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Pine Forest Investments Group, LLC v. County of Bastrop

Court of Appeals of Texas, Third District, Austin

June 22, 2018

Pine Forest Investments Group, LLC, Appellant
v.
The County of Bastrop, Texas; The Bastrop Independent School District; and the City of Bastrop, Texas, Appellees

          FROM THE DISTRICT COURT OF BASTROP COUNTY, 21ST JUDICIAL DISTRICT NO. 052-21, HONORABLE CARSON TALMADGE CAMPBELL, JUDGE PRESIDING

          Before Justices Puryear, Field, and Bourland

          MEMORANDUM OPINION

          CINDY OLSON BOURLAND, JUSTICE

         Appellant Pine Forest Investments Group, LLC ("the Developer") complains of the trial court's final judgment in favor of appellees Bastrop County, Bastrop Independent School District, and the City of Bastrop (collectively, "the Bastrop Entities"). The dispute arises out of a 2012 real estate contract under which the Developer sought to purchase 262 lots in the Pine Forest Subdivision. As explained below, we affirm the trial court's judgment in part and reverse and remand in part for proceedings related to the Developer's claims pursuant to the Texas Open Meetings Act ("TOMA"). See Tex. Gov't Code §§ 551.001-.146.

         Factual and Procedural Summary

         This case is grounded in a long, contentious, and complicated background. The factual summary below is taken from the pleadings and attached evidence and the testimony and exhibits produced at the various hearings before the trial court. The Pine Forest Property Owners Association ("the Association") is a non-profit corporation formed in 1978 to govern the subdivision, which consists of multiple "units" of lots-Unit 6, which is where the 262 lots in question are located, and Units 7 through 12. The articles of incorporation state that a voting member in the Association is a person or entity "who is the owner of a fee interest or of the equitable title in any lot" in the subdivision and that ownership is deemed to have vested "upon delivery of a duly executed deed or contract" to the buyer. The original Unit 6 Declaration of Covenants, Conditions, and Restrictions (CCRs), executed in 1979, define owner as "(i) the record owner . . . of the fee simple title and (ii) any lot purchaser who is purchasing his or her or its lots under an agreement for deed," and provide that "[e]ach Owner shall automatically be a member of the Association with a right to one vote for each whole Lot or Reserve owned." The CCRs could only be amended by a vote of at least one-third of the owners. Units 7 through 12 are governed by their own CCRs, but those documents do not appear to have been introduced into evidence. The Association is operated by a board of directors, and the two sets of CCRs govern how board members are elected.

         This dispute arises out of a 2012 real estate contract ("the Contract") under which the Developer agreed to buy a total of 262 lots in Unit 6 from the Bastrop Entities and the Association.[1]The Bastrop Entities had acquired ownership of the lots largely through foreclosure. The Developer, acting through its managing partner, Robert Leffingwell, agreed to pay $2, 000 per lot and to provide infrastructure for Unit 6. The Contract imposed two "conditions precedent"-the first required that a "final construction Development Agreement" be approved by the City before the closing date and the second required that the Association execute the contract within 180 days of the date the first party signed it. The Contract also provided that the sellers would provide the Developer with a commitment for title insurance within forty-five days of the date the title company was given a copy of the Contract; that the Developer could object in writing to any defects, exceptions, or encumbrances to title disclosed in the commitment within thirty days or before closing, whichever was earlier; and that the selling entities "shall cure the timely objections of [the Developer] or any third party lender within 181 days after [the selling entities] receive[] the objections and the Closing Date will be extended as necessary. If objections are not cured within such 181 day period, this contract will terminate and the earnest money will be refunded to [the Developer] unless [the Developer] waives the objections." The Contract stated that closing "shall be held" on or before 180 days after the Developer receives the title commitment, subject to possible extension related to objections to the title commitment. The first of the Bastrop Entities executed the contract on February 21, 2012, and Leffingwell signed it on behalf of the Developer on October 15, 2012.

         A title company soon sent the Developer a title commitment containing numerous "exceptions to title," largely due to the fact that the properties were acquired by the Bastrop Entities through foreclosure. Leffingwell testified that the Developer objected to those exceptions and never waived those objections. Although Leffingwell seems to have sought a title commitment elsewhere, the Bastrop Entities never cured the Developer's objections.

         Following execution of the Contract, on September 14, 2012, the City and the Developer signed a Development Agreement ("the Agreement") setting out the Developer's duties with regard to the infrastructure it was to provide to the subdivision. The Agreement provided that the Developer would submit to the City a Master Drainage Plan within ninety days and specified that Developer's failure to do so "shall result in an automatic and full termination of the Agreement" unless the City specifically agreed in writing to an extension of time. The Agreement would "only become fully and finally effective" when the City's engineer reviewed and accepted the Master Drainage Plan, and the City had the right to terminate the Agreement in the event of the Developer's "uncured material default," breach, or failure "to meet any stipulated time frames for deliverables or other performance requirement . . . after written notice and reasonable time to cure." The Developer provided a "Master Drainage Study" on December 12, 2012, and on January 3, 2013, the City asked the Developer to provide additional information and verify certain items. The City reminded the Developer that its "review cannot be completed until the comments of this letter have been addressed" and that the drainage study was required under the Agreement and was "the first step prior to submitting construction/development plans." The Developer did not provide the requested information or an updated drainage plan, and the parties never closed on any of the lots.

         On June 4, 2013, the City wrote a letter informing Bastrop ISD that the city council had determined that the Developer "has failed to timely submit . . . a complete, sealed Master Drainage Plan" or request an extension of time for that plan and that "this failure has resulted in an automatic and full termination of the Agreement." On June 5, 2013, the City sent the Developer a letter stating that the Agreement was "now automatically and fully terminated" because the Developer had not responded to the City's notice of deficiencies in the drainage plan or asked for an extension of time. The City reminded the Developer of its contractual duty to submit a "complete Master Drainage Plan" and stated that the deficiencies noted by the City Engineer had to be addressed before the proposed Drainage plan would be considered a complete and final submission. On June 10, the County commissioners court convened a meeting and voted to reject amendments to the Contract proposed by the Developer. On June 12, Bastrop County informed the Developer that the commissioners had voted to reject the amendments and to consider the Contract "void on its own terms," stating that "[t]here is no valid contract for the sale of lots," the Developer "does not have any interest, equitable or otherwise, in the lots," and the Developer "does not have any authority to vote the County of Bastrop's properties at any property owners' association meeting."

         At a June 13, 2013 Association board meeting, board president John Gardner told the board that although the County and the City had "canceled the contract," the Developer "has equitable title, and thus, contractual rights." Gardner said the Developer had "secured equitable title [to the 262 lots] two weeks before the City and the County reneged."[2] In September 2013, the Association held a meeting and voted to amend the Unit 6 CCRs, which required approval by at least one-third of the Unit 6 lots. Fifty-six non-developer-owned lots voted against the amendments, fifty-seven non-developer lots voted for them, and the Developer added 262 votes in favor-the board minutes stated the Developer had "record title under contract" for those lots.[3] Among other things, the amended CCRs gave the board sole discretion to "sever one or more Lots from the jurisdiction of the Association if deemed reasonable and prudent." The amended CCRs also gave the Developer exclusive development rights for an eight-year "development period" and stated that provisions related to developer privileges could not be amended, modified, or replaced during that period. On April 11, 2015, representatives of the Bastrop Entities attended the annual membership meeting, but the president of the board would not allow the Entities to vote for the 262 lots in question and instead again allowed the Developer to cast votes for the 262 lots. The CCRs were amended similarly to the 2013 amendments, providing that a member of the Association was a record owner of fee simple title or any purchaser under an agreement for deed; giving the board the ability to sever lots from the Association's jurisdiction; and giving the Developer exclusive development rights for eight years.

         Meanwhile, on April 9, 2015, the Bastrop Entities filed this suit, seeking, among other things, a declaration that the Contract was "null, void, ineffective and of no legal merit" because the Developer had not complied with the Contract's conditions precedent; had breached the Agreement, which was a condition precedent to the Contract; and lacked sufficient funding to perform under the Contract. The Bastrop Entities sought a declaration that the Developer had "misappropriated" their voting rights in the Association and that any actions taken by the Association based on votes cast by the Developer were null and void. The Bastrop Entities also sought an injunction barring the Developer and anyone acting in concert with the Developer from misappropriating the Entities' voting rights. The Developer answered and counterclaimed for specific performance, later asserting an additional counterclaim alleging TOMA violations related to what it claims was an improper executive session held by the City on May 28, 2013. The Association intervened on the side of the Developer in August 2015, and in September 2015, the trial court signed a scheduling order setting the matter for a bench trial on May 5 and May 6, 2016.

         The Bastrop Entities filed a motion for partial summary judgment asserting that as of April 11, 2015, the date of the Association's annual meeting, and December 21, 2015, they were the owners of the lots in question and entitled to vote as members of the Association. The Bastrop Entities pointed to the Association's governing documents and argued that they held record title and that there was no agreement or contract for deed under which the Developer might assert an "equitable right" to the lots. On January 13, 2016, the trial court held a hearing on the motion, and about a week later, it signed an order determining that as of April 11 and December 21, 2015, the Bastrop Entities were the record owners of and entitled to vote on behalf of the lots.[4]

         On February 6, 2016, the Association's annual membership meeting was held. Clifton Seidel, Drusilla Rogers, and Brenda Winkler were elected to the board of directors, and John Gardner and William Haschke were voted off the board. On February 16, the Bastrop Entities issued a notice of a special Association meeting to be held February 27, seeking to declare null and void the 2013 and 2015 CCRs; to reaffirm the original CCRs; and to remove John Clark and Robert Leffingwell from the board. On February 19, the board held a special meeting in which four of the seven board members voted to sever 100 lots from the Association's membership, including the lots owned by Seidel, Winkler, and Rogers. On February 24, Clark emailed Seidel, Winkler, and Rogers to inform them that they had been removed from the board. On February 25, the board held another special meeting at which they severed the remaining Unit 6 lots from the Association and appointed Gardner and Haschke back onto the board. That meeting was very contentious, with Seidel insisting that he, Winkler, and Rogers were still board members and Clark largely refusing to allow or answer questions from those individuals.

         On February 27, a special membership meeting called by the Bastrop Entities was held. Clark asserted that the meeting had not been properly called because the Bastrop Entities did not own enough lots in Units 7 through 12, and he and three board members voted to adjourn and then left the meeting. The Bastrop Entities continued with the meeting, and the vast majority of the lot owners in all units voted to remove Clark and Leffingwell from the board. Excluding the 262 lots voted by the Bastrop Entities in favor of both removals, the non-Entity-owners voted eighty-three to two to remove Clark and eighty-four to one to remove Leffingwell. All forty-three non-Entity owners of Unit 6 lots present at the meeting voted to declare the 2013 and 2015 CCRs invalid and to reaffirm the original CCRs.

         In March 2016, Clifton Seidel and Drusilla Rogers ("Intervenors") intervened in the lawsuit, naming John Gardner, John Clark, Robert Leffingwell, and William Haschke as third-party defendants and seeking declarations about the validity of the 2013 and 2015 CCRs, the Unit 6 severance, Intervenors' removal from the board, and the appointment of Gardner and Haschke. Intervenors asserted that although the 2013 CCRs recited that one-third of the owners had ratified the changes-specifically that fifty-seven "non-developer lots" and the "262 lots over which [the Developer] holds record title under contract" voted in favor of the changes while only forty-six "non-developer owned lots" voted against-the Developer improperly voted as "the purported equitable owner" when the Bastrop Entities were instead the owners; Intervenors made similar allegations about the 2015 CCRs. In April 2016, the third-party defendants filed their own request for declaratory relief, asking the trial court to declare that the February 2016 severance of Unit 6 from the Association was valid.[5]

         The Bastrop Entities filed a motion to enter an amended scheduling order, asking the court to reset the original May 5 bench trial and instead set "a partial nonjury trial on May 3, 2016 regarding the declaratory relief sought with respect to the actions of" the Association and its board; the Entities asked the court to sign the amended scheduling order "so that there will be certainty regarding the matters to be tried nonjury before the court on May 3, 2016." The third-party defendants then filed a notice setting a hearing on their request for declaratory judgment for May 3. The Bastrop Entities filed a cross-claim against the third-party defendants[6] and a notice of non-jury trial on May 3 on that cross-claim and on their request for declaratory relief "regarding the unlawful actions of [the Association] and its former Board of directors." The trial court then signed an amended scheduling order stating that a "nonjury trial" was set for May 3 "with respect to [the Bastrop Entities'] complaints regarding the actions of the Association, the voting rights of members of the Association, and Cliff Seidel and Drusilla Rogers' Plea in Intervention and Third-Party Petition for Declaratory Judgment and Application for Temporary Injunction."

         A three-day hearing was held starting on May 3, and at the conclusion, the trial court stated, "The real estate contract that's the subject of this suit is-has terminated and it is null and void. It has no effect. The Court will adopt the [Bastrop Entities'] grounds in evidence that the contract is terminated and is null and void." The court went on to make statements related to actions taken by the Association and its former president, stating that Gardner told the Association's board a "falsehood" in stating that the Developer, through Leffingwell, had "secured equitable title."[7] The court stated that it was denying the relief sought by the third-party defendants and was granting most of the relief sought by the Bastrop Entities in their original petition. The court stated who the board members were as of February 6, 2016. A follow-up hearing was held on May 18 to address whether certain board members should be removed. At the conclusion of that hearing, the trial court and the parties' attorneys discussed drafting a final judgment and the possible severance of the Association's remaining claims, noting that there was uncertainty as to whether the court-declared board members would want to proceed on those claims. On September 21, the trial court signed a final judgment in favor of the Bastrop Entities.

         Discussion

         In its first issue, the Developer argues that in the hearing or bench trial held May 3 through May 5, the trial court erroneously resolved matters that "had not been pleaded such that they were not noticed prior to trial" and were not identified in the trial setting and that it improperly made its rulings "without the benefit of discovery." In its second issue, in which it argues that the court erred in ruling that the Developer did not have equitable title to the lots in question so as to vote in the Association meetings, the Developer insists that questions related to equitable title "were not identified as contested issues in any pleading" filed by the Bastrop Entities, were not properly noticed as issues to be addressed in the hearing, and "were not the subject of any pre-trial discovery." It further argues that the court erred in making its determinations that the Developer did not have equitable title to the lots so as to allow it to vote in the Association meetings. In its third issue, the Developer contends that the trial court improperly disposed of its TOMA claims without hearing argument or evidence on those issues. We will consider the Developer's issues related to notice first.

         As a preliminary matter, the Developer asserts that the court proceeded to trial when "no discovery had been conducted/allowed." However, the Bastrop Entities filed their original petition in April 2015, discovery was not stayed until March 2016, [8] and the record reflects that some amount of discovery did in fact take place between April 2015 and March 2016. Furthermore, at a hearing in January 2016, the trial court urged the parties to finish discovery, noting that April 5 was the discovery deadline. Indeed, at that hearing, counsel for the Developer, in response to a motion for continuance filed by the Bastrop Entities, stated, "Your Honor, there's been an adequate time for discovery. It's been-we've been going through discovery for six ...


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