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Phelps v. Caperoon

Superior Court of Pennsylvania

June 18, 2018

NIKOS FLOROS PHELPS Appellant
v.
LOUIS L. CAPEROON NIKOS FLOROS PHELPS
v.
LOUIS L. CAPEROON Appellant

          Appeal from the Judgment Entered May 30, 2017 In the Court of Common Pleas of Dauphin County Civil Division at No(s): 2012-CV-10889-CV, 2012-CV-10889-CV

          BEFORE: STABILE, J., NICHOLS, J., and RANSOM, J. [*]

          OPINION

          NICHOLS, J.

         Appellant/Cross-Appellee Nikos Floros Phelps (Buyer) appeals from the judgment entered following a bench trial on his claims under the Real Estate Seller Disclosure Law (RESDL), [1] Unfair Trade Practices and Consumer Protection Law (UTPCPL), [2] and fraudulent misrepresentation against Appellee/Cross-Appellant Louis L. Caperoon (Seller). Seller, in turn, cross-appeals from the order granting summary judgment in favor of Buyer on his RESDL claim. We affirm in part, reverse in part, and remand for further proceedings, as set forth below.

         The trial court set forth the relevant facts below:

This matter stems from a residential real estate transaction between [Buyer] and [Seller]. The subject property is located at . . . Parkway East, Lower Paxton Township, Dauphin County, Pennsylvania (hereinafter "the Property"). The Property consists of a 165 year-old, 1, 888 square-foot, two (2) story single family home, with an unfinished basement, together with several outbuildings (barn, garage, greenhouse structures) on 7.98 acres of land. After negotiating, the parties agreed that [Buyer] would lease the Property for a period of six (6) months, and at the end of the lease term, [Buyer] would purchase the property. On June 30, 2010, the parties executed an Agreement of Sale contemporaneous with a lease agreement.

Trial Ct. Op., 8/1/17, at 1-2.

Prior to signing the Agreement of Sale, Buyer inspected the Property three times. R.R. at 52a-53a.[3] During his inspections, Buyer testified he asked Seller if there was anything he needed to know and Seller responded that "everything was fine. There was nothing to be concerned with." Id. at 54a. Buyer acknowledged that he chose not to hire a property inspector and that he was aware that a seller should provide a RESDL disclosure statement.

Id. at 145a. Buyer stated he did not find it unusual that Seller did not provide a RESDL disclosure statement in this case. Id.

         Paragraph 11 of the Agreement of Sale provided as follows:

Inspection of Premises - Buyer certifies that he has personally inspected the premises, or has caused it to be inspected in a manner satisfactory to him. Buyer agrees that the property is in satisfactory condition and repair. Buyer hereby acknowledges that he is purchasing the property "as is". Buyer expressly waives any and all implied warranties to which the Buyer might be entitled, and acknowledges that he was given no express warranties.

Id. at 16a.

         Buyer lived at the Property for six months under the lease. It was only after Buyer purchased the Property, however, that he discovered numerous deficiencies, including a deteriorated septic system requiring replacement; a cracked furnace heat exchanger; leaky roof; flawed electrical wiring; water damage from a never-connected washer drain; and various issues associated with the improper removal of load-bearing walls and heating ducts.[4] See generally Compl., 1/8/13, at ¶ 7.

         Buyer sued Seller, raising three claims: (1) violation of RESDL; (2) violation of UTPCPL; and (3) fraudulent misrepresentation. With respect to his first claim, Buyer averred that Seller failed "to disclose material defects, " in the disclosure form required by RESDL. Compl., 1/8/13, at ¶¶ 4, 9. With respect to his claim for RESDL damages, Buyer alleged as follows:

The total damages suffered by [Buyer] as a result of [Seller's] failure to disclose material defects, as required by [RESDL] are unknown precisely, as [Buyer] continues to investigate the best and most cost-effective solutions to the various problems, but said damages are currently estimated to be approximately $120, 000.00. [Buyer] reserves the right to supplement this averment as his investigation continues.

Compl., 1/8/13, at ¶ 9; id. ad damnum cl.

         Seller admitted that he did not provide Buyer a RESDL disclosure form. Answer, 5/6/13, at ¶ 4. Seller further averred that he "did not disclose any of the material defects alleged [by Buyer] solely because no such defects existed or were known to [Buyer] at the time the Agreement of Sale was entered into." Id. Seller additionally asserted that no disclosure was required because it was a sale of commercial property. Id. at ¶ 9.

         At the close of discovery, Buyer moved for partial summary judgment on Seller's liability under RESDL. Seller filed an answer and cross-motion for summary judgment on all of Buyer's claims. Buyer, in turn, filed an answer in opposition to Seller's cross-motion.

         Following a hearing, the trial court denied Seller's cross-motion and granted Buyer's motion for partial summary judgment on Buyer's liability under RESDL. The court reasoned that the "provisions of the [RESDL] cannot be waived." Order, 4/23/15. The court ordered that Seller "is liable to [Buyer] for all damages, if any, resulting from the material defects alleged in [Buyer's] Complaint, in an amount to be proven by [Buyer] at trial." Id.

         On December 13 and 29, 2016, the trial court held a bench trial.[5] Buyer did not orally move for or file a motion for a directed verdict at the close of evidence.

         On May 4, 2017, the trial court awarded damages of $39, 065.02 to Buyer for Seller's violation of RESDL with respect to "(1) the defective roof and resulting water damage; and (2) re-wiring of the electric which resulted in hidden junction boxes and open air splices."[6] Memo. Op. & Order, 5/4/17, at 13. The court found in favor of Seller on Buyer's remaining claims of UTPCPL and fraudulent misrepresentation. Id.

         Buyer filed a timely post-trial motion that, in relevant part, challenged the trial court's award of RESDL damages. Buyer claimed that the court miscalculated RESDL damages and did not consider whether he was entitled to additional damages of $194, 692.82, representing consequential and difference-in-value damages under Skurnowicz v. Lucci, 798 A.2d 788, 795 (Pa. Super. 2002).[7]

         The trial court denied Buyer's post-trial motion on May 24, 2017, before Seller filed a response. The court formally entered judgment on May 30, 2017, and Buyer timely appealed on May 31, 2017. Although Seller did not file a post-trial motion, he timely cross-appealed on June 9, 2017.[8] Each party filed a timely court-ordered Pa.R.A.P. 1925(b) statement. Seller's Rule 1925(b) statement claimed that the existence of the "as is" statement in the Agreement of Sale precluded any RESDL liability. Seller's Pa.R.A.P. 1925(b) Statement, 6/23/17, at 1-2.

         Seller's Cross-Appeal at 923 MDA 2017

         For ease of disposition, we first resolve the cross-appeal of Seller, who raises the following issue:

1. Whether the Summary Judgment Court erred in granting [Buyer's] motion for partial summary judgment when it found, as a matter of law, that the inclusion of an "as is" clause in the Agreement to purchase real estate was not sufficient to put [Buyer] on notice that there may be liabilities attendant to the purchase and relieve [Seller] of the obligation to provide a seller's disclosure form?
2. Whether the Trial Court erred when it failed to find that [Seller] was entitled to an "advice of counsel" defense as to all of the allegations of [Buyer's] complaint?

Seller's Brief at 4.

         Seller's First Issue - The "As Is" Clause

         In support of his first issue, Seller contends that no Pennsylvania appellate court has ruled on whether an "as is" clause in a real estate sales contract negates the disclosure requirement set forth within RESDL, a statute. Seller's Brief at 35-36. Seller relies on PBS Coals, Inc. v. Burnham Coal Co., 558 A.2d 562 (Pa. Super. 1989), which he claims controls, even though it predates RESDL.[9] Id. at 33-34.

         Our standard of review follows:

When a party seeks summary judgment, a court shall enter judgment whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense that could be established by additional discovery. A motion for summary judgment is based on an evidentiary record that entitles the moving party to a judgment as a matter of law. In considering the merits of a motion for summary judgment, a court views the record in the light most favorable to the nonmoving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Finally, the court may grant summary judgment only when the right to such a judgment is clear and free from doubt. An appellate court may reverse the granting of a motion for summary judgment if there has been an error of law or an abuse of discretion.

Erie Ins. Exch. v. Moore, 175 A.3d 999, 1008 (Pa. Super. 2017) (citation omitted).

         The rules of statutory construction are well-settled:

The Statutory Construction Act, 1 Pa.C.S. §§ 1901-1991, sets forth principles of statutory construction to guide a court's efforts with respect to statutory interpretation. In so doing, however, the Act expressly limits the use of its construction principles. The purpose of statutory interpretation is to ascertain the General Assembly's intent and to give it effect. In discerning that intent, courts first look to the language of the statute itself. If the language of the statute clearly and unambiguously sets forth the legislative intent, it is the duty of the court to apply that intent and not look beyond the statutory language to ascertain its meaning. Courts may apply the rules of statutory construction only when the statutory language is not explicit or is ambiguous.
. . . We must read all sections of a statute together and in conjunction with each other, construing them with reference to the entire statute. When construing one section of a statute, courts must read that section not by itself, but with reference to, and in light of, the other sections. Statutory language must be read in context, together and in conjunction with the remaining statutory language.
Every statute shall be construed, if possible, to give effect to all its provisions. We presume the legislature did not intend a result that is absurd, impossible, or unreasonable, and that it intends the entire statute to be effective and certain. When evaluating the interplay of several statutory provisions, we recognize that statutes that relate to the same class of persons are in pari materia and should be construed together, if possible, as one statute. Also, when interpreting a statute we must listen attentively to what the statute says, but also to what it does not say.

Retina Assocs. of Greater Phila., Ltd. v. Retinovitreous Assocs., Ltd., 176 A.3d 263, 270 (Pa. Super. 2017) (citations and internal quotation marks omitted); see also 1 Pa.C.S. § 1928(a) (stating that for any statute that derogates common law and was adopted after September 1, 1937, we do not have to strictly construe that statute).

         By way of background, RESDL, which became effective on December 20, 2001, applies "to all residential real estate transfers" except for certain types of transfers, none of which are applicable here. See 68 Pa.C.S. § 7302. Section 7303 provides as follows:

Any seller who intends to transfer any interest in real property shall disclose to the buyer any material defects[10] with the property known to the seller by completing all applicable items in a property disclosure statement which satisfies the requirements of section 7304 (relating to disclosure form).[11] A signed and dated copy of the property disclosure statement shall be delivered to the buyer in accordance with section 7305 (relating to delivery of disclosure form) prior to the signing of an agreement of transfer by the seller and buyer with respect to the property.

68 Pa.C.S. § 7303 (emphases added). Generally, a seller "should only be required to reveal material defects with the actual physical structure of the house, with legal impairments on the property, and with hazardous materials located there." Milliken v. Jacono, 60 A.3d 133, 140 (Pa. Super. 2012) (en banc).

         Section 7308 of RESDL imposes an affirmative duty on the seller:

The seller is not obligated by this chapter to make any specific investigation or inquiry in an effort to complete the property disclosure statement. In completing the property disclosure statement, the seller shall not make any representations that the seller or the agent for the seller knows or has reason to know are false, deceptive or misleading and shall not fail to disclose a known material defect.

68 Pa.C.S. § 7308.

         The Pennsylvania Supreme Court "has recognized that the term 'shall' is mandatory for purposes of statutory construction when a statute is unambiguous." Koken v. Reliance Ins. Co., 893 A.2d 70, 81 (Pa. 2006) (some internal quotation marks and citation omitted); accord SAS Inst., Inc. v. Iancu, 138 S.Ct. 1348, 1354 (2018) ("The word 'shall' generally imposes a nondiscretionary duty." (citation omitted)).

         In PBS Coals, a case that predates RESDL by over a decade, the parties executed an agreement for the sale of real property that had been inspected by both parties in the winter. PBS Coals, 558 A.2d at 563. The agreement provided that the sale of the property was "as is." Id. at 564. In the spring, "an acid water discharge was discovered" on the property that neither party knew about. Id. at 563. The parties essentially disagreed over the meaning of "as is" as to which party under the agreement should pay for and fix the discharge. Id. at 564.

         The PBS Coals Court noted that the "use of the term, 'as is' in the context of a transfer of real property interests present[ed] a question of first impression in Pennsylvania." Id. at 564. After summarizing pertinent caselaw from other jurisdictions, the Court held that the parties' "agreement contained a term which has common meaning; when something is accepted 'as is' the buyer is put on notice that there may be liabilities attendant to the purchase." Id. The Court thus held that the buyer of the real property was obligated to resolve the discharge because it purchased the property on an "as is" basis. Id. at 565. Because PBS Coals predated RESDA and RESDL, the Court did not address any statutory disclosure requirement.

         Here, Seller essentially asks this Court to conclude that the "as is" clause in a separate, distinct agreement of sale and the holding of PBS Coals permits him to escape the obligatory statutory language of "shall" in Section 7303. However, Seller does not refer us to any RESDL section or caselaw permitting him to disregard the mandatory language of Section 7303. In fact, Seller does not raise any statutory interpretation argument or argue that the Agreement of Sale was a contractual waiver of Section 7303.

          In contrast, RESDL, which was enacted over a decade after PBS Coals, contains mandatory language: "Any seller who intends to transfer any interest in real property shall disclose to the buyer any material defects with the property known to the seller." 68 Pa.C.S. § 7303 (emphasis added); Koken, 893 A.2d at 81. RESDL contains no exceptions to the disclosure requirements, including the presence of an "as is" clause in an agreement to transfer residential real estate, and thus, Seller must comply.[12] See 68 Pa.C.S. § 7303; Koken, 893 A.2d at 81; Retina Assocs. of Greater Phila., 176 A.3d at 270.[13] Thus, we conclude that Seller has not established that he does not have to comply with RESDL's disclosure requirement because of an "as is" clause in an agreement of sale.

         Seller's Second Issue - Advice of Counsel

Seller's second argument, which we quote in its entirety, is as follows:
[Seller], relying on the advice of counsel, sold the Property "as is" and did not provide [Buyer] with a seller's disclosure form. A good faith reliance on the advice of counsel establishes a defense to a under the Dragonetti[14] statute (Miller v. St. Luke's Univ. Health Network, 142 A.3d 884, 897 ([Pa. Super.] 2016), appeal denied, 164 A.3d 479 (Pa. 2016)) and should also establishes a good faith defense under the RESDL.
Because of his reliance on the advice of counsel, [Seller's] violation of the RESDL was not willful or negligent and he should not be liable to [Buyer] for any damages under the RESDL.

Seller's Brief at 37.

Initially, Seller's reliance on Miller is inapt because the language of the Dragonetti statute explicitly permits a defense of "advice of counsel."[15] See 42 Pa.C.S. § 8352(2). RESDL does not. See 68 Pa.C.S. §§ 7301-7315. Seller has not cited or otherwise argued that the mandatory language of 68 Pa.C.S. § 7303 regarding the provision of a seller's disclosure can be negated by "advice of counsel." See 68 Pa.C.S. § 7303. Accordingly, Seller has not established entitlement to relief.

         Buyer's ...


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