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55 Kenmore Lane, LLC, Assignee of Kenmore Woods, LLC v. Upper Providence Township Sewer Authority

February 11, 2011


The opinion of the court was delivered by: David R. Strawbridge United States Magistrate Judge


I. Introduction

Plaintiff, 55 Kenmore Lane, LLC (alternately "Plaintiff" or "Kenmore"), controlled by a Delaware County developer, Robert DiDomenico, brought this action against the Upper Providence Township Sewer Authority (alternately "Defendant" or "Authority"). Plaintiff seeks reimbursement of a pro-rata percentage of expenditures incurred in the construction of an extended sewer line (the "Kenmore Line" or "Line") to support of a residential development project which Kenmore's assignor, Kenmore Woods, LLC. (also referred as "Kenmore"), was undertaking known as 211 Sycamore Mills Road, Upper Providence Township, Delaware County.Plaintiff brought claims for breach of contract, promissory estoppel, unjust enrichment, misrepresentation and denial of due process under the Fourteenth Amendment. The misrepresentation and due process claims were dismissed at summary judgment, and trial proceeded before a jury on the contract and quasi-contract claims.

It is undisputed that the parties reached a binding agreement, memorialized in writing on August 8, 2007 in a document entitled the "Sewer Improvement Development Agreement" ("SIDA"). It is also undisputed that Kenmore had fulfilled its obligations under that agreement by properly constructing the Kenmore Line and dedicating it to the Authority. The parties also agree that, at some point, it was at least contemplated that certain other properties, namely the Reformation Lutheran Church (the "Church"), the Springton Lakes Middle School (the "School"), and ten adjacent residential properties would be in a position to connect to Line and could therefore provide a source for some reimbursement to Plaintiff. Finally, the parties agree that at least one of the residential properties had connected to the Line, but that neither the Church nor the School had done so.

The focus of the factual dispute concerned the nature of the agreement that had been reached between the parties as well as the extent and legal effect of any representations the Authority may have made to Plaintiff regarding reimbursement. While the parties agreed that Kenmore would bear full responsibility for that portion of the Line serving its subdivision, 32.9% of the total construction costs, the dispute left unresolved the question of Plaintiff's entitlement to reimbursement of the remaining 67.1%. Defendant argued that the extent of the reimbursement was tied to, and dependent upon, which of the remaining properties actually connected to the Line. The Defendant also argued that the reimbursement did not include the costs of "grinder pumps" and that Plaintiff was not entitled to recoup certain "tapping fees" which it had been required to pay in order to obtain permits for occupancy of the ten houses in the Kenmore subdivision. Plaintiff argued that, based upon the Defendant's promises, it was entitled to all of this reimbursement without regard to what properties actually connected to the Line, or indeed without the necessity of any property connecting to the Line. The parties agreed that the question of reimbursement of construction costs and for the grinder pumps would be put to the jury at trial, while the court would resolve the question of reimbursement of the tapping fees.

Of central importance to the resolution of those issues put to the jury was the necessity to resolve two ambiguities in the SIDA. The first concerned what conditions precedent would be required to trigger entitlement to any reimbursement. The second concerned whether any reimbursement would include the cost of the grinder pumps. Each party presented to the Court its interpretation of the agreement. The Court found both interpretations to be reasonable, and had them presented to the jury in its instructions and by way of special interrogatory.

Plaintiff contended that the parties agreed that it would be entitled to recover its full proportionate share of the costs and expenses of constructing the Kenmore Line (the 67.1%) upon the event of the completion of the Line and the Authority's acceptance of the deed of dedication, and certainly upon the connection of any one property not in the Kenmore subdivision to the Line. According to Plaintiff, the Authority had identified the source of that reimbursement as the connection fees from the Church, the School and the residences, and that reimbursement was conditioned only upon satisfactory completion of the project and dedication of the deed, and not upon having any of those properties actually connect to the Line. Plaintiff contended that the Authority had promised to direct those properties to connect to the Line, and that it breached its agreement by constructing its own sewer line and directing the Church, the School and some of the ten residences to connect to the Authority's line and not to the Kenmore Line. Plaintiff also contended that the parties had agreed that the cost of the grinder pumps would be included in the reimbursement.

The Authority, on the other hand, denied making any promises or representations that the Church, the School or the residential properties would be directed to connect to the Kenmore Line, and contended that the parties had agreed that Plaintiff's reimbursement would be calculated based only upon the properties that actually connected to the Line. The Authority also asserted that the cost of the grinder pumps was not part of the contemplated reimbursement.

The jury resolved the two ambiguities in Plaintiff's favor and found for Plaintiff on the breach of contract claim. More particularly, it found by way of answering jury interrogatories that Plaintiff was entitled to full proportional reimbursement independent of the number of properties that connected to the Line, and that the cost of the grinder pumps was part of the agreed reimbursement. Theparties had agreed prior to trial that the proportional reimbursement sum was $130, 938.66and the cost of grinder pumps was $40,000.

It is now appropriate for the Court to consider the issue of whether Plaintiff is entitled to recoup "tapping fees" in the amount of $24,300, $2,700 for each of the nine homes in the Kenmore subdivision, that Plaintiff paid in order to obtain residency permits for the homes. Plaintiff was required to pay these fees after it had completed construction of the Kenmore Line, dedicated the Line to the Authority, and was seeking to obtain occupancy permits for the homes in the development. The parties have agreed that the amount of the fee was $2,700 per residence. (Ex. 30). Plaintiff, through counsel, objected to payment of the fees at that time, but eventually paid them in order to secure the necessary permits. (Doc. 56 at 3.)

Plaintiff now contends that, under the Municipal Authorities Act, 53 Pa.C.S. § 5600, et seq. (hereinafter "MAA"), it should not have been required to pay the tapping fees since it constructed the Kenmore Line itself and dedicated the Line to the Authority. According to Plaintiff, and relying upon Section 5607(d)(24)(i)(C), such a dedication was made "in lieu of" paying the tapping fee.

Section 5607 of the MAA deals with the "purposes and powers" of a municipal authority incorporated under this provision. These purposes and powers include "constructing," "maintaining and operating," "sewers, sewer systems or parts thereof." See 53 Pa.C.S.A. § 5607(a). As authorized by subsection (d), the Authority "may exercise all powers necessary or convenient for the carrying out of the purposes set forth in this section," including at subsection (24), "[t]o charge enumerated fees to property owners who desire to or are required to connect to the Authority's sewer or water system." These shall be based upon "... the duly appointed fee schedule which is in effect at the time of payment and shall be payable at the time of the application for connection or at the time to which the property owner and the Authority agree ..." Subsection (24) goes on to further delineate the "fees" and articulates that they: may include any of the following if they are separately set forth in resolution adopted by the Authority:

(A) Connection fee. ***

(B) Customer facilities ...

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