Bluegrass Equine & Tourism Found., Inc. v. Commonwealth

Full title: BLUEGRASS EQUINE AND TOURISM FOUNDATION, INC.; AND KHPWESLUX, LLC…

Court: Commonwealth of Kentucky Court of Appeals

Date published: May 10, 2013

NO. 2011-CA-000218-MR (Ky. Ct. App. May. 10, 2013)

Opinion

NO. 2011-CA-000218-MR NO. 2011-CA-000257-MR

05-10-2013

BLUEGRASS EQUINE AND TOURISM FOUNDATION, INC.; AND KHPWESLUX, LLC APPELLANTS/CROSS-APPELLEES v. COMMONWEALTH OF KENTUCKY APPELLEE/CROSS-APPELLANT

BRIEFS FOR APPELLANTS/CROSS- APPELLEES: Catherine E. Howard Covington, Kentucky William E. Johnson Frankfort, Kentucky BRIEFS FOR APPELLEE/CROSS- APPELLANT: Kenneth A. Bohnert Richard M. Sullivan Scott A. Johnson Louisville, Kentucky

CAPERTON

NOT TO BE PUBLISHED

APPEAL FROM FRANKLIN CIRCUIT COURT

HONORABLE PHILLIP J. SHEPHERD, JUDGE

ACTION NO. 08-CI-00841

OPINION

AFFIRMING

BEFORE: CAPERTON, KELLER,¹ AND THOMPSON, JUDGES. CAPERTON, JUDGE: The Appellants and Cross-Appellees, KHPWESLUX, LLC, and Bluegrass Equine and Tourism Foundation, Inc., (hereinafter "Bluegrass"), appeal the January 4, 2011, order of the Franklin Circuit Court granting the motion for summary judgment filed by the Appellee and Cross-Appellant, the Commonwealth of Kentucky, against the Appellants. On appeal, Bluegrass argues that the trial court erred in granting the motion and was wrong in concluding that, as a matter of law, the Appellants' failure to obtain financing for the Project was a material breach of the agreement between the parties. On cross-appeal, the Commonwealth submits that it is entitled to a judgment that Bluegrass had a contractual obligation to reimburse the Commonwealth its costs for relocation of utilities on the Project. Upon review of the record, the arguments of the parties, and the applicable law, we affirm the determination of the court below to grant the motion for summary judgment filed by the Commonwealth and declining to order Bluegrass to reimburse the Commonwealth for the costs of relocation of utilities on the Project.

1 Judge Michelle M. Keller concurred in result only in part, dissented in part, and filed a separate opinion in this appeal prior to her appointment to the Kentucky Supreme Court. Release of this opinion was delayed by administrative handling.

In early 2006, a "Request for Proposal" (hereinafter "RFP") for the construction and management of a hotel at the Kentucky Horse Park (hereinafter "Project") was issued by the Commonwealth, and Koll Development, a company affiliated with Brad Burgess, was the successful bidder. Burgess was a principal of both Koll and Bluegrass. That RFP was ultimately canceled because Koll was unable to secure "conventional financing."²

2 On October 30, 2006, Burgess wrote a letter to then-Governor Fletcher stating that Koll "[W]ill not be able to meet the deadline mutually imposed ... .We are very cognizant of the importance of this hotel to the success of the World Equestrian Games and the Commonwealth of Kentucky." See Appendix 2, Burgess Ltr. 10/30/2006.

Thereafter, on December 6, 2006, the Commonwealth issued an RFP for the construction of a luxury hotel at the Kentucky Horse Park which was to be constructed in anticipation of the Alltech FEI World Equestrian Games (hereinafter "WEG"), to be held in the United States for the first time commencing on September 25 and ending on October 10, 2010. KHPWESLUX responded to the RFP with a proposal for construction of same.

At that time, Burgess and Joe Staka were principals in both KHPWESLUX and Bluegrass. Bluegrass was a newly formed non-profit, no-stock corporation organized under Kentucky law and "was formed for the purpose of constructing and operating the Project as a result of the Federation Equestre Internationale decision to hold the Alltech World Equestrian Games at the Horse Park in 2010."³ KHPWESLUX was its developer.

3 Appendix 3, Private Placement Memorandum (PPM), p. 15.

Burgess's concept for responding to the new RFP involved the use of a non-profit structure and the issuance of tax-exempt bonds, a type of financing structure which Burgess hoped would be more attractive to potential investors than a conventional financing structure which had failed with the prior RFP. Burgess retained Ross Sinclair and Associates ("RSA") as a financial advisor, placement agent, and underwriter for the bond and to prepare the necessary documents for the response to the RFP on behalf of KHPWESLUX.

On December 8, 2006, KHPWESLUX made its initial Submittal in response to the new RFP and on May 5, 2007, provided the second part of its Submittal containing financial and technical information. The Submittal was premised upon the sale of tax-exempt bonds exclusively supported by hotel revenues and benefits realized through a sales tax program. The Submittal contained various representations by Bluegrass regarding financing, construction, and design.⁴ The Submittal also included a letter from Bluegrass's financial consultant, RSA, on the status of financing. That letter stated that, "I expect to hear favorably from one of these candidates⁵ within ten days, so that we can move commitment documents in order to close the financing on schedule - June 15, 2007."⁶

4 These included assurances that Bluegrass "filed for tax-exempt status and received initial approval"; would meet its commencement of construction date of August 2007; had set a development schedule to commence in August and would be open in October of 2009; would conclude its design development process within 60 days of selection; would have its mass grading plan ready for mobilization on site in early August; would close financing in early June with a first issue of $10 million and a second and last issue of approximately $70 million in December; and would pay for the relocation of utilities within the site estimated to be $700,000 but not exceeding $750,000, and that in accordance with a "preliminary schedule." Bluegrass would mobilize construction activities by October 19, 2007, and would complete construction by October 12, 2009.

5 A reference to potential financiers.

6 Appellants' Appendix 3, at Gabbert Ltr. 05/03/2007.

On May 25, 2007, the Commonwealth issued to KHPWESLUX notice of its intent to award the right to develop and construct the Project to KHPWESLUX. The Commonwealth asserts that its intent to award the Project was based on the RFP and Submittal.

In order for the Project to be financed primarily by the sale of tax-exempt revenue bonds, KHPWESLUX helped to establish the Bluegrass Equine and Tourism Foundation, Inc. In its brief to this Court, the Commonwealth asserts that at the time the financing structure was being implemented, the municipalities of Georgetown, Lexington-Fayette County, and Scott County were considered as government entities which would possibly issue tax-exempt bonds to finance the Project. The Commonwealth asserts that it was never represented in the Submittal that the Commonwealth's involvement in the issuance of the bonds was required for the Project.

On May 29, 2007, Burgess sent a memorandum to Frank Pinkston and Paul Gannoe of the Commonwealth informing them of "the milestones we have set for ourselves toward funding and commencement of construction."⁷ Nevertheless, the Commonwealth asserts that in the weeks following that memorandum, it became increasingly concerned about what it describes as a "lack of progress" in meeting the milestones, particularly with respect to financing. Thus, on July 10, 2007, Finance and Administration Cabinet counsel, Gwin Pinson, sent a letter to Burgess setting deadlines in July and August of 2007 for the Ground Lease, loan commitment letter, written documentation of financing, surety bond, casualty insurance policy, hotel agreement, and written proof of 501(c)(3) status, failing which the intent to award would be rescinded. Only a few days later, however, after a meeting with Burgess in which he represented progress was being made, Pinson sent a second letter dated July 13, 2007, rescinding the deadlines.

7 These milestones included plans to submit a license application to Starwood (Westin) for approval on June 19, an intended June 20th date for funding of the initial tranche of bonds, confirmation of tax-exempt status from the IRS sometime in the summer, groundbreaking plans set for August 31, 2007, plans for second and final bond funding in December of 2007, and anticipated opening of the hotel in October of 2009.

On that same date, Bluegrass and the Finance Cabinet, on behalf of the Commonwealth, entered into a Ground Lease Agreement which stated that "Ground Lessee desires to ground lease a portion of the Kentucky Horse Park, for the purpose of acquiring financing, constructing, and operating ... a lodging and conference facility."⁸ The Commonwealth notes that Bluegrass was the only named lessee on the Lease, and that KHPWESLUX was not presently and has never been a party to the Lease nor is in any respect owned by Bluegrass.⁹ Thus, the Commonwealth asserts that no contractual agreement exists between KHPWESLUX and the Commonwealth. Further, we note that Bluegrass has not assigned its right under the Lease to KHPWESLUX, or to any other person or entity. The Commonwealth states that the Lease served as the RFP award and incorporated the terms of the RFP and Submittal, and in conjunction with those documents, was to govern the Project.

8 Appendix 7, at p. 2.

9 As previously noted herein, KHPWESLUX was retained by Bluegrass as the "Developer" of the Project. Thus, Bluegrass and KHPWESLUX are legally connected in a client-contractor relationship under the Development Agreement. The Commonwealth was not a party to the Development Agreement nor to other contractual agreements with other contractors retained by Bluegrass and KHPWESLUX with respect to the Project.

In its brief to this Court, the Commonwealth asserts that while the Lease conveyed some rights to Bluegrass, such as the right to engage in preconstruction investigations and due diligence, it also contained open issues, such as contingent terms which became effective only upon the occurrence of certain events. The Commonwealth asserts that the Lease provided that the lease term would not commence until construction documents were approved by the Commonwealth,¹⁰ an assertion which is now disputed by Bluegrass.

10 We note that Section 2.01(a) of the Lease entitled "Term" states as follows:

(a) Original Term: The term of this Ground Lease shall be for a period of forty-two (42) years, commencing on the date upon which Ground Lessee shall receive written notification from Ground Lessor that the terms of the Ground Lease and the Construction Documents (as hereinafter defined) have been approved by _ (the "Commencement Date"), and expiring at midnight on the forty-second (42nd) anniversary of the Rent Commencement Date (as defined in Section 5.01)('Original Term') ... .Ground Lessee shall have access to the Leased Property prior to the Commencement Date in order to carry out pre-construction investigations and due diligence, at Ground Lessee's sole risk and expense.

Further, Section 5.01 of the Lease, entitled "Construction of Improvements," provides that:

The initial Improvements shall be of the nature described on the Construction Documents in Schedule C, attached hereto and incorporated herein by reference (the 'Construction Documents'), and shall be constructed substantially in accordance with the schematic drawings contained in the RFP and Submittal.

Finally, we note that Schedule C, entitled "Construction Documents," provides that:

Ground Lessee shall construct the Improvements substantially as described on the preliminary plans and specifications attached hereto as Schedule C-1 .... Subject to the terms and conditions of the Ground Lease and the provisions set forth hereinbelow.

After signing the Lease, KHPWESLUX and Bluegrass began the process of attempting to secure financing for the Project. Bluegrass asserts, however, that it was not possible to finalize the sale of the bonds until the Kentucky Economic Development Finance Authority (hereinafter "KEDFA") granted approval. This did not occur until February 28, 2008, at which time KHPWESLUX and Bluegrass assert that they immediately began the process of finalizing buyers for the bonds.

The Commonwealth notes that in the meantime, however, RSA sent an August 13, 2007, letter to Burgess advising that it "anticipate[d] that the financing will be executed through the issuance of approximately $100,000,000 of senior tax debt issued through the Lexington Fayette Urban County Government." Bluegrass and KHPWESLUX representative Joe Straka testified that this "anticipated" funding was not realized and that market pressures negatively impacted the ability to close this proposed financing.

By late summer of 2007, Bluegrass and RSA concluded that the proposed sale of bonds supported exclusively by hotel revenues and sales tax recapture was not going to work and that there needed to be an additional financial backstop or credit enhancement in order for the Project to get financing. Below, Nelson Taul of RSA testified that the original financing plan without "credit enhancement" was not being well received in the marketplace, and that marketing this particular hotel project was particularly challenging because it was to be built on state-owned land and subject to reversion to the state at the conclusion of the Lease.¹¹

11 In its brief to this Court, the Commonwealth asserts that financing efforts were also frustrated by the delay in Bluegrass receiving its charitable foundation 501(c)(3) designation from the IRS. According to the Commonwealth, Bluegrass had represented that it already had 501(c)(3) status prior to being awarded the Project, although this was not actually the case. This approval actually occurred on November 28, 2007.

As the original financing concept upon which the RFP award had been premised was faltering, Burgess sent an October 4, 2007, letter to John Hindman, Secretary of Economic Development, requesting financial support from the Commonwealth. In that letter, Burgess stated:

Within the last two months, the capital markets have fluctuated unfavorably, and as a result, have caused a need to supplement, through economic support, the commitments we have standing by to complete our bond financing to develop the hotel.

Following receipt of that letter, Tom Howard, Executive Director of the Office of Financial Management, Finance and Administration Cabinet, was asked by his superiors in December of 2007 to assist Bluegrass and KHPWESLUX in developing a revised financing plan. Meetings were held with members of the Beshear administration and a presentation was made by Bluegrass to state officials on December 13, 2007. In that presentation, Bluegrass assured the Commonwealth that, notwithstanding delays it had experienced in securing financing, delivery and opening would be in Fall or Winter of 2009 in order to ensure that the hotel was operating smoothly in advance of the WEG, and that Bluegrass could begin construction within 30 days.

The new financing concept involved $75.9 million in Series A (Senior Bonds) and $42.1 million in Series B (Subordinate Bonds) issued through KEDFA. It was proposed that the Commonwealth offer certain limited "credit enhancement" to the Series B bonds in the form of a $3-million loan from the Economic Development Cabinet which would act as a secondary debt service reserve fund in the event that subordinated bond holders could not be paid from Project revenues. The Series B bonds would also have a "put option" in favor of investors when those bonds would be up for remarketing in 2014.

Subsequently, on February 15, 2008, there was a Special Meeting of KEDFA. A Bond Authorization Resolution was considered by KEDFA, but due to a defect in the final resolution document submitted by Bluegrass's bond counsel, the resolution could not be acted upon at that meeting. Accordingly, the resolution was considered at a subsequent meeting on February 28, 2008.¹² Ultimately, the resolution authorizing the $3-million loan and the issuance of bonds was approved by KEDFA.

12 The meeting minutes from that date state as follows:

Ms. Hale asked about status of bond sale in today's market. Mr. Peterman responded the bond market is in turmoil, but legally everything is fine. Ms. Hale asked if the bonds had been placed yet. Mr. Peterman replied the bonds had not been placed.
Ms. Hale asked if there is a deadline for placing the bonds. Mr. Peterman responded there is a time crunch to have the Project completed prior to the 2010 FEI Alltech World Equestrian Games. Ms. Flanery stated the Secretary of Finance will be sending a letter to the developer with a deadline set in April 2008.

Appendix 27, KEDFA Minutes, 02/28/2008 at KY1848.

On February 29, 2008, the day after KEDFA granted approval to sell the bonds, the Commonwealth sent a letter to KHPWESLUX.¹³ The letter did not state that Appellants were in default, or that they had failed to timely perform any contractual obligation. To the contrary, Jonathan Miller, the Secretary of Finance and Administration, testified unequivocally that Appellants were not delinquent in their contractual obligations as of February 29, 2008. The letter did, however, include a list of new requirements for KHPWESLUX to perform, which were not included in the Lease but were necessary in order to continue the Project.

13 This letter was not sent to Bluegrass, the actual lessee under the Lease.

Specifically, the Commonwealth demanded that KHPWESLUX secure all bond financing for the hotel by April 15, 2008, and by the same date execute an amended and restated lease, secure a surety bond for the construction of the Project, obtain casualty insurance for the premises, and produce an executed agreement with a AAA Three Diamond hotel operator. The Commonwealth stated that if KHPWESLUX and Bluegrass did not meet these demands by April 15, the Project would be terminated, "pursuant to Section 13 of the Ground Lease."

In their brief to this Court, Bluegrass and KHPWESLUX note that the Commonwealth's February 29, 2008, letter did not assert any existing defaults or delinquencies under the Lease by Bluegrass, and that the February 29, 2008, letter did not include any references to specific deadlines in the RFP or the Lease. While Bluegrass acknowledges that the Lease contains a Section 16.2 titled "Time for Performance," which sets forth deadlines for performance of certain obligations under the Lease, it argues that the Lease contains no deadlines for any of the items set forth in the Commonwealth's letter. Accordingly, Bluegrass argues that the April 15 deadline was chosen unilaterally and imposed without warning by the Commonwealth.

Nevertheless, Bluegrass and KHPWESLUX state that they attempted to meet the Commonwealth's newly imposed extra-contractual requirements for continuing the Project, and on April 4, 2008, provided the Commonwealth with a list of items they had completed. Bluegrass and KHPWESLUX assert that the only remaining open item demanded by the Commonwealth's February 29, 2008, letter was the sale of the Series A bonds. The April 4, 2008, letter issued by Bluegrass indicated that their financial advisors were engaged with several interested investors and were also obtaining a letter of credit ("LOC") that would enable them to obtain a commitment for the purchase and sale of the bonds.

To the contrary, the Commonwealth asserts that it received a letter from Burgess on April 4, 2008, indicating that while the Series B bonds had been committed, full placement of the Series A bonds had not been completed. He represented that a bank LOC was in the works and that, following such a commitment, Bluegrass would be able to sell the Series A bonds within 30 days. Burgess requested an extension of the April 15 deadline, and the Commonwealth declined.

Needing third-party credit enhancement to sell the Series A bonds, Bluegrass arranged to make a presentation on April 11, 2008, before a syndicate of banks and request an LOC for the Project. The meeting was organized by Burgess and by Luther Deaton of Central Bank of Lexington, and the stated purpose was "to explain the project, the current financing situation, and to explore any opportunity that he [Deaton] might be able to provide in assisting the financing."

Following the initial contact with Deaton, but prior to Bluegrass's presentation to the banks, RSA sent an April 3, 2008, letter to Deaton. That letter informed Deaton that, "The liquidity crisis had indeed affected our ability to issue the Series A bonds. Without the LOC, the sale of the Series A bonds at this time would not be possible." On April 9, 2008, Burgess forwarded a copy of that letter to Marcheta Sparrow, Secretary of Commerce, and Jonathan Miller, Secretary of Finance. Prior to the April 11, 2008, meeting, Governor Beshear encouraged Deaton and Central Bank to consider financing the Project.

The April 11, 2008, meeting took place at Central Bank's offices, and involved representatives of Bluegrass, KHPWESLUX, Central Bank, and approximately six other banks. After consideration, none of the banks were willing to offer an LOC as a credit enhancement to the Series A bonds. Central Bank stated that it did not believe this was a "bankable deal." Thereafter, on April 16, 2008, Secretary Miller was informed of the outcome of the bank meeting, and that there was no commitment to provide credit enhancement to the Series A bonds.

As a result, the Commonwealth sent an April 16, 2008, letter to the Appellants, claiming that KHPWESLUX and Bluegrass were in default on the Lease. While the letter did not identify any events of default, it nevertheless asserted that the Commonwealth was terminating the Lease "effective immediately." Accordingly, on May 14, 2008, Bluegrass and KHPWESLUX filed a complaint against the Commonwealth for breach of contract, seeking monetary damages and alleging that months of efforts and millions of dollars had been expended toward the Project.

Thereafter, the parties engaged in discovery for approximately one year before the Commonwealth filed for summary judgment. After extensive briefing, the court granted the Commonwealth's motion on January 4, 2011. The basis for the court's decision was that Bluegrass and KHPWESLUX had breached the parties' agreement by not diligently advancing the work on the Project, and specifically by failing to obtain financing and by depriving the Commonwealth of its expected benefit of opening the hotel before the WEG. The court also found that certain representations made by Bluegrass and KHPWESLUX did not comport with standards of good faith and fair dealing. Finally, the circuit court found that the Commonwealth had provided the proper notice of termination and opportunity to cure to the Appellants. It also held that while the Appellants had a contractual obligation to reimburse the Commonwealth for its costs in relocation of utilities, principles of equity and mutual mistake barred the counterclaim. It is from that order that Appellants now appeal to this Court, and from which the Commonwealth cross-appealed.

Prior to reviewing the arguments of the parties, we note that the proper standard of review on appeal when a trial judge has granted a motion for summary judgment is well established in this Commonwealth. We must determine whether the trial court erred in concluding there was no genuine issue as to any material fact and the moving party was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). Summary judgment is only appropriate "if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Kentucky Rules of Civil Procedure (CR) 56.03. In Paintsville Hospital Co. v. Rose, 683 S.W.2d 255 (Ky. 1985), our Kentucky Supreme Court held that summary judgment is only proper when it has been shown that the adverse party cannot prevail under any circumstances. Indeed, the proper function of summary judgment is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Further, we note that this Court is not required to defer to the trial court when factual findings are not at issue. Goldsmith v. Allied Building Components, Inc., 833 S.W.2d 378 (Ky. 1992).

Additionally, the record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor. Steelvest, 807 S.W.2d at 480. However, a party opposing a properly supported summary judgment motion cannot defeat it without presenting at least some affirmative evidence showing that there is a genuine issue of material fact for trial. Id. at 482. We review this matter with these standards in mind.

On appeal, Bluegrass and KHPWESLUX argue that the court below erred in granting the Commonwealth's motion for summary judgment. They assert that the issue below was only whether the Commonwealth had the right to terminate the Lease "effective immediately" on April 15, 2008. Bluegrass argues that the Commonwealth was expressly limited to terminating the Lease only in the case of "the occurrence of an Event of Default ...."¹⁴ Bluegrass asserts that no event of default occurred at any time and that there is no basis in either the Lease or in Kentucky law for the Commonwealth's unilateral and immediate termination of the Lease. Bluegrass argues that in finding that its failure to obtain financing was a material breach of the agreement, it incorrectly focused on the RFP rather than the Lease, failed to properly apply the plain language of the parties' agreements, and further imposed terms that did not exist in the agreements and to which the parties did not agree.

14 Appendix 7, at Sec. 13.02(a).

Bluegrass also argues that the trial court disregarded evidence that created multiple issues of material fact. Specifically, it argues that the trial court made the following incorrect conclusions or findings: (1) that the Commonwealth's request for proposal and the parties' subsequent Lease collectively constituted a "contract for construction services"; (2) that Plaintiffs materially breached a "contract for construction services"; and (3) that the Commonwealth gave Plaintiffs an opportunity to cure its alleged breach. Bluegrass argues that each of these findings constitutes reversible error.

First, Bluegrass argues that the Lease is not a contract for construction services, and asserts that the trial court incorrectly determined that the RFP and the Lease together form a contract for construction services. In order to reach that conclusion, the trial court relied on an excerpt from the following sentence in the RFP: "To that end, the Commonwealth solicits proposals from private, third-party developers who will finance, design, construct, maintain, manage, operate, and furnish a first class, high quality resort hotel/conference center and restaurant." Bluegrass argues that the trial court characterized that portion of the RFP as evidence that the Lease entered into by the parties months later was a contract to construct a first-class high quality resort hotel/conference center and restaurant.

Bluegrass argues that, contrary to the conclusion of the trial court, the Lease is in fact simply a lease, and that in finding otherwise the court disregarded the substance of the parties' agreement. Bluegrass directs the attention of this Court to various provisions of the Lease, and asserts that a simple perusal of the Lease reveals that it was intended to be a lease and nothing more.¹⁵ Bluegrass further notes that of the 34 pages in the Lease, only one section addresses construction,¹⁶ and specifically references "other construction documents." Bluegrass argues that if considered in their plain meaning, it is not possible to construe the RFP and the Lease together as a contract for construction services. While acknowledging that the Lease was between the Commonwealth and Bluegrass, Bluegrass asserts that neither party believed that Bluegrass was actually going to perform the construction services itself, and that both parties knew that many other contracts would have to be secured for the ultimate construction of the hotel. In support of that assertion, Bluegrass notes that both the RFP and the Lease expressly contemplate a separate contract for construction services, and do not themselves address any aspect of the hotel's actual construction.¹⁷

15 In support of its assertion, Bluegrass notes that:

-Article 1 of the Lease, entitled "Leased Property," describes Bluegrass as "tak[ing] and leas[ing] from Ground Lessor the real estate and appurtenances more particularly described in Schedule A ..."
-Article I also includes a warranty and representation from the Commonwealth, in reliance on a title opinion produced by Chicago Title Company, that the title is free and clear of liens, assessments, taxes and easements, other than those previously disclosed by the Commonwealth.
-Article I also provides Bluegrass with "quiet, peaceful, exclusive, and undisturbed possession of the Leased Property."
-Article II of the Lease governs the lease term, which was a period of 42 years with an option to extend.
-Article III of the Lease, entitled "Rent," states that there would be minimum rent, a minimum rent adjustment, and additional rent based on a percentage of gross receipts. The parties also specified that this would be a "triple net lease."
-Article IV specifies the permitted uses of the Leased Property, stating that it should be "occupied and used solely for the development, construction, maintenance, and operation of a hotel project."
-Article VII addresses costs, including real property taxes on the Leased Property.
-Article VIII specifies that Bluegrass must maintain public liability insurance and insurance that protects the Leased Property against fire and other hazards.
-Article XI, entitled "Assignment and Subletting," states the instances in which Bluegrass could assign or sublet the Lease.
-Article XII covers what mortgages Bluegrass could obtain.
-Article XV indicates that the Leased Property did not contain any hazardous substance and was not subject to any environmental investigation.

16 Article V of the Lease is titled "Construction and Alterations." The Lease gave Bluegrass "the right, at its sole cost and expense, to construct, repair, replace, add to, alter, demolish and otherwise deal with any and all buildings, structures, utility installations, paving, landscaping and other improvements hereinafter constructed on the Leased Property, or any part thereof, except as expressly limited by this Article V." The Lease further stated that the "Initial Improvements shall be of the nature described on the Construction Documents in Schedule C, attached hereto and incorporated herein by reference (the "Construction Documents"), and shall be constructed substantially in accordance with the schematic drawings contained in the RFP and Submittal." However, Bluegrass notes that the Lease contemplates that it would be "amended by the parties hereto to incorporate final construction plans and specifications ..." Bluegrass asserts that this never happened, as the Commonwealth terminated the Lease before the parties had final construction plans.

17 While this Court acknowledges Bluegrass's argument in this regard, we feel it important to note that while Bluegrass may have planned to subcontract the work of actually constructing the hotel to various builders and construction companies, this alone would not relieve them of the responsibility to see that the work itself was completed and that the various contracts with builders were secured. This was an obligation under the Lease, one ultimately belonging to Bluegrass and KHPWESLUX, the lessees themselves, who were the principle contractors in this matter.

In addition to arguing the Lease and RFP are not a contract for construction services, Bluegrass argues that it did not materially breach a contract for construction services. It asserts that although the trial court set forth factors to consider when determining whether a material breach occurred, it failed to apply any of those to the facts and instead concluded that Bluegrass "had no realistic way to cure their inability to obtain financing in a way that would diligently advance the project." Bluegrass argues that this conclusion is inconsistent with the facts, and that there was no evidence that it failed to diligently advance the Project. Bluegrass argues that the court mistakenly accepted the Commonwealth's position that the de facto deadline for the completion of the Project was the start of the WEG, and that because Bluegrass could not complete the Project prior to the WEG, it was not diligently advancing it. Bluegrass argues that this was plainly wrong, that there was no such deadline, and that neither the RFP nor the Lease had an express requirement that the Project be financed by a specific date. Moreover, Bluegrass argues that the Commonwealth could not unilaterally impose a deadline for financing the Project with no opportunity to cure if it was not met.

Alternatively, it argues that even if there had been a September 2010 deadline for the completion of the Project, the trial court erred in concluding as a matter of law that Bluegrass could not meet that deadline as of the Spring of 2008. It asserts that KEDFA approved the bond sale on February 28, 2008, and that the Commonwealth immediately gave KHPWESLUX and Bluegrass a 45-day deadline to complete the financing. Bluegrass asserts that although the trial court noted that Bluegrass had not obtained financing on April 16, 2008, its conclusion that Bluegrass had no realistic way to finance the Project in an additional 30 days was inconsistent with the Commonwealth's express insistence that the task be done in the previous 45 days. Bluegrass argues that it is entirely speculative as to whether or not it would have met the deadline, as the Commonwealth terminated the contract before the deadline arrived. It argues that at a minimum there were issues of fact as to whether the work was being "diligently advanced" that should have precluded summary judgment on this issue.

Finally, Bluegrass argues that the Commonwealth failed to provide proper notice of a default and opportunity to cure.¹⁸ It argues that even assuming a substantive default by Bluegrass under the terms of the RFP, the Commonwealth did not abide by the default provision of the RFP.¹⁹ While the court below found that the Commonwealth only had to give written notice to comply with the RFP, Bluegrass notes that the provision provided that:

18 Bluegrass argues that the Commonwealth's termination of the Lease without proper notice and an opportunity for Bluegrass to cure resulted in a material breach by the Commonwealth, in reliance upon Chrysler Realty Co. LLC v. Design Forum Architects, Inc., 544 F.Supp.2d 609, 616 (E.D. Mich. 2008)(holding that the party that "failed to adhere to the contract's express notice-and-cure provision ... was the first party to commit a material breach of the agreement."). In response, the Commonwealth argues that the RFP termination provision was satisfied, and that, while a cure period may be provided, it was not required. Additionally, it notes that the "Termination Notice" was only required to state: (a) "terminated ...for default," (b) "effective date," (c) "extent of termination," and (d) "special instructions," not an opportunity to cure. The Commonwealth thus argues that if the Lease "commenced," Section 13.01(b) of the Lease only required "(30) days of notice ... of such delinquency," not a notice of default. The Commonwealth asserts that its letter of February 29, 2008, provided notice of "delinquencies," and more than 30 days to cure. Further, the Commonwealth asserts that Bluegrass ignores that Section 13.01(b) required performance of the RFP and Submittal, not just the Lease. Finally, the Commonwealth argues that under Section 13.02(a), it could terminate "without any demand or notice."

19 Bluegrass also argues that the court erroneously determined that as between the RFP and the Lease, the RFP governed default. Bluegrass argues that the default provisions of the Lease are the relevant provisions, and not those of the RFP, noting that the Lease indicated that, "Notwithstanding anything which may be construed to the contrary, each of the following shall be deemed an "Event of Default" by Ground Lessee, and no other definition shall apply." Further, it asserts that when the Commonwealth approved the bond issuance, the Private Placement Memorandum issued by Bluegrass included the default language from the Lease and not from the RFP, which the Commonwealth never objected to. Bluegrass asserts that in light of this language, it is clear that the parties intended for the applicable default provisions to be those of the Lease, and not the RFP.

If a lessee is determined to be in default, the Commonwealth shall notify the lessee of the determination in writing, and may include a specified date by which the lessee shall cure the identified deficiencies. The Commonwealth may proceed with termination if the lessee fails to cure the deficiencies within the specified time.

While the court concluded that the Commonwealth's February 29, 2008, letter satisfied this provision, Bluegrass argues that that is not possible because it was not in default on that date.²⁰ It asserts that the Commonwealth concedes that February 29, 2008, was not a deadline under the RFP for any of the demands made in the letter, and that, accordingly, the non-occurrence of those events by that date did not constitute a default under the RFP. Bluegrass asserts that in fact, KHPWESLUX never received any notice that the Commonwealth deemed the actions or inactions of KHPWESLUX as defaults under the RFP. Thus, it argues that as it never received notice of "default," KHPWESLUX never had an opportunity to cure.

20 In support of this assertion, Bluegrass notes that the Commonwealth's Secretary of Finance and Administration, Jonathan Miller, testified that as of February 29, 2008, Bluegrass was not in default in its obligations under the Lease.

Alternatively, Bluegrass argues that even if this Court were to consider the February 29, 2008, letter to be a notice of an Event of Default under the Lease, a question of fact exists with respect to efforts made by Bluegrass to cure the alleged default. It asserts that the court disregarded evidence in the record which indicated that as of April 16, 2008, Bluegrass had commenced and was diligently pursuing remedies to the issues identified by the Commonwealth.

In response to the arguments made by Bluegrass, the Commonwealth argues that Bluegrass essentially expected an unlimited time period in which to complete its obligations under the contract, when in fact they were in default for failing to diligently advance the work on the Project, primarily by failing to obtain financing and by depriving the Commonwealth of its expected benefit of opening the hotel before the WEG. First, the Commonwealth asserts that the circuit court correctly held that Bluegrass was rightfully terminated due to its default of the RFP, Lease, and Submittal. In support of that argument, the Commonwealth asserts that: (1) the parties' agreement was memorialized by the Ground Lease, RFP, and Submittal, and constituted a "contract for construction services"; (2) that Bluegrass defaulted by failing to diligently advance the work on the Project; and that (3) Bluegrass defaulted due to its failure to make timely delivery per their schedules, failure to pay bills, and failure to provide other deliverables.

Concerning whether the agreements between the parties constituted a "contract for construction services," the Commonwealth asserts that although Bluegrass claims that its representations in the Submittal and schedule provided in May of 2007 were not promises that became part of its contractual obligations to the Commonwealth, this was in error. The Commonwealth asserts that, to the contrary, the RFP and Submittal, in conjunction with the Lease, are clearly part of the parties' agreement.²¹ It asserts that pursuant to 200 Kentucky Administrative Regulations (KAR) 5:307²² and 200 KAR 5:313 at Section 3,²³ the Lease could not deviate from the RFP. While acknowledging the argument of Bluegrass that a construction contract between the parties never existed and that, therefore, the default provision of the RFP is of no consequence, the Commonwealth disagrees and asserts that several provisions of the RFP and the Lease show otherwise.²⁴ The Commonwealth argues that it is clear that the work required of Bluegrass under the agreement of the parties was a "contract for construction" to be diligently advanced by the Commonwealth, and that the circuit court was correct to hold that the purpose of the agreement between the parties was to construct a hotel and that reliance on the term "lease" was not dispositive of the nature of the legal relationship between the parties.²⁵

21 In support of that assertion, the Commonwealth notes that:

-The Appellants' Submittal states: "KHPWESLUX, LLC acknowledges and agrees to all of the rights of Finance and Administration Cabinet including terms and conditions, and all other rights and terms specified in this RFP/Solicitation."
-RFP states at Section V.A.: "The lease between the Commonwealth of Kentucky and the offeror shall consist of: (1) the Request for Proposals (RFP and any addenda thereto), (2) the offeror's proposal submitted in response to the RFP, and (3) a lease from the Commonwealth to the offeror (the 'Lease')."
-RFP states at Section VI.A: "THE SUCCESSFUL OFFEROR'S PROPOSAL DOCUMENTS WILL BECOME PART OF ANY FINAL LEASE AGREEMENT. ALL ITEMS LISTED MUST BE THOROUGHLY ADDRESSED IN YOUR WRITTEN PROPOSAL."
-Lease at 1.04 states: "This agreement shall consist of this Ground Lease and the Schedules attached hereto and incorporated herein by reference, the Request for Proposals (RFP and any addenda thereto, hereinafter, the "RFP"), identified as Schedule F, attached hereto and incorporated herein by reference; and Ground Lessee's proposal submitted (hereinafter the "Submittal") in response to the RFP, identified as Schedule G, attached hereto and incorporated herein by reference. The RFP and Submittal shall be hereinafter referred to collectively as the 'RFP Documents.'"

22 Stating that, "[T]he terms and conditions of the contract shall not in any material respect deviate in a manner detrimental to the purchasing agency from the terms and conditions specified in the solicitation for proposals."

23 Stating that, "Submission of a response to a solicitation shall be deemed to be an agreement to comply with all terms, conditions, and specifications of the solicitation."

24 In example, the Commonwealth notes that:

-The RFP and Submittal were titled a "Contract to Develop, Construct, Operate and Maintain a Hotel and Associated Facilities at the Kentucky Horse Park." The RFP at "I. Intent" states: "...the Commonwealth solicits proposals from private third-party developers who will finance, design, construct, maintain, manage, operate, and furnish a first class, high quality resort hotel/ conference center and restaurant (the "Project")."
-The RFP at V.C. titled "Commencement of Construction" and Section IV. A. "Hotel Facility" states: "It is the desire of the Commonwealth to develop a lodging facility at the Kentucky Horse Park as referenced in the RFP."
-Lease Section 4.01(a) "Use" states: "The Lease property shall be occupied and used solely for the development, construction, maintenance, and operation of a hotel project." The Commonwealth notes that the Lease states that, "WHEREAS, Ground Lessee desires to ground lease a portion of the Kentucky Horse Park, for the purpose of acquiring financing, constructing, and operating such a lodging and conference facility ..." The Lease at "Construction of Improvements" gave Bluegrass "the right, at its sole cost and expense, to construct ... all buildings, structures ... on the Leased Property." "Schedule C Construction Documents" states: "Ground Lessee shall construct the Improvements ..."
-The Commonwealth notes that Bluegrass's own PPM states that the "principal purpose" of Bluegrass is "to build and operate the Project ..." Bluegrass also acknowledged that it was formed "for the purpose of constructing and operating the Project as a result of the Federation Equestre Internationale decision to hold the Alltech World Equestrian Games at the Horse Park in 2010."

25 In its reply brief to this Court, Bluegrass does not dispute that the terms "construct" or "construction" appear in the RFP and Lease several times. Bluegrass argues that these terms would obviously be included in the documents, as it intended to construct a hotel, but disputes that the inclusion of these terms in the documents at issue constitutes a "contract for construction services." It argues that the Commonwealth provides no legal support for the idea that these documents and not the future construction documents that the parties plainly contemplated were a "contract for construction services." Moreover, Bluegrass argues that both parties knew that Bluegrass itself would not be performing the actual construction services, and that these services would be performed by and secured through contracts with actual construction companies. In its reply brief to this argument, the Commonwealth argues that any delegation to construction contractors is only a choice made by Bluegrass, and is not dispositive.

Secondly, the Commonwealth asserts that the court correctly deemed Bluegrass to be in default because it failed to diligently advance work on the Project and, specifically, because it failed to obtain financing and deprived the Commonwealth of its expected benefit of opening the hotel before the WEG. The Commonwealth argues that it is undisputed that Bluegrass was responsible for all financing of the Project, and that the Commonwealth was not obligated to assist in securing financing, to provide credit enhancement, or to put its own money into the Project. The Commonwealth argues that, contrary to the assertions made by Bluegrass, there was a very specific construction deadline,²⁶ and that pursuant to Schedule C, substantial completion was to be achieved within 24 months.

26 In support of this assertion, the Commonwealth notes that Schedule C to the Lease provides that :

Substantial completion of the Improvements is expected to be achieved within twenty-four (24) months from the date of execution of the Ground Lease, subject to delays caused by acts of God, war, invasion, rebellion, revolution, insurrection, riots, labor problems, unavailability of materials, government intervention, or acts or omissions of Ground Lessor; provided that in no event shall the period of excused delay exceed 365 days in the aggregate.

The Commonwealth notes that according to the testimony of Bluegrass representative Joe Straka, none of the reasons for excused delay set forth in any of the agreements between the parties occurred and, further, that Bluegrass's own construction schedules indicated that the July 13, 2009, deadline could not be met. Further, the Commonwealth notes that financing deadlines were established in the Submittal. Specifically, the Commonwealth states that it was represented that Bluegrass could close financing in early June of 2007, with a first issue of $10 million and a second and last issue of approximately $70 million in December of 2007. Further, the Commonwealth asserts that Bluegrass promised to move the date for securing commitment documents in order to close the financing by June 15, 2007, and did not do so. The Commonwealth also claims that there were numerous schedules, work plans, and timelines provided to the Commonwealth by Bluegrass which contained mobilization deadlines,²⁷ as well as numerous other representations on financing, which were acted upon as deadlines.²⁸

27 Specifically, the Commonwealth references a May 3, 2007, schedule with an October 19, 2007, mobilization date which was attached to the Submittal; an October 11, 2007, schedule with a December 1, 2007, mobilization date which was submitted per the requirements of the RFP and the Lease; and a schedule dated February 5, 2008, and containing a March 3, 2008, mobilization deadline.

28 These representations included the following:

-May 29, 2007: Burgess sent a memorandum to Frank Pinkson and Paul Gannoe of the Commonwealth setting "the milestones we have set for ourselves toward funding and commencement of construction." The memorandum stated that, "[W]e are shooting for a June 20 funding of the initial tranche of bonds," and "[s]econd and final bond funding will be in December [2007]."
-June 15, 2007: Brad Burgess e-mailed Frank Pinkston of the Commonwealth and stated: "...our financing should be gelled up by the end of next week, I think we will be ready to sign early, the week of June 25 ..."
-June 22, 2007: Burgess e-mailed Paul Gannoe of the Commonwealth and stated: "We ... are negotiating some terms and conditions of our bond loan, are full speed ahead on design and although we haven't met our June 20 deadline for funding, we are well along in getting our commitments ..."
-July 9, 2007: Burgess e-mailed Frank Pinkston of the Commonwealth and stated: "Our bond issuance will be in two parts. The first issue (within 30 days)[or 08/09/07] will be for around $12 million which will provide for earth work, design costs and other cash needs, and the second issue (approximately $72 million) will be upon finalization of the DD drawings at which time will have a GMP from our contractor."
-August 22, 2007: Burgess communicated with Frank Pinkston and indicated that "the bonds are due to be sold on September 5th?"
-September 13, 2007: Burgess sent a memorandum to Mike Burnside of the Commonwealth and represented: "Ever seeking to find the most beneficial solution, we now have two distinctly different structures acceptable to our bond purchasers that provide the Commonwealth with sound assurances of financial success ... With the Commonwealth's concurrence on either option, we can conclude our financing within 30
days."
-February 5, 2008: Bluegrass's bond counsel Roger Peterman e-mailed Tom Howard of the Commonwealth and attached a current financing schedule. This schedule indicated a January 29, 2008, distribution of term sheet to investors and a March 3, 2008, finalization of financing.

The Commonwealth notes that as the lower court found, the failure of Bluegrass to obtain its 501(c)(3) designation from the IRS in a timely manner was the reason that financing was not timely obtained. The Commonwealth directs the attention of this Court to the fact that it relied upon the assertions made by Bluegrass to the effect that it already had 501(c)(3) status at the time it was selected for the Project, when in fact it did not actually attain that status until November 28, 2007, six months after Bluegrass had been selected. The Commonwealth notes that this is important not only because it relied upon the representations, but also because Bluegrass could not proceed with the tax-exempt financing as proposed in its Submittal without the 501(c)(3) status. The court below found that the misrepresentations of Bluegrass in this regard were "egregious" and "did not comport with standards of good faith and fair dealing," and the Commonwealth urges that this was a conclusion supported by the evidence.

Further, the Commonwealth asserts that contrary to the denials made by Bluegrass, there were specific references to the WEG in the Lease and RFP Submittal, indicating that Bluegrass knew and intended for the hotel to be completed in advance thereof.²⁹,³⁰ Thus, the Commonwealth argues that the lower court correctly concluded that the failure to obtain financing by April 15, 2008, was a material breach of the agreement between the parties.³¹

29 In support of this assertion, the Commonwealth notes that:

-The sixth "WHEREAS" clause of the Lease provides: "WHEREAS, the hotel conference facility and ancillary services will become a focal feature of the Kentucky Horse Park ... and the hotel will be a major attraction and feature of the World Equestrian Games in 2010 ..."
-The Submittal to the RFP states: "... we have set our development schedule to commence in August and will be open in October 2009. This is critical to have three months to 'shake down' the hotel and be fully operational by January of 2010, as we anticipate very substantial occupancy demand beginning in January with advance groups for the World Games and the hotel must be open."
-During a December 13, 2007, "Kentucky Horse Park Westin Hotel" presentation, Appellants stated the hotel could be "[O]pen in advance of the World Equestrian Games for seasoning prior to the games." Further, Bluegrass stated that: "Delivery and opening will be in Fall/Winter 2009, to ensure a smooth operation for the influx of world dignitaries in advance of the WEG.
-The Commonwealth asserts that the Private Placement Memorandum (PPM) prepared by Bluegrass's bond counsel also contained WEG representations, such as "The Project constitutes the lodging facility, which, in addition to the general promotion of tourism, will provide luxury accommodations for the Alltech World Equestrian Games," and "The Borrower was formed for the purpose of constructing and operating the Project as a result of the Federation Equestre International decision to hold the Alltech World Equestrian Games at the Horse Park in 2010."

30 Bluegrass disputes the Commonwealth's assertion that the "deadline" for completing the Project was the start of the WEG. It notes that there are no RFP or Lease provisions to indicate that this is the case, and that had the Commonwealth required the completion of the hotel prior to the WEG, it could have made it so, but did not.

31 The Commonwealth asserts that the conclusion of "material breach" was also supported by the court's other findings that: (1) Financing "was necessary to begin, much less complete, the construction of the "Project"; (2) "It was reasonable for the Commonwealth to conclude that Bluegrass could not complete the Project within twenty-four (24) months of execution of the contract between the parties" and, therefore, "...the Commonwealth had every right to protect its interest in ensuring that the operation of the Kentucky Horse Park was not impaired by an uncompleted major construction project during the WEG"; and (3) "[T]he Commonwealth would be significantly injured and deprived of its expected benefit because the hotel would not be finished by the opening of the WEG."

The Commonwealth ultimately asserts that the contract between the parties had very specific and finite dates and that, accordingly, the contractual rights of Bluegrass did not exist in perpetuity. Additionally, it asserts that the court's finding that Bluegrass would not be able to secure financing for the Project within the designated time frame was supported by substantial evidence, and was not "speculative" as Bluegrass now attempts to argue.³²

32 In support of that argument, the Commonwealth argues that overwhelming evidence existed to establish that the failure to obtain the Letter of Credit in April of 2008 was critical, noting that Nelson Taul of RSA stated, "Without the LOC, the sale of the Series A bonds at this time would not be possible." The Commonwealth notes that Bluegrass's own representatives agreed, testifying that Bluegrass needed this credit enhancement to sell the bonds in the marketplace. The Commonwealth also points to testimony from financial representatives Taul and Barrow that hotel financing has been particularly difficult in the current economy, and that the financial markets were in turmoil after the Lease execution in July of 2007.
The Commonwealth points to testimony from Nelson Taul that the market had been challenging since February of 2008 and had not improved, and that the market for the high-yield bonds in this case remained, "very challenging." It also directs the attention of this Court to the testimony of Tom Howard of the Finance and Administration Cabinet to the effect that, "[T]he market was increasingly difficult and getting much [more so] from February, March, April, onward. So, with that, I was not surprised that they were unable to get the financing," and that, "Given market conditions, I have to say I was skeptical that they would be able to get financing for the Series A bonds."

As its final basis in support of its argument that the court below correctly found Bluegrass to be in default, the Commonwealth argues that Bluegrass also defaulted due to its failure to make timely delivery per its schedules, failure to pay bills, and failure to provide other deliverables.³³

33 In its reply brief, Bluegrass disputes this argument, stating that the Commonwealth makes this assertion without identifying why the RFP default provisions, as opposed to the lease default provisions, would govern. Bluegrass asserts that the applicable default provisions are those of the Lease, and not the RFP. It states that the parties signed the Lease after they signed the RFP and the response to the RFP. It asserts that the Lease was very clear about what document would govern default, stating, "Notwithstanding anything which may be construed to the contrary, each of the following shall be deemed an 'Event of Default' by Ground Lessee, and no other definition shall apply."
Alternatively, Bluegrass argues that even if this Court considers the RFP default provision, the Commonwealth's arguments regarding alleged defaults under the RFP do not provide adequate grounds to affirm the trial court's decision. In addressing the Commonwealth's claim that Bluegrass failed to "make delivery within the time specified or according to a delivery schedule fixed by contract," it asserts that the Commonwealth identified only initial schedules, none of which the parties expected to be the actual schedules in support of its claim. It notes that the Commonwealth also references other "representations," none of which were fixed by contract, and which are, therefore, Bluegrass argues, irrelevant. Alternatively, Bluegrass argues that a minimum, the existence of any such "delivery schedule," is a disputed issue of fact for trial.
Moreover, Bluegrass argues that it did not default as a result of late or non-payment of bills for labor, materials, supplies, or equipment. It notes that the support cited by the Commonwealth for its claim includes a lien filed after its termination of the Lease, and a letter of indebtedness resolved by Bluegrass prior to the time that the Lease was terminated. Bluegrass asserts that at the time the Lease was terminated, there were no late payments or letters of indebtedness received that had not been resolved.
Finally, Bluegrass asserts that even setting aside the absence of any substantive default on the part of Bluegrass under the terms of the RFP default provision, the Commonwealth ignores its own failure to follow the provision's requirements. It notes that the provision at issue provides that, "If a lessee is determined to be in default, the Commonwealth shall notify the lessee of the determination in writing, and may include a specified date by which the lessee shall cure the identified deficiencies. The Commonwealth may proceed with termination if the lessee fails to cure the deficiencies within the specified time." Bluegrass states that it never received notice that the Commonwealth deemed any of the alleged failures or omissions it now describes as deficiencies under the RFP at the time they occurred, and never took the necessary steps to hold Bluegrass in default.
The Commonwealth, in its reply brief, argues that the Lease's default provisions did not supersede the RFP provisions, and that the Lease could not deviate from the RFP to the Commonwealth's detriment, noting that 200 KAR 5:307, Section 7 provides that, "The terms and conditions of the contract shall not in any material respect deviate in a manner detrimental to the purchasing agency from the terms and conditions specified in the solicitation for proposals." Further, it notes that the RFP itself states that in a conflict between the RFP and the Lease, "the provisions and requirements set forth and/or referenced in the RFP shall govern." Thus, the Commonwealth argues that the schedules were both required and binding.

The Commonwealth notes that this was not a basis for the circuit court's ruling, but nonetheless argues that Bluegrass was in default for these reasons.³⁴,³⁵

34 While the Commonwealth asserts that these issues were preserved for review by memoranda filed below, and urges this Court to consider these arguments as a basis to affirm the court below on alternative grounds pursuant to City of Louisville v. Kavanaugh, 495 S.W.2d 502, 506 (Ky. 1973), we do not believe that such "alternative grounds," are necessary sub judice, in light of the other reasoning contained herein, infra, which supports our affirmation of the ruling below.

35 In its reply brief to this Court, Bluegrass disputes the arguments made by the Commonwealth concerning its alleged default, noting that neither the RFP nor the Lease had an express requirement that the Project be financed by a specific date. Alternatively, Bluegrass argues that even if the Commonwealth's February 29, 2008, letter established a de facto April 15, 2008, deadline by which the financing of the Project had to be completed, Bluegrass asserts that it was not given a chance to cure the default that, by definition, occurred on April 15, because the Commonwealth terminated the Project immediately. Further, Bluegrass argues that ample evidence exists to support its assertion that as of April 15, 2008, the Project could still have been completed prior to September 2010. Ultimately, Bluegrass argues that the trial court improperly read deadlines for performance into the RFP and Lease when same were not actually there. Bluegrass argues that this error was compounded by the trial court's determination as a matter of law that Bluegrass failed to "diligently advance" its work because it did not complete financing of the Project in advance of those extra-contractual deadlines.
In its reply brief, the Commonwealth disputes the characterization of these deadlines as "extra-contractual," and states that there was a specific construction deadline in the lease that was not met, noting that Schedule C provided for performance "24 months from date of execution of ground lease." Further, it notes that Bluegrass does not dispute the promise in the RFP Submittal to close "financing in early June [2007] with a first issue of $10 million and then a second and last issue of approximately $70 million in December [2007]."

In addition to arguing that the court below correctly found default to have occurred, the Commonwealth argues that the court correctly found that the Commonwealth provided proper notice of termination and an opportunity to cure. The Commonwealth asserts that Bluegrass disingenuously claims it did not receive written notice of default and an opportunity to cure, as it provided Bluegrass with notice of identified deficiencies on February 29, 2008. The Commonwealth argues that this letter clearly indicated that if the deficiencies were not corrected, the Commonwealth would consider "terminating" the parties' agreement and otherwise cancel the Project. Further, it notes that an April 16, 2008, letter provided notice of "termination for default and cancellation of the project," and that it was "effective immediately," as well as the reasons why the contract was being terminated. Finally, the Commonwealth argues that contrary to the assertions of Bluegrass, the default provision of the RFP states that notice "may include a specified date by which the lessee shall cure the identified deficiencies." Thus, the Commonwealth asserts that a cure period under the RFP was ultimately not required.

Alternatively, the Commonwealth asserts that even if the Lease notice provisions applied, Bluegrass was still in default and received the proper notice and opportunity to cure. It argues that if the Lease actually did "commence," a default occurred for "failure to timely perform or observe any other terms, conditions, or covenants of Ground Lease, the RFP, or Submittal ...."³⁶

36 Appellant's Appendix 7: Lease, Section 13.01(b).

The Commonwealth argues that Bluegrass ignores this provision, which requires that the RFP and Submittal provisions must also be performed, and not just the provisions contained in the Lease. Moreover, it argues that despite the claims made by Bluegrass, Section 13.01(b) of the Lease required "thirty (30) days of notice from Ground Lessor to Ground Lessee of such delinquency," not a notice of default. The Commonwealth argues that its February 29, 2008, letter provided the requisite notice of "delinquencies" and thirty days to cure. It thus argues that pursuant to 13.02(a), the Commonwealth could then elect to terminate the Lease without any demand or notice.

In making this argument, the Commonwealth disputes Bluegrass's claim that the thirty-day period to cure was extended as long as they were working on identified issues. First, the Commonwealth argues that its letter afforded Bluegrass an additional forty-six days to cure, and not just thirty. It argues that when the undisputed facts of the prior notice of delinquencies on July 10, 2007, were considered, in conjunction with the fact that Bluegrass had been working on those items since the intent to award date of May 25, 2007, the time to cure allowed was reasonable. Thus, the Commonwealth argues that as a matter of law, the circuit court was correct in determining that a reasonable amount of time for performance³⁷had passed and Bluegrass could not perform its obligations on time.

37 The circuit court held that,

"It was not unreasonable of the Commonwealth to ask for such [financing] assurances given the timeline of the WEG, failure in Appellants' previous attempts to gain financing, and the risk associated with the possibility of an unfinished structure at the Kentucky Horse Park during the WEG."

Finally, the Commonwealth asserts that Bluegrass's claim that KHPWESLUX never received notice is baseless. It asserts that the February 29, 2008, letter from the Commonwealth was addressed to Burgess at KHPWESLUX, which was a principal of Bluegrass. It notes that the April 16, 2008, letter was also addressed to both parties. Thus, it asserts that proper notice and an opportunity to cure were provided.³⁸

38 In its reply brief to this Court, Bluegrass again disputes proper notice of default and an opportunity to cure. It notes the Commonwealth's reliance on its February 29, 2008, letter as evidence of notice under the default provision of the RFP, but argues that the Commonwealth could not have given notice of a default when there is no evidence in the record that a default occurred as of that date. Bluegrass asserts that in fact, the evidence of record indicates that KEDFA had approved the sale of the bonds by Bluegrass the very day before, at the behest of the Finance Administration, and that the Commonwealth's own Secretary Jonathan Miller testified that Bluegrass was not "delinquent in their obligations" as of that date. Bluegrass argues that even when read in the manner most favorable to the Commonwealth, the February 29, 2008, letter merely establishes a future date by which, if the identified obligations were not performed, Bluegrass would have been delinquent.
Bluegrass also disputes the Commonwealth's assertion that it did not have to provide an opportunity to cure at all, and asserts that the provision at issue merely gives the Commonwealth the option to identify a "specific date" by which identified deficiencies must be cured. Bluegrass asserts that the provisions did not free the Commonwealth from the obligation to provide Bluegrass the opportunity to cure in the first instance. Indeed, it asserts that as made clear by the next sentence of the cited section which states, "The Commonwealth may proceed with termination if the lessee fails to cure the deficiencies within the specified time[,]" the Commonwealth's right to terminate expressly requires an opportunity to cure.
Likewise, Bluegrass disputes the trial court's conclusion that the Commonwealth complied with the Lease's default provision, in addition to the default provision of the RFP. Bluegrass asserts that both the Events of Default, and Notice of Default are defined in Section 13.01 of the Lease, which provides that, "Within thirty (30) days of notice from Ground Lessor to Ground Lessee of such delinquency," or sale of Bluegrass's interest in the Lease or Bluegrass's bankruptcy or receivership. Bluegrass asserts that the Commonwealth has failed to identify any event of default as required by the Lease, and instead, relies in error on the default provisions of the RFP. Further, it argues that the Commonwealth cannot point to any notice of default other than the February 29, 2008, letter. However, Bluegrass again asserts that when that letter was sent, Bluegrass was not in default of or otherwise delinquent in its obligations under the Lease, an assertion which it claims is unchallenged by the Commonwealth. Bluegrass thus argues that without notice of a then-existing default, Bluegrass could not have had an opportunity to cure.
Further, Bluegrass asserts that from the moment it received notice of the Commonwealth's additional demands, it was diligently executing remedies. Thus, it again argues that the 30-day cure period should have been extended, and at a minimum, an issue of material fact exists on this issue.

As an alternative basis for support of the circuit court's holding,³⁹ the Commonwealth argues that Bluegrass's claims were barred because the Ground Lease never commenced. It argues that an interpretation of the plain meaning and language of the Lease indicates that it never actually commenced. The Commonwealth notes that Section 2.01 (a)⁴⁰ of the Lease provides that the term of the Lease would not commence until the construction documents, as defined in the Lease, were approved by the Ground Lessor, which in this case was the Commonwealth. It also asserts that the contract term "construction documents" was clearly defined in Section 5.01⁴¹ of the Lease, and that it is uncontroverted that the necessary "plans and specifications" defined therein were never made part of the schedule as the Project never progressed to the stage where they would be developed.⁴²

39 The Commonwealth asserts that this issue was properly preserved by memoranda filed below, and notes that although this was not a basis for the court's holding, this Court may affirm on these alternative grounds pursuant to Red Arrow Delivery, Inc. v. Greyhound Corp., 377 S.W.2d 596, 599 (Ky. 1964), et. al.

40 Section 2.01(a) of the Lease, entitled "Term" provides that:

(a) Original Term: The term of this Ground Lease shall be for a period of forty-two (42) years, commencing on the date upon which Ground Lessee shall receive written notification from Ground Lessor that the terms of the Ground Lease and the Construction Documents (as hereinafter defined) have been approved by _ (the "Commencement Date"), and expiring at midnight on forty-second (42nd) anniversary of the Rent Commencement Date (as defined in Section 5.01 ("Original Term")).

41 Providing, in pertinent part, "The initial Improvements shall be of the nature described on the Construction Documents in Schedule C, attached hereto and incorporated herein by reference (the 'Construction Documents')(Schedule C, entitled 'Construction Drawings') provided in pertinent part that, "Ground Lessee shall construct the Improvements substantially as described on the preliminary plans and specifications attached hereto as Schedule C-1. (Attach Plans and Specifications), subject to the terms and conditions of the Ground Lease and the provisions set forth hereinbelow. (Appellants' Appendix 7: Lease, Schedule C).

42 The Commonwealth notes that Bluegrass representative Joe Straka testified that he had "[N]o knowledge of any formal approval on any plans or specifications by the Commonwealth ..."

Thus, the Commonwealth argues that as the Lease term was never commenced, the lease termination provisions set forth in the Lease do not apply. Rather, it asserts that Bluegrass's rights under the Lease were limited prior to the "Commencement Date" to those rights set forth in Section 2.01, where it is provided in applicable part that the "Ground Lessee shall have access to the Leased Property prior to the Commencement Date in order to carry out pre-construction investigations and due diligence, at Ground Lessee's sole risk and expense." Thus, the Commonwealth argues that as the only activities performed by Bluegrass below were at its "sole risk and expense," its claim for damages should fail in its entirety, and that the Commonwealth has no obligation to pay Bluegrass's costs and expenses.⁴³,⁴⁴

43 The Commonwealth argues that in addition to its arguments that only pre-construction investigations and due diligence were performed, resulting in a lease term that did not commence, other provisions of the Lease and RFP also make clear that the Commonwealth was not responsible for costs and provisions on the Project, including:

-"Ground Lessor shall not be required to make any payment of any kind whatsoever with respect to the Leased Property." (Lease §3.05)
-"Ground Lessee shall have the right, at its sole cost and expense, to construct ... on the Leased Property, or any part thereof ..." (Lease §5.01)
-"Nothing in this Ground Lease shall in any way be deemed or construed as constituting an order or request by the Ground Lessor, expressed or imposed, to any contractor, sub-contractor, supplier, material-man, or laborer for the performance of any labor or the furnishing of any materials for the maintenance of any improvements on, alterations to, or other improvements of the Leased Property ... Ground Lessee shall indemnify Ground Lessor and hold Ground Lessor harmless from all costs, losses, expenses, and attorneys' fees in connection with any such Lien [on the Leased Property]." (Lease §5.03).
-"Ground Lessee shall be responsible for obtaining and paying for all utilities for the construction and development of the Improvements ... All expenses and costs resulting from ... easements and rights-of-way shall be borne by Ground Lessee." (Lease §5.03).
-"It will be the responsibility of offeror to obtain and pay for all utilities for the construction and development of the Project ... All expenses and costs resulting from the granting and installation of such easements and rights of way will be borne by the successful offeror ... Payment of all utilities for operation of the Project will be the responsibility of the offeror ..." (RFP III.Q.).

44 In its reply brief to this Court, Bluegrass disagrees with the Commonwealth's claim that the Lease never commenced, noting that the provision relied upon by the Commonwealth, Section 2.01(a) of the Lease, contemplates a 42-year term. Bluegrass asserts that though the Commonwealth argues that the Lease never commenced because the "construction documents" were never submitted and approved by the unidentified person in the Lease, this premise is flawed. It argues that it provided all of the documents that the parties believed were necessary to commence the Lease. It argues that, in fact, the Commonwealth, and specifically the Governor and the Secretary of Finance and Administration "approved" the Lease and all its Schedules, including the "attached" and "incorporated" Schedule C.
Thus, Bluegrass argues that the Lease commenced the moment the Governor approved it because it included Schedule C. Bluegrass argues that the Commonwealth's suggestion that final "Construction Documents" had to be attached to the Lease at Schedule C at the time of the Lease's execution contradicts the facts, and that the parties understood, from the time of Bluegrass's response to the RFP, that the Project would be constructed in a "fast track/phased" sequence, which would result in final construction documents being completed later in the process. In support of that assertion, it notes that the Lease expressly provides for this at Section 5.01, stating: "This Ground Lease shall be amended by the parties hereto to incorporate final construction plans and specifications when completed on or about April 2008, and which shall be subject to Ground Lessor's reasonable approval which shall be provided within a reasonable time following any request therefor." It also asserts that its argument is supported by Section 16.02 of the RFP, and by the language of Schedule C.
Bluegrass also argues that prior to signing the Lease, the Commonwealth approved the "Construction Documents" available at that time, noting an e-mail from Frank Pinkston which stated, "Due to the Design/Build nature of the project it is not reasonable to expect plans and specs at this point. The Commonwealth has approved the schematic drawings submitted with Phase II which is incorporated by reference in this Lease along with the RFP and Phase 1 Submittals."
Thus, Bluegrass argues that two weeks before the parties executed the Lease the Commonwealth acknowledged that it had already "approved" the documents that it expected to approve at that juncture. It also asserts that beyond Pinkston's e-mail, other actions taken by the Commonwealth implicitly acknowledged the enforceability of the Lease, including the counterclaim filed by the Commonwealth. While acknowledging that the counterclaim is based on the RFP, Bluegrass asserts that the RFP is only enforceable, if at all, by virtue of its incorporation in a binding lease. Further, Bluegrass notes that when the Commonwealth decided to end the Project, it did so by threatening to cancel it, "[P]ursuant to Section 13 of the Ground Lease." Bluegrass asserts that the Commonwealth's position raises the question of why, if the Lease obligations never "commenced," there was any need to "terminate" the Lease at all.
Finally, Bluegrass argues that because the Lease is a contract in addition to a conveyance, occurrence of the "commencement date" for purposes of conveyance does not dictate whether a contract exists, and that every lease functions as two separate documents, a contract and a conveyance.
In its reply brief, the Commonwealth argues that the claim that the Lease's Schedule C did not require any documents is incorrect, and that Schedule C says to, "attach plans and specifications." It again argues that Bluegrass never submitted any development plans or specifications, and only submitted a timeline for same. It asserts that a "commencement date" was separately defined and prior access to the property granted specifically because the Lease did not commence upon execution, but rather after certain actions were taken. Finally, it argues that its counterclaim has no bearing on "commencement," and that it was a mandatory counterclaim under CR 13.01. The Commonwealth argues that Bluegrass was responsible for utility costs whether the lease term commenced or not.

Bluegrass disputes the argument that the Commonwealth is not obligated to pay its costs and expenses, stating that this argument rests on a reading of the Lease that ignores the Commonwealth's termination of the Lease for convenience.⁴⁵ Bluegrass argues that as a result, Kentucky law dictates that the Commonwealth is liable to Bluegrass. It also asserts that the Commonwealth's argument that recovery should be barred based on the structure of the deal is disingenuous, as the Commonwealth specifically requested both the deal and the financing be structured in the manner that they were structured.

45 Bluegrass notes that Section 45A.200 of the Procurement Code provides that, "all construction contracts expected to exceed fifty thousand dollars in price ... [shall include] a clause providing that a contract may be terminated for the convenience of the Commonwealth or for default, and further providing for liquidated damages when appropriate ..."

As its final response to the arguments made by Bluegrass and KHPWESLUX on appeal, the Commonwealth argues that KHPWESLUX has no standing, and that its claims are barred by sovereign immunity. The Commonwealth argues that KHPWESLUX lacks standing for damages because it was not a party to the Lease nor a third-party beneficiary, nor did Bluegrass assign its rights to KHPWESLUX, and that only parties to a contract may sue to enforce it. The Commonwealth disputes any assertion that the Commonwealth's "intent to award," issued on May 27, 2008, is evidence of a direct contractual obligation to KHPWESLUX, and argues that the "intent to award" is neither an award in and of itself, nor a contract. Additionally, the Commonwealth argues that sovereign immunity bars any claims by KHPWESLUX, as sovereign immunity can only be waived expressly or by "overwhelming" implications, neither of which were present sub judice.

In response to this argument, Bluegrass argues that KHPWESLUX does in fact have standing, and notes that until the briefing on summary judgment, the Commonwealth asserted that the "Plaintiffs" (meaning both KHPWESLUX and Bluegrass) were obligated to the Commonwealth under the Lease and RFP. It states that at no point prior to the summary judgment did the Commonwealth argue that KHPWESLUX had no standing.

Moreover, Bluegrass notes that it is undisputed that KHPWESLUX was the winning bidder for the Project. As a result, it asserts that the Commonwealth was prohibited by Kentucky law from entering into a contract for the Project with any entity other than KHPWESLUX. It thus argues that if the Commonwealth's argument is taken at face value, it is an admission that it violated state law in procurement of the Project, relying upon 200 KAR 5:307 Section 7. Further, Bluegrass notes that the Commonwealth itself sued KHPWESLUX for breach of contract for failing to pay for utility work on the Project site.

Alternatively, Bluegrass argues that if this Court agrees with the Commonwealth that the RFP does not create any obligations, contractual or otherwise between KHPWESLUX and the Commonwealth, then KHPWESLUX should be dismissed from this case because it cannot be contractually liable to the Commonwealth if it is not a party to any contract.

On cross-appeal, the Commonwealth submits that it is entitled to a judgment that Bluegrass has a contractual obligation to reimburse the Commonwealth its costs for relocation of utilities on the Project. It asserts that despite the holding of the lower court, mutual mistake and equity do not bar the Commonwealth's claim.

First, the Commonwealth asserts that the doctrine of mutual mistake does not apply to this case. The Commonwealth asserts that mutual mistake relates to present, existing facts, and that sub judice there was no mistake regarding facts or conditions existing at the time of contract formation. The Commonwealth asserts that financing was just a condition precedent that was not fulfilled, and that any mistakes involved only the forecasting and calculation of financing conditions that would exist in the future. Thus, it argues that the mutual mistake finding is erroneous.

Further, the Commonwealth argues that the circuit court incorrectly held that principles of equity, including unjust enrichment, bar the Commonwealth's counterclaim. The Commonwealth argues that there is no evidence that it acted recklessly or inequitably about financing, nor that it assumed any risk regarding utilities. To the contrary, the Commonwealth argues the evidence is clear that it relied on the parties' agreement regarding utilities and Bluegrass's numerous representations on financing before it relocated utilities. The Commonwealth also asserts that the court should not have resorted to equitable doctrines when adequate legal remedies were available. Thus, it asserts that the contractual obligation requiring Bluegrass to reimburse for utilities should be enforced, and a judgment entered in favor of the Commonwealth.

In response to the cross-appeal made by the Commonwealth, Bluegrass argues that the Commonwealth cannot have it both ways, and cannot recover from a breach of contract that they claim never existed. Moreover, it argues the Commonwealth cited no evidence to support its assertion that it relied on the parties' agreement regarding utilities, or on the representations of Bluegrass before relocating utilities. Bluegrass asserts that, in fact, the evidence demonstrates that the parties understood that the payment for utilities would be made out of the proceeds from the first construction draw.⁴⁶ Thus, Bluegrass argues that the fact that the Commonwealth moved the utilities before the financing was completed was a risk it chose to bear. Finally, Bluegrass notes that there was no dispute that the utilities were not used at the Project, and that the Commonwealth seeks a windfall by attempting to have Bluegrass pay for the utilities, while at the same time devoting the entirety of its brief to pointing out that the Project was not and would never be successful.

46 In its reply brief to this Court, the Commonwealth disputes Bluegrass's claim that it assumed the risk of utility location. It argues that Bluegrass was responsible for utilities and all financing, and that the circuit court correctly held that this was the primary reason that the Commonwealth relocated utilities.

We now address the arguments of the parties in turn. Having reviewed the record, and the extensive arguments of the parties, we are in agreement with the circuit court that these arguments can most effectively be characterized as three issues: (1) Whether a "contract for construction services" existed as that term is contemplated by the RFP; (2) If so, whether Bluegrass diligently advanced work on the Project under the contract; and (3) What form of notice of termination and opportunity to cure the Commonwealth was required to provide, and whether or not it effectively complied.

Turning first to the issue of whether a "contract for construction services" existed, we are ultimately in agreement with the court below that the title of a document alone does not dictate the substance of the agreement itself, and that a contract for construction services, consisting of the RFP, the Lease, and the Submittal, existed in this instance. Certainly, the construction and interpretation of a written instrument is a question of law for the court. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky. App. 1998). Concerning both contracts and conveyances, one of the first rules of construction is that absent ambiguity or silence on a matter, the parties' intentions must be discerned from the four corners of the instrument. White Log Jellico Coal Co., Inc. v. Zipp, 32 S.W.3d 92, 94 (Ky. App. 2000). See also Hoheimer v. Hoheimer, 30 S.W.3d 176, 178 (Ky. 2000), and Cantrell Supply Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App. 2002).

Bluegrass correctly notes that in Kentucky a lease is defined as "an agreement for a continuous interchange of values between landlord and tenant, rather than a purchase single and completed of a term or estate in lands." Evans v. Kroh, 284 S.W.2d 329, 331 (Ky. 1955).

While we certainly recognize the parties' designation of the document at issue as a lease, we ultimately do not find this designation to be controlling. The law of this Commonwealth is clear that the designation of a legal instrument by parties to the instrument is evidence of the nature of the parties' legal relationship, but is not dispositive. See Terrill v. Kentucky Block Cannell Coal Co., 160 S.W.2d 326 (Ky. App. 1942).⁴⁷ As the court below correctly held, even if some ambiguity exists in the agreement between the parties, the rule in construing contracts to which the government is a party is to resolve all ambiguities, presumptions, and implications in its favor. Codell Construction Co. v. Commonwealth, 566 S.W.2d 161, 164 (Ky. App. 1978).

47 In which a 999-year coal lease was determined to be a deed rather than a lease.

Sub judice, the RFP clearly describes the agreement between the parties as a contract to finance, construct, and manage a hotel on property owned by the Commonwealth. Indeed, the RFP and Submittal were titled a "Contract to Develop, Construct, Operate and Maintain a Hotel and Associated Facilities at the Kentucky Horse Park."

Concerning whether the RFP and the Submittal were ultimately part of the contract between the parties, we are not persuaded by the assertions of Bluegrass that such is not the case. The Lease itself, at Section 1.04, provides that,

This agreement shall consist of the Ground Lease and the Schedules attached hereto and incorporated herein by reference, the Request for Proposals (RFP) and any addenda thereto, hereinafter the "RFP", identified as Schedule F, attached hereto and incorporated herein by reference; and Ground Lessee's Schedule F, attached hereto and incorporated herein by reference; and Ground Lessee's proposal submitted (hereinafter the "Submittal") in response to the RFP, identified as Schedule G, attached hereto and incorporated herein by reference. The RFP and Submittal shall be hereinafter referred to collectively as the RFP documents.

Thus, we believe that by the plain language of the Lease itself, the parties intended to include and incorporate each of these documents into their agreement.

Moreover, 200 KAR 5:307 at Section 7 clearly states that, "The terms and conditions of the contract shall not in any material respect deviate in a manner detrimental to the purchasing agency from the terms and conditions specified in the solicitation for proposals." Further, our law is clear that a contract must be construed as a whole, and all writings that are part of the same agreement are to be construed together. ABCO-Bramer, Inc. v. Market Ins. Co., 55 S.W.3d 841, 845 (Ky. App. 2000). Having so found, we turn to the second issue raised by the parties, namely, whether or not there was a material breach of the contract for construction services.

Having determined that a contract for construction services did exist between the parties, we believe the agreement between the parties clearly indicates that the failure to diligently advance work under the contract constitutes default. As the court below correctly noted, in determining whether a failure to render or to offer performance is material, the following circumstances are significant:

(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Restatement (Second) of Contracts, § 241.

Certainly, diligent advancement of work under the contract was of critical importance in this case because of the importance of completing the Project in advance of the WEG. Indeed, as is clear from the evidence reviewed herein, the entire purpose of the Project was to construct a world-class facility to enhance the WEG, to promote equine-related tourism, and to enhance the Commonwealth's reputation as the "Horse Capital of the World."

A thorough review of the evidence, including correspondence, testimony, and documentation from both sides indicates that all parties understood these to be the goals and intended for the Project to be completed prior to the beginning of the WEG, despite any assertions now made to the contrary. Having found this to be the clear purpose and goal of the agreement between the parties, it remains for this Court only to determine whether the court below correctly found that a material breach was committed by the Plaintiffs in the course of making progress toward this goal.

In analyzing this issue, we find one fact to be of particular importance, namely, the undisputed evidence which establishes that Bluegrass made representations to have tax-exempt status at the time it was selected to construct the Project when, in fact, it did not actually obtain that status until six months later, on November 28, 2007. This Court is in agreement with the court below that in light of the evidence presented, securing financing would have been difficult even in the best of circumstances, but was nearly impossible in light of the delay in obtaining the status which Bluegrass clearly represented itself to already have at the time of selection. We are in agreement with the court below that no lender would consider financing a project that was dependent on tax-exempt status until IRS approval of such status had been granted. This material misrepresentation caused an already short amount of time to obtain financing to become shorter.

Our Kentucky Model Procurement Code is clear in providing that, "Every contract or duty under this code shall impose an obligation of good faith in its performance or enforcement. 'Good faith' shall mean honesty in fact in the conduct or transaction concerned and the observance of reasonable commercial standards of fair dealing." Kentucky Revised Statutes (KRS) 45A.015(2). Having reviewed the record, we are in agreement with the court below that Bluegrass's misrepresentation in this regard was not in good faith, and substantially contributed to its failure to obtain financing.

Moreover, despite Bluegrass's assertions to the contrary, there were numerous representations made, mobilization and scheduling deadlines provided, and acknowledgements made that financing was to be secured within approximately twenty-four months. This was not achieved, and we do not agree with the argument put forth by Bluegrass that the court below "speculated" on the prospects of obtaining financing on schedule because there was testimony provided by numerous financial advisors and representatives that this was the case. Accordingly, we affirm.⁴⁸

48 Having so found, and finding that this breach was material, we decline to address the additional arguments set forth by the parties concerning failure to make timely delivery per their schedules, failure to pay bills, and failure to provide other deliverables. This was not a basis for the circuit court ruling, and finding other substantial grounds upon which to affirm, we believe affirmation on alternative grounds to be unnecessary herein.
Likewise, we decline to address the argument made by the Commonwealth the KHPWESLUX lacks standing to claim damages, and is barred from doing so by sovereign immunity. For reasons set forth herein infra,we do not believe a claim for damages to be warranted, and in any event, affirm the court's ruling on the grounds contained therein.

Having so found, we now turn to the issue of whether the Commonwealth provided Bluegrass with proper notice and an opportunity to cure. Certainly, the RFP clearly states that, "Any lessee who is determined to be in breach ... shall be declared in default and the lease may be terminated ... The Commonwealth shall terminate a contract by written notice."⁴⁹ As previously noted herein, the Lease agreement itself provided that notice be given along with 30 days to cure.

49 See RFP, pp. 37-38.

As also previously discussed herein, should a conflict exist between the provisions in the RFP and the Lease, we believe the provisions of the RFP to be controlling. In this instance, however, we are in agreement with the court below that the Commonwealth's letter to Bluegrass on February 29, 2008, complied with the substantive requirements of notice under the Lease agreement and, indeed, gave Bluegrass more than the required 30 days to cure. While Bluegrass argues that the Commonwealth's demands in the February 29, 2008, letter were extra-contractual, our review of the record does not reveal this to be the case.

Indeed, our review of the letter dated February 29, 2008, reveals that the Commonwealth sought to confirm Bluegrass's ability to obtain financing and secure a first-class hotel sponsor. We are in agreement with the court below that this was not unreasonable in light of the timeline for the WEG; the failure of Bluegrass to previously gain financing and the fact that this failure had been communicated to the Commonwealth; and the risks presented by the presence of an unfinished structure at the Kentucky Horse Park during the WEG. Certainly, the Commonwealth had the right to protect its interests in ensuring that the operation of the Kentucky Horse Park was not impaired by the presence of a major unfinished construction project, and to terminate the contract when it did upon the failure of Bluegrass to cure the default within the time provided.⁵⁰ Accordingly, we affirm.⁵¹

50 In so finding, we briefly address the "termination for convenience" argument set forth by Bluegrass in its briefs to this Court. In sum, we are not persuaded by this line of reasoning, and note that the termination for convenience provision was not premised upon failures or delinquencies in performance, but instead upon the decision of the terminating party to provide a "written notice of termination." Reasons were not required, and certainly, a letter such as that issued on February 29, 2008, would not have been necessary. Indeed, such a letter, setting forth delinquencies and requests for assurances as to performance would have been out of place in the context of a termination for convenience. Thus, we are in agreement with the Commonwealth that what existed below was a termination for default.
Further, we are unpersuaded by the argument that KHPWESLUX never received notice. The February 29, 2008, letter from the Commonwealth was addressed to Burgess, who was also a principal of Bluegrass. Accordingly, we believe sufficient notice was provided, and decline to address this argument further herein.

51 In affirming, we decline to address the arguments made by the Commonwealth that the Lease never commenced as an alternative ground for affirmation. Having reviewed that argument in detail, this Court fails to see why, if the Commonwealth wishes to argue that the Lease never commenced at all, termination was necessary in the first place. Indeed, this argument seems contrary to the remainder of the arguments set forth in the Commonwealth's brief, and contrary to the findings upon which our opinion is based. Accordingly, we decline to address these arguments further herein.

In affirming, we briefly address the arguments of the Commonwealth that KHPWESLUX is barred from asserting any claims because it has no standing, and because of sovereign immunity.

Having reviewed these arguments, we ultimately decline to dismiss KHPWESLUX as a party. We note that up until the time that summary judgment was issued in this matter, the Commonwealth asserted that both KHPWESLUX and Bluegrass were liable and obligated to the Commonwealth under both the RFP and the Submittal. We decline to now entertain arguments to the contrary on appeal. Moreover, we note that KHPWESLUX was the entity which was the undisputed winning bidder for the Project, and pursuant to 200 KAR 5:307 Section 7, the Commonwealth, by accepting the bid, entered into a relationship with KHPWESLUX which created obligations on behalf of both parties. Accordingly, we decline to dismiss KHPWELUX as a party to this matter.

Finally, we turn to the cross-appeal raised by the Commonwealth. Upon review of the record and applicable law, we are again in agreement with the court below that there is no general issue of material fact concerning this issue. Certainly, pursuant to Section 5.06 of the Lease, Bluegrass had a contractual obligation to reimburse the state for its costs in relocation of the utilities. However, we are in agreement with the court below that mistake occurred in this instance. As our law makes clear, mutual mistake occurs when both parties participate in the transaction and each labors under the same conception of the alleged agreement. Pryor's Restaurants, Inc. v. Beliles, 560 S.W.2d 25 (Ky. App. 1977).

Sub judice, both parties were mistaken as to the availability of bond financing, and the Commonwealth's belief that financing would be available was the primary reason it completed the utility projects prior to the completion of financing. The Commonwealth did so with clear and full knowledge that financing had not yet been obtained and, thus, assumed the risk that the Project might still fail for lack of financing. Moreover, the improvements made by the state still inure to the benefit of the Commonwealth, and will facilitate any future efforts to develop the site.

We are in agreement with the court below that principles of equity dictate that the Commonwealth should have to assume the costs of these improvements, particularly in light of the fact that it will continue to realize the economic benefits of same. We are also in agreement with the assertion of Bluegrass that the Commonwealth cannot simultaneously recover from a breach of contract, and at the same time, recover for initiating a utility project at a time when they now argue it was clear that financing for the Project would ultimately not be obtained. Accordingly, we affirm.⁵²

52 For the same reasons, we are unpersuaded by the arguments of Bluegrass that the Commonwealth should reimburse it for costs and expenses. As this Court has previously held, "Equity will not relieve one party against another where both are in pari delicto." Eline Realty Co. v. Foeman, 252 S.W.2d 15, 19 (Ky. 1952). Moreover, we note that Bluegrass itself admits that only "preconstruction investigations and due diligence" were performed. Straka Deposition, p. 43. The Lease clearly indicates that such activities were performed at the "sole risk and expense" of Bluegrass. See Lease, Sec. 2.01. Accordingly, we are unpersauded by any arguments to this effect.
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Wherefore, for the foregoing reasons, we hereby affirm the January 4, 2011, opinion of the Franklin Circuit Court.

THOMPSON, JUDGE, CONCURS.

KELLER, JUDGE, CONCURS IN RESULT ONLY IN PART, DISSENTS IN PART, AND FILES SEPARATE OPINION.

KELLER, JUDGE, CONCURRING IN RESULT ONLY IN PART AND DISSENTING IN PART: I concur in result only as to the Majority's conclusion that the trial court properly granted summary judgment in favor of the Commonwealth and dismissed the Appellants' claims. However, I disagree with the Majority's conclusion that the trial court also correctly granted summary judgment in favor of the Appellants and dismissed the Commonwealth's counterclaim for $476,322 for the construction and relocation of utilities.

First, I do not believe that there was a mutual mistake of fact in this case. As set forth in Abney v. Nationwide Mut. Ins. Co.,215 S.W.3d 699, 704 (Ky. 2006):

To vary the terms of a writing on the ground of mistake, the proof must establish three elements. First, it must show that the mistake was mutual, not unilateral. Second, "[t]he mutual mistake must be proven beyond a reasonable controversy by clear and convincing evidence." Third, "it must be shown that the parties had actually agreed upon terms different from those expressed in the written instrument."

(Citations omitted) (emphasis in original).

In this case, the RFP, Submittal, and Lease all contain provisions requiring Appellants to pay for the relocation of utilities on the Project. Neither party asserts that the terms they agreed upon regarding the relocation of the utilities are different from those set forth in their written instruments. Accordingly, there was not a mutual mistake of fact in this case.

Furthermore, I do not believe that principles of equity apply. When "an express contract is made defining the circumstances under which an obligation may arise with reference to a certain subject matter such contract excludes the possibility of an implied contract concerning the same matter." Sparks Milling Co. v. Powell, 283 Ky. 669, 672, 143 S.W.2d 75, 76 (1940). Therefore, any recovery must be under the terms of the express contract. Id.

In this case, there was a written contract that set forth the obligations of the Appellants and the Commonwealth as to the relocation of the utilities. Thus, the written agreement controls. Accordingly, I believe the trial court erred in granting the Appellants' motion for summary judgment as to this issue. BRIEFS FOR APPELLANTS/CROSS-
APPELLEES:
Catherine E. Howard
Covington, Kentucky
William E. Johnson
Frankfort, Kentucky
BRIEFS FOR APPELLEE/CROSS-
APPELLANT:
Kenneth A. Bohnert
Richard M. Sullivan
Scott A. Johnson
Louisville, Kentucky