412 North Front Street Associates, LP v. Spector Gadon & Rosen, P.C.

J-S67043-16
2016 PA Super 266412 NORTH FRONT STREET IN THE SUPERIOR COURT OF
ASSOCIATES, LP; AND MARK J. PENNSYLVANIA
BROWNSTEIN AND TODD A. NEWMAN
AND BEEZER FAMILY REAL ESTATE, LLC
Appellant
v.
SPECTOR GADON & ROSEN, P.C.; DAVID
M. GILES, ESQUIRE; OLIVER D. GRIFFIN,
ESQUIRE AND RICHARD D. GALLUCCI,
JR., ESQUIRE
Appellee No. 777 EDA 2016
Appeal from the Order Entered February 4, 2016
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): Control No. 15070357
March Term, 2014, No. 4495
BEFORE: FORD ELLIOTT, P.J.E., RANSOM, J., and STEVENS, P.J.E.*
OPINION BY STEVENS, P.J.E.: FILED NOVEMBER 29, 2016
412 North Front Street Associates, LP, Mark J. Brownstein, Todd A.
Newman, and Beezer Family Real Estate, LLC (“Appellants”) appeal from the
order entered by the Court of Common Pleas of Philadelphia County granting
in part a motion for summary judgment filed by Spector Gadon & Rosen,
P.C., David M. Giles, Esquire, Oliver D. Griffin, Esquire, and Richard D.
Gallucci, Jr., Esquire (“Appellees”) and dismissing claims asserting billing
errors and overbilling in Appellant’s breach of contract and professional
negligence action against Appellees. In the same order, the court also
*Former Justice specially assigned to the Superior Court.
J-S67043-16
denied Appellees’ motion in its capacity as counterclaimant seeking unpaid
legal bills for legal services allegedly rendered to Appellant Beezer.
Previously, on October 23, 2014, the court sustained Appellees’
preliminary objections and dismissed with prejudice Appellants’ negligence
and contract based legal malpractice claims. With both orders putting
Appellants out of court, they file this direct appeal claiming that their second
amended complaint stated sufficient facts to survive preliminary objections
and that genuine issues of material fact regarding Appellees’ alleged breach
of professional duty required the denial of Appellees’ motion for summary
judgment.1 Appellees, for their part as counterclaimant, argue that the
court improperly denied their counterclaim for payment on an account
stated. We affirm.
I. ORDER SUSTAINING PRELIMINARY OBJECTIONS
With respect to Appellants’ challenge to the order sustaining
preliminary objections and dismissing their breach of contract and
professional negligence claims, we glean the pertinent facts underlying the
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1
Appellants have filed a reply brief in which they included a supplemental
reproduced record without prior permission of this Court. The inclusion of
such a reproduced record, thus, runs counter to Pa.R.A.P. 2156, which
provides only for an appellee to file a supplemental reproduced record. More
problematic, still, is that the supplemental reproduced record contains
information absent from the certified record. Accordingly, we accept the
filing of Appellants’ reply brief but strike the supplemental reproduced record
contained therein.
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case sub judice from Appellants’ Second Amended Complaint,2 filed
September 5, 2014, which stated as follows:
9. Plaintiffs Brownstein, Newman and Beezer Family Real
Estate, LLC formed 412 North Front Street Associates, LP, a
limited partnership established to purchase, manage, and
develop real estate.
10. As part of that intended purpose, on or about October 21,
2005, 412 North Front Street Associates, LP (hereinafter “412
North Front Street”) entered into a loan agreement with
Abington Bank.
11. Pursuant to the loan documents, 412 North Front Street
promised to pay Abington Bank (the “Bank”) the principal sum of
Five Million Nine Hundred Thousand Dollars ($5,900,000.00).
the initial term of the loan expired on March 21, 2007.
12. The loan agreement was subsequently amended three
times with the principal sum changing to Seven Million One
Hundred Twenty-Five Thousand Dollars ($7,125,000.00). The
term of the Note was extended to March 31, 2009.
13. On or about October 21, 2005, Brownstein, Newman,
Zitomer and Beezer Family Real Estate executed Surety
Agreements in favor of the Bank.
____________________________________________
2
On April 8, 2014, Appellants filed the original complaint against Appellees
asserting breach of contract and professional negligence claims. Appellees
filed a separate action on April 22, 2014 seeking allegedly unpaid legal fees.
On May 21, 2014, Appellants served certificates of merit regarding all
Appellees named in the original complaint. Appellees filed preliminary
objections to the original complaint, but, based on alleged new information
pertaining to firm time records attached to Appellees’ action, Appellants filed
an amended complaint asserting improper billing practices and named
Gallucci as an additional defendant. Appellants again filed preliminary
objections, which the court sustained in part but with leave to allow further
amendment of the complaint. Appellants filed their Second Amended
Complaint, at issue herein, on September 5, 2014.
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14. Under the Sureties, Brownstein, Newman, Zitomer, and
Beezer Family Real Estate agreed to guaranty and become
sureties to the Bank for all obligations of 412 North Front Street
under the Loan.
15. During the course of the refinancing of the loan agreement
with the Bank, in the early spring 2009, Plaintiffs retained the
services of the Firm and Attorneys Giles, Griffin and Gallucci
(hereinafter “Attorney Defendants” to help in the refinancing and
to assist in the potential discussions involving restructuring or
modification of the loan. It was agreed that the Firm and
[Appellees] would be representing all Plaintiffs in all matters
stemming from loan documents including any future litigation.
16. The Firm and the Attorney Defendants and the Plaintiffs
entered into a legal services contract.
17. The legal services contract was in the form of a letter of
representation. Defendant Giles drafted and forwarded a letter
of representation to all Plaintiffs and specifically referenced that
Defendants would be representing the interests of 412 North
Front Street as well as the interests of Newman, Brownstein,
Zitomer and Beezer Family Real Estate, LLC in the attempted
refinancing as well as any litigation stemming from, or as a
result of, a failure to restructure or modify the loan.
18. The letter of representation made it abundantly clear that
the strategies employed by the Firm would be consistent and the
same for all Plaintiffs and that all actions taken or pursued on
behalf of one of the Plaintiffs would be taken or pursued on
behalf of all Plaintiffs. Defendants are in possession of the
executed letter of agreement.
19. Plaintiffs retained the Firm and the Attorney Defendants
because of their supposed knowledge of the banking industry
and real estate market. The Firm and the Attorney Defendants
hold themselves out to be experts in banking and banking
litigation.
20. While Newman and Brownstein are attorneys, their
respective areas of practice and expertise are separate and
distinct from that of the Firm, Giles, and Griffin, which is why
Plaintiffs sought out the Attorney Defendants[’] representation
and assistance.
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21. The Firm and the Attorney Defendants, despite their initial
representations, were not helpful in renegotiating or modifying
payments to the Bank pursuant to the loan and therefore, the
Bank confessed judgment against all Plaintiffs in the Court of
Common Pleas in the amount of Eight Million Two Hundred Fifty
thousand Four Hundred Fifty-Eight dollars and Seventy Five
cents ($8,250, 458.75).
22. Plaintiffs forwarded the confessions of judgment to David
Giles, Esquire, who informed Plaintiffs that the confessions
themselves were flawed and that Petitions to Open said
Judgments would be filed as to Newman, Brownstein, Beezer
Family Real Estate and 412 North Front Street.
23. Attorney Giles represented to Plaintiffs that the warrants to
all the confessions of judgment, including the confession of
judgment against 412 North Front Street, were defective and
that the Attorney Defendants would move to open or strike all
the confessions of judgment.
24. The Attorney Defendants specifically communicated to
Plaintiffs during multiple meetings and telephone conferences
that all Plaintiffs, including 412 North Front Street as the Debtor,
had valid, good faith defenses, including defective warrants, to
the Confessions of Judgment.
25. A review of the billing entries of the Firm confirms that
efforts were initially undertaken and billing entries were
submitted reflecting that the confessions of judgment entered
against all Plaintiffs were going to be attempted to be open.
(See Exhibit “A”).
26. The description of legal services for June 29, 2009
specifically states:
“Discussions with DMGiles; retrieval of dockets
regarding confessions of judgment entered against
Borrower and Guarantors; begin drafting of other
petitions to open/strike for all defendants.”
27. There are no time entries indicating a conversation with
any of the Plaintiffs wherein one or more of them were advised
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that no efforts would be undertaken to open or strike the
judgment against 412 North Front Street.
28. The Firm and the Attorney Defendants successfully moved
to open the judgments against Brownstein, Newman, and Beezer
Family Real Estate, but unbeknownst to Plaintiffs, never
attempted to open the judgment against 412 North Front Street,
even though the Attorney Defendants had specifically
represented that the warrants for all of the confessions of
judgment, including the 412 North Front Street judgment, were
defective, and that the Attorney Defendants were going to
attempt to open or strike all the judgments against all of the
Plaintiffs pursuant to the letter of representation.
29. Plaintiffs made it clear to the Firm and the Attorney
Defendants that all judgments needed to be opened, or at least
good faith attempts needed to be made to open the judgments,
against all Plaintiffs based upon the representations of the
Attorney Defendants that there were valid defenses to the
confessions of judgment entered against all Plaintiffs.
30. By failing to open the judgment against 412 North Front
Street, or even attempting to open same, Plaintiffs, as
guarantors, were left completely exposed and with no real
recourse.
31. Additionally, by failing to open the judgment against 412
North Front Street, or even attempting to open same, the Firm
and Attorney Defendants had violated the terms of the letter of
representation.
32. The Firm and the Attorney Defendants misrepresented
their strategy with respect to the judgment entered against 412
North Front Street in that the Attorney Defendants stated their
intention to file Petitions to Open/Strike Judgments as to “all
defendants” but failed to do so.
33. The Firm and the Attorney Defendants never informed
Plaintiffs that they had no intention of moving to open the
judgment and every intention of allowing the judgment against
412 North Front Street to stand.
34. It was only after Plaintiffs’ retained new counsel in 2012
that the Attorney Defendants communicated that they did not
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attempt to open the judgment against 412 North Front Street
because they did not believe there to be a valid ground for doing
so. This new position of the Attorney Defendants was in
complete contradiction to the Attorney Defendants’ previously
communicated position to Plaintiffs that the warrants for all of
the confessions of judgment were defective.
35. By failing to adhere to the terms of the letter of
representation and the instructions of Plaintiffs in handling the
judgments, the Firm and the Attorney Defendants acted in bad
faith and in violation of the legal services contract between the
parties.
36. Plaintiffs relied upon the Attorney Defendants’
representations that they would protect the interests of all
Plaintiffs and accepted that the protracted litigation relating to
the loan was being addressed in their best interests.
37. However, unbeknownst to Plaintiffs, the protracted and
costly litigation was due directly to the actions and inactions of
the Firm and the Attorney Defendants.
38. Plaintiffs were billed in excess of $300,000 for legal
services, the majority of which could have been avoided had
Defendants attempted to open the judgment against 412 North
Front Street.
39. Because the Firm and the Attorney Defendants provided no
assistance with respect to handling a potential refinancing or
modification of the loan, and made no attempt to open the
confession of judgment against 412 North Front Street, the real
property collateralizing the loan, 107 Callowhill Street,
Philadelphia, Pennsylvania, 412 North Front Street, Philadelphia,
Pennsylvania, and 416 North Front Street, Philadelphia,
Pennsylvania, was subject to a Sheriff’s Sale.
40. On or about September 24, 2009, the Bank assigned the
Judgment, Mortgage and all loan documents to North Front
Street Realty, LLC (hereinafter “North Front Street Realty”).
41. On or about October 6, 2009, North Front Street Realty, by
Writ of Execution, caused the Sheriff’s Sale of the Mortgaged
Property.
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42. The Bank was the successful bidder of the property at
Sheriff’s Sale.
43. The Firm and the Attorney Defendants allowed the Sheriff’s
Sale to proceed and erroneously permitted a portion of
unencumbered property to be sold along with the mortgaged
property.
44. Plaintiffs instructed Giles to object to and fight the Sheriff’s
Sale. Giles advised Plaintiffs that they had no legal basis to
object to the Sheriff’s Sale and that it was meaningless to
[make] any efforts in reaching an amicable resolution of the
matter. Because no objection was raised to the Sheriff’s Sale by
the Firm, a date was set for a Fair Market Value Hearing. It
never occurred to Plaintiffs, as they had placed their reliance
upon the Attorney Defendants to adhere to the legal services
contract, that no effort had been taken to open the judgment
against 412 North Front Street. Attorney Giles never informed
Plaintiffs that there was no legal basis to object to the Sheriff’s
Sale because the Attorney Defendants had never attempted to
open the judgment.
45. Had Defendants filed a Petition to Open the Judgment
against 412 North Front Street, none of these events would have
occurred.
46. Further, Giles allowed an unencumbered property known
as 440 N. Front Street owned by 412 N. Front Street to be sold
at the Sheriff’s Sale causing additional damages to Plaintiffs.
47. On or about April 1, 2010, the Bank, through North Front
Street Realty, filed a Petition to Fix Fair Market Value and
Establish a Deficiency Judgment against 412 North Front Street,
Brownstein, Newman, and Beezer Family Real Estate as
Respondents.
48. After extensive and costly written submissions, the Court
conducted approximately two days of hearings on the Petition to
Fix Fair Market Value.
49. The Court fixed the fair market value of the property at Six
Million One Hundred Twenty-Five Thousand Dollars
($6,125,000.00) and declared that the deficiency amount was
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One Million Three Hundred Four Thousand Eight Hundred Eleven
dollars and Ninety Six cents ($1,304,811.96).
50. The Bank, through North Front Street Realty, filed a
Complaint in the Court of Common Pleas of Philadelphia County
against Brownstein, Newman, and Beezer Family Real Estate
seeking the deficiency judgment.
51. The Firm filed a Motion for Reconsideration as well as an
appeal of the fair market value order.
52. While the costly appeal was pending, Plaintiffs voiced their
unhappiness with their representation by the Firm and the
Attorney Defendants.
53. Plaintiffs determined that new counsel was necessary and
in or around May 2012, Plaintiffs[ ] retained the services of
Michael Wolf, Esquire.
54. In May 2012, upon retaining the services of Attorney Wolf,
Plaintiffs learned for the first time of the Firm[’s] and Attorney
Defendants’ mishandling of the judgment entered against 412
North Front Street. Specifically, Attorney Wolf advised after
reviewing the file and the pleadings in the matter that no effort
had been undertaken to protect 412 North Front Street from the
confession of judgment.
55. In May 2012, Plaintiffs discovered for the first time that
the actions or inactions of the Firm and the Attorney Defendants
in failing to contest the judgment by confession entered against
412 North Front Street and the subsequent Sheriff’s Sale
involving unencumbered property in complete disregard for
Plaintiff’s specific requests and in direct contradiction of the legal
services agreement rose to the level of professional negligence
and breach of contract.
56. Ultimately, the deficiency action was settled for the sum of
Eighty-Seven Thousand Five Hundred dollars ($87,500.00).
57. The settlement was effectuated by new counsel for
Plaintiffs to whom Plaintiffs paid additional legal fees.
58. The Firm[’s] and the Attorney Defendants’ mishandling of
the loan dispute resulting in thousands of dollars in unnecessary
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legal fees being assessed to Plaintiffs, as well as their significant
over-billing of the events surrounding the loan dispute, have
caused significant damage to Plaintiffs in an amount in excess of
$300,000.
59. Additionally, by allowing an unencumbered property known
as 440 N. Front Street owned by 412 N. Front Street to be sold
at the Sheriff’s Sale, Plaintiffs have suffered damages totaling in
excess of $200,000.
Second Amended Complaint, filed 9/5/14, at 1-11 (emphasis in original).
Appellants alleged further in their Second Amended Complaint
(hereinafter “complaint”) that, pursuant to the terms of the parties’ contract,
Appellees were required to perform their services competently, in good faith,
in a manner consistent with the standards of the legal profession, and in
accordance with the reasonable instructions and requests of Appellees.
Nevertheless, Appellees breached the terms of the contract through
instances of over-billing and billing for services that do not fall under the
terms of the legal services contract, Appellants alleged.
In particular, the complaint continued, Appellees failed to perform
services discussed by the parties, namely, to modify or restructure the loan
documents and, eventually, to open or attempt to open the confession of
judgment against the debtor, 412 North Front Street. But for Appellees’
actions and omissions in this regard, Appellants would not have been
exposed to the legal liabilities that befell them, it is alleged. Additionally,
the complaint claimed that Appellees’ excessive billing was tied directly to
activities necessitated by the Sheriff’s Sale and the fair market value
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litigation that should never have occurred. The sale of an unencumbered
property along with the encumbered property at Sheriff’s Sale was an
additional unjustifiable loss caused by Appellees’ breach of duty, the
complaint contended.
Appellees filed preliminary objections to the complaint in which they
argued, inter alia, that Appellants failed to allege all necessary elements to
their negligence and contract-based claims of legal malpractice. Specifically,
Appellees maintained, Appellants failed to allege either a good-faith basis
upon which Appellees could have filed a petition to open judgment against
the debtor or any facts from which a reasonable inference could be drawn
that such a petition would have succeeded. An assertion of negligence was,
therefore, not supported by well-pleaded facts, they argued. Moreover,
Appellants failed to identify what injury Appellees caused when no facts were
alleged from which it could plausibly be inferred that the filing of a petition
to open or strike could have asserted a meritorious defense and led to a
more favorable result for debtor 412 North Front Street and the other
Appellants.
Breach of contract was not sufficiently alleged, either, according to
Appellees’ preliminary objections, where the complaint pleaded only that
Appellees informed Appellants they would make a good faith attempt to
open the judgments against all Appellants. The complaint, however, failed
to identify a good faith basis or defense available to support the filing of a
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petition, Appellees objected, negating the allegation of breach. Additionally,
to Appellants’ allegation that Appellees agreed to abide by Appellants’
reasonable directions and requests, Appellees objected that Appellants’
failure to identify a valid defense to the confession of judgment against 412
North Front Street precluded them from alleging that any direction to file a
petition to open or strike would have been reasonable.
As noted above, on October 23, 2014, the lower court3 entered an
order sustaining Appellees’ preliminary objections and dismissing with
prejudice Appellants’ breach of contract and professional negligence claims.
As for Appellants’ claims relating to improper or inaccurate billing of
attorneys’ fees, the court sustained preliminary objections but with leave to
amend. On November 12, 2014, the court denied Appellants’ motion for
reconsideration.
Appellant raises the following issues pertinent to the court’s order
sustaining preliminary objections:
1. Whether the Trial Court erred in sustaining in part
Defendants’/Appellee’s [sic] Preliminary Objections to
Plaintiffs’ Second Amended Complaint and dismissing with
prejudice Plaintiffs’/Appellants’ claims for legal malpractice
and malpractice-based breach of contract.
2. Whether the Trial Court erred in denying Plaintiffs’/Appellants’
Motion for Reconsideration.
Appellants’ brief at 8.
____________________________________________
3
The Honorable Pamela Pryor Dembe presiding.
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In their first issue, Appellants contend the court erroneously sustained
Appellees' demurrers when the complaint comprised sufficient factual
allegations, which must be read as a whole and accepted as true, to support
liability under the respective theories of breach of contract and legal
malpractice. Breach of contract was set forth through allegations that
Appellees prepared and delivered to Appellants a letter of representation
indicating that the interests of all Appellants, including debtor 412 North
Front Street, would be advanced in the attempted refinancing as well as in
any litigation stemming from a failure to reform or modify the loan.
According to the complaint, moreover, Appellees declared to
Appellants that the confessions of judgment against all were defective and
that Appellee attorneys would move to open or strike each one, Appellants
argue. Appellants point to the complaint's averment that Appellees, on
multiple occasions, represented that every Appellant had valid, good faith
defenses, including but not limited to defective warrants, against the
confessions of judgment. Despite these representations, Appellees never
attempted to open or strike judgment against 412 North Front Street as they
did for its guarantors, in violation of the contract, the complaint stated.
As to the claim of legal malpractice, Appellants direct us to where the
complaint alleged that Appellees submitted billing entries reflecting
measures taken to open the confessions of judgment entered against all
Appellees. The description of legal services rendered for June 29, 2009, the
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complaint alleged, identified the retrieval of dockets regarding confessions of
judgments entered against "Borrower and Guarantors" and the preparation
of petitions to open/strike for all defendants. The complaint also sufficiently
alleged malpractice by asserting that Appellees allowed an unencumbered
property owned by 412 North Front Street Associates to be sold at sheriff's
sale, causing a $200,000 loss, Appellants maintain.
Appellees respond that, while the complaint alleged they represented
to Appellants that "all judgments needed to be opened, or at least good faith
attempts needed to be made to open the judgments, against all plaintiffs,"
Appellants failed, to the detriment of their contract-based claim, to allege
that any defense or "good faith" basis actually existed to support an attempt
to open. The complaint likewise failed to state a claim for legal
malpractice/professional negligence, Appellees argue, where it failed to
allege that a valid defense to the judgment confessed against the debtor,
412 North Front Street, actually existed.
Without pleading facts allowing for the reasonable inference that a
valid defense existed, Appellees maintain, Appellants were unable as a
matter of law to prove the necessary element of Appellees' negligence, i.e.,
the breach of their professional duty to exercise ordinary skill and knowledge
by presenting such a valid defense. Simply calling Appellees "negligent,"
without offering facts, which, accepted as true, would establish or allow the
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inference of negligence, was nothing more than a conclusory assertion
incapable of surmounting a preliminary objection, Appellees insist.
So, too, does it follow that the complaint failed to allege facts from
which one could reasonably infer an injury caused by Appellees, they
maintain, as it contained no allegation as to how losses tied to 412 North
Front Street's confessed judgment would have been avoided simply by filing
a petition to open or strike on its behalf. Indeed, Appellees contend, the
complaint essentially conceded that the debtor owed a substantial debt it
could no longer pay and one that Abington Bank opted against restructuring
despite Appellees’ good-faith negotiating efforts.
We review appeals from orders sustaining preliminary objections in the
nature of a demurrer under the following standard:
A preliminary objection in the nature of a demurrer is properly
granted where the contested pleading is legally insufficient.
Preliminary objections in the nature of a demurrer require the
court to resolve the issues solely on the basis of the pleadings;
no testimony or other evidence outside of the complaint may be
considered to dispose of the legal issues presented by the
demurrer. All material facts set forth in the pleading and all
inferences reasonably deducible therefrom must be admitted as
true.
In determining whether the trial court properly sustained
preliminary objections, the appellate court must examine the
averments in the complaint, together with the documents and
exhibits attached thereto, in order to evaluate the sufficiency of
the facts averred. The impetus of our inquiry is to determine the
legal sufficiency of the complaint and whether the pleading
would permit recovery if ultimately proven. This Court will
reverse the trial court's decision regarding preliminary objections
only where there has been an error of law or abuse of discretion.
When sustaining the trial court's ruling will result in the denial of
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claim or a dismissal of suit, preliminary objections will be
sustained only where the case is free and clear of doubt.
Thus, the question presented by the demurrer is whether, on the
facts averred, the law says with certainty that no recovery is
possible. Where a doubt exists as to whether a demurrer should
be sustained, this doubt should be resolved in favor of overruling
it.
Weiley v. Albert Einstein Medical Center, 51 A.3d 202, 208-209 (Pa.
Super. 2012) (internal citations and quotation marks omitted).
Where the complaint fails to set forth a valid cause of action, a
preliminary objection in the nature of a demurrer is properly sustained.
Lerner v. Lerner, 954 A.2d 1229, 1234-35 (Pa.Super. 2008). The
complaint need not identify specific legal theories, but it must provide
essential facts to support the claim. See Krajsa v. Keypunch, Inc., 622
A.2d 355, 357 (Pa.Super. 1993). “Assertions of legal rights and obligations
in a complaint may be construed as conclusions of law, which have no place
in a pleading.” DelConte v. Stefonick, 408 a.2d 1151, 1153 (Pa.Super.
1979) (citation omitted).
“It is well-established that three elements are necessary to plead a
cause of action for breach of contract: (1) the existence of a contract,
including its essential terms, (2) a breach of the contract; and, (3) resultant
damages.” Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law
Firm of Malone Middleman, P.C., 137 A.3d 1247, 1258 (Pa. 2016) (citing
J.F. Walker Co., Inc. v. Excalibur Oil Grp., Inc., 792 A.2d 1269, 1272
(Pa.Super. 2002)). “Resultant damages” are those damages suffered from
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the breach. McShea v. City of Philadelphia, 995 A.2d 334, 340 (Pa.
2010). See also Logan v. Mirror Printing Co. of Altoona, Pa., 600 A.2d
225, 226 (Pa.Super. 1991) (recognizing “[i]n order to recover damages
pursuant to a breach of contract, the plaintiff must show a causal connection
between the breach and the loss.”). A claim of legal malpractice requires
that the plaintiff plead the following three elements: employment of the
attorney or other basis for a duty; the failure of the attorney to exercise
ordinary skill and knowledge; and that the attorney's negligence was the
proximate cause of damage to the plaintiff. Kituskie v. Corbman, 714
A.2d 1027, 1029 (Pa. 1998); accord Steiner v. Markel, 968 A.2d 1253,
1255 (Pa. 2009).
After reviewing the record, the parties’ respective arguments, and
governing authority, we conclude Appellants failed to allege in their
complaint sufficient facts allowing the plausible inference that a viable basis
for recovery existed for either its breach of contract or legal malpractice
claim. Most problematic for Appellants was that no allegation provided a
causal connection between either the alleged breach of contract or
professional duty, respectively, and Appellants’ proclaimed losses.
Specifically, the complaint alleged that Abington Bank confessed judgment
against all Appellants after it declined Appellants’ request, presented through
the advocacy of Appellee Firm and attorneys, to restructure or modify the
terms of the loan agreement between the lender bank and debtor 412 North
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Front Street. Appellants failed to allege how, but for Appellees’ conduct,
they would have avoided what, by every indication in the pleading, was
Abington Bank’s inevitable collection of a defaulted loan through sheriff’s
sale of property owned by 412 North Front Street. Allegations of fact
essential to establishing that Appellees’ conduct caused Appellants’ losses
were, therefore, absent from the complaint.
Relatedly, the complaint refers to Appellees’ failure to act upon its
pledge to make good-faith attempts to open judgments against all
defendants as constituting a breach of contract, but Appellants failed to
assert therein what practicable, good-faith attempts could have plausibly
resulted in a superior outcome to the one obtained. Without identifying
these essential facts, the complaint offers, at best, a baseless, conclusory
statement that Appellees failed to make at least a "good-faith attempt" to
file a petition.
In Appellants’ complaint, therefore, we discern insufficient assertion of
essential facts necessary to support legally viable claims of breach of
contract and legal malpractice. Accordingly, we find no abuse of discretion
in the dismissal of both claims by way of the court order sustaining
preliminary objections.4
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4
The same reasons for rejecting Appellants’ first claim apply to defeat their
second claim, which pertains to the court’s denial of their motion for
(Footnote Continued Next Page)
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II. ORDER GRANTING DEFENSE MOTION FOR SUMMARY
JUDGMENT
The second aspect of the present appeal involves the lower court’s5
order granting Appellees’ motion for summary judgment on Appellants’
remaining claims asserting billing errors and practices but denying their
motion seeking judgment on its counterclaims asserting breach of contract
and unpaid legal fees. In setting forth the pertinent factual and procedural
history of this phase of the case, the lower court aptly provides the following
in its opinion dated February 1, 2016:
Defendants/Counterclaim Plaintiffs [Appellees] filed the instant
motion for summary judgment seeking judgment on plaintiffs’
[Appellants’] sole remaining claim for breach of contract and
legal services. [A summary of the underlying bank loan,
retention of Appellees to negotiate and restructure the loan,
failure to come to agreement with bank, confessions of
judgment, decision not to include 412 North Front Street
Associates among petitions to open, and sheriff’s sale is
provided].
***
Pursuant to the retainer agreement between plaintiffs and
defendants, plaintiffs were charged an hourly fee for the legal
services SGR performed plus the cost of all out of pocket
expenses. SGR submitted monthly invoices to plaintiffs for
payment. The invoices included the hourly rate, the amount
due, a description of the work performed by SGR, the identities
_______________________
(Footnote Continued)
reconsideration, as the arguments offered in support thereof essentially
reiterate the arguments appearing in the unsuccessful first claim.
5
Presiding over the motion for summary judgment was the Honorable Ramy
I. Djerassi, who assumed the calendar of the Honorable Pamela Pryor
Dembe upon her July 2015 retirement.
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of the attorneys and staff who performed the billable work, the
amount of time to complete the work and the monetary fee for
the legal work and expenses.
On April 29, 2011, David Giles, Esquire of SGR emailed the
following to plaintiffs Newman and Brownstein:
“As we advised you, as of March 1, 2011, you owe
our firm approximately $91,000.00 in legal fees
regarding our defending you from the actions
brought by Abington Bank to collect on a Loan in the
amount of $6,390,000.00 made by Abington Bank to
412 North Front Street LP which was guaranteed by
the both of you as well as Beatrice Zitomer and
Beezer Family Real Estate, LLC (“Beezer”). I am
confirming our agreement wherein you have agreed
to the following:
1. Payment of $20,000.00 by the close of business
today.
2. Commencing on June 1, 2011 and on the first day
of each month thereafter, you will pay $10,000.00
per month until all legal fees incurred in this
matter have been paid in full.
3. As we previously agreed, you are entitled to a
courtesy discount of 10% of the legal fees
incurred and as soon as the amount due in legal
fees has been reduced to the amount of the
discount that you are entitled to then such fees
shall applied [sic] to the satisfaction of the
discount.
4. We will be drafting a petition for Reconsideration
of the Court order which improperly violated the
Deficiency Judgment Act by entering a judgment
against the both of you without even an action
being filed against you by Abington Bank under
your Guaranty Agreements. We will not be
representing Beatrice Zitomer or Beezer in the
Petition for Reconsideration.
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5. We will be filing an appeal on the amount of the
deficiency determined by the Court. We will not
be filing an appeal of this Order on behalf of
Beatrice Zitomer or Beezer.
6. We will also be representing the both of you
regarding any actions filed by Abington Bank
against you (under the Guaranty Agreements
executed by you) to collect the “deficiency.” We
will not be representing Beatrice Zitomer or
Beezer with respect to any actions filed against
them by Abington Bank.
7. You are confirming that you owe the legal fees set
forth above and that it is your intention to pay all
such fees pursuant to the terms of this email.
Please confirm your agreement to the terms set forth
above.
Best Regards
David Giles[fn]
Fn. Exhibit “3” to Defendants/Counterclaim Plaintiffs’ Motion
for Summary Judgment.
On May 2, 2011, Giles acknowledged receipt of $20,000 from
plaintiffs and requested confirmation of the parties’ Agreement:
“Please let me know if you agree to these terms. I received the
payment, I just want to make sure that we are all in agreement
with the email I sent on Friday which is set forth below.” On
May 3, 2011, Brownstein responded: “Agreed, however, we
reserve the right to review all submissions for payment. I want
you to take Stern on and get this turned around.”
In addition to the $20,000 immediate payment, plaintiffs made
several monthly payments including a $10,000 payment in July
2011, a $4,000 payment in August 2011, a $20,000 payment in
December 2011, and a $10,000 payment on January 2012. No
further payments were made. Presently, SGR alleges that it is
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owed $78,511.94 for legal services rendered and out of pocket
expenses incurred, exclusive of interest, as set forth in the most
recent unpaid invoice dated May 3, 2013.[fn]
Exhibit “4” to Defendants/Counterclaim Plaintiffs’ Motion for
Summary Judgment.
On April 8, 2014, plaintiffs filed their original complaint against
SGR, Giles and Griffin. On May 21, 2014, certificates of merit
were filed. [A summary of proceedings leading to the Honorable
Judge Pamela Pryor Dembe’s order sustaining preliminary
objections and dismissing Appellants’ negligence and contract
based claims is provided].
Presently before the court is SGR’s motion for summary
judgment seeking to dismiss plaintiff’s sole remaining claim for
breach of contract alleging “billing errors” and “overbilling.” SGR
also seeks judgment on its counterclaims at Count 1 (breach of
contract) and County 2 (unpaid legal fees).
Trial Court Opinion, filed 2/1/16, at 1, 2-6.
With respect to Appellants’ remaining breach of contract claim
asserting overbilling and billing errors, the court granted Appellees’
summary judgment motion because, in its opinion, Appellants failed to
present evidence sufficient to make out a prima facie cause of action.
Specifically, the court opined, the presentation of Appellees’ “invoices with
boxes drawn around certain entries and another document with notations of
‘overbilling’ or ‘error in billing’ noted beside each entry[]’” failed to explain
what the proper amounts for such services really were or why such entries
constituted errors or overbilling. Id., at 7.
Moreover, the court discounted the deposition testimony of Todd
Newman, Esquire, that Attorneys Giles and Doherty took too long in
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responding to the Bank’s letter and preparing for oral argument on the
deficiency hearing, respectively, and that Giles’ delegation of other matters
to less experienced attorneys was improper. Id., at 7 n. 9. Newman, the
court noted, “is not a specialist in banking or lender litigation, confessions of
judgment or deficiency proceedings. He also testified at deposition that he
does not get paid by the hour for his legal work and has no experience
keeping time records.[]” Id. at 7-8. The court, therefore, cited to authority
calling for summary judgment where a party fails to produce expert
testimony in a situation requiring one, and no other evidence exists to
support the cause of action. Id. at 8 (citing Masgai v. Franklin, 787 A.2d
982, 985 (Pa.Super. 2001).
Consistent with its judgment against Appellants’ breach of contract
claim alleging overbilling, the court also entered judgment in favor of
Appellees’ counterclaim for breach of contract pertaining to outstanding fees
and costs and awarded them $78,511.94 along with prejudgment interest at
the statutory rate of 6% per annum, totaling $13,148.03. The court,
however, denied Appellees’ additional counterclaim for $27,000 for legal
services allegedly performed for Appellant Beezer Family Real Estate
because the billing invoices attached as exhibits did not distinguish such
services from the work being performed for Appellants as a group. Without
such evidence differentiating Beezer in this way, Appellees failed to
substantiate its claim, the court ruled.
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Appellants now contend there existed genuine issues of material fact
regarding the scope of work Appellees’ promised to perform, whether or not
it was actually performed, whether or not overbilling took place, and
whether Newman’s deposition offered sufficient insight into and criticism of
such billing so as to have required denial of Appellees’ summary judgment
motion. We disagree.
We begin by noting our scope and standard or review of the grant of
summary judgment:
Our review of the trial court's grant of summary judgment is
plenary. Summary judgment is proper where the pleadings,
depositions, answers to interrogatories, admissions and
affidavits and other materials show there is no genuine issue of
material fact and the moving party is entitled to judgment as a
matter of law. We must view the record in the light most
favorable to the opposing party and resolve all doubts as to the
existence of a genuine issue of material fact in favor of the
nonmoving party. We will reverse the trial court's grant of
summary judgment only upon an abuse of discretion or error of
law.
Cresswell v. End, 831 A.2d 673, 675 (Pa.Super. 2003) (citation omitted).
Appellants argue that the allegations of Appellees’ overbilling and
improper billing practices are so straightforward as to be within the
understanding of a jury, thus obviating the need for expert explanation. For
example, Appellants point to Appellants’ bill for over $28,000 for the
research and drafting of four identical petitions to open/strike as an example
of a matter coming within the common experience and comprehension of
nonprofessional persons. Also within a layperson’s understanding,
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Appellants’ contend, is the breach of duty manifest in Appellees’ allowing
unencumbered property owned by 412 North Front Street to be sold at
sheriff’s sale, causing additional damages of $200,000. An $80,000 bill for
work associated with the fair market value hearing is also cited as patently
excessive.
In Powell v. Risser, 99 A.2d 454 (Pa. 1953), our Supreme Court
stated: “[E]xpert testimony is necessary to establish negligent practice in
any profession.” Id. at 456. This Court expounded on the precept in Storm
v. Golden, 538 A.2d 61 (Pa.Super. 1988), wherein we stated that although
the general statement in Powell “is not a concrete pronouncement as to any
one profession, it exhibits a recognition that when dealing with the higher
standards attributed to a professional in any field[,] a layperson's views
cannot take priority without guidance as to the acceptable practice in which
the professional must operate.” Id. at 64.
In Storm, the plaintiff alleged that her former attorney breached
duties owed to her in performance of a real estate transaction. Defendant
attorney moved for nonsuit given plaintiff's failure to present expert
testimony. On appeal, we rejected plaintiff's contention that the purported
simplicity of the real estate transaction eliminated the need for expert
testimony. Specifically, we stated:
Generally, the determination of whether expert evidence is
required or not will turn on whether the issue of negligence in
the particular case is one which is sufficiently clear so as to be
determinable by laypersons or concluded as a matter of law, or
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whether the alleged breach of duty involves too complex a legal
issue so as to warrant explication by expert evidence.... Here,
the underlying question of whether legal malpractice occurred
revolves around a lawyer's duty and responsibility in connection
with representing a client in a real estate transaction. We do not
agree with appellant's assertions that the sale of real estate is an
elementary and non-technical transaction [that] requires only
simple common sense.... At issue is not the simplicity of the
transaction but the duty and degree of care of the attorney.
Whether an attorney failed to exercise a reasonable degree of
care and skill related to common professional practice in
handling a real estate transaction is a question of fact outside
the normal range of the ordinary experience of laypersons.
Id. at 64–65. We indicated, further, that “[e]xpert testimony becomes
necessary when the subject matter of the inquiry is one involving special
skills and training not common to the ordinary layperson.” Id. at 64.
Therefore, our decisional law has held that the standard of care applicable to
a given profession must be determined from the testimony of experts,
unless the conduct involved is within the common knowledge of the ordinary
layperson.
Contrary to Appellants’ position, we discern nothing about the subject
matter at issue that resides within the ordinary layperson’s common
knowledge. Billing practices in the litigation of petitions to open or strike
orders relating to the high-stakes banking and real estate matters at hand
would transcend the experience of lay jurors and, therefore, require the
testimony of an expert to clarify the issues. Attorney Newman did not fill
that role, moreover, as he, himself, conceded that the scope of his practice
and skills has never included such work.
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Nor was it obviously the product of a breached duty of care that
unencumbered property belonging to debtor 412 North Front Street
Associates was also subjected to sheriff’s sale, as the sale proceeds were
applied to satisfy the debtor’s obligations owed to Abington Bank. Again, an
expert would have been required to explain how Appellees’ actions or
inaction in this instance deviated from the “knowledge and skill required” of
an attorney practicing in this field. Therefore, Appellants’ failure to produce
an expert or any other source of explication as to the standards of care
required in the case sub judice justified the dismissal of their claim.
Consistent with its dismissal of Appellants’ claim of overbilling, the
lower court accepted Appellees’ counterclaim that Appellants were,
therefore, in breach of contract by not paying the outstanding $91,000.00 in
legal fees in accordance with the parties’ agreement. In their May 3, 2011,
reply to David Giles’ letter setting forth the balance of legal fees owed,
Newman and Brownstein clearly and concisely said they “agreed” with Giles’
accounting. See correspondence, supra. Appellants deny that their reply
amounted to an agreement on legal fees owed because, they claim, it was
made under duress and only in response to David Giles’ “ultimatum”
demanding payment. Consequently, Appellants argue, there was no
“account stated” on which they were subject to pay.
This bare assertion, however, is in conflict with the record before the
lower court, as the correspondence between the parties supports the court’s
conclusion that no issue of material fact existed regarding the formation of
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an agreement as to the amount of legal fees accrued as of the April 29,
2011 date of Giles’ letter. Neither Appellants’ financial difficulties at the time
nor their subsequent statement in reply to Giles that they reserved the right
to review all submissions for payment qualified, in any way, their succinct
and explicit assent to Giles’ account of legal fees as of the date of their
correspondence. Accordingly, we will not disturb the grant of summary
judgment on this this claim for legal fees.6
Order Affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/29/2016
____________________________________________
6
We also affirm the court’s denial of summary judgment on Appellees’
counterclaim for $27,000 payable by Appellant Beezer Family Real Estate, as
Appellees’ briefed argument fails to address, let alone establish error with,
the lower court’s determination that billing invoices did not separately
describe work performed for Beezer as a separate group. As such, we
perceive no reason to upset the court’s conclusion that factual support for
the position that such a sum was due and owing by Beezer was lacking.
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