191 A.3d 938
Pa. Commw. Ct.2018Background
- Ridings at Newlin is a nine-unit planned community; Laurel Road Homeowners Association (Association) is the mandatory unit owners’ association; William and Nancy Freas (Declarants) developed the community and retained control until January 2014.
- Association sued the Declarants (three-count complaint) alleging (I) breaches of fiduciary duty/good faith and UPCA violations, (II) statutory warranty against structural defects in common areas (UPCA §5411), and (III) failure to pay assessments under contract/UPCA.
- Trial court held the community qualified for the UPCA §5102(a)(1) small-community exception (12 or fewer units), so many UPCA provisions (including §5411 and §5314) did not apply; Count II and the UPCA-based portion of Count I and Count III failed.
- The trial court found, under common law, a confidential/fiduciary relationship during Declarants’ control and that Declarants breached fiduciary duties by mismanaging records, drafting deficient governing documents, and failing to complete/repair common areas (notably the private roadway).
- Court awarded the Association $59,588 in damages (road repair $31,588; replacement/amendment of Declaration $6,500; revised Bylaws $6,500; replacement of subdivision plans $15,000). Both sides appealed; Commonwealth Court affirmed.
Issues
| Issue | Plaintiff's Argument (Association) | Defendant's Argument (Freas/Declarants) | Held |
|---|---|---|---|
| Applicability of UPCA §5102(a)(1) exception | Section 5102(a)(1) should not exclude application because existence/extent of common elements (private road) makes the exception inapt; statute is a "de minimis" exception tied to common elements, not just unit count | Subsection (a)(1) plainly applies to communities with 12 or fewer units where no reserved conversion/addition rights exist; Ridings has 9 units and no reservation, so the exception applies | Affirmed: §5102(a)(1) applies; exception is based on unit count and absence of rights to create additional units/convertible real estate, so UPCA provisions like §5411 and §5314 do not apply |
| Declarants’ obligation to pay initial $4,000 assessments after first sale | Declaration/UPCA require Declarants to pay initial assessment (Association reads Article IV §3 as obligating Declarants after first sale) | Article IV §3 levies initial assessment on each lot at time of its sale/settlement; only the record owner at settlement is an "owner" and liable for assessments | Affirmed: Declarants not personally liable for others’ assessments; obligation arises on sale/settlement by each lot owner |
| Existence of fiduciary/confidential relationship giving rise to common-law fiduciary duties | Association: even if UPCA provisions do not apply, common law can impose fiduciary duties on Declarants who controlled the association and harmed owners | Declarants: no special fiduciary relationship; UPCA-based claims fail and Restatement §6.20 not adopted by Pa.; no basis for tort fiduciary duty here | Affirmed: common-law principles and precedent support imposition of fiduciary duties on developers/declarants during their control; trial court reasonably found a confidential relationship and breaches |
| Sufficiency/weight of evidence for damages award (road, document repairs) | Association: expert testimony and exhibits justify the $59,588 award | Declarants: expert testimony was inconsistent/tainted; measurements and repairs speculative; award against weight of evidence | Affirmed: trial court—factfinder—credited Association’s expert; record contains competent evidence supporting the damages award |
Key Cases Cited
- Little Mountain Community Ass’n, Inc. v. Southern Columbia Corp., 92 A.3d 1191 (Pa. Super. 2014) (refused to adopt Restatement §6.20 to retroactively impose UPCA; noted common-law remedies may remain)
- Lyman v. Boonin, 635 A.2d 1029 (Pa. 1993) (when statutes do not cover a situation, courts may provide equitable relief for unauthorized, fraudulent, bad-faith or self-dealing acts by governing bodies)
- Pinecrest Lake Cmty. Trust ex rel. Carroll v. Monroe County Bd. of Assessment Appeals, 64 A.3d 71 (Pa. Cmwlth. 2013) (trustees of developer-created trust owed fiduciary duties to unit owners despite inapplicability of UPCA retroactively)
- Tooey v. AK Steel Corp., 81 A.3d 851 (Pa. 2013) (discussed recognition of fiduciary duties and equitable remedies where statutory frameworks leave gaps)
- Village at Camelback Property Owners Ass’n v. Carr, 538 A.2d 528 (Pa. Super. 1988) (developer/promoter owed fiduciary duties to prospective purchasers and association during marketing and formation)
- Cohen v. S&S Constr. Co., 151 Cal. App. 3d 941 (Cal. Ct. App. 1983) (developer liable for breach of basic fiduciary duties to act in good faith and properly manage common-interest community)