City of Bowling Green v. Cnty. of Butler

• Decision Date: 09 November 2017
• Docket Number: NO. 2015-CA-001534-MR,2015-CA-001534-MR
• Parties: CITY OF BOWLING GREEN APPELLANT v. COUNTY OF BUTLER AND CITY OF MORGANTOWN APPELLEES
• Court: Kentucky Court of Appeals

CITY OF BOWLING GREEN APPELLANT v. COUNTY OF BUTLER AND CITY OF MORGANTOWN APPELLEES

NO. 2015-CA-001534-MR

Commonwealth of Kentucky Court of Appeals

NOVEMBER 9, 2017

NOT TO BE PUBLISHED

APPEAL FROM BUTLER CIRCUIT COURT

HONORABLE RONNIE C. DORTCH, JUDGE

ACTION NO. 14-CI-00103

OPINION

REVERSING AND REMANDING

** ** ** ** **

BEFORE: DIXON, J. LAMBERT, AND NICKELL, JUDGES.

NICKELL, JUDGE: In this declaration of rights case, the City of Bowling Green (Bowling Green) challenges an order entered by the Butler Circuit Court preventing the sale of a portion of acreage it owns in Butler County (County). The trial court determined Bowling Green cannot subdivide or sell any portion of the 256-acre parcel—part of which was used as a landfill—until all regulatory and environmental agencies release the entire parcel from all closure activities and maintenance obligations. Additionally, the trial court found any notice Bowling Green had sent to County or to its county seat, the City of Morgantown (Morgantown), attempting to trigger a 180-day purchase option reflected in a Solid Waste Landfill Agreement (Agreement) is ineffective until all government requirements have been satisfied.

Relevant provisions of the Agreement read as follows:

1. Bowling Green shall apply for and take whatever action may be necessary to properly attempt to obtain a solid waste landfill construction permit and operational permit from the Kentucky Department for Natural Resources and Environmental Protection in its name and at its cost, to be located upon the above-described 256 acre William's tract in Butler County, Kentucky.

. . .

3. In the event that its said application is approved, Bowling Green shall maintain and properly operate the said solid waste landfill in compliance with all state and federal regulations and laws pertaining thereto.

. . .

12. This agreement shall remain in force and effect indefinitely and for so long as Bowling Green uses any portion of the subject 256 acre tract for a solid waste landfill disposal site; provided however, this agreement may be terminated by Bowling Green upon sixty (60) days written notice to the other parties hereto, in the event that it should ever determine within its sole discretion to discontinue using subject real estate for a solid waste landfill disposal site.

13. In the event Bowling Green terminates this agreement as set out in paragraph 12, Morgantown, and Butler County shall thereafter have the first option to purchase the subject 255¹ acre tract from Bowling Green for a period of 180 days at a cash price equal to the fair market value of said tract at that time.

Upon review of the record, the briefs and the law, and in the absence of any contract ambiguity, we hold the trial court did not interpret the Agreement based solely on the four corners of the document as required by Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003), and Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384-85 (Ky. App. 2002). Further, the trial court read requirements into the Agreement not adopted by the parties. Therefore, we reverse and remand for further proceedings consistent with this Opinion.

FACTS

In 1977, County, Morgantown, and Bowling Green executed an Agreement allowing Bowling Green to establish a landfill on a 256-acre parcel² situated inside County. The landfill, which did not consume the entire tract, operated from 1978 until the late 1990's when solid waste was no longer accepted at the site and the closure process began. It appears Bowling Green is maintaining the site during the closure process and complying with all government regulations. Bowling Green has given no indication it seeks to abandon responsibilities associated with landfill closure or post-closure maintenance.

Around 2008, Bowling Green began negotiating with Owl's Head Alloys, Inc., a secondary aluminum recycler, for the sale of some—but not all—of the 256-acre parcel. In late 2013, a deal was finally reached for Bowling Green's sale of sixty-seven acres to Owl's Head, on which the company planned to dispose of salt cake, an aluminum processing waste product. None of the land in the prospective sale is within the landfill operation, nor has it ever been used as a landfill.

By letter dated August 26, 2013, Bowling Green notified Morgantown and County of the pending sale, indicating it had agreed to sell Owl's Head sixty-seven acres at $2,500 per acre for a total of $167,500. As part of the sale, Owl's Head would share the cost of a survey and Bowling Green would retain timber rights and easements. County and Morgantown were offered the opportunity to purchase the sixty-seven acres on the terms negotiated with Owl's Head. County responded the August letter was flawed because it failed to state Bowling Green's intention to terminate the Agreement as required by Paragraph 12 of the Agreement.

The August letter was superceded by a letter dated December 2, 2013, in which Bowling Green notified County and Morgantown it was terminating the Agreement and their 180-day purchase option period for the entire 256-acre parcel was running. Accompanying the December letter was Municipal Order No. 2013-126 in which Bowling Green formally discontinued use of the property as a solid waste landfill disposal site, declared a portion of the 256-acre parcel to be surplus,approved its sale, and gave the sixty- and 180-day notices required by the 1977 Agreement. Neither Morgantown nor County exercised the purchase option within the 180-day window.

County sought input from the Division of Waste Management (DWM) on whether sale of the sixty-seven acres was permissible. By letter dated March 27, 2014, the state responded closure of the landfill will span "several years" and responsibilities will continue once closure is completed. DWM specifically wrote,

DWM cannot determine what maintenance obligations will remain at the Butler County Landfill until closure work is complete. The City of Bowling Green has not indicated it intends to sell the portion of the landfill where closure work is occurring, or that it is trying to abandon the facility. Once the landfill is closed, the City of Bowling Green will be required to file a deed notice in the chain of title notifying future purchasers of the waste disposal activities. Thus, currently the City of Bowling Green will be the entity that has the responsibility to maintain the closed landfill in accordance with Kentucky law after closure, and any subsequent purchaser will be notified those obligations exist.

The DWM letter went on to say:

[b]ecause the tract proposed for sale was never used for waste disposal purposes, the new property boundary will be further than 100 feet from the closed waste disposal areas, and the sale likely will not impact activities being overseen by DWM, the DWM has no objections to the proposed sale.

DWM was not asked to comment on whether sale of the entire 256-acre parcel was permissible.

On May 30, 2014, (before the 180-day first purchase option expired), County filed a complaint against Bowling Green and Morgantown seeking a Declaration of Rights under KRS³ 418.040 et. seq. At the same time, County moved for a temporary injunction to halt the proposed sale to Owl's Head and preserve the status quo.

In the complaint, County argued Bowling Green cannot terminate the Agreement until the entire parcel is released from government regulatory control;⁴ Bowling Green cannot give effective notice triggering the 180-day first purchase option until it obtains full release from all government regulation; and, Bowling Green cannot subdivide the 256-acre parcel and sell a portion of it because neither County nor Morgantown could then purchase the full 256 acres.

Morgantown admitted the entirety of the complaint in its answer and included a cross-claim against Bowling Green arguing the Agreement does not allow sale of the 256 acres in parcels, nor does it state the method for determining fair market value. Bowling Green timely answered the complaint, primarily arguing dismissal was appropriate because neither County nor Morgantown had exercised the option to purchase the land within the 180-day window. As for the cross-claim, Bowling Green argued the terms of the Agreement speak for themselves and Morgantown failed to state a claim on which relief could be given.

Following a hearing, the trial court denied County's request for a temporary injunction due to no showing of immediate and irreparable injury, loss or damage, and ordered all three parties to maintain the status quo and mediate the dispute. When mediation failed, Bowling Green moved for a status conference to return the matter to the active docket.

On February 2, 2015, stipulations—agreed to by all three parties—were filed. One of those stipulations says Bowling Green is responsible to DWM "for all environmental closure compliance related to the solid waste landfill disposal site, and acknowledges that continuing responsibility." Another stipulation says County sought guidance from DWM on whether the sale to Owl's Head was permissible. DWM's response was attached to the stipulations.

On September 18, 2015, the trial court entered a nine-page order concluding Bowling Green cannot terminate the Agreement until the entire 256-acre parcel "is released by all federal, state, and local environmental and regulatory agencies[;]" any notice Bowling Green sent to County and/or Morgantown attempting to trigger the 180-day first purchase option is ineffective until Bowling Green "has complied with all state and federal requirements[;]" and, Bowling Green "has no right to subdivide the 256 acres and to sell the same under the terms and conditions of the Solid Waste Landfill Agreement." Bowling Green timely appealed. With the foregoing in mind, we consider the trial court's decision.

ANALYSIS

The primary object in construing [an] . . . agreement is to effectuate the intentions of the parties. See Withers v. Commonwealth, Department of

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