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Chamberlain, LLC v. Hills Land & Development Co.

United States District Court, W.D. Kentucky, Louisville

February 9, 2015

CHAMBERLAIN, LLC, Plaintiff,
v.
HILLS LAND & DEVELOPMENT CO., Defendant.

MEMORANDUM OPINION

CHARLES R. SIMPSON, III, Senior District Judge.

This matter is before the court on motion of third-party defendants Norton Commons, LLC and Traditional Town, LLC (collectively, "Norton Commons"), for judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c).[1]

The facts underlying this suit are as follows[2]:

In the course of developing Norton Commons Planned Village Development in Jefferson County, Kentucky, Norton Commons was required by the governing land use authorities to acquire an easement over a piece of adjacent property for the construction and maintenance of a retention basin and associated wetlands in order to obtain the land use approvals necessary to complete their own development. (Third-Party Complaint ("TPC"), ¶¶ 17, 19; DN 22-1, p. 1-2). To that end, Norton Commons obtained a 165, 291 square foot variable drainage easement (the "easement") over property owned by plaintiff, Chamberlain, LLC in 2004. This easement continues to encumber the Chamberlain property. (TPC, ¶18). It appears undisputed that the retention basin and associated wetlands were "required as binding commitments and conditions of approval of the Norton Commons Master Plan by the Jefferson County Planning Commission and Jefferson County Commissioner." (DN 22-1, p.2, n. 2; TPC, ¶¶ 19, 20, 22, 23).

In August, 2010, Chamberlain entered into a real estate purchase agreement ("REPA") with developer Hills Land & Development Co. ("Hills") to sell the property adjacent to the Norton Commons development, including the portion of the property encumbered by the easement. Pursuant to the sales agreement, Hills deposited $25, 000.00 in escrow simultaneously with the execution of the agreement. TPC, ¶¶ 24, 25, 31). Hills filed a proposed development plan which revealed an intention to alter the boundaries of the retention basin and to build impervious parking areas within the boundaries of the easement. (DN 22-1, p. 2).

In 2011, Norton Commons filed suit against Hills, Chamberlain, and Louisville and Jefferson County Metropolitan Sewer District to enjoin Hills from making the proposed alterations within the easement. That action remains pending in the Jefferson Circuit Court. (TPC, ¶¶ 33, 34).

Hills has been unable to resolve the land use issues and consummate the sale. TPC, ¶ 36. Chamberlain filed the complaint in this case in the Jefferson Circuit Court against Hills seeking a declaration that it may exercise its right to terminate the agreement as a result of Hills' failure to purchase the property within a reasonable time (Count I), and a finding that Hills failure to purchase the property within a reasonable time constitutes a default under the sales agreement, entitling Chamberlain to the deposit as liquidated damages (Count II). Hills removed the action to this court under our diversity jurisdiction, and filed a counterclaim against Chamberlain and third-party complaint against Norton Commons, Traditional Town and WPPA.

This court issued an order that Hills show cause why the matter should not be remanded as improperly removed. In reviewing the notice of removal, the court noted that one ground for removal - the purchase price of the real property - was irrelevant to a determination of the amount in controversy:

The purchase price of the real property is wholly irrelevant to the determination of the amount in controversy in this case, as Chamberlain seeks only to terminate the REPA rather than enforce it. Compl., ¶¶ 14; 18; Prayer, ¶ 1. Rather, Chamberlain seeks only the $25, 000.00 deposit as liquidated damages. Compl., ¶ 21; Prayer, ¶ 2; REPA, ¶ 3. Even the Counterclaim, which we do not consider for purposes of this evaluation, which seeks specific performance[, ] does not seek a judgment requiring Chamberlain to convey the property. Rather, it seeks an order that Chamberlain perform under the REPA upon Hills' attainment of all conditions precedent. DN 4, p. 14, ¶ 65. Thus Hills seeks nothing more than a declaration that it is, essentially, not out of the game with respect to the REPA, and damages allegedly caused by delay.

DN 29, pp. 3-4.

Chamberlain has asserted a breach of contract claim against Hills, stating that "Hills' failure to perform within a reasonable time its obligation to purchase the Property is a default of its obligations under the Agreement... Chamberlain is entitled to the Deposit as liquidated damages." DN 1-3, p. 3, ¶¶ 20, 21. The term "Deposit" is defined within the agreement: "Hills delivered to an escrow agent certain money ("Deposit") to be held and applied according to the terms of the Agreement." DN 1-3, p. 2, ¶ 5. The parties agree that Hills paid $25, 000.00 into escrow at the time of the execution of the agreement, although the amount is not mentioned in Chamberlain's complaint.

The court initially thought that this was the end of the matter, as the "Deposit" identified in the complaint is a sum well below the court's $75, 000.00 jurisdictional limit. However, upon consideration of the precise wording of the REPA provision, the court concludes that the "Deposit" may have increased to $100, 000.00 by operation of the provision, thus exceeding the jurisdictional limit.

Paragraph 3(a) of the REPA addressing payment of the purchase price states, in pertinent part:

Upon execution of this Agreement by Buyer and Seller, Buyer will deliver to Sterling Land Title Agency, Inc. ("Escrow Agent") $25, 000 (the "Deposit", which includes interest accruing thereon)... The Deposit will be credited towards the Purchase Price. However, if the Closing (as defined in Section 10) does not occur, the Deposit shall be paid to the party entitled to receive it. If Buyer fails to terminate this Agreement on or before Satisfaction Date 2, then within five days thereafter Buyer will ...

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