IN THE COMMONWEALTH COURT OF PENNSYLVANIA College Woods Homeowners : Association, : : Appellant : : v. : No. 2212 C.D. 2013 : Trappe Borough : Argued: May 13, 2014 BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE COHN JUBELIRER FILED: July 7, 2014 College Woods Homeowners Association (College Woods) appeals from the Order of the Court of Common Pleas of Montgomery County (trial court), which granted the Motion for Summary Judgment of Trappe Borough (Borough) in College Woods contract action seeking to compel the Borough to accept the dedication of two streets, 1 along with emergency access ways (collectively, the Streets) within the College Woods residential development (the Development). Before this Court, College Woods argues that it is an intended third party beneficiary with standing to enforce a Subdivision and Development Agreement 1 These streets are known individually as Harvard Drive and Yale Court.
(Agreement) between Borough and the developer, Gambone Brothers (Developer), and that this Agreement imposes a duty on Borough to accept dedication of the Streets. The Development is a planned community organized pursuant to the Uniform Planned Community Act, 68 Pa. C.S. 5101 5414. On June 6, 1995, Borough Council approved, by resolution (the Resolution), final plans for the Development. 2 The Resolution imposed a number of conditions on approval of the Development s final plan, including payments of various fees and securities, completion of public improvements, creation of a homeowners association, and construction specifications. On September 6, 1995, Developer and Borough entered into the Agreement in which the Developer agreed, inter alia, to construct certain public amenities and improvements within the Development. The Agreement provided that public improvements would be constructed in compliance with Borough s standards and such improvements would be offered for dedication. By letter dated December 28, 2001, the Borough Engineer confirmed that the Development had been completed in compliance with the relevant requirements. Borough initially refused to release funds held in escrow to ensure the completion of public improvements to Developer, but did so after the Developer filed suit. By letter dated October 26, 2005, College Woods requested that Borough accept dedication of the Streets, but Borough has not accepted dedication of the Streets. College Woods asserts that it unsuccessfully attempted 2 The Resolution was amended on December 5, 1995 to refine some of its requirements. 2
litigation to compel Borough to accept dedication of the Streets, including an appeal pursuant to The Borough Code 3 and an action in mandamus. 4 On September 22, 2009, College Woods filed its Complaint in the current action, claiming that Borough had a contractual obligation pursuant to the Agreement to accept dedication of the Streets. After discovery, the parties filed cross-motions for summary judgment. By Order dated January 7, 2013, the trial court granted a motion by Borough to strike College Woods Motion for Summary Judgment as untimely 5 and denied College Woods Motion for Summary Judgment. By Order entered July 24, 2013, the trial court granted Borough s Motion for Summary Judgment. College Woods appealed the July 24, 2013 Order. In its opinion, filed pursuant to Rule 1925(a) of the Pennsylvania Rules of Appellate Procedure, the trial court determined that there were no material facts in dispute and held that, pursuant to the test articulated in Guy v. Liederbach, 459 A.2d 744 (Pa. 1983), and Scarpitti v. Weborg, 609 A.2d 147 (Pa. 1992), College Woods was not an intended third party beneficiary to the Agreement and, therefore, did not have standing to enforce the Agreement. The trial court also held that the Agreement did not impose an obligation on Borough to accept the 3 Act of February 1, 1966, P.L. (1965) 1656, as amended, formerly 53 P.S. 45101 48501. The Borough Code was repealed by the Act of April 18, 2014, P.L. 432, effective June 17, 2014. These provisions may now be found at 8 Pa. C.S. 101-3501. 4 The record does not contain information regarding the exact disposition of these previous cases. 5 The trial court issued an Order on February 3, 2012 directing that any dispositive motions be filed by March 5, 2012. Borough filed its Motion for Summary Judgment on March 5, 2012, but College Woods did not file its Motion for Summary Judgment until March 28, 2012. 3
public improvements offered for dedication. College Woods appeal is now before this Court. 6 On appeal, College Woods argues that it is an intended third party beneficiary of the Agreement and, therefore, has standing to enforce it, and also that the Agreement imposes a duty on the Borough to accept dedication of the Streets. We first address College Woods argument that it is an intended third party beneficiary of the Agreement. Preliminarily, we note that when interpreting the language of a contract, this Court s goal is to ascertain the intent of the parties and give it effect. TruServ Corp. v. Morgan s Tool & Supply Co., Inc., 39 A.3d 253, 260 (Pa. 2012). When the words of a contract are clear and unambiguous, the intent of the parties must be ascertained from the language employed in the contract, which shall be given its commonly accepted and plain meaning. Id. 6 The Pennsylvania Supreme Court has stated that an appellate court s standard of review of the grant of summary judgment is de novo and [the] scope of review is plenary, but that [t]he grant of summary judgment may be reversed only if the lower court committed an error of law. Pyeritz v. Commonwealth, 32 A.3d 687, 692 (Pa. 2011). With regard to the standard for summary judgment, the Supreme Court has stated: Id. A motion for summary judgment is properly made if there is no genuine issue of any material fact as to a necessary element of the cause of action. Pa. R.C.P. [No.] 1035.2(1). Summary judgment may be entered only when, even after examining the record in the light most favorable to the non-moving party, and resolving of all doubts as to the existence of a genuine issue of material fact against the moving party, the moving party is clearly entitled to judgment as a matter of law. 4
Generally, in order for a third party beneficiary of a contract to have standing to enforce a claim based on that contract, both contracting parties must have expressed an intention that the third party be a beneficiary, and that intention must have affirmatively appeared in the contract itself. Scarpitti, 609 A.2d at 149 (citing Spires v. Hanover Fire Insurance Co., 70 A.2d 828 (Pa. 1950) (plurality)). In Guy, the Pennsylvania Supreme Court carved out an exception to this rule, adopting Section 302 of the Restatement (Second) of Contracts, which states: 302. Intended and Incidental Beneficiaries (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. Guy, 459 A.2d at 751 (quoting Restatement (Second) of Contracts 302) (emphasis in original). The Supreme Court explained that: There is thus a two part test for determining whether one is an intended third party beneficiary: (1) the recognition of the beneficiary s right must be appropriate to effectuate the intention of the parties, and (2) the performance must satisfy an obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. Id. (quoting Restatement (Second) of Contracts 302). Put another way: The first part of the test sets forth a standing requirement which leaves discretion with the court to determine whether recognition of third party beneficiary status would be appropriate. The second part defines 5
the two types of claimants who may be intended as third party beneficiaries. If a party satisfies both parts of the test, a claim may be asserted under the contract. Scarpitti, 609 A.2d at 150. Thus, we must first determine whether recognition of College Woods right to enforce the Agreement is appropriate to effectuate the parties intention. This part of the test sets forth a standing requirement which leaves discretion [7] with the court to determine whether recognition of third party beneficiary status would be appropriate. Id. In Scarpitti, the Supreme Court concluded that individual homeowners were intended third party beneficiaries of an implied contract between a developer and an architect requiring him to review plans of lot purchasers in the subdivision for compliance with subdivision restrictions. Id. at 148. The subdivision restrictions prohibited garages larger than two and a half cars and required plans for buildings in the subdivision to be approved by the architect. Id. at 149. The homeowners submitted plans for homes with three-car garages, which the architect rejected, and they then built homes with smaller garages. Id. The architect, however, approved plans for homes designed by his firm with three-car garages, and the homeowners sued under the theory that they were third party beneficiaries to the implied contract between the developer and the architect. Id. at 149 & n.1. In looking to 7 This discretion appears to lie in the reviewing court rather than the trial court. For instance, when considering this prong of the test in Chen v. Chen, 893 A.2d 87, 94-96 (Pa. 2006), the Supreme Court analyzed this question as one of law, looking to various policy considerations without any deference to the trial court s determination. 6
whether recognition of the homeowners right to enforce the contract was appropriate to effectuate the parties intention, the Supreme Court considered that the purpose of the contract, whereby the architect would review proposed plans for compliance with recorded subdivision restrictions, was to make lots in the subdivision more attractive to potential buyers by assuring that all buyers would be subject to the restriction. Id. at 151. The Supreme Court determined that it was the homeowners who would have greatest interest in uniform enforcement of the restrictions and that they were the ones who benefitted from a vehicle for enforcement. Id. On this basis, the Supreme Court concluded that recognition of the homeowners right to enforce the contract would be appropriate to effectuate the intention of the parties. Id. Applying this rationale to the current case, College Woods meets the first prong of the test. Because, as we discuss further below, we conclude the Agreement contains a promise by Borough to Developer to accept dedication of the Streets, it is appropriate to effectuate the parties intention to recognize College Woods right to enforce that promise. College Woods alleges that the Borough Engineer has evaluated the Development and concluded that it had been completed in compliance with the Agreement. (Complaint 15, R.R. at 8a; Letter from Borough Engineer to Borough Manager (December 28, 2001), R.R. at 65a.) After litigation, Borough released the money held in escrow to ensure completion of the Development by Developer. (Complaint 16, R.R. at 8a; Answer 16, R.R. at 71a.) As in Scarpitti, College Woods is the main beneficiary of such a promise because it is obliged, pursuant to the Resolution, to maintain the Streets itself until their dedication is accepted. (Resolution 18, R.R. at 19a-20a.) Thus, once the 7
lots in the Development were sold and the funds held in escrow were released, Developer no longer had an interest in enforcing the Agreement, leaving only College Woods. Accordingly, there is sufficient evidence in the record to show that recognition of College Woods right to enforce the Agreement would be appropriate to effectuate the intention of Borough and Developer that Borough be obligated to accept dedication of the Streets. Thus, College Woods meets the first prong of the test set forth in Guy and Scarpitti. We, therefore, turn to the second prong of the test whether the circumstances indicate that Developer intended to give College Woods the benefit of Borough s promise to accept dedication of the Streets. In Scarpitti, the Supreme Court was convinced that the developer intended to give the property owners the benefit of enforcement of the subdivision restrictions because they were among the limited class of persons who would benefit from such enforcement. Scarpitti, 609 A.2d at 151. Similarly, in this case as discussed above, College Woods and its constituent members are the only parties with an interest in enforcing Borough s obligation to accept dedication of the Streets. Moreover, in determining whether circumstances indicate that Developer intended to give College Woods the benefit of Borough s promise, this Court may look to the provisions of the Agreement to determine the intention of the parties. Victoria Gardens Condominium Association v. Kennett Township, 23 A.3d 1098, 1105-06 (Pa. Cmwlth. 2011) (looking to the purposes expressed by the parties for entering into the contract in question in determining whether they intended to 8
benefit putative third party beneficiary). 8 The Agreement evidences an intention to benefit not only Developer and Borough, but also potential purchasers of properties in the Development, such as College Woods members. One of the express purposes of the Agreement is to ensure the Development will be completed in accordance with certain standards. The Agreement provides that its purpose is to set forth the conditions according to which the Development was to be completed, stating WHEREAS, the parties now wish to evidence the terms and conditions of the construction of the public improvements and conditions for the development of said property. (Agreement at 2, R.R. at 30a.) More specifically, the Agreement requires that: buildings in the Development will comply with relevant building codes, (Agreement III(11), R.R. at 43a); public improvements, including lighting, roads, a water system, landscaping, and a drainage system must be constructed in the Development in a workmanlike manner, (Agreement I(1)- (2), III(8)-(10), R.R. 31a, 42a-43a); emergency access roads must be established, (Agreement II(1)(g), R.R. at 33a); and Developer was required to provide security to ensure the completion of the public improvements, (Agreement I(4), II(1)(f), V, R.R. at 31a-33a, 46a-50a), and inspection of buildings in the Development, (Agreement II(4), R.R. at 36a-37a). 8 In Victoria Gardens, a condominium association asserted third-party beneficiary status to attempt to compel a municipality to accept dedication of and complete roads and other common improvements in the condominium development after the developer failed to complete them. Victoria Gardens, 23 A.3d at 1102. This Court held that the condominium association was not an intended third-party beneficiary with standing to compel the municipality to complete the streets and other improvements. Id. at 1106-07. Importantly, in Victoria Gardens, the contract at issue specifically provided that it was the developer s responsibility to complete the roads and other common improvements and that the municipality in question was intended to benefit from the contract by receiving completed roads and improvements. Id. at 1106. In this case, by contrast, the Streets have been completed per the terms of the Agreement. 9
While these provisions may offer a benefit to the Borough, they largely benefit potential purchasers in the Development and, therefore, as in Scarpitti, evidence an intention in the Agreement to benefit College Woods and its constituent members. Thus, College Woods meets the second prong of the test set forth in Guy and Scarpitti. Because both prongs of the test are met, the trial court erred in determining that College Woods could not demonstrate that it was an intended third party beneficiary to the Agreement. Next, we address the issue of whether College Woods can establish that the Agreement imposes a duty on Borough to accept dedication of the Streets. This, like the previous issue, is a matter of contract interpretation. As before, we must look to the language of the Agreement to ascertain the intention of the parties. TruServ Corp., 39 A.3d at 260. Although the Agreement does not contain an explicit provision that Borough will accept dedication of the Streets, College Woods argues that this promise is implicit throughout the Agreement. In fact, the Agreement does contain multiple instances of language requiring or contemplating the offer of dedication of public improvements to Borough and assuming Borough s acceptance of such offer. For example: DEDICATION 1. When the construction of installation of the public improvements shall have been fully completed and approved by the Borough Engineer in accordance with the Pennsylvania Municipalit[ies] Planning Code [9] and applicable ordinances of the Borough of Trappe, Owner/Developer shall tender to the Borough the following: 9 Act of July 31, 1968, P.L. 805, as amended, 53 P.S. 10101 11202. 10
(a) deeds of dedication, in customary form reasonably satisfactory to the Borough Solicitor, dedicating to the Borough those public improvements to be conveyed to the Borough.... (b) a bond with approved surety and in satisfactory form, if not previously furnished, or an escrow deposit of cash or securities... in the amount required for maintenance bond... for a period of eighteen (18) months..... 2. Prior to acceptance of dedication, the following must occur: (a) the Borough shall have received from Owner/Developer all sums due and owing as security deposits or reimbursements under the provisions of this Agreement; (b) the Borough shall have received all fees and monies due and owing to the Borough, pursuant to this Agreement and any and all ordinances of the Borough of Trappe; (c) all documents required herein shall be executed and delivered in a form reasonably approved by the Borough Solicitor. 3. Title to all property dedicated shall be such as will be insurable by a reputable title insurance company.... All costs in connection with the deed of dedication are to be borne by Owner/Developer. (Agreement IV, R.R. at 44a-45a.) Thus, there is language in the Agreement requiring Developer to complete and receive approval from the Borough Engineer for the public improvements, which would then be tendered to the Borough for dedication, and assuming Borough acceptance of the dedication as long as the terms had been met. Although not specifically defined in the Agreement, the Resolution includes all roadways in a list of public improvements. (Resolution 11(b), R.R. at 15a-16a.) The Agreement contemplates that public improvements, including the Streets, would not only be offered for dedication, but accepted during Developer s involvement with the Development. For instance, the Agreement requires Developer to provide a maintenance bond for a period of 18 months upon acceptance of such deeds of dedication. (Agreement V(3), R.R. at 49a.) The Agreement also requires Developer to transfer ownership of the public 11
improvements to Borough after the Borough Engineer certifies that the improvements have been completed pursuant to specifications. (Agreement V(6), R.R. at 50a.) Given such provisions, the Agreement shows that it was the intention of the parties that Developer not only offer the Streets for dedication, but that Borough accept the dedication once the terms of the Agreement had been met. Accordingly, we conclude that the trial court erred in granting summary judgment to Borough on the basis that College Woods did not have standing as a third party beneficiary to enforce the Agreement, and also erred in not imposing an obligation on Borough to accept dedication of the Streets. Therefore, we reverse the trial court s Order granting Borough summary judgment and remand this matter for further proceedings. 10 RENÉE COHN JUBELIRER, Judge 10 We note that College Woods does not, in its Notice of Appeal or Brief, challenge the trial court s January 8, 2012 Order dismissing College Woods Motion for Summary Judgment as untimely. 12
IN THE COMMONWEALTH COURT OF PENNSYLVANIA College Woods Homeowners : Association, : : Appellant : : v. : No. 2212 C.D. 2013 : Trappe Borough : O R D E R NOW, July 7, 2014, the Order of the Court of Common Pleas of Montgomery County in the above-captioned matter is hereby REVERSED and this matter is REMANDED. Jurisdiction relinquished. RENÉE COHN JUBELIRER, Judge