Rittenhouse 1603 v. Barbera, E.

J-A28021-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
RITTENHOUSE 1603, LLC, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
EUGENE BARBERA,
Appellant No. 2068 EDA 2015
Appeal from the Order Entered June 19, 2015
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): 00080 December Term, 2014
BEFORE: PANELLA, SHOGAN, and PLATT,* JJ.
MEMORANDUM BY SHOGAN, J.: FILED DECEMBER 16, 2016
Eugene Barbera, Appellant, appeals from the order denying his motion
to transfer the underlying litigation to arbitration. We affirm.
Appellant and Lewis Katz created Rittenhouse 1603, LLC
(“Rittenhouse”) in order to purchase a condominium at 202-10 Rittenhouse
Square, Unit 1603, in Philadelphia. Lewis Katz contributed $235,000 for
four, Class A voting units and the role of manager; Appellant contributed $1
for one Class B non-voting unit. Pursuant to section 10.02 of Rittenhouse’s
Operating Agreement, any dispute among the parties or between a member
and the manager, whether arising under the Operating Agreement or
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*
Retired Senior Judge assigned to the Superior Court.
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otherwise, had to be settled by Judicial Arbitration and Mediation Services,
Inc. (“JAMS”). Operating Agreement, 3/13/13, at § 10.02.
On December 12, 2013, Appellant assigned his Class B non-voting unit
in Rittenhouse to Lewis Katz. That same day, Rittenhouse and Appellant
entered into an Occupancy Agreement, whereby Rittenhouse granted
Appellant the right to live in Unit 1603 from December 23, 2013, until thirty
days after written notice of termination. The occupancy was “at will” and did
not create a landlord-tenant relationship.
Lewis Katz died on May 31, 2014. His son, Drew Katz, became
manager of Rittenhouse. In a letter dated August 19, 2014, Drew Katz
informed Appellant that Rittenhouse was terminating the Occupancy
Agreement and, pursuant to its provisions, directed Appellant to vacate Unit
1603 within thirty days. Appellant failed to vacate Unit 1603 and remains in
possession.
Rittenhouse filed an action against Appellant for possession of Unit
1603 in Philadelphia Municipal Court and prevailed. Judgment, 11/21/14.
Appellant filed an appeal to the Philadelphia Court of Common Pleas and a
praecipe for Rittenhouse to file a complaint. Rittenhouse filed a five-count
complaint on December 15, 2014, seeking damages and possession of Unit
1603 based on Appellant’s breach of the Occupancy Agreement, ejectment,
trespass, and unjust enrichment. Rittenhouse also filed a motion for
preliminary injunctive relief on December 15, 2014. Appellant responded on
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December 23, 2014, with a brief in opposition. Following a hearing on
January 15, 2015, the trial court denied injunctive relief and granted
Appellant a supersedeas that allowed him to remain in Unit 1603 while
paying money into escrow and providing insurance documents. Order,
2/3/15.
Beginning on January 30, 2015, a volley of preliminary objections
ensued. Eventually, the trial court sustained Appellant’s preliminary
objection to Rittenhouse’s trespass count. Order, 4/20/15. As for the
remaining counts, Appellant argued that the Occupancy Agreement attached
as an exhibit to Rittenhouse’s complaint did not contain valid signatures.
The trial court overruled the objection, noting that Appellant’s argument
could be raised as new matter. Id.
Appellant filed an answer and new matter on May 7, 2015, raising
standard defenses. Rittenhouse filed a reply to the new matter on May 22,
2015, and a motion to quash Appellant’s notice to attend the upcoming trial.
Less than one hour before trial on May 28, 2015, Appellant filed a response
to Rittenhouse’s motion to quash and a motion to transfer the matter,
raising the arbitration provision in section 10.02 of the Operating
Agreement. After hearing from one witness presented by Rittenhouse, the
trial court continued the trial to address the arbitration issue, allowing
Rittenhouse to file a response to the motion to transfer, which it did on June
16, 2015. The trial court denied the motion to transfer on June 19, 2015,
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finding the issue waived and, alternatively, the arbitration provision
inapplicable.
Appellant filed the instant appeal on July 7, 2015.1 He raises one
question for our review: “Did the trial court err by failing to transfer the
matter to JAMS arbitration pursuant to the Parties’ agreement?” Appellant’s
Brief at 4.
Whether a dispute falls within the purview of a contractual arbitration
provision is a question of law. McNulty v. H&R Block, Inc., 843 A.2e
1267, 1272 (Pa. Super. 2004). In answering this question, courts engage in
a two-step inquiry: (1) does a valid agreement to arbitrate exist; (2) is the
dispute within the scope of the agreement. Id. “[A]bsent an agreement
between the parties to arbitrate an issue, they cannot be compelled to
arbitration.” PBS Coal, Inc. v. Hardhat Min., Inc., 632 A.2d 903, 905
(Pa. Super. 1993).
Appellant argues that the Operating Agreement and its arbitration
provision control the outcome of this case. Appellant’s Brief at 14–21.
Notably, Appellant makes no argument regarding the Occupancy Agreement,
which does not have an arbitration provision.
In contrast, the trial court concluded that the Occupancy Agreement
controls the outcome of this dispute:
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Appellant and the trial court have complied with Pa.R.A.P. 1925.
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No relief sought by [Rittenhouse] is based on a breach of the
Operating Agreement. Rather, the five count complaint seeks
damages and possession of Unit 1603 based on the alleged
breach of the Occupancy Agreement, as well as the common law
legal theories of ejectment, trespass and unjust enrichment.
* * *
Section 10.02 of the Operating Agreement is inapplicable.
[Appellant] was a Class B Nonvoting Member of [Rittenhouse]
from March 13, 2013, the effective date of the Operating
Agreement, until December 12, 2013, when [Appellant]
absolutely and irrevocably assigned, transferred and set over his
membership interest in [Rittenhouse] to Lewis Katz. [Appellant]
argues that the absolute assignment of his member interest to
[Rittenhouse] was not effective because Lewis Katz “never
issued prior consent to the Purported Assignment.” See
Paragraph 4 of [Appellant’s] motion to transfer. In support of
his argument, [Appellant] relies on Section 7.02 of the Operating
Agreement which provides that “with the prior written consent of
the manager, any Class B Nonvoting Member may, at any time
or times, transfer Class B Nonvoting Units (a) to any other
member, (b) to any Affiliate of a member, or (c) to the
Company.”
The court appreciates the need for Lewis Katz to provide
written consent if [Appellant] wanted to transfer his Class B
Nonvoting Unit to someone other than Lewis Katz. There is no
logical or legal basis to hold that the transfer from [Appellant] to
Lewis Katz was not effective because Lewis Katz did not issue his
prior written consent to the transfer. Additionally, section 7.08
of the Operating Agreement provides that Lewis Katz, as “the
Initial Class A Member shall have the right, but not the
obligation, to repurchase all of the Class B Nonvoting Units from
any Class B Nonvoting Member at anytime for one Dollar.”
Section 7.08 does not require any prior written consent. The
December 12, 2013 Absolute Assignment of Membership Interest
refers to Section 7.08 and Lewis Katz obtained [Appellant’s]
Class B Nonvoting Unit from [Appellant] for one dollar.
Therefore, after December 12, 2013, [Appellant] no longer
was a member of [Rittenhouse]. As of December 12, 2013, the
only member of [Rittenhouse] was Lewis Katz. Section 10.02 of
the Operating Agreement requires negotiation and arbitration
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“(1) in the event of any dispute among the parties hereto arising
under this Agreement or (2) in the event of any dispute between
a member and the Manager whether arising under this
Agreement or otherwise.” Since [Appellant] ceased being a
party or member as of December 12, 2013, Section 10.02 is
inapplicable.
The Occupancy Agreement is the central and controlling
agreement in this case. Unlike the Operating Agreement, the
Occupancy Agreement does not contain any negotiation and
arbitration clause. Even if [Appellant] remained a member of
[Rittenhouse] or a party to the Operating Agreement after Lewis
Katz and he entered into the December 12, 2013 Absolute
Assignment of Membership Interest, the current dispute is not
one “arising under this Operating Agreement.” As noted above,
it is a dispute arising under the Occupancy Agreement.
Section 10.02 of the Operating Agreement also provides
for negotiation and arbitration in the event of a dispute between
a member and the manager “whether arising under this
Operating Agreement or otherwise.” While the inclusion of “or
otherwise” makes the scope of the covered dispute broader, it
does not include the present dispute. Even if the court assumes
that [Appellant] continues to be a member, the present dispute
is not with the manager. Rather, the dispute is with
[Rittenhouse] over whether or not [Appellant] has any lawful
right to occupy Unit 1603 under the terms of the Occupancy
Agreement. [Rittenhouse] and not its manager is the owner of
Unit 1603.
Trial Court Opinion, 3/9/16, at 3, 5–6.
Upon review, we agree with the trial court that Appellant’s refusal to
vacate Unit 1603 falls squarely under the Occupancy Agreement. In
compliance therewith, Rittenhouse sent Appellant a thirty-day notice of
termination. Appellant refused to vacate Unit 1603, which constitutes a
breach of the Occupancy Agreement. Contrary to Appellant’s arguments, his
status under the Operating Agreement does not control the outcome of this
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matter. Therefore, we discern no error in the trial court’s refusal to transfer
the underlying litigation to JAMS.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/16/2016
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