Real Estate Law and Fraud Article co-authored by a Philadelphia Attorney

Real Estate Law and Fraud Article co-authored by a Philadelphia Attorney. Attorney Dimmerman offers free, initial consultations.

The Superior and Commonwealth Court Getting Aligned on the UTPCPL, “Legal Intelligencer” Article

Forcing adversaries to prove intent is where adept attorneys can easily earn their keep. Mounting the offensive is never an easy feat, especially when allegations of fraud require such a stringent inquiry into the mental processes of an oftentimes shrewd defendant. The stakes can be especially high too, with punitive damage or treble damage claims laying out there, as the case may be. And the icing on the crumbling cake of exposure are those occasional instances where the individual owner(s) of an entity behaves in a manner that gives rise to the potential for personal liability, losing the protection of the corporate veil.

Just last month, our Pennsylvania Superior Court handed down a critical decision in Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC (Pa. Super. Ct., 1302 MDA 2011), a case that forms yet another chapter in the storied history of the well-intended Uniform Trade Practices Consumer Protection law. Perhaps at least a limited discussion of the origin of the Act is in order. Originally conceived as a statute affording private remedies to consumers of “goods or services”, the Act allowed for treble damages to be imposed on those who ran afoul of the statute. The Superior Court, in Gabriel v. O’Hara, 534 A.2d 488 (1987), expanded the Act’s scope by ruling that sales of residential real estate are also within its purview, a great day for righteous plaintiffs lawyers indeed. Resultantly, unfair trade claims are now included routinely in fraud litigation versus realtors, sellers, inspectors and developers.

Up until the mid-90’s, 1996 to be precise, the Act addressed only “fraudulent conduct.” And naturally this required a plaintiff to prove all the elements of common law fraud: proof that a material misrepresentation was made intentionally, or with reckless disregard of its truth inducing justifiable reliance and injury based on such reliance. Now however, the Act we have is the result of a concerted effort to expand the definition of conduct deemed to be “unfair or deceptive acts or practices.” This 1996 amendment broadened the definition of deceptive conduct within the “catchall” definition.

Despite the 1996 legislative amendment that added the phrase “deceptive conduct,” the Superior Court, by its own admission, required an aggrieved party to establish the elements of common law fraud under Act for liability to attach. In arguing for a reversal of the jury’s decision, Mr. Colledge, the Appellant here, heavily relied on Skurnowicz v. Lucci, 798 A.2d 788 (Pa. Super 2002), which held that there must be a showing of common law fraud. Hence, it was argued that not only should the UPTCL claim never have been submitted to a jury but also, in the alternative, the charge employing the phrase “misleading conduct” constituted misleading and reversible error.

A great deal of the Masterpiece Court’s analysis was consumed by the court’s defense of its holding that the trial judge’s instruction to the jury that “misleading conduct” under the Act’s “catchall” provision was not an error warranting reversal. But to get there, the Court had to explain away its line of cases that did in fact require the proof of fraud, cases handed down as late as2010. The Masterpiece Court cited to a litany of decisions in which either the Commonwealth of Eastern District Courts permitted liability based on the less stringent deceptive conduct standard. Holding otherwise would have led to a result that “ignore[d] the textual changes of the 1996 amendment as well as the rules of statutory construction.” “[W]here words of a statute differ from those of a previous one on the same subject they presumably are intended to have a different construction.”… and that “every word, sentence and provision of a statute must be given effect.” The legislature “does not intend a result that is absurd, unreasonable or impossible of execution.”

The Masterpiece case notably involved two (2) set of plaintiffs, the Bennett’s and Hoefferle’s, couples who felt compelled to commence an action against the same builder of their new homes. Apparently, numerous building deficiencies were endemic in both properties. The Hoefferles’ home contained non-grade lumber, floors that sagged and bounced, improperly installed insulation and clearances and ventilation and electrical systems completed in violation of code. Not only was a gas smell evident emanating from a basement, but the Masterpiece Court accepted the testimony of an engineering expert who opined that if corrective action had not been taken by Hofferle’s, there would have been structural failure in the sloping roof surface area. That expert also testified for the Bennett’s concerning foundational concerns and other comparable issues.

A bifurcated jury eventually concluded liability was founded under contract, warranty and UPTCPL theories. The statutory multiplier was utilized as well, awarding the Bennett’s about 50k and the Hoefflere’s a bit under 175k, inclusive of attorney’s fees. Critically also, as to piercing, it was determined that the assurances of the appellant, Mr. Colledge, rose to the level of a personal guarantee. The Court cited to statements such as “I will take care of it” and “I guarantee it,” which in its estimation constituted specific assumptions of personal liability.

Prior to the Masterpiece decision, the Pennsylvania Superior Court had repeatedly ruled that a plaintiff suing under the Act’s catchall provision must still prove all elements of common law fraud. However, the Masterpiece case now brings the Superior Court’s reading of the catchall phrase in line with the Commonwealth Court, the Bankruptcy Court and most rulings from the United States District Courts. Cohesion and clarity will assuredly make pursuing arguably deceptive consumer practices far easier. Sellers and service providers would be wise to take heed.

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Harper J Dimmerman is also an adjunct professor at Temple University’s Fox School of Business. His firm represents clients in general litigation, legal malpractice law, various land use, residential, commercial real estate and criminal law matters. They also provide approved attorney title insurance services and real estate consulting statewide. He can be reached via e-mail at harper@hjdlaw.net or telephone at 215-545-0600. James M. Lammendola is an Instructor at Temple University’s Fox School of Business who was in private practice for twenty years. He may be reached via e-mail at james.lammendola@temple.edu or telephone 267-254-3324.
Unauthorized reproduction is prohibited. ALM. 2012.