Telwell, Inc. v. Grandbridge R.E. , 2016 Pa. Super. 159 ( 2016 )

J-A08010-16
2016 Pa. Super. 159
TELWELL INC., IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
GRANDBRIDGE REAL ESTATE CAPITAL
LLC,
Appellee No. 1713 EDA 2015
Appeal from the Order Entered April 30, 2015
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s):
August Term 2011 No. 02204
October Term 2013 No. 02327
BEFORE: BOWES, OLSON AND STRASSBURGER,* JJ.
OPINION BY BOWES, J.: FILED JULY 21, 2016
Telwell Inc. (“Telwell”) appeals from the trial court’s grant of summary
judgment in favor of Grandbridge Real Estate Capital LLC (“Grandbridge”),
on its contract claim, which was premised upon the court’s finding that there
was no evidence of a contractual relationship between the parties. In
addition, Telwell challenges the court’s earlier grant of a demurrer as to its
tort claims against Grandbridge based upon the gist of the action doctrine.
After thorough review, we affirm in part and reverse in part.
Telwell commenced this action in contract and tort against the Public
School Employees’ Retirement System (“PSERS”), and Grandbridge, alleging
that, together, they overcharged it interest on a $2.6 million ten-year
* Retired Senior Judge assigned to the Superior Court.
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balloon mortgage note (“Note”) executed on March 3, 2003. The loan was
obtained to refinance a property Telwell owned in Philadelphia. PSERS and
Telwell executed a Permanent Loan Commitment setting forth the terms of
the loan and Telwell signed the Note. The Note provided that, after sixty
months of interest at 8.5 percent, the interest would be recalculated based
on the U.S. Treasury Note Yield Rate at the time.1
It is unclear whether, at the time of the mortgage loan, PSERS had
already entered a commercial real estate mortgage servicing agreement with
Laureate Capital, LLC (“Laureate”), Grandbridge’s predecessor, or whether it
did so shortly thereafter. Nonetheless, as of November 1, 2007,
Grandbridge, the successor-in-interest to Laureate and the agent of PSERS,
assumed responsibility for collecting the monthly payments of capital and
interest from Telwell and escrowing money for payment of taxes.
Grandbridge retained for itself a monthly servicing fee of $279.16, and paid
the remainder to PSERS. After sixty months, Grandbridge did not
recalculate the interest as provided in the Note. According to Telwell,
Grandbridge continued to charge, and Telwell continued to pay, 8.5 percent
interest instead of 4.85 percent interest, the recalculated rate.
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1
The terms of the Note regarding the interest rate appear to be inconsistent
with the terms of the loan commitment document.
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Telwell first became aware of this overpayment after it notified
Grandbridge on May 26, 2011, that it intended to refinance the property and
requested a payoff statement. In the midst of a disagreement over whether
a prepayment penalty was due, Telwell realized and communicated to
Grandbridge that it had been overcharged interest since March of 2008.
Grandbridge did not repay the overage or recalculate the interest, but
instead continued to charge Telwell the higher rate of interest.
Telwell refinanced the loan and then commenced this action against
PSERS and Grandbridge sounding in both contract and tort. In its amended
complaint at count one, Telwell alleged that Grandbridge and PSERS
breached the terms of the Note as well as the implied covenant of good faith
and fair dealing in charging excessive interest. At count two, Telwell pled
that Grandbridge knew that it was overcharging and that it did so
intentionally, knowingly, and fraudulently. Additionally, Telwell averred that
Grandbridge made fraudulent misrepresentations to induce Telwell to enter
the loan relationship, never intending to recalculate the interest after sixty
months. At count three, Telwell alleged that Grandbridge negligently
misrepresented the terms of repayment. Finally, Telwell alleged in count
four that the defendants conspired to breach the contract and fraudulently
overcharge Telwell.
Grandbridge and PSERS filed extensive preliminary objections, initially
challenging the court’s jurisdiction. Specifically, Grandbridge and PSERS
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alleged that, under the Commonwealth Procurement Code, 62 Pa.C.S.
§1724, the Board of Claims had exclusive jurisdiction to hear all contract
claims against Commonwealth agencies. Preliminary Objections of
Defendants, 9/6/11, at ¶4. The defendants also demurred to the contract
count, maintaining that, since the complaint failed to allege that Grandbridge
was a party to the loan contract, the complaint failed to state a claim in
contract against that entity. Furthermore, the defendants alleged that the
loan commitment, which was executed on December 16, 2012, between
Telwell and PSERS, contained the agreement of the parties and it did not
provide for adjustment of the interest rate. Telwell neglected to attach a
copy of that document to its complaint.
With regard to the tort claims, the defendants averred that fraud was
not pled with the particularity required under Pa.R.C.P. 1019(b), in that
Telwell failed to plead that defendants’ representations were knowingly false
or that Grandbridge was involved prior to or during the formation of the loan
relationship. PSERS and Grandbridge also asserted that the tort claims were
barred by the gist of the action doctrine as the claims arose from the
contract and the duties allegedly breached were duties imposed in the
contract itself.
Following the filing of preliminary objections, the trial court transferred
the contract claims against both defendants to the Board of Claims, agreeing
the Board had exclusive jurisdiction over claims arising from Commonwealth
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contracts pursuant to 62 Pa.C.S. § 1724.2 The court also concluded that the
gravamen of the tort claims sounded in contract, and dismissed them based
on the gist of the action doctrine.
The Board of Claims subsequently determined that it did not have
subject matter jurisdiction over the contract claims against PSERS and
Grandbridge. It further held that there was no exception from sovereign
immunity that would permit recovery against PSERS, and dismissed the case
in its entirety. On appeal, the Commonwealth Court affirmed the Board’s
determination that it lacked subject matter jurisdiction, but concluded that
the Board erred in failing to transfer the claims against Grandbridge back to
the court of common pleas, and remanded with directions to the Board to
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2
Title 62 Pa.C.S. § 1724, Jurisdiction, provides in pertinent part:
(a) Exclusive jurisdiction. — The board [of Claims] shall have
exclusive jurisdiction to arbitrate claims arising from all of the
following:
(1)A contract entered into by a Commonwealth agency in
accordance with this part and filed with the board in
accordance with section 1712.1 (relating to contract
controversies).
...
(3)Unless otherwise provided by law, a contract entered
into by a Commonwealth agency involving real property
interests in which the Commonwealth agency is the
respondent.
62 Pa.C.S. § 1724.
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effectuate the transfer. Telwell, Inc. v. Public School Employees’
Retirement System and Grandbridge Real Estate Capital LLC, No.
1734 C.D. 2013 (Pa.Cmwlth. 2014).
Following transfer of the breach of contract claim against Grandbridge
to the court of common pleas, the parties engaged in discovery.
Grandbridge then filed a motion for summary judgment, which the trial court
granted, finding no contractual relationship that would support recovery in
contract. This timely appeal followed in which Telwell challenges both the
earlier dismissal of its tort claims under the gist of the action doctrine and
the grant of summary judgment on its contract claim.3
1. Should the trial court have granted Grandbridge’s Motion
for Summary Judgment, resulting in the entry of judgment in
favor of defendant Grandbridge, on the basis that Grandbridge
was not a party to the underlying agreement and that Telwell
had not introduced evidence sufficient to sustain a claim for
unjust enrichment, notwithstanding the fact that Telwell had
adduced clear evidence that Grandbridge was aware of, and
concerned about, the fact that it significantly overcharged
Telwell in breach of obligations set forth in an applicable loan
agreement?
2. Should the trial court have dismissed Telwell’s claims
against Grandbridge for fraudulent misrepresentation, negligent
misrepresentation, and conspiracy pursuant to the “gist-of-the-
action” doctrine, notwithstanding the fact that the court did not
determine whether Telwell had any contractual relationship with
Grandbridge, and, later, inconsistently held that Grandbridge did
not owe contractual duties to Telwell?
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3
We have re-ordered the issues for ease of disposition.
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Appellant’s brief at 4.
Telwell’s overarching premise is that the trial court’s order granting
summary judgment on the contract claims due to the absence of evidence of
a contractual relationship is fundamentally inconsistent with its earlier order
dismissing its tort claims against Grandbridge on the basis that the gist-of-
the-action was in contract. Telwell contends that a contractual relationship
with Grandbridge was a prerequisite to the applicability of the gist-of-the-
action doctrine, and that the trial court’s dismissal of its tort claims before
ascertaining whether there was a contractual relationship was premature
and improper.
Grandbridge asserts Telwell’s position constitutes a false dichotomy.
According to Grandbridge, Telwell merely recast an ordinary breach of
contract claim as a tort claim in which the duty breached was the failure to
reduce the mortgage interest rate per the agreement. Since there was no
contractual relationship between Grandbridge and Telwell, Telwell could not
prevail on a breach of contract claim and summary judgment was properly
entered.
As our Supreme Court reiterated in Gilbert v. Synagro Cent., LLC,
131 A.3d 1, 10 (Pa. 2015) (citing Basile v. H & R Block, Inc., 761 A.2d
1115, 1118 (Pa. 2000)), an appellate court’s scope of review of an order
granting summary judgment is plenary. Our standard of review is that “the
trial court's order will be reversed only where it is established that the court
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committed an error of law or clearly abused its discretion.” Id.
Furthermore,
[s]ummary judgment is appropriate only in those cases where
the record clearly demonstrates that there is no genuine issue of
material fact and that the moving party is entitled to judgment as
a matter of law. The reviewing court must view the record in the
light most favorable to the nonmoving party, resolving all doubts
as to the existence of a genuine issue of material fact against the
moving party. When the facts are so clear that reasonable minds
cannot differ, a trial court may properly enter summary
judgment.
Gilbert, supra at 10.
The trial court granted summary judgment on the breach of contract
claim against Grandbridge because Telwell produced no evidence that
Grandbridge was a party to the loan commitment or Note, or that
Grandbridge purchased the Note, or that the Note was subsequently
assigned by PSERS to Grandbridge. The court further concluded that
contractual liability could not be sustained on an unjust enrichment theory
because the benefit of overpayment was conferred upon PSERS, as
Grandbridge’s service fee remained the same regardless of the amount
collected.
Telwell alleges that summary judgment was improper for three
reasons. First, it contends that the court’s ruling was inconsistent with its
earlier ruling that the gist of the action was in contract. Secondly, Telwell
argues that Grandbridge received a benefit from overcharging, if only briefly.
Finally, Telwell maintains that Grandbridge, as PSERS’s agent, undertook
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responsibility for compliance with the terms of the Note, and thus was liable
for any breach of its terms. In support of that position, it relies upon
Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC, 40 A.3d 145,
150 (Pa.Super. 2012), where an agent who made repeated assurances and
guarantees about the quality of the construction work was held to have
voluntarily assumed personal responsibility on the principal’s contract with
the homeowner. Telwell contends that, at a minimum, there were genuine
issues of material fact as to whether Grandbridge personally undertook
responsibility for compliance with the Note, and exposed itself to personal
liability.
Grandbridge counters first that Telwell failed to allege the existence of
a contractual relationship with Grandbridge. Telwell merely pled that it
believed that at some point, Grandbridge may have purchased the Note from
PSERS. Amended Complaint, 9/13/11, at ¶8. Furthermore, Grandbridge
asserts that Telwell bore the burden of proving the breach of contract, and
that to avoid entry of summary judgment, it could not simply rely upon its
pleadings. See Pa.R.C.P. 1035.2(2) (providing for summary judgment if “an
adverse party who will bear the burden of proof at trial has failed to produce
evidence of facts essential to the cause of action or defense”). It alleges
that Telwell offered no proof of a contractual relationship with Grandbridge.
In contrast, Grandbridge denied that it purchased the Note from PSERS,
denied the existence of a contractual relationship with Telwell, and supplied
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affidavits from its employees to the effect that there was no assignment of
the Note to Grandbridge. Additionally, Grandbridge provided a copy of the
mortgage satisfaction piece that was filed following the payoff that indicated
that the mortgage lender was PSERS.
Grandbridge also challenges Telwell’s ability to recover on an unjust
enrichment theory, pointing out that Telwell did not plead that claim in its
amended complaint. Furthermore, if Telwell had been permitted to amend
after April 2012 to assert such a claim, Grandbridge asserts the claim would
be time-barred as it arose in March 2008. Moreover, Grandbridge maintains
that Telwell did not introduce sufficient evidence that it was unjustly
enriched as it received the same fixed monthly fee for servicing the loan and
transferred the remaining sums to PSERS. Finally, Grandbridge contends
that Telwell is precluded from recovery on such a theory because it has
unclean hands: although Telwell knew it was being overcharged, it took no
action.
Telwell counters that the grant of summary judgment based on
affidavits proffered by Grandbridge employees violates the Nanty-Glo rule.4
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4
In Nanty-Glo v. American Surety Co., 163 A. 523, 524 (Pa. 1932), the
Supreme Court reversed a directed verdict, recognizing that "[h]owever
clear and indisputable may be the proof when it depends on oral testimony,
it is nevertheless the province of the jury to decide, under instructions from
the court, as to the law applicable to the facts, and subject to the salutary
power of the court to award a new trial if they should deem the verdict
(Footnote Continued Next Page)
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With regard to the unjust enrichment claim, Telwell argues that the trial
court would not have directed the parties to address unjust enrichment
unless the pleadings, liberally construed, fairly presented such a claim.
Furthermore, Telwell relies upon the persuasive value of Ruddy v. Mt. Penn
Borough Mun. Auth., 2014 WL 1852002, at *4 (Pa.Cmwlth. 2014)
(unpublished memorandum)5 for the proposition that recovery on an unjust
enrichment theory does not require that a defendant retain the benefit for
any specific length of time and that a party can be unjustly enriched even if
it passed along part of the benefit to another. Therein, a public utility was
deemed enriched due to a customer’s overpayment, even though it
effectively passed on the overpayment to ratepayers, because it benefitted
from the goodwill that flowed from not having to raise its rates. The critical
inquiry, according to Telwell, was whether one benefitted from what it
wrongfully obtained. Appellant’s reply brief at 17 (citing Torchia v.
Torchia, 499 A.2d 581 (Pa.Super. 1985) (unjust to allow second wife to
_______________________
(Footnote Continued)
contrary to the weight of the evidence." Nanty-Glo is cited for the
proposition that, when courts are determining whether there is a genuine
issue of material fact that would warrant submission of the issue to the jury,
the court may not summarily enter a judgment where the evidence consists
exclusively of oral testimony. See Stimmler v. Chestnut Hill Hosp., 981
A.2d 145, 154 (Pa. 2009).
5
“An unreported panel opinion of the Commonwealth Court issued after
January 15, 2008, shall be cited only for its persuasive value, not as binding
precedent.” See Commonwealth Court's Internal Operating Procedures, 210
Pa.Code §69.414.
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retain the proceeds of her deceased husband’s life insurance policies where
husband promised for consideration to maintain the policies for the benefit
of his children, but subsequently changed the beneficiary designation to
second wife)). Moreover, Telwell rejects Grandbridge’s assertion of its
unclean hands for a mere failure to act, maintaining that the doctrine would
only apply where the party seeking relief commits fraud, bad faith, or
unconscionable conduct. Appellant’s brief at 18 (citing Olson v. N. Am.
Indus. Supply, Inc., 658 A.2d 358 (Pa.Super. 1995)). In short, Telwell
contends that genuine issues of material fact surrounding the unjust
enrichment claim preclude the entry of summary judgment.
As this Court held in Lackner v. Glosser, 892 A.2d 21, 24 (Pa.Super.
2006), in order “[t]o maintain a cause of action in breach of contract, a
plaintiff must establish: (1) the existence of a contract, including its
essential terms; (2) a breach of a duty imposed by the contract; and (3)
resulting damages.” We agree with the trial court that, as to its breach of
contract claim, Telwell had the burden of proving a contractual relationship
with Grandbridge. It simply proffered no evidence of such a relationship
while Grandbridge supplied evidence refuting it.
At the time the loan agreement was executed, Telwell dealt exclusively
with PSERS through its agent, BB&T. The record contains no evidence that
either Grandbridge or its predecessor, Laureate, was a party to the contract
between Telwell and PSERS. Furthermore, there was no proof that the Note
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subsequently was assigned to Grandbridge. Moreover, the Nanty-Glo rule
is not implicated herein because the affidavits supplied by Grandbridge
employees were not the sole evidence relied upon by Grandbridge in support
of its motion. The Note, the loan commitment document, the payoff letter,
and the mortgage satisfaction piece refuted Telwell’s allegation that there
was a contractual relationship between Grandbridge and Telwell.
Nor did Telwell offer any evidence that would suggest that
Grandbridge, as PSERS’s agent, voluntarily assumed personally liability on
the loan. Although Telwell dealt exclusively with Laureate and Grandbridge
in connection with repayment of the loan, Telwell did not plead or prove that
Grandbridge made any guarantees similar to those in Bennett, supra, that
would subject it to personal liability on the contract. In short, Telwell failed
to offer sufficient proof of a contractual relationship with Grandbridge to
raise a genuine issue of material fact as to a breach of contract.
Unjust enrichment, however, is not dependent on the existence of a
contractual relationship.6 See Roman Mosaic & Tile Co. v. Vollrath, 313
A.2d 305, 307 (Pa.Super. 1973) (holding the doctrine inapplicable when the
parties’ relationship is based on a written agreement or contract). Unjust
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6
Although Telwell did not specifically plead a claim entitled unjust
enrichment, it pled facts that would arguably support such a cause of action.
Hence, the trial court did not err or abuse its discretion in directing the
parties to brief whether recovery could be premised on that legal theory.
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enrichment is an equitable doctrine that imposes a duty despite the absence
of an agreement, when one party is unjustly enriched at the expense of the
other. In determining if the doctrine applies, the focus is on whether the
defendant has been unjustly enriched. As we reaffirmed in Lackner, supra,
“The elements of unjust enrichment are benefits conferred on defendant by
plaintiff, appreciation of such benefits by defendant, and acceptance and
retention of such benefits under such circumstances that it would be
inequitable for defendant to retain the benefit without payment of value.”
Id. at 24. Whether the enrichment of the defendant was unjust was
deemed in Lackner to be the determining factor, and where the doctrine
applied, the remedy was to require the defendant to make restitution in
quantum meruit. See Wilson Area School Dist. v. Skepton, 895 A.2d
1250, 1254 (Pa. 2006) (opinion announcing the judgment of the Court) (the
doctrine contemplates that "[a] person who has been unjustly enriched at
the expense of another must make restitution to the other.").
The trial court concluded that Grandbridge did not retain any direct
benefit conferred due to the alleged overpayment of interest since it
transmitted any overpayment to PSERS. Furthermore, since Grandbridge’s
servicing fee was fixed rather than based on the amount collected, it was not
unjustly enriched in the form of higher fees. We agree. We find Ruddy,
supra, inapposite. Telwell offered no evidence that Grandbridge received
any benefit, financial or otherwise, from overcharging it, and hence, no
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recovery will lie under that theory. The facts herein are also readily
distinguishable from those in Torchia, where the second wife both received
and retained insurance proceeds to which she was not entitled. Absent
proof that Grandbridge benefitted from the overpayment, summary
judgment was properly entered on the unjust enrichment theory.
We turn now to Telwell’s claim that the trial court improperly sustained
a demurrer to its tort claims against Grandbridge based upon the gist of the
action doctrine.
The question presented in a demurrer is whether, on the
facts averred, the law says with certainty that no recovery is
possible. If doubt exists concerning whether the demurrer should
be sustained, then this doubt should be resolved in favor of
overruling it. Our Court's standard of review of a lower court's
decision granting a demurrer is de novo.
Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014) (internal citations and
quotations omitted).
Preliminarily, we agree with Grandbridge that the granting of summary
judgment on the contract claims does not ipso facto mean that the trial court
erred in dismissing the tort claims as sounding in contract. It is possible for
a plaintiff to plead tort claims that are actually based on a breach of
contract, but suffer summary judgment on the breach of contract due to lack
of sufficient proof. That was not the case herein.
Telwell pled both contract and tort claims, a common practice since
our rules permit the pleading of claims in the alternative. See Pa.R.C.P.
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1020(c) (providing that “causes of action . . . may be pleaded in the
alternative.”). Grandbridge filed a preliminary objection in the nature of a
demurrer seeking to eliminate the tort claims as redundant of the contract
claim. It also took the position that there was no contract between the
parties. The trial court was faced with a determination whether, as a matter
of law, Telwell’s tort claims sounded in contract and were barred by the gist
of the action doctrine. The record consisted of the complaint, preliminary
objections, and response to preliminary objections. Although Telwell pled
that Grandbridge breached a contract, Grandbridge denied that there was
any contract between itself and Telwell. Telwell maintains that it sufficiently
pled tort claims to withstand a demurrer based on failure to state a claim.
We agree with Telwell that the trial court’s dismissal of the tort claims
based on a finding that the gist of the action was in contract was both
premature and erroneous. The Supreme Court’s recent decision in Bruno,
supra, informs our review. Justice Todd, writing for the majority, traced the
origins of the gist of the action doctrine, and reasoned that, “[i]f the facts of
a particular claim establish that the duty breached is one created by the
parties by the terms of their contract — i.e., a specific promise to do
something that a party would not ordinarily have been obligated to do but
for the existence of the contract — then the claim is to be viewed as one for
breach of contract.” Id. at 68 (citations omitted). “If, however, the facts
establish that the claim involves the defendant's violation of a broader social
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duty owed to all individuals, which is imposed by the law of torts and, hence,
exists regardless of the contract, then it must be regarded as a tort.” Id.
(citations omitted). The Court also referenced cases where even a party to a
contract was subject to liability in tort for negligently performing its
obligations under the contract and causing injury or harm to the other party
or to a third party.
It was far from clear at the demurrer stage that the gist of the action
against Grandbridge sounded in contract and that recovery on a tort theory
was impossible. Telwell pled that Grandbridge fraudulently misrepresented
the amount of the monthly payment. According to the complaint,
Grandbridge knew that it was overcharging Telwell, but withheld that
information and continued to overcharge Telwell. Such a claim sounds in
tort as it implicates the “societal duty not to affirmatively mislead or advise
without factual basis.” Bruno, supra at 58 (citing Mendelsohn Drucker v.
Titan Atlas Mfg., 885 F. Supp. 2d 767, 790 (E.D. Pa. 2012) (tort claim for
fraudulent inducement of contractual relations not barred by the gist of the
action doctrine since act of fraudulent misrepresentation "constitutes a
breach of duty of honesty imposed by society, and not contractual duties.").
Telwell also alleged that Grandbridge negligently misrepresented the
amount due. “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
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induce another to act on it; and (4) which results in injury to a party acting
in justifiable reliance on the misrepresentation.” Bilt-Rite Contrs., Inc. v.
Architectural Studio, 866 A.2d 270, 277 (Pa. 2005). Therein, our High
Court expressly adopted the Restatement (Second) of Torts § 552
(“Information Negligently Supplied for the Guidance of Others”), which
imposes tort liability against one whose business is to supply information,
and who knows it will influence others, but supplies it negligently. The Court
also held therein that the economic loss doctrine did not apply to preclude a
monetary recovery for claims of negligent misrepresentation falling within
that section.
Based on the foregoing rationale, we affirm the grant of summary
judgment on the contract and unjust enrichment claims. We reverse the
November 7, 2011 order sustaining the demurrer and dismissing all tort
claims against Grandbridge, and remand for further proceedings consistent
with this opinion.
Order affirmed in part and reversed in part. Case remanded.
Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/21/2016
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