Celebrate Va. S. Holding Co. v. CVAS Prop. Mgmt., LLC

• Decision Date: 27 October 2021
• Docket Number: Civil No. 3:21cv261 (DJN)
• Parties: CELEBRATE VIRGINIA SOUTH HOLDING COMPANY, LLC, et al., Plaintiffs, v. CVAS PROPERTY MANAGEMENT, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

569 F.Supp.3d 316

CELEBRATE VIRGINIA SOUTH HOLDING COMPANY, LLC, et al., Plaintiffs,

v.CVAS PROPERTY MANAGEMENT, LLC, et al., Defendants.

Civil No. 3:21cv261 (DJN)

United States District Court, E.D. Virginia, Richmond Division.

Signed October 27, 2021

Timothy C. Bass, Greenberg Traurig LLP, McLean, VA, Brian Alex Crumbaker, Pro Hac Vice, Greenberg Traurig, P.A., Tallahassee, FL, Ira William Spivey, II, Pro Hac Vice, Greenberg Traurig PA, Orlando, FL, for Plaintiffs.

John K. Burke, Jr., J.K. Burke Law Firm PLC, Richmond, VA, Nicole Marie Barnard, Pro Hac Vice, Thomas M. Wood, IV, Pro Hac Vice, Neuberger, Quinn, Gielen, Rubin & Gibber, P.A., Baltimore, MD, for Defendants.

MEMORANDUM OPINION

David J. Novak, United States District Judge

Plaintiffs Celebrate Virginia South Holding Company, LLC ("CVS Holdings") and UMB CV Holding Company, LLC ("UMB," collectively, "Plaintiffs") bring this action against Defendants Celebrate Virginia South Property Management, LLC ("CVS Management"), Celebrate Virginia South, L.L.C. ("CVS"), CVAS 2, LLC ("CVAS 2"), CVAS Boulevard, LLC ("Boulevard"), CVAS Parkway, LLC ("Parkway"), SCH at Celebrate Virginia South, LLC ("SCH"), The Collection at Celebrate Virginia South, LLC ("Collection"), CVAS Properties, LLC ("Properties"), CVAS Grocery, LLC ("Grocery"), Rappahannock Quarry West, L.L.C., ("Quarry"), CVA Expo Center, LLC ("Expo") and Celebrate Virginia South Owners Association, Inc. (the "Association"), alleging interference with property rights related to land within the unified development Celebrate Virginia South, seeking legal and equitable relief. This matter now comes before the Court on the Motion to Dismiss (ECF No. 12) filed by Defendants.

For the reasons set forth below, the Court hereby GRANTS IN PART and DENIES IN PART Defendant's Motion (ECF No. 12). Specifically, the Court DENIES Defendant's Motion as to Counts One and Two of the Complaint (ECF No. 1). However, the Court GRANTS Defendant's Motion as to Counts Three, Four and Five.

I. BACKGROUND

At this stage, the Court must accept as true the facts set forth in the Complaint (ECF No. 1). Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Against this backdrop, the Court accepts the following facts as alleged for purposes of resolving Defendants’ Motion.

A. Factual Background

This case involves a commercial, retail and residential common plan development known as Celebrate Virginia South (the "Project"), located in the City of Fredericksburg, Virginia. (Compl. ¶¶ 20, 24; Declaration for Celebrate Virginia South R-4 (ECF No. 1-1).) The Project includes multiple land parcels that CVS, CVAS 2, Boulevard and Parkway (collectively, the "Foreclosure Defendants") previously owned. (Compl. ¶ 21.) Silver Development, its affiliates and their underlying principal, Larry D. Silver (collectively, "Silver"), own or control each of the Foreclosure Defendants. (Compl. ¶ 21.)

In December 2000, the City of Fredericksburg created the Celebrate Virginia South Community Development Authority and a special assessment district. (Compl. ¶ 22.) In 2006, the Community Development Authority issued bonds (the "Series 2006 Bonds") to raise proceeds to fund development of public infrastructure benefitting lands owned by the Foreclosure Defendants. (Compl. ¶ 23.) To secure repayment of the bonds, the District imposed a special assessment lien against property within the District. (Compl. ¶ 23.)

CVS and the founding entities subjected the Project to various provisions and restrictions that run with the land as set forth in several recorded documents, including two land declarations relevant to this case: (1) a property owners association declaration, the Declaration for Celebrate Virginia South (as amended and supplemented, the "POA Declaration" (ECF No. 1-1)), dated December 16, 2005, and recorded in the land records of the City of Fredericksburg (the "Land Records") (Compl. ¶¶ 24–27, 118–20); and (2) the Declaration of Covenants, Restrictions and Agreements for Celebrate Virginia South, Fredericksburg, Virginia, (the "Gondola Declaration" (ECF No. 13-1)) dated December 12, 2005, and recorded in the Land Records. (Compl. ¶ 76; Pls.’ Mem. of Law in Opp'n to Defs.’ Mot. to Dismiss the Compl. ("Pls.’ Resp.") (ECF No. 17) at 9.) The POA Declaration underlies Counts One and Two, while the Gondola Declaration underlies Counts Three, Four and Five.

1. The 2018 Assignment of Declarant Rights

In December 2005, CVS recorded the POA Declaration. (Compl. ¶¶ 24–28.) At that time, CVS owned nearly all of the land within the Project and the POA Declaration designated CVS as the original Declarant. (Compl. ¶ 28.) Defendant Quarry, a property owner controlled by CVS, joined, along with several others, in execution of the POA Declaration to subject their property to the terms and conditions contained therein. (Compl. ¶¶ 29–30.) The POA Declaration, the Articles of Incorporation (the "AOI" (ECF No. 1-2)), any Supplementary Declarations and the Bylaws, as amended from time to time, constitute the "Association Documents." (POA Decl. § 1.1(7).) "The Association Documents shall be construed together and shall be deemed to incorporate one another in full." (POA Decl. § 1.2(d).) The POA Declaration defines "Declarant" as "Celebrate Virginia South, LLC, ... or its assigns pursuant to Article 5 of the [POA] Declaration or pursuant to any instrument properly recorded in the Land Records and executed by the Declarant." (POA Decl. § 1.1(19).)

As Declarant, CVS, and any successors or assigns, possessed "Declarant Rights" for the duration of the "Declarant Control Period" (the "DCP"). (Compl. ¶ 31.) The Declarant Rights include, inter alia , the right to: use and grant certain easements; approve design, development and building plans; bid upon property foreclosed upon by the Celebrate Virginia South Owners Association, Inc. (the "Association"); record certain amendments to the POA Declaration; veto any proposed termination of the Declaration; submit additional land to the terms of the POA Declaration. (Compl. ¶ 31; POA Decl. §§ 3.1, 8.5, 12.2(c), 14.1, 14.5, 15.2, 18.1.) The Declarant Rights also include the right to vote as Class B Member of the Association, casting three votes per acre owned, over the Class A Members’, including Plaintiffs’, one vote per acre. (Compl. ¶ 31; AOI § 4.2.) The DCP ends on the earliest of three dates: December 16, 2025; the day the number of Class A votes equals twice the number of Class B votes; or the date chosen by the Declarant. (Compl. ¶ 56; POA Decl. § 1.1(20).)

The POA Declaration allows the Declarant to transfer Declarant Rights pursuant to provisions within Article 5. (POA Decl. § 5.2(a)–(e).) The Declarant has exercised its right to transfer Declarant Rights on several occasions, including in 2007, 2011 and 2018. (Compl. ¶¶ 35–37, 51.) In 2007, CVS conveyed land within the Project to CVAS 2 and contemporaneously partially assigned certain Declarant Rights related to that land. (Compl. ¶¶ 35–36.) In 2011, CVS and CVAS 2 conveyed land within the Project to Boulevard and Parkway and partially assigned certain Declarant Rights related to that land. (Compl. ¶¶ 37–38.) In 2018, the Foreclosure Defendants assigned their Declarant Rights, which forms the basis of Counts One and Two, as discussed in further detail below. (Compl. ¶¶ 51–52.)

Beginning in 2009 and continuing thereafter, the Foreclosure Defendants defaulted on the payment of taxes and assessments pledged to repay the Series 2006 Bonds. (Compl. ¶ 40). After years of attempting to enforce collection, the City sold the Foreclosure Defendants’ property on May 31, 2018 at a tax sale. (Compl. ¶¶ 41–46.) At the tax sale, Plaintiff CVS Holdings acquired three parcels. (Compl. ¶ 47.) Plaintiff UMB later acquired fee title to a fourth parcel. (Compl. ¶ 47.) UMB Bank controls both CVS Holdings and UMB in its capacity as trustee for the Series 2006 Bonds and trust assets for the benefit of the bondholders. (Compl. ¶ 48.) The POA Declaration and its rights and restrictions apply to Plaintiffs’ parcels as a part of the trust estate. (Compl. ¶ 49.)

Three weeks before the tax sale, the Foreclosure Defendants assigned their Declarant Rights (the "2018 Assignment") to related entities CVAS P10, LLC (which changed its name to SCH), Collection, Quarry, Properties, Expo and Grocery (collectively, the "Successor Declarants") and recorded that instrument on May 10, 2018. (Compl. ¶¶ 51–52.) Each of the Successor Declarants also constitute Silver controlled entities. (Compl. ¶ 52.) Additionally, each owned property within the Project before the 2018 Assignment, most for multiple years. (Compl. ¶¶ 51, 64.)

In August 2020, Plaintiffs sent the Successor Declarants a letter requesting that they turn over control of the Association to the Class A Members, asserting that the 2018 Transfer proved invalid and, resultantly, the Declarant Control Period lapsed upon the completion of the tax sale. (Compl. ¶¶ 70–71.) The Successor Declarants wrote back denying Plaintiffs’ request and objecting to their allegations. (Compl. ¶ 73.)

2. The Gondola Easement

In December 2005, just before executing the POA Declaration, CVS also executed the Gondola Declaration. The Gondola Declaration provides that it binds all then-present and future owners of property in the Project. (Gondola Decl. ¶ 14.) Accordingly, the Gondola Declaration applies to Plaintiffs’ parcels. (Gondola Decl. ¶ 14; Supplemental Declaration of Covenants Restrictions and Agreements for Celebrate Virginia South, Fredericksburg, Virginia (the "2013 Supplemental Declaration") (ECF No. 1-19) ¶¶ 4–6.)

At the time, CVS owned all property in the Project and thus named itself as the original Declarant (the "Gondola Declarant"). (Compl. ¶ 76; Gondola Decl. at 1.) Like the POA Declaration, the Gondola Declaration defines "[Gondola] Declarant" to include the successors and assigns of the Gondola Declarant. (Gondola Decl. ¶ 11.) In 2013, CVS assigned its rights as...