Reserve at Winchester I, LLC v. R 150 SPE, LLC, 2022 U.S. Dist. LEXIS 21367, 2022 WL 358500 (W.D. Va. Feb. 7, 2022);
Reserve at Winchester I, LLC v. R 150 SPE, LLC, 2022 U.S. Dist. LEXIS 106803, 2022 WL 2161518 (W.D. Va. Jun. 15, 2022);
Reserve at Winchester I, LLC v. R 150 SPE, LLC, 2022 U.S. Dist. LEXIS 177447 (W.D. Va. Sep. 29, 2022)
Robert B. Cathcart (“Cathcart”) and the Reserve at Winchester, LLC (“Reserve” and collectively with Cathcart, the “Plaintiffs”) signed a real estate purchase option agreement (the “Option”) with R 150 SPE, LLC (“R150”). The Option structured the parties’ responsibilities and negotiations pertaining to Cathcart’s potential future purchase of 26 acres of R150’s land (the “Property”). If the parties agreed on the exact location of the 26 acres and honored their respective contractual obligations, R150 would sell the 26 acres to Cathcart and keep the remainder for itself. The Option required the Plaintiffs to deliver 3 documents to R150 at appropriate times. One of these documents was a “written notice of exercise” on or before the Options expiration. The Plaintiffs were also required to give a final approved Site Plan and the legal description of the approximately 26 acres to be subdivided into parcels to R150 before closing on any given parcel. The parties executed 3 Amendments to the Option. The Second Amendment memorialized the parties’ intent to make the potential sale in two conveyances instead of three. However, the deal fell through, partly
because R150 failed to secure local government permits it had agreed to obtain. The Plaintiffs sued R150 for specific performance and filed a memorandum of lis pendens against the Property. R150 counterclaimed for slander of title, breach of contract, and breach of the covenant of good faith and fair dealing. R150 moved to dismiss Plaintiffs’ complaint, as well as quash Plaintiffs’ memorandum of lis pendens.
In considering the motions, the Court discussed the contract’s scope. Generally, integration clauses defeat the use of parol evidence to amend contract terms. However, the Option’s Amendments incorporated by reference site plans outlining the conveyance boundaries. Because the Supreme Court of Virginia has never articulated requirements for incorporation by reference, the Court had to predict how the Supreme Court of Virginia would rule. In doing so, the Court cited to the Fourth Circuit, which has broken incorporation by reference down into three elements: (i) whether the underlying contract makes clear reference to a separate document; (ii) the identity of the separate document may be ascertained; and (iii) incorporation of the document will not result in surprise or hardship. The Court determined that the site plans outlining the conveyance boundaries were incorporated and could be considered. The Court rejected R150’s argument that the Option was terminated after both parties failed to perform conditions precedent necessary for closing. R150 could not complain that the circumstances necessary for performance never came about if R150 had a duty to bring them about and took steps to ensure they did not.
The Court denied R150’s motion to quash the memorandum of lis pendens. Virginia prohibits the filing of a lis pendens unless an action on which the lis pendens is based seeks to establish an interest by the filing party in the real property described in the memorandum. A claim for specific performance of a contract conveying ownership of real property can support a motion for lis pendens. A party’s interest in an easement can also sustain its filing of a lis pendens.
The Court granted Plaintiffs’ motion to dismiss R150’s slander of title claim. In Virginia, to state a valid claim for slander of title, a plaintiff must allege facts showing: (i) the uttering and publication of the slanderous words by the defendant; (ii) the falsity of the words; (iii) malice, and (iv) special damages. Words spoken or written in a judicial proceeding that are relevant and pertinent to the matter under inquiry are absolutely privileged from subsequent charges of defamation. The privilege is broad and comprehensive, including within its scope all proceedings of a judicial nature. The privilege extends to a lis pendens that merely republishes the key information from the related lawsuit.
The Court denied Plaintiffs’ motion to dismiss R150’s breach of contract and breach of the covenant of good faith and fair dealing claims. The Court held that R150 had plausibly alleged that Plaintiffs violated this covenant and was entitled to take discovery of this theory of breach.