Pierson Lakes Homeowners Ass'n, Inc. v. Pierson Project (In re Pierson Lakes Homeowners Ass'n, Inc.)

• Decision Date: 14 January 2022
• Docket Number: Case No. 18-22463 (RDD),Adv. Pro. No. 19-08251 (RDD)
• Citation: 636 B.R. 574
• Parties: IN RE: PIERSON LAKES HOMEOWNERS ASSOCIATION, INC., Reorganized Debtor. Pierson Lakes Homeowners Association, Inc., Plaintiff v. Pierson Project, L.L.C., Potake Lake, L.L.C., and Rock Hill, L.L.C. d/b/a Rock Hill Project, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

636 B.R. 574

IN RE: PIERSON LAKES HOMEOWNERS ASSOCIATION, INC., Reorganized Debtor.

Pierson Lakes Homeowners Association, Inc., Plaintiff

v.Pierson Project, L.L.C., Potake Lake, L.L.C., and Rock Hill, L.L.C. d/b/a Rock Hill Project, Defendants.

Case No. 18-22463 (RDD)

Adv. Pro. No. 19-08251 (RDD)

United States Bankruptcy Court, S.D. New York.

Signed January 14, 2022

KELLEY DRYE & WARREN LLP by William S. Gyves, Esq., Randall L. Morrison, Jr., Esq., New York, and Robert N. Ward, Esq., for Plaintiff Pierson Lakes Homeowners Association, Inc.

MONTALBANO, CONDON & FRANK, P.C. by Richard H. Sarajian, Esq., New City, for Defendants Pierson Project L.L.C., Potake Lake L.L.C., and Rock Hill L.L.C. d/b/a Rock Hill Project.

MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT

Hon. Robert D. Drain, United States Bankruptcy Judge

This is a dispute over responsibility for maintaining a causeway (the "Causeway"), including a road on it, that crosses Cranberry Lake, which in turn is located in a residential development in Sloatsburg, New York. Defendants Pierson Project, L.L.C., Potake Lake, L.L.C., and Rock Hill, L.L.C. d/b/a Rock Hill Project (collectively, the "Sponsors") contend that because the Causeway was included in a parcel of land that they conveyed to plaintiff and reorganized debtor herein, Pierson Lakes Homeowners Association ("PLHA"), the PLHA has the maintenance responsibility and, in any event separately assumed that responsibility in a 2004 agreement. The PLHA denies that the Causeway has been transferred to it and further contends that under the parties’ agreements the Sponsors still have the maintenance responsibility even if the Causeway was previously transferred to it.

The parties submitted cross-motions for summary judgment on these issues, and this Memorandum of Decision explains the Court's reasons for (a) granting summary judgment to the Sponsors insofar as they seek a declaration that PLHA owns the Causeway and the road on it, (b) granting summary judgment to the Sponsors insofar as they seek a declaration that PLHA undertook responsibility for maintaining the Causeway under the parties’ 2004 agreement, and (c) granting summary judgment to the PLHA insofar as it seeks a declaration that Potake Lake, L.L.C. must cause the road on the Causeway to be brought to a proper standard before shifting the maintenance burden regarding the road to the PLHA, which in any event will not occur until the first lot in the phase of the development where the Causeway is located is sold.¹ To the extent that the parties make contrary arguments in their motions for summary judgment, the motions for summary judgment are denied with prejudice.

Procedural Background

On April 19, 2019, the PLHA filed an adversary complaint against the Sponsors seeking a declaratory judgment as to (i) ownership of the Causeway and (ii) whether the maintenance, repair, and any required improvements of the Causeway and the road on it are the responsibility of the PLHA or the Sponsors.² After the Sponsors answered the complaint,³ the parties submitted cross-motions for summary judgment,⁴ their respective objections to the cross-motions,⁵ and their respective replies.⁶ After hearing initial oral argument,⁷ the Court directed the parties to file supplemental briefs on certain issues. Having reviewed the parties’ supplemental briefs⁸ and replies,⁹ the Court again heard oral argument¹⁰ and again directed the parties to file supplemental briefs on certain new issues that those briefs and the argument raised. The parties submitted their second supplemental briefs,¹¹ and the Court heard final oral argument,¹² after which counsel for PLHA filed a letter confirming the parties agreed answer to the Court's question about the subdivision map addressed during that argument.¹³

Jurisdiction

The Court has jurisdiction over this dispute under 28 U.S.C. §§ 157(a) - (b) and 1334(b). In their settlement of PLHA's objection to the Sponsors’ claims in this chapter 11 case, which comprised a core proceeding under 28 U.S.C. § 157(b)(2)(B) that was central to the confirmed chapter 11 plan, the parties reserved this adversary proceeding, which they were not able to settle as part of that claims dispute, for the Court's determination. They did so under the plan and plan confirmation order,¹⁴ and therefore the Court has post-confirmation jurisdiction and can decide the dispute under the U.S. Constitution by a final order.¹⁵

Standards for Declaratory Judgment and Summary Judgment

A. The Declaratory Judgment Act

Under the Declaratory Judgment Act, courts may issue a declaratory judgment only "[i]n a case of actual controversy."¹⁶ "[T]he phrase ‘case of actual controversy’ in the Act refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III" of the U.S. Constitution.¹⁷ The question to be asked "is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."¹⁸ The dispute must be " ‘definite and concrete, touching the legal relations of parties having adverse legal interests’; and that it be ‘real and substantial’ and ‘admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.’ "¹⁹

The parties agree, and the Court determines, that their Causeway/road dispute is sufficiently fixed and final to provide the basis for a judicial declaration of the parties’ rights and obligations.

B. Summary Judgment

Fed. R. Civ. P. 56(a), as made applicable to adversary proceedings by Fed. R. Bankr. P. 7056, states that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A fact is material if it "might affect the outcome of the suit under the governing law."²⁰

The movant has the initial burden of establishing the absence of any genuine issue of material fact.²¹ In response, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts."²² "Conclusory allegations will not suffice to create a genuine issue."²³ Instead, "the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment."²⁴ But then the Court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments."²⁵ If facts are subject to legitimate dispute, they are construed in favor of the non-moving party.²⁶ Of course, if the parties do not dispute the material facts and instead disagree on the outcome based on the applicable law, the matter is appropriate for summary judgment.²⁷

"If there are cross-motions for summary judgment, the Court must assess each of the motions and determine whether either party is entitled to judgment as a matter of law."²⁸ "[W]hen both sides move for summary judgment, neither side is barred from asserting that there are issues of fact, sufficient to prevent the entry of judgment, as a matter of law, against it. When faced with cross-motions for summary judgment, a ... court is not required to grant judgment as a matter of law for one side or the other."²⁹ Rather, the Court must "evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration."³⁰

Discussion

The parties rely primarily on their written agreements, including their deed and the incorporated subdivision map memorializing them, and rightly so. Under New York law, which governs here, the "fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties’ intent,’ and the best evidence of what parties to a written agreement intend is what they say in their writing. A court's fundamental objective in interpreting a contract is to determine the parties’ intent from the language employed and to fulfill their reasonable expectations. Where the terms of a contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving a practical interpretation to the language employed and reading the contract as a whole."³¹ "[A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. Extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide. A contract is unambiguous if the language it uses has a definite and precise meaning unattended by danger of misconception in the purport of the [agreement] itself and concerning which there is no reasonable basis for a difference of opinion."³²

The starting point for construing a deed is § 240(3) of the New York Real Property Law, which similarly provides

Every instrument creating, transferring, assigning, or surrendering an estate or interest in real property must be construed according to the intent of the parties, so far as such intent can be gathered from the whole instrument and is consistent with the rules of law.³³

"The construction of deeds generally presents a question of law for the court to decide, and deeds must be construed according to the intent of the parties, so far as such intent can be gathered from the whole instrument, and is consistent with the rules of law."³⁴ "The ‘intent’ at issue is the objective intent of the parties manifested by the language of the deed; unless the deed is ambiguous, evidence of unexpressed, subjective intentions of the parties is irrelevant."³⁵ "It is only when language...