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LLC v. U.S. Home Corp.

United States District Court, E.D. Virginia, Norfolk Division

April 26, 2018

PARKWAY 1046, LLC, Plaintiff,
v.
U.S. HOME CORPORATION, Defendant.

          OPINION & ORDER

          Henry Coke Morgan, Jr. Senior United States District Judge

         This matter is before the Court following a bench trial held April 17, 2018, at which Plaintiff Parkway 1046, LLC ("Plaintiff or "Parkway") and Defendant U.S. Home Corporation ("Defendant" or "U.S. Home") presented evidence and argument. After the trial, the Court FOUND the Defendant liable to Plaintiff and entered Judgment in the amount of $2, 249, 999. See Doc. 41. The Court instructed the Parties to submit briefs to the Court on the appropriate measure of interest as well as whether Plaintiff is entitled to attorneys' fees and if so in what amount. The following findings of fact and conclusions of law explain the Court's reasoning as to liability.

         I. FINDINGS OF FACT

         A. The Contracts

         On November 15, 2005, Defendant entered into an Agreement of Purchase and Sale of Membership Interests ("Land Transfer Agreement") with Settlers Crossing, LLC ("Settlers Crossing"), a Virginia limited liability company whose sole members are Steven B. Sandler and Arthur B. Sandler ("the Sandler Brothers"), and Washington Park Estates, LLC ("WPE"), a Maryland limited liability company whose sole member was Settlers Crossing. Pl.'s Ex. 1. On the same date, Defendant entered into a Contract for Services ("Development Contract") with Bevard Development Company ("Bevard"), an entity owned 51% by the Sandler Brothers and 49% by Daniel Colton. Pl.'s Ex. 2. Plaintiff is a Virginia limited liability company whose sole members are the Sandler Brothers. Plaintiff is not a signatory to either the Land Transfer Agreement or the Development Contract; however, Plaintiff has brought the instant breach of contract action as a third-party beneficiary under the Development Contract.

         At the time of the Land Transfer Agreement, WPE held title to 1, 250 acres of land in Prince George's County, Maryland. In the Land Transfer Agreement, Defendant promised to pay Settlers Crossing $160, 000, 000 for its 100% interest in WPE. Defendant planned to use the land owned by WPE for a large residential development project (the "Project"). In the Development Contract, Defendant promised to pay Bevard a fee of $40, 000, 000 for Bevard's provision of certain development services related to the Project. Also in the Development Contract, Defendant promised to "reimburs[e] Parkway 1046, LLC for the acquisition costs for the two (2) properties identified on Exhibit A in the approximate amount of $2, 249, 999 ('Right of Way Acquisition Reimbursement')." Pl.'s Ex. 2 ¶ 4. Defendant promised to pay the Right of Way Acquisition Reimbursement ("Reimbursement") to Plaintiff "at the time of Settlement under the [Land Transfer] Agreement." Id. "Settlement" is defined in the Land Transfer Agreement to mean the "consummation of the purchase and sale" under that Agreement. Pl.'s Ex. 1 ¶ 5. At the time of the Land Transfer Agreement, the Settlement Date was June 30, 2006, and if certain conditions precedent were not satisfied by that date, the Settlement Date would be extended to September 30, 2006.

         On December 31, 2005, the parties to the Land Transfer Agreement executed an amendment to that Agreement. The first amendment did not change the definition of Settlement, nor did it change the Settlement Date. On May 16, 2007, the parties executed a second amendment to the Land Transfer Agreement. Among other changes, the second amendment reduced the purchase price from $160, 000, 000 to $103, 000, 000, and extended the Settlement Date to December 5, 2007, or, if certain conditions precedent were not satisfied by that date, to March 15, 2009 at the latest. The second amendment also modified Settlers Crossing's remedies in the event of U.S. Home's default, to include "specific performance and injunctive relief against" U.S. Home, which would require U.S. Home "to complete the Settlement in accordance with the [Land Transfer] Agreement and pay the Purchase Price to Settlers Crossing." Pl.'s Ex. 5 ¶ 27. At the same time, the parties to the Development Contract executed an amendment reducing the development fee from $40, 000, 000 to $26, 000, 000.

         On June 19, 2007, the parties executed a third amendment to the Land Transfer Agreement. On the same date, iStar Financial, Inc. ("iStar") made a $100, 000, 000 loan to affiliated Sandler entities that was secured by the real estate underlying the Land Transfer Agreement, as well as Settlers Crossing's and Bevard's interests in that Agreement and the Development Contract. The third amendment to the Land Transfer Agreement specified that if iStar foreclosed on the loan, the Land Transfer Agreement would convert from a purchase and sale of membership interest in WPE to a purchase and sale of the underlying property. The third amendment was executed in conjunction with a Consent and Estoppel Agreement. See Pl.'s Ex. 7. The third amendment did not change the definition of Settlement, nor did it extend the Settlement Date.

         B. The Maryland Litigation

         The parties to the Land Transfer Agreement did not close. On July 17, 2008, U.S. Home filed suit in the United States District Court for the District of Maryland against Settlers Crossing, WPE, Bevard, Steven B. Sandler, and iStar. U.S. Home v. Settlers Crossing. LLC, et ah, No. 8:08-cv-01863. U.S. Home alleged that the sellers had breached the environmental representations and warranties of the Land Transfer Agreement, and that they had materially breached that Agreement by denying U.S. Home access to the property upon request. On June 30, 2009, Settlers Crossing, WPE, Bevard, and iStar filed a joint counterclaim against U.S. Home, asking for a declaratory judgment and specific performance of both the Land Transfer Agreement and Development Contract. SeeDef.'s Ex. 18. On November 17, 2009, WPE conveyed its interest in the property underlying the Land Transfer Agreement, pursuant to the terms of iStar's loan in event of default. In accordance with the third amendment to the Land Transfer Agreement and the Collateral Estoppel Agreement, iStar also acquired all of WPE's, Settler's Crossing's, and Bevard's interests in the Land Transfer Agreement and Development Contract.

         After a two-week bench trial in 2014, the district court concluded that U.S. Home had not met its burden as to its breach-of-contract claims against WPE, Settler's Crossing, and Bevard. See U.S. Home Corp. v. Settlers Crossing. LLC. 33 F.Supp.3d 596 (D. Md. July 18, 2014). The court further held that iStar was entitled to specific performance, in accordance with the terms of the second amendment to the Land Transfer Agreement, and was also entitled to judgment in its favor with respect to the Development Contract. See Id. The district court entered its final judgment on January 22, 2015. See Pl.'s Ex. 19.

         Pursuant to the district court's final judgment, U.S. Home was declared to be in default of the Land Transfer Agreement "for wrongfully failing to proceed to settlement on May 27, 2008." See Pl.'s Ex. 19 ¶ 2. Accordingly, the district court ordered U.S. Home "to proceed to Settlement within 30 days and pay the amounts due under the terms of the [Land Transfer Agreement] and [Development Contract] and as detailed in the foregoing Memorandum Opinion." Id. ¶ 4. The Fourth Circuit affirmed the district court's ruling on April 12, 2017. U.S. Home Corp. v. Settlers Crossing. L.L.C.. 685 Fed.Appx. 173 (4th Cir. Apr. 12, 2017) (unpublished per curiam opinion). On April 21, 2017, U.S. Home satisfied the district court's final judgment, which amounted to the payment of $114 million for breach of the Land Transfer Agreement and the Development Contract, plus interest and real estate taxes, totaling $237, 401, 901.95. See Pl.'s Ex. 18 at 43-45; Doc. 35 ¶ 35. This entire payment went to iStar, since at the time of the judgment the Sandier-affiliated entities and Bevard had forfeited all of their interests in the Land Transfer Agreement and Development Contract by virtue of their inability to repay the June 19, 2007 loan.

         C. The Right of Way Reimbursement

         Turning to the instant litigation, pursuant to the Development Contract, U.S. Home agreed to reimburse Parkway for its acquisition of "the two (2) properties identified on Exhibit A in the approximate amount of $2, 249, 999 ('Right of Way Acquisition Reimbursement')." Pl.'s Ex. 2 ¶ 4. The Parties stipulated in the Final Pretrial Order to the following relevant facts:

• On or about November 28, 2005, Parkway acquired the parcel located at 9104 Brandywine Road from Yong K. Yoon and Hae Sook Yoon (the "Yoon Parcel"). The deed reflects the consideration was $999, 000.00 for the Yoon Parcel.
• On or about January 4, 2006, Parkway acquired the parcel located at 9100 Piscataway Road from Ernest A. Loveless, Jr. and Margaret B. Loveless (the "Loveless Parcel"). The deed reflects the consideration was $1, 250, 000.00 for the Loveless Parcel.
• The total consideration reflected on the deeds for the Yoon Parcel and the Loveless ...

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