Aep Industries Inc. v. B.G. Properties, Inc.
2014 SC 000512
| Ky. | Oct 24, 2017Background
- AEP leased an industrial facility from BG and held a written Option Agreement (2001 and 2010 documents) giving AEP a multi-stage process to fix purchase price (negotiate → BG appraisal → AEP appraisal → neutral third appraiser if needed) and a 7‑day right for AEP to withdraw after the final price.
- AEP exercised the option in 2011. BG’s appraiser valued the property at $7,500,000; AEP’s appraiser (CBRE) at $3,550,000. BG disputed CBRE as non‑compliant with the Agreement’s “highest and best use” and special‑features requirements and refused to proceed to the third appraiser.
- AEP sued to compel BG’s cooperation; the trial court found CBRE compliant, ordered selection of a neutral third appraiser (Pritchett), who valued the property at $3,834,000. The trial court ordered BG to convey and awarded AEP a rent credit, producing a stated consideration of $3,426,012.63.
- BG executed and delivered a general warranty deed unconditionally accepting the stated consideration and did not record a lis pendens, post a supersedeas bond, seek a stay, or otherwise preserve the status quo; AEP recorded the deed. BG then appealed only the valuation/related rulings.
- The Court of Appeals vacated and remanded, finding the trial court had not resolved whether AEP breached the appraisal process (which could bar specific performance). The Supreme Court granted review and reversed the Court of Appeals, holding BG’s unconditional conveyance and acceptance of consideration foreclosed further challenge; the case was remanded with directions to dismiss BG’s counterclaims.
Issues
| Issue | AEP's Argument | BG's Argument | Held |
|---|---|---|---|
| Can BG continue to challenge enforcement after it conveyed the property and accepted consideration? | BG’s deed and acceptance render the controversy moot; BG waived objections by unconditionally transferring title. | BG can appeal without posting a supersedeas bond (per Dreamers) and can seek relief on valuation without undoing conveyance. | Held: BG’s unconditional deed and acceptance of consideration preclude further challenge; appeal is moot as to relief sought; remand to dismiss counterclaims. |
| Was specific performance premature because AEP allegedly failed to comply with appraisal conditions (thus barring its equitable relief)? | CBRE and Pritchett appraisals complied with Agreement’s special requirements; AEP followed the contract and sought third appraiser when BG refused. | AEP initially tendered a non‑qualifying appraisal; AEP also breached lease roof‑maintenance provisions that should affect valuation—so specific performance was barred. | Held: Trial court had ruled appraisals compliant; even if error, BG’s subsequent unconditional deed and acceptance of consideration prevent reversal relief that would restore status quo. |
| Did BG’s failure to post a supersedeas bond or obtain a stay preserve its appellate rights? | AEP: BG failed to preserve the status quo by not posting bond or obtaining stay; BG therefore cannot prevent enforcement of the conveyance. | BG: Dreamers allows appeal without bond; paying or accepting judgment does not forfeit appellate rights. | Held: For real property conveyances, posting a supersedeas bond or obtaining a stay is required to preserve the status quo; Dreamers (money judgments) is distinguishable. BG did not preserve the status quo. |
| Does the merger doctrine bar collateral attack on the underlying option contract after delivery and acceptance of an unconditional deed? | The deed merges and extinguishes prior contractual provisions; absent an express reservation in the deed, BG’s claims concerning purchase‑price adjustments are merged away. | BG: Could still litigate valuation errors and seek re‑assessment on appeal without undoing the conveyance. | Held: Merger doctrine applies; the unconditional deed extinguished the underlying contract rights as to the conveyed property—BG could have preserved rights in the deed but did not. |
Key Cases Cited
- Dreamers LLC v. Don's Lumber & Hardware, Inc., 366 S.W.3d 381 (Ky. 2011) (discussing appeals without supersedeas bonds for money judgments)
- Green Valley Environmental Corp. v. Clay, 798 S.W.2d 141 (Ky. 1990) (Court of Appeals may grant stays to preserve status quo pending appeal)
- Rose v. Cox, 179 S.W.2d 871 (Ky. 1944) (judicial sale not voided by later reversal absent supersedeas or stay)
- Sedley v. Louisville Trust Co., 419 S.W.2d 531 (Ky. 1967) (failure to supersede sale prevents appellate relief; case becomes moot)
- Drees Co. v. Osburg, 144 S.W.3d 831 (Ky. App. 2003) (acceptance of deed merges and extinguishes prior contract terms)
- Dahlin v. Amoco Oil Corp., 567 N.E.2d 806 (Ind. Ct. App. 1991) (seller’s conveyance inconsistent with arguing decree of specific performance was invalid; appellant waived challenge)