February 18, 2014
22 FRONT STREET LLC T/A 22 FRONT STREET, L.P. Appellant
FOX ROTHSCHILD LLP, ROBERT S. TINTNER, ESQUIRE, AND BRETT A. BERMAN, ESQUIRE Appellee
Appeal from the Order Dated March 18, 2013 In the Court of Common Pleas of Montgomery County Civil Division at No(s): 2012-27183
BEFORE: BENDER, P.J., LAZARUS, J., and FITZGERALD, J. [*]
22 Front Street ("22 Front") appeals from the order of the Court of Common Pleas of Montgomery County entered on March 18, 2013, sustaining Fox Rothschild's preliminary objections and dismissing 22 Front's complaint. After careful review, we affirm.
The trial court ably summarized the facts and pertinent procedural history of this matter as follows:
The Defendants are the law firm Fox Rothschild, LLP and two of its lawyers, Robert S. Tintner, Esquire and Brett A Berman, Esquire, who represented condominium owners in a suit filed against 22 Front Street.
The Plaintiff, 22 Front Street, is the declarant of a condominium located at 22 Front Street, Philadelphia, Pennsylvania. 22 Front Street's original plan, which was to market its condominiums as boutique luxury properties[, ] ran into difficulty in 2009. Unable to make its payments on outstanding loans, and burdened with numerous unsold condominium units, 22 Front Street altered its original plan to sell units to the general public. In this change in marketing policy, 22 Front Street began seeking out bulk sales to an organization seeking to establish a retirement community. That organization was Friends Center City Riverfront ("Friends Center City"), which sought to purchase ten individual units and one commercial unit from 22 Front Street. Friends Center City and 22 Front Street allegedly entered into an agreement to enable the purchases in November 2009. According to 22 Front Street, the agreement provided for various non-medical services such as "the coordination of medical and health services for out-patient or in-home treatment, and the coordination of transitions to off-site inpatient health care facilities."
The prior purchasers of units from 22 Front Street (the "Residents") sought legal redress after meeting with Friends Center City in August 26, 2010. The Residents retained attorneys, [Fox Rothschild], to pursue a suit against 22 Front Street and Friends Center City. [Fox Rothschild] filed the underlying action on behalf of the Residents, against 22 Front Street and Friends Center City on October 1, 2010, which included a request for preliminary injunctive relief. The petition for preliminary injunctive relief in the Underlying Action was denied on November 15, 2010. On December 2, 2010, [Fox Rothschild] filed the Residents' Notice of Appeal from the preliminary injunction decision. Subsequently, Residents settled their claims against Friends Center City, and later withdrew their Appeal on August 18, 2011.
A Third Amended Complaint was filed in the Underlying Action on August 2, 2011. The Third Amended Complaint contains many of the original claims against 22 Front Street as asserted in the initial pleadings, including claims of breach of fiduciary duty, breach of contract and violation of the Pennsylvania Uniform Condominium Act. Pursuant to the Settlement with Friends Center City, no claims are asserted against Friends Center City in the Third Amended Complaint. While the Third Amended Complaint was pending in the Philadelphia Court of Common Pleas, 22 Front Street initiated a four-count complaint against the Residents and [Fox Rothschild] in Philadelphia County ("Philadelphia Action"), alleging the same Dragonetti Act claims brought here, tortious interference with contract, abuse of process, and slander of title. Upon preliminary objections, Judge Glazer dismissed the Dragonetti Act claim of 22 Front Street against Defendants based on the fact that the Underlying Action had settled and had not terminated in favor of 22 Front Street.
In September of 2012, 22 Front Street settled with the Residents in both the Philadelphia and the Underlying Actions, entering into a global settlement agreement. This settlement agreement completely concluded the Underlying Action, and all parties to the Underlying Action have now amicably resolved their claims. In the settlement, among other things, 22 Front Street agreed to build a roof deck, which was one of the demands made in the Underlying Action by [Fox Rothschild] while they represented the Residents. The Philadelphia Action is still pending between 22 Front Street and [Fox Rothschild], the same parties to this action. 22 Front Street filed the instant Complaint, alleging the same wrongful use of civil proceedings claim dismissed by Judge Glazer. [Fox Rothschild] filed preliminary objections. This Court sustained the preliminary objections and dismissed the Complaint with prejudice.
Trial Court Opinion, 6/18/13, at 1-3. This timely appeal followed.
On appeal, Front Street presents the following issues for our review:
1. Whether the trial court erred as a matter of law by dismissing 22 Front's Complaint on the doctrine of res judicata?
2. Whether the trial court erred as a matter of law by dismissing 22 Front's complaint on the doctrine of prior pending action?
3. Whether the trial court erred as a matter of law by concluding that the underlying claims were not terminated in favor of 22 Front when dismissing 22 Front's Dragonetti [Act] claim?
4. Whether the trial court erred as a matter of law by considering extrinsic documents, i.e., speaking demurrers, when adjudicating the preliminary objections to 22 Front's complaint?
Brief of Appellant, at 4.
22 Front's issues are predicated on the trial court's sustaining Fox Rothschild's preliminary objections. The standard of review we apply when considering a trial court's sustaining of preliminary objections is well settled.
Our standard of review of an order of the trial court overruling or sustaining preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer test the legal sufficiency of the complaint. When considering preliminary objections, all material facts set forth in the challenged pleadings are admitted as true, as well as all inferences reasonably deducible therefrom. Preliminary objections which seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally sufficient to establish the right to relief. If any doubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the preliminary objections.
Hand v. City of Philadelphia, 65 A.3d 916, 920 (Pa.Super. 2013) (quoting Richmond v. McHale, 35 A.3d 779, 783 (Pa.Super. 2012)) (citations omitted).
The first issue on appeal pertains to the application of res judicata. 22 Front argues that res judicata is an affirmative defense that must be raised by new matter, and because such review is not proper on preliminary objections, the trial court's decision must be reversed. We disagree.
22 Front is correct that the defense of res judicata must be raised as new matter. However, if raised as a preliminary objection, and no objection is filed to such preliminary objection, then the defect is waived. See Richmond v. McHale, 35 A.3d 779, 782 (Pa.Super. 2012) (quoting Preiser v. Rosenzweig, 614 A.2d 303, 305 (Pa.Super. 1992)); see also, Del Turco v. Peoples Home Sav. Ass'n, 478 A.2d 456, 461 (Pa.Super. 1984 (permitting preliminary objections where reference is made to prior litigation in complaint).
Here, 22 Front failed to file the required objection to Fox Rothschild's preliminary objection. In failing to do so, 22 Front has waived its right to object to Fox Rothschild's form of pleading. Preiser, supra. Accordingly, we find that the affirmative defense of res judicata was properly raised by way of preliminary objections.
22 Front further argues that res judicata is inapplicable because there was no final ruling on the merits on 22 Front's Dragonetti Act claim.Although we agree that there was no final ruling on the merits of 22 Front's Dragonetti Act claim, 22 Front is still precluded from re-litigating this issue because the underlying action upon which the Dragonetti Act claim is based has not yet terminated. Therefore, 22 Front's Dragonetti Act claim is still premature,  and the trial court properly sustained Fox Rothschild's preliminary objections and dismissed 22 Front's complaint.
The second issue on appeal pertains to the application of the doctrine of prior pending action, or lis pendens. 22 Front argues that the doctrine of prior pending action is inapplicable because there is no identity of the claims asserted in the two actions. Specifically, the instant action alleges only a Dragonetti Act claim, whereas the Philadelphia Action did not include such a claim, subsequent to May 30, 2012, and therefore the relief requested in two actions is not the same.
"In order to plead successfully the defense of lis pendens, i.e., the pendency of a prior action, it must be shown that the prior case is the same, the parties are the same, and the relief requested is the same. The three-pronged identity test must be applied strictly when a party is seeking dismissal under the doctrine of prior pending action" Crutchfield v. Eaton Corp., 806 A.2d 1259, 1262 (Pa.Super. 2002) (citations omitted). A review of the record reveals that the instant complaint re-alleges the same Dragonetti Act claim, the parties are the same, and the relief requested is the same. Although Judge Glazer dismissed the Dragonetti Act claim from the Philadelphia Action prior to filing the instant action, the three-pronged identity test is satisfied. Moreover, as the Philadelphia Action is still pending, Judge Glazer's analysis that the Dragonetti Act claim is premature is still applicable. Accordingly, the trial court properly sustained Fox Rothschild's preliminary objections and dismissing 22 Front's complaint based on the doctrine of prior pending action.
In its third issue, 22 Front argues that the trial court erred as a matter of law when it concluded that the underlying action was not terminated in favor of 22 Front for purposes of the Dragonetti Act. Section 8351(a) of the Judicial Code, which is referred to as the Dragonetti Act, provides:
(a) Elements of action.-A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings:
(1) He acts in a grossly negligent manner or without probable cause and primarily for a purpose other than that of securing the proper discovery, joinder of parties or adjudication of the claim in which the proceedings are based; and
(2)The proceedings have terminated in favor of the person against whom they are brought.
42 Pa.C.S.A. § 8351. Further, D'Elia v. Folino, 933 A.2d 117 (Pa.Super. 2007), is dispositive of this issue. Therein we held,
where the parties to the underlying suit agree jointly to end the underlying suit in a non-litigious nature, the liability of the underlying defendant, i.e., the plaintiff in the wrongful use of civil proceedings suit, is never determined with finality. Therefore, the underlying suit is not a "favorable termination" within the meaning of 42 Pa.C.S.A. § 8351.
Id. at 122-23 (citations omitted).
Here, the resolution of the underlying action was more than a voluntary discontinuance by the Residents. There was a settlement executed by the parties and indexed on the docket. This settlement agreement between 22 Front and the Residents precludes 22 Front from establishing a favorable termination in the underlying action, a requirement for maintaining a Dragonetti Act claim. Id. Accordingly, we agree that 22 Front failed to satisfy section 8351(a)(2) and trial court properly dismissed 22 Front's Dragonetti Act claim as a matter of law.
In its fourth issue, 22 Front contends that the trial court erred as a matter of law by considering extrinsic documents, i.e., speaking demurrers, when adjudicating the preliminary objections to 22 Front's complaint. See Pa.R.C.P. 1028. The note to Rule 1028 specifically states: "[p]reliminary objections raising an issue under subdivision (a)(1), (5), (6), (7), or (8) cannot be determined from facts of record." "If an issue of fact is raised, the court shall consider evidence by depositions or otherwise." Pa.R.A.P. 1028(c)(2).
Here, Fox Rothschild filed its preliminary objections pursuant to Rule 1028(a)(6). As this subdivision is specifically earmarked as requiring extrinsic evidence, Fox Rothschild was under a legal obligation to create the record upon which the trial court could properly adjudicate its preliminary objections. Moreover, it is undisputed that 22 Front did not object to Fox Rothschild's preliminary objections. Given this tactical choice, as we have already concluded, 22 Front has failed to preserve this issue for appellate review. Accordingly, this issue is waived. Preiser supra, at 305; see also Pa.R.A.P. 302(a) (issues not raised in trial court are waived and cannot be raised for first time on appeal).