J-A27024-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MARK A. REARICK, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
ELDERTON STATE BANK,
Appellee No. 1769 WDA 2014
Appeal from the Order Entered October 24, 2014
In the Court of Common Pleas of Armstrong County
Civil Division at No(s): 1615-2012
MARK A. REARICK, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
ELDERTON STATE BANK,
Appellee No. 1770 WDA 2014
Appeal from the Order Entered September 24, 2014
In the Court of Common Pleas of Armstrong County
Civil Division at No(s): 1615-2012
BEFORE: BOWES, OLSON & STABILE, JJ.
MEMORANDUM BY OLSON, J.: FILED NOVEMBER 19, 2015
Appellant, Mark A. Rearick, appeals from the orders entered on
September 24, 2014 and October 24, 2014, sustaining preliminary
objections complaint filed by Elderton State Bank (ESB) and dismissing
Appellant’s complaint. Upon review, we affirm.
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We briefly set forth the facts and procedural history of this case as
follows.1 This case concerns the development of a commercial real estate
venture, generally referred to as the Saltwork Project, in Elderton,
Pennsylvania. In 2006, Appellant secured a $205,000.00 loan from ESB,
secured by the property and guaranteed by Appellant. In July 2007, ESB
loaned Appellant an additional $443,000.00 to begin construction. Appellant
and ESB agreed to expand the Saltwork Project from approximately 11,000
square feet of rental space to just under 16,000 square feet. In January
2008, ESB agreed to lend Appellant a total of $1,200,000.00 and Appellant
secured the loan with several unrelated residential properties. Appellant
transferred these properties to ESB via deeds in lieu of foreclosure.2 By the
end of 2008, the Saltwork Project was two-thirds completed when Appellant
requested another $1,000,000.00 to finish construction. ESB would not lend
additional funds because Appellant had received the bank’s maximum credit
limit. In October 2008, ESB recommended an investor, Tom Smith, to
Appellant. Smith loaned Appellant $875,000.00 and the Saltwork Project
was completed.
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1
A more detailed account of this case may be found in this Court’s prior
memorandum filed on July 23, 2014. See Rearick v. Elderton State
Bank, 2014 Pa. Super. 157.
2
Appellant owned another residential property that he also used to secure
the loans for the Saltwork Project. However, this property was not
transferred through deeds in lieu of foreclosure. As discussed infra, ESB
later filed a complaint against Appellant to foreclosure on this property.
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In September 2009, Appellant defaulted on his loans citing poor
economic conditions and low rental rates. Prior to default, however, on June
1, 2009, ESB executed the deeds in lieu of foreclosure on the residential
properties used by Appellant to secure the Saltwork Project loan. In
October 2010, Smith purchased the Saltwork Project at auction for
$450,000.00; the Saltwork Project was appraised at approximately
$1,450,000.00. Thereafter, in January 2011, ESB filed an action in
mortgage foreclosure on the residential property owned by Appellant, used
to secure the ESB loan, which was not one of the properties transferred
through deeds in lieu of foreclosure. In June 2012, the trial court granted
summary judgment for ESB in the mortgage foreclosure action. Appellant
did not appeal that decision.
On October 24, 2012, Appellant filed a complaint against ESB, alleging
claims for breach of the implied covenant of good faith and fair dealing,
breach of fiduciary duty, alter ego, and negligence. On December 13, 2012,
ESB filed preliminary objections to the complaint. In particular, ESB
demurred based on res judicata on the theory that Appellant should have
raised his claims in the earlier foreclosure action. The trial court agreed and
sustained ESB’s preliminary objection on res judicata grounds, concluding
that the substance of Appellant’s claims could, and therefore should, have
been raised in the earlier foreclosure action. The trial court dismissed ESB’s
remaining preliminary objections as moot. On appeal, after a lengthy
discussion regarding permissive counterclaims in a mortgage foreclosure
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action, we remanded the matter for the trial court to rule on Appellant’s
remaining preliminary objections or to allow Appellant to amend his
complaint.
On September 24, 2014, by order and accompanying opinion, the trial
court sustained ESB’s remaining preliminary objections and dismissed
Appellant’s complaint. On October 14, 2014, without leave of court,
Appellant filed an amended complaint. He then filed a motion for leave of
court and an amended complaint on October 24, 2014. The trial court
entered an order on October 24, 2014 denying Appellant’s request for leave
to file an amended complaint. This timely appeal followed.3
On appeal, Appellant presents the following issues for our review:
1. Whether the trial court erred when it, after sustaining
ESB’s preliminary objections and dismissing [Appellant’s]
____________________________________________
3
On October 24, 2014, Appellant filed a notice of appeal from the order
entered on September 24, 2014 granting ESB’s preliminary objections and
dismissing Appellant’s complaint. On that same date, Appellant also filed a
notice of appeal from the order entered on October 24, 2014, denying
Appellant’s motion to amend his complaint. On October 27, 2014, the trial
court ordered Appellant to file a concise statement of errors complained of
on appeal pursuant to Pa.R.A.P. 1925(b) for both matters. On November
14, 2014, Appellant filed separate Rule 1925(b) statements. The trial court
issued an opinion pursuant to Pa.R.A.P. 1925(a) on December 11, 2014. In
that opinion, the trial court addressed the issues pertaining to Appellant’s
request to amend his complaint and relied upon its earlier decision, issued
on September 24, 2014, for its rationale in sustaining preliminary objections
and dismissing Appellant’s complaint. Appellant terms the instant
proceedings as “consolidated appeals.” In fact, Appellant simply challenges
two separate orders in the same case. Accordingly, we refer to these
proceedings as a single appeal.
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[c]omplaint, did not allow [Appellant] to amend the
[c]omplaint.
2. Whether the trial court erred when it denied [Appellant’s]
request to file an amended complaint.
3. Whether in the course of disposing of ESB’s preliminary
objections to count I of [Appellant’s] [c]omplaint, the
trial court erred when it determined that [Appellant]
failed to plead facts sufficient to establish that ESB owed
[Appellant] a duty of good faith and fair dealing.
4. Whether in the course of disposing of ESB’s preliminary
objections to count I of [Appellant’s] [c]omplaint, the
trial court erred when it determined that [Appellant]
failed to plead facts sufficient to establish that ESB could
have breached a duty of good faith and fair dealing that
it owed to [Appellant].
5. Whether in the course of disposing of ESB’s preliminary
objections to count II of [Appellant’s] [c]omplaint, the
trial court erred when it determined that [Appellant]
failed to plead facts sufficient to establish that ESB owed
[Appellant] a fiduciary duty.
6. Whether in the course of disposing of ESB’s preliminary
objections to count II of [Appellant’s] [c]omplaint, the
trial court erred when it determined that for [Appellant]
to advance a cause of action for breach of fiduciary duty,
[Appellant] must plead facts sufficient to prove that
Thomas Smith was ESB’s agent, expressly or implicitly
authorized to make decisions and take actions binding on
ESB.
7. Whether in the course of disposing of ESB’s preliminary
objections to count II of [Appellant’s] [c]omplaint, the
trial court erred when it determined that [Appellant]
failed to plead facts sufficient to establish that Thomas
Smith was ESB’s agent, expressly or implicitly authorized
to make decisions and take actions binding on ESB.
8. Whether in the course of disposing of ESB’s preliminary
objections to count III of [Appellant’s] [c]omplaint, the
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trial court erred in determining that the alter ego theory
of liability is inapplicable to this case.
9. Whether in the course of disposing of ESB’s preliminary
objection to count III of [Appellant’s] [c]omplaint, the
trial court erred in determining that [Appellant] did not
plead facts sufficient to establish a prima facie case for
alter ego liability.
10. Whether in the course of disposing of ESB’s preliminary
objections to count IV of [Appellant’s] [c]omplaint, the
trial court erred in determining that [Appellant’s] claim
for negligence is barred by the economic loss doctrine.
11. Whether in the course of disposing of ESB’s preliminary
objections to count IV of [Appellant’s] [c]omplaint, the
trial court erred in determining that [Appellant] did not
plead facts sufficient to establish a prima facie case for
negligence.
Appellant’s Brief at 4-5.
Our review of a challenge to a trial court's decision to sustain
preliminary objections is guided by the following standard:
Our standard of review of an order of the trial court
overruling or [sustaining] preliminary objections is to
determine whether the trial court committed an error of
law. When considering the appropriateness of a ruling on
preliminary objections, the appellate court must apply the
same standard as the trial court.
Preliminary objections in the nature of a demurrer test the
legal sufficiency of the complaint. When considering
preliminary objections, all material facts set forth in the
challenged pleadings are admitted as true, as well as all
inferences reasonably deducible therefrom. Preliminary
objections which seek the dismissal of a cause of action
should be sustained only in cases in which it is clear and
free from doubt that the pleader will be unable to prove
facts legally sufficient to establish the right to relief. If any
doubt exists as to whether a demurrer should be sustained,
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it should be resolved in favor of overruling the preliminary
objections.
Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011) (citation
omitted).
We have reviewed the certified record, the parties’ briefs, the relevant
law, and the trial court’s opinion entered on September 24, 2014. That
opinion thoroughly and accurately disposes of Appellant’s issues regarding
ESB’s preliminary objections. Thus, we adopt that decision as our own. We
briefly recount the trial court’s determinations here.
First, the trial court determined Appellant failed to present sufficient
allegations of fact to establish a claim for breach of the contractual duty of
good faith and fair dealing, relying upon this Court’s decisions in Creeger
Brick & Bldg. Supply Inc. v. Mid-State Bank & Trust Co., 560 A.2d 151,
153 (Pa. Super. 1989) and Cable & Associates Ins. Agency, Inc. v.
Commercial Nat. Bank of Pennsylvania, 875 A.2d 361, 362 (Pa. Super.
2005). The trial court noted that Appellant did not aver ESB violated the
terms of any executed loan documents, made specific misrepresentations, or
committed fraud. Moreover, the trial court determined that Appellant, not
ESB, decided to expand the Saltwork Project and requested additional
funding. Additionally, the trial court opined Appellant failed to set forth facts
that gave rise to ESB’s independent duty of good faith, based solely upon
Appellant’s unsubstantiated allegation that his family had done business with
ESB for more than 50 years. Thus, the trial court determined Appellant had
not set forth a viable claim for breach of the contractual duty of good faith
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and fair dealing as a matter of law and sustained ESB’s demurrer on this
count of Appellant’s complaint. We discern no legal error or abuse of
discretion.
Next, the trial court examined ESB’s preliminary objection to
Appellant’s breach of fiduciary claim. The trial court determined Appellant
failed to present facts showing that ESB directly controlled Appellant’s
business decisions or managed the funds used to finance the construction of
the Saltwork Project. It further concluded Appellant failed to plead facts
sufficient to establish an agency relationship between ESB and Smith.
Instead, Appellant only alleged that Smith acted as an independent investor
who rendered opinions regarding construction and possible tenants. The
trial court found there was no indication that ESB or Smith managed the
daily operations of the Saltwork Project. Thus, the trial court sustained
ESB’s demurrer to Appellant’s breach of fiduciary claim. Again, we discern
no error of law or abuse of discretion.
Regarding negligence, the trial court concluded Appellant’s claim was
barred by the economic loss doctrine, because no cause of action exists for
negligence that results solely in economic damages unaccompanied by
physical injury or property damage. Here, Appellant’s alleged damages
included only the loss of his economic investment in property. Moreover,
citing our decision on remand, the trial court held that Appellant’s claim that
ESB frivolously sold off Appellant’s properties, or that Smith subsequently
acquired properties improperly, should have been raised during the
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mortgage foreclosure action. Thus, the trial court determined Appellant’s
negligence claim was barred by the economic loss doctrine. We agree.
Finally, with regard to Appellant’s alter ego claim, the trial court found
that the claim was largely duplicative of Appellant’s fiduciary duty claim.
Moreover, it noted the alter ego theory is a means of piercing the corporate
veil and assessing liability for the acts of a corporation against an equity
holder in the corporation. The trial court opined that there were no
allegations that Appellant or the Saltwork Project were themselves corporate
entities or that Appellant claimed that ESB shareholders were responsible for
his damages. Thus, the trial court sustained ESB’s preliminary objection in
the nature of a demurrer to Appellant’s claim under the alter ego theory of
liability. Again, we discern no abuse of discretion or error of law.
We turn, now, to Appellant’s claims regarding the trial court’s denial of
his request to file an amended complaint. Recently, our Court has stated:
Even where a trial court sustains preliminary objections on
their merits, it is generally an abuse of discretion to dismiss
a complaint without leave to amend. There may, of course,
be cases where it is clear that amendment is impossible and
where to extend leave to amend would be futile....
However, the right to amend should not be withheld where
there is some reasonable possibility that amendment can be
accomplished successfully. In the event a demurrer is
sustained because a complaint is defective in stating a
cause of action, if it is evident that the pleading can be
cured by amendment, a court may not enter a final
judgment, but must give the pleader an opportunity to file
an amended pleading....
Nevertheless, a defective pleading that cannot be cured by
amendment is appropriately dismissed upon a demurrer.
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Juszczyszyn v. Taiwo, 113 A.3d 853, 856 (Pa. Super. 2015) (internal
citations omitted).
Here, in its December 11, 2014 opinion, the trial court determined
Appellant was not entitled to amend his complaint. First, the trial court
deduced that Appellant did not request leave of court prior to filing his first
amended complaint. Pursuant to Pa.R.Civ.P. 1028(e), the trial court
concluded that Appellant failed to file a motion for leave within 20 days of
the order dismissing his complaint and, thus, his request to amend was
untimely. The trial court further declared Appellant never presented a
proper and timely filed motion for leave. Instead, without advance notice,
Appellant presented a single motion to file the prior amended complaint at
the same time he filed a second amended complaint. Finally, and most
importantly, the trial court stated that on October 24, 2014, at motions
court, Appellant’s counsel specifically requested, with Appellant’s express
written consent, that the trial court deny the motion to amend. Thus, the
trial court concluded that Appellant could hardly complain about the entry of
an order that was requested and to which he consented. In sum, the trial
court concluded Appellant’s motion to amend his complaint was untimely,
procedurally defective, and denied at Appellant’s request with his express
consent. Upon review, we agree.
Therefore, we conclude there has been no error or abuse of discretion
in this case and that the trial court’s September 24, 2014 and December 11,
2014 opinions meticulously, thoroughly, and accurately dispose of
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Appellant’s issues on appeal. Therefore, we affirm on the basis of the trial
court’s opinions and adopt them as our own. Because we have adopted the
trial court’s opinions, we direct the parties to include the trial court’s
opinions in all future filings relating to our examination of the merits of this
appeal, as expressed herein.
Orders affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/19/2015
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