In 2001, UDOT condemned some property located in Centerville, Utah, as part of the project to construct Legacy Parkway. The owners of the property had planned to develop a portion of their property into a business park, and they had already gone to the trouble of changing the zoning and obtaining city approval of their development plans prior to the condemnation. However, the portion of the property designated for development could only be accessed one way - using a road that circumvented wetlands also located on the property.
The owners discovered that the UDOT condemnation included the area where the access road was located, but UDOT represented that Legacy Parkway would include a frontage road that would allow access to the portion of the property designed for the business park. The appraisal obtained by UDOT concluded that were would be no severance damages because UDOT would construct the access road at its own expense. In the condemnation action that commenced in September 2001, UDOT submitted a map showing the proposed location of the frontage road and in subsequent negotiations, UDOT continued to represent that it would build the frontage road. Based upon these representations, the property owners entered into a Right of Way Contract with UDOT, selling a portion of their property to UDOT, including the portion where the access road was located.
The property owners entered into a Real Estate Purchase Contract (“REPC”) with Hillcrest Investment Co., LLC (“Hillcrest”) and conveyed their interest in the Centerville property to Hillcrest, in late 2005 and early 2006. While the REPC specifically identified the property conveyed to Hillcrest, it made no mention of assigning contractual rights to Hillcrest. At about the same time, Hillcrest was informed that UDOT would not construct the frontage road to access the business park. Ultimately, Hillcrest sued UDOT for breach of contract and unjust enrichment in December 2008, and asked for an injunction requiring UDOT to construct the frontage road. UDOT argued that Hillcrest did not have standing to enforce any contract and there was no contract requiring UDOT to build the frontage road. The district court agreed and granted summary judgment to UDOT, dismissing Hillcrest’s claims.
The problem for Hillcrest is that the REPC did not expressly assign the contract right to Hillcrest when it bought the property from the previous owners. Nor did Hillcrest obtain a separate assignment of the contract between UDOT and the sellers. Hillcrest tried to argue that according to the terms of the REPC, the sellers held fee title to “property rights,” that the contractual rights for construction of the frontage road was one of these property rights, and that the property rights constituted a portion of the real estate conveyed to Hillcrest.
The Utah Court of Appeals concluded that Hillcrest did not have standing to bring claims against UDOT as a party or assignee under any contract. It also concluded that “property rights,” as that term was used in the REPC did not include the contract rights Hillcrest was trying to enforce.
However, the Utah Court of Appeals did not completely eliminate Hillcrest’s hopes. Hillcrest had also argued before the district court that it had standing to enforce the contract with UDOT because it was a beneficiary of a trust that was a party to the contract with UDOT. One of the original owners of the property that contracted with UDOT for the sale of the condemned property was the SVC Horman Family Trust. Hillcrest was a beneficiary of the SVC Horman Family Trust. Hillcrest argued that the SVC Horman Family Trust (and the other trusts that had constituted the original owners and contracting parties with UDOT) had been liquidated by the trustees and that through this liquidation, Hillcrest gained equitable and beneficial title the trust’s property including the contract rights. The Utah Court of Appeals considered whether Hillcrest had presented sufficient evidence to support this complicated argument to stop summary judgment. It determined that there was not sufficient evidence to definitively determine whether Hillcrest could enforce the contract as a beneficiary of the SVC Horman Family Trust. But there were sufficient facts presented to create a dispute of material facts that required reversal of the district court’s decision to grant summary judgment.
Because of this decision, Hillcrest gets one more chance to argue that it has standing to enforce the contract with UDOT. If it can establish standing, a dispute remains whether the contract between UDOT and the previous owners required to construction of the frontage road. However, had Hillcrest and the previous property owners simply prepared an assignment of the contract with UDOT, the whole question of standing could have been completely avoided. When you are buying or selling real property, you need to be aware of other contract rights related to the real property but that will not be conveyed through a real estate purchase contract or a deed. If you want these contractual rights to transfer with the property, you must make sure that the proper documentation is prepared to expressly assure this transfer of title. Otherwise, you may find yourself in Hillcrest’s unenviable position.