AJ Cunningham Packing v. Congress Financial

• Decision Date: 28 May 1985
• Docket Number: 84-2063.,Civ. A. No. 84-2061
• Citation: 611 F. Supp. 532
• Parties: A.J. CUNNINGHAM PACKING CORPORATION; Chicago Dressed Beef Co., Inc.; Continental Food Products, Inc.; and Florence Beef Company, Plaintiffs, v. CONGRESS FINANCIAL CORPORATION and Philadelphia National Bank, Defendants. PIERCE TRADING COMPANY, Plaintiff, v. CONGRESS FINANCIAL CORPORATION and Philadelphia National Bank, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

611 F. Supp. 532

A.J. CUNNINGHAM PACKING CORPORATION; Chicago Dressed Beef Co., Inc.; Continental Food Products, Inc.; and Florence Beef Company, Plaintiffs, v. CONGRESS FINANCIAL CORPORATION and Philadelphia National Bank, Defendants.

PIERCE TRADING COMPANY, Plaintiff, v. CONGRESS FINANCIAL CORPORATION and Philadelphia National Bank, Defendants.

Civ. A. Nos. 84-2061, 84-2063.

United States District Court, W.D. Pennsylvania, Civil Division.

May 28, 1985.

Michael Malakoff, Michael Fishbein, John P. Curran, Philadelphia, Pa., for plaintiffs.

Eric A. Shaffer, Pittsburgh, Pa., Morton L. Gitter, New York City, for defendant Congress Financial.

Richard DiSalle, Henry J. Kupperman, Philadelphia, Pa., for defendant Philadelphia Nat. Bank.

OPINION

SIMMONS, District Judge.

I.

Plaintiffs brought these above-captioned actions against the Defendants Congress Financial Corporation and Philadelphia National Bank on August 29, 1984, alleging violations of RICO Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. common law deceit, and misrepresentation. Plaintiffs claim that between September, 1979, and January, 1981, Defendants made false representations to Plaintiffs concerning the financial strength and capitalization of American International Meat Importers, Inc. (AIMI), and a related company, American International Meat Co. (AIMC), which misrepresentations the Plaintiffs allege that they relied upon in selling meat to AIMI on a credit basis.

Defendants have moved for summary judgment, contending that the above-captioned cases are time-barred by the two year limitations period in Pennsylvania applicable to common law fraud. It is the Defendants' contention that by January 27, 1981, the date bankruptcy petitions were filed by AIMI, the Plaintiffs knew, or should have known, of the alleged misrepresentations regarding the financial condition of AIMI, and that the Plaintiffs thereafter had until January 27, 1983 to file a timely complaint.

Oral argument has been held on all of the motions for summary judgment, briefs have been submitted in support of the respective positions, and the matter is now ready for decision by this Court. The Defendants contend that at the relevant time, the period of limitations for common law fraud in Pennsylvania was two years; Plaintiffs, however, claim that the appropriate limitations period at the relevant time was six years. Plaintiffs concede that they were on notice of the facts giving rise to their claim for relief more than two, but less than six years before the above-captioned cases were commenced.

II.

It is uncontested that there is no specified period of limitations for cases brought under RICO, and it is likewise uncontested that in cases brought under RICO, the common law fraud action is the most analogous state cause of action appropriate to effectuate the remedial purposes of RICO. See Board of Regents v. Tomanio, 446 U.S. 478, 483-84, 100 S.Ct. 1790, 64 L.Ed.2d 440 (1980); Polite v. Diehl, 507 F.2d 119, 122 (3d Cir.1974) (en banc). Plaintiffs acknowledge that there is no dispute as to any fact material to the resolution of Defendants' motions, and the only matter to be resolved by this Court is the question of law of whether at the relevant time, the two year or six year limitations period applied to actions for common law fraud in Pennsylvania.

The Pennsylvania Supreme Court has never addressed this question of the applicable limitations period for common law fraud in Pennsylvania subsequent to the enactment of the 1976 Judicial Code, so this Court must predict how the Pennsylvania Supreme Court would decide the matter, and in so predicting, this Court must accord the decisional law of lower state courts "proper regard" but not conclusive effect. Safeco Insurance Company of America v. Wetherill, 622 F.3d 685, 688 (3d Cir.1980); McKenna v. Ortho Pharmaceutical Corporation, 622 F.2d 657, 661 (3d Cir.1980).

Relevant to the consideration of the above-captioned cases are certain statutory provisions: 12 P.S. § 31, 42 Pa.C.S.A. § 5524(3), 42 Pa.C.S.A. § 5524(3) as amended, and 42 Pa.C.S.A. § 5527.

A two year limitations period is provided in 42 Pa.C.S.A. § 5524 (Purdon 1981), as follows:

The following actions and proceedings must be commenced within two years:

. . . . .

(3) An action for taking, detaining or injuring personal property, including actions for specific recovery thereof.

A six year limitations period is set forth in 42 Pa.C.S.A. § 5527 (Purdon 1981), which contains a residual provision:

The following actions and proceedings must be commenced within six years:

. . . . .

(6) Any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by section 5531 (relating to no limitation).

These two sections, sections 5524 and 5527, were created by the Judicial Code, Act of July 9, 1976, Act No. 142, 1976 Pa.Laws 586, and became effective on June 27, 1978. However, any proceeding where the statute of limitations was reduced could be commenced within one year after the effective date of the enactment, or the period heretofore limited by statute, whichever was less. Section 25(a) and 25(b) of Act 1976, July 9, P.L. 586, No. 142. The Official Source Notes indicate that section 5524(3) was derived from 12 P.S. § 31.

Prior to the 1976 enactment of the Pennsylvania Judicial Code, the limitations period for common law fraud was six years, as set forth in 12 P.S. § 31:

§ 31. Personal actions, when to be brought.

All actions of trespass quare clausum fregit, all actions of detinue, trover and replevin, for taking away goods and cattle, all actions upon account and upon the case . . ., all actions of debt grounded upon any lending, or contract without specialty, all actions of debt, for arrearages of rent, ... and all actions of trespass, of assault, menace, battery, wounding and imprisonment ... shall be commenced and sued within the time and limitation hereafter expressed, and not after; that is to say, the said actions upon the case, other than for slander, and the said actions for account, and the said actions for trespass, debt, detinue and replevin, for goods or cattle, and the said actions of trespass quare clausum fregit ... within six years next after the cause of such actions or suit, and not after. And the said actions of trespass, of assault, menace, battery, wounding, imprisonment, or any of them, within ... two years next after the cause of such actions or suit, and not after; ....

12 P.S. § 31 (1953).

The Pennsylvania statute, 42 Pa.C.S.A. § 5524(3), which mandates a two year limitations period for actions involving "taking, detaining or injuring personal property" does not specifically mention an action for fraud, and so, if it is not included under the provisions of section 5524, an action for common law fraud would be subject to the residual limitations period expressed in 42 Pa.C.S.A. § 5527(6), which specifies that a six year limitations period is applicable.

To further complicate matters, in 1982 the Pennsylvania legislature amended 42 Pa.C.S.A. § 5524 to include the following among the actions and proceedings which must be commenced within the two year limitations period:

(7) Any other action or proceeding to recover damages for injury to person or property which is founded on negligent, intentional, or otherwise tortious conduct or any other action or proceeding sounding in trespass, including deceit or fraud,....

42 Pa.C.S.A. § 5524(7) (Supp.1984-85). As amended, 1982, December 20, P.L. 1049, No. 326, Art. II, § 201, effective in 60 days.

Section 403 of the Act of December 20, 1982, provided in part that the amendment "shall apply only to causes of action which accrue after the effective date of this act." As of February 18, 1983, then, the limitations period for fraud and deceit in Pennsylvania was clearly two years.

The Pennsylvania Supreme Court has never addressed the issue of whether a two year or a six year limitations period applies during the time period between the effective date of the enactment of section 5524 (June 27, 1978) and the effective date of the 1982 amendment to section 5524 (February 18, 1983). The Superior Court of Pennsylvania in Bickell v. Stein, 291 Pa.Super.Ct. 145, 435 A.2d 610 (1981), assumed the applicability of the two year limitations period without otherwise discussing the matter. Some federal courts have held that a two year limitations period is applicable, while others have held that the limitations period is six years. See, e.g., Sharp v. Coopers & Lybrand, 649 F.2d 175 (3d Cir.1981); Culbreth v. Simone, 511 F.Supp. 906 (E.D.Pa. 1981) (Giles, J.); D'Iorio v. Adonizio, 554 F.Supp. 222 (M.D.Pa.1982) (Caldwell, J.); Eisenberg v. Gagnon, 564 F.Supp. 1347 (E.D.Pa.1983); Bernicker v. Pratt, 595 F.Supp. 1034 (E.D.Pa.1984) (Lord, J.), for cases applying the six year limitations period. See, e.g., Fickinger v. C.I. Planning Corporation, 556 F.Supp. 434 (E.D.Pa. 1982) (Shapiro, J.); Malley-Duff Associates, Inc. v. Crown Life Insurance Co., Civil Action Number 81-439, Memorandum Opinion (W.D.Pa. March 23, 1984) (Bloch, J.), for cases applying a two year limitations period.

III.

In Biggans v. Bache Halsey Stuart Shields, 638 F.2d 605 (3d Cir.1980), an action was brought by a customer claiming damages from a brokerage house for excessive trading of a customer's account. The United States Court of Appeals for the Third Circuit recognized the problem created by the Pennsylvania Judicial Code with respect to the limitations period for fraud, but declined to resolve it:

Under the new scheme, it is unclear whether the two-year period applicable to actions for "taking, detaining or injuring personal property . . ." id. § 5524(3) or the six-year catch-all provision, id § 5527(6), applies to an action based on common law fraud.... We need not decide that issue because it would not make a

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