Marion v. Bryn Mawr Trust Co.

Citation253 A.3d 682
Decision Date16 February 2021
Docket NumberNo. 2470 EDA 2018,2470 EDA 2018
CourtSuperior Court of Pennsylvania
Parties David H. MARION, Receiver for Bentley Financial Services, Inc. and Entrust Group, Appellant v. BRYN MAWR TRUST COMPANY, Appellee

Thomas Ben Fiddler, Philadelphia, for appellant.

Edward Michael Koch, Philadelphia, for appellant.

Justin Edward Proper, Philadelphia, for appellant.

Thomas R. Hurd, Philadelphia, for appellee.

Stephen Paul Chawaga, Philadelphia, for appellee.

MelissaAnn Ruth, Philadelphia, for appellee.

BEFORE: PANELLA, P.J., STABILE, J., and COLINS, J.*

OPINION BY STABILE, J.:

Appellant, David H. Marion, receiver for Bentley Financial Services, Inc. and Entrust Group, appeals from the July 26, 2018 judgment entered in favor of Appellee, Bryn Mawr Trust Company ("BMT"). We vacate and remand for a new trial.

On October 23, 2001, the Securities and Exchange Commission commenced an action against Robert Bentley for an alleged Ponzi scheme. The Federal District Court for the Eastern District of Pennsylvania ("District Court") appointed Appellant receiver on November 1, 2001. The District Court also froze the assets of Bentley and two entities he controlled, Bentley Financial Services ("BFS") and Entrust Group ("Entrust"). The scheme arose in 1996 shortly after Main Line Bank ("Main Line") discovered that Bentley forged his accountant's signature on a document. Main Line promptly demanded repayment of a fully drawn $2 million line of credit within thirty days. To satisfy Main Line, Bentley sold $2 million dollars of fictitious certificates of deposit ("CDs").

Thereafter, Bentley continued to sell fictitious CDs to new investors in order to pay off previous investors. He also hired a new accountant, Sanford Goldfein. In October of 1997, Goldfein referred Bentley to BMT for his banking needs. Goldfein had referred business to William Fink, BMT's vice president for commercial lending, on several prior occasions. Initially, Bentley sought a $2 million line of credit, checking accounts, and wire transfer accounts. BMT conditionally approved the line of credit pending, among other things, a favorable credit reference from Main Line. Proof of collateral apparently was not one of the conditions. Regardless, Bentley withdrew his application for the line of credit before BMT contacted Main Line. He opened various deposit and wire transfer accounts with BMT and quickly became one of BMT's largest customers.

According to Appellant's amended complaint, Bentley and his companies went on to sell more than $4 billion in private, unregistered notes, falsely leading investors to believe they were buying FDIC-insured CDs. Amended Complaint, 8/1/12, at ¶¶ 2, 13. Bentley eventually pled guilty to mail fraud and was sentenced to serve 55 months in federal prison and pay $38 million in restitution. The instant action concerns Bentley's use of his BMT accounts to deposit and transfer investor funds in furtherance of his fraudulent scheme.

Appellant, as receiver, claims BMT knew of or, at the very least, deliberately ignored obvious evidence of Bentley's unlawful activity. Appellant claims BMT turned a blind eye in order to accommodate a very profitable customer. BMT denies any awareness of Bentley's scheme and claims Bentley's victims could have been compensated in full but for Appellant's errant actions as receiver. In particular, BMT claims Appellant's expensive litigation strategy and his decision to redeem some CDs prior to their maturity more than offset the damages Appellant sought to recover in this case. Appellant counters that the trial court erred in admitting evidence of Appellant's counsel fee expenditures and in permitting the jury to consider the merit of Appellant's early redemption of CDs. Appellant notes the SEC and many of the victims urged early redemption of CDs and all of his decisions and fee expenditures as receiver, were approved by the District Court.

Appellant filed a complaint against BMT on May 21, 2004, alleging breach of common law fiduciary duty, breach of the Uniform Fiduciaries Act ("UFA"), 7 P.S. § 6351, et. seq. , aiding and abetting fraud, and negligence. With leave of court, Appellant filed an amended complaint more than eight years later, on August 1, 2012. The amended complaint alleged the same causes of action. On January 24, 2014, the trial court granted BMT's summary judgment motion on aiding and abetting fraud, but denied the motion as to Appellant's remaining claims. The trial court concluded Pennsylvania does not recognize an action for aiding and abetting fraud.

The parties chose a jury on March 9, 2018. At the close of his evidence, Appellant withdrew his claim for breach of common law fiduciary duty. On March 16, 2018, the jury returned a defense verdict on Appellant's UFA and negligence claims. Appellant filed post-trial motions seeking a new trial that was denied by the trial court on July 26, 2018. Judgment was entered on the verdict that same day. This timely appeal followed. Appellant filed a timely 1925(b) statement on August 27, 2018, to which the trial court issued an opinion on July 2, 2019. Appellant raises the following issues for our review.

(1) Did the trial court err in holding that Pennsylvania law does not recognize a claim for "aiding and abetting fraud," when this Court has expressly recognized such a tort claim consistent with the Restatement (Second) of Torts as synonymous with the established claim for "concerted tortious conduct"?
(2) Is the Receiver entitled to a new trial because the trial court improperly and repeatedly allowed the Defendant to introduce prejudicial evidence of:
(a) the Receiver's estimated attorneys’ fees and expenses over the entire life of the receivership, including this litigation and many other matters, when the Receiver's attorneys’ fees and expenses (1) were completely irrelevant to any issue in this case; (2) had been approved by the federal court having jurisdiction over and supervising the Receivership; and (3) in attempting to cure his prior errors, the trial court gave a confusing and misleading jury instruction on the subject?
(b) the Receiver's decision to liquidate Certificates of Deposit ("CDs") prior to their maturity, when that decision was also (1) irrelevant to the issues in this case; (2) was directed and approved by the supervising federal court; and (3) in attempting to cure his prior errors, the trial court gave a confusing and misleading jury instruction on the subject ?

Appellant's Brief at 4-5.

A. Aiding and Abetting Fraud.

Appellant's first argument—that the trial court erred in granting summary judgment on his aiding and abetting fraud cause of action—presents a question of law. Our standard of review is de novo and our scope of review is plenary. Eclipse Liquidity, Inc. v. Geden Holdings, Ltd. , 200 A.3d 507, 509-10 (Pa. Super. 2018). Summary judgment is appropriate where there is no genuine issue of material fact as to a necessary element of a cause of action that can be established by discovery or expert report. Pa.R.C.P. No. 1035.2(1). "In reviewing an order granting a motion for summary judgment, an appellate court must examine the entire record in the light most favorable to the non-moving party and resolve all doubts against the moving party." Donegal Mut. Ins. Co. v. Fackler , 835 A.2d 712, 715 (Pa. Super. 2003). Instantly, the trial court granted summary judgment on Appellant's aiding and abetting fraud claim because it believed no such cause of action exists in Pennsylvania.

We begin with a review of Appellant's allegations. In the amended complaint, Appellant alleged that BMT failed to follow its own industry-standard Know Your Customer ("KYC") policy, and that the account activities of Entrust were not consistent with that of a custodian of CDs, which Bentley claimed Entrust was. Amended Complaint, 8/1/12, at ¶¶ 19-32. Likewise, Appellant alleged that BFS, a purported broker of securities and CDs, would have required a line of credit for BFS to operate its business. Id. at ¶¶ 35-36. Bentley chose not to pursue a line of credit from BMT, and BMT never inquired whether or from where BFS maintained a line of credit anywhere else. Id. Appellant alleged that Bentley was, in effect, using the Entrust account as a revolving line of credit for BFS, and that this should have been obvious to BMT. Id. at ¶ 37. Appellant alleged that BMT prioritized collecting fees from Bentley and hoped Bentley would bring BMT more business. Id. Appellant also alleged that BMT should have asked Main Line about Bentley. Id. at ¶¶ 38-40.

In opposing BMT's motion for summary judgment, Appellant argued that BMT's conduct was actionable under § 876 of the Restatement (Second) of Torts:

For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he
(a) does a tortious act in concert with the other or pursuant to a common design with him, or
(b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or
(c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.

Restatement (Second) of Torts § 876 (1979).1

First, we consider whether Pennsylvania recognizes a cause of action for aiding and abetting fraud. In Skipworth v. Lead Indus. Ass'n, Inc. , 547 Pa. 224, 690 A.2d 169 (1997), the plaintiff alleged a personal injury action against manufacturers of lead-based paint. The Supreme Court rejected the plaintiff's market share theory of liability, whereby the known manufacturers of lead-based paint would have been liable to the plaintiff in proportion to their market share even though the plaintiff could not identify which defendant manufactured the paint that caused the injury. The Skipworth Court held that a claim under § 876 cannot succeed where the plaintiff cannot...

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    ...of action theory of liability under section 876(a) to be " ‘eminently reasonable’ and expressly adopted them." Marion v. Bryn Mawr Tr. Co. , 253 A.3d 682, 689 (Pa. Super. 2021), quoting Skipworth , 690 A.2d at 175. The panel noted that subsequently, in Sovereign Bank v. Valentino , 914 A.2d......
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