South Mulberry Properties v. GT Management ( 2022 )

NOT DESIGNATED FOR PUBLICATION
No. 124,039
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
SOUTH MULBERRY PROPERTIES, L.L.C.,
Appellee/Cross-appellant,
v.
GT MANAGEMENT, L.L.C.,
Appellant/Cross-appellee.
MEMORANDUM OPINION
Appeal from Crawford District Court; LORI BOLTON FLEMING, judge. Opinion filed October 21,
2022. Affirmed in part, reversed in part, and remanded.
Todd E. Shadid and Joseph A. Dempewolf, of Klenda Austerman LLC, of Wichita, for
appellant/cross-appellee.
David M. Traster, of Foulston Siefkin LLP, of Wichita, and Kevin F. Mitchelson, of Wheeler &
Mitchelson, Chartered, of Pittsburg, for appellee/cross-appellant.
Before WARNER, P.J., HURST, J., and TIMOTHY G. LAHEY, S.J.
PER CURIAM: GT Management, L.L.C. (GT), owns the land upon which it
operates a landfill under a permit from the Kansas Department of Health and
Environment (KDHE). South Mulberry Properties, L.L.C. (South Mulberry), is
exercising its exclusive option to repurchase the real estate upon which the landfill sits.
At issue is whether the underlying contract and applicable law require GT to close the
landfill when it conveys the property to South Mulberry. The district court granted partial
summary judgment in favor of South Mulberry, finding the contract requires GT to close
the landfill before it transfers the land to South Mulberry. GT appeals that ruling.
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South Mulberry filed a second summary judgment motion seeking a declaratory
ruling that GT was responsible for addressing off-site waste found on property located
just north of the landfill. The district court denied that motion, and South Mulberry cross-
appeals that determination.
As explained below, we reverse the grant of partial summary judgment because
neither the contract nor Kansas law require closure of the landfill when title to the landfill
property is transferred. And we find the district court did not err when it declined to find
GT responsible for addressing off-site waste because the issue is not ripe.
FACTUAL AND PROCEDURAL BACKGROUND
The two issues on appeal arise from separate summary judgment rulings by the
district court. As such, the facts we consider are limited in scope to the uncontroverted
facts in the respective motions and responses. With respect to the ruling that GT must
close the landfill, there is no dispute as to the underlying material facts. We summarize
those facts first.
In April 1998, John and Rosemary Massa entered into a contract to sell 40 acres of
land to Southeast Kansas Construction and Demolition Landfill, L.L.C., a Kansas
company (SEK), for use as a construction and demolition landfill, waste tire monofill and
processing facility, and open burn pit facility (the Landfill). The contract, which applies
to the parties' successors and assigns, required SEK to obtain a permit from the KDHE
and comply with applicable environmental statutes, regulations, ordinances, and permits.
When SEK obtained a KDHE permit, the Massas signed a warranty deed
conveying the property. SEK also filed a restrictive covenant limiting use of the property
after the Landfill's closure to grassland and pasture. The Landfill opened in May 1999.
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In January 2008, the contract was amended to allow SEK to sell the property. SEK
thereafter sold the property and transferred its KDHE permit to another company, which
then sold the property and transferred the permit to GT, subject to the original 1998
agreement as amended. GT has operated the Landfill from April 2009 to the present time.
The contract provided the Massas the option to repurchase the property after the
Landfill became full, or in 20 years, whichever occurred first. In 2017, approaching the
20-year mark, the Massas advised GT they intended to exercise their option to repurchase
the property and sent $100 as required under the contract. The Massas asked GT to begin
the process of closing the Landfill. GT agreed to convey the property back to the Massas
but would not close the Landfill; it explained the contract's repurchase option only
required it to close the Landfill when it had finished exploiting the Landfill, not after the
20-year term. Just prior to the filing of this lawsuit, the Massas transferred their contract
rights to South Mulberry.
Ownership and operation of the Landfill are regulated by the KDHE, and the 1998
contract requires it be operated in conformance with Kansas law and the KDHE
regulations. The full context of the required conformance is set forth in the three specific
contract provisions included in South Mulberry's statement of facts. Paragraph 8 of the
contract, entitled "ENVIRONMENTAL MATTERS" provides:
"Buyer agrees during the period of time that he will be using the real estate purchased
herein for a construction and demolition landfill, waste tire monofil[l], waste tire
processing facility, and open burn pit, that Buyer will in connection with the use,
ownership, condition or operation of his businesses as above-stated, comply in all
material respects with all laws, ordinances, permits, orders, statutes, rules, permitting and
licensing requirements, determinations and regulations promulgated or issued or applied
by any municipal, local, city, county, state or federal court, agency, board, legislature,
commission or other legislative, judicial, administrative, or regulatory body relating to
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the protection of the environment (including, without limitation, ambient air, surface
water, ground water and land, natural resources, wildlife or human health) (including,
without limitation, all environmental laws concerning emissions, discharges, spills, leaks,
releases or threatened releases of petroleum (including, without limitation, oil, used oil,
waste oil, gasoline, constituents thereof and petroleum based fuels), petroleum bi-
products, petroleum waste, petroleum contaminated soils, salt water, asbestos, waste
associated with oil and gas drilling, expiration production activities, pollutants,
contaminants, deleterious substances, chemicals, special waste, or radioactive substances
and materials, or hazardous substances, toxic substances, or hazardous waste, as those
terms are defined in any environmental law.)"
Paragraph 9 of the contract made the sale contingent upon Buyer obtaining a
KDHE permit to operate the Landfill on the property. It states:
"Buyer is purchasing the real estate herein solely for the purposes of operating a
construction and demolition landfill, waste tire monofil[l], waste tire processing facility,
and an open burn pit, all in conformance with the laws of the State of Kansas and as a
condition precedent to Buyer's obligation to close herein, Buyer will apply for the
appropriate permits from the State of Kansas, specifically through the Kansas Department
of Health and Environment, and upon receiving said permits Buyer shall thereafter
immediately proceed to close."
Finally, paragraph 10 specifically addresses the repurchase option:
"a. When Buyer, or its assigns or grantees, finish the exploitation of said land for the
purpose of the operation of a construction and demolition landfill, waste tire
monofil[l], waste tire processing facility, and burn pit, or upon the expiration of
twenty (20) years, whichever shall first occur, Sellers may exercise their option to
repurchase the real estate herein by notifying Buyer within ninety (90) days of
Buyer's termination of operations as above-stated, or the expiration of twenty (20)
years from the date of the execution of this Agreement that Sellers desire to
repurchase said real estate, and along with said notice tender the sum of One Hundred
and no/100 ($100.00) Dollars payable to Buyer, its successors or assigns.
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"In no event, shall the exercise of the exclusive option herein granted interfere with
Buyer's obligations to close its operation as a construction and demolition landfill,
waste tire monofil[l], waste tire processing center, or open burn pit in compliance and
conformance with the then existing rules and regulations of the State of Kansas or
such other governmental entities which shall have jurisdiction over such operation.
"b. Failure of Sellers to exercise their option to repurchase as above-stated, shall operate
as a cancellation and termination of said option, and thereafter Buyer shall be free to
place the real estate for sale on the open market or continue to own the same at
Buyer's sole option and discretion."
Additional uncontroverted facts include that the Landfill has remaining capacity, it
can generate additional revenue, and the cost to close the Landfill will exceed $400,000.
In December 2016, GT provided the KDHE with an irrevocable letter of credit in the
amount of $504,234 to meet the KDHE's financial assurance guidelines. In September
2017, the KDHE sent a letter to South Mulberry's attorneys advising them that K.S.A. 65-
3406(a)(18) places responsibility for long-term care of a landfill site on the owner of the
site, and further that a person acquiring ownership rights in a permitted site prior to its
closure is subject to all requirements of the permit for the site. The letter concludes, "The
implication is that a person taking ownership of a solid waste disposal site prior to the
site's closure becomes responsible for the site's closure." The parties also agree that it will
take GT more than 90 days to complete initial closure of the Landfill. At the time of the
district court's ruling, the property had not yet been transferred to South Mulberry, and
GT continues to own and operate the Landfill.
In February 2019, the district court granted South Mulberry's motion for partial
summary judgment. The court concluded paragraph 10 requires GT to close the Landfill
when the option to repurchase is exercised. The district court rejected GT's contention
that it was obligated to close the Landfill only when it finished exploitation of the
Landfill but not upon the exercise of the repurchase option after 20 years. The ruling
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requires GT to close the Landfill before it transfers the property to South Mulberry, and
the court found Kansas law and regulations specify the steps necessary to close and
monitor a construction and demolition landfill.
After obtaining the partial summary judgment ruling in its favor, South Mulberry
sought a declaratory judgment that GT would be responsible for any KDHE-required
clean-up of waste, which had been dumped and buried on its land located just north of the
Landfill property. South Mulberry argued the 1998 contract requires GT Management to
address the waste as part of its obligation to close the Landfill, and the permit requires the
current operator to mitigate a prior operator's conduct. To that end, South Mulberry
requested a declaratory judgment that GT was contractually or statutorily liable for clean-
up of the off-site waste in the event the KDHE initiated an enforcement action.
After discovery of the waste, South Mulberry contacted the KDHE in March 2018
and, with the help of a neighbor, dug test holes, which revealed buried construction and
demolition waste mixed with small amounts of household trash. Many of the specific
facts are controverted, but the parties appear to agree that one of GT's predecessors,
rather than GT itself, was responsible for the waste. During this litigation, the KDHE
informed South Mulberry that it believed the off-site dumping was unrelated to the
Landfill. Though open to receiving additional information, the KDHE advised South
Mulberry that it would be responsible for the waste unless the responsible party's identity
could be confirmed. Specifically, the KDHE requested a signed affidavit by someone
with firsthand knowledge of the facts surrounding the dumping; absent that evidence, the
KDHE would begin an enforcement action if South Mulberry did not address the waste.
South Mulberry responded that it believed the dumping occurred between May 1999 and
March 2001 by SEK, but it did not provide an affidavit. Though South Mulberry
indicated it was unlikely that it could provide that affidavit, it believed it could provide
compelling circumstantial evidence that SEK was responsible.
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As factual support, South Mulberry attached the affidavit of the neighbor who
owned and worked at a quarry north of the Landfill. He stated that between 1999 and
2008, he observed someone from the Landfill digging pits and hauling and covering
waste on the property north of the Landfill. Based on these observations, he had been
able to locate and uncover this waste when digging test holes for the KDHE in March
2018.
In denying the second summary judgment motion, the district court ruled that even
if the neighbor's statements were accurate, the contract and the KDHE permit do not
address off-site conduct or liability for trespasses or contract breaches by prior owners.
Additionally, the court found Kansas law does not require GT Management to remediate
off-site dumping by a predecessor. And the court's prior ruling regarding GT
Management's closing obligation does not extend to off-site waste dumped by a prior
owner. Based on these reasons, the court declined to issue a declaratory judgment. As this
disposed of all outstanding claims, the court's order served as a final judgment.
GT Management challenges the district court's finding that South Mulberry's
exercise of the repurchase option upon the expiration of the 20-year term requires it to
close the Landfill. South Mulberry argues the court erred by not issuing a declaratory
judgment finding GT Management responsible for addressing the off-site waste.
DISCUSSION
Summary judgment is appropriate when there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. The trial
court is required to resolve all facts and inferences which may reasonably be drawn from
the evidence in favor of the party against whom the ruling is sought. On appeal, we apply
the same rules, and when we find reasonable minds could differ as to the conclusions
drawn from the evidence, summary judgment must be denied. Patterson v. Cowley
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County, 307 Kan. 616, 621, 413 P.3d 432 (2018). Summary judgment may be appropriate
in contract cases when there are no disputed material facts. See Ives v. McGannon, 37
Kan. App. 2d 108, 116, 149 P.3d 880 (2007). Although the parties do not agree on all of
the specific facts in this case, they agree the foregoing material facts are not in dispute
and that resolution of the case turns on the interpretation of the underlying contract and
related statutory and regulatory rules governing the operation of the Landfill.
Contract interpretation presents a legal question appellate courts review de novo.
Trear v. Chamberlain, 308 Kan. 932, Syl. ¶ 1, 425 P.3d 297 (2018). "[R]egardless of the
construction given a written contract by the trial court, an appellate court may construe a
written contract and determine its legal effect." City of Topeka v. Watertower Place
Development Group, 265 Kan. 148, Syl. ¶ 2, 959 P.2d 894 (1998). When interpreting a
written contract, the primary rule is to ascertain the parties' intent. If the contract's terms
are clear, the intent of the parties is to be determined from the contract language without
applying the rules of construction. Stechschulte v. Jennings, 297 Kan. 2, 15, 298 P.3d
1083 (2013). Extrinsic evidence may be used to determine that intent only if an
ambiguity exists. Chamberlain, 308 Kan. 932, Syl. ¶ 2.
Here, both parties contend there is no ambiguity in the language, so the intent of
the parties is to be determined from the language used in the contract. We also interpret
contracts by construing and considering the entire instrument from its four corners—not
by isolating one sentence or provision. Waste Connections of Kansas, Inc. v. Ritchie
Corp., 296 Kan. 943, 963, 298 P.3d 250 (2013). It is a basic rule of contract law that
courts will allow parties to choose the terms by which they will be bound under written
agreements. Squires v. Woodbury, 5 Kan. App. 2d 596, 598, 621 P.2d 443 (1980), rev.
denied 229 Kan. 671 (1981).
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I. Does the contract or Kansas law require GT to close the Landfill prior to transferring
ownership?
GT asserts the district court erred by concluding it must close the Landfill, arguing
that neither the contract nor Kansas law mandate closure when a landfill is transferred.
We agree.
Our analysis begins by noting that each party interprets the contract language
differently and in a manner that benefits itself. But neither party contends the contract is
ambiguous nor seeks to present any extrinsic evidence to bolster their suggested
interpretation. Thus, because ambiguity is not a point of contention on appeal, we rely
solely on the contract language to determine its intended meaning.
Reading the contract as a whole, we find the parties intended the Landfill be
operated in compliance with all applicable statutory and regulatory provisions governing
its operation at all times, including at the time of closure or transfer of the property.
Paragraphs 8 and 9 of the agreement call for compliance with all regulatory standards at
the outset and during the time the Landfill is in operation. Like the parties, we necessarily
focus on the specific language of paragraph 10 because it addresses the particular point of
contention between the parties.
Paragraph 10(a) of the 1998 contract grants South Mulberry the option to
repurchase the property after 20 years or when GT has finished exploiting the Landfill,
whichever occurs first. It goes on to state, in part:
"In no event, shall the exercise of the exclusive option herein granted interfere with
[GT's] obligations to close its operation as a construction and demolition landfill, waste
tire monofil[l], waste tire processing center, or open burn pit in compliance and
conformance with the then existing rules and regulations of the State of Kansas or such
other governmental entities which shall have jurisdiction over such operation."
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There is a single option to repurchase the Landfill property, and we agree with the
district court that the language concerning closure obligations was intended to apply
whether the option was exercised at the time the Landfill was fully exploited or at the end
of 20 years. But we part ways with the district court's analysis when it concludes that the
contract language requires GT to close the Landfill because South Mulberry is exercising
its exclusive repurchase option.
The plain language of paragraph 10 does not impose an absolute obligation on GT
to close the Landfill. Rather than creating an independent contractual obligation on GT
that it be responsible for closure of the Landfill, the closure obligations are those required
by Kansas law at the time closure occurs. Thus, the contract directs that "in no event"
shall exercise of the option interfere with GT's obligation to close the Landfill "in
compliance and conformance with the then existing rules and regulations of the State of
Kansas or such other governmental entities which shall have jurisdiction over such
operation." (Emphasis added.) The parties did not agree that GT would close the Landfill
when the option was exercised; they agreed that closure obligations would be in
conformance and compliance with the KDHE regulations in effect at the time the option
was exercised. It is fair to say the parties did not know what closure obligations GT
would ultimately have because those obligations were based on the regulation in effect at
the time the option was exercised rather than on the regulatory requirements at the time
the contract was signed.
South Mulberry contends the inclusion of the phrase "in no event" in the language
of paragraph 10 is significant because that indicates the parties intended GT to be
obligated to close the Landfill whenever the option was exercised, either after the
Landfill was fully exploited or at 20 years. It argues that any other interpretation renders
the "in no event" language meaningless. But, as part of the closure process, Kansas
regulations require the owner or operator of a construction and demolition landfill to do
several things, which the parties recognize will take at least 90 days. For example,
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closure requires installation of a final cover over a landfill. K.A.R. 28-29-304(g)(1)(A)-
(B); K.A.R. 28-29-321(b)(1). And the owner or operator must repair and maintain that
cover during the 30-year postclosure period. K.S.A. 65-3402(n); K.A.R. 28-29-321(c).
The parties knew at the time the contract went into effect that GT's closing obligations
could require continuing access to the property after it was transferred back to South
Mulberry. Future regulations could have expanded or contracted those obligations, and
the phrase "in no event" in paragraph 10 makes it clear that the exercise of the option
cannot interfere with GT's closure obligations, whatever they might be under the then-
existing regulations.
GT's contractual closure obligations are the same whether South Mulberry
exercises its option after 20 years or when the Landfill is full—GT must comply and
conform with the then-existing KDHE regulations. The contract could have provided that
GT be responsible for closure no matter what the law required, or it could have provided
closure obligations were to be based on the rules and regulations in effect at the time the
contract was executed, but it did not. GT's closure obligations are determined by
referencing the rules and regulations in effect at the time the option is exercised. GT's
precise obligation regarding closure was not known at the time of the execution of the
contract. And the applicable regulations could have changed such that responsibility for
closure, in all circumstances, was placed entirely upon a party taking ownership of
landfill property. Or the regulations could have mandated closure whenever landfill
property is sold without a concurrent transfer of the permit. The point being that GT's
closure obligations can only be determined by referencing the rules and regulations in
effect at the time the option is exercised. The fact there has been little change in the
governing regulations since the contract was signed does not change the analysis.
If GT is obligated to close the Landfill, that obligation arises from the KDHE rules
and regulations. We must therefore look at the KDHE rules and regulations governing
closure of the Landfill.
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A review of applicable regulations confirms closure of the Landfill is not required
at present. There is no KDHE rule or regulation requiring closure of landfill property
before, or because, it is sold or transferred. And South Mulberry admits "it is true that the
regulatory scheme does not require closure of the landfill upon transfer of title to the
property."
Under the KDHE regulations, closure of a landfill occurs when disposal
permanently ceases, the landfill is abandoned, becomes full, or the permit is revoked.
"'Closure' means the permanent cessation of active disposal operations, abandonment of
the disposal area, revocation of the permit or filling with waste of all areas and volume
specified in the permit and preparing the area for the long-term care." K.S.A. 65-
3402(m). If GT had finished exploiting the Landfill, that would meet the regulatory
definition of closure and GT consequently would have been required to fulfill its closure
obligations, as GT admits. But at the present time, the undisputed facts show that disposal
of waste has not ceased, the Landfill has not been abandoned or become full, and the
permit has not been revoked, so closure is not required.
KDHE regulations recognize transfer may occur before closure is required, and the
consequences are spelled out in the regulations. One consequence being that closure and
postclosure responsibility then falls upon the new landowner, as outlined in the letter
from the KDHE to South Mulberry's counsel. When ownership of a permitted landfill
transfers after it accepts waste but before closure occurs, the new owner "shall be subject
to all requirements of the permit for the site or facility, including the requirements
relating to long-term care of the site or facility." K.S.A. 65-3406(a)(18). Furthermore,
even without a permit to operate the landfill, the new owner becomes responsible for
closing the landfill according to the approved closure plan. See K.A.R. 28-29-308.
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The district court ruled that GT was the owner and operator of the Landfill and
therefore responsible for meeting all closure and postclosure requirements referenced in
the KDHE letter to South Mulberry. The court reasoned that South Mulberry has "no
right of ownership until the closing of the repurchase is complete" and then held "[South
Mulberry] is not obligated to close on the repurchase prior to the closure of the landfill
being completed by Defendant." The court's ruling also requires closure of the Landfill
before the transfer of title occurs. We find no basis for these findings in the language of
the contract or the applicable KDHE regulations.
South Mulberry also argues that nothing in the agreement indicates the Massas or
South Mulberry ever intended to take over operation of the Landfill, and, comparing the
cost of closure to the amount of how much they received in compensation, requiring them
to close the Landfill is unreasonable. Conversely, it argues that GT has the existing
permit and the financial wherewithal to cover the cost of closure. But these current-day
extrinsic fact considerations do not shed any light on what was intended 20 years ago
when the contract was signed. No language in the agreement suggests that the relative
financial condition of either party is a factor to be considered in allocating the burdens of
closure. Furthermore, the contract does not require repurchase of the property—if it does
not make financial sense, South Mulberry can decline to exercise the option.
And while it is true that the agreement does not explicitly indicate the Massas or
South Mulberry ever intended to operate the Landfill, there is also no express indication
in the contract that South Mulberry did not so intend. Whether South Mulberry ever
intended to operate the Landfill is ultimately of no consequence in determining GT's
closure obligations. What is clear from the contract is that the parties intended that GT's
closure obligations were dependent upon and derived from the KDHE regulations in
effect at the time of the option. As South Mulberry admits, those regulations do not
require closure before ownership of the Landfill property is transferred.
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We make no finding whether or not GT may ultimately have closure obligations
required by its KDHE permit or future events as those issues were not raised in South
Mulberry's partial summary judgment motion. The extent of our ruling is to address the
court's ruling on partial summary judgment. We hold GT is not contractually obligated to
close the Landfill based on South Mulberry's exercise of its exclusive option and
therefore reverse the district court's partial summary judgment ruling. We remand the
case to the district court for further proceedings consistent with this court's ruling.
II. The district court did not err by declining to issue a declaratory judgment because the
off-site waste issue is not ripe.
In its cross-appeal, South Mulberry argues the district court erred by failing to
issue a declaratory judgment that the 1998 contract and permit require GT Management
to comply with any future KDHE directive ordering South Mulberry to address the off-
site waste. South Mulberry wants to use the declaratory judgment solely to shift potential
future responsibility for clean-up of off-site waste to GT. The district court thoroughly
analyzed the contract and applicable KDHE regulations and determined that neither
obligated GT to be responsible for clean-up of off-site waste created by a previous
landfill owner. We affirm the district court's denial of the declaratory judgment but for
reasons other than those articulated by the court. See Price v. Simmons, 31 Kan. App. 2d
631, Syl. ¶ 4, 71 P.3d 1164 (2002) ("A judgment of the district court may be affirmed on
appeal if it was right for any reason.").
A court may enter a declaratory judgment declaring "rights, status, and other legal
relations." K.S.A. 60-1701; see also K.S.A. 60-1704 (party may seek court order
interpreting and declaring contract rights); K.S.A. 60-1705 (court may act if actual or
threatened breach of contract). However, a declaratory judgment must also involve an
actual case or controversy. Solomon v. State, 303 Kan. 512, 520, 364 P.3d 536 (2015).
This requires a claim to be ripe for adjudication. 303 Kan. at 521. As an element of a
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court's subject-matter jurisdiction, a party or the court may raise ripeness concerns at any
time. KNEA v. State, 305 Kan. 739, 743, 387 P.3d 795 (2017).
Ripeness prevents courts from prematurely adjudicating disputes. 305 Kan. at 748.
To be ripe, an issue must have taken shape and be concrete. 305 Kan. at 748; see
Solomon, 303 Kan. at 521 (a claim must have "taken fixed and final shape rather than
remaining nebulous and contingent"); Woolums v. Simonsen, 214 Kan. 722, Syl. ¶ 5, 522
P.2d 1321 (1974) (unless necessary to determine a present right, courts will not decide
matters that are future, contingent, or uncertain). A claim is ripe when "'no additional
facts need to arise or be developed on the record.'" KNEA, 305 Kan. at 748 (quoting
Solomon, 303 Kan. at 522).
South Mulberry seeks to shield itself from liability in any future KDHE action to
avoid an obligation that the KDHE has not yet imposed—and might never impose. We
find the issue is not ripe and affirm the district court's denial of South Mulberry's request
for declaratory relief.
Affirmed in part, reversed in part, and remanded.
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