SURRICK, District Judge.
Presently before the Court are Plaintiff Franklin Mills Associates L.P.'s Motion for Summary Judgment (ECF No. 11) and Defendant Nationwide Life Insurance Company's Cross-Motion for Summary Judgment and Motion to Strike (ECF No. 12). For the following reasons, Plaintiff's Motion is granted in part and denied in part, and Defendant's Motion is denied.
In this action, Plaintiff Franklin Mills Associates L.P. asserts a breach of contract claim against Defendant Nationwide Life Insurance Company, alleging that Defendant owes Plaintiff certain promotional and maintenance assessment payments related to property owned by Defendant.
The property at issue and owned by Defendant is located at 1933 Franklin Mills Circle, a/k/a 4301 Byberry Road, Unit M3, Philadelphia, Pennsylvania (the "Property"). (Compl. ¶ 3, ECF No. 1.) The Property is part of a larger parcel of land that was developed as a shopping mall. (Id. at ¶ 5.) Plaintiff owns property known as the Franklin Mills Mall that is located adjacent to the Property. (Id. at ¶¶ 4-5.) On August 15, 1988, Plaintiff's predecessor in interest, Liberty Mills Limited Partnership ("Liberty Mills"), conveyed the Property to PMI Associates ("PMI"). (Id. at ¶ 8; Pl.'s Mot. Ex. A at 1, ECF No. 11.) After the Property was conveyed to PMI, Defendant loaned money to PMI using the Property as collateral for the loan. (Def.'s Mot. 2, ECF No. 12.) When PMI defaulted on the loan, PMI conveyed the Property to Defendant by way of deed in lieu of foreclosure. (Id.)
On August 15, 1988, in connection with conveying the Property to PMI, Liberty Mills and PMI entered into a Declaration of Restrictions (the "Declaration") and a Supplemental Agreement. (Compl. at ¶ 9; Pl.'s Mot. Exs. B, D; Pl.'s Sur-reply Ex. A, ECF No. 17.) The Declaration was recorded on August 18, 1988. (Pl.'s Sur-Reply & Ex. A.) The Supplemental Agreement was never recorded. The purpose of the Declaration was to "memorialize certain understandings regarding the use, occupancy
(Pl.'s Sur-reply Ex. A ¶ 13(c).) The Declaration further states:
(Id. at ¶ 13(d).) Finally, the Declaration states:
(Id. at ¶ 16.)
The Declaration further requires that the Annual Assessments are to be paid in
A dispute exists about when the Annual Assessments ceased being paid. In its Complaint, Plaintiff contends that Defendant has failed to pay Annual Assessments since January 1, 2008. (Compl. ¶ 19.) In its Answer, Defendant denies the allegation, and admits only that it "has not paid assessments requested by Plaintiff." (Answer ¶ 19, ECF No. 4.) Plaintiff thereafter states that Defendant has not paid Annual Assessments since March 1, 2007. (Pl.'s Mot. 3.)
On October 27, 2004, Defendant filed a civil action against Plaintiff in the United States District Court for the Eastern District of Pennsylvania, seeking a declaration with respect to certain covenants contained in the Declaration related to the use and transfer of the Property. Nationwide Life Ins. Co. v. Franklin Mills Assocs. Ltd. P'ship, No. 04-5049 (E.D.Pa., filed Oct. 27, 2004). Plaintiff and Defendant settled that action by entering into a Settlement Agreement dated January 15, 2008. (Pl.'s Mot. Ex. C.) The case settled without any ruling on the substantive issues.
Defendant also filed a civil action on January 20, 2005, against Commonwealth Land Title Insurance Company ("Commonwealth"). Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co., No. 05-281 (E.D. Pa., filed Jan. 20, 2005). Defendant purchased a title insurance policy from Commonwealth in connection with issuing a mortgage on the Property. In that action, Defendant sought coverage for losses it allegedly incurred as a result of covenants and restrictions contained in the Declaration. (Id.) Summary judgment was granted in favor of Defendant with respect to entitlement of coverage under the title insurance policy. Nationwide, 2011 WL 611802, at *24, 2011 U.S. Dist. LEXIS 16446, at *77. The court denied summary judgment with respect to the amount of damages. Id., at *32-33, 2011 U.S. Dist. LEXIS 16446, at *107-08. As part of its damages claim, Defendant sought reimbursement for Annual Assessments that it allegedly paid since taking title to the Property. Id., at *28-29, 2011 U.S. Dist. LEXIS 16446, at *93-94. The court subsequently denied Commonwealth's motion for reconsideration and granted Commonwealth's request to certify the court's February 17, 2011 Memorandum and Order for interlocutory appeal. (Order, Nationwide, No. 05-281, ECF No. 67.) As a result, all matters before the District Court in that action are stayed, including Defendant's request for reimbursement of Annual Assessments charges, pending resolution of the interlocutory appeal. (Id.)
On July 8, 2009, Plaintiff filed the instant Complaint alleging a breach of contract claim against Defendant. On December 21, 2009, Plaintiff filed its Motion for Summary Judgment. On January 7, 2010, Defendant filed its Cross-Motion for Summary Judgment and Motion to Strike.
A party is entitled to summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ("Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted."). Where the nonmoving party bears the burden of proof at trial, the moving party may identify an absence of a genuine issue of material fact by showing the court that there is no evidence in the record supporting the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497, 502 (3d Cir.2004). If the moving party carries this initial burden, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(c)(1) ("A party asserting that a fact is genuinely ... disputed must support the assertion by ... citing to particular parts of materials in the record."); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (noting that the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts"). "Where the record taken as a whole could not lead a reasonable trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. 1348 (citations omitted). When deciding a motion for summary judgment, courts must view facts and inferences in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. Courts must not resolve factual disputes or make credibility determinations. Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1127 (3d Cir.1995).
When a court is faced with cross-motions for summary judgment, "[t]he rule is no different." Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir.2008). "Cross-motions are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist." Id. (quoting Rains v. Cascade Indus., Inc., 402 F.3d 241, 245 (3d Cir.1968)).
In its Motion, Plaintiff contends that the covenant to pay Annual Assessments is a covenant that runs with the land and is therefore binding on subsequent owners of the Property, such as Defendant. In support of its contention, Plaintiff points to language contained in the Declaration and argues that the language establishes an intent that the covenant to pay Annual Assessments was meant to run with the land.
In its Cross-Motion, Defendant puts forth numerous arguments that the covenant to pay Annual Assessments does not run with the land and that judgment should instead be entered in its favor. In the alternative, Defendant posits that summary judgment is premature at this stage and requests that we deny summary judgment entirely to allow the parties to complete discovery.
For the following reasons, we will grant summary judgment to Plaintiff with respect
We look to state law to determine if a covenant runs with the land. Jetro Cash and Carry Enter. Inc. v. Food Distrib. Ctr., 569 F.Supp. 1404, 1407-08, 1417 (E.D.Pa.1983). Under Pennsylvania law, the determination of whether a covenant runs with the land is governed by the intent of the parties. Leh v. Burke, 331 Pa.Super. 98, 331 A.2d 755, 761 (1975), petition for allowance of appeal denied (Feb. 2, 1975) ("the test ... is whether it was so intended by its creators.") (citing J.C. Grille, Inc. Liquor License Case, 181 Pa.Super. 456, 124 A.2d 659, 663 (1956)). A statement that "the grantees' heirs or assigns are considered bound by its terms is generally decisive of the question." Leh, 331 A.2d at 760. However, where the language is not clear, the parties' intentions "should be interpreted in the light of the subject matter, the apparent object or purpose of the parties, and the conditions existing when [the agreement] was made." Id. (quoting Parker v. Hough, 420 Pa. 7, 215 A.2d 667, 670 (1966)).
Covenants providing for annual assessments or charges have been found to run with the land. See Locust Lake Village Prop. Owners Ass'n v. Wengerd, 899 A.2d 1193, 1199-1200 (Pa.Commw.Ct.2006) (affirming summary judgment against property owner subject to covenant to pay annual assessments for the maintenance and operation of the common areas); Wild Acres Lakes Prop. & Homeowners Ass'n v. Coroneos, 690 A.2d 794, 796 (Pa. Commw.Ct.1997) ("Covenants providing for assessment of an annual lien or charge are clearly covenants running with the land."); Treasure Lake Prop. Owners Ass'n, Inc. v. Meyer, 832 A.2d 477, 482 (Pa.Super.Ct.2003) (covenant to pay maintenance fees held to run with the land); Birchwood Lakes Cmty. Ass'n, Inc. v. Comis, 296 Pa.Super. 77, 442 A.2d 304, 307 (1982) (finding that covenant to pay annual maintenance dues which extended to "Grantee ... heirs, successors, executors, administers and assigns" were clearly intended to run with the land).
Here, the Declaration states that "[a]ll of the foregoing covenants ... shall be covenants running with the land, and shall be binding upon the parties hereto and their respective representatives, successors and assigns, and all subsequent owners and occupants of the Property." (Pl.'s Sur-reply Ex. A ¶ 16.) Moreover, the Declaration states that Annual Assessments shall be "charges and continuing liens upon the Property, binding upon Buyer and all successors in title to the Property." (Id. at ¶ 13(c).) The Declaration further provides that "[n]o sale or transfer shall relieve the owner of the Property (including, without limitation, any mortgagee in possession) from liability for any Annual Assessments." (Id.) Accordingly, the plain language of the Declaration manifests a clear intent that the covenant to pay Annual Assessments was meant to run with the land. See Jetro Cash, 569 F.Supp. at 1407, 1417 (specific language in contract that "covenants shall be ... running with the land" held to be dispositive on issue of intent); Leh, 331 A.2d at 760 (statement in deed that "Grantees, their heirs or successors in title shall bear their proportionate share of the expenses of such improvements" was indicative that covenant was intended to run with the land).
Defendant's arguments opposing its responsibility to pay Annual Assessments lack merit. We will address each argument in turn.
First, it is irrelevant that Defendant was not a signatory to the Declaration or the Supplemental Agreement. Defendant appears to be confusing the principles of contract law with the principles of property law. Although generally, a contract cannot impose obligations on one who is not a party to that contract, Matter of Estate of Barilla, 369 Pa.Super. 213, 535 A.2d 125, 128 (1987), if an obligation in a deed or contract relating to real estate is found to run with the land, the obligation is binding on subsequent property owners, regardless of whether they were signatories to the original real estate contract or deed. Leh, 331 A.2d at 761. The Declaration is a contract relating to real estate, the Property. The covenant to pay Annual Assessments runs with the land, and is therefore personally binding on subsequent property owners, including Defendant.
Second, Defendant's contention that it has not expressly assumed the obligation to pay Annual Assessments similarly confuses property law with contract law. Defendant does not need to expressly assume a properly recorded covenant if the covenant runs with the land. Defendant assumed the obligation when it accepted the deed to the Property in lieu of foreclosure, and was put on constructive notice of all of the covenants and restrictions contained in the Property's chain of title. Vernon Twp. Volunteer Fire Dep't, Inc. v. Connor, 579 Pa. 364, 855 A.2d 873, 880 (2004) ("A property owner has the duty to become aware of the recorded restrictions in the chain of title and will be bound to such restrictions absent actual notice."); Walsh v. East Pikeland Twp., 829 A.2d 1219, 1223 (Pa. Commw.Ct.2003) (property owner must have actual or constructive notice of an encumbrance on the property in order for the encumbrance to be enforced against him) (citation omitted); see also 21 Pa. Stat. Ann. §§ 356, 357.
Third, Defendant's argument that it "was not aware of and had not been provided a copy of the Supplemental Agreement" at the time it took title to the Property (Baiamonte Aff. ¶ 10, Def.'s Mot. Ex. A), and therefore had improper notice of the obligation to pay Annual Assessments, is legally and factually unsupportable. Under Pennsylvania law, a "grantee is charged with notice of everything affecting his title which could be discovered by an examination of the records or other [documentary evidence] of title of his grantor." Vernon Twp., 855 A.2d at 880 (quotation and citation omitted); see also Balog v. Marlow, 30 Pa. D. & C. 3d 170, 182 (Pa.Com.Pl.1980) ("[c]onstructive notice exists when there are facts available which a reasonably prudent buyer of land should learn of or discover whether he actually does so or not.").
The Supplemental Agreement was never recorded. The Declaration, however, which spells out the obligation to pay Annual Assessments, and repeatedly refers to the Supplemental Agreement as the source of how to calculate the amounts of these assessments, was duly recorded.
The fact that details on how to calculate the amounts of these assessments were contained in an unrecorded document is irrelevant. See Reed v. Reese, 473 Pa. 321, 374 A.2d 665, 670 (1976) (unrecorded plot plan was sufficient to establish easement in favor of property owner where plot plan was referenced in recorded deed); Loeb v. Watkins, 428 Pa. 480, 240 A.2d 513, 516 (1968). In Loeb, landowners complained that they did not have notice of a restrictive covenant because the agreement containing the covenant failed to adequately describe the restriction and merely referred to an unrecorded development plan. Loeb, 240 A.2d at 516. The Pennsylvania Supreme Court rejected this argument and stated that the "instrument containing the restriction was placed of record and this was sufficient to indicate and provide notices of the properties covered thereby." Id. Accordingly, even though the Supplemental Agreement was not recorded, Defendant's constructive notice of the Declaration was sufficient to put Defendant on notice of the existence of the covenant to pay Annual Assessments.
Fourth, Defendant's reliance on Pennsylvania's Realty Transfer Tax statute, 72 Pa. Stat. Ann. § 8101-C et seq, in arguing that the Supplemental Agreement is unenforceable ignores the plain language of the statute.
Defendant suggests that because the taxable value of the transfer of the Property included "the value of the construction work to be performed pursuant to the Supplemental Agreement," the Supplemental Agreement should also have received a documentary stamp. (Def.'s Reply 4, ECF No. 16.) Although it may be true that the taxable value of any transfer includes amounts related to construction, see 61 Pa.Code § 91.137, Defendant cannot ignore the definition of "document" which includes only those writings that "convey[], transfer[], devise[], vest[] ... or evidence[] ... transfer or devise of title to real estate." 72 Pa. Stat. Ann. § 8101-C. At best, Defendant has presented an ambiguity in the statute's construction, and ambiguities are construed in favor of the taxpayer, here Plaintiff's predecessor. Commonwealth v. Willson Prods., 412 Pa. 78, 194 A.2d 162, 165 (1963) (stating that ambiguities are construed "most strongly and strictly against the Government and if there be a reasonable doubt as to its construction
Fifth, Defendant contends that the Promotional Assessment does not "touch and concern" the Property nor "affect the physical senses" and therefore does not run with the land. (Def.'s Mot. 11-12.) Specifically, Defendant argues that the Promotional Assessment is "solely for the economic benefit of the mall" and does not "bear any physical relationship to the real property it allegedly burdens." (Id. at 11.) Defendant relies on the case of Price v. Anderson, 358 Pa. 209, 56 A.2d 215 (1948).
Restrictive covenants, and particularly land use restrictions, are not favored by Pennsylvania law and are therefore strictly construed. Vernon Twp., 855 A.2d at 880. As a result, courts have fashioned various ways by which a property owner burdened by restrictive covenants may seek to have them declared unenforceable. See, e.g., Daniels v. Notor, 389 Pa. 510, 133 A.2d 520, 523 (1957) (changed or altered conditions in the neighborhood may allow a restrictive covenant to be discharged); Kajowski v. Null, 405 Pa. 589, 177 A.2d 101, 106 (1962) (acquiescence in its breach by others, or an abandonment of the restriction may result in discharge of a restrictive covenant); Price, 56 A.2d at 221 (invalidating restrictive covenant that serves only pecuniary or economic benefit to the dominant estate). The methods used to invalidate land use restrictions, however, are not applicable to the covenant to pay Annual Assessments. See Birchwood Lakes, 442 A.2d at 307 (rejecting defendant's attempt to frame obligation of paying maintenance fees as a restrictive covenant "in the hope that a standard of review more favorable to their position will be applied," and instead applying the standards applicable to nonrestrictive covenants).
Notably, Defendant has not pointed to nor are we aware of any Pennsylvania case supporting the proposition that the enforceability of nonrestrictive covenants, like the obligation to pay assessments, turns on whether such covenants "affect the physical senses."
Sixth, Defendant's contention that the Maintenance Assessment does not run with the land because it renders the Property's value negative is without legal support. Defendant submits that it has attempted, although unsuccessfully, to sell or lease the Property. According to Defendant, the Property is unmarketable, and thus the covenant to pay Annual Assessments is unenforceable. Again, Defendant relies on cases construing restrictive covenants.
Seventh, we reject Defendant's rather disingenuous contention that a statement made in a joint case report filed by Plaintiff constitutes a prior admission by Plaintiff that the covenant to pay Annual Assessments does not run with the land.
Having determined that the covenant to pay Annual Assessments runs with the land and is binding on Defendant, the question remains what amount is owed by Defendant. Plaintiff submitted a summary of the "outstanding debt" allegedly representing the past due Annual Assessments owed by Defendant. (Def.'s Mot. Ex. E.) Defendant objects to this summary, and requests that it be stricken from the record. Specifically, Defendant objects on the basis that Defendant has not been provided with the back-up documentation supporting the summary and because the summary includes charges that are not related to the physical maintenance of the common areas.
Disputed issues of fact related to the claimed damages require us to deny summary judgment at this stage with respect to damages. First, there is a dispute about when Defendant ceased making payments, the resolution of which will require additional discovery. In the Complaint, Plaintiff initially stated that Defendant ceased making payments in January of 2008. In its Motion for Summary Judgment, Plaintiff stated that payments stopped in March of 2007. Defendant submits only that it has not paid the requested assessments; however, it does not state when payments were or were not made.
Second, Defendant disputes certain amounts that Plaintiff includes in its calculation of Annual Assessments allegedly owed, arguing that many of the alleged charges were never contemplated by the Declaration and Supplemental Agreement. The Supplemental Agreement provides that maintenance costs associated with the interior of the mall are not included in Maintenance Assessments. (Pl.'s Mot. Ex. D ¶ 5(b).) Defendant argues that some of the charges for which Plaintiff seeks reimbursement relate to the interior of the mall. Defendant has repeatedly requested back-up documentation for this summary and has not, to date, been provided with the requested discovery. In addition, Defendant has requested a Rule 30(b)(6) deposition of one of Plaintiff's representatives. Defendant is entitled to this discovery so that it has the opportunity to object to the amount of damages.
Finally, the Supplemental Agreement refers to and relies upon definitions contained in the Master Declaration when describing how to calculate the Maintenance Assessment. (See id. (stating that "Common Area Maintenance Expenses" and "Enclosed Mall" are defined in the Master
Defendant requests that the Court strike the Supplemental Agreement based on application of the Pennsylvania Realty Transfer Tax statute, 72 Pa. Stat. Ann. § 8101-C et seq. For the reasons stated above, see supra ¶ III.A, we deny Defendant's Motion to Strike. The Pennsylvania Transfer Tax statute does not affect the admissibility of the Supplemental Agreement for purposes of summary judgment.
Defendant also requests that the Court strike Exhibit E to Plaintiff's Motion for Summary Judgment, which is the summary of alleged Annual Assessments owed by Defendant. Because we decline to grant summary judgment with respect to the amount of damages, we need not examine Exhibit E at this stage. However, we caution Plaintiff that a summary of expenses will not be admitted at any trial in this matter without complying with Federal Rule of Evidence 1006.
For the foregoing reasons, Plaintiff's Motion for Summary Judgment is granted in part and denied in part, and Defendant's Cross-Motion for Summary Judgment is denied. Moreover, Defendant's Motion to Strike is denied. An appropriate Order follows.