J-A02015-17

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

FULTON BANK, N.A. IN THE SUPERIOR COURT OF

PENNSYLVANIA

Appellant

v.

PAUL A. SANDQUIST, PATRICIA A. 

ZWAAN, BARRY L. SPEVAK AND 

DOWNEY, SPEVAK & ASSOCIATES, LTD.

Appellee No. 2306 EDA 2016

Appeal from the Order June 1, 2016

In the Court of Common Pleas of Chester County

Civil Division at No(s): 2016-01908-TT

BEFORE: OTT, J., RANSOM, J., and FITZGERALD, J.*

MEMORANDUM BY OTT, J.: FILED SEPTEMBER 27, 2017

Fulton Bank, N.A. (“Bank”), appeals from the order entered on June 1, 

2016, which granted Barry L. Spevak1and Downey, Spevak & Associates, 

Ltd.’s (“Accountants”) preliminary objections.2 The Bank asserts the court 

____________________________________________

*

Former Justice specially assigned to the Superior Court.

1

 Spevak is a certified public accountant and a principal of the accounting 

firm, Downey, Spevak & Associates, Ltd. See Amended Complaint, 

4/19/2016, at 3.

2

 The court entered a companion order on the same day, dismissing all 

claims as to co-defendants Patricia Zwaan and A. Paul Sandquist. Zwaan 

was the Director of Operations at HiFi House, a home theater installation 

business that was founded by Saul Robbins. Sandquist was the Chief 

Financial Officer/Chief Operating Officer of HiFi House. As will be discussed 

(Footnote Continued Next Page)
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erred in finding that it did not present viable claims for negligent 

misrepresentation, fraud, and negligence per se. Based on the following, we 

affirm in part and reverse in part.

The trial court set forth the facts as follows:

This matter arises out of a relationship between High 

Fidelity House, Inc. (“HiFi House” [or “HiFi”]), who is not a party 

to this action, and the Bank related to a loan made to HiFi House 

... by the Bank. The Accountants, since at least 1986 had been 

providing accounting services, including preparation of tax 

returns, financial statements, to HiFi House and had no 

independent relationship with the Bank. In 2012, HiFi House 

reached out to the Bank to advise that it was seeking refinancing 

of its existing indebtedness. At the initial meeting, 

representatives from HiFi House and the Bank met and began 

introductory conversations. Following the meeting, the Bank 

requested certain financial documentation in order to evaluate 

HiFi House’s request for financing, which HiFi House provided, 

including the 2008-2011 financial statements prepared by the 

Accountants. The Bank alleges that these financial documents 

contained material misrepresentations as to the financial 

condition of HiFi House.

At a second meeting, the discussions focused on the 2011 

Financial Statement, which the Bank alleges that the 

Accountants gave to HiFi House for the express purpose of 

providing to the Bank. The Bank avers that the financial 

statements at issue were required to comply with generally 

accepted accounting principles. Following its review of HiFi 

House’s financial documentation, the Bank issued a commitment 

letter to HiFi House, which accepted the terms and conditions set 

forth therein. The Bank subsequently extended HiFi House a 

commercial line of credit in the original principal amount of 

$4,200,000. In addition, the Bank extended another loan to HiFi 

House in the amount of $1,800,000.

(Footnote Continued) _______________________

in more detail below, the Accountants provided accounting services to HiFi 

House. That companion order was not appealed.
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The commitment letter required HiFi House to prepare and 

submit to the Bank monthly borrowing base certificates (“BB 

Certificates”), certifying the value of inventory and the amount 

and age of its accounts receivable. The Accountants did not 

prepare the BB Certificates.

In October of 2012, HiFi House sought an additional line of 

credit to support a project at Drexel University. On January 7, 

2013, the Bank extended another commercial loan to HiFi House 

in the amount of $1,250,000. 

The commitment letter also required that HiFi House 

maintain[] certain financial ratios and other financial covenants, 

which HiFi House did not meet for fiscal year 2012. However, 

the Amended Complaint avers that HiFi House and Accountants 

represented to the Bank that they would be cleaning up HiFi 

House’s books and records moving forward. As a result, the 

Bank agreed to waive the covenant violations.

In spring of 2014, the Bank alleges it learned of certain 

systemic fraudulent practices of HiFi House with respect to its 

accounts receivable reporting whereby HiFi [House] “refreshed” 

accounts receivable that had aged to or beyond ninety (90) days 

from the original date of invoice. The Bank alleges that the 

Accountants were “aware” of this practice. There is no allegation 

that HiFi House’s practice was initiated by or done with the 

concurrence of the Accountants. The Bank alleges that the 

Accountants did not take sufficient steps to determine whether 

the age of the receivable remained less than one year old. This 

practice, according to the Bank’s allegations, allegedly violated 

generally accepted accounting principles. 

The Accountants prepared a draft 2013 Financial 

Statement showing a loss of $583,000 for 2013. HiFi House 

again informed the Bank that it would not meet its loan 

covenants. HiFi House subsequently retained a financial 

management consulting company (“ESB”) which specialized in 

turning around troubled companies. The Bank also engaged an 

independent financial investigation of HiFi House, performed by 

Trump Lender Services, Inc. (“TLS”). TLS prepared a report 

which, according to the Bank, details the manner in which HiFi 

House “fraudulently and intentionally manufactured inaccurate 

records of inventory and accounts receivable, using same to 
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induce [the Bank] into extending credit to HiFi House.” The 

Bank clearly avers that HiFi House “intentionally and grossly 

exaggerated and misrepresented” its inventory and accounts 

receivable. HiFi House has ceased operations as of spring or 

summer of 2014. It has insufficient assets to repay the Bank.

[On March 3, 2016, t]he Bank commenced litigation 

against the owners of HiFi House, Saul Robbins and Jon Robbins, 

in the Delaware County Court of Common Pleas.[3] In the instant 

action, the Bank asserted claims, including fraud (Count I), 

fraudulent misrepresentation (Count II), fraud in the inducement 

(Count III), negligent misrepresentation (Count IV), [c]onspiracy 

(Count V), [n]egligence [p]er [s]e (Count VI) and [c]oncerted 

[t]ortious [c]onduct ([a]iding and [a]betting) (Count VII) against 

Accountants.

Trial Court Opinion, 7/15/2016, at 1-4 (record citations omitted; emphasis 

removed).

The Bank filed an amended complaint on April 19, 2016. The 

Accountants filed preliminary objections on May 11, 2016. On June 1, 2016, 

the court granted the preliminary objections and dismissed the Bank’s 

amended complaint with prejudice. The Bank did not seek reconsideration 

of the trial court’s decision. This appeal followed.4, 5

____________________________________________

3

 The Delaware County action is not a part of the present appeal.

4

 On June 21, 2016, the trial court ordered the Bank to file a concise 

statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b). 

The Bank filed a concise statement on July 7, 2016. The trial court issued 

an opinion pursuant to Pa.R.A.P. 1925(a) on July 15, 2016, adopting in part 

its findings made in its June 1, 2016, order.

5

 In its statement of questions involved, the Bank presented the following 

additional issue: “Did the trial court abuse its discretion in refusing to 

(Footnote Continued Next Page)
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We begin with our well-settled standard of review:

[O]ur standard of review of an order of the trial court overruling 

or granting 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.

Richmond v. McHale, 35 A.3d 779, 783 (Pa. Super. 2012) (internal 

citations omitted).

In the Bank’s first issue, it claims the Accountants are liable for 

negligent misrepresentation pursuant to Section 552 of the Restatement 

(Second) of Torts. See Bank’s Brief at 18. Specifically, the Bank states that 

Section 552 applies “directly and precisely to the conduct engaged in by” the 

Accountants. Id. In support of this argument, the Bank relies on Bilt-Rite 

Contractors, Inc. v. The Architectural Studio, 866 A.2d 270 (Pa. 2005), 

in which the Pennsylvania Supreme Court expressly adopted Section 552. 

(Footnote Continued) _______________________

permit the filing of an amended complaint?” Bank’s Brief at 7. However, it 

has abandoned that issue in the argument section of the brief. Therefore, 

we need not address the claim further.
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The Bank suggests the trial court erroneously “found that Bilt-Rite applies 

only to architects, and distinguishes Bilt-Rite from the instant case, based 

upon the difference between architects and accountants.” Bank’s Brief at 

19. The Bank contends the language in Bilt-Rite is not limited to just 

architects. Id. at 19-20. Furthermore, it states:

The Bank is not aware of any Pennsylvania case directly on point 

with the instant case, i.e., involving a bank seeking damages 

from its borrower’s outside accountants, premised on the bank’s 

reliance on the accountant’s negligent misrepresentations 

contained in the accountant’s financial statements that were 

prepared in connection with the accountant’s engagement with 

the borrower. There seems no reason – logical, policy-based, or 

otherwise – however, to exempt accountants from the 

application of this holding. Bilt-Rite held that an architect, 

hired by a property owner to prepare plans and specifications, 

could be liable to a contractor that relied upon the architect’s 

plans and specifications in preparing its bid to the owner. There 

is really nothing different here, where the borrower hires the 

accountant to prepare financial statements, which are then 

provided to a bank, which uses them to underwrite a loan 

request from its potential borrower. [The Bank]’s position vis a 

vis Spevak is exactly analogous to the contractor’s position in 

relation to the architect in Bilt-Rite. Spevak prepared financial 

statements for HiFi pursuant to his firm’s longstanding 

professional engagement with HiFI. Spevak knew that the 

financial statements were to be relied upon by HiFi’s lenders. In 

fact, Spevak actually provided, by email on May 3, 2012, the 

financial statements that were actually delivered to the Bank[.] 

Spevak met with the Bank on May 11, 2012 to discuss these 

very same financial statements. The financial statements 

attached as Exhibit C to the Amended Complaint contain material 

misrepresentations as to the value of HiFi’s accounts receivable 

and its inventory that [Accountants] knew were false. [The 

Bank] relied upon and used these materials to analyze HiFi’s 

financial status, and formulated its loan proposal for HiFi based 

upon those financial statements. [The Bank]’s loan proposal 

was, in this regard, no different from the contractor’s bid to the 

owner in Bilt-Rite. The loan proposal, like the contractor’s bid, 
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was accepted, and [the Bank], like Bilt-Rite, came out on the 

short end of things, because of the misrepresentations.

Bank’s Brief at 21-22 (record citations omitted). 

Pennsylvania has applied both the common law and Restatement 

(Second) of Torts § 552 interpretations of a negligent misrepresentation 

claim to case law. See Bortz v. Noon, 729 A.2d 555, 561 (Pa. 1999); BiltRite Contractors, Inc., 866 A.2d at 280, 285. The common law factors are 

as follows:

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 induce another to act on it; and 

(4) which results in injury to a party acting in justifiable reliance 

on the misrepresentation. The elements of negligent 

misrepresentation differ from intentional misrepresentation in 

that the misrepresentation must concern a material fact and the 

speaker need not know his or her words are untrue, but must 

have failed to make a reasonable investigation of the truth of 

these words. Moreover, like any action in negligence, there must 

be an existence of a duty owed by one party to another.

Bilt-Rite, 866 A.2d at 277 (citations omitted). 

Section 552 sets forth the elements in a different manner:

(1) One who, in the course of his business, profession or 

employment, or in any other transaction in which he has a 

pecuniary interest, supplies false information for the guidance of 

others in their business transactions, is subject to liability for 

pecuniary loss caused to them by their justifiable reliance upon 

the information, if he fails to exercise reasonable care or 

competence in obtaining or communicating the information.

(2) Except as stated in Subsection (3), the liability stated in 

Subsection (1) is limited to loss suffered
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(a) by the person or one of a limited group of persons for whose 

benefit and guidance he intends to supply the information or 

knows that the recipient intends to supply it; and

(b) through reliance upon it in a transaction that he intends the 

information to influence or knows that the recipient so intends or 

in a substantially similar transaction. . . .

Restatement (Second) of Torts § 552 (1979).

In Bilt-Rite, supra, a school district entered into a contract with an 

architectural firm, The Architectural Studio (“TAS”), to design a new school. 

The district also solicited bids from contractors for all aspects of the project, 

including the firm’s “plans, drawings, and specifications in the bid documents 

supplied to the contractors.” Bilt-Rite, 866 A.2d at 272. The school district 

awarded the general construction contract to Bilt-Rite, who was the lowest 

responsible bidder. Id. “TAS’s plans provided for the installation of an 

aluminum curtain wall system, sloped glazing system and metal support 

systems, all of which TAS expressly represented could be installed and 

constructed through the use of normal and reasonable construction means 

and methods, using standard construction design tables.” Id. After 

construction commenced, though, Bilt-Rite discovered the work required it 

“to employ special construction means, methods and design tables, resulting 

in substantially increased construction costs.” Id. Bilt-Rite then filed a suit 

against TAS based upon a theory of negligent misrepresentation pursuant to 

Section 552, “claiming that TAS’s specifications were false and/or 

misleading, and seeking damages for its increased construction costs.” Id.
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at 273. TAS filed preliminary objections, which were sustained by the trial 

court and affirmed by a panel of this Court. Id. at 273-274.

The Pennsylvania Supreme Court granted review to determine 

the first impression question of whether a building contractor 

may maintain a negligent misrepresentation claim against an 

architect for alleged misrepresentations in the architect’s plans 

for a public construction contract, where there was no privity of 

contract between the architect and the contractor, but the 

contractor reasonably relied upon the misrepresentations in 

submitting its winning bid and consequently suffered purely 

economic damages as a result of that reliance.

Id. at 272. In analyzing the issue, the Supreme Court opined:

We are persuaded by [] decisions from our sister jurisdictions 

that: (1) this Court should formally adopt Section 552 of the 

Restatement (Second), which we have cited with approval in the 

past, as applied by those jurisdictions in the architect/contractor 

scenario; (2) there is no requirement of privity in order to 

recover under Section 552; and (3) the economic loss rule does 

not bar recovery in such a case. Recognizing such a cause of 

action, with such contours, is consistent with Pennsylvania’s 

traditional common law formulation of the tort of negligent 

misrepresentation. 

Section 552 sets forth the parameters of a duty owed when one 

supplies information to others, for one’s own pecuniary gain, 

where one intends or knows that the information will be used by 

others in the course of their own business activities. The tort is 

narrowly tailored, as it applies only to those businesses which 

provide services and/or information that they know will be relied 

upon by third parties in their business endeavors, and it includes 

a foreseeability requirement, thereby reasonably restricting the 

class of potential plaintiffs. The Section imposes a simple 

reasonable man standard upon the supplier of the information. 

As is demonstrated by the existing case law from Pennsylvania 

and other jurisdictions, and given the tenor of modern business 

practices with fewer generalists and more experts operating in 

the business world, business persons have found themselves in a 

position of increasing reliance upon the guidance of those 

possessing special expertise. Oftentimes, the party ultimately 
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relying upon the specialized expertise has no direct contractual 

relationship with the expert supplier of information, and 

therefore, no contractual recourse if the supplier negligently 

misrepresents the information to another in privity. And yet, the 

supplier of the information is well aware that this third party 

exists (even if the supplier is unaware of his specific identity) 

and well knows that the information it has provided was to be 

relied upon by that party. Section 552 is not radical or 

revolutionary; reflecting modern business realities, it merely 

recognizes that it is reasonable to hold such professionals to a 

traditional duty of care for foreseeable harm.

Id. at 285-286. Consequently, the Supreme Court held:

[W]e hereby adopt Section 552 as the law in Pennsylvania in 

cases where information is negligently supplied by one in the 

business of supplying information, such as an architect or design 

professional, and where it is foreseeable that the information will 

be used and relied upon by third persons, even if the third 

parties have no direct contractual relationship with the supplier 

of information. In so doing, we emphasize that we do not view 

Section 552 as supplanting the common law tort of negligent 

misrepresentation, but rather, as clarifying the contours of the 

tort as it applies to those in the business of providing 

information to others.

Id. at 287.

Turning to the present matter, in its Rule 1925(a) opinion, the trial 

court addressed the issue of whether Bilt-Rite and Section 552 were 

applicable to the case. The court opined: 

In Bilt-Rite, the Pennsylvania Supreme Court considered on first 

impression the question of whether a viable negligent 

misrepresentation claim could be asserted in the context of an 

architect/contractor/no privity scenario. After a lengthy opinion, 

the Court held that (1) the Supreme Court should formally adopt 

§ 552 of the Restatement (Second) of Torts as applied in the 

architect/contractor scenario; (2) there is no requirement of 

privity in order to recover under § 552 in the architect/contractor 

scenario; and (3) the economic loss rule did not bar recovery in 

such a case. Thus, the holding appears to be limited to factual 
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scenarios involving negligent misrepresentation claims by a 

contractor against the architect or similar design professionals.

...

Applying the Bilt-Rite case to the instant matter, the 

matters are distinguishable. Here, the issue of negligent 

misrepresentation arises in the accounting context whereas BiltRite involved a general contractor bringing suit against an 

architect in a school construction case. The Supreme Court’s 

lengthy opinion makes this distinction clear, indicating that its 

ruling applies specifically to the design professional or limited 

analogous scenarios. Because the factual context differs and 

Bilt-Rite’s holding appears to be limited, I sought direction from 

several federal cases which were directly on point.

In Williams Controls, Inc. v. Parente, Randolph, 

Orlando, Carey & Associates, 39 F. Supp.2d 517 (M.D. Pa. 

1999), the buyer of a corporate division sued the seller’s 

accountants for, inter alia, negligent misrepresentation. In 

denying defendant-accountants[’] motion for summary 

judgment, the court placed great emphasis on the fact that the 

defendant-accountants were engaged for the purpose of 

performing certain accounting work related to the sale at issue. 

Id. at 520 (emphasis added). The court also noted that the 

defendant-accountants had actual notice, prior to their 

performance, that the work product would be used, inter alia, for 

finalizing the purchase price. Id. at 552.

Similarly, in In re Phar-Mor, Inc. Sec. Litig. and PNC 

Bank, Kentucky, Inc. v. Hous. Mortgage Corp., the courts 

noted the distinction between an accounting firm engaged for a 

specific purpose, e.g., to audit financial statements, or as part of 

an ongoing business relationship. In re Phar-Mor, Inc. Sec. 

Litig., 892 F. Supp. 676 (W.D. Pa. 1995); see also, PNC Bank, 

Kentucky, Inc. v. Hous. Mortgage Corp., 899 F. Supp. 1399 

(W.D. Pa. 1994).

The instant matter is distinguishable in that the Amended 

Complaint avers that the Accountants had a long-standing 

relationship with HiFi House and performed various accounting 

services for decades, including verifying the accuracy of HiFi 

House’s balance sheets, preparing financial statements and 

preparing tax returns. See, Amended Complaint at ¶17, ¶18 and
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¶47. They were not engaged, nor is there any allegation that 

they were engaged, for the purpose of preparing financial 

statements to be used in obtaining credit from the Bank, or any 

other potential lending institution. It is reasonably deducible, in 

the absence of averments to the contrary, that the financial 

statements provided to the Bank were prepared in the regular 

course of the ongoing business relationship between HiFi House 

and the Accountants; that the statements were prepared for HiFi 

House and no one else; and the relationship between HiFi House 

and the Accountants predated any contact with this Bank by 

more than twenty years.

Moreover, § 552 provides an example, Illustration 10 

under comment H, which is directly on point: 

A, an independent public accountant, is retained by B 

Company to conduct an annual audit of the customary 

scope for the corporation and to furnish his opinion on the 

corporation's financial statements. A is not informed of 

any intended use of the financial statements; but A knows 

that the financial statements, accompanied by an auditor’s 

opinion, are customarily used in a wide variety of financial 

transactions by the corporation and that they may be 

relied upon by lenders, investors, shareholders, creditors, 

purchasers and the like, in numerous possible kinds of 

transactions. In fact B Company uses the financial 

statements and accompanying auditor’s opinion to obtain a 

loan from X Bank. Because of A’s negligence, he issues an 

unqualifiedly favorable opinion upon a balance sheet that 

materially misstates the financial position of B Company, 

and through reliance upon it X Bank suffers pecuniary loss. 

A is not liable to X Bank. See, Williams Controls, Inc., 

supra, at 537, fn. 10.

In accordance with this illustration, the Accountants could 

not be held liable to the Bank with respect to any financial 

statements Accountants prepared for HiFi House prior to the 

Bank extending credit because there was no factual allegation 

that the Accountants understood, prior to performing the 

accounting services at issue, e.g. the preparation of the 2011 

Financial Statement, that such work would be used in connection 

with HiFi House’s efforts to seek credit with any financial 

institution.
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In contrast, the Amended Complaint merely alleges that 

the 2011 Financial Statement had been prepared and that the 

Accountants at some point thereafter provided it to HiFi House 

upon request of the Bank for the Bank’s review. Thus, the 

distinction is small but important – there is no allegation that the 

Accountants prepared the financial documentation with actual 

notice that it would be used by the Bank (or some other lending 

institution as opposed to internal use by HiFi House); rather, the 

Accountants prepared the documents prior to the relationship 

with the Bank, but subsequently transmitted the documentation 

upon request to HiFi House, with knowledge that it was going to 

be reviewed by the Bank.

Perhaps more importantly, however, is the absence of any 

allegation regarding a pecuniary interest on behalf of the 

Accountants in the transaction between HiFi House and the 

Bank, an essential element of the claim for negligent 

misrepresentation. Instead, the allegation that is at the heart of 

the Bank’s negligent misrepresentation claim, to wit, that 

Accountants breached their duty to prepare financial statements 

and review balance sheets in accordance with generally accepted 

accounting principles, is the very essence of a claim for 

professional negligence. The Bank is not permitted to 

circumvent the law through artful pleading to recast a 

professional negligence claim as one for negligent 

misrepresentation. See, In re Phar-Mor, Inc., supra, 892 F. 

Supp. 676 at 693; see also, PNC Bank, Kentucky, Inc., supra, 

899 F. Supp. at 1408.

Trial Court Opinion, 7/15/2016, at 7-12. While the trial court’s analysis is 

thorough, we are constrained to disagree. 

We find the court applied a too narrow reading to Bilt-Rite in 

determining that the case only concerns disputes involving an 

architect/contractor scenario. Rather, we conclude Bilt-Rite can be applied 

to other factual scenarios where a party is providing professional information 
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that is designed to be relied upon by a third party. Bilt-Rite, 866 A.2d at 

287. As the Bank argues,6the Bilt-Rite holding points to the architect or 

design professional example as an illustrative suggestion, but the Court’s 

wording does not impose a limitation on which kind of situation Section 552 

can apply. See id. (“[W]e hereby adopt Section 552 as the law in 

Pennsylvania in cases where information is negligently supplied by one in the 

business of supplying information, such as an architect or design 

professional, and where it is foreseeable that the information will be used 

and relied upon by third persons, even if the third parties have no direct 

contractual relationship with the supplier of information.”) (emphasis 

added).

Moreover, our research has revealed that, while limited, precedence 

has applied Section 552 and Bilt-Rite to a non-architect/contractor dispute. 

In Kirschner v. K&L Gates LLP, 46 A.3d 737, 741 (Pa. Super. 2012),

appeal denied, 65 A.3d 414 (Pa. 2013), a bankruptcy trustee for a bottle 

beverage corporation brought an action against the retained law firm and an 

investigating fraud company, claiming, inter alia, negligent 

misrepresentation pursuant to Section 552 and Bilt-Rite. On appeal, the 

issue was whether the trial court erred in dismissing the trustee’s negligent 

misrepresentation claim at the preliminary objection stage because the 

____________________________________________

6

 See Bank’s Brief at 20.
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trustee alleged: (1) both defendants were professional firms in the business 

of supplying information; (2) they provided false information concerning the 

absence of any evidence of fraud; and (3) the bottle beverage company, to 

its substantial financial harm, justifiably relied on their false information. 

Kirschner, 46 A.3d at 747. A panel of this Court determined that Section 

552 and Bilt-Rite did apply and the amended complaint averred a legally 

sufficient cause of action for negligent misrepresentation. Kirschner, 46 

A.3d at 760. 

Additionally, with respect to the court’s reliance on Williams 

Controls, Inc., supra, and In re Phar-Mor, Inc. Sec. Litig., supra, we 

note that while persuasive, “decisions of the federal district courts ... are not 

binding on Pennsylvania courts, even when a federal question is involved.” 

Kubik v. Route 252, Inc., 762 A.2d 1119, 1124 (Pa. Super. 2000) (citation 

omitted); see also Feleccia v. Lackawanna Coll., 156 A.3d 1200, 1214 

n.6 (Pa. Super. 2017). It merits mention that both federal cases relied upon 

by the trial court in the present matter predate the Pennsylvania Supreme 

Court’s decision in Bilt-Rite.

7

 

____________________________________________

7

 Likewise, Illustration 10 under comment H of Section 552, which was 

noted by Williams Controls, Inc. and cited by the trial court in the present 

matter, was not specifically adopted by the Bilt-Rite Court. Further, as will 

be discussed below, the facts set forth in Illustration 10 are distinguishable 

from the present matter. Here, as averred by the Bank, the Accountants 

were informed of the intended use of the financial statements whereas in the 

(Footnote Continued Next Page)
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Furthermore, returning to the trial court’s analysis of the allegations 

set forth in the Bank’s amended complaint, see Trial Court Opinion, 

7/15/2016, at 10-12, we note the Bank alleged the following relevant facts:

32. On the evening of May 3, 2012, at or about 7:04 p.m., 

Sandquist e-mailed [Betsy] Niedziejko [of the Bank] HiFi House 

Financial Statements (2008 through 2011), prepared by 

Defendant Spevak.

...

36. [Jon A.] Robbins,[8]together with Spevak and Sandquist, 

had a follow-up meeting with Niedziejko and Ken Goddu of 

Fulton on May 11, 2012 (the “Second Meeting”).

37. During this Second Meeting, discussions occurred between 

Robbins, Spevak, Sandquist (on behalf of HiFi House) and

Niedziejko and Goddu, regarding HiFi House’s financial 

statements and financial conditions.

38. The discussions regarding HiFi House’s financials were 

primarily focused on the 2011 Financial Statement, prepared by 

[the Accountants], which Spevak gave to Sandquist for the 

express purpose of Sandquist transmitting same to Niedziejko 

prior to the Second Meeting. 

...

44. In preparing financial statements, one of Spevak’s inquiries 

under the review engagement was to ascertain whether HiFi 

House’s accounts receivable were properly reported as current 

and collectible.

(Footnote Continued) _______________________

illustration, the accountant merely knew the documents were customarily 

used in a wide variety of financial transactions by the corporation.

8

 Robbins was the son of the founder of Hifi House and eventually became 

Chief Executive Officer and President of the business. See Amended 

Complaint, 4/19/2016, at 4.
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45. Spevak testified that accounts receivable may be reported 

on a balance sheet as current assets if they are less than one 

year old and deemed collectible by management. 

46. Financial Statements, such as those prepared and furnished 

by [the Accountants] to [the Bank], must be free of material 

misstatements and must be fairly presented in accordance with 

generally accepted accounting principles.

...

48. Spevak knew that the 2011 Financial Statement would be 

used by [the Bank] to assess the financial condition of HiFi 

House in response to HiFi’s request for credit from [the Bank].

...

Count IV: Negligent Misrepresentation

...

167. [The Accountants] misrepresented the state of HiFi House’s 

accounts receivable and inventory, through information and 

documents submitted by [the Accountants] to [the Bank] for 

purposes of obtaining loans.

168. In the alternative that [the Accountants] did not knowingly 

make such misrepresentations, they were made negligently 

which induced [the Bank] into believing that HiFi House was in a 

better financial position than it actually was.

169. Assuming arguendo that their acts were not intentional, 

[the Accountants] failed to exercise reasonable care or 

competence in providing accurate financial information to [the 

Bank], whereby such inaccuracies and misrepresentations 

improperly inflated HiFi’s borrowing base for Loans I, [II,] and 

III[9]and the value of the collateral for Loans I, II, and III.

____________________________________________

9

 Loan I pertains to a commercial line of credit the Bank extended to HiFi 

House in the original principal amount of $4,200,000.00 on June 11, 2012. 

Loan II pertains to a commercial line of credit the Bank extended to HiFi 

(Footnote Continued Next Page)
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170. [The Accountants] played a role, through their actions 

and/or inactions aforesaid, in misrepresenting material 

information and documentation to [the Bank] for purposes of 

securing and maintaining Loans I, II, and III.

171. Assuming arguendo that their acts were not intentional, 

[the Accountants]’ negligent accounting of its financial condition, 

including age and value of its accounts receivable and inventory, 

induced [the Bank] to extend Loans I, II, and III.

172. [The Bank]’s reliance upon the false figures reported by 

[the Accountants] on behalf of HiFi House was justifiable as [the 

Bank] should not reasonably expect a potential borrower to 

violate the law in providing [the Bank] with financial information.

173. Further, the actual books and records of HiFi House were 

kept in such a manner that without knowing of HiFi’s improper 

accounting practices, [the] Bank would have been able to 

determine same.

174. [The Bank]’s inability to now collect on the substantial 

indebtedness owed thereto by HiFi House, causing substantial 

economic harm, is a proximate and direct result of the Bank’s 

justifiable reliance on [the Accountants]’ misrepresentations.

Amended Complaint, 4/19/2016, at 29-30.

Contrary to the trial court’s comments, we find that at this stage of the 

pleadings, the Bank presented a plausible claim alleging a legally sufficient 

cause of action for negligent misrepresentation. In accordance with Section 

552, the Bank alleged: (1) the Accountants were in the business of 

(Footnote Continued) _______________________

House in the original principal amount of $1,800,000.00 on the same day. 

Loan III pertains to a commercial loan the Bank extended to HiFi House in 

the original principal amount of $1,250,000.00 on January 7, 2013. See

Amended Complaint, 4/19/2016, at ¶¶ 56, 61, and 69.
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supplying professional accounting information for HiFi House; (2) they 

supplied information regarding the financial condition of HiFi House for the 

preparation of a May 2012 meeting with the Bank; (3) Spevak was present 

at that meeting where the 2011 financial statements were discussed; and 

(4) the Bank relied on this information and extended multiple loans to HiFi 

House. Indeed, the allegations in the amended complaint appear to aver the 

Accountants prepared the documents for the express purpose of the May 

2012 meeting with the Bank. Accordingly, we reverse the trial court’s June 

1, 2016, order granting the Accountant’s preliminary objections as to the 

negligent misrepresentation cause of action and reinstate the Bank’s 

amended complaint as to that count.

In its next argument, the Bank contends its amended complaint set 

forth a claim of fraud. Bank’s Brief at 28. Specifically, it states: 

To be liable for fraud, Spevak need only to have had reason to 

expect that [the Bank] would act based on the false and 

misleading financial statements that he prepared. As the 

Amended Complaint makes clear, the only purpose for the 

practice of “refreshing” the accounts receivable was to deceive 

the only entity relying on the accuracy of those numbers: the 

lender. There is no legitimate business purpose for this practice.

...

As there is no legitimate basis for the false representations to 

[the Bank], the totality of the circumstances as pled in the 

Amended Complaint shows Spevak’s intent to deceive [the 

Bank].

Id. at 29-30 (citations omitted). Moreover, the Bank claims:
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The trial court ... disregards the overall substance of the scheme 

engaged in by HiFi and Spevak, which is adequately set forth in 

the Amended Complaint, and elevates form over substance, 

relying largely upon the single fact that Sandquist was the 

person that physically emailed the financial statement to the 

Bank, and that Spevak did not hand them directly to the Bank. 

The trial court also takes the position that any complaint as to 

the content of the financial statement, lies with the accountant’s 

client, HiFi. These points, however, do not address the issue of 

“particularity” of a particular averment. Rather, these points 

illustrate a fundamental policy position, which, in reality, attends 

more directly to the applicability of § 552 to this case. It is not 

an indictment as to a lack of specifics in the pleading.

As set forth above, the financial statements prepared by Spevak 

were filled with false information, intentionally so, in order to 

inflate the value of HiFi’s assets, and to induce the Bank in to 

lending more money than it otherwise would. 

Id. at 31-32.

“Fraud is a generic term used to describe anything calculated to 

deceive, whether by a single act or combination, or by suppression of the 

truth, or suggestion of what is false, whether it be by direct falsehood or by 

innuendo, by speech or silence, word of mouth, or look or gesture.” 

Blumenstock v. Gibson, 811 A.2d 1029, 1034 (Pa. Super. 2003), appeal 

denied, 828 A.2d 349 (Pa. 2003).

To prove fraud, a plaintiff must demonstrate by clear and 

convincing evidence: (1) a representation; (2) which is material 

to the transaction at hand; (3) made falsely, with knowledge of 

its falsity or recklessness as to whether it is true or false; (4) 

with the intent of misleading another into relying on it; (5) 

justifiable reliance on the misrepresentation; and (6) the 

resulting injury was proximately caused by the reliance. 

Unsupported assertions and conclusory accusations cannot 

create genuine issues of material fact as to the existence of 

fraud.
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Id. (internal citations omitted). 

Here, in its amended complaint, the Bank alleged its fraud claim as 

follows:

134. [The Accountants] knew that the financial statements, 

information and documentation maintained, prepared and 

transmitted by HiFi House to [the Bank] would be used by [the 

Bank] to assess the financial condition of HiFi House, and to 

develop the lending limits and borrowing base for Loans I, II and 

III.

135. [The Accountants] also knew that their business assets, 

the majority value of which was accounts receivable and 

inventory, was the collateral for Loans I, II, and III and thus a 

primary consideration of [the Bank] in determining whether to 

extend credit to HiFi.

136. A large portion of Loan I and Loan II was used to pay off 

HiFi’s obligations to its prior lender, M&T Bank, and thus without 

the amount of funds ultimately loaned by [the Bank], there 

would have been no lending relationship at all between HiFi and 

Fulton.

137. [The Accountants] acted in bad faith with regard to the 

information and documentation – comprised of material 

misrepresentations – provided to [the Bank].

138. Each and every document HiFi provided to [the Bank] with 

representations of HiFi’s assets, materially misrepresented the 

age and value of HiFi House’s accounts receivables, concealed 

HiFi House’s advanced billing practices, and misstated the value 

of HiFi’s inventory.

139. The Financial Statements prepared and furnished by [the 

Accountants] were known by [the Accountants] not to present a 

fair or accurate image of HiFi’s financial position, contrary to 

generally accepted accounting principles.

140. [The Accountants]’ misrepresentation of HiFi House’s 

finances was intentional.
J-A02015-17

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141. Consequently, the misrepresentations fraudulently inflated 

HiFi House’s lending base and the value of the collateral for Loan 

I, Loan II, and Loan III, while concurrently concealing HiFi

House’s financial troubles from [the Bank].

142. The improper practice was known by [the Accountants] 

and used and concealed by [the Accountants] to secure Loan I, 

Loan II, and Loan III.

143. [The Bank] would not have extended HiFi House credit if it 

knew of HiFi’s fraudulent accounting practices.

144. [The Bank] also would not have provided HiFi House with 

Loan I, Loan II, and Loan III if it knew of the actual value of 

HiFi’s collateral and borrowing base, as this would not have 

supported lending enough money to pay off HiFi’s prior lender, 

M&T Bank.

145. [The Bank]’s reliance upon the fraudulent figures reported 

by [the Accountants] on behalf of HiFi House was justifiable, as 

[the Bank] should not reasonably expect a potential borrower to 

violate the law in providing [the Bank] with financial information.

146. Further, the actual books and records of HiFi House were 

kept in such a manner that, without knowing of HiFi’s fraudulent 

accounting practices, [the] Bank would not have been able to 

determine the existence of same.

147. [The Bank]’s inability to now collect on the substantial 

money loaned to HiFi House, causing substantial economic harm 

to [the Bank], is a proximate and direct result of the Bank’s 

justifiable reliance on [the Accountants]’ misrepresentations.

Amended Complaint, 4/19/2016, at 23-25.

In sustaining the preliminary objections regarding this claim, the trial 

court found the following:

Our review of the Amended Complaint reveals that [the Bank] 

has not pleaded fraud with the requisite particularity. Generally, 

[the Bank] complains about financial documentation, in part 

prepared by [the Accountants], which contained misleading 

and/or false information regarding the financial condition of HiFi. 
J-A02015-17

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However, [the Bank] specifically alleges that the HiFi Financial 

Statements from 2008 through 2011 were provided to [the 

Bank] by Defendant Sandquist, not [the Accountants]. Any 

complaints regarding the content of the financial documents 

prepared by [the Accountants] lies with its client, HiFi, and are 

not properly asserted by [the Bank]. [The Bank] further alleges 

that Defendant Spevak attended a meeting with [the Bank], but 

does not make any specific allegations regarding 

misrepresentations that were made by Defendant Spevak to [the 

Bank]. Fraud is insufficiently pleaded where [the Bank] merely 

complains that the financial documentation created by [the 

Accountants] and provided to their client, HiFi, contained 

misrepresentations. Complaints that [the Accountants] failed to 

use generally accepted accounting principles sounds in 

negligence, not fraud.

The Amended Complaint further alleges that Defendant Spevak 

attended a subsequent meeting and, together with Defendant 

Sandquist, informed [the Bank] that HiFi was unable to meet the 

financial covenants for the year 2012. This is not alleged to be a 

false or misleading statement. Additionally, [the Bank] claims 

that Defendants Spevak and Sanquist represented that they 

recently discovered the misdealings of HiFi’s former CEO, cut ties 

with him, and would be “cleaning up HiFi House’s books and 

records and financial practices going forward, to ensure nothing 

like this happened again.” At this same meeting, [the Bank] 

alleges Defendants Spevak and Sandquist represented that they 

had a strategic plan to improve HiFi’s financial position. Again, 

these representations are not alleged to be false; rather, they 

constitute “promises” to do something in the future. 

Accordingly, they cannot form the basis of a claim for fraud. The 

remainder of [the Bank]’s allegations regarding [the 

Accountants] similarly cannot support a claim for fraud because 

they do not amount to representations or were not alleged to be 

false. Thus, [the Bank] has failed to state a cognizable claim for 

fraud because it does not plead each element with the requisite 

level of specificity.

Order of Court, 6/1/2016, at n.1, 3 (record citations omitted). Keeping our 

standard of review in mind, we conclude the trial court has thoroughly and 
J-A02015-17

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accurately disposed of this fraud issue. Accordingly, we affirm on the basis 

of the court’s analysis.

Lastly, the Bank asserts it set forth a viable claim of negligence per se

in its amended complaint. Banks’ Brief at 33. Specifically, it states:

The Trial Court found that the Amended Complaint failed to state 

a claim for Negligence Per Se, as the relevant criminal statutes 

do not exist to “secure to individuals the enjoyment of rights or 

privileges to which they are entitled only as members of the 

public.” This, however, is a misrepresentation of this 

requirement, as the statutes relied upon in the Amended 

Complaint clearly exist to protect a specific class of individual 

crime victims, and not the public at large.

Id. (citation omitted). Moreover, the Bank asserted:

[The Bank]’s negligence per se claims are based upon violations 

of 18 U.S.C. § 1343, related to wire fraud, and 18 Pa.C.S.A. § 

4107(a)(6) related to deceptive or fraudulent business practices. 

18 U.S.C. § 1343 contains a specific provision for actions that 

affect a financial institution (i.e. [the Bank]), and it seems 

implausible to suggest this statute is not intended to protect [the 

Bank], a financial institution, as opposed to society at large. 

Similarly, 18 Pa.C.S.A. § 4107(a)(6) makes it a crime to make or 

induce “others” to rely on a false or misleading written 

statement for the purpose of obtaining property or credit. The 

“others” in the instant matter is clearly [the Bank], as opposed 

to society at large. In fact, 18 Pa.C.S.A. § 104, it is clearly 

stated that the purpose of Title 18 of the Crimes Code, is “[t]o 

forbid and prevent conduct that unjustifiably inflicts or threatens 

substantial harm to individual or public interest[.]” Id. 

Individual interest is unmistakably what 18 Pa.C.S.A. § 

4107(a)(6) exists to prote[c]t.

Id. at 34-35.

In order to prove a claim based on negligence per se, the 

following four requirements must be met:
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(1) The purpose of the statute must be, at least in part, to 

protect the interest of a group of individuals, as opposed to 

the public generally;

(2) The statute or regulation must clearly apply to the 

conduct of the defendant;

(3) The defendant must violate the statute or regulation;

(4) The violation of the statute or regulation must be the 

proximate cause of the plaintiff's injuries.

Mahan v. Am-Gard, Inc., 2003 PA Super 510, 841 A.2d 1052, 

1058-1059 (Pa. Super. 2003) (citations and quotations omitted).

Schemberg v. Smicherko, 85 A.3d 1071, 1074 (Pa. Super. 2014).

The statutes the Bank claims the Accountants violated are as follows. 

Section 1343 states:

Whoever, having devised or intending to devise any scheme or 

artifice to defraud, or for obtaining money or property by means 

of false or fraudulent pretenses, representations, or promises, 

transmits or causes to be transmitted by means of wire, radio, or 

television communication in interstate or foreign commerce, any 

writings, signs, signals, pictures, or sounds for the purpose of 

executing such scheme or artifice, shall be fined under this title 

or imprisoned not more than 20 years, or both. If the violation 

occurs in relation to, or involving any benefit authorized, 

transported, transmitted, transferred, disbursed, or paid in 

connection with, a presidentially declared major disaster or 

emergency (as those terms are defined in section 102 of the 

Robert T. Stafford Disaster Relief and Emergency Assistance Act 

(42 U.S.C. 5122)), or affects a financial institution, such person 

shall be fined not more than $ 1,000,000 or imprisoned not more 

than 30 years, or both.

18 U.S.C. § 1343. 

Section 4107 provides, in pertinent part:

(a) Offense defined. — A person commits an offense if, in the 

course of business, the person:
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...

(6) makes or induces others to rely on a false or misleading 

written statement for the purpose of obtaining property or 

credit[.]

18 Pa.C.S. § 4107(a)(6).

Here, the trial court found the following:

Statutes which the Superior Court has held were too general to 

support a negligence per se claim involve statutes that less 

clearly indicate an intention to protect specific groups from 

specific types of harm. See, e.g., Wagner v. Anzon, Inc., 684 

A.2d 570, 574-575 (Pa. Super. 1996) (holding that there was no 

negligence per se claim based upon violation of Philadelphia Air 

Management Code, because “the purpose of the Code was to 

protect the ‘atmosphere over the City’ of Philadelphia, with ... 

concomitant benefits to its ‘inhabitants.’”). After careful review, 

we conclude that the purposes of 18 U.S.C. § 1343 and 18 

Pa.C.S.A. § 4107 are to protect the interests of the general 

public against wire fraud and deceptive business practices, 

respectively. We find no indication that either statute was 

designed to protect a specific group, such as banks or lending 

institutions. Because [the Bank] does not plead that is a 

member of a specific protected group, [the Bank]’s claim for 

negligence per se fails.

Order of Court, 6/1/2016, at n.1, 4. Again, keeping our standard of review 

in mind, we conclude the trial court has thoroughly and accurately disposed 

of the Bank’s negligence per se issue. Therefore, we affirm this issue on the 

basis of the court’s analysis.
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Accordingly, we affirm the trial court’s June 1, 2016, order with 

respect to the fraud and negligence per se causes of action and reverse with 

regard to the negligent misrepresentation count.10 

Order affirmed in part and reversed in part. Case remanded for 

further proceedings. Application for relief denied. Jurisdiction relinquished. 

Fitzgerald, J., joins this memorandum.

Ransom, J., files a concurring and dissenting memorandum.

____________________________________________

10

 We deny the Accountants’ December 30, 2016, application for relief 

based on the argument that the Bank’s claims are barred by res judicata. 

The ruling the Accountants seek to introduce is a December 21, 2016, 

decision by the Honorable Ashely M. Chen of the United States Bankruptcy 

Court for the Eastern District of Pennsylvania. See Fulton, N.A. v. 

Robbins (In re Robbins), 562 B.R. 83 (Bankr. E.D. Pa. 2016). The related 

proceeding involved Jon A. Robbins, the debtor, and the Bank. It merits 

mention:

The doctrine of res judicata will preclude an action where the 

former and latter suits possess the following common elements: 

(1) identity of issues; (2) identity in the cause of action; (3) 

identity of persons and parties to the action; and (4) identity of 

the capacity of the parties suing or being sued.

Daley v. A.W. Chesterton, Inc., 37 A.3d 1175, 1189-1190 (Pa. 2012). A 

review of both cases reveals that the bankruptcy action and present matter 

involve different parties and causes of actions. As a result, the doctrine of 

res judicata does not apply.
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Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 9/27/2017