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Victoria Gardens Condominium v. Kennett Township of Chester County

January 21, 2011

VICTORIA GARDENS CONDOMINIUM ASSOCIATION, APPELLANT
v.
KENNETT TOWNSHIP OF CHESTER COUNTY, ALLAN FALCOFF, MIKE ELLING, ROBERT HAMMAKER, HERRON HILL PROPERTIES, LLC, VICTORIA GARDENS, L.P., A PENNSYLVANIA LIMITED PARTNERSHIP, BY ITS GENERAL PARTNER, LONGWOOD CROSSING PROPERTIES, LLC AND YORKTOWN PROPERTIES, LLC



The opinion of the court was delivered by: James R. Kelley, Senior Judge

ORDER AND NOW, this 21st day of April, 2011, it is ordered that the opinion filed on January 21, 2011, shall be designated OPINION rather than MEMORANDUM OPINION, and that it shall be reported.

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Victoria Gardens Condominium Association, Appellant v. Kennett Township of Chester County Allan Falcoff, Mike Elling, Robert Hammaker, Herron Hill Properties, LLC, Victoria Gardens, L.P., a Pennsylvania limited partnership, by its General Partner, Longwood Crossing Properties, LLC and Yorktown Properties, LLC

No. 1652 C.D. 2009

Submitted: May 17, 2010

BEFORE: HONORABLE RENEE COHN JUBELIRER, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE JAMES R. KELLEY, Senior Judge

OPINION BY SENIOR JUDGE KELLEY

Victoria Gardens Condominium Association (Association) appeals the order of the Court of Common Pleas of Chester County (trial court) sustaining the preliminary objections of Kennett Township of Chester County*fn1 , Allan Falcoff, Mike Elling and Robert Hammaker (collectively, "Township Defendants")*fn2 , and dismissing Counts I and V of the Association's Complaint.*fn3 We affirm.

The Association is a condominium association composed of unit owners in the Victoria Gardens development in the Township. Victoria Gardens, L.P. (hereinafter, "Developer"), is the record owner of the streets, clubhouse, common areas and certain common elements in the development. On July 26, 2001, the Township approved subdivision plans submitted by Developer for the development pursuant to the provisions of the Township's Subdivision and Land Development Ordinance (Ordinance).*fn4

On August 7, 2001, Developer and the Township executed a Road and Improvement Construction Agreement (Construction Agreement) under which Developer agreed to complete construction of the roads and improvements in the development in three phases. In Phase I of construction, Developer agreed to complete construction of the roads within three years. In Phase II, Developer agreed to complete construction of the public improvements, facilities and common amenities within three years. In Phase III of construction, Developer agreed to complete construction of the control measures relating to soil erosion and sedimentation within three years. The Association was not a party to the Construction Agreement.

The Construction Agreement also provided for financial security with respect to the construction in the development as a condition precedent to the agreement. The security was set at 110% of the cost of the construction in Phases I and II, was to be posted with a bank, and could take the form of an irrevocable letter of credit. Once the Phase I and II work was reduced to an amount equal to 110% of the cost of Phase III, no further reduction in the escrow was permitted until the Phase III work commenced. The agreement also provided that, should Developer fail to complete the construction within three years, the amount of security would be automatically increased to the higher of either 10% for each additional year, or an amount 110% of the cost of completing construction. In addition, if Developer did not automatically increase the security at the end of the three year period, Developer was in default and the Township could revoke all building permits and refuse to grant new permits. Further, if Developer failed to complete construction, the Township could withdraw the funds necessary for completion, and Developer would reimburse the Township for any funds in excess of the escrow funds that were needed for completion.*fn5 *fn6

In light of the Construction Agreement, on August 7, 2001, Developer and the Township also entered into a Road and Improvement Construction Irrevocable Letter of Credit Agreement (Letter of Credit Agreement) with First Financial Bank (Bank). Under the Letter of Credit Agreement, a letter of credit*fn7 drawn on the Bank was issued in the amount of $1,745,392.00, which represented 110% of the cost of completing Phases I and II of the construction. Again, the Association was not a party to the Letter of Credit Agreement.

Starting in 2004, the Association repeatedly notified Developer and the Township that the improvements in the development were not completed or were severely deteriorating. In addition, Developer failed to furnish additional security as required by the Construction Agreement. Developer advised the Township and the Association that it has no funds or assets to repair and complete construction of the roads and improvements. The cost to complete construction and repair of the roads and improvements in the development according to the approved subdivision plans totals $665,802.00; however, only $202,000.00 remains in the escrow account.

As a result, on February 17, 2009, the Association filed the instant complaint in the trial court. In Count I of the complaint, sounding in mandamus, the Association sought to compel the Township to complete all of the roads and improvements in the development according to the approved subdivision plans. Likewise, in Count V of the complaint, sounding in specific performance, the Association sought to compel the Township to complete all of the roads and improvements in the development according to the approved subdivision plans. In support of this claim, the Association cited Safford v. Board of Commissioners, Annville Township, 387 A.2d 177 (Pa. Cmwlth. 1978) and Kennedy v. Lehman Township, 459 A.2d 921 (Pa. Cmwlth. 1984).

On March 12, 2009, the Township Defendants filed preliminary objections to Counts I and V of the Complaint. On March 25, 2009, the Association filed a response to the preliminary objections. Each of the parties filed a brief in support of their respective positions.

On August 7, 2009, the trial court issued an order sustaining the Township Defendants' preliminary objections, and dismissing the claims against them sounding in mandamus and specific performance.*fn8 The Association then filed the instant appeal of the trial court's order.*fn9 *fn10

In this appeal, the Association claims: (1) the trial court erred in failing to accept as true all well-pleaded facts set forth in the complaint as well as all inferences fairly deducible therefrom; (2) the trial court erred in sustaining the preliminary objections because the Association and it members are intended third party beneficiaries of the Construction Agreement and Letter of Credit Agreement; (3) the trial court erred in sustaining the preliminary objections because equity requires that the Township provide for the completion of the roads and improvements; (4) the trial court erred in sustaining the preliminary objections because the actions of the Township's Board of Supervisors constituted willful misconduct; and (4) the trial court erred in sustaining the preliminary objections because the Association has pleaded a valid cause of action in mandamus.

The Association first claims that the trial court erred in failing to accept as true all well-pleaded facts set forth in the complaint as well as all inferences fairly deducible therefrom. More specifically, the Association contends that the trial court erred in failing to accept as true the averment in the complaint that it was an intended third party beneficiary of the Construction Agreement.

In ruling on the Township Defendants' preliminary objections, the trial court was required to accept as true all well-pleaded allegations of material fact and all inferences reasonably deduced therefrom, but the court was not required to accept conclusions of law or expressions of opinion in the complaint. Pennsylvania Division, Horsemen's Benevolent and Protective Association, Inc. v. Mountainview Thoroughbred Racing Association, Inc., 855 A.2d 957 (Pa. Cmwlth. 2004). The Association's averment that it was an intended third party beneficiary of the Construction Agreement was a conclusion of law that did not need to be accepted as true in ruling on the preliminary objections. Strutz v. State Farm Mutual Insurance Company, 609 A.2d 569 (Pa. Super.), petition for allowance of appeal denied, 532 ...


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