John D. Derfler and Monique A. Derfler, husband and wife, and Tom Murphy and Barbara A. Murphy, husband and wife, v. City of Lebanon, City of Lebanon Department of Public Safety, Duane Trautman, Director of Public Safety, Sherry Capello, Mayor, and Council of the City of Lebanon

JUDGE’S OPINION

 

John D. Derfler and Monique A. Derfler, husband and wife, and Tom Murphy and Barbara A. Murphy, husband and wife, v. City of Lebanon, City of Lebanon Department of Public Safety, Duane Trautman, Director of Public Safety, Sherry Capello, Mayor, and Council of the City of Lebanon

 

Civil Action-Law-Mandamus-Property Damage-Fire-Escrowed Fire Insurance Proceeds-Return to Insured-Motion for Summary Judgment-Actual Case or Controversy-Moot-Monetary Damages

 

Plaintiffs owned townhouses in the City of Lebanon that were rented to tenants that sustained damage in a fire.  Plaintiffs escrowed fire insurance proceeds paid under their insurance policies and held as security under Title 40 P.S. § 628 and Article § 1515.03 of the City of Lebanon Ordinances.  Plaintiffs hired businesses to secure and to clean the properties following the fire.  The properties subsequently were sold.  A second fire caused severe damage the properties following the sale of the properties.  The purchasers subsequently abandoned the property and Defendant City of Lebanon undertook demolition and repairs using the escrowed fire insurance proceeds in addition to other monies.  Plaintiffs filed the within action in Mandamus seeking to compel Defendants to release the fire insurance proceeds that remained after the original fire.  Defendants, who released to Plaintiffs the remaining insurance proceeds following demolition and repairs after the second fire, asserted that Plaintiffs failed to comply with the requirements of the Ordinance by using the proceeds for repair and security of the properties.  Plaintiffs have filed a Motion for Summary Judgment seeking judgment in the amount of the reimbursement of the total originally escrowed fire insurance proceeds.

 

1. Summary judgment is appropriate only where there is no genuine issue of material fact and the record viewed in the light most favorable to the nonmoving party establishes that the moving party is entitled to judgment as a matter of law.

 

2. The court must resolve any doubts as to the existence of a genuine issue of material fact against the moving party.

 

3. Mandamus lies to compel official performance of a mandatory duty only where the plaintiff has a clear legal right, the defendant has a corresponding duty and there is no other appropriate or adequate remedy.

 

4. Mandamus may not be used to direct how judgment or discretion should be exercised or to direct the retraction or reversal of an action already taken.

 

5. A court cannot decide a moot or abstract question or enter judgment or a decree to which effect cannot be given.

 

6. An actual case or controversy must exist at all stages of review, not merely at the time when a complaint is filed, as changes in the facts or the law may deprive a litigant of the necessary stake in the outcome.

 

7. The issue of release of the escrowed insurance proceeds is moot, as there are no funds remaining in escrow due to the City using those proceeds to make repairs to the properties following the second fire and the release of the remaining proceeds to Plaintiffs after that time.

 

8. Under the Lebanon City Ordinance, a duty to return the full fund of insurance proceeds to a named insured arises where the repairs, removal or security of the structure are complete and comply with City regulations, the Fire Commissioner has received the required proof of completion and the City has not paid to have the structure brought into compliance with City regulations.

 

9. Since at no time before the second fire did Plaintiffs provide notice to Defendants that they did not need the escrowed proceeds to cover the cost of repair, removal or security of the property and could release the proceeds to them, Defendants had no duty under the Ordinance to release the full proceeds so as to entitle Plaintiffs to monetary damages in the amount of the full proceeds initially held.

 

L.C.C.C.P. No. 2019-00047, Opinion by Charles T. Jones, Jr., Judge.

 

 

IN THE COURT OF COMMON PLEAS

OF LEBANON COUNTY, PENNSYLVANIA

 

CIVIL ACTION – LAW

 

JOHN D. DERFLER and MONIQUE A. DERFLER,            :

husband and wife, and                                                             :

TOM MURPHY and BARBARA A. MURPHY,                   :

husband and wife,                                                                    :

Plaintiffs                                                                             :

:

1. :          No. 2019-00047

:

CITY OF LEBANON, CITY OF                                            :

LEBANON DEPARTMENT OF PUBLIC SAFETY,            :

DUANE TRAUTMAN, Director of Public Safety                  :

SHERRY CAPELLO, Mayor                                                  :

COUNCIL OF THE CITY OF LEBANON,                           :

Defendants.                                                                        :

 

ORDER OF COURT

 

AND NOW, to wit, this 1st day of November, 2021, after careful consideration of the record, Plaintiffs’ Motion for Summary Judgment, Defendants’ Response thereto, and the Briefs of Counsel, Plaintiff’s Motion for Summary Judgment is hereby DENIED.

 

 

BY THE COURT:

 

____________________________, J.

CHARLES T. JONES, JR.

 

CTJ/cbm

cc:

Andrew J. Race, Esquire

Paul G. Lees, Esquire // 4905 West Tilghman Street, Allentown, PA 18104

Caitlin Mininger, Esquire/Law Clerk

IN THE COURT OF COMMON PLEAS

OF LEBANON COUNTY, PENNSYLVANIA

 

CIVIL/CRIMINAL DIVISION

 

JOHN D. DERFLER and MONIQUE A. DERFLER,            :

husband and wife, and                                                             :

TOM MURPHY and BARBARA A. MURPHY,                   :

husband and wife,                                                                    :

Plaintiffs                                                                             :

:

1. :          No. 2019-00047

:

CITY OF LEBANON, CITY OF                                            :

LEBANON DEPARTMENT OF PUBLIC SAFETY,            :

DUANE TRAUTMAN, Director of Public Safety                  :

SHERRY CAPELLO, Mayor                                                  :

COUNCIL OF THE CITY OF LEBANON,                           :

Defendants.                                                                        :

 

APPEARANCES:

Andrew J. Race, Esquire                                                          For Plaintiffs

Reilly Wolfson Attorneys at Law

 

Paul G. Lees, Esquire                                                               For Defendants

Marshall Dennehey Warner Coleman & Goggin, P.C.

OPINION BY JONES, J. (November 1, 2021):

Before the Court is the Plaintiffs’ Motion for Summary Judgment on two claims for mandamus relief against Defendants in their capacity as municipal government officials. After a review of the documents submitted by Plaintiffs and Defendants, the Court finds that the question of Plaintiffs’ entitlement to mandamus relief is moot. Summary judgment in Plaintiffs’ favor is therefore denied.

Procedural History

Plaintiffs are two married couples, John and Monique Derfler and Tom and Barbara Murphy, who at one time each owned a townhouse in a row of three adjoining townhouses in the City of Lebanon. (Complaint ¶¶1, 2, 4–6.) Plaintiffs initiated this action in mandamus on January 7, 2019, based on the failure of Defendant City and City Officials to release escrowed fire insurance proceeds paid under Plaintiffs’ respective insurance policies and held as security pursuant to 40 P.S. §638 and Article 1515 of the Codified Ordinances of Lebanon, Pennsylvania.[1] (Complaint ¶¶ 10–12, 14–21, 26–33.) The Complaint sought either to compel the release of the full escrowed funds or to recover damages under 42 Pa. C.S. §8303 for the failure or refusal to perform a duty required by law. (Complaint ¶¶ 18–19, 22, 30–31, 34.) Defendants filed an Answer and New Matter on June 3, 2019, wherein they asserted that Plaintiffs had not complied with the requirements of the city ordinances for repairing and securing the structures and Defendants were therefore required to use a portion of the escrowed funds to make repairs, after which the insurance proceeds remaining in escrow were returned to Plaintiffs as provided by the Fire Prevention Code. Plaintiffs filed a Reply to New Matter on June 7, 2019, asserting that they had complied with the ordinances, Defendants therefore had a duty to release all escrowed funds, and instead Defendants wrongfully held and used a portion of the escrowed funds to which Plaintiffs are entitled. (Reply to New Matter ¶¶ 43, 48, 52.)

The case proceeded to discovery. On May 6, 2021 Plaintiffs took depositions of Lebanon City Mayor Sherry Capello and Lebanon City Fire Commissioner Duane Trautman and Defendants took depositions of Plaintiffs Tom Murphy and John Derfler. At the close of discovery, Plaintiffs filed the instant Motion for Summary Judgment and a Brief in Support thereof on June 11, 2021. The case was listed for the August 2021 Term of Argument Court. Defendants filed a Response to the Motion for Summary Judgment on July 12, 2021 and a Brief in Opposition on July 27, 2021. The matter is ripe for disposition.

 

Legal Standard

Summary judgment is appropriate only where there is no genuine issue of material fact and the record, viewed in the light most favorable to the non-moving party, is clear that the moving party is entitled to judgment at a matter of law. Jones v. Southeastern Pennsylvania Transit Auth., 772 A.2d 435, 438 (Pa. 2001). In reviewing a motion for summary judgment, a court must resolve any doubts as to the existence of a genuine issue of material fact against the moving party. Id. The reviewing court’s function is to determine whether there is an issue of fact to be tried, rather than to decide on the issues of fact. McFadden v. American Oil Co., 257 A.2d 283, 286 (1969). A material fact is one that affects the outcome of the case based on the nature of the claim. Windber Area Auth. v. Rullo, 387 A.2d 967 (Pa. Cmwlth. 1978).

Mandamus will only lie to compel official performance of a mandatory duty where the plaintiff has a clear legal right, the defendant has a corresponding duty, and there is no other appropriate or adequate remedy. Chanceford Aviation Properties, L.L.P. v. Chanceford Twp. Bd. of Supervisors, 923 A.2d 1099, 1107–08 (2007). It may be used to compel performance of a ministerial duty or compel action that involves judgment or discretion, but it may not be used to direct how judgment or discretion should be exercised, nor to direct the retraction or reversal of an action already taken. Id. at 1108. Additionally, under 42 Pa. C.S. § 8303, “A person who is adjudged in an action in the nature of mandamus to have failed or refused without lawful justification to perform a duty required by law shall be liable in damages to the person aggrieved by such failure or refusal.”

Courts cannot decide “moot or abstract questions, nor can they enter a judgment or decree to which effect cannot be given.” Orfield v. Weindel, 52 A.3d 275, 277 (Pa. Super. 2012); Department of Public Welfare, Fairview State Hospital v. Kallinger, 615 A.2d 730 (Pa. 1992). An actual case or controversy must be extant at all stages of review, not merely at the time the complaint is filed: changes in the facts or law may deprive a litigant of the necessary stake in the outcome. Pap’s A.M. v. City of Erie, 812 A.2d 591, 599–600 (2002).

Factual Record

On April 6, 2016, a fire started in 424 Cumberland Street and spread to the adjoining premises at 422 Cumberland Street. At that time, John and Monique Derfler owned 424 Cumberland Street (“Derfler Premises”), and Barbara Murphy owned 422 Cumberland Street (“Murphy Premises”). None of the Plaintiffs lived on the respective premises: Plaintiffs Derfler rented their premises to residential tenants, and the Murphy Premises had recently become vacant. Foremost Insurance Group insured both properties against fire damage. Section 1515 of the Codified Ordinances requires insurance companies to transfer to the Superintendent of Public Safety of the City a portion of insurance proceeds to be held in escrow when a claim equals or exceeds sixty percent of the liability limits on all fire policies covering the building restructure. Following the ordinance’s scheme of $2,000 transferred to the City for every $15,000 of a claim and for each fraction of the claim, Foremost provided one check each to Fire Commissioner Trautman for the claims on the two premises. The $18,000 check for the Derfler Premises is dated May 13, 2016, and was sent by Commissioner Trautman to City Finance to be deposited in a fire escrow on June 6, 2016. (Complaint, Exhibit B.) The $20,000 check for the Murphy Premises is dated May 17, 2016, and was sent by Commissioner Trautman to City Finance to be deposited in a fire escrow on May 23, 2016. (Complaint, Exhibit E.)

Section 1515 codifies at the municipal level Pennsylvania statute 40 P.S. § 638, and the provisions of the statute note that the purpose of Section 638 is to “deter the commission of arson and related crimes, to discourage the abandonment of property and to prevent urban blight and deterioration.” 40 P.S. § 638(k). As such, insurance proceeds transferred to and held in escrow by the City are security against the total costs of “removing, repairing or securing the building or structure” which may be incurred by the City; if such remediation is completed without the City stepping in, the full amount of the escrowed funds must be returned to the named insured once the City receives notice of the completion of the repairs, removal, or securing. Fire Prevention Code §§ 1515(e)(1), (3). According to the deposition of Mayor Capello and Commissioner Trautman, on the advice of the City Solicitor, the City established criteria about eleven years ago for the return of fire escrows: either the property is demolished with notice to the City through the permit process, or the property is repaired to the point where a Certificate of Occupancy is issued. (Plffs. Mot., Exhibit F: Deposition of Duane Trautman at 16, 20; Exhibit E: Deposition of Sherry Capello at 32.) Neither Mayor Capello nor Commissioner Trautman were aware if this criteria for required notice to the City were written down in a way available to members of the general public. (Id. Exhibit F at 16, Exhibit E at 33.)

Plaintiffs hired Compleat Restoration to “secure” the properties and Krall’s Removal Services to clean the properties. Plaintiffs have submitted invoices and balance statements that indicate that these companies billed Plaintiffs or Plaintiffs’ insurer, but the record does not contain specific facts as to what work was performed on the properties, nor the exact extent of the damage as a result of the April 6, 2016 fire. There were, at least, holes in the roof of each property. (Def.’s Opp. Brief, Exhibit B: Deposition of John Derfler at 8, Exhibit C: Deposition of Tom Murphy at 12.) There is an indication through the deposition testimony of John Derfler and Tom Murphy that those doors and windows broken as part of fighting the fire on the two premises were boarded up or “secured” against unlawful entry. (Id., Exhibit B at 10; Exhibit C at 13.) Plaintiffs put their properties up for auction, and both were bought by a group of two or three people the parties refer to as the “Velazquez Group.”

Per Messrs. Derfler and Murphy’s testimony, Attorney Jeffrey Arnold drew up the Conditions of Sale, though the Plaintiffs’ testimony differs on whether Attorney Arnold was their lawyer or the lawyer for Kleinfelter’s Auctioneer Company. The Conditions of Sale document shows that the Derfler Premises and the Murphy Premises were auctioned as a single lot with a minimum starting bid of $21,000. (Def. Opp. Brief, Exhibit D.) The purchaser was to immediately execute an agreement of sale and make a cash down payment of $7,500, with settlement to occur on or before thirty days from September 13, 2016, the date of the Conditions. (Id.) Paragraph 11 of this document provides that the purchaser of the two premises must complete “all required renovations/repairs within six (6) months of the date of final settlement” and that if the purchaser fails to complete renovations or repairs they will be responsible to arrange with the City of Lebanon for “the release of Sellers’ funds being held in escrow in the total amount of $40,000[sic], either by way of replacement funds or a bond acceptable to the City of Lebanon.” (Id.)

The Conditions of Sale state that the agreement of sale was to be attached to the Conditions of Sale; however, an agreement signed by the purchasers of the property does not appear in the record. (Id.) The Conditions of Sale only contains the apparent signatures of John and Monique Derfler and Barbara Murphy. The deposition testimony of record is not clear when settlement occurred, but correspondence of Plaintiffs’ Counsel to the solicitor for Lebanon City,[2] attached as exhibits to the Complaint and Plaintiff’s Motion, indicates that the names of the buyers are Abraham Velazquez and Carlos Quintana Velazquez and settlement took place on September 28, 2016. (Pffs.’s Mot., Exhibit D.) The parties do not dispute that Plaintiffs sold the properties to the Velazquezes or that the Velazquezes began to remodel the properties, but the record does not contain evidence of the terms of the final contract created by mutual assent between Plaintiffs and the Velazquez Group.

As far as the parties know, the Velazquez Group was close to completing renovations when on May 19, 2017 a second fire caused severe damage to both the Murphy and Derfler Premises, as well as the dentist’s office adjoining the other side of the Derfler Premises. In deposition the parties agree the damage from the second fire was worse than the first, but the record does not contain documentation as to the extent of the damage immediately after the fire. Structural Engineer’s Reports for the City from December 28, 2017 and March 21, 2018 reflect fire damage and damage from being left open to the elements, recommending the salvage of only the brick and masonry parts of the structure. (Defs. Opp. Brief Exhibit G.) Per the deposition testimony of Mayor Capello and Comissioner Trautman, the Velazquezes abandoned the property and the City undertook demolition of the interior of the premises and repair of the roof—leaving the brick facades so that Habitat for Humanity could rebuilt the interiors. To pay for the costs incurred by the City, Defendants used all of the $6,680 escrowed from the Velazquez’s insurance, $14,453.22 from escrowed funds related to the dentist’s office, $12,463.24 from the Murphy’s fire escrow, and $4,963.93 from the Derfler’s fire escrow. (Def. Opp. Brief, Exhibit F.) Neither Plaintiffs Derfler nor Plaintiffs Murphy contacted Defendants regarding return of the fire escrows or the work performed by Compleat and Krall’s until after the second fire. (Def. Opp. Brief, Exhibit B at 18; Exhibit C at 39–40.) The City released the money remaining in Plaintiffs’ fire escrows following the initiation of this action: Plaintiffs Derfler received $13,036.76 out of the original $18,000 in escrow and Plaintiffs Murphy received $7,536.76 out of the original $20,000 in escrow.

Discussion

Plaintiffs contend that there are no issues of fact in this case—rather the question of whether Plaintiffs are entitled to full refund of their fire escrow proceeds is one of statutory construction. (Plffs. Supp. Brief 4.) Under the plain language of the municipal ordinances, Plaintiffs argue, the City of Lebanon had no discretion in choosing to release the funds once the properties were “secured” and therefore Plaintiffs are entitled in mandamus to the full amount as a matter of law. (Id. 4–5.) Defendants argue that under the facts, Plaintiffs have failed to establish a right to mandamus relief: first, because Plaintiffs did not supply the city with the required proof of completion of repair, removal, or securing under the ordinance and City administrative policy prior to the second fire, and second, because the issue of release of escrowed funds is moot when there are no more escrowed funds to release. (Defs. Opp. Brief, unpaginated, 7–8.)

Mandamus may compel an administrative agency to act, but it cannot compel the reversal of an action already taken. Chanceford Aviation, 923 A.2d at 1108. Defendants used part of the Plaintiffs’ escrowed funds to pay for repairs to the subject properties after the second fire and paid the funds remaining in escrow to Plaintiffs as a result of this litigation. The release of escrow funds is moot because courts cannot enter judgment to which effect cannot be given—without funds currently in escrow, the Court cannot compel escrow funds be paid. See Orfield, 52 A.3d at 277. However, Pennsylvania law provides for liability in monetary damages where a person is adjudged in a mandamus action to have failed or refused to perform a duty required by law without lawful justification. Pa. C.S. § 8303. It is undisputed that Defendants did not return the original amount of the insurance proceeds held in escrow in the two accounts. The questions posed by Plaintiffs’ Motion for Summary Judgment then are 1) whether Defendants had a duty under the Fire Prevention Code to return $18,000 to Plaintiffs Derfler and $20,000 to Plaintiffs Murphy, and 2) if Defendants had such a duty, whether the failure or refusal to perform it was without lawful justification. If the answer to both questions is yes, Plaintiffs Derfler are entitled to damages of $4,963.24 and Plaintiffs Murphy are entitled to damages of $12,463.24, as the respective amounts not paid from the original escrow accounts.

Before the second fire Defendants did not have a duty under the Fire Prevention Code to return the full escrow amounts. Section 1515.03(e)(3) provides:

When repairs, removal or securing of the building or other structure have been completed in accordance with all applicable regulations and orders of the Municipality and the required proof of such completion received by the designated officer, and if the Municipality has not incurred any costs for repairs, removal or securing, the fund shall be returned to the named insured. If the Municipality has incurred costs for repairs, removal or securing of the building or other structure, the costs shall be paid from the fund and if excess funds remain, the Municipality shall transfer the remaining funds to the named insured.

In other words, three conditions must be met before the Municipality has a duty to return the full fund of insurance proceeds to the named insured: 1) the repairs, removal, or securing of the structure are complete and comply with City regulations and orders, 2) the designated officer, in this case Fire Commissioner Trautman, has received the “required proof” of the completion, and 3) the City of Lebanon has not paid to have the structure brought to compliance with City regulations and orders. Plaintiffs’ argument centers on the fact that the properties were boarded up to fit the plain-language meaning of the word “securing” and call the apparent policy of the City requiring either proof of demolition or a Certificate of Occupancy before proceeds can be released a red herring. The crux of the issue is that regardless of the construction of the word “securing,” and regardless of the construction of the term “required proof,” Plaintiffs needed to provide some notice to the City that it would not need the escrow funds to cover the cost of repair, removal, or securing itself and could release the funds to Plaintiffs. The parties do not dispute that at no time before the second fire did either set of Plaintiffs communicate to Commissioner Trautman or any other city official that repairs or securing as a result of the first fire were complete. Thus, Defendants did not yet have a duty under Section 1515.03 to release the full escrows and Plaintiffs are not entitled to return of the total remaining unpaid amounts as monetary damages in a mandamus action.

Conclusion

The record does not contain information as to what portion of the repairs or removal undertaken by the City were the result of the first fire versus the second fire. Subsection 1515.03(f) of the Fire Prevention Code provides that nothing in the ordinance should be construed to limit the ability of the Municipality to recover a deficiency in the proceeds to cover repair costs incurred by the City or charges against the property. However, it is not clear that the ordinance, or the state law it arises from, establishes a right of Defendants to use insurance proceeds—paid for a first fire, held as security, and belonging to one named insured—in order to repair damages caused by the failure of subsequent owners to make repairs after a second fire more than a year later. The question is arguable: on the one hand Article 1515 states that insurance proceeds are to be held as security and returned to the named insured, not the current property owner. On the other hand, Article 1515 states that the proceeds are to be held solely against the total costs incurred by the Municipality in removal, repair, or securing the building that is the subject of the insurance proceeds. The text of the ordinance, and the statute it derives from, do not say one way or the other whether use of the proceeds by a municipality is limited to those repairs that stem from the event that occasioned the insurance payout and are the responsibility of the named insured to whom the payout belongs. Further, without an Agreement of Sale assented to by the purchasers of the property, it cannot be known for certain whether the purchasers actually agreed to the clause in the Conditions of Sale stating they would replace the funds held by the City if repairs were not complete in six months.

In any event, such determinations are beyond the scope of an action in mandamus. While Plaintiffs may have constitutional, tort, or breach of contract claims against the City of Lebanon and the so-called Velasquez Group for the $4,963.24 not returned to the Derflers and $12,463.24 not returned to the Murphys, recovery cannot lie in mandamus when there are other remedies available at law and when Defendants did not yet have a duty to return the full escrows. Plaintiffs’ Motion for Summary Judgment is denied.

 

 

[1] Under Section 101.02 of the Codified Ordinances, component codes may be referred to by name and sections may be cited by their number. The relevant component code is Part 15, named the “Fire Prevention Code.”

[2] The letter with respect to the Derfler Premises is dated November 7, 2018, and the letter with respect to the Murphy Premises is dated November 13, 2018.