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Jones v. Penny Foreclosures

February 5, 2010


The opinion of the court was delivered by: Hay, Magistrate Judge


The Amended Complaint [Doc. 15] filed in this diversity action comprises four counts:

1) breach of contract; 2) unjust enrichment; 3) violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("CPL"); and 4) fraud. The Court considers here the Defendants' Motion to Dismiss the Amended Complaint [19].*fn1 The Defendants have, in reality, filed alternative Motions to Dismiss, one made pursuant to Fed. R. Civ. P 12(b)(7) for failure to join a necessary party in accordance withFed. R. Civ. P. 19, and the other made pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The Motion to Dismiss for lack of joinder will be denied, and the Motion to Dismiss for failure to state a claim will be granted in part and denied in part.


The Plaintiffs, Colorado residents, Glenn and Marsha Jones ("the Joneses" or "the Plaintiffs") allege that Michael Ragans ("Ragans"), an employee of the Defendants, Penny Foreclosures, LLC, Penny Foreclosures II, LLC, Dome Properties, LLC, and Carlos and Wendy De Oliviera (collectively, "the Defendants"), fraudulently induced them to buy properties in Western Pennsylvania. According to the Joneses, the Defendants worked with them to formulate "a plan . . . to purchase properties that would be conducive to re [sic] rented as Section 8 housing." (Doc. 15 ¶ 9). The Plaintiffs state that Ragans understood that they wanted to establish a source of retirement income, and were, therefore, interested in buying only property that could be rented without significant repairs or rehabilitation. (Id. At ¶¶ 9-10). Based on Ragan's representation that he had located properties satisfying these criteria, the Joneses executed written contracts for the purchase of five properties from Penny Foreclosures, LLC, one mortgage from Penny Foreclosures II, LLC, three properties from Carlos and Wendy De Oliviera, and one property from Dome. (Id. ¶¶ 12-15).

The Plaintiffs state that they "were informed repeatedly by [Ragans] that it was not necessary for [them] to . . . tour each property" because Ragans knew what they were looking for and was working in their best interest. (Id. at ¶ 16) Accordingly, the Joneses did not inspect any of the properties prior to purchase, and executed integrated contracts clearly notifying them that they had the right to inspection, that the property was being sold "as is," and that the condition of the properties was "unknown" to the sellers. (Id. ¶ 16, Ex. 1-10).

When the purchased properties were not immediately rented, Ragans allegedly assured the Joneses that a short period of time was needed to effect minor repairs. When approximately six months had elapsed with none of the properties under lease, the Joneses traveled to Western Pennsylvania where they learned that each of the properties "was uninhabitable, had little or no rental value[, and was] in such a state of disrepair" that demolition was "the only solution." (Id. at ¶¶ 16 -20). This action was filed in June 2009.

The Court addresses first the Defendants' request that the action be dismissed for failure to join a necessary party.

The Motion to Dismiss Based on Rule 12(b)(7)

In evaluating a Motion filed pursuant to Rule 12(b)(7), the Court must "accept all factual allegations in the complaints and all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiffs." Lorenz v. CSX Corp., 1 F.3d 1406, 1411 (3d Cir. 1993). The Court next determines whether the absent party "should be joined as [a] 'necessary' part[y] under Rule 19(a)." See Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 312 (3d Cir. 2007). This portion of Rule 19 states:

A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:

(i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed. R. Civ. P. 19(a). The party filing the motion bears the burden of establishing that a non-joined party is indispensable. See Axiom Worldwide, Inc., v. Becerra, No. 08-cv-1918-T- 27TBM, 2009 WL 1347398 at *3, (M.D. Fla. May 13, 2009) (citing Nottingham v. Gen. Am. Commc'ns Corp., 811 F.2d 873, ...

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