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[U] Sittig, Cortese & Wratcher, LLC v. New York Life Investment Management LLC

Superior Court of Pennsylvania

February 28, 2014

SITTIG, CORTESE & WRATCHER, LLC, Appellee
v.
NEW YORK LIFE INVESTMENT MANAGEMENT LLC, Appellant

NON-PRECEDENTIAL DECISION

Appeal from the Judgment entered on November 8, 2012 in the Court of Common Pleas of Allegheny County, Civil Division, No. GD 11-017879

BEFORE: PANELLA, OLSON and MUSMANNO, JJ.

MEMORANDUM

MUSMANNO, J.

New York Life Investment Management LLC ("New York Life") appeals from the Judgment entered in favor of Sittig, Cortese & Wratcher, LLC ("SCW"). We affirm.

In 2008, SCW, a law firm specializing in real estate development, was retained by Dominion Capital Management, LLC ("Dominion"), the developer of a distressed shopping center, to provide representation in connection with numerous legal claims resulting from construction defects and sub-surface problems at the shopping center. N.T., 5/31/12, at 36-40. Specifically, SCW was retained to "stave off or defend any claims that were out there in order to preserve the value of [the shopping center]." Id. at 40. Early in the representation, it became clear to SCW that Dominion had no money, and that New York Life, which had an equity interest in the shopping center, was handling the approval and disbursement of payments for expenses relating to the shopping center, including utility and tax bills, in order to preserve the value of its collateral in the property. Id. at 49-59, 178-79. Throughout the course of SCW's representation, which lasted approximately one year, employees of New York Life, including Kevin Smith ("Smith"), whose emails identified him as New York Life's Managing Director and in-house counsel, "called the shots, " strategized and directed SCW's defense of the claims. Id. at 81, 102-03.

New York Life also approved and directed the payment, via three installments, of legal fee invoices submitted by SCW to Dominion totaling $113, 698. Id. at 60-65, 69. Dominion forwarded SCW's legal fee invoices to Smith, who approved the payment of the invoices, and directed another New York Life employee to make an initial $30, 000 installment to SCW. Id. at 60-61, 63-64. The first installment payment of $30, 000 was thereafter wired to SCW. Id. at 71. The wire transaction records referenced the source of the funds as New York Life. Id. at 71-72. When the second installment payment was not received, SCW threatened to withhold its services, and to withdraw from the representation. Id. at 72-73. Thereafter, New York Life approved an additional payment of $45, 000, and directed that the funds be wired to SCW. Id. at 74-75. The wire transaction records for the second installment payment to SCW referenced the source of the funds as New York Life. Id. at 76-77. New York Life thereafter approved the third installment payment to SCW of $38, 698, and directed the funds to be wired to SCW. Id. at 78-79. The wire transaction records for the third installment payment to SCW referenced the source of the funds as New York Life. Id. SCW continued to defend the claims, but New York Life, without any notice or directive to cease working, refused to pay SCW's subsequent legal fee invoices, leaving an unpaid balance of $71, 164. Id. at 209, 322; N.T., 5/31/12, at 140-41, 152-53, 180.

SCW brought suit against New York Life seeking to recover the unpaid balance due for its legal services, asserting in its Complaint claims based on third-party beneficiary and unjust enrichment theories. Following a non-jury trial, the trial court found in favor of New York Life on SCW's third-party beneficiary claim, but found for SCW on its unjust enrichment claim and on a promissory estoppel/detrimental reliance claim that SCW first raised at trial.

New York Life filed a Motion for Post-Trial Relief, which the trial court denied. On November 8, 2012, the trial court entered Judgment in favor of SCW in the amount of $71, 164, plus interest. New York Life filed a timely Notice of Appeal.

On appeal, New York Life raises the following questions for our review:

1. Whether the trial court erred in disregarding the corporate separateness between [] New York Life [] and its subsidiary[, NYLIM-MM, LLC ("NYLIM-MM")] in which [New York Life] held less than one [] percent?
2. Whether the trial court erred in finding that an adverse third party can be unjustly enriched by work performed by an attorney on behalf of his client in light of the special relationship that exists between attorney and client?
3. Whether the trial court erred in allowing SCW to pursue at trial a detrimental reliance/promissory estoppel claim that had never been pled?
4. Whether the trial court abused its discretion in finding that there was sufficient evidence to support SCW's claims?

Brief for Appellant at 4-5 (issues reordered for ease of disposition).

Because New York Life's first and second claims are interrelated, we will address them together. New York Life contends that the trial court improperly concluded that it made the three installment payments to SCW and claims, instead, that such payments were "consented to" by its subsidiary, NYLIM-MM, which paid SCW from a lockbox account created with Dominion's funds, at Dominion's request. Brief for Appellant at 17; see also id. at 15 (wherein New York Life argues that SCW sued the wrong party and should have instead sued NYLIM-MM). New York Life further claims that the trial court erred in finding that it "had a stake" in NYLIM-MM's investment portfolio (which, according to New York Life, included the subject shopping center) because New York Life owned less than one percent of NYLIM-MM. Id. at 18. New York Life also contends that there is no evidence that it was enriched by SCW's services, and that the trial court's factual findings only suggest that New York Life "passively incurred some ancillary amorphous benefit from the legal work performed by SCW on behalf of Dominion, without expressly agreeing to jointly engage SCW or pay its fees on behalf of Dominion." Id. at 10, 12; see also id. at 10 (wherein New York Life claims that it cannot be responsible for payment of SCW's fees because no New York Life entity had any attorney-client relationship with SCW).

When reviewing a case tried by a judge sitting without a jury, we are limited to determining whether the trial court's factual findings are supported by competent evidence, and whether the court properly applied the pertinent law. See Prestige Bank v. Inv. Properties Group, Inc., 825 A.2d 698, 700 (Pa. Super. 2003). Those findings must be afforded the same weight and effect as a jury verdict, and will not be disturbed on appeal absent an error of law or an abuse of discretion. Id. Furthermore, absent an abuse of discretion, this Court is bound by the trial court's credibility determinations. See Viener v. Jacobs, 834 A.2d 546, 554 (Pa. Super. 2003).

The essential elements of a claim for unjust enrichment are (1) benefits conferred on defendant by plaintiff; (2) appreciation of such benefits by defendant; and (3) acceptance and retention of such benefits under such circumstances that it would be inequitable for defendant to retain the benefit without payment of value. Wolf v. Wolf, 514 A.2d 901, 905-06 (Pa. Super. 1986).

Here, the trial court determined that SCW provided legal work that benefitted New York Life. Trial Court Opinion, 9/12/12, at 1. The trial court further found that, despite its small and attenuated ownership interest the shopping center, New York Life had determined that it "had a stake" in the legal proceedings and "wished to ensure that its interests were protected." Id. at 6. The trial court specifically found that SCW's legal work "served to 'buy time' for the [shopping center] owners to determine what would be the best and appropriate course of property management into the future." Id.

The trial court's findings are supported by the record. SCW Attorney William Sittig ("Attorney Sittig") testified that SCW was used by New York Life as a vehicle for it to "buy time" to investigate and determine whether it should become an equity partner, buy out other creditors, or to make some arrangement where it could save part of the shopping center. N.T., 5/31/12, at 138. According to Attorney Sittig, New York Life "dictated the play on everything" related to the claims and, at times, rejected the recommendations of SCW and directed SCW to proceed in an alternate manner, as determined by New York Life. Id. at 103-06. New York Life also edited and approved draft pleadings and other legal documents prepared by SCW. Id. at 106-08. New York Life's director and associate general counsel, LienHa Nguyen ("Nguyen"), testified that NYLIM-MM authorized the three payments to SCW because "we have a stake" in the shopping center and felt that the payments were "necessary" to "make sure that our interests are being protected." N.T., 6/1/12, at 211-12. Notably, Nguyen was not employed by NYLIM-MM, and had no position with that entity. Id. at 215. Through its continued legal representation, SCW was able to delay foreclosures and buy time for New York Life and other entities with an ownership interest in the shopping center to evaluate the problems with the shopping center in order to determine whether mitigation could occur timely and cost-effectively. N.T., 5/31/12, at 145-46.

Given that New York Life, to its own advantage, was "calling the shots" and directing SCW in the defense of the claims, it is clear that New York Life accepted and retained benefits under circumstances that render it inequitable for New York Life not to pay for the value of such legal services.[1]Thus, the trial court's determination that New York Life was unjustly enriched by SCW's legal services is supported by competent evidence.[2]

In its third claim, New York Life contends that the trial court erred in finding that SCW successfully pled a claim for promissory estoppel/detrimental reliance, despite the absence of such a claim in its Complaint. Brief for Appellant at 19. New York Life claims that SCW's Complaint is devoid of the essential elements of a promissory estoppel/detrimental reliance claim. Id. at 20. New York Life argues that it was unaware that SCW intended to assert such a claim until the notion was "sprung" at trial, and was thereby deprived of the opportunity to seek demurrer of the claim, effectively conduct discovery related thereto, or devise a defensive strategy. Id.

Under the Pennsylvania Rules of Civil Procedure, a plaintiff is not obliged to state the legal theory or theories underlying his complaint. DelConte v. Stefonick, 408 A.2d 1151, 1153 (Pa. Super. 1979). Rather, Rule 1019(a) requires a plaintiff to plead only allegations of the "material facts on which a cause of action … is based." Id.; see also Pa.R.C.P. 1019(a). The obligation to discover the plaintiff's causes of actions falls upon the trial court, and the plaintiff need not specifically identify them. DelConte, 408 A.2d at 1153.

The doctrine of promissory estoppel allows a party, under certain circumstances, to enforce a promise even though that promise is not supported by consideration. Shoemaker v. Commonwealth Bank, 700 A.2d 1003, 1006 (Pa. 1997). To establish a promissory estoppel cause of action, a party must prove that (1) the promisor made a promise that he should have reasonably expected would induce action or forbearance on the part of the promisee; (2) the promisee actually took action or refrained from taking action in reliance on the promise; and (3) injustice can be avoided only by enforcing the promise. Id.

Here, the trial court determined that, despite the absence of a specific and independent claim in the Complaint for promissory estoppel, SCW pled sufficient material facts to support the claim. Trial Court Opinion, 9/12/12, at 7-8. We agree.

In its Complaint, SCW specifically averred that (1) "[New York Life, ] by its words and conduct[, ] represented that it would pay for the legal services provided by [SCW;]" (2) "[i]n reliance upon the representations and conduct of [New York Life] in making partial payments, [SCW] continued to provide [] legal services[;]" and (3) that "[u]nder the circumstances, [New York Life] has been unjustly enriched by its actions and it would be inequitable for [New York Life] to retain the benefit without paying for the value of same." Complaint, 8/30/11, at ¶¶ 33, 34, 36. Based on these averments, we conclude that the trial court properly determined that SCW pled the material elements of a promissory estoppel claim in its Complaint.

In its fourth claim, New York Life contends that, even if SCW properly pled a promissory estoppel claim, SCW failed to prove that a promise was made to SCW by any New York Life entity. Brief for Appellant at 23-25. Instead, according to New York Life, SCW's promissory estoppel claim appears to be based on SCW's reliance on the payment by NYLIM-MM, New York Life's subsidiary, of a single invoice (in three installments) out of the Dominion lockbox account. Id. at 23-24. Finally, New York Life contends that, because the trial court determined that no contract existed between SCW and any New York Life entity, the parties' course of performance cannot be used to create a contract between them. Id. at 25.

Here, the trial court found that SCW detrimentally relied upon New York Life's prior consent to payments under SCW's contract with Dominion, and that New York Life received the benefit of SCW's continued work under that contract prior to its refusal to continue payment. Trial Court Opinion, 9/12/12, at 1-2. The trial court specifically determined that the three installment payments that New York Life made to SCW for legal work related to the shopping center "clearly should have led New York Life to reasonably expect that SCW would continue to perform such work." Id. at 6. Finally, the trial court determined that "[SCW's] decision to continue to perform work to the benefit of the [] owners [of the shopping center] was entirely reasonable, and plainly induced by past [New York Life] payments, in light of the fact that [SCW] had received no notification of any change in the arrangements between the parties that would lead [SCW] to expect that [it] should not continue to work as [it] had been doing." Id. at 6-7.

We agree with the sound reasoning of the trial court. Our review of the evidence supports the trial court's determination that New York Life engaged in a course of conduct that it should have reasonably expected would induce SCW to continue to provide legal representation; (2) that SCW continued to represent the interests of the shopping center in reliance on New York Life's conduct; and (3) injustice can be avoided only by holding New York Life liable for payment of the unpaid balance of SCW's legal fees. Shoemaker, 700 A.2d at 1006. Notably, both Smith and Nguyen conceded at trial that no New York Life entity ever disclosed to SCW that the three installment payments were made by any entity other than New York Life. N.T., 6/1/12, at 320-21. Thus, we conclude that the trial court's finding of promissory estoppel is supported by competent evidence.

Judgment affirmed.

Judgment Entered.


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