Eastern District Affirms Abuse of Process Damages in St. Louis County Subdivision Lot Split Lawsuit

in Law

By JAMES R KELLER

Missouri’s Eastern District Court of Appeals recently upheld sizable attorney fee awards for a seller and against subdivision trustees. The court also found in favor of those same trustees and against a buyer of a residential lot in the City of Frontenac.

The dispute involved an attempted lot split for construction of another home. The case is Trustees of Clayton Terrace Subdivision v. 6 Clayton Terrace, LLC and Huey, Trustee, June 19, 2018.

The seller’s mother, Jane Huey, lived in a home on a 2.3-acre parcel known as Lot 6 Clayton Terrace. Lot 6 was part of a 22-lot subdivision in Frontenac established by plat in 1923.

Huey died in 2011. The seller was the trustee of her mother Huey’s estate, including Lot 6. The seller had not lived in the home on Lot 6 for decades. She listed Lot 6 with Janet McAfee Real Estate, Inc. in 2012. A few months later, Lot 6 was sold.

The subdivision had various recorded restrictions amended over time. One of them required a 15-day notice to all subdivision lot owners of a pending sale. This allowed the subdivision owners, who had a right of first refusal, the first opportunity to purchase the lot at the sale price of the original sale – subject to all its other sale terms and conditions.

If more than one lot owner decided to a timely purchase, all such purchasing owners would own the lot on a pro rata basis.

The realtor timely hand-delivered notice of the sale to all lot owners. The sale closed for $415,000. No lot owner made a claim to purchase. This was a key piece of evidence for part of the appellate court’s decision.

The seller had no notice of any objection to the sale. There were no signs for someone to claim an irregularity in the sale going forward. The seller disbursed the proceeds to the estate beneficiaries.

The buyer wanted Lot 6 for investment purposes. Meanwhile, he leased it to Kevin McGowan and his six children.

The family made considerable improvements to their new home. Among them were removal of walls, combining the kitchen and dining areas, adding bedrooms and an exterior door, removing trees, refinishing the swimming pool, adding a new heater and replacing/refinishing the concrete pool deck.

The subdivision indentures provided that each lot—no matter its size—can only have one house.

More than a year after the sale, the buyer filed an application with the City of Frontenac to subdivide Lot 6. The City’s Planning and Zoning Commission approved the lot split.  This would allow another house on the new lot.

Two months later, the subdivision trustees sued the seller and the buyer. Count I sought a declaratory judgment against the seller for alleged failure to follow the required 15-day notice of a pending sale. It alleged that the seller failed to accept the offer of lot owner Elizabeth Schwartz to purchase the property under the 15-day notice provision.

Count II sought to enjoin (prohibit) the buyer from building an additional home on Lot 6. The subdivision indenture prohibiting any lot split had been “a matter of public record for almost 85 years and was still in effect,” according to the appellate court. This was another key piece of evidence.

The seller made a counterclaim against the trustees for abusive process in bringing Count I.

The trial took place on stipulated facts with no jury. This means the parties agreed on the evidence. It was up to the judge to apply these facts to the law and decide who would prevail. A stipulated record is not typical in a case tried before a judge, but it does occur occasionally. It never happens in a case tried before a jury.

The trial court’s decision sparked this appeal. On Count I, the judge ruled the sale was proper and the trustees abused process by suing the seller. A claim for abuse of process requires proof that the defendant made an illegal, improper, perverted use of process, a use neither warranted nor authorized by the process. The claim alleges that a defendant had an improper purpose in exercising its action, and this resulted in damage.

The trial court found the seller’s attorney fees and costs due to the litigation in the amount of $119,243 to be fair and reasonable. And yet, the court only awarded her $60,000 with $40,000 of that amount to be paid by the buyer and the other $20,000 to be paid by the trustees. The buyer had no claim against the seller.  The seller had no abuse of process claim against the buyer, only the trustees.

In Count II, the trial court found for the trustees. This allowed the division of Lot 6 into two parcels with a house on each.

The case turned in large part on the testimony of the head subdivision trustee. He stated that the only reason for suing the seller was to have the buyer move out of the neighborhood and take “their schemes with them.” He also acknowledged that the trustees had no “beef with the seller.”

There also was no evidence that subdivision lot owner Schwarz had made an offer to purchase the lot. This lack of evidence probably sealed the trustees’ fate on this point.  Based upon this record, the appellant court increased the attorney fee award to the seller and against all trustees to its full amount of $119,243.

The appellant court decided that the trustees should prevail against the buyer and prevent the splitting of the lot based upon the subdivision indentures which prohibited any lot split.

The Eastern District decided that the trial court’s award of $203,915 in attorney fees and costs to the trustees was too high. It sent the case back to the trial court to determine a “more reasonable amount” to be paid by buyer, “if any.”

James R. Keller is counsel with Sandberg Phoenix & von Gontard, P.C. where he concentrates his practice on construction law, complex business disputes, real estate and alternative dispute resolution. He is also an arbitrator and a mediator. Keller can be reached at (314) 446-4285, jkeller@sandbergphoenix.com.

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