This is a continuation of a recent post. To read the original post, click here.
After the Development Agreement was signed (in December of 2005), WVA applied for and received a construction loan from Frontier Bank in order to break ground. Later, the parties executed the TRIP agreement, and Woodinville broke ground on the roundabout project. Woodinville completed the work, and then billed WVA for its part, which was $1.4 million. WVA disputed the amount (as opposed to the entire debt), and so Woodinville obtained a court judgment against WVA for that amount in 2010. The unpaid judgment created a lien on WVA’s property, which, in this case, was the future site of the Village. However, because WVA had obtained a construction loan, the bank also had a lien on the property (a mortgage). Shortly after the bank began foreclosure, Woodinville filed a court claim seeking to stop the foreclosure, in order to determine if its lien was, in fact, superior to the bank’s lien.
The Foreclosure Fight
The central question in court was this: If the mortgage was created in 2005, and the judgment lien was created in 2010, why would Woodinville think its lien was senior?” Well, here’s how that argument went . . .
Woodinville argued that its obligation to be paid for the improvements did not originate solely in the TRIP, but instead in the Development Agreement, which pre-dated the bank’s lien. Additionally, it argued that the combination of the Development Agreement and the TRIP created the duty to pay for the frontage improvements as a covenant running with the land. While an ordinary contract is enforceable against a particular person or entity, a covenant that runs with land is enforceable in relation to a particular piece of land, regardless of who is the current owner of the land. Anyone who has been prevented from building a shed within ten feet of the front of his or her property knows about this.
Woodinville filed the case in July 2011. In late 2013, the trial court entered a judgment mostly against Woodinville. Woodinville’s lien was held to be enforceable only against WVA, and thus it does not “run with the land.” It cannot be enforced against the property’s new owner, Woodinville Village Partners. It is believed that Woodinville is currently appealing the trial court’s ruling.
What Happens Next
During this process, the interest held by Frontier Bank was transferred more than once and eventually ended up in the hands of Legacy Capital, located in Bellevue, Washington, who created the development entity Woodinville Village Partners. Legacy now holds the reigns for developing the Village, and it is believed that it wants to move forward as soon as is practicable. Most likely, because the dispute with the City of Woodinville is on appeal and not yet completed, this may delay the re-start of development of the Village.
No one disagrees that this property in Woodinville could be a celebration of Washington wine, food, and the agricultural history of Woodinville and the entire state. The development could be a hub of new experiences in Woodinville wine country, and bring even more of a “sense of place” than Woodinville already has. Based on Legacy’s work in the past, I believe it will bring this sort of vision to the site.
However, being experienced in real estate construction, I also assume that Legacy understands that executing a project of this scope requires more of a partnership approach than a “build it and they will come” approach. Woodinville must be partner number one, rather than a quasi-adversary. Even when ground breaks, I common sense dictates that it may take roughly 18-24 months to complete a project of this magnitude. Nevertheless, until litigation is over (appeals and all), and Legacy and Woodinville reach a unified vision of what the Village will be, the site will remain a large patch of overgrown grass with three beautiful roundabouts dotting the edges – a reminder of the Wine Village that may become.
(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)
© All rights reserved Kevin Guidry 2014.