NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P

Transcription

1 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P EL-MUCTAR SHERIF AND SAMI SEI GANDY DERIVATIVELY ON BEHALF OF AFRICAN ISLAMIC COMMUNITY CENTER, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellees AMERICAN LAND TRANSFER, INC., STEWART TILE GUARANTY COMPANY, JOHN F. HARTZEL, ESQUIRE, MOHAMED JOMANDY, AND SOUTHWEST COMMUNITY CENTER, INC., APPEAL OF: MOHAMED JOMANDY AND SOUTHWEST COMMUNITY CENTER, Appellants No EDA 2012 Appeal from the Order Entered August 6, 2012 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): February Term, 2012 No BEFORE: STEVENS, P.J., OLSON, J., and STRASSBURGER, J. * MEMORANDUM BY STRASSBURGER, J. FILED JULY 26, 2013 Southwest Community Center, Inc. (SWCC) 1 appeals from the Order entered August 6, 2012, denying its petition to open default judgment. After careful review, we reverse. The trial court summarized the relevant facts and procedural history as follows: * Retired Senior Judge assigned to the Superior Court. 1 While Mohamed Jomandy is listed as an appellant, both in the caption and on SWCC s brief, judgment was not entered against him.

2 On 17 February 2012, El-Muctar[] Sherif and Sami Sei Gandy ([ Appellees ]) derivatively, on behalf of an entity named African Islamic Community Center ( AICC, ) filed a Complaint against the above captioned defendants, including appellant SWCC. [Appellees complaint included claims of fraud and civil conspiracy against SWCC. Specifically, Appellees claimed that Mohamed Jomandy transferred ownership of a mosque from AICC to SWCC without authorization.] On 14 March 2012, [Appellees ] Complaint with Notice-to-Defend was served upon SWCC. SWCC failed to file a pleading in response to the Complaint, as required under Pa.R.C.P On 16 April 2012, judgment by default was entered against SWCC for its failure to file any pleading in response to [Appellees ] Complaint. On the same day, approximately two hours after judgment by default was entered against SWCC, [Appellees] filed an Amended Complaint. The Amended Complaint averred the same facts and asserted against SWCC the same claims as the original Complaint, even though judgment by default had already been entered two hours earlier against SWCC. One day later, 17 April 2012, SWCC filed preliminary objections to the Amended Complaint. On 24 April 2012, SWCC filed a Petition to Open Default Judgment. The petition was not accompanied by a verified copy of an answer, as required by PA.R.C.P On 16 May 2012, [Appellees] filed their Response in Opposition to the Petition to Open Default Judgment. On 18 May 2012, the Petition to Open Default Judgment was assigned, and [the trial c]ourt ruled on the petition and issued its Order on 6 August The Order dated 6 August 2012 denied the Petition to Open Default Judgment for failure of the moving party to attach copy of the proposed answer. On 22 August 2012, SWCC appealed to the Pennsylvania Superior Court the Order of [the trial c]ourt denying the Petition to Open Default Judgment. [2] Trial Court Opinion, 10/2/12, at 1-2 (footnote added). 2 We note that an appeal may generally be taken as of right from an order refusing to open a judgment pursuant to Pa.R.A.P See Mother's Restaurant Inc. v. Krystkiewicz, 861 A.2d 327 (Pa. Super. 2004) (en banc)

3 The trial court did not order SWCC to file a statement pursuant to Pa.R.A.P. 1925(b), and none was filed. SWCC raises the following issues on appeal: [SWCC is] entitled to the granting of [its] Petition to Open Default Judgment. When applying the Pennsylvania Rules of Civil Procedure, the trial court abused its discretion and/or misapplied the law in reviewing the following questions: SWCC s Brief at 7. a) Whether timely filed preliminary objections are a valid substitute for an answer attached to a Petition to Open Default Judgment under Pa R.C.P ? b) Whether filed preliminary objections [that are] visible as part of the docket, but not physically attached will suffice as attached within the meaning under Pa.R.C.P ? c) Whether disregarding meritorious defenses raised in responsive pleadings, such as a preliminary objection[s], [is] an abuse of discretion by the [trial c]ourt to enforce technicalities under Pa.R.C.P ? The standard of review for challenges to a decision concerning the opening of a default judgment is well settled. The decision to grant or deny a petition to open a default judgment is within the sound discretion of the trial court, and we will not overturn that decision absent a manifest abuse of discretion or error of law. However, we will not hesitate to find an abuse of discretion if, after our o[w]n review of the case, we find that the equities clearly favored opening the judgment. An abuse of discretion is not a mere error of judgment, but if in reaching a conclusion, the law is overridden or misapplied, or the judgment exercised is manifestly unreasonable, or the - 3 -

4 result of partiality, prejudice, bias or ill will, as shown by the evidence or the record, discretion is abused. Smith v. Morrell Beer Distributors, Inc., 29 A.3d 23, 25 (Pa. Super. 2011) (quoting Dumoff v. Spencer, 754 A.2d 1280, 1282 (Pa. Super. 2000)). Generally, in order to open a default judgment, a petitioner is required to meet a three-part test, as laid out by our Supreme Court in Schultz v. Erie Insurance Exchange, 477 A.2d 471 (Pa. 1984). A petition to open a judgment is addressed to the equitable powers of the court and is a matter of judicial discretion. The court will only exercise this discretion when (1) the petition has been promptly filed; (2) a meritorious defense can be shown; and (3) the failure to appear can be excused. [3] Id. at 472 (citing Balk v. Ford Motor Co., 285 A.2d 128, 130 (Pa. 1971)). However, in 1994, our Supreme Court adopted Pa.R.C.P Rule was intended to ease[] the burden of a party against whom judgment has been entered and who moves promptly for relief from that judgment. Pa.R.C.P , 1994 Explanatory Comment. The text of this Rule is as follows. (a) A petition for relief from a judgment of non pros or of default entered pursuant to Rule shall have attached thereto a 3 I cannot agree with Judge Olson s Concurring Memorandum where she states that SWCC has satisfied the third prong of Schultz a reasonable excuse or explanation for failure to file a responsive pleading. In this regard, I agree with President Judge Stevens dissent

5 verified copy of the complaint or answer which the petitioner seeks leave to file. (b) If the petition is filed within ten days after the entry of the judgment on the docket, the court shall open the judgment if the proposed complaint or answer states a meritorious cause of action or defense. Pa.R.C.P The Rule is accompanied by a note and explanatory comments, which specifically address situations where a petitioner has failed to follow the plain language of the Rule. The note to the Rule specifies that [a] defendant who seeks to file a pleading other than an answer is not entitled to the benefit of this rule but must comply with the requirements of Schultz v. Erie Insurance Exchange, supra. Illustration 5 indicates that [a] defendant who wishes to file preliminary objections upon the opening of a judgment must proceed pursuant to case law and meet the standards set forth in Schultz. The 2001 Explanatory Comment to the Rule further states that [c]ontrary to the holding of the Commonwealth Court in Peters Township Sanitary Auth. v. American Home and Land Dev. Co., 696 A.2d 899 (Cmwlth. Ct. 1997), preliminary objections are not an appropriate attachment to a petition to open a default judgment under Rule In the instant case, SWCC filed its petition to open fewer than 10 days after default judgment was entered. Despite this, SWCC did not have a proposed answer, or any pleading, attached to its petition. SWCC did, however, file improperly-verified preliminary objections the day after - 5 -

6 judgment was entered. The trial court concluded, based on the plain language of Rule and its explanatory comments, that the fact that SWCC filed preliminary objections, rather than an answer, precluded the default judgment from being opened. Trial Court Opinion, 10/2/2012 at 3-4. SWCC argues that the trial court abused its discretion by refusing to open the default judgment, and directs our attention to several cases in which this Court has distanced itself from a strict, mechanical interpretation of the Rule. SWCC s Brief at For the reasons that follow, we agree with SWCC, and conclude that the trial court erred by failing to grant its petition to open. In Smith, supra, this Court laid out the analytical framework to be applied when determining if a petition to open a default judgment sufficiently complies with Pa.R.C.P In Smith, the petitioner filed a petition to open a default judgment within 10 days of the entry of default judgment. 29 A.3d at 24. However, the petitioner filed only a petition, and never attached or filed any other pleading. Id. at 28. This Court summarized a number of our previous decisions, in which petitioners were granted relief from default judgment despite various procedural errors. Id. at The Court then went on to apply these cases and assess whether or not the petitioner was entitled to relief despite failing to comply with the plain language of Pa.R.C.P

7 [T]he record before us reflects that Appellants failed to attach a copy of the proposed answer to their petition; rather, they indicated that an answer would be forthcoming. Thus, Appellants failed to complete the initial requirement of a petition to open a default judgment under Rule 237.3(a). Nevertheless, despite their omission, Appellants would be entitled to relief if their petition met the requirements of Rule 237.3(b). However, it did not. Although timely filed, the petition did not set forth allegations of a defense that, if proven at trial, would entitle Appellants to relief. Instead of alleging facts of record in the petition that support a meritorious defense, Appellants set forth in their petition conclusions of law and challenges to Appellee's proof. In sum, Appellants allege that they have a strong defense for this matter and it is highly likely that plaintiff will not prevail on this case in chief. We conclude that Appellants' petition does not set forth a meritorious defense supported by verified allegations of fact. Thus, Appellants are not entitled to relief under Rule 237.3(b). Id. at 28 (citations omitted). The Court then addressed whether the petitioner met the requirements of the Schultz test, and concluded that it did not. Id. We now apply the framework laid out by Smith to the instant case. Like the petitioner in Smith, SWCC has clearly failed to comply with the requirements of Pa.R.C.P (a) by failing to attach a properly verified answer to its petition to open. Nonetheless, this Court s precedent makes clear that the preliminary objections filed by SWCC in advance of its petition to open entitle SWCC to relief under Pa.R.C.P (b). Indeed, in Boatin v. Miller, 955 A.2d 424 (Pa. Super. 2008) this Court held that a petition with no additional pleading attached or filed at all was sufficient to fall - 7 -

8 under the rule so long as the petition itself raised a meritorious defense. Regardless of the explanatory comments to the rule, 4 it would be an arbitrary distinction to say that a petition without any sort of pleading attached is permissible under Pa.R.C.P while a petition with preliminary objections attached is not. Additionally, in Stauffer v. Hevener, 881 A.2d 868 (Pa. Super. 2005), the petitioners attached only the first page of an answer (the entirety of which had been previously filed) to their petition to open. This Court nonetheless concluded that the appealing party had raised a meritorious defense as follows: Appellees argue that, although the petition was filed within ten days, Appellants only attached the first page of their answer to the petition in violation of Rule 237.3(a) which directs that a petitioner attach to the petition a verified copy of the answer which the petitioner seeks leave to file. However, this Court has concluded that looking exclusively at the answer attached to a petition to open a default judgment, when deciding if there is a meritorious defense, is an overly strict interpretation of Pa.R.C.P Himmelreich v. Hostetter Farm Supply, 703 A.2d 478, 479 (Pa. Super. 1997). In this case Appellants filed a complete copy of their answer on January 27, Therefore, Appellees had notice of Appellants' anticipated defenses. 4 Pa.R.C.P. 129(e) instructs that [a] note to a rule or an explanatory comment is not a part of the rule but may be used in construing the rule. Thus, the note and explanatory comment to Pa.R.C.P are not binding on this Court. See McGonigle v. Currence, 564 A.2d 508, 511 (Pa. Super. 1989) ( While an explanatory comment to a Rule is not binding, it may be utilized as an aid in interpreting the meaning of the Rule. )

9 Stauffer, 881 A.2d at 871 (emphasis added). In the instant case, SWCC s preliminary objections should likewise be considered. The Appellees clearly had notice of SWCC s defenses, as SWCC filed its preliminary objections the day after default judgment was entered. Further, SWCC filed its petition to open within 10 days of the entry of default judgment. Therefore, the only remaining question is whether these preliminary objections state a meritorious defense. See Penn-Delco School Dist. v. Bell Atlantic-Pa, Inc., 745 A.2d 14, (Pa. Super. 1999) ( Pursuant to Pa.R.C.P , as long as the petition to open is filed within ten days after the entry of the judgment on the docket, the petition may be opened if a meritorious defense is stated. ). In their complaint, the Appellees raised claims of fraud and civil conspiracy against SWCC. These claims were based on the allegation that Jomandy and SWCC transferred ownership of a mosque from AICC to SWCC without authority. See Appellees Complaint, 2/17/2012, at 1-8. In its preliminary objections SWCC argues, inter alia, that the Appellees complaint failed to state a claim for fraud because it does not exhibit any specific misrepresentations by [SWCC] amounting to a fraudulent utterance thereby causing AICC to rely upon to its detriment. Memorandum of Law in Support of Defendants Mohamed Jomandy and Southwest Community Center Preliminary Objections to Plaintiff s Complaint, 4/17/2012, at 10. As correctly observed by SWCC, [t]he essential elements of a cause of action - 9 -

10 for fraud or deceit are a misrepresentation, a fraudulent utterance thereof, an intention to induce action thereby, justifiable reliance thereon and damage as a proximal result. The Brickman Group, Ltd. v. CGU Ins. Co., 865 A.2d 918, 929 (Pa. Super. 2004) (quoting Wilson v. Donegal Mut. Ins. Co., 598 A.2d 1310, 1315 (Pa. Super. 1991)). It is the fundamental princip[le] of the law of fraud, regardless of the form of the relief sought, that in order to secure redress, the representee must have relied upon the statement or representation as an inducement to his action or injurious change of position. The recipient of a fraudulent transaction can recover against its maker if, but only if, (a) he relies on the misrepresentation in acting or refraining from action, and (b) his reliance is justifiable. Drelles v. Manufacturers Life Ins. Co., 881 A.2d 822, 840 (Pa. Super. 2005) (quoting Toy v. Metropolitan Life Ins. Co., 863 A.2d 1, 11 (Pa. Super. 2004). Moreover, absent a civil cause of action for a particular act, there can be no cause of action for civil conspiracy to commit that act. Goldstein v. Phillip Morris, Inc., 854 A.2d 585, 590 (Pa. Super. 2004) (quoting McKeeman v. Corestates Bank, N.A., 751 A.2d 655, 660 (Pa. Super. 2000)). A review of the relevant complaint confirms that nowhere do Appellees aver that SWCC made a fraudulent statement to AICC, nor do they claim

11 that AICC relied on any such statement to its detriment. Thus, SWCC s preliminary objections present a meritorious defense. 5 Therefore, because SWCC filed its petition to open within 10 days of the entry of default judgment, and because its previously-filed preliminary objections present a meritorious defense, we conclude that the trial court abused its discretion by denying the petition to open the default judgment. 5 Of course, Appellees may seek to amend the complaint to add any missing averments, but as the record now stands a meritorious defense is stated. It is of no moment that SWCC s preliminary objections were not properly verified, as SWCC has presented a meritorious defense based not on new factual allegations, but on the lack of certain factual allegations in Appellees complaint. See Smith, 29 A.3d at 26 (citing Penn-Delco, 745 A.2d at 18) ( [V]erification under Rule [is] not needed for averments of fact that appeared in the record or for conclusions of law. ). Additionally, we note that this Court has held that a meritorious defense may be presented purely on the basis of the legal inadequacy of a complaint. See Atlantic Credit and Finance, Inc. v. Giuliana, 829 A.2d 340 (Pa. Super. 2003). The facts in Atlantic differ from those in the instant matter, as the petitioners in that case failed to file their petition to open within 10 days after the default judgment was entered. Id. at 341. As a result, the petitioners were required to meet the three-prong Schultz test, and could not proceed under Pa.R.C.P See id at 342. Nonetheless, this Court in Atlantic adopted the reasoning of the Commonwealth Court in Peters Township Sanitary Authority, cited disfavorably in the explanatory comments to Rule 237.3, supra, and concluded that preliminary objections, rather than an answer, may be attached to a petition to open and in that fashion establish a meritorious defense. Id. at 343. In Atlantic, the petitioners preliminary objections raised the claims that the complaint based on which default judgment was entered was not properly verified, and that the complaint did not have attached to it a copy of a relevant contract between the parties. Id. at This Court explained that [t]he two preliminary objections filed to the complaint in the instant case are both clearly meritorious. Id. at

12 Order reversed. Jurisdiction relinquished. Judge Olson files a concurring memorandum. Judge Olson concurs in the result. Judge Stevens, P.J. files a dissenting memorandum. Judgment Entered. Prothonotary Date: 7/26/