Mancuso et al v. Meadowbrook Mall Company Limited Partnership, et a

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE §
§
RESTAURANT ASSOCIATES, LLC, § BK NO. 03-2402
§
Debtor(s). §
§
ANTHONY J. MANUCSO and §
ALICE D. MANCUSO, §
§
Plaintiff(s), §
v. § AP NO. 05-175
§
THE MEADOWBROOK MALL COMPANY §
LIMITED PARTNERSHIP, et al., §
§
Defendant(s). §
O R D E R
On March 26, 2004, pursuant to notice, this Court entered an order authorizing the sale of the
Bridgeport assets of the Debtor, Restaurant Associates, LLC and Bridgeport Restaurant, LLC, free
and clear of liens, claims and encumbrances to Anthony J. Mancuso and Alice D. Mancuso
(“Mancusos”).
The Debtor then deeded the property on April 2, 2004, after which they demolished the
building on the premises. On November 1, 2004, the Mancusos received a letter from Meadowbrook
Mall Company informing them that they were in violation of the covenants and restrictions relating to the
parcel of land.
In the deed from Meadowbrook to the Debtor, Page 4, Paragraph 2 contains the following
Dated: Friday, February 17, 2006 2:08:49 PM
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provision:
Grantee for itself and its grantees, successors and assigns, hereby covenants and agrees
to observe, satisfy and be bound by all the terms, covenants, conditions and restrictions
contained in the Real Estate Sale Agreement between Grantor and Grantee, dated
January 22, 1987, which is incorporated herein by reference and made a part hereof as
if fully rewritten at length.
West Virginia law does not require that the restrictions be placed of record. All that is
necessary is that the notice be given of the restrictions. For example, West Virginia Code § 40-1-8
provides that a memorandum of the actual lease may be recorded. As set forth above in the deed to the
Debtor, notice was given that there were restrictions on the use of the property and these restrictions
were set forth in two documents entitled “Criteria for Outparcels” and “Real Estate Sale Agreement”
between Grantor and Grantee dated January 22, 1987. The West Virginia Supreme Court has
recognized that buyers are subject to the notice in In re Williams, 213 W.Va. 780, 584 SE2d 922
(W.Va. July 2003).
The Court order reflecting the sale of the property provided that the sale was free and clear of
all liens, the liens to attach to the proceeds of sale. There was no language in the order relating to the
restrictive covenants. Furthermore, the Meadowbrook Mall was not provided notice of the proposed
sale. Accordingly, even if the Court were able to effectuate a sale under
§ 363(f), it would not be binding on Meadowbrook Mall as they had no notice.
The unrecorded restrictive covenants are a part of the real estate and follow it throughout
subsequent purchases. The covenants inure to the benefit of both parties and are consistent with
competition within a mall area. The property may not be used in violation of the covenants.
Paragraph 17 of the Real Estate Purchase Agreement provides as follows:
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1The portion of Paragraph 13 that pertains to ascertaining the fair market value of the property - numerical
average of (3) appraisals by MAI designated appraisers, one nominated by each party and the third selected by the
two nominated appraisers.
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17. In the event the improvements on Parcel No. 45 are substantially damaged or
destroyed by fire, casualty or any other cause, and such substantial damage or
destruction prevents Purchaser from using the Property as herein contemplated or
renders the improvements thereon unsightly, Purchaser shall promptly restore and
rebuild the same with diligence and continuity to the condition of such improvements
immediately preceeding [sic] such occurrence. In the event Purchaser (a) fails to
commence the restoration of the Property within one (1) year from such occurrence, or
(b) fails to complete such restoration within one (1) year and six (6) months from the
date of such occurrence, Seller shall have the right, but not the obligation, to acquire the
property from Purchaser for the Purchase Price set forth in Clause 2 hereof. Seller shall
exercise this right by notifying Purchaser of its intention to so acquire the Property
within ninety (90) days after the expiration of either such events. The closing of such re-
acquisition by Seller shall take place within thirty (30) days after the date Seller notifies
Purchaser of its desire to acquire the Property
This section contemplates the destruction of the property from fire or other cause. In this case,
the Plaintiffs, obviously unaware of the restrictions, demolished the building anticipating the construction
of a new business. However, the restrictions on the property limit the type of business the Plaintiffs can
conduct. There is a factual issue as to whether the amount the Plaintiffs paid for the parcel is the fair
market value of the property (assuming that the Plaintiffs purchased the property not knowing of the
restrictions and intending to begin a different business on the premises.)
The Court finds that after almost 20 years, the price set forth in Clause 2 of the Real Estate
Purchase Agreement has no relationship to value of the real estate at the present time. If the Plaintiffs do
not rebuild a business in accordance with the covenants within a year and six months from the date of
this order, Meadowbrook Mall shall have the option to repurchase the property at a price as set forth in
Paragraph 13 of the Real Estate Sale Agreement.1
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It is accordingly SO ORDERED.
The Clerk is directed to transmit copies of this Order to the parties in interest.
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