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New Castle County v. Pike Creek Recreational Services, LLC

Court of Chancery of Delaware, New Castle

September 5, 2013

NEW CASTLE COUNTY, Subdivision of the State of Delaware, Plaintiff, Respondent,
v.
PIKE CREEK RECREATIONAL SERVICES, LLC, a Delaware limited liability company, Defendant, Petitioner,

Submitted: June 14, 2013

Corrected: September 6, 2013

Max B. Walton, Esquire, Connolly Gallagher LLP, Newark, Delaware, Bernard V. Pepukayi, Esquire, County Attorney, New Castle County Office of Law, Wilmington, Delaware, Attorneys for Plaintiff/Respondent.

Richard P. Beck, Esquire, A. Kimberly Hoffman, Esquire, Morris James LLP, Wilmington, Delaware, Attorneys for Defendant/Petitioner.

Richard L. Abbott, Esquire, Abbott Law Firm, Hockessin, Delaware, Attorney for Interested Parties.

OPINION

Paul R. Wallace, Judge

I. Introduction

Plaintiff New Castle County (the "County") moves for partial summary judgment, asking the Court to uphold alleged land use restrictions created by two agreements - a 1964 agreement and a 1969 amendatory agreement (later described and hereinafter referred to collectively as the "Master Plan") that were executed to govern the development of Pike Creek Valley - and thus prevent Defendant Pike Creek Recreational Services ("PCRS") from developing any portion of approximately 177[1] acres that once operated as a golf course.[2] The County argues PCRS must follow the procedural process required by the County's Unified Development Code ("UDC") § 40.31.130, also known as the "Restriction Change Statute, " before PCRS can develop any part of the land.[3] PCRS has also moved for partial summary judgment requesting an order from this Court that UDC § 40.31.130 does not apply to the subject land either because no such restrictions exist on that acreage, or because the PCRS development plans would not violate any now-extant restrictions.[4] Both parties were heard at oral argument before this Court[5] in November 2011.

The County first filed a Complaint in November 2010 in the Court of Chancery.[6] It seeks to compel PCRS' compliance with alleged restrictions in the Master Plan and to "maintain and operate an 18-hole golf course."[7] In December 2010, PCRS countered with a mandamus action in Superior Court[8] seeking "plan review, engineering approvals and building permits" for its proposed residential development of the Golf Course (the "Mandamus Action").[9] The action in Chancery[10] was consolidated with the Mandamus Action.[11] For the reasons described below, both Motions for Summary Judgment are GRANTED, in PART.

II. Factual and Procedural Background

In 1964 the four original owners[12] of 1, 141 acres in Mill Creek Hundred, now known as Pike Creek Valley, in New Castle County, operated as Mill Creek Ventures and entered into an agreement to develop the land "pursuant to a comprehensive master plan, applying the principles of a planned unit development.'[13] At the time, New Castle County was governed by the Levy Court, and the County's zoning code had not yet evolved to include provisions to accommodate such mixed-use development plans.[14] In order to "permit the [Levy Court] to consider the proposed rezoning in the light of specific proposed uses, "[15]the original owners voluntarily entered into the 1964 Agreement[16] which imposed restrictions on the subject acreage in the event that the Levy Court approved the owners' petition for rezoning.[17] The original owners also made the Levy Court a third-party beneficiary of the 1964 Agreement.[18] As such, the Levy Court and its successors were given the power to prospectively enforce the 1964 Agreement.[19]Similarly, any amendments to the 1964 Agreement would require approval by the Levy Court or its successors in interest.[20] With respect to a golf course, the 1964 Agreement set aside open space for "a par three golf course or other recreational use."[21] The original owners requested the area set aside for the par-three golf to be zoned commercial, and in return covenanted to use the land for either commercial recreational purpose or non-profit recreational use only.[22] In December 1964, the Levy Court approved the original owners' development plan as described in the 1964 Agreement and rezoned the subject acreage. As a result, the voluntary restrictions in the 1964 Agreement became effective. The 1964 Agreement was recorded in the Recorder of Deeds office.[23]

In 1969 the original contracting parties executed an amendment to the 1964 agreement (the "1969 Amendatory Agreement").[24] The 1969 Amendatory Agreement had several distinct objectives: (1) to acknowledge New Castle County Council (the "County Council") as the Levy Court's successor in interest, and thus the governmental organization with final jurisdiction over the subject acreage;[25] (2) to identify changes in the corporate identities of two of the original owners;[26] and (3) to expand the "SUBJECT ACREAGE" from approximately 1, 141 acres to approximately 1, 364 acres.[27] As required by the 1964 Agreement, the 1969 Amendatory Agreement was subject to the County Council's approval.[28] And, just as the restrictions in the 1964 Agreement were contingent upon the County approving certain rezoning, the 1969 Amendatory Agreement was contingent upon the County approving additional zoning changes.[29]

Whereas the 1964 Agreement had contemplated a par-three golf course, the 1969 Amendatory Agreement required the "set aside and hold[ing] throughout the course of development of the entire SUBJECT ACREAGE the following land use[] ... [o]pen spaces [] including 130 acres set aside for an 18-hole golf course... ."[30] In addition, the contracting parties agreed that 85 additional acres would be set aside as "non-golf open space" for a total of 215 acres set aside for open or recreational space.[31] At the time of covenanting, the parties agreed that if construction of the golf course did not begin within five years, "the open space set- aside for the [golf course] shall be devoted to uses approved by the Department of Planning and the New Castle County Council."'[32] The owners' requested zoning changes were approved by the County Council in early 1970.[33] The voluntary restrictions in the 1969 Amendatory Agreement then became effective.[34]

Nearly two years later, in September 1971, the then-owners recorded a plan for Pike Creek Golf Course, which established "private open space ... in accordance with the [1964] agreement as amended, " and which again also designated the County as a third-party beneficiary.[35] In order to develop the open space set-aside as a golf course without losing the land's residential zoning designation, the owners sought and were granted a special exception by the County.[36] Soon thereafter, the plot was sold to Pike Creek Valley Country Club.[37]

In 1970, the owners had prepared an "Approved Tentative Master Plan Pike Creek Valley, "[38] (the "Distributed Master Plan") which developers distributed to prospective purchasers of Pike Creek residential units.[39] The Distributed Master Plan included a signature block whereby lot purchasers acknowledged that the Distributed Master Plan derived from the Master Plan and could be changed only with approval by the County Council.[40] In the decade or so immediately following, a series of revised subdivision plans document minor modifications to the Golf Course, some containing language establishing the Golf Course as "private open space" in accordance with the Master Plan.[41] Subsequent recorded plans, however, made no mention of the two Agreements, and did not make reference to the "private open space, " as previous plans had done.[42]

In 1980, G.R.G. Realty Co. ("G.R.G."), then-owner of the Golf Course, sought approval to subdivide twenty townhouse lots from a portion thereof along Hogan Drive (the "Hogan Drive Plan"). In response to the County's refusal to review its plans for the Hogan Drive Plan, G.R.G. filed a mandamus action in Superior Court.[43] The limited question then decided by the Court was whether such writ should issue.[44]

The Court's conditional writ ordered the Department of Planning to carry out its statutory duty to review the Hogan Drive Plan "as to content."[45] The Court also instructed the Department of Planning to "make it clear in its decision that it is not passing upon the issues which fall outside its assigned duties."[46] As a result, after the Department of Planning reviewed and approved the Hogan Drive Plan in 1982, it placed the following note on the recorded plan:

This plan has been reviewed as to content and compliance with the New Castle County Subdivision and Land Development Regulations. The Department of Planning has not reviewed the Plan as to compliance with the 1964 Agreement or the 1969 Amendatory Agreement of record pertaining to the development of the Pike Creek Valley Community or any other applicable agreement per letter opinion of the Superior Court dated 12/30/81 re: G.R.G. Realty vs. New Castle County 81M-MR-18.

The Hogan Drive Plan was recorded thereafter, and each of the twenty lots assigned a tax parcel number, [47] but the County took additional action to block development of Hogan Drive. The County Council's attorney directed the County Director of Public Works not to issue any building permits related to the recorded plan.[48] The County Council also adopted Resolution 82-092 in which it, inter alia, authorized the County to join a lawsuit filed by Pike Creek Valley residents.[49]That lawsuit was dismissed, however, after G.R.G. went bankrupt, and before the County joined.

Three Little Bakers, Inc. ("Three Little Bakers") purchased the Golf Course from G.R.G, in December 1982.[50] In 1985, in order to entice the County to rezone portions of the 170 acres they owned, Three Little Bakers recorded a declaration (the "1985 Declaration") through which it voluntarily entered into a series of covenants restricting the use of the subject land.[51] The 1985 Declaration established "covenants running with the land .., binding upon the Declarant, its successors and assigns, and ... for the benefit of New Castle County, its successors and assigns."[52] Specifically, Three Little Bakers covenanted to restrict the commercial development on the land to "a restaurant, golf course, club house, pro shop, parking lot, and uses allied, ancillary and accessory to said uses, and to the golf course."[53] No changes were to be made "without the prior consent of New Castle County Council ...." Finally, the 1985 Declaration stated that any rezoning would not prejudice the County, the County Council, or civic associations with respect to "agreements, restrictions, easements, conditions or other matters relating to the Pike Creek Golf Course."[54]

The 1985 Declaration was recorded, and the County rezoned a portion of the Three Little Bakers' land.[55] Three Little Bakers operated the Golf Course until 2008, when the property was sold to the current owners, PCRS.[56] At no time prior to selling the Golf Course did Three Little Bakers attempt residential development of the twenty Hogan Drive lots.

In 2008, prior to the sale of the land, the title to the Three Little Bakers property was divided in order to separate the Golf Course from the other operations on the land.[57] PCRS took title to the Golf Course, including the Hogan Drive lots, while Pike Creek Healthcare Services LLC ("PC Healthcare") took title to the remaining land.[58] That remainder was commercially-zoned.[59] In order to build a nursing home facility, PC Healthcare applied to have the restrictions contained in the Master Plan and the 1985 Declaration removed.[60] Pursuant to the County's UDC[61] §40.31.130, the "Restriction Change Statute, " which states "any amendment to a declaration of restrictions to which the County is either a party or a beneficiary of the covenants therein shall follow the [statutory] procedure, " PC Healthcare submitted its deed restriction change request to the Department of Land Use.[62] The Department of Land Use recommended the change to the Planning Board, which also endorsed the change to the County Council.[63] On July 8, 2008, the County Council formally removed any deed restrictions on the commercially- zoned portion of the land that originated from either the Master Plan or the 1985 Declaration.[64] The Golf Course was unaffected by this 2008 deed change.[65]

The Golf Course's current owners, PCRS, shut it down in 2010, intending to construct thereon the Terraces at Pike Creek (the "Terraces"), a mixed-use development comprised of 288 residential dwellings[66] and commercial buildings totaling 62, 000 square feet.[67] As a prelude, PCRS first submitted engineering plans for the development of the twenty Hogan Drive lots.[68] The County responded with a letter dated September 23, 2010, in which it notified PCRS that no approvals could be granted until PCRS could show that the development of Hogan Drive would not violate "any other deed restrictions affecting the property, "[69] PCRS filed an appeal from the September 2010 letter with the County Planning Board, [70] and as a result the County review process was put on hold.[71] With its appeal pending, PCRS submitted additional engineering drawings and applications for Hogan Drive on October 14, 2010.

On November 9, 2010, before the County took action on the appeal, New Castle County Council adopted Resolution 10-197, which authorized legal action against PCRS and asserted the County's main contention that the Master Plan prohibited any development on the entirety of the Golf Court as it was configured, including the Hogan Drive lots.[72] The resolution also directed the Land Use Department not to issue PCRS engineering approvals or building permits for residential or other construction.[73] On the same day, the County filed its Complaint in the Court of Chancery, arguing that PCRS' development plan for the shuttered Golf Course violated the applicable restrictions, covenants, and dedications.[74]

PCRS countered with a petition for a writ of mandamus filed in Superior Court on December 1, 2010, seeking a court order directing the County to review the engineering plans and applications. Nearly a week later, the County Council adopted Resolution 10-217, [75] which corrected and amended Resolution 10-197, and filed its First Verified Amended Complaint in the Chancery action. In December 2010, the County, through counsel, notified PCRS that it would review the plans, but simultaneously told PCRS that no building permits would issue until the County approved, pursuant to the Restriction Change Statute, the deed restriction changes it deemed necessary.[76] Additional appeals of County agency decisions were stayed by this Court's order.[77]

Immediately before this Court are the remaining actions: (1) the County's Chancery action seeking equitable relief in the form of a ruling that PCRS is required to maintain and operate an 18-hole golf course on the existing approximately 177 acres previously known as the Pike Creek Golf Course; and (2) PCRS' mandamus action seeking a court order instructing the County to review and approve its proposed plans for both the Hogan Drive lots and the Terraces. This decision also addresses the Motion to Intervene, filed in November 2011, by several residents of Pike Creek Valley.[78] Yet, before the Court considers the merits of each argument, it is first necessary to review several prior decisions, which address the 1964 and 1969 Agreements' effects, and which the parties frequently cite as precedential to the instant case.

III. Prior Judicial Proceedings

The development of Pike Creek Valley has a tortured legal history. The interpretation of the various agreements and the Pike Creek Valley Master Plan has been the subject of several notable decisions in the nearly 50 years since the 1964 Agreement was first memorialized. The first such decision was issued by the Delaware Supreme Court in 1975. In New Castle County v. Richeson, [79] the Supreme Court held that the ultimate decision in a dispute over whether any proposed plans for the Pike Creek Valley conformed to the Master Plan was properly left to the courts, not the New Castle County Planning Board.[80]

Six years later, the Superior Court addressed a different issue: whether the Court could compel the Department of Planning to review and act on G.R.G.'s plan to subdivide a portion of what was then approximately 199 acres on which the Golf Course was situated.[81] G.R.G., which had purchased the Golf Course in 1980, intended to develop 8.7 acres of the 199 for residential use, and to re-design the Golf Course around the new construction.[82] The County's Department of Planning argued, however, that it was not compelled to review and act upon G.R.G.'s submissions because G.R.G. had not secured consent from the County Council, successor in interest to the Levy Court and third-party beneficiary of the Master Plan.[83] The Superior Court disagreed and compelled the Department of Planning to review G.R.G.'s proposal as to content only, with the caveat that the Department of Planning "make it clear in its decision that [the Department of Planning] is not passing upon the issues which fall outside its assigned duties."[84]The Department of Planning could not avoid its statutory duty to review the plans, and determining whether the plans were in accordance with the Master Plan was outside the Department of Planning's jurisdiction.[85] Therefore, the County's Department of Planning, under G.R.G. and Richeson, was both compelled to conduct its review and limited in its regulatory review of the then-pending development plan's content.[86] The issue of whether the then-planned development was in accordance with the Master Plan was a question properly left to the Court.[87]

In Regency Group, Inc. v. New Castle County, the Court of Chanceiy addressed yet another Pike Creek Valley development issue: whether a designation on the Master Plan map alone creates a restrictive covenant.[88] In Regency, the County argued that the designation on the Master Plan map of certain acreage as "Motor Inn Site" created a covenant that restricted use of that acreage to a motor inn.[89] Again, the Court did not agree with the County and found that enforcing a restrictive covenant against Regency in particular, would be "arbitrary and inequitable, " in light of the fact that the County had neglected to enforce other similar designations on the Master Plan map as restrictive covenants.[90] Relying on the following clause from the 1964 Agreement, the Court found that the specific designation on the planning map of "Motor Inn Site" was not controlling, and that portions of the subject land zoned for business may be used in any way that accorded with the County zoning code:

The acreage set aside for commercial use on the updated Master Plan and rezoned for that purpose; whether the classifications be G-l, C-2, R-C, or C-3, shall be utilized for the land uses and purposes described in the zoning Code of New Castle County as the same now is or may hereafter be amended to restate such uses; provided, however, and as the only exception to the foregoing, the area shown on the updated Master Plan set aside for a par 3 golf course if zoned commercial shall only be used for a recreational purpose.[91]

In determining that the "Motor Inn Site" map designation did not constitute a restrictive covenant, the Court did not address the primary question raised here: whether the 1964 Agreement and 1969 Amendatory Agreement created a restrictive covenant with respect to the entirety of the acreage previously operated as the Golf Course.[92]

IV. Standard of Review

This Court cannot grant either party's motion for summary judgment "unless no genuine issue of material fact exists and one of the parties is entitled to judgment as a matter of law."[93] The moving party has the burden of showing that there is no genuine issue of material fact.[94] If that burden is met, the non-moving party must demonstrate that "there is a genuine issue for trial."[95] And in determining whether there ...


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