First Owners' Ass'n of Forty Six Hundred v. Gordon Properties, LLC

470 B.R. 364, 2012 WL 1456345, 2012 U.S. Dist. LEXIS 58767
CourtDistrict Court, E.D. Virginia
DecidedApril 26, 2012
Docket1:11-cv-1060
StatusPublished
Cited by16 cases

This text of 470 B.R. 364 (First Owners' Ass'n of Forty Six Hundred v. Gordon Properties, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Owners' Ass'n of Forty Six Hundred v. Gordon Properties, LLC, 470 B.R. 364, 2012 WL 1456345, 2012 U.S. Dist. LEXIS 58767 (E.D. Va. 2012).

Opinion

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

Appellee in this bankruptcy appeal seeks dismissal of the appeal, arguing that the order being appealed is interlocutory and that appellant neither requested nor obtained leave of court for an interlocutory appeal. Appellant contends in response that the order being appealed is a final order, or in the alternative, that leave should be granted for an interlocutory appeal.

For the reasons that follow, appellee’s motion to dismiss must be denied.

I.

The Forty Six Hundred Condominium (“Forty Six Hundred”) is a mixed-use condominium located at 4600 Duke Street in Alexandria, Virginia and comprised of more than 400 residential and commercial units. It consists of a main high-rise apartment building, with both residential and commercial units, and two commercial units — a restaurant and a gas station— that are adjacent to the high-rise building.

Appellant First Owners’ Association of Forty Six Hundred, Inc. (“FOA”) is a Virginia non-stock corporation formed to oversee the management of Forty Six Hundred as the unit owners’ association. Every person, group of persons, corporation, trust or other legal entity, or any combination thereof, that owns a condominium at Forty Six Hundred is a member of FOA. FOA is governed by a seven-person Board of Directors (the “Board”), each of whom is elected by members of FOA at annual meetings for two-year terms, with three or four seats expiring each year. Every member of FOA is required to pay an annual assessment, representing the member’s proportionate share of FOA’s common expenses. Appellee Gordon Properties is a Virginia limited liability company that owns approximately 38 units in Forty Six Hundred, including the adjacent restaurant unit, and thus is a paying member of FOA.

Animosity and litigation characterize the relationship between FOA and Gordon Properties, notwithstanding that Gordon Properties is a member of FOA and controls approximately twenty percent of the vote within FOA. This long-running feud dates back until at least 2006, when FOA terminated Condominium Services, Inc. (“CSI”), a wholly owned subsidiary of Gordon Properties, as FOA’s managing agent. The termination resulted in litigation, and ultimately, FOA obtained a judgment against CSI for $91,125 in compensatory damages and $275,000 in punitive damages for CSI’s breach of the management agreement and conversion, which was affirmed by the Supreme Court of Virginia. *367 See Condominium Services, Inc. v. First Owners’ Ass’n of Forty Six Hundred Condominium, Inc., 281 Va. 561, 709 S.E.2d 163 (2011).

Also following the termination of CSI, FOA determined that the condominium assessment for the restaurant unit owned by-Gordon Properties had been improperly calculated. As a result, FOA levied a significant increased assessment against Gordon Properties with respect to the restaurant. Thereafter, litigation concerning the increased assessment ensued in state court, and once again, FOA prevailed. With the exception of this disputed assessment, Gordon Properties has paid all other fees owed to FOA. Importantly, because Gordon Properties still has not paid the disputed assessment for the restaurant unit, FOA’s Bylaws prohibit Gordon Properties from either voting or being elected to the Board. 1

On October 2, 2009, Gordon Properties commenced a Chapter 11 proceeding in the U.S. Bankruptcy Court of the Eastern District of Virginia. On the same day that it filed its bankruptcy petition, Gordon Properties also initiated an adversary proceeding in which it alleged that FOA, by prohibiting Gordon Properties from voting, violated the automatic stay, which prohibits “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title.” 11 U.S.C. § 362(a)(6). Accordingly, Gordon Properties sought a preliminary injunction requiring FOA to permit it to vote at the next annual meeting, scheduled for October 7, 2009. The bankruptcy court declined to issue a preliminary injunction prior to the October 7, 2009 meeting, citing the lack of time and opportunity for the parties to prepare argument or develop a factual record. But the bankruptcy court specifically noted that this ruling was without prejudice to Gordon Properties seeking similar relief at a later date.

At the October 7, 2009 meeting, it was determined that no quorum was achieved, and the meeting was adjourned sine die. Subsequently, Gordon Properties filed an amended complaint in the adversary proceeding, alleging that it was denied the right to vote at the October 7, 2009 annual meeting and seeking a preliminary injunction requiring FOA to reconvene the meeting and to permit Gordon Properties to vote at the reconvened meeting. In a memorandum opinion issued on June 2, 2010, the bankruptcy court found as a matter of law that enforcement of the Bylaws’ provision preventing Gordon Properties from voting violated the automatic stay. See In re Gordon Properties, LLC, 435 B.R. 326, 330-333 (Bkrtcy.E.D.Va. 2010). In addition, after hearing testimony by members at the annual meeting, the bankruptcy court found that certain members, including at least three members of the Board and the chair of the elections committee, did not register for the annual meeting with the intention of avoiding a quorum, even though they were present at the meeting. Furthermore, the bankruptcy court found that FOA not only denied Gordon Properties its right to vote against adjournment sine die at the meeting, but also denied other members, who voted against adjournment sine die and sought to have the meeting adjourned only temporarily, of their right to vote. Id. at 333-342. In fact, the bankruptcy court determined that even if Gordon Properties’ votes were not counted, the votes of two *368 other members, who voted their proxies against the motion to adjourn sine die, would have constituted a clear majority against the motion had they been counted. Id. at 340. Thus, the bankruptcy court concluded that by improperly avoiding a quorum and pushing through an adjournment sine die, members of the Board preserved their positions for at least another year. Despite these abuses, the bankruptcy court denied Gordon Properties’ request for injunctive relief, holding that because Gordon Properties was not singled out for mistreatment, FOA’s actions were not intended to collect a pre-petition debt and thus did not violate the automatic stay. Id. at 343. FOA appealed this determination, but both the district court and the Fourth Circuit dismissed the appeal because FOA was the prevailing party. See In re Gordon Properties, LLC, No. 10cv872 (E.D.Va. Aug. 27, 2010) (Order) (Doc. 16); In re Gordon Properties, LLC, 433 Fed.Appx. 173 (4th Cir.2011) (per curiam) (unpublished).

The conclusion of the adversary proceeding did not end the parties’ feud or the litigation.

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Bluebook (online)
470 B.R. 364, 2012 WL 1456345, 2012 U.S. Dist. LEXIS 58767, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-owners-assn-of-forty-six-hundred-v-gordon-properties-llc-vaed-2012.