United States: Pennsylvania Commonwealth Court Finds That A Homeowners Association Is Intended Third-Party Beneficiary Of Development Agreement With Right To Enforce Its Terms

In the case of College Woods Homeowners Association v. Trappe Borough, 2014 WL 3056140 (July 7, 2014), College Woods Homeowners Association (Association) filed a contract action against Trappe Borough (Borough) seeking to compel the Borough to take dedication of two streets within the residential development.  The Association argued that it was an intended third party beneficiary with standing to enforce a Subdivision and Development Agreement between the Borough and the developer of the residential subdivision (the Agreement). 

By way of background, after the developer had completed construction of the roads and other public improvements within the development, the borough engineer confirmed that the improvements had been completed in compliance with the relevant Borough requirements and the Agreement.  Yet, despite the developer's request, the Borough refused to release the developer's escrow until the developer sued the Borough, at which point the escrow was released, but the streets were never accepted for dedication by the Borough.  Four years later, the Association sent a letter to the Borough requesting that the Borough accept dedication of the streets, but the Borough did not agree to accepted dedication.  As a result, the Association filed a complaint claiming that the Borough had a contractual obligation pursuant to the Agreement to accept dedication of the streets within the development.  After both the Association and the Borough filed motions for summary judgment, the trial court granted the Borough's motion, determining that there were no material facts in dispute and holding that the Association was not an intended third party beneficiary to the Agreement and, as a result, had no standing to enforce the Agreement.  The trial court also held that the Agreement did not impose an obligation on the Borough to accept dedication of the streets.

Thereafter, the Association filed the subject appeal with the Pennsylvania Commonwealth Court, arguing that it was an intended third party beneficiary with standing to enforce the Agreement and further arguing that the Agreement imposed a duty on the Borough to accept dedication of the streets. 

In determining whether the Association was a third party beneficiary of the Agreement, the Commonwealth Court cited the Pennsylvania Supreme Court's decision in Guy v. Liederbach, 459 A.2d 744 (Pa. 1983), noting that such a determination requires a two part test:  "(1) the recognition of the beneficiary's right must be 'appropriate to effectuate the intention of the parties', and (2) the performance must 'satisfy an obligation of the promisee to pay money to the beneficiary' or 'the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.'" 

The court then noted that the first part of the test sets forth a standing requirement which leaves discretion with the court to determine whether recognition of third party beneficiary status would be appropriate.  Because the court concluded that the Agreement contained a promise by the Borough to the developer to accept dedication of the streets, the court deemed that, in order to appropriately effectuate the parties' intention, the Association's right to enforce that promise should be recognized.  The court appropriately noted that, until the streets are accepted for dedication by the Borough, the Association has the obligation to maintain those streets, thereby further confirming the Association's status as the main beneficiary of the promise. 

The second prong of the test required the court to determine whether the circumstances indicated that the developer intended to give the Association the benefit of the Borough's promise to accept dedication of the streets.  The court held that the Association is the only party with an interest in enforcing the Borough's obligation to accept dedication of the streets since the developer's escrow had been released.  Further, in looking at the provisions of the Agreement itself, the court found that the Agreement evidenced an intention to benefit not only the developer and the Borough, but also potential purchases of properties in the development, such as the Association's members.

In finding that both prongs of the test were met, the court, in an unreported decision, reversed the decision of the trial court and held that the Association was an intended third party beneficiary to the Agreement with the right to enforce the Agreement. 

Yet the court did not stop there.  The court went on to address whether the Association could establish that the Agreement imposed a duty on the Borough to accept dedication of the streets.  In holding that the Agreement did impose such a duty on the Borough, the court noted that the Agreement contained multiple instances of language requiring or contemplating the offer of dedication of public improvements to the Borough and language assuming the Borough's acceptance of such offer.  Specifically, the Agreement contained language requiring the developer to complete the improvements and receive approval from the Borough Engineer for the improvements, which improvements would then be offered to the Borough for dedication and, so long as the requirements of the Agreement had been met, the Borough would accept dedication.  Given these provisions, the court held that it was the intention of the parties not only for the developer to offer the streets for dedication, but also for the Borough to accept dedication once the terms of the Agreement had been met. 

Although this was an unreported decision of the Commonwealth Court, it is telling of where the  court stands on matters of dedication.   Based on this case, if the agreement between the developer and the municipality contains language indicating that certain public improvements are proposed to be offered for dedication upon completion in accordance with the municipality's standards, such language will be construed as an assumption that the municipality has agreed to accept dedication of such improvements.  Further, the homeowners with the development will become third party beneficiaries of the assumption of acceptance of dedication and will have the ultimate right to enforce such dedication.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions