Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC// East Avenue Property Owners' Association, Inc. and UP Austin Holdings, LP and UP Austin Land Holdings, LP v. UP Austin Holdings, LP UP Austin Land Holdings, LP And East Avenue Property Owners' Association, Inc.// Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC

CourtCourt of Appeals of Texas
DecidedDecember 9, 2014
Docket03-13-00080-CV
StatusPublished

This text of Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC// East Avenue Property Owners' Association, Inc. and UP Austin Holdings, LP and UP Austin Land Holdings, LP v. UP Austin Holdings, LP UP Austin Land Holdings, LP And East Avenue Property Owners' Association, Inc.// Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC (Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC// East Avenue Property Owners' Association, Inc. and UP Austin Holdings, LP and UP Austin Land Holdings, LP v. UP Austin Holdings, LP UP Austin Land Holdings, LP And East Avenue Property Owners' Association, Inc.// Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC// East Avenue Property Owners' Association, Inc. and UP Austin Holdings, LP and UP Austin Land Holdings, LP v. UP Austin Holdings, LP UP Austin Land Holdings, LP And East Avenue Property Owners' Association, Inc.// Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC, (Tex. Ct. App. 2014).

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-13-00080-CV

Appellants, Central Austin Apartments, LLC; UP-32nd Street, LLC; and UP-32nd Street Hospitality, LLC// Cross-Appellants, East Avenue Property Owners’ Association, Inc. and UP Austin Holdings, LP and UP Austin Land Holdings, LP

v.

Appellees, UP Austin Holdings, LP; UP Austin Land Holdings, LP; and East Avenue Property Owners’ Association, Inc.// Cross-Appellees, Central Austin Apartments, LLC; UP-32nd Street, LLC; and UP-32nd Street Hospitality, LLC

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT NO. D-1-GN-11-003367, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING

MEMORANDUM OPINION

The principal issue in this case is whether East Avenue Property Owners’

Association, Inc. (the POA) had authority to levy a special assessment to complete basic

infrastructure for a multi-million dollar property development that the original developer abandoned

after becoming insolvent before the infrastructure was finished. The POA issued a $2.99 million

special assessment to complete part of the essential infrastructure work, which was then allocated

to the property owners pro rata based on property value. UP Austin Holdings, LP, which at that time

owned one of the few developed lots in the project, and UP Austin Land Holdings, LP, a related

entity that owned several undeveloped lots (collectively, UP Austin), sued for a declaration that the

assessment was invalid and void and sought appointment of a receiver for the POA. See Tex. Bus. Orgs. Code § 11.404 (appointment of receiver for domestic entity). UP Austin also sued other

property owners who had voted to approve the assessment—Central Austin Apartments, LLC

(CAA), UP-32nd Street, LLC (the Owner Declarant), and UP-32nd Street Hospitality, LLC

(Hospitality) (collectively, the Owners)—seeking damages and attorney’s fees under a minority-

oppression theory.

Following a bench trial, the trial court (1) concluded that the POA lacked the power

and authority, under the development’s amended Covenants, Conditions, and Restrictions (Amended

CCRs), to levy assessments for construction of original subdivision infrastructure and that the special

assessment was therefore ultra vires and void ab initio; (2) nullified two subsequent amendments

to the Amended CCRs and permanently enjoined the Owner Declarant from further amending the

CCRs to increase its voting power or extend its control period without UP Austin’s prior consent;

(3) declined to appoint a receiver for the POA because nullifying the Amended CCRs and issuing

a related permanent injunction were adequate alternative remedies; (4) found that the Owners

oppressed UP Austin by using their control of the POA to levy the special assessment; (5) found

that the Owner Declarant oppressed UP Austin with respect to the second and third amendments to

the CCRs; and (6) denied UP Austin’s request for prejudgment attorney’s fees but conditionally

granted UP Austin post-judgment and appellate attorney’s fees. The trial court further denied

(1) UP Austin’s requests for actual and exemplary damages, (2) the POA’s counterclaims to compel

payment of the special assessment and for attorney’s fees, and (3) the Owners’ counterclaim for

attorney’s fees and cross-claims for reimbursement of the sums they had paid to the POA pursuant

to the void special assessment. All of the parties challenge the trial court’s judgment in numerous

2 respects, but they predominantly challenge the invalidation of the special assessment and the award

and denials of attorney’s fees. We will affirm in part, reverse and render in part, and reverse and

remand in part.

FACTUAL AND PROCEDURAL BACKGROUND1

The dispute in this case involves a multi-million dollar mixed-use redevelopment plan

for the former Concordia University campus in Austin, Texas. In 2007, 2008, and 2009, the Austin

City Council approved three site plan components of a planned unit development (PUD) for the

site, which was then known as East Avenue and is now called University Park. A PUD is intended

for large or complex developments that are under unified control and are planned as a single

continuous project.2 Once a unified site plan has been approved, the City will not issue permits

or a permanent certificate of occupancy (CO) to any lot owner within the subdivision until all

requirements of the unified site plan are satisfied, in addition to requirements specific to each

1 The complicated factual and procedural background of this case is well known to the parties and will not be repeated at length in this opinion. 2 The City of Austin’s frequently-asked-planning-questions page explains,

A [PUD] is intended for large or complex developments under unified control planned as a single continuous project, to allow single or multi-use projects within its boundaries and provide greater design flexibility for development proposed within the PUD. Use of a PUD district should result in development superior to that which would occur using conventional zoning regulations. PUD zoning is appropriate if the PUD enhances preservation of the natural environment; encourages high quality and innovative design and ensures adequate public facilities and services for development within the PUD.

austintexas.gov website (http://www.austintexas.gov/faq/planned-unit-development-pud-what-it) (accessed Oct. 30, 2014).

3 owner’s individual lot. Until permanent COs are issued, temporary COs may be periodically issued

if certain requirements are met.

After the PUD was approved, the original developer, East Avenue IG LP, organized

the POA, enacted the Bylaws and original CCRs, and was named the “declarant” in the CCRs. The

CCRs allow the declarant to exercise control over the direction and processes of the subdivision

and POA until a time certain (the Declarant Control Period), at which point control will transition

to the POA. The Declarant Control Period afforded East Avenue IG an opportunity to complete

construction of the project and its infrastructure and amenities while protecting its investment in

the development, which is typical and anticipated for the development of a PUD. Indeed, it is

undisputed that the developer intended to fully fund and complete the original subdivision

infrastructure for the University Park development. Unfortunately, East Avenue IG became

insolvent before completing a significant portion of the essential infrastructure—including streets,

drainage, sidewalks, and utilities—and without posting adequate fiscal security with the City of

Austin to ensure its completion.

When the original developer pulled out, the development consisted of several

individually owned condominium units, an office building on Lot 4 that was operating under a

temporary CO (Lot 4), partially completed infrastructure, and several undeveloped lots. The cost

to complete critical infrastructure was estimated to be $5.5 million.

On January 29, 2010, a series of transactions were consummated in which (1) the

CCRs were amended to assign the declarant’s rights and obligations to the Owner Declarant (the

4 Amended CCRs),3 (2) several lots were transferred to the POA along with existing construction

permits and materials, and (3) several undeveloped commercial lots were acquired by the Owner

Declarant, CAA, and Hospitality, entities that were affiliated with Cypress Real Estate Advisors, Inc.

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Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC// East Avenue Property Owners' Association, Inc. and UP Austin Holdings, LP and UP Austin Land Holdings, LP v. UP Austin Holdings, LP UP Austin Land Holdings, LP And East Avenue Property Owners' Association, Inc.// Central Austin Apartments, LLC UP-32nd Street, LLC And UP-32nd Street Hospitality, LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/central-austin-apartments-llc-up-32nd-street-llc-and-up-32nd-street-texapp-2014.