Crestar Mortg. Corp. v. Shapiro

• Decision Date: 12 September 1996
• Docket Number: Civil Action No. 95-680.
• Citation: Crestar Mortg. Corp. v. Shapiro, 937 F.Supp. 453 (E.D. Pa. 1996)
• Parties: CRESTAR MORTGAGE CORPORATION v. Gerald SHAPIRO, Esquire, David Kreisman, Esquire, and Shapiro & Kreisman, a Partnership.
• Court: U.S. District Court — Eastern District of Pennsylvania

937 F. Supp. 453

CRESTAR MORTGAGE CORPORATION v. Gerald SHAPIRO, Esquire, David Kreisman, Esquire, and Shapiro & Kreisman, a Partnership.

Civil Action No. 95-680.

United States District Court, E.D. Pennsylvania.

September 12, 1996.

Stephen Levin, Neil E. Jokelson & Associates, PC, Philadelphia, PA, for Plaintiff.

Denis James Lawler, Blank, Rome, Comisky and McCauley, Philadelphia, PA, for Gerald Shapiro, David Kreisman, Shapiro & Kreisman.

MEMORANDUM

LOUIS H. POLLAK, District Judge.

This diversity case is a legal malpractice action arising out of defendant attorneys' alleged mishandling of a foreclosure action on behalf of plaintiff against property owned by Richard Gottfried. Plaintiff Crestar Mortgage Corporation ("Crestar," a Virginia corporation) asserts that defendants Gerald Shapiro, Esq., David Kreisman, Esq., and Shapiro & Kreisman (collectively, "S & K," Pennsylvania lawyers in a Pennsylvania law firm) delayed filing the action for a period of several months and, after filing, delayed in filing or omitted to respond to various motions. These delays and omissions, Crestar asserts, resulted in additional delay as Gottfried obtained a stay of the foreclosure action. The stay was not lifted until Crestar fired S & K and hired new counsel, seven months later.

After proceeding in the foreclosure action with new counsel, Crestar brought suit against the partnership of Shapiro & Kreisman, Gerald Shapiro and David Kreisman individually, and two other attorneys at S & K later dismissed from this action. The complaint asserts causes of action for breach of contract, negligence, breach of fiduciary duty, and intentional misrepresentation. Crestar seeks damages based on the diminution in value of the property during the pendency of the foreclosure action; impairment of the opportunity to seek monies in satisfaction of Gottfried's mortgage from Gottfried or a third party (Peoples Mortgage Company); loss of use of funds invested in Gottfried's property; and incidental and consequential damages. The suit was originally filed in the Court of Common Pleas of Philadelphia County, from which it was removed to this court. I ordered dismissal of the intentional misrepresentation claim on September 7, 1995.

Defendants S & K have now moved for summary judgment on the basis of release.¹ Their Fourth Affirmative Defense asserts that a release signed by Crestar in earlier litigation involving the same property — which is located at 4 Stoneham Lane, in Paoli, Pennsylvania — bars Crestar's claims against them. The earlier litigation was a suit by Crestar against Peoples Mortgage Co., Inc. ("Peoples"), Jay M. Berger, Unity Abstract Co., Inc. ("Unity"), Audrey Scheier, Roy Chowdhury, Gottfried, National Financial Corporation ("National"), and Stewart Title Guaranty Company and Stewart of Pennsylvania, Inc. (collectively "Stewart"), and was instituted in this court as No. 91-7990. In that action, Crestar claimed damages based on its purchase of a Note and Mortgage executed by Gottfried in favor of Peoples. Crestar later settled this action and executed a General Mutual Release with Peoples, Berger, Unity, Scheier, and Chowdhury, as well as a separate Settlement Agreement and Release with Stewart. It is the General Mutual Release that is at issue in this motion.

The Peoples Action

Some details of the earlier action — No. 91-7990, which I shall refer to as the "Peoples action" — are necessary to understanding the scope of the release. Crestar's amended complaint alleged the following facts: Peoples, Unity, Berger (President), Scheier (an employee of both Peoples and Unity and an agent of Stewart), Chowdhury (apparently also an employee of Peoples), and Stewart participated in a conspiracy with Gottfried and National Financial Corporation, a company Gottfried owned and controlled. Gottfried forged his sister Karen Gottfried's signature in order to purchase the Paoli property, and later forged it again to transfer the property from his sister to himself. In each transaction, Scheier allegedly notarized Gottfried's signature and participated in drawing up a settlement sheet reflecting a false and inflated purchase price and a false down payment. In acquiring the property in his own name, Gottfried took out a loan from Peoples, which loan was immediately purchased by Crestar pursuant to a Bi-Weekly Purchase Agreement between the two mortgage companies. Peoples, Unity, and Stewart allegedly submitted credit and title documents, including verifications and an appraisal, to Crestar; these were false in various material respects. Crestar relied on these documents in purchasing the Gottfried note and mortgage. Gottfried defaulted after the first payment was due, after which Crestar obtained a new appraisal, which showed the property to be worth substantially less than had been asserted by Peoples.

Counts I and II of Crestar's amended complaint in 91-7990 asserted breach of contract claims against Peoples. Counts III and IV asserted claims against Berger and Chowdhury individually for participation in making the false statements upon which Crestar relied. Counts V and VI alleged negligence in underwriting and misrepresentation on the part of National and Peoples. Count VII asserted misrepresentation by Gottfried. Counts VIII and IX alleged failure by Stewart and Unity to inform Crestar of certain forgeries and misrepresentation in the settlement statements. Count X and XI asserted that Stewart and Unity had been negligent in providing title insurance and in conducting the closing. Count XII, against Scheier, alleged false notarization and participation in fraud. Counts XIII and XIV asserted claims on the basis of respondeat superior and breach of fiduciary duty against Stewart, Unity, and Peoples. Counts XV, XVI, and XVII alleged bad faith and breach of the title insurance policy on the part of Stewart Title. Finally, Count XVIII alleged conspiracy on the part of all defendants.

On May 25, 1995, Crestar signed a document titled "General Mutual Release (PA)," which was later signed by Peoples, Berger, Unity, Scheier, Chowdhury, and Reliance Insurance Company of Illinois (Reliance). The document states that the release is given in consideration of Reliance's payment to Crestar of the remaining available proceeds under Peoples's and Berger's insurance policy, represented to be at least $150,000; it also acknowledges payment by Stewart to Crestar of $125,000. Crestar entered into a separate Settlement Agreement and Release with Stewart, releasing Stewart from all past or future causes of action relating to Stewart's title insurance policy on the Paoli property.

The General Mutual Release provides in relevant part as follows:

The parties hereto, their parents, subsidiaries, affiliates, officers, directors, shareholders, agents, servants, employees, successors, and assigns ("Releasors") do hereby remise, release, and forever discharge each other, as well as each of their respective parents, subsidiaries, affiliates, officers, directors, shareholders, agents, servants, employees, successors, and assigns, and all other persons (collectively referred to hereafter as "Releasees") of and from all manner of actions, causes of action, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands arising directly or indirectly out of the claims made in Civil Action No. 91-7990 or which could have been asserted in the Civil Action, whether in law or in equity. which against the said Releasees the Releasors ever had, now have, or which the Releasors or any of them hereafter can, shall or may have, for or by reason of any cause, matter or thing whatsoever.

PROVIDED: Nothing in this General Mutual Release is a release of Richard Gottfried and National Financial Corporation.

PROVIDED: Nothing in this General Mutual Release is a release by Mark C. Clemm, Esquire, and Cutler, Clemm & Morris, P.C. of Peoples, Berger, and Unity, and nothing in this General Mutual Release is a release by Peoples, Berger, and Unity of Mark C. Clemm, Esquire, and Cutler, Clemm & Morris, P.C.

Exhibit A to Stipulation, at 2-3 strikeout signed by Sterling Edwards, Jr., Executive Vice President of Crestar. The question on this motion for summary judgment is whether the quoted language releases S & K from liability to Crestar for its alleged mishandling of the foreclosure of Gottfried's mortgage on the Paoli property.

Pennsylvania Law Governing Releases

The Pennsylvania Supreme Court has consistently upheld the application of releases to claims against persons or entities not party to the release.² Pennsylvania law holds that a release's effect must be determined from the ordinary meaning of its language. See, e.g., Wolbach v. Fay, 488 Pa. 239, 412 A.2d 487, 488 (1980). A release may be applicable to parties not specifically named in the release if its terms clearly extend to them. See, e.g., Hasselrode v. Gnagey, 404 Pa. 549, 172 A.2d 764, 765 (1961). Parties "may agree for reasons of their own that they will not sue each other or any one for the event in question. However improvident their agreement may be or subsequently prove for either party, their agreement, absent fraud, accident or mutual mistake, is the law of their case." Buttermore v. Aliquippa Hospital, 522 Pa. 325, 561 A.2d 733, 735 (1989). The reason given for this doctrine is that:

If such a release can be nullified or circumvented, then every written release and every written contract or agreement of any kind no matter how clear and pertinent and all-inclusive, can be set aside whenever one of the parties has a change of mind or whenever there subsequently occurs a change of circumstances which were unforeseen.... It would make a mockery of the English language and of the law to permit this release to be circumvented or held to be nugatory.

Id. (quoting Emery v. Mackiewicz, 429 Pa. 322, 240 A.2d 68, 70 (1968)).

Numerous arguments have been raised that this line of cases...