Gibson Island Corp. v. Grp. Home On Gibson Island, LLC

• Decision Date: 05 June 2020
• Docket Number: Case No. RDB-20-0842
• Parties: GIBSON ISLAND CORPORATION, Plaintiff, v. GROUP HOME ON GIBSON ISLAND, LLC, et al., Defendants.
• Court: U.S. District Court — District of Maryland

GIBSON ISLAND CORPORATION, Plaintiff, v. GROUP HOME ON GIBSON ISLAND, LLC, et al., Defendants.

Case No. RDB-20-0842

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

June 5, 2020

MEMORANDUM OPINION

Plaintiff Gibson Island Corporation (the "Corporation") filed this action against co-Defendants Group Home on Gibson Island ("Group Home") and Craig Lussi ("Lussi") as a result of Defendants' continuing efforts to construct an assisted-living group home for seniors with disabilities at 1753 Banbury Road on Gibson Island (the "Banbury Property"). In this case, the Corporation seeks a declaration that Defendants must halt all construction and submit a proposal for an exception to two restrictive covenants incorporated in the Property's deed. (Corporation's Compl., RDB-20-0842, ECF No. 1 ¶ 49.) Concurrently, in a subsequently filed companion case, Group Home claims that the Corporation has violated the Fair Housing Act, 42 U.S.C. §§ 3601, et seq., by discriminating against it based on the disabilities of its future residents. (Group Home's Compl., RDB-20-0891, ECF No. 1, at 12.)

The Corporation filed a Motion for Summary Judgment in this Declaratory Judgment action, (RDB-20-0842, ECF No. 13), while Group Home filed a competing Motion for Preliminary Injunction in its discrimination case. (RDB-20-0891, ECF No. 2.) These motions were consolidated, and a telephonic hearing was held on May 28, 2020. (RDB-20-0842, ECF Nos. 8 and 27.) For the reasons set forth on the record at the hearing, and as supplemented by this opinion, the Corporation's Motion for Summary Judgment has been GRANTED, and this case has been closed. (RDB-20-0842, ECF Nos. 28 and 29.)¹ The parties have been directed to submit further filings in Group Home's discrimination case. (RDB-20-0891.)

BACKGROUND

In ruling on the Corporation's Motion for Summary Judgment, this Court reviews the facts and all reasonable inferences in the light most favorable to Group Home. Scott v. Harris, 550 U.S. 372, 378, 127 S. Ct. 1769 (2007); see also Hardwick ex rel. Hardwick v. Heyward, 711 F.3d 426, 433 (4th Cir. 2013).

I. Gibson Island and the Deed Covenants

Gibson Island is a small island community in Anne Arundel County, located near the junction of the Magothy River and the Chesapeake Bay. (Statement of Material Facts ("SOF"), RDB-20-0842, ECF No. 13-2 ¶¶ 1-2.) The island is about three miles long and two miles wide and contains over 200 residential lots. (Id. ¶ 3.) The Gibson Island Corporation holds title to all land on the Island other than private residences and manages the community as a homeowner's association. (Group Home's Compl., RDB-20-0891, ECF No. 1 ¶¶ 13, 3.) The Corporation maintains the island's undeveloped areas, oversees a private security force, and controls access to the island through a small bridge and gatehouse. (Id.) Gibson Island property owners are shareholders of the Corporation, and have a right of access to the island, its roadways, and its public facilities. (Id. ¶ 13.)

Every lot on Gibson Island is encumbered by a set of restrictive covenants (the "Deed Covenants") that have run with the land since it was developed in the early twentieth century. (SOF ¶ 3.) The Banbury Property has been encumbered since it was conveyed to private ownership by the Corporation in 1925. (Deed and Agreement, RDB-20-0842, ECF No. 13-3, at 2-3.)

Two covenants are relevant to this case: First, Subdivision VII (the "exterior alterations covenant") requires the Corporation's approval before the construction of any "building, fence, wall, drainage or sewerage system or other structure on [the] tract," or "any addition to or change or alteration therein." (Id. at 8.) The Corporation has delegated the oversight of this process to an Architectural Review Committee, which enforces compliance with the Deed Covenants, and studies all proposed renovations to recommend a course of action to the Corporation. (Jost Decl., RDB-20-0842, ECF No. 14-3 ¶¶ 6-8, 28.) According to Chairman Peter H. Jost, the Architectural Review Committee has reviewed 689 proposed renovations since 1995, and approved about eighty-seven percent of submissions. (Id. ¶¶ 2, 17-21.)

Second, Subdivision III (the "business purpose covenant") requires that island properties be "used for private residential purposes only," and provides that "buildings may [only] be erected, maintained or used for business purposes in such locations as may be approved by the Company." (Deed and Agreement, RDB-20-0842, ECF No. 13-3, at 5-6.) The deed also lists specific prohibited businesses but does not include group homes or provide criteria for defining a business use. (Id.)² According to James P. Daly, Jr., President of theGibson Island Corporation, "the Corporation has not authorized any private homeowner to erect, use or maintain their home as a business." (Daly Aff., RDB-20-0842, ECF No. 14-1 ¶ 8.) However, at least forty-eight properties on Gibson Island are owned by LLCs and trusts. (Real Prop. Dat. Search, RDB-20-0842, ECF No. 21-17.) Additionally, the Corporation has allowed residents to rent their homes to non-family, employ household staff, host catered events, work from home, and receive medical or hospice care in their homes. (Corporation's Resp. to Req. for Admis., RDB-20-0842, ECF No. 21-3, at 6.)

II. Craig Lussi's Previous Efforts to Establish a Group Home

Craig Lussi is a resident of Gibson Island. (Lussi Aff., RDB-20-0842, ECF No. 21-4 ¶ 2.) Since 2000, Lussi has purchased and held properties on the island in the name of at least three business entities, including two single-member LLCs. (Id. ¶ 3.) Through these business organizations, Lussi has leased out properties "for rental timeframes from a few days to over a year," frequently turning a profit on his proceeds. (Id. ¶¶ 6-7, Ex. A.) According to Lussi, the Corporation "has never inquired as to [his] plans for the properties" or their impact on the surrounding community. (Id. ¶ 4.)

On August 20, 2016, Lussi contacted Jeffrey Kanne—one of the Corporation's board members—about purchasing two properties on Magothy Road to construct a 32-bed assisted living group home. (Id. Ex. E.) Kanne forwarded this proposal to the board for consideration. (Id.) The board ultimately declined Lussi's offer, and Kanne explained the Corporation had "no interest in the assisted living concept." (Id.) Lussi again attempted to purchase one of the two Magothy lots in 2019. (Id. ¶¶ 18-21, Ex. G.) The Corporation emphasized that it harbored no concerns with Lussi's proposed use, but nonetheless rejected Lussi's offer, citingLussi's "history of inappropriate confrontational behavior," and "aggressive, bad faith conduct," providing several emails in which Lussi had threatened the Corporation and its members with litigation. (Id. Ex. K.)

III. Group Home's Acquisition and Financing of the Banbury Property

The Banbury Property has been used as a private residence since the 1970s and was substantially renovated and remodeled in 2005 and 2007. (Group Home's Compl., RDB-20-0891, ECF No. 1 ¶ 16.) On November 22, 2019, property owner Joseph Hennessy Jr. applied to the Anne Arundel County Department of Inspections and Permits for a permit to convert the dwelling into an assisted living facility for seniors with disabilities. (Hennessy Permit Application, RDB-20-0842, ECF No. 13-11.) His application requested permission for various renovations necessary to achieve ADA-compliance. (Id.)

In December 2019, Lussi held talks with Anne Arundel County about Hennessy's pending permit and expressed his intention to build a group home at the Banbury Property. (Riggs Email, RDB-20-0842, ECF No. 13-8.) He created two for-profit LLCs for this purpose: (1) Group Home on Gibson Island, to finance and purchase the Property; and (2) Assisted Living Well Compassionate Care 2, to manage the group home's daily affairs. (Articles of Organization, RDB-20-0842, ECF Nos. 13-5 and 13-9.) Through these arrangements, Group Home plans to provide "a place where [disabled seniors] may reside for an unlimited period of time in a supportive, family-like environment." (Mot. for Prelim. Inj., RDB-20-0891, ECF No. 2, at 11.) The facility will charge residents for housing, will require state licensure, will hire and maintain staff, and will receive deliveries of catered meals. (SOF, RDB-20-0842, ECF No. 13-2 ¶¶ 17-22.) Assisted Living has already begun to advertise online. (Id. ¶ 16.)

Hennessy's permit was issued by Anne Arundel County on January 16, 2020. (RDB-20-0842, ECF No. 13-6.) On March 4, Group Home bought the Banbury Property from Hennessy for $6,000,000.00. (RDB-20-0891, ECF No. 2-2, Ex. A.) To finance this purchase, the company obtained a loan from the Commercial Banking Department of Sandy Spring Bank. (Supp. Statement of Facts, RDB-20-0842, ECF No. 22-2 ¶ 26.) The loan documents describe the Banbury Property as a "business property", and Group Home executed a promissory note with the Bank, warranting "that all of the proceeds of the loan . . . will be used to acquire or carry on a business or commercial enterprise." (Id. ¶¶ 26, 29.) Mr. Lussi also provided an appraiser with a budget calculating projected income from rental revenue, and estimated expenses including "salaries, food, advertising, website maintenance, entertainment, consultants, and uniforms." (Id. ¶ 32.)

IV. Construction and Confrontations

On March 4, Group Home began work on the Banbury Property without submitting a proposal to the Architectural Review Committee. (Group Home's Compl., RDB-20-0891, ECF No. 1 ¶ 22.) The Corporation observed the ongoing construction on March 25, 2020. (Corporation's Compl., RDB-20-0842, ECF No. 1 ¶ 27.) That same day, attorney Craig D. Roswell informed Lussi that he was in violation of the Deed Covenants and demanded that Group Home halt its construction activities. (Group Home's Compl. ¶ 23.) This was followed by a letter from James P. Daly, President of the Gibson Island Corporation, who reiterated that Lussi...