United States District Court, E.D. Pennsylvania
BARCLAY SURRICK, J.
before the Court is Defendants 200 Christian Street
Partner's, Arthur Elwood's, and Virgil
Procaccino's Motion to Dismiss Plaintiff's Amended
Complaint Pursuant To Fed.R.Civ.P. 12(b)(6). (ECF No. 18.)
For the following reasons, Defendants' Motion will be
action arises from the sale of a house. Defendants Virgil
Procaccino (“Procaccino”) and Arthur Elwood
(“Elwood”) are partners in the Defendant company
200 Christian Street Partners (“200 CSP”), which
built and then sold a house (“the Home”) to
Plaintiff MILO, LLC (“MILO”). MILO now asserts
claims against Defendants, all related to Defendants'
alleged defective construction of the Home.
First Amended Complaint alleges that David and Beth Ferreira
formed MILO, a limited liability company registered in
Delaware, for the purpose of purchasing and holding assets in
trust for their two children. (Am. Compl. ¶¶ 12,
21-22, ECF No. 12.) Virgil Procaccino and Arthur Elwood are
partners in 200 CSP, a limited liability company formed in
Pennsylvania. (Id. ¶¶ 13-15.) 200 CSP
builds and sells high-end homes in Philadelphia.
(Id. ¶ 27.) In 2014, MILO authorized David
Ferreira to search for and purchase a newly-constructed house
in Philadelphia, Pennsylvania, to serve as the Ferreira's
new home. (Id. ¶¶ 23, 26.) On November 11,
2014, David Ferreira agreed to buy a new house built by 200
CSP located at 501A South 12thStreet in
Philadelphia. (Id. ¶¶ 2, 30.) The purchase
price was $1, 955, 000. (Id. ¶ 8.) Ferreira
assigned the Agreement of Sale to MILO, which then made
settlement on the Home on January 15, 2015. The Ferreiras
moved into the Home in March, 2015. (Id.
alleges that the Home suffers from numerous material defects
due to shoddy construction. Specifically, MILO alleges that
the Home has a water infiltration problem, which has led to
leaks inside the Home, a recurring fungus growing in one of
the bedrooms, and mold. (Id. ¶¶ 40, 50-60,
70-73, 87.) MILO alleges that it hired independent home
inspectors to assess the water issue and that these
inspections revealed significant construction defects in the
Home. (Id. ¶¶ 84-89.) These defects
include: a foundation wall below grade and not to code;
insufficient wall cavity thickness in the brick veneer;
inadequately secured brick veneers lacking proper relief
angles, leading to a risk of collapse; a structurally
unstable foundation not compliant with the building code; and
mold and water infiltration. (Id. ¶¶
119-29.) As a result of these defects and the water issues,
the Ferreiras allege that the Home was not safe to live in
and so they were forced to move out and seek temporary
residence elsewhere from late 2015 through the summer of
2016. (Id. ¶¶ 87, 100.)
alleges that Defendants are responsible for these defects,
the water issues that have resulted from the defects, and
that, as the builder-vendors, Defendants knew or should have
known of these defects before the Home was sold to MILO.
(Id. ¶¶ 134-146.) In addition, MILO
alleges that Defendants not only failed to disclose these
defects to MILO, but also consistently misrepresented the
nature of the defects, the cause of the water issues, and
their willingness and ability to fix these problems, both
before and after the sale. (Id. ¶¶ 39-47,
58-64, 94-95.) MILO also alleges that Procaccino and Elwood,
acting as individuals, repeatedly guaranteed that the
problems with the Home would be fixed and that the water
issues would not keep occurring, all while not revealing that
the root cause of these problems was Defendants' use of
fraudulent cost-cutting measures while constructing the Home.
(Id. ¶¶ 46, 53, 66, 76.) MILO claims it
relied on the misrepresentations made by Procaccino, Elwood,
and 200 CSP in deciding to purchase the Home, and that as a
result of the defects in the Home not disclosed by
Defendants, the Ferreiras cannot live in the Home, cannot
resell it at an adequate price, have had to pay for a
temporary residence, and ultimately were forced to purchase
another house. (Id. ¶¶ 147-50.) Finally,
MILO alleges that Defendants have refused to engage in any
meaningful negotiation or mediation with MILO to resolve
these issues. (Id. ¶ 151.)
Complaint alleges the following claims against all
Defendants: Count I - violation of the Pennsylvania Unfair
Trade Practices and Consumer Protection Law
(“UTPCPL”) 73 Pa. Stat. and Cons. Stat. Ann.
§ 201-2(4)(v), (vii), and (xii)(2017); Count II - breach
of contract; Count III - breach of implied warranty; Count IV
- negligence; Count V - negligent supervision claim; Count VI
- civil conspiracy; and Count VII - violation of the
Pennsylvania Real Estate Seller Disclosure Law
(“RESDL”), 68 Pa. Stat. and Cons. Stat. Ann.
§ 7303. Procaccino and Elwood seek dismissal of all of
MILO's claims. 200 CSP seeks dismissal of Count V, the
negligent supervision claim, Count VI, the civil conspiracy
claim, and Count VII, the RESDL claim.
November 4, 2016, MILO filed the original Complaint in this
Court. (ECF No. 1.) On January 9, 2017, Defendants filed a
Motion to Dismiss Plaintiff's Complaint. (ECF No. 10.) On
January 30, 2017, MILO filed an Amended Complaint. (Am.
Compl. ECF No. 12.) On March 8, 2017, Defendants filed the
instant Motion. (MTD, ECF No. 18.) MILO filed a Response in
Opposition to Defendants' Motion on April 7, 2017.
(Pl.'s Resp., ECF No. 19.)
Federal Rule of Civil Procedure 8(a)(2), “[a] pleading
that states a claim for relief must contain a short and plain
statement of the claim showing that the pleader is entitled
to relief.” Rule 12(b)(6) provides for the dismissal of
a complaint, in whole or in part, for failure to state a
claim upon which relief can be granted. A motion under Rule
12(b)(6) tests the sufficiency of the complaint against the
pleading requirements of Rule 8(a). “To survive a
motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
is plausible “when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Id. A complaint that merely alleges entitlement to
relief, without alleging facts that show entitlement, must be
dismissed. See Fowler v. UPMC Shadyside, 578 F.3d
203, 211 (3d Cir. 2009). Courts need not accept
“[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements . . .
.” Iqbal, 556 U.S. at 678. “While legal
conclusions can provide the framework of a complaint, they
must be supported by factual allegations.” Id.
at 679. This ‘“does not impose a probability
requirement at the pleading stage, ' but instead
‘simply calls for enough facts to raise a reasonable
expectation that discovery will reveal evidence of' the
necessary element.” Phillips v. Cty. of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting
Twombly, 550 U.S. at 556).
determining whether dismissal of the complaint is
appropriate, courts use a two-part analysis. Fowler,
578 F.3d at 210. First, courts separate the factual and legal
elements of the claim and accept all of the complaint's
well-pleaded facts as true. Id. at 210-11. Next,
courts determine whether the facts alleged in the complaint
are sufficient to show that the plaintiff has a
“‘plausible claim for relief.'”
Id. at 211 (quoting Iqbal, 556 U.S. at
679). Given the nature of the two-part analysis,
“‘[d]etermining whether a complaint states a
plausible claim for relief will . . . be a context-specific
task that requires the reviewing court to draw on its
judicial experience and common sense.'”
McTernan v. City of York, 577 F.3d 521, 530 (3d Cir.
2009) (quoting Iqbal, 556 U.S. at 679).
Breach of Contract, RESDL, and Breach of Implied Warranty
and Procaccino contend that MILO's breach of contract
claim against them must fail because 200 CSP, the corporation
which built and sold the Home, is the only proper defendant
in this case. They argue that only MILO and 200 CSP were
bound by the contract and that MILO has not alleged
sufficient reasons to pierce the corporate veil. MILO
contends that it has alleged sufficient
justification to pierce the corporate veil and to go after
Elwood and Procaccino as individuals for their role in the
breach of contract. MILO also contends that Defendants
violated the RESDL by failing to disclose material defects to
the Ferreiras. MILO argues that because Defendants were
obligated to comply with the RESDL as provided in the
Agreement of Sale, the RESDL violation resulted in a breach
of the Agreement.
state a claim for breach of contract, a plaintiff must
establish: (1) the existence of a contract, including its
essential terms; (2) a breach of duty imposed by the
contract; and (3) resulting damages. Chemtech Int'l,
Inc. v Chemical Injection Techs., Inc., 170 F. App'x
805, 807 (3d Cir. 2006) (internal quotation omitted). It is
fundamental to the law of contracts that one cannot be liable
for a breach of contract unless one is a party to the
contract. Accurso v. InfraRed Servs., Inc., 23
F.Supp.3d 494, 503 (E.D. Pa. May 28, 2014) (internal
quotation omitted). When a corporate agent signs a contract
on behalf of the principal corporation, it is the corporate
principal that is alone liable for any breach of the
contract. Id. (citing Daniel Adams Assoc., Inc.
v. Rimbach Pub., Inc., 519 A.2s 997, 1000-01 (Pa. Super.
Ct. Jan. 9, 1987)).
the contract for the sale of the Home lists the buyer as
“David Ferreira or assignee” and the seller as
“200 Christian Street Partners.” (Am. Compl. Ex.
B at 37.) We must therefore determine whether MILO's
Complaint alleges facts sufficient to justify the imposition
of liability on Elwood and Procaccino as individuals for
breach of contract.
Piercing the Veil
corporation is a legal entity unto itself. See,
e.g., Pearson v. Component Tech. Corp., 247
F.3d 471, 484 (3d Cir. 2001). Shareholders, officers, and
directors of the corporation do not normally bear personal
liability for the acts of the corporation. Id.
However, when equity requires it, courts may allow plaintiffs
to “pierce the ...