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Jurisdictional Amount Pegged to Whole Parcel

An asset management company’s suit for a declaratory judgment that defendant Trump Virginia Acquisitions LLC does not have a right of first refusal to buy certain property can be heard by the Charlottesville U.S. District Court because the amount in controversy is the value of the whole of the real estate to which the claim extends, or $15.26 million.

Plaintiff Quality Properties Asset Management Company acquired the property for $15.26 million through a foreclosure sale on Feb. 16, 2011. At the sale, Donald J. Trump, or an entity acting on his behalf, was the second highest bidder for the property, with a bid of $3.6 million.

Defendants Trump Virginia Acquisitions LLC and Trump Vineyard Estates LLC are entities owned by Donald Trump that, either separately or collectively, claim ownership of a right of first refusal (ROFR) regarding the property. While the right arguably extends only to the property’s original nine acres, Trump claims the right to purchase the entire property, 97.98 acres.

The alleged ROFR stems from a June 1990 quitclaim deed from JWK Inc. to Patricia Kluge. The quitclaim deed retained a ROFR in the 9.9 acre parcel, vested in the owner of the “Burdened Land” as defined by the quitclaim deed.

Plaintiff now seeks a declaration that the ROFR has terminated or, in the alternative, for the court to declare the persons who own the ROFR and the terms on which that person or persons may exercise the right.

No matter how one decides to measure the property’s value, when the court gives plaintiff the benefit of all reasonable inferences, the property is worth at least $75,000.

In 1938, the 4th Circuit ruled in Peterson v. Scuro, 83 F.2d 878 (4th Cir. 1938), that in suits to quiet title or in actions for ejectment, the amount in controversy is the value of the whole of the real estate to which the claim extends and not the value of the defendant’s claim. Other courts have cited and adopted the Peterson rule. Even disregarding Peterson, the object of this action seeking declaratory relief is to clear Quality Properties’ right to market the property for sale, with marketable title, to a third party. Under Virginia law, a “marketable title” is one that is free from liens or encumbrances, is dependent for its validity upon no doubtful questions, and will not expose the purchaser to the hazard of litigation. The present controversy over the ROFR subjects any potential purchaser to the hazard of litigation with defendants (or as plaintiff contends, with Trump).

Plaintiff contends it cannot presently convey marketable title to a third party and the economic worth of the object in controversy is the value of the entire property, which unsettled claims regarding the ROFR render unmarketable Thus, for the amount in controversy purposes, the value of the entire property is the proper measurement, even if one were inclined to disregard Peterson.

Motion to dismiss for lack of subject matter jurisdiction is denied.

Quality Properties Mgmt. Co. v. Trump Virginia Acquisitions LLC (Moon) No. 3:11cv00053, Nov. 10, 2011; USDC at Charlottesville, Va. VLW 011-3-621, 9 pp.

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