*1 6, 2008, Watkins, from Kent D. October Pennsylvania, COMMONWEALTH calculation of the maxi- 4. Once the new By Attorney Acting General Thomas Board, mum announced date was CORBETT, W. Jr. Hughes’s this new calculation rendered v. 31, 2008, January recalcu- challenge to the Wesley SNYDER, Sydney Snyder, Alvin lation order moot. Counsel was terse Jacqueline Hepford-Rennie, Julie Ann explanation his but he did set forth Musser, Hunt, Louise Kenneth Susan request reason the for administrative relief Roger Bennetch, Cheryl Bennetch and grant petition I would was moot. Alyssha Mary Waid withdraw affirm on the merits. Appeal of: Kenneth Bennetch. Pennsylvania, Commonwealth of LEADBETTER Judge President Attorney Acting by General Judge join in this dissent. LEAVITT Corbett, Thomas Jr. W. v.
Wesley Snyder, Sydney Snyder, Alvin Jacqueline Hepford-Rennie, Julie Ann Musser, Hunt, Louise Kenneth Susan Roger Bennetch, Cheryl Ann Ben netch, Amy Styer Mary Lou and Alicia Waid Appeal of: Julie Ann Musser. Pennsylvania, Commonwealth of by Attorney Acting General Corbett, Thomas W. Jr. v.
Wesley Snyder, Sydney Snyder, Alvin Jacquelyn Hepford-Rennie, Julie Ann Musser, Hunt, Louise Kenneth Susan Roger Bennetch, Cheryl Ann Ben netch, Amy Styer, Lou and Alicia Mary Waid Appeal Jacquelyne Hepford-Rennie. of: Pennsylvania, Commonwealth of by Attorney Acting General Corbett, Thomas W. Jr. Wesley Snyder, Sydney Snyder, Alvin Jacqueline Hepford-Rennie, Julie Ann Musser, Hunt, Susan Louise Kenneth Bennetch, Cheryl Roger Ann Ben netch, Amy Styer, Lou and Alicia Mary Waid *2 Appeal of: Louise Hunt. Susan Pennsylvania.
Commonwealth Court April 2009.
Argued
Decided June
OPINION BY Judge SIMPSON. appeals, In these consolidated four for- mortgage allegedly mer consultants in- huge in a volved fraudulent scheme seek reversal of a in- preliminary junction by entered Court Common court) (trial County Pleas of Berks in a brought by action protection consumer Commonwealth, acting by Attorney Gener- (Common- Corbett, Jr., al Thomas W. wealth) pursuant to the Unfair Trade Protection Practices Consumer Law (CPL).1 Bennetch, Kenneth R. Ann Julie Musser, Jacquelyne Hepford-Rennie and (collectively, Susan Louise Hunt tants) contend the trial court erred or abused its discretion them enjoining working in the financing products investment fields pending disposi- tion of the For Commonwealth’s claims. reasons, following we conclude the trial *6 grounds court had reasonable to issue the Gray, Reading, appellants, Robin J. for injunction. preliminary Ann Cheryl Kenneth R. Bennetch and Bennetch. Background I. Long, Philadelphia, ap- Elizabeth L. for OPFM/Wesley Snyder A. A.
pellant, Jacqueline Hepford-Rennie. protection This consumer case arises out Kathryn Harrisburg, ap- L. for Simpson, OPFM, transactions between Inc. Ann pellant, Julie Musser. (OPFM), mortgage a broker- now-defunct age group by Wesley and investment run Tesoro, Deputy Attorney M. Sr. Claudia A. Snyder (Snyder) in Berks and Lancas- General, A. Slot- Philadelphia, and William Counties,2 ter approximately and 811 ter, Deputy Attorney Sr. General-in- mortgage homeowners and 31 investors Allentown, Charge, appellee, for Common- (Consumers). Snyder presi- was OPFM’s Pennsylvania. wealth of September
dent and sole shareholder. In 2007, JUBELIRER, bankrupt- OPFM filed for 7 Chapter BEFORE: COHN SIMPSON, (R), Thereafter, cy. and States Judge, Judge Attorney and United FRIEDMAN, Judge. Pennsylvania Senior for the Middle District of 17, 1968, 1224, companies 1. Act of December P.L. as Commonwealth asserts these exist- amended, §§ 73 P.S. 201-1—201-9.3. only paper. by ed on All received these funds deposited entities were into one account. 2. OPFM did business as six different entities: separate accounting. All There was no bills (a Management Financial fictitious Personal paid Corporate were from the one account. Masters, Inc., name); Image Mortgage Pro- followed, regular formalities were not and fessionals, Inc.; II, Mortgage Professionals meetings were not held. shareholder Inc., Treasures, Inc. and Discovered D.I.V.I.D.I.T., complaint, Inc. its average Id. loss for all Mort- Snyder operating a “Ponzi”3 The charged with $29,000. gage of more was Id. scheme defrauded Consumers victims $29,000,000. Sny- In November than B. Consultants guilty in court to one pled der federal fraud, of mail a violation of 18 count U.S.C. vary- for Consultants worked OPFM for somewhere be- resulting in a loss salesper- time as ing mortgage amounts of $32,000,000. $15,000,000 tween and See con- They promoted sons. sold both and Plea). Sny- Guilty Ex. (Snyder Cmwlth. mortgages Wrap Mortgages. ventional and 12-year now sentence in serving der is Snyder Hepford-Rennie, the most trained prison. federal consultant, senior who in 1993. started Bennetch, Hepford-Rennie later trained appeal part Of sole in this is the concern Hunt. met with Musser and involving promotion of the scheme responded who OPFM’s ad- Consumers a purported sale of second vertisements. discussed known as “wrap-around mortgage”4 Consumers, includ- mortgage options what mar- (Wrap Mortgage) under OPFM ing Wrap Mortgage Equity Pro- “Equity keted Slide Down Program. They Slide took Down also gram.” Wrap Mortgage Of the 811 Con- sumers, applications Consumers’ and handled all See but sustained loss. Plea) ensuing Although settlements. Guilty at 26. (Snyder Cmwlth. Ex. 3 brokers, tants were not licensed Wrap Mortgage The total among loss OPFM, $26,600,000. Id. a licensed mort- group approximately worked $201,897. highest gage loss was broker.5 individual trustee, opined ruptcy 3. A Ponzi as: “A also scheme is defined fraudulent that OPFM’s money legitimate mortgages investment scheme in which contribut- Mortgages were not generates artificially high ed later investors were unenforceable. Id. at 739a. thus investors, original dividends for the whose one, I think we a failure of "Number have example larger even attracts investments. at the the con- consideration onset. Unlike *7 Money directly the new investors used mortgages whereby ventional the homeowner investors, repay pay to or interest to earlier actually Wells receives funds from Chase or any operation revenue-pro- usu. without or Fargo mortgage Image company, ... ducing activity other than the continual rais- give any- Masters didn't these homeowners ing Dictionary new Law funds." Black's Rather, thing. gave Image these homeowners (8th 2004). 1198 ed. Image Masters stuff.... still owes Masters homeowner; yet money back to the and (with wrap-around mortgage A4. is defined reason, for then en- whatever homeowner added) emphasis mortgage as second is- "[a] Image mortgage and tered into a note payments sued when a on lender assumes pay money promising Masters to to Im- more (usu. mortgage the borrower's low-interest first age Id. Masters.” lender) through issued a different lends and mortgage additional Such a covers funds. Mortgage 5.Section of the former Bankers outstanding both the balance of the first mort- Equity and Brokers and Consumer Protection gage and the additional funds loaned.” 1989, (Brokers Act), Act Act of December (8th 2004). Dictionary Law Black’s ed. 456.302, formerly § P.L. 63 P.S. in effect Crossland, Department Banking Brian here, at all times relevant defined investigator, Image Wrap testified Masters person directly indi- as or "[a] brokers who Mortgage "wrap-around” a true was not rectly negotiates places mortgage or loans for mortgage. Image Masters did not Con- lend primary in the for consider- anything sumers and others market Consumers remained ob- 3(11) ligated pay mortgages. to their conventional to of the Bro- ation.” Pursuant Section (R.R.) Act, 456.303(11), Reproduced formerly Record at 897a. kers 63 P.S. em- Further, Cottier, ployees mortgage required are not brokers legal Lawrence J. counsel Feldman, licensed, Lynn subject Chapter to be are to for OPFM’s 7 bank- but nonetheless solely Wrap Money) Image on a com- ment or to paid were Masters Snyder to invest. In exchange, for Con- They received annual mission basis. sumers received an interest rate on the Wrap the life of the commission over Wrap Mortgage usually points one to two The amount of the commission Mortgage. rate lower than the on their conventional Wrap of the on the amount was based mortgages, depending on the size of the subsidiary, Image Payment to OPFM’s However, Payment. Wrap Wrap addition, any prepayments In Masters. Mortgage any documents did not include life the Wrap Masters over the Image addition, contrary investment terms. the amount of Mortgage increased practice, Wrap Mortgages normal were commission. tants’ annual not recorded. they never disclosed to Consumers on the Wrap received commissions based scheme, As part Mortgage Mortgage Payment prepay- entity promised an OPFM to assume re- ments. sponsibility monthly for Consumers’ pay- ments on their conventional mortgages. Wrap Mortgage The Scheme C. entity An OPFM sent Consumers com- Wrap Mortgage scheme worked as The mitment letter it stating would convert the OPFM advertised low interest follows. mortgage by changing some newspapers in Berks mortgages rate conditions, of its terms and lower- Lancaster Counties. To obtain the ing the interest rate. See Ex. Cmwlth. 15. rate, interest Consumers need- discounted entity The OPFM also required Consum- Wrap Mortgage pro- qualify ed to sign “Subrogation Agreement” ers to qualify, needed a gram. To Consumers purported to render the conventional large payment large down or a amount of mortgage subordinate the Wrap Mort- 20%) (at equity property least their However, See Ex. gage. Cmwlth. mortgage. “wrap around” never subrogation OPFM obtained required Consumers to determine scheme agreement from the conventional lenders. the amount needed intended Moreover, noted, the Wrap Mortgages were then convinced borrow. Consumers signed were not recorded. Consumers to execute a with a conventional settlement statement which indicated Im- they actually lender for more than needed. age Masters assumed the conventional were recorded in the mortgages These 30, 37, 48, mortgages. See Exs. Cmwlth. *8 Office. County Recorder of Deeds’ 68, 76. later, days
A executed a OPFM, Masters, few Consumers through Image mailed mortgage (Wrap Mort- purported second monthly statements to Consumers. The subsidiary Fi- gage) to OPFM Personal first statement reflected a reduction in Management, nancial and later to OPFM Wrap Mortgage their equal Wrap to their However, subsidiary Image Masters.6 Payment. Consumers Consumers never re- equity Pay- any then turned over the ceived statements from their conven- (Wrap Snyder provisions Image The Act at of statute. Brokers 731a. created Masters 8, 2008, repealed by July was 796, the Act of P.L. Sny- in 2000-02. sometime Id. at 731a-32a. Mortgage Industry known as the Loan kept der the OPFM books at one location and Licensing and Consumer Protection Act Image (Wrap Mortgage) Masters at books Act), (Mortgage §§ Loan 7 Pa.C.S. 6101-51. Thus, Department another location. Id. Banking Image of did not know Masters exist- (Bookkeeper) kept testified she 6. Alicia Waid Id. at 896a. ed. Snyder’s companies. for all of R.R. the books Wrap Mortgage name to conceal regarding lenders mortgage tional Department scheme from auditors. At clos- mortgage balance.7 to ing, required Consumers Consultants Mortgage Wrap D. Documents in- change of letter execute a address presented Consultants Consumers with for- conventional lenders to structing their Wrap Mortgage documents at the sec- information, cor- ward all statements and Wrap The docu- closing. Mortgage ond respondence regarding their accounts to: and a mortgage. ments of a note consisted Masters, Inc, “[Consumer], P.O. Image c/o pages The of two in 12- note consisted 2007041, 144, PA, Oley, Box 19547.”8 Dept. type. six point mortgage consisted of 23, 58. See Exs. Cmwlth. pages 8-point type. paragraphs with 48 Image Wrap actuality, Mortgage In neither Masters nor 21 of the Paragraph added): (with OPFM, provided emphasis parent, Wrap its used Consumers’ pay down their conventional Money to REMAINS IN SENIOR MORTGAGE addition, Notwithstanding anything only in- EFFECT. mortgages.9 In OPFM contained, contrary to the therein Bor- very portion money it vested a small agrees keep rower covenants primarily the mon- received. OPFM used present mortgage in senior ey full pay new Consumers the con- force entire tern effect for of mortgages existing ventional Consum- notwithstanding any mortgage other ers, thereby keeping the scheme Ponzi contained, prepayment there provisions Wrap also used Consumers’ alive. OPFM you convey property sell or unless employees Money pay expenses. its Person, any Firm or Corporation other Further, although the De- Pennsylvania any or refinance in- completely and all partment Banking examined OPFM’s Masters, Image debtedness owed Inc. business, (R.R. 59a) it never aware mortgage became Image or the the existence Masters However, did not explain program. Mas- Wrap Mortgage Images addition, Paragraph 21 to Consumers. ters was not a licensed banker required sign Consumers Snyder broker. stored the Mort- statement, provided settlement which on gage separate facility documents at Line “Loan of con- Assumed-[amount Pa., Reading, that he owned in his own ventional See Cmwlth. Exs. loan].”10 Bookkeeper 7. Waid testified if 10.Consumer Heather Keens testified that af- that even Con- paid Image sumers off their Masters’ ter second settlement Consultant Mortgage, they would not receive statement Hepford-Rennie, understanding it her indicating their conventional still Image Masters assumed the mort- first existed. R.R. at 713a. gage. Had she R.R. at 762a-63a. known she responsible mortgages, would be for two Con- form, change Because of address agreed have sumer Keens never would to a received Consumers never statements Wrap Mortgage. Id. at 764a. Consumer Di- *9 mortgage from their conventional lenders. DeCoursey, Hepford- ane who also dealt with R.R. at 713a-14a. testified; Rennie, “I was told that the mort- Masters, gage by Image being was assumed bankruptcy legal 9. counsel OPFM’s trustee's dealing strictly Image I and would be literally robbing “[Snyder] Peter testified was Masters; way it explained and that's the comingled all pay to Paul.” R.R. at 738a. He account; good, me. to And it so that's what I every money sounded funds into one month Keith, did.” go oper- Id. at 778a. Consumer Gail in and out. would come Id. OPFM Musser, who average at dealt with Consultant testified: at an deficit of least a million ated mortgage [Image “The be with per year. at was to Mas- dollars Id. 741a-42a.
37 48, 68, 37, Further, required 76. Consultants also which remained in effect.12 Con- Consumers to execute fraudulent subro- sultants did not inform Consumers that gation agreement purported that to render they had the to option language insert mortgage the recorded conventional subor- Wrap Mortgage that stating their con- Wrap Mortgage. dinate to the unrecorded mortgage ventional paid would be off when Ex. See Cmwlth. they paid off their Wrap Mortgage. OPFM’s bookkeeper, Alicia Waid testified Paragraph Wrap Mortgage 27 of the provision this in only was inserted five (with added): provided emphasis Wrap Mortgages. R.R. at 735a. may PREPAYMENT. The Borrower prepay any any of the Liabilities at time Collapse Wrap E. However, in any amount. prepay- Mortgage Scheme ment shall not accelerate the LEND- obligation ER’S hereunder to make pay- OPFM engaged Mortgage Mortgage they ments on the Senior scheme for approximately years, begin- (R.R. 59a) actually are due. ning in 1986-87. The Wrap Mortgage pro- Many Wrap Mortgage scheme, chose a gram, Consumers a Ponzi annually paid out it, because unlike most conventional mort- more than it consistently received and lost However, gages, permitted prepayment.11 large money amounts of (approximately a point Consultants did out Paragraph not million per year). dollars Id. at 741a-42a. provided prepayment which did Despite scam, a cash infusion from another Image obligation accelerate Masters’ Mortgage Participation Program, Sny- pay on the conventional mortgage, der’s Ponzi eventually scheme collapsed. getting substantially We were Hepford-Rennie ters]. lower explain did not Para- taking rate graph interest because we were out the 27 to her. Id. at 764a. Keens and her mortgage responsible pay Image Mas- husband family sold their stock in a business ters, they responsible they were were pay family off their home. Id. Keens — because, taking mortgage care of the other they paid Wrap Mortgage, testified off their course, kept saying $168,000 she $56,000 it's a matter of formal- (including the amount of ities, responsible that we are not for that wrap payment), early in 2005. R.R. at 765a. mortgage.” Id. at 792a. Consumer Mark September Fargo Wells notified Fansler, Bennetch, who dealt with Consultant $137,392.42 Keens she still owed on her con- recall, testified: “As I the words used was the mortgage. ventional Id. at 765a-66a. Con- assume, they word would assume or as- sumer Pamela O'Brien testified she asked responsibility sume the of that first loan." Id. Consultant Musser if she her husband at 871a. Consumer Marcia Stauffer testified prepayments, could make and Musser told Consultant Bennetch told her she had no re- However, her could. Id. at 782a. Mus- sponsibility mortgage. for her conventional explain Paragraph ser did not 27. Id. Con- Id. at 880a. sumer Keith also testified wanted she to make prepayments pay mortgage down the faster Wrap Mortgage 11. The brochure Consultants and Consultant told her that Musser would stated, provided "Prepaying your Consumers problem. not be a Id. at 796a-97a. Musser you will save a fortune in interest!” explain Paragraph did not 27 to Keith or R.R. at 48a. language Paragraph mention that the changed. could be Id. at 797a. Consumer 12. Consumer Steven Inners testified Consul- Stauffer testified she told Consultant Ben- Hepford-Rennie pointed tant never pay out Para- netch that she wanted to off her graph explained language 30-year 27 or that different before the term and Bennetch did not Paragraph requiring could be added prepayments mention that on the Mort- *10 paid gage obligate Image conventional to be in full when would not Masters to Image paid apply in mortgage. Masters full. them to the conventional Id. R.R. at 757a. Consumer Keens also testified at 879a. en- alleges Consultants having prob- Commonwealth 2007, started OPFM early In following deceptive unfair or gaged in the timely payments on Consum- making lems 2(4) May in Around defined Section of mortgages. practices ers’ conventional 2007, his staff Snyder advised or June CPL: prob- cash flow experiencing
OPFM was (i) Passing goods off or services as those lems. another; of testified she Hepford-Rennie Consultant (ii) Causing likelihood or confusion of Mortgages when selling Wrap stopped source, misunderstanding as of on the missing payments OPFM started approval or certification sponsorship, mortgages. Significantly, services; or goods Bennetch, however, Musser Consultants (iii) likelihood of confusion or of Causing Wrap Mortgag- to sell and Hunt continued affiliation, con- misunderstanding as finan- aware of OPFM’s becoming es after with, or certifica- nection or association 2007, September In OPFM problems. cial another; by, tion impending bank- its notified Consumers filed for shortly thereafter ruptcy and (v) or Representing goods services Thereafter, over bankruptcy protection. approval, characteris- sponsorship, have complaints filed with 700 Consumers uses, tics, benefits, quan- or ingredients, Attorney General. or that a they tities that do not have Complaint F. Commonwealth’s person sponsorship, approval, has a sta- tus, affiliation or connection that he does filed a May In the Commonwealth have; complaint comprehensive four-count includ- Snyder employees, and his against Consultants, alleging they engaged
ing (vii) goods or Representing services prohibited deceptive fraudulent or conduct standard, quality or particular are of prelimi- purposes For CPL. grade, goods particular or that are of only we need focus on nary injunction, model, another; style or are of if [CPL], of the Com- Count II —Violations R.R. at monwealth v. See [Consultants].13 (ix) Advertising goods or services 80a-36a. advertised; intent not to sell them as complaint, In 128-29 of its Paragraphs alleges the Commonwealth Consultants (xxi) other Engaging fraudulent capacity mortgage acted in the brokers deceptive conduct which creates a duty to act for fiduciary and thus owed a likelihood or misunder- of confusion Id. at 30a. In the benefit of Consumers. standing. Paragraph alleges the Commonwealth 201-2(4)®, (ii), (iii), (v), (vii), §§ fiduciary duty 73 P.S. breached their (ix) (xxi) added). (emphasis ways. Id. at 31a-33a. nümerous Bennetch, Hunt 131-35, Musser and Paragraphs Common- objections to the preliminary filed Com- wealth violated alleges Consultants complaint alleging, among monwealth’s particularly, Id. at 33a-34a. More CPL. (R.R. 36a-40a); Styer Amy at I—Vio- wealth v. Lou 13. The other counts included: Count Wesley Commonwealth v. v. Alicia Waid [CPL] lations of and Count IV—Commonwealth (R.R. 23a-30a); Snyder Snyder Sydney (R.R. 40a-46a). at Cheryl Bennetch Common- [CPL] Count III—Violations
39 things, engaged that the in deceptive other Commonwealth Consumers and a claim the business conduct with failed to state under CPL. Consumers. The preliminary objections were trial granting Consultants’ court issued an order the Hepford-Rennie following filed an an- relief: overruled. complaint.
swer to the A. are restrained and [Consultants] enjoined from receiving monies and/or Preliminary Injunction G. services, payments for an employee as Pursuant to Pa. No. R.C.P. 1531 and otherwise, or pertaining provision CPL, the Commonwealth filed a motion for of mortgage financing investment and/or preliminary injunction against a products; three seeking tants and other defendants B. are restrained [Consultants] and temporary injunctive relief a freezing and enjoined from entering into contracts pending disposition of their assets of the verbal, agreements, oral and/or and/or at lawsuit. See R.R. 91a-104a. In late written, otherwise, employee as an 2008, August the trial court held seven provide mortgage financing in- and/or days hearings requested injunc- on the products; vestment presented tion. The 15 Commonwealth C. shall within 20 busi- [Consultants] witnesses, including a number of Consum- days ness prepare this order It Bennetch for ers. also called Consultant upon serve the Commonwealth a finan- purposes cross-examination. The Com- cial which all statement lists transfers exhibits, monwealth submitted 86 of assignments of assets and property which were admitted. $2,500 valued in excess of since January Hepford-Rennie, Hunt and 1, 2007, indicating the name and address Musser testified their own defense. assignee, of the transferee or the value exhibits, eight Consultants submitted but assignment transfer or and the to move for their failed admission into the paid.... value of consideration court, own, record. The trial on its called D. A hearing to establish whether a Bennetch, Cheryl manager, OPFM’s office permanent injunction should be entered a ques- and asked her limited number of will be beginning held the Court at tions. (R.R. a.m. April 9:30 on 963a) At the close of the hearing, order,
trial
opinion
court determined
the Common
In an
support
its
wealth
prerequisites
established
six
trial court noted that
brokers
preliminary injunction.14
The trial court
a fiduciary duty
owe
to their customers.
agreed
also
with the
Commonwealth
McGlawn
v. Pa. Human Relations
Comm'n,
(Pa.Cmwlth.2006).
fiduciary duty
Consultants breached them
A.2d
conduct;
party seeking
preliminary injunction
ately prior
allegedly wrongful
14. A
to the
(1)
(4)
injunction
activity
must
that:
nec-
establish
is
it seeks to restrain is action-
able,
essary
prevent
irreparable
right
wrong
immediate and
its
to relief is clear and the
manifest,
words,
adequately compensated
harm that
likely
cannot be
or in other
that it is
(2)
merits; (5)
by damages;
greater injury
prevail
injunction
would result
on
it
refusing
injunction
grant-
reasonably
an
from
than
seeks is
suited to abate the offend-
it, and,
(6)
ing
concomitantly,
ing activity;
preliminary injunction
issuance
injunction
substantially
adversely
will
public
harm other
will not
affect the
interest.
(3)
Centre,
parties
proceedings;
interested
Summit
v.
Towne
Inc.
Shoe Show of
Mount, Inc.,
preliminary injunction
properly
Rocky
will
restore
573 Pa.
3. Restoration Status conduct, wrongful not their status alleged immediately prior to the lawsuit. Ambro seeking preliminary A party gi. injunction show the will injunction must parties the to their status
properly restore
Right to Relief
4. Clear
alleged wrongful
prior
as it existed
to the
party seeking
preliminary
A
assert a
Shoe Show. Consultants
conduct.
injunction
right
must show a clear
to relief.
is an interim meas
injunction
preliminary
quo
right
To establish a “clear
to
designed
preserve
to
the status
Shoe Show.
ure
relief,”
injunction
an
hearing
party seeking
is
parties
until a
protect
prove
underly
the merits of the
Corp.
quo
The status
need not
DiLucente
held.
claim,
only
but need
show
sub
ing
the last actual and lawful
maintained is
be
status,
questions must be resolved to
preceded
legal
stantial
which
uncontested
rights
parties.
of
Valley Forge Hist.
determine
controversy.
pending
Welfare,
Pub.
497 Pa.
Dep’t
493 Pa. Fischer v.
Washington,
Chapel,
Mem.
Soc. v.
of
(1982). Thus,
(1981).
when
of
439 A.2d
purpose
The
426 A.2d
granting
preliminary
order
reviewing
maintain
injunctive relief is to
preliminary
the mer
inquire
we do not
into
injunction,
be investi
until the case can
quo
the status
Show.
underlying
action. Shoe
its of
adjudicated.
Israel.
gated and
Where,
here,
injunction merely Wrap Mortgage
scheme in violation of the
prohibitive
mandatory, may
rather than
we
liberally
CPL.
CPL is to be
con-
only
reverse
if there are no reasonable
legislative goal
strued
effectuate the
grounds
support
the decree or if the
protection.
consumer
v.
Commonwealth
Percudani,
(Pa.Cmwlth.2004).
palpably
misap-
rule of law is
erroneous or
Consultants advance two fundamental of confusion as source of funds arguments why the Commonwealth has used pay mortgages right demonstrated a clear to relief. and as First, identity to the primary they mortgagees. Consultants contend were 2(4)(ii) CPL, consultants, Section merely 73 P.S. 201- not mort- 2(4)(ii) (“[clausing gage brokers. Therefore likelihood of confusion Consultants ar- or of misunderstanding as to the gue finding the trial court erred in source they services”). 2(4)(ii) ... ... owed a fiduciary duty to Consumers. Sec- Section ond, the CPL does not contain merely Consultants assert were a discrete state- element, of, of-mind employees knowledge require with no nor does it or re- for, predicate sponsibility fiduciary duty. fully what OPFM did. As more above, set forth the likelihood of confusion The Commonwealth counters it raised *16 occurred when presented Consultants a legal questions substantial as to both is- settlement sheet for the Wrap Mortgage preliminary injunction sues and thus the which showed the conventional must stand. “assumed;” when Consultants discussed Wrap the Mortgage with Application Consumers at a. to CPL Consultants settlement; the and when Consultants had Consultants contend the trial court the sign change Consumers a of address in determining applies erred that the CPL form, so that the conventional mortgagee to. individual employees who themselves any would not mail directly information to have committed no wrongdoing. Essen- Testimony by Consumers. Consumers tially, they Consultants claim cannot be supports a determination that the relative held liable under the Snyder’s CPL for duties and by liabilities created Wrap the wrongdoing. Mortgage and the conventional mortgage, The Commonwealth counters that the ability and the prepay a binding mort- applies CPL “person” engaged in gage, were material to their decision to unfair or deceptive practices. support, In participate in Wrap the Mortgage pro- the Moy Commonwealth cites v. Schreiber gram. Co., Deed Security Pa.Super. 370 535 Also, by handling closings the for con- (1988). A.2d Moy, the Superior mortgages ventional Wrap Mortgages and corporate Court held a officer could be in the same manner by failing to ex- individually held partic- liable under the plain differences, functional Consultants ipation theory for unfair or deceptive ac- misrepresented qualities characteristics or tions if there is positive proof engaged he Wrap Mortgages of the as follows: that prohibited in conduct by the CPL. Wrap Mortgages the were valid and lawful mortgages; We conclude the trial court that Wrap the Mortgages grounds had reasonable to determine functioned as to Con assume liabilities for the actively sultants themselves participated mortgages; and that prepay- and played a vital role in deceptive ment of the Mortgages would reduce by § 73 P.S. 201-3. This evidence itself mortgages. the conventional bability on 2(4)(v) CPL, § to satisfy of the P.S. 201- sufficient the Commonwealth’s Section 2(4)(v) that ... (“[rjepresenting regard part services burden with to this of our ... or quantities preliminary injunction Although have ... characteristics review. have”). 2(4)(v) not Section they do view the of fiducia- following we discussion contain discrete state- CPL does not ry duty unnecessary, we include it element, it require nor does of-mind responding interests completely duty. Testimony by predicate fiduciary arguments. parties’ supports a determination that Consumers Fiduciary Duty b. and liabilities created relative duties by Wrap Mortgage the conven- First, argue they were not ability prepay and the mortgage, tional licensed and did not mortgage brokers binding mortgage, were material to hold out to be licensed mort- themselves in the participate decision to Mort- Therefore, assert, gage they brokers. gage program. they duty no fiduciary owed Consumers. Further, in more as set forth detail be- merely Bennetch he an em- argues low, misrepresented quali- who ployee training took his directions ty or of the investment services for grade Thus, Snyder. asserts, Bennetch Wrap Payment indicating that Snyder owed fiduciary duty. Consum- invested and money would be Snyder, complaints against ers filed 2(4)(vii) investment would be safe. Section him. 201-2(4)(vii) CPL, (“Hep- 73 P.S. argument. Musser a similar advances ... are of resenting partic- services had no ownership She interest OPFM. ular ... if quality grade ... are of *17 merely She claims she was an OPFM em- another”). 2(4)(vii) of Section the CPL OPFM, ployee. Consumers dealt not does contain a discrete state-of-mind not Thus, her. had no fidu- Musser claims she element, require it a predicate nor does addition, ciary duty to In Consumers. Testimony of fiduciary duty. Consumers Musser the evidence shows the claims supports quality a determination that the Mortgage pro- breakdown in the of to investment services material Snyder failed gram occurred because Wrap Payment. their to make a decision required make the Musser investments. Moreover, general given knowl- per- there had allegation asserts is no she edge extremely unusual of the structure of on knowledge any wrongdoing sonal the Wrap Program specific the and their OPFM; therefore, part of she had no rea- missing knowledge payments of OPFM on son to know the investments were not mortgages, certain being made. the argues She CPL deceptive tants in “other engaged conduct” impose parties not liability does on who market continuing Mort- any wrongdoing not did commit 2(4)(xxi) June, gages after 2007. Section attempting the Commonwealth is hold 201-2(4)(xxi). CPL, of the 73 P.S. her liable for of others. the actions sum, In pro- the referenced evidence corpo grounds vides reasonable for an ultimate Musser also claims entity recognized upheld in un- rate be engaged conclusion that Consultants must practices fair acts or unusual call an deceptive or as de- unless circumstances 2(4) Inc. exception. Eng'rs, fined S.T. Hudson v. by Section CPL and de- Assocs., CPL, 747 A.2d by Section 3 of the Hotel Dev. 931 clared unlawful Camden 46 Shareholders, received the customer’s loan which lender officers
(Pa.Super.2000). negotiator with the ulti- held liable absent and was the sole cannot be and directors theory” “participation The broker also influenced mate lender. establishment equitable The broker assertion ultimate interest rate. successful veil. corporate piercing doctrine of sums from the received substantial also Builders, Realvest, Avery Inc. v. McGlawn, First See 891 A.2d proceeds. loan 572, Inc., A.2d 601 600 Pa.Super. 410 Here, no claims Hepford-Rennie (1991). pierces court the cor- Where such involvement. veil, is liable be- only the owner porate fiduciary relation- to establish a In order a bona is not corporation cause the fide asserts the Com- ship, Hepford-Rennie v. Milzoco entity. Wicks independent 1) a relation- must establish: monwealth
Builders, Inc.,
Pa.
edge invited reliance Consumers. duty injunction overly unduly broad and unequal posi- could arise from the parties tions of the reliance. harsh. Consultants Bennetch and Musser addition, people problem. Id. at O'Brien Musser testified she told 817a. Consumer testified Consultant Musser told her Snyder Id. invested low risk mutual funds. knowledge people "most don't have the Snyder Image She asked if Masters 950a. money.” Id. at skill to do that to—invest that provided investment statements Consum- investments, Image *20 780a. Because of the Snyder replied ers. Id. that he did not do give Masters could her a lower rate. Id. at Snyder good enough that. Id. felt he had a they 781a. If Musser would not have said reputation people and that needed to be com- going money, were to invest O'Brien with that. fortable Id. would not have bothered with a Mort- gage. Id.
49 the trial court had authority un- We conclude the Commonwealth’s contend pre grounds reasonable determine to promulgating is limited the CPL der Consultants, par who liminarily enjoining ad- the enforcement and for regulations in Wrap to various extents ticipated restraining ministration of CPL scheme, public in the interest. Mortgage is of the CPL. to be violations acts deemed of and conven The number Consumers authority no contains They assert CPL potentially affect tional lenders enjoin a the Commonwealth permitting Wrap Mortgage program, ed in their entire voca- working from person mortgage-like extensive use of unrecorded Thus, assert tional field. Consultants regulatory documents which hindered broad, harsh, unduly injunction overly of mail com oversight, and the redirection living. away right their to earn and takes sufficiently public impact munications persuad- counters it The Commonwealth support injunc the trial court’s interest to know- the trial court that Consultants ed tion. deprived Consumers ingly persistently information, thereby actively of needed Evidentiary Rulings IV. Snyder’s illegal in scheme. participating Bennetch and Musser also put could There is a risk Consultants assert the trial court erred and abused its in and de- experience of fraudulent years by permitting discretion Common- em- to work for another ceptive schemes enter into wealth to documents evidence ployer. were not made available to Bennetch prior preliminary to the in- and Musser conclude the trial court had reason- We junction hearing. They assert the Com- grounds enjoin able nearly monwealth had three months to fi- any capacity working that before trial exchange information and products pending or investment nancing all exchange the trial court directed the CPL disposition Commonwealth’s parties documentation the intended to of- true especially them. This is against case fer into evidence. they duty unsuspecting where claim no consumers, superior an aura of despite briefs, However, in their neither knowledge. any place Bennetch nor Musser cite to the record where the trial court made Interest
6. Public
objection to the
ruling
party’s
on either
Be
particular
admission of
document.
injunction cannot
preliminary
A
Bennetch nor
devel
cause neither
Musser
Shoe
public
run counter to the
interest.
briefs,
in their
this
oped
argument
this
argue
injunction
Show. Consultants
deemed waived. See In re
issue is
Con
living
prohibiting
earning
them from
Land
the S.E.
Bus.
demnation
Cent.
knowingly engage in
when
did not
(105
# 1:
Mad
Redevelopment
Dist.
Area
public
in
against
malfeasance is
Street,
Chester),
the matter referred ORDER Bennetch further as Consultant June, 2009, NOW, day of AND this 9th discretion the trial court abused its serts foregoing stated in the for the reasons Cheryl Defendant Bennetch by calling the order of the Court Common opinion, her own accord after the stand on its prelimi- County granting of Berks Pleas However, the her case. counsel rested Appellants Jacque- nary injunction against injunction an trial court did not issue Musser, Ann Julie Hepford-Rennie, line and, Bennetch, Consultant against Cheryl Hunt, Roger Kenneth Susan Louise not clear acknowledges, “[i]t Bennetch Bennetch is AFFIRMED. the trial court took into consider whether Cheryl Defendant Bennetch’s ation Further, Appellants Bennetch’s and to enter testimony making decision QUASHED are to the appeals Musser’s the other preliminary injunctions against review of the appeals extent their seek Bennetch’s Br. defendants.” Consultant denying their Pleas Court’s order Common fact, Cheryl at 25. In the trial court called objections. preliminary defense, in her Bennetch as a witness own regarding any other defen testify not to OPINION BY Senior DISSENTING Consequent R.R. at 961a-62a. dant. See FRIEDMAN. Judge most, the trial decision was ly, court’s harmless error. majority respectfully I dissent. Pleas concludes the Court Common Preliminary Objections
V. (trial court) reason- County of Berks had in- grant preliminary able grounds Bennetch and Musser junction sought by the Commonwealth in denying assert trial court erred also Pennsylvania, By Attorney General Acting However, objections. preliminary Corbett, (Commonwealth), Jr. Thomas out, W. points dis Commonwealth orders Bennetch, Julie Ann enjoin and to Kenneth ap missing preliminary objections are not Musser, Ferrara, Jacquelyne Hepford-Rennie and F.D.P. v. pealable orders. Consultants) (an (together, Susan Louise Hunt deny 1221 (Pa.Super.2002) A.2d order for, receiving payments entering from preliminary objections put ing does for, of mort- litigant anything; provision out of court as to it is into contracts products gage financing not “final” and cannot be certified under investment and/or 341(c); and, I the trial agree Pa. R.A.P. it is not an inter services. cannot where the locutory grounds court had reasonable appealable right order as of under 311). quash Pa. R.A.P. we failed to meet its burden Accordingly, Commonwealth prerequisites for a appeal establishing Bennetch and all of the preliminary injunction.1 to the extent review of Musser seek it; (3) properly seeking injunction ing injunction an will restore party preliminary 1. A (1) it immedi- injunction parties to their status as existed must show that: an is neces- conduct; alleged wrongful sary irreparable ately prior to the prevent immediate and clear; (5) (4) injunc- compensated right relief is adequately harm that cannot be (2) reasonably abate the by damages; greater injury it suited to would result tion seeks is (6) injunction will grant- offending activity; an refusing injunction than from *22 funds, ment the excess to make the mortgage as employed were Consultants in engaged larger payment, leaving entities conventional loan by business consultants financing mortgage Image profit consisting Masters with a provision such, As services. products investment money remaining from the investment customers of potential advised Consultants of the excess funds. forms of availability of two alternative 2007, the business enti- September In (1) secured a conventional loan financing: subject of a federal bank- ties became lending an outside mortgage from by a Subsequently, Wesley ruptcy proceeding. (2) institution; a loan se- Snyder, the President and sole Alvin an outside lend- a by cured entities, of the business was shareholder institution, wrap-around a coupled with ing fed- charged arrested and with numerous offered Im- (Wrap Mortgage) arising from the sale of eral offenses Masters), Masters, (Image one of Inc. age 2007, Wrap Mortgages. November the business entities. Snyder pled guilty to one count of mail Mortgage option provided Wrap The date, Snyder fraud. At a later received a rate and a lower interest customer with years sentence of no less than twelve In ex- monthly mortgage payments. lower prison. two months in federal to ob- required the customer was change, loan for an amount tain a conventional 23, 2008, May On Commonwealth pay or her need and excess of his prelimi- and motion for complaint filed to invest money Image Masters excess nary injunction against Consultants and If customer chose a for the customer.2 others, were en- alleging closings. there were two Wrap Mortgage, gaged operation in the of a “Ponzi held on the conven- closing The first was Scheme” connection with the sale of compa- a title insurance tional loan before Wrap Mortgages.3 Commonwealth closing The second was ny representative. alleged also had violated later, usually week approximately one held 2(4) provisions various of section of the home, at which time the at the customer’s Trade Practices and Unfair Consumer Wrap Mortgage executed the customer (CPL),4 which, generally Protection Law turned over the Image Masters and engage makes it unlawful to speaking, received from the convention- excess funds that creates a likelihood deceptive conduct Thereafter, the customer made al loan. misunderstanding with re- of confusion Image Mas- single mortgage payment spect goods to the sale of or services. rate, interest and Im- ters at the reduced preliminary injunction hearing, After a payment, plus used that
age Masters that, from invest- the trial court concluded because money earned portion Image point, Masters was unable to public Sum 3. At some adversely affect the interest. Centre, Rocky get Inc. v. Shoe Show mit Towne investment returns to cover the sufficient Mount, Inc., A.2d 995 573 Pa. Mortgage Wrap custom- conventional loans of issue, (2003). injunction to preliminary aFor Thus, Image stopped investing Masters ers. every one of these petitioner must establish funds, using the excess instead the excess petitioner if fails to estab prerequisites; Wrap Mortgage funds from one customer them, no need to one of there is lish money owing pay on the conventional loans the others. Id. address Mortgage customers. of other 2.Thus, qualify for a Mort- in order to 17, 1968, Act December P.L. required gage, the to have suffi- customer amended, 201-2(4). 73 P.S. equity home. cient in his or her *23 (1982). statutorily prescribed a “mortgage bro- Where functioned as
Consultants available, remedy equity in 2 of the Mort- at law is will not kers” as defined section showing a clear that the Brokers and intervene without gage Bankers and Consumer (Brokers Act),5 remedy inadequate. is Id. Protection Act Con- Equity to their fiduciary duty a sultants owed witnesses One Commonwealth’s The trial court then concluded customers. new legislature testified that the enacted a fiduciary the breached Consultants law, 5, 2008, that effective November candor, loyalty by duty honesty li- require originators loan to be would information failing to disclose material censed, continuing to meet preliminary Wrap Mortgages about the so requirements pass education and to a test. informed deci- customers could make an (N.T. 896a.) 819-20, The wit- R.R. at result, prelimi- a the trial court sion. As be ness testified that Consultants would receiving narily enjoined Consultants originators considered loan under the new for, contracts payments entering or into Thus, today, law. Id. Consultants could for, financ- provision any mortgage originators loan unless not work as services. ing products investment and/or requirements, were to meet new education to this court.6 appeal now pass test and obtain license.8 Right I. to Relief of the act known as the Section 6102 argue Mortgage Industry Licensing Loan Common- right (Mortgage Origi- wealth failed to establish that its Protection Act Consumer Act), law, I that the the term agree relief is clear. Common- nator new defines in right “mortgage originator,” pertinent part, wealth failed to establish that its equitable permanent relief in the form of a as follows: injunction is clear. ... An individual not licensed as a mort- solicits, that, gage accepts broker ... who or supreme
Our
court has stated
applica-
loan
injunctive
sought,
accept mortgage
where
relief is
the initial
offers to
tions,
jurisdiction
negotiates mortgage
or
loan
equity
focus is whether
terms, in
than a
proper.7
Public
v.
other
clerical or minis-
Department of
Welfare
530,
in
Eisenberg,
capacity
personally
499 Pa.
7 Pa.C.S. of argue Consultants that the Common- Mortgage Act that Originator requires injunc- wealth failed to that the establish mortgage meet edu- originators certain properly tion restores to their them status requirements, pass prior cational a test to immediately prior as it existed to the al- licensing and meet additional educational leged wrongful agree. I conduct. requirements licensing. after 7 Pa.C.S. alleged The wrongful conduct is failing 6131(g). § to material disclose information about Upon receipt application of Wrap Mortgages, a failure that initially license, mortgage Depart- originator the after occurred Consultants were hired to Banking may of conduct an investi- ment explain to customers financing options, two 6133(a.l) gation applicant. Section a conventional and a mortgage Act, Originator the Mortgage of 7 Pa.C.S. The Mortgage. fact that gave Consultants 6133(a.l). Department § Banking The of customers information about conventional license, may deny a or otherwise restrict as well mortgages Mortgages as is license, if it the does applicant finds that significant because the Commonwealth did character, possess in- reputation, not the not any establish -wrongdoing relating to tegrity general fitness to command the Indeed, the conventional mortgages. the confidence of the and to warrant the public witness, a Depart- Commonwealth’s own that the loan will mortgage belief business ment Banking investigator, of testified that operated honestly, lawfully, fairly be no problems “there were with Mr. Sny- in accordance the law. Section (N.T. der’s conventional mortgages.” at 6133(e)(4) Act, Mortgage of Originator 895a.) R.R. 6133(e)(4). § 7 Pa.C.S. Thus, the injunction have should re- Originator Mortgage Act in is now stored Consultants to their status as em- effect, providing various means for control- ployees field, in the mortgage financing who, ling Consultants, like pro- individuals immediately prior status held to vide information regarding to consumers any making representations any to cus- mortgage products. loan The Common- tomers about Wrap Mortgages. that wealth, in order establish right to a clear status, Consultants could have continued equitable relief in form of a perma- living by providing earn a injunction, prove nent would have to that services, products but not new will measures be ineffective However, Wrap Mortgages. the injunc- preventing con- harming Consultants places tion here in a Consultants status alleged sumers the manner case. this law, pre-dates that employment Given the in the requirements of the new Thus, especially authority financing of Department mortgage field. the in- Banking licensing mortgage junction over the does properly not restore Con- Indeed, Department Banking, if are fit to work provided originators, which Department Banking a witness for the Common- case, wealth in this were that to determine would not issue licenses to them. Here, it im- section of the CPL states status as existed sultants to their Attorney whenever the General has reason alleged wrongful mediately prior any person using believe conduct. method, practice act or declared unlawful Reasonably statute, III. to Abate Attorney “may Suited General Activity
Offending ... such bring against person an action by temporary permanent in- restrain argue the Common- method, junction the use such act or injunc- that the wealth failed to establish add- practice.” (emphasis 73 P.S. 201-4 reasonably tion is suited to abate the of- ed). give Section of the CPL does not *25 i.e., failure to fending activity, the disclose statutory authority to law- courts restrain Wrap Mortgag- material information about activity. ful agree. es to I customers. here, offending activity the the To abate In District v. Arm Armstrong School enjoin only trial court needed Association, strong Pa. Education Wrap Mortgage from providing tants (1972) 291 A.2d Cmwlth. products services to consumers. and/or (footnote omitted) (citations omitted), this injunction protected Such an would have court stated: losing money customers from in future Mortgage “Ponzi Scheme” and history jurisdiction of equity have allowed Consultants to contin- would Pennsylvania is different ue in the field. working mortgage financing Chancery other of exist- states. Courts By enjoining providing Consultants from times, public ed but here colonial any mortgage financing investment and/or against prejudice strong was so them services, trial products and court abat- after Revo- they were abolished activity legal ed and harmed no was lution. of there- Courts Common Pleas issuing injunction, one. such after only pow- exercised common law equitable trial powers court exceeded ers, powers possessed and none CPL, and, given under the because 1886], Chancery. Court of some [In injunction enjoined con- unnecessarily power grant equity again relief in was legal activity, injunction tinuation Philadelphia given to the courts of Coun- reasonably suited abate and,
ty, through subsequent legislation offending activity. provisions, these Constitutional later powers expanded grant- were I Accordingly, prelimi- vacate the would ed to courts in pleas all common nary injunction. powers
Commonwealth. These are still however,
limited, and the extent may be
which exercised lies within Legislature. control of the jurisdic-
A Pennsylvania equity court’s
tion, therefore, limited well de- equity
fined “The .... courts
Pennsylvania possess general do not only court
powers equity, of a but upon them such as have been conferred ”
by statute....