Diehl, G. v. The Cutler Group ( 2016 )

J-A11029-16
GLENN AND WENDY DIEHL, H/W AND IN THE SUPERIOR COURT OF
DANIEL AND SUSAN SCOTT, H/W AND PENNSYLVANIA
GAYATHRI AND SRIRAM KRISHNAN, H/W
AND RASHMI RADHAKRISHNAN AND
LISA PARVISKHAN AND JOSEPH AND
ANN WORRELL, H/W
v.
THE CUTLER GROUP, INC.
APPEAL OF: JOSEPH AND ANN WORRELL,
No. 2302 EDA 2015
H/W
Appeal from the Order Entered December 22, 2014
In the Court of Common Pleas of Chester County
Civil Division at No(s): 2010-08568
BEFORE: SHOGAN, J., MUNDY, J., and FITZGERALD, J.*
DISSENTING MEMORANDUM BY MUNDY, J.: FILED JULY 18, 2016
I respectfully dissent from the learned Majority’s decision to affirm the
grant of summary judgment in favor of Cutler. In my view, the Worrells’
claim under the UTPCPL may proceed to trial.
As the Majority notes, a private cause of action is explicitly authorized
by the UTPCPL and our Supreme Court has instructed that we construe the
UTPCPL liberally. See generally Majority Memorandum at 6-7; 73 P.S.
§ 201-9.2(a); Fazio v. Guardian Life Ins. Co. of Am., 62 A.3d 396, 405
____________________________________________
*
Former Justice specially assigned to the Superior Court.
J-A11029-16
(Pa. Super. 2012) (citation omitted; emphasis added), appeal denied, 72
A.3d 604 (Pa. 2013).
The Majority further cites the following portion of the Worrells’
complaint, alleging Cutler engaged in the following unfair or deceptive trade
practices.
134. Due to the defective conditions set forth [in the
complaint, Cutler] has violated the [UTPCPL], in that
[Cutler]:
a. represented that goods or services
have sponsorship, approval,
characteristics, ingredients, uses,
benefits, or quantities that they do not
have;
b. represented that goods or services
are of a particular standard, quality or
grade when they were another;
c. failed to comply with the terms of a
written guarantee or warranty given to
the buyer at, prior to, or after a contract
for the purchases of goods or services;
and
d. made improvements on tangible,
real or personal property, of a nature or
quality inferior to or below the standard
of that agreed to in writing.
The Worrells’ Amended Complaint, 2/25/11, at ¶ 134; see also generally
73 P.S. § 201-2(4)(v), (vii), (xiv), (xvi). Cutler’s motion for summary
judgment solely argued that the Worrells’ claim under the UTPCPL was
precluded as a matter of law, because there was an admitted lack of privity
between Cutler and the Worrells. Cutler’s Second Motion for Summary
-2-
J-A11029-16
Judgment, 9/9/14, at ¶¶ 2-3. Cutler’s summary judgment motion relied
exclusively on our Supreme Court’s opinion in Conway v. Cutler Group, 99
A.3d 67 (Pa. 2014), which I discuss infra. Although the Majority agrees that
privity is not required under the UTPCPL, the Court nevertheless affirms the
trial court’s order. I cannot agree for the following reasons.
In Valley Forge Towers S. Condo. v. Ron-Ike Roof Insulators,
Inc., 574 A.2d 641 (Pa. Super. 1990), affirmed, 605 A.2d 798 (Pa. 1992)
(per curiam), this Court confronted the question of whether the UTPCPL
private cause of action requires privity. The Court recognized, as do the
parties here, that in the UTPCPL “there is no express requirement that there
be strict technical privity between the party suing and the party sued.” Id.
at 645. Therefore, this Court proceeded to examine whether, as a matter of
Pennsylvania law, “privity should be deemed to be an implied requirement
for a cause of action under the [UTPCPL.]” Id. (emphasis in original).
To make that determination, the Valley Forge Court extensively
examined three fundamental considerations. First, the Valley Forge Court
noted that the General Assembly enacted the UTPCPL “to substantially
enhance the remedies available to consumers as the result of unfair or
deceptive business practices,” and this intent “weighs heavily against
implying a restrictive requirement which would hinder the act’s remedial
effects, or provide a simple expedient for evasion of its force.” Id. at 646.
Second, the Valley Forge Court looked at how the law of privity had been
-3-
J-A11029-16
“eroded” when applied to claims of fraud. Id. Third, the Valley Forge
Court rejected alternative constructions of the UTPCPL, that in its view would
lead to evasions of liability. Id. at 646-647. Based on these considerations,
this Court rejected the argument that the UTPCPL contains an implied privity
requirement as a matter of law. Id. at 647.
Further, our decision in Woodward v. Dietrich, 548 A.2d 301 (Pa.
Super. 1988), upon which the Valley Forge Court heavily relied, should also
guide the resolution of the instant case. In Woodward, the plaintiffs,
subsequent purchasers of a home, sued the Dietrichs, the sellers of the
home, and Smith, who was an excavator. Id. at 303. The complaint alleged
the “basement had been flooded and damaged two years after they
purchased their home from the Dietrichs[.]” Id. The complaint further
alleged “the defendants … fraudulently misrepresented and concealed the
fact that the [gray] water sewage sewer connection had not been completed
by Smith in the manner indicated in the township records and communicated
to the Woodwards by the Dietrichs during their negotiations relating to their
purchase of the Dietrichs’ residence.” Id.
Smith filed preliminary objections in the nature of a demurrer,
averring that “[t]he plaintiffs are not in privity with defendant Smith.” Id. at
304. The trial court sustained the preliminary objections and dismissed the
complaint against Smith, but this Court reversed. The Woodwards argued
“that the non-installation of the gray water sewer connection was
-4-
J-A11029-16
fraudulently concealed by Smith, and … they reasonably relied on the
misrepresentations made relating to the sewers in purchasing the Dietrichs’
house and that they incurred substantial damages proximately caused by
the concealed non-installation of the gray water sewage sewer connection.”
Id. at 307. This Court concluded that the Woodwards’ reliance “on
misrepresentations relating to the concealed [gray] water sewage sewer
connections,” as alleged, was reasonable. Id. We further held that the
Woodwards’ reliance was foreseeable by Smith.
The Woodwards alleged that as potential subsequent
purchasers their reliance was specially foreseeable.
In our present mobile society, estates in land are
transferred freely and regularly. Thus, while Smith
may not have known that the Dietrichs would sell
their home, the possibility of such a sale during the
useful lifetime of a sewer connection was certainly
quite foreseeable. Cf. Barnhouse v. City of
Pinole, 183 Cal.Rptr. 881, 894 (Cal. Ct. App. 1982)
(the sale of a home to a subsequent purchaser was
certainly foreseeable); Terlinde v. Neely, 271
S.E.2d 768, 770 (S.C. 1980) (the sale of a home to a
subsequent purchaser was clearly foreseeable). If,
as alleged, Smith had concealed the non-installation
of the [gray] water sewage connection from the
Dietrichs, Smith would have had special reason to
foresee that any subsequent purchaser would be
unaware of the material latent defect Smith allegedly
concealed.
Id. at 311 (parallel citations omitted).
The Woodward Court next considered whether the Woodwards’ claim
was precluded because of the conceded lack of privity between Smith and
the Woodwards, who were subsequent, remote purchasers of the home. We
-5-
J-A11029-16
noted that our Supreme Court, as far back as 1931, had “eroded and then
fully abandoned” the defense of privity when it “recognized a general
exception to the strict privity rule for those whom the contractor should
expect, that in the natural course of things, would also be brought into
contact with or use the defective article or structure.” Id. at 314. This
Court ultimately concluded that the admitted lack of privity between Smith
and the Woodwards was not a bar to the Woodwards’ claims, and that those
claims could proceed. Id. at 316.
Instantly, the trial court concluded that the Worrells’ UTPCPL claim
failed based upon the following rationale.
Unlike Valley Forge Towers, there is no
evidence of record at bar to suggest that [Cutler]
had unequivocal notice that the Worrells were the
intended beneficiaries of the warranty. There is no
evidence of record that the Worrells were specifically
intended to rely upon the alleged fraudulent conduct
of [Cutler]. The allegations contained in paragraph
134 of the [a]mended [c]omplaint focus on
representations and warranties given to the Kings,
the original purchasers of the home. Absent any
allegations of fraudulent conduct on the part of
[Cutler] directly involving the Worrells, this claim
cannot go forward.
Trial Court Order, 12/22/14, at 4 n.1. The Majority adopts this rationale,
concluding that a “special relationship” is required under the UTPCPL.
Majority Memorandum at 11-12. I note that privity is defined as “[t]he
connection or relationship between two parties, each having a legally
recognized interest in the same subject matter (such as a transaction,
-6-
J-A11029-16
proceeding, or piece of property).” BLACK’S LAW DICTIONARY 1217 (7th ed.
1999). Furthermore, vertical privity is defined as “[t]he legal relationship
between parties in a product’s chain of distribution (such as a manufacturer
and a seller).” Id. at 1218.
With due respect to the trial court and the Majority, this conclusion is
simply a privity defense cloaked in different language. As discussed above,
this Court held, as a matter of law, that privity is neither an explicit nor
implicit requirement of the UTPCPL. Valley Forge, supra. The Majority
acknowledges this legal tenet, which concedes that the Worrells’ argument is
correct. Majority Memorandum at 11. In my view, given that this Court
agrees with the Worrells as to Cutler’s only argument that it raised to the
trial court, no further inquiry is required. Whether one subscribes to the trial
court’s requirement “of fraudulent conduct on the part of [Cutler] directly
involving the Worrells,” or the Majority’s “special relationship” requirement,
they both have the inescapable effect of requiring the Worrells to show a
“connection or relationship between [Cutler and the Worrells], each having a
legally recognized interest in the same subject matter (such as a
transaction, proceeding, or piece of property).” BLACK’S LAW DICTIONARY
1217 (7th ed. 1999) (emphasis added); Trial Court Order, 12/22/14, at 4
n.1 (emphasis added); see also generally Majority Memorandum at 11-12.
-7-
J-A11029-16
This is tantamount to an implicit privity element, which the Majority
concedes is foreclosed by Valley Forge.1
In addition, I view the trial court’s requirement that the Worrells show
they “were specifically intended to rely upon the alleged fraudulent conduct
of [Cutler]” as too rigid. Trial Court Order, 12/22/14, at 4 n.1. As we noted
in Woodward, with regard to claims of fraudulent misrepresentation,
reliance by a subsequent homeowner need only be “foreseeable.”
Woodward, supra at 311. We observed in 1988 that in “our present
mobile society, estates in land are transferred freely and regularly.” Id.
Certainly, this is also true in 2016. In Woodward, we observed that while
“Smith may not have known that the Dietrichs would sell their home, the
possibility of such a sale during the useful lifetime of a sewer connection was
quite foreseeable.” Id. Instantly, while Cutler may not have known that the
Kings would sell their home, the possibility of such a sale during the useful
____________________________________________
1
Even assuming the Majority’s “special relationship” requirement to be
correct, it is unclear why the Worrells do not meet that requirement. It
appears the Majority arrives at this requirement through language in Valley
Forge Towers, discussing “special” foreseeability, which itself came from
Woodward. Valley Forge Towers, supra at 349, quoting Woodward,
supra at 312-316. As I explained, Woodward concluded that a subsequent
purchaser’s reliance on misrepresentations made by a contractor to the
first purchaser is “specially foreseeable.” Woodward, supra at 310-312.
Respectfully, I believe the Majority is incorrect when it frames the
Woodwards’ argument as pertaining to “misrepresentations made by the
seller[,]” who were the Dietrichs. Majority Memorandum at 11 n.3. The
relevant portion of Woodward’s analysis was “whether the Woodwards
have stated a valid cause of action for fraudulent misrepresentation against
Smith[,]” who was the contractor. Id. at 310.
-8-
J-A11029-16
lifetime of the original stucco cladding system was also foreseeable.
Significantly in Woodward, we held the representations alleged to be made
by Smith to the Dietrichs were reasonably relied upon by the Woodwards.2
See generally Woodward, supra at 310-311.
I recognize that Woodward dealt with claims of fraudulent
misrepresentation and concealment, and not the UTPCPL directly.
Nevertheless, it is axiomatic that the UTPCPL is a consumer protection
statute, in which the General Assembly has employed broad phrasing that
our Supreme Court has instructed us to construe liberally. See generally
Schwartz v. Rockey, 932 A.2d 885, 897 (Pa. 2007). If a subsequent
purchaser of a home need not be in privity, and need only “reasonably rely”
on representations made to the first owner in fraudulent misrepresentation
claims, then a fortiori, the same is true of the UTPCPL, which as noted
above, provides a broader, more liberally construed remedy.
Also in support of its conclusion, the Majority posits that “to conclude
that Cutler is liable to the Worrells, subsequent purchasers who were
strangers to the contract between Cutler and the original purchaser, could
place Cutler in a position of warrantor to all subsequent purchasers.”
Majority Memorandum at 10. This conclusion is erroneous for several
____________________________________________
2
My disagreement in this case is limited to Paragraphs 134(a) and (b) of the
Worrells’ complaint pertaining to representations made by Cutler. I express
no opinion on Paragraphs 134(c) and (d) pertaining to agreements,
warranties, and writings.
-9-
J-A11029-16
reasons. As noted above, my disagreement is not contingent on Paragraphs
134(c) and (d) pertaining to warranties.
Second, even if this argument applies to Paragraphs 134(a) and (b),
there can never be any “unlimited” liability as the Majority suggests.
Woodward emphasizes “the liability … recognized [must] not [be] indefinite
as to amount, duration or class of prospective plaintiffs.” Woodward,
supra at 303. Certainly the UTPCPL does not provide for “indefinite”
damages, and the Worrells would have the burden to prove their damages at
trial like every other plaintiff. Liability would not be temporally indefinite
because, as this Court pointed out in Conway, “all homeowners must still
bring their claims within the 12-year period set out by the statute of
repose.” Conway v. Cutler Group, 57 A.3d 155, 162-163 (Pa. Super.
2012) (footnote omitted), reversed, 99 A.3d 67 (Pa. 2014), citing 42
Pa.C.S.A. § 5536(a) (stating, “a civil action or proceeding brought against
any person lawfully performing or furnishing the design, planning,
supervision or observation of construction, or construction of any
improvement to real property must be commenced within 12 years after
completion of construction of such improvement[]”). Finally, permitting the
Worrells’ case to go to trial would not permit an indefinite “class of
perspective plaintiffs” to sue Cutler. Any such class can only be owners of
the home within the General Assembly’s 12-year statute of repose.
- 10 -
J-A11029-16
Therefore, the endless liability that the Majority forecasts simply does not
exist.
Finally, I address Cutler’s reliance on our Supreme Court’s decision in
Conway. In Conway, our Supreme Court concluded “where the builder-
vendor sold a new home to a purchaser-user, we hold that an action for
breach of the implied warranty requires contractual privity between the
parties.” Id. at 73. Our Supreme Court also stated, “the question of
whether and/or under what circumstances to extend an implied warranty of
habitability to subsequent purchasers of a newly constructed residence is a
matter of public policy properly left to the General Assembly.” Id. at 72.
We note that the UTPCPL provides a remedy and cause of action of the
General Assembly’s creation, for which we have held no privity is required.
Therefore, Conway does not preclude the Worrells’ case from proceeding.
Based on the foregoing, I conclude the trial court erred when it
granted Cutler’s motion for summary judgment as to the Worrells’ claim
under the UTPCPL. See Cadena, supra. Accordingly, I would reverse the
trial court’s December 22, 2014 order. I respectfully dissent.
- 11 -