Carey v. Howard
Carey v. Howard
Opinion
Jana Howard Carey sued her brother, John R. Howard, Sr., other relatives, and a family-owned limited-liability company in the Madison Circuit Court, seeking a declaratory judgment regarding the validity of an option contract for the sale of land and seeking a sale of certain lands owned by John, Jana, and other members of their family for a division of the proceeds. Jana, Beth Howard Bailey, John Newell Bailey II, and Bo Randall Bailey (hereinafter referred to collectively as "the Carey litigants") appeal from a partial summary judgment in favor of John, John R. Howard, Jr., and Benjamin Jamison Howard (hereinafter referred to collectively as "the Howard litigants") on the declaratory-judgment count.1 John, John R. Howard, Jr., and Benjamin Jamison Howard have *Page 1133 filed a cross-appeal, contending that the trial court erred in denying their motion for a partial summary judgment predicated upon their contention that the Carey litigants lacked standing to file the declaratory-judgment action.2
On October 3, 1994, Mrs. Howard entered into an option agreement with her son, John; that agreement provided that after Mrs. Howard's death John could purchase Mrs. Howard's undivided interest in the Alabama property for $1,200 per acre for a period of 12 months from the date her will was duly admitted to probate. The payment terms provided that John tender to the record owner of the property an unsecured promissory note, payable without interest for a period of 10 years, in 10 equal installments, with the first installment due one year from the date the option was exercised. There was to be no prepayment penalty. The day after Mrs. Howard and John entered into the option agreement, Mrs. Howard, John, and Susan formed Howard Farms, LLC (an Alabama limited-liability company, hereinafter referred to as "the LLC"). Ownership of the LLC was held in 100 "units," with Mrs. Howard owning 98 of those units, and John and Susan each owning 1 unit.
On October 24, 1994, Mrs. Howard executed a deed conveying her interest in the Alabama property to the LLC. This conveyance was expressly subject to the option agreement between Mrs. Howard and John. Mrs. Howard thereafter made periodic transfers of her units in the LLC to her children and grandchildren so that by January 1, 1999, she no longer held any units in the LLC.4 Upon completion of Mrs. Howard's transfers, Jana, Beth, and Susan each owned 18.85 units of the LLC; John owned 18.85 units. Mrs. Howard's grandchildren, directly or through trusts established for their benefit, owned the remaining 26.1 units.
On February 23, 2002, pursuant to Rule 27(a), Ala. R. Civ. P., the Howard litigants *Page 1134 filed a petition for discovery in the Madison Circuit Court. They sought to preserve testimony regarding Mrs. Howard's capacity to execute the option agreement and her will. On May 26, 2004, the Carey litigants filed in the Madison Circuit Court a petition for a declaratory judgment as to the validity of the option agreement and seeking a sale of the Alabama property for a division of the proceeds.
The trial court consolidated the Howard litigants' Rule 27(a) discovery petition and the Carey litigants' petition on June 10, 2004. Both the Howard litigants and the Carey litigants moved for a partial summary judgment on the question of the validity of the option agreement; the Howard litigants also alleged that the Carey litigants did not have standing to maintain their declaratory-judgment action. On October 15, 2004, the trial court heard arguments on their motions. By order entered December 3, 2004, the trial court granted in part the Howard litigants' motion for a partial summary judgment (holding that the option contract was valid and enforceable) and denied in part their motion for a partial summary judgment (holding that the Carey litigants had standing to maintain their claim for declaratory relief). The Carey litigants filed a timely notice of appeal from the order granting the Howard litigants' motion for a partial summary judgment; the Howard litigants filed a timely cross-appeal from the order denying their motion for a partial summary judgment as to the Carey litigants' standing to seek declaratory relief.5
The record shows that the Howard litigants raised the standing issue as an affirmative defense in the trial court. The standing issue is properly before this Court on the Howard litigants' cross-appeal.6
Section
"Any person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status or other legal relations thereunder."
Under the plain language of the statute, therefore, the Carey litigants have standing to seek declaratory relief relating to the option agreement only if they are "interested under" or if their "rights, status, or other legal relations are affected by" the option agreement.
The Carey litigants assert that they satisfy these requirements in two respects. First, they contend that their interests as members of the LLC are adversely affected by the option agreement because, they allege, it allows John to purchase the Alabama property, which is currently held by the LLC, at a price well below its fair market value.7 Second, the Carey litigants contend that their undivided individual interests in the property, which are not subject to the option agreement, are also adversely affected by the fact that John has the option to purchase a large portion of the remaining undivided property at a discount price. Neither of these grounds, however, is sufficient to confer standing.8
Under the provisions of the Alabama Limited Liability Company Act, §
To the extent the injury the Carey litigants allege they will suffer if John is permitted to exercise his option is an actual injury, therefore, it is not to the rights the Carey litigants have as members of the LLC. Instead, it is an injury to the LLC — the owner of the property subject to the option — and any right to bring a declaratory-judgment action with respect to that injury rests with the LLC. As members, the Carey litigants are not proper parties to any proceedings brought by that entity. §
Although we recognize that the provisions of the Declaratory Judgment Act are to be "liberally construed and administered," §
Because the Carey litigants seek declaratory relief in their individual capacities, their standing to sue hinges on their allegation of individual injury. Although their individual interests in the undivided property are not subject to the option agreement, they contend, nevertheless, that the option agreement adversely affects their interests by allowing John the right to purchase a substantial portion of the undivided property at, what they contend, is "a bargain basement price." The Carey litigants, however, have not explained this claim with particularity. Instead, they simply contend that their rights in their interests in the Alabama property "will be diminished" if the option agreement is allowed to stand. We cannot see how this is the case.
As tenants in common, the Carey litigants' right to possess and use the property is coextensive with that of their cotenants.See Ruffin v. Crowell,
The Carey litigants' reliance on Roberts v. PearceConstruction Co.,
Thereafter, MST executed a deed in lieu of foreclosure to the entire condominium complex to Pearce Construction. Pearce Construction did not assume the MST-R L contract and demanded that Roberts vacate the condominium or pay the purchase price. Roberts refused, and Pearce Construction brought an action seeking a declaration of its rights to the disputed condominium.
Relevant to this case, on appeal Roberts asserted that Pearce Construction lacked standing to bring the declaratory-judgment action with respect to his sales contract with MST because MST had not assigned the sales contract between it and Roberts to Pearce Construction. We concluded that this fact was not dispositive of the standing issue. Because Pearce Construction had given "valuable consideration in exchange for a fee simple title to the premises" and had "declined to assume the debt owed by MST to R L," we held that "[Pearce Construction's] rights to the condominium [were] clearly affected by the Roberts-MST contract."
Unlike Pearce Construction in Roberts, the Carey litigants have failed to demonstrate how their membership rights in the LLC or their individual property rights are affected at all by the option agreement. Roberts, therefore, is distinguishable and does not support the Carey litigants' claim that they have standing to seek declaratory relief in this case.9
JUDGMENTS VACATED; APPEALS DISMISSED.
SEE, HARWOOD, STUART, and BOLIN, JJ., concur.
Reference
- Full Case Name
- Jana Howard Carey v. John R. Howard, Sr. John R. Howard, Sr. v. Jana Howard Carey
- Cited By
- 17 cases
- Status
- Published