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Trustees of Clayton Terrace Subdivision v. 6 Clayton Terrace, LLC

Court of Appeals of Missouri, Eastern District, First Division

June 19, 2018

TRUSTEES OF CLAYTON TERRACE SUBDIVISION, Plaintiff/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, Defendants/Appellants/ Cross-Respondents.

          Appeal from the Circuit Court of St. Louis County Honorable Dale Hood

          SHERRI B. SULLIVAN, J.

         Introduction

         Jeannette R. Huey, Trustee of the Jane R. Huey Lifetime Trust Agreement Dated May 21, 1998 (Seller); 6 Clayton Terrace, LLC (Buyer); and the Trustees of Clayton Terrace Subdivision (Subdivision Trustees) appeal from the trial court's Judgment entered December 21, 2016, and Judgment entered December 30, 2016. We affirm in part, reverse in part, and remand.

         Factual and Procedural Background

         Seller's mother, Jane Huey, lived in a home on a 2.3-acre piece of property at 6 Clayton Terrace (hereinafter referred to as Lot 6) in an approximate 22-lot/residence subdivision called Clayton Terrace Subdivision off of Lindbergh Boulevard in Frontenac, Missouri (the Subdivision). The Subdivision was established by Plat in 1923, at which time it had 23[1] recorded lots, and is subject to Original Indentures recorded with the Plat; Indentures which have been renewed, extended, and amended approximately five times since their origination.[2]

         On October 15, 2011, Jane Huey died. Seller, as trustee of her mother's trust, became responsible for, among other things, Lot 6. Seller herself had not lived in the home for decades. Seller prepared to sell Lot 6 and listed it with realtor Judy Miller of Janet McAfee Real Estate, Inc. in September 2012.

         On February 15, 2013, Seller sold Lot 6 to Buyer, 15 days after Miller hand-delivered notice to all Subdivision lot owners of the proposed sale 15 days prior to closing as required by the right of first refusal provision, part of the Fourth Amended Indentures on record since 1973.[3]The sale closed on February 15, 2013, with no right of first purchase exercised by any lot owner, and all lot owners waiving their rights either expressly or by expiration of 15 days from notice without any offers to buy being made.[4] Seller sold Lot 6 to Buyer for approximately $415, 000, proceeds which went into her mother's trust and were disbursed a year later in April 2014 to the trust's beneficiaries. Seller had no reason to believe and had no notice of any potential irregularities or concerns about the validity of the sale of Lot 6 to Buyer when winding up and closing the trust over a year later.

         Buyer acquired Lot 6 for investment purposes and with the intention of leasing it to Kevin McGowan (McGowan) until such time as McGowan could acquire sufficient funds to purchase it from Buyer. After the sale, McGowan and his six children moved into the existing home on Lot 6 and began making considerable physical changes thereto, including: a) the demolition and removal of certain walls; b) combining the former kitchen and dining room into a single kitchen space which, as of the date of trial, remained in an unfinished condition; c) reconfiguring the layout of the upstairs so as to increase the number of bedrooms; d) raising the floor in the sunroom; e) walling off the French doors from the sunroom leading to the greenhouse; f) cutting through the brick exterior to add an additional door to the exterior; g) removing trees and clearing substantial brush and plantings from the grounds; h) refinishing the swimming pool; i) replacing the pool's heating and filtration system; and j) repairing/replacing the concrete decking around the pool.

         The Original Indentures in 1923 state they can be amended by two-thirds of Subdivision lot owners in writing. There is a provision established by the 1928 Amendment passed by two-thirds vote and introduced in the First Revised Indentures which provides as follows:

         (e) Only one residence shall be erected on each lot.

         Lot 6 is 2.3 acres.[5] As one lot under the Plat and Amended Indentures, it can only support one residence. Buyer intended to seek approval from the Planning and Zoning Commission of the City of Frontenac to split the lot. Subdivision Trustees Cathy Stahr (Stahr) and Rick Francis (Francis) were made aware of Buyer's plan to subdivide Lot 6 within ten days of the closing. Stahr was concerned by the idea of having Lot 6 subdivided, but neither she nor Francis approached McGowan to discuss it or take any action with regard thereto, electing instead to "just wait and see, " hoping "it's not going to be an issue."

         On April 24, 2014, over a year later, Buyer filed an application with the City of Frontenac to subdivide Lot 6. On June 24, 2014, Frontenac approved Buyer's application to subdivide Lot 6 into two lots, known as Lots 6A and 6B. Less than two months later, on August 21, 2014, Subdivision Trustees filed a two-count petition against Seller and Buyer for Declaratory and Injunctive Relief; first amended on December 3, 2014, asking for a Declaratory Judgment in Count I against Seller declaring that Seller violated the Subdivision's Amended Restrictions in failing to provide 15 days' written notice to all of the Subdivision lot owners of the proposed sale of Lot 6 to Buyer, in failing to accept lot owner Elizabeth Schwartz's offer to purchase Lot 6 on terms equal to those offered to Buyer in connection with the February 15, 2013 sale of Lot 6 to Buyer, and for the court to declare the sale null and void. The petition asked for Injunctive Relief in Count II against Buyer to prevent Buyer from constructing an additional residence on Lot 6 or selling any subdivided portion of Lot 6.

         On December 5, 2014, Seller filed a Counterclaim against Subdivision Trustees for Abuse of Process.

         On June 28, 2016, the parties submitted a Joint Stipulation of Facts and likewise stipulated to the admissibility of numerous documents identified in their joint Stipulated Admissibility of Exhibits, which has formed the basis for the above recounting of the factual background of this case.

         Trial was held on Subdivision Trustees' two-count petition in equity and Seller's counterclaim on July 11-12, 2016. On August 11, 2016, all three parties submitted proposed Findings of Fact, Conclusions of Law, and Judgments.

         On December 21, 2016, the trial court entered its Order and Judgment finding in favor of Seller and against Subdivision Trustees on Count I, finding no violation by Seller with regard to the sale; declining to set aside the sale; and additionally finding in favor of Seller on her Abuse of Process Counterclaim against Subdivision Trustees for bringing Count I against Seller. The trial court found Seller's damages in the form of attorney's fees, costs, and expenses in the amount of $119, 243.99 to be fair and reasonable yet awarded her only $60, 000. The trial court assessed $40, 000 of those damages against Buyer, who brought no claim against Seller and against whom Seller claimed no abuse of process. The trial court assessed the remaining $20, 000 against Subdivision Trustees.

         On Count II, the trial court found in favor of Subdivision Trustees and against Buyer, disallowing the division of Lot 6 and/or the construction of an additional residence on Lot 6.

         On December 30, 2016, the trial court entered an Order and Judgment addressing Subdivision Trustees' claim for a total of $203, 915.56 in attorney's fees, costs, and expenses in filing this lawsuit, finding the amount fair and reasonable and awarding them same, to be payable in their entirety by Buyer.

         On January 23, 2017, Seller filed a Motion to Correct, Amend, or Modify the Judgment with regard to her attorney's fees. The court denied the motion on February 28, 2017. This appeal follows.

         Points on Appeal

         Buyer's Appeal

         Buyer presents five points on appeal. In its first point, Buyer claims the trial court erred in holding that the one residence per lot provision contained in the amended indentures is valid and enforceable and in entering judgment on Count II of Subdivision Trustees' first amended petition against Buyer because such holding was against the weight of the evidence and constituted a misapplication of the law, as the one residence per lot provision was never unanimously approved by the lot owners in the Subdivision.

         In its second point, Buyer asserts the trial court erred in entering judgment on Count II of Subdivision Trustees' first amended petition against Buyer because such holding misapplied the law and was against the weight of the evidence, in that the one residence per lot provision does not prohibit the subdivision of Lot 6 or the construction of a residence on a subdivided lot.

         In its third point, Buyer maintains the trial court erred and misapplied the law in ordering Buyer to pay Subdivision Trustees' attorney's fees, as there exists no applicable contract, statute, or exception under the American Rule that would permit Subdivision Trustees to recover attorney's fees from Buyer.

         In its fourth point, Buyer argues the trial court abused its discretion in ordering Buyer to pay all of Subdivision Trustees' attorney's fees and costs incurred in this dispute because only Count II of their first amended petition was directed at Buyer; Count I was directed only at Seller; and the trial court found Subdivision Trustees liable with respect to Seller's counterclaim for abuse of process in asserting Count I.

         In its fifth point, Buyer contends the trial court erred in entering judgment in favor of Seller and against Buyer on Seller's counterclaim for abuse of process in that Seller did not claim abuse of process against Buyer and Buyer did not assert any claims against any party.

         Seller's Appeal

         Seller presents two points in her appeal. In her first point, she claims the trial court erred in awarding her only $60, 000 of her attorney's fees and costs because the trial court expressly found and reiterated that the full $119, 243.99 in damages suffered by Seller, which damages consisted of the attorney's fees and costs actually charged to and paid by her, was fair and reasonable under the circumstances, thereby requiring the entry of judgment in that amount.

         In her second point, Seller maintains the trial court erred in apportioning $40, 000 of her attorney's fees and costs against Buyer, a party against whom she did not assert any claims or seek any relief, thereby precluding the entry of judgment against Buyer in her favor.

         Subdivision Trustees' Cross-Appeal

         In their first point, Subdivision Trustees assert the trial court erred in granting judgment in Seller's favor on Count I of their petition because it erroneously declared and applied the law in that the right of first refusal provision was ...


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