J-A22032-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
FRANKLIN TOWNE CHARTER HIGH : IN THE SUPERIOR COURT OF
SCHOOL AND FRANKLIN TOWNE : PENNSYLVANIA
CHARTER ELEMENTARY SCHOOL :
:
:
v. :
:
:
ARSENAL ASSOCIATES, L.P., : No. 2306 EDA 2017
ARSENAL CONDOMINIUM :
ASSOCIATION AND MARK HANKIN :
:
Appellants :
Appeal from the Order Entered July 5, 2017
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): April Term, 2017 No. 01474
BEFORE: BENDER, P.J.E., NICHOLS, J., and STEVENS, P.J.E.*
MEMORANDUM BY NICHOLS, J.: FILED MARCH 11, 2019
Appellants Arsenal Associates, L.P., Arsenal Condominium Association,
and Mark Hankin appeal from the order denying in part their motion to compel
arbitration and staying arbitration of the arbitrable claims in this matter.1
Appellants assert that all claims raised by Appellees Franklin Towne Charter
High School and Franklin Towne Charter Elementary School are subject to a
binding arbitration clause. We affirm.
The relevant factual background to this matter includes the following:
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* Former Justice specially assigned to the Superior Court.
1 The order denying an application to compel arbitration is an immediately
appealable order. See 42 Pa.C.S. § 7320(a).
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Franklin Towne Charter High School (the “High School”) owns four
condominium units at, and 24.5710% of the ownership interest
in, The Arsenal Condominium (the “Condominium”), which is
controlled by [Appellant] Arsenal Condominium Association (the
“Condo Association”). [Appellant] Arsenal Associates, L.P. (the
“Limited Partnership”) was the developer of the Condominium and
the declarant under the Uniform Condominium Act[, 68 Pa.C.S. §§
3101-3414].
The Limited Partnership still owns the majority of the units at the
Condominium and thereby controls the Condo Association.
[Appellant] Mark Hankin is President of the General Partner [2] of
the Limited Partnership, so he controls the Limited Partnership[,]
which controls the Condo Association.
In this action, the High School asserts claims against [Appellants]
for injunctive relief, for breach of the Real Estate Purchase
Agreement (RESPA) for Unit 215[, which the High School
purchased from the Limited Partnership], and for breach of
fiduciary duty for allegedly failing to provide that Unit with the
promised 600 amps of power . . . , so that the Unit can be used
for its intended purpose as a gymnasium for the High School and
as additional classroom space for the Elementary School.[3]
The High School also asserts claims for injunctive relief and breach
of fiduciary duty against [Appellants] for allegedly refusing to
execute a proposed Amendment to the Declaration of
Condominium regarding the High School’s responsibility to
maintain the storm water management system, so that the
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2 Arsenal Inc., is the General Partner of the Limited Partnership.
3 Appellees also assert claims of breach of the covenant of good faith and fair
dealing, attorney’s fees and costs, and punitive damages. In the complaint,
Appellees have asserted the claims of breach of contract and for attorney’s
fees related to the alleged breach of contract against the Limited Partnership
only. In all other claims, Appellees have asserted the claims against all
Appellants.
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Schools may obtain a Certificate of Occupancy . . . from the City
[of Philadelphia] and utilize the space . . . .[4]
The High School further asserts a claim for breach of fiduciary
duty, because Mr. Hankin allegedly insists that the High School
employ, and pay outsized fees to, companies owned by Mr. Hankin
to perform necessary work on the Units.
Finally, the High School asserts a claim for breach of fiduciary duty
based on [Appellants’] alleged failure . . . to remove snow and to
salt the sidewalks around the units as required under the
Declaration of Condominium.
[Appellants] filed a Motion to Compel Arbitration because the
Declaration of Condominium contains [an arbitration] provision.
Trial Ct. Op., 1/17/18, at 2-3.
On July 5, 2017, the trial court issued an order holding that any claims
arising under the RESPA were not subject to arbitration. On this basis, the
court stayed arbitration until the breach of contract claims under the RESPA
could be adjudicated.
Appellants filed a timely notice of appeal. The trial court did not order
Appellants to file a Pa.R.A.P. 1925(b) statement, and they did not file one.
The trial court complied with Pa.R.A.P. 1925(a).
On appeal, Appellants raise the following issues for our review:
[1.] Whether [Appellees’] claims against [the Condo Association]
are subject to mandatory arbitration pursuant to an arbitration
provision in the Arsenal Condominium Declaration (the
“Declaration”) providing that “any and all controversies, claims or
disputes of any kind or nature whatsoever arising out of or relating
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4 After the complaint was filed, Appellees filed two petitions for injunctive
relief, including one related to the amendment regarding storm water
management and one related to providing necessary electrical service. In
both instances, injunctive relief became unnecessary because the issues were
resolved.
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in any way to the Condominium, including controversies, disputes
or claims involving performance under this Declaration or breach
thereof” must be arbitrated[.]
[2.] Whether, in addition to the Association, [Appellants] Arsenal
Associates, L.P. (the “Limited Partnership”) and Mark Hankin may
enforce the arbitration provision[.]
Appellants’ Brief at 3-4.
Appellants’ issues are closely related and we address them together.
Appellants assert that the Declaration binds Appellees to arbitrate their claims
because it is a valid agreement between the parties that specifies that all
claims “relating in any way to the Condominium” must be arbitrated. Id. at
15. Appellants argue that all of Appellees’ claims are within the scope of the
arbitration provision in the Declaration. Id. at 17-18. Further, Appellants
assert that each of them may enforce the provision in the Declaration. Id. at
25.
In support of their argument that each Appellant may enforce the
arbitration clause in the Declaration, Appellants contend that “non-signatories
to an arbitration agreement can enforce the agreement when there is an
‘obvious and close nexus’ between the non-signatories . . . and the contracting
parties.” Id. at 20 (citing Provenzano v. Ohio Valley Gen. Hosp., 121 A.3d
1085, 1096 (Pa. Super. 2015); Dodds v. Pulte Home Corp., 909 A.2d 348
(Pa. Super. 2006); Smay v. E.R. Stuebner, Inc., 864 A.2d 1266 (Pa. Super.
2004)). Appellants assert that “it would be a patent waste of resources—the
parties’ and the court’s—to litigate what are identical claims arising from the
same factual nucleus in two different fora.” Id. at 25.
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Our review of a trial court’s denial of a motion to compel arbitration is
for an abuse of discretion and to determine whether the trial
court’s findings are supported by substantial evidence. In doing
so, we employ a two-part test to determine whether the trial court
should have compelled arbitration. The first determination is
whether a valid agreement to arbitrate exists. The second
determination is whether the dispute is within the scope of the
agreement.
Whether a claim is within the scope of an arbitration provision is
a matter of contract, and as with all questions of law, our review
of the trial court’s conclusion is plenary. “The scope of arbitration
is determined by the intention of the parties as ascertained in
accordance with the rules governing contracts generally.” “These
are questions of law and our review is plenary.”
Arbitration is a matter of contract, and parties to a contract cannot
be compelled to arbitrate a given issue absent an agreement
between them to arbitrate that issue. Even though it is now the
policy of the law to favor settlement of disputes by arbitration and
to promote the swift and orderly disposition of claims, arbitration
agreements are to be strictly construed and such agreements
should not be extended by implication.
In general, only parties to an arbitration agreement are subject to
arbitration. However, a nonparty, such as a third-party
beneficiary, may fall within the scope of an arbitration agreement
if that is the parties’ intent.
Elwyn v. DeLuca, 48 A.3d 457, 461 (Pa. Super. 2012) (citations omitted).
In Smay, an employee of a construction company sued an architect, the
school district that had retained the construction company to build a
gymnasium, and other parties. Smay, 864 A.2d at 1269. The architect and
school district sought indemnity from the construction company based upon
the contract it had with the school district. Id. Even though the architect was
not a party to the contract, this Court held that the claims of the architect and
school district were indistinguishable and based on the same legal principles.
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Id. at 1272. Accordingly, to uphold principles of judicial efficiency and
eliminate duplicative litigation, the architect was required to arbitrate its
claims. Id.
In Dodds, a couple sued a homebuilder and its parent company.
Dodds, 909 A.2d at 349. The builder was permitted to compel arbitration
even though the parent company had not signed the contract between the
builder and the plaintiffs. Id. at 352. This was because the interests of the
builder and its parent company were the same, and an arbitration agreement
“would be of little value if a party could obviate the effect of the agreement
merely by finding a way to join another party.” Id.
Similarly, in Provenzano, suit was filed based upon an employment
contract, and the question was whether board members of the defendant
hospital could compel arbitration even though they had not signed the
employment agreement. Provenzano, 121 A.3d at 1093. This Court
determined that based on the “obvious and close nexus” between the hospital
and its board members, who were similar to agents of the hospital, the board
could enforce the arbitration clause in the employment agreement. Id. at
1103.
More recently, our Supreme Court has held that “where a plaintiff has
multiple disputes with separate defendants arising from the same incident,
and only one of those claims is subject to an arbitration agreement, the Court
requires, as a matter of law, adjudication in separate forums.” Taylor v.
Extendicare Health Facilities, Inc., 147 A.3d 490, 507 (Pa. 2016).
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Here, the Condo Association and its members are bound by the
Declaration’s provisions, which include an arbitration agreement. Appellee
High School is a member of the Condo Association and must arbitrate disputes
arising under the Declaration. However, the Condo Association is not a party
to the RESPA, whose parties include only the Limited Partnership and Appellee
High School. Accordingly, the Condo Association cannot enforce the provisions
of the RESPA against Appellees, as it is not a party to the RESPA. See Elwyn,
48 A.3d at 461.
Furthermore, the RESPA does not include an arbitration provision, nor
does it adopt the terms of the Declaration’s arbitration clause. At most, the
RESPA mentions that the Declaration exists, but it does not incorporate any
of its provisions as terms of the RESPA. Therefore, any of Appellees’ contract
claims in the complaint that are predicated solely on the RESPA and against
the Limited Partnership are not subject to any arbitration provision. These
claims cannot be compelled into arbitration since no contract requires them to
be arbitrated. See id.
As to whether the Limited Partnership and Mr. Hankin can enforce the
arbitration provision in the Declaration because of a “close nexus” with the
Condo Association, we initially note that Appellants have named only the
Limited Partnership in its claims under the RESPA. These claims do not
implicate the Condo Association at all, since the Condo Association is not a
party to the RESPA and is not being sued in the counts of the complaint
devoted to breach of the RESPA.
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Further, the cases Appellants cite in support of their position that a non-
signatory can enforce the RESPA, including Smay, Dodds, and Provenzano,
are distinguishable because, in each instance, only one contract was at issue.
Here, two contracts are at play, each with a different scope. The RESPA
includes a merger clause stating that the RESPA “embodies the entire
agreement between [the Limited Partnership and High School] and shall not
be modified, changed or altered in any respect, except in writing, executed in
the same manner as this Agreement by the parties hereto.” RESPA, ¶ 18.
The Limited Partnership cannot use an arbitration clause from the Declaration,
a separate contract, to defend itself against litigation of breach of contract
claims under the RESPA.
Insofar as the claims in the complaint implicate a failure to perform
under the RESPA, they are not arbitrable. However, to the extent they arise
based upon the Declaration, they are arbitrable. See Taylor, 147 A.3d at 507
(permitting adjudication in separate forums for arbitrable and non-arbitrable
claims).
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/11/19
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