Opinion ID: 569105
Heading Depth: 1
Heading Rank: 3

Heading: fraud under pennsylvania law

Text: 33 Plaintiffs claimed that when seeking to acquire the railroad rights-of-way defendants fraudulently misrepresented, among other things, that Monongahela had power to condemn private property. The district court found this representation to be true, holding that as a matter of law Monongahela had eminent domain powers. It granted partial summary judgment for defendants as to that representation, but sent other alleged misrepresentations to the jury. Plaintiffs appeal this grant of partial summary judgment. We have plenary review and will affirm. 34 Plaintiffs assert that Monongahela did not have eminent domain power for three reasons: (1) because it lacked the Interstate Commerce Commission's (ICC) approval to construct the new track; (2) because there was no public use to justify condemnation; and (3) because the track was outside Monongahela's chartered area. 35 First, we disagree with plaintiffs as to their first reason. To begin, we note that ICC approval is required when a rail carrier seeks to construct, operate or acquire an additional line or extension. 49 U.S.C. § 10901(a). It, however, is not required when a rail carrier seeks to construct, operate, or acquire an intra-state spur. 49 U.S.C. § 10907(b)(1). Whether a track is a spur or extension is a mixed question of law and fact. United States v. Idaho, 298 U.S. 105, 109, 56 S.Ct. 690, 692, 80 L.Ed. 1070 (1936). 36 If the proposed track is designed to transport goods between different points of shipment or to invade the territory occupied by another railroad, that track is an extension. See Texas & Pac. Ry. v. Gulf, Colo. & Santa Fe Ry., 270 U.S. 266, 278, 46 S.Ct. 263, 266, 70 L.Ed. 578 (1926); Nicholson v. ICC, 711 F.2d 364, 368 (D.C.Cir.1983), cert. denied, 464 U.S. 1056, 104 S.Ct. 739, 79 L.Ed.2d 197 (1984). If, however, the track is designed and used for loading, unloading, switching, and other purposes connected with, and incidental to, but not actually and directly used for [transporting goods between two different points of shipment], that tract is a spur and lies outside ICC jurisdiction. Nicholson, 711 F.2d at 367-368. Among other factors to be considered in determining whether it is a spur are the length of the addition; whether the proposed addition will serve only a single customer; and whether the carrier had been requested by the customer to provide service. See Pennsylvania R.R. Co. v. Reading Co., 132 F.Supp. 616, 621-22 (E.D.Pa.1955). 37 The district court correctly found that the proposed track was a spur. Though a track's designation itself does not determine its character (extension or spur), the track in question is sufficiently local to preclude ICC jurisdiction. Nicholson, 711 F.2d at 368, n. 12. The track runs from the Bailey Mine in Grand Enon, Pennsylvania, to Waynesburg. It runs only 14.5 miles. 1 It is located wholly intra-state. It functions as a route to unload and transfer shipments from the Waynesburg line. It does not invade the territory of another railroad. Only Monongahela uses it. And it serves only Consol. In short, none of its features evokes national concern. Texas & Pacific, 270 U.S. at 277, 46 S.Ct. at 266. The district court was correct; ICC approval was unnecessary. 38 Second, we disagree with plaintiffs as to the second reason. Plaintiffs contend that Monongahela can only condemn for public use. See U.S. Const. amends. V; Pa. Const., art. I, § 10; Id., art. X, § 4. The proposed use, they contend, is private. 39 When determining what constitutes public use, the Supreme Court defers to legislative decisions. Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 241, 104 S.Ct. 2321, 2329, 81 L.Ed.2d 186 (1984) (Court will defer to legislative decision regarding public use unless that decision is unreasonable). That property is taken by eminent domain and is transferred to a private party can still fall within the gambit of public use. This is so even when the motive for taking is to give to a private party. Id., 467 U.S. at 243-44, 104 S.Ct. at 2330-31. Thus, under the United States Constitution public use is a broad concept. 40 Pennsylvania law is much the same. A condemning authority may only take for public use. The legislature may not grant the condemnor the right to take private property for private use. See Philadelphia Clay Co. v. York Clay Co., 241 Pa. 305, 309-310, 88 A. 481, 482 (1913); Borough of Big Run v. Shaw, 16 Pa.Commw. 623, 626, 330 A.2d 315, 317 (1975). Notwithstanding, a taking retains its public character even when a portion of it benefits a private party. In re Franklin Town Project-Philadelphia, 19 Pa.Commw. 272, 280-81, 339 A.2d 885, 889, cert. denied, 423 U.S. 992, 96 S.Ct. 409, 46 L.Ed.2d 312 (1975). See Dornan v. Philadelphia Hous. Auth., 331 Pa. 209, 200 A. 834 (1938). 41 In Pioneer Coal Co. v. Cherrytree & Dixonville R.R., the Pennsylvania Supreme Court reasoned that public use should be broadly defined when the use benefits the Commonwealth. 272 Pa. 43, 116 A. 45 (1922). When defendant railroad condemned property to extend its track to reach a coal mine, the Court found public use because the life, happiness and prosperity of the people of Pennsylvania depend to a very large degree upon getting the coal supply of the state out of the mines, on its way to the consumer. Id., 272 Pa. at 52, 116 A. at 48. See Philadelphia, Wilmington & Baltimore R.R. v. Williams, 54 Pa. 103 (1867) (prosperity of city depended on transporting coal by rail). 42 Here, the district court found public use. We agree. The district court noted: [Manor Reserve,] once at full production, will produce 3,000,000 tons of coal per year and will employ 350 people. The coal extracted from the mine has an average sulfur content of 1.7%, a low and desirable level that complies with emission standards generally applicable in the United States and Europe. Supp.App. at 115-116. The Manor Reserve mine and the track running to it benefit the Commonwealth's coal mining industry and the public. That the mine serves a private coal company does not diminish the public value. Constructing a spur will tap vital coal resources, provide fuel for the Commonwealth, create jobs, and better the environment. 43 Last, we disagree with plaintiffs as to their third reason. They contend that because the Manor track runs outside Monongahela's charter area Monongahela lacked the power to condemn property outside of its franchise without first obtaining a certificate from the Commonwealth's Public Utility Commission (PUC). See 66 Pa.Cons.Stat.Ann. § 1104. 44 We need not consider this contention in light of what happened at trial. Judge Teitelbaum instructed the jury that [y]ou will reach the issue of damages only if you find that the plaintiffs have established all of the elements of any of their claims. Supp.App. 218. This instruction reflects the correct assumption that since plaintiffs had but one property each they could have suffered as a result of the misrepresentations only once, regardless of the number of misrepresentations committed. The jury found that fraud was committed and awarded damages to plaintiffs. Thus even if this additional misrepresentation was made, it is irrelevant. 45 In sum, the district court properly granted partial summary judgment on plaintiffs' claim that Upshur agents misrepresented Monongahela's condemnation powers.
46 JURY INSTRUCTIONS ON FRAUDULENT MISREPRESENTATION 47 The district court instructed the jury, [i]f it is shown that a misrepresentation was made knowingly, then the misrepresentation need not be material. Supp.App. at 216. Defendants argue that when the district court gave this instruction it erred as a matter of law. We disagree and will affirm. Our review of this legal issue is plenary. 48 Under Pennsylvania law a fraud claim requires plaintiff to prove either a knowing misrepresentation or nonprivileged failure to disclose some existing fact. If, however, the misrepresentation is innocently made, then it is actionable only if it relates to a matter material to the transaction involved. Smith v. Renault, 387 Pa.Super. 299, 305-06, 564 A.2d 188, 192 (1989) (quoting Shane v. Hoffman, 227 Pa.Super. 176, 181-82, 324 A.2d 532, 536 (1974)), overruled on other grounds, Aiello v. Ed Saxe Real Estate, Inc., 508 Pa. 553, 560-61, 499 A.2d 282, 286 (1985). Thus, materiality becomes important only when the misrepresentation was innocently made or when it involved a privileged failure to disclose. The district court's instructions adequately reflected this distinction. 49 Even if we held all the misrepresentations were innocently made and materiality became a concern, the error is harmless. Upshur's misrepresentations were most material. The gross disparity between the prices obtained by the plaintiffs and those who knew of Consol's role (Closser, the Phillippis, and the Culps) bespeaks materiality. Moreover, while defendants correctly point out that Upshur had no duty to disclose Consol's role, they neglect to mention that Upshur agents affirmatively misrepresented that Monongahela was the sole principal. See Chiarella v. United States, 445 U.S. 222, 227-228, 100 S.Ct. 1108, 1114-1115, 63 L.Ed.2d 348 (1980). This representation constituted more than mere silence; it constituted active concealment. It amounted to common law fraud. Renault, 387 Pa.Super. at 306, 564 A.2d at 192.
JUSTIFIABLE RELIANCE ON TAX REPRESENTATIONS 50 The defendants moved for judgment n.o.v. as to the liability based on the representation of the tax free nature of the transactions. They claim there was insufficient evidence for the jury to conclude that plaintiffs justifiably relied on defendants' representation. Because they are not tax experts, defendants argue, plaintiffs should have independently investigated the tax matter. The district court denied the motion. We will affirm. 51 The same standard of review applies to this denial of a judgment n.o.v. as it did for the denial of the RICO judgment n.o.v., supra. See Kinnel v. Mid-Atlantic Mausoleums, Inc., 850 F.2d 958, 961 (3d Cir.1988). 52 Justifiable reliance on a misrepresentation is an element of common law fraud. Klemow v. Time, Inc., 466 Pa. 189, 197 n. 17, 352 A.2d 12, 16 n. 17, cert. denied, 429 U.S. 828, 97 S.Ct. 86, 50 L.Ed.2d 91 (1976). Moreover, [w]here the means of obtaining information are not equal the positive representations of the person who is supposed to possess superior means of information may be relied on. Siskin v. Cohen, 363 Pa. 580, 70 A.2d 293 (1950) (quotation omitted). 53 The Upshur agent approached plaintiff landowners, told them that he represented Monongahela, denied involvement of Consol, offered a purchase price, threatened plaintiffs that they would receive a lower fixed condemnation price if they refused to accept the agent's offer, and stated that part of the purchase price paid would be tax free. Upshur agents possessed superior access to information, initiated the sales of property, and presented themselves as land experts. Under these circumstances, the negotiating parties did not stand on equal footing and plaintiffs justifiably relied on the Upshur agent's statements concerning the tax consequences of a sale without making an independent investigation. 54 Justifiable reliance is even more evident in the cases where defendants' attorneys told plaintiffs of the tax free consequences of the sale. A lay person may justifiably rely on a lawyer's statement of fact or opinion of law though he knows the lawyer is representing a client whose interest is adverse to his own. Restatement (Second) of Torts, § 545, comment d.