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HomeNewsLocal newsBoth Sides State Their Case in Fight Over Caneel Bay Ownership

Both Sides State Their Case in Fight Over Caneel Bay Ownership

An aerial photo shows the extent of the destruction at Caneel Bay following the twin Category 5 hurricanes of September 2017. The resort has been closed ever since. (Photo by NPS)

Both sides in the long-running lawsuit over ownership of the Caneel Bay resort on St. John filed dueling briefs in V.I. District Court by 5 p.m. sharp on Thursday, meeting the deadline imposed by Judge Cheryl Ann Krause to answer questions of contract and property law specific to the case.

At issue is whether the resort on 150 acres of prime St. John beachfront real estate belongs to EHI Acquisitions, which has managed the property since 2004 under an agreement known as a Retained Use Estate, or to the federal government after the RUE expired at the end of September.

The RUE was created in 1983 by Laurance Rockefeller, who donated some 5,000 acres of land to the National Park Service but reserved the Caneel Bay property for the Jackson Hole Preserve, the family’s land trust. Under the agreement, the preserved land was transferred to the NPS with the understanding the RUE — also known as the 1983 Indenture — would remain in place for 40 years. The resort has been managed by different entities since then, the latest being EHI Acquisitions, an affiliate of CBI Acquisitions.

The question now is whether language in the RUE obligates the federal government to pay EHI for its improvements to the property over the years; whether it reverts to EHI because the Interior Department rejected its 2019 offer to relinquish the RUE for $70 million after the resort was destroyed by hurricanes Irma and Maria in 2017; or whether it belongs to the NPS free and clear.

Both sides quote liberally from Black’s Law Dictionary in their briefs, arguing the definitions of words like “convey,” “offer” and “transfer.”

EHI’s argument in part hinges on the word “an,” for example. It contends in its 24-page brief that includes entire pages of footnotes that when “an offer” is followed by the words “to convey and transfer,” the meaning of “offer” does not become “gift” — meaning an exchange for no consideration.

The Justice Department counters in its brief that “Black’s Law Dictionary defines the term ‘offer’ as ‘the act or an instance of presenting something for acceptance.’” It said the court “should look to the plain language of the 1983 Indenture to interpret the phrase ‘offer to convey and transfer,’” which it says “is plain and unambiguous.”

Specifically, the RUE does not use the words “sell” or “pay,” the government argues. “It does not say ‘offer to sell’ or ‘upon payment.’ It simply says: ‘offer to convey’ and ‘upon acceptance.’ Nothing in the 1983 Indenture suggests that when JHPI used the term convey, it really meant sell and when it used the word accept it really meant pay,” it said.

If there were any doubt, the brief states, the court need only look at the extrinsic evidence surrounding the RUE’s creation, including a 1982 letter by Rockefeller to the Interior Department stating that the buildings would also be donated to the NPS at the end of the RUE. Or another by the preserve’s board chairman to an insurance company stating the terms of the Indenture, including that it would retain use of the property for Jackson Hole Preserve for 30 years, and that at the end of the period, “the improvements would also become the property of the United States Government.”

EHI argues in its brief that the government should not be allowed to rely on such extrinsic evidence because some of it dates more than five years after the Indenture was signed, and because some of the correspondence was never shared with the United States. “Because none of these documents were communicated between the parties, these documents may not be consulted as extrinsic evidence,” it said.

“[T]he Court may only consult extrinsic evidence bearing on the early termination of the RUE, and in particular that addresses the purportedly ambiguous phrase (‘an offer … to convey and transfer’),” EHI argues. “Statements about the general expectations or effect of the transaction may not be considered.”

The government contends that EHI brought the lawsuit only after it failed to get a 60-year extension of the RUE, which the company had argued it would need to recoup its investment rebuilding the resort after it was destroyed in Irma. It has not disclosed the amount of insurance proceeds it received for the property in the wake of the 2017 hurricanes, which has been an issue in the case. The Justice Department has appealed a magistrate judge ruling rejecting its motion to compel EHI to produce that information.

“EHI signed documents agreeing to convey and transfer the improvements to the United States at the end of the RUE and operated under those documents for over 15 years. It was only after EHI failed to get the RUE extended and the time was approaching for EHI to transfer the improvements to the United States that, all of a sudden, EHI claimed it owned the entire 150 acres of land and all the improvements on it,” the government states.

The brief, at 16 pages, is forthright on the matter of ownership and whether the RUE holder has any right to compensation and asks that “EHI should be ordered to convey the Improvements to the United States and estopped from claiming title to the Premises.”

Furthermore, EHI has been unjustly enriched because it has retained possession of the improvements located on prime real estate on St. John after the RUE expired in September and the court ordered the United States to refrain from taking possession of the property until the lawsuit is resolved.

“EHI also has retained possession of the insurance proceeds that it received to rebuild the Caneel Bay Resort after the 2017 hurricanes,” the brief states. “The resort has not been rebuilt.”

EHI argues that “properly framing the issue is decisive here,” which comes down to the meaning of the phrase “an offer … to convey and transfer.”

“Defendant cannot prevail merely by demonstrating that the phrase encompasses a gift. Defendant can prevail only by demonstrating that it means only a gift and precludes a bargain,” it said.

Furthermore, if “the Indenture were interpreted as requiring a gift of the Improvements, it would necessarily be a future gift, and would therefore be ineffective and unenforceable” under Virgin Islands law, the brief argues.

U.S. Attorney Delia Smith has asked the court to dismiss the complaint with prejudice, meaning it could not be brought again, or to grant summary judgment in favor of the United States.

EHI, represented by Dudley Newman Feurzeig of St. Thomas and Dovel and Luner of California, has asked the court to grant its motion for summary judgment, or for a partial summary judgment on the issues identified in its Statement of Issues.

Judge Krause, of the Third Circuit Court of Appeals, was appointed to the case in December after V.I. District Court Chief Judge Robert Molloy was removed without explanation.

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