Court Opinion

ID: 3156183
Source: CourtListenerOpinion
Date Created: 2015-11-19 19:08:47.323077+00
Date Added: 2024-06-11T12:00:49.993875
License: Public Domain

J-A27024-15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

MARK A. REARICK,                                   IN THE SUPERIOR COURT OF
                                                         PENNSYLVANIA
                           Appellant

                     v.

ELDERTON STATE BANK,

                           Appellee                   No. 1769 WDA 2014

             Appeal from the Order Entered October 24, 2014
            In the Court of Common Pleas of Armstrong County
                     Civil Division at No(s): 1615-2012

MARK A. REARICK,                                   IN THE SUPERIOR COURT OF
                                                         PENNSYLVANIA
                           Appellant

                     v.

ELDERTON STATE BANK,

                           Appellee                   No. 1770 WDA 2014

            Appeal from the Order Entered September 24, 2014
            In the Court of Common Pleas of Armstrong County
                     Civil Division at No(s): 1615-2012

BEFORE: BOWES, OLSON & STABILE, JJ.

MEMORANDUM BY OLSON, J.:                          FILED NOVEMBER 19, 2015

     Appellant, Mark A. Rearick, appeals from the orders entered on

September     24,   2014    and   October   24,   2014,   sustaining   preliminary

objections complaint filed by Elderton State Bank (ESB) and dismissing

Appellant’s complaint. Upon review, we affirm.
J-A27024-15

         We briefly set forth the facts and procedural history of this case as

follows.1    This case concerns the development of a commercial real estate

venture, generally referred to as the Saltwork Project, in Elderton,

Pennsylvania.     In 2006, Appellant secured a $205,000.00 loan from ESB,

secured by the property and guaranteed by Appellant.       In July 2007, ESB

loaned Appellant an additional $443,000.00 to begin construction. Appellant

and ESB agreed to expand the Saltwork Project from approximately 11,000

square feet of rental space to just under 16,000 square feet.      In January

2008, ESB agreed to lend Appellant a total of $1,200,000.00 and Appellant

secured the loan with several unrelated residential properties.     Appellant

transferred these properties to ESB via deeds in lieu of foreclosure.2 By the

end of 2008, the Saltwork Project was two-thirds completed when Appellant

requested another $1,000,000.00 to finish construction. ESB would not lend

additional funds because Appellant had received the bank’s maximum credit

limit.    In October 2008, ESB recommended an investor, Tom Smith, to

Appellant.     Smith loaned Appellant $875,000.00 and the Saltwork Project

was completed.

____________________________________________

1
   A more detailed account of this case may be found in this Court’s prior
memorandum filed on July 23, 2014. See Rearick v. Elderton State
Bank, 2014 Pa. Super. 157.
2
   Appellant owned another residential property that he also used to secure
the loans for the Saltwork Project.         However, this property was not
transferred through deeds in lieu of foreclosure. As discussed infra, ESB
later filed a complaint against Appellant to foreclosure on this property.

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      In September 2009, Appellant defaulted on his loans citing poor

economic conditions and low rental rates. Prior to default, however, on June

1, 2009, ESB executed the deeds in lieu of foreclosure on the residential

properties used by Appellant to secure the Saltwork Project loan.             In

October 2010, Smith purchased the Saltwork Project at auction for

$450,000.00;     the   Saltwork   Project   was   appraised   at   approximately

$1,450,000.00.     Thereafter, in January 2011, ESB filed an action in

mortgage foreclosure on the residential property owned by Appellant, used

to secure the ESB loan, which was not one of the properties transferred

through deeds in lieu of foreclosure. In June 2012, the trial court granted

summary judgment for ESB in the mortgage foreclosure action.           Appellant

did not appeal that decision.

      On October 24, 2012, Appellant filed a complaint against ESB, alleging

claims for breach of the implied covenant of good faith and fair dealing,

breach of fiduciary duty, alter ego, and negligence. On December 13, 2012,

ESB filed preliminary objections to the complaint.            In particular, ESB

demurred based on res judicata on the theory that Appellant should have

raised his claims in the earlier foreclosure action. The trial court agreed and

sustained ESB’s preliminary objection on res judicata grounds, concluding

that the substance of Appellant’s claims could, and therefore should, have

been raised in the earlier foreclosure action. The trial court dismissed ESB’s

remaining preliminary objections as moot.         On appeal, after a lengthy

discussion regarding permissive counterclaims in a mortgage foreclosure

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action, we remanded the matter for the trial court to rule on Appellant’s

remaining preliminary objections or to allow Appellant to amend his

complaint.

       On September 24, 2014, by order and accompanying opinion, the trial

court sustained ESB’s remaining preliminary objections and dismissed

Appellant’s complaint.         On October 14, 2014, without leave of court,

Appellant filed an amended complaint. He then filed a motion for leave of

court and an amended complaint on October 24, 2014.            The trial court

entered an order on October 24, 2014 denying Appellant’s request for leave

to file an amended complaint. This timely appeal followed.3

       On appeal, Appellant presents the following issues for our review:

         1. Whether the trial court erred when it, after sustaining
            ESB’s preliminary objections and dismissing [Appellant’s]

____________________________________________

3
   On October 24, 2014, Appellant filed a notice of appeal from the order
entered on September 24, 2014 granting ESB’s preliminary objections and
dismissing Appellant’s complaint. On that same date, Appellant also filed a
notice of appeal from the order entered on October 24, 2014, denying
Appellant’s motion to amend his complaint. On October 27, 2014, the trial
court ordered Appellant to file a concise statement of errors complained of
on appeal pursuant to Pa.R.A.P. 1925(b) for both matters. On November
14, 2014, Appellant filed separate Rule 1925(b) statements. The trial court
issued an opinion pursuant to Pa.R.A.P. 1925(a) on December 11, 2014. In
that opinion, the trial court addressed the issues pertaining to Appellant’s
request to amend his complaint and relied upon its earlier decision, issued
on September 24, 2014, for its rationale in sustaining preliminary objections
and dismissing Appellant’s complaint.         Appellant terms the instant
proceedings as “consolidated appeals.” In fact, Appellant simply challenges
two separate orders in the same case. Accordingly, we refer to these
proceedings as a single appeal.

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          [c]omplaint, did not allow [Appellant] to amend the
          [c]omplaint.

       2. Whether the trial court erred when it denied [Appellant’s]
          request to file an amended complaint.

       3. Whether in the course of disposing of ESB’s preliminary
          objections to count I of [Appellant’s] [c]omplaint, the
          trial court erred when it determined that [Appellant]
          failed to plead facts sufficient to establish that ESB owed
          [Appellant] a duty of good faith and fair dealing.

       4. Whether in the course of disposing of ESB’s preliminary
          objections to count I of [Appellant’s] [c]omplaint, the
          trial court erred when it determined that [Appellant]
          failed to plead facts sufficient to establish that ESB could
          have breached a duty of good faith and fair dealing that
          it owed to [Appellant].

       5. Whether in the course of disposing of ESB’s preliminary
          objections to count II of [Appellant’s] [c]omplaint, the
          trial court erred when it determined that [Appellant]
          failed to plead facts sufficient to establish that ESB owed
          [Appellant] a fiduciary duty.

       6. Whether in the course of disposing of ESB’s preliminary
          objections to count II of [Appellant’s] [c]omplaint, the
          trial court erred when it determined that for [Appellant]
          to advance a cause of action for breach of fiduciary duty,
          [Appellant] must plead facts sufficient to prove that
          Thomas Smith was ESB’s agent, expressly or implicitly
          authorized to make decisions and take actions binding on
          ESB.

       7. Whether in the course of disposing of ESB’s preliminary
          objections to count II of [Appellant’s] [c]omplaint, the
          trial court erred when it determined that [Appellant]
          failed to plead facts sufficient to establish that Thomas
          Smith was ESB’s agent, expressly or implicitly authorized
          to make decisions and take actions binding on ESB.

       8. Whether in the course of disposing of ESB’s preliminary
          objections to count III of [Appellant’s] [c]omplaint, the

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           trial court erred in determining that the alter ego theory
           of liability is inapplicable to this case.

        9. Whether in the course of disposing of ESB’s preliminary
           objection to count III of [Appellant’s] [c]omplaint, the
           trial court erred in determining that [Appellant] did not
           plead facts sufficient to establish a prima facie case for
           alter ego liability.

        10. Whether in the course of disposing of ESB’s preliminary
           objections to count IV of [Appellant’s] [c]omplaint, the
           trial court erred in determining that [Appellant’s] claim
           for negligence is barred by the economic loss doctrine.

        11. Whether in the course of disposing of ESB’s preliminary
           objections to count IV of [Appellant’s] [c]omplaint, the
           trial court erred in determining that [Appellant] did not
           plead facts sufficient to establish a prima facie case for
           negligence.

Appellant’s Brief at 4-5.

      Our review of a challenge to a trial court's decision to sustain

preliminary objections is guided by the following standard:

        Our standard of review of an order of the trial court
        overruling or [sustaining] preliminary objections is to
        determine whether the trial court committed an error of
        law. When considering the appropriateness of a ruling on
        preliminary objections, the appellate court must apply the
        same standard as the trial court.

        Preliminary objections in the nature of a demurrer test the
        legal sufficiency of the complaint. When considering
        preliminary objections, all material facts set forth in the
        challenged pleadings are admitted as true, as well as all
        inferences reasonably deducible therefrom. Preliminary
        objections which seek the dismissal of a cause of action
        should be sustained only in cases in which it is clear and
        free from doubt that the pleader will be unable to prove
        facts legally sufficient to establish the right to relief. If any
        doubt exists as to whether a demurrer should be sustained,

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         it should be resolved in favor of overruling the preliminary
         objections.

Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011) (citation

omitted).

      We have reviewed the certified record, the parties’ briefs, the relevant

law, and the trial court’s opinion entered on September 24, 2014.           That

opinion thoroughly and accurately disposes of Appellant’s issues regarding

ESB’s preliminary objections. Thus, we adopt that decision as our own. We

briefly recount the trial court’s determinations here.

      First, the trial court determined Appellant failed to present sufficient

allegations of fact to establish a claim for breach of the contractual duty of

good faith and fair dealing, relying upon this Court’s decisions in Creeger

Brick & Bldg. Supply Inc. v. Mid-State Bank & Trust Co., 560 A.2d 151,

153 (Pa. Super. 1989) and Cable & Associates Ins. Agency, Inc. v.

Commercial Nat. Bank of Pennsylvania, 875 A.2d 361, 362 (Pa. Super.

2005).      The trial court noted that Appellant did not aver ESB violated the

terms of any executed loan documents, made specific misrepresentations, or

committed fraud. Moreover, the trial court determined that Appellant, not

ESB, decided to expand the Saltwork Project and requested additional

funding. Additionally, the trial court opined Appellant failed to set forth facts

that gave rise to ESB’s independent duty of good faith, based solely upon

Appellant’s unsubstantiated allegation that his family had done business with

ESB for more than 50 years. Thus, the trial court determined Appellant had

not set forth a viable claim for breach of the contractual duty of good faith

                                      -7-
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and fair dealing as a matter of law and sustained ESB’s demurrer on this

count of Appellant’s complaint.        We discern no legal error or abuse of

discretion.

      Next,   the   trial   court   examined    ESB’s   preliminary   objection    to

Appellant’s breach of fiduciary claim.     The trial court determined Appellant

failed to present facts showing that ESB directly controlled Appellant’s

business decisions or managed the funds used to finance the construction of

the Saltwork Project.       It further concluded Appellant failed to plead facts

sufficient to establish an agency relationship between ESB and Smith.

Instead, Appellant only alleged that Smith acted as an independent investor

who rendered opinions regarding construction and possible tenants.                The

trial court found there was no indication that ESB or Smith managed the

daily operations of the Saltwork Project.        Thus, the trial court sustained

ESB’s demurrer to Appellant’s breach of fiduciary claim. Again, we discern

no error of law or abuse of discretion.

      Regarding negligence, the trial court concluded Appellant’s claim was

barred by the economic loss doctrine, because no cause of action exists for

negligence that results solely in economic damages unaccompanied by

physical injury or property damage.           Here, Appellant’s alleged damages

included only the loss of his economic investment in property.           Moreover,

citing our decision on remand, the trial court held that Appellant’s claim that

ESB frivolously sold off Appellant’s properties, or that Smith subsequently

acquired properties improperly, should have been raised during the

                                        -8-
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mortgage foreclosure action.     Thus, the trial court determined Appellant’s

negligence claim was barred by the economic loss doctrine. We agree.

      Finally, with regard to Appellant’s alter ego claim, the trial court found

that the claim was largely duplicative of Appellant’s fiduciary duty claim.

Moreover, it noted the alter ego theory is a means of piercing the corporate

veil and assessing liability for the acts of a corporation against an equity

holder in the corporation.      The trial court opined that there were no

allegations that Appellant or the Saltwork Project were themselves corporate

entities or that Appellant claimed that ESB shareholders were responsible for

his damages. Thus, the trial court sustained ESB’s preliminary objection in

the nature of a demurrer to Appellant’s claim under the alter ego theory of

liability. Again, we discern no abuse of discretion or error of law.

      We turn, now, to Appellant’s claims regarding the trial court’s denial of

his request to file an amended complaint. Recently, our Court has stated:

        Even where a trial court sustains preliminary objections on
        their merits, it is generally an abuse of discretion to dismiss
        a complaint without leave to amend. There may, of course,
        be cases where it is clear that amendment is impossible and
        where to extend leave to amend would be futile....
        However, the right to amend should not be withheld where
        there is some reasonable possibility that amendment can be
        accomplished successfully. In the event a demurrer is
        sustained because a complaint is defective in stating a
        cause of action, if it is evident that the pleading can be
        cured by amendment, a court may not enter a final
        judgment, but must give the pleader an opportunity to file
        an amended pleading....

        Nevertheless, a defective pleading that cannot be cured by
        amendment is appropriately dismissed upon a demurrer.

                                     -9-
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Juszczyszyn v. Taiwo, 113 A.3d 853, 856 (Pa. Super. 2015) (internal

citations omitted).

       Here, in its December 11, 2014 opinion, the trial court determined

Appellant was not entitled to amend his complaint.        First, the trial court

deduced that Appellant did not request leave of court prior to filing his first

amended complaint.       Pursuant to Pa.R.Civ.P. 1028(e), the trial court

concluded that Appellant failed to file a motion for leave within 20 days of

the order dismissing his complaint and, thus, his request to amend was

untimely.   The trial court further declared Appellant never presented a

proper and timely filed motion for leave. Instead, without advance notice,

Appellant presented a single motion to file the prior amended complaint at

the same time he filed a second amended complaint.          Finally, and most

importantly, the trial court stated that on October 24, 2014, at motions

court, Appellant’s counsel specifically requested, with Appellant’s express

written consent, that the trial court deny the motion to amend. Thus, the

trial court concluded that Appellant could hardly complain about the entry of

an order that was requested and to which he consented. In sum, the trial

court concluded Appellant’s motion to amend his complaint was untimely,

procedurally defective, and denied at Appellant’s request with his express

consent. Upon review, we agree.

       Therefore, we conclude there has been no error or abuse of discretion

in this case and that the trial court’s September 24, 2014 and December 11,

2014    opinions   meticulously,   thoroughly,   and   accurately   dispose   of

                                     - 10 -
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Appellant’s issues on appeal.   Therefore, we affirm on the basis of the trial

court’s opinions and adopt them as our own. Because we have adopted the

trial court’s opinions, we direct the parties to include the trial court’s

opinions in all future filings relating to our examination of the merits of this

appeal, as expressed herein.

      Orders affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/19/2015

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