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McGaffic v. City of New Castle

May 14, 2009

ROBERT W. MCGAFFIC, EXECUTOR OF THE ESTATE OF ELEANOR L. MCGAFFIC, DECEASED, AND ROBERT W. MCGAFFIC, IN HIS OWN RIGHT, AND GEORGE G. LOVE
v.
CITY OF NEW CASTLE, APPELLANT



The opinion of the court was delivered by: Judge Simpson

Argued: January 28, 2009

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE BERNARD L. McGINLEY, Judge , HONORABLE DORIS A. SMITH-RIBNER, Judge, HONORABLE DAN PELLEGRINI, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JOHNNY J. BUTLER, Judge.

OPINION

In this interlocutory appeal by permission, the City of New Castle (City) seeks review of a verdict in favor of Robert W. McGaffic, Executor of the Estate of Eleanor L. McGaffic, Deceased, and Robert W. McGaffic, in his own right, and George G. Love (Property Owners), from a non-jury trial conducted in the Court of Common Pleas of Lawrence County (trial court). The bifurcated trial was limited to two questions: 1) whether the Property Owners' complaint alleging breach of contract was timely filed within the four-year statute of limitations, and 2) whether the City entered into an enforceable contract where the contract was not signed by the City Controller.*fn1 Following a verdict for the Property Owners on both issues, the City sought an interlocutory appeal, which the trial court certified pursuant to Pa. R.A.P. 1311. Thereafter, this Court granted the City's petition for permission to appeal. Upon review, we affirm the trial court.

I. Background

A. Redevelopment

The Centennial Building (Property) was a commercial rental property owned by the Property Owners in the downtown section of the City. In 1958, the New Castle City Council (City Council) created the Redevelopment Authority of the City of New Castle (RANC) to conduct urban renewal activities in the City. RANC participated in redevelopment activities with financial assistance from the United States Department of Housing and Urban Development (HUD), the Commonwealth of Pennsylvania, and the City.

In 1968, RANC filed a development plan for the City's downtown area. Subsequently, RANC informed the Property Owners and their tenants that the Property would be acquired, the tenants relocated, and the building demolished as part of the redevelopment of the City. By 1973, RANC acquired 96% of all properties located within the redevelopment area and had taken and destroyed all but five of the 212 buildings scheduled for demolition. At this time, RANC had neither acquired nor destroyed the Property.

By the end of 1974, HUD funds were no longer available to RANC. In 1977, the City and RANC entered into the Urban Redevelopment Closeout Agreement (Closeout Agreement). The Closeout Agreement, which is the basis for the present controversy, stated, "[a]ny costs or obligations incurred in connection with the said program with respect to claims which are disputed, contingent, unliquidated or unidentified, and for the payment of which insufficient program funds have been reserved . shall be borne by the [City]." Reproduced Record (R.R.) at 878a. The Closeout Agreement required the City to assume debts and liabilities for RANC and allowed the City to receive HUD funds directly. The City Council approved and the Mayor signed the Closeout Agreement, though the City Controller did not.

B. De Facto Taking Litigation

In 1978, RANC publically announced it no longer intended to take the Property. Subsequently, the Property Owners filed a Petition of Appointment of Viewers against RANC and the City to determine if a de facto taking of the Property occurred. At the time, the Property Owners failed to raise the existence of the Closeout Agreement, and the City was dismissed from the action. However, the trial court left open the possibility of later review of the City's liability if it found a de facto taking occurred and RANC could not pay just compensation because the City withheld the funds.

The de facto taking litigation continued against RANC alone. In 1986, the trial court found a de facto taking of the Property occurred.

In 1994, the Board of View issued a report valuing the Property at $184,000 at the time of the taking. After a series of appeals and motions by RANC, the trial court awarded delay compensation resulting in a final damage award of $1,254,007.92.*fn2 RANC appealed, and this Court affirmed the trial court with minor adjustments. See McGaffic v. Redev. Auth. of the City of New Castle, 732 A.2d 663 (Pa. Cmwlth. 1999).

C. Contract Litigation

RANC lacked funds to pay the de facto taking award, and the City refused to honor its obligation under the Closeout Agreement. Property Owners, as third-party beneficiaries of the Closeout Agreement, subsequently filed suit against the City.

Following a non-jury trial, limited to the issues of whether the Property Owners timely filed their complaint and whether the Closeout Agreement was enforceable, the trial court ruled in favor of the Property Owners on both issues. Thereafter, the trial court certified its ...


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