THE DREES COMPANY v. FRED OSBURG AND JEANNIE OSBURG
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RENDERED:
OCTOBER 24, 2003; 2:00 p.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2002-CA-001051-MR
THE DREES COMPANY
APPELLANT
APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE WILLIAM J. WEHR, JUDGE
ACTION NO. 01-CI-01154
v.
FRED OSBURG AND
JEANNIE OSBURG
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE:
BARBER, COMBS, AND KNOPF, JUDGES.
KNOPF, JUDGE:
In October 2000, Fred and Jeannie Osburg
contracted for the construction and purchase of a new home with
The Drees Company, a multi-state developer and builder of
residential communities.
The company was developing Glenridge,
a residential subdivision in Cold Spring, Campbell County.
Soon
after the Osburgs took possession of their new home in May 2001,
they installed an above-ground pool.
When the company informed
them that the pool violated restrictive covenants governing the
use of the property, the Osburgs filed suit.
Alleging that the
company had induced them to contract by representing that aboveground pools would be permitted, they sought compensatory and
punitive damages.
The company moved to have the suit dismissed
or stayed on the ground that an arbitration clause in the
purchase contract required the Osburgs to submit their claim to
arbitration.
The trial court denied the motion.
By order
entered May 10, 2002, it ruled that the purchase agreement had
been superseded by—merged into—the Osburgs’ deed.
Because the
deed did not include an arbitration clause, the court concluded
that the Osburgs’ suit could proceed.
that the Drees Company has appealed.
It is from that ruling
It contends that the trial
court misapplied the doctrine of merger.
We agree and so
reverse and remand.1
1
Our jurisdiction to entertain an appeal from what is plainly an
interlocutory ruling comes from KRS 417.220, which permits an
appeal from “an order denying an application to compel
arbitration[.]” The Osburgs contend that this statute should
not apply in this case because the company’s motion sought
dismissal or a stay, not an order compelling arbitration. The
company, of course, is the defendant and is not obliged to seek
an order compelling the Osburgs to proceed against it, in
arbitration or otherwise. Its motion to dismiss the Osburgs’
suit was nevertheless clearly a motion to compel the Osburgs, if
they wished to proceed, to do so in arbitration, not in court.
The denial of such a motion, although interlocutory, is
appealable under the statute.
2
Under the merger doctrine, upon delivery and
acceptance of a deed the deed extinguishes or supersedes the
provisions of the underlying contract for the conveyance of the
realty.2
The doctrine applies to covenants pertaining to title,
possession, quantity, or emblements3 of the property, the
covenants commonly addressed in deeds.4
Covenants in the
antecedent contract that are not commonly incorporated in the
deed, and that the parties do not intend to be incorporated, are
often referred to as collateral agreements.
The merger doctrine
does not apply to collateral agreements.5
The arbitration agreement in this case was collateral
to the property transfer.
It had nothing to do with the title,
2
Borden v. Litchford, Ky. App., 619 S.W.2d 715 (1981).
3
Generally speaking, “emblements” refers to crops.
4
Coe v. Crady Davis Corporation, 60 P.3d 794 (Colo. App. 2002);
Waterville Industries, Inc. v. Finance Authority of Maine, 758
A.2d 986 (Maine 2000). We have been unable to find any Kentucky
case addressing this precise issue, but the Kentucky cases
applying the merger doctrine are consistent with this principle.
Borden v. Litchford, supra (warranties of condition, apparently
thought by the court to bear significantly on the title);
Humphries v. Haydon, 297 Ky. 219, 179 S.W.2d 895 (1944)
(quantity).
5
Coe v. Crady Davis Corporation, supra; Premier Title Company v.
Donahue, 765 N.E.2d 513 (Ill. App. 2002); Spears v. Warr, 44
P.3d 742 (Utah 2002); Waterville Industries, Inc. v. Finance
Authority of Maine, supra; Beck v. Smith, 538 S.E.2d 312 (Va.
2000); Bruggeman v. Jerry’s Enterprises, Inc., 591 N.W.2d 705
(Minn. 1999).
3
possession, quantity, or emblements of the property.
And it is
reasonable to suppose that the parties intended post-closing
performance of that clause; disputes, after all, frequently
arise after closing.
The trial court erred, therefore, when it
applied the merger doctrine to the arbitration agreement.
Accordingly, we reverse the May 10, 2002, order of the
Campbell Circuit Court and remand for entry of a new order
giving effect to the parties’ agreement to arbitrate.
BARBER, JUDGE, CONCURS.
COMBS, JUDGE, DISSENTS AND FILES SEPARATE OPINION.
COMBS, JUDGE, DISSENTING:
I dissent.
The trial court
correctly characterized this issue by holding that all the
contracts for purchasing land, for construction of a residence,
and for the above-ground pool have a direct bearing on the
nature of the real estate title acquired by the Osburgs.
Therefore, the deed describing and restricting that title is the
only relevant document governing this controversy.
All other
contracts or agreements truly merged into their deed of title
and were not – as the majority opinion suggests – merely
collateral agreements standing separate and apart from the deed.
Since the trial court correctly applied the merger
doctrine to the contract for the pool, it was also correct in
refusing to apply the arbitration clause contained in the
contract that had been subsumed into the deed.
4
This matter
should proceed to litigation as to the deed rather than being
subject to the arbitration clause of the contract.
BRIEFS FOR APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEES:
Gerald F. Dusing
Adams, Stepner, Woltermann &
Dusing, P.L.L.C.
Covington, Kentucky
Paul J. Vesper
Covington, Kentucky
Valerie Van Valkenburg
Aronoff, Rosen & Hunt
Cincinnati, Ohio
BRIEF FOR AMICUS CURIAE HOME
BUILDERS ASSOCIATION OF
NORTHERN KENTUCKY AND HOME
BUILDERS ASSOCIATION OF
KENTUCKY:
Elizabeth Graham Weber
Deters, Benzinger & LaVelle,
P.S.C.
Covington, Kentucky
ORAL ARGUMENTS FOR APPELLANT:
Gerald F. Dusing
Covington, Kentucky
5
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