Motion-Secondary: BEE CAVE TX VS GALLERIA TEXAS

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Preview
                                Filed
11 October 21 A11:48
Amalia Rodriguez-Mendoza

District Clerk
Travis District
CAUSE NO, D-1-GN-11-000796 D-1-GN-11-000796
BEE CAVE (TX)—HC APARTMENTS IN THE DISTRICT COURT OF

SYNDICATED HOLDINGS, LLC
v.

HILL COUNTRY TEXAS GALLERIA
LLC, DILLARD TEXAS, LLC, DILLARD
TEXAS SOUTH, LLC, DILLARD’S
PROPERTIES, INC., BLUESTEM
RESIDENTIAL, LLC, HCG LAND
PARTNERS, LLC, ROBERT B.
BALDWIN, II, WELLS FARGO BANK
N.A., and RS BACK WOODS HOLDINGS
AUSTIN, LLC

TRAVIS COUNTY, TEXAS

PLP LP LP LP LP LP LP LP LP LP LP) LP LP

353"? JUDICIAL DISTRICT

DEFENDANT HILL COUNTRY TEXAS GALLERIA, LLC’S RESPONSE TO
PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT

Defendant Hill Country Texas Galleria, LLC (“Galleria”) files this Response to
Plaintiffs Motion for Partial Summary Judgment (“Plaintiff's Motion”). The Court should deny
Plaintiff's Motion because the unambiguous terms of the COREA support Galleria’s CAM
Election as a matter of law. Plaintiff's alternative reading of the COREA ignores the plain
meaning of the COREA’s terms, is internally inconsistent, and renders huge portions of the
COREA meaningless. Plaintiffs proposed interpretation confuses “easement” rights with
“Common Area” in a manner contradictory to the plain language of the COREA. This confusion
poisons each of Plaintiff's arguments and is fatal to Plaintiffs proposed interpretation.
Moreover, Plaintiff's interpretation must be discarded because it would require the Court to
ignore or re-write vast portions of the COREA, including the definitions of “Common Area,”
“Common Area Maintenance Costs,” and “Access Roads,” as well as the easement (Section
2.14) and common area maintenance provisions (Section 6.1, 6.4 and 6.5) at the heart of this
dispute. An interpretation requiring drastic revisions of the COREA is improper as a matter of

law. Accordingly, Plaintiff's Motion should be denied.

838062I. INTRODUCTION

Galleria is the owner of a portion (the “Galleria Mall”) of a municipal center
development in Bee Cave, Texas, known as the Hill Country Galleria (the “Mixed Use
Development”). Bee Cave (TX)}—HC Apartments Syndicated Holdings, LLC (“Bee Cave” or
“Plainitff’) is the owner of a residential portion of the Mixed Use Development called the
Alexan Galleria Apartments (the “Apartments” or “Apartment Tracts”). Both Galleria and Bee
Cave are parties to a reciprocal easement agreement governing the Mixed Use Development
called the Construction, Operating and Reciprocal Easement Agreement (as amended, the
“COREA”). Galleria is the Developer under the terms of the COREA.

Section 6.1 of the COREA sets forth the default rule regarding maintenance of the
common area throughout the Mixed Use Development. It provides that each party to the
COREA, with the exception of Dillard’s, is responsible for maintaining and repairing the
common area on its respective tract. Section 6.5 of the COREA, however, empowers the
Developer, at its sole discretion, to make a Common Area Maintenance Election (“CAM
Election”) as to one or more of the tracts subject to the terms of the COREA. By this CAM
Election, the Developer assumes responsibility to maintain and repair the common area located
on the tracts subject to the CAM Election. Each party whose tract is subject to the CAM
Election (“CAM Party”) pays the Developer a proportionate share of all the common area
maintenance costs according to a formula set out by Section 6.5 of the COREA.

On April 19, 2010, Galleria made a CAM Election as to a number of tracts, including the
Apartment Tracts. Subsequently, Galleria forwarded Bee Cave an estimate of the Apartments’
proportionate share of the common area maintenance costs as determined by application of the

formula set out in Section 6.5 of the COREA. Bee Cave filed this suit to ask the Court to

838062oe

declare, among other things, that Galleria’s CAM Election as to the Apartment Tracts “is
prohibited by the unambiguous terms of the” COREA or that Galleria’s “billing to Bee Cave for
expenses under the COREA is improper and incorrect.”! On July 29, 2011, Galleria filed a
motion for summary judgment asking the Court to rule as a matter of law that Galleria may use a
CAM Election to impose a common area maintenance cost obligation on the Apartments that
applies to all common area maintenance costs incurred by Galleria on the Mixed Use
Development and is not limited by the caps on certain common area maintenance costs provided
by Section 6.4 of the COREA.

Bee Cave has now filed a cross motion for partial summary judgment on essentially the
same issues. Bee Cave contends that Galleria’s CAM Election is improper for three reasons: (1)
Section 2.14 of the COREA denies Galleria a maintenance easement across the Residential
Tracts,” which, according to Bee Cave, implies that the COREA must also deny Galleria the right
to make a CAM Election as to the Residential Tracts; (2) the Apartments have no Common Area,
as that term is defined under the COREA, and so cannot be subject to a CAM Election; and (3)
Galleria’s bill to the Apartments for the CAM Election is “nearly 100 times the amount”
permitted by the caps set out in Section 6.4.°

None of Bee Cave’s grounds for summary judgment withstand scrutiny. First, nothing in
the COREA conditions whether a tract is subject to a CAM Election on Galleria’s easement
rights to the tract. The COREA provides Galleria with a contractual right to access the

Apartment Tracts to perform maintenance activities, which is more than sufficient for the

purposes of a CAM Election.

' Plaintiff's Fourth Amended Petition at 4] 13.
? The Apartment Tracts are Residential Tracts under the terms of the COREA.
* See Plaintiff's Motion for Partial Summary Judgment at 4-5.

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838062Second, the Apartments unambiguously contain “Common Area”, as is clear from the
items listed in the COREA’s definition of Common Area, Bee Cave’s own argument concerning
the application of Section 2.14, and numerous provisions of the COREA that specifically
reference the Common Area on the Apartment Tracts. Bee Cave’s proposed interpretation of
Common Area rests on an unfounded assumption that all Common Area must be the subject of
cross-easements among all the parties to the COREA. Based on this assumption, Bee Cave
concludes that the Common Area only includes certain portions of the Mixed Use
Development’s Access Roads. Bee Cave’s interpretation is not supported by any language in the
COREA. Bee Cave cannot identify any section, clause, or provision in the COREA that makes
cross-easements a prerequisite to an area’s constituting Common Area. This language does not
exist. Moreover, Bee Cave’s cramped definition is an improper contract interpretation because it
would: (1) require the Court to exclude numerous items explicitly included in the definition of
Common Area and (2) render huge portions of the COREA meaningless. Bee Cave’s contrived
definition of Common Area is simply not a reasonable alternative to the clear meaning of the
COREA.

Finally, Galleria’s estimate of the Apartments’ proportion of CAM expenses is based on
an application of Section 6.5’s unambiguous formula for determining allocation of such expenses
and is therefore proper pursuant to the COREA. Every expense for which Galleria has billed the
Apartments is among the type of expenses expressly included in the COREA’s definition of
“Common Area Maintenance Costs.” Further, under the clear terms of Section 6.5, the
Apartments’ proportionate share of CAM expenses is not limited by the caps contained in

Section 6.4.

838062Il. ARGUMENT AND AUTHORITIES

A. Section 2.14 Has No Effect on Galleria’s Right to Apply a Section 6.5 CAM Election
to the Residential Tracts.

Section 6.5 of the COREA provides that “Developer may from time to time elect (“CAM
Election”) to maintain and repair the Common Area located on one or more of the Tracts in the
manner hereinafter set forth... . Any such CAM Election shall be in writing and shall be given
to each Party subject to the CAM Election... .” Nothing in Section 6.5 excludes the Residential
Tract Parties from the CAM Election provisions. The drafters of the COREA knew how to limit
the term “Party” or “Tract” to exclude the Residential Tract Parties when it was their intention to
do so. For example, in Section 6.4, the immediately preceding section, the drafters explicitly
state that “each Party (other than Dillard and each Residential Tract Party) shall pay to the
Developer” certain common area maintenance costs. No such excluding language appears in
Section 6.5.

Because nothing in Section 6.5 even hints at the possibility that the Apartment Tracts are
excluded from its CAM Election provisions, Bee Cave has combed the rest of the COREA in
search of language that might nonetheless support Bee Cave’s preferred outcome. Bee Cave
apparently believes Section 2.14 provides something it can work with. This belief is misplaced.

Article II sets out the terms and conditions of the various easements granted among the
parties to the COREA. Section 2.14 grants Galleria a maintenance easement over the
Development Tracts “as may be necessary for the purpose of permitting [Galleria] to perform its
obligations” under the COREA. However, the easement granted by Section 2.14 contains the
following limitation:

Nothing contained in this Section 2.14 shall be construed as creating any

easement in favor of Developer over, across, upon and under those portions of the
Common Area on the Residential Tracts, it being understood that each Residential

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838062Tract Party shall be responsible for all maintenance and repair of all Common
Area located on such Residential Tract Party’s Residential Tract, all as more
particularly set forth in this [COREA].

Bee Cave concludes that because Section 2.14 denies Galleria a maintenance easement over the
Common Area of the Residential Tracts, then 2.14 also implicitly denies Galleria the right to
subject the Apartment Tracts to a CAM Election. This argument is not based on the language of
the COREA or the context of Section 2.14, and makes no attempt to harmonize the various
provisions of the COREA. Instead, Bee Cave simply asks, “what other purpose could Section
2.14 possibly have than to prevent [Galleria] from electing to maintain the Residential Tracts
through a CAM Election?” According to Bee Cave, if the COREA were read to permit Galleria
to subject the Apartment Tracts to a CAM Election, “Section 2.14 would be rendered
meaningless.”* Further, Bee Cave contends that this section specifically requires that the
Apartment Tracts provide their own common-area maintenance. Bee Cave’s argument fails for
several reasons.

1. Applying a CAM Election to the Apartment Tracts is consistent with
Galleria’s contractual rights and does not render Section 2.14 meaningless.

Construing the plain meaning of Section 6.5 to include the Apartment Tracts among the
parties subject to a CAM Election in no way renders Section 2.14 “meaningless.” Section 2.14
grants Galleria a maintenance easement across all the Development Tracts except for the
Residential Tracts. These easements are granted and have meaning regardless of whether the
Apartment Tracts are subject to a CAM Election. Moreover, subjecting the Residential Tracts to
a CAM Election does not render meaningless the specific denial of a maintenance easement to

the Residential Tracts. Section 2.14 merely denies Galleria a property interest in the Apartment

“Id. at 7.
° Id. at 4.

838062Tracts. The limitation of this property interest is not inconsistent with permitting Galleria
nonetheless to access the Apartment Tracts under certain conditions as a matter of contractual
right—as in fact the COREA plainly does.

Various sections of the COREA give Galleria a contractual right to access the Apartment
Tracts. Section 4.2 details various maintenance standards required of the Outparcel and
Residential Tract Buildings, which includes the Apartment Tracts. Subsection 4.2(b)(ii)
provides:

[Galleria] hereby reserves unto itself, the right to cure any failure of any

Outparcel Party and Residential Tract Party to make such repairs, maintenance or

restoration as are required under the aforesaid covenants, conditions and

reservations and as required under Articles 6, 9 and 11 hereof; provided, however

. .. Developer has first given the Outparcel Party or the Residential tract Party

written notice of such failure... .

Similarly, Section 6.6. provides:

If any Party . . . fails to perform any of its duties or obligations respecting the

Common Area located on its respective Tract as provided in this Article 6, then

[Galleria] may at any time give a written notice to the Failing Party reasonably

detailing the non-performance [and if the Failing Party fails to cure, then Galleria]

shall have the right to perform same in accordance with the standards set forth in

this [COREA, including a] temporary non-exclusive easement to enter upon the

Common Area on the Failing Party’s Tract to perform same... .

Thus the COREA clearly provides Galleria with the contractual right to perform various
operations concerning the Common Area on the Apartment Tracts, as long as certain conditions
are met. There is a reason Section 2.14 never mentions a connection between Galleria’s

possession of a maintenance easement to a particular tract and Galleria’s right to subject that

tract to a CAM Election—there is no connection.

8380622. The plain language of the COREA and accepted principles of contract law
support Galleria’s contractual right to make a CAM Election and receive
payments absent a maintenance easement.

Nothing in the CAM Election provisions—or any other part of the COREA—conditions
whether a tract is subject to a CAM Election on the Developer’s easement rights to the tract.
More generally, however, even if a party lacks a property right to access property that is subject
to a contract for services, this does not mean that the owner of that property may contract for
services on the property and then disavow its contractual obligations by preventing performance.
If Galleria tenders performance of its maintenance responsibilities under a CAM Election, the
Residential Parties are obliged to perform in return by paying under the formula set out in
Section 6.5. This is hornbook contract law. See, e.g., Tex-Craft Builders, Inc. v. Allied
Constructors of Houston, Inc., 465 S.W.2d 786, 791 (Tex. App.—Tyler 1971, writ refid n.r.e.)
(“The rule is well settled that there may be a recovery on the contract for part performance of an
entire contract if complete performance has been prevented by the other party. Stated in another
way, where a party in whose favor something is to be done prevents that performance and the
other party is not in default, a recovery may be had as if the act had been performed.”) (citations
omitted). In other words, two parties may make an enforceable contract even though one of the
parties lacks the right to force the other party to submit to performance. Galleria need not
actually perform to fulfill its contractual obligations under Section 6.5. Galleria need only tender
performance. If Bee Cave denies Galleria access to its property, this does not alter its obligation
to pay Galleria for services tendered.

In addition, although Section 2.14 does state that “each Residential Tract Party shall be
responsible for all maintenance and repair of all Common Area located on such Residential Tract

Party’s Residential Tract,” this language is conditioned by what follows: “all as more particularly

838062set forth in this [COREA].” This statement thus explicitly subjects itself to the portions of the
COREA addressing the Common Area, which include Section 6.1 (setting forth the default rule),
as well as the CAM Election provisions of Section 6.5.

The plain language of 6.5 permits Galleria to subject all the tracts in the Mixed-Use
Development to a CAM Election, including the Apartment Tracts. Although Section 2.14 denies
Galleria a maintenance easement over the Apartment Tracts, Sections 4.2 and 6.6 give Galleria a
contractual right to access the Apartment Tracts with notice. Thus, regardless of whether
Galleria has a property right or an easement to enter the Apartment Tracts to perform
maintenance operations, the COREA grants Galleria both the contractual right to perform
maintenance services on the Apartment Tracts, and the contractual right to access the Apartment
Tracts to perform such services.

Nothing in Sections 6.5 or 2.14 conditions whether a tract is subject to a CAM Election
on Galleria’s easement rights to the tract. In fact, Section 2.14 never even mentions the CAM
Election provisions. There are any number of reasons why the drafters of the COREA might
have chosen to withhold a maintenance easement to the Residential Tracts that have nothing to
do with preventing CAM Elections. The most obvious is that such easements make the resale of
specifically residential properties especially difficult, as easements give the dominant estate such
expansive and non-negotiable rights of access. Thus, it makes perfect sense that the COREA
withholds a maintenance easement from the specifically residential tracts, while providing
Galleria with a host of contractual rights to enter the Residential Tracts for any number of
purposes, including performing maintenance activities pursuant to a CAM Election. Bee Cave’s
argument concerning Section 2.14 ignores the plain language of the COREA and the rights

granted to Galleria, and is internally inconsistent. Accordingly, this argument must fail.

838062B. Bee Cave’s Argument that the Apartment Tracts Do Not Contain Common Area is
Facially Invalid.

Bee Cave’s contention that the Apartment Tracts cannot be subject to CAM Election
because the Apartment Tracts have no “Common Area,” as that term is defined in the COREA,
cannot withstand the most cursory scrutiny. Bee Cave emphasizes the first portion of Section
1.6’s definition of Common Area, which provides:

The term “Common Area” shall mean all areas within the exterior boundaries of

the Shopping Center Site, which are made available, as hereinafter provided, for
the non-exclusive use, convenience and benefit of all Permitees.°

Bee Cave then assumes, without any support from the COREA, that an area is only made
available for the non-exclusive use, benefit, and convenience of the Permitees if that area is
subject to cross-easements held by all the Parties to the COREA. To the extent that no portion of
the Apartment Tracts is subject to such cross-easements, Bee Cave contends that no part of the
Apartment Tracts is made available for the non-exclusive use, convenience, and benefit of all
Permitees, and so no part of the Apartment Tracts constitutes Common Area. In fact, according
to Bee Cave, the only parts of the Mixed Use Development that constitute Common Area under
the COREA are certain portions of the Access Roads.’ Bee Cave then contends that Section 6.5
cannot apply to the Apartment Tracts because the Apartment Tracts do not contain any Common
Area (e.g., Access Roads). This argument is flawed and ignores proper contract construction in a
number of ways.

First, if the Apartment Tracts have no Common Area, then the COREA should not
contain explicit references to the Common Area on the Apartment Tracts. However, the COREA

contains numerous references to Common Area on the Residential Tracts, including in Section

‘ The “Permitees” include all Parties to the COREA. See COREA at Sections 1.33, 1.26, and 1.30.
Id. at 11.

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8380622.14—the very section Bee Cave cites in its first argument, discussed above. Bee Cave contends
that the Apartment Tracts are exempt from a CAM Election because Section 2.14 denies Galleria
a maintenance easement to the Apartment Tracts. As part of its argument, Bee Cave highlights
the following portion of Section 2.14: “it being understood that each Residential Tract Party shall

be responsible for all maintenance and repair of all Common Area located on such Residential

 

Tract Party’s Residential Tract, all as more particularly set forth in this [COREA].” (Emphasis
added). Clearly, the COREA’s drafters intended the meaning of Common Area to include
portions of the Residential Tracts, which include the Apartment Tracts.

Second, to the extent that the Common Area only includes portions of the Access Roads,
as Bee Cave contends, then huge portions of the COREA become meaningless. The Access
Roads are part of Galleria’s and Dillard’s tracts. No other tracts contain Access Roads or any
portions of Access Roads. But if the only Common Area in the Mixed Use Development is on
Galleria’s and Dillard’s tracts, why does Section 6.1 provide as a default rule that “each Party
shall Operate and maintain . . . the Common Area on its Tract in first-class good order... ?”
What is the purpose of Section 6.5, which permits Galleria to elect to “maintain and repair the
Common Area located on one or more of the Tracts... .?” Why do Sections 4.2 and 6.6 grant
Galleria the right to access all the tracts in the development to ensure that the Common Area
located thereon is properly maintained? None of these provisions make any sense if the
Common Area is limited to certain portions of the Access Roads. As a matter of law, this cannot
be a reasonable interpretation of the COREA’s definition of Common Area. See Jacobson v. DP
Partners Ltd. P’ship, 245 S.W.3d 102, 106 (Tex. App.—Dallas 2008, no pet.) (“A court must
favor an interpretation that affords some consequence to each part of the agreement so that none

of the provisions will be rendered meaningless.”); see also Columbia Gas Transmission Corp. v.

ll

838062ULM Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996) (“For an ambiguity to exist, both
interpretations must be reasonable.”) (emphasis added).

Not only does Bee Cave’s limitation of Common Area to portions of the Access Roads
render much of the COREA meaningless, it makes hash of the enumerated list of items contained
within the definition of Common Area itself. The COREA states that:

The Common Area shall include, but not be limited to, Common Utility Lines,
the Automobile Parking Area, roadways, islands, private streets, entrances and
exits to and from public roadways and streets, ramps, truckways, loading areas,
delivery passages, truck tunnels and service corridors, curbs, lighting standards,
paving, traffic and directional signs and traffic stripings and markings, Perimeter
Sidewalks, other_sidewalks [sic] walkways and exterior stairways, fountains,

malls, landscaping, landscaping irrigation systems, landscaped buffer strips,
detention areas (regardless of whether located on-site or off-site), amphitheatres,

pylon and monument signage, restrooms not located within space exclusively
appropriated by an Occupant, and in addition, subject to Section 1.21 B.4., a
Common Area maintenance office and equipment storage area. The Common
Area includes those portions of Shopping Center Site which are improved and
intended to be used as the Common Area, until such time as any construction of a
building is commenced or about to be commenced thereon in accordance with the
terms of this REA.®

 

The Apartment Tracts contain, at the very least, the items underlined in this list—and Bee Cave
admits as much.” Bee Cave attempts to skirt the implications of this fact by contending that the
items in this list “constitute Common Area only insofar as they satisfy the general definition of
that term,” i.e., the first portion of the definition, which Bee Cave alleges limits the Common
Area to parts of the Access Roads.'° However, construing the general definition of Common
Area to include only portions of the Access Roads renders meaningless a number of items in this
list. No part of the Automobile Parking Area, for example, is located on the Access Roads.

There are no private streets, fountains, malls, detention areas, amphitheaters, or restrooms on the

* Section 1.6 of the COREA (defining “Common Area”) (boldface and underlines added).
i See Plaintiff's Motion for Partial Summary Judgment at 11.
Id.

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838062Access Roads. And neither the Common Area maintenance office nor the equipment storage
area is on the Access Roads.

Pursuant to Bee Cave’s interpretation, dozens of terms would have to be stricken from
the definition of Common Area because they fall outside of Bee Cave’s limited definition of
Common Area as portions of the Access Roads only. The definition of Common Area cannot
reasonably be read to exclude wholesale multiple items of a list that the definition expressly
includes, An interpretation that requires ignoring or re-writing the COREA is not supported by
the settled rules of contract construction. See J/linois Tool Works, Inc. v. Harris, 194 S.W.3d
529, 533 (Tex. App.—Houston 2006, no pet.) (A court must construe a contract “so as not to
render any of the language superfluous.”).

The general definition of Common Area that precedes the itemized list must be read in a
manner consistent with each item on the list constituting Common Area. See First Union Nat.
Bank y. Richmont Capital Partners I, L.P., 168 S.W.3d 917, 924 (Tex. App.—Dallas 2005, no
pet.) (When interpreting a contract, “specific and exact terms are given greater weight than
general language.”); Restatement (Second) of Contracts § 203(c) (1981) (“[S]pecific terms and
exact terms are given greater weight than general language.”).

The fallacy in Bee Cave’s construction of the general definition arises from Bee Cave’s
assumption that the only way an area can be “made available for the non-exclusive use,
convenience and benefit of all Permitees” is if the COREA grants to all the Permittees an
easement to that area, Nothing in the COREA conditions availability for the use, benefit, and
convenience of all Permittees on common easement rights. Bee Cave closely analyzes the
sections of Article II granting various cross-easements for ingress and egress, management of

utility lines, and storm water drainage, although none of these sections even suggest that such

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838062easements are equivalent to or prerequisites of availablity for the non-exclusive use,
convenience, and benefit of all Permitees.

Bee Cave thus reads the definition of Common Area by starting with the general
definition, assuming that common availability necessitates common easements, and then
excluding items in the enumerated list that follows to the extent such items do not fit the
contrived reading of the general definition. This reading is exactly backwards. See First Union
Nat. Bank, 168 S.W.3d at 924, To ensure that the definition of Common Area is both internally
consistent and consistent with the rest of the COREA, we must start with the enumerated list of
what constitutes Common Area. The items in this list are then by definition “made available for
the non-exclusive use, convenience and benefit of all Permitees.”'! This reading ensures that all
the items in the list are in fact included in the Common Area, as the terms of the definition
require, and ensures that the other sections of the COREA that presume the Common Area
consists of such items have meaning and purpose. See Jacobson, 245 S.W.3d at 106.

Bee Cave admits that the Apartment Tracts contain at least some of the items expressly
included in the definition of Common Area. To this extent, the Apartment Tracts contain
Common Area under a plain reading of the COREA. Bee Cave’s alternative, cramped, and
contrived definition of Common Area makes the definition of Common Area itself incoherent
and renders much of the COREA meaningless. Bee Cave’s reading should therefore be rejected

as unreasonable as a matter of law.

"| This reading is aided by the fact that the enumerated list of items expressly included in the definition of
Common Area is immediately followed by an enumerated list of items expressly excluded from the
definition of Common Area. Such items include “those Portions of any Tract which are improved with a
building (including any interior portions of any building, and any appurtenant canopies, supports and
other outward extension) ... .” See Section 1.6 of the COREA.

14

838062Cc. Galleria’s CAM Charges to Bee Cave are Proper Because They Conform to the
Formula Set Out in Section 6.5.

Bee Cave contends that Galleria has “grossly overcharged” Bee Cave pursuant to the
CAM Election because: (1) these charges include amounts for items that do not meet Bee Cave’s
limited definition of Common Area and (2) the charges exceed the caps on certain common area
maintenance costs set out in Section 6.4. In fact, neither of these considerations is relevant to the
proper determination of the Apartments’ share of CAM expenses.

Bee Cave begins its discussion of Galleria’s alleged overcharges by contending that
CAM expenses charged to the Apartments must be limited to those expenses associated with
maintaining the Common Area—as Bee Cave has chosen to understand that term. Bee Cave
then details the various easement provisions of Article II relating to Access Roads, again
insisting that only certain select portions of the Access Roads constitute Common Area under the
COREA. According to Bee Cave, any CAM charges not associated with these portions of the
Access Roads are improper.

Despite its lengthy discussion of the proper method for allocating CAM expenses, Bee
Cave never once looks to Section 6.5 itself for guidance. Subsection (iv) of Section 6.5 sets out
the rule for allocating such expenses as follows:

(iv) each Party (other than Dillard) whose Tract is subject to the CAM Election

shall pay to Developer its proportionate share of Common Area Maintenance

Costs in equal monthly installments, in advance, as reasonably estimated by

Developer... .
A CAM Party’s “proportionate share” of Common Area Maintenance Costs is determined

according to a particular formula based on square footage of floor space.'* Section 1.7 of the

COREA defines the term “Common Area Maintenance Costs” as: “the total of all monies paid

° See Plaintiff's Motion for Partial Summary Judgment at 13-17.
' See Section 6.5 of the COREA.

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838062and expenses incurred by Developer during an accounting period for costs and expenses relating
to maintenance, lighting, cleaning, inspecting, painting, repair, management, and Operation of
the improvements of the Common Area” (emphasis added). Section 1.7 then sets out a non-
exclusive list of the types of costs included in the definition that covers more than two pages,
including costs such as policing, security, all service contracts, insurance premiums, taxes,
management office expenses, and many others.

Presumably, Bee Cave imports its constricted definition of Common Area into a similarly
constricted definition of Common Area Maintenance Costs and contends that Bee Cave is only
responsible for its proportionate share of Common Area Maintenance Costs associated with
maintaining certain portions of the Access Roads. But defining Common Area Maintenance
Costs in this way yields the same absurd results as in the case of Common Area, i.e., a huge
portion of the two-and-one-half page list of items expressly included in the definition of
Common Area Maintenance Costs is rendered meaningless. Even a cursory glance at the kinds
of items the COREA lists as examples of Common Area Maintenance Costs suggests the

implausibility of construing such items solely in terms of Access Roads.'* For example,

“Common Area Maintenance Costs shall include . . . amounts for the following: costs of acquisition,
rental and replacement of maintenance equipment and cost of small tools and supplies; acquisition costs
of maintenance equipment (including reasonable financing charges [excluding late charges]); policing,
security protection, traffic direction (including, without limitation, all costs and expenses of traffic
regulation, directional signs and traffic consultants), control and regulation of the Automobile Parking
Area; all costs and expenses of maintaining, operating, replacing, repairing, repaving, lighting, striping,
salting and sealing the Automobile Parking Area, including any parking decks, perimeter driveways and
entrance areas of the Common Area and other improvements located on the Common Area; costs relating
to the operation, maintenance and repair of any storm water detention and drainage area servicing the
Shopping Center Site, whether located in the Shopping Center Site or not; maintenance and repair of off-
site improvements (including off-site signs, landscaping, streetscape, and lighting systems); real estate
taxes attributable to any public amphitheater, detention facilities and retaining walls (whether on-site or
off-site) serving the Shopping Center; cost of cleaning and removal of rubbish, dirt and debris from the
Common Area (including, without limitation, costs of collection and disposal of all trash and garbage); all
costs and expenses of all service and maintenance contracts for the Common Area, including, without
limitation, windows and general cleaning, surface water, pest control, electronic instruction, fire control

16

838062specifically enumerated Common Area Maintenance Costs include: control and regulation of the
Automobile Parking Area, maintenance and repair of off-site improvements, windows and
general cleaning, all varieties of insurance and property taxes, salaries for employees of the
management office, other expenses of the management office, security for the whole Mixed Use
Development, and many others (see footnote 13). Bee Cave’s contrived definition renders these
terms meaningless and essentially writes them out of the COREA. Therefore, Bee Cave’s
interpretation is unreasonable and improper as a matter of law. See Jacobson, 245 S.W.3d at

106; see also Harris, 194 S.W.3d at 533.

 

and telephone alert systems; the cost of landscape maintenance and supplies for the Common Area; costs
of maintaining the Common Utility Lines; charges for utilities services utilized in connection with
Operating and maintaining the Common Area (except for such charges to be separately metered and
charged to less than all Parties) together with costs of maintaining and replacing lighting fixtures in the
Automobile Parking Area; all reasonable charges for interest on and depreciation of equipment installed
in, or improvements or alterations made to, the Common Area which are for the purpose of reducing
energy costs, maintenance costs or other Common Area Maintenance Costs, or which are required under
any governmental laws, regulations, or ordinances (including any accessibility statute) which were not
required as of the date hereof, so as to amortize the costs of such equipment, improvements or alterations
over the reasonable life of the same on a straight line basis; permits, program service and loudspeaker
systems; the costs and expenses of the Valet Program (as hereinafter defined); premiums for insurance
required to be carried by Developer under this REA and premiums for fire and extended coverage
insurance covering the Common Area and the Common Area equipment as well as premiums for other
insurance coverage carried by Landlord with respect to the Shopping Center; personal property taxes on
the Common Area equipment and personal property taxes on capital improvements and replacements; real
property taxes and assessments on the Common Area (such as restrooms, emergency exit corridors, stairs,
elevators and escalators within the improvements located on the Developer Tract not exclusively
servicing one Occupant); premiums on liability; property damage, earthquake, fire and extended
coverage, vandalism and plate glass insurance for the Common Area improvements and equipment;
maintenance, repair and replacement of mechanical equipment, including the Automobile Parking Area
lighting fixtures (including replacement of tubes, bulbs and ballasts), domestic water distribution and
delivery systems; maintenance of landscaping and plants; repair, maintenance, sweeping and cleaning of
the Common Area, covered walkways and the roofs thereof; the cost of providing employment and so-
called fringe benefits for employees involved in the operation and maintenance of the Common Area;
amounts paid to contractors or subcontractors for work or services performed in connection with the
operation, maintenance repair and replacement of the Common Area; on-site management office expenses
(including rental), Developer’s costs in administering and supervising such Operation and maintenance
and all other items of expense which are incurred for the maintenance, lighting, cleaning, inspecting,
painting, replacement, repair, management and Operation of the Shopping Center Site together with a 15
percent management fee.” (Emphasis Added).

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838062Bee Cave does not suggest that Galleria’s CAM charges include expenses for items not
found in the list of items Section 1.7 expressly includes in the definition of Common Area
Maintenance Costs. Indeed, Galleria’s reliance on the express language of the COREA as the
basis for its charges demonstrates the reasonableness of Galleria’s interpretation. No mental
gymnastics are required to arrive at the covered expenses. To this extent, Galleria’s CAM
charges to Bee Cave are proper as a matter of law.

Bee Cave also insists that whatever the nature of the expenses, the amount Galleria is
permitted to charge the Apartments is limited by the caps set out in Section 6.4.'° Recall that
absent a CAM Election, the owner of each tract is obliged by Section 6.1 of the COREA to
provide on its own for maintenance and repair of Common Area on its respective tract. Section
6.4, however, segregates a series of maintenance operations that cannot be effectively managed
or contracted for by individual tract owners, assigns Galleria the responsibility of managing these
tasks, and sets up a reimbursement scheme that includes caps on certain Parties’ reimbursement
obligations.

Subsection (iii) of Section 6.5, however, makes clear that as to a CAM Party, the CAM
Election provisions of Section 6.5 trump the payment scheme set out in Section 6.4 regarding
Parties’ obligations to cover a certain subset of Common Area Maintenance Costs:

(iii) each Party whose Tract is subject to the CAM Election shall not be required

to make the quarterly payments contemplated by Section 6.4 hereof, it _being

understood that _such_amounts shall be paid monthly as part of such Party’s
proportionate share of Common Area Maintenance Costs, ....

 

(Emphasis added). Thus Section 6.5 explicitly recognizes that the kinds of expenses covered by
Section 6.4 are only a “part” of the tracts’ proportionate share of Common Area Maintenance
Costs in the event of a CAM Election. This distinction makes sense, given that the maintenance
'S See Plaintiff's Motion for Partial Summary Judgment at 18-19.

18

838062activities of Section 6.4 are only a subset of the universe of common area maintenance activities
contemplated by Section 6.5. The express language of Section 6.5 therefore negates any
argument that the Apartments’ reimbursement obligations pursuant to a Section 6.5 CAM
Election are somehow limited to the capped reimbursement obligations provided in section 6.4 of
the COREA.

It is also important to note that absent a CAM Election, the Apartments avoid
contributing any amount whatsoever for a subset of common area maintenance activities
assumed by Galleria under Section 6.4 called the Universal Common Area Maintenance Items.
These activities include road maintenance (including maintenance of the only road giving access
to Bee Cave’s garages), streetlights, and the electricity to power them, security, insurance, and
other expensive items. Thus, the Apartments are only required to pay a share of such expenses
in the event of a CAM Election that includes the Apartment Tracts. To this extent, a CAM
Election ends what would otherwise be the Apartments’ free ride on a range of costly common
area maintenance activities.

Til. CONCLUSION

Bee Cave asks the Court to rule as a matter of law that Section 2.14 of the COREA
precludes Galleria from subjecting the Apartments to a CAM Election, when nothing in this
section or any other section conditions a CAM Election on easement rights to a particular tract.
Bee Cave asks the Court to rule as a matter of law that the Common Area is confined to portions
of the Access Roads only, when such an interpretation renders whole sections of the COREA
meaningless and reads out of the COREA numerous examples of Common Area specifically
enumerated in the definition itself. And Bee Cave asks the Court to rule as a matter of law that

Galleria’s bill to the Apartments for the CAM Election is limited by the caps set out in Section

19

8380626.4, when Section 6.5 makes clear that a CAM Election trumps the provisions of Section 6.4.

These are not reasonable interpretations of the terms of the COREA. Bee Cave’s Motion for

Partial Summary Judgment should be denied in its entirety.

838062

Respectfully submitted,

SCOTT, DOUGLASS & McCONNICO, L.L.P.
600 Congress Avenue, Suite 1500

Austin, Texas 78701-2589

(512) 495-6300

(512) 474-0731 Fax

By /s/ Asher Griffin
Stephen E. McConnico
State Bar No. 13450300
Asher Griffin
State Bar No. 24036684
Bryan Lauer
State Bar No. 24068274

ATTORNEYS FOR DILLARD TEXAS SOUTH,
LLC

20CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing has been served on all
counsel of record, as listed below, on October 21, 2011.

VIA CMRRR #7009 1680 0000 9649 3868 VIA HAND DELIVERY

Greg W. Curry Debora B. Alsup
Gregory D. Binns Thompson & Knight LLP
Thompson & Knight LLP 98 San Jacinto Blvd., Suite 1900
1722 Routh Street, Suite 1500 Austin, TX 78701-4238
Dallas, TX 75201
VIA HAND DELIVERY VIA HAND DELIVERY
Hal L. Sanders John J. McKetta III
Haynes & Boone, LLP Graves, Dougherty, Hearon & Moody, P.C.
600 Congress Avenue, Suite 1300 401 Congress Avenue, Suite 2200
Austin, TX 78701 Austin, TX 78701

/s/ Asher Griffin

Asher B. Griffin

21

838062