Tuesday, June 24, 2008

bankruptcy - ch. 13 - lien avoidance - adversary proceeding required

In re Mansaray-Ruffin - 3d Circuit - June 24, 2008


"This appeal requires us to determine whether the debtor in a Chapter 13 bankruptcy case successfully invalidated a lien on her property by providing for it as an unsecured claim in her confirmed plan, without initiating an adversary proceeding as required by the Federal Rules of Bankruptcy Procedure. We agree with the lienholder, as well as with the Bankruptcy Court and the District Court, that the answer to this question is no. Accordingly, we will AFFIRM."

This was a 2-1 decision. David Scholl represented the debtor.

contracts - fraud - parol evidence - integration clause

Shutter v. Herskowitz and Banks - ED Pa. - June 23, 2008


This commercial case involved the sale of a youth hostel. There was a dispute about alleged mispresentations concerning the number of beds permitted by city ordinances. The contract, which contained an integration clause, did not address this disputed issue.

Material misrepresentation
Where a sales contract contains an integration clause which expressly confirms that all agreed terms between the parties are set out in the contract and that any modifications or changes have to be contained in a writing signed by both parties, a plaintiff claiming fraudulent inducement is precluded from offering any extrinsic evidence as to any further representations. Youndt v. First Nat’l Bank, 868 A.2d 539, 548-9 (Pa. Super. 2005)

As the Youndt court stated [and as we are sick of hearing again and again]:

“Where the parties to an agreement adopt a writing as the final and complete expression of their agreement, alleged prior or contemporaneous oral representations or agreements concerning subjects that are specifically covered by the written contract are merged in or superseded by that contract.”....Where the parties,without any fraud or mistake, have deliberately put their engagements in writing, the law declares the writing to be not only the best, but the only, evidence of their agreement. All preliminary negotiations, conversations and verbal agreements are merged in and superseded by the subsequent written contract…and unless fraud, accident or mistake be averred, the writing constitutes the agreement between the parties, and its terms and agreements cannot be added to nor subtracted from by parol evidence.

Once a writing is determined to be the parties’ entire contract, the parol evidence rule applies and evidence of any previous oral or written negotiations or agreements involving the same subject matter as the contract is almost always inadmissible to explain or vary the terms of the contract. Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 436 (Pa. 2004).

Material non-disclosure
"Fraud in the inducement” exists as a narrow exception to the rule barring parol evidence when an integration clause exists. This exception may be invoked where the party proffering the extrinsic evidence contends that he executed the agreement because he was led to believe that the document contained terms that actually were omitted.

To prevail on a claim for non-disclosure of fact, a plaintiff must satisfy the following elements:
(1) One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.
(2) One party to a business transaction [emphasis added] is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated,
(a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and
(b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and
(c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so; and
(d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and
(e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.

"Basic to the transaction"
A fact “basic to the transaction” under element (e) is a fact that is assumed by the parties as a basis for the transaction itself. It is a fact that goes to the basis, or essence, of the transaction, and is an important part of the substance of what is bargained for or dealt with. Other facts may serve as important and persuasive inducements to enter into the transaction, but [do] not go to its essence. These facts may be material, but they are not basic. If the parties expressly or impliedly place the risk as to the existence of a fact on one party or if the law places it there by customor otherwise the other party has no duty of disclosure.

appeal - final order - POs

Pennsylvania Bankers Assn. v. Department of Banking -Pa. Supreme Court - June 16, 2008

majority http://www.courts.state.pa.us/OpPosting/Supreme/out/J-31A&B-2008mo.pdf
concurring http://www.courts.state.pa.us/OpPosting/Supreme/out/J-31A&B-2008co.pdf

An order granting some and denying other of defendant's preliminary objections in plaintiff's declaratory judgment action held to be interlocutory and not a final order subject to appeal.

- As a general rule, where a plaintiff files a multi-count complaint setting forth alternative theories of recovery, an order dismissing less than all of the claim is considered to be interlocutory, because the plaintiff may still pursue the merits of the case based on another theory.
- A final order under PaRAP 341(b)(1) is one that disposes of all claims and all parties
- The plaintiff filed a multi-count complaint which raised alternative constitutional theories of relief
- The lower court's granting of POs resulted in dismissal of some but not all of plaintiff's claims
- The lower court's order did not result in the the dismissal of any parties
- The lower court order did not end the litigation against any party but merely narrowed the scope of the plaintiff's case
- Under its remaining claims, plaintiff might still obtain the relief it is seeking