Source: http://lebanoncountylegaljournal.org/robert-e-siegrist-jr-vs-cameron-b-batz-and-monica-a-kapp-no-2016-01053/
Timestamp: 2019-12-09 16:35:12
Document Index: 387096449

Matched Legal Cases: ['§ 318', '§ 36', '§14', '§8818', '§8816', '§8819', '§8923', '§ 318', '§525']

Robert E. Siegrist, Jr., vs. Cameron B. Batz and Monica A. Kapp No. 2016-01053 — Lebanon County Legal Journal
Judges Opinions, — May 2, 2018 10:00 — 0 Comments
Robert E. Siegrist, Jr., vs. Cameron B. Batz and Monica A. Kapp No. 2016-01053
Civil Action-Law-Joint Business Venture-Real Property-Remodeling and Sale-Preliminary Objections-Limited Liability Company-Indispensable Party-Joinder-Breach of Fiduciary Duty-Unjust Enrichment-Waste of Assets-Intentional Misrepresentation-Self Dealing
Plaintiff, who was involved in a joint business venture with Defendants involving the purchase, remodeling, rental and sale of real property, brought a Complaint against Defendants seeking recovery of Defendants’ share of deficits incurred in the venture and the recovery of an advance Plaintiff provided to Defendants for the purchase of Defendants’ residence. Defendants filed Preliminary Objections to Plaintiff’s Complaint, asserting that Plaintiff failed to join as an indispensable party the limited liability company formed by the parties to perform real estate transactions and challenging the legal sufficiency of the inclusion of Monica A. Kapp as a party in this case and the Breach of Fiduciary Duty, Unjust Enrichment, Waste of Assets, Intentional Misrepresentation and Self Dealing causes of action in the Complaint.
1. Pa.R.C.P. Rule 1028(a)(5) provides that a party may file a preliminary objection based upon a party’s failure to join a necessary party to a lawsuit.
2. A party is indispensable to litigation when its rights are so connected with the claims of the litigants that no decree can be made without impairing its rights, and it must be made a party to protect such rights. The absence of an indispensable party renders any decree or order in the matter void for lack of jurisdiction.
3. To determine whether a party is indispensable, the court must determine whether the absent party has a right or an interest related to the claim and the nature of the right or the interest, the right or the interest is essential to the merits of the issue and justice can be afforded without violating the due process rights of the absent party.
4. The inquiry into whether a party is indispensable is to be made from the perspective of protecting the rights of the absent party, not from the view of whether joining the party will make the matter more difficult to litigate.
5. Pa.R.C.P. Rule 2227(a) provides that persons having only a joint interest in the subject matter of an action must be joined on the same side as a plaintiff or a defendant.
6. Property acquired by a limited liability company becomes the property of the company, and a member has no interest in any specific property of the company.
7. The limited liability company formed by the parties is an indispensable party to this action in light of the fact that some of the properties over which damages are sought by Plaintiff were purchased in the name of the limited liability company such that it is possible that the company would have an interest in the amounts sought by Plaintiff and the inclusion of the limited liability company is essential to avoid the possibility of future litigation.
8. Plaintiff sufficiently stated a cause of action against Defendant Monica A. Kapp in the Complaint when he alleged that she was a party to the agreement regarding the joint venture and she failed to fulfill her obligation to share in the losses of the venture or to repay the amounts advanced for the purchase of Defendants’ residence.
9. A confidential relationship and the resulting fiduciary duty may attach wherever one occupies toward another such a position of advisor or counselor as reasonably to inspire confidence that he or she will act in good faith for the other’s best interest.
10. In a business relationship, a business association may serve as the basis of a confidential relationship if one party surrenders a substantial control over some portion of his or her affairs to the other party.
11. In general, a joint venturer owes a fiduciary duty of the utmost good faith and must act toward his associate with scrupulous honesty.
12. Plaintiff sufficiently alleged a cause of action in Breach of Fiduciary Duty against Defendants when he alleged that the parties were involved in a relationship of the joint venture through which members generally owed each other a duty of good faith and Defendants breached this duty by failing to fulfill the obligations under the terms of the agreement regarding the joint venture.
13. The elements necessary to prove an Unjust Enrichment cause of action are benefits conferred upon a defendant by a plaintiff, appreciation of such benefits by the defendant and the acceptance and retention of such benefits under such circumstances that it would be inequitable for the defendant to retain the benefit without the payment of value.
14. The Complaint is legally sufficient to set forth a cause of Action in Unjust Enrichment when Plaintiff alleged that he conferred benefits upon Defendants by financing their residence and assuming liability for the losses of the joint venture and Defendants appreciated the benefits.
15. A transaction constitutes a waste of corporate assets if it involves an expenditure of corporate funds or a disposition of corporate assets for which no consideration is received in exchange and for which there is no rational business purpose.
16. Plaintiff’s Complaint sufficiently alleges a cause of action in Waste of Corporate Assets when it alleges that Defendants used funds of the joint venture, profited from the activities and failed to turn over such profits to the joint venture.
17. The elements of Intentional Misrepresentation are a representation that is material to the transaction at hand that was made falsely with knowledge of its falsity or recklessness as to whether it is true or false with the intent of misleading another into relying upon it, justifiable reliance on the misrepresentation and resulting injury proximately was caused by the reliance.
18. Plaintiff’s Complaint fails to set forth a cause of action in Intentional Misrepresentation when it fails to identify a representation that was false at the time when it was made.
19. Self dealing is present when a minority shareholder is denied the right to participate in the benefits of a corporation, as a majority shareholder has a fiduciary duty not to misuse its power by promoting its personal interest at the expense of the corporate interests.
20. The theory of the cause of action in Self Dealing appears to be included in Plaintiff’s cause of action for Breach of Fiduciary Duty and should not be asserted as an independent theory of recovery.
L.C.C.C.P. No. 2016-01053, Opinion by John C. Tylwalk, President Judge, July 26, 2017.
CIVIL DIVISION NO. 2016-01053
ROBERT E. SIEGRIST, JR.
CAMERON B. BATZ and MONICA A. KAPP
FREDERICK LONG, ESQUIRE FOR ROBERT E. SIEGRIST, JR.
JUSTIN BOLLINGER, ESQUIRE FOR CAMERON B. BATZ AND
GIBBEL KRAYBILL & HESS LLP MONICA A. KAPP
AND NOW, this 26th day of July, 2017, upon consideration of Defendants’ Preliminary Objections to Plaintiff’s Complaint, it is hereby Ordered that Plaintiff is granted twenty days to file an Amended Complaint, in accordance with the accompanying Opinion:
1. The Preliminary Objections as to failure to join Four J’s Renovations, LLC as an indispensable party is SUSTAINED.
2. The Preliminary Objection for failure to state a claim against Defendant Monica Kapp is OVERRULED.
3. The Preliminary Objection to Plaintiff’s claims for Breach of Contract is SUSTAINED, in part, and OVERRULED, in part. The Preliminary Objection to the statement of damages in Plaintiff’s first Breach of Contract claim is SUSTAINED. Plaintiff is directed to state with more specificity the items included in the $25,187.00 sought in that count. The remaining Preliminary Objections to the claims for Breach of Contract are OVERRULED.
4. The Preliminary Objection for Plaintiff’s claim for Breach of Fiduciary Duty is OVERRULED.
5. The Preliminary Objection to Plaintiff’s Additional Common Law Claims is OVERRULED, in part, and SUSTAINED, in part:
(a.) The Preliminary Objection to Plaintiff’s claim for Unjust Enrichment is OVERRULED;
(b.) The Preliminary Objection to Plaintiff’s claim for Waste of Assets is OVERRULED.
(c.) The Preliminary Objection to Plaintiff’s claim for Intentional Misrepresentation is SUSTAINED.
(d.) The Preliminary Objection to Self-Dealing is SUSTAINED.
6. Plaintiff is granted leave to file an Amended Complaint within twenty days of this Order.
OPINION, TYLWALK P.J., JULY 26, 2017.
The Complaint in this matter alleges that the parties entered into a joint business venture in January 2007 which involved the purchase, remodeling, renting, and sale of real property. The parties agreed that Plaintiff would provide the financing for the purchase of and renovations to the properties and would cover the expenses for the improvements to the property and Defendants would provide the labor. All of the parties would be equally responsible for the interest on loans obtained for financing the purchases and the profits and losses from the sales of the properties would be equally split among the parties. It is alleged that the parties engaged in many of these transactions over the course of several years, with Plaintiff continuing to provide cash advances to fund the purchases and improvements. As the collective result of those transactions, the joint venture incurred a deficit, including interest payments that continued to accrue. Plaintiff alleges that Defendants’ share of the deficit is $25,187.00, and that they have failed to pay their share of despite his demands for payment and their acknowledgment of this obligation.
Plaintiff also avers that he provided a $40,000.00 cash advance for the purchase of a property which was to be Defendants’ residence. Defendants agreed to repay Plaintiff with interest. Plaintiff alleges that Defendants have also failed to repay him this amount. Initially, Plaintiff had indicated to Defendants that he would forgive $15,000.00 of this amount; however, due to Defendants’ failure to repay anything, he seeks the entire $40,000.00 in this lawsuit.
In the Complaint, Plaintiff also avers that the Defendants have continued in the business of flipping houses by using funds which are owed to the parties’ joint venture, have gained profit through the continuation of those activities, have failed to surrender or account for the profits which are due to the joint venture from these activities, and have failed to disclose information regarding the operation of the joint venture to Plaintiff.
The Complaint contains two counts in Breach of Contract, one for recovery of Defendants’ share of the losses of the joint venture, and one for recovery of the amount advanced for the purchase of their residence. Plaintiff also asserts one count in Breach of Fiduciary Duties, and one count in Additional Common Law Claims (Unjust Enrichment, Waste of Assets, Intentional Misrepresentation, and Self-Dealing). Plaintiff seeks recovery of $25,187.00 for Defendants’ share of the overall deficit from the joint venture and $40,000.00 for repayment of the cash advance for Defendants’ residence for a total of $65,187.00.
Defendants have filed Preliminary Objections asserting that the parties formed a limited liability company, Four J’s Renovations, LLC (“Four J’s”) in October 2008 and that all real estate transactions were thereafter conducted by Four J’s in accordance with an Operating Agreement executed in December 2008. They complain that Four J’s is an indispensable party to this litigation and that Plaintiff has failed to join it as a defendant in violation of Pa.R.C.P. No. 1028. They also complain that Plaintiff has failed to attach the Operating Agreement of Four J’s to the Complaint in violation of Pa.R.C.P. No. 1019(i). In addition, Defendants claim that all dealings were between Plaintiff and Defendant Cameron Batz and seek dismissal of Defendant Monica Kapp and demur to the various causes of action asserted in the Complaint.
In his response to the Preliminary objections, Plaintiff explains that the real estate transactions involved in this action were conducted outside of the Operating Agreement, that the Defendants are personally liable for the debt incurred by Plaintiff on his personal line of credit pursuant to their agreement, and that Defendant Kapp was an active participant in the joint venture. The parties have filed Briefs in support of their respective positions and the Preliminary Objections are before us for resolution.
Plaintiff argues that the parties did not conduct the transactions involved in this litigation as part of Four J’s, the limited liability company, but instead continued their dealings in accordance with their joint venture.
A joint venture is not a status created or imposed by law; it is a relationship voluntarily assumed and arising wholly from contract. 2 Williston on Contracts 557, § 318A (3rd ed. 1959). Whether persons have engaged in it must depend primarily upon their intention as expressed in their agreement and the construction they have placed upon it. “To constitute a joint venture certain factors are essential: (1) each party to the venture must make a contribution, not necessarily of capital, but by way of services, skill, knowledge, materials or money; (2) profits must be shared among the parties; (3) there must be a ‘joint proprietary interest and right of mutual control over the subject matter’ of the enterprise; (4) usually, there is a single business transaction rather than a general and continuous transaction.” McRoberts v. Phelps, 391 Pa. 591, 599, 138 A.2d 439, 443–444 (1958). A joint venture partakes in many ways of a partnership, the principal difference being that it usually, though not necessarily, applies to a single transaction instead of being formed for the conduct of a continuing business. West v. Peoples First National Bank & Trust Co., 378 Pa. 275, 281–282, 106 A.2d 427, 431 (1954).
The rights, duties, and obligations of joint venturers, as between themselves, depend primarily upon the terms of the contract by which they assume that relationship. 46 Am.Jur.2d, Joint Ventures § 36. The obligations of the parties need not be equal; they may differ in character and/or amount. The liability of a joint venturer for a proportionate part of the losses or expenditures of the enterprise may be fixed by the terms of the agreement. Absent a limitation in the agreement, a joint venturer will be held responsible with his or her associates for the losses sustained by the enterprise.
Snellbaker v. Hermann, 462 A.2d 713, 717 (Pa. Super. 1983).
Plaintiff alleges that the parties entered into their joint venture “flipping” houses in or about January 2007. In their Preliminary Objections, Defendants aver that on October 31, 2008, Four J’s was formed by Plaintiff and Defendant Batz as a limited liability company with the Pennsylvania Department of State and that on December 1, 2008, Four J’s entered into an Operating Agreement to govern all real estate purchases made after that date. Defendants claim that Four J’s is an indispensable party to this litigation and that Plaintiff’s failure to name Four J’s as a defendant and to attach a copy of the Operating Agreement constitutes violations of the applicable procedural rules.
Pa.R.C.P. No. 1028(a)(5) provides that a party may file a preliminary objection for a party’s failure to join a necessary party to a lawsuit. Pa.R.C.P. No. 1028(a)(5). A party is indispensable to litigation when its rights are so connected with the claims of the litigants that no decree can be made without impairing its rights, and it must be made a party to protect such rights. Grimme Combustion, Inc. v. Mergentime Corp., 95 A.2d 77, 81 (Pa. Super. 1991). The absence of an indispensable party renders any decree or order in the matter void for lack of jurisdiction. Hubert v. Greenwald, 743 A.2d 977, 979-80 (Pa. Super. 1999). The basic inquiry is whether justice can be done in the absence of a third party. Id.
Pennsylvania courts look to the following guidelines in determining whether a party is indispensable:
a.) Do absent parties have a right or interest related to the claim?
b.) If so, what is the nature of the right or interest?
c.) Is that right or interest essential to the merits of the issue?
d.) Can justice be afforded without violating the due process rights of the absent parties?
Hubert v. Greenwald, supra at 980. A party is indispensable when “some of the relief necessarily involves” that party. Cry, Inc. v. Mill Service, Inc., 640 A.2d 372 (Pa. 1994). If judgment is entered without the joinder of an indispensable party “there could be a duplication of the requirement to defend, and, more importantly, a confusing and incomplete disposition which would prejudice the defendant.” Id. at 375.
Pa.R.C.P. No. 2227 provides:
Rule 2227. Compulsory Joinder
Pa. R.C.P. No. 2227.
In the Complaint, Plaintiff seeks recovery of funds which are allegedly owed to him through the parties’ business activities in the joint venture and by virtue of his funding Defendants’ purchase of their residence. Plaintiff alleges that these agreements were separate and distinct from the business affairs of Four J’s and the Four J’s Operating Agreement. Defendants claim that as of October 31, 2008, the parties ceased acting in their individual capacities and that after December 1, 2008, all of their real estate transactions were conducted in the name of Four J’s and were governed by the Operating Agreement. For these reasons, Defendants argue that proceeding to a determination on the merits without Four J’s would violate its right to due process.
Plaintiff explains that even after December 1, 2008, the parties continued to conduct business outside of the confines of the Operating Agreement and that all of them continued to incur individual liability for the debts of the joint venture as a result of transactions conducted beyond that point in time. Plaintiff further argues that requiring the joinder of Four J’s would place form over substance because all of its members are parties to this litigation and its rights will be adequately protected by the parties. Plaintiff also argues that the joinder of Four J’s would increase the expense of and complicate this litigation because it would be necessary to appoint a receiver to facilitate Four J’s participation.
Despite Plaintiff’s position that Four J’s was not involved in the agreements at issue here, we must determine whether the rights of Four J’s can be properly protected without its joinder in this lawsuit. The inquiry into whether a party is indispensable is to be made from the prospective of protecting the rights of the absent party, not from the view of whether the joinder or nonjoinder of a party will make the matter more difficult to litigate. 3 Standard Pennsylvania Practice 2d §14:160, citing Montella v. Berkheimer Associates, 690 A.2d 802 (Pa. Commw. 1997); Grimme Combustion, Inc. v. Mergentime Corp., 595 A.2d 77 (Pa. Super. 1991). Thus, we will not be constrained in our determination due to the possibility that this litigation might become more complicated or expensive by the joinder of Four J’s, but must consider what is necessary for the protection of all the parties.
It appears from Defendants’ Preliminary Objections that Four J’s has not been dissolved and continues in existence as a limited liability company. In his Response to the Preliminary Objections, Plaintiff does not indicate otherwise. Thus, it appears that this is not a case where there is one sole member of the limited liability company who is able to protect the interests of the entity. See, New Coalition for Alternatives in Jewish Education, Inc. v. Piltch, 2013 WL 3946240 (Pa. Commw. 2013). This litigation involves two members in a dispute regarding transactions which may have resulted in property and debts which could impact the financial affairs of the limited liability company.
A limited liability company is an entity distinct from its members. 15 Pa.C.S.A. §8818(a). The entity may enforce its operating agreement, 15 Pa.C.S.A.§8816(a), and be sued in its own name. 15 Pa.C.S.A. §8819(b). A membership interest is an ownership interest in a limited liability company and is akin to an interest in stock of a corporation. Missett v. Hub Inter. Pennsylvania, LLC, 6 A.3d 530 (Pa. Super. 2010). Property acquired by a limited liability company becomes the property of the company and a member has no interest in any specific property of a company. 15 Pa.C.S.A. §8923.
Despite Plaintiff’s arguments and position that his claims are not based on the Four J’s Operating Agreement, we believe Four J’s is an indispensable party to this action. Defendants allege that the property acquired for their residence was purchased in the name of Four J’s as were other properties purchased after the formation of Four J’s. 1 Thus, it is possible that Four J’s would have an interest in some or all of the amounts sought by Plaintiff and, as noted by Defendants, it is necessary to protect these interests. Plaintiff has alleged no facts to support our disregard of this business entity and, in his Brief, admits that the affairs of Four J’s will be relevant and pertinent in future proceedings. If it turns out that Four J’s rights will not be impacted by this litigation, appropriate dispositive motions may be filed.
In addition to protection of the property interests of Four J’s, we believe that its inclusion in this litigation is essential to avoid the possibility of any future litigation. In the event that Plaintiff is unsuccessful in proceeding solely against the Defendants in the current lawsuit, he would then be free to pursue his claims against Four J’s in separate litigation.
For these reasons, we believe that Four J’s is an indispensable party to this proceeding and will sustain this Preliminary Objection. Thus, we will grant Plaintiff leave to amend his Complaint to join Four J’s.
In response to Defendants’ complaint of Plaintiff’s failure to attach a copy of the Operating Agreement to his Complaint, Plaintiff argues that his claims are not based on any provisions of the Operating Agreement. Based on Plaintiff’s claim, we will not require that he attach a copy to his amended pleading and will leave him to support his position with proof in future proceedings in this litigation. 2 Defendants are correct in their assertion that Plaintiff has failed to specify in the Complaint whether the agreements on which his claims are based were written or oral. In his Brief, Plaintiff explains that the contracts at issue were oral and implied in fact. He should include averments to that effect in his amended pleading. Defendants are, of course, free to assert and provide evidence of their own position that the transactions involved were conducted by Four J’s in accordance with the Operating Agreement.
Lack of Specificity/Legal Insufficiency
When a party files preliminary objections for insufficient specificity in a pleading pursuant to Pa.R.C.P. No. 1028(a)(3), the pertinent question is whether the complaint is sufficiently clear to enable the defendant to prepare his defense or informs the defendant with accuracy and completeness of the specific basis on which recovery is sought so that he may know upon what grounds to make his defense. Ammlung v. City of Chester, 302 A.2d 491 (Pa. Super. 1973). When ruling on preliminary objections as to the legal sufficiency of a plaintiff’s claim, the court must accept as true all well and clearly pleaded facts, together with such reasonable inferences as may be drawn from those fact, but not conclusions or averments of law. Santiago v. Pennsylvania National Mutual Casualty Insurance Company, 613 A.2d 1235 (Pa. Super. 1992). The question presented by a demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible. Mistick, Inc. v. Northwestert National Casualty Company, 806 A.2d 39 (Pa. Super. 2002).
Claims against Monica Kapp
Defendants seek dismissal of Defendant Monica Kapp, claiming that she was never a member of the joint venture and was not a party to the Operating Agreement. They argue that the Complaint does not set forth a cause of action against Kapp individually because no property was ever purchased in her name. Defendants concede that if the Complaint is amended, a cause of action could possibly be stated against Kapp as to the property purchased for their residence.
Plaintiff counters that Kapp should not be dismissed from this litigation because a party may be dismissed only when no claim for relief has been asserted against them. Plaintiff argues that Kapp was identified in the Complaint as a party to both agreements and failed to fulfill her obligations.
We agree that Plaintiff has stated causes of action against Kapp in her individual capacity. Plaintiff alleges that Kapp was a party to the agreement regarding the joint venture and failed to fulfill her obligation to share in the losses of those activities while she continues to conduct the same activities utilizing joint venture funds. In addition, Plaintiff alleges that he agreed to advance $40,000.00 for the purchase of Defendants’ residence, and that Kapp, along with Batz, personally agreed to repay him with interest. Kapp failed to repay the amounts owed pursuant to both agreements and Plaintiff now seeks repayment in this lawsuit. Thus, we will overrule this Preliminary Objection.
Defendants next argue that Plaintiff’s claims for Breach of Contract should be dismissed for legal insufficiency. Defendants complain that the two breach of contract claims do not specify what contracts have been breached or whether they are oral or written. They also argue that if these claims are based on the Operating Agreement, a copy is not attached to the Complaint. They further argue that Plaintiff also fails to explain how his monetary damages were calculated.
Plaintiff counters that his two Breach of Contract claims are sufficiently specific to enable Defendants to respond and prepare a defense. He explains that the parties operated pursuant to an oral agreement from January 2007 through December 21, 2008 and thereafter, pursuant to “contracts implied in fact,” which were collateral to the Operating Agreement. He claims that these collateral agreements are the basis for much of his claim for relief. The first Breach of Contract claim is based on the contract to divide the losses from the business, which is the $25,187.00 claimed. The second Breach of Contract claim is based on the contract which resulted from Plaintiff’s $40,000.00 loan to Defendants and their breach of their agreement to repay that amount.
We find that Plaintiff has sufficiently alleged the contracts upon which his claims are based and we will overrule this Preliminary Objection. To maintain a cause of action for breach of contract, the plaintiff must allege and ultimately prove the existence of a contract, including its essential terms, a breach of a duty imposed by the contract, and resultant damages. CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053 (Pa. Super. 1999).
In the first Breach of Contract claim of the Complaint, Plaintiff seeks Defendants’ payment of their share of the losses from the joint venture. Plaintiff alleges that the parties entered an agreement whereby he would provide the financing for purchasing and renovating the properties, the Defendants would provide the labor for the improvements, and they would share equally in the gains and losses. Despite Plaintiffs’ demands, Defendants have failed to pay their share of the losses which total $27,187.00. Defendants object to Plaintiff’s providing only a lump sum of these losses and argue that they are entitled to more specificity in this regard. We agree and direct that Plaintiff provide more specificity of the items included in the calculation of the losses owed pursuant to the joint venture to the extent that he is able to set forth details of specific transactions. See, General State Authority v. Lawrie and Green, 356 A.2d 851 (Pa. Commw. 1976). If Plaintiff does not have information regarding individual transactions which resulted in these deficits, he can explain his calculation of the figure set forth in the Complaint. Otherwise, we find that Plaintiff has alleged the elements necessary for a cause of action for Breach of Contract and we will overrule the Preliminary Objection to this claim.
In the Complaint’s second Breach of Contract claim, Plaintiff seeks recovery of $40,000.00 he advanced for the purchase of a residential property for Defendants. In exchange for this advance, Defendants promised to repay $25,000.00 along with interest. Because Defendants have failed to make the payments timely fashion, Plaintiff now seeks recovery of the entire $40,000.00. Plaintiff has likewise set forth sufficient allegations to state a cause of action for Breach of Contract in this claim and we will overrule this Preliminary Objections.
Defendants next contend that Plaintiff’s claim for breach of fiduciary duty should be dismissed for legal insufficiency, arguing that his count is superfluous because it merely states a claim for Breach of Contract. Plaintiff argues that the claim for breach of fiduciary duty is sufficiently specific, asserting that the Complaint sets forth averments which demonstrate the egregiousness of Defendants’ conduct, which goes far beyond a mere breach of contract claim, such as continuing to operate with the use of joint venture funds without turning over the profits which were rightfully due to the joint venture.
The determination of whether a fiduciary duty existed under these circumstances requires an evaluation of the relative positions of the parties. A confidential relationship and the resulting fiduciary duty may attach wherever one occupies toward another such a position of advisor or counsellor as reasonably to inspire confidence that he will act in good faith for the other’s interest. Basile v. H & R Block, Inc., 777 A.2d 95 (Pa. Super. 2001). In the context of a business relationship, Pennsylvania courts have held that a business association may be the basis of a confidential relationship if one party surrenders a substantial control over some portion of his affairs to the other. Commonwealth, Dept of Transportation v. E-Z Parks, Inc., 620 A.2d 712 (Pa. Commw. (1993). In general, a joint venturer owes a fiduciary duty of the utmost good faith and must act toward his associate with scrupulous honesty. Snellbaker v. Hermann, 462 A.2d 713 (Pa. Super. 1983), citing 2 Williston on Contracts 622, § 318C (3rd ed. 1959); Friedland v. Weinstein, 429 Pa. 347, 242 A.2d 797 (1968); Universal Builders Supply, Inc. v. Shaler Highlands Corp., 409 Pa. 334, 186 A.2d 30 (1962); William Goldstein Co. v. Joseph J. & Reynold H. Greenberg, Inc., 352 Pa. 259, 42 A.2d 551 (1945).
Plaintiff has alleged that the parties were involved in a joint venture, a relationship through which the members would generally owe each other a fiduciary duty of good faith. It is alleged that Defendants breached this duty by failing to fulfill their obligations under the terms of the parties’ agreement regarding the joint venture. We believe the allegations of the Complaint describing the parties’ business relationship and the conduct alleged of Defendants establish the elements of a cause of action for Breach of Fiduciary Duty and we will therefore overrule this Preliminary Objections.
Additional Common Law Claims
Defendants also argue that Plaintiff’s count for Additional Common Law Claims should be dismissed for lack of specificity or legal insufficiency. Plaintiff argues that, considering the allegations of the Complaint in its entirety, he alleges facts to support the assertion of these additional counts.
28. Plaintiff incorporates by reference all of the preceding Paragraphs to this Complaint as if each and every one was individually set forth below.
29. In addition to the claims set forth previously in this Complaint, and based on the specific and general allegations as set forth by Plaintiff herein, which have been incorporated by reference, Plaintiff also asserts the following common law claims, under which Plaintiff avers that she is entitled to relief from this Honorable Court:
b. Waste of assets;
c. Intentional misrepresentation; and
(Complaint, Para. 28-29)
We first note that Pa.R.C.P. No. 1020(a) provides that “[t]he plaintiff may state in the complaint more than one cause of action cognizable in a civil action against the same defendant. Each cause of action and any special damage related thereto shall be stated in a separate count containing a demand for relief.” Pa.R.C.P. No. 1020(a). Thus, these claims should have been set forth in separate counts in the Complaint.
The elements necessary to prove Unjust Enrichment are (1) benefits conferred on defendant by plaintiff, (2) appreciation of such benefits by defendant, and (3) acceptance and retention of such benefits under such circumstances that it would be inequitable for defendant to retain the benefit without payment of value. Mitchell v. Moore, 729 A.2d 1200 (Pa. Super. 1999). The application of this doctrine depends on the particular factual circumstances of the case. Id. In determining if the doctrine applies, the focus is not on the intention of the parties, but rather on whether the defendant has been unjustly enriched. Id.
We believe that the Complaint contains sufficient allegations to plead this cause of action. The Complaint avers that Plaintiff conferred benefits upon Defendants: providing the financing for Defendants’ residence and assuming the liability of the losses of the joint venture. Defendants appreciated these benefits by the ownership of their residence and failing to pay their share of the losses of the joint venture, which is inequitable in light of their agreement to repay Plaintiff for his financial support. Thus, we will overrule the Preliminary Objection to this cause of action.
A transaction constitutes a waste of corporate assets if it involves an expenditure of corporate funds or a disposition of corporate assets for which no consideration is received in exchange and for which there is no rational business purpose. … White v. George, 66 Pa. C. & C. 4th 129 (C.C.P. Mercer Cnty. 2004). In order to find that a waste of corporate assets has occurred, “there has to be something more than a decision adverse to the petitioner. … For there to be waste, there must be a blatant squandering of assets to the detriment of the business entity, as if the sole purpose were to harm the entity.” Id. at 149. Defendants assert that they are unable to respond to this claim due to lack of detail.
In the Complaint, Plaintiff avers that the Defendants have used funds which are due to the joint venture in a continuation of the business of flipping houses, that they have profited from these activities, and that they have failed to turn the profits over to the joint venture. If true, such activities would constitute a squandering of assets which is detrimental to the financial condition of the joint venture to support this cause of action. Thus, we will overrule this Preliminary Objection.
The elements of Intentional Misrepresentation are (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 cause by the reliance. Gibbs v. Ernst, 647 A.2d 889 (Pa. 1994), citing Restatement (Second) of Torts §525 (1977).
Defendants complain that the Complaint does not identify what statement was made to support the claim for Intentional Misrepresentation. Plaintiff explains that he relied on Defendants’ representation that they would share in the business losses, and in reliance on that representation, he advanced a good bit of money to fund the business. Instead, Defendants shared in the gains, but walked away when there were losses. 3
We do not believe the allegations of the Complaint support the assertion of this cause of action. Plaintiff avers that upon his demands for payment, Defendants acknowledged that they are responsible for both payment of the $40,000.00 advance for their residence and for their share of the losses incurred by the joint venture. Thus, there was no representation, false at the time when it was made, to support this cause of action. We will therefore sustain this Preliminary Objection.
Self-dealing is present when a minority shareholder is denied the right to participate in the benefits of a corporation, as a majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interest at the expense of the corporate interests. Viener v. Jacobs, 51 Pa. D. & C. 4th 260 (C.C.P. Berks Cnty. 2000). Defendants argue that they are likewise unable to respond to this charge due to lack of specificity. We will sustain this Preliminary Objection as it appears that this theory of recovery would be included in Plaintiff’s claims for Breach of Fiduciary Duty and should not be asserted as an independent theory of recovery.
We will enter an Order in accordance with this Opinion and granting Plaintiff twenty days to file an Amended Complaint.
1 Both parties have averred facts not included in the pleadings in their Briefs and have attached exhibits, including affidavits, Four J’s Operating Agreement, and settlement documents for Defendants’ residence and other properties to their Briefs. However, we will direct our review in this matter to the pleadings when disposing of preliminary objections. Foster v. UPMC South Side Hospital, 2 A.3d 655 (Pa. Super. 2010). A court cannot decide a case on the basis of allegations of facts contained only in a party’s brief. Van Mastrizt v. v. Delta Tau Delta, 573 A.2d 1128 (Pa. Super. 1980). Also, the parties’ submission of these affidavits, etc., invites the Court to consider matters more properly addressed by a motion for summary judgment after the pleadings are closed. See, Khawaja v. RE/MAX Central, 151 A.3d 626 (Pa. Super. 2016).
2 The Operating Agreement is not attached to any of the pleadings thus far filed in this matter. However, a copy is attached to Defendants’ Brief in support of their Preliminary Objections,
3 Plaintiff also avers that Defendants sold the residence purchased with the $40,000.00 advance and used the profits from that sale to purchase other properties on their own for their own financial gain. This allegation was not contained in the Complaint. Plaintiff may add this allegation to his amended pleading.