Alibro Holdings, LLC v. the Falls at Old Henry Condominium Council, Inc. ( 2020 )

RENDERED: NOVEMBER 20, 2020; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2018-CA-1020-MR
&
NO. 2018-CA-1064-MR
ALIBRO HOLDINGS, LLC APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE CHARLES L. CUNNINGHAM, JR., JUDGE
ACTION NO. 17-CI-003944
THE FALLS AT OLD HENRY
CONDOMINIUM COUNCIL, INC. APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
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BEFORE: DIXON, KRAMER, AND K. THOMPSON, JUDGES.
THOMPSON, K., JUDGE: The Falls at Old Henry Condominium Council, Inc.
(The Falls) filed this action against Alibro Holdings, LLC alleging that Alibro is a
developer and, therefore, responsible for the expense of top coating the roadways
serving condominium units built within The Falls’ condominium project and for
making infrastructure improvements within the project as required by the
Louisville Metro Planning Commission. Alibro argued that it was merely a builder
and had no obligations as a developer.
On cross-motions for summary judgment, the trial court ruled that
Alibro is the successor developer to The Falls condominium project and that if
Alibro proceeds with building and selling the remaining units, it must do so as a
developer and is required to maintain the roadways. However, the trial court ruled
that because of the passage of time between when Alibro constructed
condominiums within the condominium project and The Falls’ claim that Alibro
must pay for top coating the roadways, it would be inequitable to require Alibro to
pay for the top coating.
We affirm in part, reverse in part, and remand. Although we agree
with the trial court that Alibro cannot be forced to take on developer
responsibilities based upon building and selling four units, we disagree with the
trial court’s interpretation of why. The elapse of time and the failure of The Falls
to assert its rights is not what prevents Alibro from being forced to assume
developer responsibilities. Instead, Alibro was never a developer because Central
Bank could not convey such rights and responsibilities to Alibro when they had
already expired. Under the terms of the master deed the developer rights and
responsibilities expired five years from the date of the recording and the
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undeveloped land had reverted to The Falls. As The Falls has objected to Alibro
building new units without taking on developer responsibilities and Alibro is not a
developer under the master deed, we disagree that the trial court could impose such
responsibilities on Alibro going forward. If Alibro wishes to construct further
condominiums on this site, it will be up to The Falls and Alibro to negotiate the
terms of their relationship.
In December 2007, The Falls’ condominium project was commenced
by the developer of the project, The Ridge I, LLC. The lender for the project was
Central Bank of Jefferson County. The Ridge prepared a master deed and
declaration of condominium project regime that was recorded in the office of the
Jefferson County Clerk on December 13, 2007. Pursuant to the master deed,
twelve condominium units and certain common elements were dedicated and
described with the Ridge having the right to construct more units in the future. It
was contemplated that thirty-seven units would be built.
Pursuant to the master deed, the Ridge conveyed the land referred to
as “Tract 3” to The Falls on December 12, 2007, shifting ownership of Tract 3
from the Ridge to The Falls. At that point, the Ridge only held the developer
rights to build the remaining units in the condominium project.
Pursuant to Article II, Section 2.3 of the master deed, the common
elements of the condominium regime are owned in common, appurtenant to each
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unit’s percentage of common interest that “shall not be altered without the
acquiescence of the Owners representing all Units in the Regime.” Article II,
Section 2.4(d) of the master deed provides in part under the heading “Expandable
Regime” that the initial condominium regime was expandable under the following
terms:
Developer hereby reserved for itself, its successors and
assigns, for a period of five years from the date of the
recording this Declaration, the right to execute on behalf
of all contract purchasers, Unit Owners, mortgagees or
other lien holders, or other parties claiming a legal or
equitable interest in the Regime, any amendment,
agreement or supplement that may be required to expand
the Regime and to add additional real estate to the
Regime . . . Developer, for itself, and for its successors
and assigns, reserves an interest in any real estate,
including the Regime and each Unit, for these purposes.
This interest is reserved by Developer and the power of
attorney hereby granted by each interest holder includes
the right to amend the definition of “Property” to reflect
the additional real estate made part of the Regime and to
amend the percentage of common interest appurtenant to
each Unit and otherwise to amend this Declaration to
supplement the floor plans to accomplish the expansion
of the Regime, as contemplated by this section.
Article VI, Section 6.2 provides time restrictions regarding the administration of
the condominium regime stating:
The administration of the Regime . . . is vested in the
Developer until (i) 120 days from the date at least 95% of
the Units contemplated for the Regime have been
conveyed to third parties; (ii) until the Developer elects
to surrender this power to the Unit owners; or (iii) until
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five years after the date this Declaration is recorded,
whichever occurs first.
Article VI, Section 6.3(a) explains that in administration of the
regime, the developer has the duty to maintain, repair and replace all
improvements in common elements. Article I, Section 1.2 defines “common
elements” as including in (d) roadways. Article VII, Section 7.2 empowers the
council to make assessments against units to defray the costs associated with
maintaining the common elements. Article XI, Section 11.2 states:
this Declaration may be amended from time to time by a
majority of the Unit owners, effective only upon
recording of the signed instrument setting forth the
amendment. In addition, during Developer’s period of
control of the Regime, as set forth in section 6.2 of this
Declaration, Developer may make such clarifying or
correction amendments as are appropriate for or required
by FHLMC, FNMA, HUD, FHA, VA or other similar
program or secondary market lender or insurance.
The Ridge built thirty units before it had financial trouble in October
2011. Although Tract 3 had been conveyed to The Falls in December 2007 as a
common element, on October 19, 2011, the Ridge attempted to convey Tract 3
(certain identified condominium units were excepted) in a deed in lieu of
foreclosure to Central Bank. On March 27, 2012, through a reservation of special
declarant rights under the master deed, Central Bank was purported to have gained
the Ridge’s developer rights. On June 19, 2013, Central Bank executed a special
warranty deed, excepting the identified condominium units which had been
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previously built and sold, that purported to convey the underlying land contained in
Tract 3 to Alibro for $240,000.
In 2015, Alibro constructed four condominium units on Tract 3. On
August 3, 2015, Alibro executed and recorded a seventh amendment1 to the master
deed that was recorded in the Jefferson County Clerk’s office. In that document,
Alibro is identified as the successor developer. Specifically, the seventh
amendment states:
Pursuant to Section 2.4 of the Declaration, the
Developer reserved for itself and on behalf of any Unit
owners and mortgagees in the Regime, the right to
expand the Regime by creating additional units as part of
the Regime.
NOW THEREFORE, pursuant to its powers
reserved in the Declaration, the Successor Developer
hereby amends the Declaration to create certain
additional Units as part of the Regime as follows:
The seventh amendment identifies the units built by Alibro as the successor
developer to be included as part of the Regime.
An undated letter from The Falls’ board of directors indicates that The
Falls became aware that the developer rights under the master deed expired on
December 12, 2012. This letter was written sometime after the construction of the
four units by Alibro. However, during the construction of those units, there is no
1
The record does not contain any previous amendments to the master deed.
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evidence that Alibro or The Falls questioned Alibro’s authority to build the units
on Tract 3.
The four condominium units built by Alibro were sold by Alibro.
Two units were conveyed in August 2015, one in December 2015, and one in
August 2016.
This dispute arose after Alibro constructed and sold those four units
and sought to construct the remaining units on Tract 3. Alibro maintained that it
was a builder, not a developer, and it had no obligation to top coat the roadways
and make infrastructure improvements to the condominium project. This would
leave The Falls responsible for making these improvements. Despite that it
declared itself to be a successor developer in the seventh amendment to the master
deed and sold the additional units, Alibro argues the developer rights expired
before the property was conveyed to it.
On July 27, 2017, The Falls filed a verified petition for declaration of
rights pursuant to Kentucky Revised Statutes (KRS) 418.005 requesting that Alibro
be named the successor developer, that Alibro be required to finalize the
completion of the roads and infrastructure improvement, and to quiet title as to The
Falls’ exclusive right, title, ownership, possession, control, and use of the Tract 3
parcel of land. Alibro filed a response and counter-claim alleging that it was not
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the successor developer and not responsible for top coating the roadways and
infrastructure improvements.
Alibro filed a motion for summary judgment and The Falls responded
with a motion for summary judgment. During the hearing on summary judgment,
Alibro argued it was only a builder because the developer responsibilities had
expired before it received the property from Central Bank. Alibro argued it
inequitable for it to be forced to pay for top coating the roads when it had only
built four units rather than the twenty-four units that the Ridge built, and it would
cost around $35,000 to top coat the roads.
The Falls argued that it was unjust to allow Alibro to build and make
money but not finish the development, explaining Alibro only had the right to
build as a developer, and it took on the role of the developer when it built and in
taking on that role it assumed certain obligations. The Falls argued that as the
common owner it could sell off the raw land rather than allow it to be developed,
but it had attempted to negotiate with Alibro.
The trial court questioned whether it would really be unjust, where
most of the common elements were completed by the last developer, to require
Alibro to top coat the road as that was almost the last step and Alibro had profited
by constructing and selling the units. Alibro admitted that each unit had sold for
between $350,000 and $450,000 but did not disclose how much of that was profit.
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The trial court also noted that the privilege for building these units
was paid to Central Bank and not The Falls, which only received the advantage
that the additional units would then be responsible for paying fees to the
association. The trial court questioned whether Alibro could buy the right to build
without also assuming the obligations of a developer, noting that if all rights
reverted to The Falls then Alibro had no right to build.
In its written opinion, the trial court concluded that Alibro could not
purchase from Central Bank simply the right to build condominiums without
regard to the obligation of a developer to pay for those expenditures required to be
paid by the developer. However, the trial court found it would be inequitable to
require payment by Alibro of those expenses because of the lapse of time after the
existing condominiums were built and when The Falls sought to hold Alibro
responsible for those expenses. Finally, the trial court ruled that if Alibro chooses
to proceed with building and selling the remaining units, it must do so as a
developer and provide all items the developer would provide, including top coating
the roadways. The trial court designated its opinion as being final and appealable.
Alibro appealed and The Falls cross-appealed.
When a trial court grants a motion for summary judgment,
the standard of review for the appellate court is de novo because only legal issues
are involved. Hallahan v. The Courier-Journal, 138 S.W.3d 699, 705 (Ky.App.
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2004). Summary judgment is appropriate where “the pleadings, depositions,
answers to interrogatories, stipulations, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” Kentucky
Rules of Civil Procedure (CR) 56.03. Although the movant bears the initial burden
of demonstrating that there is no genuine issue of material fact in dispute, the party
opposing the motion then has the burden to present “at least some affirmative
evidence showing that there is a genuine issue of material fact for trial.” Steelvest,
Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991) (citations
omitted). “If the summary judgment is sustainable on any basis, it must be
affirmed.” Fischer v. Fischer, 197 S.W.3d 98, 103 (Ky. 2006). We agree that
these matters were appropriate for summary judgment as the facts are undisputed
and it is only how the law applies to the facts that is in issue.
The interpretation of a contract, including whether it is ambiguous, is
a question of law. Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 105 (Ky. 2003).
“In the absence of ambiguity[,] a written instrument will be enforced strictly
according to its terms.” O’Bryan v. Massey-Ferguson, Inc., 413 S.W.2d 891, 893
(Ky. 1966). “In determining the proper interpretation of a deed, we look to the
intentions of the parties which we deduce from the four corners of the instrument.”
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Villas at Woodson Bend Condominium Ass’n, Inc. v. South Fork Development,
Inc., 387 S.W.3d 352, 357 (Ky.App. 2012).
Alibro argues that it is not a developer because the developer rights
had expired when Central Bank purported to assign those same rights to Alibro.
Alibro relies on the general rule that an assignee can only receive those rights the
assignor has to assign. Whayne Supply Co. v. Morgan Const. Co., 440 S.W.2d
779, 782-83 (Ky. 1969).
The master deed is not ambiguous. Specific time limits were set out
in it as to when developer rights were retained and when the property became
solely owned by The Falls. Alibro did not acquire the right to build on Tract 3
until more than six months had passed after the expiration of the time limitations
set out in both Article II, Section 2.4(d) and Article VI, Section 6.2(iii). Compare
with Villas at Woodson Bend Condominium Ass’n, Inc., 387 S.W.3d at 359
(interpreting a master deed and explaining that a four-year marketing interval did
not restrict the developer to completing construction of the contemplated units to
that period of time).
Although The Falls attempts to rely upon the seventh amendment,
arguing that Alibro thereby assumed both the rights and responsibilities of a
developer, the seventh amendment was recorded beyond the time limitations set
forth in the original developer’s master deed and there is no indication that any
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previous amendments could or did extend these time limitations. No matter
Alibro’s actions in designating itself as a successor developer, this designation on
its own could not serve to revive expired developer rights. Although The Falls
acceded to allowing Alibro to build additional condominiums in Tract 3, this action
did not make Alibro a “developer” thereby responsible for top coating the
roadways and making infrastructure improvements. See S.W. Bardill, Inc. v. Bird,
346 S.W.2d 25, 26-27 (Ky. 1961) (explaining that assignees’ royalty interest in an
oil and gas lease which ended through a lapse of time could not thereafter receive
royalties from new lessees under a new lease because the assignees’ rights were
extinguished when the lease lapsed and those rights were not revived by the new
lease).
The master deed also unambiguously does not support Alibro’s
position that it has rights as a builder. Alibro has identified nothing in the master
deed which would allow the assignment from Central Bank to imbue it with the
right to build and sell units. Essentially, Central Bank’s assignment of the property
to Alibro after the five-year period was ineffective to convey any rights to Alibro
either as a developer or a builder because all rights to the property reverted to The
Falls prior to this time. Therefore, Alibro had no right to build or sell those units,
but it also had no responsibilities as a developer to complete common elements.
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Once Alibro started to build, the Falls could have sought an injunction
against Alibro and sought to quiet title. However, The Falls took no action at that
time.
The Falls is not now disputing that Alibro had the right to construct
the four units or sell them; instead it is asserting that because Alibro acted as a
developer, it now has the obligations of a developer. Therefore, we will not
address whether or not The Falls currently has any recourse against Alibro for its
building and selling of the four units as that issue is not before us.
We disagree with the trial court that Alibro has any right to build the
remaining units and that by doing so it would thereby assume developer
responsibilities now that it knows what The Falls’ expectations are. Just as Alibro
could not succeed to the rights and responsibilities of a developer before, it cannot
do so now. Should Alibro wish to build these units, it must negotiate with The
Falls as the property owner to do so. The association can amend the master deed to
allow for further development. Based upon the letter in the record, it appears that
The Falls was willing at one point to negotiate for such an outcome if Alibro was
willing to take on developer responsibilities. We also offer no opinion as to
whether Alibro has any recourse against Central Bank for selling it property that it
no longer had any right to develop or build upon, as that issue and potential party is
not before us.
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Accordingly, we affirm the Jefferson Circuit Court’s opinion to the
extent that it rules that Alibro is not obligated to fulfill developer responsibilities
after completing and selling the four units. We reverse and remand the portion of
the Jefferson Circuit Court’s opinion ruling that Alibro has the status of a
developer under the master deed and the right to build the outstanding three units if
it assumes responsibility as a developer.
ALL CONCUR.
BRIEF FOR APPELLANT/CROSS- BRIEF FOR APPELLEE/CROSS-
APPELLEE: APPELLANT:
Mark J. Sandlin Richard Hornung
Louisville, Kentucky Louisville, Kentucky
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