Opinion ID: 1059826
Heading Depth: 1
Heading Rank: 4

Heading: 1994 deed of trust

Text: In light of our holding that the exercise of the purchase option by the Trustee was valid and not a breach of the trust agreement, we need not address the Beneficiaries' assignments of error I, III, and that portion of II relating to the validity of the 1995 deed of conveyance based on the 1976 contract of sale; assignment of error IV relating to consent, ratification and affirmation of the 1995 deed of conveyance; assignment of error V relating to equitable estoppel; and the Trustee's remaining assignments of cross-error. We do, however, address the Beneficiaries' claim that the trial court erred in holding that the 1994 Deed of Trust on the trust property was valid. The Beneficiaries assert that the 1994 Deed of Trust executed by the Trustee in favor of Life of Virginia was invalid because the trust agreement only allowed the Trustee to place a deed of trust on the trust property for the benefit of the trust. The Beneficiaries contend that the loan secured by the 1994 Deed of Trust was for improvements to the property and those improvements did not and were not intended to benefit the trust. The record shows, however, that the 1994 Deed of Trust was part of the plan worked out to develop the property and secure financing for the development. Consequently, whether the 1994 Deed of Trust benefited the trust must be evaluated within the context of that plan. In 1969, the trust property was swampy wetland with scrub trees and a dilapidated, uninhabited house on it. Wood testified he tried to purchase the property outright, but the Trustee refused, requiring instead a lease which would provide an income stream over an extended period of time. Wood hoped to develop the property himself, even though the Trustee refused to include a provision in the lease that it would agree to subordinate its fee interest to secure development financing. After struggling for a few years with zoning and financing, Wood was approached by the principals of Rio with an offer to undertake the development of the trust property as a shopping center. The shopping center development was feasible for Rio only if the fee simple interest could be put up as part of the financing. Negotiations ensued, resulting in the assignment of the lease and option to purchase from Wood to Rio and the execution of the 1972 agreement. As a condition for subordinating its fee interest, the Trustee required removal of all risks from the Trustee's standpoint. Accordingly, the 1972 agreement provided a guarantee of the rental income and purchase price by requiring Rio and Wood to acquire a line of credit for the rent and a certificate of deposit for the purchase price. Additionally, the Trustee was relieved from all risk related to rezoning, sewer, road access, environmental concerns, in short, from all risks connected with anything [Rio] might do with the property. The 1994 Deed of Trust was part of the financing and development plan initiated by the 1972 agreement. In that agreement, the Trustee agreed to subordinate its fee interest in the future in exchange for a virtually risk-free position while insuring income to the trust over a period of years. Without that agreement, the trust had only Wood's personal obligation to pay over $13,000 a month for non-income producing property. This change in position benefited the trust. Based on the facts we have just recited, we conclude that the 1994 Deed of Trust was executed in performance of the 1972 agreement. As such, it was a contributing factor to the overall benefit which the 1972 agreement brought to the trust. Therefore, the trial court did not err in holding that the 1994 Deed of Trust was valid.