Angel Arms Condo. Ass'n v. Tripoli (In re Pius St. Assocs., LP)
| Decision Date | 16 March 2022 |
| Docket Number | Case No. 19-21560-GLT |
| Parties | IN RE: PIUS STREET ASSOCIATES, LP, Debtor. Angel Arms Condominium Association, Movant, v. Thomas Tripoli, Respondent. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania |
Nicholas A. Miller, Esq., Herron Business Law, Pittsburgh, PA, Attorney for the Association.
Jeffrey T. Morris, Esq., Elliot & Davis, PC, Pittsburgh, PA, Attorney for Tripoli.
Related to Dkt. Nos. 332, 336, 345 346, 347, 357, 358, 359
Once God's house, the former St. Michael's Church on Pittsburgh's South Side Slopes is now the 26-unit Angel Arms Condominium complex. In the absence of any higher power, there is a dispute over who holds the worldly authority to license the condominium's amenities, such as parking and storage. For roughly ten years, the debtor-developer Pius Street Associates, LP ("Debtor") did just that and kept the licensing fees it collected. But the Angel Arms Condominium Association ("Association") asserts the Debtor converted those fees by usurping the Association's dominion over condominium property.1 Thomas Tripoli, the Debtor's limited partner and the sole shareholder of its general partner, objects to the Association's claim to both past and future licensing fees, contending that they are subject to the Debtor's reserved rights in the condominium's formation documents.2 This discrete issue is presently before Court on cross-motions for summary judgment.3 For the reasons below, the Court finds that only the Association is entitled to partial summary judgment, though on a more narrow basis than it urges.
The salient facts are undisputed. The condominium build out began in 2002.4 In July 2003, the Debtor recorded a declaration of condominium (as amended, the "Declaration") in accordance with the Pennsylvania Uniform Condominium Act5 ("Condominium Act") formally creating the Angel Arms Condominium ("Angel Arms").6 The Declaration provides that the individual parking spaces in the covered garage and outdoor parking decks, the rooftop decks, certain storage areas, and the wine cellar are all "limited common elements" that may be created in the condominium and licensed to unit owners.7 Until licensed, however, these "licensable elements"—a descriptor used by the Court for clarity—are expressly "common elements"8 and not "limited common elements."9 As explained in greater detail below, the difference pertains to the exclusivity with which the use and financial burden of these elements are allocated. Notably, however, the Declaration prohibits unit owners and other occupants from using parking spaces that are not specifically licensed to them.10
But the right to legally enforce "all restrictions, conditions, covenants, reservations, liens and charges set forth" in the Declaration or the Association's rules is separately granted to the declarant, the Association, and each unit owner.14 Moreover, the inaction of any of those parties "shall in no event be deemed a waiver of the right to enforce at a later date the original violation or a subsequent violation."15
In accordance with Condominium Act,16 the Debtor prepared a Public Offering Statement ("Offering Statement") that discloses certain required information about the property to prospective unit buyers.17 Among the disclosures was a statement that the "Unit Owners will pay license fees for parking spaces, outdoor terraces, storage spaces and wine cellars, as selected by the Unit Owner."18 The Offering Statement, however, does not specifically identify to whom such fees would be paid. Indeed, it only explains that "[t]he [Debtor as] Declarant will decide what to do with any parking spaces which remain unlicensed prior to the expiration of Declarant Control, as defined in the Declaration."19
Even so, it is undisputed that between February 10, 2005 and July 28, 2015, the Debtor entered into over a dozen agreements by which it licensed various licensable elements to unit owners (including members of the Tripoli family), and retained all licensing fees.20 The Debtor executed two of the license agreements after it was compelled to cede control of the Association to the individual unit owners pursuant to a court order.21 The details of those licenses are as follows:
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[Editor's Note: The preceding image contains the references for footnotes22 ,23 ]
In each license agreement, the Debtor purports to license in its own right as the declarant of Angel Arms, noting that "under the Declaration ..., certain common areas are to be created in the Condominium by Declarant," and that "Licensor has agreed to designate some of the parking areas roof decks, wine cellar and storage areas as Limited Common Areas...."24 For the record, the parties agree that the Association did not authorize the Debtor to act as a licensing agent, though Tripoli insists that is irrelevant because the Debtor reserved the right to do so in the condominium documents.25
Each license agreement also states that "upon the transfer of the Common Areas to the [ ] Association , including the Limited Common Areas, this License Agreement will be assigned to the Association."26 In other words, this language suggests a period during which the declarant holds the common elements, not the Association or unit owners. Although there is unquestionably a period of declarant control before the Association and its executive board gain independence,27 the Declaration unequivocally provides that the unit owners are each allocated an undivided interest in the common elements.28
On April 17, 2019, the Debtor filed a voluntary chapter 11 petition, but the Court later converted the case to chapter 7.29 The Association filed a secured proof of claim in the amount of $3,063,795.72, inclusive of approximately $825,000 related to the allegedly converted licensing fees.30 In response, Tripoli objected to the proof of claim.31 The Association then moved for partial summary judgment on the discrete issue as to whether the Debtor had the legal authority to license the Limited Common Elements and retain the proceeds,32 prompting Tripoli to file a cross-motion for partial summary judgment.33 After a hearing on the matters, the Court took the cross-motions under advisement.
This Court has authority to exercise jurisdiction over the subject matter and the parties under 28 U.S.C. §§ 157(a), 1334, and the Order of Reference entered by the United States District Court for the Western District of Pennsylvania on October 16, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(B).
The Association asserts that nothing in the Declaration explicitly reserves in the Debtor the power to license Limited Common Elements or retain the licensing fees.34 The Association argues that the Debtor cannot assert any "special declarant right" to retain the licensing fees because Pennsylvania courts have determined that "each additional declarant right must be specifically stated within the declaration of condominium."35 Instead, the Association maintains that the right to license Limited Common Elements rests solely with the Association because the Declaration provides it with the obligation to "budget, maintain, and repair the Common Elements and Limited Common Elements." 36
Finally, the Association contends that the Offering Statement, the only document which seemingly suggests that the Debtor has any discretion over the parking spaces, is a non-dispositive "marketing piece" that the Court should disregard.37
Tripoli argues that "the Declaration ... and the [Offering Statement] narrative clearly provide that the Declarant contemplated and reserved the right to license parking spaces and other Limited Common Elements to Unit Owners for a fee and fully disclosed same to prospective condominium unit purchasers."38 Frustratingly, he does not acknowledge that the Declaration lacks an explicit reservation of rights. Instead, Tripoli points to all the passive language throughout the Declaration that envisions the licensing of Limited Common Elements as if it expressly says the Debtor (as declarant) can create, designate, and license.39 At any rate, he contends that a reservation of rights in favor of the Debtor is implicit in these passages and is supported by the Offering Statement which provides that "[t]he Declarant will decide what to do with any parking spaces which remain unlicensed prior to the expiration of Declarant Control, as defined in the Declaration."40 In support, Tripoli relies on two cases, MetroClub Condo. Ass'n v. 201-59 N. Eighth St. Assocs., L.P.41 and Gior G.P., Inc. v. Waterfront Square Reef ,42 for the proposition that nothing in the Condominium Act bars real estate developers from retaining indefinite control and exclusive use of a limited common elements.
Alternatively, Tripoli asserts that the Court should be persuaded by the "roughly 10 years in which parking spaces and other limited common elements were licensed by the Debtor to individual unit owners in exchange for consideration."43 He argues that "[s]uch course of dealing evidence is strong and persuasive evidence of the parties[’] mutual understanding that such licensing by the Debtor as Declarant was contemplated, permitted and assented to, even if arguendo the...
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