Natural State Properties, LLC v. Summit Limited Partnership Two

ca01-1302

DIVISION II

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

JOHN E. JENNINGS, JUDGE

CA01-1302

August 28, 2002

NATURAL STATE PROPERTIES, LLC

APPELLANT AN APPEAL FROM SEBASTIAN COUNTY

CHANCERY COURT

V. [NO. E2000-959(III)]

HONORABLE JIM SPEARS

SUMMIT LIMITED PARTNERSHIP CHANCERY JUDGE

TWO

APPELLEE

AFFIRMED

This is a dispute between neighboring hotels in the city of Fort Smith. Appellant owns the Best Inn, located west of appellee's Comfort Inn. In 2000, appellee sued appellant claiming that, contrary to the terms of a 1994 easement agreement, its guests were denied permission to use appellant's swimming pool and that appellant had blocked a driveway area in which appellee had an access easement. The chancellor ordered the barrier removed, and he specifically enforced the agreement permitting appellee's guests to use the pool. We affirm.

The easement agreement was executed in 1994 between appellee and appellant's predecessor-in-interest, FS Hotel Limited Partnership. FS Hotel had a leasehold interest in a Sheraton Hotel on two tracts of land. In 1994, it sold its interest in the eastern tract, known as Tract A, to appellee, while retaining its interest in the western tract, known as Tract B. The parties entered into a sales agreement and an easement agreement which permitted appellee's guests to use FS Hotel's swimming pool and gave each party an access easement in the other's driveway areas. There is no dispute that, when FS Hotel sold its interest to appellant in 2000, appellant became subject to the terms of the agreements.

The sales agreement contained the following pertinent clauses:

12. Seller [FS Hotel] represents that:

* * *

E. Seller owns and operates the adjacent Sheraton Inn. Seller will allow guests of Buyer's [appellee's] motel complete access to the swimming pool/recreation area during normal times of operation, provided there is no violation of Seller's policies for its guests or disturbance of Seller's guests, which determination will be based on Seller's sole judgment, subject to execution by Buyer and Seller of the Cross Easement Agreement set forth in Paragraph 14 below.

* * *

14. During the sixty (60) day Review period, Buyer and Seller shall agree upon the form of a Cross Easement Agreement for the following purposes:

A. Seller will allow guests of Buyer's motel complete access to the swimming pool/recreation area during normal times of operation, provided there is no violation of Seller's policies for its guests or disturbance of Seller's guests, which determination will be based on Seller's sole judgment.

B. Seller will allow Buyer and Buyer's guests access to and use of the parking spaces which abut the West property line of the subject Real Estate, with maintenance and upkeep of said parking spaces to be performed by Buyer.

* * *

E. Seller and Buyer shall grant a cross-easement to each other for access of Buyer and Seller and their respective guests to Buyer's and Seller's respectiveproperty through and across the areas shown as Drive and Parking areas on the survey attached hereto as Exhibit "C". Neither Buyer nor Seller shall construct any barriers or otherwise interfere with such access.

The easement agreement provided in pertinent part as follows:

WHEREAS Owner A [appellee] is the owner of a certain leasehold interest...referred to as Tract A, upon which are located certain facilities operated as a hotel which shall hereinafter be referred to as "Hotel A";

WHEREAS Owner B [FS Hotel] is the owner of certain adjoining leasehold interests...referred to as Tract "B" upon which are located certain facilities operated as a hotel which shall hereinafter be referred to as "Hotel B";

WHEREAS a swimming pool is located on Tract B for the use of guests of Hotel B, and Owner B is willing to allow guests of Hotel A to use said swimming pool, provided there is no violation of Hotel B's policies for its guests and no disturbance of the guests of Hotel B, which determination will be based solely on the judgment of the owners and operators of Hotel B;

WHEREAS Owner B is willing to allow use of certain parking spaces by guests of Hotel A;

* * *

WHEREAS Owner A and Owner B have agreed to grant a cross-easement to each other for access of Owner A and Owner B and their respective guests to Owner A's and Owner B's respective property through and across the areas shown as "Drive and Parking" areas on the survey attached hereto as Exhibit "C". Neither Owner A nor Owner B shall construct any barriers or otherwise interfere with such access.

NOW THEREFORE...the parties do hereby agree and covenant as follows:

* * *

3. Reciprocal Rights to Use Common Facilities. Owner A hereby establishes and creates for the benefit of Owner B a mutual, reciprocal, and non-exclusive easement, license, right, and privilege to use and enjoy, for the purposes for which they have been designed, all Common Facilities [defined earlier to include parking and driveway areas] which may have been or may hereafter be constructed on Tract A. Owner B hereby establishes and creates [on its property the same easement for OwnerA]. The rights and privileges granted and conferred by this Section 3 shall be exercised and enjoyed in common by the parties hereto.

8. Right to Use Recreational Facilities. Owner B hereby establishes and creates for the benefit of Owner A a mutual and nonexclusive easement, license, right, and privilege to use and enjoy, for the purposes for which they have been designed, all Recreational Facilities [defined earlier to mean the swimming pool]...upon Tract B. The rights and privileges granted and conferred by this Section [8] shall be exercised and enjoyed by Owner A in common with Owner [B]. The right granted by this Section [8] is contingent upon Owner A and the guests of Hotel A causing no violation of Hotel B's policies for its guests and no disturbance of the guests of Hotel B, which determination will be based solely on the judgment of the owners and operators of Hotel B.

* * *

14. Nature of Rights Granted. The easements, restrictions, benefits, and obligations set forth in this Agreement shall create mutual and reciprocal easements, restrictions, benefits, and servitudes upon Tracts A and B, running with the land, which shall be perpetual. This Agreement shall create privity of contract and estate with and among the parties hereto and all subsequent grantees and mortgagees of all or any part of the interest [of] Owner A and/or Owner B in Tracts A and/or B, their successors and assigns.

Following appellant's acquisition of Tract B (the western tract containing the swimming pool) in 2000, appellant observed appellee's guests using the pool either before or after the posted hours and, on one occasion, improperly using a glass container. Additionally, a misunderstanding occurred when appellant attempted to eject certain persons from the pool, even though some of them were in fact appellee's guests; the situation became so heated that the police were called. After that incident, appellant banned all of appellee's guests from using the pool. Appellee then filed a petition in chancery court to enjoin the ban and sought damages for loss of revenue and goodwill. The chancery court entered a temporary restraining order against appellant on July 28, 2000.

While the restraining order was in force, appellee's guests continued to use the pool, which led to another incident in which one of appellee's guests permitted her dog to enter the pool, necessitating its closing for several days. As a result, appellant once again banned appellee's guests from using the pool. The parties returned to court, and appellant moved to transfer the case from chancery court to circuit court on the ground that appellee had an adequate remedy at law. The chancellor initially agreed to the transfer, but later resumed jurisdiction, based partly on the fact that appellee had amended its petition to seek specific performance of the 1994 agreement. The case was ultimately tried in chancery court, and an order was entered on June 1, 2000. This appeal followed.

Because appellant's second argument concerns a jurisdictional matter, we will address it first. Appellant argues that appellee should not have been permitted to seek equitable relief in chancery court because it had an adequate remedy at law in monetary damages.1 To support its argument, appellant points to the fact that a pool repair agreement executed between its predecessor and appellee required payment to appellee of $100 per day as liquidated damages for every day past a deadline that the pool was not repaired. We believe that the liquidated damage clause, rather than supporting appellant's argument, illustrates the difficulty in placing a dollar figure on appellee's loss of use of the pool. The clause expressly states that "[t]he parties herein agree that any delay in repairing and maintaining the swimming pool will cause [appellee] to incur substantial damages, the amount of which would be difficult to calculate." Where damages are difficult, if not impossible, to calculate,it cannot be said that the plaintiff has an adequate remedy at law. See Standridge v. Rice, 212 Ark. 703, 207 S.W.2d 598 (1948). Further, the availability of an adequate remedy at law is not relevant in this case. Where land or any estate or interest in land is the subject matter of an agreement, jurisdiction to enforce specific performance is undisputed and does not depend on the inadequacy of the legal remedy in a particular case. Dickinson v. McKenzie, 197 Ark. 746, 126 S.W.2d 95 (1939). The chancellor in the case at bar declared that appellee's right to use the swimming pool and to have access to the common driveways was an easement, and that finding is not challenged on appeal. An easement is an interest in land. See Hatfield v. Arkansas West. Gas. Co., 5 Ark. App. 26, 632 S.W.2d 238 (1982). Appellee's suit, therefore, was to enforce an interest in land and, under the rule stated in Dickinson, equity may order specific performance without regard to whether an adequate remedy at law exists.

Appellant argues further that equity jurisdiction was improper because specific performance was not a viable remedy. In particular, appellant argues that the terms of the 1994 agreement were uncertain and that there was a lack of mutuality of obligation between the parties. The record, as abstracted, does not reveal that appellant challenged the award of specific performance on these bases below; therefore, these arguments are being raised for the first time on appeal, and we need not address them. Hurst v. Holland, 347 Ark. 235, 61 S.W.3d 180 (2001). Further, the chancellor made no ruling on these arguments, in which case appellant has waived these arguments on appeal. See Britton v. Floyd, 293 Ark. 397, 738 S.W.2d 408 (1987). In any event, we find neither a lack of certainty in the terms of the agreement nor a lack of mutuality, such as would bar specific performance, and we note thata court is granted some latitude in granting or denying specific performance. Mitchell v. House, 71 Ark. App. 19, 26 S.W.3d 586 (2000).

Next, appellant contends that the chancellor erred in interpreting the 1994 agreement. In his ruling from the bench, the chancellor stated:

I find that there is an easement, and it is binding on the parties here; that it is very specific in what it allows, and that is, for the use of the swimming pool by the guests of the Comfort Inn.

And the phrase that says "provided there's no violation of hotel policies for its guest and disturbance of its guests" merely goes to the policing of the facility, not the termination of the agreement as such. They have control over the people who are using it. They can exclude specific people for violations of pool rules who are using it, but they cannot unilaterally terminate the Easement Agreement. So, they will be enjoined from interfering with the guests of the Comfort Inn from using the pool that's in question, absent a violation of a rule by a specific guest who then may be excluded.

We cannot say that the chancellor erred in interpreting the agreement. In construing a contract, an interpretation should be adopted that is most reasonable. Love v. Couch, 181 Ark. 994, 28 S.W.2d 1067 (1930). By its terms, the rights granted by the agreement were "mutual and reciprocal easements, restrictions, benefits and servitudes upon Tracts A and B, running with the land, which shall be perpetual." It was reasonable for the chancellor to conclude that the parties did not intend for rights of such magnitude to evaporate upon the basis of rules violations by certain guests. The more logical interpretation is that, when appellant, in its judgment, determined that a violation of pool rules had occurred, it could then revoke the violator's right to use the pool.

Finally, appellant argues that the chancellor erred in ordering it to remove barriers erected along a common driveway. Appellant insists that it only erected the barrier to protectitself from members of the public who were using that particular area as a drive-through to reach other property.

The relevant provisions of the Easement Agreement on this issue are contained in paragraph 3, which provides that both Owner A and Owner B shall have a mutual, reciprocal easement in each other's "common facilities," which is defined in paragraph 1(a) to include parking and driveway areas. Additionally, the final "Whereas" clause in the Easement Agreement provides that neither party shall construct any barriers or interfere with such access. These provisions clearly prohibit appellant's erection of a barrier in a common driveway area. Although the agreement does provide that the common areas are not intended to become public thoroughfares, it makes no provision for one party's unilateral placement of a barricade to prevent such use. Further, while the agreement also provides that either party may temporarily close a common area for a reasonable period to avoid granting by prescription any absolute rights in such areas, that situation does not apply here. Appellant has erected a permanent barrier and has not expressed a concern about losing its rights in the property through prescription.

For the foregoing reasons, we affirm the chancellor's order.

Affirmed.

Griffen and Neal, JJ., agree.

1 The chancellor's final order in this case was entered on June 1, 2001, which was before the effective date of Amendment 80 and the merger of law and equity courts.