Wolf Block Sued for Failing to Advise on Subsurface Rights

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Wolf Block

A bankrupt Florida business has sued Wolf Block for malpractice, alleging the firm failed to advise it that the company's plans to build multimillion-dollar homes on a West Virginia property it bought would be stifled by the fact that others owned the subsurface mineral rights.

In Dutch Run-Mays Draft v. Wolf Block, Dutch Run is suing defunct Wolf Block in the Philadelphia Court of Common Pleas regarding the work former real estate partner Henry Miller did in acquiring the title to the West Virginia property on behalf of Dutch Run. Miller, who joined Cozen O'Connor after Wolf Block dissolved in 2009, died in February 2010.

Dutch Run is alleging the property's value is decreased and the company's plans to build high-end homes is stifled by the fact that mineral rights holders can build things such as railroads and retention ponds on the land as part of their efforts to extract subsurface minerals.

In October 2004, Dutch Run, a company created solely for the purpose of purchasing this land, contracted to purchase about 5,000 acres of land in Greenbrier County in West Virginia. Dutch Run said the land abutted the "famous luxury hotel and country club" The Greenbrier. Before, during and after this time, Dutch Run said, it worked with Miller, a "prominent and exceptionally experienced and talented land-use attorney."

In October 2004, Miller allegedly procured a title insurance commitment for Dutch Run for the purchase of the land. The title policy listed exceptions to the title of the land, including certain mineral rights holders, Dutch Run said in its complaint.

Dutch Run said Miller knew of its plans to develop the land into multiple high-end subdevelopments, one of which would include numerous multimillion-dollar homes advertised for their "serenity, privacy, exclusivity and relaxation."

Miller negotiated, reviewed and advised Dutch Run on the title policy as well as handled other legal matters involving the land deal, Dutch Run said. The company said in the complaint that it ultimately purchased the land based on Miller's representations.

"Miller never advised or informed Dutch Run that the mineral rights holders could or would frustrate Dutch Run's development plans and hinder the development or the sales points," Dutch Run said in the complaint.

Dutch Run said it became aware Jan. 20, 2013, that West Virginia law gave surface rights to the owners of subsurface minerals. Among those rights, the company said, was a right to access the surface to retrieve the minerals and a right to engage in extraction operations.

Dutch Run said it became aware that certain mineral rights holders claimed or could claim through their conveyance deeds surface rights to the land that included the right to build roads and railroads across the land; create waste and refuse piles; construct buildings, pipelines and plants; and create waste ponds. Not only would the mineral rights holders' use of the land reduce the amount of land Dutch Run could sell or use as homebuilding, park or recreational space, but the mineral rights holders would be considered a nuisance to interested buyers of and visitors to the property, Dutch Run said in the complaint.

"As a result of the rights of the mineral rights holders, Dutch Run can no longer develop the plans it had tediously created nor enter into contracts with hotels or other vendors who could occupy the land," Dutch Run said in the complaint.

Dutch Run said it cannot use the land as it intended because of Miller's alleged negligent advice about the consequences of the mineral rights holders. Dutch Run said in the complaint that it would not have purchased the land but for Miller's alleged negligence.

This isn't the only litigation Dutch Run has become involved with in Pennsylvania over the West Virginia property.

In November 2013, a split panel of the Pennsylvania Superior Court ruled in Dutch Run-Mays Draft v. Lawyers Title Insurance that Dutch Run could not get title insurance coverage for lawsuits filed against it in West Virginia by nearby property owners looking to assert prescriptive easements on Dutch Run's property. Dutch Run's application for reargument before the Superior Court was denied last month.

Dutch Run is being represented in the case against Wolf Block by Jonathan R. O'Boyle of The O'Boyle Law Firm in Philadelphia. O'Boyle said Dutch Run would be petitioning the state Supreme Court for the right to appeal the insurance coverage suit.

The issues with the prescriptive easements caused the initial delay in developing the land, O'Boyle said, noting the issues related to the subsurface rights weren't discovered until many of the easement concerns were being researched.

Martin O'Boyle, Jonathan O'Boyle's father, is the owner, along with several family trusts, of Commerce Limited Partnership 9352. Dutch Run is a wholly owned subsidiary of Commerce Limited created for the sole purpose of purchasing the land in Greenbriar County, Martin O'Boyle said. He said he paid more than $6 million for the land and, nine years later, now has about $10 million invested in it.

Martin O'Boyle said Dutch Run went into bankruptcy mainly due to the issues with the prescriptive easements, but he said the subsurface rights were a contributing factor. He said Dutch Run is currently in bankruptcy in the Southern District of Florida and is hoping to get its reorganization plan approved soon.

A request for comment from an attorney working for Wolf Block was not immediately returned. An entry of appearance has not been made on behalf of Wolf Block in the Dutch Run suit, which was filed Jan. 30.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI. •

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    What a disaster! How could "an experienced" real estate lawyer miss such a basic issue? Better call the excess carrier too.

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