce evidence of a fact essential to prove the cause of action. Pa.R.C.P. 1035.2. The purpose of the rule is to eliminate cases where a party cannot prevail on a claim or a defense. Eaddy v. Hamaty, 694 A.2d 639, 643 (Pa. Super. 1997). If the defendant is the moving party, he must point to materials that indicate the plaintiff is unable to satisfy an element of his cause of action. Godlewski v. Pars Manufacturing Co., 408 Pa. Super. 425, 431, 597 A.2d 106, 109 (1991). In considering a motion for summary judgment, the court must examine the record in the light most favorable to the non-moving party. Kerns v. Methodist Hospital, 393 Pa. Super. 533, 574 A.2d 1068 (1990).

Both Andritz and HATS claim they are Mr. Kappas’ employer for purposes of workers’ compensation immunity. Mr. Kappas contends neither is his employer, and both are fair game for this tort action.

The Workers’ Compensation Act provides that recovery under the Act is the exclusive remedy available to employees injured when acting in the scope of their employment. 77 P.S. §481(a). The law obliterated the employee’s right to maintain a tort action for these injuries in exchange for what the legislature perceived to be a more equitable and certain system of compensation. Kosowan v. MDC Industries Inc., 319 Pa. Super. 91, 465 A.2d 1069 (1983). Under the quid pro quo established by the Act, the employee gives up the right to sue his or her employer for negligence in return for automatic compensation for the injuries, without having to prove the employer was at fault. Wasserman v. Fifth & Reed Hospital, 442 Pa. Super. 563, 660 A.2d 600 (1995).

In determining whether an entity is an employer under the Workers’ Compensation Act, any discrepancies in the facts are for a jury to decide; however, whether the facts as they exist constitute an employment relationship is strictly a question of law. English v. Lehigh County Authority, 286 Pa. Super. 312, 322, 428 A.2d 1343, 1348 (1981). Here, there are no significant issues of material facts for a jury to decide; therefore, summary judgment is appropriate.

I. Andritz’ Motion for Summary Judgment

A. Borrowed Servant Doctrine

Andritz maintains it is the employer because of the “borrowed servant” doctrine, under which an employee furnished by one person becomes the employee of the person to whom he or she is loaned. The test as to whether a person becomes a borrowed servant is whether the right to control the work and the manner in which the work is performed passes to the borrower. JFC Temps Inc. v. W.C.A.B. (Lindsay), 545 Pa. 149, 153, 680 A.2d 862, 864 (1996). The entity possessing the right to control the manner of the performance of the work is the employer, irrespective of whether that control is actually exercised. Id. Although other factors such as the right to select and discharge the employee and the payment of wages may be relevant, the right to control the performance of the work is the overriding factor. Id. at 156, 680 A.2d at 865.

It is clear from the record that Andritz had the right to control the manner in which Mr. Kappas performed the work at the Andritz plant. Carl Miller, the team leader of the Cast and Clean Department in which Mr. Kappas was placed, testified in his deposition that when Mr. Kappas arrived at the plant, he took Mr. Kappas to his office and explained when the breaks were, when the dinner hour was, when he was to start cleaning up, and what personal protection equipment he was required to wear. Miller deposition, p. 25. Mr. Kappas testified that Mr. Miller showed him the area in which he was to grind and provided him with ear plugs, a helmet with a face shield, safety glasses, gloves, and a hard hat. Kappas deposition, pp. 40-41. Peter Brandt, plant supervisor, testified that Carl Miller was in charge of training the temporary workers, and that workers were required to wear certain protective equipment. Brandt deposition, p. 27. Mr. Miller showed Mr. Kappas what to grind, explained that he was to “take the lips and edges off,” and told him how to do it after Mr. Kappas asked him. Id. at p. 42. Mr. Miller testified that he watched Mr. Kappas grinding for 15 minutes. Miller deposition, p. 27. When any new piece was assigned to Mr. Kappas, Mr. Miller would go over it with him and explain what had to be removed. Miller deposition, p. 29. Andritz provided the grinders, as well as the materials to be ground. Kappas deposition, pp. 80-81. Mr. Miller showed Mr. Kappas how to operate the overhead crane and how to lubricate the grinder. Kappas deposition, pp. 42, 68. Mr. Miller was the person with the authority to tell Mr. Kappas if he was not doing a satisfactory job. Kappas deposition, pp. 75, 78, 82. If Mr. Miller was unsatisfied with Mr. Kappas’ work, he would first confront Mr. Kappas and then if the problem was not cleared up, would report it to his supervisor. Miller deposition, p. 38. And finally, Andritz had the power to terminate Mr. Kappas. Packard-Howe deposition, pp. 40-41.

Mr. Kappas contends these facts are insufficient to show Andritz had the right to control his work for the following reasons. First, he argues that Mr. Kappas was a skilled employee, and thus the right to control never passed to Andritz because there was no need to train him. In support of this proposition, Mr. Kappas cites Accountemps v. W.C.A.B. (Myers & Spectrum Arena), 120 Pa. Commw. 489, 548 A.2d 703 (1988), in which a referral agency supplied skilled accountants to companies. The Superior Court found that the plaintiff accountant already possessed the requisite skills and did not have to be instructed on how to perform her basic job. Thus, the borrowing employer never acquired control over the performance of the work. In Wilkinson v. K-Mart, 412 Pa. Super. 434, 603 A.2d 659 (1992), however, the Superior Court unequivocally stated that Accountemps does not stand for the principle that the borrowed servant doctrine is inapplicable when the borrowed employee is a specially skilled professional. Instead, the court stated that the Accountemps holding was based upon that court’s conclusion that the borrowing employer did not exercise the control necessary to invoke the borrowed servant doctrine, and that the skill of the employee was only one of the factors to be considered. Wilkinson, supra at 441, 603 A.2d at 662.

Similarly, in JFC Temps, the Pennsylvania Supreme Court explicitly rejected an argument similar to the one Mr. Kappas is making. In JFC Temps, the plaintiff truck driver did not need to be trained to drive a tractor-trailer, and argued that, based on Accountemps, he was not an employee of the trucking company. The Supreme Court held that although the trucking company did not need to teach the plaintiff how to drive a truck, it was still his employer because the company “directed him as to the specifics of the deliveries to be made,” and because the driver reported to company headquarters daily and returned there at the end of each workday. Id. at 155, 680 A.2d at 865. The Supreme Court, like the Superior Court in Wilkinson, held that Accountemps is limited to the factual scenario of that case. JFC Temps, supra at 158, 680 A.2d at 866.

Similarly, in the case before this court, although Mr. Kappas had some prior experience in grinding, Andritz nevertheless directed him as to the specifics of what was to be ground and what parts were to be removed, as well as specifying his work hours and break times. The court also notes that grinding is hardly a highly skilled profession like accounting, and therefore any parallels Mr. Kappas attempts to draw between the two cases are thin indeed.

Mr. Kappas next argues that the borrowed servant doctrine does not apply because Andritz exercised no actual control over the manner in which Mr. Kappas completed the work. He points out that Andritz did not formally train him, allowed him to choose which grinder to work on and whether to grind in a booth or not, did not spend much time actually supervising him, and did not specify the details of precisely how he was to grind. In this way, Mr. Kappas attempts to compare himself to an independent contractor, arguing that Andritz cared only about the finished product, rather than the manner in which Mr. Kappas produced the product.

This argument must fail because Mr. Kappas is doing nothing more than splitting hairs. His argument is similar to that advanced by the plaintiff in JFC Temps, who maintained he was not a borrowed employee because, although the company where he was placed told him what truck to use and where to drive it, the company did not specify which route to take. The Superior Court rightly rejected that argument, and so do we. Supervisory personnel need not dictate every move an employee makes in order for their company to be considered an employer.

The record shows that Andritz, through Mr. Miller, told Mr. Kappas what to grind, when to grind, the area in which to grind it, the safety equipment he was to wear, and the machines he was to use. Mr. Miller showed him how to take “the lips and edges off” the materials, how to use the overhead crane, and how to lubricate the grinders. Mr. Miller also watched Mr. Kappas for 15 minutes to make sure he was performing the job properly. Clearly, Andritz exercised control over the manner in which the work was performed. The fact that it did not specify in minute detail precisely how every single step in the process was to be done is immaterial. After all, most employees are permitted to exercise some degree of discretion and independence, as most tasks allow for some flexibility. In a capitalist economy, it pays to allow employees to complete tasks the way they find easiest and most comfortable, for that often leads to the most efficient production. Employers who attempt to dictate every movement of every employee soon find themselves with extravagant management costs and low worker productivity.

Moreover, as discussed above, the overriding factor is the right to control the manner of the work performance, rather than the actual control exercised. Thus, in JFC Temps, the court concluded that the trucking company was the employer because it had the right to select the routes taken by the workers, even if it did not exercise that right. Id. at 158, 680 A.2d at 866. Similarly, in English v. Lehigh County Authority, 286 Pa. Super. 312, 428 A.2d 1343 (1981), the court stated that it is the right to control, and not the actual exercise of control, that creates an employment relationship. Although the borrowing employer in English did not exercise much control, it could have done so. The court concluded, “The fact that the authority did not exercise such control demonstrates, not its lack of authority, but its negligence.” Id. at 325, 428 A.2d at 1350.

In the case before the court, the facts clearly show that Andritz could have asserted greater control if it had wanted to or felt it necessary to do so. Mr. Kappas himself admitted that if he was not doing a task correctly, Mr. Miller could have admonished him. Kappas deposition, p. 75. Mr. Miller testified that if a worker’s performance was unsatisfactory, including the temporary employees, it was his job to tell the worker and to report the poor performance to his own supervisor, if necessary. Miller deposition, p. 38. And finally, Andritz had the right to terminate Mr. Kappas, an ultimate demonstration of control over a worker’s performance. Paclcard-Howe deposition, pp. 40-41.

For these reasons, the court finds that the right to control the manner of Mr. Kappas’ work performance passed to Andritz when Mr. Kappas worked at the Andritz foundry. Therefore, the borrowed servant doctrine applies and Andritz is immune from tort liability for the injuries Mr. Kappas sustained at its facility.

B. Judicial Admission and Judicial Estoppel

Andritz also argues it is entitled to summary judgment because Mr. Kappas admitted in a previous federal complaint and his initial complaint in this case that he worked at the Andritz plant as a temporary worker and/or a borrowed employee. We will not consider this statement a judicial admission because it is a legal conclusion rather than an averment of fact, and because to do so would undermine Pennsylvania’s policy of allowing liberal amendment of the pleadings. We decline to apply the doctrine of judicial estoppel because Mr. Kappas did not maintain this position in a prior successful action. See Ligon v. Middletown Area School District, 136 Pa. Commw. 566, 584 A.2d 376 (1990).

II. HATS’ Motion for Summary Judgment

A. Workers’ Compensation Immunity

HATS does not contest that Andritz was Mr. Kappas’ employer. Instead, it argues that it too was his employer. There does not appear to be any case on record addressing the question of whether an employee can have more than one employer at the same time, if both have the right to control a person’s work performance. However, we need not answer that question because it is clear from the record that HATS did not have that right.

HATS is a temporary employment agency. As such, it interviews individuals, determines what qualifications they possess, and places them in appropriate work situations. HATS provides the weekly paycheck, deducts all taxes, and pays workers’ compensation insurance. It then bills the company at which the employee works for all these expenses, plus a markup. Andritz determined the amount of money paid to Mr. Kappas, and when he would work. Packard-Howe deposition, pp. 11, 41-42. Mr. Kappas would then fill out time sheets, have them signed by his Andritz supervisor, and submit them to HATS, which would process the paperwork and issue the paycheck. Packard-Howe deposition, pp. 25, 30.

While the payment of wages may be considered, it is not determinative of an employer/employee relationship. JFC Temps, supra at 153, 680 A.2d at 864. Rather, the overwhelming factor is the right to control the manner in which the work is performed. Id. at 156, 680 A.2d at 865. Here, it is clear that HATS did not maintain the right to control Mr. Kappas’ work performance once he arrived at the Andritz foundry.

HATS points out that it had the power to terminate Mr. Kappas, and that it had issued a sheet entitled “guidelines” to him, which listed two safety precautions he should take while working. However, Ella Packard-Howe of HATS stated in her deposition that once Mr. Kappas reported to Andritz for work, HATS had no further involvement with him except for payroll and other administrative functions. Packard-Howe deposition, p. 15. She also admitted it was Andritz’ responsibility to determine what tools, uniforms, and other equipment were necessary for the work, as well as what safety equipment was required. Packard-Howe deposition, pp. 38-40. And finally, she admitted that Andritz controlled the work of grinding and the manner in which it was to be done. Packard-Howe deposition, pp. 46-47. The temporary agency in English, supra, performed similar functions to HATS, yet was found not to be the employer for workers’ compensation immunity purposes. The Superior Court held,

“While we agree that Kelly Labor retained some control over its workers, we have nevertheless concluded that the lower court was correct in holding that for workmen’s compensation purposes, not Kelly Labor but the authority was English’s employer.
“Although Kelly had almost absolute control over which of its workers would service the needs of which of its customers, it had no significant control over the manner in which the workers carried out the work to which they were assigned. Thus, for example, while Kelly Labor was responsible for placing Thomas English into the service of the authority, once he arrived, Kelly Labor did not purport to instmct English on how he should carry out the authority’s sewage testing program. That was clearly the province of the authority. Kelly Labor had no supervisory personnel of any kind at the job site; nor did it contemplate training its workers to perform the various tasks to which it assigned them at the request of its customers.” Id. at 323-24, 428 A.2d at 1349. (footnote omitted)

Similarly, in JFC Temps, supra, the temporary agency selected and assigned the employee, paid the salary, had the sole right to terminate the employee, and was the entity to be called if the employee had any questions or was ill. Nonetheless, the Supreme Court held that the temporary agency was not the employer for workers’ compensation purposes. And in Keller v. Old Lycoming Township, 286 Pa. Super. 339, 428 A.2d 1358 (1981), the Superior Court reached a similar conclusion in regard to STEP, an agency that placed economically disadvantaged persons with employers. In that case, the plaintiff had been sent to work for Old Lycoming Township. The court found that STEP was not the employer, even though “STEP did indeed retain considerable control over its CETA funded workers, and we note that the federal government had the power to increase STEP’S control over the CETA funded workers to an even greater extent.” Id. at 347, 428 A.2d at 1362. The dispositive fact, however, was that the township controlled the activities of the work site and directed the conduct of the employees while they were there. The case before the court is precisely parallel to the above-cited cases. Even though HATS maintained some control over the worker, the evidence shows that it had no significant control over the manner in which the work was performed once the worker went to the job site. It had no supervisory personnel at the Andritz plant, and there is no indication HATS had any right to interfere with the foundry’s operation in regard to the workers it sent there. Therefore, we find that HATS is not Mr. Kappas’ employer for workers’ compensation immunity purposes, and thus is not entitled to immunity.

B. Judicial Admission and Judicial Estoppel

HATS also claims it is entitled to summary judgment because Mr. Kappas admitted in his original complaint that he was an employee of HATS. We will not consider this statement a judicial admission because it is a legal conclusion rather than an averment of fact, and because to do so would undermine Pennsylvania’s policy of allowing liberal amendment of the pleadings. We decline to apply the doctrine of judicial estoppel because Mr. Kappas did not maintain this position in a prior successful action. See Ligon v. Middletown Area School District, 136 Pa. Commw. 566, 584 A.2d 376 (1990).

C. Negligence

HATS next argues that even if it is not Mr. Kappas’ employer, the suit against it must be dismissed either because it owed no duty to Mr. Kappas or because the evidence shows it fulfilled that duty.

This court is not prepared to hold that temporary agencies like HATS owe no duty whatsoever to the individuals they place. Such companies profit from the employees’ work, and it is only fair that they shoulder some responsibility for their safety. Temporary agencies have voluntarily entered into a relationship with these individuals, in which they take it upon themselves to assign the workers to facilities where they could be exposed to some danger. The very nature of such a relationship entails an obligation of some sort. The question then becomes exactly what duty HATS owed to Mr. Kappas and the other workers.

1. The duty

Legal duties are not decreed from on high, nor are they instilled into human nature. They are created by judges and legislators. They are artificial constructs which society uses to assign responsibilities between individuals. As Dean Prosser put it, “Duty is only a word with which we state our conclusion that there is or is not to be liability.” Quoted in Troxel v. A.I. Dupont Institute, 450 Pa. Super. 71, 82, 675 A.2d 314, 319 (1996).

Determining whether a duty exists and defining a duty, then, are nothing more than public policy decisions. Majestic by Majestic v. Commonwealth of Pennsylvania, 537 Pa. 81, 85, 641 A.2d 295, 298 (1994). In making these determinations, a court should consider many factors, including the relationship of the parties, whether the defendant could have foreseen the likelihood of harm, the ability of the defendant to prevent the injury, the cost of avoiding or spreading the risk, the ability of the courts to cope with new litigation, the probability of feigned claims, and the burden on the defendant and the community. Id. In the end, says Prosser, the courts will decide if there is a duty based on the mores of the community, “always keeping in mind the fact that we endeavor to make a rule in each case that will be practical and in keeping with the general understanding of mankind.” Quoted in Troxel, supra at 82, 675 A.2d at 320.

Our job in defining the duty temporary agencies owe to workers is made easier because the people of Pennsylvania have already clearly expressed their ideas about workplace liability in the Workers’ Compensation Act. That Act represents a compromise between employees and employers: employees give up the right to sue the employer; in return, they recover for work-related injuries without regard to fault. Although the amount of recovery is lower than what workers might expect from a judicial award of damages, they are spared the time and expense of tort litigation, and can recover whether or not they were fully or partly responsible for the injury.

This scheme was developed for several reasons. First, because the common law failed to meet the needs of workers in an industrial society. Before the days of steam, electricity, and dynamite, workers used a few simple tools, and could pretty well protect themselves from injuries by exercising ordinary care. The law reflected that reality by making it difficult to recover damages from an employer at common law. See the discussion in Keller, supra at 348 and n.6, 428 A.2d at 1363 and n.6, citing Walton, Workman’s Compensation and the Theory of Professional Risk, 11 Col.L.Rev. 36 (1911). The common law defenses of the fellow servant doctrine, contributory negligence, and assumption of the risk resulted in few successful negligence actions against an employer. Id. When industrialization significantly changed the average working environment, the states responded by enacting workers’ compensation laws. Id.

The primary evil these laws sought to address was uncompensated work-related injuries, but this court believes the intent went much deeper. The laws were also an attempt to achieve economic efficiency — to make our economy maximally productive. Workers’ compensation laws help do this in several ways.

First, they recognize that in this industrial age, accidents will happen at the workplace, and that this is the price our society must pay in order to produce certain products. Workers’ compensation laws simply seek to allocate the cost of work-related injuries, and attempt to place the greatest burden on the purchaser of those products. They do this by requiring the employer to buy workers’ compensation insurance, and assuming that the employer will pass on this cost to the buyer. Moreover, because the price of insurance depends upon the nature of the workplace as well as the number of accidents sustained there, products entailing more injuries will be more expensive. Therefore, consumers will ultimately be the ones to decide how many such injuries they are willing to tolerate through their decision on how much they are willing to pay. Thus, the products that are highly useful or desirable to our society will be produced, while others will not. Meanwhile, products that are safer to produce will not be penalized, and their price will not be significantly increased by the insurance.

This system wisely minimizes the financial risks of producing products that entail considerable workplace danger because the owners of the plants can anticipate what their liability costs will be, and will not be exposed to weighty personal injury lawsuits. By reducing the possibility of unforeseen financial loss and making the cost predictable, our society eliminates a great deal of the risk involved in such ventures, and thus ensures a supply of such products, some of which are essential to our country’s economy.

In addition to encouraging producers to make products that might involve workplace danger, workers’ compensation laws also encourage workers to work at such facilities, for they can rest assured they will be compensated for any injuries they sustain with little expenditure of time, money, or effort.

Workers’ compensation laws also make the economy more efficient by encouraging businesses to make their workplaces safer, since the cost of their insurance increases with the incidents of injuries. That could ultimately reduce the cost of workers’ compensation insurance, and the price of the products — not to mention the added benefit of fewer injuries to workers, which is significant not only for humanitarian reasons but also for economic reasons, because injured workers draw money without contributing to the economy.

Workers’ compensation laws also eliminate the potential for acrimony between the workers and their employers and management, which hinders workplace efficiency. Legal disputes all too often create bad feelings between litigants which would result in either the resignation of the worker, which would presumably increase the turnover costs for the employer and financial hardship for the employee, or create terrible tension and hostility at the work site, which naturally decreases productivity. The present system, however, awards compensation without the necessity of protracted legal disputes over fault. In addition to preserving workplace harmony, workers’ compensation laws also save both workers and owners untold money and time that would have been expended in litigation.

And that brings us to what is perhaps the most fundamental purpose behind workers’ compensation laws: they take care of work-related injuries quickly, efficiently, and fairly, and allow employees and employers to get on with the business of producing. The system saves everyone time, money, and effort, which can then be spent producing and purchasing products. And that, of course, is what makes our economy hum.

Mr. Kappas now wants us to tinker with the workers’ compensation system by imposing liability on temporary agencies when workers suffer injuries at the work sites where they were dispatched. Placing a heavy duty on temporary agencies to ensure the safety of each client’s workplace would clearly undermine the goals of the workers’ compensation system, which is designed to channel workplace disputes into one procedure and handle them quickly and efficiently. Instead, we would be creating an additional remedy for employees — at least for temporary employees. In addition to collecting workers’ compensation insurance from the work site employer, these employees would be able to sue the temporary agency, as well. That throws a monkey wrench into the streamlined process the legislature has carefully crafted, and opens up entirely new avenues for litigation over employee injuries, which is directly contrary to the intent of the Workers’ Compensation Act. It also would destroy the system of compromise embodied in the Act: the worker does not give up his or her right to file suit in regard to the injury, yet still maintains the benefits of compensation under the Act.

Consideration of the additional Troxel factors leads us to the same conclusion. Permitting a worker to sue the temporary agency for the negligence of another company would be placing the financial burden of the injury on an entity that has no substantial control over the actual work site, which is not directly responsible for the negligence, and which is not in a position to spread the cost of the risk to the consumer. It could, in fact, impose an unreasonable task on the temporary agencies, which would be charged with the responsibility of carefully inspecting every client’s workplace and investigating all safety policies. Temporary agencies are not set up to have expertise in workplace safety, and thus would need to hire individuals who could conduct such inspections. This would require a major investment of time and money which some agencies could not afford. Temporary agencies serve an important purpose in our economy, and this court sees no reason to saddle them with a burden that might well put them out of business or decrease their profits to such an extent as to discourage individuals from establishing and operating such agencies.

Nonetheless, this court is not prepared to hold that temporary agencies have no duty whatsoever toward the individuals they place in employment situations. Such businesses are willingly and knowingly establishing a special relationship with the individuals they place, and are profiting from the work the employees perform. Therefore, they deserve to shoulder some responsibility for their actions. Exactly what type of duty they should owe the workers is the important question.

It would be unreasonable and impractical, in this court’s opinion, to require temporary agencies to investigate in detail the safety of every client’s work site. It would also be unreasonable for a temporary worker to assume the temporary agency has done this, and to rely on the temporary agency to ensure his or her safety at the placement site. After all, workplace safety is heavily regulated by various government agencies, and workers should rely on the work of those entities, rather than temporary agencies, to ensure work sites are safe.

It is not unreasonable or impractical, however, to impose upon temporary agencies a duty to refrain from sending workers to a work site which the agency knows or has reason to know is unsafe. Any agency that violates this duty deserves to be liable for injuries to a placed worker, for such an action would be unconscionable. Moreover, it makes sense to impose this duty because if a temporary agency knows a particular place is unsafe, it can easily prevent an injury by not sending a worker there. Such a duty would be simple to comply with, and imposes little, if any, financial burden on the temporary agency. It also creates a clear standard for courts to follow in deciding summary judgment motions like the one before us. The sole question would be whether the plaintiff can show that the temporary agency knew a particular place was unsafe, or whether the information the agency possessed would have led a reasonable person to conclude the facility was unsafe.

Imposing this minimal duty would interfere little with the Workers’ Compensation Act, for it would limit negligence suits to instances where the temporary agency sent a worker to a place it knows or had reason to know should be unsafe. Presumably, few temporary agencies do that, and even fewer will do so once such a duty is imposed upon them. Agencies who violate such a basic, minimal duty deserve to be sued, and workers who are injured as a result of such referrals deserve to recover from the temporary company, for the agency has added insult to their injury.

2. Did HATS breach its duty?

In sending Mr. Kappas to the Andritz foundry, then, HATS was not guaranteeing the safety of the facility; it was merely guaranteeing that it had no reason to know the facility was unsafe. The record shows that HATS had no knowledge that the foundry was unsafe, nor did it have any evidence that would have led a reasonable person to conclude it was unsafe.

Ms. Ella Packard-Howe, of HATS, testified that before HATS places workers in a light industrial setting, she takes a tour of the plant. Packard-Howe deposition, p. 18. She made two tours of the Andritz plant, one at the beginning of their relationship in 1987, and another in 1997. Packard-Howe deposition, p. 42. She clearly stated that based on what she saw at the plant and the information and knowledge she had of the company, she had no concern about safety issues at the plant. Packard-Howe deposition, p. 43. In fact, she believed Andritz was one of HATS’ most safety-conscious clients. Packard-Howe deposition, p. 43. She stated she would never send a worker to an unsafe facility, and had actually turned down clients because she was concerned about their safety measures. Packard-Howe deposition, pp. 43,52. She did not know of any grinders who had suffered any type of injury while working for Andritz, and none of the temporary grinders she had placed there suffered any serious injury. Packard-Howe deposition, p. 9.

These statements show that HATS adequately fulfilled its duty to Mr. Kappas. In light of the fact that Mr. Kappas has not produced one shred of evidence that HATS knew or had reason to know of unsafe conditions at the Andritz plant, we must grant summary judgment in favor of HATS.

ORDER

And now, March 17, 2000, for the reasons stated in the foregoing opinion:

(1) The motion for summary judgment filed by Andritz is granted and the complaint against Andritz is dismissed with prejudice;

(2) The motion for summary judgment filed by HATS is granted and the complaint against HATS is dismissed with prejudice;

(3) The motion in limine filed by Andritz is rendered moot and is therefore denied.


author: WETTICK JR., J.,

text:
    FirstSouth Savings Association v. Goldberg & Vergotz P.C.

      C.P. of Allegheny County,
    no. GD95-4220.

      Ernest P. DeHaas III, for plaintiff.

      Dennis J. Roman, for defendants Goldberg & Vergotz.

      Joseph A. Katarincic, for defendants Thorpe, Reed & Armstrong.
    December 15, 1999
   WETTICK JR., J.,

In this lawsuit, plaintiff, FirstSouth Savings Association, seeks to recover losses in excess of $2.5 million that it sustained from the purchase of promissory notes from Alpine Valley Resorts, Inc. The motions for summary judgment of the Goldberg defendants (Goldberg & Vergotz P.C.; Lee Goldberg; James S. Vergotz) and the Thorpe Reed defendants (Thorpe, Reed & Armstrong; Douglas E. Gilbert) seeking dismissal of FirstSouth’s claims against these defendants are the subject of this memorandum and order of court.

Alpine sold undivided ownership interests in a campground that it was developing in Fayette County, Pennsylvania. The agreement between Alpine and its purchasers is titled “Agreement for deed.” The agreement for deed states that the purchaser is not purchasing the right of exclusive use of any specific campsite but only the right to use an available campsite. The agreement for deed further states that the purchaser is generally guaranteed the use of a campsite anytime during the year but on certain holiday weekends the campsites will be allotted on a first-come basis.

Usually, the purchaser made a small down payment and executed a promissory note in which he or she agreed to pay the balance in equal monthly installments over several years. The usual interest rate was 18 percent; this was an above-market interest rate. See exhibit 1 of FirstSouth exhibits in opposition to motions for summary judgment which includes (1) an agreement for deed in which Alpine sold the buyers an undivided l/750th interest in the real estate known as phase I-B of Alpine for $5,740 with a down payment of $550 and (2) the promissory note which the purchasers executed which provided for the balance to be paid in 84 monthly payments (interest rate — 18 percent).

In the agreement for deed, the purchasers agree to comply with the rules and regulations of Alpine. At the closing, they acknowledge receipt of a three-page document (FirstSouth exhibit 2, pp. 2-4) which contains the facts and regulations that apply to a phase I-B ownership interest. Paragraph 1 permits a purchaser to camp on lots only in a tent or recreational vehicle. Paragraph 2 requires Alpine to construct various recreational amenities including a restaurant, a large recreational activity center, and an indoor and outdoor heated pool. Paragraph 5 provides that Alpine will provide the campsites with water, electricity, a driveway, a picnic table, and a fire ring. Paragraph 9 provides that any recreational vehicle must be removed from the campsite if it is going to be unoccupied for seven days or more. Paragraph 14 states that the purchasers will pay an annual maintenance fee for the entire operation of Alpine, including property maintenance, security, road maintenance, water, electricity, and property taxes.

The purchasers also signed a separate real estate maintenance contract (FirstSouth exhibit 2, p. 1) in which they promised to pay an annual maintenance fee covering labor, utilities, taxes, and necessary materials and supplies.

In most instances, the consideration that Alpine received for most of the purchase price was the promissory note which the purchaser executed. Alpine and FirstSouth entered into negotiations for Alpine’s sale of these promissory notes to FirstSouth. On January 5,1988, Alpine and FirstSouth executed an agreement (FirstSouth exhibit 25) under which Alpine agreed to sell its promissory notes to FirstSouth for the face amount of the notes. These were unsecured notes (i.e., not supported by any lien on the real estate). However, Alpine agreed to deposit into a FirstSouth reserve account 35 percent of the face amount of the note.

Shortly after the agreement was executed, FirstSouth purchased promissory notes at a face value in excess of $1.8 million. By early fall 1988, Alpine had defaulted on a substantial loan secured by a lien on the campground property, ceased providing services (including utility services and maintenance) to the campground, and was not in a position to develop the campground site. Various campground purchasers whose notes had been assigned to FirstSouth stopped making the monthly installment payments provided for under these notes. FirstSouth exhibit 32 includes five letters (dated between 10/3/88 and 10/15/88) written by counsel and a sixth written by a purchaser on advice of counsel stating in two instances that the purchasers would not make additional payments to FirstSouth until Alpine met its commitments and in four instances that the purchasers were rescinding their contracts. One of these letters written by counsel with Hyatt Legal Services stated that the agreements between Alpine and its purchasers are in violation of the Pennsylvania Goods and Services Installment Sales Act and the Unfair Trade Practices and Consumer Protection Law and demanded a refund of the money received to date and the return of all documents executed by the clients.

On June 20, 1990, a purchaser, on behalf of all other purchasers, filed a class action in the Common Pleas Court of Fayette County. (Exhibit 9 of the Goldberg & Vergotz exhibits is a copy of the complaint.) In the complaint, the purchaser alleged that the transactions between Alpine and its purchasers are governed by the Goods and Services Installment Sales Act (69 P.S. § 1101 et seq.) and that under the Act the holder of the credit document is subject to all claims and defenses which the debtor may raise against the seller of the goods and services. The purchaser also raised claims against FirstSouth under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. §201-1 et seq. and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1964(c).

FirstSouth filed preliminary objections seeking dismissal of the class action complaint in its entirety. In an opinion and order of court dated December 10, 1990 (FirstSouth exhibit 39), the trial court sustained the preliminary objections as to the RICO claim. However, it overruled the preliminary objections seeking dismissal of claims based on the Goods and Services Installment Sales Act and the Unfair Trade Practices and Consumer Protection Law. The court ruled that the transactions between the installment purchasers of undivided interests in the campground and Alpine are governed by the Goods and Services Installment Sales Act because

“Plaintiffs purchased services within the meaning of section 1202 of the GSISA. The sale of memberships in Alpine was not realty; it was a right to use the campground facilities. This same conclusion was reached by the court in Com. ex rel. Zimmerman v. Nickel, 26 D.&C.3d 115 (1983).” FirstSouth exhibit 39, p. 3.

The court ruled that under the provisions of this legislation, FirstSouth had stepped into the shoes of Alpine and by virtue of section 1402 is subject to all claims and defenses which the purchasers could assert against Alpine because no right of action shall be cut off by assignment.

On August 25, 1992, FirstSouth settled the class action. Under the settlement agreement (FirstSouth exhibit 45), FirstSouth paid $675,000 to be distributed among the plaintiffs in the class action suit and agreed to forgive the remaining amounts owed by the class members on the promissory notes.

In the present lawsuit, FirstSouth has sued to recover the $675,000 paid pursuant to the settlement agreement, the balance forgiven by FirstSouth on the notes (an amount in excess of $850,000), lost interest on the aggregated principal balance due (an amount in excess of $650,000) and counsel fees and expenses incurred in defending and settling the class action (an amount in excess of $360,000).

In the negotiations leading to the January 5, 1988 agreement between Alpine and FirstSouth, FirstSouth was represented by the Thorpe Reed defendants and Alpine was represented by the Goldberg defendants. In this lawsuit, plaintiff has raised claims against the Thorpe Reed defendants based on this law firm’s alleged failure to advise FirstSouth that there was a substantial risk that the purchasers of the undivided interests in the campground would be able to raise against FirstSouth claims and defenses which they could assert against Alpine.

FirstSouth’s claims against the Goldberg law firm are based on this law firm’s failure to advise FirstSouth that documents that Alpine used in its transactions with its purchasers violated the Goods and Services Installment Sales Act because the promissory notes failed to state that an assignee of the promissory notes takes the notes subject to claims and defenses that the purchasers could assert against Alpine. FirstSouth’s claims against Goldberg arise out of a January 5, 1988 opinion letter that Goldberg issued (Goldberg exhibit 5) which failed to discuss the possibility that the underlying transactions between Alpine and its purchasers were governed by the Goods and Services Installment Sales Act.

I.

I initially consider the Goldberg law firm’s motion for summary judgment seeking dismissal of claims raised against this law firm.

Paragraph 5(d) of the January 5, 1988 agreement between Alpine and FirstSouth provides that FirstSouth shall not purchase any owner notes until it has received a “favorable opinion of Goldberg & Vergotz P.C., counsel for operator, in form and substance satisfactory to FirstSouth.” Pursuant to Alpine’s direction, the Goldberg law firm issued an opinion letter dated January 5, 1988 addressed to FirstSouth. The letter identified Goldberg & Vergotz as counsel for Alpine and Eastern Resorts Corp. (a guarantor) in connection with the preparation, execution, and delivery of the January 5, 1988 agreement and guarantee. The letter stated that this opinion is furnished to you pursuant to section 5(d) of the January 5, 1988 agreement between Alpine and FirstSouth. The letter contained several opinions concerning matters that would have been outside the knowledge of Thorpe Reed/ FirstSouth, including (1) Alpine is a duly organized corporation in good standing under the laws of Pennsylvania; (2) the execution, delivery, and performance by Alpine of the agreement are within Alpine’s corporate powers, have been authorized by all necessary corporate action and do not contravene Alpine’s charter or bylaws; (3) the agreement has been duly executed on behalf of Alpine and constitutes a legal, valid, and binding obligation; (4) the execution, delivery, and performance of the agreement by Alpine does not require the consent of any trustee or holder of any indebtedness of Alpine or any other person or entity; (5) to the best of the law firm’s knowledge and based on discussions with officers of Alpine, there is no pending or threatened action affecting Alpine or any of its properties which is likely to have a materially adverse effect on the financial condition or operations of Alpine; and (6) the undivided interests in real property are not securities within the meaning of the present laws of the United States or the Commonwealth of Pennsylvania and the law firm has discussed with an attorney on the staff of the Pennsylvania Securities Commission the scope of Pennsylvania’s securities laws in relation to the sales operations at resort campgrounds and has been advised that the commission has taken the position that in a campground situation in which existing facilities are sold for personal use, there is no security.

FirstSouth’s claims against the Goldberg law firm are not based on any opinions rendered in the January 5, 1988 letter regarding matters that would have been outside the knowledge of Thorpe Reed/FirstSouth. Instead, its claims are based on the italicized portion of the provision within the letter:

“(b) The execution, delivery and performance by Alpine of the agreement are within Alpine’s corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) Alpine’s charter or bylaws, (ii) any law, mle or regulation applicable to Alpine, (iii) any contractual or legal restriction contained in any indenture, mortgage, loan or credit agreement, bond or note of Alpine or any other agreement or instrument by which Alpine is bound, or (iv) any order, writ, judgment, award, injunction of decree applicable to Alpine.”

It is FirstSouth’s position that the above paragraph constitutes an opinion rendered by the Goldberg law firm that the transactions between Alpine and its purchasers complied with Pennsylvania law.

FirstSouth raises three claims against the Goldberg law firm: breach of a contractual agreement between FirstSouth and the law firm; breach of a contract between the Goldberg law firm and Alpine to which FirstSouth was a third party beneficiary; and professional negligence.

There is no evidence to refute the law firm’s testimony that it was never asked by Alpine or FirstSouth to render an opinion as to the applicability of the Goods and Services Installment Sales Act, as to the legality or enforcement of the promissory notes signed by Alpine’s purchasers and assigned to FirstSouth, or as to whether FirstSouth would be a holder in due course.

I agree with the contention of the Goldberg law firm that the January 5,1988 letter cannot be fairly construed as rendering any opinions concerning the legality of the documents that Alpine was using in its transactions with its purchasers or the applicability of the Goods and Services Installment Sales Act. The language upon which FirstSouth relies — “the execution, delivery and performance by Alpine of the agreement are within Alpine’s corporate powers ... and do not contravene ... (ii) any law, rule or regulation applicable to Alpine”— refers to laws that would prevent Alpine from being bound by the January 5, 1988 agreement.

Goldberg was representing Alpine. FirstSouth was represented by separate counsel (Thorpe Reed). Thorpe Reed was fully aware of the transactions between Alpine and its purchasers and the documents that Alpine utilized. If FirstSouth was concerned with the applicability of any consumer protection laws to the underlying transactions, Goldberg would have anticipated that FirstSouth would be looking to its own lawyer rather than Alpine’s lawyer for legal advice. Consequently, the opinion letter cannot be construed as addressing this issue unless the writer of the opinion letter specifically addressed the issue in the same fashion in which he addressed the applicability of federal and Pennsylvania securities laws.

Even assuming that the opinion letter could be construed as offering an opinion that the documents used in the underlying transactions between Alpine and its purchasers complied with Pennsylvania law, there is no evidence that would support a finding that FirstSouth relied on the letter. The evidence shows that Thorpe Reed was providing legal advice to FirstSouth regarding the legality of the underlying transaction and the risks that FirstSouth may not be a holder in due course. In support of its claim against Thorpe Reed, FirstSouth presented testimony that it was looking to Thorpe Reed for its legal advice. In his deposition, Edmund M. Sanctis stated that FirstSouth was looking to Thorpe Reed to review all documents and protect FirstSouth’s interests, (pp. 15, 21-22, 24-26, 37-38, 93-97.) Mr. Fitterer testified that he never relied on the opinion letter of the Goldberg law firm with respect to the legality of the underlying transactions between Alpine and the campers. In the absence of evidence to the contrary, it cannot be assumed that a party that is represented by counsel would be relying on the legal opinions of counsel representing the other party to the transaction with respect to a legal issue that its own counsel is in a position to address, particularly where other counsel represents a client that wants the transaction to go forward regardless of whether FirstSouth is subject to claims or defenses that can be raised against Alpine.

Furthermore, even if this opinion letter had stated that the underlying transaction is not governed by the Goods and Services Installment Sales Act, Goldberg raises other defenses that support the dismissal of plaintiff’s complaint.

FirstSouth’s breach of contract claim fails because there was no contract between Goldberg and FirstSouth. There were no communications between Goldberg and FirstSouth other than the issuance of the opinion letter. FirstSouth did not make any payments to Goldberg. FirstSouth knew that Goldberg was representing the other party to the transaction. The opinion letter was issued pursuant to Goldberg’s representation of Alpine; Goldberg, acting on Alpine’s behalf and for the benefit of Alpine, issued the opinion letter required under 5(d) of the agreement in order that FirstSouth would purchase its client’s notes. There was no specific undertaking to provide legal advice as to the legality of the documents used in the underlying transactions.

FirstSouth’s third party beneficiary claim also fails; under Pennsylvania law, FirstSouth is not a third party beneficiary. Alpine did not intend to create a right for FirstSouth to sue the law firm that was representing Alpine. Goldberg prepared the letter in order to further Alpine’s interests. The case does not involve an opinion rendered to an unsophisticated third party. In this case, the third party (FirstSouth) was represented by a law firm that participated in the drafting of the opinion letter— the January 5, 1988 agreement provided for a favorable opinion “in form and substance” satisfactory to First-South. Consequently, if the parties had intended to permit FirstSouth to bring contract claims against Alpine’s law firm, Thorpe Reed would have required that this be included in the opinion letter. See generally, Guy v. Liederbach, 501 Pa. 47, 459 A.2d 744 (1983).

Plaintiff’s brief discusses Lawall v. Groman, 180 Pa. 532, 37 A. 98 (1897); Pittsburgh Coal and Coke Inc. v. Cuteri, 404 Pa. Super. 298, 590 A.2d 790 (1991), rev’d, 533 Pa. 311, 622 A.2d 284 (1993) (mem.) (remanded to allow plaintiff to amend the complaint); Gregg v. Lindsay, 437 Pa. Super. 206, 649 A.2d 935 (1994); and Cost v. Cost, 450 Pa. Super. 685, 677 A.2d 1250 (1996).

Lawall does not apply because in that case there was evidence that supported a finding that there was an understanding between the plaintiff and the lawyer who kept the plaintiff’s mortgage that the lawyer would promptly record the mortgage — in other words, by keeping the mortgage the lawyer voluntarily assumed the responsibility for promptly recording the mortgage. The court also relied on principles of tort law that impose liability on one who voluntarily undertakes certain duties for another if the party doing the undertaking knows that the other party is relying on him.

Gregg v. Lindsay, supra, has no precedential value because two of the three judges only concurred in the result. Furthermore, it is a will case in which the court found that there can be no recovery as a matter of law against the lawyer because the evidence did not show that the lawyer breached his duty to the client.

Pittsburgh Coal and Coke Inc. v. Cuteri, supra, does not apply because in that case the court found that the law firm engaged in a specific undertaking to furnish specific professional services to the plaintiff.

In the final case — Cost v. Cost, supra — the plaintiff did not seek a third party beneficiary status. The sole issue that the court addressed was whether an attorney malpractice claim could be pursued.

In order to recover as a third party beneficiary, the third party must show a breach of the agreement between the lawyer and the client. Consequently, plaintiff’s third party beneficiary claim also fails because of the absence of any evidence showing that Alpine intended for its law firm’s opinion letter to address the issue of the applicability of the consumer protection laws to the underlying transactions between Alpine and its purchasers.

The Goldberg law firm, as Alpine’s counsel in this transaction, was obligated to further Alpine’s interests (i.e., the completion of the transaction). Consequently, the Goldberg law firm would look to Alpine to establish the scope of any opinion letter that would be furnished to FirstSouth. Unless directed to do so by its client (Alpine), the Goldberg law firm could not refer to any legal issues that might discourage FirstSouth from purchasing Alpine’s notes in an opinion letter to be submitted to FirstSouth.

If the evidence would support a finding that the opinion letter incorrectly represented that the underlying transactions between Alpine and its purchasers were not governed by any Pennsylvania consumer legislation, Pennsylvania law may recognize a cause of action under tort law upon a showing of justifiable reliance. See section 552 of the Restatement (Second) of Torts; Greycas Inc. v. Proud, 826 F.2d 1560 (7th Cir. 1987).

Any tort claim is governed by a two-year statute of limitations. FirstSouth instituted this lawsuit against the Goldberg law firm in June 1992. The wrongdoing (false representation) occurred on January 5, 1988.1 will assume that the statute of limitations does not begin to run until FirstSouth suffered appreciable harm as a result of the false representations made in January 1988.

FirstSouth contends that it did not suffer harm until the December 10,1990 Fayette County ruling in the class action lawsuit that the Goods and Services Installment Sales Act applies to the transactions between Alpine and its purchasers. I disagree. FirstSouth began sustaining losses by the fall of 1988 when purchasers were refusing to make the monthly payments provided for in the promissory notes after Alpine had breached obligations it owed the purchasers.

FirstSouth’s reliance on my opinion in Spang & Co. v. Reed Smith Shaw & McClay, 145 P.L.J. 540 (1997), is misplaced. In Spang, the plaintiff did not suffer any appreciable harm until the federal court ruling because until after this ruling, Spang continued to control the pension plan and the surplus funds in the pension plan. The present case is similar to Fiorentino v. Rapoport, 693 A.2d 208 (Pa. Super. 1997). In that case, the court ruled that the statute of limitations began to ran when the buyer ceased making the payments specified in the stock purchase agreement because the client (whose attorney drafted an agreement that failed to protect the client’s interests) suffered economic harm as of this date. Id. at 219-20.

FirstSouth also relies on the discovery rale. This rule provides that the limitations period does not begin to ran until a plaintiff knew or should have known (1) that he has been injured and (2) that his injury has been caused by another party’s conduct. Bradley v. Ragheb, 429 Pa. Super. 616, 621, 633 A.2d 192, 194-95 (1993). Under the discovery rule, a party asserting a cause of action is under a duty to use all reasonable diligence to be properly informed of the facts and circumstances upon which a potential right of recovery is based. See Bailey v. Tucker, 533 Pa. 237, 252 n.15, 621 A.2d 108, 115 n.15 (1993).

In the present case, FirstSouth should have discovered more than two years before the filing of the lawsuit that the representation in the opinion letter (if made) that the underlying transaction did not violate Pennsylvania consumer laws was false. The October 1988 letter from Hyatt Legal Services stated that the agreements between Alpine and its purchasers were in violation of the Pennsylvania Goods and Services Installment Sales Act; in the letter, counsel demanded a refund of the money received to date and the return of all documents executed by the clients. As of that date, FirstSouth should have questioned the accuracy of any representation of the Goldberg law firm upon which it relied that the underlying transactions between Alpine and its purchasers complied with Pennsylvania law. With the exercise of reasonable diligence, it should have discovered that it should have been advised that there was a substantial likelihood that the transactions between Alpine and FirstSouth were governed by the Goods and Services Installment Sales Act. See the analysis in the October 24, 1988 Thorpe, Reed & Armstrong memorandum (FirstSouth exhibit 34); also, see Commonwealth ex rel. Zimmerman v. Nickel, 26 D.&C.3d 115, 133-35 (1983).

I recognize that the evidence upon which FirstSouth relies shows that Thorpe Reed withheld the information within the October 24, 1988 memorandum. It is FirstSo.uth’s position that upon receipt of the Hyatt Legal Services letter, it looked to its law firm (Thorpe Reed) which incorrectly advised FirstSouth that the Goods and Services Installment Sales Act does not apply. However, the discovery rule is not tolled because the negligence of a third party prevented plaintiff from discovering the harm and wrongdoing.

FirstSouth’s claim against the Goldberg law firm is that it failed to exercise ordinary skill and knowledge because of its failure to advise FirstSouth of the potential applicability of the Goods and Services Installment Sales Act. It is FirstSouth’s claim, in other words, that an attorney, exercising ordinary care, would have recognized the potential applicability of this legislation. If FirstSouth’s contention is correct, it cannot contend that it was not in a position to discover the potential applicability of this legislation after receipt of the Hyatt Legal Services letter.

For these reasons, I am dismissing all claims raised against the Goldberg law firm.

I next consider the motion for summary judgment of Thorpe Reed. Thorpe Reed contends that FirstSouth’s contract claims are barred by the four-year limitation period and its tort claims are barred by the two-year limitation period.

As I previously discussed, FirstSouth had sustained an “actual injury” or “harm” as of the fall of 1988 because (1) Alpine had breached its obligations to its purchasers so these purchasers were now in a position to raise against FirstSouth claims and defenses that they could assert against Alpine and (2) purchasers had ceased making payments based on Alpine’s breach of its obligations owed to its purchasers. The lawsuit against Thorpe Reed was not filed until December 8,1992, this being more than four years after FirstSouth sustained actual harm or injury because of the alleged malpractice.

As to FirstSouth’s claims against the Goldberg law firm, I found that under the discovery rule the statute of limitations began to run when FirstSouth received the Hyatt Legal Services letter for the following reason: Upon receipt of this letter, FirstSouth was under a duty to use all reasonable diligence to become properly informed as to whether there was any merit to the legal positions that Hyatt Legal Services was asserting. Any attorney whom FirstSouth consulted following its receipt of the Hyatt Legal Services letter should have advised FirstSouth that there was a substantial likelihood that any holder of the notes would take subject to the claims and defenses that Alpine’s purchasers could raise against Alpine.

For reasons that I will discuss, as to FirstSouth’s claims against Thorpe Reed, I do not find that the statute of limitations began to run when FirstSouth received the Hyatt Legal Services letter.

Upon receipt of the Hyatt Legal Services letter, FirstSouth looked to Thorpe Reed for legal advice. The evidence most favorable to FirstSouth establishes that over the next two years FirstSouth raised two concerns with Thorpe Reed: (1) if FirstSouth sued the purchasers to recover the money due under the notes, could the purchasers raise against FirstSouth those defenses that could be raised against Alpine and (2) whether the purchasers could raise claims against FirstSouth to recover money already paid and other damages. It appears that FirstSouth used the terminology “holder in due course” to refer to the first issue and the terminology “Goods and Services Installment Sales Act” to refer to the second issue.

After reviewing the Hyatt Legal Services letter, an attorney with Thorpe Reed authored a memorandum dated October 24,1988. (FirstSouth exhibit 34.) The issue that the attorney addressed was whether the transactions involving Alpine and its purchasers were subject to the Goods and Services Installment Sales Act and/or the Unfair Trade Practices and Consumer Protection Law. The writer of the memorandum concluded that this legislation may apply to these transactions; thus, FirstSouth could be precluded from collecting amounts due under the notes and could be liable for damages by virtue of its relationship with Alpine.

According to the testimony most favorable to FirstSouth, Thorpe Reed never furnished to or discussed with FirstSouth this October 24, 1988 memorandum. It was not until the period between April 1989 (FirstSouth exhibit 35) and July 4,1989 (FirstSouth exhibit 51) that Thorpe Reed advised FirstSouth that there were problems with the notes. At that time, Thorpe Reed advised FirstSouth that it may not be a holder in due course because FirstSouth had known that Alpine was having serious financial difficulties that might prevent Alpine from meeting its obligations to its purchasers at the same time that it was purchasing Alpine’s notes. However, until after the December 10, 1990 Fayette County Common Pleas Court ruling, Thorpe Reed continuously assured First-South that there was no merit to the legal arguments that the transactions were governed by Pennsylvania consumer protection laws that would permit the purchasers to recover damages against FirstSouth.

This lawsuit was brought within four years after Thorpe Reed advised Alpine that it may not be a holder in due course. Since FirstSouth, upon receipt of the Hyatt Legal Services letter, looked to Thorpe Reed for legal advice, Thorpe Reed cannot take the position that FirstSouth should have discovered that it was not a holder in due course at an earlier date. In addition, since Thorpe Reed allegedly concealed from FirstSouth the conclusions set forth in the October 24, 1988 memorandum, this case is governed by the case law, holding that where through concealment the defendant causes the plaintiff to relax its vigilance or deviate from its right of inquiry, the defendant is estopped from invoking the bar of the statute of limitations. Molineux v. Reed, 516 Pa. 398, 402, 532 A.2d 792, 794 (1987).

Consequently, I am denying Thorpe Reed’s motion for summary judgment seeking dismissal of FirstSouth’s breach of contract action based on the statute of limitations defense.

I next consider the statute of limitations defense to FirstSouth’s professional negligence claim. This claim is governed by a two-year limitation period.

The testimony establishes that more than two years prior to the filing of this lawsuit, FirstSouth’s president knew that FirstSouth was not a holder in due course. (Radcliffe 2/10/99 deposition, pp. 87-91, 172.) Consequently, FirstSouth’s claims raised in its tort action for recovery of money that would be due under the notes if Alpine had not breached its obligations to its purchasers are barred by the statute of limitations.

FirstSouth’s testimony will support a finding that until after the Fayette County ruling on December 10,1990, Thorpe Reed continued to advise FirstSouth that the damage claims which the purchasers were raising had no merit. (Radcliffe deposition, pp. 95,107-108.) This lawsuit was brought within two years after FirstSouth had reason to question Thorpe Reed’s legal advice. Consequently, FirstSouth may pursue the claims raised in its tort action for the money paid under the settlement agreement. Plaintiffs may also seek the money spent defending and settling the class action litigation because (under the evidence most favorable to FirstSouth) these are damages which flow from an agreement that FirstSouth would have not executed if properly advised that there was a substantial likelihood that the notes that it received would not be free and clear of claims and defenses that could be raised against Alpine.

I next consider Thorpe Reed’s motion for summary judgment based on the ground that the record contains no evidence of proximate cause. According to Thorpe Reed, Mr. Fitterer testified that he was prepared to complete the transaction regardless of any legal opinion that Thorpe Reed may have provided. However, I cannot rule out the possibility that FirstSouth can present expert testimony stating that Thorpe Reed attorneys failed to exercise ordinary skill and care because of their failure to furnish an opinion to the primary decision-makers within FirstSouth (FirstSouth’s chairman of the board of directors, FirstSouth’s president, and FirstSouth’s chief financial officer) that there was a substantial likelihood that the purchasers would be able to assert against FirstSouth claims and defenses that could be raised against Alpine and, thus, this was a risky transaction because of Alpine’s poor financial status.

Furthermore, the March 14,1996 deposition testimony of Mr. Fitterer, if construed most favorably to FirstSouth, does not require (1) a finding that Thorpe Reed fully advised Mr. Fitterer of the magnitude of the risk that Alpine’s purchasers may be able to raise against FirstSouth claims and defenses that could be raised against Alpine or, alternatively, that Thorpe Reed failed to fully inform FirstSouth of these risks because First-South had limited the scope of the representation or (2) a finding that FirstSouth would have completed the transaction even if advised that there was a very substantial likelihood that Alpine’s purchasers would be able to raise against FirstSouth any claims and defenses that could be raised against Alpine.

Instead; this deposition testimony can be read as follows: FirstSouth informed Thorpe Reed that it wanted to promptly complete the transaction so Thorpe Reed was to focus on, negotiate over, and discuss with First-South only critical terms in the proposed agreement; FirstSouth advised Thorpe Reed that it was important that the transaction be written in a way that FirstSouth is only a lender of money in order to minimize the risks that FirstSouth would be. subject to any defenses that the purchasers could raise against Alpine; and Mr. Fitterer believed that Thorpe Reed was having the documents prepared in a way that minimized these risks. FirstSouth was never advised by Thorpe Reed that these risks could not be minimized because of the substantial likelihood that the underlying transactions between Alpine and its purchasers would be characterized as sales of services within the meaning of the Goods and Services Installment Sales Act. Furthermore, the testimony does not establish that FirstSouth would have completed the transaction if it had received the following legal advice: Because of the Goods and Services Installment Sales Act, there is a high probability that Alpine’s purchasers may raise against FirstSouth those claims and defenses that can be raised against Alpine. Thus, if Alpine does not meet its obligations to its purchasers, the 35 percent reserve offers minimal protection to FirstSouth because FirstSouth will not recover any additional money from the purchasers and these purchasers may recover from FirstSouth any money that they paid FirstSouth. Therefore, FirstSouth should view this transaction as if it were a $2 million unsecured loan to Alpine. See generally, Mr. Fitterer’s testimony at pp. 37-46, 92-104, 126-31, 137-40.

For these reasons, I enter the following order of court:

ORDER

On December 15,1999, upon consideration of defendants’ motions for summary judgment, it is hereby ordered that:

(1) plaintiff’s claims against Goldberg & Vergotz P.C., Lee Goldberg, and James'S. Vergotz are dismissed;

(2) plaintiff’s tort claims against Thorpe, Reed & Armstrong and Douglas E. Gilbert for recovery of amounts owed on the promissory notes that were forgiven pursuant to the class action settlement are dismissed; and

(3) the summary judgment motion of the Thorpe Reed defendants is otherwise denied.

(4) status conference will be held on January 10,2000 at 10:30 a.m. o’clock.

      . The husband of my senior law clerk (Catherine Gerhold) works for Thorpe, Reed & Armstrong. Ms. Gerhold has had no involvement in this case.

      . Goldberg exhibit 6 includes several additional similar letters written by or on behalf of purchasers in October 1988.

      . Shortly after the lawsuit was filed, the office of the attorney general sent a letter (FirstSouth exhibit 36) to FirstSouth stating that Gallitan National Bank’s foreclosure on the Alpine Valley Campground renders it impossible for the persons who purchased an interest in the resort to use and enjoy the resort as promised. The letter stated that FirstSouth holds the installment contracts subject to all claims and defenses which the debtor could assert against the seller and that the initiation of any collection activities against any purchasers who assert a defense against payment will be considered a practice violating the Unfair Trade Practices and Consumer Protection Law.

      . Section 1402 reads, in relevant part, as follows:
      “No right of action or defense arising out of a retail installment sale which the buyer has against the seller, other than is provided in section 1202, and which would be cut off by assignment, shall be cut off by assignment of the contract to any third party whether or not he acquires the contract in good faith and for value.”

      . Exhibit 51 is attached to plaintiff’s supplemental brief in response to reply briefs of the defendants.

      . Radcliffe exhibit 1 (Radcliffe deposition) is a January 5, 1988 memorandum from Mr. Gilbert to the file in which he states that Alpine and the guarantor are in poor financial positions and most likely will not be able to support the totality of their obligations as now existing.