Furlong Development Co. v. Georgetown-Scott County Planning & Zoning Commission
2016 Ky. LEXIS 628
| Ky. | 2016Background
- Developer (Furlong Development/Gordon Stacy) posted three subdivision performance bonds (insured by Platt River) to secure required public improvements for a 26‑acre subdivision called The Enclave. Bonds equaled 125% of estimated improvement costs.
- Developer financed the project with United Bank; Stacy personally guaranteed loans. After the 2008 market crash Developer defaulted and conveyed the property to the bank (deed in lieu); bank released Developer and Stacy from loan obligations.
- The bank later transferred the property internally to a holding company and asked the Planning & Zoning Commission to call the bonds and escrow proceeds to reimburse the bank for completing required infrastructure.
- The Commission declared the bonds forfeited; Developer and Insurer refused to pay. Insurer obtained an agreed judgment against Developer for a portion of potential exposure and reserved jurisdiction. Developer sued the Commission, the Bank, and the holding company in state court.
- Trial court granted summary judgment for appellees; Court of Appeals affirmed (split). Kentucky Supreme Court granted review and affirmed the lower courts, holding bond obligations enforceable under their terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bonds were callable/enforceable after Developer’s default and transfer of the property | Bonds are not callable because no houses were built; collection should be conditioned on construction/sale of lots (relying on Brooksville) | Bond language and parties’ agreements impose an unconditional obligation to repay; bank’s release of loans did not affect third‑party bond obligations | Held: Bonds are enforceable as written; no condition precedent requiring homes to be built before the Commission may collect |
| Whether calling the bonds would result in unjust enrichment to the bank/holding company | Requiring bond payment would let bank/holding company receive property without bearing infrastructure costs—unjust enrichment | An express contract (the Bond Agreements) governs recovery; unjust enrichment unavailable where express contract controls | Held: No unjust enrichment claim; express bond terms control and permit collection without plaintiff proving actual damages |
| Whether municipal ordinance or plat changes limit bond enforcement (i.e., sale of lots or ordinance requiring occupancy triggers) | Developer: local ordinance/regulatory scheme and absence of occupied lots mean bonds shouldn’t be forfeited | Defendants: no relevant ordinance condition; bond covers specified improvements regardless of lot sales; altered plat is outside the trial record | Held: Ordinance cited by Developer is irrelevant; court confines remedy to improvements required by the original bonded plat and declines to take judicial notice of later plat changes |
| Whether summary judgment was premature due to limited discovery and whether newly discovered evidence (affidavit) warranted relief under CR 60.02 | Developer: needed more discovery; affidavit shows bank/commission intended to release bonds — warrants reopening | Defendants: Developer didn’t identify specific missing evidence or how it would create a genuine issue; affidavit insufficient to change result | Held: No abuse of discretion in staying discovery or denying CR 60.02; Developer failed to show that additional discovery or the affidavit would alter outcome |
Key Cases Cited
- Coomer v. CSX Transp. Inc., 319 S.W.3d 366 (Ky. 2010) (standard of review for summary judgment)
- Blankenship v. Collier, 302 S.W.3d 665 (Ky. 2010) (de novo review of summary judgment)
- Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991) (view evidence favorably to nonmoving party on summary judgment)
- Hazard Coal Corp. v. Knight, 325 S.W.3d 290 (Ky. 2010) (contract interpretation principles)
- Bd. of Supervisors of Stafford County v. Safeco Ins. Co. of America, 310 S.E.2d 445 (Va. 1983) (obligee may collect on a performance bond without first incurring expense)
- City of Merced v. American Motorists Ins. Co., 126 Cal.App.4th 1316 (Cal. Ct. App. 2005) (measure of obligee’s right is cost to complete bonded improvements)
- Foley v. Commonwealth, 55 S.W.3d 809 (Ky. 2000) (standard for newly discovered evidence to reopen judgment)
- Jones v. Sparks, 297 S.W.3d 73 (Ky. Ct. App. 2009) (elements of unjust enrichment)