United States District Court, E.D. Pennsylvania
March 19, 2004.
BRENDA DICICCO Plaintiff,
WILLOW GROVE BANK; FRED MARCEL; THOMAS FEWER; and, KEVIN O'DONNELL Defendants; WILLOW GROVE BANK Counterclaim Plaintiff, vs. BRENDA DICICCO; and, 1750 WOODHAVEN DRIVE, L.P. Counterclaim Defendants; 1750 WOODHAVEN ROAD, L.P. Counterclaim Plaintiff, vs. WILLOW GROVE BANK Counterclaim Defendant
The opinion of the court was delivered by: JAN DUBOIS, District Judge
ORDER AND MEMORANDUM
AND NOW, this 19th day of March, 2004, upon consideration of
Plaintiff's Motion for Leave to Fil a Third Amended Complaint (Document
No. 32, filed July 15, 2003), Defendant Kevin O'Donnell's Motion in
Opposition to Brenda DiCicco's Motion for Leave to File a Third Amended
Complaint (Document No. 38, filed August 14, 2003), and the related
plaintiff Brenda DiCicco,*fn1 and Defendant Kevin O'Donnell's
Motion to Dismiss 1750 Woodhaven Drive, L.P.'s Counterclaims with
Prejudice (Document No. 37, filed August 14, 2003), and the related
submissions of the parties,*fn2 IT IS ORDERED that Plaintiff's
Motion for Leave to File a Third Amended Complaint (Document No. 32) is
GRANTED. Kevin O'Donnell's Motion in Opposition to Brenda
DiCicco's Motion for Leave to File a Third Amended Complaint (Document
No. 38), treated by the Court as a response to Plaintiff's Motion for
Leave to File a Third Amended Complaint, is DENIED.
IT IS FURTHER ORDERED that Defendant Kevin O'Donnell's Motion
to Dismiss 1750 Woodhaven Drive, L.P.'s Counterclaims (Document No. 37)
is GRANTED IN PART AND DENIED IN PART as follows:
(1) Defendant Kevin O'Donnell's Motion to Dismiss 1750 Woodhaven Drive,
L.P.'s Counterclaims for breach of the loan agreement and breach of oral
contract is DENIED.
(2) Defendant Kevin O'Donnell's Motion to Dismiss 1750 Woodhaven Drive,
L.P.'s Counterclaims for fraud, negligent misrepresentation, breach of
fiduciary duty and negligence is GRANTED.
(3) Defendant Kevin O'Donnell's Motion to Dismiss 1750 Woodhaven Drive,
L.P.'s Counterclaims is DENIED in all other respects.
I. FACTS AND PROCEDURAL HISTORY
This consolidated action arises out of a series of loan transactions
between plaintiff Brenda DiCicco. ("DiCicco") and defendant Willow Grove
Bank ("Willow Grove"). The parties include: DiCicco; Willow Grove; Kevin
O'Donnell ("O'Donnell"), Vice President of Commercial Loans at Willow
Grove Bank; Fred Marcel ("Marcel"), President and Director of Willow
Grove Bank; Thomas Fewer ("Fewer"), Senior Vice President at Willow Grove
Bank; and 1750 Woodhaven Road, L.P., a business wholly owned by DiCicco.
The following facts are set forth in the pleadings at issue in the
In the fall of 1999, DiCicco. met with O'Donnell about securing a
$5,000,000 credit line for her business, ATS Products Corporation
("ATS"). ATS is in the business of catalog sales of automobile and travel
related products. On January 10, 2000, ATS executed a Loan, Security and
Suretyship Agreement ("loan agreement") for the $5,000,000 loan. DiCicco
signed the loan agreement as an individual surety, and 1750 Woodhaven
Drive, L.P. ("Woodhaven") signed as a corporate surety. Woodhaven's sole
corporate purpose was to acquire, own, and operate a property located in
Bensalem, Pennsylvania to serve as ATS's corporate headquarters.
In or around June 2000, ATS requested an additional $2,000,000 loan or
credit extension. Willow Grove approved the request on September 22,
2000. The closing for the additional loan took place on October 6, 2000.
At the closing, despite promises to extend $2,000,000 in credit,
O'Donnell presented DiCicco. with an amendment to the loan agreement
providing only an additional $1,548,670 loan. O'Donnell told DiCicco
that Willow Grove preferred the other $400,000 to be advanced by a
participating lender. However, O'Donnell assured DiCicco. that, if
a participating lender could not be obtained, Willow Grove would
provide the additional $400,000 loan. O'Donnell also authorized ATS to
issue checks that day totaling approximately $500,000 and promised that
Willow Grove would honor those checks even if ATS did not have sufficient
funds in its account. In reliance on this promise, ATS issued
approximately $500,000 in checks to the United States Post Office to
cover the mailing of ATS's catalogs. When the checks were presented to
Willow Grove, however, only one of the checks were honored. As a result,
the Post Office refused to mail the catalogs and ATS's business "was
On or about January 5, 2001, Willow Grove confessed judgment against
ATS, DiCicco. and Woodhaven in the Bucks County Court of Common Pleas,
seeking to recover monies under the loan agreement. See Willow Grove
Bank v. ATS Products Corp., et al., Bucks County C.C.P.
01-00122-17-1. On January 18, 2001, ATS, DiCicco. and Woodhaven filed a
Verified Petition to Strike Off, or Alternatively, to Open Judgment
Entered by Confession, and to Stay Execution ("Petition to Strike"). On
March 7, 2001, ATS filed a petition under Chapter 11 of the Bankruptcy
Code. As a result of the bankruptcy filing, DiCicco. alleges ATS was able
to remain in the Woodhaven property without paying rent until
approximately December 2001, leaving Woodhaven unable to obtain a new
tenant to cover its monthly mortgage payments. In June 2001, Allied
Capital SBLC Corporation, Woodhaven's mortgagor, declared Woodhaven in
default of its mortgage agreement and filed a confession of judgment
action in the Bucks County Court of Common Pleas. See Allied Capital
SBLC Corp., v. 1750 Woodhaven Drive, L.P., et al., Case No.
DiCicco. filed the instant action against Willow Grove on October 10,
2002. The complaint originally contained eight counts: breach of the loan
agreement, breach of oral
contract, fraud, negligent misrepresentation, breach of fiduciary
duty, unjust enrichment, conversion and negligence. On November 18, 2002,
before a responsive pleading was filed, DiCicco. filed an amended
complaint, adding a claim for declaratory judgment. On December 4, 2002.
Willow Grove filed and Answer and Counterclaims against DiCicco. and
Woodhaven for judgment under the loan agreement and for fraudulent
transfer. On December 24, 2002, Woodhaven filed counterclaims against
Willow Grove for breach of the loan agreement, breach of oral contract,
fraud, negligent misrepresentation, breach of fiduciary duty, negligence,
and declaratory judgment.
DiCicco. filed a Second Amended Complaint, with leave of the Court, on
January 23, 2003. In the Second Amended Complaint, DiCicco. added Marcel,
Fewer, and O'Donnell as parties on the fraud, negligent
misrepresentation, breach of fiduciary duty, and negligence claims.
DiCicco. also added claims against Willow Grove for violation of
Gramm-Leach-Bliley Act and for breach of contract to preserve privacy.
On July 14, 2003, Woodhaven filed additional counterclaims: for breach
of the loan agreement and breach of oral contract against O'Donnell; for
fraud, negligent misrepresentation, breach of fiduciary duty and
negligence against O'Donnell, Marcel and Fewer; and for declaratory
judgment against Marcel and Fewer. By agreement reached by the parties on
June 16, 2003, all of Woodhaven's counterclaims against O'Donnell, Marcel
and Fewer are deemed to have been filed on March 18, 2003.
Presently before the Court is DiCicco's Motion for Leave to File a
Third Amended Complaint against O'Donnell and O'Donnell's Motion to
Dismiss Woodhaven's Counterclaims.
A. MOTION FOR LEAVE TO FILE A THIRD AMENDED COMPLAINT
1. Standard of Review
Rule 15(a) of the Federal Rules of Civil Procedure provides that "leave
[to amend] shall be freely given when justice so requires." Fed.R. Civ.
P. 15(a). The rule embodies the liberal pleading philosophy of the
federal rules. The Third Circuit has held that this liberal philosophy
limits a district court's discretion to deny motions to amend, permitting
denials only if a plaintiff's delay in seeking amendment is "undue,
motivated by bad faith, . . . prejudicial to the opposing party,"
Adams v. Gould, Inc., 739 F.2d 858, 864 (3d Cir. 1984)
(citations omitted), or when the amendment would be "fufile." In re
Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1434
(3d Cir. 1997). In "assessing `futility,' the district court applies the
same standard of legal sufficiency" used in 12(b)(6) motions.
Id. Accordingly, the court must "accept as true all the facts
alleged in the complaint and all reasonable inferences that can be drawn
from them," and deny a motion to amend only "where it is certain that no
relief could be granted under any set of facts that could be proved."
Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.
O'Donnell argues that the Motion for Leave to Amend the Complaint to
add claims against him for breach of the loan agreement and for breach of
oral contract should be denied because the claims are fufile. In support
of this argument, O'Donnell contends that he cannot be held personally
liable under the loan agreement because DiCicco. knew that O'Donnell was
acting merely as an agent for Willow Grove, and that he was not
authorized to approve a loan.
According to O'Donnell, these facts preclude liability under
well-settled principles of agency and § 329 of the Restatement
(Second) of Agency.
DiCicco. counters that in promising to procure the $2,000,000 loan,
O'Donnell impliedly warranted that he had the authority to bind Willow
Grove. Under Pennsylvania law, this implied warranty of authority
constitutes a basis for personal liability on a contract. See Kribbs
v. Jackson, 387 Pa. 611, 623-24 (1957). In Kribbs, the
Supreme Court of Pennsylvania adopted § 329 of the Restatement
(Second) of Agency, which states in pertinent part:
A person who purports to make a contract,
conveyance or representation on behalf of another
who has full capacity but whom he has no power to
bind, thereby becomes subject to liability to the
other party thereto upon an implied warranty of
authority, unless he has manifested that he does
not make such warranty or the other party knows
that the agent is not so authorized.
Id.; Kribbs, 387 Pa. at 623-24. Thus, DiCicco
argues, the claims for breach of the loan agreement and breach of oral
contract against O'Donnell are not fufile.
On the present state of the record, the Court concludes that the
contract claims against O'Donnell are not fufile. O'Donnell correctly
argues that he would not be personally liable under the loan agreement if
DiCicco. knew, despite O'Donnell's alleged promises to procure the
$2,000,000 loan, that he did not have authority to approve a loan on
behalf of Willow Grove. See Id. However, whether
DiCicco. had such knowledge is a factual issue that is not raised in any
of DiCicco's pleadings. Thus, it is not properly before the Court. This
issue may be appropriately considered in a motion for summary judgment.
However, on the current state of the record, the Court rejects this
argument for denying the Motion for Leave to File a Third Amended
The Court also rejects O'Donnell's argument that any oral agreement
entered into by O'Donnell would be a suretyship agreement, requiring a
written contract under the Statute of
Frauds. The Restatement (Second) of Agency, § 329, grounds
personal liability on the implied condition that an agent has the
authority to enter into the contract on behalf of a principal, not on any
express promise to guarantee the debt. Thus, § 329 operates as a
warranty, not as a guaranty. A writing is therefore not required under
the Pennsylvania statute of frauds. 33 Pa.C.S.A. § 3.
As the implied warranty of authority is grounded in the contract that
the agent purports to enter on behalf of the principal, the agent may
take advantage of any statute of frauds defenses that would be available
to the principal.*fn3 Whether Willow Grove has such a defense, however,
has not been addressed in the motion papers. Thus, on the present state
of the record, the Court grants DiCicco's Motion for Leave to File a
Third Amended Complaint, without prejudice to O'Donnell's right to raise
any defenses warranted by the facts by a summary judgment motion after
completion of relevant discovery and/or at trial.
B. MOTION TO DISMISS 1750 WOODHAVEN DRIVE, L.P.'S COUNTERCLAIMS
1. Standard of Review
On a motion to dismiss under Rule 12(b)(6), a court must "accept as
true all the facts alleged in the complaint and all reasonable inferences
that can be drawn from them," and grant the motion only "where it is
certain that no relief could be granted under any set of facts that could
be proved." Markowitz v. Northeast Land Co., 906 F.2d 100, 103
(3d Cir. 1990).
In deciding a motion to dismiss under Rule 12(b)(6), "a court may refer
to certain documents apart from the complaint. For example, a court may
judicially notice matters of public record and other facts capable of
accurate and ready determination by resort to sources whose accuracy
cannot reasonably be questioned." In re ATI Technologies. Inc.,
Securities Litigation, 216 F. Supp.2d 418, 430 (E.D.
Pa. 2002) (citing Pension Benefit Guaranty Corp., 998 F.2d 1192,
1196 (3d Cir. 1993).
O'Donnell argues in his Motion to Dismiss that Woodhaven has disguised
its tort claims in breach of contract language in order to circumvent the
statute of limitations bar. In support of this position, O'Donnell
reasserts his argument that an agent acting on behalf of a disclosed
principal cannot be held personally liable on a contract. As these issues
were addressed in Section II (A) of this Opinion, the Court will not
repeat its analysis. O'Donnell's Motion to Dismiss Woodhaven's claims for
breach of the loan agreement and breach of oral contract are therefore
denied without prejudice to O'Donnell's right to raise this and any other
appropriate defense by motion for summary judgment after completion of
relevant discovery and/or at trial.
Next, O'Donnell argues Woodhaven's tort claims are barred by the
statute of limitations. The parties agree that the tort claims are
governed by a two-year statute of limitations and that Woodhaven's
counterclaims against O'Donnell are deemed to have been filed on March
18, 2003. Thus, the question before the Court is whether the tort claims
accrued more than two years prior to the date the counterclaims were
deemed filed, i.e., prior to March 18, 2001.
In Pennsylvania, a cause of action accrues on the date the injury was
sustained, or when "a party has a legal right to institute suit and can
maintain a successful action." ITC. Inc. v. Price
Waterhouse, 697 F. Supp. 867, 870-71 (E.D.
Pa. 1988)(citing Kapil v. Assoc. of Pa. State College and Univ.
Faculties, 470 A.2d 482 (Pa. 1983)). "Lack of knowledge, mistake or
misunderstanding do not toll the running of the statute of
limitations. . . . It is the duty of the party asserting a cause of
action to use all reasonable diligence to properly inform himself of the
facts and circumstances upon which the right of recovery is based and to
institute suit within the prescribed period." Lang v. Cont'l Assur.
Co., 54 Fed. Appx. 72, 74 (3d Cir. 2002) (citing Cappelli v.
York Operating Co., Inc., 711 A.2d 481, 484-85 (Pa. Super. 1998)
(internal quotations and citations omitted).
The discovery rule provides a limited exception to the statute of
limitations bar by tolling the date that the statute limitations begins
to run until the time that the plaintiff knows or reasonably should know:
(1) that he has been injured, and (2) that his injury has been caused by
another party's conduct. Id. Where the discovery rule is
invoked, "the limitations period begins to run when the injured party
possesses sufficient critical facts to put him on notice that a wrong has
been committed and that he needs to investigate to determine whether he
is entitled to redress." Id. (internal quotations and citations
According to O'Donnell, Woodhaven was "injured" for statute of
limitations purposes when ATS was unable to pay its rent in or around
October 2000 as a direct result of Willow Grove's alleged breach of the
loan agreement. Thus, O'Donnell argues, Woodhaven's tort claims are now
In response, Woodhaven argues that the earliest date at which it could
have been injured, was April 10, 2001, when Woodhaven was prohibited from
disposing of its property pursuant to an Order of the Bucks County Court
of Common Pleas. Woodhaven claims that, prior to that
time, it did not know that "it would be completely unable to fund
its obligations to Allied Bank," and thus, did not suffer an injury for
statute of limitations purposes.
The Court rejects Woodhaven's arguments. While a court must accept as
true all facts alleged in a complaint on a 12(b)(6) motion, a court "need
not credit a complaint's `bald assertions' or `legal conclusions' when
deciding a motion to dismiss." Morse v. Lower Merion School
Dist., 132 F.3d 902, 906 (3d Cir. 1997)(citations omitted).
Accordingly, the Court need not accept Woodhaven's bald assertion that it
suffered no injury until April 10, 2001, when the record before the Court
clearly demonstrates otherwise. In reaching this conclusion, the Court
notes that Woodhaven's first two claims against O'Donnell breach
of the loan agreement and breach of oral contract are contract
claims. Under Pennsylvania law, a contract claim accrues when the
contract is breached. See, e.g. Packer Soc. Hill Travel v. Presby.
Univ., 430 Pa. Super. 625, 631, 635 A.2d 649, 652 (1993).
Woodhaven's Counterclaim states that Willow Grove breached the loan
agreement when it failed to honor postage checks issued by ATS on or
around October 6, 2000. (Counterclaim of 1750 Woodhaven Drive, L.P.
Against Willow Grove Ban, Fred Marcel, Thomas Fewer and Kevin O'Donnell
("Woodhaven Counterclaim"), ¶ 37). Thus, under Pennsylvania law, the
breach of the loan agreement and breach of oral contract claims accrued
in or around October 2000 when Willow Grove failed to honor the checks.
Because the acts or omissions that underlie the breach of contract
claims also form the basis for Woodhaven's tort claims, the Court
concludes that these tort claims accrued at the same time. Willow Grove's
alleged failure to provide the full $2,000,000 loan promised by O'Donnell
is the basis for the fraud, negligent misrepresentation, negligence and
breach of fiduciary duty claims. Accordingly, to the extent that
Woodhaven has viable tort claims against Willow Grove,
"the occurrence of the final significant event necessary to make
those claims suable," and thus trigger the statute of limitations, took
place when Willow Grove dishonored the checks made payable to the post
office in or around October 2000. Mack Trucks. Inc. v.
Bendix-Westinghouse-Automotive Air Brake Co., 372 F.2d 18, 20 (3d
Cir. 1966). The tort claims are, therefore, time-barred unless the
running of the statute of limitations can be tolled under the discovery
The Court concludes that to the extent that Woodhaven has viable
arguments under the discovery rule, the running of the statute of
limitations cannot be tolled beyond January 5, 2001. On that date, Willow
Grove filed a confession of judgment action against ATS, Woodhaven and
DiCicco. for monies under the loan agreement. (Counterclaim of 1750
Woodhaven Drive, L.P. Against Willow Grove Bank, ¶ 48). See
Willow Grove Bank v. ATS Products Corp., et al., C.C.P. No.
01-000122-17-1. The Court takes judicial notice of the complaint in that
action, in which Willow Grove alleged that ATS issued checks in excess of
its account balance in violation of the loan agreement.*fn4
See Complaint in Confession of Judgment Action, ¶ 12;
Zahn v. Transamerica Corp. 162 F.2d 36, 48 (3d Cir. 1946)(court
may take judicial notice of pleadings because they are part of the public
record). This allegation specifically addresses the issue of overdrawn
checks and should have reasonably alerted Woodhaven to the fact that
had not honored the checks made payable to the Post Office for
postage. At minimum, the complaint put Woodhaven on notice of "sufficient
critical facts" to require investigation of any potential claims by
Woodhaven under the discovery rule. Lang v. Cont'l Assur. Co.,
54 Fed. Appx. 72, 74 (3d Cir. 2002) (citing Cappelli v. York
Operating Co., Inc., 711 A.2d 481, 484-85 (Pa. Super. 1998)
(internal quotations and citations omitted)
Indeed, Woodhaven's Petition to Strike, filed January 18, 2001 in the
confession of judgment action, demonstrates that Woodhaven knew that
Willow Grove had dishonored the checks more than two years prior to the
date that Woodhaven's counterclaims were deemed filed. See
Petition to Strike, ¶ 33 (alleging that "in breach of and contrary to
its representations, assurances and agreement, and without knowledge or
consent of the Defendants, Willow Grove failed to honor and in fact
bounced the postage checks.") Thus, to the extent that Woodhaven has any
viable arguments under the discovery rule, those arguments cannot toll
the running of the statute of limitations beyond the date the confession
action was filed, January 5, 2001. Woodhaven's tort claims against
O'Donnell are, therefore, time-barred because they are deemed to have
been filed on March 18, 2003, more than two years later.
For the foregoing reasons, the Court grants Plaintiff Brenda DiCicco's
Motion to File a Third Amended Complaint without prejudice to Defendant
Kevin O'Donnell's right to raise the issues addressed in this motion by
motion for summary judgment after completion of relevant discovery and/or
at trial. The Court grants in part and denies in part Defendant Kevin
O'Donnell's Motion to Dismiss 1750 Woodhaven Drive, L.P.'s Counterclaims
as follows: the Motion to Dismiss the claims for breach of the loan
agreement and breach of oral contract is
denied; the Motion to Dismiss is granted as to the fraud, negligent
misrepresentation, breach of fiduciary duty and negligence claims on
statute of limitations grounds.