Robbins v. Penn Ctr. House, Inc.

• Decision Date: 23 May 2016
• Docket Number: No. 979 C.D. 2015,979 C.D. 2015
• Parties: Brian ROBBINS and Jennifer Merves Robbins, and Larry Scott Auerbach, Executor of the Estate of Shirley Braverman, Deceased v. PENN CENTER HOUSE, INC., Appellant.
• Court: Pennsylvania Commonwealth Court

138 A.3d 734

Brian ROBBINS and Jennifer Merves Robbins, and Larry Scott Auerbach, Executor of the Estate of Shirley Braverman, Deceased

v.PENN CENTER HOUSE, INC., Appellant.

No. 979 C.D. 2015

Commonwealth Court of Pennsylvania.

Argued Feb. 9, 2016.

Decided May 23, 2016.

Cecil Judson Jones, Jr., Philadelphia, for appellant.

Mary Ann Mullaney and Brian S. Paszamant, Philadelphia, for appellee Brian Robbins.

BEFORE: PATRICIA A. McCULLOUGH, Judge, and ANNE E. COVEY, Judge, and JAMES GARDNER COLINS, Senior Judge.

OPINION BY Senior Judge JAMES GARDNER COLINS

.

This is an appeal from a ruling of the Philadelphia County Court of Common Pleas (trial court) granting partial summary judgment in favor of plaintiffs Brian Robbins and Jennifer Merves Robbins (the Robbinses) and Larry Scott Auerbach, Executor of the Estate of Shirley Braverman (Estate) (collectively, Plaintiffs), and against defendant Penn Center House, Inc. (PCH) in an action for declaratory relief and damages. This action arises out of a policy enacted by PCH's board of directors (Board) limiting the number of dwelling units that a member may own in its building and PCH's rejection of the Robbinses' purchase of an additional unit from the Estate based on that policy. The trial court held that limitation on the number of units that a member may own can be imposed only by amendment of PCH's bylaws, and therefore granted a declaratory judgment that the Board's policy was void. For the reasons set forth below, we affirm that declaratory judgment.

PCH is a nonprofit cooperative housing corporation incorporated under Maryland law. (PCH Articles of Incorporation, Reproduced Record (R.R.) at 26a.) PCH owns and operates Penn Center House, a residential, cooperative housing building with over 420 dwelling units, located in Center City Philadelphia. PCH is owned by its members, who are individuals who own a cooperative interest in a unit under a membership certificate and have signed an occupancy agreement for their unit. (Id. Art. V, R.R. at 27a; PCH Bylaws Art. III §§ 1, 4, R.R. at 33a–34a.) All individuals with a membership certificate for the same unit constitute a single member. (PCH Bylaws Art. III § 4, R.R. at 34a.)

PCH's articles of incorporation do not define who may become a member or acquire an interest in a unit and do not set forth any rights or restrictions concerning sale or transfer of memberships or units, but provide that “[t]o the extent not addressed in these Articles of Incorporation, Members shall have such qualifications, rights and privileges as set forth in the by-laws.” (PCH Articles of Incorporation Art. V § 1, R.R. at 27a.) PCH's bylaws provide with respect to membership:

Eligibility. Any natural person approved by the Board of Directors shall be eligible for membership, provided that he or she executes a Subscription Agreement and an Occupancy Agreement in the usual form employed by the Corporation covering a specific unit in the cooperative (each, a “Unit”).

(PCH Bylaws Art. III § 1, R.R. at 33a) (italics in original). PCH's bylaws can be amended only by a two-thirds vote of the members, not by a vote of the Board. (Id. Art. VIII, R.R. at 43a–44a.)

PCH's bylaws restrict transfer of units and provide that PCH has an option to purchase a member's membership and right of occupancy before he or she may sell it to a third party. (PCH Bylaws Art. III § 5, R.R. at 34a–35a.) The bylaws also provide that if PCH does not exercise that option,

the member may sell his/her membership to any person who (i) fulfills the Corporation's membership eligibility requirements, (ii) is duly approved by the Corporation as a member, (iii) executes a Subscription Agreement and an Occupancy Agreement with the Corporation, and (iv) pays the Administrative Transfer Fee and such other charges as may be established from time to time by the Board.

(Id. Art. III § 5(c), R.R. at 34a–35a) (emphasis added). PCH's occupancy agreements in effect at the time of these events provided that if PCH did not exercise its option to purchase the unit,

the Member may sell his membership to any person, but such sale shall not entitle the purchaser to any right of occupancy unless he has been duly approved by the Corporation as an occupant.

(2012 Form Occupancy Agreement Art. 7(c), R.R. at 394a; Estate Occupancy Agreement Art. 8(c), R.R. at 114a; Robbins Occupancy Agreements Art. 8(c), R.R. at 127a, 139a.)

PCH's bylaws neither restrict the number of units that an individual may own nor do they state that a member has a right to own more than one unit or purchase an interest in additional units. The bylaws contain language addressing the situation where an individual owns more than one unit, providing that such individuals count as a member for each unit that he or she owns in membership meetings and votes. (PCH Bylaws Art. IV §§ 5, 7, R.R. at 36a.) These provisions include a reference to possible ownership of three units, stating with respect to annual meetings and special meetings of the members: “For illustrative purposes, should a member have interest in three Units, such member shall count as three members for purposes of determining whether a quorum is present.” (Id. § 5, R.R. at 36a.) Nothing in the occupancy agreements addresses ownership of multiple units. (2012 Form Occupancy Agreement, R.R. at 390a–400a; Estate Occupancy Agreement, R.R. at 108a–120a; Robbins Occupancy Agreements, R.R. at 122a–144a.)

With respect to the powers of its board of directors, PCH's bylaws provide:

Powers and Duties. The Board shall have the powers and duties necessary for the administration of the affairs of the Corporation and may do all such acts and things as are not by law or these Bylaws directed to be exercised and done by the members. The power of the Board shall include but not be limited:

(a) To accept or reject all applications for membership and admission to occupancy of a Unit in the cooperative, either directly or through an authorized representative;

(b) To establish monthly carrying charges prescribed in the Occupancy Agreement, based on an annual operating budget formally adopted by such Board;

(c) To promulgate such rules and regulations pertaining to use and occupancy of the premises as may be deemed proper and which are consistent with these Bylaws and the Articles of Incorporation .

(PCH Bylaws Art. V § 2, R.R. at 37a) (underline emphasis added, italics in original). The Board's policies concerning membership applications in effect at the time of these events provided that when a unit became available, it was to be offered first to the members occupying the adjacent units. (PCH Procedural Guidelines for Applications, Agreements and Transfers, R.R. at 47a.) The Board's policies also required income and financial condition minimums for approval of memberships and transfers, which are based on the sale price of the unit and the amount of the monthly charges to which the unit is subject, and provided for criminal background checks. (Id., R.R. at 47a–48a; PCH Financial Requirements for Purchasing a Unit, R.R. at 414a.)

The Robbinses own and occupy Penn Center House Units 1001 and 1013, which they have merged internally into a single, combined dwelling. In December 2012, the Robbinses notified PCH's general manager that they had learned that the occupant of Unit 1015, which is adjacent to their Unit 1013, had passed away and that they wished to purchase it if it became available. The Robbinses intend to merge Unit 1015 with their combined Units 1001 and 1013.

In its March 2013 Board meeting, a proposal was made to limit the number of units that a member could own to two units. (March 2013 Board Minutes, R.R. at 73a.) This was initially proposed as a possible bylaw amendment, but was tabled and referred to the Board's Building Committee and Finance Committee for further discussion. (Id. ) Following approval of a two-unit limitation by both the Building Committee and the Finance Committee, the Board at its April 16, 2013 meeting, by a vote of four to two, enacted the following policy:

As a new policy, any one member may not own more than two units. Further, the name(s) on the certificate(s) for these unit(s) must be identical on both unit's [sic ] certificates. Lastly, any name(s) on these certificate(s) may not appear on any other Unit certificate. The only exception to this rule would be if additional unit(s) are to be purchased by an existing Member or Members and their original unit(s) are under agreement of intent to vacate and sell. Adjoining Units are to be defined as being on the same floor, are physically connected internally, and do not breach the floor slabs of building fire walls.

(April 2013 Board Minutes, R.R. at 1113a) (emphasis added). The Robbinses were not the only PCH members seeking to purchase a third unit when the Board enacted the two-unit limit; a Board member who owned two units had also placed himself on the waiting list to purchase a third unit. (R.R. at 2408a, 2497a.)

On May 3, 2013, the Estate gave notice to PCH that Unit 1015 was available. In November 2013, the Plaintiffs entered into an Agreement of Sale to sell the Estate's interest in Unit 1015 to the Robbinses, subject to PCH's approval of the transfer and issuance of a membership certificate and occupancy agreement for Unit 1015 to the Robbinses. On December 9, 2013, the Estate submitted to PCH the Robbinses' application to purchase Unit 1015 and requested approval of the transfer of Unit 1015 to the Robbinses. (Estate Letter to PCH, R.R. at 66a.) On December 16, 2013, PCH rejected the application for transfer of Unit 1015 to the Robbinses based on the two-unit limitation enacted by the Board. (PCH Letter to Estate, R.R. at 68a.) Although Plaintiffs submitted financial information and a release for criminal background check, the Board did not make a determination whether the Robbinses satisfied the other requirements for approval. (R.R. at 66a, 68a.)

The Robbinses commenced this action against PCH on September 16, 2013. On ...