Colonial Penniman, LLC v. John Williams, Maxine Williams, Evb, Successor By Merger to Va. Co. (In re Colonial Penniman, LLC), Case No. 16–50394–FJS

• Decision Date: 18 August 2017
• Docket Number: APN 17–05003–FJS,Case No. 16–50394–FJS
• Citation: 575 B.R. 664
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: IN RE: COLONIAL PENNIMAN, LLC, Debtor. Colonial Penniman, LLC, Plaintiff, v. John Williams, Maxine Williams, EVB, Successor by Merger to Virginia Company Bank, Mark C. Hanna, Trustee, Conway H. Shield, III, Trustee, Defendants.

575 B.R. 664

IN RE: COLONIAL PENNIMAN, LLC, Debtor.Colonial Penniman, LLC, Plaintiff,

v.John Williams, Maxine Williams, EVB, Successor by Merger to Virginia Company Bank, Mark C. Hanna, Trustee, Conway H. Shield, III, Trustee, Defendants.

Case No. 16–50394–FJS

APN 17–05003–FJS

United States Bankruptcy Court, E.D. Virginia, Newport News Division.

Signed August 18, 2017

W. Greer McCreedy, II, The McCreedy Law Group, PLLC, Norfolk, VA, for Plaintiff.

Paul A. Driscoll, Peter G. Zemanian, Zemanian Law Group, Norfolk, VA, Kimberly A. Taylor, Kepley Broscious & Biggs, PLC, Richmond, VA, for Defendants.

MEMORANDUM OPINION

FRANK J. SANTORO, United States Bankruptcy Judge

This matter came before the Court for trial on June 28, 2017, on the complaint filed on January 25, 2017, by Colonial Penniman, LLC (the "Complaint"). The Complaint seeks both injunctive and declaratory relief against defendants John Williams; Maxine Williams; EVB, successor by Merger to Virginia Company Bank; and Mark C. Hanna and Conway H. Shield, III, trustees. The Complaint relates to an ongoing dispute between Colonial Penniman, LLC (the "Debtor") and John and Maxine Williams, who own property neighboring the property of the Debtor, with respect to an easement. The Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Venue is proper under 28 U.S.C. §§ 1408 and 1409(a).

The Court, having fully considered the evidence and arguments of the parties and the applicable law, determines that the requested relief should be granted in part and denied in part. This Memorandum Opinion constitutes the findings of fact and conclusions of law of this Court pursuant to Federal Rule of Civil Procedure 52, as incorporated into the Federal Rules of Bankruptcy Procedure by Rule 7052.

I. Procedural History

A. The Complaint

The Complaint makes a number of allegations regarding the actions of John Williams and Maxine Williams (the "Williamses"). The dispute between the Debtor and the Williamses arises from an alleged disagreement regarding the scope of an easement (the "Easement"), which is a tree-lined gravel strip of land that runs across the Williamses' property, located at 2497 Manion Drive,¹ Williamsburg, Virginia, and onto the Debtor's 8.42 acre parcel, which the Debtor seeks to sell (the "Property"). See Compl. ¶¶ 7, 10, Ex. B. A deed of easement evidencing the Easement was attached to the Complaint.

According to the Debtor, the Williamses have undertaken numerous actions to frustrate the sale of the Property. Amongst the Debtor's concerns is the Williamses' construction of barriers across the Easement, which first consisted of a rope and chain barrier and "no trespassing" sign, which was later replaced with a "16' farm gate" (the "Gate") across the Easement. Id . ¶¶ 20(ii)-(iii). The Debtor alleges that these barriers have discouraged buyers from purchasing the Property. Id. The Debtor notes that the Williamses allege that Virginia law permits them to construct such a barrier across the Easement; however, the Debtor disagrees with this interpretation. See id . ¶ 21. The Debtor further alleges that the Williamses have advised prospective purchasers that access to the Property via the Easement is "limited" and "restricted," further frustrating the Debtor's ability to sell the Property. Id . ¶ 20(i). The Debtor contends that the Williamses' chief motivation in undertaking to frustrate the sale of the Property is a years-old dispute between the Williamses and C. Lewis Waltrip, II, the principal of the Debtor (hereinafter "Waltrip").² See id . ¶¶ 14–16.

The Debtor alleges that, taken together, the Williamses' actions have "effectively destroy[ed]" the Debtor's ability to market the Property, rendering the Debtor "unable to identify a qualified real estate agent willing to accept the listing." Id. ¶ 22. Further, due to the ongoing dispute, the Debtor alleges that the "Williams [sic ] assertions" constitute a "known claim" and therefore would not be covered by any title insurance policy. Id . ¶ 23. According to the Debtor, these obstacles have resulted in withdrawal of two purchase offers. Id . ¶ 22. Further, a verbal offer was allegedly not reduced to writing because of the dispute. Id.

Seeking to resolve the dispute, the Complaint names as defendants the Williamses, as well as EVB, successor by merger to Virginia Company Bank, a creditor secured by the Property (hereinafter "EVB").³ In addition to EVB, the Complaint also names as defendants Mark C. Hanna and Conway H. Shield, III, the trustees on EVB's deed of trust (hereinafter, collectively with EVB, the "EVB Defendants"). In the Complaint, the Debtor requests both injunctive and declaratory relief. See id. ¶ 2. The Court notes that the Debtor asserts several different requests for relief under the broad umbrellas of injunctive and declaratory relief. Accordingly, the Court has reduced the Debtor's various requests for relief into enumerated counts.

According to the Court's review of the Complaint, the Debtor proceeds on the following five Counts:

Count I:

[Entry of an injunction that] prohibit[s] and enjoin[s] Williams [sic ] from placing barriers of any kind on the subject easement, erecting signage that will or could be construed as relating to the easement or communicating in any manner with prospective purchasers or business invitees of the Debtor.

Id. ¶ 27.

Count II:

[Declaratory judgment that the] Debtors [sic ] current and intended use of the subject easement, for ingress and egress, by the current owner and subsequent owners of the benefitted lot and subdivided lots, including their reasonable invitees, is permitted by the easement and within the scope of the easement.

Id. ¶ 30(i).

Count III:

[Declaratory judgment that] Williams [sic ] are not entitled to erect fences, gates or barriers across the easement, nor may they impede, in any way, the use of the easement.

Id. ¶ 30(ii).

Count IV:

[Declaratory judgment that] [t]he Debtor is not required by law, or the plain language of the easement, to have or create any other access to the property other than the easement, to access the property from Green Springs [sic ] Road or to construct access roads or driveways from Green Springs [sic ] Road.

Id. ¶ 30(iii).

Count V:

Such other and further [declaratory judgments that] will permit a title insurer to insure title to the subdivided lots, including the easement without exception.

Id . ¶ 30(iv).

B. The Williamses' Answer

The Williamses filed the Answer and Affirmative Defenses of John and Maxine Williams to Complaint for Temporary and Permanent Injunction, and Declaratory Relief (the "Williams Answer") on February 15, 2017. Primarily, the Williamses admit to installing the rope and chain barrier that has since been replaced with the Gate, which they describe as a "hinged (but unlocked) gate." Williams Ans. ¶ 17. The Williamses also deny that the installation and maintenance of a gate on the Easement is unlawful under Virginia law. Id . ¶ 21. Further, the Williamses disagree with the Debtor's characterization of the events leading up to their sale of the Property to the Debtor.⁴ See id . ¶¶ 14–15.

C. The EVB Defendants

The Williamses and the Debtor were not the only parties involved in litigating issues related to the Easement. Prior to initiation of this suit, on November 15, 2016, EVB filed a motion for relief (the "Motion for Relief") in the related main bankruptcy case seeking relief from the automatic stay, in part on the theory that the unresolved dispute with the Williamses had depressed the Property's value and negatively impacted its marketability, depleting the Debtor's equity in the Property and denying EVB adequate protection. Mot. for Relief ¶¶ 13, 21–22, ECF No. 83.⁵ In support of its Motion for Relief, EVB explains that it is the beneficiary of a first deed of trust on the Property, securing the amount of $1,228,239.94 as of the petition date. Id . ¶ 8. Although the Property previously appraised at $2,000,000.00, id . ¶ 15, EVB alleges that due to the Easement dispute, the value of the Property is "significantly less than $2,000,000 and impairs the value of [EVB's] lien," id . ¶ 18. In the Motion for Relief, EVB claims that it has made "repeated requests" of the Debtor to file a proceeding in bankruptcy court or state court "to resolve the easement issue." Id . ¶ 14.

When the Complaint was filed, subsequent to the filing of the Motion for Relief, the Debtor named the EVB Defendants as defendants. In the EVB Defendants' Answer, filed on February 13, 2017 (the "EVB Answer"), the EVB Defendants reassert their contention that the previously appraised value of $2,000,000.00 for the Property is no longer attainable due to the ongoing Easement dispute. EVB Ans. ¶ 26. The EVB Defendants present no objection or affirmative defenses to the Debtor's requested relief. See id. ¶¶ 27, 30.

II. Findings of Fact

As pled in the Complaint, the dispute proceeds on five counts. To properly review these counts, the Court must first describe the Easement as well as the barriers the Williamses installed on the Easement. Thereafter, the Court shall make findings of fact regarding documentary evidence and testimony presented at a hearing held March 24, 2017, and trial held June 28, 2017.

A. The Easement

The Williamses and the Debtor entered into the Deed of Easement and Covenant to Maintain Buffer Area and Right of First Refusal on January 15, 2007 (the "Deed of Easement"). Debtor Ex. 2 at 1. The Deed of Easement was recorded in the City of Williamsburg and County of James City on January 17, 2007. Id . at 3. According to the document, the Easement is a strip of land that is twenty-five feet wide and two hundred fifty feet long, and runs to the Property from the end of a cul-de-sac "located on the eastern end of Manion Drive" in Williamsburg, Virginia. Id. at 1. Therein, the Williamses granted to the "Grantees," defined to include the Debtor, its successors and...