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Chetty Holdings, Inc., et al. v. Northmarq Capital

April 22, 2013


The opinion of the court was delivered by: O'neill, J.


Now before me is defendants NorthMarq Capital, LLC and Timothy C. Kuhn's*fn1 motion to dismiss the third amended complaint of plaintiffs Chetty Holdings, Inc. and Carl E. Chetty, trading as Millview Apartment Homes, LP. For the reasons that follow, I will grant defendants' motion.


This case arises out of plaintiffs' failed effort to obtain a mortgage loan insured by the United States Department of Housing and Urban Development for the refinance of an apartment complex known as the Millview Property. The facts of this case are familiar to all relevant parties and are detailed in my Opinion of May 1, 2012. Dkt. No. 50. I therefore only discuss the facts and procedural history that are relevant to the instant motion.

I previously granted defendants' motions to dismiss plaintiffs' second amended complaint, dismissing certain claims with prejudice and granting plaintiffs leave to amend certain claims. See Dkt. Nos. 50, 51. Relevant here, I dismissed plaintiffs' claims against NorthMarq and Kuhn for negligence and negligent misrepresentation, finding that plaintiffs' second amended complaint did not sufficiently allege a basis for the alleged duty of "NorthMarq, via its employee Kuhn . . . to exercise such care, skill, prudence and diligence as other members of the profession in advising Plaintiffs with regard to their financial condition, creditworthiness, financing options, and the 223(f) HUD loan application . . . ." Dkt. No. 50 at ECF p. 16-17, citing Second Am. Compl. ¶ 80.

On May 25, 2012, plaintiffs filed a third amended complaint asserting claims for negligence and negligent misrepresentation against NorthMarq and Kuhn. Dkt. No. 52. Plaintiffs' third amended complaint alleges that "NorthMarq was engaged in the business of providing commercial real estate financing and brokerage services, including loan origination and servicing, to real estate investors, developers, and capital sources," id. at ¶ 8, and that "NorthMarq possessed the requisite licenses to provide such commercial real estate financing and brokerage services in Pennsylvania." Id. at ¶ 9. Plaintiffs' third amended complaint also alleges that "Kuhn was an officer, employee and/or agent of Defendant NorthMarq and provided real estate services to Plaintiffs with respect to the Millview Property." Id. at ¶ 11. Plaintiffs now allege that "[d]uring his employment with NorthMarq, Kuhn was, upon information and belief, licensed as an Associate Broker pursuant to the laws of New York and licensed as a Broker Salesperson pursuant to the laws of New Jersey." Id. at ¶ 12. Plaintiffs' third amended complaint further contends that "Kuhn was not licensed to provide real estate services or real estate financing services under Pennsylvania law." Id. at ¶ 13. Plaintiffs assert that "Kuhn represented that he and NorthMarq were experienced real estate professionals, possessing the requisite skills to advise Plaintiffs with respect to their options as to the Millview Property." Id. at ¶ 25.

Kuhn allegedly "conducted a comprehensive review of the assets of Chetty Holdings, including the financial status of Millview, and made recommendations solely relating to refinance of the property, including an application for a 223(f) FHA/HUD refinancing loan." Id. at ¶ 26.

According to the allegations in the third amended complaint, "Kuhn, by virtue of his initiation of the relationship with Plaintiffs and his advice to pursue a 223(f) HUD loan, was the point person for Plaintiffs throughout the [223(f) loan application] process." Id. at ¶ 37. Plaintiffs now allege that, "based upon the financial condition of Plaintiffs, Kuhn and NorthMarq should have advised Plaintiffs to list the Millview Property [for sale] even while simultaneously pursuing an application for a 223(f) HUD loan, to prevent Plaintiffs from incurring any pre-payment penalties." Id. at ¶ 31. The third amended complaint asserts that "

[r]ecommending that Plaintiffs simultaneously pursue a sale of the Millview Property would have been proper advice under the circumstances, because sales of commercial real estate usually take many months to complete, and if the refinancing effort were to fail, which was or should have been obvious to Defendants from the inception of the relationship, plaintiffs should have been provided with a realistic, alternate, and concurrent strategy by Kuhn and NorthMarq to avoid prepayment penalties.

Id. at ¶ 32. Plaintiffs contend that "Kuhn did not recommend a sale of the Millview Property because Kuhn was not a Pennsylvania-licensed broker and, therefore, would be unable to collect a commission and/or fees on any sale of the Property." Id. at ¶ 34.


Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss all or part of an action for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Typically, "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations," though plaintiffs' obligation to state the grounds of entitlement to relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all of the allegations in the complaint are true (even if doubtful in fact)." Id. (citations omitted). The complaint must state "'enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Wilkerson v. New Media Tech. Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008), quoting Twombly, 550 U.S. at 556. The Court of Appeals has made clear that after Ashcroft v. Iqbal, 556 U.S. 662 (2009), "conclusory or 'bare-bones' allegations will no longer survive a motion to dismiss: 'threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.' To prevent dismissal, all civil complaints must now set out 'sufficient factual matter' to show that the claim is facially plausible." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009), quoting Iqbal, 556 U.S. at 678. The Court also set forth a two part-analysis for reviewing motions to dismiss in light of Twombly and Iqbal:

First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a "plausible claim for relief."

Id. at 210-11, quoting Iqbal, 556 U.S. at 679. The Court explained that "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Id., citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not 'show[n]' -- 'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679.


I. Duty of Care

To prevail on a claim for negligence under Pennsylvania law, plaintiffs must first establish that defendants owed them a duty of care. See Merlini ex rel. Merlini v. Gallitzin Water Auth., 980 A.2d 502, 506 (Pa. 2009). Plaintiffs' claim for negligent misrepresentation is likewise premised on the existence of a duty ...

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