Customers Bank v. Municipality of Norristown, Civil Action No. 12–2471.

• Decision Date: 26 April 2013
• Docket Number: Civil Action No. 12–2471.
• Citation: 942 F.Supp.2d 534
• Parties: CUSTOMERS BANK, et al., Plaintiffs, v. MUNICIPALITY OF NORRISTOWN, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

942 F.Supp.2d 534

CUSTOMERS BANK, et al., Plaintiffs,

v.MUNICIPALITY OF NORRISTOWN, et al., Defendants.

Civil Action No. 12–2471.

United States District Court, E.D. Pennsylvania.

April 26, 2013.

Charles D. Mandracchia, Jeffrey W. Soderberg, Keith Michael McWhirk, Kelly S. Kline, Paul W. Tressler, Mandracchia & McWhirk, LLC, Skippack, PA, for Plaintiffs.

Robert P. Didomenicis, William F. Holsten, Holsten & Associates, Media, PA, Joseph J. Santarone, Jr., Marshall Dennehey Warner Coleman & Goggin, Paul K. Leary, Jr., Cozen & O'Connor, Philadelphia, PA, David J. MacMain, Matthew J. Connell, Lamb McErlane PC, West Chester, PA, Christine E. Munion, Law Offices of William J. Ferren & Associates, Anne R. Myers, Eileen E. Monaghan Ficaro, Gregory F. Brown, Kaufman, Dolowich, Voluck & Gonzo, LLP, Blue Bell, PA, Andrew J. Fuga, Andrew Fylypovych, Burns White LLC, Andrea Emilie Hammel, Cozen O'Connor, West Conshohocken, PA, Richard J. Davies, Michael Sloan McCarter, Powell Trachtman Logan Carrle Bowman & Lombardo, PC, King of Prussia, PA, for Defendants.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge.

Customers Bank, Ryan Shofield, Paula Diane Peyton, Ellen Frank, Theresa Derby, Kelly Doyle, Jason Raysor, Edwina Monaghan, and Kim Crayton (collectively “Plaintiffs”) filed the instant action against the following eighteen defendants on May 4, 2012: 1) the Municipality of Norristown (“Norristown”); 2) the Solicitor for Norristown, Sean Kilkenny; 3) Code Enforcement Department Supervisor and Acting Building Inspector, Charles Picard; 4) Director of Planning and Community Development and Director of the Building Department, Jayne Musonye; 5) Fire Battalion Chief Remillard; 6) Interim Borough Manager Russell Bono; 7) Borough Manager David Forrest; 8) Remington, Vernick, and Beach Engineers (“RVB”); 9) Employee of RVB, Christopher Fazio; 10) Employee of RVB, John Pasquale; 11) Building Inspector and Building Code Official, Lynn Bixler; 12) Design Professional of Record, Walter Wyckoff; 13) Yerkes Associates, Inc. (“Yerkes Associates”); 14) Employee of Yerkes Associates, Tom Kelley; 15) Employee of Yerkes Associates, Vincent J. DiMartini; 16) Victory Fire Protection, Inc. (“Victory Fire”); 17) All State Design Group, Inc. (“All State Design”); and 18) Jane Does/John Does Nos. 1–50 (all defendants, collectively, “Defendants”).

Plaintiffs filed a second amended complaint, the operative complaint in this action, on August 20, 2012. ECF No. 67. All defendants except Walter Wyckoff have moved to dismiss Plaintiffs' complaint. Defendant Wyckoff filed an answer on August 23, 2009. ECF No. 69. The following motions to dismiss are pending and ripe for disposition:

(1) Defendant Sean Kilkenny's Motion to Dismiss, ECF No. 68;

(2) Joint Motion to Dismiss, filed by Defendants Municipality of Norristown, Charles Picard, Jayne Musonye, Lynn Bixler, Battalion Chief Remillard, Russell Bono, and David Forrest, ECF No. 74;

(3) Joint Motion to Dismiss, filed by Defendants RVB, Christopher Fazio, and John Pasquale, ECF No. 75;

(4) Joint Motion to Dismiss, filed by Defendants Yerkes Associates, Tom Kelley, and Vincent J. DiMartini, ECF No. 85;

(5) Defendant Victory Fire Protection's Motion to Dismiss, ECF No. 104; and

(6) Defendant All State Design Group's Motion to Dismiss, ECF No. 83.

I. FACTUAL BACKGROUND¹

On June 9, 2006, Fazio Properties Rittenhouse Club, LLC (“Fazio Properties”) borrowed $2.5 million dollars from St. Edmonds Federal Savings Bank to construct a condominium building, located at 770 Sandy Street in Norristown, Montgomery County, Pennsylvania (“the Property”). Pls.' Consolidated Reply to Defs.' Mot. to Dismiss 5, ECF No. 89. From the outset, Plaintiff Customers Bank was an interested participant in the St. Edmond's loan, owning a portion of the loan pursuant to a participation agreement with St. Edmond's. Id.

On or about November 15, 2006, Fazio Properties filed a Declaration of Condominium, submitting the Property to the provisions of the Pennsylvania Uniform Condominium Act. Id. Fazio Properties then constructed the Property with 26 residential units. Id. at 6. As set forth below, in building the Property, Fazio failed to comply with numerous provisions of the Uniform Construction Code, which ultimately led to the state court criminal prosecution of several individuals. Notwithstanding violations of the Uniform Construction Code and other deficiencies in the Property, between April 2007 and January 2009, eight units within the Property were sold to the eight Plaintiffs in the instant action. Id. Customers Bank made loans to purchasers of four other units and retained first mortgages on those units, while St. Edmond's retained a first mortgage interest on fourteen units. Id. By operation of law, Beneficial Bancorp, Inc., was the original successor in interest to the St. Edmond's loans; however, Beneficial subsequently assigned its interests and rights against Fazio Properties Rittenhouse to Plaintiff Customers, effective May 4, 2012. Id.

Fazio Properties defaulted on the loan, and judgment was entered against it on February 24, 2010. Id. In May 2010, Defendant Norristown, exercising its police power, issued a notice of condemnation regarding the Property. Further, Defendant Norristown filed a complaint and a petition for a preliminary injunction in the Court of Common Pleas of Montgomery Country seeking condemnation of the Property. Id. Defendant Norristown sought to have the residents removed from their homes because the Property presented a threat to the health, safety, and welfare of the people as a result of structural deficiencies and code violations caused by Fazio. Id. In support of its petition for a preliminary injunction, Defendant Norristown submitted a report from Defendant RVB's engineers, dated April 12, 2010, and a report from Defendant Yerkes Associates, authored by Defendant Vincent DiMartini and dated May 4, 2010. Id.

The report submitted by Defendant RVB identified numerous structural deficiencies and safety issues in the Property. Id. at 6–7. The report submitted by Defendant Yerkes identified significant fire safety issues, ultimately concluding that the building lacked adequate fire protection and could not be inhabited. Id. at 7.

On May 18, 2010, Montgomery County Court of Common Pleas Senior Judge William Nicholas condemned the Property and directed all residents to leave the Property by May 21, 2010. Id. Homeowner–Plaintiffs were displaced for more than two years—from May 21, 2010 until the condemnation order was lifted on August 17, 2012. Id. at 7–8. Even after, however, many of the units remained uninhabitable because of construction debris and incomplete remediation. Id. at 8.

Plaintiffs allege that Defendant Norristown has filed approximately 19 separate municipal lien claims regarding parcels at the Property where Plaintiff Customers Bank holds the first mortgage lien. Second Am. Compl. ¶ 55. According to Plaintiffs, in the Montgomery County Litigation Defendant Norristown argued that its municipal lien claims have automatic first priority status as a matter of law over the mortgage lien of Plaintiff Customers Bank. ²Id.

At some time prior to June 22, 2010, Defendant Norristown commissioned Keystone Municipal Services to conduct an audit and issue a report regarding the Property (the “Keystone Report”), specifically addressing the issuance of permits and inspection procedures, as well as the issuance of Use and Occupancy Certificates. Id. ¶ 61. Plaintiffs allege that the Keystone Report identifies numerous violations of Pennsylvania's Uniform Construction Code (“UCC”) revealing that Fazio Properties permitted the building to be built with numerous defects, due to lack of appropriate inspection under the UCC. Id. ¶ ¶ 63–73. Specifically Plaintiffs allege that Defendant Norristown failed to utilize certified inspectors, to conduct mandatory inspections under the UCC, and to have authorized personnel signing permits. Id. ¶¶ 124–129.

Plaintiffs bring the following seven counts against eighteen different defendants:

(1) Count I: Violation of 42 U.S.C. § 1983, against Defendants Norristown, Kilkenny, Picard, Musonye, Battalion Chief Remillard, Bixler, Bono, Forrest, RVB, Fazio, Pasquale, Yerkes, DiMartini, Kelley, and All State Design;

(2) Count II: Fraud, against Defendants Norristown, Kilkenny, Picard, Musonye, Battalion Chief Remillard, Bixler, Bono, Forrest, RVB, Fazio, Pasquale, Yerkes Associates, Dimartini, Kelley, and All State Design;

(3) Count III: Negligence, against all Defendants;

(4) Count IV: Negligence, against Defendants Norristown, Bono, Forrest, Musonye, and Bixler (collectively “Norristown Construction Professionals”);

(5) Count V: Negligence, against Defendants Fazio, Pasquale, RVB, Kelley, DiMartini, Yerkes Associates, and All State Design (collectively “Norristown Hired Professionals”);

(6) Count VI: Negligence, against Defendants Wyckoff and Victory Fire (collectively “Builder Hired Professionals”); and

(7) Count VII: Trespass to Property and/or Taking, against all Defendants

All Defendants except Walter Wyckoff have moved to dismiss all of Plaintiffs' claims. These motions are now ripe for disposition.

II. LEGAL STANDARD

In considering a motion to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6), the court must “accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party.” DeBenedictis v. Merrill Lynch & Co., Inc., 492 F.3d 209, 215 (3d Cir.2007) (internal citations omitted). In order to withstand a motion to dismiss, a complaint's “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 & n. 3, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This “requires more than labels and conclusions, and a formulaic...