Keenhold v. Department of Labor and Industry

258 A.3d 1165 (Table)

Richard KEENHOLD, Jr., Danny Keenhold, and Keenhold Associates, Appellants

v.Commonwealth of Pennsylvania, DEPARTMENT OF LABOR AND INDUSTRY

No. 494 C.D. 2020

Commonwealth Court of Pennsylvania.

Argued: April 15, 2021

Filed: June 29, 2021

MEMORANDUM OPINION BY JUDGE FIZZANO CANNON

Richard Keenhold, Jr., Danny Keenhold, and Keenhold Associates (collectively, the Keenholds) appeal the April 30, 2020 order of the Court of Common Pleas of Northampton County (trial court) that sustained the preliminary objections (Preliminary Objections) filed by the Commonwealth of Pennsylvania, Department of Labor and Industry (Department) and denied the Keenholds' Petition for the Appointment of a Board of Viewers for the Assessment of Damages (Petition) that alleged a de facto taking of their property by the Department under Section 502(c) of the Eminent Domain Code (Code),¹ 26 Pa.C.S. § 502(c). Upon review, we affirm.

I. Background

The Keenholds own a property located at 34 8th Street, Wind Gap Borough, Northampton County (Property), which is improved with a multi-unit apartment building, the units of which they have rented out to tenants for years. See Petition at 2 (pagination supplied), ¶¶ 5-6, Reproduced Record (R.R.) at 3a; see also Trial Court Order & Opinion and Statement of Reasons filed April 30, 2020 (Trial Court Opinion) at 2, R.R. at 172a. Over the years, the Property has been the subject of numerous Notices of Violation issued by the Department for violations of the Pennsylvania Construction Code Act (PCCA)² and the Uniform Construction Code (UCC).³

Following a December 8, 2011 inspection of the Property, the Department issued⁴ Notice of Violation 248098, which cited a total of 13 UCC violations at the Property. See Notice of Violation 248098,⁵ attached as Exhibit 2 to Respondent's Answer to Petition for the Appointment of Viewers and New Matter, at 1-4, R.R. at 26a-29a. The first four violations listed in Notice of Violation 248098 concerned the electrical panel in Property Apartment D, exposed wiring at the Property, a lack of fire alarms in the Property's storage spaces, and the inoperability of some of the Property's battery-operated smoke detectors. See Notice of Violation 248098 at 1-2, R.R. at 26a-27a; see also Trial Court Opinion at 2-3, R.R. at 172a-73a. Notice of Violation 248098 warned that a failure to remedy the listed violations within seven days would result in the Department declaring the Property unsafe and the issuance of an Order to Vacate. See Notice of Violation 248098 at 2, R.R. at 27a; see also Trial Court Opinion at 2-3, R.R. at 172a-73a. Notice of Violation 248098 also listed nine further UCC violations at the Property: the lack of an occupancy permit; the lack of approved building plans; the inability to determine fire separation between storage spaces and apartment units; the inability to determine fire separation between the apartments themselves; improper fire extinguishers; a lack of handrails on steps from the foyer to a second floor of one apartment; a lack of handrails on the main entrance and second exit steps from another apartment; improper guardrail height on a common deck; and a lack of handrails on two sets of common deck egress stairs. See Notice of Violation 248098 at 2-3, R.R. at 27a-28a; see also Trial Court Opinion at 3, R.R. at 173a. Notice of Violation 248098 did not include with these final nine listed violations the same 7-day warning issued for the first four violations. See Notice of Violation 248098 at 3, R.R. 28a; see also Trial Court Opinion at 3, R.R. 173a.

On August 8, 2013, the Department approved building plans submitted by the Keenholds and issued a building permit for the Property. See Trial Court Opinion at 4, R.R. at 174a. Subsequent Department inspections of the Property resulted in the October 15, 2013 issuance of Notice of Violation 248107, which outlined continuing and new UCC violations at the Property and provided a December 19, 2013 date by which the Keenholds needed to remedy the violations. See Trial Court Opinion at 4, R.R. at 174a; see also Department of Labor & Industry Industrial Board Adjudication, File No. 503168 (Board Adjudication) at 1-2, R.R. at 39a-40a.

In early 2014, Richard Keenhold sought variances from the Department's Labor & Industry Board (Board) to waive the fire rated separation requirements between the Property's storage spaces and apartments and the apartments themselves that had formed part of the violations previously noted in Notice of Violation 248098. See Trial Court Opinion at 5, R.R. at 39a-47a & 175a; Board Adjudication at 2, R.R. at 40a. Thereafter, an inspection of the Property conducted on February 21, 2014 found that the Keenholds had remedied only one of the previous 14 violations cited in Notice of Violation 248107. See Trial Court Opinion at 5, R.R. at 175a; Board Adjudication at 2, R.R. at 40a. After conducting an evidentiary hearing, the Board noted that the Keenholds failed to demonstrate: (1) that the previously cited UCC violations did not affect the safety of Property tenants; (2) that the Keenholds were attempting to make the Property UCC-compliant as quickly as possible; and (3) that the Property was equipped with compensatory safety features that would provide an equivalent degree of protection to that required by the UCC. See Board Adjudication at 7-9, R.R. at 45a-47a. Ultimately, the Board concluded that the Keenholds' continued non-compliance with UCC requirements unreasonably affected the safety of the Property's tenants and so denied the requested variances. See Board Adjudication at 9, R.R. at 47a.

Additionally, in 2012 and again in 2015, the Department brought criminal charges against Richard Keenhold for UCC violations at the Property. See Docket No. MJ-03302-CR-0000329-2012, R.R. at 31a-33a; Docket No. MJ-0332-NT-0000439-2015, R.R. at 35a-37a. Richard Keenhold pleaded guilty before a magisterial district judge in both cases. See id.

On April 9, 2014, the Department issued an order to show cause upon the Keenholds demanding they show why the Property should not be vacated as a result of the failure to resolve the violations of Notice of Violation 248107. See Trial Court Opinion at 5-6, R.R. at 175a-76a. The Department issued the same order to show cause again in early June of 2014. See id. at 6, R.R. at 176a.

On May 17, 2016, the Department filed a complaint in this Court seeking the enforcement of the Notices of Violations previously issued for violations at the Property that the Keenholds had not yet remedied. See Complaint filed May 17, 2016 at Commonwealth Court Docket No. 306 M.D. 2016 (Complaint), R.R. at 55a-67a. After the Keenholds failed to answer the Complaint, this Court granted the Department's Motion for Summary Judgment and, on August 25, 2016, entered an Order/Final Decree (Final Decree) requiring the Keenholds to vacate the apartments and dwelling units at the Property and enjoining the use of those apartments until the Property was brought into compliance with UCC requirements. See Final Decree, R.R. at 49a-51a. The Keenholds did not appeal the Final Decree.

A subsequent inspection of the Property conducted on December 14, 2016, revealed that, although certain violations had been remedied, 11 of the 14 UCC violations remained unresolved. See Department Inspection Compliance Report dated December 14, 2016, R.R. at 69a-70a. Nearly a year later, on November 29, 2017, a Department inspector observed non-permitted construction activities occurring at the Property. See Trial Court Opinion at 6-7, R.R. 176a-77a. Accordingly, the Department entered a stop work order on December 1, 2017. See Trial Court Opinion at 7, R.R. at 177a.

Despite the issuance of the stop work order, the Keenholds, believing they would be able to resolve their issues with the Department, entered into an agreement for sale of the Property with a third party. See Trial Court Opinion at 7, R.R. at 177a. The Keenholds allege that the Department refused the third-party purchaser's requests to meet with Department inspectors to discuss the Property. See id.

On May 15, 2018, the Keenholds submitted a new application for a building permit so they could complete work on the Property and have the Property inspected for sale to the third party. See Trial Court Opinion at 8, R.R. at 178a. However, the Department denied the application because the Keenholds failed to comply with statutory filing requirements.⁶ See id. At some point thereafter, the third party cancelled the purchase of the Property. See Petition at 6, ¶ 36, R.R. at 7a.

The Keenholds filed the Petition on January 18, 2020. In the Petition, the Keenholds allege a de facto taking under Section 502(c) of the Code, 26 Pa.C.S. § 502(c), by the Department through the Department's enforcement of the PCCA/UCC. See Petition at 6-7, ¶¶ 39-42, R.R. at 7a-8a. Specifically, the Keenholds assert that they have been substantially denied the beneficial use and enjoyment of the Property and are "left with a property that [they] cannot sell, nor rent to third parties due to the issues with [the Department] and the inability to obtain the necessary permits in order to be in a position to address the alleged deficiencies." Petition at 6, ¶ 37, R.R. at 7a.

On November 7, 2019, the Department filed the Preliminary Objections in the trial court, raising four objections. See Preliminary Objections, R.R. at 81a-170a. The first three Preliminary Objections respectively argued that the Petition fails to state a claim for a de facto taking because: (1) the Department lacks authority to condemn the Property, see Preliminary Objections at 4-5 (pagination supplied), R.R. at 84a-85a; (2) the Keenholds cannot establish that exceptional circumstances exist that substantially deprive them of the beneficial use and enjoyment of the Property, see Preliminary Objections at 5-8, R.R. at 85a-88a; and (3) the deprivation was not a consequence of the Department's power to condemn, see ...