## Facts

- Harry W. Koch, Alice M. Koch, and Joyce M. Meehan (homeowners) sought financing to pay for home-improvement work on their residences.
- The homeowners obtained home-equity loans from First Union National Bank of Delaware (First Union).
- The loans were arranged through First Union’s contractor, Pennsylvania Resource Corporation (PRC), and PRC’s broker, First Liberty Financial Services, Inc. (First Liberty) (collectively, the defendants).
- During the loan and home-improvement process, PRC and First Liberty provided advice and supplied estimates related to costs and payments.
- The homeowners alleged they ultimately paid amounts far above the estimates provided during the transaction.
- The homeowners filed an amended complaint asserting multiple theories, including that a confidential relationship existed between the homeowners and the defendants, creating fiduciary duties.
- The amended complaint alleged the defendants breached fiduciary duties by misleading the homeowners with inaccurate estimates and by engaging in unfair trade practices.
- The defendants filed preliminary objections, contending that the pleadings described an ordinary creditor/consumer transaction and did not state facts establishing any fiduciary duty.

## Issues

1. Whether the homeowners’ allegations about advice and estimates in connection with the home-equity loans sufficiently pleaded a confidential relationship giving rise to a fiduciary duty under Pennsylvania law.
2. Whether equitable relief premised on a fiduciary relationship—such as an equitable accounting—could proceed when the complaint did not plead facts establishing that relationship.

## Decision

- The court sustained the defendants’ preliminary objections to the extent the amended complaint attempted to impose fiduciary duties based on an alleged confidential relationship in the home-equity loan transaction.
- The court held the homeowners’ allegations did not establish a fiduciary or confidential relationship between the homeowners and the lender and its contractor/broker in this credit transaction.
- Because a fiduciary relationship was not adequately pleaded, the court rejected fiduciary-dependent equitable relief, including an equitable accounting.

## Legal Principles

- In Pennsylvania, a lender–borrower relationship in a routine credit transaction is generally an arm’s-length relationship and does not, by itself, create fiduciary duties.
- A confidential (fiduciary) relationship requires well-pleaded facts showing that one party placed special trust in the other and that the other party exercised controlling influence or dominance arising from that trust.
- Allegations that a lender’s agents or intermediaries provided advice or estimates during a consumer loan transaction, without facts showing control or domination, are not enough to transform the relationship into a fiduciary one.
- An equitable accounting is not available solely because a plaintiff alleges overcharges or inaccurate figures; the remedy typically depends on a fiduciary relationship (or other recognized bases in equity) and the absence of an adequate legal remedy.

## Conclusion

*Koch v. First Union Corp.* treated the homeowners’ home-equity loan and home-improvement financing arrangement as a standard creditor transaction and concluded that allegations of advice and inaccurate estimates did not plead the type of confidential relationship required to impose fiduciary duties; as a result, the court sustained preliminary objections to fiduciary-based claims and declined to allow fiduciary-dependent equitable relief such as an accounting.


Koch v. First Union Corp., 2002 WL 372939 (2002)