Russell v. Treanor Invs.

• Decision Date: 26 June 2020
• Docket Number: No. 117,973,117,973
• Parties: Brian RUSSELL and Brent Flanders, Trustee of the Brent Eugene Flanders and Lisa Anne Flanders Revocable Family Trust, Appellants, v. TREANOR INVESTMENTS L.L.C. and 8th & New Hampshire L.L.C., Appellees.
• Court: Kansas Supreme Court

466 P.3d 481

Brian RUSSELL and Brent Flanders, Trustee of the Brent Eugene Flanders and Lisa Anne Flanders Revocable Family Trust, Appellants,

v.TREANOR INVESTMENTS L.L.C. and 8th & New Hampshire L.L.C., Appellees.

No. 117,973

Supreme Court of Kansas.

Opinion filed June 26, 2020.

Brian P. Russell, appellant pro se, argued the cause and was on the briefs.

Todd N. Thompson, of Thompson Warner, P.A., of Lawrence, argued the cause, and Sarah E. Warner, of the same firm, was with him on the briefs for appellee Treanor Investments, L.L.C.

Mark T. Emert, of Fagan Emert & Davis, L.L.C., of Lawrence, argued the cause and Brennan P. Fagan, of the same firm, was with him on the briefs for appellee 8th & New Hampshire, LLC.

Per Curiam:

In this appeal, a condominium owner challenges construction plans for a downtown Lawrence development, claiming the proposed project violates the development's recorded size and use restrictions existing when the owner purchased his unit. He claims his consent is required before those changes occur. The district court and a Court of Appeals panel determined the changes could be made without his approval. See Russell v. Treanor Investments, L.L.C. , No. 117,973, 2018 WL 2374094 (Kan. App. 2018) (unpublished opinion). We agree and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In 1997, the owner of two adjacent properties in Lawrence bounded by 7th, 8th, New Hampshire, and Vermont Streets executed and recorded an "Operation and Easement Agreement." This document was part of the owner's effort to develop the two properties into an integrated retail shopping, restaurant, and office complex. The OEA restricted the building footprints and prohibited either property from being occupied or used for the "sale of groceries for off-premises consumption as a primary use, except for a gourmet food market."

The OEA refers collectively to the two properties as the "Shopping Center." Individually, they are identified as the "Borders Parcel" and the "Development Parcel." The OEA defines "Owner" as the "Declarant and its respective successors and assigns who become owners or lessees of the entirety of any one of the Parcels forming the Shopping Center." It defines "Parcel" as "either the Borders Parcel or the Development Parcel."

The OEA supplied instructions for amending it. Its subsection 6.11 states: "This OEA may be amended by, and only by, a written agreement signed by all of the then current Owners and shall be effective only when recorded in the Recording Office." And it contemplated in subsection 2.4 the future divisions of ownership within the original two parcels, as follows:

"2.4 Subdivisions of Parcel. If any Parcel is hereinafter divided into two (2) or more parcels by separation of Owners, lease, or otherwise, then any resulting parcels shall enjoy and be subject to the benefits and burdens of the easement and all other terms and conditions of this OEA; provided, however, that if any such Owner shall transfer, convey or ground lease its interest in any portion of a Parcel in such a manner as to create multiple Owners of a Parcel, then such multiple Owners shall designate one of their number [to] act on behalf of all such Owners in the performance of the provisions of this OEA . Any such designation shall be in writing, duly executed and acknowledged by all multiple Owners of a Parcel (including the Owner so designated), and recorded with the Recording Office. ... In the absence of any such written, recorded and mailed designation, the Owner of the largest sub-parcel of any such divided Parcel shall be the responsible Owner ." (Emphases added.)

In 2003, fee ownership of the Development Parcel and Borders Parcel split when defendant 8th & New Hampshire, L.L.C., acquired the Development Parcel. After that, 8th & New Hampshire and the Borders Parcel's Owners executed a "First Amendment to Operation and Easement Agreement."

The First Amendment altered the Development Parcel's original site plan for the required parking spaces and building location, size, and maximum height. It also provided:

"2. Article II, Subsection 2.4. Pursuant to the terms of Article II, subsection 2.4 of the OEA, 8th & New Hampshire hereby designates itself as the representative Owner of the Development Parcel, and except as set forth in this section, 8th & New Hampshire shall continue as such designated representative Owner for so long as 8th & New Hampshire shall own any part of the Development Parcel, in whole or in part, and as such 8th & New Hampshire shall be the Owner to act on behalf of all other Owners of the Development Parcel, until such time as 8th & New Hampshire shall convey all of its right, title and interest in and to the Development Parcel to third parties following which time the Owner or Owners of the Development Parcel shall designate a new representative Owner pursuant to the terms of Article II, subsection 2.4 of the OEA . Notwithstanding the foregoing to the contrary, 8th & New Hampshire may resign as such designated representative at any time, even if it owns any part of the Development Parcel, so long as a condominium association, to be known as Hobbs Taylor Lofts Association, Inc., formed as a legal entity for the association of condominium owners for the Development Parcel, becomes the designated representative in place of 8th & New Hampshire." (Emphasis added.)

The First Amendment enabled 8th & New Hampshire to build a multi-unit building with condominiums and retail space. In 2010, Brian Russell bought a unit in the building.

In 2015, Treanor Investments, L.L.C., acquired the Borders Parcel. Treanor now wants to construct a building that will exceed the OEA's footprint restriction and contain a grocery store. All parties agree these changes require amendments to the OEA.

Russell filed this lawsuit, arguing the OEA could not be amended without condominium owner consent. He sought an injunction barring Treanor's proposed grocery store redevelopment and any attempts to amend the OEA without condominium owner consent. Brent E. Flanders and Lisa A. Flanders, who also owned a unit, originally joined Russell in this lawsuit, but later conveyed their property to a revocable family trust, which did not seek this court's review of the panel's decision.

Treanor advises the trust sold its unit in 2018. For simplicity, we refer only to Russell.

In the district court, Treanor and 8th & New Hampshire counterclaimed to have the court declare 8th & New Hampshire's role as "responsible Owner" (the term used in the original OEA's subsection 2.4) to permit it to consent to OEA amendments on the condominium owners' behalf. The parties filed competing motions for summary judgment.

The district court agreed with Treanor and 8th & New Hampshire. It concluded both were "Owners" as defined by the OEA because each owned an entire Parcel at one time. It next concluded the First Amendment effectively designated 8th & New Hampshire as the Development Parcel's "responsible Owner." Finally, it determined the responsible Owner's authority to act on behalf of other Development Parcel owners included consenting to OEA amendments. The court gave several reasons for its rulings.

First, it said, the First Amendment conveyed the ability to act on the other owners' behalf, which implied more than merely performing menial tasks. The court held: "A party who is given the authority to act on behalf of all other owners in the performance of the agreement indicates one with greater authority to this court." Any doubt about this, it continued, was eliminated by the First Amendment's language. Next, it reasoned that while OEA subsection 6.11 appeared to support Russell's position in isolation, a different conclusion was apparent when that subsection was viewed in context with subsection 2.4 and the broad authority granted by the First Amendment. The court also considered the First Amendment's timing important because it was recorded shortly after 8th & New Hampshire bought the Development Parcel with intention of building condominiums, which obviously would result in multiple parcel owners. And from this it concluded the First Amendment's purpose was to ensure 8th & New Hampshire could control future restrictions or development.

The court also rejected Russell's backup argument that 8th & New Hampshire's right to act on the condominium owners' behalf was a form of agency preventing 8th & New Hampshire from acting against the other owners' wishes. The court noted nothing in the record suggested a majority of the owners objected to the planned amendment or showed that living next to a grocery store was dramatically different from living next to any other commercial development.

Finally, the district court sua sponte concluded 8th & New Hampshire's unilateral amendment authority did not violate the Restatement (Third) of Property: Servitudes § 6.21 (2000), which prohibits amendment power from being exercised in a way that materially changes a development's character, unless the instrument creating that power fairly apprises purchasers this power could be used for that kind of material change. See North Country Villas Homeowners Ass'n v. Kokenge , 38 Kan. App. 2d 254, 255-56, 163 P.3d 1247 (2007) (adopting Restatement § 6.21 ).

Russell timely appealed. A Court of Appeals panel affirmed. Russell , 2018 WL 2374094, at * 7. In doing so, the panel agreed with the district court that the OEA and First Amendment are "clear and unambiguous" in establishing 8th & New Hampshire's ability to act on other owners' behalf "in the performance of the provisions of [the] OEA" under the authority imbued in it as the "responsible/representative Owner." 2018 WL 2374094, at *6. And, the panel continued, that authority encompassed amending the OEA since one of its provisions permitted its amendment and the OEA did not limit 8th & New Hampshire's authority to performing only ministerial acts. 2018 WL 2374094, at *5. The panel further held Russell could not avoid summary judgment based on...