Trs. of Clayton Terrace Subdivision v. 6 Clayton Terrace, LLC
|13 August 2019
|No. SC 97349,SC 97349
|TRUSTEES OF CLAYTON TERRACE SUBDIVISION, Respondent/Cross-Appellant, v. 6 CLAYTON TERRACE, LLC, and Jeannette R. Huey, Trustee of the Jane R. Huey Lifetime Trust Agreement Dated May 21, 1998, Appellants/Cross-Respondents.
|Missouri Supreme Court
The LLC was represented by Steven M. Cohen and Jeffrey M. Igou of Berger, Cohen & Grandt LC in St. Louis, (314) 721-7272.
Huey was represented by John Hein and Grant J. Mabie of Hein Schneider & Bond PC in St. Louis, (314) 863-9100.
The trustees were represented by S. Todd Hamby, Gerard T. Carmody, Becky R. Eggmann and Ryan M. Prsha of Carmody MacDonald PC in St. Louis, (314) 854-8600.
Michael A. Clithero and Lauren M. Wacker of Lathrop Gage LLP in Clayton, (314) 613-2800.
Jeannette R. Huey, 6 Clayton Terrace, LLC, and the Trustees of Clayton Terrace Subdivision ("trustees") appeal from portions of the circuit court’s judgment not in their favor. This Court affirms the portion of the circuit court’s judgment upholding Ms. Huey’s sale of her home located in the Clayton Terrace subdivision despite allegations she failed to comply with the right of first refusal contained in the subdivision indentures. But this Court reverses the portion of the circuit court’s judgment holding the trustees' attempt to have the sale set aside constituted an abuse of process and awarding attorney’s fees to Ms. Huey on that claim. An abuse of process claim requires more than the proof Ms. Huey offered that the trustees' purpose was allegedly improper. She also failed to show the trustees made an improper use of process.
This Court affirms the circuit court’s refusal to reject the amended indenture provision prohibiting the building of more than one residence per lot. That provision could not be avoided by attempting to divide the lot into two sub-lots. But the circuit court erred in awarding attorney’s fees to the trustees against 6 Clayton Terrace on the basis the latter’s failure to reveal its subdivision plan constituted "special circumstances" justifying the award of attorney’s fees for intentional misconduct. Assuming attorney’s fees could be awarded where, as here, the trustees did not seek declaratory relief against 6 Clayton Terrace, the trustees fail to identify any basis on which 6 Clayton Terrace, as an arms' length purchaser, had a duty to reveal its planned use of the property. Further, the fact 6 Clayton Terrace ultimately lost its claim does not create "special circumstances" for purposes of attorney’s fees, as one party loses every claim.
Jane Huey lived in a home on a 2.3-acre piece of property referred to as Lot 6 in a subdivision called Clayton Terrace in Frontenac, Missouri. Clayton Terrace was established by plat in 1923, at which time it had 23 recorded lots.1 The subdivision is subject to the original indentures, which are handwritten and recorded on the same document that contains the plat. The original indentures provide the restrictions will be "in force and binding upon the owners of this Subdivision for a period of 25 years from date of this instrument, unless amended or extended by two-thirds of the lot owners in this Subdivision and publicly recorded."
The original indentures have been amended or extended approximately five times. There are two relevant indenture amendments and extensions. One was approved in 1928, providing that "only one residence shall be erected on each lot." In 1972, a "right of first refusal" provision was approved under which any lot owner selling a lot was required to provide "15 days' written notice to the owners of all other lots in the subdivision ... such notice to contain the selling price and other terms of the proposed sale and to whom it is made." The 1972 provision grants the other lot owners "the right to elect in writing to purchase said lot on the same terms (including the closing date) as offered to the third party buyer...." Both the "one residence per lot" provision and "right of first refusal" provision were restated in the most recent amendment and extension, which was recorded in 1998 and approved by two-thirds of the lot owners. The indentures also provide for the election of subdivision trustees. The indentures impose a fiduciary duty on the trustees to the lot owners and provide "the Trustees shall have the power to enforce the restrictions spread upon the plat of Clayton Terrace subdivision."
Jane Huey died October 15, 2011. Her daughter, Jeannette Huey, as trustee of her mother’s trust, became responsible for Lot 6. Ms. Huey listed Lot 6 with a real estate agent in September 2012. A career real estate developer, Kevin McGowan, testified at trial that, "as soon as I saw it, when I noticed it was almost three acres, my very first thought was that this might be able to be split." Before making an offer, he confirmed with Frontenac that its municipal ordinances would not prohibit subdivision of the property. To purchase the property, he secured an investor, Century Renovations, LLC, and both he and the investor reviewed the Clayton Terrace indentures. In January 2013, Ms. Huey and Century Renovations agreed to terms for the sale of Lot 6 and set the closing for February 2013.
As the sale was pending, Insight Title Company, LLC, on behalf of Ms. Huey, reached out to the trustees concerning the sale. The trustees advised Insight Title of the "right of first refusal" provision. Insight Title prepared a notice of sale for the property and the real estate agent hand-delivered notice to Clayton Terrace lot owners of the proposed sale 15 days before the closing date. Whether all lot owners were given this notice later became the subject of dispute. The notice of sale did not contain the identity of the proposed purchaser.
Only one homeowner returned her notice of sale indicating she might be interested in acquiring the property. Her request to walk through the property was denied. Ultimately, that homeowner delivered a written document expressly waiving her right of first refusal and later confirmed she did not want to buy the property. The day before closing, and after the notices had gone out, Century Renovations assigned the sale contract to an entirely new entity, 6 Clayton Terrace. 6 Clayton Terrace is a limited liability company owned by Century Renovations.
On February 15, 2013, Ms. Huey sold Lot 6 to 6 Clayton Terrace. The proceeds from the sale of Lot 6 went into Jane Huey’s trust. Believing the sale of the property to be final, Ms. Huey disbursed its proceeds to the trust beneficiaries in April 2014. As part of the sale, Insight Title tendered the outstanding homeowners' association fees to the trustees of Clayton Terrace. The trustees deposited these funds in the subdivision account. Following the sale of the lot to 6 Clayton Terrace, Mr. McGowan leased the home and moved in with his children. He began substantial renovations that would have been evident to those passing or living near the home, including renovating the pool and deck, removing multiple trees and significant brush, knocking out walls within the residence, and cutting holes in the exterior walls to add more doors.
In the meantime, 6 Clayton Terrace began attempting to obtain approval from the Frontenac planning and zoning commission to split the 2.3 acres into two lots. No formal notice of this plan was given to the Clayton Terrace trustees, although 6 Clayton Terrace presented evidence Mr. McGowan’s nine-year-old son informally told a Clayton Terrace resident about the plan shortly after closing, and that resident informed one or more trustees. The trustees were concerned about the idea of having the lot subdivided but had received no direct notice of an intent to subdivide and they did not approach the owners or those living in the home about the rumor the lot would be subdivided.
The following spring, in April 2014, 6 Clayton Terrace filed an application with Frontenac to subdivide Lot 6 into two lots, to be known as Lots 6A and 6B. The trustees and several of the Clayton Terrace residents strongly opposed 6 Clayton Terrace’s proposal and appeared at public meetings to voice their opposition. Frontenac advised the trustees it was bound only by its own municipal ordinances, which simply required that each lot be greater than one acre in size, and it had no authority to enforce private indentures. In June 2014, Frontenac approved 6 Clayton Terrace’s application as it did not violate city ordinances.
Two months later, in August 2014, the trustees sued both Ms. Huey and 6 Clayton Terrace. Count I sought a declaratory judgment against Ms. Huey, claiming she violated the amended indentures by failing to provide sufficient written notice to all the subdivision lot owners and failing to accept one lot owner’s offer to purchase Lot 6. In support, the trustees asserted the hand-delivered notice did not show the property was being purchased by a developer rather than a family, gave an incorrect closing date, and one or more Clayton Terrace owners were not given the notice.
In count II the trustees sought injunctive relief against 6 Clayton Terrace to prohibit it from subdividing the lot and constructing an additional home on Lot 6, claiming division of Lot 6 into two sub-lots would violate the restrictions in the amended indentures. The trustees also sought attorney’s fees. Both 6 Clayton Terrace and Ms. Huey denied these claims and asserted affirmative defenses, including that the trustees had waived and ratified the purchase by waiting more than one year to challenge the sale and alleging the amendments to the original indentures were invalid because they were adopted without the unanimous consent of all lot owners. Ms. Huey also filed a counterclaim against the trustees for abuse of process, based on her contention the trustees filed count I against her for the sole and allegedly improper purpose of...
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