Matarazzo v. Millers Mut. Group, Inc.

927 A.2d 689

Lucy M. MATARAZZO and Vincent Matarazzo, Appellants v. MILLERS MUTUAL GROUP, INC., a Pennsylvania Corporation, and the Municipal Authority of Westmoreland County.

No. 554 C.D. 2006.

Commonwealth Court of Pennsylvania.

Argued May 9, 2007.

Decided July 2, 2007.

Lawrence F. Becker, III, Greensburg, for appellants.

Anthony J. Vigilante, Lower Burrell, for appellee, Municipal Authority of Westmoreland County.

BEFORE: LEADBETTER, President Judge, and COLINS, Judge, and McGINLEY, Judge, and FRIEDMAN, Judge, and COHN JUBELIRER, Judge, and SIMPSON, Judge, and LEAVITT, Judge.

OPINION BY Judge FRIEDMAN.

Lucy M. Matarazzo and Vincent Matarazzo (Plaintiffs) appeal from the February 17, 2006, order of the Court of Common Pleas of Westmoreland County (trial court) granting the preliminary objections in the nature of a demurrer filed by the Municipal Authority of Westmoreland County (Authority) and dismissing Plaintiffs' complaint as to the Authority.¹ We affirm.

On August 23, 2005, Plaintiffs filed a complaint against the Authority, asserting, in part, the following facts. In June of 2003, Plaintiffs directed the Authority to turn off the water to their vacant property, which is located at 402 Wood Street. An Authority employee advised Lucy Matarazzo that the water would be turned off. Thereafter, the Authority provided Plaintiffs with a bill indicating that it was a final statement. In reliance upon the employee's representation and the final billing statement, Plaintiffs reasonably believed that the water was turned off. The Authority did not turn off the water to the property, and, as a result, during extremely cold weather, the pipes in the home froze and broke, flooding the home and damaging the structure and Plaintiffs' personal property. (Complaint, ¶¶ 1-18.) Count I of the complaint, captioned as a claim of detrimental reliance against the Authority, reasserts the above facts and alleges that the injuries to Plaintiffs' property resulted directly from their reasonable reliance on the Authority's assurance that the water would be turned off. (Complaint, ¶¶ 22-30.) Plaintiffs seek damages in excess of thirty thousand dollars ($30,000).

The Authority filed preliminary objections in the nature of a demurrer, asserting immunity under the statute commonly known as the Political Subdivisions Tort Claims Act (Tort Claims Act), 42 Pa.C.S. §§ 8541-8542. Specifically, the Authority argued that the exception to immunity set forth at section 8542(b)(5) of the Tort Claims Act, 42 Pa.C.S. § 8542(b)(5) (utility service facilities) does not apply because the water pipes that froze are not owned by the Authority or located within a right-of-way owned by the Authority.² Plaintiffs contended that they have pled a cause of action based upon a theory of detrimental reliance, or promissory estoppel, and, therefore, the doctrine of governmental immunity does not apply.

The trial court concluded that the damages Plaintiffs seek are in the nature of tort damages. The trial court relied upon our decision in Sims v. Silver Springs-Martin Luther School, 155 Pa.Cmwlth. 619, 625 A.2d 1297, appeal discontinued, 537 Pa. 636, 642 A.2d 489 (1993), which held that the legislature never intended for a local agency to be held liable for tort damages under a contract theory. Accordingly, the trial court granted the Authority's preliminary objections and dismissed Plaintiffs' complaint as to the Authority.

On appeal to this court,³ Plaintiffs argue that the trial court erred in granting the Authority's preliminary objections because Plaintiffs pled a cause of action for detrimental reliance, a claim that is outside the scope of governmental immunity provided by the Tort Claims Act.

Detrimental reliance is another name for promissory estoppel. Travers v. Cameron County School District, 117 Pa. Cmwlth. 606, 544 A.2d 547 (1988). Under this theory, a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee and which does induce such action or forbearance is binding if justice can be avoided only by enforcing the promise. Restatement (Second) Contracts § 909(1) (1981). In effect, the detrimental reliance of the promisee creates the consideration necessary for the formation of a contract, the breach of which is actionable. Travers. See also Crouse v. Cyclops Industries, 560 Pa. 394, 745 A.2d 606 (2000) (holding that the doctrine of promissory estoppel sounds in contract law and, like other contract actions, is subject to the four-year statute of limitations set forth at 42 Pa.C.S. § 5525). The doctrine of promissory estoppel is the law in Pennsylvania. Thatcher's Drug Store of West Goshen, Inc. v. Consolidated Supermarkets, Inc., 535 Pa. 469, 636 A.2d 156 (1994).

In response to the Authority's assertion of governmental immunity, Plaintiffs rely on Travers and Herzfeld v. City of Philadelphia, No. 84-5014, 1985 WL 2700, 1985 U.S. Dist. LEXIS 16020 (E.D.Pa. September 13, 1985), as cases that allow for a suit against a governmental agency even where the claim does not fall within an exception to immunity under the Tort Claims Act. In Travers, the school district hired James E. Travers (Travers) for a teaching position. Upon accepting the job, Travers moved from Ohio to Pennsylvania. After school started, the school district learned that Travers did not have the proper teaching certification. The school district informed Travers that he had until the beginning of the second semester to acquire the certification and that failure to do so would result in the cancellation of his contract. Because classes necessary to obtain certification were already underway, Travers was unable to obtain certification.

Travers filed a complaint against the school district, alleging in part that the district, through its agents/employees, had assured him when it offered him the position that he was qualified for the position and had promised Travers that it would prepare and submit the requisite Pennsylvania certification application if Travers accepted the position. Travers alleged that the school district failed to do so, breaking its promise, that he relied on their promises and inducements and that he suffered irreparable financial harm, which was foreseeable to the school district.

The trial court dismissed Travers' action for failure to state a cause of action. Our court reversed, holding that the allegations and inferences were sufficient to state a cause of action based on promissory estoppel.⁴ Plaintiffs here assert that the holding in Travers establishes that the immunity normally afforded to a governmental entity may not be available when reliance upon the governmental agency's actions and words induces another into acting or forbearing from acting to that person's detriment.

Herzfeld involved a property owner, Gerald Herzfeld (Herzfeld), who was notified by letter from the assistant city solicitor that a hearing would be held on June 13, 1984, during which the city would seek an order to demolish his property. The building was demolished three weeks before the scheduled hearing, and Herzfeld filed suit in the district court against the city, the assistant city solicitor and other defendants, asserting a variety of claims under federal and state law. The case was tried before a jury, which found in Herzfeld's favor only on his theory of detrimental reliance and awarded damages in the amount of $562,000. In its ruling on post-trial motions, the district court concluded that Pennsylvania courts have held that the theory of promissory estoppel may be applied against governmental entities. Plaintiffs here concede that this court is not bound by the decision in Herzfeld, but they argue that it persuasively suggests that Pennsylvania law supports their claim for detrimental reliance against the Authority.

The Authority asserts that Plaintiffs are attempting to transform a negligence action into a contract action in an attempt to avoid the defense of governmental immunity. The Authority distinguishes Travers on the grounds that the facts of that case involved a negotiated employment situation that could not support a cause of action in tort. The Authority also asserts that the cases relied upon by the court in Herzfeld do not involve tort actions pled as actions in assumpsit supported by promissory estoppel, thus diminishing the persuasiveness of the decision in Herzfeld. The Authority maintains that, in contrast to the facts in Travers and Herzfeld, the facts of this case do not support a conclusion that a contract was formed or even contemplated by the parties.

The Authority points out that when it receives a request to turn off water, it may not determine whether it wishes to do so and then negotiate a mutually agreeable price for terminating service. Instead, it must turn off the water upon a customer's request.

The Authority characterizes the Plaintiffs' allegations as stating that: Plaintiffs called upon the Authority to perform a pre-existing duty (turning off the water); the Authority breached that duty by failing to shut off the water; and the Authority's breach of that duty resulted in frozen pipes and damages to Plaintiffs' building. The Authority notes that duty, breach, causation and harm are the essential elements of a cause of action in negligence, not contract, and the Authority argues that, in a situation where a real contract would not have arisen, it is improper to plead a quasi-contract into existence in a complaint.

More important, the Authority observes that Pennsylvania courts have consistently held that a plaintiff may not avoid the defense of governmental immunity by couching a claim for the recovery of tort damages under a breach of contract theory. For example, in Gilius v. Board of Supervisors of Fairview Township, 122 Pa.Cmwlth. 371, 552 A.2d 327 (1988), appeal denied, 523 Pa. 633, 564 A.2d 1262 (1989), the court rejected an attempt by landowners to recover...