Martik Brothers, Inc. v. HUNTINGTON NATIONAL BANK v. KIEBLER SLIPPERY ROCK, L.L.C. On Appeal from the United…

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 09-1455
MARTIK BROTHERS, INC.,
Appellant
v.
HUNTINGTON NATIONAL BANK
v.
KIEBLER SLIPPERY ROCK, L.L.C.
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civ. No. 2:08-0083)
Honorable Arthur J. Schwab, District Judge
Argued November 3, 2009
BEFORE: SCIRICA, Chief Judge, and JORDAN and GREENBERG, Circuit Judges
(Filed: December 8, 2009)
Phillip 1. Binotto
Marcia L. DePaula
Jana P. Grimm
Eckert, Seamans, Cherin & Mellot
1001 Corporate Drive
Suite 200
Canonsburg, PA 15317
..

-- 1 of 14 --

Robert A. Graci (argued)
Eckert, Seamans, Cherin & Mellott
213 Market Street
8th Floor
Harrisburg, PA 17101
Attorneys for Appellant
Adam M. Barnes
Walsh, Collis & Blackmer
707 Grant Street
Suite 1400, The Gulf Tower
Pittsburgh, PA 15219
Charles W. Zepp (argued)
Porter, Wright, Morris & Arthur
925 Euclid Avenue
Suite 1700
Cleveland, OH 44115
Attorneys for Appellee
OPINION OF THE COURT
GREENBERG, Circuit Judge.
This matter comes on before this Court on an appeal from an order for summary
judgment entered in favor of the defendant-appellee Huntington National Bank
("Huntington") on January 14, 2009, in this action that plaintiff-appellant Martik
Brothers, Inc. ("Martik") brought against Huntington. See Martik Bros., Inc. v.
Huntington Nat'l Bank, 2009 WL 89282 (W.D. Pa. Jan. 14,2009) ("Martik"). The action
arose from Kiebler Slippery Rock, LLC's ("Kiebler") development of a student housing
2

-- 2 of 14 --

project ("Project") near Slippery Rock University in Slippery Rock Township, Butler
County, Pennsylvania. Huntington financed the Project in accordance with a
Construction Loan Agreement with Kiebler dated October 10, 2006, in which Huntington
agreed to provide up to $29,521,368 for construction to be secured by two mortgages on
the property on which Kiebler was constructing the Project. Martik was Kiebler's general
contractor on the Project pursuant to two contracts it entered into with Kiebler on or about
August 29, 2006. Though Huntington made its loan to Kiebler and not to Martik, it
disbursed proceeds from the loan by wire transfer directly to Martik upon receipt of
Martik's approved draws as work on the Project progressed.'
During the course of the construction financial difficulties arose on the Project
that resulted in Huntington not making payments on Martik's final draw in September
2007. Consequently, Martik initiated arbitration proceedings against Kiebler in
accordance with a standard arbitration provision in the construction contracts, and in
those proceedings Martik obtained an arbitration award against Kiebler for
$2,687,781.38, plus interest and costs to cover the shortfall.' Kiebler, however, is in
lIn its briefMartik explains that "[t]he parties agreed that Martik would send [its] pay
applications directly to Monica Butko, senior account relationship associate for
Huntington, with copies of the pay applications to Richard Dexter, construction risk
manager for Huntington, and Paul Kiebler." Appellant's br. at 5. As a matter of
convenience we refer to the pay applications as "draws" as does Huntington in its brief.
2Martik filed a petition to confirm the arbitration award in the Common Pleas Court of
Washington County, Pennsylvania, but Kiebler removed the proceedings to the District
Court. The parties in their briefs do not tell us the status of those proceedings.
3

-- 3 of 14 --

bankruptcy and has not paid the award. Martik did not have a contract with Huntington
and thus ordinarily Martik, as it recognizes, would not be able to look to Huntington for
payment on its contracts with Kiebler even though Huntington had been making payments
directly to Martik for its work on the Project.
Nevertheless Martik believes that Huntington is liable to it for an amount equal to
the arbitration award as a consequence of certain representations that Huntington made to
Martik. In this regard it is undisputed for purposes of these summary judgment
proceedings that Martik expressed its concerns about payment to Richard Dexter, a
Huntington construction risk manager, on three occasions? The first of the occasions
followed a meeting regarding the Project in June 2007 at which Kiebler, Martik and
Huntington were represented. Prior to that meeting Huntington had for a number of
months been aware of financial difficulties on the Project and the meeting was held to
address that situation. Following the meeting, Frank Martik, Martik's representative at
the meeting, asked Dexter who was present with another of Huntington's representatives,
whether Martik would have anything to worry about with respect to payment to it. Dexter
said "No. There's nothing to worry about." App. at 171. The other Huntington
3Huntington does not contend that notice to Dexter was not notice to Huntington.
Richard Dexter testified during his deposition that he did not recall the first two
conversations though he does not deny that they took place. Notwithstanding Dexter's
lack of memory, Huntington indicates that it "disputes the existence and contents of these
communications, but for purposes of the appeal, [it] understands that the Court must
consider the facts in the light most favorable to Martik .... " Appellee's br. at 4 n.1.
4

-- 4 of 14 --

representative present did not contradict Dexter on this point. Notwithstanding Dexter's
assurances to Frank Martik on the day ofthe meeting, Frank Martik obviously was
uneasy, as it later turned out with good reason, for the next business day he called Dexter
and again asked him if Kiebler had sufficient funds left in the loan to pay Martik for the
remainder of the work under its contracts. Dexter answered "yes."
Dexter's assurances, however, were misplaced because in September 2007, on the
third occasion when Frank Martik asked Dexter about payment for Martik's work on the
Project, at a time by which Martik substantially had finished its work but had not been
paid on its final draw, Dexter told him that there were not sufficient funds to cover the
draw. Frank Martik during his deposition indicated that if Dexter had told him in June
that the funds were not sufficient to pay Martik it would have pulled off the job. Instead,
Martik remained on the job, which now has been completed, and Martik thereby became
entitled to substantial additional payments on its construction contracts as evidenced by
the arbitration award." Significantly, notwithstanding Dexter's assurances to Frank
Martik in June 2007, when Dexter told Frank Martik that there were sufficient funds to
pay Martik, Dexter's contemporaneous internal Construction Monitoring Report showed
that there was a shortfall of $1,077,000 dollars on the Project. Dexter, however, did not
advise Frank Martik of the shortfall or of the report.
4Martik asserts that in reliance on Dexter's representations it "continued to perform
construction on the Project while incurring additional costs, which resulted in an
outstanding unpaid contract balance of$2,120,003.75." Appellant's br. at 23-24.
5

-- 5 of 14 --

By reason of its final draw on the Project not having been paid, Martik brought this
action against Huntington advancing three theories in support of its claim with which we
are concerned on this appeal. First, Martik contended that Huntington made
misrepresentations regarding the availability of funding under the construction loan to pay
Martik and the misrepresentations caused Martik to continue work on the Project and
thereby become entitled to payments which have not been made. Second, Martik
contended that it detrimentally relied on Huntington's promises and stayed on the Project
and thus Huntington, by reason of a legal theory predicated on promissory estoppel, is
liable for an amount equal to the arbitration award.' Third, Martik contended that
Huntington was unjustly enriched at Martik's expense and therefore is liable to Martik,"
Martik, 2009 WL 89282, at *1.
After completion of discovery, Huntington successfully moved for summary
judgment against Martik. In its opinion granting that motion the District Court explained
5We think that it would be incorrect to characterize Martik's damages claim as
asserting that Huntington was liable for the arbitration award, inasmuch as the award
included the amount for which Kiebler was liable under its construction contracts with
Martik and, as we have explained, Huntington is not liable under the contracts. Rather,
Martik is seeking to recover its losses from Huntington on the basis of a tort claim against
Huntington. We express no opinion on what the effect will be on Martik's arbitration
award if it makes a recovery against Huntington though we recognize that Huntington
may seek to subordinate to the arbitration award to the extent, if any, that it makes
payments to Martik.
"Martik also alleged that it was a third party beneficiary of the Kiebler-Huntington
Construction Loan Agreement, but the District Court rejected that theory. See Martik,
2009 WL 89282, at *4-6. Martik does not advance this contention in this Court so we do
not address it.
6
II

-- 6 of 14 --

that the elements of the tort of intentional misrepresentation under the applicable
Pennsylvania law are a misrepresentation which is material to the transaction at hand
made falsely, with knowledge of its falsity or recklessness as to whether it is true or false;
with the intent of misleading another into relying on it; justifiable reliance on the
misrepresentation; and a resulting injury being proximately caused by the reliance.
Martik, 2009 WL 89282, at *6. See Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999); Gibbs
v. Ernst. 647 A.2d 882, 889 (Pa. 1994). The District Court then set forth more completely
than we have done the history of the events leading to this litigation including the two
statements that Dexter made to Frank Martik in June 2007 regarding the availability of
funding and the circumstance that Dexter by that time had concluded that there was a
financial shortfall on the Project.
The District Court concluded from the facts that:
It is doubtful that Mr. Dexter's rather casual statements themselves or any
other evidence adduced by Martik can support an inference that the
representations were made falsely, with knowledge of their falsity or
recklessness as to whether they were true or false, or that Martik would be
justified in relying on such informal and non-specific conversations to
assure it that there were sufficient funds to complete the project and pay
Martik in full. [Huntington] offers evidence to support its contention that
Mr. Dexter reasonably believed that there would be sufficient funding
because, as Martik knew, Kiebler was looking for another source of
funding, and that his statements were therefore true.
Martik, 2009 WL 89282, at *7. The District Court then went on to explain that:
But even if the Court found a genuine issue of material fact on these
elements of the common law tort of intentional misrepresentation, Martik's
claim must fail in the complete absence of any evidence that might
7
..

-- 7 of 14 --

reasonably support an inference that Dexter's statements were made with
the intent of misleading Martik into relying on it and induce it to finish a
project it otherwise would not have. In lieu of actual evidence of intent,
Martik merely speculates that Dexter and [Huntington] must have intended
to mislead and induce Martik's reliance, extrapolating such intent from the
fact that they were aware of funding shortfalls before the statements were
made. Interestingly, although Martik claims that Frank Martik 'would have
pulled off and cut our losses' if Dexter's answer had been 'no,' Martik does
not aver that it communicated that to [Huntington].
Id.
After the District Court rejected Martik's misrepresentation claim," it held that
Martik could not recover on a detrimental reliance theory which it indicated is the
equivalent ofa claim predicated on promissory estoppel. Id. at 8. See Lehigh Valley
Hosp. v. County of Montgomery, 768 A.2d 1197,1200 (Pa. Commw. Ct. 2001). In
reaching this conclusion the District Court pointed out that Dexter merely said that there
was adequate funding for the Project but that "Dexter's responses to Martik cannot be
construed as a promise by [Huntington] to pay Martik for its work performed for Kiebler
nor can it be deemed a guarantee or a loan commitment." Martik, 2009 WL 89282, at *8
7Martik advances in this Court claims of both intentional and negligent
misrepresentation. The District Court, however, addressed a claim of intentional
misrepresentation but not negligent misrepresentation in granting summary judgment to
Huntington, Martik, 2009 WL 89282, at *6-8, possibly because as Huntington contended
in the District Court, Martik's complaint arguably did not state a claim for negligent
misrepresentation. At this time, however, we need not decide whether Martik adequately
pled negligent misrepresentation, though the District Court can consider that question on
iremand if it necessary to do so. Of course, we do not preclude Martik from seeking on
\th~ remand to ~mend its complaint to assert a claim predicated on negligent
rmsrepresentation.
8

-- 8 of 14 --

Though we do not agree with some aspects of the District Court's detrimental reliance
discussion that we have not quoted, we do agree with the language we quote on this point
and thus we will not reverse on the basis ofMartik's detrimental reliance theory or
address that theory any further in this opinion.
The District Court also rejected Martik's unjust enrichment claim which it
explained was "a synonym for quantum meruit," Martik, 2009 WL 89282, at *9. See
Mitchell v. Moore, 729 A.2d 1200, 1202 n.2 (Pa. Super. Ct. 1999). We agree with that
disposition because the only thing of value that Huntington can be said to have received
from Martik that could support a claim against it predicated on an unjust enrichment
theory was the advantage to Huntington of having the Project completed thereby making
its mortgage loans on the property more secure. But Martik does not contend on this
appeal, and so far as we are aware did not contend in the District Court, that Huntington
did not advance the funds that it agreed to supply when it entered into the Construction
Loan Agreement with Kiebler and thus we are satisfied that Huntington has paid what it
agreed to pay for the value ofMartik's performance under the construction contracts.
Therefore Martik's unjust enrichment claim must fail. See Meyers Plumbing and Heating
Supply Co. v. West End Fed. Sav. and Loan Ass'n, 498 A.2d 966,969 (Pa. Super. Ct.
1985). In any event, at oral argument in our Court Martik acknowledged that its unjust
enrichment claim did not add anything to its misrepresentation claim. Thus, we do not
address the unjust enrichment claim further.
9

-- 9 of 14 --

Martik now appeals from the order of January 14,2009.8 The District Court had
jurisdiction in this diversity of citizenship action pursuant to 28 U.S.C. § 1332 and we
have jurisdiction pursuant to 28 U.S.c. § 1291. We exercise plenary review on this
appeal and thus we can affirm only if there is no genuine issue as to any material fact and
Huntington is entitled to judgment as a matter oflaw. See Santos ex rel. Beato v. United
States, 559 F.3d 189, 193 (3d Cir. 2009); Fed. R. Civ. P. 56(c).9
Though we agree with the District Court's statement of Pennsylvania law setting
forth the elements of the tort of intentional misrepresentation, we are satisfied that the
Court should not have granted summary judgment to Huntington to the extent that the
Court rejected that theory. We, however, supplement the Court's statement ofthe law by
observing that Martik, in addition to asserting that Huntington intentionally
misrepresented the facts, may have intended to contend that Huntington was guilty of
negligent misrepresentation which, rather than requiring that the declarant actually know
of the falsity of its statement, merely should have known of its falsity. See Bortz v. Noon,
729 A.2d at 561.
8The District Court also granted Huntington's uncontested motion for summary
judgment for indemnification against third party defendant Kiebler for any judgment that
Martik obtained against Huntington. We, however, are not concerned with the third party
proceedings on this appeal and thus make no further reference to them.
9It should be understood that our factual recitations with respect to the events in this
case are only for purposes of this appeal from the grant of summary judgment. We do not
suggest that we are binding the District Court or a jury on remand to any factual
conclusion that we set forth now on the basis of the record before us.
10
II

-- 10 of 14 --

In explaining the reasons for our conclusion we start off by pointing out that
notwithstanding the District Court's characterization of Dexter's statements as "rather
casual," we see nothing casual about Dexter's two June 2007 statements when they are
considered together. Though it is true that Frank Martik's original inquiry of Dexter with
respect to Martik being paid followed a more formal meeting and thus standing alone
might be regarded as casual, there was nothing casual when he called Dexter the next day
and again asked about the sufficiency of the funds to pay Martik. Arguably it should have
been obvious to Dexter at that point that Martik had real concerns about getting paid and
was, quite understandably, inquiring about being paid from the source of the funds being
paid to it. In this regard we reiterate that Huntington had been disbursing proceeds from
the construction loan directly to Martik so it was logical for Martik to ask Huntington
about the availability of additional funds.
Moreover, although we certainly do not preclude the trier of the fact on the remand
that will follow this opinion from concluding that Dexter believed what he said about the
availability of sufficient funding to pay Martik, clearly the evidence supports an inference
that Dexter knew that his statements that there was sufficient funding were false or
reckless, or at a bare minimum so doubtful that a jury could believe that he was negligent
when he expressed them. In this regard we reiterate that at the same time that Dexter was
making the statements assuring Frank Martik that the funds were available to pay Martik,
Dexter had concluded that there was a shortfall of$I,077,000 on the Project, a conclusion
11

-- 11 of 14 --

he memorialized in a contemporaneous internal Huntington report. Moreover, we reject
the District Court's view that its grant of summary judgment was justified inasmuch as
Dexter "reasonably believed that there would be sufficient funding" because "Kiebler was
looking for another source of funding." Martik, 2009 WL 89282, at *7. After all, the
record does not demonstrate that Dexter had any way of knowing if Kiebler would obtain
that funding. In any event, arguably it should have been clear from the two conversations
considered together that Frank Martik was not asking Dexter whether the funding to pay
Martik would be there in the future. He was asking if it was there.
In reaching our conclusion we have not overlooked the District Court's conclusion
that it is doubtful that Martikjustifiably could rely on the "non-specific conversations"
between Frank Martik and Dexter. Rather, we cannot understand what was not specific
in Frank Martik's inquiries as to whether there was funding to pay Martik and Dexter's
answers that the funding was there. Indeed, it is difficult to understand how Frank
Martik's questions and Dexter's answers could have been more specific.
We also reject the District Court's view that Martik's claim must fail because there
was no evidence to support an inference that Dexter intended to mislead Martik and
thereby induce it to finish the Project even though funds to pay it were not available.
Quite to the contrary, we cannot help but wonder what the District Court thought Dexter
believed would have happened ifhe had told Frank Martik that, as proved to be the case,
there was not sufficient funding to pay Martik for its work, or ifhe said that he did not
12

-- 12 of 14 --

know ifthere was sufficient funding for that purpose. Surely Dexter had to believe that if
Martik doubted that it would be paid it would not complete the Project.
We recognize that the District Court correctly points out that Frank Martik did not
tell Dexter that Martik would pull off the job if the funding was not there, but Frank
Martik had no reason to do so because Dexter said that the funding was there.
Accordingly, though the District Court found that this point regarding Frank Martik not
telling Dexter that without an assurance of payment Martik would leave the job was
"interesting] ]," it is without significance because the evidence at least supports and
probably compels that an inference be drawn that Dexter was trying to keep Martik on the
job. How could the evidence not support that inference for surely, as Dexter was well
aware, it was in Huntington's interest that Martik finish the Project and thereby enhance
the value of Huntington's security?
In its brief Huntington heavily relies on its contention that "Dexter's alleged
representations regarding whether Kiebler has sufficient funds to pay Martik ... are
expressions of opinion and not statements of existing fact." Appellee's br. at 11. On the
basis of that contention any statement of fact can be repackaged as an opinion.
Huntington was financing the Project and was closely monitoring the use ofthe funds it
was advancing. Frank Martik asked Dexter point blank as the construction was nearing
its conclusion whether Kiebler had sufficient funds to pay Martik, and Dexter gave an
unequivocal answer of ''yes.'' Thus, Dexter did not hedge his answer in the slightest and
13

-- 13 of 14 --

say, for example, '"I think so." Ifthe bank financing the Project did not know the answer
to Frank Martik's question then who would? On these summary judgment proceedings
we must regard the record as supporting a conclusion that Martik had every right to
regard Dexter's statements as setting forth a fact, not an opinion. Dexter's statements
cannot be equated to a stock broker's opinion of what a security will be worth at some
future date. Frank Martik was inquiring whether the funding was there, not whether
Kiebler could raise the money to pay Martik.
For the foregoing reasons the order of January 14,2009, will be reversed and the
case will be remanded to the District Court so that Martik may proceed on its
misrepresentation claim.
14

-- 14 of 14 --