Smith v. IW Levin and Co., Inc.
| Decision Date | 10 June 2002 |
| Citation | 800 A.2d 374 |
| Parties | Harriet SMITH and Helen Harrison, v. I.W. LEVIN AND COMPANY, INC., Myrna Potts, Stanton Mortgage Corporation, Lee Cohen, Zenith Abstract Company, Harry Walker, Jerry Cohen, Steven Cohen, Harbison Walker Refactories, Harriet Smith, Helen Harrison, I.W. Levin and Company, Inc., Myrna Potts, Stanton Mortgage Corporation, Lee Cohen, Zenith Abstract Company, Harry Walker, Jerry Cohen, Steven Cohen, Harbison Walker Refactories, v. Commonwealth of Pennsylvania, State Real Estate Commission, Real Estate Recovery Fund. Appeal of State Real Estate Commission, Real Estate Recovery Fund. |
| Court | Pennsylvania Commonwealth Court |
Jackie Wiest Lutz, Harrisburg, for appellant.
Harris B. Savin, Philadelphia, for appellees.
BEFORE: LEADBETTER, Judge, and SIMPSON, Judge, and MIRARCHI, Jr., Senior Judge.
OPINION BY Senior Judge MIRARCHI.
The Commonwealth of Pennsylvania, State Real Estate Commission (Commission), Real Estate Recovery Fund (Fund) appeals from an order of the Court of Common Pleas of Philadelphia County that directed the Fund to pay Harriet Smith (Smith) and other similarly situated individuals (collectively, class members) $100,000 for the unpaid judgment entered in their class action in equity against Myrna Potts (Potts), a licensed real estate salesperson. The issue on appeal is whether the judgment entered against Potts based on the parties' stipulation constitutes a final judgment "upon grounds of fraud, misrepresentation or deceit" under Section 803 of the Real Estate Licensing and Registration Act (Act), Act of February 19, 1980, P.L. 15, as amended, 63 P.S. § 455.803, required for recovery from the Fund. We affirm.
The following relevant facts found by the trial court are undisputed. In 1994, Smith, on behalf of herself and other similarly situated individuals, filed an action in equity against, inter alia, I.W. Levin and Company, Inc. (Levin), a licensed real estate broker; Stanton Mortgage Company (Stanton); Lee Cohen (Cohen), the real estate broker of record and principal of Levin and Stanton; and Potts. In the second amended complaint, Smith alleged that the defendants fraudulently induced the class members to accept worthless second mortgage notes of buyers as partial payments of the sale price of their homes. The trial court subsequently certified the action as a class action. In 1998, Smith and Potts entered into "Stipulation of Settlement" (Stipulation), which provided:
The plaintiffs' counsel thereafter filed a motion seeking approval of the Stipulation by the trial court. After a hearing held on the motion, the trial court on July 27, 1998 granted the motion and entered judgment in favor of the plaintiffs and against Potts in the amount of $175,000, as stipulated by the parties.1
On July 19, 1999, Smith filed a petition with the trial court seeking an order directing the Fund to pay the class members the unpaid amount of the judgment entered against Levin, Cohen and Potts up to $300,000 pursuant to Section 803(a) of the Act, which provides in relevant part:
(a) When any aggrieved person obtains a final judgment in any court of competent jurisdiction against any person licensed under this act, upon grounds of fraud, misrepresentation or deceit with reference to any transaction for which a license or registration certificate is required under this act ..., the aggrieved person may, upon termination of all proceedings, including reviews and appeals, file an application in the court in which the judgment was entered for an order directing payment out of the Real Estate Recovery Fund of the amount unpaid upon the judgment. (Emphasis added.)
Section 803(b)(2) of the Act further provides that one seeking recovery from the Fund must show "[t]hat he has obtained a final judgment as set out in this section."2 In their answer to the petition, the Commission and Potts asserted that the class members may not recover under Section 803(a) of the Act because the judgment against Potts was based on the stipulation of the parties, not on any findings of fraud, misrepresentation or deceit.
In its decision on the petition, the trial court found, inter alia, that all the defendants, including Potts, conspired to fraudulently induce, and did induce, the class members to accept the second mortgage notes of the buyers in 137 real estate transactions without informing the class members that those notes were inadequately collateralized, worthless and unenforceable, and that as of February 6, 2001, $135,112.63 remained unpaid on the $175,000 judgment against Potts despite the plaintiffs' reasonable efforts to collect the judgment. The trial court, in two separate orders, directed the Fund to pay the class members $100,000 per Potts' license and $6527.23 per licenses of the other two defendants. The Commission then appealed to this Court, challenging only the trial court's order directing the Fund to pay $100,000 per Potts' license.
On appeal, the Commission does not dispute the trial court's findings that Potts engaged in acts of fraudulent misrepresentation, concealment and deceit in the real estate transactions in question and that $135,112.63 remained unsatisfied from the $175,000 judgment against Potts. The Commission contends, however, that the class members cannot recover the unpaid amount of the judgment against Potts from the Fund because the judgment was entered based on the stipulation of the parties in which Potts expressly denied her liability on the claims alleged in the complaint, not on a finding of fraud, misrepresentation or deceit as required by Section 803(1) of the Act. The Commission further contends that the trial court's finding made three years after the entry of the judgment cannot cure the lack of the required finding.3
The Legislature enacted the Act creating the Fund to protect buyers and sellers of real estate, a most expensive item to most people, from abuse by persons engaged in the real estate business. Kalins v. State Real Estate Commission, 92 Pa.Cmwlth. 569, 500 A.2d 200 (1985). To effectuate the legislative objective, the provisions of the Act must be liberally construed. Id; Section 1928(c) of the Statutory Construction Act of 1972, 1 Pa. C.S. § 1928(c).
It is well established that the parties are free to bind themselves in all matters. Chamberlin of Pittsburgh, Inc. v. Fort Pitt Chemical Co., 237 Pa.Super. 528, 352 A.2d 176 (1975). Settlement of matters in dispute, especially in class actions, is favored and must be sustained in the absence of fraud or a mistake. Dauphin Deposit Bank & Trust Co. v. Hess, 556 Pa. 190, 727 A.2d 1076 (1999); Sofronski v. Civil Service Commission, City of Philadelphia, 695 A.2d 921 (Pa.Cmwlth. 1997). Consequently, "whatever does not affect the jurisdiction, or the due order of business and convenience of the court is capable of arrangement between the parties or their counsel, and an agreement by them will become the law of the case." Foley Bros., Inc. v. Commonwealth, 400 Pa. 584, 589, 163 A.2d 80, 84 (1960).
In stipulating that judgment may be entered against her in the amount of $175,000 to settle the dispute, Potts also agreed that the Stipulation was not intended to affect the plaintiffs' claims "against any other person." In approving the Stipulation, the trial court reviewed not only the terms of the Stipulation but also the notice of the proposed settlement sent to the class members, which contained the following statement:
Plaintiff counsel does not know whether he will be able to locate assets sufficient to satisfy any significant part of that judgment. Potts contends that she has no assets except mortgages on four modest houses in Philadelphia.... If judgment is entered based on the proposed settlement, plaintiffs' counsel will try to locate other assets of Potts to satisfy that $175,000 judgment, .... [I]f... assets cannot be found to satisfy the judgments against .... Potts, plaintiffs' counsel expects to seek compensation on behalf of the plaintiff class from the Real Estate Recovery Fund, a fund established by law for the compensation, in certain circumstances,...
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