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Williams v. Colonial Penniman, LLC

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

February 22, 2018

JOHN WILLIAMS, et al., Appellants/Cross-Appellees,
v.
COLONIAL PENNIMAN, LLC, Appellee/Cross-Appellant.

          OPINION & ORDER

          Henry Coke Morgan, Jr. Senior United States District Judge

         This matter comes before the Court on appeal from the United States Bankruptcy Court for the Eastern District of Virginia (the "Bankruptcy Court"). Appellants/Cross-Appellees John and Maxine Williams ("Appellants" or the "Williamses") and Appellee/Cross-Appellant Colonial Penniman, LLC ("Appellee" or "Colonial Penniman") both appeal certain decisions of the Bankruptcy Court. Docs. 1, 3. For the reasons stated herein, the Court REMANDS this matter to the Bankruptcy Court for further proceedings regarding the management of the bankruptcy estate but otherwise AFFIRMS the remainder of the opinion in two (2) particular respects: (1) FINDING that the Deed of Easement permits all uses "for the benefit of Appellee and (2) FINDING that Appellee's successors in interest will have the same rights in the Deed of Easement as Appellee has. The Court's rulings on these issues are independent of and do not alter the zoning requirements of James City County as they apply to the Appellee's property, nor do they invade the jurisdiction of the bankruptcy court to manage this pending bankruptcy proceeding including the requirements in contracts for sale in the bankruptcy estate.

         I. BACKGROUND

         A. Facts

         Appellee acquired an 8.42 acre parcel of land on the James River (the "Property") from Appellants on January 15, 2007. Adversary Proceeding R. (Doc. 5-2, hereinafter "R") at 15, 23-25 (the "Deed of Easement"), 45. As part of that transfer, Appellee and Appellants entered into a deed of easement with the Property as the dominant estate and Appellants' remaining property as the subservient estate. See id.

          The easement "is twenty-five [25] feet wide and two hundred fifty [250] 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." R. at 422 (quoting Deed of Easement).[1] It conveys the easement to "the Grantee, its successors and assigns, and to the owners" of lots subdivided from the Property, collectively called the "Grantees." Deed of Easement. It also contemplates that the owner may subdivide the Property into "no more than three [3] riverfront lots and one [1] interior lot-----" Id.

         The Deed of Easement grants several rights. First, it grants "right of ingress and egress to and from the Dominant Parcel across the Subservient Parcel, in areas described above, to Manion Drive." Id. Second, it grants "the right to install, construct, maintain, and repair all underground utilities" Id. Third, it grants the right to "improve the current gravel driveway within the area of easement without destruction or mutilation of the trees currently lining the driveway." Id. Fourth and finally, it grants the right to "establish and erect an entry way gate or decorative wall at the northwest entrance to the driveway from Manion Drive." Id.

         The Deed of Easement also contains two (2) other provisions relevant to this proceeding. First, the Grantees must maintain the existing tree line: "a row of seven (7) magnolia trees spaced approximately twenty-five feet (25') apart on the southwest boundary of the driveway; and a row of twenty-two (22) Layland cypress trees spaced approximately twelve feet (12') apart along the northeast boundary of the driveway." Id. Second, "[t]he right of way shall only be for the benefit of the Grantors, or either, and Grantees." Id.

         After Appellee subdivided the Property for development, the Parties began disputing the scope of the easement, and Appellants used barriers to restrict access. R at 15, 45; Plaintiffs Ex. 10, ll.[2] At first, Appellants placed a rope barrier with hanging chains fastened to wooden posts in front of the easement. Plaintiffs Ex. 10, 11. Subsequently, they placed an unlocked metal gate in front of the easement in lieu of the rope barrier. Plaintiffs Ex. 12; Defendants' Ex. F.

         Appellee sought injunctive and declaratory relief to clarify the scope of the easement. R. at 18-20.

          B. Procedural History

         Appellants submitted a statement of the case summarizing the relevant procedural history, both in chapter 11 proceedings and in the underlying adversary proceeding, which Appellee adopts for purposes of this appeal. Doc. 6 at 5-8; Doc. 10 at vii. Thus, here is the agreed statement of the case:

         Statement of the Case - - Chapter 11 Proceedings

         Colonial Penniman filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 1101, et seq., on March 24, 2016, and continues to operate its business of holding and developing real estate as 'debtor in possession' pursuant to 11 U.S.C. § 1107(a). The following motions, responses, hearings and orders pertinent to this appeal have been filed on the main case docket:

• On May 18, 2016 [ch. 11 docket no. 22]. Mr. and Mrs. Williams filed a Motion for Relief from Automatic Stay (the "Williams Relief Motion"), as a protective response to several Debtor allegations (both oral and written) of alleged stay violations. At a preliminary hearing conducted on June 24, 2016, this Court denied the Williams Relief Motion based upon its determination that 'no case or controversy presently exists that is appropriate for adjudication.' This ruling is memorialized in an Order Denying Relief Motion entered on June 27, 2016 [ch. 11 docket no. 35].
• The Debtor nevertheless resumed this dispute by filing a Motion for Contempt and for Sanctions for Violation of the Automatic Stay (the 'Contempt Motion') on July 15, 2016 [ch. 11 docket no. 41], in response to which Mr. and Mrs. Williams filed their Response to Debtor's Motion for Contempt and for Sanctions for Violation of the Automatic Stay on July 27, 2016 [ch. 11 docket no. 47].
• Mr. and Mrs. Williams also filed on July 27, 2016 [ch. 11 docket no. 48] a Motion for Permissive Abstention of State-Law Issues Relating to Private-Easement Dispute. Pursuant to 28 U.S.C. § 1334fcVU (the "Original Abstention Motion"). The Debtor filed a Response to the Original Abstention Motion on September 15, 2016 [ch. 11 docket no. 67], as did the Debtor's designated representative Mr. C. Lewis Waltrip, II ("Mr. Waltrip") on September 16, 2016 [ch. 11 docket no. 68].
• The Bankruptcy Court conducted hearings on the Contempt Motion and on the Original Abstention Motion (and on the various responses) on September 23, 2016, at which it: (i) dismissed the Contempt Motion on procedural grounds; and (ii) accordingly denied the Abstention Motion as moot. Such rulings are memorialized in Orders entered respectively on November 21, 2016 [ch. 11 docket no. 85] and October 13, 2016 [ch. 11 docket no. 79].
• On November 15, 2016 [ch. 11 docket no. 83], Eastern Virginia Bank, successor by merger to Virginia Company Bank ("EVB"), [3] filed a Motion for Relief from Automatic Stay (the "EVB Relief Motion"), seeking permission for EVB to exercise its state-law rights of foreclosure against the Remaining Property. Colonial Penniman opposed EVB's request by its filing of a Response on November 29, 2016 [ch. 11 docket no. 90]. Hearings on the EVB Relief Motion were repeatedly continued [ch. 11 docket nos. 91, 107, 112, 119 & 129], until EVB's successor by merger voluntarily withdraw the EVB Relief Motion on August 31, 2017 [ch. 11 docket no. 131].
• On December 21, 2016 [ch. 11 docket no. 95] the local Office of the United States Trustee (the "U.S. Trustee") filed a renewed Motion to Convert or Dismiss Case (the "U.S. Trustee Conversion/Dismissal Motion"), seeking the conversion to chapter 7 or dismissal of the Debtor's chapter 11 case, which was a reiteration of a prior U.S. Trustee conversion/dismissal motion filed on August 16, 2016 [ch. 11 docket no. 55] and voluntarily withdrawn on September 2, 2016 [ch. 11 docket nos. 65, 66]. Hearings on the U.S. Trustee Conversion/Dismissal Motion were repeatedly continued [ch. 11 docket nos. 103, 108, 113, 120 & 130], until it was voluntarily withdrawn [ch. 11 docket no. 141].

         Statement of the Case - - Adversary Proceeding

          Colonial Penniman commenced the underlying adversary proceeding, pursuant to Fed. R. Bank. P. 7001(7) & (9), on January 25, 2017 [ch. 11 docket no. 104; adv. proc. docket no. 1] by its filing of a Complaint for Temporary and Permanent Injunction, and Declaratory Relief (the 'Complaint'), from which ensued the following motions, responses, hearings and orders pertinent to this appeal:

• A Motion for Injunction and for Consolidation of Hearing with Trial on the Merits (the "Injunction Motion"), also filed by the Debtor on January 25, 2017 ...

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