United States v. Integrated Cmty. Servs. of Parkersburg, Inc., Civil Action No. 2:19-cv-00506

Decision Date28 September 2020
Docket NumberCivil Action No. 2:19-cv-00506
CourtU.S. District Court — Southern District of West Virginia
PartiesUNITED STATES OF AMERICA, Plaintiff, v. INTEGRATED COMMUNITY SERVICES OF PARKERSBURG, INC., formerly Known as Worthington Mental Health Services, Inc., and ROGER BRADLEY, Defendants.
MEMORANDUM OPINION AND ORDER

Pending is plaintiff United States of America's motion for default judgment, filed December 23, 2019. ECF No. 13.

I. Background

This case arises from the transfer of real property located at 4200 Emerson Avenue, Parkersburg, West Virginia ("the property") from the United States, through the Department of Health and Human Services ("HHS"), to Worthington Mental Health Services, Inc. ("Worthington") by quitclaim deed on March 23, 2006. Compl. ¶¶ 1, 8, 10. Worthington later changed its name to Integrated Community Services of Parkersburg, Inc. ("Integrated"), defendant in this case. Id. at ¶ 10. The other defendant, Roger Bradley, is the president of Integrated. Id. at ¶ 6.

HHS transferred the property to Worthington pursuant to the Federal Property and Administrative Services Act of 1949, 40 U.S.C. § 550, which "allows the transfer of property owned by the United States for the protection of public health," and pursuant to the McKinney-Vento Homeless Assistance Act, 42 U.S.C. § 11411, which "allows the use of public buildings and real property to assist the homeless." Id. at ¶ 13.

The deed specifically describes the property as "Tract No. A-100 consisting of 3.40 acres fee [. . .] acquired [by deed] from Robert W. and Charles R. Ingram on 10 January 1957, and recorded among the land records of Wood County, West Virginia, in Book 406 of Deeds at page 259 (File No. 33-50-134-1)." Quitclaim Deed ("Deed"), Compl., Ex. A, ECF No. 1-1, 2. The parties recorded the Deed in the Wood County, West Virginia Clerk's Office. Compl. ¶ 11.

The Deed contains six "conditions subsequent, which shall be binding and enforceable against [the] Grantee, its successors and assigns." Deed 3-4. First, the Deed provides: "[t]hat for a period of thirty (30) years from the date hereof the Property herein conveyed will be used continuously forhealth purposes in accordance with Grantee's approved program of utilization as set forth in its application dated October 13, 2005, and amended November 15 and December 28, 2005, and for no other purpose . . . ."1 Id. at 3. Second, the Deed states: "[t]hat during the aforesaid period of thirty (30) years Grantee will not resell, lease, mortgage, or encumber or otherwise dispose of any part of the Property or interest therein except as Grantor or its successor in function may authorize in writing . . . ." Id. Third, the Deed requires that the property "be placed into use within twelve months" of the instrument's date with an exception if construction or major renovation is contemplated at the time of the transfer. Id.

Fourth, the deed provides:

[t]hat one year from the date hereof and annually thereafter for the aforesaid period of thirty (30) years, unless Grantor or its successor in function directs otherwise, Grantee will file with Grantor or its successor in function reports on the operation and maintenance of the Property and will furnish, as requested, such other pertinent data evidencing continuous use of the Property for the purposes specified in the above-identified application . . . .

Id. Fifth, the Deed requires that the grantee remain "a tax-supported organization or a nonprofit institution, organization, or association exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986, as amended . . ." for the duration of the conveyance. Id. at 4. The sixth condition mandates compliance with certain provisions of federal law, including, as relevant here, "all requirements imposed by or pursuant to the regulations of Grantor (45 CFR Parts 12, 80, 84, 86 and 91) . . . ." Id. at 4.

Immediately following these listed conditions, the Deed further provides that:

[i]n the event of a breach of any of the conditions subsequent set forth above, whether caused by the legal or other inability of Grantee, its successors and assigns, to perform any of the obligations herein set forth, Grantor or its successor in function will, at its option, have an immediate right of reentry thereon, and to cause all right, title, and interest in and to the Property to revert to the United States of America, and Grantee, its successors and assigns, shall forfeit all right, title, and interest in and to the Property and to any and all of the tenements, hereditaments, and appurtenances thereunto belonging . . . .

Id. at 4.

Finally, as relevant here, the Deed states that:

[i]n the event title to the Property or any part thereof is reverted to the United States of America for noncompliance . . . Grantee, its successors or assigns . . . shall be responsible for and shall be required to reimburse the United States of America for the decreased value thereof . . . . The United States of America shall . . . . be reimbursed for such damage, including such costs as may be incurred in recovering title to or possession of the above-described property, as it may sustain as a result of such noncompliance.

Id. at 6.

Pursuant to the conditions of the Deed, HHS required Integrated to submit annual utilization reports evidencing continued use of the property for homeless assistance programs. Compl. ¶¶ 15, 17. HHS notified Integrated in June 2018 that thedefendant had failed to submit a timely 2017 utilization report, but the plaintiff was unable to obtain the requisite information after multiple attempts to contact Integrated. Id. at ¶¶ 17, 25-26.

With HHS' approval, Integrated leased a portion of the property to Recovery Point of Parkersburg ("Recovery Point") beginning in January 2017. Id. at ¶ 16. After HHS notified Integrated of its delinquent reporting, the agency conducted an October 29, 2018 inspection of the property. Id. at ¶ 19. HHS discovered that while Recovery Point was operating its facility on the portion of the property it leased from Integrated, a remaining portion of the property appeared to be vacant. Id. HHS later learned that a portion of the property that was not leased to Recovery Point had been rented or leased to a third-party entity for equipment storage without HHS' permission. Id. at ¶ 20.

After months of fruitless notices to Integrated and Bradley, HHS sent Bradley a final letter dated April 15, 2019 indicating that Integrated had failed to comply with the conditions of the Deed. Compl., Ex. C, ECF No. 1-1, 18-19. HHS attached a new quitclaim deed to this letter and directed Integrated to sign it to convey the property to Recovery Point of Huntington. Id. Neither Bradley, nor any other agent ofIntegrated, signed that deed or responded in any manner. Compl. ¶ 21.

The United States subsequently filed this action on July 10, 2019, naming Integrated and Bradley as defendants. Compl. The United States' complaint alleges four counts: (1) reverter of title to the property due to breach of conditions subsequent;2 (2) ejectment of Integrated for breach of the conditions subsequent; (3) costs, fees, and damages associated with exercising its rights under the Deed and any decrease in the value of the property in accordance with the terms of the Deed; and (4) "misappropriation of funds and breach of condition subsequent" for Bradley's collection of rents and payments relating to Integrated's lease or rental of the property to a third-party for uses not prescribed by the Deed and federal law. Id. at ¶¶ 31-52.

The complaint requests an order and judgment: (1) declaring that the United States is vested with title to the property in fee simple free of any liens, mortgages, or encumbrances; (2) directing the Clerk of Wood County to takeaction to reflect that the United States is vested with absolute and unencumbered title; (3) compelling Integrated to convey the property by deed to the United States; (4) awarding the United States exclusive possession of the property; (5) ejecting Integrated and "any other entity or person not authorized by HHS and/or the United States [] from possession of the [p]roperty;" (6) awarding costs and disbursements relating to this case; (7) "compelling Roger Bradley to pay the United States all rental and other payments he collected or had collected on his behalf or on behalf of Integrated in contravention to the terms of the Deed and federal law regarding the Program involving the Property;" and (8) "[s]uch other relief as the Court shall deem proper and just." Id. at 11.

Integrated and Bradley were served with process on September 4, 2019. ECF Nos. 8-9. The district court entered default against Integrated on September 26, 2019 pursuant to Federal Rule of Civil Procedure 55(a). ECF No. 10. The United States subsequently filed the pending motion for default judgment against Integrated on December 23, 2019. ECF No. 13.3

II. Legal Standard

Default judgments are governed by Rule 55 of the Federal Rules of Civil Procedure. Rule 55(a) states that if a party has "failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed. R. Civ. P. 55(a). Once default has been entered by the clerk, the plaintiff may move the court to enter default judgment against the defendant pursuant to Rule 55(b)(2). Fed. R. Civ. P. 55(b)(2).

"The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact[.]" Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) (quoting Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). "The defendant is not held . . . to admit conclusions of law." Id. (quoting Nishimatsu, 515 F.2d at 1206) (alteration in original). "The court must, therefore, determine whether the well-pleaded allegations in [the] complaint support the relief sought in [the] action." Id. (citation omitted). "Assuming that the...

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