Adams, C. v. Hellings Builders, Inc. , 146 A.3d 795 ( 2016 )

J-A08022-16
2016 PA Super 192CHRISTOPHER ADAMS AND MARGARET IN THE SUPERIOR COURT OF
A. ADAMS, H/W, PENNSYLVANIA
Appellants
v.
HELLINGS BUILDERS, INC.,
Appellee No. 1407 EDA 2015
Appeal from the Order Entered April 17, 2015
In the Court of Common Pleas of Chester County
Civil Division at No(s): 2014-11344-TT
BEFORE: BOWES, OLSON AND STRASSBURGER,* JJ.
OPINION BY OLSON, J.: FILED AUGUST 29, 2016
Appellants, Christopher Adams and, his wife, Margaret A. Adams
appeal from the order entered on April 17, 2015, sustaining preliminary
objections filed by Hellings Builders, Inc. (Hellings) and dismissing
Appellants’ complaint. Upon careful review, we vacate the order and
reinstate the complaint against Hellings.
The trial court summarized the facts of this case as follows:
In 2011, Appellants purchased a home from the Witsky
[f]amily, [none of whom] [is] a party to this action. The
Witsky[s] bought the home as a newly constructed dwelling
from Hellings [] in 2008.
In 2014, [Appellants] noticed that other homes in the
neighborhood were being tested for moisture. Armed only
with this observation, [] Appellants decided to hire a
company to conduct infrared testing on their home to test
for moisture infiltration.
*Retired Senior Judge assigned to the Superior Court.
J-A08022-16
According to [Appellants], the testing results indicated
possible moisture infiltration and the possible presence of
mold due to the improper application of stucco.
* * *
Appellants filed suit against [Hellings] alleging, inter alia,
violation of the Unfair Trade Practices and Consumer
Protection Law, 73 P.S. 201-1 et seq. (hereinafter UTPCPL).
[Hellings] filed [p]reliminary [o]bjections asserting that []
Appellants were not the direct purchasers of the property,
had no direct business dealings with [Hellings], [Hellings]
was never employed by Appellants and therefore could not
raise [a claim under] the UTPCPL. In addition, [Hellings]
argued that Appellants failed to establish that they relied on
direct conversations with [Hellings]. Appellants argue that
there are promotional materials which assert [Hellings]
build[s] nice homes that they relied upon in making their
purchase.
Trial Court Opinion, 7/21/2015, at 2 (emphasis and quotations omitted).
The trial court sustained Hellings’ preliminary objections by order dated April
17, 2015. This timely appeal resulted.1
Appellants present the following issues for our review:
a. Whether the [t]rial [c]ourt erred in sustaining Hellings
Builders Inc.’s demurrer to Count I and Count II of
[Appellants’] [c]omplaint for [v]iolation of the [UTPCPL]
and [f]raud on the basis that “Hellings made no
representation to [Appellants]” where [Appellants] have
specifically pled that Hellings Builders Inc. made specific
representations that [Appellants] relied upon in
purchasing the [h]ome, and where the standard for
____________________________________________
1
Appellants filed a notice of appeal on May 12, 2015. On May 13, 2015, the
trial court ordered Appellants to file a concise statement of errors
complained of on appeal pursuant to Pa.R.A.P. 1925(b). Appellants
complied timely on May 29, 2015. The trial court issued an opinion pursuant
to Pa.R.A.P. 1925(a) on July 21, 2015.
-2-
J-A08022-16
resolving preliminary objections requires that such
specific averments be taken as true.
b. Whether the [t]rial [c]ourt erred in sustaining Hellings
Builders Inc.’s demurrer to Count I of [Appellants’]
[c]omplaint for [v]iolation of the UTPCPL and Count II for
[f]raud where [Appellants’] reliance on representations
to the original purchasers was specially foreseeable by
Hellings Builders Inc., and where the Pennsylvania
Superior Court has specifically ruled that a contractor is
liable to subsequent purchasers of a home for fraud for
representations made to the original owners on the basis
that such reliance is specially foreseeable, and where
such specially foreseeable reliance may be the basis for a
claim for violation of the UTPCPL, even if such reliance
had not been specifically intended.
c. Whether the [t]rial [c]ourt erred in sustaining Hellings
Builders Inc.’s demurrer to Counts I and II of
[Appellants’] [c]omplaint in finding that, as a matter of
law, [Appellants] were required to plead that
representations by Hellings Builders Inc. were made
directly to [Appellants], despite the fact that the UTPCPL
is a remedial statute specifically directed at eradicating
fraudulent practices towards consumers, and despite the
fact that such a requirement constitutes a de facto privity
requirement and such a privity requirement has been
rejected by the Superior Court of Pennsylvania for claims
for fraud and claims brought under the UTPCPL.
Appellants’ Brief at 4-5 (citations and suggested answers omitted).
All of Appellants’ issues are interrelated, so we will examine them
together. Generally, Appellants argue the trial court erred in sustaining
Hellings’ preliminary objections and dismissing Appellants’ complaint. First,
Appellants assert they “specifically pled that they relied on the
representations made by Hellings regarding the quality of the [h]ome [they
purchased], which the [t]rial [c]ourt was bound to consider as true under
the well-settled standard of review for preliminary objections.” Id. at 13
-3-
J-A08022-16
(emphasis omitted). Appellants claim they relied “on promotional materials
and statements [Hellings] made directly to the public” when purchasing the
home. Id. at 15. More specifically, Appellants contend that Hellings
represents itself as “one of the area[’]s most reputable builders” and its
corporate slogan is “Building A Higher Standard.” Id. at 16. Appellants
assert that Hellings is liable for water damage to their home because they
relied upon Hellings’ misrepresentations. Id. at 16-17. Next, Appellants
argue the trial court erred by sustaining Hellings’ preliminary objections on
their UTPCPL claim because:
Pennsylvania law recognizes that claims for fraud and for
violation of the UTPCPL do not require privity [and]
subsequent purchasers of residential real estate are
specially foreseeable plaintiffs vis-à-vis the home builder,
are entitled to rely on statements made by the home-
builder to the original purchasers and have standing to
bring a claim for fraud based on misrepresentations made
by the home-builder to the original purchasers.
Id. at 17. Similarly, Appellants maintain the trial court erred by dismissing
their fraud claim because they alleged, as subsequent purchasers of the
home at issue, that they were specially foreseeable plaintiffs who relied upon
Hellings’ knowingly false misrepresentations to the original homeowners and,
as a proximate result, Appellants suffered moisture infiltration damage to
their home from defective stucco installation. Id. at 25-32.
We review a challenge to a trial court's decision to sustain preliminary
objections under the following standard:
-4-
J-A08022-16
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,
it should be resolved in favor of overruling the preliminary
objections.
Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011) (internal
citation omitted).
Our decisions in Woodward v. Dietrich, 548 A.2d 301 (Pa. Super.
1988) and Valley Forge Towers South Condominium v. Ron-Ike Foam
Insulators, Inc., 574 A.2d 641 (Pa. Super. 1990) are dispositive of the
issues presented herein. Those cases provide that fraud and UTPCPL claims
may be asserted by third parties against contractors who make
misrepresentations, despite the absence of privity, when reliance is specially
foreseeable and damage proximately results.
In Woodward, “we [we]re called upon to determine whether a party
may be held liable for damages proximately resulting from a person's
reasonable reliance on fraudulent misrepresentations, despite the fact that
such a person had no privity with the party making the misrepresentations
-5-
J-A08022-16
and was not specifically intended to rely on the misrepresentations, when
the reliance was nonetheless specially foreseeable.” Woodward, 548 A.2d
at 303. The Woodwards filed a complaint alleging “their basement had been
flooded and damaged two years after they purchased their home from the
Dietrichs” because either the Dietrichs and/or Harry Smith, a sewer
contractor, “had fraudulently misrepresented and concealed the fact that the
grey 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.
Initially, the Woodward Court noted that “[u]nder our early case law,
a contractor’s liability for defects in the construction was limited to the
persons in direct privity with the contractor; the contractor was fully
absolved from liability to third persons for injuries caused by even latent
defects upon delivery and acceptance of possession of the realty.” Id. at
314. However, as the Woodward Court recognized, “[t]he privity
requirement of earlier caselaw was first eroded and then fully abandoned by
our Supreme Court.” Id. Thus, in examining “whether the Woodwards []
stated a valid cause of action for fraudulent misrepresentation against
Smith[,]” this Court conducted a “two part analysis: first, [] determin[ing]
the degree of foreseeable and reasonable reliance alleged, and then []
decid[ing] whether liability for fraudulent misrepresentation may be
predicated upon such foreseeable reasonable reliance.” Id. at 310.
-6-
J-A08022-16
“[W]e concluded that the Woodwards[] alleged specially foreseeable
reasonable reliance upon Smith’s misrepresentations” because: (1) “sewer
connections are not by their nature open to inspection [and] prospective
buyers must ordinarily rely upon representations made by the sellers and
any confirmatory documentation available[;]” (2) “while Smith may not
have known that the Dietrichs would sell their home, the possibility of such a
sale during the useful life of the a sewer connection was certainly quite
foreseeable[;]” and, (3) “Smith’s alleged fraudulent procurement of
governmental approval of the concealed non-installation of the gray water
sewage sewer connection would also increase the foreseeability of a
subsequent purchaser’s reliance on misrepresentations[.]” Id. at 311-312.
The Woodward Court ultimately found:
Assuming that the Dietrichs were not parties to the alleged
fraudulent conduct by Smith, recognition of the Woodwards'
cause of action against Smith would merely allow the right
to recover for damages proximately caused by the
fraudulent misrepresentations and concealed non-
installation to pass from the seller to the buyer when
subsequent transfer of the property substituted a new
victim for the original victim of the undiscovered fraud.
Under the facts alleged, only the identity of the victim was
affected by the sale of the property by the Detrichs; the
amount, duration, and class of persons to whom Smith was
alleged to be liable for damages remained the same.
* * *
If, as alleged, the Dietrichs were not aware of Smith's
alleged fraudulent camouflaged non-installation of grey
water sewage sewer connection, we can see no reason why
the Dietrichs' sale of the home to the Woodwards should
absolve Smith from liability for damages proximately caused
-7-
J-A08022-16
by such fraud. When fraud creates or conceals a latent
defect, transfer of the defective chattel or realty to an
innocent third party should not absolve the wrongdoer from
liability for damages caused by that undiscovered fraud.
Thus, we find that this theory of liability was improperly
rejected by the trial court.
Id. at 316. Hence, in Woodward, we rejected the trial court’s
determination that privity is required between contractors and subsequent
third-party homebuyers in actions sounding in fraud.
Thereafter, in Valley Forge, our Court expanded upon the holding in
Woodward to determine that privity is likewise not required in bringing a
cause of action under the UTPCPL. Therein, a condominium association
brought an action against a roofing manufacturer under the UTPCPL. In
Valley Forge, this Court noted, “the most vexing problem presented in
[that] appeal [was] the absence of technical privity” between the
condominium association and the roofing manufacturer. Valley Forge, 574
A.2d at 646. Looking at the language of 73 P.S. § 201-9.2, Pennsylvania’s
UTPCPL statute, our Court determined “the statute is silent on the
significance of privity.” Id. Thus, we examined the legislative intent and
concluded, “the law was passed to substantially enhance the remedies
available to consumers as the result of unfair or deceptive business,
specifically including the failure to comply with any written guarantee or
warranty.” Id. at 646. We then considered our decision in Woodward and
concluded:
that strict technical privity was not intended by our
legislature to be required to sustain a cause of action under
-8-
J-A08022-16
73 P.S. § 201-9.2. The statute is to be construed broadly to
effectuate its general intent to eradicate fraudulent business
practices. Consequently, we decline[d] to engraft a
requirement of strict technical privity onto a silent statute,
especially since no such restriction applies in fraud cases
generally.
Id. at 647.
In this case, in sustaining Hellings’ preliminary objections, the trial
court determined:
In the instant case the salient facts are not in dispute.
Appellants never spoke with [Hellings]. Appellants never
met with any representative of [Hellings]. Appellants did
not hire [Hellings] to build the home. Appellants did not
purchase the home from [Hellings].
The UTPCPL appears to be silent on the issue of privity. It
is silent on whether Appellants need to have contracted with
[Hellings], but the act is clear that there must be reliance.
* * *
[…] Appellants purchased the home from Matthew and
Michelle Witzky in August 2011. The Witzkys purchased the
home new from Hellings Builders in 2006. While no privity
maybe [sic] required under the UTPCPL, what is required, at
least at this stage, is an allegation that the Appellants relied
on Hellings[’] conduct, deceptive or otherwise. Appellants
were very careful in the drafting of their [c]omplaint to
allege that the Witzky[s] relied upon representations of
Hellings. But even if those representations were made to
the Witzky[s], Hellings made no representations to the
Appellants.
* * *
[The trial court] note[s] that the UTPCPL is silent regarding
privity and there are very few, if any, cases addressing this
particular issue, i.e. a subsequent purchaser of a newly
constructed home. Valley Forge [] addressed the issue of
subsequent purchasers in relation to the UTPCPL and
-9-
J-A08022-16
ultimately found that the Homeowners’ Association could
bring a private action against the manufacturer despite not
having purchased the product directly from the
manufacturer. That case differed significantly from the
instant matter in that it dealt with the purchase of a specific
product, which failed under a warranty that was given
directly to the Homeowners’ Association. In addition, the
Association asked for that product specifically. That is not
the case here.
Thus, [the trial court determined the UTPCPL] focus[ses] on
reliance. Specifically, [one must make a purchase] ‘as a
result of the use or employment by any person of a method,
act or practice declared unlawful by section 3 of this Act…’
See, UTPCPL 201-9.2. The [c]omplaint makes clear that
the house was purchased from the Witzkys approximately
five years after it was built. While Appellants note the
advertising Hellings put forth to the Witzky[s], Appellants
do not assert anywhere in the [c]omplaint that any
representations by the builder were made to them.
Nowhere in the [c]omplaint do Appellants allege that the
builder, ever spoke to them. The UTPCPL clearly anticipates
that the [p]laintiff relied upon a [d]efendant’s
representations, methods, or acts. In the instant case, if
Appellants relied on anyone it was the seller of the home,
the Wit[z]kys.
Trial Court Opinion, 7/21/2015, at 3-5.
We conclude that the trial court erred as a matter of law in sustaining
Hellings’ preliminary objections on grounds that Hellings made no
representations to Appellants. As set forth in detail above, Woodward and
Valley Forge make clear that technical privity is no longer required to
assert a cause of action for fraud or a violation of the UTPCPL. However, the
trial court consistently referred to that fact. Instead, the focus is on whether
reliance on alleged misrepresentations was specially foreseeable. In
Woodward, we specifically determined that a third-party purchaser of
- 10 -
J-A08022-16
property is specially foreseeable. Moreover, reviewing all material facts set
forth in Appellants’ complaint as true, as well as all inferences reasonably
deducible therefrom, as our standard requires, Appellants allege that
Hellings generally represented, in printed materials and on Hellings’ own
website, that it was a reputable builder touting superior quality and
construction. See Complaint, at 2-3, ¶¶ 9-11. Appellants further aver that
in the sales agreement with the Witzkys, Hellings stated that the home at
issue would include a three-coat stucco system according to International
Residential Code standards. Id. at 3-4, ¶¶ 9, 14-15. However, Appellants
maintain that upon inspection by their expert, the stucco system did not
comply with those standards and they suffered damage as a result. Id. at
5-7, ¶¶ 27-42. In support of both their fraud and UTPCPL claims, Appellants
assert that they justifiably relied upon Hellings’ misrepresentations in
purchasing the home. Id. at 9, 11, ¶¶ 64, 75. Accordingly, based upon our
standard of review and the prevailing law, we conclude that Appellants’
claims should not have been dismissed on preliminary objections.
Order vacated. Complaint reinstated. Case remanded for further
proceedings. Jurisdiction relinquished.
- 11 -
J-A08022-16
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/29/2016
- 12 -