United States District Court, E.D. Virginia, Newport News Division
OPINION & ORDER
Coke Morgan, Jr. Senior United States District Judge
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
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.
easement "is twenty-five  feet wide and two hundred
fifty  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). 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  riverfront
lots and one  interior lot-----" Id.
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."
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.
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. 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.
sought injunctive and declaratory relief to clarify the scope
of the easement. R. at 18-20.
B. Procedural History
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:
of the Case - - Chapter 11 Proceedings
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"),  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].
of the Case - - Adversary
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
• 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