Northslope III Owners Association v. Richard J. Harley

Richard J. Harley (Harley) appeals from an order of the Court of Common Pleas of Monroe County (trial court) denying his motion for post-trial relief and ordering him to pay Northslope III Owners Association (Association) $13,337.63 in dues and assessments. The Association has filed a cross-appeal from the trial court's order denying its post-trial motion and ordering Harley to pay only a portion of the attorneys' fees requested by the Association. On October 4, 2006, the Association filed a complaint with the trial court (No. 7180 C.V. 2006) pursuant to 68 Pa. C.S. §53141 of the Uniform Planned Community Act2 to recover delinquent dues and assessments owed by Harley for Unit 45-A, the unit he owned in the residential subdivision known as Northslope III. The dues covered the period from April 28, 2003, through August 14, 2006, and were in the amount of $2,621.26.

Harley filed an answer and new matter and a counterclaim admitting that he was the owner of the unit but denied that he owed dues to the Association.

He alleged that he had paid in excess of $17,000 to the Association in June 2002 towards dues and assessments for which he believed he had not been credited. Harley also alleged that he had previously paid the Association on August 15, 1997, $7,007.42 in unpaid association dues and fees which were not properly credited. He had also made two payments totaling $7,000 in 1997 that were not credited.

In response, the Association filed a reply to the new matter and an answer to the counterclaim arguing that Harley did not pay $17,000 to the Association, any fees previously paid were to satisfy Harley's indebtedness for prior litigation unrelated to the present matter, and Harley was further precluded from raising the alleged payments due to the statute of limitations, estoppel, waiver and laches. The Association admitted that Harley had paid the sum of $7,007.42 for unpaid dues and fees but that it was not for settlement of the present case; rather, it was made towards settlement of prior unrelated litigation not relevant to the present matter. The Association denied that Harley ever made two payments totaling $7,000 in 1997.

On August 20, 2007, a court arbitration took place regarding the Association's complaint. The arbitrators found in favor of the Association and Harley appealed from the award. However, before that decision was issued, the Association filed a second complaint with the trial court against Harley for dues and assessment that had accrued from October 2, 2006, forward in the amount of $4,655.30 (No. 6449 C.V. 2007). Harley filed an answer, new matter and a counterclaim to the complaint making the same allegations as in his previous answer, new matter and counterclaim.

The trial court consolidated the two cases for trial and the parties submitted the following stipulated facts to the trial court for a decision without a jury pursuant to Pa. R.C.P. No. 1038.1:3

• The Association is a residential subdivision/residential development within the meaning of the Uniform Planned Community Act;

• Harley is the owner of Unit 45A within Northslope III pursuant to a recorded Deed;

• Pursuant to the recorded Deed, Harley's ownership is subject to the "Declaration of Protective Covenants, Restrictions and Easements” for Northslope III;

• As an owner within Northslope III, Harley was responsible for payment towards common expenses of the Association with any past due assessments bearing an interest rate of 15% per year;

• The covenants relating to Northslope III provided that any judgment entered against a property owner must include all expenses of the owner's association, including reasonable attorneys' fees, incurred in the collection of the delinquent assessment, by legal proceedings or otherwise;

• Harley paid part of his dues between September 2002 and September 2005 and ceased issuing payments to the Association in November 2005;

• Northslope III filed a complaint against Harley demanding payment of delinquent dues and assessments

and sought to recover its costs, interest at the rate of 15% and its attorneys' fees;

• Harley's sole defense to the Association's complaint was that he had paid the Association sums of money in 1997 and 2002 which were not credited to his account;

• When the pleadings were closed, the case was submitted to a Board of Arbitrators who entered an award in favor of the Association for the full amount sought by the Association less some attorneys' fees that were incurred by a predecessor attorney for the Association;

• Harley took an appeal of the decision of the Board of Arbitrators; and

• The Association incurred attorneys' fees through March 14, 2008 in the amount of $7,924.23.

Based on the stipulation, the trial court issued two orders, one for the case filed in 2006 and the other for the case filed in 2007. In the verdict for the 2006 case, the trial court awarded the Association $5,881.77 – a base amount requested by the Association of $2,969.76 plus 15% interest at $685 plus $2,500 in attorneys' fees. In the verdict for the 2007 case, the trial court awarded the Association $7,755.86 – a base amount requested by the Association of $4,655.30 plus 15% interest at $603.36 plus $2,500 in attorneys' fees. Regarding the Association's request for attorneys' fees, because the trial court found in favor of the Association in both cases, it stated that they should be awarded given the nature of the proceedings and the amount would be based on the standard of reasonableness. While the attorneys' fees were almost $8,000, the trial court reduced the requested amount to $2,500 for each case or a total award of $5,000 because some of the fees were related to the settlement and to administrative costs and not to the litigation. The trial court also denied Harley's counterclaim based on the four-year statute of limitations. Both parties filed post-trial motions requesting post-trial relief which the trial court denied. This appeal by Harley and cross-appeal by the Association followed.4

I. Harley's Appeal

Harley contends that the trial court erred in dismissing his counterclaim for his credits and payments as out of time because the statute of limitations for actions regarding an instrument signed under seal is 20 years, not four years as the trial court found. He argues that the trial court failed to address why this matter was governed by a four-year statute of limitations and not a 20- year statute of limitations.

What Harley ignores is that the stipulation which he agreed to submit to the trial court specified that the covenants and restrictions of the Association controlled the owners living in Northslope III. According to those covenants and restrictions, any homeowner, including Harley, who owns unit 45A under the covenant, i.e., contract, was responsible for payment towards common expenses of the Association. Common expenses include dues and expenses, which Harley stipulated that he stopped paying after 2005. When Harley stopped paying his dues, the Association filed a complaint which essentially was an action in contract to collect the unpaid dues and assessment. See London Towne Homeowners Association v. Karr, 866 A.2d 447 (Pa. Cmwlth. 2005). An action in contract falls within the four-year statute of limitations, not the 20 years as contended by Harley.

Specifically, 42 Pa. C.S. §5525 provides:

(a) General rule. Except as provided for in subsection

(b), the following actions and proceedings must be commenced within four years:

* * *

(8) An action upon a contract, obligation or liability founded upon a writing not specified in paragraph (7), under seal or otherwise, except an action subject to another limitation specified in this subchapter. Because the four-year statute of limitations applies in this case, the 20-year statute of limitation is inapplicable. Consequently, the trial court correctly determined that his argument was barred.5

II. Association's Cross-Appeal

Addressing the Association's cross-appeal, it argues that the trial court abused its discretion and incorrectly concluded that it was not entitled to $7,924.23, the total amount of attorneys' fees it incurred in pursuing the matter, because the trial court did not make its decision on the basis of reasonableness.

We agree.

Section 1 of the Uniform Condominium Act, 68 Pa. C.S. §3315(f), provides the following regarding attorneys' fees:

A judgment or decree in any action or suit brought under this section shall include costs and reasonable attorneys' fees for the prevailing party.

Additionally, the Covenants of the Association mandate that reasonable attorneys' fees be paid in the collection of a delinquent assessment.

The total amount of the attorneys' fees stipulated to by the parties was $7,924.23.

The trial court reduced the Association's attorneys' fees because it determined that the fees included administrative costs and time incurred in settlement discussions because they were not litigation related.6 However, attorneys' fees in seeking settlement and administrative costs are necessary to pursue litigation are proper costs of litigation reimbursable under the Condominium Act. Consequently, the (continued...) (June 11, 2008 hearing at 11-12.) At the second hearing on the post-trial motions, the trial court stated:

THE COURT: With respect to the attorney's fees, I want to make it clear, reasonableness has several different meanings, legal and practical, and I had also addressed the attorney's fees during the announcement hearing. There was certainly no indication that Mr. Hardy's fees themselves and the amount he charged was unreasonable. As a matter of fact I think the bills and the fees themselves were stipulated to.

MR. HARDY: That's correct, Your Honor.

THE COURT: There was absolutely no contest to the reasonableness in that sense, in the sense of – is it a charge over and above what is customarily and usually charge in these types of proceedings, or for the type of services that Mr. Hardy performed.

I don't think that was challenged and the Court certainly can indicate that was not a basis for not awarding all of the attorney's fees.

The reasons I articulated during the announcement hearing I will stand by, but essentially there was some aspects of the fees that were incurred that were not necessarily in the nature of litigation or in the nature of trying to force Mr. Harley to pay, but in the nature of settlement and administrative type expenditures and that is the portion, if you will to use a very common term so we can all understand it, that we deducted from the sum total. I think I articulated my reasoning for the attorney's fees awarded at the announcement hearing as well, and I'll stand on that for the post trial motions.

(August 15, 2008 hearing at 17-19.) (Emphasis added.)

Association is entitled to $7,924.23 in attorneys' fees and that portion of the trial court's order is reversed.7

* * *

See: http://www.aopc.org/OpPosting/Cwealth/out/2393CD08_5-5-09.pdf

Accordingly, the order of the trial court denying Harley’s post-trial motion is affirmed. The order of the trial court denying the Association’s post-trial motion is affirmed except as to the portion reducing attorneys’ fees. The matter is remanded to the trial court for the sole purpose of issuing an order to award attorneys’ fees in the entire amount as determined in the stipulation agreement by the parties.