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Majestic Oaks Homeowners Association, Inc. v. Majestic Oaks Farms, Inc.

Supreme Court of Kentucky

September 28, 2017

MAJESTIC OAKS HOMEOWNERS ASSOCIATION, INC. APPELLANT
v.
MAJESTIC OAKS FARMS, INC., JOSEPH O'BRIEN AND ASHLYN O'BRIEN APPELLEES

         ON REVIEW FROM COURT OF APPEALS CASE NO. 2014-CA-000492 SHELBY CIRCUIT COURT NO. 2009-CI-00873

          COUNSEL FOR APPELLANT: John C. Robinson Robinson Salyers, PLLC Brad Keeton Matthew Kuhn William M. Lear Jr Stoll Keenon Ogdon, PLLC.

          COUNSEL FOR APPELLEE, MAJESTIC OAKS FARMS, INC.: Paul Anton Zimlich Paul A. Zimlich, PLLC.

          COUNSEL FOR APPELLEES, JOSEPH O'BRIEN AND ASHLYN O'BRIEN: Austin Hays Austin Hite Hays, PLLC. John B. Baughmam Baughman Harp, PLLC.

          OPINION

          MINTON CHIEF JUSTICE.

         Kentucky law confirms the possibility of a defeasible easement, although the term itself appears in no reported case describing this type of easement, which is an easement capable of termination upon the occurrence of a specified event or contingency. In this case, Majestic Oaks Homeowners Association (HOA) contends the defeasible easement principle applies to the easement for ingress and egress retained by its subdivision's developer, Majestic Oaks Farms (Developer), to terminate it when a majority of HOA members voted to do so, as allowed by the express terms of Developer's recorded subdivision plat. On discretionary review, we agree with HOA.

         I. FACTUAL AND PROCEDURAL BACKGROUND.

         In 1995, Developer began developing a residential subdivision, Majestic Oaks Equestrian Estates (Estates). To memorialize Developer's and future homeowners' rights in Estates, Developer recorded with its subdivision plat a declaration of covenants, conditions, and restrictions (Original Declaration) and incorporated its terms into the homeowners' deeds to lots in the development. The Original Declaration accomplished two noteworthy things.

         First, the Original Declaration created Developer's easement in gross, stating, "[Developer] shall have a superior right and easement in gross [to use Estates's private roads]...for so long as [Developer], its successors or assigns, owns any Lot or any portion of the Property." The Original Declaration defined Lot as "any Lot which is part of the Property." Property was defined as "Lots 1-23 as shown on the above referenced Plat." Additional lots could be added as part of Property, according to the following language: "[Developer] intends to make this section containing 23 lots a part of a larger community known as [the Estates], having been developed in accordance with current plan. Subsequent additional plats will be recorded in the office of the Shelby County Clerk's Office."

         Second, § 8.3 of the Original Declaration, the other section at the center of this dispute, states:

Unless cancelled, altered or amended under the provisions of this paragraph, these covenants and restrictions are to run with the land and shall be binding on all parties claiming under them...unless an instrument signed by a majority of the then owners of all lots subject to these restrictions has been recorded agreeing to change these restrictions and covenants in whole or in part. These restrictions may be cancelled, altered or amended at any time by a 67% approval from each class of membership subject to these restrictions, but Developer shall retain the sole right to appoint the architectural approval committee until the last lot is sold.[1]

         In 1998 and 2000, Developer expanded Estates to include Lots 24-59, ( identified as "Sections 2 and 3, " by recording a plat. The plat for Section 3 also identified a section of land for "Future Development, " identified as "Sections 4 and 5." By this time, Estates included Lots 1-59, identified as "Sections 1-3." By March 13, 2006, Developer no longer owned any property in the Estates, having transferred Sections 1-3 to individual homeowners within the HOA through a quitclaim deed, but continued to own Section 4. Section 4 did not become part of Estates until April 2008, two years after all of Developer's then-existing property in the Estates was originally conveyed.

         In August 2006, HOA proposed amendments to the Original Declaration to be voted on by the homeowners, proposing .two relevant changes: (1) to expand "Property" to include Lots 1-59, i.e. Sections 1-3 of the Estates; and (2) to remove the language granting an easement in gross to Developer. The amendment to remove this language passed with 82% approval, well above the 67% required by the Original Declaration.[2]

         Believing the easement to be ineffective, HOA filed suit in circuit court against Developer to stop Developer's continued use of the purportedly terminated easement in gross because of the adoption by HOA of the amendment to the Original Declaration arid the relinquishment by Developer of any ownership rights in "Property." Both parties filed summary judgment motions against each other, with the trial court granting Developer's motion and a panel of the Court of Appeals affirming. We granted HOA's motion for discretionary review.

         II. ANALYSIS.

         A. Standard of Review.

         "The standard of review on appeal of a summary judgment is whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law."[3]"An appellate court need not defer to the trial court's decision on summary judgment and will review the issue de novo because only legal questions and no factual findings are involved."[4]

         B. The Possessory Interest Granted to Developer was a Defeasible Easement in Gross that Terminated Upon a Greater Than 67% Vote, Sufficiently Fulfilling a Condition for Termination ...


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