Ronald Appel v. Gerald Kaufman

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

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No. 11-1879
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RONALD M. APPEL; RITA APPEL; NANETTE APPEL-BLOOM,
INDIVIDUALLY AND ON BEHALF OF A
CLASS OF PERSONS SIMILARLY SITUATED,
Appellants

v.

GERALD S. KAUFMAN; GERALD S. KAUFMAN CORPORATION,
A DELAWARE CORPORATION; CAROL F. KAUFMAN; ARIES CAPITAL
INCORPORATED, AN ILLINOIS CORPORATION; NORWEST
BANK MINNESOTA, A NATIONAL ASSOCIATION

__________

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-08-cv-00392 )
District Judge: The Honorable Mary A. McLaughlin

Submitted Under Third Circuit L.A.R. 34.1(a)
January 10, 2012

BEFORE: FUENTES, JORDAN, and NYGAARD, Circuit Judges

(Filed: April 26, 2012)

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OPINION OF THE COURT
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NYGAARD, Circuit Judge

Because this opinion is not precedential, we write briefly only for the parties. The

suit arises from a 1959 Agreement concerning the Terminal Commerce Building in

Philadelphia, establishing a tenancy-in-common among approximately 600 investors and

naming five nominees who held title to the property and managed it. Ronald M. Appel,

Nanette Appel-Bloom, and Rita Appel (collectively “Appels”), who inherited interests in

the property of two original nominees, appeal the District Court’s dismissal of their civil

suit that was brought individually and on behalf of a class. We will affirm.

The Appels filed suit on November 27, 2007 alleging fraud and breach of

fiduciary duty by Gerald S. Kaufman, the son of another nominee, who also held an

interest in the property and manages it. The suit sought damages for fraud and breach of

fiduciary duty (Count 1), an accounting and appointment of a receiver (Count 2), a

declaratory judgment invalidating deeds granting Kaufman and his corporation title to the

property (Count 3), and a partition requiring the sale of the property and a distribution of

the proceeds to the tenants-in-common (Count 4).1

On appeal, the Appels assert that the District Court improperly denied their Rule

56(f) motion for a continuance to depose Kaufman. They also challenge the District

Court’s conclusion that Count 1 (their claim of fraud and breach of fiduciary duty) and

Count 3 (their claim for a declaration invalidating certain deeds) were barred by a statute

1
Counts 1, 2, and 4 also named as defendants Gerald S. Kaufman Corporation and the
wife of Gerald S. Kaufman, Carol F. Kaufman. Count 3 also named as defendants Aries
Capital Incorporated and Norwest Bank Minnesota, now known as Wells Fargo Bank.
We refer to these defendants collectively as “Wells Fargo, et al.”
2
of limitation. They argue that the District Court erred by holding that their claims for an

accounting and receivership were barred by either a statute of limitation or laches.

Finally, they appeal the District Court’s decision that the 1959 Agreement prohibited

their claim for partition of the property. We will address each issue separately.

The Appels claim that the statute of limitation did not run against their fraud and

breach of fiduciary duty claim (Count 1), and is inapplicable to their declaratory

judgment claim (Count 3). Breach of fiduciary duty and fraud are governed by a two-

year statute of limitation. 42 Pa.C.S. § 5524. However, alleging that there is no evidence

of an express repudiation of the trust by Kaufman, the Appels attempt to side-step section

5524, arguing that it is settled law that a statute of limitation cannot run in favor of a

trustee until such a repudiation occurs. Yet, the Appels ignore the fact that they accuse

Kaufman of fraud and breach of fiduciary duty, acts that—if true—would repudiate the

trust. See Pennsylvania Co. for Insurances on Lives and Granting Annuities, v. Ninth

Bank & Trust Co., 158 A. 251, 253 (Pa. 1932).

In support of its conclusion that a time bar applies, the District Court detailed

correspondence between the Appels and Kaufman dating from 1997 through March 2001

that accuse Kaufman of the very same misconduct that comprises their claims of fraud

and breach of fiduciary duty in the instant suit. This substantiates their undisputed

knowledge of such acts at that time. Given that they did not file suit until 2007, the

District Court did not err by applying the two-year statute of limitation to Count 1.

3
Likewise, since the declaratory relief the Appels sought in Count 3 was predicated upon

the fraud claim at law, the District Court properly dismissed this claim at equity as well.2

As to the claims for an accounting and receivership, the District Court noted that

the Appels first requested such an accounting on January 18, 2001 and it also detailed

Kaufman’s responses to their demands. Moreover, there is no dispute that witnesses died

and others lost recall of relevant facts while the Appels sat on their claims. We agree

with the District Court that, even with every reasonable inference drawn in favor of the

Appels, the undisputed record supports conclusions that the Appels failed to exercise due

diligence and that prejudice to the defendants has been adequately demonstrated. The

District Court correctly decided that laches bars Count 2 of the complaint.

Regarding Count 4, assertions of the District Court’s error have no merit. The

District Court properly exercised its authority and correctly concluded that Paragraph 3 of

the 1959 Agreement is valid and binding. Therefore, we concur that the Agreement

precludes the instant claim.

2
To the extent that the Appels base their declaratory judgment claim on their alleged
2008 discovery of two deeds and a mortgage, uncontroverted evidence shows they had
knowledge of a mortgage no later than March 2001, substantiating a conclusion that the
defendants failed to exercise due diligence to discover these documents of public record
from 1999 and earlier. Additionally, as to the declaratory judgment claim against Wells
Fargo, et al., while they are not named in the fraud/breach of fiduciary duty claim, a bar
applies because any declaration invalidating the deeds or mortgage would be predicated
upon the alleged fraud by Kaufman. Moreover, even if—as the Appels suggest—the suit
is construed as a quiet title action, laches would apply for substantially the same reasons
raised in our discussion of Count 2 (see infra). See Dorsch v. Jenkins, 365 A.2d 861, 864
(Pa. Super. Ct. 1976). As a result, the District Court properly barred the claim against
Wells Fargo, et al.
4
 The Appels construe the District Court’s decision on their Rule 56(f) motion for a

continuance to depose Kaufman as an ex post facto ruling, occurring after the entry of

summary judgment. They also challenge the District Court’s denial of this motion. They

are mistaken about the timing of the decision because the District Court preceded its

discussion of summary judgment with an analysis of the Rule 56(f) motion.3 Moreover,

we find no abuse of discretion in the District Court’s decision to deny the motion.

Rencheski v. Williams, 622 F.3d 315, 339 (3d Cir. 2010).

Finally, the Appels claim that the District Court relied upon “perjurious”

statements to dismiss this case. The allegations of perjury are thinly veiled attempts to

recharacterize legal arguments raised elsewhere in their suit. Moreover, after reviewing

the District Court’s decision, we conclude that the District Court correctly stated that the

dispute over the affidavit was not material to its decision.4

For all of these reasons, we will affirm the order of the District Court.

3
The written sequence of the District Court’s disposition of the various motions in the
July 29, 2010 order is of no consequence.
4
The Appels’ request for assignment of the case to a different district court judge is
mooted by our decision.
5