Appeal from the order dated February 26, 1997, docketed February 27, 1997, Court of Common Pleas, Lycoming County, Civil Division at No. 96-00,565. Before Smith, J.
Before: Johnson, Hudock and Saylor, JJ. Opinion BY Johnson, J.
The opinion of the court was delivered by: Johnson
We are asked to determine whether a mortgagor who is obligated by a mortgage to maintain insurance on the mortgaged property can establish a cause of action in promissory estoppel based upon an oral promise made by the mortgagee to obtain insurance. We find no merit in those portions of the instant case sounding in fraud and breach of contract. We conclude, nevertheless, that a mortgagee's promise to obtain insurance can be actionable on a theory of promissory estoppel. Accordingly, on this appeal from the order granting summary judgment to the mortgagee, we affirm in part, reverse in part and remand for further proceedings.
Lorraine and Robert S. Shoemaker obtained a $25,000 mortgage on their home from Commonwealth Bank (Commonwealth). The mortgage agreement provided that the Shoemakers were required to "carry insurance" on the property. By January 1994, the Shoemakers had allowed the home-owners' insurance policy covering their home to expire. In 1995, the Shoemakers' home, still uninsured, was destroyed by fire. The parties disagree as to the series of events that occurred after the insurance had lapsed.
The Shoemakers allege that Commonwealth sent a letter to them, dated January 20, 1994, that informed them that their insurance had been cancelled and that if they did not purchase a new insurance policy, Commonwealth might "be forced to purchase [insurance] and add the premium to [their] loan balance." The Shoemakers further allege that Mrs. Shoemaker received a telephone call from a representative of Commonwealth in which the representative informed her that if the Shoemakers did not obtain insurance, Commonwealth would do so and would add the cost of the premium to the balance of the mortgage. The Shoemakers assert that they assumed, based on the letter and phone conversation, that Commonwealth had obtained insurance on their home. They also contend that they received no further contact from Commonwealth regarding the insurance and that they continued to pay premiums as a part of their loan payments. Only after the house burned, the Shoemakers allege, did they learn that the house was uninsured.
Commonwealth, on the other hand, admits that it sent the letter of January 20, but denies the Shoemakers' allegations regarding the contents of the alleged conversation between its representative and Mrs. Shoemaker. Commonwealth further claims that it obtained insurance coverage for the Shoemakers' home and notified them of this fact by a letter dated February 4, 1994. Commonwealth also asserts that it elected to allow this coverage to expire on December 1, 1994, and that, by the letter dated October 25, 1994, it informed the Shoemakers of this fact and reminded them of their obligation under the mortgage to carry insurance on the property. The Shoemakers deny receiving any letter from Commonwealth regarding the insurance other than the letter dated January 20, 1994, that informed them that their policy had expired.
After the house burned down, Mrs. Shoemaker sued Commonwealth, alleging causes of action in fraud, promissory estoppel and breach of contract; the basis for all three causes of action was Commonwealth's alleged failure to obtain insurance coverage for the Shoemaker home. By order of the court, Mr. Shoemaker was joined as an involuntary plaintiff. Commonwealth then filed a motion for summary judgment.
The trial court granted Commonwealth's motion. The court noted that, even if Commonwealth had promised to obtain insurance on the Shoemakers' home, it made no representation regarding the duration of that coverage. The court concluded that because Commonwealth had actually obtained insurance, even though the policy later expired, it had fulfilled its promise to the Shoemakers. Thus, the court reasoned that because Commonwealth had made no misrepresentation and breached no promise, the Shoemakers could not prevail on any of their causes of action. Mrs. Shoemaker now appeals.
Pennsylvania Rule of Civil Procedure 1035.2 provides that:
After the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or part as a matter of law
(1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or
(2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which ...