Pitney Road Partners, LLC v. Lazun, S. ( 2020 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
PITNEY ROAD PARTNERS, LLC : IN THE SUPERIOR COURT OF
T/D/B/A REDCAY COLLEGE : PENNSYLVANIA
CAMPUSES I, :
:
Appellant :
:
:
v. :
:
:
STEPHEN R. LAZUN : No. 203 MDA 2019
Appeal from the Order Entered January 25, 2019
in the Court of Common Pleas of York County
Civil Division at No(s): 2012-SU-000711
BEFORE: STABILE, J., McLAUGHLIN, J., and MUSMANNO, J.
MEMORANDUM BY MUSMANNO, J.: FILED JANUARY 13, 2020
Pitney Road Partners, LLC (“Pitney”) t/d/b/a Redcay College Campuses
I, appeals from the Order granting the Motion for summary judgment filed by
Stephen R. Lazun (“Lazun”), a Pennsylvania attorney who formerly
represented Pitney. We reverse and remand for further proceedings.
The trial court set forth the relevant factual and procedural history
underlying this appeal in its Order granting Lazun’s Motion for summary
judgment, as follows:
[Pitney, a Pennsylvania LLC based in Lancaster,] alleges
that prior to December 16, 2011, it was the owner of Harrisburg
Area Community College’s (“HACC”) Lancaster Campus[,] and
HACC was [Pitney’s] tenant. The parties entered into an original
lease agreement in 1999[,] whereby [Pitney] obtained financing
for the construction of the original classroom building on the
Campus ([“]Phase I Project[”]). As part of its rent, HACC was
responsible for paying the debt service [fee] on the financing
obtained by [Pitney].
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In 2003, [Pitney] and HACC entered into several new lease
agreements whereby [Pitney] agreed to perform expansion and
renovation projects on the Lancaster Campus. [Pitney] and HACC
agreed to finance the expansion project by refinancing the existing
debt service from the Phase I Project [(hereinafter, the “2003
Refinance”),] and [Pitney] also obtained bond financing. [Pitney]
alleges that in the 2003 Refinance, [Pitney] and HACC agreed to
equally share all costs associated with refinancing the debt
service, as well as all savings derived from the refinancing.
[Pitney] and HACC also agreed in the 2003 Refinance that HACC
would pay the credit enhancement fee[,] because the fee was an
interest expense. [Pitney] alleges that following the 2003
Refinance, the costs and savings were shared between [Pitney]
and HACC.[1]
In 2008, [Pitney] retained … Lazun from the firm Hartman,
Underhill & Brubaker LLP[,] to represent it in the issuance of a
new series of notes, which would be used to refinance the 2003
bond debt on the Lancaster Campus (the [“]2008 Refinance[”]).
[Notably, Pitney] alleges that it informed [Lazun] that [Pitney] and
HACC wanted to structure the 2008 Refinance in the same manner
as the 2003 Refinance, including the provisions that the parties
would equally share all costs and savings derived from the
refinance[,] and that HACC would be responsible for the credit
enhancement fee.
[Pitney] alleges that [Lazun] performed approximately 130
hours of work between April 18, 2008 and June 25, 2008[,] on the
2008 Refinance matter[,] without a written engagement
agreement. On June 27, 2008, [Pitney and HACC] signed the
2008 Refinance.[2] [Pitney] alleges that it proceeded with issuing
the new series of notes based upon its belief that [Lazun] had
structured the 2008 Refinance in accordance with the 2003
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1 In 2007, Pitney filed suit against HACC concerning certain expenses it had
incurred regarding the HACC Lancaster Campus expansion project. The
parties entered into an agreement to arbitrate the dispute, which we will
hereinafter refer to as the “Pitney/HACC Arbitration.”
2 The 2008 Refinance was not a single contract, but rather, was composed of
several separate transactional documents, spanning numerous pages.
Additionally, other attorneys and professionals aside from Lazun were involved
in drafting some of these documents.
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Refinance. However, [Pitney] alleges that [Lazun] failed to review
the 2003 Refinance documents and did not structure the 2008
[Refinance] documents in the same manner as the 2003
[Refinance] documents[,] when drafting the 2008 Refinance
documents.
[Pitney] claims that as a result of [Lazun’s] failure to
exercise due diligence and care, [Pitney] was required to pay half
of all the costs of the 2008 Refinance, but was not able to share
in half of all the savings, resulting in [Pitney] being deprived of
over $350,000 in additional savings. [Pitney] alleges that it, not
HACC, was also forced to pay the credit enhancement fee[,] in the
amount of $508,876.
On February 17, 2012, [Pitney] filed a Praecipe for writ of
summons in legal malpractice. On March 19, 2012, [Pitney] filed
a Complaint[,] which alleged a single count of professional
negligence against [Lazun,] alleging[, in sum,] that he failed to
draft the 2008 Refinance documents as [Pitney] wished….
Order and Opinion, 11/8/18, at 2-4 (footnotes added, some capitalization
altered).
Of particular importance to the instant appeal is a letter dated December
4, 2008 (hereinafter the “2008 Letter”). Stuart Savin (“Savin”), the HACC
Dean and Campus Vice President, sent the 2008 Letter to Robert Redcay
(“Redcay”), the president of Pitney, in response to a letter that Redcay had
sent to HACC. The 2008 Letter disputed Redcay’s assertion in his letter that
HACC owed Pitney additional rent payments to compensate Pitney for
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increased interest costs.3 The 2008 Letter referenced and cited provisions of
certain 2008 Refinance documents.
Following the 2008 Refinance, in 2010, arbitration hearings commenced
in the Pitney/HACC Arbitration. On September 29, 2011, the arbitration panel
entered a final arbitration award, ruling that the operative 2008 Refinance
documents, which Pitney alleges were drafted by Lazun, did not require HACC
to share with Pitney the savings derived from the 2008 Refinance, or to pay
the credit enhancement fee (hereinafter, the “2011 arbitration award”).
According to Pitney, it was not until the 2011 arbitration award that it became
aware of Lazun’s purported negligence in connection with the 2008 Refinance.
On June 7, 2012, Lazun filed Preliminary Objections to Pitney’s
Complaint, which the trial court later denied. Lazun subsequently filed an
Answer and New Matter, to which Pitney filed a Reply.
On May 4, 2018, Lazun filed a Motion for summary judgment asserting,
inter alia, that Pitney’s cause of action was barred by the applicable two-year
statute of limitations.4 Pitney filed an Answer in opposition, asserting that the
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3 Specifically, Savin stated that “[c]ontrary to your contentions, no additional
rent is required for the period of July, 2008 through September, 2008.” Savin
went on to explain that this was because “Pitney and HACC had expressly
agreed what the rent was to be” for this time.
4 The statute of limitations for claims sounding in legal malpractice is two
years. See Wachovia Bank, N.A. v. Ferretti, 935 A.2d 565, 571 (Pa. Super.
2007) (citing 42 Pa.C.S.A. § 5524(3)). Pitney did not claim breach of contract,
which has a four-year statute of limitations. See id.
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statute of limitations was tolled until September 29, 2011, i.e., the date of the
arbitration award, which was the first time that Pitney reasonably could have
discovered Lazun’s negligence in connection with the 2008 Refinance. Lazun
filed a Reply Brief, wherein he countered that the statute of limitations had
not been tolled. Lazun further claimed that even if it was, it was tolled only
until December 4, 2008, i.e., the date of the 2008 Letter, at which time Pitney
knew, or should have reasonably known, that there was a problem with the
2008 Refinance documents, which implicated Lazun’s representation of Pitney.
By an Order and Opinion entered on November 8, 2018, the trial court
granted Lazun’s Motion for summary judgment. In sum, the court agreed with
Lazun’s above-mentioned claim concerning the 2008 Letter putting Pitney on
notice. Pitney timely filed a Notice of Appeal,5 followed by a court-ordered
Pa.R.A.P. 1925(b) Concise Statement of errors complained of on appeal.
Pitney now presents the following issue for our review: “Should the trial
court’s [O]rder granting summary judgment in favor of Lazun on the basis of
the discovery rule be reversed[,] where reasonable minds could disagree
about whether the [] 2008 [L]etter put Pitney on notice of Lazun’s
malpractice?” Brief for Appellant at 2.
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5The trial court allowed reconsideration of the November 8, 2018 Order, which
granted Lazun’s Motion for summary judgment. By an Order entered on
January 25, 2019, the trial court declined to disturb the November 8, 2018
Order; Pitney timely filed a Notice of Appeal from the former Order.
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We apply the following standard in reviewing the grant of a motion for
summary judgment:
[S]ummary judgment is only appropriate in cases where there are
no genuine issues of material fact and the moving party is entitled
to judgment as a matter of law. Pa.R.C.P. 1035.2(1). When
considering a motion for summary judgment, the trial court must
take all facts of record[,] and reasonable inferences therefrom[,]
in a light most favorable to the non-moving party[,] and must
resolve all doubts as to the existence of a genuine issue of material
fact against the moving party. An appellate court may reverse a
grant of summary judgment if there has been an error of law or
an abuse of discretion. Because the claim regarding whether
there are genuine issues of material fact is a question of law, our
standard of review is de novo and our scope of review is plenary.
Nicolaou v. Martin, 195 A.3d 880, 891-92 (Pa. 2018) (some citations
omitted). “Only when the facts are so clear that reasonable minds could not
differ can a trial court properly enter summary judgment.” Straw v. Fair,
187 A.3d 966, 982 (Pa. Super. 2018) (citation omitted).
Summary judgment may properly be entered in favor of a defendant
when the plaintiff’s cause of action is barred by the statute of
limitations. Brooks v. Sagovia, 636 A.2d 1201, 1202 (Pa. Super. 1994). “It
is the duty of a party asserting a cause of action to use all reasonable diligence
to be properly informed of the facts and circumstances upon which a potential
right of recovery is based and to institute suit within the prescribed statutory
period.” Booher v. Olczak, 797 A.2d 342, 345 (Pa. Super. 2002). “The
requirement of reasonable diligence is not an absolute standard but, rather,
is what is expected from a party who has been given reason to inform himself
of the facts upon which his right of recovery is premised.” Saksek v. Janssen
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Pharm., Inc., 2019 Pa. LEXIS 6480, at *15 (Pa. 2019) (citation and quotation
marks omitted). Moreover, “the trigger for the accrual of a legal malpractice
action, for statute of limitations purposes, is not the realization of actual loss,
but the occurrence of a breach of duty.” Commc’ns Network Int’l v.
Mullineaux, 187 A.3d 951, 960 (Pa. Super. 2018) (citation omitted)
(collecting cases and explaining the “occurrence rule”).
However, the statute of limitations may be tolled pursuant to the
“discovery rule,” upon which Pitney relies. This rule
provides that where the existence of the injury is not known to
the complaining party and such knowledge cannot reasonably be
ascertained within the prescribed statutory period, the limitations
period does not begin to run until the discovery of the injury is
reasonably possible. The statute begins to run in such instances
when the injured party possesses sufficient critical facts to put him
on notice that a wrong has been committed and that he need
investigate to determine whether he is entitled to redress. The
party seeking to invoke the discovery rule bears the burden of
establishing the inability to know that he or she has been injured
by the act of another despite the exercise of reasonable diligence.
Id. at 961 (citation and emphasis omitted); see also id. (explaining that “the
statute of limitations in a legal malpractice claim begins to run when the
attorney breaches his or her duty, and is tolled only when the client, despite
the exercise of due diligence, cannot discover the injury or its cause.” (citation
and emphasis omitted)).
The Pennsylvania Supreme Court has further explained that
Pennsylvania’s formulation of the discovery rule represents a
more narrow approach and places a greater burden on plaintiffs
than other jurisdictions[,] because the commencement of the
limitations period is grounded on “inquiry notice” that is tied to
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actual or constructive knowledge of at least some form of
significant harm and of a factual cause linked to another’s conduct,
without the necessity of notice of the full extent of the injury, the
fact of actual negligence, or precise cause.
Nicolaou, 195 A.3d at 892 (citations and some quotations omitted). The
applicability of the discovery rule may be resolved “at the summary judgment
stage where reasonable minds could not differ on the subject.” Wilson v. El-
Daief, 964 A.2d 354, 361-62 (Pa. 2009) (emphasis added); see also
Gleason v. Borough of Moosic, 15 A.3d 479, 485 (Pa. 2011).
Importantly here, this Court, interpreting Nicolaou, supra, recently
observed that the Supreme “Court emphasized the jury’s prerogative, under
the discovery rule, to decide whether a plaintiff’s efforts to investigate a
defendant were sufficiently reasonable to toll the statute of limitations.” Rice
v. Diocese of Altoona-Johnstown, 212 A.3d 1055, 1059 (Pa. Super. 2019);
see also Nicolaou, 195 A.3d at 894 (stating that the determination of
whether a plaintiff exercised reasonable diligence relevant to the application
of the discovery rule is generally a question for the jury); Fine v. Checcio,
870 A.2d 850, 858 (Pa. 2005) (holding that because application of the
discovery rule “involves a factual question as to whether a party was able, in
the exercise of reasonable diligence, to know of his injury and its cause,
ordinarily, a jury is to decide it.”).
In the instant case, the trial court explained its reasons for determining
that the discovery rule was of no avail to Pitney as follows:
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We believe that this case is similar to the [Superior Court’s
decision in Robbins & Seventko Orthopedic Surgs. v.
Geisenberger, 674 A.2d 244 (Pa. Super. 1996)]. In
Geisenberger, plaintiffs retained defendants’ law firm to
incorporate its practice and to prepare and file an employee
pension plan with the IRS. [Id.] at 244. Defendant John Gibbel
submitted pension plan forms to the IRS in September 1977. Id.
That same month, plaintiff received the pension plan forms back
with instructions that they be resubmitted. Id. On October 17,
1978, defendant S.R. Zimmerman, III[,] sent an amended
pension plan with an application for determination to the IRS. Id.
On May 4, 1983, “[plaintiffs] were informed by the IRS that
the pension plan had failed to qualify, and that deductions made
to it in 1976, 1977, 1978, and 1979 were disallowed.” Id.
Plaintiffs’ new counsel filed an administrative appeal with the IRS.
Id. On October 8, 1986, plaintiffs and the IRS reached a
settlement agreement whereby the IRS accepted amendments to
the plan for 1978 and 1979, but refused to accept amendments
relating back to 1976 and 1977. Id. Plaintiffs also submitted a
Form 870-AD Waiver of Restriction on Assessment and Collection.
Id. On September 22, 1986, plaintiffs received notice that the
IRS accepted the Form 870-AD Waiver[,] and the case relating to
the tax years 1976 through 1979 was closed. Id.
Defendants were originally notified of the problem through
a letter from the IRS dated February 24, 1986. Id. “On April 15,
1986, [defendants] informed the [plaintiffs] that they believed the
IRS’s objections to the plan were simple to amend.” Id. Plaintiffs
hired another firm to amend the plan in January 1987. Id. On
January 21, 1988, plaintiffs’ new firm, Dechert, Price, and Rhoads,
contacted defendants and informed them that plaintiffs were
precluded from amending and resubmitting the plan because they
filed the waiver form. Id.
On December 12, 1988, plaintiffs issued a writ of summons
against defendants and filed a complaint on December 22, 1989.
Id. Plaintiffs alleged that defendants “were negligent in preparing
and filing the employee pension plan with the IRS for the 1976
and 1977 tax years.” Id. Defendants filed a motion for summary
judgment arguing that plaintiff’s action was barred by the statute
of limitations[,] and the trial court agreed, granting defendant’s
motion. Id. at 245-46.
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It was noted by the Superior Court that “the trial court
agreed with the [plaintiffs] that the statute of limitations was
tolled during its administrative appeal with the IRS.” Id. at 246.
The trial court initially “concluded that the statute began to accrue
on September 22, 1986, when the IRS informed the [plaintiffs]
that it had accepted their waiver.” Id. The trial court granted
summary judgment because plaintiffs failed to bring the
malpractice suit within two years of the date of September 22,
1986, as they did not file their complaint until 1989. Id.
The Superior Court agreed with the trial court that the
motion for summary judgment should have been granted, but
disagreed with the trial court that the statute of limitations was
tolled during the administrative appeal with the IRS. The Superior
Court held that the proper accrual date was actually May 4, 1983,
“when the IRS notified the [plaintiffs] that the deductions for the
pension plan were disallowed.” Id. The Court held that plaintiffs
“acquired knowledge of the harm on May 4, 1983, when the IRS
notified them that the pension deduction was disallowed.” Id. at
377.
In the present case, the record shows that on December 4,
2008, a representative from HACC sent [the 2008] Letter to
[Pitney,] which indicated a disagreement between the parties over
the amount of rent that was to be paid under the 2008 Refinance.
The [2008] Letter references provisions from the 2008 Refinance
Agreement that [Pitney and HACC] signed. [Pitney’s] Complaint
alleges that [Lazun] had a duty to structure the 2008 Refinance
in the same manner as the 2003 Refinance[,] to ensure that
[Pitney] and HACC would equally share in all the savings and that
HACC would pay the credit enhancement fee.
We find that upon receiving [the 2008] Letter, [Pitney]
reasonably should have been aware that there was an issue with
the 2008 Refinance Agreement[,] and should have pursued some
type of action to discover the extent of the injury. [Pitney] has
failed to indicate in its brief that it attempted to review the
documents after receiving this [2008 L]etter. We believe a review
of the documents would have revealed that the 2003 Refinance
and the 2008 Refinance were not structured in a similar manner[,]
and should have alerted [Pitney] that there was an issue with the
agreement. We find that [Pitney] should have been alerted of an
issue upon receiving [the 2008] Letter….
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We do not agree with [Pitney] that the statute of limitations
should be tolled until after the [Pitney/HACC Arbitration] panel
issued its [2011 arbitration] award…. The Geisenberger Court
expressly rejected an argument made by appellants in that case
that the statute of limitations should be tolled while an appeal to
an underlying action is pending. [See Geisenberger,] 674 A.2d
at 376. Pennsylvania law requires us to determine when the
breach occurred and whether the plaintiff would have been unable
to discover the injury[,] even exercising due diligence[,] until after
the statute of limitations had passed.
In the present matter, we find that [Pitney] has failed to
demonstrate that it acted diligently in discovering the injury in this
matter. Therefore, we find that the discovery rule should only be
extended to December 4, 2008….
Because [Pitney] did not file its Complaint until March 19,
2012, we find that it is beyond the two[-]year statute of limitations
and, therefore, [Lazun] is entitled to judgment as a matter of law.
Order and Opinion, 11/8/18, at 13-17 (some capitalization altered, footnote
citation moved to body).
Pitney argues, to the contrary, that the trial court improperly applied
the discovery rule, and usurped the role of the jury, where the evidence was
far from clear that Pitney should have reasonably discovered that Lazun may
have committed malpractice in connection with his work on the 2008
Refinance, prior to the 2011 arbitration award. See Brief for Appellant at 22-
24, 28-34 (relying heavily upon Nicolaou, supra). Pitney argues that the
trial court erred in finding, as a matter of law, that the 2008 Letter should
have put Pitney on notice of Lazun’s alleged malpractice:
Pitney’s claims [against Lazun] are based on two specific failures
by Lazun with respect to the 2008 Refinance: his failure to ensure
that the transaction documents required HACC to pay the upfront
credit enhancement fee[,] and his failure to ensure that HACC was
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required to split any interest savings derived from the 2008
Refinance with Pitney.
***
The [] 2008 [L]etter cited by the trial court as the sole basis for
holding that Pitney knew or should have known[,] prior to 2011[,]
of Lazun’s negligence had nothing to do with sharing interest rate
savings or the upfront letter of credit fee. The trial court held that
this [2008 L]etter put Pitney on notice of “issues” with the “2008
Refinance Agreement” drafted by Lazun. But this letter had
nothing to do with any “issues” with the 2008 Refinance at all.[FN]
Rather, the letter dealt with the question of the amount, if any, of
additional rent HACC was required to pay during a short three-
month period from July to September 2008.
[FN]There is no single “2008 Refinance Agreement[,]”
as the [trial] court repeatedly suggested in its Opinion.
Rather, the 2008 Refinance was a complex transaction
that involved 42 different documents[,] comprising
hundreds of pages. This misstatement by the trial court
is not a simple matter of semantics. The trial court’s
repeated references to the “2008 Refinance
Agreement” demonstrate[s] that the trial court failed to
appreciate the complexity of the transaction and the
documents associated with it. This is a critical reason
that a jury, rather than the court, should be permitted
to determine whether Pitney knew or should have
known of Lazun’s negligence.
Brief for Appellant at 29-30 (footnote in original, citations to record omitted).
Pitney further asserts that, in the letter that Redcay/Pitney had sent to
HACC prior to HACC’s responsive 2008 Letter,
Pitney was telling HACC that [HACC] was obligated to pay
additional interest expenses [as part of HACC’s rent], which has
nothing to do with Lazun’s failure to make sure interest savings
were shared equally[; i]ndeed, the provision relied upon by HACC
in the [] 2008 [L]etter[] was not written by Lazun.
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Id. at 32 (footnote moved). Pitney argues that it has “never alleged[] that
Lazun did anything wrong with respect to the rent provisions[,]” and there is
“no reason that HACC’s refusal to honor its rent obligations should have
triggered a complete investigation by Pitney into Lazun’s work.” Id. at 32-
33. Pitney urges that “[a] jury could certainly find that HACC’s short payments
of rent for a period of time in 2008 and 2009 was not a ‘clue’ that should have
triggered an inquiry into Lazun’s work.” Reply Brief for Appellant at 14.
Finally, Pitney argues that
[t]he trial court’s holding[,] that the 2008 [L]etter concerning the
amount of HACC’s rent triggered a duty by Pitney to scour the
hundreds of pages of complex financing documents associated
with the 2008 Refinance for potential negligence by Lazun on
unrelated issues[,] is contrary to law which … requires an attorney
representing a client in a transaction to fully understand all the
documents and to explain them to the client. The law certainly
does not require transactional clients to hire one lawyer after
another to check on the work of the prior attorney.
Brief for Appellant at 42-43; see also id. at 42 (collecting cases).
We are persuaded by Pitney’s arguments. Unlike the trial court, we
cannot determine that the record, viewed in a light most favorable to Pitney,
is so clear that “reasonable minds could not differ on the subject[,]” Wilson,
supra, i.e., as to whether the 2008 Letter should have reasonably put Pitney
on notice of Lazun’s alleged malpractice concerning the 2008 Refinance. The
trial court thus erred in usurping the province of a jury to make a finding
concerning this matter regarding the 2008 Letter. See Nicolaou, 195 A.3d
at 894-95 (holding that because there was a genuine issue of material fact
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and reasonable minds could differ as to whether the plaintiff exercised
reasonable diligence in determining the cause of her injury, Pennsylvania’s
general rule that the issue should be submitted to the jury applied in the
case); Rice, supra (stating that the Nicolaou “Court emphasized the jury’s
prerogative, under the discovery rule, to decide whether a plaintiff’s efforts to
investigate a defendant were sufficiently reasonable to toll the statute of
limitations.” (emphasis added)).6 Moreover, we determine that
Geisenberger is inapposite to this appeal. See Brief for Appellant at 36-40
(discussing and distinguishing Geisenberger).
Based on the foregoing, we reverse the trial court’s Order granting
Lazun’s Motion for summary judgment and remand for further proceedings.
Order reversed; case remanded for further proceedings; Superior Court
jurisdiction relinquished.
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6 The Rice Court held that because reasonable minds could differ as to
whether the plaintiff exercised due diligence in a case involving alleged sexual
molestation by a priest, as well as the alleged cover-up by the Diocese, under
Nicolaou, the issue was for the jury to decide; this Court thus reversed the
trial court’s grant of judgment on the pleadings in favor of the Diocese. Rice,
212 A.3d at 1066; see also id. (emphasizing that “[t]o find the discovery rule
inapplicable here, we would need to engage in the fact-finding and inference-
drawing functions that Nicolaou teaches are preserved for the jury.” (citation
and quotation marks omitted)).
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/13/2020
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