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Emkey v. W.S.C., Inc.

United States District Court, D. Maryland

August 21, 2019

TANYA EMKEY, et al., Plaintiffs,
v.
W.S.C., Inc., et al., Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett, United States District Judge

         Plaintiffs Tanya and Timothy Emkey (“the Emkeys” or “Plaintiffs”), residents of Florida, allege that the Defendants, W.S.C., Inc. (“WSC”), a Pennsylvania Corporation, and its wholly owned Maryland subsidiary, Indian Acres Club of Chesapeake Bay, Inc. (the “Indian Acres Club” or “the Club”) (collectively, “Defendants”), have breached their obligation to transfer ownership and operation rights of common amenities in a planned campground, Indian Acres of Chesapeake Bay (“Indian Acres”), to themselves and other similarly situated owners of campground lots, or “Funsteads.” (Compl. ¶ 13.) The Emkeys' Complaint (ECF No. 1) asserts five counts, all sounding in Maryland state law: breach of contract (Counts One and Four); violations of the Maryland Real Property Article, Md. Code, Real Prop., § 11B-106.1, et seq. (Counts Two and Three); unjust enrichment (Count Five); unfair and deceptive trade practices (Count Six); and seeks a declaratory judgment (Count Seven). (Id.) Plaintiffs filed their Complaint in this Court pursuant to the jurisdiction conferred under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d).[1]

         Pending before this Court is Defendants' Motion for Summary Judgment (ECF No. 33). The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons stated below, Defendants' Motion for Summary Judgment (ECF No. 33) is GRANTED, and Judgment is ENTERED in favor of Defendants, W.S.C. and Indian Acres Club.

         BACKGROUND

         I. Factual Background.

         This dispute arises out of the Emkeys' claim that the Defendants have failed to uphold their contractual obligation to transfer ownership and operation rights of common amenities in a planned campground, known as Indian Acres. (Id. at ¶¶ 45.) Indian Acres is a 300-acre property in Cecil County, Maryland which has been subdivided into nine Glens containing individually-owned campground lots, or “Funsteads.” (Compl. ¶ 19; Ans. ¶ 19.) Defendant WSC, a Pennsylvania corporation which operates in Cecil County, was created to develop Indian Acres and continues to engage in the sale of Funsteads. (Compl. ¶ 18; Ans. ¶ 18; Defs.'s Ex. I, Restated Declaration at 330, ECF No. 33-2.)[2] Defendant Indian Acres Club is a Maryland corporation which manages and operates the campground. (Compl. ¶ 19; Ans. ¶ 19.) The Emkeys allege that they jointly own three Funsteads. (Compl. ¶ 14, 16, 17.)

         A. The Restated Declaration.

         The Emkeys' claims arise from the Defendants' alleged breach of the terms of a Restated Declaration recorded in the Land Records for Cecil County, Maryland (Compl. ¶ 29; Ans. ¶ 20.) On July 6, 1978, WSC executed a Restated Declaration to “establish[] and create[] certain restrictions in furtherance of the plan for the subdivision, improvement and sale of the subdivided numbered lots (hereinafter referred to as “Funsteads”) set forth and described in the recorded plats [for Indian Acres].” (Restated Declaration at 330.) The Restated Declaration sets forth that its restrictions “run with the land and shall be binding on all parties having acquired any right, title or interest in and to the real property or any part or parts thereof, or right to use any part or parts thereof subject to such Restrictions.” (Id. at 331.) The covenant prohibits the use of Funsteads “except for camping purposes” and specifically declares that “No Funstead shall be used as a residence[.]” (Id. at §§ 4(A), 7(A)(1)).

         The document also establishes the authority of the Indian Acres Club as follows:

The purchaser of a Funstead acknowledges that the Declarant[3] has granted to Indian Acres Club of Chesapeake Bay, Inc. a non-stock Maryland Corporation, (hereinafter referred to as the ‘Club') the exclusive right to operate and maintain all community areas and recreational facilities and understands that the Club is engaged in the sale of membership to the general public[.]

(Id. at § 11 (A)).

The Club shall have all the powers that are set out in its Articles of Incorporation and all other powers that belong to it by operation of law, including, but not limited to, the power to levy against every member of the Club a uniform annual charge per Funstead or membership in the amount of such charge to be determined by the club after consideration of current maintenance needs, leasing fees and future needs of the Club, for the purposes set forth in its Articles of Incorporation.

(Id. at §11(E)).

         The Emkeys claim that the Defendants have failed to abide by § 11(K) of the Restated Declaration by failing to transfer the “common elements” of Indian Acres to the Funstead owners. (Compl. at ¶¶ 3, 22.) This provision specifies that WSC must “transfer to the Club all of the Declarant's rights and obligations with respect to the operation of [Indian Acres] (excepting rights with respect to the then unsold Funsteads) . . . when eighty (80%) of the total number of Funsteads held for sale or other disposition by Declarant and its predecessors have been sold, leased, conveyed or otherwise disposed.” (Id. at § 11(K)). The provision further specifies how the number of Funsteads are to be tallied and how the transfer is to effectuated. The total number of Funsteads must be “determined with reference to the latest recorded plat or plats covering all nine (9) Glens[].” (Id.) When 80% of the total number of Funsteads have been conveyed, “[t]he Club will be obligated to purchase from the Declarant all of the common areas and recreational facilities[.]” (Id.) The purchase price is also stated with specificity: it is to be “equal to the figure obtained by multiplying the number of Funsteads sold, under contract of sale, or otherwise disposed of, along with a contract reference to this obligation, by $495.00, such price to be paid in case by the Club to the Declarant.” Finally, when WSC receives the Club's payment, “[WSC] will execute and deliver to the Club a deed conveying title to such common areas and recreational facilities, and all of the Declarant's rights and obligations with respect to the property (excepting rights with respect to the then unsold Funsteads).” (Id. at § 11(K)(2).)

         B. Indian Acres Club By-Laws

         The Emkeys also claim that the Indian Acres Club has violated its own By-Laws by improperly assessing fees and engaging in “mismanagement, and acts of self-dealing.” (Id. at ¶ 67.) The By-Laws of Indian Acres Club (“By-Laws”) provides that the purpose of the corporation is to “operate, manage and maintain, the development known as Indian Acres of Chesapeake Bay, Cecil County, Maryland.” (Defs.'s Ex. J, By-Laws Art. 1 § 3, ECF No. 33-1.) The By-Laws complement WSC's obligations to transfer ownership of the campground's common amenities. They specify that the Club must purchase all of the community areas and recreational facilities in Indian Acres from WSC when eighty percent (80%) of the total number of Funsteads at Indian Acres are sold or under contract. (Id. at Art. 8 § 5.) The method of determining the total number of Funsteads is the same in the By-Laws as in the Restated Declaration: they are to be “determined with reference to the latest recorded plat or plats covering all nine Glens.” (Id. at Art. 8 § 5.) As stated in the Restated Declaration, the purchase price for the amenities will be $495 per each sold Funstead.

         C. The Total Number of Funsteads and the 80% Threshold.

         Plaintiffs allege that Indian Acres consists of 2, 154 lots and that WSC's own internal audit of May 2017 found that WSC had sold eighty-one percent (81%) of the original lots. (Compl. at ¶ 25.) Despite this, Plaintiffs allege, the Defendants have not transferred ownership of Indian Acres' common amenities as they are contractually obligated. To support these allegations, Plaintiffs attached the “internal audit” to their Complaint-an unsigned, two-page document labeled “Land Inventory as of ...


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