Wilcox Inv. Grp., LLC v. P & D, LLC.

• Decision Date: 30 September 2016
• Docket Number: 1150052,1150025
• Citation: Wilcox Inv. Grp., LLC v. P & D, LLC., 223 So.3d 903 (Ala. 2016)
• Parties: WILCOX INVESTMENT GROUP, LLC, et al. v. P & D, LLC. P & D, LLC v. Wilcox Investment Group, LLC, et al.
• Court: Alabama Supreme Court

223 So.3d 903

WILCOX INVESTMENT GROUP, LLC, et al.

v.P & D, LLC.

P & D, LLC

v.Wilcox Investment Group, LLC, et al.

1150025

1150052

Supreme Court of Alabama.

September 30, 2016

Daniel G. Blackburn of Blackburn & Conner, P.C., Bay Minette; and K. Amanda Barton of Barton Law, LLC, Mobile, for appellants/cross-appellees Wilcox Investment Group, LLC, et al.

William W. Watts III and S. Wesley Pipes of Pipes, Hudson & Watts, LLP, Mobile, for appellee/cross-appellant P & D, LLC.

PER CURIAM.

Wilcox Investment Group, LLC ("Wilcox Investment"), Foley Investment Partners, LLC ("Foley"), and Wilcox Communities, LLC ("Wilcox Communities")¹ (hereinafter collectively referred to as "Wilcox"), appeal from a judgment of the Baldwin Circuit Court awarding P & D, LLC ("P & D"), $122,291 on P & D's claims alleging the breach of two leases involving two condominium units formerly owned by P & D. P & D appeals the trial court's judgment on the grounds that the damages the trial court awarded were insufficient and that the trial court erred in failing to award it attorney fees. We consolidated the appeals for the purpose of writing one opinion.

I. Facts

The genesis of this litigation is a condominium development in Foley, Alabama, known as Sea Pines of Bon Secour Condominiums ("the condo project"). The developer of the condo project was Sea Pines, LLC ("Sea Pines"). Sea Pines began to develop the condo project in September 2006; plans called for 84 residential condominium units (21 buildings of 4 units each), a clubhouse, a pool, and other amenities. On September 15, 2006, Sea Pines executed a note with Superior Bank for a construction and development loan, secured by a mortgage on the land to be developed.

On September 27, 2007, Sea Pines filed a "Declaration of Condominium of Sea Pines at Bon Secour, A Condominium" ("the declaration"), in the Baldwin probate office in accordance with the Alabama Uniform Condominium Act, Ala. Code 1975, §§ 35–8A–101 - 35–8A–417 ("the AUCA"). The declaration included core aspects of the condo project such as the plans and plats, the condominium association's bylaws, and special rights reserved to Sea Pines as the developer of the condo project.

The AUCA provides, in part:

"(a) The declaration for a condominium must contain:

"....

"(8) A description of any development rights specified in Section 35-8A-103(11) and other special declarant rights specified in Section 35-8A-103(24) reserved by the declarant , together with a legally sufficient description of the real estate to which each of those rights applies, and a time limit within which each of those rights must be exercised...."

§ 35–8A–205(a)(8), Ala. Code 1975 (emphasis added). The AUCA defines "special declarant rights" as

"[r]ights reserved for the benefit of a declarant (i) to complete improvements indicated on plats and plans filed with the declaration (Section 35-8A-209); (ii) to exercise any development right (Section 35-8A-210); (iii) to maintain sales offices, management offices, signs advertising the condominium, and models (Section 35-8A-215) ; (iv) to use easements through the common elements for the purpose of making improvements within the condominium or within real estate which may be added to the condominium (Section 35-8A-216); (v) to make the condominium subject to a master association (Section 35-8A-220); (vi) or to appoint or remove any officer of the association or any master association or any board member during any period of declarant control (Section 35-8A-303(d))."

§ 35–8A–103(24), Ala. Code 1975 (emphasis added). Section 35–8A–215, Ala. Code 1975, provides, in part:

"A declarant may maintain sales offices, management offices, and models in units or on common elements in the condominium only if the declarationso provides and specifies the rights of a declarant with regard to the number, size, location, and relocation thereof . Any sales office, management office, or model not designated a unit by the declaration is a common element, and if a declarant ceases to be a unit owner, he ceases to have any rights with regard thereto unless it is removed promptly from the condominium in accordance with a right to remove reserved in the declaration. ..."

(Emphasis added.) The Commissioner's Commentary 1 to § 215 further explains:

"This section prescribes the circumstances under which portions of the condominium—either units or common elements—may be used for sales offices, management offices, or models. The basic requirement is that the declarant must describe his right to maintain such offices in the declaration. There are no limitations on that right, so that either units owned by the declarant or other persons , or the common elements themselves, may be used for that purpose...."

(Emphasis added.)

The declaration defines " ‘Developer’ or ‘Declarant’ " as "Sea Pines, LLC, an Alabama limited liability company, and its successors and assigns." § 2.01(M). Section 5.02 of the declaration provides:

"Use for Sales Purposes . All Units and the Common Elements shall be subject to the statutory right concerning sales and management offices and models in Units and the Common Elements in favor of the Developer allowed by § 35-8A-215 of the [AUCA] . The Developer otherwise expressly reserves the right to use one (1) or more Units owned by the Developer for management offices and/or sales and leasing offices. The Developer reserves the right to relocate offices and/or models from time to time within the Property. The Developer further reserves the right to maintain on the Common Elements advertising signs in any location or locations and from time to time to relocate and/or remove the same, all in the sole discretion of the Developer."

(Emphasis added.) Thus, in accordance with provisions of the AUCA and the declaration, among the special declarant rights possessed by Sea Pines was the right to maintain models in units of the condo project.

By October 2007, Sea Pines had built the clubhouse and one building of condominiums consisting of four units. To get more money released from its construction loan, Sea Pines needed to sell at least two of those units. Patty Lee, a licensed realtor, was the exclusive listing agent for the condo project. Keith Clay, Sea Pines' managing agent, made a proposal to Lee that she in turn shared with Dave Wirtes, an attorney,² for the sale of two units, which would mutually benefit Sea Pines and Lee and Wirtes. The proposal involved Sea Pines selling two units to Lee and Wirtes contingent upon Lee and Wirtes leasing the units back to Sea Pines to use as sales models. Wirtes testified that Clay represented the deal as one in which "there would be no money out of [Wirtes's] pocket" and "[at] the end of the buildout of Phase I [of the condo project] I would own the two units outright."³

To this end, Lee and Wirtes formed P & D. On October 28, 2007, P & D executed purchase agreements with Sea Pines for the purchase of unit 103 for $282,160 and unit 104 for $257,771. P & D financed the purchases through First National Bank of Baldwin County. On the same day, Sea Pines executed lease agreements with P & D in which P & D agreed to lease to Sea Pines unit 103 for $2,200 per month and unit 104 for $2,100 per month on the condition that Sea Pines "shall use the premises as a model home for real estate purposes." The leases stated that they would terminate on "November 9, 2009, or sale by Sea Pines, LLC, of final unit of Phase I of project known as Sea Pines at Bon Secour, whichever is later."⁴ The final paragraph of each of the leases ("paragraph 10") provided:

"10. In the event Sea Pines, LLC, its members, successors and assigns elect for any reason not to complete construction of all presently planned units of Phase I of Sea Pines at Bon Secour, Sea Pines, LLC, its members, successors or assigns shall, at the election of P & D, LLC, either a) satisfy all remaining indebtedness owed at that time by P & D, LLC, to First National Bank of Baldwin County (or its successors or assigns) for the purchase price of the condominium unit that is the subject of this lease agreement; or b) purchase from P & D, LLC, the condominium unit that is the subject of this lease agreement for the sum represented by the last most recent appraisal of the unit."

On November 16, 2007, Superior Bank issued a "Partial Release" from its lien on the condo project for units 103 and 104. On June 8, 2009, the leases were recorded in the Baldwin probate office.

On August 31, 2011, P & D sent Sea Pines a letter contending that Sea Pines had breached the leases because of a "failure to complete construction of all presently planned units of Phase I of [the condo project]." According to P & D, nearly four years after execution of the lease agreements, Sea Pines had built only 3 of the 21 condominium-unit buildings. In the letter, P & D formally invoked the remedy of paragraph 10, asking Sea Pines to "satisfy all remaining indebtedness owed ... by P & D, LLC, to First National Bank of Baldwin County."

On September 7, 2011, Sea Pines responded by letter to P & D's demand, stating that it "has no available cash from which to acquire the units or assume the debt." Sea Pines noted that it had

"not had any recent sales of units in the development. Sea Pines, LLC's agreement with its lender is that it can construct new units but only as existing ones are sold. ... [T]he market for units such as these has been extremely depressed and Sea Pines, LLC certainly hopes that conditions will improve at some point so that development can continue and will make economic sense."

Despite Sea Pines' response, it continued to pay rent to P & D on units 103 and 104 through January 2013.

Cadence Bank, the successor of Superior Bank, ultimately declared Sea Pines to be in default on the note secured by the mortgage on the condo project. On February 8, 2013, Cadence Bank conducted a foreclosure sale of the condo project; the condo project was sold to Wilcox Investment for $685,654. The foreclosure deed...