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Bethany Marina Townhouses Phase II Condominiums, Inc. v. BMIG, LLC

Supreme Court of Delaware

October 10, 2017

BETHANY MARINA TOWNHOUSES PHASE II CONDOMINIUMS, INC., Petitioner Below, Appellant,
v.
BMIG, LLC, Respondent Below, Appellee.

          Submitted: September 20, 2017

         Court Below: Superior Court of the State of Delaware C.A. No. S15-C-01-019

          Before VALIHURA, VAUGHN, and SEITZ, Justices.

          ORDER

          COLLINS J. SEITZ, JR. JUSTICE.

         This 10th day of October, 2017, having considered the briefs and the record below, it appears to the Court that:

         (1) Bethany Marina Townhouses Phase II Condominiums, Inc. ("Condo Association"), a condominium owners association located in Ocean View, Delaware, and BMIG, LLC, a successor in interest to the original condominium developer, have each appealed a Superior Court's decision addressing disputes between the parties over development rights and assessments in the condominium complex. In this order, we affirm the Superior Court's judgment that (a) the land designated for the eleven undeveloped units was expressly excluded from the condominium Declaration, and thus BMIG may develop the land into eleven condominium units as contemplated by the Declaration Plan; (b) the easement granting the developer the right to build the additional eleven units remains in force; and (c) BMIG must pay all future assessments for boat slips it owns, as well as costs, including interest, associated with collection. We reverse, however, the Superior Court's ruling that BMIG owns the land dedicated to five condominium features- the pumping station, pump house, pool, pool house, and stormwater management ponds.

         (2) Bethany Marina, Inc. is the original developer of the condominium complex. It recorded a declaration on February 14, 1996, establishing a plan to develop seventy-seven units on 10.57 acres as a condominium complex in Sussex County, Delaware ("Declaration"). The Condo Association was the incorporated condominium association for the complex. After encountering financial troubles while building the project, in February 2005, Bethany Marina, Inc. sold its interest as developer to Spicer/Hill through a liquidating trust. Spicer/Hill purchased the interest with loans from K Bank. Spicer/Hill also ran into financial troubles, and in 2008, K Bank foreclosed the mortgage and sold all interests as developer to BMIG, LLC, the current developer ("BMIG" or "Developer").

         (3) The Declaration established an "expandable" condominium complex with the intent to develop the property in two phases.[1] Phase One included the land described in Schedule A attached to the Declaration encompassing "all improvements and recreational amenities thereon, together with the one (1) building composed of six (6) units"[2] described in Schedule B. Phase Two included "the remaining fourteen (14) additional buildings to be built in the future on the land described and excepted from submission under the Unit Property Act as identified and designated by unit number in Schedule A, composed of seventy-seven (77) units."[3] The Declaration did not define the specific metes and bounds of the undeveloped parcels but did identify their locations in the Declaration Plans.[4]

         (4) At the time the developer filed the Declaration, the condominium "consist[ed] of six (6) units located in one building."[5] The land required to build the additional fourteen buildings and seventy-seven units of Phase Two was expressly excluded from the Declaration.[6] The developer contemplated that as the seventy- seven units were built and sold, it would annex the land to the condominium to include the new units by filing amendments to the Declaration. The developer's right to annex land for the unbuilt units under the Declaration appears under the heading "Expansion":

(a) Right to Expand. The Developer and any successors in title thereto shall have the absolute right, without consent of the Council or any Unit Owner or the holder of any lien on any Unit, at any time and from time to time, to be exercised prior to the 29th day of August, 2005, to annex to the land and the improvements constituting the property of BETHANY MARINA TOWNHOUSES PHASE II CONDOMINIUM, as the same are described and identified by legal description on Schedule A . . . . [A]nd thereby to submit to each and everyone [sic] of the provisions of this Declaration and the Unit Property Act, any land owned by the Developer which is currently excepted out and from submission under the Unit Property Act, and which land underlies the remaining units to be built as excepted on said Schedule "A."[7]

         The deadline to annex land to the condominium complex without unitholder consent was later extended to August 29, 2010.[8] After the expiration date, the Declaration and the Unit Property Act require the developer to obtain the consent of all unitholders before further annexing any land.[9]

         (5) The Declaration also included an easement to build the undeveloped parcels, which was "perpetual during the continued existence" of the condominium.[10] The Developer reserved:

an easement to construct fourteen (14) buildings and the remaining portion of the first building as delineated on the said Declaration Plan, and all of the necessary parking lots, walks, and other appurtenances requisite to service some or all of said fourteen (14) buildings and the remaining portion of the first building and to provide for the necessary ingress and egress to said building.[11]

         (6) Over time the developer executed a series of eight amendments to the Declaration. The original Declaration and seven of the amendments submitted the land and improvements associated with completed units to the condominium Declaration.[12] As the amendments were recorded, they continued to except out of the Declaration the "parcels of land required to build the proposed additional buildings."[13] Further, in the Declaration and all amendments submitting land, the developer excepted out the "pumping station" and "pump house."[14] The third and subsequent amendments submitting land also excepted out the "pool, " "pool house, " and "storm water management pond[s]."[15] After the eighth and final amendment, there were three undeveloped buildings not subject to the Declaration, with the units identified as numbers 51 through 53, 60 through 64, and 112 through 114.

         (7) In June of 2014, BMIG began to develop one of the remaining parcels. The Condo Association objected, informing BMIG that the right to add land to the condominium expired on August 29, 2010, and that the Declaration prohibited further development without the existing unitholders' approval.

         (8) As to the boat slip assessments, when BMIG purchased the interest as developer of the condominium project, it also purchased eleven boat slips, identified as I, M, S, 158 through 164, and 172.[16] On October 25, 2011, the Condo Association filed a complaint against BMIG seeking payment for past assessments associated with ownership of the boat slips, totaling $25, 250. The parties settled on December 21, 2011. BMIG paid $21, 760 and, according to the language of the settlement agreement, "confirm[ed] and agree[d] that it is obligated to pay, and shall pay, any and all future monthly assessments for the boat slips due and owing under the Declaration and Code of Regulations."[17] BMIG failed to pay any assessments after the settlement. As of December 31, 2015, the assessments due totaled $35, 370.41.[18]

         (9) On November 27, 2014, the Condo Association filed a petition in the Court of Chancery requesting (1) specific performance of payment for future condominium assessments and (2) payment of condominium assessments due and owing under the Declaration. BMIG filed a motion to dismiss for lack of subject matter jurisdiction, alleging the claim sought a legal remedy for breach of contract and not specific performance.[19] The Condo Association stipulated to transfer the proceedings to the Superior Court. BMIG filed its answer and counterclaim, seeking declaratory relief for rights to develop the undeveloped parcels, ownership of five condominium features, and the validity of the easement. Both parties filed for summary judgment based on a stipulated record.

         (10) The Superior Court held BMIG could develop the eleven remaining parcels free of the Declaration's restrictions because the land associated with the unbuilt units was expressly excepted from the Declaration and subsequent amendments. According to the court, the August 29, 2010 deadline to submit land to the condominium had no effect on BMIG's development rights, and thus the unitholders' consent was not required to build the units. The Superior Court also held BMIG could enforce the easement to build on the undeveloped parcels because the easement continued in force as long as the condominium development existed. In addition, the Superior Court held BMIG owned the pumping station, pump house, pool, pool house, and stormwater management ponds because they were excepted from the Declaration as amended. Lastly, the court required BMIG to pay the assessments, legal costs, late fees, and rebilling fees because BMIG agreed to pay all future assessments in the Settlement Agreement and thus "ha[d] no defense" to the Condo Association's claim.[20] Both parties appealed. This Court reviews the Superior Court's order granting summary judgment de novo.[21]

         (11) The Declaration controls the relationship between the Condo Association and BMIG, as Developer.[22] "As with any other contract, the intent of the parties to a condominium declaration or code of regulations must be ascertained from the language of the contract. Where that language is clear and unambiguous, this court will accord that language its ordinary meaning."[23] Our responsibility, therefore, is to interpret the plain language of the Declaration as it pertains to the land, easement, and features.

         (12) The Condo Association argues the Superior Court erred in finding BMIG had the right to develop the remaining land. The Condo Association points to paragraph 5(a)'s fixed deadline to annex land and improvements to the condominium without the consent of the condominium council or the unitholders.[24]According to the Condo Association, once the deadline expired, BMIG lost the rights to develop the excluded land. The Condo Association also argues that Schedule A of the Declaration limited the excepted property to the land "required to build" the remaining unbuilt condominium units.[25] Because the deadline passed to annex land to the condominium without further unitholder consent, the argument goes, there were no longer any units to add and thus no land "required" to build them. Thus, the Condo Association contends, BMIG's right to develop the parcels "for any purpose" expired.[26]

         (13) BMIG concedes the deadline expired to expand the condominium without consent, but argues it does not affect BMIG's right to build out the remaining undeveloped parcels in the condominium. We agree. Under paragraph 5(a) of the Declaration, the Developer can

annex to the land . . . [and] submit to each and every one of the provisions of this Declaration and the Unit Property Act, any land owned by the Developer and which is currently excepted out and from submission under the Unit Property Act, and which land underlies the remaining units to be built . . . .[27]

         Once the deadline expired, unitholder consent was required to add the undeveloped units to the condominium complex. But, BMIG does not seek to add the land and unbuilt units to the condominium regime. Instead, BMIG intends to develop the land and unbuilt units independent of the condominium established by the Declaration. Thus, the deadline has no effect on BMIG's development rights.[28]

         (14) The Condo Association also argues that, under the Declaration, the unitholders were "assured there would be no further development" after the expiration date when they purchased their units.[29] A plain reading of the Declaration, however, shows the unitholders were only assured that after August 29, 2010, no further units would be annexed to the condominium without their consent.[30]Thus, we affirm the Superior Court's decision that BMIG may develop the parcels to construct additional units.[31]

         (15) As to the easement, the Condo Association argues the Superior Court erred in holding BMIG can use the easement to construct the units. The Declaration granted the developer an easement "to construct fourteen (14) buildings . . . and to provide for the necessary ingress and egress to the said building[s]."[32] The Superior Court noted that "[t]he easement itself has no time limitation for construction."[33]And the Declaration states the easement is "perpetual during the continued existence" of the condominium-which still exists.[34] The Condo Association concedes that the easement was "strictly tied to future development of the condominium, " but argues that it expired when BMIG's right to develop the property expired. BMIG's right to develop the property did not expire, and thus neither did the easement required to complete the development.[35] We affirm the Superior Court's decision that the easement remains in effect.[36]

         (16) Turning to the features in the condominium complex, the pump house and pumping station were excepted from the condominium in the Declaration and all subsequent amendments. But the original Declaration Plan, dated January 23, 1996, states the pumping station is "to be conveyed to Sussex County."[37] And the First Amended Declaration Plan, dated February 21, 1996, and all subsequent plans confirm that it was "conveyed to Sussex County."[38] The Second Amended Declaration Plan and all subsequent plans state the pump house is "to be removed."[39]Thus, if the notes on the Declaration Plans are accurate, the Developer does not own the land associated with these features and cannot reclaim them by later amendment. But if the notes on the Declaration Plans are not accurate, then they belong to BMIG because they were excepted from the condominium in the Declaration and all relevant amendments.

         (17) As for the pool, pool house, and stormwater management ponds, the Declaration Plans establish their locations on condominium property prior to being excepted.[40] In Council of Unit Owners of Pilot Point Condominium v. Realty Growth Investors, [41] the Court of Chancery explained that buildings constructed on already submitted land belonged to the condominium and thus were subject to its declaration and the Unit Property Act.[42] Similarly, the pool, pool house, and stormwater management ponds were constructed on submitted condominium land before the third amendment attempted to except them out. Consequently, the unitholders had a percentage interest in the ...


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