OGONTZ FIRE COMPANY v. CHELTENHAM TOWNSHIP

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

OGONTZ FIRE COMPANY, et al.

Plaintiffs,

v. CIVIL ACTION NO. 23-569

CHELTENHAM TOWNSHIP, et al.

Defendants.

MEMORANDUM OPINION

Rufe, J. July 16, 2025

After the Court granted in part and denied in part Defendants Cheltenham Township

(“Township”), the Board of Commissioners of Cheltenham Township (“BOC”), and the

Cheltenham Township Fire Board’s motion to dismiss, remaining Defendant Township filed its

Answer. The Township also filed a Counterclaim against Plaintiff Ogontz Fire Company

(“Ogontz Fire”) for contractual indemnity.1 Plaintiff Ogontz Fire has moved to dismiss

Cheltenham Township’s Counterclaim. For the reasons stated below, Ogontz Fire’s motion to

dismiss will be granted.

I. BACKGROUND2

A. Factual Background

Cheltenham Township is a home rule township in Montgomery County, Pennsylvania,

organized under the Pennsylvania Home Rule Charter and Optional Plans Law.3 The Cheltenham

1 See Answer & Countercl. at 21 [Doc. No. 20].

2 The facts alleged are taken as true for the purposes of this Motion to Dismiss. Much of the factual and procedural

background in this case can be found in the Court’s Memorandum Opinion denying Defendants’ Motion to Dismiss.

[Doc. No. 16]. The relevant background is repeated here as necessary to provide context.

3 Act of April 13, 1972, as amended, formerly 53 Pa. Stat. §§ 1-101-1-1309, repealed by Act of December 19, 1996,

P.L. 1158, No. 177, § 2(a). A similar act is now found in 53 Pa. Cons. Stat. §§ 2901-3171.

Township Fire Department provides fire protection and firefighting services to the Township and

its residents. During the relevant period, the Fire Department consisted of five all-volunteer fire

companies: Glenside Fire Company (Station 1), LaMott Fire Company (Station 2), Elkins Park

Fire Company (Station 3), Cheltenham Hook and Ladder Company (Station 4), and Ogontz Fire

Company (Station 5).4 Each of the volunteer fire companies had its own Fire Chief, but there was

no single Chief of the entire Fire Department.5 The Township separately employed a Fire

Marshal who reported directly to the Township Manager, who in turn reported directly to the

BOC.6

Ogontz Fire (Station 5), Plaintiff and Counterclaim Defendant, is a private not-for-profit

Pennsylvania corporation.7 Its Charter, as approved and recorded by the Montgomery County

Court of Common Pleas, states that “[t]he corporation is desirous of holding and owning real

estate for the purpose of using it and enjoying it as a fire engine and hose house and a place of

meeting for the transaction of business of the corporation by its members . . . .”8 On December

19, 1974, Ogontz Fire entered into an Indenture with the Township for the land bounded by

Green Briar Road, Old York Road Spur, and Old York Road (“Ogontz Property”).9 The

Indenture, which was recorded in the Recorder of Deeds, provides a 99-year lease for the Ogontz

Property and states as follows:

TO HAVE AND TO HOLD the said premises for and during the term of ninety-

nine (99) years [. . .]

4 Compl. ¶ 39 [Doc. No. 1].

5 Compl. ¶ 72 [Doc. No. 1].

6 Compl. ¶ 73 [Doc. No. 1].

7 Compl. ¶ 11 [Doc. No. 1].

8 Compl. ¶ 33 [Doc. No. 1].

9 Compl. ¶ 43, 35 [Doc. No. 1].

3. The Lessor [Township] hereby covenants with the Lessee [Ogontz Fire] as

follows: (1) That the said Lessee on paying the said yearly rent [of $1.00] and

performing said covenants on his part shall and may peaceably and quietly have,

hold and enjoy the demised premises during the term aforesaid.10

The Counterclaim and Motion to Dismiss presently before the Court are both based on

the Indemnity Provision of the Indenture, which reads:

2. The Lessee [Ogontz Fire], to the intent that the obligation may continue

throughout the term hereby created, covenants with the Lessor [Township] as

follows:

. . .

(11) To indemnify the Lessor [Township] against all costs and expenses,

including counsel fees, lawfully and reasonably incurred in or about the premises,

or in defense of any action or proceeding, or in discharging the premises from any

charge, lien or encumbrance, or in obtaining possession after default of the Lessee

[Ogontz Fire] or the determination of this lease and to maintain fire and liability

insurance protecting both the Lessee [Township] and the Lessor [Ogontz Fire] in

such amounts and with companies as may be acceptable to the Township.11

On March 5, 1980, Ogontz Fire entered into a Memorandum of Understanding with the

Township, which documented Ogontz Fire’s agreement to sell its previous firehouse at the

corner of York and Church Roads and to construct a new firehouse at its own expense at a cost

not to exceed $500,000.12 In return, the Township conveyed its intent to purchase the new

firehouse after its construct at a price equal to its construction costs, after which Ogontz Fire

would lease the firehouse back from the Township for amortized rental payments over 20

years.13 The Memorandum of Understanding contemplated that Ogontz Fire would have the right

to purchase the firehouse for $1.00 upon completion of the 20-year lease.14

10 Compl. ¶ 42-45 [Doc. No. 1].

11 Mot. Dismiss Countercl. Ex. A [Doc. No 26-1].

12 Compl. ¶ 49 [Doc. No. 1].

13 Compl. ¶ 49-50 [Doc. No. 1].

14 Compl. ¶ 50 [Doc. No. 1].

On December 24, 1980, Ogontz Fire and the Township entered into a Lease-Purchase

Agreement, whereby Ogontz Fire lease-purchased the new firehouse for 20 years.15 The Lease-

Purchase Agreement incorporated the Indenture, including Ogontz Fire’s continuing 99-year

lease of the Ogontz Property, but the Agreement did not contain any provisions requiring that the

property be used as a firehouse.16 Ogontz Fire made its annual payments over 20 years, totaling

$960,986.50: $500,000 in principal and $460,986.50 in interest.17 In 2000, at the end of the 20-

year period, Ogontz Fire purchased the firehouse for $1.00.18 Plaintiffs contend that, in addition

to Ogontz Fire’s ownership of the firehouse, Ogontz Fire also has a continuing right to use the

Ogontz Property pursuant to the 99-year lease, until on or about December 19, 2073.19

B. Procedural Background

Plaintiffs Ogontz Fire and Arthur Gordon filed suit against the Township, the Board of

Commissioners of Cheltenham Township, and the Cheltenham Township Fire Board alleging

constitutional violations under 42 U.S.C. § 1983 and various state law violations arising from the

Board of Commissioners’ decertification of Ogontz Fire. Defendants then filed a motion to

dismiss for failure to state a claim, which the Court granted in part and denied in part, giving

leave to Plaintiffs to file an Amended Complaint.20 Plaintiffs declined to file an Amended

Complaint, and remaining Defendant Cheltenham Township filed its Answer and

15 Compl. ¶ 51, 53 [Doc. No. 1].

16 Compl. ¶ 52-54 [Doc. No. 1].

17 Compl. ¶ 55 [Doc. No. 1].

18 Compl. ¶ 56 [Doc. No. 1].

19 Compl. ¶ 57, 59-60, 379, 381 [Doc. No. 1].

20 See Mem. Op. [Doc. No. 16]; Order [Doc. No. 17].

Counterclaim.21 Plaintiff Ogontz Fire then filed this Motion to Dismiss Defendant’s

Counterclaim.22

At the parties’ request, litigation was stayed for approximately eight months while the

parties attempted resolution through private mediation.23 Private mediation having been

unsuccessful, the Court lifted the stay.24 Now, Ogontz Fire’s Motion to Dismiss Cheltenham

Township’s Counterclaim is fully briefed and ripe for disposition.

II. LEGAL STANDARD

For the purposes of deciding a motion to dismiss under Rule 12(b)(6), claims and

counterclaims are treated the same.25 To survive a motion to dismiss, a counterclaim must

contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on

its face.’”26 In evaluating the sufficiency of a counterclaim, the court accepts all the well-pleaded

factual allegations as true and draws all reasonable inferences in favor of the counterclaimant.27

“A claim has facial plausibility when the [counterclaimant] pleads factual content that allows the

court to draw the reasonable inference that the [plaintiff] is liable for the misconduct alleged.”28

“Threadbare recitals of the elements of a cause of action, supported by mere conclusory

statements, do not suffice.”29

21 Answer & Countercl. [Doc. No. 20].

22 Mot. Dismiss Countercl. [Doc. No. 26].

23 See Doc. Nos. 29, 30, 31, 32, 33.

24 Order [Doc. No. 34].

25 See Key Star Partners, LLC v. Insignia Disposal Servs., LLC, No. 22-2338, 2023 WL 2920283, at *4 (E.D. Pa.

Apr. 12, 2023).

26 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see

also Talley v. Wetzel, 15 F.4th 275, 286 n.7 (3d Cir. 2021).

27 Kalu v. Spaulding, 113 F.4th 311, 325 (3d Cir. 2024).

28 Iqbal, 556 U.S. at 678.

29 Id.

III. DISCUSSION

The Township brings a counterclaim of indemnification against Ogontz Fire, alleging that

the Indenture pertaining to the Ogontz Property requires Ogontz Fire to indemnify the Township

for all its expenses related to this litigation. The counterclaim makes no allegations that the

Township has paid anything—costs, expenses, or counsel fees—yet.

To state a claim for contractual indemnification, a claimant must show that a valid

contract for indemnification exists and that the claim for indemnification falls within the scope of

the agreement.30 A claim for contractual indemnification is ripe only after expenses associated

with the indemnification are actually paid.31

The parties do not dispute that a valid contract for indemnification exists. Rather, at issue

is: A) whether the claim for indemnification falls within the scope of the agreement and B)

whether the claim is ripe.

A. The Township’s claim for indemnity does not fall within the scope of the

agreement.

First, Ogontz Fire argues that “[t]he language of the 1974 Indenture does not state or even

suggest that the indemnification clause would apply to such first party disputes between the

contracting parties such as [the Township’s] breach of its agreements with Ogontz Fire.”32

The construction of an indemnity contract is a question of law for the court to decide.33

The parties do not dispute that Pennsylvania law applies to this counterclaim. Under

Pennsylvania law, indemnification agreements are to be “narrowly interpreted in light of the

30 McClure v. Deerland Corp., 585 A.2d 19, 22 (Pa. Super. Ct. 1991); Int’l Fid. Ins. Co. v. DHLP – Limerick Golf

Cmty., L.P., No. 15-3291, 2017 WL 550585, at *2 (E.D. Pa. Feb. 10, 2017).

31 F.J. Schindler Equip. Co. v. Raymond Co., 418 A.2d 533, 534 (Pa. Super. Ct. 1980).

32 Pls.’ Mem. Law Supp. Mot. Dismiss Def.’s Countercl. at 2-3 [Doc. No. 26].

33 Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986).

parties’ intentions as evidenced by the entire contract.”34 Moreover, the court must strictly

construe the scope of an indemnity contract against the party seeking indemnification.35 “If the

indemnity clause is clear and unambiguous, then the intentions of the parties should be

ascertained primarily by looking to the language used in the agreement. Only where the court

finds ambiguity may it consider the circumstances under which the contract was signed. The

mere fact that the parties do not agree upon the proper interpretation of an indemnity clause does

not necessarily render the clause ambiguous.”36

If the parties intended for the Indenture to provide for indemnification for the Township’s

alleged intentional breach of the Indenture itself, or for its alleged intentional violations of

Ogontz Fire’s civil rights, the prevailing and “well-settled” law would require “clear and

unequivocal” language to that effect.37 The Indemnity Provision provides no such language:

2. The Lessee [Ogontz Fire], to the intent that the obligation may continue

throughout the term hereby created, covenants with the Lessor [Township] as

follows:

. . .

(11) To indemnify the Lessor [Township] against all costs and expenses,

including counsel fees, lawfully and reasonably incurred in or about the premises,

or in defense of any action or proceeding, or in discharging the premises from any

charge, lien or encumbrance, or in obtaining possession after default of the Lessee

[Ogontz Fire] or the determination of this lease and to maintain fire and liability

insurance protecting both the Lessee [Ogontz Fire] and the Lessor [Township] in

such amounts and with companies as may be acceptable to the Township.38

34 Burlington Coat Factory of Pa., LLC v. Grace Constr. Mgmt. Co., 126 A.3d 1010, 1022 (Pa. Super. Ct. 2015)

(quoting Consol. Rail Corp. v. Del. River Port Auth., 880 A.2d 628, 632 (Pa. Super. Ct. 1980)).

35 Dilks v. Flohr Chevrolet, Inc., 192 A.2d 682, 687 (Pa. 1963); Brown v. Moore, 247 F.2d 711, 722-23 (3d Cir.

1957), disapproved on other grounds.

36 Jacobs Constructors, Inc. v. NPS Energy Servs., Inc., 264 F.3d 365, 371 (3d Cir. 2001) (internal citations

omitted).

37 See Prosperi v. Twp. of Scott, No. 06-501, 2007 WL 9782934, at *2 (W.D. Pa. Jan. 23, 2007). This is known as

the Perry-Ruzzi rule. See Ruzzi v. Butler Petroleum Co., 588 A.2d 1, 4 (Pa. 1991); Perry v. Payne, 66 A. 553, 555-

56 (Pa. 1907).

38 Mot. Dismiss Countercl. Ex. A [Doc. No 26-1].

This alone is enough for the Court to hold that the Indemnification Provision clearly does not

encompass the indemnification claim at issue here.39

The Township ignores the fact that the Indemnity Agreement fails to explicitly and

unequivocally indemnify against the claimant’s own actions, and instead points to how the

agreement “requir[es] indemnification for the ‘defense of any action or proceeding,’” urging that

the expansive language of the indemnification agreement “extends to the plaintiff’s action

here.”40 The Township argues that “[p]laintiff points to no language limiting the indemnity

obligation to the third-party claims, and the express extension of the lease beyond the defense of

third party claims, as discussed above, precludes a finding at the motion to dismiss phase that the

words ‘defense of any action’ somehow exclude the defense of the claims plaintiff brings in this

case.”41 The Township’s argument, however, gets the standard exactly backward. Pennsylvania

courts regularly and specifically rule against indemnification in actions arising from the

claimant’s own actions—negligent or intentional—where the contract at issue contains only such

“words of general import.”42

Moreover, “in cases where Perry-Ruzzi rule is not applicable, Pennsylvania law dictates

that we look to general principles of contract interpretation to determine if [the indemnitor]

would be obligated to defend [the indemnitee] in this matter.”43 The Court merely needs to

consider the facts of the present case to recognize that the Township’s argument is patently

39 See also Cottman Ave. PRP Grp. v. AMEC Foster Wheeler Env’t Infrastructure Inc., 439 F. Supp. 3d 407, 438

(E.D. Pa. 2020) (collecting cases agreeing that an indemnity provision with broad language is limited to third-party

claims).

40 Resp. Mot. Dismiss Countercl. at 3-4 [Doc. No. 27].

41 Id.

42 Dilks, 192 A.2d at 688.

43 Prosperi, 2007 WL 9782934, at *4.

deficient. Considering whether Ogontz Fire would be required to defend the Township against

Ogontz Fire’s own lawsuit answers the question succinctly: this argument is ridiculous on its

face. But the Township urges the Court to read the indemnity agreement to require this dizzying

conclusion. The Township asks the Court to accept that Ogontz Fire intended to indemnify the

Township for all costs—including the Township’s legal fees associated with defending the

Township against suits Ogontz Fire itself brings in good faith against the Township. Construing

the indemnification agreement strictly against the Township, the Court cannot accept that Ogontz

Fire intended the indemnity agreement to essentially give the Township immunity from suit by

Ogontz Fire.44

Because the Township has not sufficiently pled that its indemnity claim is covered by the

Indemnification Agreement, the Court will grant Ogontz Fire’s motion to dismiss and dismiss the

Township’s counterclaim.

B. The Township’s claim is premature.

Next, Ogontz Fire argues that the Township’s claim is premature. While the indemnity

sought here does not remotely fall within the scope of indemnity agreement, even if it did, the

Township’s indemnification claim is premature as a matter of law.

“Under Pennsylvania law, unless a loss has actually been incurred, an indemnity claim

for that loss is premature.”45 Indeed, “before the right of indemnification arises, the indemnitor

must in fact pay damages to a third party. Any action for indemnification before such payment,

44 See Jacobs Constructors, Inc., 264 F.3d at 374 (“Consistent with the policy of the Pennsylvania Supreme Court as

demonstrated in the Perry–Ruzzi doctrine, we will not endorse the silent shifting or involuntary assumption of

obligations that an indemnitor ordinarily would not likely undertake. To do otherwise would be to transform

definitive indemnification agreements into open-ended guarantees in the nature of insurance policies.”).

45 Key Star Partners, LLC, 2023 WL 2920283, at *7.

as in the present case, is premature.”46 “Because the right to indemnification does not arise until

payment is made, the party seeking indemnity is not prejudiced by being denied the pursuit of

any claim prior to that time.”47

“[T]he mere expenditure of counsel fees does not constitute the accrual of a cause of

action for indemnification.”48 Further, “the appropriateness and reasonableness of the counsel

feels and costs allegedly incurred to date cannot be determined until the underlying actions are

resolved.”49

Here, no verdict or judgment has been rendered, and no payment has been made. The

expenditure of counsel fees here does not constitute the accrual of a cause of action.50 In fact, the

Township has not even pled—with particularity or at all—that it has made any payment. The

Counterclaim makes only three allegations: (1) that the parties entered into an Indenture; (2) the

language of the Indenture; and (3) that the Indenture entitles the Township to “costs and

expenses, including counsel fees, arising out of Ogontz [Fire]’s present suit against [the]

Township.”51 The Township does not plead that it has paid costs and expenses, or even that it has

paid any legal fees. It simply alleges that the indemnification claim would apply to such costs.

Accordingly, its indemnification claim is premature.

46 F.J. Schindler Equip. Co., 418 A.2d at 534. See also McClure, 585 A.2d at 23 (“Under Pennsylvania law, actual

payment, and not just a verdict or judgment, is required.”).

47 McClure, 585 A.2d at 23 (citing Nat’l Liberty Life Ins. Co. v. Kling P’Ship, 504 A.2d 1273 (Pa. Super. Ct. 1986)).

48 Id.

49 Id. at 22-23.

50 Contrast this counterclaim with that in Key Star Partners, where Judge Baylson found that legal fees and losses

due to the plaintiff’s actions were sufficient for the indemnification counterclaim to survive a Rule 12(b)(6)

challenge. 2023 WL 2920283, at *8.

51 Answer & Countercl. at 21 [Doc. No. 20].

As explained above, the Court dismisses the Township’s indemnification claim because

indemnification of this type is not explicitly contemplated in the indemnification agreement.

However, in the alternative, the Township’s indemnification claim is premature as no payment

has been made.

IV. CONCLUSION

For the reasons stated above, Ogontz Fire’s motion to dismiss the counterclaim will be

granted and the Township’s counterclaim will be dismissed with prejudice. An order will be

entered.