Argued February 12, 2014.
Appealed from No. 4030. State Agency Board of Claims.
Paul J. Drucker, West Chester, for petitioner.
Thomas O. Williams, Camp Hill, for respondents.
BEFORE: HONORABLE DAN PELLEGRINI, President Judge, HONORABLE BONNIE BRIGANCE LEADBETTER, Judge, HONORABLE RENÉ E COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge.
RENÉ E COHN JUBELIRER, Judge.
In the matter presently before this Court we are asked to determine whether the Board of Claims (Board) has jurisdiction pursuant to Section 102(f.1) of the Commonwealth Procurement Code (Code), 62 Pa. C.S. § 102(f.1), to consider a breach of contract claim arising from a contract between the Public School Employees' Retirement System (PSERS) and Telwell, Inc. (Telwell) wherein Telwell borrowed $2.6 million from PSERS to refinance a property it owned. The Board concluded that it did not have jurisdiction because, pursuant to Section 102(f.1), the Code does not apply to loans and dismissed with prejudice Telwell's " Restated Claim for Breach of Claim/Duty of Good Faith" (Restated Claim) against PSERS and Grandbridge Real Estate Capital LLC (Grandbridge) (together, Respondents). On appeal, Telwell argues that the Board has broad jurisdiction to consider both Code and non-Code disputes and the Restated Claim was filed pursuant to and in conformity with Chapter 17 of the Code, thereby providing the Board with jurisdiction that cannot be restricted by Section 102(f.1). Additionally, Telwell and Respondents agree that, if this Court holds that the Board does not have jurisdiction, the Board should have transferred Telwell's claims against Grandbridge, a private entity, to the Court of Common Pleas of Philadelphia County (trial court) for the trial court's consideration. Because we agree with the Board that the plain language of Section 102(f.1) renders the Code, which now includes both the Board's enabling and jurisdictional provisions, inapplicable to loans made by the Commonwealth of Pennsylvania (Commonwealth) or a Commonwealth agency, we are constrained to affirm the Board's Order to the extent it holds that it does not have jurisdiction, rendering PSERS immune from suit. However, we vacate the Board's Order dismissing Telwell's claims against Grandbridge and remand for the Board to transfer those claims to the trial court for further proceedings.
In 2003, Telwell borrowed $2.6 million from PSERS to refinance a Telwell Property in Philadelphia. (Board Op. at 1.) PSERS and Telwell executed a Permanent Loan Commitment (Commitment) that set forth the terms of the loan, including the interest rate to be paid. (Board Op. at 1.) Telwell also signed a Balloon Mortgage Note (Note) that provided terms of payment and an interest rate for the loan. (Board Op. at 1.) Grandbridge collected Telwell's payments and serviced the loan. (Board Op. at 1-2.) In June 2011, Telwell pre-paid the remaining balance of the loan and discovered that the interest rate in the Commitment and the interest rate in the Note were different. (Board Op. at 2.) As a result, Telwell believed it was overcharged interest on the loan. (Board Op. at 2.)
In August 2011, Telwell filed a complaint against Respondents in the trial court alleging breach of contract. (Board Op. at 1.) Respondents filed preliminary objections asserting, inter alia, that the trial court lacked jurisdiction over Respondents and the subject matter. (Board Op. at 1.) The trial court sustained the preliminary objections and ordered that the breach of contract claim be transferred to the Board. (Board Op. at 1.) Telwell filed the
Restated Claim, averring that Respondents breached the loan contract and owed it approximately $500,000 due to an overcharge of interest on the loan, which represents the difference between the interest rates in the Commitment and the Note. (Board Op. at 1.) Respondents filed an Answer and New Matter, asserting that the Commitment governs the loan terms and denying that they breached any contract with Telwell. (Board Op. at 2.) Respondents did not challenge the Board's jurisdiction in their Answer and New Matter. (Board Op. at 2.) The parties engaged in discovery. (Board Op. at 2.) On May 17, 2013, Telwell filed a Motion for Summary Judgment on the issue of liability, to which Respondents filed answers. (Board Op. at 2.) In its answer, PSERS raised several issues which it contended precluded summary judgment, including that the Board did not have subject matter jurisdiction pursuant to Section 102(f.1) of the Code. (Board Op. at 2.) Grandbridge also filed a Motion for Summary Judgment. (Board Op. at 2.) The Board gave the parties the opportunity to brief the issue of the Board's jurisdiction over the Restated Claim, and Telwell and Respondents filed briefs setting forth their positions. (Board Op. at 2-3.)
II. The Board's Opinion
In determining whether it had subject matter jurisdiction over the Restated Claim, the Board examined whether the language of Sections 102(f.1) and 1724(a) of the Code (setting forth the Board's exclusive jurisdiction), when read together, precluded it from having subject matter jurisdiction. The Board recognized its 200 year history of having broad jurisdiction over contracts entered into by the Commonwealth and cited several recent cases, including Hanover Insurance Co. v. State Workers' Insurance Fund, 35 A.3d 849 (Pa. Cmwlth. 2012), and Department of Health v. Data-Quest, Inc., 972 A.2d 74 (Pa. Cmwlth. 2009), which reaffirmed that broad jurisdiction. The Board further noted that, if it did not have jurisdiction over the contract here, a non-Code contract involving a loan, " there would be no exception to sovereign immunity and, therefore, no possibility for [Telwell to obtain] redress against the Commonwealth." (Board Op. at 5 n.1 (citing Scientific Games International, Inc. v. Department of Revenue, Pa., , 66 A.3d 740, 756 (2013) (Scientific Games II)).) After applying certain principles of statutory construction, including reviewing the legislative history of Act 142 of 2002 (Act 142), which, inter alia, repealed Section 4 of the Board of Claims Act and amended the Code, the Board concluded that " a literal but expansive reading of Section 1724(a)" would provide the Board with jurisdiction over some non-Code contracts. (Board Op. at 15 and n.7.) The Board noted that a broad reading of its jurisdiction " ultimately serves the best interest of the Commonwealth by providing parties contracting
with a Commonwealth agency assurance that it may rely upon the agency to fulfill its obligations as well, avoiding the economic disruption that may result from public knowledge of a contrary holding." (Board Op. at 15 n.7.)
Notwithstanding its position that it has broad jurisdiction, the Board nevertheless concluded that it did not have subject matter jurisdiction over the contract here. The Board held that the plain and unambiguous language of Section 102(f.1), added by Act 142, explicitly states that " Part I of the . . . Code (which part now includes all of the Board's enabling provisions) is not applicable to certain activities of the Commonwealth, including loans." (Board Op. at 16 (emphasis in original).) The Board stated that, because it could not " reach the constitutional issues raised by the manner of Act 142's passage and can find no alternative construction of [its] enabling provisions which would allow the Board to assert jurisdiction ...