Appeal from the Order entered June 26, 1987 in the Court of Common Pleas of Westmoreland County, Civil Division, No. 4474 of 1986.
David F. Megnin, Kittaning, for appellants.
John P. Lydon, Pittsburgh, for appellees.
Olszewski, Tamilia and Kelly, JJ. Olszewski, J., files concurring statement.
[ 378 Pa. Super. Page 115]
In this case we are called upon to determine whether a party may be held liable for damages proximately resulting from a person's reasonable reliance on fraudulent misrepresentations, despite the fact that such a person had no privity with the party making the misrepresentations and was not specifically intended to rely on the misrepresentations, when the reliance was nonetheless specially foreseeable. We find that such a cause of action may be recognized so long as under the particular circumstances of the case presented the liability to be recognized is not indefinite as to amount, duration or class of prospective plaintiffs.
Appellants, Paul and Patricia Woodward (Woodwards), appeal from the order granting the preliminary objections in the nature of a demurrer made by the appellee, Harry L. Smith, t/a R & D Excavating Service (Smith), dismissing appellants' amended complaint as to Smith (separate counts against Raymond and Dorothy Dietrich (Dietrichs) were unaffected by the order). We reverse the order of the trial court, and reinstate the complaint against Smith.
[ 378 Pa. Super. Page 116]
An order granting preliminary objections in the nature of a demurrer is final and appealable. See McKinney v. State Farm Mutual Automobile Insurance Co., 295 Pa. Super. 319, 441 A.2d 1252 (1982). Our standard of review was set forth in Vattimo v. Lower Bucks Hosp., Inc., 502 Pa. 241, 465 A.2d 1231 (1983) as follows:
All material facts set forth in the complaint as well as all inferences reasonably deducible therefrom are admitted as true [for the purpose of this review.] 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.
502 Pa. at 244, 465 A.2d at 1232-33 (citations omitted); see also Mahoney v. Furches, 503 Pa. 60, 66, 468 A.2d 458, 461-62 (1983). In reviewing the grant of a demurrer we are not bound by the inferences drawn by the trial court nor are we bound by its conclusions of law. See Drug House Inc. v. Keystone Bank, 272 Pa. Super. 130, 132, 414 A.2d 704, 705 (1979). Moreover, the novelty of a claim or theory, alone, does not compel affirmance of a demurrer. See Sinn v. Burd, 486 Pa. 146, 404 A.2d 672 (1979); Papieves v. Lawrence, 437 Pa. 373, 376-77, 263 A.2d 118, 120 (1970).
On June 27, 1986, the Woodwards filed a civil complaint against Smith and the Dietrichs alleging causes of action for intentional, negligent and/or unintentional misrepresentations and breach of warranty. The Woodwards alleged that their basement had been flooded and damaged two years after they purchased their home from the Dietrichs because either or both of the defendants (the Dietrichs or Smith) had fraudulently misrepresented and concealed the fact that the grey water sewage sewer connection had not been completed by Smith in the manner indicated in the township records and communicated to the Woodwards by
[ 378 Pa. Super. Page 117]
the Dietrichs during their negotiations relating to their purchase of the Dietrichs' residence. Because this pleading was later amended, it is unnecessary for us to review the specific averments made therein.*fn1
Preliminary objections in the nature of a demurrer were filed by Smith on November 12, 1986, and a brief in support of the objections was filed on December 2, 1986. In his brief, Smith summarized the grounds of his preliminary objections as follows:
Defendant Smith has filed these Preliminary Objections in the nature of a demurrer to the Complaint alleging that the plaintiffs have failed to state facts constituting a cause of action against him because:
1. The facts as stated establish that defendant Smith owed no duty to the plaintiffs which he could have violated;
2. Plaintiffs have not alleged a cause of action for fraud or fraudulent misrepresentation;
3. The Complaint does not state the material facts upon which the cause of action is based;
4. No facts establishing causation between the harm suffered by the plaintiffs and any breach by the defendant is shown; and
5. The plaintiffs are not in privity with defendant Smith.
(Smith's Brief 12/2/86 at 3; R.R. at 53a).
The Woodwards' Answer to the preliminary objections was filed December 8, 1986, and a brief in opposition to the objections was filed December 23, 1986. The Woodwards responded that the complaint averred that the damages alleged were incurred as the result of Smith's camouflaged non-installation of the proper sewer connections and the Dietrichs' subsequent intentional or negligent misrepresentations to the Woodwards concerning the sewer connections. The Woodwards further responded that a legal basis
[ 378 Pa. Super. Page 118]
for a cause of action against Smith existed, "under Restatement of Torts, 2d, Sections 531, 532, 533, 536, the logic of Mill-Mar, Inc. v. Statham, 278 Pa. Super. 296, 420 A.2d 548 (1980), and well-established general case law regarding fraud . . . ." (Woodwards' Brief 12/23/86 at 6).
On January 23, 1987, the trial court granted Smith's preliminary objections and gave the Woodwards leave to file an amended complaint within twenty (20) days. In response to a request for clarification by the Woodwards' attorney on January 26, 1987, the trial court wrote a letter to the parties dated January 27, 1987, which explained:
The intent of my Order was to dismiss the Complaint as to Smith on the theory of liability which you had asserted. I held that there could be no liability to the Plaintiffs by Smith inasmuch as there was no contractual relationship between them, no privity, and that the section of the Restatement which you cited was inapplicable.
At your request, I granted leave to file an amended complaint on the chance that you had some other theory of liability. If you're simply reasserting the same type of liability, I would suggest that the same Preliminary Objections will be filed, and the same Order from this Court will be entered. In other words, unless you have some other theory of liability, I would not suggest filing an amended Complaint as to Smith.
(Trial Court Letter 12/27/87; R.R. at 108a, 116a).
The Woodwards filed their amended complaint on February 11, 1987. Because it is from the demurrer to that pleading that appeal is taken, close review of the averments of the amended complaint (under the standard cited in Part I, supra) is required. The averments of the amended complaint and reasonable inferences derivable therefrom allege the following factual scenario.
The regulations of the Municipal Authority of Allegheny County require the disposal of all "black water" and "gray water" sewage through the Municipal Authority's sanitary sewer system. (Amended Complaint at I, 6; R.R. at 80a). In September of 1978 an inspector for the Municipal Authority
[ 378 Pa. Super. Page 119]
prepared a sketch of the lateral sewer lines which the Dietrichs were to install to connect their home to the sanitary sewer system. (Amended Complaint at I, 5; Exhibit 2; R.R. at 80a, 94a). On April 17, 1979, the Dietrichs were given notice that they were required to acquire a permit, to complete the connection of the house to the sewer system in accordance with the Municipal Authority's sketch and applicable regulations, and to begin using the sanitary sewer system within sixty (60) days. (Amended Complaint I, 5; Exhibits 3 & 4; R.R. at 79a-90a, 95a-97a).
By April 30, 1979, the Dietrichs had contracted with Smith to make the sewer connection for them and had secured the necessary permit to begin work on the connections. (Amended Complaint at I, 5, 7; Exhibit 4; R.R. at 80a, 97a). Smith completed his work in May or June of 1979 and was paid in full by the Dietrichs. (Amended Complaint at I, 7; Exhibit 5; R.R. at 80a, 98a).
Smith did not, however, complete the connections in accordance with the Municipal Authority's sketch, which required two sewer lines, one for "black water" sewage produced by the commodes and another for the "gray water" sewage produce by all the other plumbing fixtures in the house. Rather, Smith installed only the black water sewage connection line, and left the gray water sewage line connected to the existing terra cotta sewer. In order to camouflage his non-installation of the gray water connection line, Smith installed a standpipe and a clean-out pipe in the old terra cotta line. (Amended Complaint at I, 7; R.R. at 80a-81a).
Smith contacted the Municipal Authority on behalf of the Dietrichs and sought approval of the sewer connections. Though Municipal Authority regulations required that connections be left uncovered until they were inspected, Smith's work may or may not have been properly inspected. In either case, Smith improperly gained approval of work which was not in accordance with the Municipal Authority's connection sketch. Approval was given orally and noted in
[ 378 Pa. Super. Page 120]
the Municipal Authority's records. (Amended Complaint at I, 8; R.R. at 81a).
On August 8, 1983, the Woodwards purchased the Dietrichs' residence. (Amended Complaint at I, 4; R.R. at 79a). Prior to purchasing the Dietrichs' residence, the Woodwards specifically asked the Dietrichs about the sewer system. The Dietrichs assured the Woodwards that the sewer system was in compliance with Municipal Authority requirements and provided the Woodwards with various documents which purported to establish that the sewer connections had been installed in accordance with the sketch drawn by the Municipal Authority's inspector. (Amended Complaint at I, 9; Exhibits 2-5; R.R. at 81a-82a, 94a-98a). The Woodwards relied upon the Dietrichs' representations regarding the condition of the sewer connections, the approval of the connections by the Municipal Authority, and the skill, competence, and integrity of Smith. (Amended Complaint at I, 10; R.R. at 82a).
In July 1985, a clogged drain caused basement flooding in the Woodwards' residence on two occasions resulting in $2,165.00 worth of property damage.*fn2 Following the second incident, the Woodwards excavated a portion of the gray water sewage line and thereby discovered Smith's camouflaged non-installation of the gray water sewage connection line. The flooding had been caused by blockage in the old terra cotta sewer line, thus, was proximately caused by the failure to install the gray water sewage connection to the sanitary sewer system. (Amended Complaint at I, 11-12; R.R. at 82a-83a).
The Woodwards expended $2,024.09 to properly connect the gray water sewage line to the sanitary sewer system, and also expended 289 hours of personal labor worth $15.00 per hour. From the time they purchased the house to the time they finally connected the gray water sewage line to the sanitary sewer the Woodwards paid $823.24 for sewer services which they did not fully enjoy as the result of the
[ 378 Pa. Super. Page 121]
lack of a gray water sewage connection. (Amended Complaint at I, 12; R.R. at 83a).*fn3
Because the pleading of the theory of liability is critical to our disposition of this appeal, we set forth that portion of the amended complaint verbatim:
13. Smith intentionally worked a fraud on Woodwards, who, as the subsequent owners and occupants of the residence, were members of the class of persons whom he had reason to expect would act in reliance on his misrepresentations. This fraud was worked, inter alia, by Smith's camouflaging the non-installation of the 'gray water' lateral sewer line, by his role in securing approval of the lateral sewer line installation which did not include connection of the 'gray water' sewer line to the sanitary sewer main line, which approval was filed with the records of the Municipal Authority as required by its ordinances and regulations and by his participation in, if not orchestration of, the scheme set forth in paragraphs 1 through 12. Furthermore, in the event that Dietrichs were, in fact, unaware of the actual manner of Smith's installation of the lateral sewer lines, Smith misrepresented to Dietrichs, as well as the Municipal Authority, the actual manner of his installation of the lateral sewers, and he had reason to know that his misrepresentations to Dietrichs and the Municipal Authority regarding his camoflaged [sic] non-installation of the 'gray water' lateral sewer line and his improper obtaining of Municipal Authority approval would in substance be repeated to the subsequent owners and occupants of the residence who would act in reliance thereon.
(Amended Complaint at I, 13; R.R. at 84a). The Woodwards seek compensatory and exemplary damages in excess of $10,000, together with an award for counsel fees and
[ 378 Pa. Super. Page 122]
Preliminary objections in the nature of a demurrer were again filed by Smith on March 5, 1987, and a brief in support of the objections was filed March 19, 1987. Smith argued that the amended complaint did not meet the objections raised to the prior complaint and therefore the demurrer should again be sustained based upon the "law of the case" as embodied in the trial court's letter explaining the grant of the prior demurrer.
The Woodwards filed their answer to the objections on March 23, 1987, and a brief in opposition to the objections on May 22, 1987. The Woodwards responded that the amended complaint met the prior objections and properly stated a valid cause of action against Smith. The Woodwards' brief simply incorporated by reference its prior brief.
The preliminary objections were sustained on May 26, 1987. The opinion of the trial court explained the grant of the demurrer to ...