author: NEW, J.,

text:
    C.J.M. v. Archdiocese of Philadelphia

      Stewart J. Eisenberg and Jay N. Abramowitch, for plaintiffs.

      Timothy R. Coyne, for defendants.
    August 13, 2004
   NEW, J.,

The statutory violation/ negligence per se and intentional failure to supervise claims are dismissed. Plaintiffs’ other claims are barred by the applicable two-year statute of limitations. Consequently, the defendants’ motions for judgment on the pleadings are granted.

PROCEDURAL AND FACTUAL HISTORY

From January to May 2004, plaintiffs commenced lawsuits against various religious authorities. Plaintiffs allege, during their childhood, they were abused by various priests and, in some cases, a former nun, (priests) employed by the Archdiocese of Philadelphia. The earliest allegation of abuse is alleged to have occurred in 1957, while the latest allegation occurred in 1983. At the time of their abuse, plaintiffs ranged in age from 10 to 18. At the time their complaints were filed, plaintiffs were between the ages of 34 and 61.

For the purposes of this opinion, the plaintiffs will be divided into two groups. The first group of plaintiffs admit they knew they suffered an injury at the time the abuse occurred. (Pl.’s compl. ¶93.) These plaintiffs sued both the Archdiocese of Philadelphia and Cardinal Anthony Bevilacqua (Archdiocesan defendants). Presently, the Archdiocesan defendants move for judgment on the pleadings. The second group consists of one plaintiff, Rocco J. Parisi Jr. According to his complaint, Parisi was unable to recall the abuse until 2002 due to “spiritual duress.” (Parisi compl. ¶23, 54.) Parisi sued both the Archdiocesan defendants and his alleged abuser, Reverend Gallagher. Both the Archdiocesan defendants and Reverend Gallagher move for judgment on the pleadings in this case.

Plaintiffs claim it was not until the disclosures discussed below that they realized the Archdiocesan defendants were a responsible party. This realization has caused them new harm and exacerbated their original injuries from the abuse. (Pl.’s compl. ¶¶93, 97(f).)

• In February 2002, the Archdiocese of Philadelphia acknowledged the existence of allegations of sexual and/ or physical abuse against at least 35 priests within the Archdiocese. (Pl.’s compl. ¶68.)

• On June 13,2002, the president of the United States Conference of Catholic Bishops made certain statements regarding the Catholic Church’s response to the victims of “priest abusers.” (Pl.’s compl. ¶66.)

• In November 2003, plaintiff John Patrick McDonnell met with representatives of the Archdiocesan defendants and they provided him with his abuser’s employment history.

• In December 2003, the Archdiocese of Philadelphia announced it removed four of its own priests who had abused children. (Pl.’s compl. ¶72.)

• On February 12,2004, a newspaper article was published in the Delaware County Daily Times regarding Eileen Rhoads’ arrest for sexually abusing a minor in 1969.

• On January 31,2004, an article was published in the Philadelphia Daily News regarding the earlier 2004 lawsuits that had already been filed by some of the plaintiffs.

Based on the above-referenced disclosures, plaintiffs argue the statute of limitations began to run anywhere from 2002 to 2004 on their cases. In contrast, Parisi does not specify what event, if any, triggered his recollection of the abuse; however, he was able to recall the abuse in 2002. (Parisi compl. ¶54.)

LEGAL ANALYSIS

According to the Pennsylvania Rules of Civil Procedure, “[a]fter the relevant pleadings are closed, but within such time as not to unreasonably delay the trial, any party may move for a judgment on the pleadings.” Pa.R.C.P. 1034(a). A motion for judgment on the pleadings is in the nature of a demurrer as it gives the means to test the legal sufficiency of the pleadings. All of the plaintiffs’ allegations must be taken as trae for the purposes of a motion for judgment on the pleadings. In addition, the motion should be granted where the law is clear and trial would be “a fruitless exercise.” Bata v. Central-Penn National Bank, 423 Pa. Super. 373, 378, 224 A.2d 174, 178 (1966). It is well-settled that judgment on the pleadings is appropriate if there are no disputed issues of fact. Williams by Williams v. Lewis, 319 Pa. Super. 552, 555, 466 A.2d 682, 683 (1983).

I. Statutory Violation/Negligence Per Se Claim

Both groups of plaintiffs allege the Archdiocesan defendants violated the Child Protective Services Law by failing to report allegations of sexual child abuse to the proper authorities. (Pl.’s compl. ¶99.) The Child Protective Services Law requires members of the clergy to report child abuse. However, clergy members were added to the list of reporters via an amendment effective July 1,1995. See 23 Pa.C.S. §6311 (2004). Since all the incidents of sexual abuse occurred prior to 1995, the Archdiocesan defendants were not required to report those incidents of abuse. Therefore, the statutory violation/negligence per se claim is dismissed.

II. Intentional Failure To Supervise Claim

The first group of plaintiffs also allege the Archdiocesan defendants intentionally failed to supervise the abuser priests within the church. (Pl.’s compl. ¶¶175-179.) However, Pennsylvania does not recognize a cause of action for the intentional failure to supervise a cleric. Hutchinson ex rel. Hutchinson v. Luddy, 763 A.2d 826, 837 (Pa. Super. 2000). Therefore, the plaintiffs’ intentional failure to supervise claim is dismissed.

III. Group I Plaintiffs

A. Statute of Limitations As to the Archdiocesan Defendants

Defendants allege the plaintiffs’ claims are barred by the two-year statute of limitations. See 42 Pa.C.S. §5524 (1)(2)(7) (2004). “[T]he statute of limitations begins to run as soon as the right to institute and maintain a suit arises; lack of knowledge, mistake or misunderstanding do not toll the statute of limitations ....” Pocono International Raceway Inc. v. Pocono Produce Inc., 503 Pa. 80, 84, 468 A.2d 468, 471 (1983) (citing Nesbitt v. Erie Coach Co., 416 Pa. 89, 204 A.2d 473 (1964); Bell v. Brady, 346 Pa. 666, 31 A.2d 547 (1943)). A person asserting a claim 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 and to institute suit within the prescribed statutory period. Id.

The law, however, recognizes an exception to the principle that an action will be barred if not filed within the statute of limitations. This exception is known as the “discovery rule” and can act to toll the statute of limitations. “The ‘discovery rule’ provides that where the existence of the injury is not known to the complaining party and such knowledge cannot reasonably be ascertained within the prescribed statutory period, the limitations period does not begin to run until the discovery of the injury is reasonably possible.” E.J.M. v. Archdiocese of Philadelphia, 424 Pa. Super. 449, 454, 622 A.2d 1388, 1391 (1993) (quoting Hayward v. Medical Center of Beaver County, 530 Pa. 320, 325, 608 A.2d 1040, 1042-43 (1992)). The statute begins to run when the injured party “possesses] sufficient critical facts to put him on notice that a wrong has been committed and that he need investigate to determine whether he is entitled to redress.” Haggart v. Cho, 703 A.2d 522, 526 (Pa. Super. 1997) (quoting A. McD. v. Rosen, 423 Pa. Super. 304, 308, 621 A.2d 128, 130 (1993)).

In the cases sub judice, the most recent allegation of sexual abuse was by plaintiff C.J.M. in 1983, which occurred over 20 years ago. The plaintiffs admit they were aware they were injured at the time of their abuse. (Pl.’s compl. ¶93.) The plaintiffs also knew, at the time of their abuse, both the identity of the priests and the priests’ relationship to the Archdiocese of Philadelphia. Since plaintiffs did not file their complaints until 2004, a minimum of 21 years later based on the most recent allegation, plaintiffs’ claims are barred by the statute of limitations unless the discovery rule is applicable.

1. The discovery rule exception

Plaintiffs argue the discovery rule tolls the statute of limitations in their cases. As stated previously, “[t]he ‘discovery rule’ provides that where the existence of the injury is not known to the complaining party and such knowledge cannot reasonably be ascertained within the prescribed statutory period, the limitations period does not begin to run until the discovery of the injury is reasonably possible.” E.J.M., 424 Pa. Super, at 454, 622 A.2d at 1391 (quoting Hayward, 530 Pa. at 325, 608 A.2d at 1042-43). (emphasis added) The discovery rule applies “in only the most limited of circumstances, where the plaintiff,.. . despite the exercise of reasonable diligence, [was unable to] discover his or her injury or its cause.” Id. at 458-59, 622 A.2d at 1393.

Here, plaintiffs admit they were injured and were aware of their injuries at the time they were abused. (PI.’s compl. ¶93.) Nonetheless, plaintiffs claim they were unaware of the Archdiocesan defendants’ tortious acts until the various disclosures that occurred in 2002 through 2004. Therefore, plaintiffs allege the discovery rule must apply since they could not have, despite the exercise of reasonable diligence, discovered the Archdiocesan defendants’ role in the batteries performed on them by the priests.

Our Supreme Court’s decision in Dalrymple v. Brown, 549 Pa. 217, 701 A.2d 164 (1997), is highly instructive. Although the holding in Dalrymple concerns repressed memory, our Supreme Court provides us with a complete and thoughtful analysis of the statute of limitations and its applicability in our Commonwealth. After extensive review of the law of the statute of limitations and the discovery rule exception, our Supreme Court held the Commonwealth of Pennsylvania favors a strict application of the limitations period, following an objective approach and “focusing on the nature of the injury rather than the particularities of the specific plaintiff.” Dalrymple, 549 Pa. at 231, 701 A.2d at 171. (emphasis added) (footnote omitted)

Applying this law to the cases before us, we must determine whether the plaintiffs were unable to discover their injuries and its cause within the applicable time period. Plaintiffs’ allegations against the Archdiocesan defendants are for failing to supervise, failing to warn, concealing information, and other actions which could have prevented the batteries from happening. The Archdiocesan defendants’ actions prior to the batteries in and of themselves did not cause the actual injury to the plaintiffs. Although the Archdiocesan defendants’ actions may have placed the priests in a position to commit the batteries, it was the actions of the priests which caused the actual injury. The actions of the Archdiocesan defendants were not the primary, or even concurrent, cause of injury to the plaintiffs. While the Archdiocesan defendants’ actions may have contributed to plaintiffs’ initial injuries, they did not create a new injury, a creeping injury, or alter the cause of the injury. The Archdiocesan defendants’ actions, although compensable claims of action, were a secondary cause of action related to the injury brought about by the battery itself. Plaintiffs admit they knew they were injured as a result of the battery. The harm caused to the plaintiffs occurred at the moment of the battery and was a result of the battery. Although the Archdiocesan defendants may have contributed to that harm by their prior actions, the statute of limitations must be deemed to begin to run at the time of the harm. Where the cause of harm is a battery, a plaintiff will ordinarily know all he needs to know at the moment the battery occurs. Levenson v. Souser, 384 Pa. Super. 132, 146-47, 557 A.2d 1081, 1088 (1989), allocatur denied, 524 Pa. 621, 571 A.2d 383 (1989).

This court has been unable to find any appellate authority for the proposition the statute of limitations is tolled as to an individual defendant’s tortious acts, even though the plaintiff is aware that he has suffered an injury and is aware of the cause of that injury. Plaintiffs would have us interpret the word “cause” to mean an individual “cause of action.” Pennsylvania’s interpretation of the discovery rule has never extended that far and should not be so extended.

In addition, plaintiffs have not shown in their pleadings that they have used any diligence, let alone reasonable diligence, to be properly informed of the facts and circumstances of their injury. Upon the actions of the priests, plaintiffs had a duty to investigate to determine if parties other than the priests were involved. The plaintiffs do not allege in their pleadings any such investigation took place or was even attempted. Although they knew an injury had occurred and the cause of the injury, plaintiffs waited over 20 years to determine all the parties involved. Plaintiffs knew, or should have known, at the time of the battery that they had a valid legal action and an obligation at that time to investigate to determine all causes of action against all parties.

At oral argument, plaintiffs’ counsel argued the Superior Court’s decision in Cappelli v. York Operating Co. Inc., 711 A.2d 481 (Pa. Super. 1998), stood for the proposition that an unknown co-defendant could be sued after the statute of limitations had run because a reasonable investigation would not have disclosed the fact that the third party was responsible for the plaintiffs’ injuries. (Tr., pp. 37-40.) However, Cappelli is distinguishable because it is a “creeping disease” case. 711 A.2d at 486. Applying the statute of limitations test in a creeping disease case, the Superior Court stated the plaintiffs’ claim accrued when they knew they had been further injured and their injuries were caused by the third party’s conduct. Id. Indeed, a close reading of Cappelli shows it to be favorable to the Archdiocesan defendants’ position. The Superior Court in Cappelli specifically states, if the defendant was alleged to have caused the initial injury, the plaintiff’s claim would have been time-barred. Id. at 484. Here, the plaintiffs specifically allege the Archdiocesan defendants’ actions led to the initial injury caused by the priests. There is no allegation that, when the abuse ended, the plaintiffs suffered any further harm, until the statements of 2002.

Plaintiffs also cite the case of Blaine v. York Financial Corporation, 847 A.2d 727 (Pa. Super. 2004). This case is inapplicable. In Blaine, the defendant purposefully concealed the name of the proper defendant until after the statute of limitations had ran. A complaint had been properly filed within the statute of limitations but had named the wrong defendant. As a result, plaintiffs filed a motion to amend complaint in order to correct name of defendant. The court found, if a defendant actively misleads a plaintiff into believing the correct defendant has been sued, the complaint may be amended to name the correct defendant. Blaine, 847 A.2d at 728,730. In contrast, plaintiffs in the cases sub judice are not moving to amend a complaint. Moreover, plaintiffs are not attempting to correct misinformation provided to them by the Archdiocesan defendants, nor are plaintiffs seeking to replace the priests’ names with that of the Archdiocesan defendants. Thus, the Blaine case has no bearing on the issues before us.

There can be no question the plaintiffs knew they had a right to institute and maintain a suit as to the priests who committed the battery within the statute of limitations. There can be no question the plaintiffs knew, or should have known, of the relationships between the priests and the Archdiocese of Philadelphia. Furthermore, there can be no question the plaintiffs had a duty to use reasonable diligence to investigate the facts and circumstances of their injury, including the Archdiocesan defendants’ relationship to the batteries within the statute of limitations, which they did not do. Therefore, plaintiffs’ cause of action arose at the time of the abuse itself, not when the various disclosures were made in 2002 through 2004. Since plaintiffs knew of the existence of their injury at the time of the battery, the discovery rule is inapplicable.

2. The doctrine of fraudulent concealment

Plaintiffs also assert the Archdiocesan defendants fraudulently concealed prior incidents of sexual abuse of minor parishioners within the Archdiocese. In particular, plaintiffs’ counsel cites Blaine as precedence that a defendant’s fraudulent concealment tolls the statute of limitations. The Archdiocesan defendants maintain their argument that plaintiffs’ claims are barred by the two-year statute of limitations.

A party’s fraudulent concealment can toll the statute of limitations. E.J.M., 424 Pa. Super, at 461-62, 622 A.2d at 1395. Fraudulent concealment is defined as: “[w]here, ‘through fraud or concealment, the defendant causes the plaintiff to relax his vigilance or deviate from his right of inquiry,’ the defendant is estopped from invoking the bar of the statute of limitations____Moreover, defendant’s conduct need not rise to fraud or concealment in the strictest sense, that is, with an intent to deceive; unintentional fraud or concealment is sufficient. . . . Mere mistake, misunderstanding or lack of knowledge is insufficient however, . . . and the burden of proving such fraud or concealment, by evidence which is clear, precise and convincing, is upon the asserting party.” Id. (quoting Molineux v. Reed, 516 Pa. 398, 402-403, 532 A.2d 792, 794 (1987)).

The “reasonable diligence” standard for determining the application of the discovery rule is the same threshold test for determining whether the doctrine of fraudulent concealment tolls the statute of limitations. “Whether the statute of limitations is tolled because of the discovery rule or the doctrine of fraudulent concealment, it begins to run as soon as the plaintiff, exercising reasonable diligence, knew or should have known of the injury and its cause.” Bailey v. Abbott, 51 D.&C.4th 103, 110 (Mercer Cty. 2001) (quoting Bohus v. Beloff, 950 F.2d 919 (3d Cir. 1991)). As mentioned earlier, plaintiffs admit they knew they were aware of their injuries at the time they were sexually abused as children, yet plaintiffs did not exercise reasonable diligence in pursuing their legal claims. Plaintiffs did not commence any lawsuits against the Archdiocesan defendants until 2004. For the reasons stated previously concerning the discovery rule, plaintiffs’ claims must be denied for failure to exercise due diligence in pursuing their legal claims.

Even assuming arguendo that plaintiffs exercised reasonable diligence, they have not met the elements of fraudulent concealment. “[I]n order for fraudulent concealment to toll the statute of limitations, the defendant must have committed some affirmative independent act of concealment upon which the plaintiffs justifiably relied.” Kingston Coal Co. v. Felton Mining Co. Inc., 456 Pa. Super. 270, 284, 690 A.2d 284, 291 (1997) (citing Krevitz v. City of Philadelphia, 167 Pa. Commw. 412, 421-22, 648 A.2d 353, 357 (1994)). Thus, in determining whether the doctrine of fraudulent concealment tolls the statute of limitations, the court must focus on two prongs: whether there has been some affirmative independent act of concealment on behalf of the Archdiocesan defendants, and, if so, whether plaintiffs justifiably relied on that affirmative independent act of concealment.

As to the first prong, plaintiffs’ counsel list no affirmative independent act of concealment which they allege is applicable to an individual plaintiff, despite listing numerous acts which were “systematic.” Plaintiffs never allege there were specific “acts of concealment” directed towards their own abuse. As an example, plaintiffs allege the fraudulent concealment of the identity of other priests accused of abuse prevented plaintiffs from bringing lawsuits against the priests who abused them. (Pl.’s compl. ¶172.) Whether plaintiffs knew the names of other priests accused of abusing other minor parishioners does not affect plaintiffs’ ability to exercise reasonable diligence as to their own lawsuits. Not one plaintiff alleges he did not know the name of his abuser at the time of the abuse, or that the Archdiocesan defendants attempted to conceal the name of his abuser from him. Once plaintiffs knew they were injured, they had a duty to exercise reasonable diligence in investigating any potential claims regarding the abuse. Since they did not exercise reasonable diligence, plaintiffs cannot use the doctrine of fraudulent concealment to toll the statute of limitations.

Plaintiffs further allege, “[t]he effect of these practices by the Archdiocesan defendants was to create the misperception in the mind of plaintiff[s] that the plaintiff [s] w[ere] safe with priests in general and with . . . [their priest] in particular, and that, if there was a conduct about which plaintiff[s] might be concerned, it was an isolated incident of spurious conduct, when in fact plaintiff[s] w[ere] the victim of a known and preventable hazard that the Archdiocesan defendants had created and/or allowed to continue.” (Pl.’s compl. ¶46.) (emphasis added) Plaintiffs’ misunderstanding does not constitute fraudulent concealment. E.J.M., 424 Pa. Super, at 461, 622 A.2d at 1395.

As to the second prong regarding whether plaintiffs justifiably relied on the affirmative act of concealment, again, plaintiffs rely on general statements. Not one complaint alleges a plaintiff spoke to an official of the Archdiocese within the period of the statute of limitations and was misled by that official. Plaintiffs have not shown, through fraud or concealment, the Archdiocesan defendants caused them to relax their vigilance or deviate from their right of inquiry. At most, the allegations reveal the Archdiocesan defendants’ nondisclosure of prior incidents of sexual abuse within the Archdiocese. The Archdiocesan defendants’ nondisclosure does not constitute fraudulent concealment. Krevitz, 167 Pa. Commw. at 421, 648 A.2d at 357 (citing Walters v. Ditzler, 424 Pa. 445, 227 A.2d 833 (1967); Dobbs on Remedies §2.3) (“[Mjere silence or nondisclosure is not enough to trigger estoppel....”).

B. “New Harm”

Plaintiffs also allege they suffered a new harm and aggravation of old harm as a result of the 2002 through 2004 disclosures. This court agrees with the following rationale of the Honorable Judge Alan Black of the Le-high County Court of Common Pleas:

“Once the statute of limitations began to run on the plaintiffs’ initial injury, it also began to run on any later injuries from the same tortious conduct. Orozco v. Children’s Hospital of Philadelphia, 638 F. Supp. 280, 282 (E.D. Pa. 1986); Cathcart v. Keene Industrial Insulation, 324 Pa. Super. 123, 149, 471 A.2d 493, 507 (1984). The plaintiffs contend, however, that they suffered a new harm as a result of the 2002 disclosures, and therefore that they have a new cause of action beginning in 2002. The flaw in this argument is that the disclosures themselves were not tortious.” A.L.M., no. 2004-C-78 at 15-16.

Since the disclosures were not tortious, there can be no aggravated old harm or new harm.

IV. Group 2 — Parisi Plaintiff

A. Statute of Limitations As to the Archdiocesan Defendants and the Priest

Unlike the consolidated cases above, Parisi is suing both the Archdiocesan defendants and the priest who abused him. Also, Parisi’s complaint contains different causes of action than those presented by the first group of plaintiffs. Parisi’s case also differs because it is one of repressed memory.

Like the other plaintiffs, Parisi argues the Archdiocesan defendants fraudulently concealed incidents of sexual abuse of minors within the Archdiocese. (Parisi compl. ¶¶34-42.) Defendants argue Parisi’s claims are barred by the applicable statute of limitations. Like the other plaintiffs’ claims, the same two-year statute of limitations applies to Parisi’s claims. See 42 Pa.C.S. §5524(1) (2)(7) (2004). Parisi was abused between 1973 and 1976, or from the seventh grade through his sophomore year at high school. (Parisi compl. ¶18.) However, Parisi did not commence his lawsuits until 2004, at age 44, which is over 20 years after the statute of limitations had expired. Consequently, plaintiff’s claims are barred by the statute of limitations.

1. The discovery rule

Parisi has brought a battery claim against his abuser. However, the discovery rule does not normally apply to cases “where the underlying cause of action is fundamentally one for battery . . . [because] a plaintiff will ordinarily know all he or she needs to know concerning the injury and its cause at the moment the battery occurs.” E.J.M., 424 Pa. Super. at 459, 622 A.2d at 1393 (citing Levenson, 384 Pa. Super. 132, 557 A.2d 1081). Therefore, Parisi’s battery claim is barred by the two-year statute of hmitations. See 42 Pa.C.S. §5524(1) (2004).

Also, Parisi’s claim is based on allegations of repressed memory. In Pennsylvania, the discovery rule does not apply to toll the statute of limitations in repressed memory cases. Dalrymple, 701 A.2d at 165, 171. In Dalrymple, the appellant recovered memories of being abused as a child. Appellant repressed those memories until 20 years after the assault occurred. Id. 701 A.2d at 165. The Pennsylvania Supreme Court upheld summary judgment because the recovery of repressed memories does not extend the statute of limitations. Id., 701 A.2d at 171. Importantly, the court noted, “[rjegardless of how appellant categorizes repressed memory she cannot escape the fact that the original injury was a battery which is commonly defined at law as a harmful or offensive contact.” Id., 701 A.2d at 170.

In E.J.M., the appellant did not commence a lawsuit against his abuser until eight years later, because he “did not become aware of the psychological and emotional injuries he suffered as a result of the alleged abuse 424 Pa. Super, at 451, 622 A.2d at 1389. However, the Superior Court affirmed the lower court’s ruling that the discovery rule did not apply to the case and the statute of limitations was not tolled. Id.

Here, Parisi makes allegations similar to those presented in the repressed memory cases. In particular, Parisi alleges he “was unable specifically to recall and/or to remember the sexual abuses . . . until approximately 2002.” (Parisi compl. ¶54.) Parisi goes on to allege he was “repeatedly subject to mental trauma ... [and] was psychologically disabled from understanding his legal rights and/or his ability to pursue legal action against defendants____” (Parisi compl. ¶24.) Since Parisi’s claims are based on repressed memory and Pennsylvania does not apply the discovery rule to toll the statute of limitations in repressed memory cases, the discovery rule is inapplicable here and Parisi’s claims are time-barred.

2. The doctrine of fraudulent concealment

Parisi’s allegations also do not toll the statute of limitations based on the doctrine of fraudulent concealment. “[The Superior Court] ha[s] previously held that a defendant’s general assurances that a situation or condition being experienced by the plaintiff is normal do not rise to the level of fraudulent concealment where the plaintiff’s own common sense should inform him that he has been injured.” E.J.M., 424 Pa. Super, at 462, 622 A.2d at 1395 (emphasis added) (citing DeMartino v. Albert Einstein Medical Center, 313 Pa. Super. 492, 460 A.2d 295 (1983)). In E.J.M., the plaintiff alleged the priest abuser had assured plaintiff that “the physical acts being performed on [him] were necessary for his spiritual development ....” The Superior Court held the plaintiff’s allegations did not rise to the level of fraudulent concealment. Id.

In the case sub judice, the allegations are analogous to the allegations of fraudulent concealment in the E.J.M. decision; moreover, the Superior Court’s reasoning is applicable. Parisi alleges Reverend Gallagher “made the nature and extent of plaintiff’s injuries unknown to plaintiff, disguising his illegal and immoral acts as acts sanctioned by God.” (Parisi compl. ¶25.) In addition, the priest swore Parisi to secrecy about the sexual abuse by “invoking the names of God and Jesus Christ and invoking plaintiff’s faith in the Holy Roman Catholic Church.” (Parisi compl. ¶21.) Based on the Superior Court’s reasoning in the E.J.M. decision, Parisi’s allegations do not constitute fraudulent concealment since Parisi’s common sense should have informed him of his injuries at the time of the abuse. Therefore, the doctrine of fraudulent concealment does not toll the statute of limitations in this case and Parisi’s claims are barred by the two-year statute of limitations.

V. Conclusion

Plaintiffs’ arguments do not meet the requisite standards for application of either the discovery rule or the doctrine of fraudulent concealment. As stated by our Supreme Court in Dalrymple, “[t]he very essence of the discovery rule in Pennsylvania is that it applies only to those situations where the nature of the injury itself is such that no amount of vigilance will enable the plaintiff to detect an injury.” 701 A.2d at 170 (quoting Pocono, 503 Pa. at 85, 468 A.2d at 471). While this court is sympathetic to the claims of the plaintiffs, the plaintiffs in their pleadings admit they knew at the time of the battery the cause of their injuries. Therefore, the statute of limitations as to their injuries started to run at the time of the battery and the plaintiffs’ claims are time-barred. Since neither the discovery rule nor the doctrine of fraudulent concealment applies to toll the statute of limitations, plaintiffs’ claims are time-barred.

Wherefore, for all of the reasons stated above, the Archdiocesan defendants’ and Reverend Gallagher’s motions for judgment on the pleadings are granted.

      . During their childhood, plaintiffs McNeila, Nolan, Meehan, and Nolan Sr. were sexually abused by their teacher Eileen Rhoads, a former nun with the Servants of the Immaculate Heart of Mary. (McNeila compl. ¶¶1, 30, 65; Nolan compl. ¶¶ 1, 30, 64; Meehan compl. ffl, 30, 64; Nolan Sr. compl. ¶¶ 1, 30, 65.)

      . The court accepts plaintiffs’ allegations as the truth for the purposes of these motions. Bata v. Central-Penn National Bank, 423 Pa. 373, 378, 224 A.2d 174, 178 (1966).

      . On June 16,2004, pursuant to the parties’ agreement, the following 17 cases were consolidated for discovery and pretrial purposes:
        C.J.M. v. Archdiocese of Philadelphia, no. 0401-4048 [lead case]; Dolan v. Archdiocese of Philadelphia, no. 0401-4050; McDonnell v. Archdiocese of Philadelphia, no. 0401-4052; D.P.A. v. Archdiocese of Philadelphia, no. 0402-4335; P.M.B. v. Archdiocese of Philadelphia, no. 0403-5300; McNeila v. Archdiocese of Philadelphia, no. 0403-5301; Nowacky v. Archdiocese of Philadelphia, no. 0403-5303; Dietz Jr. v. Archdiocese of Philadelphia, no. 0403-5304; Nolan v. Archdiocese of Philadelphia, no. 0403-5305; C.T.G. v. Archdiocese of Philadelphia, no. 0403-5298; Coleman v. Archdiocese of Philadelphia, no. 0405-1435; Crothers v. Archdiocese of Philadelphia, no. 0405-1436; Downing v. Archdiocese of Philadelphia, no. 0405-1439; Walsh v. Archdiocese of Philadelphia, no. 0405-1440; Meehan v. Archdiocese of Philadelphia, no. 0405-1441; Doe 3 v. Archdiocese of Philadelphia, no. 0405-1457; Nolan Sr. v. Archdiocese of Philadelphia, no. 0405-3130.

      . For ease of reference, the court will refer to plaintiff C.J.M.’s complaint throughout this opinion unless specified otherwise.

      . Included in the Archdiocesan defendants in the Parisi case is St. Monica Roman Catholic Church and the estate of Cardinal John Krol.

      . Specifically, the president, Bishop Wilton B. Gregory, stated as follows: “[w]e are the ones, whether through ignorance or lack of vigilance, or — God forbid — with knowledge, who allowed priest abusers to remain in ministry and reassign them to communities where they continue to abuse. We are the ones who chose not to report the criminal actions of priests to the authorities, because the law did not require this. We are the ones who worried more about the possibility of scandal than in bringing about the kind of openness that helps prevent abuse. And we are the ones who, at times, responded to the victims and their families as adversaries and not as suffering members of the church.” (Pl.’s compl. ¶72.)

      . Plaintiffs John Patrick McDonnell, Alex Joseph McDonnell, Brian Francis McDonnell, and Coleman did not know about the harm resulting from the Archdiocesan defendants’ concealment and misconduct until learning about their abuser’s employment history in November 2003. (McDonnells’ compl. ¶¶74-75, 89; Coleman compl. ¶¶66-67, 83.)

      . Plaintiffs McNeila, Nolan, and Nolan Sr. claim they did not know about the Archdiocesan defendants’ concealment and misconduct until February 12, 2004, when they read this article. (McNeila compl. ¶¶82, 94; Nolan compl. ¶¶81, 93; Meehan compl. ¶¶79, 91; Nolan Sr. compl. ¶¶80, 92.)

      . This article led other plaintiffs, namely C.T.G., Nowacky, Dietz, Doe 3, Downing, and Crothers, to realize they had a cause of action against the Archdiocesan defendants. See C.T.G. compl. ¶¶91-92; No-wacky compl. ||68-69; Dietz compl. ¶¶70, 72; Doe 3 compl. ¶¶66, 78; Downing compl. ¶¶67, 79; Crothers compl. ¶¶66, 78.

      . Plaintiffs’ counsel withdrew these allegations based on the Le-high County Court of Common Pleas decision in A.L.M. v. Diocese of Allentown, no. 2004-C-78 (Lehigh Cty. 2004). (Tr. p. 47.)

      . The following actions and proceedings must be commenced within two years:
      “(1) An action for assault, battery, false imprisonment, false arrest, malicious prosecution or malicious process of abuse.
      “(2) An action to recover damages for injuries to the person or for the death of an individual caused by the wrongful act or neglect or unlawful violence or negligence of another. . . .
      “(7) Any other action or proceeding to recover damages for injury to person or property which is founded on negligent, intentional, or otherwise tortious conduct or any other action or proceeding sounding in trespass, including deceit or fraud, except an action or proceeding subject to another limitation specified in this subchapter.”

      . See our discussion below in part IV.

      . Our courts have traditionally limited the discovery rule to unknown injuries (i.e. a sponge accidentally left in a person’s body after surgery), creeping diseases which result from continuous exposure to hazardous substances (i.e. asbestosis), and damages which are not ascertainable (i.e. structural defects). See Dalrymple, 701 A.2d at 170.

      . See part HI, section B.

      . It should be noted that this court does not find in the pleadings of the plaintiffs any factual claims that the Archdiocesan defendants actively misled the plaintiffs as to their injury or the cause of their injury.

      . As discussed earlier, Blaine is distinguishable from our cases.

      . Plaintiff P.M.B. alleges his parents filed a complaint with the pastor at his church a year after his abuse and that no further action was taken by the Archdiocesan defendants. (P.M.B. compl. |¶40,42.) However, plaintiff P.M.B. does not allege that he was misled by any Archdiocesan defendants. His sole allegation is he filed a complaint. Plaintiffs C J.M., C.T.G., and the McDonnells allege discussions with the Archdiocese; however, these discussions occurred after the statute of limitations had already expired.

      . Plaintiffs have brought fraudulent concealment, civil conspiracy, intentional infliction of emotional distress, negligent infliction of emotional distress, battery, negligence, statutory violation/negligence per se, common-law duty of reasonable care, breach of fiduciary duty and respondeat superior claims.


source: Caselaw Access Project

author: NEALON, J.,

license: Public Domain

text:
    Busy Bee Inc. v. Corestates Bank N.A.

      C.P. of Lackawanna County,
    no. 97 CV 5078.

      Steven M. Coren, for plaintiff.

      Joan R. Sheak, for defendant.
    August 9, 2004
   NEALON, J.,

In this lender liability suit, the defendant Bank has filed a motion for partial summary judgment seeking to dismiss the borrowers’ claims for fraudulent and negligent misrepresentation. The summary judgment materials demonstrate that there are genuine issues of material fact whether (a) the Bank possessed the requisite intent so as to be chargeable with fraud and (b) the borrowers justifiably relied upon the Bank’s fraudulent misrepresentation. Furthermore, since the Bank arguably supplied false information for the guidance of the borrowers and had reason to foresee economic harm to the borrowers as a result of their reliance upon any negligently provided information, the borrowers’ claim for negligent misrepresentation is not barred by the economic loss doctrine. Thus, for the reasons set forth below, the Bank’s motion for partial summary judgment will be denied.

I. FACTUAL BACKGROUND

Plaintiffs Busy Bee Inc., Baby Bee Inc., MLL Corp. and Jasami Inc. t/a Century Shoes Ltd., and Carlton Shoes Ltd. t/a BLS Associates (collectively referred to as B. Levy) seek more than $39 million in compensatory damages and an unliquidated sum of punitive damages from defendant Corestates Bank N. A., as successor by merger to the Third National Bank & Trust Co. of Scranton (Bank), for allegedly causing B. Levy’s bankruptcy. B. Levy’s claims are predicated upon the Bank’s conduct in connection with a loan agreement and line of credit which provided working capital to finance B. Levy’s wholesale and retail shoe business. The Bank has filed a motion for partial summary judgment requesting the dismissal of B. Levy’s claims for fraudulent and negligent misrepresentation.

Examining the summary judgment materials in the light most favorable to B. Levy as the non-moving party, see Wilkes v. Phoenix Home Life Mutual Insurance Co., 851 A.2d 204, 210 (Pa. Super. 2004), the record reflects that on November 14, 1994, B. Levy and the Third National Bank & Trust Co. of Scranton executed a “Loan agreement — Revolving line of credit,” pursuant to which the Bank extended a $6,500,000 line of credit to B. Levy and its wholly-owned subsidiary, Shoeterialnc. (See dkt. entry no. 62, exhibit A.) The line of credit was to “be utilized for working capital, acquisition of inventory, general corporate purposes, and to pay off existing lines of credit, and for the issuance of Bank letters of credit for the purchase of inventory” for B. Levy’s wholesale and retail operations. (Id., p. 2.) Article 1, section 1.03 of the agreement governs the renewal of the parties’ line of credit and states that “[t]he loan is a continuing credit facility; however, it is subject to annual review by May 31 of each year (anniversary date), by Bank, who, in its sole discretion, may continue to offer this loan for each subsequent year.” (Id., p. 8.)

As security for the loan, B. Levy granted the Bank first lien security interests in its inventory, marketable securities, accounts receivable and bills of lading. (Id., pp. 9-11.) Section 5.02 of the agreement provides “that until payment in full of the obligation provided for herein,” B. Levy “will not, without the prior written consent of the Bank, which consent shall not be unreasonably withheld . . ., operate [B. Levy’s] business other than in the normal and customary course.” (Dkt. entry no. 62, exhibit A, p. 23.) Of particular significance for purposes of the Bank’s motion for partial summary judgment, section 6.01 identifies “events of default” as including:

“(b) If either of the borrowers or any guarantor shall apply for or consent to the appointment of a receiver, or a trustee or to liquidation of itself or of all or substantial part of its assets, or admit in writing its inability to pay its debts as they fall due, make a general assignment for the benefit of its creditors, be adjudicated as bankrupt or insolvent, or file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors, or to take advantage, as debtor, of any insolvency law or file any answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or take any corporate action for the purpose of effecting any of the foregoing.” (Id., pp. 24-25). (emphasis added) In that regard, section 3.02 states that the “Bank reserves the right to decline issuance of any letters of credit if... there exists an event of default....” (Id., p. 18.)

B. Levy and its affiliated shoe enterprises were owned and operated by members of the Levy family and had been engaged in the wholesale and retail shoe business since the late 1800s. In 1994-1995, poor market conditions caused B. Levy’s retail business to experience financial difficulties. As a result, B. Levy made a strategic decision in April 1995 to change the format of certain retail stores to discount stores in an effort to increase revenues, lower expenses and improve profitability. After B. Levy advised the Bank’s vice president, Frank Heston, regarding its intentions, B. Levy converted two of its 17 retail stores to discount “Brands for Less” outlets in August 1995. (Id., no. 68, exhibit C, pp. 356-62, 366-68.) On August 4, 1995, Corestates Bank, as the successor by merger to the Third National Bank & Trust Co. of Scranton, renewed the $6,500,000 line of credit which was to “mature on May 30, 1996, and ... be renewable at that time at the option of the Bank....” (Id., no. 62, exhibit 2, p. 1.)

In August and early September 1995, B. Levy’s principals sold marketable securities totaling $1,275,620.34 and used the proceeds from those stock sales to satisfy the $1,000,000 term loan issued by the Bank in conjunction with the line of credit. (Id., no. 68, exhibit E.) According to an internal memorandum authored by Mr. Heston as the Bank’s vice president, B. Levy and Shoeteria characterized this “sale of marketable securities as evidence of their commitment.” (Id., exhibit D, p. 1.) By October 1995, the conversion of two retail stores to a discount format had proven to be a “strong success” with sales increasing by 24 percent at the first store and 6.5 percent at the second outlet. Corresponding reductions in advertising and personnel expenses for the discount stores “substantially improved” B. Levy’s profit margins with the new format. Mr. Heston “was elated” with the sales and operating reports for the two discount stores and “expressed his support” for B. Levy’s conversion strategy. When Mr. Heston inquired whether B. Levy intended to convert more retail stores to discount outlets, B. Levy indicated “that if their success continued, [B. Levy] would plan to convert more stores to that concept.” (Id., exhibit C, pp. 363-64, 369-71; exhibit D; exhibit G.) During a subsequent meeting with Mr. Heston in November 1995, B. Levy representatives officially informed the Bank of “the plan to convert four more stores to this [discount] concept next month, including the two Scranton stores, which have been hurt by the Steamtown Mall, along with the Kingston and remaining Wilkes-Barre store.” (Id., exhibit H, p. 2.)

On December 22, 1995, representatives of B. Levy and the Bank met to discuss the financial condition of B. Levy’s operations, particularly its retail sales division, and to provide a status update on the conversion of selected retail stores to the discount outlet format. The Bank’s internal memoranda concerning that meeting indicate that B. Levy “continue[d] to lose money in [the] continuing poor retail climate” and that “[w]hile wholesale revenues reflect an $838M improvement with a $250M operating profit, the retail division continues to lag.” (Id., exhibit K, p. 1.) Bank records memorialize that B. Levy representatives referenced “their commitment to the company’s future, citing last year’s $500M capital injection and this year’s sale of marketable securities, along with plans to vacate and sell/lease the 53,000 sq. ft. headquarters and downsize the operation into the approximate 15,000 sq. ft. Penn Avenue location.” (Id., exhibit I, p. 1.) In response, the Bank’s senior credit officer, Robert Spencer, advised B. Levy that the Bank did not endorse the new discount store concept and instead “wanted [B. Levy] to get out of the retail business” since the Bank’s economist had opined “that there would be a continuous downturn in the retail environment.” Mr. Spencer further informed B. Levy that the Bank would continue to provide financing for B. Levy’s wholesale operations only if it terminated its retail business. (Id., exhibit C, pp. 375-87; exhibit J, pp. 37-40.)

Following the parties’ meeting on December 22,1995, Benjamin Levy contacted his brothers, Robert S. Levy and Irwin Levy, to advise them of the Bank’s insistence that B. Levy “liquidate the retail business” in order for the Bank to provide continued financing for B. Levy’s wholesale business beyond the line of credit’s anniversary date of May 31, 1996. (Id., exhibit B, pp. 85-89; exhibit L, pp. 58-69; exhibit O, p. 105.) Unbeknownst to B. Levy, the Bank reportedly intended as early as December 27,1995, to discontinue B. Levy’s line of credit prior to the May 31,1996 anniversary date. In his internal memorandum dated December 27,1995, Mr. Heston discussed B. Levy’s retail sales woes and remarked that the Bank’s “staying in the line [of credit] facility will hinge upon the Levy’s willingness to support the company, the reasonableness of their projection and acceptance of our requirement of an independent financial consultant going forward.” (Id., exhibit K, p. 1.) Mr. Heston expressly stated in his memo that the Bank “would then look to exit, preferably prior to the [credit] facility’s May 31, 1996 expiration.” (Id.)

Despite their emotional attachment to their family’s long-standing retail business, the B. Levy brothers begrudgingly agreed to liquidate their retail operations as per the Bank’s demand. (Id., exhibit B, pp. 88-89; exhibit L, pp. 59-60,62-67.) In a letter to Mr. Heston dated January 11,1996, B. Levy outlined its plan to “liquidate [its] retail business” in an effort to “substantially reduce the amount of indebtedness due the Bank over a reasonable period of time,” and stated:

“(1) Commence a liquidation of all retail operations on or about March 1, and anticipate a 90-day program expected to result in a reduction of the indebtedness due the Bank by approximately $2.5 million by the end of June.

“(2) Operate several liquidation stores for the remainder of 1996 to reduce the indebtedness further by an additional $500,000 to $1,000,000 by the end of the year.

“This program is in addition to the positive actions taken during 1995 whereby the indebtedness due the Bank was reduced by approximately $1,200,000 and the partners invested an additional $500,000 in the business.

“All of the above represents a realistic plan to reduce the indebtedness due the Bank by the end of the year to approximately $1.5 million. I am preparing projections to show that our wholesale business will continue to be profitable, and I would expect that the Bank would commit to an adequate banking facility so that the 108-year-old wholesale business, the oldest privately owned business in the United States, can continue.” (Exhibit M, p. 1.)

At the conclusion of a follow-up meeting between the parties on January 12,1996, the Bank recommended that B. Levy retain a liquidation consultant to assist with the retail liquidation. (Id., exhibit N.) However, at no time during the meeting did the Bank indicate that it did not consent to B. Levy’s retail liquidation plan under section 5.02 of the line of credit agreement or that it might regard such a liquidation as an “event of default” under section 6.01(b). (Id., exhibit O, pp. 121-22.)

To the contrary, Bank reports reflect that Bank representatives met with B. Levy principals again on January 16, 1996 “to let the Levy’s know that [the Bank] certainly agreed in general and supported their plan” for liquidation of the retail business. (Id., exhibit P.) At that time, the Bank and B. Levy “agreed that the general plan made sense,” although B. Levy expressed concerns about “the need to negotiate with various landlords, some of which had quite some time remaining on their leases” for properties that B. Levy rented for its retail stores. (Id.) The Bank urged B. Levy to hire a liquidation consultant and even provided the name of a liquidation consultant that it had worked with on a prior liquidation. (Id., exhibit C, pp. 396-400.) On January 18, 1996, the Bank forwarded a letter to B. Levy confirming the retail liquidation plans and acknowledging that B. Levy’s liquidation of its retail division “must have been a very difficult decision and one which could only have been made after considerable thought and planning.” (Id., exhibit Q.) The Bank did not voice any objection to the proposed liquidation, nor did it suggest that the liquidation could conceivably be considered an “event of default.”

In fact, Bank documents from February 1996 reflect the Bank’s endorsement of the retail liquidation plan and its intent to continue financial support for the wholesale operations during the liquidation. As per an internal memorandum of February 6, 1996, B. Levy contacted the Bank on that date “to provide an update on the status of [B. Levy’s] plan for the liquidation of the retail business and to report on [its] progress towards meeting [the Bank’s] desire for a complete and accurate financial plan for the liquidation.” (Id., exhibit R.) By that date, B. Levy had retained the liquidation consultant recommended by the Bank and was negotiating with landlords to prematurely terminate leases for their retail sites. (Id., exhibit C, pp. 405-408.) The Bank advised B. Levy that the line of credit for the wholesale business “would remain open through the liquidation” of the retail division, (Id., exhibit R), which liquidation was expected to extend “through the remainder of 1996” according to Bank reports. (Id., exhibit N.) Once again, no indication was given by the Bank that liquidation of B. Levy’s retail business would be deemed an “event of default,” nor did the Bank reveal its apparent intention “to exit” the line of credit facility prior to May 31, 1996.

In reliance upon the Bank’s approval of the retail liquidation plan, B. Levy took several measures in furtherance of the liquidation of its retail division. First, as noted above, B. Levy retained and paid the liquidation consultant that had been recommended by the Bank. Second, B. Levy terminated several leases for its retail stores and received correspondence from landlords confirming those terminations and the early termination charges being assessed by the landlords. Third, B. Levy cancelled scores of retail merchandise orders that had been placed with its retail stores’ suppliers. Fourth, it informed more than 100 of its retail store employees that it was liquidating its retail operations so that those employees could seek other employment. Fifth, B. Levy prepared and mailed notices of the private liquidation sales to its preferential customers. (Id., exhibit C., pp. 405-409, 556-60; exhibit J, pp. 155-56; exhibits S, T, U and AA.) Parenthetically, it bears noting that throughout the month of February 1996, B. Levy continued to make payments towards its line of credit balance. {Id., exhibit V.)

Forty-nine days after B. Levy had confirmed its retail liquidation plan in writing on January 11,1996, and despite the Bank’s express endorsement of the liquidation plan, the Bank forwarded a letter to B. Levy on February 29,1996, providing B. Levy with “formal notice that you are in default of your obligations to the Bank under the loan documents evidencing the above-referenced loans as a result of . . . your plan to liquidate your retail operations.” The Bank stated that “[a]s a result of the default, the Bank [was] no longer obligated to make further advances under the line of credit, and ha[d] the right to decline any requests for the issuance, renewal or extension of letters of credit.” {Id., exhibit X.) It is undisputed that following the Bank’s declaration of a default under section 6.01(b) of the agreement, the Bank did not advance any more funds to B. Levy under the line of credit arrangement. {Id., exhibit W, pp. 25-26.) Thus, by treating B. Levy’s retail liquidation as an “event of default” under the agreement, the Bank was able “to exit... prior to the [credit] facility’s May 31, 1996 expiration” as per its apparent statement of intention in its internal memorandum dated December 27, 1995. {Id., exhibit K.)

Bank representatives have conceded that prior to the declaration of default on February 29, 1996, the Bank never advised B. Levy that it did not consent to the retail liquidation under section 5.02 or that liquidation of its retail division would be treated as a default pursuant to section 6.01(b). {Id., exhibit O, pp. 155, 157-58; exhibit W, pp. 62-63.) It is also uncontested that B. Levy was current on its monthly loan payment obligations to the Bank as of February 29,1996. {Id., exhibit O, p. 162.) By the time that B. Levy received the Bank’s letter of February 29,1996, the liquidation of its retail operations was an irreversible process since B. Levy had already terminated its retail store leases, cancelled merchandise orders for its retail stores, and taken other steps to consummate the liquidation. {Id., exhibit C, pp. 556-57; exhibit J, pp. 155-56.) Moreover, when B. Levy inquired whether the Bank “wanted [B. Levy] to turn [the retail liquidation] around and go back to [B. Levy’s] original plans” of following B. Levy’s receipt of the February 29,1996 letter, Mr. Heston “said no.” {Id., exhibit C, p. 556.)

B. Levy maintains that the Bank declared a “sham” default after B. Levy “implemented the very restructuring plan induced, authorized, encouraged and approved by [the Bank], notwithstanding that [B. Levy] was current on its debt service payments and was not in default of its loan obligations.” {Id., no. 12, ¶¶42-45.) B. Levy argues that the Bank’s approval of B. Levy’s retail liquidation plan and subsequent declaration of a default based upon that liquidation were merely “part of a ruse and subterfuge to call and terminate the loan several months before it was actually due.” (Id., ¶44.) To that end, the Bank assumed control of B. Levy’s available cash following the purported default and allegedly used the proceeds from the retail liquidation to prematurely pay down the loans. At the same time, the Bank did not provide the line of credit financing necessary for B. Levy’s wholesale operations and B. Levy was unable to purchase inventory for its wholesale business. As a consequence, B. Levy was forced to declare bankruptcy on July 27,1996. (Id., no. 62, exhibit 7, pp. 4-5.)

On October 27,1997, B. Levy commenced this litigation against the Bank asserting breach of contract and duty of good faith (Count I), fraudulent and negligent misrepresentation (Count II) and breach of fiduciary duty (Count III). (Id., nos. 1,12.) B. Levy’s economic expert, Morris Gocial C.P.A., Cr.F.A., of Gocial Gerstein LLC, has calculated the damages attributable to B. Levy’s loss of its retail and wholesale operations as totaling $39,350,490. (Id., no. 62, exhibit 7, p. 20.) Approximately four months after B. Levy filed this suit, the Bank instituted a mortgage foreclosure proceeding against B. Levy with respect to the 700 North South Road property that was pledged as collateral for the loan. (See Corestates Bank v. Levy Brothers Co., 98 CV 1158 (Lacka. Co.).) In its statement of claim that was filed in the mortgage foreclosure action on November 9,1998, the Bank alleged that it is owed $429,792.44 in principal and $143,887.34 in interest and fees for a total of $573,679.81. (Id, no. 22.)

B. Levy asserts in this lender liability action that the Bank is chargeable with fraudulent misrepresentation since: it insisted that B. Levy liquidate its retail operations and later facilitated that liquidation even though the Bank intended to declare a “sham default” on that basis so that it could “exit” the credit facility before May 31,1996; it declared a nonexistent loan default as a pretext for discontinuing B. Levy’s borrowing capability and seizing control of B. Levy’s available cash to pay down a Bank loan that was not yet due; it induced the liquidation of B. Levy’s retail business by representing that it would continue to finance B. Levy’s profitable wholesale operations only if it liquidated its retail division; and it concealed its true intention to exit the credit facility before the line of credit’s anniversary date of May 31, 1996. In its partial summary judgment motion, the Bank contends that B. Levy cannot possibly establish the “justifiable reliance” element of a fraud claim since section 6.01(b) of the parties’ agreement clearly notified B. Levy that it would be declared in default if it applied for or consented to “liquidation ... of all or substantial part of its assets.” (See no. 97 CV 5078, dkt. entry no. 63, pp. 10-13.) The Bank also avers that its alleged actions constitute nothing more than a breach of a promise to do something in the future, and as such, B. Levy cannot demonstrate the intent or scienter necessary for a cause of action in fraud. (Id., pp. 13-15.) Last, the Bank argues that B. Levy’s negligent misrepresentation claim is barred by the economic loss doctrine. (Id., pp. 16-17.) We will address the Bank’s arguments in the order in which they have been raised.

II. DISCUSSION

(A) Standard of Review

Summary judgment is appropriate where the pleadings, discovery, record admissions, and affidavits demonstrate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Porro v. Century III Associates, 846 A.2d 1282, 1284 (Pa. Super. 2004); O’Brien v. Ohio Casualty Insurance Co., 105 Lacka. Jur. 60, 62 (2004). “A proper grant of summary judgment depends upon an evidentiary record that either (1) shows the material facts are undisputed or (2) contains insufficient evidence of facts to make out a prima facie cause of action or defense.” Noel v. First Financial Bank, 855 A.2d 90, 92 (Pa. Super. 2004). In making that determination, the record must be viewed in the light most favorable to the non-moving party, with all doubts as to the existence of a genuine issue of material fact being resolved against the moving party. Meyers v. Volvo Cars of North America Inc., 852 A.2d 1221, 1224 (Pa. Super. 2004); Colacicco v. Karumbaya, 65 D.&C.4th 555, 560 (Lacka. Cty. 2004). Summary judgment may be entered only in cases where it is clear and free from doubt that the movant is entitled to judgment as a matter of law. The Brotech Corp. v. Delmarva Chemicals Inc., 831 A.2d 613, 615 (Pa. Super. 2003).

(B) Fraudulent Misrepresentation

The Bank’s first two arguments concern B. Levy’s claims of fraudulent misrepresentation. One who fraudulently makes a misrepresentation of fact or law for the purpose of inducing another to act or refrain from acting in reliance thereon in a business transaction is liable to the other for any harm caused by justifiable reliance upon the misrepresentation. Smith v. Renaut, 387 Pa. Super. 299, 305, 564 A.2d 188, 191 (1989) (citing Savitz v. Weinstein, 395 Pa. 173, 178, 149 A.2d 110, 113 (1959)). To recover on a claim of fraudulent misrepresentation, “the plaintiff must prove by clear and convincing evidence six elements: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance.” Goldstein v. Phillip Morris Inc., 854 A.2d 585, 590-91 (Pa. Super. 2004).

It has been said that fraud “consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth or look or gesture.” Pittsburgh Live Inc. v. Servov, 419 Pa. Super. 423, 428, 615 A.2d 438, 441 (1992); Delahanty v. First Pennsylvania Bank N.A., 318 Pa. Super. 90, 107, 464 A.2d 1243, 1251 (1983). False information may be communicated either directly through a positive assertion of fact, or indirectly by the nondisclosure of a material fact. See Coleman v. Sears, Roebuck & Co., 319 F. Supp.2d 544, 550 (W.D. Pa. 2003). Therefore, the deliberate nondisclosure of a material fact is regarded as the legal equivalent of an intentional false affirmation. See Bortz v. Noon, 556 Pa. 489, 499, 729 A.2d 555, 560 (1999); Fox’s Food Inc. v. K-Mart Corp., 870 F. Supp. 599, 609 (M.D. Pa. 1994). It is also fraud to induce another “to believe that the act which he does is something other than it actually is.” Delahanty, 318 Pa. Super, at 107, 464 A.2d at 1252; Greenwood v. Kadoich, 239 Pa. Super. 372, 376, 357 A.2d 604, 607 (1976).

Whether fraud has been committed is generally “a question of fact which is always a jury question.” Greenwood, 239 Pa. Super. at 375, 357 A.2d at 606; Manning v. Barber’s Chemicals Inc., 50 D.&C.4th 420, 430 (Mercer Cty. 2000). However, since evidence of fraud must be clear and convincing, the preliminary issue of whether the evidence meets the required standard so as to justify its submission to the jury is a question of law for the court to decide in the first instance. Gerfin v. Colonial Smelting & Refining Co. Inc., 374 Pa. 66, 68, 97 A.2d 71, 72 (1953); Delahanty, 318 Pa. Super at 110, 464 A.2d at 1253; Greenwood, 239 Pa. Super. at 376, 357 A.2d at 606. Hence, the court must conduct an initial inquiry to determine whether the plaintiff has stated a prima facie case of fraud under the exacting standard in Pennsylvania. Mellon Bank Corp. v. First Union Real Estate, 951 F.2d 1399, 1409 (3d Cir. 1991); Piezo Crystal Co. v. Uddeholm Corp., 870 F. Supp. 589, 594 (M.D. Pa. 1994).

(C) Justifiable Reliance

The Bank first contends that B. Levy’s reliance upon the Bank’s alleged fraud was unjustifiable as a matter of law since section 6.01(b) of the line of credit agreement states that B. Levy’s application for, or consent to, liquidation of a substantial part of its assets constitutes an “event of default” entitling the Bank to decline the issuance of further letters of credit. Resolution of that issue “depends on whether the recipient knew or should have known that the information supplied was false.” Porrecco v. Porrecco, 571 Pa. 61, 70, 811 A.2d 566, 571 (2002); Fort Washington Resources Inc. v. Tannen, 858 F. Supp. 455, 460 (E.D. Pa. 1994). In support of its argument, the Bank relies upon the Restatement (Second) of Torts which states, in pertinent part:

“Section 540 Duty to investigate
“The recipient of a fraudulent misrepresentation of fact is justified in relying upon its truth, although he might have ascertained the falsity of the representation had he made an investigation.
“Section 541 Representation known to be or obviously false
“The recipient of a fraudulent misrepresentation is not justified in relying upon its truth if he knows that it is false or its falsity is obvious to him.” See Silverman v. Bell Savings & Loan Association, 367 Pa. Super. 464, 473, 533 A.2d 110, 115 (1987); Textile Biocides Inc. v. Avecia Inc., 52 D.&C.4th 244 (Phila. Cty. 2001). Under the Restatement standard, “although the recipient of a fraudulent misrepresentation is not barred from recovery because he could have discovered its falsity if he had shown his distrust of the maker’s honesty by investigating its truth, he is nonetheless required to use his senses, and cannot recover if he blindly relies upon a misrepresentation, the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation.” Silverman, 367 Pa. Super. at 473-74, 533 A.2d at 115 (quoting Restatement (Second) of Torts §541 comment a).

The issue of whether a party’s reliance on another’s fraudulent misrepresentation is justified or unjustified is usually considered to be a question of fact. See Myers v. McHenry, 398 Pa. Super. 100, 109, 580 A.2d 860, 865 (1990) (whether party unjustifiably relied upon misrepresentation “should be decided by a jury on the basis of all of the facts and permissible inferences which may be drawn from the evidence presented at trial.”); Corestates Leasing Inc. v. Housewright, 1998 WL151028, *9 (E.D. Pa. 1998). Accord, Silverman, supra (“The right to rely upon a representation is generally held to be a question of fact.”). In deciding whether the recipient justifiably relied on information, the court may consider the history of the negotiation process between the parties. Tannen, 858 F. Supp. at 460; Greenberg v. Tomlin, 816 F. Supp.

1039, 1056 (E.D. Pa. 1993). Since the “[Reasonableness of reliance involves all of the elements of the transaction,” “the question of justifiable reliance is most appropriately left to the jury . . . and is rarely susceptible of summary disposition.” Krisa v. Equitable Life Assurance Society, 113 F. Supp.2d 694, 706 (M.D. Pa. 2000) (quoting Williams Controls Inc. v. Parente Randolph Orlando Carey & Associates, 39 F. Supp.2d 517, 534 (M.D. Pa. 1999)). This is true even if the recipient ostensibly relied upon fraudulent oral communications in the face of written documents which clearly contradict the contents of those verbal statements. See e.g., Bowes v. Travelers Insurance Co., 173 F. Supp.2d 342, 346 (E.D. Pa. 2001) (“The determination of whether or not it was justifiable for the [recipient] to rely on the statements of [defendants’] agent in the face of contrary written policies involves issues of material fact whose resolution should be reserved for the jury.”); Piezo Crystal Co., 870 F. Supp. at 596 (whether plaintiff’s “reliance upon representations that [defendant] was supplying UHB-20 steel” was justifiable “in light of the fact that the containers carrying steel displayed blue tags which clearly identified UHB-20C steel” was for jury to decide); Avecia Inc., supra (declining to grant summary judgment based upon Restatement (Second) of Torts §541 even though verbal representations at issue contradicted wording of signed agreements).

The Bank posits that B. Levy’s reliance was unjustified as a matter of law since section 6.01(b) of the parties’ agreement notified B. Levy that liquidation of its retail business could be deemed a default and the Bank “promptly advised the B. Levy borrowers that [it] was declaring a default based on their liquidation of the retail operation.” (Dkt. entry no. 63, p. 11.) The Bank’s argument overlooks the fact that the terms of a written agreement may be modified subsequently by the parties’ conduct or oral representations. See e.g., Brinich v. Jencka, 757 A.2d 388, 399 (Pa. Super. 2000), appeal denied, 565 Pa. 634, 771 A.2d 1276 (2001); Fina v. Fina, 737 A.2d 760, 764 (Pa. Super. 1999). More importantly, “under the estoppel concept, a contract may be modified if either words or actions of one party to the contract induce another party to the contract to act in derogation of that contract, and the other justifiably relies upon the words or deeds of the first party.” Kreutzer v. Monterey County Herald Co., 560 Pa. 600, 607, 747 A.2d 358, 362 (2000).

Section 5.02 of the agreement states that B. Levy would not operate its “business other than in the normal and customary course” unless the Bank provided its consent to do so, “which consent [would] not be unreasonably withheld.” The Bank’s actions as chronicled above clearly raise genuine issues of material fact as to whether the Bank consented in writing to the retail division liquidation and waived the applicability of the default provision in section 6.01(b). In response to the Bank’s documented demand in December 1995 that B. Levy liquidate its retail division, B. Levy devised a liquidation plan and timetable which it communicated to the Bank in writing on January 11, 1996. The Bank’s own internal memoranda confirm that the Bank later advised the B. Levy principals that the Bank “supported their plan” and even expedited the retail liquidation process. By doing so, the Bank arguably modified the parties’ written agreement, including section 6.01(b), and induced B. Levy “to act in derogation of that contract” by liquidating its retail business, thereby estopping the Bank from strictly enforcing the default provision. Kreutzer, supra.

During the 49-day period between January 11, 1996 and February 29, 1996, the Bank never once suggested that B. Levy’s liquidation of its retail division would be deemed an event of default. Cf. Delahanty, 318 Pa. Super. at 107, 464 A.2d at 1252 (it is fraud to induce another “to believe that the act which he does is something other than it actually is.”). The summary judgment record indicates that B. Levy relied upon the Bank’s actions and representations by hiring the liquidation consultant recommended by the Bank, terminating its retail stores’ leases prematurely, canceling a plethora of retail merchandise orders, and scheduling private liquidation sales of its retail merchandise. It is apparent from the parties’ submissions that B. Levy took these detrimental steps in reliance upon the Bank’s lack of an objection to the retail liquidation.

Considering the transactional history between the parties and the documented representations made by the Bank, triable issues of fact exist as to whether B. Levy’s reliance was justified. To declare under these circumstances that the Bank’s representations to B. Levy were obviously and patently false as a matter of law would mean that Pennsylvania law obligates a borrower to presume at all times that its lender is lying when it makes a representation. Our jurisprudence places no such duty of suspicion upon borrowers when dealing with banks. Based upon the materials submitted for review, the issue of whether B. Levy’s reliance was justified cannot be decided as a matter of law.

(D) Scienter

To state a viable claim of fraud, B. Levy must establish that the Bank’s false statement, concealment, or fraudulent act “was made knowingly, or in conscious ignorance of the truth, or recklessly without caring whether it be true or false.” Delahanty, 318 Pa. Super, at 108, 464 A.2d at 1252 (bank officials assured borrower “that the Bank was behind him 100 percent” and did not inform the borrower of its true intentions to the contrary); Piezo Crystal Co., 870 F. Supp. at 594-95. The Bank contends that its alleged actions amount to nothing more than the breach of a promise to do something in the future, which conduct cannot serve as a proper basis for a cognizable fraud claim. See Shoemaker v. Commonwealth Bank, 700 A.2d 1003, 1006 (Pa. Super. 1997) (“It is well-established that the breach of a promise to do something in the future is not actionable in fraud.”); Krause v. Great Lakes Holdings Inc., 387 Pa. Super. 56, 67-68, 563 A.2d 1182, 1187 (1989), appeal denied, 524 Pa. 629, 574 A.2d 70 (1990). The Bank’s argument in this regard assumes that the sole basis for B. Levy’s fraud claim is the Bank’s promise that it “would continue to finance B. Levy’s wholesale operations during and following the retail liquidation.” (Dkt. entry no. 63, p. 13.)

However, B. Levy’s submissions reflect that its fraud claim is multi-faceted. B. Levy avers that the Bank lured it into an alleged default by demanding that it liquidate its retail division, only to later declare B. Levy in default for undertaking the very action that the Bank had demanded. See Renaut, 387 Pa. Super, at 305, 564 A.2d at 191-92 (one who induces another to act through any conduct or silence which is calculated to deceive is liable in fraud for harm caused by the plaintiff’s justifiable reliance). B. Levy also claims that it was defrauded by the Bank’s declaration of a “sham” default which was merely a subterfuge to cease line of credit advances and to obtain control of B. Levy’s cash to pay a Bank loan prematurely. Consequently, B. Levy’s fraud allegations concerning the Bank involve much more than a simple promise to perform in the future.

Even assuming arguendo that the linchpin of B. Levy’s fraud claim was the Bank’s promise to provide continued financing for B. Levy’s wholesale operations during the retail liquidation, the Bank still would not be entitled to partial summary judgment. As stated above, the Bank’s internal memorandum suggests that the Bank intended to terminate the line of credit prior to May 31, 1996, regardless of the success of B. Levy’s retail liquidation. Therefore, there is a genuine issue of fact whether the Bank truly intended to provide continuing financing at the time that it promised B. Levy that it would do so. While it is true that the mere breach of a promise to do something in the future is not tantamount to fraud, “a promise which the promissor had no intention of keeping at the time he made it may be actionable as fraud.” Precision Printing Co. Inc. v. Unisource Worldwide Inc., 993 F. Supp. 338,356 (W.D. Pa. 1998); Fox’s Foods Inc., 870 F. Supp. at 609 (denying summary judgment since “sufficient evidence exists in this record for a jury to believe that [defendant] intended not to perform when the promise was made.”). As our Supreme Court has noted, “[statements of intention,... which do not, when made, represent one’s true state of mind are misrepresentations known to be such and are fraudulent.” Col lege Watercolor Group Inc. v. William H. Newbauer Inc., 468 Pa. 103, 115, 360 A.2d 200, 206 (1976). Accord Jairett v. First Montauk Securities Corp., 203 F.R.D. 181, 185 (E.D. Pa. 2001). Accordingly, since B. Levy’s submissions indicate that the Bank did not intend to provide continued financing at the time that it promised it would, it is not clear and free from doubt that B. Levy will be unable to prove the culpable state of mind required for a fraud claim.

(E) Negligent Misrepresentation

In addition to advancing a claim for fraudulent misrepresentation, B. Levy alternatively avers that “if such misrepresentations were made negligently, and without the intent to defraud, they constitute actionable negligent misrepresentation because [the Bank] breached its duty to exercise reasonable care in supplying truthful information to B. Levy in connection with B. Levy’s conduct of its business.” (Dkt. entry no. 12, ¶66.) Negligent misrepresentation requires proof of: “(1) a misrepresentation of a material fact; (2) made under circumstances in which the misrepresenter ought to have known its falsity; (3) with an intent to induce another to act on it; and (4) which results in injury to a party acting in justifiable reliance on the misrepresentation.” Bortz, 556 Pa. at 500, 729 A.2d at 561; Heritage Surveyors & Engineers Inc. v. National Penn Bank, 801 A.2d 1248, 1252 (Pa. Super. 2002). The differences between fraudulent misrepresentation and negligent misrepresentation are the state of mind of the person making the misrepresentation and the standard of proof that must be met by the plaintiff. Kerrigan v. Villei, 22 F. Supp.2d 419, 429 (E.D. Pa. 1998). With a negligent misrepresentation claim, the misrepresentation must concern a material fact and the speaker need only have failed to make a reasonable investigation of the truthfulness of the representation (i.e., failure to exercise reasonable care in supplying the information). Bortz, supra; Gibbs v. Ernst, 538 Pa. 193, 210, 647 A.2d 882, 890 (1994). Furthermore, whereas fraudulent misrepresentation must be demonstrated by clear and convincing evidence, negligent misrepresentation may be established by a preponderance of the evidence. Kerrigan, supra.

The Pennsylvania standard for negligent misrepresentation is derived from the Restatement (Second) of Torts §552. See Gibbs, supra. Section 552 of the Restatement provides:

“Section 552. Information negligent supplied for the guidance of others
“(1) One who, in the course of his business, profession, or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
“(2) Except as stated in subsection (3), the liability stated in subsection (1) is limited to loss suffered
“(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
“(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
“(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.” Restatement (Second) of Torts §552.

Relying upon Pflumm Paving & Excavating Inc. v. Foundation Services Co., 816 A.2d 1164 (Pa. Super. 2003), the Bank contends that the economic loss doctrine bars B. Levy’s negligent misrepresentation claim under section 552 since “any plaintiff with a negligent misrepresentation claim, including the B. Levy borrowers, must present evidence of physical injury or property damage to recover economic damages on their negligent misrepresentation claim.” (Dkt. entry no. 63, p. 17.)

The economic loss doctrine developed as a means to protect defendants from liability for unforeseeable harm by limiting the class of potential plaintiffs who may recover in situations where the negligent defendant is unaware of the contract or prospective relation with the injured party. The genesis of this doctrine can be found in the United States Supreme Court ruling in Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927), where the court stated that “[a]s a general rule, at least, a tort to the person or property of one man does not make the tort-feasor liable to another merely because the injured person was under a contract with that other unknown to the doer of the wrong.” Duquesne Light Co. v. Pennsylvania American Water Co., 850 A.2d 701, 703 (Pa. Super. 2004) (quoting Flint, 275 U.S. at 309). The Pennsylvania courts have formulated a comparable rationale for the economic loss doctrine and have concluded that “[t]he reason a plaintiff cannot recover stems from the fact that the negligent actor has no knowledge of the contract or prospective relation and thus has no reason to foresee any harm to the plaintiff’s interests.” Pflumm Paving, 816 A.2d at 1168-69; Aikens v. Baltimore and Ohio Railroad Co., 348 Pa. Super. 17, 21, 501 A.2d 277, 279 (1985). The Restatement’s standard for negligent misrepresentation incorporates this liability restriction by limiting recovery to those “persons for whose benefit and guidance [the defendant] intends to supply the information” and who the defendant intends to be influenced by such information. Restatement (Second) of Torts §552(2)(a) and (b).

The case law cited by the Bank in its legal briefs actually supports this interpretation of the economic loss doctrine. In Athens, supra, employees of a plant that was damaged by a train derailment filed suit against the railroad company seeking to recover damages for lost wages attributable to decreased production at the plant. In dismissing the plant employees’ claim for negligent interference with prospective contractual relations under the Restatement (Second) of Torts, §766C, the Superior Court declined to recognize a “cause of action for negligent interference with economic advantage” under section 766C since the defendant had “no knowledge of the contract or prospective relation” with the employees and “no reason to foresee any harm” to them from the derailment. Aikens, 348 Pa. Super, at 21,501 A.2d at 279. The Aikens court reasoned that extending negligence liability in such a context “would clearly lead to problems in consistency and foreseeability, and could be harmful in scope.” Id. at 22, 501 A.2d at 279. See also, Linde Enterprises Inc. v. Hazleton City Authority, 412 Pa. Super. 67, 77, 602 A.2d 897, 901 (1992) (finding that a contractor could not sue an architect for faulty specifications in the absence of privity since the contractor had “not offered a compelling reason why we should deviate from the well-established requirement of privity to adopt a rule holding negligent architects directly liable for economic damages to contractors with whom they share no contractual relationship.”).

Similarly, in Pflumm Paving, supra, an excavation contractor on a township’s library construction project asserted a negligent misrepresentation claim against companies that had contracted with the township to perform subsurface testing for the foundation design. The excavation contractor had not entered into any contract with the subsurface testing companies which issued a geological engineering report in July 1993. More than two years later, the excavation contractor submitted a bid to the township which provided bidding instructions notifying prospective bidders that they “must assume all risks in excavating for this project and shall not be entitled to rely on any subsurface information obtained” by the township. The excavation contractor was later awarded the contract which included express conditions reiterating that contractors could not rely upon the subsurface testing report and were required to “assume all risks in excavating for this project” and to “make their own investigation of existing subsurface conditions.” Pflumm Paving, 816 A.2d at 1165-66. After the excavation contractor encountered a large quantity of rock and incurred additional expense, he sued the subsurface testing companies for negligent misrepresentation on the grounds that the contractor had allegedly relied upon the geological engineering report which erroneously indicated that rock would not be encountered during excavation. Citing section 552 of the Restatement, the court held that the economic loss doctrine precluded the excavation contractor’s claim for negligent misrepresentation. Id. at 1171.

In reaching its decision, the Pflumm Paving court quoted comment i to section 552 of the Restatement which states that “[t]he maker of the negligent misrepresentation is subject to liability to only those persons for whose guidance he knows the information to be supplied, and to them only for loss incurred in the kind of transaction in which it is expected to influence them, or a transaction of a substantially similar kind.” Id. at 1170. However, since “none of the defendants provided the 1993 [geological engineering] report, including the drawing, to Pflumm for its guidance in submitting its bid,” the Superior Court reasoned that the Restatement comment “does not support Pflumm’s argument that the economic loss doctrine does not prevent its claim under section 552.” Id.

The Pflumm Paving court likewise quoted illustration 9 from the Restatement dealing with situations where a defendant owner notifies the subsurface testing company that its “report will be made available to bidders as a basis for their bids and that it is expected to be used by the successful bidder in doing the work.” Id. Noting that the Restatement recommends that the subsurface testing company be subject to liability in that instance for an inaccurate or misleading report, the court remarked that it had “no particular disagreement with a finding of liability under those circumstances.” Id. Nevertheless, it found that example to be distinguishable “because the plaintiff in illustration 9 was informed that the report was to be used by the bidder in doing its work” whereas in Pflumm Paving the “bidders were specifically told not to rely on the report and to perform their own subsurface investigation.” Id. at 1170-71. (emphasis in original)

The Superior Court has previously recognized that a bank may be liable for negligent misrepresentations made in connection with financial transactions even if the plaintiff suffers economic harm only. See e.g., Baker v. Cambridge Chase Inc., 725 A.2d 757, 770 (Pa. Super. 1999), appeal denied, 560 Pa. 716, 745 A.2d 1216 (1999) (allegations that bank, as owner of townhouse which was conveyed to plaintiffs by a developer, failed to disclose the fact that the developer no longer owned the property, were sufficient to state a claim for negligent misrepresentation under section 552 of the Restatement (Second) of Torts); Bolus v. United Penn Bank, 363 Pa. Super. 247, 262-65, 525 A.2d 1215,1223-24 (1987), appeal denied, 518 Pa. 627, 541 A.2d 1138 (1988) (bank held liable for negligent misrepresentations by bank’s assistant vice-president in connection with financing provided by bank for plaintiff’s construction project). We do not interpret Pflumm Paving as overruling that well-established precedent by abolishing all causes of action for negligent misrepresentation where the injured victim suffers only economic damage. Rather, by virtue of its discussion of section 552 and the relevant comments and illustrations, Pflumm Paving stands for the proposition that the economic loss doctrine precludes a claim for negligent misrepresentation if the defendant does not know that the plaintiff will be influenced or guided by the information provided and, therefore, has no reason to foresee economic harm to the plaintiff.

However, if the plaintiff is a person for whose benefit and guidance the defendant intended to supply the erroneous information and the defendant intends the information to influence the plaintiff in a business transaction, the defendant may be liable for pecuniary loss caused by the negligent misrepresentation. See Bolus, supra. The economic loss doctrine would not foreclose liability in that event since the negligent defendant’s knowledge of the prospective relationship conceivably makes harm to the plaintiff foreseeable by the defendant. Cf. Ellenbogen v. PNC Bank, 731 A.2d 175, 188-89 n.26 (Pa. Super. 1999) (“where, as here, the claim is grounded upon a contractually imposed duty . . ., the economic loss doctrine, a feature of tort law, is irrelevant.”); Beecham v. American Life and Casualty Insurance Co., 65 D.&C. 4th 370, 382 (Lacka. Cty. 2003) (economic loss doctrine did not bar plaintiffs’ claims that insurer failed to inform plaintiffs that it had investigated and terminated for misconduct the agent who handled plaintiff’s annuity contract and misappropriated their funds since the insurer’s knowledge of the annuity contract and the plaintiffs’ business relation with the agent furnished a reason to foresee potential harm to the plaintiffs); Rapidigm Inc. v. ATM Management Services LLC, 63 D.&C.4th 234, 240-41 (Allegheny Cty. 2003) (economic loss doctrine does not apply to professional negligence actions where there is privity of contract). Inasmuch as there are legitimate issues of material fact whether the Bank failed to exercise reasonable care in supplying false information to B. Levy in a transaction in which it had a pecuniary interest, and that B. Levy justifiably relied upon that false information by liquidating its retail business, the Bank may be accountable for negligent misrepresentation under section 552 of the Restatement (Second) of Torts. For that reason, the Bank’s motion for partial summary judgment will be denied.

ORDER

And now, August 9, 2004, upon consideration of defendant’s motion for partial summary judgment with respect to plaintiffs’ claims for fraudulent and negligent misrepresentation, the summary judgment exhibits and memoranda of law submitted by the parties, and the oral argument of counsel, and based upon the reasoning set forth in the foregoing memorandum, it is hereby ordered and decreed that defendant’s motion for partial summary judgment is denied.

      . B. Levy also pledged property that it owns at 700 North South Road, Scranton, as security for the Bank’s loans by executing an “open end collateral mortgage.” See Corestates Bank v. Levy Brothers Co., no. 98 CV 1158 (Lacka. Cty.).

      . Section 7.02(b) of the line of credit agreement required the Bank to promptly provide B. Levy “with notice of the occurrence of an event of default” and afforded B. Levy “30 days after receipt of such a notice . . . in which to remedy such event of default satisfactory to Bank.” (Id., exhibit A, p. 28.) B. Levy submits (a) that the retail liquidation was irreversible as of February 29, 1996, since the Bank waited 49 days to object and (b) that the Bank rejected its offer to cure the alleged default by attempting to reverse the liquidation process. $1.7 million and $2.5 million. The parties’ “open end collateral mortgage” contained an assignment of rents clause in the event of a default by B. Levy, and on April 7,1998, the Bank advised Allied that it “may be liable to [the Bank] for any rent payments made to Levy after [its] receipt” of the Bank’s invocation of the assignment of rents clause. (hi, no. 19, exhibit B.) After Allied intervened and sought to inter-plead its rental payments into court, we issued an order on October 5, 1998, directing Allied to deposit its monthly rental payments with the clerk of Judicial Records to be held in an interest bearing escrow account pending resolution of the parties’ dispute. (Id., no. 14.) As a result of Allied’s rental payments from October 1998 through December 2003, the balance of the escrow account grew to $768,897.09. Since the fair market value of the mortgaged property and the balance of the escrow account were more than triple the revised amount ($768,897.09) which the Bank alleged that it was owed on the collateral mortgage, we granted B. Levy’s motion to modify the order of October 5, 1998, and directed that all monthly rental payments made after December 31, 2003, were to be distributed directly to the Levy family members who are the lessors on the Allied lease. See Corestates Bank v. Levy Brothers Co., no. 98 CV 1158, Nealon, J., at pp. 9-10 (Lacka. Cty. Dec. 16, 2003).

      . The mortgaged property has been leased to Allied Healthcare Services Inc. pursuant to renewable five-year leases and has been appraised by the parties as having a fair market value ranging between