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R & J Holding Co. v. Redevelopment Authority of the County of Montgomery

November 30, 2009

R & J HOLDING COMPANY, ET AL. PLAINTIFFS,
v.
THE REDEVELOPMENT AUTHORITY OF THE COUNTY OF MONTGOMERY, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Jones, J.

MEMORANDUM

I. Procedural History

Currently before this Court are Motions to Dismiss by all Defendants in the above-captioned matter. This case involves quite an extensive and somewhat tortured history, which is best summarized by the Honorable Legrome D. Davis in a suit originally filed by Plaintiffs in 2002 and bears repeating herein:

Plaintiff R & J Holding Company ("R & J Holding") is a Pennsylvania general partnership that owns the property known as 110 Washington Street, Borough of Conshohocken, Pennsylvania 19428 (the "Florig Property"). Compl. ¶ 1. Plaintiff RJ Florig Industrial Company, Inc. ("RJ Florig") is a Pennsylvania corporation that operates a steel processing business on the Florig Property. Id. at ¶ 2. Defendant Redevelopment Authority of the County of Montgomery (the "RACM") is a public entity established pursuant to the Urban Redevelopment Law (the "URL") of the Commonwealth of Pennsylvania, 35 Pa. Cons.Stat. Ann. § 1701, et seq. Id. ¶ 3. Defendant Donald W. Pulver ("Pulver") is the principal of Defendants Greater Conshohocken Improvement Corporation (the "GCIC") and TBFA Partners, L.P. ("TBFA"). Id. at ¶¶ 4-6.

On January 1, 1986, the RACM entered into an agreement (the "1986 Agreement") with the GCIC regarding the redevelopment of blighted areas in the Boroughs of Conshohocken and West Conshohocken. Compl. Ex. A at 1. Pursuant to Section 3(c)(4) of the 1986 Agreement, the RACM was to acquire by eminent domain properties in the Boroughs' specified project area and to convey them to the GCIC for development. Id. at 5. The RACM, however, could not exercise its eminent domain powers except at the specific request of GCIC. Id. at 6. The GCIC, in turn, was required to compensate the RACM for all costs incurred in connection with the acquisitions, and was to provide security for any takings in accordance with a formula set forth in the 1986 Agreement. Id. at 6-8.

On October 13, 1993, the RACM entered into another agreement (the "1993 Agreement") with the GCIC whereby the RACM agreed to "forthwith, commence legal acquisition proceedings against [the Florig Property]" and to "take whatever steps are necessary to acquire, pursuant to the Eminent Domain Code, and any other applicable statute, title to the fee and possession of [the Florig Property]." Compl. Ex. C at 2-3. The RACM was to fund the acquisition of the Florig Property by using the funds provided by a grant from the Commonwealth. Id. at 3-4. The GCIC, in turn, was to cover all direct condemnation costs that exceeded the Commonwealth's grant. Id. at 4. Finally, neither the Borough of Conshohocken nor the RACM was "authorized to file a Declaration of Taking of [the Florig Property] without the prior written consent of the [GCIC]." Id. at 7.

On March 14, 1995, the RACM entered into an agreement (the "Surety Agreement") with TBFA in which the rights and obligations of the GCIC under the 1993 Agreement were assigned to TBFA. Compl. Ex. D. at 1. Among the responsibilities and obligations which TBFA agreed to assume were those to pay any funds necessary for acquisition of the Florig Property which were not paid by the Commonwealth's grant, and to provide surety to the RACM that such payments would be forthcoming when due. Id. Pursuant to the Surety Agreement, TBFA posted security for the taking in the amount of $775,000 less $247,035 attributable to costs already paid. Id. This security was "posted to induce [RACM] to commence acquisition and condemnation proceedings in order to acquire the Florig [Property]." Id. at 2.

On July 11, 1996, the RACM filed a Declaration of Taking for the Florig Property. Compl. ¶ 31. On August 26, 1996, R & J Holding filed preliminary objections to the Declaration of Taking and, on June 4, 1997, it filed amended preliminary objections to the Declaration of Taking. See Condemnation of 110 Washington St., Borough of Conshohocken, Pennsylvania, by the Redevelopment Auth. of the County of Montgomery, For Urban Renewal Purposes, 767 A.2d 1154, 1157 (Pa.Commw.Ct.2001). The preliminary objections alleged that the Declaration of Taking be set aside because: (1) the RACM had unlawfully delegated its eminent domain powers to Pulver; (2) the RACM acted in bad faith condemning the subject property; and (3) TBFA posted inadequate security for the condemnation. Id.

On December 17, 1998, the Pennsylvania Court of Common Pleas issued an order (the "December Order") overruling R & J Holding's preliminary objections based on unlawful delegation and bad faith. Id. The court, however, determined that the security that had been posted was inadequate, and directed TBFA to post an additional $750,000 in security. Id. R & J Holding filed an appeal in the Pennsylvania Commonwealth Court. Id. R & J Holding asserted that the Court of Common Pleas erred in overruling its preliminary objection based on unlawful delegation and bad faith, and that the court's evidentiary errors during the hearing on the preliminary objections required a new hearing. Id.

On February 13, 2001, the Commonwealth Court held (the "February Order") that the Court of Common Pleas erred in overruling R & J Holding's preliminary objection to the Declaration of Taking filed by the RACM and, as a result, reversed the December Order. Id. Specifically, the Commonwealth Court found:

It is clear that the actions of [the RACM] in this case were beyond those conferred by the URL. It is true that [the RACM] ultimately filed the Deceleration of Taking for [the Florig Property]. However, under the Agreements, [the RACM] was purportedly not authorized to take this action without Pulver's prior written consent. Thus, Pulver directed the condemnation of [the Florig Property]. [The RACM] was merely acting on Pulver's behalf. Such an exercise of eminent domain is clearly beyond the provisions of the URL, and is patently without authority of law. Moreover, any agreement which purportedly transfers such powers to a private individual must be deemed to be void and unenforceable. Id. at 1160.

On March 1, 2001, the RACM entered into an agreement (the "March Letter Agreement") with GCIC and TBFA whereby the GCIC and TBFA agreed to continue working with the RACM in connection with its redevelopment efforts in the Conshohockens. Compl. Ex. E. The March Letter Agreement provides:

[T]he Board of the Redevelopment Authority has acted to appeal the decision of the Commonwealth Court to the Pennsylvania Supreme Court and has authorized legal counsel for the [RACM] to file a petition for allocater seeking review of the Commonwealth Court order. The Redevelopment Authority seeks to reverse the order of the Commonwealth Court, to reinstate the validity of the aforementioned agreements and to uphold the condemnation of [the Florig Property].

Id. at 1. The March Letter Agreement further provides:

If this letter is accepted by GCIC and TBFA, the Redevelopment Authority would continue to recognize GCIC as its developer within the area covered by the agreement dated as of January 1, 1986, and, in particular, the redeveloper of the [Florig Property] if and when such condemnation is successfully completed.... The obligations of the parties under the three contracts would continue with the exception that those provisions found by the Commonwealth Court to be in violation of public policy would be ...


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