Opinion
NO. 2015-CA-001534-MR
11-09-2017
CITY OF BOWLING GREEN APPELLANT v. COUNTY OF BUTLER AND CITY OF MORGANTOWN APPELLEES
BRIEFS FOR APPELLANT: H. Eugene Harmon Bowling Green, Kentucky Timothy L. Edelen Lucas W. Humble Bowling Green, Kentucky BRIEF FOR APPELLEE, BUTLER COUNTY, KENTUCKY: Richard J. Deye Morgantown, Kentucky BRIEF FOR APPELLEE, CITY OF MORGANTOWN: Jonathan S. King Central City, Kentucky
NOT TO BE PUBLISHED APPEAL FROM BUTLER CIRCUIT COURT
HONORABLE RONNIE C. DORTCH, JUDGE
ACTION NO. 14-CI-00103 OPINION
REVERSING AND REMANDING
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BEFORE: DIXON, J. LAMBERT, AND NICKELL, JUDGES. NICKELL, JUDGE: In this declaration of rights case, the City of Bowling Green (Bowling Green) challenges an order entered by the Butler Circuit Court preventing the sale of a portion of acreage it owns in Butler County (County). The trial court determined Bowling Green cannot subdivide or sell any portion of the 256-acre parcel—part of which was used as a landfill—until all regulatory and environmental agencies release the entire parcel from all closure activities and maintenance obligations. Additionally, the trial court found any notice Bowling Green had sent to County or to its county seat, the City of Morgantown (Morgantown), attempting to trigger a 180-day purchase option reflected in a Solid Waste Landfill Agreement (Agreement) is ineffective until all government requirements have been satisfied.
Relevant provisions of the Agreement read as follows:
1. Bowling Green shall apply for and take whatever action may be necessary to properly attempt to obtain a solid waste landfill construction permit and operational permit from the Kentucky Department for Natural Resources and Environmental Protection in its name and at its cost, to be located upon the above-described 256 acre William's tract in Butler County, Kentucky.
. . .
3. In the event that its said application is approved, Bowling Green shall maintain and properly operate the said solid waste landfill in compliance with all state and federal regulations and laws pertaining thereto.
. . .
12. This agreement shall remain in force and effect indefinitely and for so long as Bowling Green uses any portion of the subject 256 acre tract for a solid waste landfill disposal site; provided however, this agreement may be terminated by Bowling Green upon sixty (60) days written notice to the other parties hereto, in the event that it should ever determine within its sole discretion to discontinue using subject real estate for a solid waste landfill disposal site.
13. In the event Bowling Green terminates this agreement as set out in paragraph 12, Morgantown, and Butler County shall thereafter have the first option to purchase the subject 255 acre tract from Bowling Green for a period of 180 days at a cash price equal to the fair market value of said tract at that time.
Upon review of the record, the briefs and the law, and in the absence of any contract ambiguity, we hold the trial court did not interpret the Agreement based solely on the four corners of the document as required by Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003), and Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384-85 (Ky. App. 2002). Further, the trial court read requirements into the Agreement not adopted by the parties. Therefore, we reverse and remand for further proceedings consistent with this Opinion.
One paragraph in the Agreement lists the total acreage as 255. The rest of the document, and the deed, list the size as 256 acres. We believe this single occurrence to be a typographical error.
One paragraph in the Agreement lists the total acreage as 255. The rest of the document, and the deed, list the size as 256 acres. We believe this single occurrence to be a typographical error.
FACTS
In 1977, County, Morgantown, and Bowling Green executed an Agreement allowing Bowling Green to establish a landfill on a 256-acre parcel situated inside County. The landfill, which did not consume the entire tract, operated from 1978 until the late 1990's when solid waste was no longer accepted at the site and the closure process began. It appears Bowling Green is maintaining the site during the closure process and complying with all government regulations. Bowling Green has given no indication it seeks to abandon responsibilities associated with landfill closure or post-closure maintenance.
Bowling Green purchased the entire tract in a single deed.
Around 2008, Bowling Green began negotiating with Owl's Head Alloys, Inc., a secondary aluminum recycler, for the sale of some—but not all—of the 256-acre parcel. In late 2013, a deal was finally reached for Bowling Green's sale of sixty-seven acres to Owl's Head, on which the company planned to dispose of salt cake, an aluminum processing waste product. None of the land in the prospective sale is within the landfill operation, nor has it ever been used as a landfill.
By letter dated August 26, 2013, Bowling Green notified Morgantown and County of the pending sale, indicating it had agreed to sell Owl's Head sixty-seven acres at $2,500 per acre for a total of $167,500. As part of the sale, Owl's Head would share the cost of a survey and Bowling Green would retain timber rights and easements. County and Morgantown were offered the opportunity to purchase the sixty-seven acres on the terms negotiated with Owl's Head. County responded the August letter was flawed because it failed to state Bowling Green's intention to terminate the Agreement as required by Paragraph 12 of the Agreement.
The August letter was superceded by a letter dated December 2, 2013, in which Bowling Green notified County and Morgantown it was terminating the Agreement and their 180-day purchase option period for the entire 256-acre parcel was running. Accompanying the December letter was Municipal Order No. 2013-126 in which Bowling Green formally discontinued use of the property as a solid waste landfill disposal site, declared a portion of the 256-acre parcel to be surplus, approved its sale, and gave the sixty- and 180-day notices required by the 1977 Agreement. Neither Morgantown nor County exercised the purchase option within the 180-day window.
County sought input from the Division of Waste Management (DWM) on whether sale of the sixty-seven acres was permissible. By letter dated March 27, 2014, the state responded closure of the landfill will span "several years" and responsibilities will continue once closure is completed. DWM specifically wrote,
DWM cannot determine what maintenance obligations will remain at the Butler County Landfill until closure work is complete. The City of Bowling Green has not indicated it intends to sell the portion of the landfill where closure work is occurring, or that it is trying to abandon the facility. Once the landfill is closed, the City of Bowling Green will be required to file a deed notice in the chain of title notifying future purchasers of the waste disposal activities. Thus, currently the City of Bowling Green will be the entity that has the responsibility to maintain the closed landfill in accordance with Kentucky law after closure, and any subsequent purchaser will be notified those obligations exist.The DWM letter went on to say:
[b]ecause the tract proposed for sale was never used for waste disposal purposes, the new property boundary will be further than 100 feet from the closed waste disposal areas, and the sale likely will not impact activities being overseen by DWM, the DWM has no objections to the proposed sale.DWM was not asked to comment on whether sale of the entire 256-acre parcel was permissible.
On May 30, 2014, (before the 180-day first purchase option expired), County filed a complaint against Bowling Green and Morgantown seeking a Declaration of Rights under KRS 418.040 et. seq. At the same time, County moved for a temporary injunction to halt the proposed sale to Owl's Head and preserve the status quo.
Kentucky Revised Statutes.
In the complaint, County argued Bowling Green cannot terminate the Agreement until the entire parcel is released from government regulatory control; Bowling Green cannot give effective notice triggering the 180-day first purchase option until it obtains full release from all government regulation; and, Bowling Green cannot subdivide the 256-acre parcel and sell a portion of it because neither County nor Morgantown could then purchase the full 256 acres.
In Count I of the complaint, County acknowledges Bowling Green, as an alternative to obtaining full regulatory release, may find "a suitable and acceptable replacement entity to assume the obligations for the environmental compliance obligations[.]"
Morgantown admitted the entirety of the complaint in its answer and included a cross-claim against Bowling Green arguing the Agreement does not allow sale of the 256 acres in parcels, nor does it state the method for determining fair market value. Bowling Green timely answered the complaint, primarily arguing dismissal was appropriate because neither County nor Morgantown had exercised the option to purchase the land within the 180-day window. As for the cross-claim, Bowling Green argued the terms of the Agreement speak for themselves and Morgantown failed to state a claim on which relief could be given.
Following a hearing, the trial court denied County's request for a temporary injunction due to no showing of immediate and irreparable injury, loss or damage, and ordered all three parties to maintain the status quo and mediate the dispute. When mediation failed, Bowling Green moved for a status conference to return the matter to the active docket.
On February 2, 2015, stipulations—agreed to by all three parties—were filed. One of those stipulations says Bowling Green is responsible to DWM "for all environmental closure compliance related to the solid waste landfill disposal site, and acknowledges that continuing responsibility." Another stipulation says County sought guidance from DWM on whether the sale to Owl's Head was permissible. DWM's response was attached to the stipulations.
On September 18, 2015, the trial court entered a nine-page order concluding Bowling Green cannot terminate the Agreement until the entire 256-acre parcel "is released by all federal, state, and local environmental and regulatory agencies[;]" any notice Bowling Green sent to County and/or Morgantown attempting to trigger the 180-day first purchase option is ineffective until Bowling Green "has complied with all state and federal requirements[;]" and, Bowling Green "has no right to subdivide the 256 acres and to sell the same under the terms and conditions of the Solid Waste Landfill Agreement." Bowling Green timely appealed. With the foregoing in mind, we consider the trial court's decision.
ANALYSIS
The primary object in construing [an] . . . agreement is to effectuate the intentions of the parties. See Withers v. Commonwealth, Department of Transportation, Ky. App., 656 S.W.2d 747, 749 (1983); Wilcox v. Wilcox, Ky., 406 S.W.2d 152, 153 (1966). "Any contract or agreement must be construed as a whole, giving effect to all parts and every word in it if possible." City of Louisa v. Newland, Ky., 705 S.W.2d 916, 919 (1986).
Where a contract is ambiguous or silent on a vital matter, a court may consider parol and extrinsic evidence involving the circumstances surrounding execution of the contract, the subject matter of the contract, the objects to be accomplished, and the conduct of the parties. See, e.g., Reynolds Metals Co. v. Barker, Ky., 256 S.W.2d 17, 18 (1953); Dennis v. Watson, Ky., 264 S.W.2d 858, 860 (1953); L.K. Comstock & Co., Inc. v. Becon Const. Co., 932 F.Supp. 948, 965 (E. D. Ky .1993). Absent an ambiguity in the contract, the parties' intentions must be discerned from the four corners of the instrument without resort to extrinsic evidence. Hoheimer v. Hoheimer, Ky., 30 S.W.3d 176, 178 (2000); L.K. Comstock, 932 F.Supp. at 964. A contract is ambiguous if a reasonable person would find it susceptible to different or inconsistent interpretations. Transport Ins. Co. v. Ford, Ky. App., 886 S.W.2d 901, 905 (1994); Luttrell v. Cooper Industries, Inc., 60 F.Supp.2d 629, 631 (E. D. Ky. 1998). The fact that one party may have intended different results, however, is insufficient to construe a contract at variance with its plain and unambiguous terms. Green v. McGrath, 662 F.Supp. 337, 342 (E. D. Ky. 1986). Generally, the interpretation of a contract, including determining whether a contract is ambiguous, is a question of law for the courts and is subject to de novo review. First Commonwealth Bank of Prestonsburg v. West, Ky. App., 55 S.W.3d 829, 835 (2000); Morganfield Nat'l Bank v. Damien Elder & Sons, Ky., 836 S.W.2d 893, 895 (1992); Fay E. Sams Money Purchase Pension Plan v. Jansen, Ky. App., 3 S.W.3d 753, 757 (1999). However, once a court determines that a contract is ambiguous, areas of dispute concerning the extrinsic evidence are factual issues and construction of the contract become subject to resolution by the fact-
finder. See Cook United, Inc. v. Waits, Ky., 512 S.W.2d 493, 495 (1974); Reynolds Metals Co., supra; Lagrew v. Hooks-SupeRx, 905 F.Supp. 401, 404 (E. D. Ky. 1995).Cantrell, 94 S.W.3d at 384-85. Summarizing the above, via de novo review we will decipher the intentions of the parties based on the four corners of the Agreement without adding terms the parties did not use. We will give the words used by the parties their ordinary meaning. Frear, 103 S.W.3d at 106. Importantly, only if we discern ambiguity will we consider extrinsic proof.
None of the parties has alleged ambiguity. The trial court found no ambiguity. --------
Paragraph 12 specifies the Agreement remains in force "so long as Bowling Green uses any portion of the 256 acres as a solid waste landfill disposal site." We begin by determining how one uses land as a landfill. There is no dispute Bowling Green ceased accepting waste at the site in the late 1990's. Bowling Green maintains it has not used the Butler County property as a landfill since it stopped accepting waste at the site. Bowling Green formalized this view in a municipal order adopted November 19, 2013.
While no waste has been accepted at the landfill for two decades, Morgantown argues the site is still being used as a landfill because so long as Bowling Green is subject to closure obligations it is in the landfill business. We disagree. Morgantown's interpretation renders Paragraph 12 meaningless. Under Morgantown's theory, Bowling Green can never sell the land—not in its entirety, and not in pieces—because the former landfill will be subject to government regulation indefinitely.
Similarly, Morgantown's theory renders Paragraph 13 meaningless. If Bowling Green cannot terminate the Agreement under Paragraph 12—because a landfill in closure is a landfill in use—the purchase option will never materialize and can never be exercised by County and/or Morgantown. We simply do not believe the parties bargained for Paragraphs 12 and 13 with the intention they would never come to fruition.
Our duty is to construe the Agreement in its entirety, "giving effect to all parts and every word[.]" Newland, 705 S.W.2d at 919. We can accomplish this task without a torturous reading of the Agreement or the law. The purpose of a landfill is to dispose of waste. Merriam-Webster's Collegiate Dictionary 652 (10th ed. 2002). All parties agree Bowling Green ceased operating the landfill in the 1990's. This fact was memorialized in the stipulations signed by counsel for all parties and is reflected below:
The City of Bowling Green did operate a solid waste landfill on part of the 256 acre tract until the late 1990's, at which time it ceased operation of the landfill.Morgantown, and by extension the trial court and this Court, are bound by the stipulations to which Morgantown agreed and from which it never asked to be released. Hale v. CDR Operations, Inc., 474 S.W.3d 129, 139-40 (Ky. 2015). When Bowling Green stopped accepting waste at the site, it ceased "using subject real estate for a solid waste landfill disposal site" and could choose to terminate the agreement at any point thereafter by giving the sixty days' notice required by Paragraph 12. Contrary to the trial court's finding, Bowling Green's letter of December 12, 2013, gave Morgantown and County the notice required to terminate the Agreement and to trigger the 180-day purchase option period.
Under Paragraph 12 of the Agreement, both Morgantown and County allowed Bowling Green to control when the Agreement would end. By taking two steps, Bowling Green could terminate the Agreement. It had to unilaterally decide to cease using the property as a landfill and give sixty days' written notice of that decision. Bowling Green took both steps.
The trial court bases its decision almost entirely on a letter from DWM—a letter that should not have been considered because it is outside the four corners of the Agreement. Extrinsic evidence is not to be used "to vary the terms of a written instrument" absent ambiguity. Hoheimer, 30 S.W.3d at 178. No party has alleged the Agreement is ambiguous. In addressing whether use of the phrase "subject property" in the Agreement was ambiguous, the trial court found it was not, and identified no other item capable of multiple interpretations. There being no ambiguity, the DWM letter has no bearing on this case and provides no basis upon which to find DWM disapproves of the sale of the entire 256 acres or of the portion of the parcel on which the landfill operated. In point of fact, DWM was not asked whether the entire parcel could be sold. Having determined the notice given on December 2, 2013, was effective and neither County nor Morgantown exercised the first purchase option, any issue as to whether the 256-acre parcel can be subdivided is moot.
As written, Paragraph 12 turns entirely on Bowling Green's unilateral decision to cease use of the landfill and its giving notice of that determination to County and Morgantown. The Agreement identifies no role for DWM or any other regulatory agency in determining how Bowling Green manages its property rights. The owner of the one-time landfill will be subject to government regulation indefinitely, but there is no requirement that Bowling Green own the land in perpetuity.
The trial court exceeded its authority by imposing requirements the parties did not impose on themselves and relying on extrinsic evidence without first finding the Agreement was ambiguous. In light of these errors, we must reverse and remand for further proceedings consistent with this Opinion.
ALL CONCUR. BRIEFS FOR APPELLANT: H. Eugene Harmon
Bowling Green, Kentucky Timothy L. Edelen
Lucas W. Humble
Bowling Green, Kentucky BRIEF FOR APPELLEE, BUTLER
COUNTY, KENTUCKY: Richard J. Deye
Morgantown, Kentucky BRIEF FOR APPELLEE, CITY OF
MORGANTOWN: Jonathan S. King
Central City, Kentucky