Virginia Lawyers Weekly VA Lawyers Weekly
The trial court correctly concluded that a trust distribution belonged to the buyer of a senior care center instead of the center’s manager.
Background
The Temple Foundation operated The Virginian, a senior living center, under a lease with Thompson Associates, the property owner. Focus SH Acquisitions bought The Virginian from Thompson in 2018.
The parties entered an operations transfer agreement (OTA). Among other things, the OTA “provided that Temple ‘shall retain all rights in and title to all pre-closing accounts receivable except to the extent any portion relates in part to dates after the Closing Date.’ The closing occurred on April 25, 2019.”
Grant, one of The Virginian’s patients, executed a trust in October 2014, naming The Virginian as a 25 percent beneficiary. The trust also provided, “If The Virginian is no longer in existence, this bequest shall lapse, and shall be distributed pro rata among my remaining beneficiaries.’
“Ms. Grant died on November 4, 2017. On November 25, 2017, the trustee informed Temple, doing business as The Virginian, that it was the recipient of the bequest.
“Although the bequest vested immediately, distributions did not occur until March and April 2019. The second distribution, in the amount of $163,016.30, was received and deposited by Temple after closing had occurred on April 25, 2019. Pursuant to the OTA, following closing, the parties were to reconcile any outstanding accounts and fees.
“Focus submitted its final reconciliation to Temple on February 25, 2020. According to Focus, it owed Temple $6,596.20. Temple, however, determined that it was owed $281,084.38.” Under the OTA, reconciliation disputes would be resolved by a “third-party accounting service.” The resolution would be binding on the parties. The parties agreed to use Ernst and Young.
Ultimately, “Ernst & Young determined that the disputed funds were owed to Focus and, as such, concluded that Focus owed Temple $96,000.”
Temple sued. In addition to declaratory relief, Temple alleged breach of contract and unjust enrichment. Focus responded with a plea in bar and demurrer.
“Focus stated in its plea in bar, “‘(a) that [Temple] was not “The Virginian” at the time of the payment of the Disputed Funds and therefore has no standing, right or interest to make a claim on the Disputed Funds; and/or (b) the claims in the Complaint are subject to an Alternate Dispute Resolution … provision and therefore is not properly before this Court.’”
The circuit court sustained all three demurrers without leave to amend and dismissed Focus as a defendant. Temple appealed.
Ownership
“According to Temple, the circuit court ‘fundamentally misinterpreted the OTA’ and that this ‘fundamental misunderstanding and misapplication of the OTA tainted all the [circuit] court’s analysis.’ … [W]e disagree. …
“Temple claims that the circuit court erred by failing to look at the entirety of the OTA, as opposed to the information in the recitals section, to determine that Temple, rather than Thompson, was the owner of The Virginian.
“Temple blames the circuit court’s confusion on ‘inartfully drafted’ recitals[.]” However, the OTA refers to Thompson as The Virginian’s owner, as do a number of exhibits. “Each of these exhibits also acknowledges that Temple’s interest in the property is as a lessor pursuant to a series of lease agreements between Temple and Thompson spanning almost four decades. …
“Given the overwhelming, express language throughout the OTA and the exhibits … the circuit court did not err when it held Temple was merely a ‘manager’ of The Virginian.”
Bequest
“Temple claims that ‘the trial court created an absurd result’ allowing Ernst & Young to determine the fate of the disputed funds pursuant to § 11 of the OTA rather than assume the power to do so itself.
“According to Temple, the circuit court’s “plainly absurd reading of the contract” abdicated its responsibility to interpret and enforce the terms of the OTA – namely, that the bequest fell outside the scope of the reconciliation and dispute resolution provisions – and improperly reduced Temple’s argument to a collateral attack on the reconciliation. …
“Rather than a ‘plainly absurd reading of the contract,’ the circuit court applied the unambiguous, express meaning of the OTA’s provisions. The circuit court correctly found that the OTA’s reconciliation process, in addition to the provisions outlined under § 10.5 of Exhibit F, applied to any other amounts received by any party.
“The circuit court never broadened the scope of § 10.5 – the parties themselves did so when they modified § 10.5 with the inclusive language in § 11. As such, we hold the circuit court’s determination that the Grant bequest fell within the scope of the reconciliation process was not error.”
Demurrer
“Temple argues that the circuit court erred when it sustained demurrers as to Temple’s breach of contract, unjust enrichment, and declaratory judgment claims without leave to amend. … [W]e disagree. …
“Temple argues that Focus breached the contract when Focus invoked the reconciliation provisions of § 10.5 in Exhibit F and convinced Ernst & Young that, per § 11 of the OTA, the disputed funds were included in the reconciliation process. …
“Temple has only pled that Focus breached the OTA, by invoking the reconciliation provisions within, because Focus induced Ernst & Young to consider payments outside the scope of the reconciliation process. …
“In other words, Temple has pled that Focus has breached their contract by invoking their rights under the unambiguous terms of said contract. Even accepting as true all of Temple’s properly pled facts, Temple’s complaint cannot sufficiently state a cause of action for breach of contract, particularly, when placed alongside the plain language of the OTA.”
As to the unjust enrichment claim, “[A]s of April 25, 2019, Focus was the rightful owner of The Virginian when the second distribution of the disputed funds occurred.
“In other words, Temple had no right to the second distribution and, by keeping the money, conferred no benefit onto Focus.
“Rather than unjustly enrich themselves at Temple’s expense, Focus properly sought to make themselves whole through the reconciliation process provided in the OTA.”
Concerning declarative relief, “Temple seeks to have the reconciliation process conducted by Ernst & Young undone by the circuit court. In other words, the wrongs Temple asserts it wishes to avoid have already been suffered.
“As such, there is no declaration of rights that can provide Temple with any meaningful relief[.]”
The Temple Foundation v. Focus SH Acquisitions, Record No. 0518-22-4, March 7, 2023. CAV (unpublished opinion) (White). From the Circuit Court of Fairfax County (Bellows). Jason C. Greaves for appellant. Michael K. Kim for appellee. VLW 023-7-102, 14 pp.
