Fisher v. Virginia Elec. and Power Co.

258 F.Supp.2d 445

Wiley Vick FISHER, Jr., John White Fisher, Harmon T. Tomlinson, Jr., and Linda Tomlinson, for themselves and on behalf of all others similarly situated, Plaintiffs, v. VIRGINIA ELECTRIC AND POWER COMPANY and Dominion Telecom, Inc., Defendants.

No. CIV.A. 302CV431.

United States District Court, E.D. Virginia, Richmond Division.

April 22, 2003.

Stephen E. Baril, Esquire, A. Peter Brodell, Esquire, Samuel W. Hixon, III, Esquire, Williams Mullen P.C., Richmond, VA, Nels Ackerson, Esquire, Elaine A Panagakos, Esquire, Kathleen C. Kaufman, Esquire, The Ackerson Group Chartered, Washington, DC, Randall B. Pridgen, Esquire, Battle, Winslow, Scott & Riley, P.A., Rocky Mount, NC, for Plaintiffs.

Stephen A. Northup, Esquire, Matthew B. Kirsner, Esquire, Troutman Sanders LLP, Richmond, VA, Charles A. Zdebeski, Esquire, Troutman Sanders LLP, Washington, DC, Thomas E. Spahn, Esquire, Robert L. Hodges, Esquire, McGuire-Woods, LLP, George W. Marget, III, Esquire, John D. Sharer, Esquire, Dominion Resources Services, Inc., Richmond, VA, for Defendants.

MEMORANDUM OPINION

PAYNE, District Judge.

Plaintiffs, Wiley Fisher, Jr., John Fisher, Harmon Tomlinson, Jr. and Linda Tomlinson ("Plaintiffs"), filed an Amended Complaint against the Defendants, Virginia Electric and Power Company ("VEPCO") and its affiliated company, Dominion Telecom, Inc. ("Telecom"), seeking: (1) a declaratory judgment respecting the meaning of certain grants of easement burdening lands that Plaintiffs own in Virginia and North Carolina (Count I); (2) compensatory damages for continuing trespass on that land, alleged to be the consequence of the Defendants' conduct in using the easements for purposes that the granting documents do not permit (Count II); (3) an accounting for, and the disgorgement of, the alleged unjust enrichment which the Defendants have secured by exceeding the scope of the granting documents (Count III).

Each of the granting documents at issue contains language substantively identical to the following:

The Owner covenants that he or she has the right to convey the said easement; that the Company shall have quiet and peaceable possession, use and enjoyment of the said easement, and that the Owner will execute such further assurances of the said easement as may be requisite.

(Amended Complaint Exs. A & B). Thus, the easements each contain a covenant of quiet possession¹ and a covenant of further assurances.

In its Counterclaim, VEPCO alleges that the Plaintiffs breached the covenants of quiet possession by filing this action. In essence, VEPCO argues that, as a consequence of their efforts to require VEPCO to abide by the express terms of the granting documents, the Plaintiffs have breached the covenant of quiet possession and, for doing so, must pay the attorney's fees and costs that VEPCO incurs in defending this action. VEPCO also seeks an injunction requiring the Plaintiffs to provide "further assurances" of the easement grants, pursuant to Va.Code § 55-73, as necessary to confirm VEPCO's rights to hold and enjoy the subject lands free from any interruption, claim or demand by anyone.

On January 16, 2003, the Plaintiffs filed a Motion To Dismiss Defendant's Counterclaim, pursuant to Fed.R.Civ.P. 12(b)(6), on three separate grounds. First, the Plaintiffs point out that VEPCO has failed to allege an actual or constructive eviction, which the Plaintiffs assert is essential to any claim for a breach of the covenant of quiet possession. Second, the Plaintiffs argue that, as a matter of law, their good faith claims seeking an interpretation of the easement grants cannot constitute a breach of the covenant of quiet possession. Finally, the Plaintiffs contend that, even if VEPCO could prove a breach of the covenant of quiet possession, an award of attorney's fees is not a proper remedy for such a breach.

ANALYSIS

To resolve the motion to dismiss, it is first necessary to reflect on the standard of review for assessing motions brought under Fed.R.Civ.P. 12(b)(6), then to resolve any conflict of laws issues, and thereafter to examine the nature of the covenant of quiet possession. When those legal principles are fixed, the sufficiency of VEPCO's counterclaim may be addressed.

I. Standard of Review Under Fed. R.Civ.P. 12(b)(6)

The Plaintiffs move to dismiss VEPCO's counterclaim pursuant to Fed.R.Civ.P. 12(b)(6). It is a first principle that, "[i]n considering a motion to dismiss a [counterclaim] for its `fail [ure] to state a claim upon which relief can be granted,' a court must construe the [counterclaim] in the light most favorable to the [claimant], read the [counterclaim] as a whole, and take the facts asserted therein as true." Storey v. Patient First Corp., 207 F.Supp.2d 431, 439-40 (E.D.Va.2002) (quoting Fed. R.Civ.P. 12(b) (6)).

Because Rule 12(b)(6) motions test the legal sufficiency of a claim as it is plead, they should be granted only in very limited circumstances. Jetform Corp. v. Unisys Corp., 11 F.Supp.2d 788 (E.D.Va.1998). Indeed, a court should deny such a motion unless "it appears beyond doubt that the [claimant] can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (citations omitted). In sum, "all reasonable inferences must be made in favor of the nonmoving party, and `a [counterclaim] should be dismissed only where it appears beyond a reasonable doubt that recovery would be impossible under any set of facts which could be proven.'" Storey, 207 F.Supp.2d at 440 (quoting America Online, Inc. v. GreatDeals.Net, 49 F.Supp.2d 851, 854 (E.D.Va.1999)).

These precepts govern the ensuing assessment of the motion to dismiss VEPCO's counterclaim.

II. Applicable Law

Exhibits A, B, and C to the Amended Complaint (the "Fisher Deeds") concern land situated in Nash County, North Carolina. Exhibits D and E, (the "Tomlinson Deeds") concern land situated in Greensville County, Virginia. Thus, a question arises respecting which state's law to apply when interpreting the covenants that the deeds contain. Neither party has addressed that point. Instead, the parties alternatively pick and choose from North Carolina and Virginia law to the extent that they consider it to support their respective arguments. Hence, it is necessary that the Court address that issue sua sponte.

To begin, it is axiomatic that, when sitting in diversity jurisdiction, federal courts must apply state substantive law as announced by the state's highest court. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under the rule in Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), a federal court sitting in Virginia and exercising diversity jurisdiction applies Virginia's choice of law rules.

Although the parties have relied principally on Virginia statutes and caselaw, in actions respecting real estate contracts relating to land situated in North Carolina, the courts of Virginia would not be so inclined:

Regarding the substantive issues ... the lex loci rei sitae governs contracts relating to real estate and the rights of the parties thereto, as well as the nature and extent of the interest therein. Burtners v. Reran, 65 Va. (24 Gratt.) 42, (1873). This reflects the principle that real estate is exclusively subject to the laws of the state in which it is located. Hotchkiss v. Middlekauf, 96 Va. 649, 655, 32 S.E. 36 (1899).

Va. Elec. & Power Co. v. Norfolk S. Ry. Co., 2002 Va. Cir. LEXIS 80 (2002). Therefore, to the extent that Virginia and North Carolina law conflict on the topic of the covenant of quiet possession, Virginia law is applicable to the Tomlinson Deeds and North Carolina law is applicable to the Fisher Deeds.

III. The Covenant of Quiet Possession

A. Relationship To Covenant Of Warranty

In their briefs, the Plaintiffs argue that the covenant of general warranty and the covenant of quiet possession are essentially identical and, therefore, they rely on a number of decisions respecting the covenant of general warranty to support their position that a claim for breach of the covenant of quiet possession cannot proceed absent an actual or constructive eviction by one with paramount title. At oral argument, however, the Plaintiffs conceded that Virginia law treats the two covenants differently, at least with respect to any requirement that the covenantor indemnify the covenantee against claims and demands to the property conveyed. To fully ascertain the contours of the covenant of quiet possession, it is first necessary to determine whether, as most leading commentators attest,² the covenant of quiet possession is essentially identical to the covenant of warranty in North Carolina and Virginia, at least with respect to the requirement that, as a prerequisite to a claim for breach of the covenant, the covenantee must have been constructively or actually evicted by someone with paramount title.

1. North Carolina

The Supreme Court of North Carolina early adopted the view that the covenant of quiet enjoyment is substantially encompassed by the covenant of warranty. See Fishel v. Browning, 145 N.C. 71, 78-79, 58 S.E. 759 (1907) ("General warranty is, under our decisions, a covenant for quiet enjoyment."). The Plaintiffs assert, correctly, that the North Carolina courts have continued this practice at least with respect to the requirement for an actual or constructive eviction by one with superior title. Shinier v. Traub, 244 N.C. 466, 467-68, 94 S.E.2d 363 (1956); Guy v. First Carolinas Joint Stock Land Bank, 202 N.C. 803, 804, 164 S.E. 323 (1932) (using precedent respecting the covenant of warranty in order to resolve a dispute respecting the covenant of quiet possession); Cover v. McAden, 183 N.C. 641, 644, 112 S.E. 817 (1922). VEPCO does not challenge this assertion. (Defs. Opp. Mot. Dismiss p. 8) (stating that the Plaintiffs's argument that a covenant...