Littlebrook Airpark Condominium Association v. Sweet Peas, LLC

MAINE SUPREME JUDICIAL COURT Reporter of Decisions

Decision: 2013 ME 89

Docket: Yor-13-26

Argued: September 10, 2013

Decided: October 31, 2013

Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and

JABAR, JJ.

LITTLEBROOK AIRPARK CONDOMINIUM ASSOCIATION

v.

SWEET PEAS, LLC, et al.

SILVER, J.

[¶1] This matter comes before us pursuant to M.R. App. P. 24(c) on report

from the Superior Court (York County, Fritzsche, J.). Littlebrook Airpark

Condominium Association (“the Association”) brought this action seeking, among

other things, a declaratory judgment clarifying the rights of the parties pursuant to

a lease of real property. The reported question concerns the effectiveness of an

unrecorded amendment to a lease that violates a recorded mortgage covenant. The

Superior Court concluded that the lease amendment was effective, notwithstanding

the mortgage covenant and a subsequent foreclosure. We discharge the report.

I. BACKGROUND

[¶2] The following facts are drawn from the summary judgment record. On

March 18, 1999, John Hardy leased part of the land comprising Littlebrook Airport

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in Eliot to Littlebrook Airport Development Co., Inc. (“LADC”), for a term of

twenty years. The stated purpose of the lease was to allow for the maintenance and

sale of hangar units on the property as condominium units for the storage of private

aircraft. The same day, Jean M. Hardy, John Hardy’s wife and the president of

LADC, executed a Declaration of Condominium submitting the leased property to

the Maine Condominium Act, 33 M.R.S. §§ 1601-101 to 1604-118 (2012). Both

the lease and the declaration were recorded in the York County Registry of Deeds.1

By a recorded deed dated October 17, 2000, John Hardy conveyed his interest in

the leased property to himself and Jean Hardy as joint tenants. John Hardy died on

November 15, 2000, leaving Jean Hardy as the sole surviving owner of the leased

property.

[¶3] By a recorded deed dated June 30, 2005, Jean Hardy sold the leased

property to Littlebrook Ventures, LLC. She also assigned to Littlebrook Ventures

her interest in the lease, as successor to John Hardy. James Barrett was the sole

member of Littlebrook Ventures. Simultaneously with the conveyance from Jean

Hardy, Littlebrook Ventures executed and delivered to Hardy a mortgage deed for

the leased property to secure the purchase price. Pursuant to the mortgage, which

was recorded, Littlebrook Ventures agreed “not to . . . modify any . . . leases or

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The lease was amended later in 1999 in a manner not relevant to this appeal.

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tenancies [on the property] . . . in whole or in part, without [Hardy’s] prior written

consent.” Both the deed and the mortgage stated that the conveyance was subject

to the lease and the declaration as amended in 1999. As further security,

Littlebrook Ventures assigned to Hardy its interest in the lease. In the recorded

assignment, Littlebrook Ventures agreed “not to alter, modify or change the terms

of [any leases on the property] . . . without the prior written consent of [Hardy].”

[¶4] On the same day, LADC, through Hardy as its president, assigned its

rights as declarant of the condominiums pursuant to the Maine Condominium Act

to Windmill USA, LLC (“Windmill”). Barrett was the sole member of Windmill.

LADC also assigned its interest in the lease to Windmill, which assumed all of

LADC’s obligations as tenant.

[¶5] Windmill, through Barrett as its sole member, executed a document

styled as an “Amendment to Declaration of Condominium,” dated

October 11, 2005. The document, which was recorded, purports to extend the term

of the lease to 2059—an additional forty years beyond the original twenty-year

term—and to give unit owners the right to use the runway on the property without

a fee. Two days later, on October 13, 2005, Littlebrook Ventures and Windmill,

through Barrett as sole member of both entities, signed an “Addendum to Lease”

purporting to amend the lease in accordance with the declaration amendment by

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extending the term of the lease and allowing use of the runway without a fee. The

lease amendment was not recorded, and Hardy did not give prior written consent.

[¶6] Littlebrook Ventures conveyed the property back to Hardy by a deed in

lieu of foreclosure dated December 15, 2005, and recorded on March 31, 2006.

The deed did not discharge the mortgage or reference the 2005 amendments, but

stated that it was subject to the declaration and lease as amended in 1999. In

July 2006, Hardy enforced her statutory power of sale and purchased the property

at the foreclosure sale. Hardy then conveyed the property to Sweet Peas, LLC, via

a quitclaim deed without covenants dated October 25, 2006. This conveyance was

explicitly made subject to the 2005 declaration amendment, but not the 2005 lease

amendment. Sweet Peas later executed a mortgage in Hardy’s favor.

[¶7] On July 8, 2011, the Association filed a nine-count complaint against

Sweet Peas, naming Hardy as a party in interest. One of the counts sought a

declaratory judgment that the 2005 amendments to the lease and declaration were

effective and binding against Sweet Peas. The other counts allege breach of

contract, conversion, violation of airport standards, harassment or nuisance,

tortious interference with a contract, and retaliatory eviction. These counts allege,

among other things, that Sweet Peas has failed to maintain and repair the airport

facilities; interfered with the Association’s use of the airport facilities; improperly

demanded reimbursement for expenses; removed a windsock that the Association

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had installed on the property; violated various legal provisions regarding the

operation of airports; advised the individual hangar unit owners to discontinue their

use of airport facilities and called the police on those who persisted; interfered with

the Association’s relationship with the unit owners by communicating with the unit

owners directly; and retaliated against the Association and unit owners in an

attempt to cause an early termination of the lease after negotiations for the sale of

the airport to the Association broke down. Sweet Peas filed a counterclaim against

the Association as well as a third-party complaint against several individual unit

owners. These claims allege that the Association and the named unit owners

caused damage to the runway and tarmac, and wrongfully withheld rent. On

October 31, 2011, Sweet Peas and Hardy both moved for partial summary

judgment on the declaratory judgment count of the Association’s complaint. The

Association opposed the motions and filed a cross-motion for partial summary

judgment on that count.

[¶8] After a hearing on the cross-motions for summary judgment, the court

entered judgment in favor of the Association on April 26, 2012. The court

concluded that “the October 11, 2005 amendment to declaration of condominium

and October 13, 2005 addendum to lease are valid and enforceable.”2 The court

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On May 7, 2012, Sweet Peas and Hardy moved to alter or amend the judgment pursuant to

M.R. Civ. P. 59(e). On August 22, 2012, the court granted the motion to the extent that it sought

correction of typographical errors in the original opinion, but otherwise denied the motion.

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reasoned that “Barrett’s actions constitute [an] act of default but do not void the

lease amendments” as against the Association because “there was no agreement

where the [Association] subordinated its rights to . . . Hardy as the mortgage

holder.” On January 7, 2013, at the request of Sweet Peas and Hardy, and over the

Association’s objection, the court reported the case to the Law Court pursuant to

M.R. App. P. 24(c) for determination of “the legal question with respect to the

40 year lease amendment and whether or not the lease amendment survived the

foreclosure.” The court acknowledged that “a Law Court decision would not ‘in at

least one alternative finally dispose of the action,’” and that Rule 24(c) should be

used “sparingly,” but indicated its belief that “the issues are of sufficient doubt and

importance and would resolve the central dispute in this case.”

II. DISCUSSION

[¶9] “Rule 24 permits parties, in limited circumstances, to obtain review

from the Law Court prior to obtaining a final judgment from the trial court.”

Liberty Ins. Underwriters, Inc. v. Estate of Faulkner, 2008 ME 149, ¶ 5,

957 A.2d 94. We have discretion to accept or reject a report pursuant to Rule 24,

see Despres v. Moyer, 2003 ME 41, ¶ 14, 827 A.2d 61, and have indicated that

Rule 24 “should be used sparingly,” Bank of Am., N.A. v. Cloutier, 2013 ME 17,

¶ 8, 61 A.3d 1242; see also Liberty Ins. Underwriters, 2008 ME 149, ¶ 5,

957 A.2d 94. Rule 24(c) provides:

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If the trial court is of the opinion that a question of law involved in an

interlocutory order or ruling made by it ought to be determined by the

Law Court before any further proceedings are taken, it may on motion

of the aggrieved party report the case to the Law Court for that

purpose and stay all further proceedings except such as are necessary

to preserve the rights of the parties without making any decision

therein.

M.R. App. P. 24(c). When the trial court reports questions for review, we

independently determine whether acceptance of the report “is consistent with our

basic function as an appellate court, or would improperly place us in the role of an

advisory board.” Cloutier, 2013 ME 17, ¶ 8, 61 A.3d 1242; see also Liberty Ins.

Underwriters, 2008 ME 149, ¶ 6, 957 A.2d 94. In making this determination, we

consider the following factors: (1) whether “the question reported is of sufficient

importance and doubt to outweigh the policy against piecemeal litigation”;

(2) whether “the question might not have to be decided because of other possible

dispositions”; and (3) whether “a decision on the issue would, in at least one

alternative, dispose of the action.” Cloutier, 2013 ME 17, ¶ 8, 61 A.3d 1242;

see also Liberty Ins. Underwriters, 2008 ME 149, ¶¶ 7-9, 957 A.2d 94; Despres,

2003 ME 41, ¶ 14, 827 A.2d 61.

A. Sufficient Importance and Doubt

[¶10] The final judgment rule “promotes efficiency and reduces costs by

requiring parties to obtain a final judgment at the trial level before seeking

appellate review.” Liberty Ins. Underwriters, 2008 ME 149, ¶ 5, 957 A.2d 94.

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Because Rule 24 is an exception to the final judgment rule, we will accept a report

only if the significance of the issue presented outweighs the policy underlying that

rule. See Cloutier, 2013 ME 17, ¶ 8, 61 A.3d 1242; see also Guardianship of I.H.,

2003 ME 130, ¶ 6, 834 A.2d 922 (“We consider whether our acceptance of the

report will encourage piecemeal litigation.”) In making this determination, we

have considered whether the issue is novel and capable of repetition. See, e.g.,

Baker v. Farrand, 2011 ME 91, ¶ 9, 26 A.3d 806; Liberty Ins. Underwriters,

2008 ME 149, ¶¶ 7, 11, 957 A.2d 94; York Register of Probate v. York Cnty.

Probate Ct., 2004 ME 58, ¶ 12, 847 A.2d 395. We have rejected reports “when the

issue is not novel, when it can be resolved by applying well established rules of

law, and when it does not require statutory interpretation.” Despres, 2003 ME 41,

¶ 14, 827 A.2d 61; see also Guardianship of I.H., 2003 ME 130, ¶ 6, 834 A.2d 922

(“When the answer to a reported question is readily apparent from the record, we

discharge the report as improvidently granted by the trial court.”).

[¶11] The parties have not cited, and we cannot locate, any Maine authority

squarely addressing the precise issue of whether an unrecorded lease amendment

prohibited by a prior recorded mortgage is effective as between the mortgagee and

a third party following a foreclosure on the property. Although novelty of an issue

can meet the requirement of importance and doubt, see Liberty Ins. Underwriters,

2008 ME 149, ¶ 7, 957 A.2d 94, we think that this issue may be resolved on the

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basis of broader principles of law. This factor therefore weighs against acceptance

of the report. See Despres, 2003 ME 41, ¶ 14, 827 A.2d 61; Guardianship of I.H.,

2003 ME 130, ¶ 6, 834 A.2d 922.

B. Other Possible Dispositions

[¶12] We will not accept a report if the question reported “might not have to

be decided because of other possible dispositions.” Cloutier, 2013 ME 17, ¶ 8,

61 A.3d 1242; see also Despres, 2003 ME 41, ¶ 14, 827 A.2d 61. “If, for example,

fact-finding or determination of a preliminary issue such as the statute of

limitations may render the reported question moot, the question may be

discharged.” Liberty Ins. Underwriters, 2008 ME 149, ¶ 8, 957 A.2d 94. Because

there do not appear to be any dispositive threshold issues and the parties have filed

cross-motions for summary judgment on largely undisputed facts, it does not

appear that further proceedings would likely render the reported question moot.

See Cloutier, 2013 ME 17, ¶¶ 9-10, 61 A.3d 1242 (accepting a reported question

where “given the . . . pending motion for summary judgment, and the apparent

absence of disputed facts in the record, it did not appear that resolution of the

question could be avoided.”). This factor therefore weighs in favor of acceptance

of the report.

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C. Dispose of the Action in One Alternative

[¶13] M.R. App. P. 24(a) requires that “the decision [on the reported

question] would in at least one alternative finally dispose of the action.” Although

Rule 24(c) has no similar language, we nevertheless consider this factor in

deciding whether to accept a Rule 24(c) report. See Liberty Ins. Underwriters,

2008 ME 149, ¶¶ 7-9, 957 A.2d 94; see also Alexander, Maine Appellate Practice

§ 24.1 at 191 (4th ed. 2013) (“[Although] Rule 24(c) does not explicitly require a

determination that . . . the report will, in at least one alternative, finally dispose of

the action, . . . precedent establishes that . . . [this] prerequisite[] govern[s] Law

Court consideration of Rule 24(c) reports.”). In discussing former M.R.

Civ. P. 72(c), the predecessor to Rule 24(c), see Despres, 2003 ME 41, ¶ 14 n.2,

827 A.2d 61, we have indicated that “the reporting of an interlocutory issue is not

strictly limited to those cases in which a decision by the Law Court would, in at

least one alternative, dispose of the action, [but] certainly this fact would be

relevant to the trial court in assessing whether to report an issue pursuant to

Rule 72(c) and to us in deciding whether to accept the report,” Meiners v. Aetna

Cas. & Sur. Co., 663 A.2d 6, 8 (Me. 1995); see also Morris v. Sloan,

1997 ME 179, ¶ 7, 698 A.2d 1038 (“Although Rule 72(c) does not require us to do

so, we may take into account whether our decision will in at least one alternative

dispose of the action.” (quotation marks omitted)). In considering this factor, “[i]t

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is sufficient that there be one possible avenue for decision that would dispose of

the action.” Liberty Ins. Underwriters, 2008 ME 149, ¶ 9, 957 A.2d 94.

[¶14] Here, because the original lease term has not yet expired, most of the

remaining counts of the Association’s complaint—including counts alleging

damage to or failure to maintain airport facilities, interference with the

Association’s relationship with the individual unit owners, and conversion of a

windsock—do not turn on the validity of the lease amendment. Indeed, the lease

amendment would impact the remaining counts only to the extent that they involve

fees for use of the runway, which the lease amendment purported to eliminate. As

the trial court found, “a Law Court decision would not ‘in at least one alternative

finally dispose of the action.’” This factor therefore weighs against acceptance of

the report.

D. Conclusion

[¶15] On balance, we conclude that acceptance of the report in this case

would not be “consistent with our basic function as an appellate court” and “would

improperly place us in the role of an advisory board.” See Cloutier, 2013 ME 17,

¶ 8, 61 A.3d 1242. We therefore exercise our discretion to reject the report. See

Despres, 2003 ME 41, ¶ 14, 827 A.2d 61. We take this opportunity to reiterate that

Rule 24 should be used sparingly, in accordance with the analysis we have

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articulated. See Cloutier, 2013 ME 17, ¶ 8, 61 A.3d 1242; Liberty Ins.

Underwriters, 2008 ME 149, ¶¶ 5, 7-9, 957 A.2d 94.

The entry is:

Report discharged. Remanded for further

proceedings consistent with this opinion.

__________________________________

On the briefs:

Gene R. Libby, Esq., Libby O’Brien Kingsley & Champion, LLC,

Kennebunk, for appellants Sweet Peas, LLC and Jean M. Hardy

James A. Hopkinson, Esq., and Gerald B. Schofield, Hopkinson &

Abbondanza, P.A., Portland, for appellee Littlebrook Airpark Condominium

Association

At oral argument

Gene R. Libby, Esq., for appellants Sweet Peas, LLC and Jean M. Hardy

James A. Hopkinson, Esq., for appellee Littlebrook Airpark Condominium

Association

York County Superior Court docket number CV-2011-148

FOR CLERK REFERENCE ONLY