Pei Partnership Architects, LLP v. Celebrate Virginia South, LLC et al
Filing
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MEMORANDUM OPINION. Signed by District Judge James R. Spencer on 3/19/2013. Copies to counsel.(cmcc, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
PEI PARTNERSHIP ARCHITECTS, LLP,
Plaintiff,
v.
CELEBRATE VIRGINIA SOUTH, LLC, et al,
Defendants.
Civil Action No. 3:13–CV–48
MEMORANDUM OPINION
THIS MATTER is before the Court on a Motion to Dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6) filed by Defendant Celebrate Virginia South, LLC (“Celebrate
VA”)(ECF No. 4). Plaintiff seeks a declaratory judgment, or alternatively, an action to quiet
title regarding real property owned by Defendant United States National Slavery Museum
(“USNSM”). Celebrate VA seeks to dismiss the Complaint against all defendants on the
ground that Plaintiff lacks standing to bring this action and fails to state a claim for which
relief can be granted. On March 15, 2013, the Court heard oral argument on the Motion to
Dismiss. For the reasons provided below, the Court GRANTS the Motion to Dismiss.
I.
BACKGROUND1
This suit arises from an effort by Plaintiff, a limited liability partnership providing
architectural services, to enforce a judgment lien that it holds against USNSM on a property
owned by USNSM in Fredericksburg, Virginia (“the Property”), and intended as a site for a
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For the purposes of this Motion, the Court assumes all of Plaintiff’s well‐pleaded
allegations to be true, and views all facts in the light most favorable to it. T.G. Slater & Son v.
Donald P. & Patricia A. Brennan, LLC, 385 F.3d 836, 841 (4th Cir. 2004)(citing Mylan Labs,
Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). See Fed. R. Civ. P. 12(b)(6).
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national slavery museum. On or about January 31, 2002, Celebrate VA entered a Real Estate
Gift Transfer Agreement (“GTA”) with USNSM in which Celebrate VA agreed to gift the
Property to USNSM subject to the following restrictions:
A covenant at Settlement (to be recorded) in form and content satisfactory to
Donor that the Property will be used for (i) an African‐American Heritage
Museum (and related and incidental ancillary uses), or (ii) charitable,
educational or public purposes and related uses, and for no other use or
purpose; provided, however, in no event shall the permitted use include any
drug counseling or rehabilitation, medical procedures, manufacturing,
assembling, industrial, or laboratory use or component. The Property shall
also be subject to a prohibition on use for a hotel, motel or lodging purposes
until the earlier of (y) twenty (20) years from the date of Settlement, or (z)
the date Donor has sold or commenced development on at least eighty
percent (80%) of the remaining developable sites in Phase I of Celebrate
Virginia South as shown on Exhibit “B” attached hereto; provided, however,
that temporary lodging facilities for visiting dignitaries and scholars‐in‐
residence (not to exceed ten (10) rooms) shall be permitted so long as no
charge is made for use thereof. It is understood and agreed that the
permitted use may include museum shops, living history areas, storage areas,
office and administrative areas, and any other matters that are a part of the
function of the museum. The foregoing use restrictions (other than the
restrictions on hotel, motel or lodging purposes, and the prohibition on use
for drug counseling or rehabilitation, medical procedures, manufacturing,
assembling, industrial or laboratory uses), shall expire at such time as Donee
has built a national caliber museum (both size and design, contents and
materials), has fully furnished and staffed the same (including exhibitions),
and the same has been open to the public continuously for a period of one (1)
year excluding holidays. The museum building shall be at least 125,000
square feet with full administration and operational staff and function (on‐
site).
(Compl. ¶ 15.)
On February 8, 2002, Celebrate VA transferred the Property to USNSM by a Deed of
Gift (“Deed”), subject to the following restrictions:
The Property is conveyed subject to all easements, conditions, restrictions,
covenants and matters of record which are applicable to the Property or any
portion thereof. The Property is also conveyed subject to certain restrictions
on use and development which were agreed upon and accepted by Grantee
as more particularly set forth in that certain Real Estate Gift Transfer
Agreement dated January 16, 2002, between Grantor and Grantee, a
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duplicate original copy of which is on file at the offices of Grantor and
Grantee. Such restrictions shall be binding on Grantee, its successors and
assignees and shall run with title to the Property.
(Compl. ¶ 20.) In 2005, USNSM hired Plaintiff to provide design services for the planned
museum. Although Plaintiff performed the requested services pursuant to their agreement,
USNSM did not pay Plaintiff for the services rendered through the end of 2005.
In March 2009, Celebrate VA filed a Supplemental Notice of Covenants and
Restrictions with the City of Fredericksburg giving supplemental notice of the above
restrictions. In December 2009, Plaintiff filed suit against USNSM to recover damages
following USNSM’s failure to pay for Plaintiff’s design services, and in April 2010, Plaintiff
was awarded a judgment in the amount of $5,168,002.60. Plaintiff recorded the judgment
with the City of Fredericksburg in order to enforce a judgment lien on the Property.
After failing to successfully develop this museum project, USNSM commenced
voluntary bankruptcy proceedings in the U.S. Bankruptcy Court for the Eastern District of
Virginia in or about September 2011. The Bankruptcy Court dismissed the case at USNSM’s
request in or about August 2012, and on or about September 14, 2012, the City of
Fredericksburg commenced an action against USNSM in the Circuit Court of the City of
Fredericksburg (“Fredericksburg Action”) seeking to have the Property sold in order to
satisfy a real property tax lien. Due to its status as a judgment lienholder on the Property,
Plaintiff was named as a defendant in the Fredericksburg Action, and it asserted claims
against the City of Fredericksburg and USNSM relating to the enforceability of the above‐
mentioned restrictions on the Property. Plaintiff also attempted to join Celebrate VA as a
defendant in the Fredericksburg Action, and in the course of this proceeding, Celebrate VA
asserted that the restrictions are valid, enforceable, and run with the land. On December
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10, 2012, the Circuit Court sustained the demurrer filed by the City of Fredericksburg to
Plaintiff’s claims and denied Plaintiff’s motion to join Celebrate VA as a defendant.
Plaintiff has filed suit in this Court seeking a declaratory judgment regarding the
enforceability of the restrictions, or alternatively, to quiet title to the Property on the
ground that if the restrictions are enforced and found to run with the land, the value of the
Property, and thus Plaintiff’s lien, will decrease. In Count One, Plaintiff seeks a declaratory
judgment stating that the restrictions are unenforceable and do not run with the land,2
arguing that “[t]he question as to the enforceability and applicability of the Restrictions
creates a cloud on title which significantly affects the value of the Property” (Compl. ¶ 37),
and an actual controversy exists regarding the restrictions. Plaintiff contends that its ability
to recover on its judgment lien will be prejudiced by the cloud on the title and asks for an
order from this Court to be entered in the City of Fredericksburg land records giving notice
of the unenforceability of the restrictions prior to any judicial sale to satisfy the tax lien. In
Count Two, Plaintiff alternatively seeks to quiet title for the same reasons as in Count One,
asserting that it has an equitable interest in the property as a judgment lienholder.
Defendant Celebrate Virginia filed its Motion to Dismiss on January 22, 2013,
arguing that the Complaint should be dismissed against all defendants pursuant to Rule
2 Plaintiff contends that the restrictions are unenforceable and do not run with the land
because: (1) the GTA does not express mutual intent for the restrictions to run with the
land and provides that the restrictions would expire upon the happening of certain events;
(2) the gift to USNSM was an unconditional gift and Celebrate VA did not reserve any right
to reclaim title as a result of USNSM’s failure to comply with the restrictions; (3) the
restrictions were not included in the Deed, and the Supplemental Notice of Covenants and
Restrictions does not suffice to correct or amend the deed; (4) the Deed does not provide
that the restrictions would benefit other real property; and (5) the language of the
restrictions is so vague that they are unenforceable. (See Compl. ¶¶ 29‐36.)
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12(b)(6) on the ground that, as a mere judgment creditor, Plaintiff lacks standing3 to bring
this cause of action and fails to state a claim to quiet title since it does not own or hold any
title to the Property. Celebrate Virginia further argues that Plaintiff’s claim under Count
One for a Declaratory Judgment is merely a rephrasing of its action to quiet title, and
therefore, similarly must be dismissed. In the event that the Court grants the Motion to
Dismiss, Plaintiff asks for leave to submit an amended Complaint. This motion has been
fully briefed, and the Court heard oral argument on March 15, 2013. USNSM has not
answered, appeared or otherwise responded in this matter. This matter is ripe for review.
II.
LEGAL STANDARD
A motion to dismiss for failure to state a claim upon which relief can be granted
challenges the legal sufficiency of a claim, rather than the facts supporting it. Fed. R. Civ. P.
12(b)(6); Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007); Republican Party of
N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). A court ruling on a Rule 12(b)(6) motion
must therefore accept all of the factual allegations in the complaint as true, see Edwards v.
City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999); Warner v. Buck Creek Nursery, Inc., 149
F. Supp. 2d 246, 254‐55 (W.D. Va. 2001), in addition to any provable facts consistent with
those allegations, Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), and must view these
facts in the light most favorable to the plaintiff. Christopher v. Harbury, 536 U.S. 403, 406
(2002). The Court may consider the complaint, its attachments, and documents “attached
to the motion to dismiss, so long as they are integral to the complaint and authentic.” Sec’y
of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007).
3 Despite Celebrate VA’s use of the word “standing” throughout its Motion, Celebrate VA has
not moved to dismiss for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P.
12(b)(1); rather, the Motion seeks a dismissal for failure to state a claim under 12(b)(6).
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To survive a motion to dismiss, a complaint must contain factual allegations
sufficient to provide the defendant with “notice of what the . . . claim is and the grounds
upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)(quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). Rule 8(a)(2) requires the complaint to allege facts showing
that the plaintiff’s claim is plausible, and these “[f]actual allegations must be enough to
raise a right to relief above the speculative level.” Twombly, 550 U.S. at 545; see id. at 555
n.3. The Court need not accept legal conclusions that are presented as factual allegations, id.
at 555, or “unwarranted inferences, unreasonable conclusions, or arguments,” E. Shore
Mkts., Inc. v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 2000).
III.
DISCUSSION
a. Count One: Declaratory Judgment
In Count One, Plaintiff seeks a declaratory judgment stating that the restrictions are
not enforceable and do not run with the land. The Court has the discretionary authority to
grant a declaratory judgment under the Declaratory Judgment Act, 28 U.S.C. § 2201, which
provides that “[i]n a case of actual controversy within its jurisdiction . . . any court of the
United States, upon the filing of an appropriate pleading, may declare the rights and other
legal relations of any interested party seeking such declaration, whether or not further
relief is or could be sought.” § 2201(a). In order to properly state a claim for declaratory
relief, the plaintiff must allege that an actual controversy exists within the Court’s
jurisdiction and that it is an interested party. § 2201(a). An actual controversy exists when
“the facts alleged, under all the circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.” Maryland Casualty Co. v. Pacific Coal & Oil
Co., 312 U.S. 270, 273 (1941).
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In this case, Plaintiff has not sufficiently stated a plausible claim for declaratory
relief. In the exercise of the Court’s discretion, “[d]eclaratory relief is reserved for forward
looking actions and is appropriate if the relief sought will serve a useful purpose in
clarifying and settling the legal relations in issue, and will terminate and afford relief from
the uncertainty, insecurity, and controversy giving rise to the proceeding.” Horvath v. Bank
of N.Y., N.A., No. 1:09‐CV‐1129, 2010 U.S. Dist. LEXIS 19965, at *1 (E.D. Va. Jan. 29,
2010)(internal citations omitted); see Trull v. Smolka, 3:08CV460‐HEH, 2008 U.S. Dist.
LEXIS 70233, at *24 (E.D. Va. Sept. 18, 2008)(explaining that declaratory relief “is designed
to apply prospectively to prevent or mandate reasonably certain, future conduct”).
While Plaintiff argues that there is a substantial, ongoing controversy regarding the
enforceability of the restrictions, there is no actual controversy that is ripe for declaratory
relief because this case involves rights that have already been determined and events that
have already taken place. The parties are already aware that Plaintiff has the legal right to
enforce its judgment lien, thus despite Plaintiff’s doubts as to the value of its judgment lien
if the restrictions are enforced, a declaratory judgment as to the enforceability of the
restrictions would not aid in further clarifying the parties’ legal relationship. Further, there
is no reasonably certain future conduct to be prevented or mandated in this case. Celebrate
VA filed its Supplemental Notice seeking to record the restrictions on the Property in
March 2009, more than a year before Plaintiff obtained its judgment lien in April 2010.
Plaintiff alleges that Celebrate VA attempted to enforce the restrictions in USNSM’s 2011
bankruptcy action, but this proceeding was dismissed, and Plaintiff was unsuccessful in
joining Celebrate VA in the pending Fredericksburg tax lien action because the Circuit
Court held that Plaintiff’s claim against Celebrate VA regarding the enforceability of the
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restrictions did not arise from the same matter as the tax lien action. In the hearing on this
matter, Plaintiff represented that the tax lien action has since been delayed, and Plaintiff
does not show or allege that Celebrate VA has again attempted to enforce the restrictions in
this or in any other proceeding. For these reasons, Plaintiff has failed to sufficiently state a
claim for a declaratory judgment, and the Court GRANTS the Motion to Dismiss Count One.
b. Count Two: Action for Quiet Title
In the alternative to its declaratory judgment claim, Plaintiff alleges an action for
quiet title in Count Two. “An action for quiet title is based on the premise that a person
with good title to certain real or personal property should not be subjected to various
future claims against the title.” Maine v. Adams, 277 Va. 230, 238 (2009). A plaintiff
asserting a quiet title claim must allege and prove that it has superior legal or equitable
title. Id.; see Va. Code Ann. § 55‐153 (“When a bill in equity is filed to remove a cloud on the
title to real estate relief shall not be denied the complainant because he has only an
equitable title thereto and is out of possession, but the court shall grant to the complainant
such relief as he would be entitled to if he held the legal title and was in possession.”)
Celebrate VA moves to dismiss on the ground that, as a mere judgment creditor,
Plaintiff does not hold any title to the Property, much less superior title, and thus lacks
standing to bring an action for quiet title and fails to state such a claim. See Gallant v.
Deutsche Bank Nat. Trust Co., 766 F.Supp.2d 714, 719 (W.D. Va. 2011)(granting a motion to
dismiss a plaintiff’s claim for quiet title because the complaint did not contain any facts
supporting the plaintiff’s claim of superior title). Celebrate VA argues that Plaintiff’s only
remedy to enforce its lien on the Property is a creditor’s bill under Va. Code Ann. § 8.01‐
462 et seq., and that Plaintiff cannot state an action for quiet title since it does not hold title.
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Plaintiff argues in response that it has sufficiently stated a quiet title claim because the
Complaint alleges that Plaintiff holds a legal and equitable interest in the Property in the
form of its judgment lien, despite the fact that Plaintiff “does not claim title to a fee interest
in the Property (currently held by USNSM).” (Mem. Opp. Mot. Dismiss 3.) Plaintiff argues
that its real property interest is superior to Celebrate VA’s interest in enforcing the
restrictions, and that it has stated a plausible claim for an action to quiet title because the
Complaint alleges that there is a cloud on Plaintiff’s real property interest.
Plaintiff has not sufficiently alleged that it has superior legal or equitable title to the
Property. Even when directly prompted by the Court, Plaintiff cited absolutely no support
for the proposition that its claimed interest in the form of a judgment lien which has
attached to the Property is itself a title to the estate. On the contrary, a judgment lien “is not
a proprietary right in the lands of the judgment debtor, but merely a right to levy on any
such lands for the purpose of satisfying the judgment to the exclusion or destruction of any
right which may have accrued to others since the attachment of the lien.” Jones v. Hall, 177
Va. 658, 664 (1941). Simply put, Plaintiff’s judgment lien does not constitute good title to
the Property, and therefore, Plaintiff’s claim of superior title necessarily fails. Accordingly,
the Court GRANTS the Motion to Dismiss Count Two.
IV.
CONCLUSION
For the reasons stated above, Celebrate VA’s Motion to Dismiss is GRANTED.
Let the Clerk send a copy of this Memorandum Opinion to all counsel of record.
An appropriate order shall issue.
____________________/s/_________________
James R. Spencer
United States District Judge
ENTERED this 19th day of March 2013.
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