Fulton Bank, N.A. v. Sandquist, P.
2306 EDA 2016
| Pa. Super. Ct. | Sep 27, 2017Background
- HiFi House (borrower) maintained a long-term relationship with accountants Downey, Spevak & Associates; Spevak prepared HiFi’s financial statements for years.
- In 2012 HiFi sought refinancing from Fulton Bank; HiFi provided 2008–2011 financial statements prepared by the Accountants, and Fulton met with HiFi and received the 2011 statement in advance of a May 11, 2012 meeting.
- Fulton extended multiple loans (2012 and 2013) after reviewing those financials; later, Fulton learned HiFi used improper accounts‑receivable practices that materially overstated assets and then defaulted.
- Fulton sued HiFi principals in another forum and sued the Accountants in Chester County, alleging fraud, fraudulent misrepresentation, fraud in the inducement, negligent misrepresentation (Restatement §552), conspiracy, negligence per se, and concerted tortious conduct.
- The trial court sustained preliminary objections and dismissed Fulton’s amended complaint with prejudice as to the Accountants; Fulton appealed.
- The Superior Court affirmed dismissal of fraud and negligence‑per‑se claims but reversed as to negligent misrepresentation under §552 and remanded that count for further proceedings; res judicata argument based on a bankruptcy decision was rejected.
Issues
| Issue | Plaintiff's Argument (Fulton) | Defendant's Argument (Accountants) | Held |
|---|---|---|---|
| Negligent misrepresentation (§552) | Accountants supplied false financial info foreseeably used by the Bank; §552 applies beyond architects; Accountants knew statements would be given to Fulton and failed to exercise reasonable care. | §552 should be limited to architects/design professionals or where accountant was engaged for that specific purpose; no allegation Accountants had pecuniary interest or were engaged to prepare statements for the Bank. | Reversed trial court: §552 can apply beyond architects; complaint plausibly alleged Accountants supplied information to be relied on by the Bank and stated a §552 claim. |
| Fraud (common law) | Accountants intentionally misrepresented HiFi’s finances to induce lending; conduct was calculated to deceive the Bank. | Pleadings lack particularity as to misrepresentations by Spevak; documents were provided to the Bank by HiFi’s officer (Sandquist); allegations sound in negligence, not fraud. | Affirmed: fraud dismissed for failure to plead with requisite particularity and for reliance concerns—deficient specific allegations against Accountants. |
| Negligence per se | Violations of 18 U.S.C. §1343 (wire fraud) and 18 Pa.C.S. §4107 support negligence per se; statutes protect banks or identifiable victims, not just the public. | Statutes protect the public generally; Fulton is not a member of a specifically protected class required for negligence per se. | Affirmed dismissal: statutes held to protect the public generally, not a specific protected group; claim fails. |
| Res judicata (defense raised by Accountants) | N/A (Accountants argued prior bankruptcy ruling precluded claims). | A December 2016 bankruptcy decision bars the claims. | Denied: Superior Court found different parties and causes of action, so res judicata did not apply. |
Key Cases Cited
- Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270 (Pa. 2005) (adopting Restatement §552 for negligent misrepresentation by information suppliers; privity not required)
- Kirschner v. K&L Gates LLP, 46 A.3d 737 (Pa. Super. 2012) (applying §552 to professional firms outside architect/contractor context)
- Bortz v. Noon, 729 A.2d 555 (Pa. 1999) (negligent misrepresentation principles under Pennsylvania law)
- Richmond v. McHale, 35 A.3d 779 (Pa. Super. 2012) (standard of review on preliminary objections/demurrer)