Beaver Dam Outdoors v. Hazleton City Auth.

• Decision Date: 20 February 2008
• Citation: 944 A.2d 97
• Parties: BEAVER DAM OUTDOORS CLUB v. HAZLETON CITY AUTHORITY, Appellant.
• Court: Pennsylvania Commonwealth Court

944 A.2d 97

BEAVER DAM OUTDOORS CLUB v. HAZLETON CITY AUTHORITY, Appellant.

Commonwealth Court of Pennsylvania.

Argued December 11, 2007.

Decided February 20, 2008.

Reargument Denied April 10, 2008.

Peter P. O'Donnell, Hazleton, for appellant.

Thomas L. Kennedy, Hazleton, for appellee.

BEFORE: SMITH-RIBNER, Judge, and SIMPSON, Judge, and FLAHERTY, Senior Judge.

OPINION BY Judge SIMPSON.

We are asked to determine whether the Hazleton City Authority (Authority) entered into an enforceable lease with the Beaver Dam Outdoors Club (Club), a hunting and fishing club, for a multi-year lease of approximately 487 acres of the Authority's watershed property in Carbon County. Following a non-jury trial, the Carbon County Court of Common Pleas (trial court) entered declaratory judgment in favor of the Club. The trial court held the lease to be a valid and binding contract. For the following reasons, we affirm.

I. Background

The Authority is a municipal authority created by the City of Hazleton for the purpose of providing water to municipalities in the Greater Hazleton area. The Authority's Board of Directors (Board) consists of five members.

The Club is a nonprofit corporation incorporated in 2001 for the purpose of promoting responsible use of natural resources.

At some point prior to the Club's incorporation, Andrew Sherkness (Club President), Carlo Collevechio (Club Secretary) and the Board's Vice Chairman Joe Zoba (Board Vice Chairman) began negotiating for a lease regarding three parcels of land the Authority owned in Packer Township, Carbon County. As a result of negotiations, Board Vice Chairman informed Club President he would present a motion to the Board to approve a lease of the property if the Club formed a nonprofit corporation and obtained liability insurance for the land. Shortly thereafter, the Club was incorporated.

In August 2003, the Club obtained liability insurance for the property and named the Authority as an additional insured. Thereafter, the parties prepared a lease. With the exception of the metes and bounds description, the terms of the Club's lease were identical to four existing leases in place at the time between the Authority and similar hunting clubs.

At the Board's December 8, 2003 regular meeting, Board Vice Chairman made a motion to approve Resolution 123 in order to enter into the proposed lease. Prior to the vote on Resolution 123, Board Chairman Frank DeAndrea (Board Chairman) moved to suspend the rules in order to place Resolution 123 on the agenda even though the Board did not review the proposed lease at a prior work session. The motion to suspend the rules passed, and the Board voted on Resolution 123.

As reflected in the meeting minutes, Resolution 123 provided:

"Be it Resolved by [the Board], that a Lease be entered into between the [Authority and the Club] for the purpose of leasing a parcel or tract of land situated in Packer Township, Carbon County as more particularly described in said Lease Agreement. Be it further resolved, that the appropriate officers are authorized to sign, as such, any and all documents to effectuate the above lease agreement. That an opinion from the Authority's engineer as to the usefulness and necessity of the property as it relates to the water system be obtained and notice of the lease agreement be forwarded to all parties of interest by the Solicitor."

Club Ex. No. 11; Reproduced Record (R.R.) at 578a.

A three-member majority voted to approve Resolution 123.¹ Id. One Board member voted against it, and another abstained. Id. The Board minority opposed the lease in part because the Board did not have the completed lease to review when it voted on Resolution 123.

Following the meeting, the parties signed the lease at the office of Solicitor Ned McNelis (Authority Solicitor). Board Chairman signed the lease on behalf of the Authority. Club President and Club Secretary signed for the Club. By its terms, the lease became effective immediately. Board Chairman's term of office expired at the end of December 2003, and he was replaced.

Ultimately, the Authority's manager, Randy Calahan (General Manager), informed the Club the lease was invalid. He returned the lease payments and the notice of insurance coverage.

Thereafter, the Club filed a two-count complaint for declaratory and equitable relief arising from an alleged breach of contract. In its declaratory judgment count, the Club averred the lease is in full force and effect, is unambiguous, and contains no contingencies preventing or limiting the Club's right to use the property. In its equity count, the Club sought to permanently enjoin the Authority from interfering with the Club's use and enjoyment of the property and sought consequential damages.

The Authority filed an answer and new matter denying the Club's material allegations. Authority's new matter included the averment that the lease is invalid because it was not placed before the Board for review, comment and vote. The Authority further averred that the lease was not properly signed and that the lease is invalid because the Board approved it in an ultra vires manner.

Following a non-jury trial, the trial court held the lease to be a binding contract. In so doing, the trial court found that at the time the Board majority voted to approve the lease, the contracting parties understood there were no additional conditions precedent to formation of the contract. Tr. Ct. Op. at 4. In particular, the trial court found the Board majority understood that an engineering certificate was not a mandatory condition precedent or a hurdle to contract formation. Id. The court also found any discussion at the meeting regarding the need to finalize the contract referred only to having Board Chairman sign the lease. Id., n. 2.

The trial court also rejected the Authority's remaining arguments that a valid contract did not exist. In so doing, it held:

on December 8, 2003, once the majority of the [Board] voted to adopt the Lease Agreement, a meeting of the minds occurred and a valid contract was formed. We further conclude that failure to obtain an engineering certificate was not a bar, nor was it a pre-condition to contract formation. Lastly, we conclude that, in entering into the Lease Agreement with [the Club], the [Authority] was performing a proprietary function, not a governmental function, and, therefore, the [Board] did not act ultra vires. Accordingly, [we grant] declaratory relief. (Tr. Ct. Op. at 13.)

The Authority filed a post-trial motion asserting the trial court committed errors of law and abused its discretion inasmuch as its crucial findings were not supported by substantial evidence. The trial court denied the motion, and the Authority appealed.

Our review in declaratory judgment and equity actions is limited to determining whether the trial court's findings were supported by substantial evidence and whether the trial court erred as a matter of law or abused its discretion. Pa. Indep. Waste Haulers Ass'n v. Twp. of Lower Merion, 872 A.2d 224 (Pa.Cmwlth. 2005); Millstone Enters., Inc. v. Dep't of Envtl. Res., 101 Pa.Cmwlth. 408, 516 A.2d 814 (1986).

II. Issues

The Authority presents three issues. First, it asserts the trial court erred in failing to find that two mandatory conditions precedent to the lease were not fulfilled. Second, the Authority asserts the Board majority acted in an ultra vires manner in approving and executing the lease. The Authority further contends the lease is unenforceable as against public policy. Third, the Authority asserts the trial court erred in determining the Authority's approval of the lease constituted a proprietary rather than governmental function.

III. Contract Formation; Conditions Precedent

The Authority first argues the trial court erred in concluding that at the time the Board approved the lease the parties understood there were no additional conditions precedent to formation of the contract. Rather, the Authority maintains, Resolution 123 did not constitute an acceptance of the Club's lease offer, but rather a counter-offer that included two mandatory conditions precedent. The Authority asserts that no valid contract ever existed.²

"[A] condition precedent may be defined as a condition which must occur before a duty to perform arises." Acme Mkts., Inc. v. Fed. Armored Express, Inc., 437 Pa.Super. 41, 648 A.2d 1218, 1220 (1994). "While the parties to a contract need not utilize any particular words to create a condition precedent, an act or event designated in a contract will not be construed as constituting one unless that clearly appears to have been the parties' intention." Id. "To determine the purpose of the conditions, the general rules of contract interpretation are applied and the intention of the parties is controlling." Estate of Barilla, 369 Pa.Super. 213, 535 A.2d 125, 129 (1987).

However, if parties agree upon essential terms and intend them to be binding, a contract is formed, even though they intend to adopt a formal document with additional terms at a later date. Hartman v. Baker, 766 A.2d 347 (Pa.Super.2000); see also Restatement (Second) of Contracts, § 27 (1981). As a general rule, signatures are not required to create a contract unless such signing is expressly required by law or by intent of the parties. Hartman.

First, the Authority contends, Resolution 123 requires two Authority officers sign the lease. Second, the Authority maintains, an engineering certificate is required by Authority bond documents. The Authority claims it is beyond dispute that these conditions were not met. Therefore, the Authority asserts, the execution of the lease lacked any legal effect. See Keystone Tech. Group v. Kerr Group, 824 A.2d 1223 (Pa.Super.2003) (if a contract contains a condition precedent, the condition must be met before a duty to perform the contract arises); Acme Mkts. (same).

As to the existence of the alleged conditions precedent, the trial court...