Heatherwood Holdings, LLC v. HGC, Inc. (In re Heatherwood Holdings, LLC)

Summarized by Paul Avron , Berger Singerman LLP
11 years 11 months ago

Citation:

No. 12-16020 (11th Cir. Mar. 27, 2014)

Tag(s):

Ruling:

First, the defendant-mortgagee was a "person aggrieved" and therefore possessed Article III standing to appeal district court's affirmance of bankruptcy court's ruling that the mortgagee's property was restricted to use as a gof course. Second, the bankruptcy court correctly held that the golf course property at issue was subject to an implied covenant running with the land restricting its use to a golf course.

Procedural context:

The Eleventh Circuit considered the district court's affirmance of the bankruptcy court's ruling that the golf course property at issue was subject to an implied covenant running with the land restricting its use to a golf course. Previously, the Alabama Supreme Court had opined on 1 of 3 questions certified to it, that is, that Alabama law will recognize or imply a restrictve covenant as to a golf course constructed as part of a residential project consistent with case law from Arizona.

Facts:

Developer of residential project (USX) marketed and sold homes as part of a golf course community in Shelby County, Alabama. Certain persons formed a company (HGC) to purchase, operate and maintain the golf course; however, the deed did not include a restriction on the use of the property as a golf course. A second coveyance of the property was made and, like the first deed, the second deed did not include a restriction on the use of the property as a golf course. To make renovations, a loan was obtained (from FCB); however, eventually the club shut down, and the second transferee (Heatherwood), filed a chapter 11 bankruptcy case and then sued for a determination that the property could be sold free and clear of liens, encumbrances and restrictions and that the property could be used for something other than as a golf course. Defendant HGC argued that the property was subject to covenants running with the land that required the property onlybe used as a golf course. Ultimately, the bankruptcy court agreed, as did the district court on intermediate appeal. On further appeal, the Eleventh Circuit affirmed, concluding that the ruling was supported by evidence adduced at trial before the bankruptcy court and consistent with the answer to one of the questions certified to the Alabama Supreme Court.

Judge(s):

Chief Judge Carnes, Circuit Judge Tjoflat and U.S. District Judge Marra (Southern District of Florida)

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