J-A32021-14
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GEORGE KURUVILA, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
ARASU RAJARATNAM,
Appellee No. 421 EDA 2014
Appeal from the Judgment Entered March 28, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): May 2012 Term – No. 000450
BEFORE: PANELLA, OLSON AND FITZGERALD,* JJ.
MEMORANDUM BY OLSON, J.: FILED APRIL 06, 2015
Appellant, George Kuruvila, appeals from the judgment entered on
March 28, 2014. We vacate in part and remand.
On May 9, 2012, Appellant initiated the current action by filing a
complaint against Arasu Rajaratnam (hereinafter “Defendant Rajaratnam”).
Within his complaint, Appellant averred the following.
In September 1995, Appellant successfully bid, at a private auction,
upon a seven-unit apartment building that was located at 229 West Harvey
Street, in Philadelphia (hereinafter “the Property”). Appellant’s Complaint,
5/9/12, at ¶¶ 4-5. Appellant’s winning bid for the Property was $51,500.00.
Id. at ¶ 5.
“[Appellant] paid a deposit of $5,150[.00], representing 10% of the
winning bid, and was given [approximately] one month to pay the balance of
*
Former Justice specially assigned to Superior Court.
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the purchase price.” Id. at ¶¶ 5-6. In an attempt to pay the remaining
amount owed, Appellant contacted Defendant Rajaratnam. Defendant
Rajaratnam obtained the necessary financing and then paid the balance of
the purchase price for the Property. Id. at ¶¶ 6-9.
On October 27, 1995, Appellant and Defendant Rajaratnam entered
into a written contractual agreement in regards to the Property. Id. at ¶ 10.
The brief contract reads:
[Defendant Rajaratnam] and [Appellant] agree as follows:
RE: [The Property]
1) Name of Corporation to own abovementioned property[]
is to be called “Raj Villa” Corporation.
2) Our objective is to minimi[z]e costs, maximi[z]e returns.
3) [Defendant Rajaratnam] is to hand over 49% of total
shares to [Appellant] within five [] working days from date
of initial financing[.]
4) All decisions should be jointly made and approved jointly:
major decisions in writing and signed by both parties.
Contract between Appellant and Defendant Rajaratnam, dated 10/20/95, at
1.
On January 15, 1996, Appellant and Defendant Rajaratnam elected to
form a small business corporation named the “Raj Villa Corporation.”
Appellant’s Complaint, 5/9/12, at ¶ 12. Defendant Rajaratnam received
51% of the shares of the corporation and was named the president of the
corporation; Appellant received the remaining 49% of the corporate shares.
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Id. at ¶¶ 10-12. However, as Appellant averred: “[Appellant] and
[Defendant Rajaratnam] verbally agreed to share the [corporate] profits
equally notwithstanding that [Defendant Rajaratnam] held 51% of the
shares in the small business corporation.” Id. at ¶ 13. Title to the Property
was apparently transferred to the Raj Villa Corporation – and the Raj Villa
Corporation then began to manage and rent units in the Property. Id. at
¶ 37; see also id. at “Exhibit 4.”
As the trial court explained:
Both parties managed the Property from October 1995 []
until September 1997, when [Appellant] permanently
moved back to India.[1] [Id. at ¶¶ 18-19.] Defendant
Rajaratnam kept all the financial records and books for the
[Raj Villa] Corporation [and continued to manage] the
Property after [Appellant’s] departure. [Id. at ¶ 19.]
Upon suffering losses, the [Raj Villa] Corporation listed the
Property for sale in November 2005. [Id. at ¶¶ 20-21.] On
or about February 27, 2006, the Property sold for
$325,000[.00]. [Id. at ¶ 22.] In [May] 2006, [Appellant]
first learned the Property was sold. [Id. at ¶ 23.] After the
sale, Defendant Rajaratnam wire transferred [Appellant]
$24,577.55[, which, according to Defendant Rajaratnam,
represented] 49% of the [sale] proceeds. [Id. at ¶ 22; id.
at “Exhibit 4.” Appellant received this money on May 10,
2006. Id. at ¶ 23].
Once [he] receiv[ed] his share of the Property’s sale
proceeds, [Appellant] [e-mailed] and [telephoned]
Defendant Rajaratnam[,] inquiring [as to] why he received
____________________________________________
1
Appellant, an Indian national, resided in Philadelphia, Pennsylvania for
approximately 18 years before he permanently returned to India in 1997.
Appellant’s Complaint, 5/9/12, at ¶ 1.
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only $24,577.55 [given that] the Property [] sold for
$325,000[.00]. [Id. at ¶ 25.] Defendant Rajaratnam
provided [Appellant] with a Settlement Statement[, which]
referenc[ed] three deductions [that were] taken from the
gross amount of $325,000[.00]: (a) settlement charges to
the seller in the amount of $157,966.03; (b) payoff of [the]
existing loan to First Penn Bank in the amount of
$118,238.05; and[,] (c) payoff of [the] existing loan to First
Penn Bank in the amount of $150[.00]. [Id. at ¶ 25-26.]
[However, “despite repeated requests from Appellant,
Defendant Rajaratnam did not provide Appellant with any
explanation or documents which evidenced how and why
these deductions related to the management of the
property nor did he explain why such a large amount of
financing was obtained that had to be paid off at
settlement.” Id. at ¶ 27.] . . .
[Appellant] also requested Defendant Rajaratnam to provide
a detailed and accurate written accounting of the sale
proceeds and the income and operating expenses from the
period the Property was owned and managed by the [Raj
Villa] Corporation. [Id. at ¶¶ 28 and 36. In response,
Defendant Rajaratnam supplied Appellant with a “purported
balance sheet,” which provided “only one line representing
rental and other income for each year between 1995
through 2006 and [failed] to list the monthly income for
each of the seven apartments during those years despite
[Appellant’s] repeated requests to Defendant [Rajaratnam]
to provide this information.” Id. at ¶ 38.]
Trial Court Opinion, 7/11/14, at 2-3.
On May 9, 2012 – which was approximately six years after Appellant
first learned that the building was sold – Appellant initiated the current
action by filing a complaint against Defendant Rajaratnam. The complaint
listed the following six counts:
Count 1: Accounting (claiming that Appellant is entitled to an equitable
accounting, directing Defendant Rajaratnam to “account to [Appellant]
[] all monies received from the management of the property, including
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but not limited to monthly income and expense statements for the
years 1995-2006, and for any deductions that were made from the
$325,000[.00] sales proceeds in 2006”);
2) Count 2: Breach of Fiduciary Duty (claiming that Defendant
Rajaratnam breached the fiduciary duties he owed to Appellant under
“Pennsylvania’s Uniform Partnership Act” and as “a majority
shareholder,” to “account for and hold any and all [] profits from
October 27, 1995 until the property was sold in 2006, at which time
[Defendant Rajaratnam] was required to pay [Appellant] half of the
sales proceeds and half of the net rental income generated before the
property was sold”);
3) Count 3: Commingling and Diversion of Assets2 (claiming that
Defendant Rajaratnam commingled and diverted “the net operating
income and sales proceeds” of the corporation the Property for his own
benefit);
4) Count 4: Breach of Contract (claiming that Appellant and Defendant
Rajaratnam “had a verbal agreement to share the profits equally” and
that Defendant Rajaratnam breached this contract when he failed to
____________________________________________
2
With respect to the third count in Appellant’s complaint, the full title of this
count is: “Defendant’s apparent co-mingling [sic] and diversion of net
operating income and sales proceeds with his own or other accounts instead
of maintaining separate accounts related solely to the management and/or
sale of the property and not paying [Appellant] his 50% share.” Appellant’s
Complaint, 5/9/12, at Count 3.
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pay Appellant “half of the $325,000[.00] sales proceeds” and “half of
the net operating income earned during the years 1995-2006”);
5) Count 5: Unjust Enrichment (claiming that, from 1995 until 1997,
Appellant “provided services to Defendant [Rajaratnam],” which
enriched the business and that it would be inequitable for Defendant
Rajaratnam to retain the benefits without proper compensation to
Appellant); and,
6) Count 6: Constructive Fraud (claiming that Defendant Rajaratnam
breached his fiduciary duty to Appellant by failing to provide Appellant
with an accounting and by concealing, destroying, falsifying, and
failing to keep documents which could allow for an accurate
accounting).
On June 18, 2012, Defendant Rajaratnam filed preliminary objections
to Appellant’s complaint. The preliminary objections claimed that: 1) but
for Appellant’s breach of contract claim, all of Appellant’s claims were barred
by the gist of the action doctrine; 2) Appellant’s claim for commingling and
diversion of assets (Count 3) failed to state a claim upon which relief may be
granted, as it “is not a recognized cause of action in Pennsylvania;” 3)
Appellant’s claim for unjust enrichment (Count 5) fails as a matter of law
because Appellant alleged the existence of a written and an oral contract and
because Appellant failed to “specify the type of work, the amount of labor
involved, the character and nature of the work performed the skill and
experience called for in providing the work, or the value of the services
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rendered in connection with the [c]ontract;” and, 4) Appellant’s claim for
breach of fiduciary duty (Count 2) and Appellant’s claim for constructive
fraud (Count 6) failed as a matter of law because Appellant alleged that the
fiduciary duty arose out of Pennsylvania’s Uniform Partnership Act – yet
Appellant and Defendant Rajaratnam were not partners, but were
shareholders in a closely held corporation. Defendant Rajaratnam’s
Preliminary Objections, 6/18/12, at 1-6.
On June 27, 2012, Appellant filed a lengthy response to Defendant
Rajaratnam’s preliminary objections and, within this response, Appellant
claimed that the trial court should overrule all of Defendant Rajaratnam’s
preliminary objections. Appellant’s Response to Preliminary Objections,
6/27/12, at 1-17. Further, within Appellant’s response, Appellant claimed
that the trial court should dismiss Defendant Rajaratnam’s preliminary
objections because they were untimely. Id. at 11. However, Appellant did
not file preliminary objections to Defendant Rajaratnam’s preliminary
objections, Appellant’s response did not contain a notice to plead, and,
within Appellant’s response, Appellant did not claim that the untimely filing
caused him prejudice. See id. at 1-17.
On September 5, 2012, following oral argument, the trial court
sustained Defendant Rajaratnam’s preliminary objections and dismissed
Counts 1, 2, 3, 5, and 6 of Appellant’s complaint. Trial Court Order, 9/5/12,
at 1. Therefore, the only claim that survived the pleading stage of the
proceedings was the breach of contract claim.
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The trial court summarized the ensuing procedural history of this
matter as follows:
Defendant [Rajaratnam filed an answer and new matter
and, within this filing, Defendant Rajaratnam], raised the
defense of statute of limitations. The defense was the basis
for Defendant [Rajaratnam’s] motion for judgment on the
pleadings and motion for summary judgment; both
[motions] were summarily denied without testimony or
argument on September 28, 2012 and October 4, 2013,
respectively.
A trial date certain of December 16, 2013 was ordered. . . .
Following a conference with counsel and [an] extensive
review of the docket and pleadings, [the trial] court ordered
the matter bifurcated on December 11, 2013, scheduling a
bench trial on the statute of limitations issue and if need be,
jury selection to commence immediately thereafter on the
breach of contract claim. The bench trial was conducted
from Monday, December 16, 2013 through Wednesday,
December 18, 2013. At the conclusion of the bench trial,
the [trial] court found that [Appellant’s] breach of contract
action had not been filed within the requisite four year
statute of limitations period and judgment was entered in
favor of [Defendant Rajaratnam. As the trial court
concluded: “at the very least[, Appellant] was aware that
[Defendant Rajaratnam] was not abiding by the terms of
their agreement as of June 19, 2006. Accordingly, an
action against [Defendant Rajaratnam] should have been
initiated no later than June 19, 2010. The [c]omplaint in
this matter was not filed until May 9, 2012, nearly two years
after the limitation period had expired.”]
Trial Court Opinion, 6/18/14, at 4 (some internal capitalization omitted).
Following the denial of Appellant’s timely post-trial motion, Appellant
filed a timely notice of appeal to this Court. Appellant now raises the
following claims on appeal:
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1(a). Did [the trial court] err in ordering a bifurcated bench
trial for the sole purpose of determining whether to dismiss
[Appellant’s] case based on the statute of limitations where
this issue had already been litigated and decided in favor of
[Appellant] by two other judges of the same level court?
1(b). Did [the trial court] err in reversing the two prior
decisions of Judge Allen and Judge Robbins-New where they
had found in [Appellant’s] favor when they denied
[Appellant’s] motion for judgment on the pleadings and
motion for summary judgment, both motions based solely
on the statute of limitations?
2(a). Did [the trial court] err in ruling that the testimony of
[Appellant’s] witnesses is not relevant to any issue
concerning the statute of limitations but, rather, their
testimony is only relevant to damages?
2(b). Did [the trial court] deprive [Appellant] of a fair trial
by not allowing his witnesses to testify?
3. Did [the trial court] err in ordering a bifurcated bench
trial on the statute of limitations only two days before
[Appellant] was scheduled to pick a jury and five days
before the jury trial was scheduled to begin, depriving
[Appellant] of his right to a fair trial, where [Appellant] did
not have sufficient time to prepare simultaneously for both
the bifurcated bench trial and the jury trial?
4. Did [the trial court] err in dismissing [Appellant’s] case
based on the statute of limitations where [Appellant] as a
matter of law acted reasonably or, minimally, reasonable
jurors could differ on the issue and the matter, therefore,
should have been decided by a jury?
5. Did [the trial court] err in ruling that the statute of
limitations began to run from 2006 when the property was
sold where [Appellant] acted reasonably and could not have
known about his breach of contract action by that date?
6(a). Did [the trial court] err in ignoring that [Defendant
Rajaratnam’s] fraud tolled the statute of limitations until
[Appellant’s] discovery of [Defendant Rajaratnam’s] fraud,
which only occurred since after the initiation of this lawsuit,
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within the four-year statute of limitations for breach of
contract?
6(b). Did [the trial court] err in not submitting to the jury
the question of whether Defendant [Rajaratnam] had made
false statements to [Appellant] and whether [Appellant] was
reasonable in relying on them?
6(c). Did [the trial court] err in not finding that [Defendant
Rajaratnam] breached his duty of disclosure which existed
by virtue of his being the majority managing shareholder
and sole maintainer of the Raj Villa corporate books and
records, and in not finding that said breach constitutes
fraud as should toll the statute of limitations until actual
discovery of [Defendant Rajaratnam’s] fraud?
6(d). Did [the trial court] err in not finding that [Defendant
Rajaratnam] both breached his fiduciary duty to [Appellant]
which existed by virtue of [Appellant] being the majority
managing shareholder and sole maintainer of the corporate
books and records, and committed fraud, and that
[Defendant Rajaratnam’s] fraud and self-dealing should
have tolled the statute of limitations?
7(a). Did [the trial court] err in dismissing [Appellant’s]
count for an accounting based on the gist of the action and
economic loss doctrines where [Appellant’s] accounting
count is not a tort remedy?
7(b). Did [the trial court] err in dismissing [Appellant’s]
counts for an accounting, breach of fiduciary duty[,] and
fraud based on the gist of the action and economic loss
doctrines?
7(c). Did [the trial court] err in not finding that [Appellant’s]
claims against [Defendant Rajaratnam] sounded in tort, that
[Defendant Rajaratnam] owed duties to [Appellant] which
existed independent of the parties’ contract, and that
parties to a contract can recover for breach of fiduciary duty
and fraud if the contract is collateral to the tort remedies
that arise by virtue of social policies rather than by virtue of
mutual consensus?
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7(d). Did [the trial court] err as a matter of law in not
recognizing that the gist of [Appellant’s] action is his action
for an accounting, without which he could not determine
whether [Defendant Rajaratnam] breached the contract,
and that the breach of contract count was collateral
thereto?
7(e). Did [the trial court] err in concluding that [Appellant’s]
counts for an accounting, breach of fiduciary duty[,] and
fraud are contract based where they, in fact, are
relationship based related to [Defendant Rajaratnam’s]
breach of duties that arise from the parties’
majority/minority shareholder relationship?
8. Did [the trial court] err in dismissing [Appellant’s] count
for an accounting which has a six-year statute of limitations
where this resulted in [the trial court] dismissing
[Appellant’s] case based on the four-year statute of
limitations for breach of contract?
9. Did [the trial court] err in dismissing [Appellant’s] breach
of fiduciary duty count based on [Appellant] purportedly not
alleging that the parties entered into a partnership?
10. Did [the trial court] err in dismissing [Appellant’s]
wrongful commingling count?
11. Did [the trial court] err in not enforcing the 20-day
deadline proscribed by the Rules of Civil Procedure when he
failed to dismiss [Defendant Rajaratnam’s] late filed
preliminary objections where [Defendant Rajaratnam] did
not provide any explanation for his delay and where
[Appellant] was extremely prejudiced by the granting of
[Defendant Rajaratnam’s] untimely preliminary objections?
12. Did [the trial court] err in denying [Appellant’s] motion
to amend the pleadings to conform to the evidence made at
the trial in accordance with Pennsylvania Code § 35.49?
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Appellant’s Brief at 7-10 (some internal capitalization omitted).3
According to Appellant’s claims “1(a)” and “1(b),” the trial court
violated the coordinate jurisdiction rule when – following a bench trial – it
concluded that Appellant’s breach of contract claim was barred by the
statute of limitations. As Appellant contends, Defendant Rajaratnam raised
the identical statute of limitations defense in his motion for judgment on the
pleadings and motion for summary judgment – and the respective trial
judges denied Defendant Rajaratnam’s claims for relief. Appellant’s Brief at
31. Appellant claims that, following a trial, the coordinate jurisdiction rule
prevented the trial court from concluding that the statute of limitations
barred Appellant’s claims – when two prior judges from the same court
already ruled on the issue and arrived at a contrary conclusion. Id.
Appellant’s claim is frivolous.
Our Supreme Court has held that, “upon transfer of a matter between
trial judges of coordinate jurisdiction, the transferee trial court may not alter
the resolution of a legal question previously decided by the transferor trial
____________________________________________
3
We remind Appellant that the better practice on appeal is to distill one’s
claims down to those with a meaningful likelihood of success. See
Commonwealth v. Robinson, 864 A.2d 460, 480 n.28 (Pa. 2004), quoting
Ruggero J. Aldisert, The Appellate Bar: Professional Competence and
Professional Responsibility–A View From the Jaundiced Eye of the Appellate
Judge, 11 Cap. U.L. Rev. 445, 458 (1982) (emphasis in original) (“when I
read an appellant’s brief that contains ten or twelve points, a presumption
arises that there is no merit to any of them.”).
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court.” Commonwealth v. Starr, 664 A.2d 1326, 1331 (Pa. 1995). Yet,
as our Supreme Court explained:
When determining whether the coordinate jurisdiction rule
applies . . . [the court] looks to where the rulings occurred
in the context of the procedural posture of the case. . . .
Where the motions differ in kind, as preliminary objections
differ from motions for judgment on the pleadings, which
differ from motions for summary judgment, a judge ruling
on a later motion is not precluded from granting relief
although another judge has denied an earlier motion.
However, a later motion should not be entertained or
granted when a motion of the same kind has previously
been denied, unless intervening changes in the facts or the
law clearly warrant a new look at the question.
Riccio v. Am. Republic Ins. Co., 705 A.2d 422, 425 (Pa. 1997) (internal
quotations and citations omitted).
In this case, the coordinate jurisdiction rule obviously did not prevent
the trial court from concluding that Appellant’s breach of contract claim was
barred by the statute of limitations: the trial court’s conclusion followed a
trial and was based upon the factual determinations the trial court made
during the trial. This is in contrast to the two prior rulings, which were made
in response to a motion for judgment on the pleadings and a motion for
summary judgment – where no fact-finding occurred or was permitted.
Therefore, since the trial court’s final statute of limitations ruling
“occurred in the context of [a different] procedural posture of the case,” the
trial court’s ruling did not violate the coordinate jurisdiction rule. Appellant’s
claim to the contrary is frivolous.
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Appellant’s claims “2(a)” and “2(b)” contend that the trial court erred
when it precluded his proposed witnesses from testifying at the statute of
limitations bench trial because, Appellant claims, the witnesses would have
provided rebuttal testimony and would have “given testimony relevant to the
issue of fraud as tolls [sic] the statute of limitations.” Appellant’s Brief at
35-36. However, within Appellant’s brief to this Court, Appellant has not:
explained the substance of his proposed witnesses’ testimony; explained
how the proposed witnesses would have qualified as rebuttal witnesses; or
explained how their testimony would have been “relevant to the issue of
fraud as tolls [sic] the statute of limitations.” See id. Instead, Appellant
simply refers this Court to pages in the reproduced record, which, Appellant
declares, constitute a summary of his witnesses’ proposed testimony. Id.
In essence, Appellant requests this Court to construct his appellate
argument for him. We will not do so. Appellant’s second numbered claim is
thus waived. See Rabatin v. Allied Glove Corp., 24 A.3d 388, 396 (Pa.
Super. 2011) (the Superior Court “may not act as counsel for an appellant
and develop arguments on his behalf”).
Third, Appellant claims that the trial court erred in ordering a
bifurcated bench trial “only two days before [Appellant] was scheduled to
pick a jury.” According to Appellant, the trial court’s scheduling order did
not provide Appellant with “sufficient time to adequately prepare for either
the bench trial or the jury trial” and the trial court thus “depriv[ed Appellant]
of his right to a fair trial.” Appellant’s Brief at 37. This claim is waived, as
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Appellant did not request a continuance from the trial court. Appellant thus
did not provide the trial court with any notice that the scheduling order failed
to provide Appellant with sufficient time to prepare for trial. Pa.R.A.P.
302(a) (“[i]ssues not raised in the lower court are waived and cannot be
raised for the first time on appeal”); see also Commonwealth v.
Kennedy, 959 A.2d 916, 924-925 (Pa. 2008) (holding that counsel’s failure
to request a continuance waives the issue on appeal).
Within Appellant’s fourth, fifth, and sixth numbered claims on appeal,
Appellant contends that the trial court erred when it determined that the
statute of limitations barred Appellant’s breach of contract claim; determined
that Defendant Rajaratnam’s fraud did not toll the statute of limitations;
and, refused to allow a jury to consider the statute of limitations and fraud
issues. Appellant’s Brief at 38-48. These claims fail.
At the outset, Appellant’s claim that the trial court erred when it
refused to allow a jury to consider the statute of limitations and fraud issues
is waived, as Appellant did not object to the trial court’s decision to act as
the fact-finder on those issues. Pa.R.A.P. 302(a) (“[i]ssues not raised in the
lower court are waived and cannot be raised for the first time on appeal”).
Appellant also contends that the evidence was insufficient to support
the trial court’s determinations that the statute of limitations barred
Appellant’s breach of contract claim and that Defendant Rajaratnam’s fraud
did not toll the statute of limitations. Appellant’s contentions are meritless.
As the trial court thoroughly explained:
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Despite the numerous filings by [Appellant], the crux of this
case is whether or not [Appellant] timely filed a breach of
contract action against [Defendant Rajaratnam]. The
statute of limitations for a contract action is [four] years.
42 Pa.C.S.A. § 5525. [Appellant] failed to bring his cause of
action within the requisite time period and no action or
inaction on the part of [Defendant Rajaratnam] tolled the
limitation period.
The record reveals that although it may have been earlier,
at the very least [Appellant] was aware that [Defendant
Rajaratnam] was not abiding by the terms of their
agreement as of June 19, 2006. Accordingly, an action
against [Defendant Rajaratnam] should have been initiated
no later than June 19, 2010. The complaint in this matter
was not filed until May 9, 2012, nearly two years after the
limitation period had expired.
...
Per the testimony and documentary evidence presented at
trial, the parties entered into an agreement in October []
1995 and managed the [P]roperty jointly until [Appellant]
returned to India in 1997. Once [Appellant] returned to
India, he did not receive rental income and was advised that
the [P]roperty was operating at a loss. [Appellant]
repeatedly e-mailed [Defendant Rajaratnam] for an
accounting and updates regarding the [P]roperty and
received sporadic responses from [Defendant Rajaratnam]
until the sale of the [P]roperty.
According to [Appellant’s] evidence, he e-mailed [Defendant
Rajaratnam] approximately [20] times between June 28,
2002 and July 13, 2006. The majority of the
communications were requesting rental and expenditure
information on the [P]roperty.
The [P]roperty was sold on February 27, 2006, for
$325,000[.00]. [Defendant Rajaratnam] wired [Appellant’s]
account in India $24,577.55 on May 10, 2006. On June 16,
2006, [Appellant e-mailed Defendant Rajaratnam,]
challenging the amount that had been wired, but confirming
its receipt. In the e-mail, [Appellant] states that “This
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amount is too little considering the large equity after
purchase and rehabilitation of the property.”[fn.1]
[fn.1.] At this point, [Appellant] had received his initial
investment with 12% interest, had been reimbursed for
his costs in rehabbing the [P]roperty, had not paid any
additional funds to maintain the [P]roperty[,] and had
received $24,577.55 from the sale proceeds.
[Appellant] again e-mailed [Defendant Rajaratnam] on June
19, 2006, asserting that at a minimum, he was entitled to
approximately $130,000[.00] from the sale. He also
contested that the sale was undertaken without his written
authorization as required by the contract. During this same
time frame, [Appellant] made an inquiry to a friend who
was a lawyer since he was concerned about his status as an
officer of the corporation. He was told he was not listed as
one.
[The trial court] finds that the statute of limitations ran on
June 19, 2010, four years from the date that [Appellant]
first challenged the amount of proceeds that he had
received from the sale of his property.
...
[Appellant’s] insistence that without an accounting he could
not know that he was injured and that actual knowledge of
[Defendant Rajaratnam’s] fraud was required before he was
bound to pursue his claim is both disingenuous and contrary
to what the law requires of [Appellant]. [Defendant
Rajaratnam’s] failure to provide an accounting only
addresses the extent of [Appellant’s] damages[,] not the
fact that a breach had occurred.
Trial Court Opinion, 6/18/14, at 7 and 13-14 (emphasis in original) (some
internal capitalization omitted).
The evidence thoroughly supports the trial court’s factual conclusion
that “at the very least [Appellant] was aware that [Defendant Rajaratnam]
was not abiding by the terms of their agreement as of June 19, 2006.” Trial
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Court Opinion, 6/18/14, at 7. Moreover, since the evidence supports the
trial court’s conclusion that Appellant knew, on June 19, 2006, that
Defendant Rajaratnam breached the contract, breached the duties he owed
to Appellant, and did not pay Appellant what was owed, the evidence also
supports the trial court’s conclusion that Defendant Rajaratnam’s alleged
fraud did not toll the running of the statute of limitations beyond June 19,
2010. See Fine v. Checcio, 870 A.2d 850, 861 (Pa. 2005) (“a statute of
limitations that is tolled by virtue of fraudulent concealment begins to run
when the injured party knows or reasonably should know of his
injury and its cause”) (emphasis added). Appellant’s claims fail.
However, Appellant’s next claim on appeal does entitle Appellant to
relief. According to Appellant, the trial court erred when it dismissed his
accounting claim at the pleading stage, based upon the gist of the action
doctrine. We agree. Moreover, since our Supreme Court has held that the
statute of limitations for an accounting claim is six years – and since
Appellant filed his complaint within six years of June 19, 2006 – we conclude
that the trial court’s error in dismissing the accounting claim cannot be
considered harmless. Therefore, we must vacate the trial court’s order in
part and remand for further proceedings.
We have stated:
A preliminary objection in the nature of a demurrer is
properly [sustained] where the contested pleading is legally
insufficient. Preliminary objections in the nature of a
demurrer require the court to resolve the issues solely on
the basis of the pleadings; no testimony or other evidence
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outside of the complaint may be considered to dispose of
the legal issues presented by the demurrer. All material
facts set forth in the pleading and all inferences reasonably
deducible therefrom must be admitted as true.
In determining whether the trial court properly sustained
preliminary objections, the appellate court must examine
the averments in the complaint, together with the
documents and exhibits attached thereto, in order to
evaluate the sufficiency of the facts averred. The impetus
of our inquiry is to determine the legal sufficiency of the
complaint and whether the pleading would permit recovery
if ultimately proven. This Court will reverse the trial court’s
decision regarding preliminary objections only where there
has been an error of law or abuse of discretion. When
sustaining the [preliminary objections] will result in the
denial of claim or a dismissal of suit, [the preliminary
objections may be sustained] only where the case [is] free
and clear of doubt.
Lugo v. Farmers Pride, Inc., 967 A.2d 963, 966 (Pa. Super. 2009)
(internal citations, quotations, and corrections omitted).
Here, the trial court sustained Defendant Rajaratnam’s preliminary
objection in the nature of a demurrer, and dismissed Appellant’s accounting
claim based upon the “gist of the action” doctrine.
The gist of the action doctrine “is designed to maintain the conceptual
distinction between breach of contract claims and tort claims.” eToll Inc. v.
Elias/Savion Advertising, Inc., 811 A.2d 10, 14 (Pa. Super. 2002). It
does so by “preclud[ing] plaintiffs from recasting ordinary breach of contract
claims into tort claims.” Id. Thus, “[w]hen a plaintiff alleges that the
defendant committed a tort in the course of carrying out a contractual
agreement, Pennsylvania courts examine the claim and determine whether
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the ‘gist’ or gravamen of [the action] sounds in contract or tort.” Erie Ins.
Exch. v. Abbott Furnace Co., 972 A.2d 1232, 1238 (Pa. Super. 2009).
This Court has explained:
Although they derive from a common origin, distinct
differences between civil actions for tort and contractual
breach have been developed at common law. Tort actions
lie for breaches of duties imposed by law as a matter of
social policy, while contract actions lie only for breaches of
duties imposed by mutual consensus agreements between
particular individuals. To permit a promisee to sue his
promisor in tort for breaches of contract inter se would
erode the usual rules of contractual recovery and inject
confusion into our well-settled forms of actions.
However, a breach of contract may give rise to an
actionable tort where the wrong ascribed to the defendant is
the gist of the action, the contract being collateral. The
important difference between contract and tort claims is
that the latter lie from the breach of duties imposed as a
matter of social policy while the former lie from the breach
of duties imposed by mutual consensus. In other words, a
claim should be limited to a contract claim when the parties’
obligations are defined by the terms of the contracts, and
not by the larger social policies embodied by the law of
torts.
Hart v. Arnold, 884 A.2d 316, 339-340 (Pa. Super. 2005) (internal
quotations, citations, corrections, and emphasis omitted).
However, an action for an accounting does not sound in tort. Rather,
as pleaded in Appellant’s complaint, an accounting is an equitable action that
is “defined as an adjustment of the accounts of the parties and a rendering
of a judgment for the balance ascertained to be due.” 1 Am. Jur. 2d
Accounts & Accounting § 52; 14 Standard Pennsylvania Practice 2d § 81:1.
Therefore, by definition, the gist of the action doctrine cannot preclude
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Appellant’s claim for an accounting – and, on this basis alone, the trial court
should have overruled Defendant Rajaratnam’s preliminary objections to the
accounting claim. Further, since Defendant Rajaratnam did not seek the
dismissal of Appellant’s accounting claim on any basis other than the gist of
the action doctrine, the trial court erred when it dismissed Appellant’s
accounting claim.
Further, as our Supreme Court held, an action for an equitable
accounting “is subject to the six-year [statute of] limitation.” Ebbert v.
Plymouth Oil Co., 34 A.2d 493, 495-496 (Pa. 1943).4 Therefore, since the
trial court concluded that, “at the very least [Appellant] was aware that
____________________________________________
4
In Ebbert, our Supreme Court expressly held that an equitable accounting
action is subject to a six-year statute of limitations. Ebbert, 34 A.2d at
495-496. The Ebbert Court reached this conclusion by first recognizing the
legal principle that “equity will frequently adopt and apply the statute of
limitations which controls analogous proceedings at law.” Id. at 495. The
Ebbert Court then held that, since an action for an accounting at law is “on
the same plane, in practice, as an action in assumpsit,” and since an action
in assumpsit was subject to the six-year statute of limitations, an equitable
account action was also subject to the six-year statute of limitations. Id. at
495-496.
Obviously, much has changed since Ebbert was decided. This includes the
fact that, today, the vast majority of contractual claims are subject to the
four-year statute of limitations, which is set forth in 42 Pa.C.S.A. § 5525.
Nevertheless, since the Ebbert Court expressly held that an equitable
accounting claim is subject to a six-year statute of limitations, we must
conclude that Appellant’s current equitable accounting claim is subject to a
six-year statute of limitations. See Fiore v. White, 757 A.2d 842, 847 (Pa.
2000) (“[u]ntil a court of greater jurisdiction reverses a decision of a lower
court, or a court of equal jurisdiction overrules a decision, the law emanating
from the decision remains law”).
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[Defendant Rajaratnam] was not abiding by the terms of their agreement as
of June 19, 2006” – and since Appellant initiated the current action within six
years of that date – Appellant’s accounting claim is not time-barred. The
trial court’s error in this case was thus not harmless. We must, therefore,
vacate the portion of the trial court’s order that dismissed Appellant’s
accounting claim and remand for further proceedings.
Next, Appellant claims that the trial court erred when it dismissed his
claims for breach of fiduciary duty, fraud, and commingling at the pleading
stage. Appellant’s Brief at 50-63. Yet, even if we were to assume that the
trial court erred when it dismissed these claims, the trial court’s error would
be harmless. This is because the trial court already arrived at the factual
conclusion that Appellant knew – as of June 19, 2006 – that Defendant
Rajaratnam wronged him by breaching the duties he owed to Appellant and
refusing to pay to Appellant what was owed. Since Appellant’s breach of
fiduciary duty claim is subject to the two-year statute of limitations set forth
in 42 Pa.C.S.A. § 5524(7) – and since Appellant’s separately-stated claims
for “fraud” and “commingling” are mere subcategories of Appellant’s breach
of fiduciary duty claim – Appellant’s claims are all barred by the applicable,
two-year statute of limitations. Therefore, even if the trial court erred when
it dismissed Appellant’s claims for breach of fiduciary duty, fraud, and
commingling, the error is harmless and does not entitle Appellant to relief.
Appellant’s claims thus fail. See Donnelly v. Bauer, 720 A.2d 447, 454
(Pa. 1998) (an appellate court “may affirm [the] decision [of the] court
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below on any ground, without regard to [the] ground[] which the court
below relied”).
For Appellant’s eleventh numbered clam on appeal, Appellant argues
that the trial court erred when it refused to strike Defendant Rajaratnam’s
untimely preliminary objections. Appellant’s Brief at 65-67. This claim is
waived, since Appellant did not file preliminary objections to Defendant
Rajaratnam’s preliminary objections. Instead, Appellant simply filed a
“response” to the preliminary objections – and Appellant’s “response”
neither contained a notice to plead nor asserted that Appellant was
prejudiced by Defendant Rajaratnam’s untimely filing. Appellant’s clam on
appeal is thus waived. See Button v. Button, 548 A.2d 316, 318 (Pa.
Super. 1988) (the failure of an opposing party to file preliminary objections
to improper or faulty preliminary objections waives the defect); see also
Peters Creek Sanitary Auth. v. Welch, 681 A.2d 167, 170 (Pa. 1996)
(holding that Pennsylvania Rule of Civil Procedure 1026 “is not mandatory
but permissive. [The Supreme Court] has held that late pleadings may be
filed if the opposite party is not prejudiced and justice requires. Much must
be left to the discretion of the lower court”) (internal quotations and citations
omitted).
Finally, Appellant claims that the trial court erred when – following the
trial – the trial court denied Appellant’s “motion to amend the pleadings” so
that Appellant could re-plead his claims for breach of fiduciary duty, fraud,
and commingling (which were the claims that the trial court dismissed in
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response to Defendant Rajaratnam’s preliminary objections). This Court
already held that the trial court erred when it dismissed Appellant’s claim for
an accounting. Further, this Court also held that, even if the trial court erred
in dismissing Appellant’s claims for breach of fiduciary duty, fraud, and
commingling, the error is harmless, as the claims are barred by the two-year
statute of limitations. Therefore, Appellant’s final claim on appeal does not
entitle Appellant to relief.
Judgment vacated in part. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/6/2015
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