Louisville Mall Assocs., LP v. Wood Ctr. Props., LLC

• Citation: 361 S.W.3d 323,76 UCC Rep.Serv.2d 597
• Decision Date: 27 January 2012
• Docket Number: Nos. 2010–CA–000933–MR,2010–CA–001255–MR.,s. 2010–CA–000933–MR
• Parties: LOUISVILLE MALL ASSOCIATES, LP; Manchester Mall Associates, LP; Corbin Mall Associates, LP; Shepherdsville Mall Associates, LP; Fairlea Mall Associates, LP; and Robert M. Greene, Appellants, v. WOOD CENTER PROPERTIES, LLC, Appellee.
• Court: Court of Appeals of Kentucky

361 S.W.3d 323

76 UCC Rep.Serv.2d 597

LOUISVILLE MALL ASSOCIATES, LP; Manchester Mall Associates, LP; Corbin Mall Associates, LP; Shepherdsville Mall Associates, LP; Fairlea Mall Associates, LP; and Robert M. Greene, Appellants,

v.WOOD CENTER PROPERTIES, LLC, Appellee.

Nos. 2010–CA–000933–MR

2010–CA–001255–MR.

Court of Appeals of Kentucky.

Jan. 27, 2012.

Myrle L. Davis, Louisville, KY, for appellants.

Gregory P. Parsons, Laura M. Bennett, Lexington, KY, for appellee.

Before ACREE and STUMBO, Judges; LAMBERT,¹ Senior Judge.

OPINION

ACREE, Judge:

Appellants, Robert B. Greene (Greene) and Louisville Mall Associates, LP, Manchester Mall Associates, LP, Corbin Mall Associates, LP, Sheperdsville Mall Associates, LP, and Fairlea Mall Associates, LP (collectively, the “Mall Appellants”) ² bring these consolidated appeals from a judgment and two post-judgment orders of the Oldham Circuit Court. Greene first appeals from the circuit court's order granting appellee, Wood Center Properties (WCP), summary declaratory judgment claiming the circuit court erroneously interpreted the Letter of Credit at issue. We find no reversible error in the circuit court's rulings respecting this issue. In the second appeal, Greene first contends the circuit court improperly denied his motion pursuant to Kentucky Rules of Civil Procedure (CR) 60.02. We find Greene's CR 60.02 motion procedurally deficient and affirm the circuit court's first post-judgment order. Greene next asserts the circuit court improperly granted WCP's motion for attorney's fees. We agree and reverse the circuit court's second post-judgment order. Accordingly, we affirm in part and reverse in part, and remand for the entry of an order consistent with this opinion.

Facts and Procedure

In 2007, WCP entered into a Purchase and Sale Agreement whereby it agreed to purchase five shopping centers from the Mall Appellants. Greene is the principal owner of the Mall Appellants. While performing its due diligence, WCP discovered environmental contamination at the Crestwood Shopping Center, one of the shopping centers it intended to purchase. The contamination occurred when a prior shopping center tenant, Crestwood Coin Laundry (Tenant), spilled hazardous chemicals used in its dry cleaning business. As a result of the contamination, WCP chose not to purchase Crestwood Shopping Center, and the parties amended the Purchase and Sale Agreement to reflect WCP's decision.

Shortly thereafter, Greene offered to provide WCP with an irrevocable letter of credit, issued by M & T Bank, in the amount of $200,000.00 (Letter of Credit). The Letter of Credit's purpose was to insulate WCP from liability and fund the environmental cleanup if the Tenant failed to do so. With that inducement, the parties again amended the Purchase and Sale Agreement reinstating Crestwood Shopping Center as one of the properties being purchased by WCP (Third Amendment). Paragraph two of the Third Amendment provided:

At closing, Robert M. Greene, individually, shall deliver an irrevocable letter of credit for the benefit of Wood Center Properties, LLC in the amount of Two Hundred Thousand Dollars ($200,000.00) drawn on M & T Bank. This letter of credit shall extend for one (1) year from the date of Closing, and shall automatically renew for one (1) additional year unless Notice of non-renewal is given to [WCP] at least 60 days prior to the expiration date on the face of the Greene Letter of Credit.

This same paragraph also included specific draw terms, authorizing WCP to draw on the Letter of Credit only if, inter alia, the Tenant failed to “proceed with mitigation or regulatory compliance with respect to the contamination in a timely manner in the reasonable discretion of” WCP. However, if WCP chose to draw on the Letter of Credit, the Third Amendment expressly provided that the “amount payable under the [Letter of Credit] shall be equal to [WCP's] actual out-of-pocket costs for the environmental cleanup without consideration of [WCP's] administrative or legal expenses.”

On June 13, 2007, M & T Bank issued the Letter of Credit for the benefit of WCP. The Letter of Credit contained an original expiration date of June 12, 2008. However, it also provided:

It is a condition of this credit that it shall be deemed automatically extended without amendment for one (1) year from the expiration date hereof, or any future expiration date [emphasis added], unless sixty (60) days prior to any expiration date M & T Bank notifies [WCP] in writing that M & T Bank elects not to consider this credit renewed for any such additional period.

The Letter of Credit also included a choice-of-law provision, which specified: “[t]his Credit is subject to the International Standby Practices 1998 International Chamber of Commerce Publication No. 590 (the “ISP98”). ³ As to matters not governed by the ISP98, this Credit is subject to the laws of New York State as in effect from time to time.”

On April 7, 2008, M & T Bank automatically renewed the Letter of Credit for a second year, and provided WCP and Greene with a letter of renewal notifying them that the Letter of Credit's new expiration date was June 12, 2009. On March 6, 2009, M & T Bank sent a second renewal letter to WCP and Greene again giving notice that it was automatically extending the Letter of Credit for a third year and its new expiration date was June 12, 2010.

Immediately after receiving M & T Bank's March 6, 2009 letter, Greene expressed to M & T Bank his view that, based on the Third Amendment, the Letter of Credit was only valid for two years and should expire on June 12, 2009. Following several conversations between M & T Bank and Greene regarding the Letter of Credit's expiration date, Greene requested that M & T Bank not renew the credit. Despite Greene's request, M & T Bank failed to send a non-renewal letter to WCP.

On July 27, 2009, Greene contacted WCP claiming the Letter of Credit had expired on June 12, 2009, and requesting that it be returned. As a result of the controversy between WCP and Greene concerning the Letter of Credit's validity, on September 18, 2009, WCP filed a declaratory judgment action in Oldham Circuit Court requesting that the circuit court determine whether the Letter of Credit had been extended to June 12, 2010, and, if so, whether WCP was entitled to draw on the Letter of Credit. Shortly thereafter, WCP filed a motion for summary declaratory judgment on the grounds that the Letter of Credit, by its terms, unambiguously extended the Letter of Credit's expiration date until June 12, 2010, and, as a result, WCP was entitled to draw on the Letter of Credit. On April 19, 2010, the circuit court entered summary declaratory judgment in WCP's favor.

On May 4, 2010, Greene filed a motion pursuant to CR 60.02 claiming the circuit court mistakenly determined both that the Letter of Credit's expiration date had been extended to June 12, 2010, and that WCP was entitled to draw on the credit. Shortly thereafter, on May 7, 2010, Greene filed a motion to amend its answer to assert a counter-claim against WCP, and a motion to file a third-party complaint against M & T Bank. Further, on May 10, 2010, WCP filed a motion to recover attorney's fees pursuant to the Third Amendment.

While these motions were pending, Greene filed a timely notice of appeal from the circuit court's April 19, 2010 judgment.

On June 7, 2010, the circuit court granted Greene's motion to file a third-party complaint but denied his motion to amend, and granted WCP's motion for attorney's fees. Greene filed a separate notice of appeal from these orders. On August 16, 2010, this Court ordered the two appeals consolidated.

Issues on Appeal

In the first appeal, Greene takes issue with the circuit court's conclusion that WCP was entitled to summary declaratory judgment because the Letter of Credit's expiration date extended until June 12, 2010, and, as a result, WCP was entitled to draw on the credit. In his second appeal, Greene contends the circuit court erred in denying his request for CR 60.02 relief and improperly awarded WCP attorney's fees.

Summary Declaratory Judgment

When a trial court grants summary judgment, the court of appeals must determine “whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.1996). We examine the record “in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor.” Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky.1991). When reviewing a summary judgment order, only legal questions and the existence, or non existence, of material facts are considered. Lewis v. B & R Corp., 56 S.W.3d 432, 436 (Ky.App.2001).

A letter of credit is an agreement between a bank and a beneficiary, made at the request of an applicant, “to honor a documentary presentation by payment or delivery of an item of value.” Kentucky Revised Statute (KRS) 355.5–102(1)(j); N.Y. U.C.C. § 5–102(10). More simply, a letter of credit provides that an issuer, upon presentation of documents specified in the credit, will pay the beneficiary a designated sum of money or deliver to the beneficiary a particular item of value.

Letters of credit primarily fall into two broad categories: commercial letters of credit and standby letters of credit. See Nissho Iwai Europe PLC v. Korea First Bank, 99 N.Y.2d 115, 752 N.Y.S.2d 259, 782 N.E.2d 55, 58 (N.Y.2002). A commercial letter of credit is commonly utilized in sale-of-goods transactions as a substitute for money. Id. Instead of delivering the purchase price to the seller, the buyer furnishes a commercial letter of credit on which the seller can draw by delivering documentation that the goods have been shipped or the underlying contract with the buyer fulfilled. Jeffrey S. Wood, Drafting Letters of Credit:...