Elderberry of Weber City, LLC v. Living Centers-Southeast, Inc.

• Decision Date: 24 July 2013
• Docket Number: Case No. 6:12–CV–00052.
• Citation: 958 F.Supp.2d 623
• Parties: ELDERBERRY OF WEBER CITY, LLC, Plaintiff, v. LIVING CENTERS–SOUTHEAST, INC., et al., Defendants.
• Court: U.S. District Court — Western District of Virginia

958 F.Supp.2d 623

ELDERBERRY OF WEBER CITY, LLC, Plaintiff,

v.LIVING CENTERS–SOUTHEAST, INC., et al., Defendants.

Case No. 6:12–CV–00052.

United States District Court,

W.D. Virginia,

Lynchburg Division.

July 24, 2013.

Milton Mallory Mantiply, Travis Alan Knobbe, Spilman Thomas & Battle PLLC, Roanoke, VA, for Plaintiff.

Lori Dawn Thompson, Leclair Ryan, A Professional Corporation, Roanoke, VA, Michael Ira Bernstein, The Bernstein Law Firm, Miami Beach, FL, for Defendants.

MEMORANDUM OPINION

NORMAN K. MOON, District Judge.

Plaintiff Elderberry of Weber City, LLC (“Elderberry”) filed this action alleging one count of breach of a lease agreement against Living Centers—Southeast, Inc. (“Living Centers”); FMSC Weber City Operating Company, LLC (“FMSC”); and ContiniumCare of Weber City, LLC (“Continium”) (collectively, the “Continium Defendants”), and a separate count for breach of contract against Mariner Health Care, Inc. (“Mariner”). Mariner, Continium, and FMSC have separately filed motions for summary judgment, and Elderberry has filed a motion for partial summary judgment. For the following reasons, I will deny each of these motions.

I. Background

On November 8, 2000, Elderberry Nursing Home, Inc. and Living Centers entered into a Lease Agreement (the “Lease”) under which Living Centers agreed to operate a long-term skilled nursing facility on a piece of property in Weber City, Virginia. Elderberry acquired the property that was the subject of the Lease from Elderberry Nursing Home, Inc. on December 20, 2004. At that time, Living Centers operated the nursing home on the property subject to the terms of the Lease. During the leasehold, Elderberry and Living Centers negotiated for the expansion of the nursing home to a 90–bed facility.

In 2006, Elderberry and Continium agreed that the planned expansion would be funded by Elderberry, and the parties negotiated an amendment to the Lease (the “Lease Amendment”) that extended the lease term for ten years and provided for two five-year extension options. The Lease Amendment specifically stated that Elderberry acquired Elderberry Nursing Home, Inc.'s rights under the original Lease. As part of the negotiations of the Lease Amendment, Living Centers requested the ability to assign the Lease and the Lease Amendment to Family Senior Care Holdings, LLC, or to any of that entity's subsidiaries or affiliates. In exchange, Elderberry requested that Mariner, the parent company of Living Centers, execute a Lease Guaranty Agreement upon such assignment of the Lease. The Lease Agreement indicates that C.L. Christian III signed it on June 26, 2006, on behalf of Elderberry, and Boyd P. Gentry signed it on July 5, 2006, in his capacity as Vice President of Living Centers. At the same time that Gentry signed the Lease Agreement, he also signed a document entitled “Lease Guaranty” (the “Guaranty”), which was attached to the Lease Amendment as Exhibit E. The signature block on the Guaranty indicates that Gentry signed that document in his capacity as Executive Vice President and Chief Financial Officer of Mariner.

Elderberry alleged in its Complaint that Living Centers assigned the Lease and the Lease Amendment to FMSC, an affiliate of Family Senior Care Holdings, LLC, sometime between July 2006 and April 2007.¹ In its summary judgment briefing, however, Elderberry argues that documents disclosed during discovery show that Living Centers assigned the Lease to FMSC prior to signing the Lease Amendment. In any case, the parties agree that FMSC began operating the nursing home facility in 2006, and improvements to the property funded by Elderberry were completed in April 2007. Pursuant to paragraph 5(1) of the Lease Amendment, the ten-year term of the Lease was scheduled to reset and begin on “the first day of the calendar month following the Completion of Construction,” which was May 1, 2007.

On September 9, 2011, counsel for FMSC sent a letter to Elderberry stating that FMSC, which had been operating the Weber City nursing home since 2006, intended to assign the Lease to Continium.² Continium began paying rent to Elderberry in November 2011, and continued to pay rent monthly as due under the terms of the Lease and the Lease Amendment until March 2012. Neither Continium nor any other defendant has paid rent since. On April 16, 2012, Elderberry sent written notice to Ted Duay of Family Senior Care that the rent payment due on April 1, 2012, was past due. On July 19, 2012, Elderberry received notification that the Virginia Department of Health & Human Services, Centers for Medicare & Medicaid Services (“VDHHS”) was terminating the Medicare Provider Agreement of Continium as a result of certain failures of Continium to operate the facility in conformance with VDHHS regulations, and on account of other deficiencies. Continium ceased all operations in the facility in August 2012.

Elderberry sent a letter to Living Centers, Continium, Mariner, and The Bernstein Law Firm on August 15, 2012, demanding payment of past-due rent and notifying all parties that if Elderberry did not receive payment within seven days of the notice, Elderberry would terminate the Lease and pursue remedies in court if necessary. On August 24, 2012, Elderberry sent another letter terminating the lease to the same four recipients. A week later, on August 31, 2012, Mariner filed a declaratory judgment action against Elderberry in the U.S. District Court for the Northern District of Georgia, seeking a declaration that the Guaranty is void under Georgia law. On September 27, 2012, Elderberry moved to dismiss the Georgia action and filed this action the same day. ³ The Court heard oral argument regarding all pending summary judgment motions on July 3, 2013.

II. Legal Standard

Summary judgment under Rule 56 should be granted if the pleadings, the discovery and disclosure materials on file, and any affidavits show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “As to materiality ... [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the evidence of a genuine issue of material fact “is merely colorable or is not significantly probative, summary judgment may be granted.” Id. at 249–50, 106 S.Ct. 2505.

In considering a motion for summary judgment, a court must view the record as a whole and draw all reasonable inferences in the light most favorable to the non-moving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). The party seeking summary judgment bears the burden of showing an absence of evidence to support the non-moving party's case. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. If the moving party sufficiently supports its motion for summary judgment, the burden shifts to the non-moving party to set forth specific facts illustrating genuine issues for trial. Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir.2008) (citation omitted). On those issues for which the non-moving party has the burden of proof, it is his or her responsibility to oppose the motion for summary judgment with affidavits or other admissible evidence specified in the rule. Fed.R.Civ.P. 56(c); Mitchell v. Data Gen.Corp., 12 F.3d 1310, 1315–16 (4th Cir.1993); see also Cheatle v. United States, 589 F.Supp.2d 694, 698 (W.D.Va.2008) (“Indeed, the non-moving party cannot defeat a properly supported motion for summary judgment with mere conjecture and speculation.”) (citation omitted). The court's role is to determine whether there is a genuine issue based upon the facts, and “not ... weigh the evidence and determine the truth of the matter.” Anderson, 477 U.S. at 249, 106 S.Ct. 2505. Ultimately, the trial court has an “affirmative obligation” to “prevent ‘factually unsupported claims [or] defenses' from proceeding to trial.” Felty v. Graves–Humphreys Co., 818 F.2d 1126, 1128 (4th Cir.1987) (quoting Celotex, 477 U.S. at 323–24, 106 S.Ct. 2548).

III. Discussion

A. Mariner's Motion for Summary Judgment

Mariner argues that the Guaranty is void as a matter of law because “it fails to include essential and necessary terms including the principal indebtedness, the creditor, the principal debtor, and identifying information which would identify the lease which Mariner allegedly guaranteed.” There is a preliminary question of what law to apply in determining the validity of the contract—Georgia law or Virginia law. Although Elderberry argues that the Guaranty incorporates the choice of law provision contained in the Lease selecting Virginia law as the governing law, nothing in the Guaranty supports such a conclusion. In fact, the Guaranty contains its own choice of law provision, which is blank. Since the Court is exercising its diversity jurisdiction in this matter, I conclude that Virginia's choice of law rules determine what law governs the validity of the Guaranty. See, e.g., Sokolowski v. Flanzer, 769 F.2d 975 (4th Cir.1985) (“[I]n diversity cases a federal district court must apply the conflict of laws rules of the forum state.”) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 494, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)).

“In Virginia, while questions of breach are determined by the law of the place of performance, the validity, interpretation, or construction of a contract is governed by the substantive law of the lex loci contractus—the place of contracting.” O'Ryan v. Dehler Mfg. Co., Inc., 99 F.Supp.2d 714, 718 (E.D.Va.2000) (citing Lexie v. State Farm Mut. Auto. Ins. Co., 251 Va. 390, 469 S.E.2d 61, 63 (1996)); see also Seabulk Offshore, Ltd. v. Am. Home Assur. Co., 377 F.3d 408, 419 (4th Cir.2004). A contract is...