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Carnegie at One Tower Drive, LLC v. Carnegie Heights Condominium Association

Superior Court of Rhode Island, Newport

October 18, 2018

CARNEGIE AT ONE TOWER DRIVE, LLC, Plaintiff,
v.
CARNEGIE HEIGHTS CONDOMINIUM ASSOCIATION, CARNEGIE HARBOR RESIDENCE CONDOMINIUM ASSOCIATION, CARNEGIE ABBEY CLUB ACQUISITION I, LP, BUTTONWOOD ACQUISITION, LP, CARNEGIE VILLAGE DEVELOPMENT CO., INC., OC RESIDENCES, LP, O'NEILL PROPERTIES GROUP, CARNEGIE TOWER AT CARNEGIE ABBEY CONDOMINIUM ASSOCIATION, AND THE COTTAGES AT CARNEGIE ABBEY CONDOMINIUM ASSOCIATION, Defendants.

         Newport County Superior Court

          For Plaintiff: Andrew Tugan, Esq.; David A. Wollin, Esq.

          For Defendant: Keith B. Kyle, Esq.; R. Kelly Sheridan, Esq.; Mark W. Freel, Esq.; Frank A. Lombardi, Esq.

          DECISION

          STERN, JUDGE

         Plaintiff Carnegie at One Tower Drive, LLC (Plaintiff) has filed a motion for summary judgment on its claims (1) that it is entitled to use forty-three prepaid golf memberships Plaintiff was assigned at the Carnegie Abbey Club (the Golf Club) in connection with the sale of residential condominium units at the Tower at Carnegie Abbey (the Tower), and (2) that an October 9, 2009 Agreement (the 2009 Agreement), to which Plaintiff claims it was not a party, does not restrict the use of such memberships or otherwise require any additional payments to the Golf Club from Plaintiff or the Tower unit purchasers. Defendants and Counterclaim Plaintiffs Carnegie Heights Condominium Association (the Heights), Carnegie Harbor Residence Condominium Association (the Harbor), and The Cottages at Carnegie Abbey Condominium Associations (the Cottages) (collectively, the Associations) have timely objected to Plaintiff's motion and have filed a cross-motion for summary judgment which requests that the 2009 Agreement is an enforceable contract and that all parties to the 2009 Agreement- including their respective successors and assigns such as Plaintiff-are bound by it. Jurisdiction is pursuant to Super. R. Civ. P. 56(c) and G.L. 1956 §§ 9-30-1, et seq.

         I Facts and Travel

         "Golf is the closest game to the game we call life. You get bad breaks from good shots; you get good breaks from bad shots-but you have to play the ball where it lies." - Robert Tyre (Bobby) Jones, Jr.[1]

         The Carnegie Abbey complex is a residential condominium located in Portsmouth, Rhode Island with several separate sub-condominiums. The complex includes the Golf Club, which is an eighteen-hole golf course comprised of members who pay dues and other fees for access to the facilities. Deposition of J. Brian O'Neill (O'Neill Dep.) 11:15-21. Peter deSavary (deSavary) was the original owner and developer of Carnegie Abbey and the Golf Club. Id. at 12:1-4. He created the Carnegie Harbor Condominium (the Master Condominium), which contains "Master Units" or sub-condominiums.[2] A sub-condominium declaration was recorded which created the Carnegie Tower at Carnegie Abbey Condominium, consisting of a seventy-nine unit residential tower structure and appurtenant common elements. O'Neill Dep. 142:9-143:1; Pl.'s Mot., Ex. 19. Three other sub-condominium associations are the Heights, the Harbor, and the Cottages.

         Beginning in 2003, deSavary sold various residential properties in the Carnegie Abbey complex-including those associated with the Heights, the Harbor, the Cottages, and the Golf Club-to J. Brian O'Neill (O'Neill) through his various entities. O'Neill Dep. 17:2-18, 141:14-18. The first relevant transaction occurred pursuant to a September 5, 2003 Purchase and Sale Agreement (the September 5, 2003 PSA) when deSavary, through his company Carnegie Harbor Village, LP (LP), sold to O'Neill's company, the O'Neill Properties Group (OPG), the land where the Tower would eventually be built for $17 million. O'Neill Dep. 142:2-145:2; Pl.'s Mot., Ex. 3 § 1.1; Carnegie Abbey Club Acquisition I, LP's Responses to Pl.'s Am. First Set of Reqs. for Admis. (O'Neill RFA) ¶ 13. The property consisted of approximately 5.4 acres in the Carnegie Abbey complex and a certain percentage of the common areas in the Master Condominium. Pl.'s Mot., Ex. 3 § 1.1.

         As part of the transaction, OPG purchased twenty-three Golf Club memberships for $100, 000 each, or $2.3 million total.[3] O'Neill Dep. 142:2-145:2; Pl.'s Mot., Ex. 3 §§ 10.1-10.2; O'Neill RFA ¶ 14. Section 10.1 of the September 5, 2003 PSA provides that all of the Golf Club memberships "have all of the privileges of full memberships in the Golf Club and shall be subject to the rules and regulations adopted from time to time for the Golf Club." Pl.'s Mot., Ex. 3 § 10.1. In addition, all the memberships were "fully assignable to the subsequent owner(s) from time to time" of the Tower units to be developed. Id. Separately, pursuant to a September 17, 2003 Purchase and Sale Agreement (the September 17, 2003 PSA), OPG purchased the land known as the Harbor, which consisted in part of approximately 9.5 acres, along with ten Golf Club memberships for $100, 000 each with the right to purchase six more at $100, 000 and five more at ninety percent of the then-market value. O'Neill Dep. 145:6-146:13; Pl.'s Mot., Ex. 4 §§ 1.1(a), 10.1-10.2; O'Neill RFA ¶ 15.

         In accordance with and "in consideration of the payments made" pursuant to the September 5, 2003 PSA and September 17, 2003 PSA, on February 12, 2004, Carnegie Abbey Club, LLC-a deSavary affiliate owning the Golf Club-executed a "Golf Membership Transfer Agreement" which transferred and assigned "all right, title and interest in and to" thirty-six Golf Club memberships "with the privileges of full membership in the Club" to OC Tower Associates, L.P., an O'Neill entity then owning the Tower property, and three other O'Neill entities owning other properties in the complex. O'Neill Dep. 149:1-24; Pl.'s Mot., Ex. 14; O'Neill RFA ¶¶ 6-12, 16. The Golf Membership Transfer Agreement stated that "[a]ll of the Memberships are hereby transferred together with the right to transfer, pledge and assign such Memberships to buyers of units in the Tower, Village and Carnegie Harbor Residence Condominium, and to the Transferees' lenders, successors and assigns." Pl.'s Mot., Ex. 14. On the same date, in a document entitled "Allocation of Golf Membership Interests," the four O'Neill entities allocated the thirty-six Golf Club memberships among themselves. O'Neill Dep. 150:2-151:1; Pl.'s Mot., Ex. 15; O'Neill RFA ¶ 18. Of the thirty-six Golf Club memberships, OC Tower Associates was assigned twenty-six Golf Club memberships. O'Neill Dep. 150:2-151:1; Pl.'s Mot., Ex. 15; O'Neill RFA ¶ 19.

         In early 2005, Defendant Carnegie Abbey Club Acquisition I, LP (Carnegie Club Acquisition)-an O'Neill entity-acquired the Golf Club from deSavary.[4] O'Neill Dep. 8:11-14; 140:23-141:5; Answer of Carnegie Club Acquisition, et al. to Compl. (O'Neill Entities' Answer) ¶ 4. Then, on April 14, 2005, OPG entered into an agreement with Peter Koch, Chairman of the Carnegie Abbey Acquisition Committee, which represented then-existing Golf Club members (the Koch Agreement). O'Neill Dep. 17:2-20:8; Associations' Mem. Supp. Cross-Motion Summ. J. and Opp'n to Pl.'s Mot. Summ. J. (Associations' Mot.), Ex. B. In the Koch Agreement, OPG agreed, in return for the resolution of certain objections that existing members had to aspects of the acquisition, that "[t]he deposit or fee to become a member [of the Golf Club] shall be not less than $150, 000." O'Neill Dep. 17:2-20:8; Associations' Mot., Ex. B. According to the Associations, the Golf Club considers the Koch Agreement to remain in effect as of today. Associations' Mot., Ex. C.

         On July 12, 2005, in addition to its twenty-six Golf Club memberships, OC Tower Associates purchased from Carnegie Club Acquisition, pursuant to a "Golf Membership Transfer Agreement," all "right, title and interest in and to" an additional twenty-seven Golf Club memberships "with the privileges of full membership" in the Golf Club at a price of $3, 225, 000.[5]O'Neill Dep. at 151:2-152:7; Pl.'s Mot., Ex. 16; O'Neill RFA ¶¶ 21-27. Like the prior Golf Club Transfer Agreement, this agreement provided: "All of the Golf Memberships are hereby transferred together with the right to transfer, pledge and assign such Golf Memberships to buyers of units in the Tower and Village," and to the purchasers' "lenders, successors and assigns." Pl.'s Mot., Ex. 16. Thus, as of that date, OC Tower Associates owned fifty-three Golf Club memberships in the Golf Club. Pl.'s Mot., Ex. 27.

         On December 22, 2006, in two separate documents entitled "Assignment and Assumption of Golf Membership Interests," OC Tower Associates-an O'Neill entity-transferred all of its "right, title and interest" in the fifty-three prepaid Golf Club memberships, including the "right to transfer, pledge and assign such Golf Memberships to buyers of the Tower units" to be developed, to Carnegie Tower Development Company, Inc. (Carnegie Tower Development), another O'Neill entity that acquired title to the Tower, together with its "lenders, successors, and assigns." O'Neill Dep. 152:8-154:5; Pl.'s Mot., Exs. 17-18; O'Neill RFA ¶¶ 29-38.

         Subsequently, from 2005 through 2009, O'Neill began developing the Tower and other properties within the Carnegie Abbey complex. Deposition of Edward T. Lopes (Lopes Dep.) 76:25-77:5. In connection with the Tower development, Carnegie Tower Development recorded the Declaration of Condominium for the Tower on July 13, 2009 (the Tower Declaration). O'Neill Dep. 59:5-11, 97:15-18; Pl.'s Mot., Ex. 19. The Tower Declaration requires each initial unit owner to be a member of the Golf Club. Pl.'s Mot., Ex. 19 § 8:18. As part of the development, O'Neill's entities obtained various loans to finance the project. O'Neill Dep. 23:9-24.

         Sometime in 2009, O'Neill contemplated expanding the Carnegie Abbey complex, and was interested in constructing thirty-six new townhouses and ensuring the number of allowable units at the Tower was as high as eighty. Lopes Dep. 22:6-18, 26:11-27:5, 35:12-36:4. At the time, O'Neill controlled the condominium associations for both the Tower and the Cottages.[6] Id. at 42:23-43:22, 77:21-78:11; O'Neill Dep. 181:8-182:2; Deposition of Michael Collins (Collins Dep.) 61:16-19; Deposition of Kathryn Luckett (Luckett Dep.) 7:6-10, 50:12-14. In particular, O'Neill needed to obtain zoning relief from the Town of Portsmouth, Rhode Island in connection with the development of the townhouses, and approval by the sub-condominium associations for an amendment to the Master Condominium to ensure he could construct a tower with at least eighty units. O'Neill Dep. 41:7-43:6; Lopes Dep. 22:6-18, 26:11-27:5, 35:12-36:4. Residential owners of the Associations became concerned about O'Neill's intentions, raised a series of objections and grievances, and planned to object to the zoning variances that O'Neill needed to build the townhouses before the Zoning Board of Review for the Town of Portsmouth, Rhode Island. O'Neill Dep. 24:9-13; Lopes Dep. 22:6-18; Collins Dep. 85:15-87:13; Barone Dep. 68:7-9. Among other things, they expressed concern about any relaxation of rental rules or policies, the influx of golf play by non-owners, and the impact, if any, of additional development on the value of their investments in their homes and in the Golf Club. Barone Dep. 46:17-48:22; Lopes Dep. 29:25-30:25. After negotiations, O'Neill, through various entities at the complex and as the Golf Club owner-specifically, Defendants Carnegie Tower Development, Carnegie Club Acquisition, Carnegie Village Development Company, OC Residences, LP, Buttonwood Acquisition, LP, and OPG (collectively, the Applicants)-reached an agreement with the Associations and the condominium association for the Tower (the Tower Association), [7]culminating in the 2009 Agreement. Pl.'s Mot., Ex. 21.

         In exchange for the Harbor and the Heights' withdrawal of objections to the townhouses and assent to amending the Master Condominium, O'Neill and his entities agreed to a number of restrictions or provisions governing development of the townhouses, an entrance location for non-residents, and limitations on rental periods for various townhouse and other residential units.[8] Pl.'s Mot., Ex. 21 at 1-3. The O'Neill entities also promised that anyone renting a unit in the complex that was not a Golf Club member would be deemed a guest and would not have golf-playing privileges except on very limited conditions. Id. ¶ 7. Additionally, the 2009 Agreement stated that it was governed by Rhode Island law and was "binding upon the parties, their heirs, representatives, successors, affiliates, and assigns." Id. ¶ 11.

         Paragraph five of the 2009 Agreement, which concerns membership in and payments to the Golf Club, states the following:

"Applicant agrees that all initial owners and subsequent owners of Townhouses must be Carnegie Abbey members which will be changed from the current policy which only requires initial owners to be members. All buyers of townhouses must purchase an equity/refundable membership. All initial buyers of properties owned by Applicant, (Tower Units, Suites, Townhouses, Cottages or O'Neill Units in Residences), must purchase equity/refundable memberships, ($150, 000 minimum Golf Membership; $75, 000 minimum Social Membership). It is understood and agreed that sales agreement for all Townhouse Units and other aforementioned O'Neill properties must separately state the membership price."[9]Id. ¶ 5.

         This provision of the 2009 Agreement is also consistent with the Tower Declaration which, as mentioned above, requires each initial Tower unit owner to be a member of the Golf Club. Pl.'s Mot., Ex. 19 § 8.18.

         In 2012, O'Neill, through his entities, sought to refinance the Tower. As part of refinancing, in March 2012, he transferred the Tower's ownership from Carnegie Tower Development to Carnegie Holdings, LLC (Carnegie Holdings), another O'Neill entity. Pl.'s Mot., Ex. 32. As part of the refinancing, on March 16, 2012, Carnegie Tower Development transferred forty-seven of the fifty-three prepaid Golf Club memberships to Carnegie Holdings. O'Neill Dep. 155:14-156:5; Pl.'s Mot., Ex. 28; O'Neill RFA ¶¶ 45-48. Specifically, in the "Assignment and Assumption of Golf Membership Interests," Carnegie Tower Development assigned and conveyed all "right, title and interest in, to and under the Golf Memberships, including the right to transfer, pledge and assign such Golf Memberships to buyers of condominium units in Carnegie Tower," and to Carnegie Holdings' "lenders, successors, and assigns." O'Neill Dep. 155:14-156:11; Pl.'s Mot., Ex. 28; O'Neill RFA ¶ 47.

         In addition, the Golf Club, through a series of consents, confirmed the validity and authorization to transfer the forty-seven prepaid Golf Club memberships to Carnegie Holdings. O'Neill Dep. 157:12-159:14; Pl.'s Exs. 29-31; O'Neill RFA ¶¶ 49-58. On March 16, 2012, the Chairman of the Golf Club also executed a Chairman's Certificate stating in part:

"F. Carnegie Holdings, LLC, a Delaware limited liability company ('CH'), is the owner of forty seven (47) full Golf Memberships (refundable) in the Club and of seventy-three (73) condominium units in the Tower ('Tower Units').
"G. The Club has granted CH the right to convert one (1) full Golf Membership (refundable) in the Club into two (2) Social Memberships in the Club (refundable) ('Conversion') and the Club recognizes CH's Conversion right and will continue to allow CH to exercise its Conversion right until all the initial purchasers of the seventy-three (73) Tower Units owned by CH have applied for membership in the Club." Pl.'s Mot., Ex. 29; O'Neill RFA ¶¶ 56-58.

         The express purpose of the transfer of the prepaid Club memberships was the "Club's desire to facilitate each resident of the Tower ('Tower Resident') becoming a member of the Club." Pl.'s Mot., Ex. 29 ¶ D. The Chairman's Certificate was also consistent with the Golf Club's March 5, 2012 letter to "To Whom It May Concern," confirming that Carnegie Tower Development had purchased a number of refundable Golf Club memberships, and that these memberships "may be divided into refundable social memberships and the ratio is 2 social refundable memberships is equivalent to one golf refundable membership." Pl.'s Mot., Ex. 26; O'Neill RFA ¶¶ 40-44. The letter further provided: "[a] membership is assigned upon closing of real estate and at that time the assigned member is responsible for all dues and associated fees as outlined in the Membership Plan." O'Neill Dep. 154:17-155:12; Pl.'s Mot., Ex. 26. According to Plaintiff, the President/General Manager of the Golf Club was authorized to send such a letter. O'Neill Dep. 154:17-155:12; O'Neill RFA ¶¶ 40-44; Collins Dep. 149:10-12; Luckett Dep. 40:11-16.

         On March 20, 2012, O'Neill, through Carnegie Tower Development, Carnegie Holdings and a third company of his (collectively, the O'Neill Borrowers), refinanced the existing construction loans with a new lender, The Union Labor Life Insurance Company (ULLICO), a life insurance company that through its Separate Account J, acts as a lender and investor in real estate financing and development. O'Neill Dep. 156:12-15, 159:16-22; Pl.'s Mot., Ex. 34. The O'Neill Borrowers and ULLICO executed an Amended and Restated Loan Agreement (Amended Loan Agreement), under which ULLICO agreed to refinance the existing loans in excess of $60, 000, 000, including additional loan proceeds not to exceed $16, 000, 000, with O'Neill agreeing to personally guarantee the loans. O'Neill Dep. 156:12-15, 159:16-22; Pl.'s Mot., Exs. 24, 34.

         Pursuant to Section 5.4 of the Amended Loan Agreement, the O'Neill Borrowers, as "additional security" for the payment of the debt, transferred and assigned to ULLICO all of the O'Neill Borrowers' right, title and interest, but not its obligations, in, under and to the forty-seven prepaid Golf Club memberships, including "the right to convert each such golf membership into two (2) social memberships, all of which are available for assignment as Mortgagor may designate to purchasers of Units . . . ." O'Neill Dep. 93:22-94:1, 159:15-160:23; Pl.'s Mot., Ex. 34 §§ 1.1(ll), 5.4; Deposition of Herbert Kolben (Kolben Dep.) 37:16-39:17, 40:13-19, 41:9-12. At the time, Plaintiff maintains that O'Neill represented to ULLICO that the prepaid Golf Club memberships were valid and binding on the Golf Club. Kolben Dep. 42:19-43:17, 45:16-22.

         On the same day, March 20, 2012, O'Neill and the O'Neill Borrowers' attorney provided an opinion letter to ULLICO on behalf of Carnegie Tower Development, Carnegie Holdings and Carnegie Club Acquisition (the Opinion Letter). O'Neill Dep. 66:4-12, 83:19-84:13; 156:12-157:1; Pl.'s Mot., Ex. 33. The Opinion Letter stated the following, in part:

"1. CTDC [Carnegie Tower Development] has duly and validly transferred forty-seven (47) full Golf Memberships (refundable) in the Club to CH [Carnegie Holdings], free and clear of liens and encumbrances other than the lien and security interest of The Union Labor Life Insurance Company, a Maryland corporation, on behalf of its Separate Account J (also referred to as 'Ullico').
"2. CH [Carnegie Holdings] [has] the right to convert each one (1) of the forty-seven (47) full Golf Memberships (refundable) in the Club assigned and transferred to CH [Carnegie Holdings] by CTDC [Carnegie Tower Development] into two (2) non-golf (refundable) Social Memberships in the Club ('Conversion Right').
. . . .
"6. The execution and delivery by CTDC [Carnegie Tower Development], CACAILP [Carnegie Club Acquisition], and the Club of the Club Membership Documents does not constitute a breach or default under any other written agreements known to us to which CTDC [Carnegie Tower Development], CACAILP [Carnegie Club Acquisition], or the Club each are bound." Pl.'s Mot., Ex. 33.

         On March 23, 2012, Edward T. Lopes, Senior Vice President of Development at O'Neill Properties, on O'Neill's behalf, wrote to Barone as President of the Heights and Collins as the President of the Harbor, requesting that they consider amending the 2009 Agreement-and particularly the provisions on golf membership prices-to assist with the marketability of the Tower units (the Lopes Letter). Lopes Dep. 50:13-23; Associations' Mot., Ex. K. The Lopes Letter also stated that the O'Neill Entities were required to seek an amendment to the 2009 Agreement as part of the refinancing with ULLICO, and that a discussion was needed between the parties to lower the membership price points highlighted in the 2009 Agreement to "make the [T]ower more viable in the current market." Associations' Mot., Ex. K; see also Lopes Dep. 50:13-53:10, 54:5-56:1, 60:5-14. According to the Associations, the Heights and the Harbor subsequently engaged in such discussions, independently and through counsel, and offered at times in such discussions to entertain lower prices for Golf Club memberships as required under the 2009 Agreement. Lopes Dep. 55:10-60:14; O'Neill Dep. 72:8-73:7; Collins Dep. 107:4-108:9. However, the parties never amended the 2009 Agreement. Lopes Dep. 56:16-20. ...


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