Lauren Heyse et al. William Case et al. No. CV S Superior Court of Connecticut September 9, 2009

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1 Lauren Heyse et al. v. William Case et al. No. CV S Superior Court of Connecticut September 9, 2009 Judicial District of Litchfield at Litchfield Judge: Pickard, John W., J. MEMORANDUM OF DECISION John W. Pickard The plaintiffs, Lauren Heyse, Barbra Eddy, Anne James, Christopher James, John Lloyd, Shelley Lloyd, Stephen Worthington, and Susan Worthington, and the defendants, William Case and Tria Case, are all owners of units in West Hill Estates, a common interest community [1] in New Hartford, Connecticut. The defendants own Lot 1C which is 61 acres of undeveloped land which they propose to subdivide into four lots. The plaintiffs have sued the defendants to prevent this subdivision based upon the premise that the defendants, as unit owners within a common interest community, have no right to subdivide their property without the unanimous consent of all unit owners. The defendants claim that they have succeeded to certain development rights from the original developer which give them the right to subdivide their property without the consent of other owners. Both sides in this dispute have filed motions for summary judgment (#164 and #180) [2] claiming that there are no issues of material fact and that they are entitled to judgment as a matter of law. The motions are supported by numerous documents, deposition transcripts and affidavits. The plaintiffs' amended complaint is in three counts: declaratory judgment pursuant to C.G.S (a), [3] quiet title pursuant to C.G.S , and declaratory judgment pursuant to C.G.S , et seq., respectively. The defendants have filed an answer, special defenses, statement of claim, and counterclaim. The defendants seek, among other things, a declaratory judgment that they hold title to the development rights that enable them to subdivide Lot 1C and to add additional units to West Hill Estates without the consent of the other unit owners. FACTS West Hill Estates was created by a written declaration of Stratton Brook Properties ("declarant") dated March 28, At the time it was formed, the community consisted of eight lots which comprised the initial "units." This is clear from the declaration which, in various places, identifies the eight units within the community as being lots 3, 4, 5, 6, 8, 9, 10 and 11. [4] Each lot is identified as being obligated for a 1/8 fractional share of common expenses and as having one vote in the affairs of the West Hill Estates Association, a non-stock corporation comprised of the lot owners. There are several statutes and sections of the declaration which are relevant to the issue at hand. "Declarant" is defined to mean Stratton Brook Properties or its successor. The declarant reserves Special Declarant Rights which include the right to exercise any Development Right reserved in the declaration. C.G.S (12) includes within the definition of "declarant" any person who "reserves or succeeds to any special declarant right." The declaration contains the following reservation of a Development Right: "The right to add Lots in the location shown as 'Development Rights Reserved in this Area' " on the survey attached to the declaration. The survey included as part of the declaration shows the area for possible future lots as shown as two parcels depicted as Lot 1 and Lot 2. [5] Although they are called "Lots" on the survey, these two parcels are not units within the community. At that time, Lot 1 consisted of approximately 80.2 and Lot 2 consisted of approximately acres. Both lots are labeled as "Additional Land-Development Rights Reserved In This Area." The declaration also provides that the development rights reserved by the declarant are limited to not more than forty-four additional lots as may be created under the

2 development rights. The development rights may be exercised at any time, but not more than twenty-one years after the recording of the initial declaration. In 1992, the declarant, Stratton Brook Properties, exercised its development rights and unilaterally amended the declaration to add Lots 1 and 2 to the community. There was no new map filed. Following the amendment to the declaration, the community then consisted then of ten lots, each of which was obligated for 1/10 fractional share of the common expenses, and each of which had one vote in the Association. There was no longer any land remaining outside the community which was reserved for future development. The amended declaration also states: "Declarant reserves the right to exercise Development Rights reserved in and pursuant to the terms of the Declaration, including, without limitation, the right to add additional Lots by reason of the subdivision and/or resubdivision of Lot No. 1." The plaintiffs argue that the declarant had no right to make this reservation because there was no right to subdivide or resubdivide reserved in the original declaration. In June 1992, a judgment of foreclosure by sale was entered against the declarant, Stratton Brook Properties. In September 1992, Monument Realty, Inc. acquired title to Lot 1 by Committee Deed. C.G.S (c) provides in relevant part: "Unless otherwise provided in a mortgage instrument... in case of foreclosure of a security interest... [or] judicial sale... of any units owned by a declarant or real property in a common interest community subject to development rights, a person acquiring title to all the property being foreclosed or sold, but only on his request, succeeds to all special declarant rights related to that property held by the declarant..." Monument Realty did not request to succeed to the special declarant rights of Stratton Brook Properties, nor did the Committee Deed refer to special declarant rights. In order to bridge this gap, the defendants rely on the periodic validating act, Section 2(d) of Special Acts No , which provides, in relevant part: "Notwithstanding the provisions of subsection (c) of section of the general statutes, title... to special declarant rights in a common interest community... owned by a person... purporting to have succeeded to special declarant rights by means of a foreclosure... prior to the effective date of this acts... is validated notwithstanding the failure or inadvertence of such person to have requested the same in accordance with subsection (c) of section of the general statutes." In 1995, Monument Realty, Inc. obtained approval from the local planning commission for a subdivision of Lot 1 into Lots 1A, 1B, 1C, and 1D. It then unilaterally recorded a second amended declaration which added these new lots to the community to create its current configuration. The map recorded at the time does not refer to development rights. The community now contains thirteen units, each of which is obligated for a 1/13 fractional share of common expenses and has one vote in the affairs of the association. The second amended declaration contains this language: "Declarant reserves the right to exercise Development Rights reserved in and pursuant to the terms of the Declaration, including, without limitation, the right to add additional Lots by reason of the subdivision and/or resubdivision of Lot No. 1C." The plaintiffs argue that Monument Realty had no right to subdivide Lot 1C and no right to reserve the ability to create additional subdivisions of that lot. In September 1996, Monument Realty conveyed Lot 1C to Alan and Pamela Vernon by quitclaim deed. The deed made no reference to the conveyance of declarant or development rights. The receipt of resale certificate from the Vernons states, in part: "No special declarant rights held." In 1999, Alan and Pamela Vernon conveyed Lot 1C to the defendants, William and Tria Case, by quitclaim deed. The deed contains the following language: "Said premises are also described as Lot 1C on the Declaration of West Hill Estates as amended referred to above. Said premises are also conveyed together with all the Grantor's right, title and interest in and to any and all Development Rights and Special Declarant Rights as described in said Declaration as amended." Also in September 1999, Monument Realty conveyed to William and Tria Case all of Monuments' interest in Lot 1C by quitclaim deed. The deed contains the following language: "The intention of this deed is to convey and transfer to the Releasees [Case] all of the right, title and interest in and to the Development Rights and Special Declarant rights as to Lot IA as more fully described in the Declaration of West Hill Estates referred to above as amended." LEGAL STANDARD FOR SUMMARY JUDGMENT "In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 318, 901 A.2d 1207 (2006). "The courts hold the [summary judgment] movant to a strict standard. To satisfy

3 his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact... As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent... When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue." (Internal quotation marks omitted.) Id., DISCUSSION The first issue is whether the defendants hold whatever development rights, if any, the original declarant held after the first amendment to the declaration. This issue can be handled summarily. Although the plaintiffs attempt to point out holes in the defendants' chain of title, the defendants have successfully provided answers to fill those holes. The defects in the foreclosure process which brought Lot 1C to Monument Realty were cured by the language of the validating act, Section 2(d) of Special Acts No The defect in the deed from Alan and Pamela Vernon was cured by the subsequent deed from Monument Realty. The court has not found any support in CIOA for the proposition that the failure to record a new survey at the time of the first amended declaration acts to terminate development rights. The court is convinced that, if Monument Realty held any development rights after the first amended declaration, they have passed to the defendants. The real issue is whether Monument Realty retained any development rights after they amended the declaration by converting Lots 1 and 2 into units within the community. Answering this question requires an interpretation of the language of the original declaration. Our Supreme Court has held that the declaration of a common interest community is in the nature of a contract which must be interpreted in accordance with the rules of contract interpretation. Cantonbury Heights Condominium Ass'n., Inc. v. Local Land Development, LLC, 273 Conn. 724, 734 (2005). "In ascertaining the contractual rights and obligations of the parties, we seek to effectuate their intent, which is derived from the language employed in the contract, taking into consideration the circumstances of the parties and the transaction. We accord the language employed in the contract a rational construction based on its common, natural and ordinary meaning and usage as applied to the subject matter of the contract. Where the language is unambiguous, we must give the contract effect according to its terms. Where the language is ambiguous, however, we must construe those ambiguities against the drafter. This approach corresponds with the general rule that any ambiguity in a declaration of condominium must be construed against the developer who authored the declaration. A contract is unambiguous when its language is clear and conveys a definite and precise intent... The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity... Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous... In contrast, a contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself... [A]ny ambiguity in a contract must emanate from the language used by the parties... The contract must be viewed in its entirety, with each provision read in light of the other provisions... and every provision must be given effect if it is possible to do so... If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous." (Citations omitted; internal quotation marks omitted.) Id In order to apply these general principles to the facts of this case, the words of the declaration must be examined to see if it has a common, natural and ordinary meaning. Pursuant to C.G.S (a), "if the declaration expressly so permits, a unit may be subdivided into two or more units." The declaration in this case does not expressly permit subdivision by anyone. On the other hand, the declaration provides that the declarant, or its successor has the right to "add Lots in the location shown as 'Development Rights Reserved in this Area' " which is currently Lot 1C. The court must determine the common, natural and ordinary meaning of these words of the declaration light of the language of C.G.S (a). The plaintiffs' argue that even if the defendants have succeeded to the development rights of the declarant, the development rights do not include the right to subdivide a unit within West Hill Estate without the unanimous consent of all unit owners as is required by C.G.S (d). [6] The plaintiffs rely upon the language of the declaration to argue that the right to subdivide or resubdivide was never reserved. C.G.S (14) provides that there are four separate varieties of rights included within the definition of "Development Rights": " 'Development rights' means any right or combination of rights reserved by a declarant in the declaration to (A) add real property to a common interest community; (B) create units, common elements, or limited common elements within a common interest community; (C) subdivide units or convert units into common elements;

4 or (D) withdraw real property from a common interest community." The only development right reserved in the declaration is found in section 7.1 of the declaration: "The right to add Lots in the location shown as 'Development Rights Reserved in this Area' on the survey." The declaration does not contain the words "subdivide" or "subdivision." The plaintiffs argue that the declaration did not, therefore, reserve the right to "subdivide units" set forth in C.G.S (14)(c). I agree with the plaintiffs. The declarant reserved the right to add lots to the community from the development area which lay outside of the community and which did not have a vote in the association or an obligation to pay for common expenses. A subdivision of the development area would not run afoul of the prohibition against subdivision of units within the community unless the declaration so permits. It is clear from several sections of the declaration that the declarant, or its successor, had the right to subdivide the development areas, at once or in phases, to create up to forty-four additional units to be added to the community. The problem with the defendants' position is their land, Lot 1C, is a unit within the community where it is subject to the statutory limitation imposed by C.G.S (a) that the declaration does not expressly permit a unit to be subdivided. It is no longer land outside the community which is reserved for future development. Once Lot 1C was added to the community as a unit, the common, natural and ordinary meaning of the declaration is that Lot 1C cannot be subdivided. It is true that the second amendment to the declaration dated November 7, 1995 subdivided Lot 1 into four lots (one of which is Lot 1C) and incorporated them within the community as new units. Apparently, no one challenged this subdivision. But, it was contrary to the provisions of C.G.S (a) which permits subdivision of lots only where the declaration so permits. Without any challenge, the amended declaration and the attached schedules make it clear that the community now consists of thirteen units known as 1A, 1B, 1C, 1D, 2, 3, 4, 5, 6, 8, 9, 10 and 11. Each of these units is identified as having a 1/13 fractional share of common expenses and as having one vote in the affairs of the Association. The survey attached to this amended declaration no longer identifies any "non-unit" land as being reserved for future development. The ordinary meaning of the declaration is that the declarant's development rights only applied to land outside the community within the old Lots 1 and 2 which has not been incorporated within the community as units. The right to subdivide is not the same as the right to "add units." This is clear from the language of C.G.S (14) which makes them separate and distinct development rights. The declarant, or its successor, had the right to add lots to the community over a 21-year period by cutting pieces from Lot 1 or Lot 2 and adding them to the community as units. Using this phased approach, the declarant could have added up to forty-four units without ever having to subdivide a unit. But, once Lots 1 and 2 were incorporated into the community as units, they became subject to the terms of the declaration. These terms do not include the right to subdivide lots. This seems perfectly clear from the language of the declaration. Had the declarant intended otherwise when the original declaration was created, it would have been easy to have said that the declarant has the right to subdivide units. It is significant that the first and second amendments to the declaration changed the wording of the original reservation by adding the words "... by reason of the subdivision and/or resubdivision of Lot 1 [Lot 1C]." [7] These word changes are invalid attempts to add the right to subdivide a unit. Although I see no ambiguity in the terms of the declaration, the plaintiffs' fall-back position is that the terms of the declaration would create a conflict between the right to create lots and the absence of express authority to subdivide. This potential conflict would be an ambiguity which must be construed against the defendants as successors of the declarant. "Where the language [of the declaration] is ambiguous, however, we must construe those ambiguities against the drafter." Cantonbury Heights Condominium Ass'n. v. Local Land Development, LLC, 273 Conn. 724, 734 (2005). Next, the defendants' four special defenses must be discussed. The first special defense is merely a restatement of the defense that the defendants hold development rights which entitle them to make the subdivision they propose. Summary judgment may be granted in favor of the plaintiffs on this defense for the reasons already given above. The second, third and fourth special defenses are based on equitable estoppel, laches, and waiver respectively. In summary, in each of these defenses the defendants allege that the plaintiffs and/or their predecessors in title failed to object to the subdivision of Lot 1 into four units which were added to the community, thereby leading the defendants to believe that development rights still existed. The plaintiffs argue that these defenses are precluded as

5 a matter of law. The defendants counter that these defenses raise issues of material fact which cannot be decided with a motion for summary judgment. "We are unfamiliar with any rule that prevents the court from rendering summary judgment on a complaint, cross complaint or counterclaim simply because of the existence of one or more special defenses. To the contrary, it is appropriate for a court to render summary judgment in favor of a plaintiff when the especial defenses asserted by a defendant are either not legally viable or do not present a genuine issue of material fact." Kazlon Communications, LLC v. American Golfer, Inc., 82 Conn.App. 593, 596 (2004). I agree with the plaintiffs that there is no legal authority for development rights to be created by estoppel, laches or waiver. The declaration specifically provides that: "No provision contained in the [declaration] is abrogated or waived by reason of any failure to enforce the same, irrespective of the number of violations or breaches which may occur." So even if Lot 1 was subdivided in violation of the declaration, this does not constitute a waiver of the rights of unit-owners to enforce the declaration now. Further, the defendants do not allege or provide any evidence that the plaintiffs in this case affirmatively did anything upon which the defendants have relied to their detriment. Neither the allegations of the second, third and fourth special defenses, nor the affidavits and other evidence submitted by the defendants, supports the defenses of estoppel, laches or waiver. For the reasons given, there is no issue of material fact as to the defendants' lack of authority to subdivide their property. Summary judgment must be given in favor to the plaintiffs as to the equitable relief requested in counts one, two and three of their complaint. The claims for monetary relief will be scheduled for trial. Summary judgment must be given in favor of the plaintiffs on the defendants' special defenses. The defendants' motion for summary judgment must be denied. As to the defendants' counterclaims, the first, second and third counts seek a judgment to quiet title and for declaratory judgment that they have development rights to subdivide Lot 1C. For all of the reasons given previously, the plaintiffs are entitled to summary judgment. The fourth and fifth counts allege a breach of a "stand still" agreement not addressed in either motion for summary judgment Footnotes: [1] A common interest community is created pursuant to the Common Interest Ownership Act ("CIOA"), C.G.S. Sec et seq. [2] The plaintiffs' motion for summary judgment seeks adjudication only as to their claims for equitable relief and does not seek adjudication that the plaintiffs are entitled to a monetary award without a trial. The defendants' motion for summary judgment is also addressed to liability only. In the event their motion is granted, the defendants will seek damages at trial. The defendants do not seek summary judgment as to counts four and five of their counterclaim which allege breaches of a Standstill Agreement entered into by the parties in an attempt to resolve the dispute. [3] This section provides in part: "If a declarant or any other person subject to this chapter [CIOA] fails to comply with any of its provisions or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply has a claim for appropriate relief. Punitive damages may be awarded for a wilful failure to comply with this chapter. The court may award court costs together with reasonable attorneys fees." [4] Lot 7 is shown on the map but not included within the community. [5] Both contain this statement: "Additional Land-Development Rights Reserved In this Area." Lot 1 is shown as containing 80.2 acres; Lot 2 is shown as containing acres. [6] Section 47-36(d) provides: "Except to the extent expressly permitted or required by other provisions of this chapter, no amendment may create or increase special declarant rights, increase the number of units or change the boundaries of any unit or the allocated interests of a unit, in the absence of unanimous consent of the unit owners."

6 [7] The original declaration states: "The right to add lots in the location shown as 'Development Rights Reserved in this Area.' " The first amended declaration states: "... the right to add additional Lots by reason of the subdivision and/or resubdivision of Lot 1." The second amended declaration states: "... the right to add additional Lots by reason of the subdivision and/or resubdivision of Lot No. 1C."