HARRISBURG – The Superior Court of Pennsylvania said an occupancy agreement, not an operation agreement, was the key document in deciding the fate of a residential dispute action centered around a condominium in Philadelphia’s affluent Rittenhouse Square neighborhood.
On Dec. 16, judges Jack A. Panella, Jacqueline O. Shogan and William H. Platt ruled defendant Eugene Barbera’s appeal would not in fact transfer a dispute between himself and Rittenhouse 1603, LLC to arbitration – explaining an operation agreement rule providing for said arbitration proceedings was not applicable in this case.
Shogan authored the court’s opinion in this matter, which affirmed that of the trial court.
Barbera and Lewis Katz created Rittenhouse in order to purchase a condominium at 202-10 Rittenhouse Square, Unit 1603, in Philadelphia. Katz contributed $235,000 for four, Class-A voting units and the role of manager, while Barbera contributed $1 for one Class B non-voting unit.
Per Section 10.02 of Rittenhouse’s operating agreement, any dispute among the parties or between a member and the manager, whether arising under the operating agreement or otherwise, must be settled by Judicial Arbitration and Mediation Services, Inc. (JAMS).
On Dec. 12, 2013, Barbera assigned his Class B non-voting unit in Rittenhouse to Lewis Katz. That same day, Rittenhouse and Barbera entered into an occupancy agreement, whereby Rittenhouse granted defendant the right to live in Unit 1603 from Dec. 23, 2013, until 30 days after written notice of termination.
According to court records, the occupancy was “at will” and did not create a landlord-tenant relationship.
Lewis Katz died on May 31, 2014, which led his son Drew Katz to then become manager of Rittenhouse. In a letter dated Aug. 19, 2014, Drew Katz informed Barbera that Rittenhouse was terminating the occupancy agreement and, according to its provisions, directed Barbera to vacate Unit 1603 within 30 days. However, Barbera failed to vacate Unit 1603 and remains in possession of the unit.
Rittenhouse filed an action against the defendant for possession of Unit 1603 in Philadelphia Municipal Court and prevailed, leading the defendant to file an appeal to the Philadelphia County Court of Common Pleas, and a praecipe for Rittenhouse to file a complaint.
Rittenhouse then filed a five-count complaint in state court on Dec. 15, 2014, seeking damages and possession of Unit 1603 based on the defendant’s breach of the occupancy agreement, ejectment, trespass, and unjust enrichment.
The defendant filed a motion to transfer the matter to JAMS on May 28, 2015, raising the arbitration provision in Section 10.02 of the operating agreement.
But, the trial court eventually denied the motion to transfer on June 19, 2015, deciding the issue as waived and the operating agreement’s arbitration provision “inapplicable.” This led Barbera to appeal the decision not to arbitrate the matter to the Superior Court on July 7, 2015.
“Whether a dispute falls within the purview of a contractual arbitration provision is a question of law. In answering this question, courts engage in a two-step inquiry: (1) Does a valid agreement to arbitrate exist?; (2) Is the dispute within the scope of the agreement? “Absent an agreement between the parties to arbitrate an issue, they cannot be compelled to arbitration.
“Upon review, we agree with the trial court that defendant’s refusal to vacate Unit 1603 falls squarely under the occupancy agreement. In compliance therewith, Rittenhouse sent defendant a 30-day notice of termination,” Shogan said. “Defendant argues that the operating agreement and its arbitration provision control the outcome of this case. Notably, defendant makes no argument regarding the occupancy agreement, which does not have an arbitration provision.”
Shogan referred to the trial court’s decision, which determined the occupancy agreement as “the central and controlling agreement in this case.”
“Unlike the operating agreement, the occupancy agreement does not contain any negotiation and arbitration clause. Even if [defendant] remained a member of [Rittenhouse] or a party to the operating agreement after Lewis Katz and he entered into the Dec. 12, 2013 absolute assignment of membership interest, the current dispute is not one ‘arising under this operating agreement.’ As noted above, it is a dispute arising under the occupancy agreement,” Shogan said.
Shogan added Section 10.02 of the operating agreement also provides for broad definition negotiation and arbitration in the event of a dispute between a member and the manager, but also that it did not include the present dispute.
“Even if the court assumes that [defendant] continues to be a member, the present dispute is not with the manager. Rather, the dispute is with [Rittenhouse] over whether or not [defendant] has any lawful right to occupy Unit 1603 under the terms of the occupancy agreement. [Rittenhouse] and not its manager is the owner of Unit 1603,” Shogan said.
“Defendant refused to vacate Unit 1603, which constitutes a breach of the occupancy agreement. Contrary to defendant’s arguments, his status under the operating agreement does not control the outcome of this matter. Therefore, we discern no error in the trial court’s refusal to transfer the underlying litigation to JAMS,” Shogan stated.
The plaintiff is represented by James C. Crumlish Jr., Henry F. Siedzikowski, Aimee L. Kumer and Stewart J. Greenleaf Jr. of Elliot Greenleaf, in both Philadelphia and Blue Bell.
The defendant is represented by Maurice R. Mitts of Mitts Law, in Philadelphia.
Superior Court of Pennsylvania case 2068 EDA 2015
Philadelphia County Court of Common Pleas case 141200080
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com