Peter Vieth//August 23, 2012
Peter Vieth//August 23, 2012//
Donald Trump’s effort to get a bargain price on “Albemarle House,” the 23,000-square-foot former home of John and Patricia Kluge, foundered in federal court this month.
A Charlottesville federal judge declared the New York developer does not have a right of first refusal to buy the Albemarle County mansion, leaving Bank of America free to market the property to any willing buyer.
U.S. District Judge Norman K. Moon ruled against a Trump entity on what he described as a matter of first impression in Virginia law in Quality Properties Management Co. v. Trump Virginia Acquisitions LLC (VLW 012-3-395). Moon found that the right of first refusal created by billionaire John Kluge in 1990 in favor of the owner of land around the mansion was extinguished when Kluge split up that surrounding land into smaller parcels.
Most of the surrounding land later was acquired by Trump after Patricia Kluge’s winery venture fell on hard times, but Moon held that reassembling the surrounding property could not revive the original right of first refusal. A right of first refusal would allow the holder to match any offer for the mansion.
A Bank of America subsidiary last year listed the Kluge mansion for $16 million.
The 1990 property split stemmed from the Kluges’ divorce, a split that left Patricia “the wealthiest divorcée in history,” in the words of People magazine. Patricia got the house, but the “front lawn” – some 200 acres including a former golf course – was retained by ex-husband John. John required that if Patricia tried to sell the house, the owner of the “lawn” got the right to match any buyer’s price.
After Patricia’s winery business hit the skids, and Bank of America ended up with the house in a foreclosure sale, Trump last year asserted the purported right of first refusal. The bank took the issue to court and the parties agreed to have Moon make a decision on the pleadings.
Reviewing the history of property transfers since the Kluge divorce, Moon found it settled that both parties each owned a portion of the “front lawn” property, although Trump owned the “lion’s share.”
Reviewing “settled” Virginia law, Moon concluded that a “radical” change in circumstances that destroyed “the essential objects and purposes” of a covenant would render the covenant null and void.
Moon held the right of first refusal was extinguished when John Kluge subdivided and distributed the surrounding land to diverse owners, a change in circumstances “so radical as practically to destroy its essential objects and purposes,” Moon wrote. The sale of the smaller parcels rendered the right of first refusal “null and void,” he said.
The object and purpose of the Kluge covenant “cannot be met,” Moon said, because the surrounding land “no longer exists as a single parcel.”
When John Kluge subdivided the land, long before the foreclosure sale, “there was no longer a single, unified parcel of Burdened Land that could benefit from the right convenanted to it,” Moon wrote.
Trump lawyer Stephen Novack of Chicago filed a notice of appeal Aug. 16, the same day Moon entered his opinion and order in favor of the bank. Novack did not return a call for comment.
Quality Properties, the bank subsidiary, was represented by Arlington lawyer Raighne C. Delaney, who declined comment.