CONTRACTS

Breach of Contract • Residential and Commercial Real Estate • Government

Telwell, Inc. v. Public Sch. Employees’ Retirement Sys., PICS Case No. 14-0513 (Pa. Commw. April 1, 2014) Jubelirer, J. (21 pages).

Petitioner Telwell, Inc. appealed the dismissal of its claim against respondents Public School Employees’ Retirement System and Grandbridge Real Estate Capital, Inc. Affirmed in part, remanded in part.

In 2003, Telwell borrowed $2.6 million from PSERS to refinance a Telwell property in Philadelphia. PSERS and Telwell executed a permanent loan commitment that set forth the terms of the loan, including the interest rate to be paid; a balloon mortgage note was further signed by the parties which included payment and interest provisions. Grandbridge collected Telwell’s payments and serviced the loan. In June 2011, Telwell pre-paid the remaining balance of the loan and discovered that the interest rate in the commitment and the interest rate in the balloon note were different. As a result, Telwell believed it was overcharged interest on the loan.

Telwell subsequently filed a complaint against PSERS and Grandbridge in the trial court alleging breach of contract. PSERS opposed stating the trial court lacked jurisdiction over respondents and the subject matter. The trial court ordered the breach of contract claim to be transferred to the Board of Claims. Telwell filed a restated claim which held the respondents breached the loan contract and owed it approximately $500,000 resulting from an overcharge of interest. Following discovery, Telwell sought summary judgment to which PSERS opposed arguing the board lacked jurisdiction. The board dismissed the claims pursuant to Commonwealth Procurement Code §102(f.1), holding it did not have subject matter jurisdiction over the loan contract.

Telwell appealed the dismissal of his breach of contract/duty of good faith claim arguing the board had broad jurisdiction to consider both matters that fall under and outside of the Commonwealth Procurement Code and its restated claim was filed pursuant to and in conformity with Commonwealth Procurement Code Chapter 17, which provided the board with jurisdiction that cannot be restricted by §102(f.1). Telwell further held that PSERS’s sovereign immunity was waived.

The appellate court was asked to determine whether the Board of Claims had jurisdiction pursuant to Commonwealth Procurement Code §102(f.1) to consider a breach of contract claim which arose from a contract between the PSERS and Telwell. The court held that §102(f.1) prohibited the board from considering loans made by the Commonwealth of Pennsylvania or a commonwealth agency and thereby affirmed the board’s decision to dismiss as it related to PSERS. Given the clear and unambiguous language of §102(f.1), the appellate court was constrained to hold the board did not have subject matter jurisdiction over the restated claim and PSERS was entitled to sovereign immunity. However, the court vacated the dismissal of Telwell’s claim against Grandbridge, a private entity without sovereign immunity, and remanded for the board to transfer those claims to the trial court for consideration.