Virginia Lawyers Weekly VA Lawyers Weekly
A property sales agreement, which set forth a mathematical formula for apportioning increases to local development-density rights between the property owners, was rendered impossible to calculate when the county removed the density limit entirely.
Background
In 2000, Appellant WG Land sold approximately 29 acres of a larger office park to Appellee Capital One. At the time of the sale, the office park was subject to a numerical cap on development density under Fairfax County’s Comprehensive Plan, based on the relationship between the total amount of a building’s usable floor area and the total area of the parcel upon which the building stands. With the density cap in place, a higher density for Capital One’s 29 acres meant a lower one for WG Land’s remaining parcels, and vice versa.
As set forth in the property sale Agreement, WG Land transferred 1.1 million square feet of density ratio to Capital One, but the Agreement imposed an eight-year restriction on Capital One’s right to apply for additional density rights from the County. WG Land also retained the right to repurchase the transferred Property if Capital One sought to sell or lease it within a 10-year period.
Furthermore, because the parties anticipated that the Metro rail system’s expansion would cause the County to allow more density in the area, they included a specific mathematical formula to apportion between the parties any additional density rights that might become “available” to the Property. Under this “sharing” formula, Capital One would first receive a fixed quantity, with the remainder then to be fractionally divided between the parties.
Significantly, this density-sharing formula incorporated a portion of the County’s 2000 Comprehensive Plan, which specified the expected density ratio that would be available to properties located around a new Metro rail station in Tysons Corner.
In 2010, the County amended its Plan to lift the density-ratio cap for properties located around the new Metro rail stations in Tysons Corner, so that no individual site in that area would be subject to a maximum density ratio. Capital One subsequently filed rezoning requests with the County and received approval to develop an additional 3.8 million square feet on the Property – then the location of Capital One’s headquarters. Capital One thereafter began construction in furtherance of its plans approved by the County to use its additional density for expansion of its corporate campus and other mixed-use development of the Property.
In 2015, WG Land sued Capital One, alleging that additional density rights became “available” under the terms of the Agreement’s density-sharing formula as a result of Capital One’s zoning requests and that Capital One breached its obligations by developing the Property without allocating and conveying a portion of these rights to WG Land.
The circuit court concluded that WG Land was not entitled to declaratory judgment because its claims had accrued and matured. The circuit court also ruled, as a matter of law, that WG Land’s allegations did not establish a breach of contract. That is, Capital One had not breached the Agreement’s density-sharing formula because the formula became impossible to calculate and perform when the County eliminated the density cap in its 2010 Plan amendment, incorporated into the Agreement by reference. Because the removal of the cap rendered the formula unworkable, the circuit court reasoned, Capital One was excused from performing. Pursuant to the Agreement’s fee-shifting provision, the circuit court also awarded attorney’s fees, costs, and expenses to Capital One totaling $1,894,477.
This appeal followed.
Declaratory relief
The circuit court did not err in denying declaratory relief. WG Land’s entire complaint was grounded on the contention that Capital One breached the Agreement by acquiring and using a certain percentage of density rights that it should have allocated to WG Land under the formula. Indeed, WG Land sought an injunction or, alternatively, $120 million in damages based on these alleged wrongful actions.
WG Land also was not entitled to declaratory relief based on the circuit court’s finding that the formula was rendered only “temporarily impossible” to perform. To the extent WG Land sought declaratory judgment to resolve rights for a theoretical scenario under a future plan or amendment, it was improperly requesting an advisory opinion.
Impossibility
The circuit court also did not err in finding that the Agreement was rendered impossible to perform by the County’s removal of the applicable density cap. The Agreement’s density-sharing formula can only reasonably be construed as requiring the allocation of density rights in reference to the County’s Plan, as the circuit court correctly concluded. That determination is then the predicate for the further conclusion that, with the removal of the cap in 2010, the formula became impossible to calculate and perform.
This court has long recognized an impossibility defense in contract actions. Here, it is undisputed that the parties crafted the density-sharing formula anticipating the extension of the Metro rail system to Tysons Corner and an attendant increase in density allowance. Without an agreement to share in such increased development rights, however, either party could have effectively monopolized such rights by being the first to take the greatest advantage of them through a prompt plan of development. Thus, the Agreement sensibly addresses density rights that become available later.
Further, there can be no question that the parties clearly understood the County’s density allocation system – including the density cap – because they attached and incorporated a portion of the 2000 Plan to the Agreement as an exhibit. The Agreement formula thus depends on the existence of the density cap set forth on the face of the County’s Plan as a mathematical variable for calculating the amount of “available” density rights to be allocated to WG Land by Capital One. Using the numerical cap from the County’s Plan is therefore the only way to calculate the mathematical equations for that determination under the formula’s express design.
Without a numerical cap on the density ratio, as was the case beginning in 2010, there was no longer any numerical variable as necessary to calculate the amount of “available” density rights to be fractionally shared under the formula. As the circuit court characterized it, absent a density cap, the numerical value of the “additional” density that was then “available” was “infinity,” which is not “a numerical value capable of being multiplied.” In this context, as Capital One aptly states on brief: “Fractions of infinity, or any unlimited quantity, are mathematical nonsense.”
The 2010 amendment thus changed the character of the “available” density rights to which the Agreement related and, by the terms of the Agreement, was made a necessary means of performance, rendering the Agreement formula impossible to calculate and perform.
Challenging this construction of the formula, WG Land asserts that the additional density rights available to the Property were that which might become available through a rezoning application submitted to the County by Capital One. But this reading is simply unsupported by the formula’s plain language. The formula says nothing about additional density rights becoming available in such a manner. It is, instead, based on additional density rights that might become available under a new or amended Plan, through an increase in the density cap— which cap, again, was eliminated in 2010, rendering the formula impossible to calculate.
Furthermore, grafting the Agreement’s rezoning application procedure onto the density-rights formula would require Capital One to create a development plan, submit it for County approval, gain approval, and then immediately go back to the drawing board to give up to some other entity a portion of whatever development rights it was seeking to implement with its initially approved development plan. Capital One would then have to return to the County a second time just to obtain approval to build some partial version of its original plan, and then a third time, and so on, after giving up a portion of the approved development rights each time. That is surely not what the parties intended.
This court also rejects WG Land’s argument that the 2010 amendment’s zoning change should not be allowed to nullify or abrogate private contract rights by rendering the parties’ density-sharing formula unenforceable. The Agreement specifically incorporated the County Plan – both the 2000 version and future ones. By design, changes in the county’s density allocations would change the density rights available to each party. The impossibility arose when the Amendment removed the density cap entirely, leaving the formula unworkable and therefore unenforceable.
Attorneys’ fees
WG Land is mistaken in asserting that the fact that Capital One prevailed on its impossibility defense as to the density-sharing formula means that the fee-shifting provision of the Agreement also was rendered unenforceable. Where the provision rendered impossible to perform is not the “basic purpose” of the contract, only that provision may be voided — not the entire contract.
Here, the basic purpose of the Agreement was the sale of the Property, including the transfer of 1.1 million square feet of density ratio. While the density-sharing formula — with its allocation of development rights that may or may not have become available in the future as of the time of the execution of the Agreement — was certainly significant, it was not the basic purpose of the Agreement. WG Land, of course, has not sought to unwind the Agreement. Furthermore, the Agreement’s fee-shifting provision is saved under the Agreement’s severability clause.
Second, while WG Land is correct that the impossibility defense is not available to a promisor when the impossibility was due to his fault, it was not Capital One’s “fault” here that the County removed the density cap, even if it lobbied the County for such removal. Indeed, Capital One had no tort or contract duty to stay silent as the County created a plan that would affect its property. Additionally, removal of the density cap benefited all entities that own or control land within 1/4 mile of a Metro station — including WG Land itself.
Third, Capital One was unmistakably the prevailing party in this case. While the impossibility of the enforcing the Agreement’s density-sharing formula could be temporary if the County re-imposed a density cap at some point in the future, the fact remains that WG Land brought three claims against Capital One, the circuit court granted judgment in Capital One’s favor on all three, and this court affirms that judgment.
Affirmed.
RECP IV WG Land Investors LLC v. Capital One Bank NA, Record No. 161506, Apr. 5, 2018. SCV (McClanahan), from Fairfax Cir. Ct. (Tran). VLW No. 018-6-024, 24 pp.
