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Charlotte Amalie
Thursday, July 25, 2024
HomeNewsLocal newsEHI Disputes Court Order Transferring Caneel Bay Improvements to Government

EHI Disputes Court Order Transferring Caneel Bay Improvements to Government

An aerial photo shows the extent of hurricane destruction at Caneel Bay in 2017. Seven years later, the resort remains in ruins. (Image courtesy NPS Environmental Report, January 2023)

EHI Acquisitions has filed a motion in V.I. District Court disputing a recent order to transfer title to the Caneel Bay Resort and its improvements to the federal government, arguing that the judge overlooked that EHI holds a mortgage on the property.

The motion, filed Friday, asks that the court alter or amend its summary judgment orders to remove reference to transferring title to the improvements to the Department of the Interior.

At issue in the lawsuit that was brought in June 2022 was whether the resort on 150 acres of prime St. John beachfront real estate belongs to EHI Acquisitions, which managed the property 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 court was left to determine whether language in the RUE obligated the federal government to pay EHI for its improvements to the property over the years; whether it reverted 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 belonged to the NPS free and clear.

Third Circuit Judge Cheryl Ann Krause was unequivocal in her 20-page Memorandum Opinion and Order granting the United States’ motion for a summary judgment, filed April 22, that the language of the 1983 Indenture makes clear that the property and its improvements were to be given back to the government at the expiration of the RUE for a nominal consideration of $1.

Krause was assigned to the case in December after V.I. District Court Chief Judge Robert Molloy was removed without explanation.

Now, EHI alleges that the RUE did not end on Sept. 30, 2023, because it and sister company CBI took out an $11 million mortgage on their interests in the property in 2015 and “the mortgage states that the mortgagors (including EHI and CBI) may not terminate the RUE without the prior written consent of the Lender,” which was initially FirstBank Puerto Rico, according to the memorandum. The mortgage was subsequently reassigned to USVI Lender, LLC on May 1, 2018, for $6.5 million, it says.

“The Indenture mandates, and both parties agreed, that the RUE cannot end, and fee title to the land and title to the RUE cannot merge, so long as a mortgage is in effect on the RUE. And both parties agreed (and the undisputed evidence established) that a mortgage of the RUE is in effect. Accordingly, the RUE did not end on September 30, 2023, and remains in effect today,” according to the memorandum.

“EHI respectfully requests that the Court reconsider, and alter or amend, this portion of its summary judgment orders because the Court overlooked an undisputed, dispositive fact: the RUE did not expire on September 30, 2023, and the RUE cannot end so long as a mortgage is in effect on the property,” it states.

EHI is also arguing that the order violated its Fourteenth Amendment rights, alleging that “[d]ue process required, at minimum, that EHI be put on notice that the Government (or the Court) was asserting that the Retained Use Estate would end on September 23, 2023, triggering transfer of the Improvements, even though the RUE was encumbered by mortgages. If this issue had been raised, EHI would have had an opportunity to present all the relevant facts in context, and to make all of its arguments regarding these issues.”

It claims the issues of EHI’s continuing ownership of the RUE and the improvements were never before the court. Rather, the complaint raised solely the issue of title to the land, it says. “EHI did not seek to adjudicate ownership of the Retained Used Estate or ownership of the Improvements. The United States never answered or asserted any counterclaims, leaving EHI’s claim to quiet title to the land as the sole issue before the Court,” according to the memorandum.

However, the government contended in its filings that 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.”

It was forthright on the matter of ownership and whether the RUE holder had any right to compensation and asked that “EHI should be ordered to convey the Improvements to the United States and estopped from claiming title to the Premises.”

Furthermore, it argued that EHI was unjustly enriched because it has retained possessionof 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 was resolved.

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

EHI, which said after last month’s order that it intends to appeal the court’s ruling that it does not have title to the land, said in the memorandum that the motion will not prejudice its rights of appeal. The company is represented by Dudley Newman Feurzeig of St. Thomas and Dovel & Lunaer of Santa Monica, California.

Neither the government nor the court has responded to the motion filed Friday, which was a territorial holiday recognizing the St. Thomas Carnival Children’s Parade.

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