Court Opinion

ID: 2772296
Source: CourtListenerOpinion
Date Created: 2015-01-22 18:00:30.827134+00
Date Added: 2024-06-11T11:27:46.404176
License: Public Domain

NOT PRECEDENTIAL
                 UNITED STATES COURT OF APPEALS
                      FOR THE THIRD CIRCUIT
                           _____________

                               No. 14-2049
                              _____________

                                CGL, LLC,
                                       Appellant

                                     v.

     WILLIAM G. SCHWAB; ANITA LAUDERMILCH; DEBRA A. FULTZ;
 ELFRIEDE GARMAN; LLOYD KRUPPENBACH; LORETTA KRUPPENBACH;
  WILLIAM GIERSCH; CAROL GIERSCH; MARY ANNE USNER; ARLAND L.
 LANDO; SHARON A. LANDO; JOSEPH A. KULAGA; WILLIAM O. MORRELL;
VONITA B. MORRELL; CHARLES GOTTSCHALL; ROBERT BOYD; LAWRENCE
  T. BRAUTIGAM; MARGARET F. BRAUTIGAM; ESTER LODEK; EDWARD
REINHART; RICHARD FISTER; EARL HERTZOG; MABEL HERTZOG; GERALD
  NYE; JANET NYE; ROBERT HAINLEY; HELEN HAINLEY; KAY REDCAY;
 BARRY REDCAY; STEVEN M. ENCK; JUDY D. ENCK; BECKY BUCHANAN;
CHARLOTTE M. GENTRY; HELEN COLEMAN; ROBERT BAUDER; JOHN HIGH;
   SCOTT D. SMITH; GENE L. LYNCH; DEBORAH L. LYNCH; CLIFFORD E.
  STOLTZFUS; RAYMOND W. MILEK; PARKSIDE MANOR HOMEOWNERS’
ASSOCIATION, INC.; DONALD E. HEINTZ; WENDY SCHMUCK, Executrix of the
                   Estate of Ruth Ann Schmuck, Deceased
                              _______________

               On Appeal from the United States District Court
                  for the Eastern District of Pennsylvania
                          (D.C. No. 5-11-cv-04593)
                 District Judge: Hon. J. William Ditter, Jr.
                             _______________

                Submitted Under Third Circuit L.A.R. 34.1(a)
                            January 21, 2015

      Before: FISHER, JORDAN, and GREENAWAY, JR., Circuit Judges.

                          (Filed: January 22, 2015)
                              _______________
                                        OPINION
                                     _______________

JORDAN, Circuit Judge.

       CGL, LLC (“CGL”) appeals an order of the United States District Court for the

Eastern District of Pennsylvania granting summary judgment against it and in favor of

William G. Schwab, a bankruptcy trustee with control of certain real property in

Lancaster County (the “Property”), and in favor of the individuals residing on the

Property (the “Parkside Residents”). The District Court did not err in concluding that

CGL lacked a claim because CGL is not a beneficiary of a purportedly restrictive

covenant on the Property, and we will therefore affirm.

I.     Background

       The Property is located in East Cocalico Township (the “Township”), and, prior to

2007, was owned by Vistacare Group, LLC (“Vistacare”). Vistacare operated a

retirement community there known as Parkside Manor Retirement Community

(“Parkside”), containing 45 lots. Lots 1-44 were zoned and subdivided by individual

residences, and, on Lot 45, Vistacare maintained an assisted-living facility. In 1984, the

Township approved and accepted for recording a land development plan for Parkside

which included certain restrictions on the land. Pertinent to this litigation is Restriction

No. 1, which provided as follows:

       
        This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
                                              2
       Fee title to the lots shown on this plan will not be transferred to the parties
       having residences constructed upon the said lots but the title will remain in
       the Developer, his heirs and assigns.

(App. at 346, 401, 402, 1469.)

       On May 7, 2007, Vistacare filed a bankruptcy petition in the United States

Bankruptcy Court for the Middle District of Pennsylvania and Schwab was appointed as

Chapter 7 Trustee to manage the bankruptcy estate.1 In an effort to liquidate Vistacare’s

assets, Schwab filed a motion in the Bankruptcy Court on July 24, 2008, seeking

permission to sell Parkside either as one parcel or as two separate parcels, one containing

Lots 1-44 and a second containing Lot 45. In the motion, Schwab stated that the sale of

Parkside as two separate parcels would “be contingent upon approval by East Cocalico

Township of the modification of Restriction No. 1” so as to allow Lot 45 and Lots 1-44 to

be separated. (App. at 649.) Two months later, the Bankruptcy Court approved a public

auction of Parkside, “free and clear of all liens and encumbrances.” (App. at 652.)

       Schwab promptly arranged for the auction of Lots 1-44 and Lot 45, but, because of

the Parkside Residents’ objections to the sale of Lots 1-44, Schwab offered only Lot 45

for sale. Grant Wise successfully purchased Lot 45 for $177,500 at the auction and later

assigned his interest in the agreement of sale to CGL, a Pennsylvania limited liability

company that he formed sometime in late 2008 or early 2009. Before closing on the sale

of Lot 45, CGL’s counsel, Mark Yoder, requested confirmation from Thomas Goodman,

       1
         Although the Property is located in Lancaster County, which is in the Eastern
District of Pennsylvania, Vistacare chose to file for bankruptcy in the Middle District of
Pennsylvania for reasons that are not readily apparent from the record and are not
pertinent to this appeal.
                                             3
the Township’s attorney, that Restriction No. 1 did not apply to Lot 45. Goodman

responded that the Township would not consider the sale of Lot 45 a violation of

Restriction No. 1 because no residence had been built on Lot 45 and Restriction No. 1

only referred to transferring ownership to those having residences on the Property. As

further confirmation, Schwab filed a motion with the Bankruptcy Court to approve the

sale of Lot 45 to CGL as free from Restriction No. 1. The Bankruptcy Court granted

Schwab’s motion, and the sale of Lot 45 to CGL closed soon after.

       While the sale of Lot 45 was being finalized, Schwab, Goodman, and counsel for

the Parkside Residents, Aaron Marines, discussed the removal of Restriction No. 1 from

Lots 1-44 so that they could be sold to the Parkside Residents. At an August 5, 2009

meeting of the Board of Supervisors for the Township, the Board, by means of a

“Declaration” drafted by Marines, voted to approve the removal from Lots 1-44 of all the

restrictions, including Restriction No. 1. Two days later, Schwab sent to CGL a draft of

the unsigned Declaration.

       To effectuate the sale of Lots 1-44, Schwab filed adversary actions against the

Parkside Residents, seeking a determination of whether the residences located on the lots

were mobile homes that belonged to their owners or were permanent structures that

belonged to the bankruptcy estate. After the Township approved the Declaration

providing for the removal of Restriction No. 1, Schwab filed Notices of Settlement

resolving the adversary actions with the Parkside Residents by allowing them all to

purchase their individual lots for $37,000 each, “free and clear of all liens and

encumbrances.” (App. at 752-53.) Schwab and the Township representatives signed the

                                              4
Declaration and it was duly recorded in the Office of the Recorder of Deeds of Lancaster

County. Schwab also sought and obtained Bankruptcy Court approval of the sale of the

common areas and remaining lots in Parkside to the newly-created Parkside

Homeowner’s Association.

       CGL had its own request before the Bankruptcy Court. It wanted leave to file suit

against Schwab in the Lancaster County Court of Common Pleas,2 so that it could

challenge the sale of Lots 1-44 and seek enforcement of Restriction No. 1. The

Bankruptcy Court granted CGL’s motion. That decision was later affirmed by the United

States District Court for the Middle District of Pennsylvania, In re Vistacare Grp, LLC,

2011 WL 2111997 (M.D. Pa. May 26, 2011), and by this Court, In re Vistacare Grp,

LLC, 678 F.3d 218 (3d Cir. 2012).

       As permitted, CGL filed suit against Schwab in Lancaster County. Schwab then

filed a Notice of Removal, taking the case from the Court of Common Pleas to federal

court, on the basis that he was being sued as a federal official. The case thus ended up

before the United States District Court for the Eastern District of Pennsylvania. CGL

later filed an amended complaint and then a second amended complaint, adding the

Parkside Residents as additional defendants. After the close of discovery, all parties filed

       2
          A party seeking to sue a court-appointed bankruptcy receiver must first obtain
leave of the appointing court. Barton v. Barbour, 104 U.S. 126, 128 (1881); In re
Vistacare Grp, LLC, 678 F.3d 218, 235 (3d Cir. 2012) (stating that a party proposing to
sue a trustee must make out a prima facie case against the trustee, showing that its claim
is “not without foundation,” and noting that that standard involves a greater degree of
flexibility than the Rule 12(b)(6) motion to dismiss standard (internal citation and
quotation marks omitted)).

                                             5
cross-motions for summary judgment. The District Court granted Schwab’s and the

Parkside Residents’ motions and denied CGL’s. This timely appeal followed.

II.    Discussion3

       CGL primarily contends that the District Court erred in holding that CGL was not

an intended beneficiary of Restriction No. 1 and therefore could not enforce that

restriction. Its argument is without merit.4

       Under Pennsylvania law, a restrictive covenant can be enforced by a party to the

agreement containing the covenant or by an intended beneficiary of the covenant.5

       3
        The District Court had jurisdiction under 28 U.S.C. § 1442. We have jurisdiction
pursuant to 28 U.S.C. § 1291. We review the District Court’s grant of summary
judgment de novo and “view inferences to be drawn from the underlying facts in the light
most favorable to the nonmoving party.” Montanez v. Thompson, 603 F.3d 243, 248 (3d
Cir. 2010) (internal quotation marks omitted). Summary judgment is appropriate where
the court is satisfied that there is no genuine dispute as to any material fact and that the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex
Corp. v. Catrett, 477 U.S. 317, 330 (1986).

       4
         CGL makes other arguments that are similarly unpersuasive. It says that the
District Court erred in characterizing its claims as being for violations of due process
rights. But, in fact, in its Second Amended Complaint, CGL specifically notes that “[t]he
sales of the individual lots violate Restriction No. 1, are unlawful and have caused
damage to CGL’s property interests in Lot 45” and that “[t]he Declaration is an attempt
to deprive CGL of its property rights without notice and without due process of law.”
(Second Amended Complaint, ¶¶ 24, 25.) Furthermore, while CGL contends that it never
asserted a due process violation, it does not argue that the District Court’s ruling on the
merits of any such due process claim was in error. CGL says that the District Court erred
in concluding that Restriction No. 1 was properly removed from Lots 1-44 before the sale
of those lots to the Parkside residents. As explained below, however, CGL was not an
intended beneficiary of Restriction No. 1 and thus, even if the restriction was improperly
removed, CGL lacks any standing to enforce the restriction.
       5
       The District Court concluded that Restriction No. 1 was not a restrictive
covenant but continued to hold that, even if it were a restrictive covenant, CGL was not
                                               6
Mariner v. Rohanna, 92 A.2d 219, 220 (Pa. 1952) (“The persons initially entitled to

enforce the obligation of a promise respecting the use of land are the promisee and such

third persons as are also beneficiaries of the promise.” (internal quotation marks

omitted)). For a person or entity who is not a party to the restriction – such as CGL in

this case – the right to seek enforcement “depends on whether or not the restrictive

covenant or agreement was imposed on the land owned by [the] defendant for the benefit

of the land owned by [the] plaintiffs who are seeking to enforce the restriction.” Fey v.

Swick, 454 A.2d 551, 554 (Pa. Super. 1982) (internal quotation marks omitted). That

question “is determined largely by the intention of the parties.” Id. (internal quotation

marks omitted). Thus, in order to enforce Restriction No. 1 as it pertains to Lots 1-44,

CGL would have to establish that the restriction was intended to be a burden on Lots 1-44

and a benefit for Lot 45.

       CGL does not point to any language in the deed to Lot 45 to show that the

purchase of Lot 45 conferred a right to enforce restrictions pertaining to Lots 1-44, nor to

any language within Restriction No. 1 to show that it was intended to benefit Lot 45.

Indeed, by CGL’s own admission, “no evidence exists of the intention of either the East

Cocalico Board of Supervisors or the Developer in plac[ing] Restriction No. 1 on the

[Parkside land development] Plan, beyond the actual language of the restriction.”

(Appellant’s Br. at 5-6.) That language gives a benefit only to the “developer, his heirs

and assigns” by stating that fee title to the lots will remain with them. (App. at 346, 401,

an intended beneficiary of it and thus could not seek its enforcement. Because we agree
with the District Court that CGL was not an intended beneficiary, we do not reach the
issue of whether Restriction No. 1 was a restrictive covenant under Pennsylvania law.
                                             7
402, 1469.) CGL provides no legal authority for its assertion – which it makes in a

footnote in its Opening Brief – that, as the purchaser of Lot 45 in a bankruptcy auction, it

is an assign of the developer of the lots. Furthermore, CGL and Schwab agreed at the

time of the sale of Lot 45 that Restriction No. 1 did not apply to that lot because there

was no residence constructed on it. After purchasing Lot 45 free from the burden of

Restriction No. 1, CGL cannot now contend that, simply by owning a lot near Lots 1-44,

it became the beneficiary of Restriction No. 1 and acquired the right to enforce that

restriction, which pertains only to Lots 1-44.

III.   Conclusion

       For the foregoing reasons, we will affirm the District Court’s grant of summary

judgment for Schwab and the Parkside Residents.

                                              8