Gulla, R. v. Howard Hanna Company

Citation: Not availableDocket: 814 WDA 2017

Court: Superior Court of Pennsylvania; September 19, 2018; Pennsylvania; State Appellate Court

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Ronald J. and Laurel M. Gulla appeal a May 8, 2017 order from the Court of Common Pleas of Washington County, which granted summary judgment in favor of Howard Hanna Company and related parties on the Gulla’s claim under the Unfair Trade Practices and Consumer Protection Law (UTPCPL). The Superior Court of Pennsylvania has vacated this order and remanded the case for further proceedings, viewing the evidence in favor of the Gullas as the non-moving party.

The Gullas owned a 141-acre farm in Hickory, Pennsylvania, and leased their oil and gas rights to Great Lakes Energy, now Range Resources, in 2002. The Gullas later alleged that Range's drilling operations contaminated their property. In 2007, Range sought to purchase the Gulla Farm for its field operations office, with licensed real estate agent William Matthews of Howard Hanna facilitating the transaction. Although there were negotiations regarding a potential sale and a 1031 tax-free exchange involving another property, the Gullas refused to sell without a suitable replacement property with unencumbered mineral rights. During a meeting on May 31, 2007, Mr. Gulla expressed his conditions for the sale, and he and his wife entered into an Exclusive Buyer Agency Contract (EBAC) with Matthews and Howard Hanna to represent them in potential property purchases, including agreeing to dual agency representation.

Paragraph 6 of the EBAC, titled "OTHER," includes specific disclosures and provisions relevant to the parties' agreement. Howard Hanna informed that Range sought assistance for a 1031 exchange related to the potential purchase of 29 Gulla Lane, Hickory, PA. Range agreed to pay Howard Hanna a minimal fee contingent upon the successful execution of the 1031 exchange and purchase of the Gulla property. Howard Hanna clarified that it was not conducting the 1031 transaction but was facilitating Ron Gulla's access to professional counsel for this purpose. The Gullas acknowledged the importance of correctly completing the 1031 transaction to secure tax benefits, affirming that Mr. Gulla was responsible for ensuring compliance. 

Howard Hanna was to represent Ron Gulla in the purchase while also searching for alternative properties for Range if negotiations with the Gullas did not succeed. It was noted that, up to that point, Howard Hanna had not engaged in negotiations with Mr. Gulla, although its licensee, Mr. Matthews, had provided information and a sales agreement to Range. The Gullas authorized Howard Hanna to negotiate on their behalf, agreeing to dual agency representation, with fees to be paid by Range. 

The EBAC included "Notices to Buyers," indicating that Mr. Matthews could present properties to other buyers and defined conflict of interest for brokers. The Gullas confirmed receipt of the Pennsylvania State Real Estate Commission Consumer Notice, detailing the roles of buyer agents and dual agents. The EBAC was designated as the comprehensive agreement between the broker and buyer, with no mention of specific properties like the Smith Farm. 

Subsequent communications indicated that, even after the EBAC was executed, Mr. Matthews was still considering the Smith Farm as a potential purchase for Range, suggesting a bid of $1.5 to $1.6 million. By late June 2007, Range had not committed to acquiring the Gulla Farm, and Mr. Matthews continued to seek alternative properties for Range's operational needs.

On July 26, 2007, Mr. Matthews encouraged the Gullas to orally offer $900,000 for the Smith Farm, although the Gullas were willing to bid up to the $1.3 million asking price. Later that day, they prepared a written offer to sell their own farm to Range, which was not contingent on acquiring the Smith Farm or completing a 1031 exchange. Mr. Matthews informed the Gullas that their verbal offer for the Smith Farm was rejected. On July 28, he provided them with listings for farms, including the Smith Farm. Two days later, he communicated that Range accepted their offer for the Gulla Farm at $1.52 million.

The Gullas expressed interest in the Smith Farm, and on September 19, 2007, they submitted a $1.1 million offer, including all mineral rights. After this offer, Mr. Matthews revealed that a portion of the Smith Farm was under an oil and gas lease and that he had not conducted the requested title search. The Smiths rejected the Gullas' offer, leading them to abandon interest in the property. Following this, the Gullas decided not to finalize the sale of the Gulla Farm, prompting Range to sue for specific performance, which resulted in a summary judgment in Range’s favor.

The Gullas then filed a claim under the UTPCPL against Mr. Matthews and Howard Hanna for deceit and misrepresentation concerning the Smith Farm. They alleged that Mr. Matthews falsely claimed he conducted a title search and concealed the oil and gas lease, which influenced their decision to sell to Range. Howard Hanna moved for summary judgment, asserting that any prior misrepresentations merged into the sales agreement and that there was no evidence indicating Mr. Matthews knew about the lease before the Gulla Farm sale. The court agreed, stating the Gullas failed to demonstrate justifiable reliance on Mr. Matthews’ claims regarding the title search.

Allegations against Mr. Matthews were characterized as negligence for not making the Gulla Farm sale contingent on acquiring the Smith Farm or other suitable property, which the court deemed time-barred. Howard Hanna argued that collateral estoppel prevented the Gullas from claiming reliance on representations about the Smith Farm being unencumbered and that there was no causal link between alleged misrepresentations and the failed 1031 exchange. The court ruled that any discussions or representations post-execution of the EBAC were unenforceable unless in writing. The Gullas appealed the summary judgment, raising three key issues: (1) whether the trial court erred by not broadly interpreting the Unfair Trade Practices and Consumer Protection Law (UTPCPL) despite evidence suggesting misleading statements from Matthews and Howard Hanna; (2) whether the trial court misapplied the parol evidence rule regarding the Gullas’ statutory cause of action based on fiduciary duty violations; and (3) whether the court incorrectly applied the parol evidence rule to exclude evidence of oral statements and conduct following a collateral agreement. The appeal focuses on the appropriateness of the summary judgment granted to Howard Hanna and Mr. Matthews, which was based on the parol evidence rule and the integration clause in the EBAC. Summary judgment is valid when no genuine material fact exists, and the reviewing court approaches the record favorably towards the non-moving party. The appeal does not seek to void the Gulla Farm sale but aims to recover damages under the UTPCPL due to misrepresentations regarding oil and gas leases on the Smith Farm, with the claim stemming from Howard Hanna's conduct as the Gullas' real estate agent.

The Unfair Trade Practices and Consumer Protection Law (UTPCPL) prohibits unfair competition and deceptive practices in trade or commerce, detailing twenty specific prohibited acts and including a catch-all for fraudulent conduct that creates confusion. Enacted in 1968 and amended in 1976, it allows individuals who purchase goods or services for personal use and suffer a measurable loss to pursue a private cause of action. The statute is intended to be broadly interpreted to protect consumers from unfair practices. 

In this case, the trial court determined that the Gullas had standing to sue under the UTPCPL due to their claim of fraudulent conduct by Mr. Matthews and Howard Hanna regarding real estate brokerage services. To succeed in such a claim, plaintiffs must demonstrate justifiable reliance on the misrepresentations and resultant harm. Justifiable reliance is not merely a causal link but requires showing that the plaintiff acted based on the misrepresentation. However, if a fiduciary relationship exists, as claimed by the Gullas, the need to prove reliance is diminished. The Gullas asserted a fiduciary relationship with Howard Hanna and Mr. Matthews, alleging reliance on false statements about the status of a title search, which led to a detrimental decision to sell their farm.

The defendants contended that the Gullas' evidence of misrepresentation was inadmissible under the parol evidence rule, which disallows prior oral statements that contradict a written contract intended to encompass the entire agreement. Exceptions to this rule exist for proven instances of fraud, accident, or mistake. The parol evidence rule aims to maintain the integrity of written agreements by preventing alterations through prior oral representations.

The parol evidence rule maintains the integrity of written agreements by preventing parties from altering their contract's meaning through contemporaneous oral statements. When parties have deliberately documented their agreement without fraud or mistake, the writing serves as the sole evidence of their contract, as established in *Gianni v. Russell Co.*. However, this rule allows for the admission of prior dealings to clarify ambiguous contract terms, as noted in *Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co.*. The rule restricts evidence of previous oral or written negotiations concerning the same subject matter once a written contract is deemed the complete agreement, following the principles from *Yocca*. In this case, the presence of an integration clause in the EBAC emphasized the applicability of the parol evidence rule, rendering prior inconsistent statements inadmissible to modify the contract's terms. The trial court determined that the EBAC did not mention the Smith Farm or make its sale contingent upon finding a replacement property, thereby applying the parol evidence rule to exclude evidence of prior negotiations. The court rejected the argument that the Smith Farm's omission from the EBAC rendered the rule inapplicable, asserting that the EBAC's reference to replacement properties sufficed for the rule's application. Additionally, any oral representations made post-execution of the EBAC required written modification to be admissible, as per *A.D.P. Inc. v. Morrow Motors, Inc.*. The court found no evidence suggesting an intent to waive the writing requirement by Howard Hanna, leading to the conclusion that no genuine issue of fact existed regarding the admissibility of such representations.

The Gullas assert a valid claim under the Unfair Trade Practices and Consumer Protection Law (UTPCPL), alleging that Mr. Matthews misrepresented himself as their agent and assured them that the Smith Farm was free of oil and gas leases. They argue that the trial court erred by disregarding Mr. Gulla's affidavit, which supported their claims, and by improperly applying the parol evidence rule to exclude evidence of Mr. Matthews' alleged deceptive conduct. They reference the Youndt case, which allows parol evidence in fraud cases, to bolster their position. The Gullas contend that the written contract, the Exclusive Buyer Agency Contract (EBAC), is irrelevant to their statutory claim, as it does not address the misrepresentations and was not intended to alter its terms. They emphasize that discussions regarding the Smith Farm occurred after the EBAC was executed and should not be considered a modification of the earlier agreement. The EBAC defined the agency relationship and responsibilities but did not mention the Smith Farm or limit the search for replacement properties to it. The Gullas must present the substance of Mr. Matthews' misrepresentations regarding the Smith Farm to support their UTPCPL claim. The court found that the discussions about the Smith Farm did not contradict the EBAC and recognized that the EBAC is collateral to the UTPCPL claim. Furthermore, the parol evidence rule does not strictly apply to the UTPCPL, as established in prior case law, which indicates that reliance on representations conflicting with a written contract's terms is unjustifiable.

Plaintiffs, the Gullas, are allowed to pursue their claims regarding misrepresentations about the Smith Farm despite the existence of a written contract (EBAC) because the representations made by Mr. Matthews occurred after the EBAC's execution and do not violate the parol evidence rule. The trial court's exclusion of Matthews' assurances—regarding a title search and the absence of oil and gas encumbrances—as oral modifications was erroneous. These representations do not alter the EBAC's terms since the EBAC did not specifically address the Smith Farm or stipulate how Matthews would perform his services. The EBAC's mention of replacement properties does not prevent the introduction of evidence related to the Smith Farm. The Gullas' claims are based on justifiable reliance on Matthews' alleged misrepresentations, which they argue led to their detriment in selling the Gulla Farm. The integration clause in the sales agreement with Range only encompasses prior oral agreements directly related to that contract, allowing the Gullas' claims about Howard Hanna's misrepresentations to be admissible. Summary judgment is inappropriate as there is sufficient evidence of misrepresentation to create a genuine issue of material fact. Mr. Gulla's affidavit asserts that Matthews either misrepresented or failed to disclose essential information about the Smith Farm's mineral rights, while Matthews denies knowledge of any encumbrances.

Mr. Matthews' prior dealings with Mr. Hunneshagen regarding Range's potential acquisition of the Smith Farm suggest he may have learned about the oil and gas lease on that property. In previous litigation between the Gullas and Range, summary judgment favored Range due to the parol evidence rule and the integration clause in the sales agreement for the Gulla Farm, which barred the Gullas from presenting evidence of Range’s prior oral statements about the Smith Farm. Range sought specific performance of the Gulla Farm sales agreement, while the Gullas claimed misrepresentations by Range representatives had led them to enter the contract. However, summary judgment was granted to Range on the basis that any alleged misrepresentations were merged into the fully integrated sales agreement. Howard Hanna argued that the Gullas' alleged misrepresentations lacked a causal link to the failure of a 1031 tax-free exchange for which they sought damages, as neither the sale of the Gulla Farm nor the purchase of a replacement property depended on qualifying for those tax benefits. The Gullas claimed damages beyond the 1031 tax benefits, prompting the court to decline partial summary judgment without trial court reasoning or further party briefing on the matter. The order was vacated, and the case was remanded, with jurisdiction relinquished. Notably, evidence indicated the Gulla Farm did not qualify for section 1031 tax benefits, as the exchange of a principal residence is ineligible unless both properties are held for investment or business use. The Gullas' expert also pointed out their preference against acquiring a replacement property encumbered by a lease, such as the Smith Farm.