The crossclaim by WEHOA against Murry/Sher-Wal was dismissed by a judge in 2016. The crossclaim was a waste of time and money for everyone involved.
The following is excerpted from a Brief filed by the attorney representing the Murry Company. It gives good background on the case.
Woods Edge is a residential planned community located in Lancaster County and developed by Additional Defendants The Murry Companies and Sher-Wal, Inc., A Joint Venture ("Murry/Sher-Wal"). The community was formed in 1987 pursuant to the Declaration of Covenants, Conditions and Restrictions for Wood's Edge (the "Declaration"). (Amended Complaint, Exhibit G). On July 20, 1997, Murry/Sher-Wal filed a Third Supplemental Declaration to Declaration Covenants, Conditions and Restrictions for Woods Edge for the purpose of adding 82 townhome lots to the development. (Joinder Complaint, 18).
Defendant Woods Edge Homeowners Association ("Woods Edge HOA" or the "Association") was formed in 1991 pursuant to the Second Amendment to the Declaration for Woods Edge. (Joinder Complaint, Exhibit A). At that time, the Association took over management and control of the affairs of the development, including maintenance of common areas and collection of assessments from Association members. Id.
Woods Edge HOA contends that in 2000, members of the Association reported that Murry/Sher-Wal was building the townhomes on consolidated lots, thereby reducing the total number of townhomes proposed under the Third Supplemental Declaration. (Joinder Complaint, 1 10, Exhibit C). For example, rather than building a single townhome on each of lots 22, 23, 24 and 25 for a total of four (4) homes, one semidetached home was built on combined lots 22 and 23, and one on combined lots 24 and 25, for a total of two (2) homes. (Joinder Complaint, Exhibit C).
Upon receiving this report from Association members, Woods Edge HOA asked its attorney, Ken Notturno, Esquire, to review the lot consolidation. While reconfiguration of this portion of the development resulted in roughly one-half of the number of homes, the recombination of lots did not strictly follow the prior lot lines. (Joinder Complaint, 1 11 1 ). Woods Edge HOA alleges that Murry/Sher-Wal advised Mr. Notturno that it intend[ed] to have each unit owner of the duplex units built on four lots to pay two reserve fees and two monthly assessments for each unit." (Joinder Complaint, 1 11, Exhibit D). Mr. Notturno reviewed the governing documents for Woods Edge and determined that the proposed double assessment was permissible under the then existing Declaration. (Joinder Complaint, 1 12, Exhibit E). Woods Edge HOA subsequently informed Association members that the double assessment complied with the terms of the Declaration. Id.
In October 2001, Plaintiffs Richard Phelps and Cheryl Rishell purchased a townhome in Woods Edge located at 206 White Chapel Road, Lancaster, PA (the "Property"). (Amended Complaint, 1 4). Plaintiffs' semidetached home is located on combined Lots 51 and 52. (Defendant's Answer and New Matter, 1 4). Plaintiffs contend that, after purchasing the Property, Wood Edge HOA charged them an annual assessment for two (2) residential lots in violation of the Declaration of Covenants, Conditions and Restrictions for Wood's Edge (the "Declaration"). (Amended Complaint, 11 18-22; Answer to Amended Complaint, 1 15). As a result of the double assessment, Plaintiffs have been required to pay an annual assessment of $960, while owners of single lots within Woods Edge are only required to pay annual assessments of $480. (Amended Complaint, 1 22).
Plaintiffs have alleged claims against Woods Edge HOA for Negligence, Breach of Contract and Unjust Enrichment. In June 2016, Woods Edge HOA filed a Joinder complaint against Murry/Sher-Wal, in its capacity as the original developer and Declarant of Woods Edge. Despite the fact that its counsel specifically reviewed and approved of a double assessment for the combined lots, Woods Edge HOA now seeks to hold Murry/Sher-Wal Iiable for the decision to impose the assessment and Mr. Notturno's advice that the assessment was permissible. In the event the assessment is found to be improper, the Joinder Complaint alleges that Murry/Sher-Wal is directly liable to Plaintiffs, jointly and severally liable or liable over to Woods Edge HOA for indemnification and/or contribution. (Joinder Complaint, ~ 20).
Plaintiffs Richard Phelps and Cheryl Rishell initiated this action by Complaint on October 6, 2015, on behalf of themselves, and similarly situated "Doe Plaintiffs," against Woods Edge HOA. On November 6, 2015, Woods Edge HOA filed Preliminary Objections to the Complaint.
In one of its objections, Woods Edge HOA requested that Plaintiffs' Complaint be dismissed pursuant to Pa.R.C.P. 1025(a)(5) for nonjoinder of a necessary party. In support of this objection, Woods Edge HOA argued that Murry/Sher-Wal first imposed the assessment complained of by Plaintiffs and, therefore, was a necessary and indispensable party to the case. That objection was overruled by Order dated March 15, 2016.
Following the disposition of the preliminary objections, Plaintiffs filed an Amended Complaint on April 14, 2016, alleging claims against Woods Edge HOA for:
Count I - Negligence; Count II - Breach of Contract; and Count III - Unjust Enrichment. Woods Edge HOA filed its Joinder Complaint on June 1, 2016, and in response, Murry/Sher-Wal filed a Preliminary Objection to the Joinder Complaint.
Whether the Joinder Complaint should be dismissed because Defendant Woods Edge HOA has not and cannot plead facts establishing that Murry/Sher-Wal had authority to impose or collect a couple assessment, or that Murry/Sher-Wal actually collected assessments from Plaintiffs?
Suggested Answer: Yes.
"A preliminary objection in the nature of a demurrer is properly granted where the underlying pleading is legally insufficient." Foster v. UPMC South Side Hosp., 2 A.3d 655,662 (Pa. Super. 2010). The trial court determines whether or not "the facts pleaded are legally sufficient to permit the action to continue." Cooley v. East Norriton Township, 78 Pa. Commw. 11, 13, n. 3, 466 A.2d 765, 767 n.3 (1983).
Because Pennsylvania is a fact-pleading state, a pleading must not only give a party notice of what the opposing party's claim is and the grounds upon which it rests, but it must also formulate the issues by summarizing those facts essential to support the claim. Alpha Tau Omega Fraternity v. University of Pa., 318 Pa. Super. 293, 298, 464 A.2d 1349, 1352 (1983); Pa. R.C.P. 1019(a).
When considering a demurrer, the Court must accept as true all well-pleaded material facts in the pleading as well as all reasonable inferences that may be drawn from those facts. O'Brien v. Township of Ralpho, 166 Pa. Commw. 337, 340,646 A.2d 663, 665 (1994). However, conclusions of law and unjustified inferences are not
admitted by the pleading. Greenspan v. U.S. Automobile Assoc., 324 Pa. Super. 315, 318, 471 A.2d 856, 858 (1984).
The Joinder Complaint against Murry/Sher-Wal must be dismissed because Woods Edge HOA has not, and cannot, plead facts demonstrating that Murry/Sher-Wal had authority to impose a double assessment, or that it collected any assessments from Plaintiffs. As a planned community, the rights, obligations and powers of the parties are both contractual and statutory in nature. The governing documents for Woods Edge HOA establish the Association's right to impose and collect assessments from Association members. Section 3 of the Second Amendment to the Declaration provides:
2. Purposes of Assessments. The assessments levied by the Association shall be used exclusively to promote the health, safety and welfare of the residents in the Property and for the purposes set forth in paragraph 1 of Section 5.
3(c). The Board of Directors may fix the annual assessment at an amount not in excess of the maximum without a vote of the membership.
7(b). Each Lot shall be subject to a lien in favor of the Association for any assessment levied against that Lot.
(Joinder Complaint, Exhibit A) (emphasis added).
2 Although development of Woods Edge and formation of Woods Edge HOA pre-date the Act, certain provisions of the statute are retroactively applicable to pre-Act communities. 68 Pa.C.S. § 5102(B) (1997) and (1999).
Likewise, pursuant to Pennsylvania's Uniform Planned Community Act, 68 Pa.C.S. § 5101 et seq. (the "Act"),» the power to impose and collect assessments from Association members is vested solely in the Woods Edge HOA. Section 5302 of the Act provides, in pertinent part:
Except as provided in subsection (b) and subject to the provisions of the declaration and the limitations of this subpart, the association, even if unincorporated, may: (1) Adopt and amend budges for revenues, expenditures and reserves and collect assessments for common expenses from unit owners.
68 Pa.C.S. § 5302(A)(1) (1997) and (2004) (emphasis added). Section 5314 of the Act also recognizes the Association's role in collecting assessments: "Until the association makes a common expense assessment, the declarant shall pay all the expenses of the planned community." 68 Pa.C.S. § 5314 (2004) (emphasis added).
Under both the Declaration of Woods Edge and the Planned Community Act, Woods Edge HOA alone has the authority and power to impose assessments against unit owners. Moreover, Woods Edge HOA admits that is was the only party that charged and collected the double assessment from Plaintiffs. (Amended Complaint, ~~ 14, 15; Answer to Amended Complaint, ~~ 14, 15). Neither of the parties allege facts demonstrating that Murry/Sher- Wal had the authority or ability to impose assessments against unit owners, or actually charged or collected the assessments giving rise to Plaintiffs' claims. (See, Amended Complaint; Answer to Amended Complaint; Joinder Complaint).
In the absence of any facts demonstrating that Murry/Sher-Wal actually imposed and collected assessments, Woods Edge HOA relies on two (2) theories to support its Joinder Complaint. First, the Association contends that Murry/Sher-Wal effectively made the decision to impose a double assessment for the combined lots. (Joinder Complaint, ~ 11, Exhibit D). Paragraph 11 of the Joinder Complaint provides: "[D]efendant HOA Board of Directors requested assistance of its counsel who reported to the Board ... that additional defendant Declarant intended to have each owner of the consolidated units pay double reserve fees and assessments." (Emphasis added).
As set forth above, Murry/Sher-Wal had no power or authority with respect to assessments. Only Woods Edge HOA could make decisions regarding assessments. While Murry/Sher-Wal could certainly provide suggestions to the Association as to the combined lots, it had no ability to direct the actions of the Association, set the assessment, collect from unit owners or amend the Declaration.
Any claim that the Association relied on Murry/Sher-Wal's alleged suggestion is contradicted by the fact that Woods Edge HOA sought the input of their counsel, Ken Notturno. The Joinder Complaint alleges that Mr. Notturno reviewed the Association's governing documents and determined that the imposition of a double assessment was permitted. (Joinder Complaint Exhibits D and E). Thus, Woods Edge HOA independently researched the double assessment, and made the decision to charge and collect it.
Second, the Association contends that Murry/Sher-Wal is liable because a double reserve fee was collected from Plaintiffs at the time of settlement. (Joinder Complaint, ,-r~ 15-16, Exhibit F). Plaintiffs purchased their home directly from Murry/Sher-Wal in October 2001. At that time, Plaintiffs paid $176.00 in assessments for the months of October and November 2001, and a $960.00 reserve fee. Id. These amounts were payable to "Woods Edge Home Owners Assoc," and collected by the settlement agent on behalf of the Association. (Joinder Complaint, Exhibit F).
The $960.00 reserve fee does not establish liability on the part of Murry/Sher-Wal. As with assessments, Murry/Sher-Wal does not have authority to set the reserve fee, and does not collect or receive any portion of the fee. Moreover, Plaintiffs have not alleged any claim for relief with respect to the reserve fee. Their claims are limited to the double assessment charged by the Association post-purchase. (Amended Complaint, ~~ 16-17). Consequently, even if the $960.00 reserve fee collected at settlement could somehow be attributed to Murry/Sher-Wal (notwithstanding Murry/Sher-Wal's inability to establish or collect such a fee), the reserve fee is separate and distinct from the double assessments which form the basis for Plaintiffs' claims in this action.
Pursuant to both the Uniform Planned Community Act, and the Association's governing documents, only Woods Edge HOA had the power arid authority to set, impose and collect assessments from its members. Murry/Sher-Wal had no ability to charge a double assessment against Plaintiffs, and did not collect any of the assessments for which Plaintiffs now seek relief.
For the reasons set forth above, Murry/Sher-Wal respectfully requests that the Court sustain their preliminary objection and dismiss the Joinder Complaint. In light of the Association's statutory and contractual authority to impose and collect assessments, there are no additional facts which Woods Edge HOA can allege to cure the deficiencies in the Joinder Complaint and, therefore, a dismissal with prejudice is warranted.