Trump attorneys fight for Albemarle House rights

Attorneys for Bank of America and Donald Trump argued in federal court Wednesday over Trump’s assertion that he has a right to match any sale price negotiated between the bank and a buyer for the foreclosed Albemarle House property once owned by Patricia Kluge.

The bank, through its affiliate Quality Properties Asset Management Co., filed a lawsuit in U.S. District Court in August seeking to have the first right to refusal claim tossed out, saying the right has negative impacts on the property’s title.

Raighne C. Delany, the attorney representing Quality Properties, told U.S. District Court Judge Norman K. Moon on Wednesday that to sell the property adequately the land title needs to be free of lien and other potential hazards such as litigation.

“According to Mr. Trump, any potential buyer who makes an offer would have to wait to see if Mr. Trump matches it,” Delany said. “A person could purchase the property, but they would be buying a lawsuit with Mr. Trump.”

Delany noted that since the clause was penned by John Kluge the properties have been sold and foreclosed upon, sold and resold. He argued that, through foreclosure, the right was either lost to Trump or the right of refusal should have been used to match the bank’s foreclosure sale of $15.26 million.

The bank had told Trump to sign a release of the right of refusal or purchase it for the foreclosure price, but Trump refused.

The right of first refusal comes from quitclaim deeds filed as part of the Kluges’ 1990 divorce. In the deeds, Patricia Kluge took ownership of the property upon which Albemarle House sits while John Kluge retained ownership of the property around the house grounds.

Patricia Kluge agreed to “not accept an offer for the purchase of all or any portion of the property without first notifying the then current owner” of John Kluge’s property. “In such event, the then current owner … shall have the right to purchase said property at the same price and upon the same terms and condition as those offered by such bona fide third party.”

The deed put a 15-day deadline on exercising the right “after delivery to it of written notice.”

The property was part of the foreclosure sale of the bankrupt Kluge Estates Winery and Vineyard, the majority of which was bought by Trump, sans the property that contained the deed restriction.

The Kluge winery and vineyard, the state’s largest, fell to harsh economic times after wine sales plummeted on the heels of quick production expansion. To help fund the winery, Patricia Kluge dedicated much of her personal property, putting real estate and possessions up as collateral.

Farm Credit Bank foreclosed on the winery, shut down production, sold off inventory and broke up the property into several parcels in a complicated foreclosure auction. Equipment that was used to operate the winery was sold off at a separate auction.

Trump purchased the winery and vineyard and, with his son Eric Trump, has resurrected the vintage as Trump Winery. He also purchased the property surrounding Albemarle House, and that was when the deed restriction was conveyed to him. He was quick to enforce it.

One court document includes a June letter from Eric Trump to Bank of America restating the right of first refusal on a “firm offer” the bank had received on Albemarle House by a prospective buyer.

“It affects the marketability of the property. We have a cloud on our title,” Delany told Moon.

David D. Hopper, representing Trump’s business interests in Virginia, disagreed.

“The notion that anyone who buys the property is buying into litigation is bogus,” Hopper told Moon. “If they get an offer and tender it to us and we don’t exercise the option, they sell it. No litigation. If they get an offer and we accept it, they sell it. No litigation.”

Hopper said the right of first refusal does not impact the bank’s ability to sell the property.

“It doesn’t affect their ownership or their right to sell it. It may affect to whom they sell it, but not how much they sell it for because that negotiated price would be need to be met,” Hopper said. “[The right of refusal] does not affect what they’re doing with the property. They’re marketing and there is a lot of interest in it.”

Moon questioned whether that was the case.

“If you know that someone else could come and step in and get your deal, why would you [buy] it?” Moon asked. “It seems that would deflate the price a willing buyer would pay and take a lot of buyers out of the market.”

Moon said he will consider the arguments presented from both Trump and Bank of America and make a decision on whether the first refusal right is valid or if there are restrictions on it.