In re Partners Group Financial, LLC
| Decision Date | 15 September 2008 |
| Docket Number | No. 05-39390ELF.,05-39390ELF. |
| Citation | 394 B.R. 68 |
| Parties | In re PARTNERS GROUP FINANCIAL, LLC, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
John R. Crayton, for Debtor.
Shawn J. Lau, for Daniel and Rita Shoemaker.
In this chapter 7 bankruptcy case, Daniel and Rita Shoemaker (collectively, "the Claimants") filed a proof of claim asserting an unsecured claim for $179,290.50 ("the Claim"). Partners Group Financial, LLC ("the Debtor") has filed an objection ("the Objection") to the Claim.
The Claim arises from the Debtor's admitted failure to meet its contractual obligation to find a mortgage lender for the Claimants in connection with the Claimants' purchase of residential real estate. The Claimants assert that the Debtor is liable for breach of contract and for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1 et seq. ("the CPL").
The Debtor does not contest its liability on the breach of contract facet of the Claim. Nor does it contest a portion of the damages claimed for breach of contract. The Debtor does dispute: (1) the asserted consequential damages for lost profits and lost income arising from the contractual breach and (2) the Claimants' asserted entitlement to treble damages, attorneys' fees and costs under the CPL.
For the reasons set forth below, I will sustain the Objection in part and overrule it in part. I will not allow the requested damages for lost profits and lost income; I will allow only the uncontested actual damages. However, I will also allow the uncontested, actual damages to be trebled under the CPL. Finally, I will allow counsel fees and costs in the requested amount. The result is that the Claim will be allowed in the amount of $42,699.43.
The Claimants filed their Claim on September 22, 2006. The Claim is supported by the verified allegations of the Claimants' prepetition complaint ("the Complaint") filed against the Debtor and the Debtor's agent, Reita Detweiler ("Ms.Detweiler"), a copy of which is attached to the Claim as Exhibit "B."1
The allegations of the Complaint may be summarized as follows:
1. On July 23, 2002, the Claimants entered into a contract to purchase real estate at 2524 Old House Point Road, Fishing Creek, Maryland 21634 ("the Property"), for $450,000.00. That contract was contingent upon the Claimants obtaining a thirty (30) year mortgage for $400,000.00. See Complaint ¶ 6.
2. On or about July 23, 2002, the Claimants retained the Debtor and/or Ms. Detweiler to attempt to find a lender for the Claimants who would finance 90% of the purchase price of the Property. See Complaint ¶¶ 8, 30 ().
3. On July 26, 2002, the Debtor's agent, Ms. Detweiler, sent a fax to a realtor involved in the real estate acquisition telling the realtor that the Debtor had sought approval from lending institutions and expected to have a pre-approval in hand by the end of the day. See Complaint ¶ 9.
4. On July 30, 2002, Ms. Detweiler ordered an appraisal of the Property. See Complaint ¶ 11.
5. On August 2, 2002, the Debtor sent the Claimants a mortgage loan commitment for a loan in the amount of $405,000.00 with 8.0% interest. See Complaint ¶ 12.
6. On August 5, 2002, Ms. Detweiler requested that the Claimants provide her with copies of their W-2s for 2000 and 2001 so that she could assist them in obtaining the best possible interest rate on a mortgage. See Complaint ¶ 13.
7. On August 9, 2002, settlement on the Property was scheduled for August 19 at 3:00 p.m. See Complaint ¶ 14.
8. On August 15, 2002, Ms. Detweiler faxed good faith estimates of fees based on proposed mortgages with interest rates of 6.5%, 7.25% and 7.99% to the Claimants. See Complaint ¶ 15.
9. The Debtor and its agents or employees failed to attend the August 19, 2002 settlement despite their knowledge of its time and place. See Complaint ¶ 16.
10. The Debtor made no effort to obtain a mortgage for the Claimants after the August 19, 2002 settlement date and, in fact, ceased all communications with the Claimants. See Complaint ¶¶ 17-18. The Debtor failed to provide the Claimants with any willing mortgage lender, regardless of the interest rate or amount, either before or after the scheduled date for settlement. See Complaint ¶ 32.
11. The Claimants relied to their detriment on the Debtor's commitment to provide them with a willing mortgage lender and the Claimants' reliance on the Debtor's assertions was justifiable and reasonable. See Complaint ¶¶ 35-36.
12. Mr. Shoemaker had no choice but to find and secure a lender on his own, which he eventually did, but on less favorable terms than the ones promised by the Debtor. See Complaint ¶¶ 22, 23, 33, 37, 43, 53, 58.
13. The Debtor's unexpected breach of its obligation to obtain financing for the Claimants disrupted the effective operations of Mr. Shoemaker's business, Atlantic Circulation, Inc., his sole means of income. See Complaint ¶ 20.
14. On September 3, 2002, the Claimants finally closed on the transaction for the purchase of the Property and obtained possession of the Property. See Complaint ¶ 21.
The Complaint pleaded causes of action for, inter alia, breach of contract and violation of the CPL. With respect to the CPL claim, the Complaint alleged that the Debtor's actions, as 3 described above, were deceptive and/or created a likelihood of confusion and/or otherwise violated the CPL and that the Claimants relied, to their detriment, on the Debtor's commitment to provide them with a willing mortgage lender. See Complaint ¶¶ 35-36, 56.
The Complaint asserted that, as a result of the Debtor's failure to meet its mortgage commitment, the Claimants and their children were forced to stay in a hotel and rent a house until settlement could occur on September 3, 2002, that Mr. Shoemaker's business was disrupted by his having to scramble to obtain alternate financing and that the Claimants suffered damages as a consequence of the Debtor's wrongful actions. See Complaint ¶¶ 19-25.
In the Claim, the Claimants asserted the following damages:
Increased settlement and interest costs $ 7,595.00
Food, lodging and additional moving
and storage fees 3,612.50
Consequential damages in the form of
lost profits and lost income 48,556.00
___________
Subtotal $ 59,763.50
Treble damages under Pennsylvania's
Unfair Trade Practices Act x 3
___________
Claim Total $179,290.50
See Proof of Claim No. 5 (Exhibit B thereto, at ¶¶ 37, 43, 53, 58-59). By virtue of their incorporation of the Complaint, they also sought attorneys' fees and costs. See Proof of Claim No. 5 ().
The Debtor filed its Objection to the Claim on December 13, 2007. A hearing on the Objection was held and concluded on April 7, 2008.2
During the April 7th hearing, the Claimants reduced their demand for lost profits and income to $41,361.25. See, e.g., Claimants' Post-Trial Brief at 4. They also produced evidence of $9,076.93 in legal fees and costs (i.e., $8,206.00 in fees and $870.93 in costs) that they incurred in connection with the prepetition state court action. See Exhibit S-9 (legal fees/costs); Proof of Claim No. 5 (Exhibit B).
Daniel Shoemaker ("Mr.Shoemaker") was the only witness at the April 7th hearing. Each party introduced a number of exhibits into evidence.3
On May 7, 2008, the parties filed simultaneous post-trial memoranda in support of their respective positions. This matter is now ready for disposition.
Based on the evidence, I make the following findings of fact.
On July 23, 2002, the Claimants entered into an agreement of sale to purchase residential real estate in Maryland (previously defined as "the Property") for $450,000.00 with settlement to take place on or before August 23, 2002. See Exhibit D-1.4 Soon thereafter, Mr. Shoemaker contacted Ms. Detweiler, an employee of the Debtor, and entered into a contractual relationship with the Debtor pursuant to which the Debtor would find the Claimants a lender who would finance 100% of the purchase price of the Property.5
Mr. Shoemaker was in close communication with Ms. Detweiler during this initial time period. During this time, Ms. Detweiler assisted him in addressing blemishes on his credit report. Additionally, Mr. Shoemaker shared with Ms. Detweiler "how scary" he found the notion of uprooting his family from Mountville, Pennsylvania (where the family had resided for the past 12 years) to Fishing Creek, Maryland, as well as his concerns regarding the effect such a move might have on his ability effectively to run his business, which had an office in Mountville. Mr. Shoemaker was particularly concerned about being able to run his business in a "state of flux."
Mr. Shoemaker was and is the owner and operator of Atlantic Circulation, Inc. ("Atlantic" or "the business"), a company that processes magazine subscription orders obtained through door-to-door solicitation. In 2002, Mr. Shoemaker managed a group of no more than 10 salespeople who sold magazine subscriptions in residential communities throughout the United States.6 He also supervised approximately 20 other companies, each with their own sales forces, with whom his business contracted.7 Atlantic maintained a business office in Mountville, Pennsylvania, however, Mr. Shoemaker conducted the majority his business from outside that office, via...
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