author: NEALON, J.,

text:
    Walsh v. PennDOT

      C.P. of Lackawanna County,
    no. 99-CV-3991.

      Paul J. Walker, for petitioner.

      Frank M. O’Neill, for respondent.
    August 1, 2000
   NEALON, J.,

Petitioner, William J. Walsh has appealed the suspension of his driving privileges by the respondent, Commonwealth of Pennsylvania, Department of Transportation, Bureau of Driver Licensing, based upon his conviction in Utah for “driving under the influence.” Since the report of Walsh’s conviction that PennDOT received from Utah does not identify the particular section of the Utah DUI statute that was violated, it is legally inadequate to support a license suspension in that it cannot be determined whether the conviction was for an offense that warrants a reciprocal suspension under the Driver’s License Compact. Therefore, for the reasons set forth below, the one-year suspension of Walsh’s operator’s license will be reversed.

I. FACTUAL BACKGROUND

Walsh was reportedly arrested in Utah for driving under the influence on September 19,1998, and pled guilty to that offense 11 days later on September 30,1998. Since Utah and Pennsylvania were both parties to the Driver’s License Compact of 1961 at that time, see U.C.A. §§53-3-601 to 604, 75 Pa.C.S. §§1581-1585, the clerk of the Third District Court, Park City, Utah, forwarded an “Out of state abstract conviction” to PennDOT indicating that Walsh pled guilty to DUI and was fined $1,300 for violating “41-6-44.” (See Commonwealth exhibit no. 1, p. 4.) In describing the violation, the Utah abstract merely states “41-6-4 driving under the influence of,” but does not identify whether Walsh was under the influence of alcohol as opposed to a controlled substance, nor does it specify the exact section of the Utah DUI statute that was violated. Moreover, the abstract report from Utah does not indicate whether Walsh’s arrest and subsequent conviction based upon the results of chemical testing, evidence of his unfitness to drive or a refusal to submit to chemical testing.

Under article IV of the compact, PennDOT may suspend or revoke a Pennsylvania motorist’s license based upon foreign state convictions for certain motor vehicle offenses that are identical or substantially similar to those offenses identified in subsection (a) of article IV of the compact. Following its receipt of the Utah abstract report, PennDOT forwarded a letter to Walsh on July 13, 1999, which stated:

“Section 1581 of the Vehicle Code requires the department to treat certain out-of-state convictions as though they had occurred in Pennsylvania. Therefore, as a result of the department receiving notification from Utah of your conviction on 09/30/1998 of an offense which occurred on 09/19/1998, which is equivalent to a violation of section 3731 of the Pennsylvania Vehicle Code, Driving Under Influence, your driving privilege is being Suspended for a period of 1 Year(s), as mandated by section 1532B of the Vehicle Code.” (Id., p. 2.)

On August 12,1999, Walsh filed a timely appeal from his license suspension and asserted that his Utah conviction was for an offense that purportedly is not substantially similar to the violations specified in subsection (a) of article IV of the compact since Utah’s DUI statute merely requires a blood alcohol content of .08 percent whereas Pennsylvania law demands a level of .10 percent. Walsh further argues that the Utah report and PennDOT suspension notice are deficient since they do not identify the statutory basis for his conviction. (See petitioner’s appeal from suspension of driver’s license, ¶¶5-6.) A de novo hearing was conducted on July 18, 2000, at which time PennDOT entered into evidence a packet of certified documents pursuant to section 1516(b) of the Vehicle Code, 75 Pa.C.S. The exhibits introduced by PennDOT include the suspension notice letter dated July 13,1999, the abstract report that PennDOT received from Utah and a chronological record of Walsh’s past motor vehicle violations. Walsh did not offer any testimony or evidence and simply relied upon the oral argument of his counsel that the Utah report was facially defective and that PennDOT had failed to establish that the Utah conviction was a “substantially similar” offense under the compact.

II. DISCUSSION

(A) Standard of Review

It is well settled that in an appeal to the court of common pleas from a suspension of a driver’s license, the initial burden of proof is on PennDOT to produce a record of the conviction which supports the suspension. Scotty. PennDOT, 730 A.2d 539, 543 (Pa. Commw. 1999). In an appeal involving a reciprocal suspension pursuant to the compact, PennDOT also bears the additional burden of proving that the foreign state conviction was for an offense that is substantially similar to article IV(a)(2) of the compact. Zawacki v. PennDOT, 745 A.2d 701 (Pa. Commw. 2000). Appellate review of a lower court decision in a license suspension case is limited to determining whether the factual findings of the trial court are supported by competent evidence or whether the lower court committed an error of law or an abuse of discretion. Petrovickv. PennDOT, 559 Pa. 614,617,741 A.2d 1264, 1265 (1999); Tarka v. PennDOT, no. 2940 C.D. 1999, at p. 2 n.2 (Pa. Commw. July 14, 2000).

(B) Driver’s License Compact

On December 10,1996, Pennsylvania joined 37 other states and the District of Columbia in enacting the Driver’s License Compact, see Schrankel v. PennDOT, 562 Pa. 337, 755 A.2d 690 (2000), which is a contractual agreement among member states seeking to promote compliance with each party state’s motor vehicle laws by empowering the licensing authority of a “home state” to revoke or suspend the driver’s license of a resident motorist based upon an out-of-state conviction for certain types of motor vehicle offenses. See Koterba v. PennDOT, 736 A.2d 761, 763 n.l (Pa. Commw. 1999), app. denied, 561 Pa. 703, 751 A.2d 195 (2000). Under article III of the compact, each state must report a motor vehicle offense conviction occurring within its jurisdiction to the licensing authority of the licensee’s home state, which “report shall clearly identify the person convicted, describe the violation specifying the section of the statute, code or ordinance violated, identify the court in which the action was taken, indicate whether a plea of guilty or not guilty was entered or the conviction was a result of the forfeiture of bail, bond or other security and shall include any special findings made in connection therewith.” 75 Pa.C.S. §1581, article III. If the foreign conviction involves an offense which is expressly enumerated in subsection (a) of article IV of the compact including “driving a motor vehicle while under the influence of intoxicating liquor ... to a degree which renders the driver incapable of safely driving a motor vehicle,” the home state licensing authority must provide the same collateral effect to the foreign conviction for purposes of the suspension or revocation of the operator’s license. 75 Pa.C.S. §1581, article IV(a)(2). However, if the foreign state conviction is for an offense which is not “described in precisely the language employed in subsection (a),” article IV(c) of the compact permits the licensing state to construe the offenses identified in subsection (a) as including the out-of-state offense only if the foreign law at issue is “of a substantially similar nature” to the offenses delineated in subsection (a). 75 Pa.C.S. §1581, article IV(c).

Effective December 21,1998, the legislature amended 75 Pa.C.S. §1584 entitled “Furnishing of information to other states” by adding a sentence which reads that “[t]he omission from any report received by [PennDOT] from a party state of any information required by article III of the compact shall not excuse or prevent [PennDOT] from complying with its duties under articles IV and V of the compact.” Furthermore, in the same 1998 Act which amended section 1584, the General Assembly also promulgated an additional compact provision which states:

“[PennDOT] shall, for purposes of imposing a suspension or revocation under article IV of the compact, treat reports of convictions received from party states that relate to driving, operating or being in actual physical control of a vehicle while impaired by or under the influence of alcohol, intoxicating liquor, drugs, narcotics, controlled substances or other impairing or intoxicating substance as being substantially similar to section 3731 (relating to driving under the influence of alcohol or controlled substance). The fact that the offense reported to [PennDOT] by a party state may require a different degree of impairment of a person’s ability to operate, drive or control a vehicle than that required to support a conviction for a violation of section 3731 shall not be a basis for determining that the party state’s offense is not substantially similar to section 3731 for purposes of article TV of the compact. ” 75 Pa.C.S. § 1586. (emphasis added) However, section 1586 and the amendment to section 1584 were not in effect at the time of Walsh’s conviction on September 30, 1998.

(C) “Substantially Similar” Analysis

In considering the merits of a reciprocal license suspension under the compact, Pennsylvania courts originally employed an approach which compared Pennsylvania’s DUI statute, 75 Pa.C.S. §3731(a), with the foreign state’s DUI law to determine whether the provisions of the respective statutes were substantially similar. See e.g., Collins v. PennDOT, 735 A.2d 754,756-58 (Pa. Commw. 1999) (suspension improper since Arizona DUI statute was not substantially similar to Pennsylvania DUI statute). However, in Petrovich, supra, the Supreme Court of Pennsylvania concluded that such a comparative analysis was unwarranted since “the relevant inquiry is whether each state’s drunk driving provisions are ‘of a substantially similar nature’ to article IV(a)(2) of the compact,” rather than to each other. Petrovich, 741 A.2d at 1266. Specifically, in considering whether Pennsylvania license suspensions were justified based upon New York and Maryland convictions, the Petrovich court reasoned:

“Thus, the compact does not call for a direct comparison of Pennsylvania’s statute to the out-of-state statute. Rather, the compact requires a two-pronged test. First, we must evaluate whether there is a Pennsylvania offense which is ‘of a substantially similar nature’ to the provisions of article IV(a)(2). Second, we must evaluate whether there is a Maryland or New York offense which is ‘of a substantially similar nature’ to article IV(a)(2). Both prongs must be satisfied before PennDOT can sanction a Pennsylvania citizen for an out-of-state conviction.” Id. at 618-20,741 A.2d at 1266-67. Accord, Tindal v. PennDOT, 756 A.2d 724 (Pa. Commw. 2000).

In Petrovich, the Supreme Court found that section 3731(a)(1) of Pennsylvania’s DUI statute which proscribes operating a vehicle “[wjhile under the influence of alcohol to a degree which renders the person incapable of safe driving,” 75 Pa.C.S. §3731(a)(1), is substantially similar to article IV(a)(2) which refers to “driving a motor vehicle while under the influence of intoxicating liquor ... to a degree which renders the driver incapable of safely driving a motor vehicle.” Id. at 620, 741 A.2d at 1267. As to the second tier of the two-step analysis, the court further determined that New York’s “driving while ability impaired” (DWAI) law is not substantially similar to subsection (a)(2) of article IV since it does not require intoxication to a degree which renders the motorist unfit to drive safely. Additionally, the Petrovich court likewise declined to uphold a reciprocal suspension for violating Maryland’s DUI statute which bans driving under the influence of alcohol but does not reference “to a degree which renders the driver incapable of safe driving,” and remarked:

“The Maryland statute fails to specify the degree to which a person must be under the influence of alcohol, and therefore permits a much lower threshold for culpability; in contrast, article IV(a)(2) requires that the person be impaired to a degree that he or she is incapable of safely driving.” Id. at 627, 741 A2.d at 1271. As a consequence, the license suspensions predicated upon the New York and Maryland violations were reversed. Id.

(D) Utah Report of Conviction

Walsh contends that PennDOT cannot satisfy its burden of estabhshing the requisite similarity under article IV of the compact since Utah permits a DUI conviction based upon a lower standard of intoxication and culpability. Cf. Hunt v. PennDOT, 750 A.2d 922, 924 (Pa. Commw. 2000) (“[sjince West Virginia, like Pennsylvania, equates driving under the influence with a 0.10 percent blood alcohol content, the level of impairment required in West Virginia is substantially similar to the standards employed in Pennsylvania and under the compact.”). Walsh’s “substantial similarity” argument need not be addressed since his license suspension is subject to reversal due to the deficient content of the abstract report that PennDOT received from the state of Utah.

Article III of the compact obligated Utah to forward a conviction report to PennDOT which contained: “(1) the identity of the person convicted; (2) a description of the violation, including the section of the statute, code, or ordinance violated; (3) the identity of the court in which the person was convicted; and (4) an indication of the plea or of whether the conviction resulted from a forfeiture of security.” Mazurek v. PennDOT, 717 A.2d 23,25 (Pa. Commw. 1998). If the foreign conviction report “lacks such information, it is incompetent to support the department’s suspension of a license.” Boots v. PennDOT, 136 A.2d 64, 66 (Pa. Commw. 1999); Mazurek, supra. Therefore, if the abstract report merely indicates that a motorist was convicted under another state’s DUI law without specifying the particular subsection of the statute that was violated, a license suspension based upon such a report must be vacated. McCann v. PennDOT, 728, A.2d 1009, 1011 (Pa. Commw. 1999) (“[i]t is necessary that the precise subsection of the violated statute be included in the report of conviction, not only to comport with Mazurek but also since this court must determine if [PennDOT] is giving proper effect ‘to the conduct reported ... as it would if such conduct had occurred in the home state,’ in accordance with article IV of the compact.”).

The Utah report simply states that Walsh pled guilty to violating “41-6-44 driving under the influence of” without any further citation or elaboration. At the time of Walsh’s arrest and conviction, Utah Code Ann. §41-6-44(2)(a) (Supp. 1998) made it unlawful for a person to operate a vehicle when [s]he either (i) has a blood or breath alcohol concentration of .08 grams or greater as shown by a chemical test given within two hours after the alleged operation, or (ii) is under the influence of alcohol, any drug, or the combined influence of alcohol and any drug to a degree that renders the person incapable of safely operating a vehicle. The DUI provision in effect in September 1998 prohibited “driving or controlling a vehicle with a blood-alcohol level of .08 grams or more, not driving or controlling a vehicle when a test shows a level of .08 grams or more.” State v. Preece, 971 P.2d 1,7 (Utah 1998) (citing U.C.A. §41-6-44,(2)(a)(i)). Effective March 3, 1999, that subsection was amended to change the temporal nature of the alcohol level determination and currently reads “has sufficient alcohol in his body that a chemical test given within two hours of the alleged operation or physical control shows that the person has a blood or breath alcohol concentration of .08 grams or greater.” U.C.A. §41-6-44(2)(a)(i) (Supp. 2000). The second subsection of Utah’s DUI statute, §41-6-44(2)(a)(ii), contains language that is comparable to the requirements of Pennsylvania law, 75 Pa.C.S. §3731(a)(l), and article IV(a)(2) of the compact, 75 Pa.C.S. §1581, article IV. Regrettably, due to the inadequacy of the abstract report from Utah, it cannot be determined which subsection Walsh admittedly violated by pleading guilty on September 30, 1998.

Inasmuch as the Utah report does not identify the relevant subsection of the Utah DUI statute involved, it cannot serve as the basis for a license suspension and Walsh’s appeal must, therefore, be sustained. McCann, supra; Mazurek, supra. Although the recent amendment to 75 Pa.C.S. §1584 now regards such an omission as inconsequential, that amendment cannot be applied retroactively to Walsh’s offense and conviction which predate its enactment on December 21, 1998. See Rouse v. PennDOT, 732 A.2d 35,37 (Pa. Commw. 1999) (section 1584 amendment may only be applied prospectively); Sweet v. PennDOT, 724 A.2d 1004, 1005 (Pa. Commw. 1999) (amendment to 75 Pa.C.S. §1584 does not apply to DUI convictions which occurred prior to December 21, 1998). Moreover, while the current provisions of 75 Pa.C.S. §1586 could yield a different result in this case, see Ester v. PennDOT, 751 A.2d 1273 (Pa. Commw. 2000) (with the advent of section 1586, a license suspension was proper for a DUI conviction under a North Carolina statute requiring a blood alcohol content of 0.08 percent), that statute likewise cannot be applied to convictions which predate December 21, 1998. Petrovich, 559 Pa. at 624-25, 741 A.2d at 1269. Based upon the language of the Utah abstract report and the provisions of 75 Pa.C.S. §§1581-1585 in effect at the time of Walsh’s conviction, PennDOT erred by suspending Walsh’s driving privileges and his license suspension appeal will be sustained.

ORDER

And now, August 1, 2000, upon consideration of the “Appeal from suspension of driver’s license” filed by the petitioner, William J. Walsh, and based upon the reasoning set forth in the foregoing memorandum, it is hereby ordered and decreed that:

(1) The license suspension appeal filed by the petitioner, William J. Walsh, is sustained;

(2) The suspension by the Commonwealth of Pennsylvania, Department of Transportation, Bureau of Driver Licensing of the driving privileges of the petitioner, William J. Walsh, pursuant to 75 Pa.C.S. §§1581-1585 is reversed; and

(3) This matter is remanded to the Commonwealth of Pennsylvania, Department of Transportation, Bureau of Driver Licensing, to reinstate the driving privileges of the petitioner, William J. Walsh.


source: Caselaw Access Project

author: HERRON, J.,

license: Public Domain

text:
    First Union Commercial Corp. v. Medical Management Services

      Barbara L. Farley, for plaintiff.

      Robert L. Grundlock, for defendant.
    July 26, 2000
   HERRON, J.,

In its complaint, plaintiff and lessor First Union Commercial Corporation alleges that defendant and lessee Medical Management Services Inc. defaulted on five medical equipment leases. Defendant Alan Sandberg, a guarantor of the leases, filed preliminary objections. The court overrules those preliminary objections.

FACTS

From June 12, 1997 to May 11, 1998, Lear Financial Corporation executed five written leases of medical equipment to MMS. Defendants Sandberg and Kenneth Davis executed written guaranties of each lease. Each guaranty permits Lear to assign the guaranty, and Lear assigned each guaranty to CoreStates Leasing Inc. CoreStates has since merged with First Union.

Each guaranty has the following clause:

“(10) Law and jurisdiction. This guaranty shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Guarantor agrees that any actions or proceeding to which lessor is a party arising directly or indirectly from this guaranty shall be litigated, at lessor’s option, in any state or federal court having situs within the Commonwealth of Pennsylvania and that said court shall have jurisdiction thereof.” Guaranty ¶10.

The complaint alleges that MMS defaulted on the five leases. In accordance with the acceleration clause in each lease, First Union declared immediately due all remaining rents, plus sales tax, interest, late charges and 20 percent attorney’s fees.

First Union sues MMS on the leases and Sandberg and Davis on their guaranties, demanding $62,085.75 plus interest, late charges and costs. Only Sandberg has filed preliminary objections. Sandberg makes four arguments: (1) that First Union lacks capacity to sue under the guaranties, (2) that this court does not have personal jurisdiction over him, (3) that the complaint lacks specificity because it does not allege the time and place of contracting, and (4) that First Union has not properly pleaded damages.

DISCUSSION

I. The Complaint Sufficiently Alleges First Union’s Capacity To Sue Under the Guaranties

Sandberg argues that First Union lacks capacity to sue on the guaranties. Pa.R.C.P. 1028(a)(5). Sandberg does not attack the validity of Lear’s assignments of the guaranties to CoreStates, but argues only that First Union has not shown that it is CoreState’s successor in interest. The argument borders on being frivolous. In its complaint, First Union alleged its well-known merger with CoreStates. First Union has since produced, under the seal of the Secretary of the Commonwealth, a copy of the articles of merger and the agreement and plan of merger. See Pa.R.E. 902(1) (setting forth self-authenticating nature of domestic public documents under seal). As the survivor of this merger, First Union succeeded to the rights and obligations of CoreStates. 15 Pa.C.S. §1929; Park v. Greater Delaware Valley Savings & Loan Association, 362 Pa. Super. 54, 63, 523 A.2d 771, 776 (1987).

The court overrules Sandberg’s motion to strike the complaint for lack of capacity to sue.

II. This Court May Exercise in Personam Jurisdiction Over Sandberg

Sandberg argues that the court lacks personal jurisdiction over him. Pa.R.C.P. 1028(a)(1). The court disagrees. In general, when a party objects to a court’s exercise of personal jurisdiction, the non-moving party bears the burden of demonstrating contacts with the forum state sufficient to justify the assertion of personal jurisdiction. International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). But each guaranty contained a clause selecting Pennsylvania as the forum for disputes. In actions involving forum selection clauses, the non-moving party need not demonstrate that the defendant’s contacts with the forum state are sufficient. Pennsylvania House Inc. v. Barrett, 760 F. Supp. 439, 448 n.13 (M.D.Pa. 1991); Mutual Fire, Marine and Inland Insurance Co. v. Barry, 646 F. Supp. 831,833 (E.D. Pa. 1986). This is because an objection to the assertion of personal jurisdiction is a waivable right, and parties may agree in advance to confer personal jurisdiction on a particular court. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985) (stating that enforcement of a forum selection clause in a freely negotiated instrument between commercial parties does not offend the due process clause); National Equipment Rental Ltd. v. Szukhent, 375 U.S. 311, 316 (1964) (stating “that parties to a contract may agree in advance to submit to the jurisdiction of a given court, to permit notice to be served by the opposing party, or even to waive notice altogether” and enforcing clause appointing agent for service of process); Continental Bank v. Brodsky, 225 Pa. Super. 426, 429, 311 A.2d 676, 677-78 (1973) (same); Commonwealth ex rel. Rothman v. Rothman, 209 Pa. Super. 180, 184, 223 A.2d 919,922 (1966) (stating that “[i]t is well-settled that a court’s jurisdiction over the person may be conferred by consent or agreement.”). Therefore, where there is a forum selection clause, the only issue is the enforceability and effect of the clause. Mutual Fire, Marine and Inland Insurance Co., 646 F. Supp. at 833 (1986). In a breach of contract action such as this one, that determination is one of contract law. General Eng’g Corp. v. Martin Marietta Alumina, 783 F.2d 352,356-57 (3d Cir. 1986) (treating interpretation of a forum selection clause in a breach of contract action as a matter of state law); Mutual Fire, Marine and Inland Insurance Co., 646 F. Supp. at 833 (1986) (same).

Under Pennsylvania law, a forum selection clause is enforceable unless the party challenging the clause can show (1) that the parties did not freely agree to the clause or (2) that enforcement of the clause would be unreasonable. Central Contracting Co. v. C.E. Youngdahl & Co., 418 Pa. 122,133,209 A.2d 810, 816 (1965); Pennsylvania House Inc. v. Barrett, 760 F. Supp. 439, 443-44 (M.D. Pa. 1991); Mutual Fire, Marine and Inland Insurance Co., 646 F. Supp. at 833; see also, Bancorp Group Inc. v. Pirgos Inc., 744 A.2d 791, 794 (Pa. Super. 2000) (holding that unambiguous forum selection clause was enforceable under Michigan law). A forum selection clause is freely agreed to if it meets the normal requirements of contract law. See e.g., id. (holding that, under the principles of contract law, defendants’ failure to read a forum selection clause before signing did not serve as a basis to avoid the clause); Churchill Corp. v. Third Century Inc., 396 Pa. Super. 314, 321, 578 A.2d 532, 536 (1990) (holding that forum selection clause was unenforceable where parties had not freely bargained for the clause and there was no consideration for the clause). A forum selection clause is unreasonable only if its enforcement-would, under the circumstances existing at the time of the litigation, “seriously impair” the litigant’s ability to pursue his claims or defenses. Central Contracting, 418 Pa. at 133, 209 A.2d at 816. “[M]ere inconvenience or additional expense” does not constitute unreasonableness. Id., quoted in Mutual Fire, Marine and Inland Insurance Co., 646 F. Supp. at 833. Additional expense may rise to the level of unreasonableness, however, when the selected forum is so remote as to make the cost of defending against the suit greater than the cost of paying a default judgment. Churchill Corp., 396 Pa. Super, at 322, 578 A.2d at 536.

The court may exercise personal jurisdiction over Sandberg because Sandberg consented in advance to the court’s jurisdiction. Sandberg does not allege that the forum selection clause is unreasonable. Instead, he argues that he did not consent to a Pennsylvania court’s assertion of personal jurisdiction over him because the forum selection clause does not describe the jurisdiction conferred as personal jurisdiction. Sandberg contrasts his forum selection clause with that of the defendants in Bancorp Group Inc. v. Pirgos Inc., 744 A.2d 791, 794 (Pa. Super. 2000). In Bancorp Group, the plaintiff sought to enforce a Michigan judgment in Pennsylvania. The defendants attacked the validity of the judgment — entered in a contract action — on the ground that the Michigan court lacked personal jurisdiction over them. The basis of the Michigan court’s assertion of jurisdiction was a clause in the contract stating that defendant agreed to submit to “personal jurisdiction and venue” in Michigan. The Pennsylvania Superior Court held that the Michigan court had properly asserted personal jurisdiction. An unambiguous provision agreeing to submit to personal jurisdiction in a particular forum is a clear indication that the party consented to personal jurisdiction in the forum. Bancorp Group, 744 A.2d at 794.

The clause in Bancorp Group specifically stated that the defendant consented to personal jurisdiction. The court holds, however, that Sandberg freely and unambiguously agreed to confer personal jurisdiction on this court by consenting to jurisdiction in Pennsylvania. Guaranty contracts are subject to the same rules of interpretation as other contracts. Meeting House Lane Ltd. v. Melso, 427 Pa. Super. 118, 628 A.2d 854, 857 (1993). The court must determine and give effect to the clearly expressed intentions of the parties. Id. If possible, the court must give effect to all of the language employed in the contract. Best v. Realty Management, Corp., 174 Pa. Super. 326, 101 A.2d 438, 439 (1953).

It is clear that the parties intended that Pennsylvania courts have personal jurisdiction over Sandberg. Without Sandberg’s agreement to submit to personal jurisdiction in Pennsylvania, the forum selection clause would be meaningless. See Pennsylvania House, 760 F. Supp. at 448 (holding that a venue selection clause contains an implied consent to personal jurisdiction because, without consent to personal jurisdiction a choice of venue would be meaningless). In addition, jurisdiction could have meant nothing but personal jurisdiction: parties may not confer subject matter jurisdiction by consent. Schleifer v. Zoning Board of Adjustment, 374 Pa. 277, 280, 97 A.2d 782, 784 (1953) (stating that “jurisdiction of the subject matter cannot be conferred upon a court by agreement, — contra as to jurisdiction of the person . . ..”). Applying Pennsylvania law, federal courts have reached similar results. See Gandalf Sys. Corp. v. TriTek Info. Sys. and Serv., 1992 WL 172596 (E.D. Pa.) (exercising personal jurisdiction based on a forum selection clause that conferred “jurisdiction and venue” on Pennsylvania courts); Pennsylvania House, 760 F. Supp. at 448 (exercising personal jurisdiction based on a forum selection clause that conferred venue in Pennsylvania but that did not expressly mention jurisdiction); Mutual Fire, Marine and Inland Insurance Co., 646 F. Supp. at 833 (same); Insurance Co. of N. Am. v. Hoffman, 1989 WL 46186 (E.D. Pa.) (exercising personal jurisdiction based on a forum selection clause that permitted an action to “be brought in any state or federal court of competent jurisdiction in any county in the State of Pennsylvania”). Compare with Atlantic Fin. Fed. v. Bruno, 698 F. Supp. 568, 570 (E.D.Pa. 1988) (holding that confession of judgment clause was too vague to confer personal jurisdiction in Pennsylvania because clause authorized “any court of record” to enter judgment against the debtor).

Sandberg also argues that the court must have an independent source of personal jurisdiction over him before interpreting the forum selection clause. One might read Sandberg’s argument two ways, and the court disagrees with both. First, Sandberg might be arguing that a court must possess jurisdiction before deciding whether it possesses jurisdiction. Second, Sandberg might be arguing that a plaintiff must demonstrate sufficient minimum contacts before the court enforces a forum selection clause. The first is tautologically absurd and the second is contrary to the due process clause and Pennsylvania law. Pennsylvania House, 760 F. Supp. at 448 n.13; Mutual Fire, Marine and Inland Insurance Co. 646 F. Supp. at 833 (1986).

The court overrules Sandberg’s preliminary objection to personal jurisdiction.

III. The Complaint Is Sufficiently Specific

Sandberg argues that the complaint lacks sufficient specificity because it does not allege the time and place of contracting. Pa.R.C.P. 1019(f), 1028(a)(3). The complaint states the date of execution of each of the leases. The complaint does not state the place of contracting. The place of contracting would be relevant to demonstrating whether Sandberg has sufficient minimum contacts with Pennsylvania. Because the enforceability of the forum selection clause makes the minimum contacts analysis unnecessary, the court overrules the preliminary objection.

IV. First Union Has Properly Pleaded Damages

Sandberg argues that First Union did not plead damages properly because (1) the complaint impermissibly seeks recovery of New York sales tax, (2) the demand for 20 percent attorney’s fees is unreasonable, and (3) the complaint does not specifically state the amount due. Though Sandberg phrases preliminary objection as a demurrer or motion to strike the complaint, the appropriate means for challenging an erroneous prayer for damages is a preliminary objection in the nature of a motion to strike off impertinent matter. Hudock v. Donegal Mutual Insurance Co., 438 Pa. 272, 277 and n.2, 264 A.2d 668, 671 and n.2 (1970); Pa.R.C.P 1028(a)(2). Therefore, the court cannot dismiss a complaint on the issue of damages. Hudock, 264 A.2d at 671 and n.2.

Even if the court interprets the preliminary objection as coming under Pa.R.C.P. 1028(a)(2), the court must overrule the objection. The complaint sets forth in detail the amounts allegedly due under each lease. The court cannot determine at this stage whether these amounts are erroneous, whether sales tax is recoverable or whether the attorney’s fees are reasonable. The court overrules the preliminary objection.

The court will enter a contemporaneous order overruling Sandberg’s preliminary objections and ordering Sandberg to file an answer to the complaint within 20 days of the entry of the order.

ORDER

And now, July 26, 2000, upon consideration of the preliminary objections of defendant Alan Sandberg to the plaintiff’s complaint and plaintiff’s response, and in accordance with the court’s contemporaneously-filed memorandum opinion, it is hereby ordered that Sand-berg’s preliminary objections are denied. Sandberg shall file an answer to the complaint within 20 days of the date of entry of this order.

      . The parties do not argue that the law of New York or another state applies to the interpretation of the forum selection clause. Since the choice of law provision in the contract designates Pennsylvania law, the court applies Pennsylvania law.

      . A party may use a forum selection clause either to limit or to enlarge a court’s jurisdiction. In the limiting situation, the forum selection clause takes away the power of the Pennsylvania court to hear the case where subject matter, personal jurisdiction and venue are otherwise proper if “the parties have freely agreed that litigation shall be conducted in another forum and where such agreement is not unreasonable at the time of litigation.” See Central Contracting Co. v. C.E. Youngdahl & Co., 418 Pa. 122, 133, 209 A.2d 810, 815 (1965) (remanding to lower court to decide whether it should decline to exercise jurisdiction in support of parties’ agreement selecting New York as forum), explained in Continental Bank v. Brodsky, 225 Pa. Super. 426, 429, 311 A.2d 676, 677-78 (1973); General Eng’g Corp. v. Martin Marietta Alumina, 783 F.2d 352, 356-57 (3d Cir. 1986); Restatement (Second) of Conflict of Laws §80 (stating that “[t]he parties’ agreement as to the place of the action will be given effect unless it is unfair or unreasonable.”).
      In the enlargement situation — which is the situation here — the forum selection clause confers personal jurisdiction and venue on the Pennsylvania court where jurisdiction or venue otherwise would not exist. Bancorp Group Inc. v. Pirgos Inc., 744 A.2d 791, 794 (Pa. Super. 2000) (holding that forum selection clause was enforceable to confer personal jurisdiction where personal jurisdiction otherwise did not exist); Continental Bank v. Brodsky, 225 Pa. Super. 426, 429, 311 A.2d 676, 677-78 (1973); Mutual Fire, Marine and Inland Insurance Co. v. Barry, 646 F. Supp. 831, 833 E.D. Pa. 1986) (asserting personal jurisdiction based on forum selection clause where personal jurisdiction otherwise did not exist). Federal courts have applied the Central Contracting “freely agreed” and “not unreasonable” standard in evaluating the enlargement situation. Pennsylvania House Inc. v. Barrett,
        760 F. Supp. 439, 443-44 (M.D. Pa. 1991); Mutual Fire, Marine and Inland Insurance Co., 646 F. Supp. at 833.

      . In M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972), the United States Supreme Court applied a similar reasonableness analysis under admiralty law to enforce a forum selection clause. The court held that a forum selection clause is enforceable absent a strong or clear showing by the party challenging the clause that (1) there was fraud or overreaching, (2) enforcement of the clause would contravene a strong public policy of the forum, or (3) trial in the contractual forum will be so gravely difficult and inconvenient that the party will for all practical purposes be deprived of his day in court. Id. at 15-18.


author: DOBSON, J.,

text:
    Thousand Dollar Club v. Krispinsky

      C.P. of Mercer Comity,
    no. 1998-209.

      William G. McConnell Jr., for plaintiff.

      Peter C. Acker, for defendant Krispinsky.

      Stanley Yorsz, for defendant IRM Distributors.

      Michael A. Joanow, for additional defendant Steklachick.

      Mark Frankovich, additional defendant, pro se.

      Frank P. Frankovich, additional defendant, pro se.

      Bernard A. Rich, additional defendant, pro se.
    July 13, 2000
   DOBSON, J.,

The matters before the court for disposition are defendant IRM Distributors’ motion for judgment on the pleadings, defendant Bernard Krispinsky’s motion for partial judgment on the pleadings, additional defendants Frank Frankovich, Mark Frankovich, Bernard Rich and John Steklachick’s preliminary objections to joinder pursuant to defendant Krispinsky’s Rule 2252(d) new matter, and additional defendant Bernard Rich’s addendum to the preliminary objections. Oral argument was heard before this court on May 1, 2000. As this is the third opinion this court has issued in this case, rather than repeat the facts and procedural history, the court incorporates and sets forth the facts and procedural history from its opinion of August 31, 1999 as follows:

“The procedural history of this case is as follows. A complaint was filed on January 20,1998 in the names of 28 individual plaintiffs. The plaintiffs were members of one or more of three different investment clubs created by defendant Bernard Krispinsky. The complaint included three counts of fraudulent misrepresentation and three counts of breach of fiduciary duty, one for each of the clubs; one count of breach of contract, one count of negligence, and one count of punitive damages, brought by the members of the clubs collectively; and one count of misrepresentation brought by plaintiff Bernard Rich only.

“Defendant filed preliminary objections. After hearing oral argument on April 6, 1998, this court issued an order striking the complaint and the count of punitive damages and granting leave to amend. The court instructed the plaintiffs as to how any amended complaint should be re-pled.

“An amended complaint was filed on July 24, 1998. The plaintiffs were changed from the individual members to the three investment clubs by their trustees ad litem. Each club brought a separate count of breach of fiduciary duty, fraud, violation of the Pennsylvania Securities Act, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, negligence, and breach of contract.

“Defendant again filed preliminary objections, and oral argument was heard on October 5, 1998. On December 22, 1998, the court issued an order striking counts 4-9 and 16-18, and sub-paragraph 69(h) and granting leave to amend.

“A second amended complaint was filed on February 5, 1999. The caption now listed as plaintiff the Thousand Dollar Club by its trustees ad litem. The complaint included counts of fraud, breach of fiduciary duty, negligence, and breach of contract.

“On March 19, 1999, plaintiff was granted leave to file a third amended complaint to add party-defendant IRM Distributors. The third amended complaint was filed on March 26, 1999, defendants now being Bernard Krispinsky and IRM Distributors.

“This complaint includes counts of fraud, breach of fiduciary duty, negligence, and breach of contract against Bernard Krispinsky and one count of negligence against IRM Distributors. .. .

“This case arose from a dispute between plaintiffs, the members of the Thousand Dollar Club, a private investment club, and its founder and organizer, defendant Bernard Krispinsky. The third amended complaint avers that in November of 1995, defendant initially solicited 24 individuals, the plaintiffs, to invest $1,000 each for membership in the Thousand Dollar Club. (Third amended complaint ¶5.) An organizational meeting was held, bylaws were approved, and defendant was appointed funds director and was made responsible for investing the club’s assets. (Id. a^8-9.) It was agreed that the plaintiffs would pay an additional $25 dollars per month as dues. (Id. at ¶9.) Defendant was given a free membership in the club as compensation for his services as funds director. (Id.)

“From December 1995 to February 1997, defendant prepared and handed out monthly statements reviewing the status of the club’s accounts and assets. (Id. at ¶21.) From March 1997 to October 1997, defendant did not prepare written monthly statements, but orally reported the status of the accounts and assets to the plaintiffs. (Id. atf23.) In November 1997, defendant was terminated as funds director. (Id. at ¶29.) The termination was based on a number of alleged acts of wrongdoing by defendant with regard to the club accounts and assets resulting in substantial monetary loss to the plaintiffs. (Id. at ¶29-30.)”

The first matter to be addressed is Krispinsky’s motion for partial judgment on the pleadings. “A motion for judgment on the pleadings may be granted only in cases where no facts are at issue and the law is so clear that a trial would be a fruitless exercise.... In addition, the court must view all well-pled facts of the non-moving party as true....” Beardell v. Western Wayne School District, 91 Pa. Commw. 348, 353, 496 A.2d 1373, 1375 (1985). (citations omitted)

Krispinsky makes several arguments in his motion for partial summary judgment; we will address them seriatim. Krispinsky first asks that the averments of his new matter and Rule 2252(d) new matter as they pertain to plaintiff Thousand Dollar Club be deemed admitted, because plaintiff has not responded in a timely fashion. This court’s order of December 29, 1999 granted plaintiff 10 days within which to file a reply to new matter. Plaintiff filed its reply that same day, thus the issue has been resolved.

Krispinsky next asks that the court enter judgment against the 28 original plaintiffs as well as original plaintiff Bernard Rich, because they failed to file amended complaints after the original complaint was stricken. The order of April 6, 1998 found that the causes of action were individual and could not be consolidated into one count as originally plead. The court struck the complaint, including Rich’s individual cause of action, and directed plaintiffs to file amended complaints within 60 days. When the original complaint was stricken, the 28 original plaintiffs and Rich were dismissed as parties, thus judgment cannot be entered against them.

A first amended complaint was properly filed in the names of the three clubs by their trustees ad litem. The court’s order of December 22, 1998 did not strike the amended complaint, but directed the Thousand Dollar Club to amend within 45 days, and directed Invest for Five and Wildcats to file separate complaints. Invest for Five and Wildcats were effectively dismissed as parties by the order of December 22,1998, thus judgment cannot be entered against them.

Krispinsky next claims that some of plaintiff’s allegations are barred by the statute of limitations. Plaintiff’s causes of action are based upon Krispinsky’s actions occurring between November 1995 and November 1997. The original complaint was filed January 20, 1998.

A two-year statute of limitations applies to the counts of fraud, breach of fiduciary duty and negligence. 42 Pa.C.S. §5524 (Supp. 2000); Maillie v. Greater Delaware Valley Health Care Inc., 156 Pa. Commw. 582, 628 A.2d 528 (1993); Walls v. Scheckler, 700 A.2d 532 (Pa. Super. 1997). The breach of contract claim alleges the breach of an oral contract and is covered by a four-year limitation period. 42 Pa.C.S. §5525 (Supp. 2000); Packer Society Hill Travel Agency Inc. v. Presbyterian University of Pennsylvania Medical Center, 430 Pa. Super. 625, 635 A.2d 649 (1993). “There is a strong policy in Pennsylvania courts favoring the strict application of statutes of limitations.” Kingston Coal Co. v. Felton Mining Company Inc., 456 Pa. Super. 270, 278, 690 A.2d 284, 288 (1997).

“[T]he statute of limitations begins to run as soon as the right to institute and maintain suit arises; . . . .” Id. (quoting Pocono International Raceway v. Pocono Produce, 503 Pa. 80, 468 A.2d 468 (1983)). An exception to this general rule exists, however, “[w]here, ‘through fraud or concealment, the defendant causes the plaintiff to relax his vigilance or deviate from his right of inquiry. ’ ” Id., 456 Pa. Super, at 283, 690 A.2d at 290 (quoting Molineux v. Reed, 516 Pa. 398, 532 A.2d 792 (1987)). “The defendant must have committed some affirmative independent act of concealment upon which the plaintiffs justifiably relied.” Id., 456 Pa. Super, at 284, 690 A.2d at 291. “Mere mistake, misunderstanding or lack of knowledge is insufficient... and the burden of proving such fraud or concealment, by evidence which is clear, precise and convincing, is upon the asserting party.” Id., 456 Pa. Super, at 283-84, 690 A.2d 290-91.

The third amended complaint avers that Krispinsky was appointed funds director and was responsible for controlling and investing the club’s funds in the club’s Charles Schwab & Co. trading account. Although Krispinsky was receiving monthly account statements from Schwab that accurately reflected the status of the account, he did not provide the club with copies of the statements. Instead, Krispinsky personally prepared 15 monthly account statements that he handed out to the members at club meetings between December 1995 and February 1997. Between March 1997 and October 1997, he orally informed the members of the account status. The club members aver they relied upon Krispinsky’s oral and written representations and continued to entrust him with club funds.

Viewing, as we must, these facts as true, it is clear that Krispinsky committed an affirmative act of concealment “upon which the plaintiff justifiably relied.” Krispinsky was the founder and organizer of the club. From the beginning, the club trusted him to control and invest its assets. According to his oral and written representations, the investments were successful. “Since [the members] had no reason to make investigation, they are not chargeable with what such investigation would have disclosed.” Rush v. Butler Fair & Agricultural Association, 391 Pa. 181, 186, 137 A.2d 245 (1958). Thus, the statute is tolled and “defendant is estopped from invoking the bar of the statute of limitations.” Kingston, 456 Pa. Super, at 283, 690 A.2d at 290.

Krispinsky next claims that he is entitled to judgment on the amount allegedly owed to club member Peter Cominos, because Krispinsky has paid Cominos $1,600 as a compromise to settle the claim. While Krispinsky’s claim may be true, it is not a basis for an award of judgment on the pleadings. There are no facts of record regarding whether the Cominos claim was settled. Thus whether Cominos may recover from Krispinsky remains a question of fact to be resolved by the fact-finder.

Krispinsky next claims that plaintiff’s claims based upon allegations of unauthorized option and margin trading are barred, because Krispinsky was authorized by the club to conduct both option and margin trading. The Schwab trade account authorization permits Krispinsky to “buy, sell and trade in stock, bonds, options, and any other securities, listed or unlisted, on margin or otherwise . . . .” Although the authorization appears to have been executed by several members of the club, plaintiff, in its reply to Krispinsky’s new matter, denies that the authorization was valid. Plaintiff alleges that Krispinsky misrepresented the nature of the document that the members were asked to sign. Plaintiff’s reply to defendant Krispinsky’s new matter ¶103. Hence, whether the authorization was valid and authorized Krispinsky to conduct option and margin trading is a question of fact to be resolved by the fact-finder. Krispinsky next claims that he is entitled to partial judgment on the pleadings, because the wrongdoing of the club’s officers is imputed to the club. See Plasterer v. Paine, 375 Pa. Super. 407, 544 A.2d 985 (1988). Krispinsky claims that the club’s officers failed to perform their duties as set forth in the bylaws, and, because of their breach of duty, they failed to discover Krispinsky’s alleged misrepresentations. Further, this failure to discover the misrepresentations was a substantial factor in the club’s losses. While it is true that the officers’ conduct may be imputed to the club, whether the officers’ conduct was wrongful and contributed to the club’s losses are questions of fact to be resolved by the fact-finder.

Krispinski next claims that many of the causes of action asserted in the third amended complaint are not cognizable. Krispinsky argues that all claims based upon his failure to utilize a conservative investment policy must fail, because his five avenue investment philosophy, third amended complaint ¶11, includes the purchase of speculative issues such as initial public offerings and equity options that are not, by nature, conservative. Whether these issues are speculative and would defeat claims based upon a conservative investment policy is a question of fact to be resolved by the fact-finder.

Krispinsky next claims that plaintiff’s claims based upon his purchase of securities on margin must fail, because an analysis of the reports he prepared must lead to the conclusion that the securities were purchased on margin. Whether the reports were clear and would lead to that conclusion and whether the members were responsible for reaching that conclusion based upon the information provided to them is a question of fact.

Krispinsky next claims that paragraph 32 of the third amended complaint alleging fraudulent misrepresentation is factually insufficient and, therefore, legally insufficient. Paragraph 32 reads as follows:

“That prior to the initial investment of the club’s assets in November 1995, Krispinsky willfully, wantonly, intentionally and fraudulently orally misrepresented to the club and its members that he would invest the club’s assets by utilizing a specific, ‘conservative,’ ‘long-term’ (15 year) ‘five avenue investment philosophy,’ when, in fact, Krispinsky’s investment of the club’s assets throughout his entire tenure as funds director was not done in either a ‘conservative’ and/or ‘long-term’ manner under any reasonably accepted definition of these terms.”

Krispinsky represented to the club that he would follow a conservative investment philosophy. Third amended complaint ¶¶32, 10, 11, and both he and the club members agreed to this investment philosophy. Id. at ¶¶10-11. The club was not aware that Krispinsky was purchasing securities on margin. Id. at ¶¶12, 33, 34(a). Krispinsky continued to misrepresent the manner in which club funds were invested and that the investments were profitable. Id. at ¶¶33-36. The club relied on Krispinsky’s representations and continued to entmst him with club funds. Id. at ¶38. Paragraph 32, when read in conjunction with other paragraphs, therefore, is factually sufficient.

Krispinsky next claims that plaintiff’s cause of action for fraudulent misrepresentation is not cognizable, because the “total” on Krispinsky’s handwritten reports is not meant to equal the “total account value” on the Schwab reports, rather the handwritten “total” more closely approximates the “investments owned” as listed on the Schwab reports. Krispinsky contends that his reports were not false, they were read incorrectly, and there are no facts averred to support the claim that Krispinsky’s “total” should equal Schwab’s “total account value.” Krispinsky is correct that that it is unclear from the facts plead and the exhibits what Krispinsky’s “total” is meant to represent. Whether plaintiff’s claim of fraudulent misrepresentation will stand depends upon what Krispinsky’s “total” represents. This is a factual question to be resolved by the fact-finder.

Krispinsky next claims that paragraph 34 of the third amended complaint “fails to state a cognizable claim because it alleges that the Krispinsky generated reports’ content materially differs from the content of the corresponding monthly Schwab accounts.” The Schwab reports are dated and contain information gathered from the first to the last day of a particular month. Krispinsky’s reports, for the most part, are not dated with a specific date. Therefore, it is impossible to determine whether the information contained in the reports is fraudulent. It is unknown whether the reports are meant to cover the same time periods. Whether the information in Krispinsky’s reports is true or false, and therefore fraudulent, is a question to be resolved by the fact-finder.

The court agrees with Krispinsky, however, that paragraph 34(h) cannot be the basis of an action for fraudulent misrepresentation, because it avers an omission as opposed to a representation. Paragraph 34(h) provides, in part, that “Krispinsky’s July 1996 statement was false and misleading as it failed to report his sale ... of 500 shares of Iomega at a loss ... on margin . ...” A false representation is necessary to support a cause of action for fraudulent misrepresentation, Bortz v. Noon, 556 Pa. 489, 729 A.2d 555 (1999), thus paragraph 34(h) is factually insufficient and must be stricken.

Krispinsky next claims that plaintiff improperly calculated the damages requested in Count I. “The rules for determining the measure of damages in tort are based upon the purposes for which actions of tort are maintainable. These purposes are: (a) to give compensation, indemnity or restitution for harms; (b) to determine rights; (c) to punish wrongdoers and deter wrongful conduct; and (d) to vindicate parties and deter retaliation or violent and unlawful self-help.” Restatement (Second) of Torts §901 (1979). “When there has been harm only to the pecuniary interests of a person, compensatory damages are designed to place him in a position substantially equivalent in a pecuniary way to that which he would have occupied had no tort been committed.” Restatement (Second) of Torts §903, comment (a) (1979).

Count I alleges fraud and resulting money damages. Plaintiff calculated its damages as “the difference between the total amount of the club’s assets entrusted to Krispinsky for investment, less the balance remaining in the [club’s] account upon discovery of Krispinsky’s fraud, plus monies paid to Krispinsky for seminar expenses — ” Third amended complaint ¶41. An award of damages calculated in this manner would return plaintiff, as nearly as possible, to the position it would have occupied had no tort been committed. Plaintiff’s calculation of damages is proper.

Krispinsky next claims that plaintiff’s cause of action for breach of fiduciary duty based upon Krispinsky’s options trading is not cognizable, because trading in options was part of the agreed upon “Five avenue investment philosophy.” Although option trading may have been part of the investment philosophy, whether the high risk and speculative option trading conducted by Krispinsky was contemplated by the club when the “conservative” investment philosophy was agreed upon is a question of fact.

Krispinsky next claims that he had no duty to provide the club members with monthly information, therefore plaintiff’s cause of action for breach of fiduciary duty is not cognizable. He further claims that if a duty existed, it was to the club as principal, and not to the individual members.

This court has already held in its opinion and order of December 22, 1998 that a principal-agent relationship existed between Krispinsky and plaintiff and that Krispinsky had fiduciary duties to plaintiff that arose from that relationship. In a principal-agent relationship “[ejither of the parties to the relation may be a natural person, groups of natural persons acting for this purpose as a unit such as a partnership, joint undertakers, or a legal person, such as a corporation.” Restatement (Second) of Agency §1, comment on subsection (l):(a) (1958). An unincorporated association is “a body of individuals acting together for the prosecution of a common enterprise . . . .” Selected Risks Insurance Co. v. Thompson, 520 Pa. 130, 137, 552 A.2d 1382, 1385 (1989). Thus, an unincorporated association may operate as a principal in a principal-agent relationship.

An unincorporated association, however, “is not a legal entity; it has no legal existence separate and apart from that of its individual members.” Krumbine v. Lebanon County Tax Claim Bureau, 541 Pa. 384, 388, 663 A.2d 158, 160 (1995). Though an association may be sued in its own name as a separate legal entity, this status is only accorded for purposes of a lawsuit, otherwise the association does not exist apart from its members. Krispinsky had a duty to provide information “relevant to the affairs entrusted to him,” and this duty was to the members that comprise the association.

Finally, Krispinsky claims that the measure of damages set forth in paragraph 60 of Count IV of the third amended complaint is incorrect. Count IV alleges breach of contract and requests damages “representing the difference between the total amount of club’s assets entrusted to Krispinsky for investment, less the balance remaining in the [club’s] account upon discovery of Krispinsky’s breaches and violations.” Third amended complaint ¶60.

Remedies for breach of contract “are designed to protect either a party’s expectation interest ‘by attempting to put him in as good a position as he would have been had the contract been performed, that is, had there been no breach;’ his reliance interest ‘by attempting to put him back in the position in which he would have been had the contract not been made;’ or his restitution interest ‘[by requiring] the other party to disgorge the benefit he has received by returning it to the party who conferred it.’ ” Trosky v. Civil Service Commission, City of Pittsburgh, 539 Pa. 356, 363, 652 A.2d 813, 817 (1995) (quoting Restatement (Second) of Contracts §344). (brackets in original)

It would be impossible to calculate damages based upon plaintiff’s expectation interest. There is no way of knowing what plaintiff’s position would have been had the contract been performed. There also cannot be an award based upon plaintiff’s restitution interest. Restitution is designed to prevent unjust enrichment, which is not present in this case.

Plaintiff’s calculation of its measure of damages is proper based upon its reliance interest. An award of the amount entrusted to Krispinsky minus the balance remaining when the breach was discovered would place plaintiff in the position it would have been in had the contract not been made.

The next matters to be addressed are additional defendants’ preliminary objections in the form of a demurrer to Krispinsky’s Rule 2252(d) new matter. Additional defendants first argue that their joinder was improper pursuant to Rule 2252(d), because they are not parties to this action. Rule 2252(d) provides:

“If the person sought to be joined is a party, the joining party shall, without moving for severance or the filing of a praecipe for a writ or a complaint, assert in the answer as new matter that such party is alone liable to the plaintiff or liable over to the joining party or jointly or severally liable to the plaintiff or liable to the joining party directly setting forth the ground therefor. . . .” Pa.R.C.P. 2252(d); 42 Pa.C.S. (Supp. 2000).

As explained above, the 28 original plaintiffs were dismissed as parties when the original complaint was stricken by the order of April 6, 1998. The additional defendants were included in that group of original plaintiffs, and were dismissed as parties, therefore Mark Frankovich and John Steklachick are not parties to this action and were not joined properly. Additional defendants Bernard Rich and Frank Frankovich, however, are named as trustees ad litem, bringing the action on behalf of the club. Bernard Rich and Frank Frankovich are parties to the action and were properly joined by Krispinsky’s Rule 2252(d) new matter.

The additional defendants also argue that they cannot be joined because the allegations against them are separate and distinct from the allegations against Krispinsky. Krispinsky has alleged a duty on the part of additional defendants, as officers of the club, to properly run the affairs of the club, properly preside over meetings, provide members with information which is relevant to the affairs entrusted to him, and to supervise other officers. If true, Rich and Frankovich’s failure to perform these duties would make them jointly liable with Krispinsky. Their breach of duty resulted in their failure to discover Krispinsky’s wrongful actions, which enabled it to continue. They also failed to provide relevant and correct information to the club members.

The next matter before the court is additional defendant Rich’s addendum to additional defendants’ preliminary objections to Rule 2252(d) new matter. Krispinsky’s Rule 2252(d) new matter was filed on October 12,1999. Rich did not file his preliminary objections until January 3, 2000. Pursuant to Rule 1026, preliminary objections must be filed within 20 days of service of the preceding pleading. Pa.R.C.P. 1026; 42 Pa.C.S. (1987). Rich’s preliminary objections are untimely and will be overruled.

It is possible that Rich did not intend his preliminary objections to be a separate pleading, but rather an amendment to the previously filed preliminary objections. If so, they were filed in violation of Rule 1033 which allows for amendment of pleadings only by leave of court or filed consent of the adverse party, neither of which exists. Pa.R.C.P. 1033; 42 Pa.C.S. (1987).

The final matter before the court is defendant IRM’s motion for judgment on the pleadings. IRM argues that it cannot be held liable for Krispinsky’s tortious acts done for his own benefit, outside the scope of his authority, and from which IRM gained no benefit. IRM cites Cover v. Cushing Capital Corp., 344 Pa. Super. 593, 497 A.2d 249 (1985) in support.

In Cover, Carl Fugh, an associate of Investors Security, agreed to invest money for plaintiff and others in exchange for payment. Some time later, he also began to solicit investments in commercial paper. He gave the investors handwritten receipts in his own name, not in the name of Investors Security, and deposited the money into his personal account. The investors knew Fugh was associated with Investors Security. Investors Security later ceased doing business and Fugh became associated with Cushing Capital Corporation as a registered representative authorized to sell mutual funds and stocks, but not commercial paper. Fugh told the investors that he had changed his affiliation to Cushing Capital and that he was continuing to work for the investors in his private capacity.

Cushing Capital was unaware of Fugh’s activities. No money was given to Cushing Capital and no receipts were given to the investors by Cushing Capital. None of the investors inquired of either Investors Security or Cushing Capital regarding the money given to Fugh.

Subsequently, the investors discovered that Fugh had not invested the money, but had converted it to his own use. They then commenced an action against Fugh and Cushing Capital. Judgment was entered against Fugh, but the trial court held that Cushing Capital was not liable for the investors’ losses.

The Superior Court affirmed. The court upheld the trial court’s finding that the investors “had no accounts with Cushing Capital and that Cushing Capital had no knowledge that [the investors] were giving Fugh money to invest for them, and no knowledge of the amounts so paid. Fugh’s scheme was entirely extracurricular, and Cushing Capital was not aware of it.” Cover, 344 Pa. Super, at 598, 497 A.2d at 252.

Based upon these facts, the court held that “where an agent acts in his own interest which is antagonistic to that of his principal, or commits a fraud for his own benefit in a matter which is beyond the scope of his actual or apparent authority or employment, the principal who has received no benefit therefrom will not be liable for the agent’s tortious act.” Id. Thus, “Cushing Capital was not obligated to answer vicariously for the losses sustained as a result of Fugh’s peculations.” Id. at 599, 497 A.2d 253.

In the instant case, plaintiff has not averred that Krispinsky was acting as an agent/representative of IRM in his capacity as funds director of the club. As in Cover, he prepared written reports for the investors/club members. He did not claim to be working as an agent/representative of IRM. The club members did not receive statements or reports of any kind from IRM, nor did they contact IRM regarding their investments. It is also not averred that IRM received any benefit from Krispinsky’s actions.

To hold that IRM had a duty to supervise Krispinsky in actions conducted outside of his capacity as agent/ representative of IRM and that IRM breached this duty by failing to supervise and discover and/or prevent Krispinsky’s tortious conduct would result in IRM improperly being held liable for that conduct. As in Cover, Krispinsky was acting in his own interest, for his own benefit, and not as an agent or representative of IRM, thus IRM had no duty to supervise.

Hence, this order:

ORDER

And now, July 13, 2000, it is hereby ordered that defendant Bernard Krispinsky’s motion for partial judgment on the pleadings is granted as to paragraph 34(h) of the third amended complaint, and denied in all other respects.

It is further ordered that additional defendants’ preliminary objections to defendant Krispinsky’s Rule 2252(d) new matter are sustained as to additional defendants Mark S. Frankovich and John A. Steklachick, and overruled in all other respects.

It is further ordered that additional defendant Bernard Rich’s addendum to additional defendants’ preliminary objections to Krispinsky’s Rule 2252(d) new matter is overruled.

It is further ordered that defendant IRM Distributors’ motion for judgment on the pleadings is granted.

      . The Thousand Dollar Club, Invest for Five, and Wildcats.

      . The court concluded in its opinion and order of December 22, 1998 that the action was properly brought by the associations and not the club members individually.

      . The Schwab trading account authorization is attached to the first amended complaint as exhibit A.

      . Krispinsky re-asserts the claims set forth in his preliminary objections in the form of a demurrer to the third amended complaint. In its opinion and order of August 31, 1999, the court determined that these claims constituted defenses and were not proper as a basis for preliminary objections.

      . This reasoning also applies to the calculation of damages in Counts II (breach of fiduciary duty) and Count III (negligence).

      . Krumbine, 541 Pa. at 388 n.2, 663 A.2d at 160 n.2; Pa.R.C.P. 2153; 42 Pa.C.S.

      . Restatement (Second) of Agency §381 (1958).

      . Additionally, Krispinsky has always dealt with plaintiff as a group of individuals as opposed to a single entity. The individual members met with Krispinsky and discussed and approved an investment philosophy. Each member was called upon to sign the Schwab trade account authorization. Krispinsky then took it upon himself to provide to the individual members monthly information pertaining to the club’s investments. Krispinsky is estopped from arguing that the club is a single entity as opposed to a group of individuals to whom he owes no duty.

      . See Pa.R.C.P. 2152.

      . At the time of the filing of the Rule 2252(d) new matter, additional defendants were represented by attorney William McConnell Jr. Attorney McConnell filed preliminary objections to the new matter on behalf of the additional defendants on October 29, 1999. We may infer that attorney McConnell was served with a copy of Krispinsky’s answer and new matter some time prior to October 29, 1999.

      . Also, the court has already held in its opinion of August 31, 1999 that Krispinsky was not acting as a broker in this case, though he was licensed as a broker by IRM.


author: JAMES JR., J.,

text:
    Klischer v. Conyngham Township

      C.P. of Columbia County,
    no. 1494-1999.

      Eric C. Stoltenberg, for petitioner.

      Nicholas A. Quinn, for respondent.
    April 28, 2000
   JAMES JR., J.,

Petitioner, George Klischer, was employed by respondent as a full-time police officer from 1990 until April 12, 1999, when respondent terminated him. From August 4, 1997, until the time of his termination, petitioner was disabled from performing his police duties, and he was receiving work-related disability benefits pursuant to the Pennsylvania Heart and Lung Act (53 P.S. §637) and pursuant to the Pennsylvania Workers’ Compensation Act (77 P.S. §1 et seq.). During 1998 there was continuing litigation and controversy concerning these benefits. At one point, respondent had “inappropriately” stopped petitioner’s medical benefits, but reinstated them after petitioner’s counsel intervened.

Sometime between July and October 1998, Township Supervisor Reichwein verbally asked petitioner to return township property in petitioner’s possession or control. There was no list of specific or general items requested.

By letter dated November 27, 1998, respondent requested that petitioner “return all township property,” specifically mentioning “police coats and badges” and “post box key.” No other specific items were mentioned. The letter further stated that if “township property is not returned by December 1,1998 discipline action will occur.” [sic] Petitioner gave this letter to his attorneys, Sean Welby, Esquire, and Hugh A. Jones, Esquire. Attorney Welby sent a letter dated December 1, 1998, to respondent. This letter said, “I received a call from Chief Klischer this morning advising that he has been directed to return all township property to the board of supervisors. Chief Klischer advises that he received this correspondence today with a deadline to return such equipment to the township on this date or face disciplinary action. The purpose of this correspondence is to inquire as to exactly what equipment the township wishes Chief Klischer to return to it. If such equipment includes his badge and identification card, I must inquiry [sic] as to whether the township is terminating his employment.” Respondent never responded.

Attorney Jones sent a letter to respondent dated December 21, 1998, which addressed the health insurance issue and further said, “I assume the other items mentioned in your letter have already been dealt with.” Respondent never responded.

However, respondent sent petitioner another letter dated December 23,1998, which again requested return of “township property” and specifically mentioned the “police coats and badges” and the “post box key.” No other specific items were mentioned. The December letter further stated: “Under section 300 of the police department rules and regulations sub-section 1 (refusal to obey a reasonable order of a board member). By this correspondence you are notified that this serves as a verbal warning for noncompliance to this rule. You have until January 4,1999, to comply with this request or face more discipline action.” [sic] The township secretary was directed to send the letter by certified mail. It was sent by regular mail. Petitioner disputed receiving this letter.

By letter to petitioner dated April 12, 1999, respondent said: “Over the last several months the Conyngham Township Supervisors have made several requests that you return all township property. Because of lack of your cooperation, you leave Conyngham Township Supervisors with no other option. In accordance with the Conyngham Township Police Department Rules and Regulations section 300 sub-section 1 you are hereby terminated as Conyngham Township police officer.” [sic]

Petitioner was never disciplined for the verbal request of approximately October 1998. Respondent did nothing to record, indicate, decide, or communicate that this incident was an “offense” under section 300 sub-section 1 or under any other rule or law.

Petitioner was never disciplined for the written request of November 27,1998. Respondent did nothing to record, indicate, decide, or communicate that this incident was an “offense” under section 300 sub-section 1 or under any other rule or law.

By letter of December 23,1998, respondent first indicated that there was some discipline imposed, but that the discipline was a “verbal warning.” Respondent did nothing to record, indicate, decide, or communicate that this incident was an “offense” under section 300 subsection 1 or under any other rule or law.

Petitioner demanded and was granted a hearing before an arbitrator under the “Police Tenure Act,” 53 P.S. §811 et seq. The hearing was held on July 6, 1999. The arbitrator rendered his findings of fact and conclusions of law on October 10,1999. The determination was that “the township had cause to terminate the employment of Klischer. All requirements of the police rules and regulations were followed concerning notice and steps of discipline. The township’s decision to terminate will not be disturbed.”

Petitioner appealed this determination to this court pursuant to 2 Pa.C.S. §752. When a full and complete record is made of the proceeding before the local agency, the common pleas court shall hear the appeal without a jury and based on the certified record of the agency. “After hearing the court shall affirm the adjudication unless it shall find that the adjudication is in violation of the constitutional rights of the appellant, or is not in accordance with the law, or that the provisions of subchapter B of chapter 5 (relating to practice and procedure of local agencies) have been violated in the proceedings before the agency, or that any finding of fact made by the agency and necessary to support its adjudication is not supported by substantial evidence.” 2 Pa.C.S. §754.

A regular full-time police officer in a second class township, such as Conyngham Township, may be removed for various reasons, including “disobedience of orders.” Procedurally, “a written statement of any charges made against any person so employed shall be furnished to such person within five days after the same are filed.” 53 P.S. §812. Conyngham Township Police Department Rules and Regulations supplement the statutory procedure set forth in the Police Tenure Act. A township may wish to offer greater protection to its employees than the statutes of the Commonwealth normally provide. When the township supervisors exercise their authority over township police officers, they are bound by their own rules. Penuel v. Uwchlan Township Police Commission, 40 Pa. Commw. 512, 514, 397 A.2d 865, 867 (1979).

Although the “police rules” indicate that “the following list of penalties is intended to serve as a guide for, and is not intended to be construed as binding, as to recommendations of the board,” the “police rules” set forth various standards and procedural policies under the heading “discipline policy,” e.g.:

“B... . therefore, all allegations of wrongdoing must be documented or otherwise capable of being shown to have been based on reasonable belief.... It is expected that the board will exercise its responsibility in processing disciplinary cases promptly....

“C. Rights of members of the department: A member accused of violating any department regulations shall be fully informed of the nature of the allegations and the name of the person making the accusation in writing by the board.

“D. Internal investigation: . .. Internal investigations shall be conducted by a designee appointed by the board. The designee assigned shall conduct a thorough and complete investigation into the accusations against the officer. Written reports shall be made to the board and the investigating designee’s recommendations, if any, shall be so noted upon the final written report to the board ....

“Section 300 ‘insubordination’ sub-section 1 refusal to obey a legal and reasonable order of a superior officer or board member.

“First offense — 5 to 30 days.
“Second offense — 15 days to dismissal
“Third offense — dismissal
“Reckoning period — 1 year.”

From Township Supervisor Tarlecki’s testimony and from respondent’s counsel’s brief, respondent clearly interpreted the “police rules” to require a “three strike” policy under section 300 sub-section 1. Actually, for respondent to terminate petitioner, there must be at least two offenses, not necessarily three (the penalty for the second offense is “15 days to dismissal”). Prior to the arbitrator’s hearing, respondent never found, decided, determined, or communicated to anyone, including petitioner, that petitioner had committed any offense.

“Due process requirements are fully applicable to adjudicative hearings involving substantial property rights before administrative tribunals.” Lewis v. School District of Philadelphia, 690 A.2d 814, 816-17 (Pa. Commw. 1997). (footnote omitted) Township police officers have a property right in their expectation of continued employment, as set forth in the Police Tenure Act, supra. Thus, the township supervisors must comply with procedural due process safeguards when dismissing police for cause.

Procedural due process safeguards were denied petitioner in several respects. First, if respondent considered the first two incidents to constitute “offenses” under their own rules, it should have provided petitioner with reasonable notice of a hearing and opportunity to respond. See 2 Pa.C.S. §504. The determination of an “offense” in this case constitutes an adjudication under 2 Pa.C.S. §101. In order to qualify as an adjudication, requiring notice and hearing, a two-prong test must be met: (1) The action of the board must be the agency’s final order, decree, decision, determination or ruling and (2) the action must impact on a person’s personal or property rights, privileges, immunities, duties, liabilities or obligations. Guthrie v. Borough of Wilkinsburg, 505 Pa. 249, 255, 478 A.2d 1279, 1281 (1984). Unlike a letter of warning (see Guthrie, supra), under respondent’s own rules, an “offense” subjected petitioner to suspension. The second offense could possibly lead to termination. Surely the third offense would lead to termination. Thus, the first offense was the first step in a series, each one alone or cumulatively affecting petitioner’s personal and/or property rights. Petitioner’s due process rights to notice and hearing on the first two offenses were denied. The arbitrator’s decision in this respect constituted an error of law.

Second, there is nothing in the record to indicate that petitioner had committed a first or second offense as required by the township’s own rules. See section 300 subsection 1. There was no adjudication of an offense. Moreover, there was no determination, record, or communication to petitioner or anyone else that petitioner had committed an “offense.” Under respondent’s own rules, termination could not occur without at least one prior offense. The arbitrator’s decision in this respect was not supported by substantial evidence and constituted an error of law.

Third, respondent violated numerous other “police rules.” Respondent did not act “promptly” in processing the disciplinary cases. (“Police rules” IIB.) Actually, it failed to take any disciplinary action at all, other than to issue a “verbal warning” in the December 23, 1998 letter. Respondent failed to “fully inform” petition of the nature of the allegations made against him. (“Police mies” IIC.) The requests for the return of “all township property,” coupled with specific requests for clothes, badges, and post box key, were confusing. In light of the specific requests and the attendant litigation concerning petitioner’s job, counsel for petitioner appropriately questioned whether petitioner’s job was being terminated and “exactly what equipment the township wishes Chief Klischer to return to it.” (Exhibit A-7.) This litigation could conceivably have been avoided if respondent had simply responded to the request for specific information. In addition, contrary to its own rules, no written report of any investigation concerning the three alleged “offenses” was ever made to the board. (“Police rules” II D.) Respondent’s violations of its own rules denied petitioner due process. In particular, petitioner surely had a right to know what specific property respondent wanted returned, particularly in light of the dispute about disability benefits and the question about employment that lurked in the background of this case.

The arbitrator’s decision was not supported by substantial evidence and contained conclusions constituting errors of law.

ORDER

And now, April 28, 2000, the arbitrator’s decision is reversed and petitioner is reinstated with back pay and benefits retroactive to April 12, 1999.

      . Respondent’s request for property is certainly proper, and it is petitioner’s obligation to comply. Any items such as clothes and badges that petitioner paid for by him should be reimbursed. The police files (which were never specifically requested) should be turned over to respondent in an orderly and professional manner. If it wishes, respondent should make a specific request for the items of township property that it wants returned. If petitioner does not comply, respondent is not precluded from taking action to discipline or terminate him under the specific sections or the broader sections of its “Disciplinary Code.” The Disciplinary Code in the “police rules” indicates that “Repeated violations of department rules and regulations or any conduct indicating a member has little regard for the obligations of the police department or board of supervisors shall be cause for the dismissal of such member.” Under this section the “three strike” procedure would not be necessary, although the provisions of the Police Tenure Act and other appropriate sections of the “police rules” and the Local Agency Law should be followed.