“The Apology Bill,” or “the Benevolent Gesture Bill,” passed the House 200-0 on October 22, and was signed by Governor Corbett on October 23. This new law is the culmination of eight years of proposed legislation. It does not allow mere statements of an apology to be admissible at trial, but does allow statements that include an admission of negligence or fault.  

This bill, similar to those approved in at least 36 other states including New Jersey, allows healthcare providers – including doctors, hospitals and nursing homes – to apologize when a procedure does not go as planned.
 
The new law will not eliminate liability on the part of doctors or hospitals or prevent medical malpractice suits.  However, research suggests it will likely reduce the number of lawsuits, medical professionals claim.
 
Both trial lawyers who supported the bill and medical professionals said they believe many patients and families would not have filed malpractice suits had they been given a timely explanation, along with an apology, for an unanticipated outcome.

In Pennsylvania, “The Landlord and Tenant Act of 1951” (“The Act”) governs all residential leases entered in Pennsylvania. The Act provides certain terms in the relationship between a landlord and tenant that cannot be waived by the tenant, even where the written lease has provisions contrary to the Act. 

A common issue that arises between landlords and tenants in residential leases governed by the Act is the handling of the tenant’s security deposit at the conclusion of the lease. Residential landlords should be wary of the Act’s remedies for improperly withheld security deposit monies. The Act requires a landlord under a residential lease to provide the now former tenant with a written list of the damages to the premises that the landlord claims are the tenant’s responsibility within 30 days of the termination of the lease.

The list of damages must be accompanied by payment of the difference between the amount claimed for the damages and the amount of the security deposit with interest.  If a landlord fails to provide the written list of damages and repayment of security deposit amounts in excess the amount of damages claimed within the 30 day window, they will be deemed to forfeit the rights to withhold any portion of the security deposit or to sue the tenant for damages to the premises. If the landlord fails to pay the amount of the security deposit for which no claim is made within 30 days of the termination of the lease, the landlord can be held civilly liable for double the amount of the security deposit wrongfully withheld. A tenant’s claim for double the security deposit can be mitigated if the landlord can prove the amount of actual damages done to the premises to the satisfaction of the Court. This procedure may be employed by a tenant regardless of the terms of the written lease agreement or other writing between the landlord and the tenant.

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

A Mechanics’ Lien Claim can present problems for Owners seeking to sell or refinance a home or other real estate.  Likewise, higher-tiered Contractors and Subcontractors can encounter headaches where a Subcontractor files a Lien Claim of questionable legitimacy or for defective work, jeopardizing the Contractor’s reputation or relationship with customers. 

The Pennsylvania Mechanics’ Lien Law presents remedy to Owners and Contractors for cases in which the Mechanics’ Lien Claim is disputed, but where a time-sensitive transaction concerning the property must be completed.  The Law allows an Owner to Discharge the Lien upon either payment of cash in the amount of the Lien into the Court, or upon the acquisition of a Surety Bond in double the face amount of the Lien (or a lesser amount upon approval of the Court).   This remedy may also be available to a higher-tiered Contractor, however the Contractor must first successfully Petition the Court to intervene in the case, and then move to pay the cash into Court or substitute the Surety Bond.

It is important to note some of the legal fictions involved in Mechanics’ Liens to better understand the import of this procedure.  A Mechanics’ Lien Claim is technically an action against real property, and not against an individual or entity.  When the Court grants the “Discharge” of a Mechanics’ Lien Claim upon payment into Court or entry of a bond, this does not extinguish the Claim, but merely substitutes the cash or bond for the real property, and removes the Lien from the chain of title to the real property so that a transaction may occur without first satisfying the Lien itself by payment to the Claimant.  Even after Discharge of the Lien Claim, the Claimant may prosecute the Claim seeking the cash held by the Court or payment under the surety bond, and therefore the Owner or intervening Contractor must defend an action at law upon the Mechanics’ Lien Claim.

UPDATE – FEBRUARY 25, 2010

I recently spoke with public relations firm representing the Estate of E. Pierce Marshall, Elaine T. Marshall, E. Pierce Marshall, Jr. and Preston Marshall who expressed a difference of opinion regarding the facts and procedural history of the Marshall litigation and asked me to provide this information to our readers.  I have added their comments below in italics.

A 2006 Supreme Court Case (Opinion) arising from a story most laypeople learned from supermarket tabloids reaffirms an age old exception to the jurisdiction of the Federal Courts. As many people know, deceased model and celebrity personality Anna Nicole Smith (then aged 26) married billionaire Oil Industry magnate J. Howard Marshall when Marshall was 89 years of age.  Famously, the marriage lasted fourteen months, until Marshall’s death, leading many to comment that Marshall must have died a happy man.

Following Marshall’s passing, Smith (who’s real name was Vicky Lynn Marshall)

Here correct name is: Vickie. Nobody commented J. Howard Marshall II was happy about his relationship with Vickie when he died. Testimony in the Houston probate trial from people who knew J. Howard was that he said the marriage was a mistake and that he was not happy.

became embroiled in a protracted dispute over the estate of her late husband with the deceased billionaire’s son and her own adult step-son, E. Pierce Marshall.  While Smith’s unrelated Bankruptcy proceedings were pending in Bankruptcy Court in California, Pierce Marshall asserted a claim against Smith, seeking to have the Bankruptcy Court declare that a claim which he intended to bring against Smith for defamation could not be discharged in Bankruptcy.

Before the Bankruptcy Court, Pierce Marshall claimed that Smith had defamed him shortly after the elder Marshall’s death by making statements through her lawyers accusing Pierce Marshall of engaging in forgery, fraud, and overreaching in order to deprive Smith of certain testamentary gifts which her husband had made for her benefit.  In response, Smith pleaded the affirmative defense of truth – asserting that Pierce Marshall’s claims should fail because the content of her lawyers’ statements were true, and filing a counterclaim for tortuous interference with a testamentary gift that she had expected from the elder Marshall.

Pierce Marshall had already won an $8 million libel verdict against her attorney in Texas state court, concerning the same facts and statements. He was seeking to preserve his future claims against Vicki during the bankruptcy process.              

The Bankruptcy Court granted summary judgment in favor of Smith on the issue of his claim for defamation, and after a trial on the merits, entered judgment in favor of Smith and against Pierce Marshall, finding that he had in fact conspired to falsify documents, and alter and destroy a trust instrument which the late J. Howard Marshall had directed his lawyers to prepare for the benefit of his wife, Anna Nicole Smith.

The Bankruptcy Court never held a trial on the issues. Instead the court arbitrarily ruled that the defendant was guilty of discovery abuse. The Bankruptcy Courts damage award was based solely on that issue. All this was taking place while the Marshall estate and all the issues Vicki raised were being heard during a 5 and ½ month long jury trial in a Texas Probate Court. Pierce Marshall prevailed in that case. The Texas Court specifically ruled that it had considered every issue before the Federal Courts.

Pierce Marshall then sought District Court review of the Bankruptcy Court’s findings, after which the District Court adopted the Bankruptcy Court’s findings and entered an award of compensatory damages in the amount of $44.3 million, and following a finding of “overwhelming” evidence of Pierce Marshall’s “willfulness, maliciousness, and fraud,” the District Court awarded an equal amount of punitive damages.

The District Court vacated the Bankruptcy Court’s decision and discovery sanctions and held a de novo review. It agreed with Pierce Marshall’s attorneys that the Bankruptcy Court overstepped its authority when it took the case as the matter was not a core bankruptcy proceeding. In addition, the District Court did not adopt any of the Bankruptcy Court’s findings. Instead it held a brief de novo review before it issued its decision, after failing to allow Pierce Marshall’s to present a single witness.

Predictably, Pierce Marshall appealed the District Court’s judgment to the Ninth Circuit Court of Appeals, seeking to have the District Court’s judgment vacated, asserting that the Bankruptcy Court and District Court lacked the authority to adjudicate Smith’s counterclaims citing the “probate exception” to the general jurisdiction of the Federal Courts.  The Ninth Circuit reversed the District Court’s judgment, and Smith appealed to the United States Supreme Court.

The Ninth Circuit vacated and remanded the District Court opinion with instructions.

The United States Supreme Court reversed the Ninth Circuit, finding that the “probate exception” did not apply to Smith’s counterclaims, and therefore that the Bankruptcy Court and District Court did have jurisdiction over Smith’s claims.

The United States Supreme Court only held that the Federal District Court had jurisdiction over claims such and Vickie’s and expressly held that the core-non-core bankruptcy jurisdiction issue was a matter left to be decided by the Ninth Circuit on remand. 

            Did the ruling include the Bankruptcy Court or just the District Court????

In a majority opinion penned by Justice Ginsburg, the Supreme Court clarified the Court’s prior holdings establishing a probate exception to Federal Jurisdiction.  The Court first noted that, although nothing in the text of the Constitution compels the exception to jurisdiction, such an exception was recognized by the English Courts of Chancery – which is the correlative jurisdiction granted to the Federal Courts in the First Session of the First United States Congress under the Judiciary Act of 1789.  The Court then explained that the probate exception did not preclude all claims related to or arising from a decedent’s estate, as the Ninth Circuit had erroneously concluded, but that claims for the annulment or probate of a will or the administration of a decedent’s estate should properly remain in the State Courts.

The Supreme Court never ruled on the merits of Vicki’s claims. The issue of whether those same issues had already been decided, in Pierce Marshall’s favor, by the Texas Probate Court is one of the many appellate issues still before the 9th U.S. Circuit Court of Appeals.

 

In Pennsylvania, where a “cloud” upon a title to real property exists, a party may initiate a civil action in order to adjudicate rights to the property.  Such actions fall under two related kinds:  1) Actions to Quiet Title, and 2) Actions in Ejectment. 

Actions in Ejectment are appropriate where a property owner seeks judicial relief to assert his right in real property where another party has encroached upon the former’s property.  A common scenario for an Action in Ejectment would be one owner’s erection of a structure which encroaches upon the aggrieved party’s property.  Essentially, an Action in Ejectment will lie where a party has usurped use or possession of the aggrieved party’s property.

In contrast, an action in Quiet Title will lie “where an action in ejectment will not lie” and may be utilized  to “determine any right, title, or interest in the land or determine the validity or discharge of any document, obligation or deed affecting any right, lien, title or interest in land.”  Actions in Quiet Title may also be brought to compel another party to initiate an action in Ejectment, compel the filing, recordation, cancellation or surrender of a document affecting an interest in land, admit the validity or invalidity of a document affecting an interest in land, or to obtain possession of land sold at a judicial or tax sale.

Common circumstances where a Quiet Title Action is appropriate include such divers claims as establishing legal title as a consequence of adverse possession, compelling a party to record a document evidencing the satisfaction of a lien, adjudicating the existence or lapse of an easement, and cancelling a fraudulent or erroneous deed.

One of the most common sources of litigation involving real property is that of disputes between adjoining property owners.  Of these disputes, many involve a disagreement regarding where the property line between the two parcels of land is actually located, and one party’s objection to his neighbor’s use of the property beyond the legal boundary between the properties.  Pennsylvania has a well-developed practical approach to such disputes where a line between the properties has been respected and acquiesced to for a requisite period of years. 

Pennsylvania Law disfavors hyper-technical, rigid determinations of real property rights where the facts and circumstances warrant a departure from the broader rules of general application. When an actual, de facto boundary between two adjoining properties exists apart from the legal descriptions of both properties by deed, Pennsylvania Law provides that property lines which are respected and mutually acquiesced to for a statutory prescribed period of twenty-one (21) years become the legal boundary between the properties. In a reported case as early as 1817, the Pennsylvania Supreme Court recognized the doctrine of “Consentable Lines” to settle issues concerning mistakes as to the boundary between adjoining properties. Sometimes referred to as “boundary by consent and acquiescence,” the Doctrine of Consentable Lines permits the passing of title to property where adjoining landowners establish a mutually respected boundary either by mistake and inadvertence or dispute and compromise, each landowner claims and occupies the land on his side of the boundary as his own, and the occupation continues uninterrupted for a period of twenty-one (21) years.  This twenty-one year requisite can include “tacking” of years from one owner to his successor in order to aggregate to a twenty-one year sum. 

As a matter of judicial policy, the doctrine functions as a rule of repose to quiet title and to discourage vexatious litigation, where no real dispute as to the validity of the boundary existed for such a period of time although the actual metes and bounds of the property may have varied from the boundary as respected by each property owner.  Consentable Lines may be used to quiet title and reflect a respected boundary as a legal boundary when, after the period has passed, one property owner (or his successor) objects to the other property owner’s use of the property up to the respected boundary – which often includes the erection of a structure – and demands that such use be ceased or the structure removed.

The Pennsylvania Uniform Fraudulent Transfers Act, (PUFTA) 12 Pa.C.S.A. § 5101 et seq., grants a statutory remedy to creditors where a debtor has acted to hinder his creditors and identifies several factors for scrutinizing transfers as fraudulent to creditors.  Where a transfer has been proven to be fraudulent as to a debtor’s creditors, remedies available to a creditor include voiding the fraudulent transfer, attaching the transferred property, injunctions against the debtor’s future disposition of assets, and Court appointment of a receiver to take charge of fraudulently transferred assets.
 

The statutory language defines a fraudulent transfer as a transfer made by a debtor “with actual intent to hinder, delay or defraud,” or a transfer made by a debtor  “without receiving reasonably equivalent value in exchange for the transfer or obligation.”  In assessing information to determine the efficacy of pursuing the collection of a debt where the debtor makes representations that he is insolvent and unable to pay the debt, it is important that the creditor diligently pursue certain information regarding the debtor’s transfer of assets and property to establish that the debtor has acted with “intent to hinder, delay or defraud” one or many creditors.
 

The most common kinds of fraudulent transfers seen in collection efforts are sham “paper transfers;”  transfers in which the debtor attempts to transfer legal title to property or assets while retaining the use and enjoyment of the property or assets.  In the context of corporate debtors, often the transfer of property or assets will be from the corporation to an “insider” for less than fair market value, yielding an undercapitalized corporation without sufficient assets and cash to satisfy a debt or judgment.  These sham transactions are particularly common where a corporation engages in a business that is cyclical and on the downslide of a cycle – the corporate “insiders” will squeeze substantially all of the income and assets from a corporation when business slows, leaving the corporation’s suppliers and other debtors with an insolvent, empty shell corporation that cannot satisfy its debts.  
 

Take, for instance, a situation in which a debtor corporation is threatened to be sued or sued for a substantial debt, and the corporation subsequently sells corporate assets or property to a corporate shareholder, board member, or officer at a “discount” of the property or asset’s fair market value – if the debtor then secures a judgment against the corporation, the sale of the corporation’s assets to a corporate insider at a “discount” may be shown to have been a fraudulent transfer.
 

Another example of a fraudulent transfer often seen in collections is the popularly believed notion that a debtor can escape a financial obligation by “putting property in someone else’s name,”  – most often a spouse or other family member – while retaining use and enjoyment of the assets or property.  For example, if an individual debtor with a money judgment against him engages in a sham sale of his car to his daughter, but no funds exchange hands or a nominal amount changes hands, and the debtor continues to use the car as if it was his own, the sham sale can most likely be avoided, and the car attached as property of a debtor pursuant to a money judgment.

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

Many Contractors may have become familiar with the recent Amendments to the Pennsylvania Mechanics’ Lien Law which became effective in January of 2007.  Those Amendments were the first Amendments to the Law since the Law’s adoption in 1963, and reflected an effort on the part of the Pennsylvania Legislature to re-assert the Contractors’ and Subcontractors’ right to file Mechanics’ Liens for non-payment by restricting effective Up-front Lien Waivers and providing a bonding procedure to ensure payment where Up-front Waivers were required.  For residential projects, Up-front Mechanics’ Lien Waivers were permitted only for projects for which the dollar value of the entire project was less than $1,000,000.00.  This dollar figure threshold seems to have created more questions than it answered, and created a good deal of ambiguity for Owners, Contractors, and Subcontractors in practice.

In response, the Pennsylvania Legislature has just amended its prior amendments to replace the million dollar threshold with a statutory test for a residential project for which Up-front Lien Waivers may be obtained.  Effective October 10, 2009, Up-front Mechanics’ Lien Waivers can be obtained for residential projects upon which will be built a residential structure not more than three stories in height, exclusive of any basement level.   Therefore, it would seem that most single family style residential projects can be the subject of Up-front Lien Waivers, increasing the chance that Contractors and Subcontractors will experience payment problems for work performed on residential projects.

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics’ Liens in Pennsylvania, click here.

Often times, Demolition contractors and Landscaping contractors will ask whether their services and the materials used in their trades constitute a proper basis for a Mechanics’ Lien Claim in order to preserve a likelihood of payment.  Knowing what is, and what is not properly lienable work and materials is something that every contractor should be mindful of when assessing different jobs.

Mechanics’ Liens have been traditionally closely associated with the improvements (i.e. the buildings or like structures) to real property much more than the land itself.  Early cases found Mechanics’ Liens extinguished due to the accidental destruction of a structure in a fire or flood, reasoning that the improvements had been removed and with them the contractor’s right to a Lien for work performed.  Subsequent to these early cases, the Mechanics’ Lien procedure was codified by statute, which defined a contractor as “one who,  by contract with the owner, express or implied, erects, constructs, alters or repairs an improvement or any part thereof  .  .  .”   Therefore, the right to Lien does not traditionally attach to land per se. 

This concept is important in order to understand when attempting to figure whether certain work – including demolition, excavation, and landscaping falls within the above definition.  In an attempt to guide contractors, the Mechanics’ Lien Law provides that “erection, construction, alteration, or repair includes  .  .  . [d]emolition, removal of improvements, excavation, grading, paving  and landscaping when such work is incidental to the erection, construction, alteration or repair.”  Therefore, under this definition, demolition of a structure or part of a structure for the purpose of erecting a new structure or addition is most likely the proper subject of a Lien Claim, whereas the demolition of a structure simply to clear the property most likely cannot give rise to a proper Lien Claim.  Landscaping contractors will similarly find that their Lien rights are strongest when they provide services and materials to finish new construction, but that the very same services and materials around an existing structure probably will not give rise to a proper Lien Claim. 

Many times a majority shareholder seeking to squeeze-out a minority shareholder will deliberately withhold information relating to the closely held corporation. Withholding information is usually coupled with another form of oppression. The reason for the same is by leaving the minority shareholder in the dark about the status of the corporations and the actions of its officers and directors the minority shareholder will be unaware of the other forms of oppression. For example, a majority shareholder may award herself an excessive salary without disclosing that it or the underlying financial data which would reveal the excessive nature of the salary.  By keeping the minority shareholder in the dark she will more often than not be in a position to complaint about it.

Unfortunately, unlike publicly traded companies which have disclosure and reporting requirements pursuant to federal securities laws, shareholders in a closely held corporation do not have such broad disclosure requirements. Nevertheless, state courts have recognized that a person who owns shares in a closely held company is a part owner of that company who is entitled for participation of their interest, to information about the company.  The problem is Courts differ on what shareholders are entitled to receive under their state’s laws and what obligations corporate managers have affirmatively to supply information.

Fortunately, the right of a shareholder to inspect corporate records has long been established in Pennsylvania common law. Simms v. Exter Architectural Products, Inc., 868 F. Supp.  668, 674 (M.D. Pa. 1994). That right was codified by the Pennsylvania legislature. 15 Pa. C.S. § 1508(B).   That statute requires the requesting shareholder to send a written request stating the purpose for the inspection of the company’s books and records. The request must request that the inspection occur during the usual hours of the business and provide the name of the person, agent or attorney who is going to conduct the inspection. A proper purpose is anything reasonably related to the interest of the shareholder.  15 Pa. C.S. §1508(B).  If the majority shareholder or company refuses to make the documents available for inspection, the requesting party has the right to file an action seeking the same.