Court Opinion

ID: 9713962
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:27:30.396845+00
Date Added: 2024-06-11T18:23:22.120425
License: Public Domain

DISSENTING OPINION BY
Judge PELLEGRINI.
What is involved in this interlocutory appeal is whether holders (collectively, Property Owners) of a judgment of $1,715,621.18 against the Urban Redevelopment Authority of the City of New Castle (Authority) for a defacto taking of their property can bring a third-party beneficiary action1 against the City of New Castle (City) under a “contract” (Close Out Agreement) providing that it would reimburse the Authority for such takings.2 The City contends that Property Owners cannot bring a third-party beneficiary action because there is no “contract” to be a beneficiary because the Close Out Agreement did not contain the statutorily required signature of the elected City Controller.
The majority finds that the City Controller’s “inaction” in not signing the contract allows the legislative mandate to be ignored. While in limited instances, we have stated in dicta that inaction may be tantamount to excuse compliance with the statute, nothing in our case law suggests that ratifications can occur absent a showing that the required elected official knew of the contract, but allowed it to proceed without objection. Because there has been no showing that the City Controller ever knew of this contract or any other contract that was unsigned, and because a quasi-contract claim cannot be maintained in a third-party beneficiary action, even among private parties, I respectfully dissent.
The City is an optional Third Class City. The signature of its Controller is required by Section 413 of the Optional Third Class City Charter Law,3 which provides; “All bonds, notes, contracts and written obligations of the city shall be executed on its behalf by the mayor and the controller.” *1057When a statute requires that certain officials execute a contract, “It has been uniformly held, and may now be regarded as the general rule in this state, that, where a statute provides a method or formal mode of making municipal contracts, such provision is mandatory and must be observed, otherwise the contract is not enforceable against the municipality....” Harris v. City of Philadelphia, 283 Pa. 496, 503, 129 A. 460, 462 (1925); Burke v. North Huntingdon Twp. Municipal Authority, 390 Pa. 588, 594, 136 A.2d 310, 313-314 (1957). Moreover, parties contracting with a governmental agency must, at their peril, know the statutory requirements for a governmental agency to enter into a contract. Central Storage & Transfer Co. v. Kaplan, 487 Pa. 485, 489, 410 A.2d 292, 294 (1979); Commonwealth v. Seagram Distillers Corporation, 379 Pa. 411, 109 A.2d 184 (1954).
However, the prescription against the enforceability of contracts that are not executed by the required elected officials mandated by statute are not without exception. In Eckert v. Pierotti,4 123 Pa.Cmwlth. 8, 553 A.2d 114, 119 (1989), we stated:
It is well settled that a municipal corporation may ratify contracts which are within its corporate powers and made by its officers without authority, or in excess of their authority. In other words, the municipal corporation may waive the irregularity of a municipal contract and ratify that contract.
It is a general rule that whatever acts public officials may do or authorize to be done in the first instance may subsequently be adopted or ratified by them with the same effect as though properly done under previous authority. [Footnote omitted.] Consequently, it is well settled that contracts which are within the scope of the corporate powers but not authorized by proper action of the municipal corporation, that is, contracts not ultra vires, may be ratified by the proper corporate authorities. 10 McQuillen § 29.104 (3rd ed.). Moreover, “[t]he ratification of a contract by the municipal corporation may be made by the affirmative action of the proper officials, or by any action or nonaction which in the circumstances amounts to an approval of the contract.” [McQuil-len (3rd ed.)] at § 29.106 (footnotes omitted).
“In other words, the municipality may waive an irregularity of a municipal contract and ratify that contract. This ratification may be made by the affirmative action of the proper officials or by any action or inaction which, under the circumstances, amounts to an approval of the contract.” City of Scranton v. Heffler, Radetich & Saitta, LLP, 871 A.2d 875 (Pa.Cmwlth.2005), petition for allowance of appeal denied, 587 Pa. 708, 897 A.2d 1184 (2006). The question here is whether the Close Out Agreement was ratified to *1058“excuse” non-compliance with the statutory mandate.5
City of Scranton is controlling. We held that the knowledge of the City Controller was required before inaction could be used as a method to ignore the statutory mandates. In that case, the former mayor signed an agreement with a corporation for professional services in the nature of analysis and auditing of insurance claims, which also contained a provision requiring the parties to attend binding arbitration in lieu of any other legal remedy. Within one year, the former-mayor’s administration was replaced by that of the newly-elected mayor. Representatives from the company eventually filed a demand for arbitration after the administration of the newly-elected mayor allegedly failed to return phone calls and maintain correspondence. The city filed a petition for rule to *1059show cause alleging that the agreement signed by the former mayor was invalid and unenforceable for failure to be approved in accordance with provisions of the city’s administrative code which required that all professional service contracts be approved by city council, reviewed and approved by the city solicitor and signed by the mayor, controller and attested to by the city clerk. The city also alleged that with the exception of the mayor’s signature, no other procedural requirements were met, which made the agreement invalid and unenforceable. The corporation alleged that the agreement was subsequently approved, ratified and endorsed by all required city officials, agents and representatives. Citing to Eckert, we noted in that decision that this Court addressed ratification, stating that a municipal corporation could ratify contracts within its corporate powers and made by its officers without its authority or in excess of their authority, and “this ratification may be made by the affirmative action of the proper officials or by any action or inaction which, under the circumstances, amounts to an approval of the contract.” Id. at 881. (Internal citations omitted.) Based on these principles, we found that the evidence of record failed to reveal that the city council was “even aware of the agreement, let alone that they had approved of and enacted appropriate legislation rela-five to this agreement.” Id. at 881. We also held that there was no post-contract ratification as the evidence of record failed to reveal the knowledge of the city controller whose signature was required along with the mayor under the provision of the city’s administrative code. In sum, we found that every official or entity that was required to sign the contract was required to have ratified the contract by taking actions that evidence their implicit assent.
Similarly to the City of Scranton, the Close Out Agreement was not signed by the City Controller as required by Section 413 of the Optional Third Class City Law. In order for Property Owners to make out their case of ratification, they must show that the City Controller ratified the Close Out Agreement, either explicitly or by his actions. Property Owners presented evi7 dence consisting of a summary of contracts between the years 1972 through 1977 requiring the City to advance funds to the Redevelopment Authority under the Close Out Agreement, none of which contained the City Controller’s signature.6 (Reproduced Record at 1265a-1275a.) Because there is no evidence to establish that the City Controller ever signed the Close Out Agreement or even acknowledged the Close Out Agreement, ratification of the original agreement by the City Controller has not been made out.7
*1060The majority also proposes as an alternative rationale that “the Close Out Agreement could be implied in law by the doctrine of quasi-contract.” In Pittsburgh Baseball, Inc. v. Stadium Authority, 157 Pa.Cmwlth. 478, 630 A.2d 505, 510 (1993), we explained that:
Quasi-contracts are contracts which are implied in law for reasons of justice. Department of Public Welfare v. Moran, 84 Pa.Commonwealth Ct. 554, 480 A.2d 356 (1984). In J.A. & W.A Hess, Inc. v. Hazle Township, 484 Pa. 628, 633, 400 A.2d 1277, 1279 (1979), our supreme court, quoting Luzerne Township v. Fayette County, 330 Pa. 247, 199 A. 327 (1938), stated:
[i]t is true that, in order to avoid results involving obvious injustice, the courts of some jurisdictions, including our own, have held that where a municipality or other local agency of government has voluntarily accepted and retained the benefits of a contract which it had the power to make but which was defective in the method of its execution and consequently invalid, the party who, by furnishing labor or material, has conferred such benefits may recover compensation therefore in a suit, not on the invalid contract itself, but upon a quantum valebat, quantum meruit, or for money had and received ... (Emphasis added.)
A quasi-contract claim then is separate and apart from the claim based on the invalid contract, i.e., the Close Out Agreement could not be implied as the majority suggests. Because it is a separate and distinct claim with a different and distinct calculation of damages, a separate claim would to have to be made in the complaint. In this case, Property Owners only pled a third-party beneficiary claim under the Close Out Agreement and never made a quasi-contract claim. Ignoring that, the amount the Authority would be entitled from the City under a quasi-contract claim would be the same as the Authority would be entitled to under the Close Out Agreement, i.e., the judgment amount. All that it would be entitled to is the amount of tangible benefit that the Authority conferred on the City for taking property that the Authority did not intend to take. Complicating this discussion even more is the entire issue of whether a third-party beneficiary claim can be raised in a quasi-contract action. Maybe those are the reasons that Property Owners did not raise that claim in their complaint.
Having said all that, I realize that the result I propose is harsh. But it is also harsh when a person is paralyzed by governmental negligence and cannot recover damages because the government’s conduct does not fall into one of the exceptions to immunity. Article I, Section 2 of the Pennsylvania Constitution; 42 Pa.C.S. § 8522(b); 42 Pa.C.S. § 8542(b). And it is harsh when ordinances are passed and approvals given allowing a property owner to engage in a major development on which he expends millions of dollars that are vitiated because the municipality inadvertently did not comply with the statutory procedures. Luke v. Cataldi, 593 Pa. 461, *1061932 A.2d 45 (2007); Glen-Gery Corp. v. Zoning Hearing Bd. of Dover Twp., 589 Pa. 135, 153, 907 A.2d 1033, 1043 (2006). While the result is similarly harsh in this ease, public policy embodied in the Constitution and statutes sometimes require harsh results on individuals for the greater good. In this case, the General Assembly mandated that the elected controller sign all contracts entered into by the City. We should not look for ways to sanction avoidance of those statutorily required procedures by further expanding exception to allow a government contract to be ratified, even when there is no showing that the elected official was aware of the contract. By doing so, the majority subverts the legislative mandate.
Accordingly, because the City Controller as mandated by Section 413 of the Optional Third Class City Charter Law did not sign the contract, and there is no evidence that he or she subsequently ratified the Close Out Agreement, I would reverse the order of the trial court.

.A third-party beneficiary of a contract may arise no higher than the rights of the promi-sor to the contract. Zimnisky v. Zimnisky, 210 Pa.Super. 266, 231 A.2d 904 (1967). See also Johnson v. Pennsylvania National Insurance Companies, 527 Pa. 504, 594 A.2d 296 (1991); General Accident Insurance Company of America v. Parker, 445 Pa.Super. 300, 665 A.2d 502 (1995). A third-party beneficiary is subject to the same limitations that may be asserted between the promisor and promisee. Id.See also Restatement 2nd Contracts § 302.

. Because this is an interlocutory appeal and the issues certified are limited, not before us is whether a private party can be the beneficiary of a contract between two governmental agencies.

. Act of July 15, 1957, P.L. 901, as amended, 53 P.S. 41413(c).

. Eckert does not involve an implied ratification, but an express ratification. In that case, an engineering firm was accepted as the contractor for a sewage project; however, there was no indication of a formal vote or resolution to that effect. Approximately six months later, the township supervisor entered into an agreement for engineering services, which was challenged as not being properly authorized. Over a year later, the township formally approved the agreement by motion. We found that because the township had the power to enter into the contract and also had the power to ratify it, the agreement was to be given its full effect. Thus, despite the fact that the township supervisor unilaterally entered into an agreement, this act without the proper authority was later rectified because the township later formally approved and ratified the agreement to use the engineering firm, which was under the proper authority.

. In making its analysis, the majority relied mainly on our decision in Pittsburgh Baseball, Inc. v. Stadium Authority of Pittsburgh, 157 Pa.Cmwlth. 478, 630 A.2d 505 (1993). While not contrary to my analysis because it also holds that knowledge of the particular official whose assent is required before there can be ratification by inaction, I need to comment because the majority opinion may give a false impression of its holding. In that case, the mayor of the City of Pittsburgh purportedly promised that the City would unconditionally provide Pittsburgh Baseball Associates with additional capital of $5,000,000. It also alleged that the city council knew about the offer and did nothing; it ratified the oral promise of the mayor. The majority cited the holding in Pittsburgh Baseball Associates as follows: “In Pittsburgh Baseball, we noted that the cases supporting ratification by municipal inaction plus the acceptance of benefits under the contract may constitute ratification.” Id. at 509. (Emphasis in original,) However, the full quote from Pittsburgh Baseball Associates is as follows:
Pittsburgh Associates cites a single Pennsylvania case, Eckert v. Pierotti, 123 Pa.Commonwealth Ct. 8, 553 A.2d 114 (1989), for the proposition that a municipality can ratify an irregular contract by inaction. In that case, we quoted extensively from 10A Eugene McQuillen, The Law of Municipal Corporations §§ 29.104-29.106 (3rd ed.), including the following: " '[tjhe ratification of a contract by the municipal corporation may be made by the affirmative action of the proper officials, or by any action or nonaction which in the circumstances amounts to an approval of the Id., § 29.106 (footnotes omitted).” Eckert, 123 Pa.Commonwealth Ct. at 18, 553 A.2d at 118 (emphasis added).
Since the township in Eckert formally approved and ratified the contract at issue in that case, we do not find that case to be persuasive. With respect to the numerous cases Pittsburgh Associates has cited from other jurisdictions, we note that most, if not all, of those cases appear to have a common denominator; namely, that municipal inaction plus the acceptance of benefits under the contract may constitute ratification. Since we conclude later in this opinion that actions by Pittsburgh Associates did not confer any direct benefits on the City, we are not persuaded by those cases from other jurisdictions. In any event, we conclude that on the facts pleaded, City Council’s failure to take action does not constitute "nonaction which in the circumstances amounts to an approval of the contract.” As such, the trial court did not err in dismissing the breach of contract count. (Emphasis added.)
As can be seen in the full quote of the language relied on by the majority, it addresses the law in other states, not the law in Pennsylvania. In addition, the other cases that have used this language, Eckert and City of Scranton, express ratification was required to appear. Nowhere have we ever held, even when the official knew of the contract, that mere inaction constitutes ratification, but instead have required affirmative action. It also illustrates how the McQuillen language regarding ratification by inaction seeped into Pennsylvania jurisprudence without discussion.
While not altogether clear, it appears that in Pittsburgh. Baseball, we held that a legislative body cannot be held to have ratified a contract just by inaction. If that were not so, the General Assembly would spend all of its time passing legislation repudiating promises made by the Governor to fund "this and that” until it passed the appropriate legislation.

. The City Controller does not sign checks. Section 415(a) on the Optional Third Class City Law, 53 P.S. § 41415(a), provides that: (a) The city treasurer shall perform such functions and duties and have such powers relating to the collection, receiving, safekeeping and payment over of public moneys including city, county, institution district and school district taxes as provided by general law and shall have such other functions, powers and duties as may be assigned to him by council. Article 127, Section 127.05 of the New Castle Code of Ordinances provides that, "All expenditures made by the City shall be made by checks signed by the City Treasurer ...”

. The majority cites to a chart contained in the Reproduced Record at 1265-75a to state at the time of the execution of the Close Out Agreement, it was the City's practice to enter into a contractual agreement without the Controller’s consent. Property Owners’ brief states that this chart was prepared from documents received regarding specific contracts that went before Council for authorization. Ignoring that I cannot find where this chart was admitted into the record, all that can be discerned from the chart is that during the five year period from 1972 to 1977, there were 54 agreements where one party signed the contract but the Controller did not. *1060There were also 41 authorizations where council authorized a contract to be entered but no one signed. I doubt this was a complete list of all the contracts that the City entered over the period — probably hundreds more — because there were no contracts listed for the types of professional services and goods and supplies that were entered into every day to run a municipality. Moreover, there was no showing whether because they remained unexecuted, they were abandoned, because no one or just the Controller failed to sign them. In any event, it does not show that the Controller had knowledge of those contracts.