Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-9-1998

Tamarind Resort v. Govt of V.I.
Precedential or Non-Precedential:

Docket 97-7020




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998

Recommended Citation
"Tamarind Resort v. Govt of V.I." (1998). 1998 Decisions. Paper 41.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/41


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Filed March 9, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 97-7020

TAMARIND RESORT ASSOCIATES, A U.S. Virgin Islands
Joint Venture consisting of TAMARIND RESORT
CORPORATION, a Delaware Corporation, CULLIGAN
PORSCHE, INC., a New York Corporation

v.

GOVERNMENT OF THE VIRGIN ISLANDS

Tamarind Resort Associates ("TRA"),

       Appellants

Appeal from the District Court of the Virgin Islands
(Division of St. Thomas)
(D.C. Civ. No. 95-cv-00010)

Argued
December 9, 1997

Before: SLOVITER, STAPLETON and MANSMANN,
Circuit Judges.

(Filed March 9, 1998)
       George H.T. Dudley, Esquire
       Henry L. Feuerzeig, Esquire
       Charles E. Engeman, Esquire
       Dudley, Topper & Feuerzeig
       Law House
       1A Frederiksberg Gade
       Charlotte Amalie, St Thomas
       USVI 00804

       Everett C. Johnson, Jr., Esquire
        (ARGUED)
       Leonard A. Zax, Esquire
       Mary E. Britton, Esquire
       Latham & Watkins
       1001 Pennsylvania Avenue, N.W.
       Suite 1300
       Washington, D.C. 20004

        COUNSEL FOR APPELLANT
        TAMARIND RESORT

       Julio A. Brady, Esquire
       Paul L. Gimenez, Esquire
       Gary M. Alizzeo, Esquire (ARGUED)
       Office of Attorney General of
        Virgin Islands
       Department of Justice
       48B-50 Kronprindsens Gade
       Charlotte Amalie, St Thomas
       USVI 00802

        COUNSEL FOR APPELLEE

OPINION OF THE COURT

MANSMANN, Circuit Judge.

After the Government of the Virgin Islands denied
Tamarind Resort Associates ("TRA") a Coastal Zone
Management Act ("CZMA") permit in order to develop Hans
Lollik Island, TRA brought suit against the Government in
the District Court of the Virgin Islands alleging breach of
contract, temporary and permanent unconstitutional

                                2
takings, and violation of TRA's constitutional rights to due
process and equal protection. The district court granted
summary judgment for the Government on the breach of
contract claim and, treating the constitutional claims as an
administrative writ of review, affirmed the Board of Land
Use Appeals' decision denying TRA a coastal zone permit.

In this appeal, we are asked to determine whether
summary judgment was appropriate on TRA's breach of
contract claim. In addition, we must examine the extent to
which the District Court of the Virgin Islands has
jurisdiction to decide writs of review and determine if the
district court erred in reviewing TRA's constitutional claims
in its appellate capacity.

Because we agree with the district court that the
agreement is unambiguous and that the Government did
not breach the agreement by applying the CZMA to TRA, we
will affirm the district court's grant of summary judgment
on the breach of contract claim. With respect to the
remaining constitutional claims, however, we find that the
district court erred in treating those claims as a writ of
review and therefore will remand for the district court to
consider TRA's constitutional claims under its original,
federal question jurisdiction.

I.

Great Hans Lollik Island is a 500 acre uninhabited island
located approximately two miles off the coast of St. Thomas.
In 1964, when the Island was owned by Hans Lollik
Corporation, the Corporation and the Government of the
Virgin Islands entered into an agreement which was
enacted into law as Act No. 1145, 1964 V.I. Sess. Laws
120, and amended by Act No. 1327, 1965 V.I. Sess. Laws
47, and Act No. 1883, 1967 V.I. Sess. Laws 53. The
agreement contains a provision identifying it as
"contractual and proprietary in nature."1
_________________________________________________________________

1. The district court applied principles of contract interpretation rather
than canons of statutory construction in interpreting the agreement
pursuant to our rationale in West Indian Co., Ltd. v. Government of the
Virgin Islands, 

, 1016-17 (3d Cir. 1988). The parties have
not disputed this ruling on appeal. For the reasons articulated by the
district court, we also will interpret the agreement under basic contract
principles.

                               3
Under the agreement, the Government approved "the use
of Hans Lollik Island for the purposes of a Hotel, Marina
and Housing Project" and provided for the lease of certain
Government land to construct a marina and related
facilities. The agreement states that the initial development
objective is to construct a hotel "with accommodations for
no less than fifty (50) rooms . . . together with a further
development plan calling for the construction of
approximately one hundred and fifty (150) major
residences." The agreement also contains language that
mirrors the Contract Clause of Article I, S10, cl. 1 of the
United States Constitution which states that "the
Government will not adopt any legislation impairing or
limiting the obligations of this contract."

In October of 1978, the Government enacted the Virgin
Islands Coastal Zone Management Act, V.I. Code Ann. tit.
12, SS 901-914 (1982 & Supp. 1997) in order to harmonize
the goals of environmental protection and economic
development. V.I. Code Ann. tit. 12, S 903(b)(1)-(11); see
also Virgin Islands Conservation Soc'y, Inc. v. Virgin Islands
Bd. of Land Use Appeals, 

, 29 (3d Cir. 1989).
The general purpose of the CZMA was to set up a
comprehensive program for the management, conservation,
and orderly development of the coastal area. West Indian
Co., Ltd. v. Government of the Virgin Islands, 

, 1011 (3d Cir. 1988); see also V.I. Code Ann. tit. 12,
S 903(b)(4). Under the CZMA, development of the coastal
zone may only be accomplished by obtaining a permit from
the Coastal Zone Management Commission ("CZMC"). V.I.
Code Ann. tit. 12, SS 904 and 910. The CZMA also provides,
however, that "[n]othing herein contained shall be
construed to abridge or alter vested rights obtained in a
development in the first tier coastal zone prior to the
effective date of [this Act]." V.I. Code Ann. tit. 12, S 905(f).
Hans Lollik Island is located in the first tier coastal zone
and is subject to CZMA restrictions absent a vested right in
development obtained prior to February 1, 1979, the
effective date of the CZMA.

TRA is a joint venture established in the Virgin Islands
comprised of Tamarind Resort Corporation, a Delaware
corporation, and Culligan Porsche, Inc., a New York

                               4
corporation. In 1990, TRA purchased Hans Lollik Island.
TRA is the successor-in-interest to the 1964 agreement
between the Government and Hans Lollik Corporation.

TRA developed a plan to construct an 800-unit resort on
the island including a 150 unit hotel. TRA submitted an
application to the CZMC for a permit. The CZMC rejected
TRA's application. TRA thereafter submitted a plan for a
675-unit development, including a 150 unit hotel and 525
residences consisting of 160 major residences and 365
villas or condominium-style homes.

The CZMC held public hearings on TRA's revised plan at
which many speakers voiced opposition to the development.
The CZMC ultimately denied TRA a permit for construction
of the 675-unit proposal in a detailed decision setting forth
its extensive findings and conclusions.

TRA appealed the CZMC decision to the Board of Land
Use Appeals. The Board affirmed the CZMC's decision
rejecting TRA's permit application. TRA then brought this
action against the Government in the District Court of the
Virgin Islands asserting claims for breach of contract,
temporary and permanent unconstitutional takings, and
violation of TRA's constitutional rights to due process and
equal protection. TRA moved for summary judgment on the
breach of contract and the due process and equal
protection claims and the Government cross moved for
summary judgment on all claims. The district court granted
summary judgment in favor of the Government on TRA's
breach of contract claim and, treating TRA's remaining
constitutional claims as an administrative writ of review,
affirmed the Board of Land Use Appeals' decision denying
TRA's permit application. This timely appeal followed.

II.

We review the district court's order granting summary
judgment on TRA's breach of contract claim de novo. Ideal
Dairy Farms, Inc. v. John Labatt, Ltd., 

, 743 (3d
Cir. 1996).

                               5
A.

Under the law of the Virgin Islands, interpretation of an
integrated agreement is to be determined as a question of
law by the court if it does not depend on the credibility of
extrinsic evidence or a choice of reasonable inferences to be
drawn from extrinsic evidence.2 Restatement (Second) of
Contract S 212(2) (1981). Any determination as to meaning
should be made in light of the relevant evidence, but after
the transaction has been examined in its entirety, the
words of an integrated agreement are the most important
evidence of intention. 

212, cmt. b. It is axiomatic
that where the language of a contract is clear and
unambiguous, it must be given its plain meaning. 

202(3)(a).

In addition, "[i]t is a fundamental principle of contract
law that `disputes involving the interpretation of
unambiguous contracts are resolvable as a matter of law,
and are, therefore, appropriate cases for summary
judgment.' " Hadley v. Gerrie, 

, 683 (D.V.I.),
aff 'd, Gas House, Inc. v. Unicorp American Corp., 

(3d Cir. 1991)(table decision)(citing Reed, Wible and
Brown v. Mahogany Run Dev. Corp., 

,
1099 (D.V.I. 1982)). We have consistently embraced the
basic common law principle that a contract is
unambiguous if it is reasonably capable of only one
construction. See, e.g., Sumitomo Mach. Corp. of America,
Inc. v. AlliedSignal, Inc., 

, 332 (3d Cir. 1996);
_________________________________________________________________

2. The agreement does not provide what law governs its interpretation,
but because the agreement relates to property within the Virgin Islands,
was performed in the Virgin Islands, and was entered into by the
Government of the Virgin Islands, we will apply Virgin Islands law. The
Virgin Islands Code establishes the sources of law for the Islands as
follows:

       The rules of the common law, as expressed in the restatements of
       the law approved by the American Law Institute, and to the extent
       not so expressed, as generally understood and applied in the United
       States, shall be the rules of decision in the courts of the Virgin
       Islands in cases to which they apply, in the absence of local laws
to
       the contrary.

V.I. Code Ann. tit. 1, S 4 (1967).

                               6
American Flint Glass Workers Union, AFL-CIO v. Beaumont
Glass Co., 

, 581 (3d Cir. 1995). We therefore
will affirm a grant of summary judgment in a breach of
contract action only where the contract is unambiguous
and the moving party is entitled to judgment as a matter of
law.

B.

TRA bases its breach of contract claim on the assertion
that the Government breached the agreement by requiring
TRA to obtain a CZMA permit prior to developing Hans
Lollik Island. TRA contends that in applying the CZMA to
TRA, the Government impaired TRA's rights under the
agreement in breach of its covenant to refrain from
adopting any legislation impairing or limiting the
obligations of the agreement. In order to determine whether
application of the CZMA impairs TRA's contractual rights
for purposes of summary judgment, we must first
determine what rights the agreement grants TRA and/or
whether the agreement is ambiguous as to the contractual
rights to which TRA is entitled.

The agreement contemplates an initial development on
Hans Lollik Island of a hotel with a minimum offifty rooms
and approximately one hundred and fifty major residences.
In addition, the agreement provides that:

       In regard to questions of land use and the zoning laws,
       the Government has satisfied itself and does hereby
       determine that the use of the respective sites in
       question for purposes of a Hotel, Marina and Housing
       Project are approved. The Government will further,
       consistent with the public interest, issue such
       certificates, licenses and permits and take such other
       action as may be required of it under any safety, health
       and related laws, and any rulings and regulations in
       connection therewith.

The Government contends that the agreement granted TRA
the right to use the Island for purposes of a Hotel, Marina,
and Housing Project, but that the agreement did not grant
TRA unlimited discretion to develop the Island for that use.
By contrast, TRA contends that the Government granted it

                                7
a vested right to develop Hans Lollik Island on any scale
above the specified minimum levels contemplated by the
agreement. We find TRA's interpretation of the agreement to
be unreasonable.

Prior to the agreement, Hans Lollik Island was zoned as
R-10 under the Virgin Islands Zoning and Subdivision Act
which permitted one or two family residential use only.
Under the plain language of the agreement, the
Government granted TRA an exception to the R-10 zoning
classification by approving the use of the Island for
purposes of a Hotel, Marina, and Housing Project. In light
of the entire transaction between the parties, the only
reasonable interpretation of the agreement is that it granted
TRA the right to use the property for commercial purposes
but did not grant TRA unlimited discretion to develop the
property for that use.

This interpretation is further supported by the fact that
the Government only agreed to issue necessary permits for
development if the proposed development was consistent
with the public interest. Under TRA's interpretation of the
agreement, the Government would have no discretion to
deny TRA the appropriate permits for development. Were we
to accept TRA's interpretation, the phrase `consistent with
the public interest' would be rendered nugatory, which is
an interpretation to be avoided. See Restatement (Second)
of Contracts S 203(a)(1981)(stating that "an interpretation
which gives . . . effective meaning to all the terms is
preferred to an interpretation which leaves a part .. . of no
effect").

In addition, the plausibility of TRA's interpretation is
further undermined by the agreement's silence on
discretional development limits. For example, while the
agreement contemplates the development of a hotel with a
minimum of fifty rooms and approximately one hundred
and fifty major residences, the agreement does not set a
maximum size limit. The agreement, however, does contain
an integration clause which specifies that the agreement
"constitutes the entire agreement of the parties." It is
therefore evident from the agreement that the parties had
no understanding as to a maximum level of development.

                               8
The agreement's silence on a maximum development
level, however, does not indicate, as TRA contends, that
TRA was granted unlimited discretion to develop the Island.
Both parties have relied on United States v. Winstar Corp.,

(1996), to support their respective positions
on this point. Winstar construed the unmistakability
doctrine, a canon of contract construction which provides
that "a contract with a sovereign government will not be
read to include an unstated term exempting the other
contracting party from the application of a subsequent
sovereign act." 

. It is somewhat
unclear after the Winstar plurality opinion as to the type of
contract to which the unmistakability doctrine applies. See
Yankee Atomic Elec. Co. v. United States, 

,
1578-79 (Fed. Cir. 1997)(noting that plurality found the
doctrine inapplicable to risk of loss shifting contracts but
that remaining five justices agreed that the doctrine's
application is unrelated to the nature of the underlying
contract). It is clear, however, that one of the basic
principles underlying the doctrine is the concern that it
would be unreasonable to presume, in the absence of an
express contractual provision, that a sovereign intended a
contractual waiver of a basic sovereign power. See generally

(Scalia, J., concurring)(stating
that "[w]hen the contracting party is the government . . . it
is simply not reasonable to presume . . . that the sovereign
[promises] that none of its multifarious sovereign acts,
needful for the public good, will incidentally disable it or
the other party from performing one of the promised acts.");
Merrion v. Jicarilla Apache Tribe, 

, 148
(1982)("[t]o presume that a sovereign forever waives the
right to exercise one of its sovereign powers unless it
expressly reserves the right to exercise that power in a
commercial agreement turns the concept of sovereignty on
its head, and we do not adopt this analysis.").

Based on this basic principle and under the specific facts
of this case, we find TRA's position that the Government
granted TRA unlimited discretion to develop the Island,
thereby relinquishing its power to regulate that
development, to be unreasonable in light of the fact that the
agreement does not contain any language to that effect.
Accordingly, because the agreement does not speak to a

                               9
maximum limitation on development and does not explicitly
or implicitly grant TRA the right of unlimited development,
the Government was at liberty to restrict TRA's
development by applying the CZMA to TRA.3

Our decision in West Indian Co., Ltd. (WICO) v.
Government of the Virgin Islands, 

(3d Cir.
1988) is instructive on this point. In WICO, we examined
the relationship between contractual obligations and
general police powers. WICO brought suit against the
Government of the Virgin Islands for a violation of the
contract clause of the United States Constitution after the
Government enacted a Repeal Act which purported to
repeal a Second Addendum to a settlement agreement
between the Government and WICO that exempted WICO
from the CZMA. WICO, 

.

We noted that the threshold inquiry in such a case is
whether the state law has operated as a substantial
impairment of a contractual relationship. 

We
held that the Repeal Act substantially impaired WICO's
contractual rights under the Second Addendum by
attempting to withdraw WICO's right to be free for a limited
time from CZMA restrictions. In completing our analysis,
we held that the Repeal Act was invalid because there was
no legitimate public purpose for the regulation's substantial
impairment.4 Significantly, we noted that:
_________________________________________________________________

3. TRA also argues that the CZMA, by its own terms, does not apply to
development of the Island because the agreement granted TRA a vested
right to develop prior to the effective date of the CZMA. As properly
noted
by the district court, the Board's interpretation of the CZMA does not
relate to TRA's breach of contract claim but is more appropriately
analyzed in connection with a potential writ of review. Accordingly, we
will discuss this portion of TRA's argument in Part III in connection with
TRA's constitutional claims.

4. We applied the following three-step analysis from the Supreme Court's
decision in Energy Reserves Group, Inc. v. Kansas Power & Light Co.,

, 411-12 (1983): (1) whether the state law substantially
impairs the contractual relationship; and if so (2) whether the state has
a significant and legitimate public purpose for the regulation; and if so
(3) whether the adjustment of rights and responsibilities of the
contracting parties is based on reasonable conditions and is of a
character appropriate to the public purpose justifying adoption of the
regulation. 

. We held that the Repeal Act was
invalid because there was a substantial impairment in WICO's
contractual relationship and because the Repeal Act could not be
justified by a significant public purpose. 

10
       We hold only that the Repeal Act is invalid. We do not,
       of course, hold that the police power of the Virgin
       Islands with respect to WICO's [land] was exhausted
       when the Second Addendum was approved. WICO is
       obviously not immune from generally applicable police
       power measures not inconsistent with the Second
       Addendum. Moreover, if conditions materially change
       so as to create a substantial problem that could not be
       foreseen in 1982, it may be that generally applicable
       land use regulations could validly alter the manner in
       which WICO may utilize its property.

In accordance with WICO, TRA is not immune from
Government regulations that are not inconsistent with
TRA's contractual rights under the agreement. Because we
hold that the agreement is unambiguous and grants TRA
the right to use the Island for commercial purposes but
does not grant TRA unlimited discretion to develop the
Island for that use, the Government's application of the
CZMA to TRA does not impair any of TRA's contractual
rights. Accordingly, summary judgment was appropriately
granted in favor of the Government on TRA's breach of
contract claim.

III.

With respect to TRA's constitutional claims, we exercise
plenary review over the district court's decision to examine
these claims in an appellate capacity. See Union Pacific R.R.
Co. v. Ametek, Inc., 

, 561 (3d Cir.
1997)(stating that "[t]his court exercises plenary review over
matters of jurisdiction."). In order to evaluate the propriety
of the district court's decision, we must first examine the
boundaries of the jurisdiction currently conferred upon the
District Court of the Virgin Islands.

A.

Our analysis of the jurisdictional boundaries of the
District Court of the Virgin Islands must begin with Article
IV, Section 3 of the United States Constitution, which

                               11
grants Congress the power to designate the jurisdiction of
the district court and the territorial court. Brow v. Farrelly,

, 1032 (3d Cir. 1993). Congress first
exercised this power in 1936 by enacting the Revised
Organic Act, 48 U.S.C. SS 1541-1645 (1994). 

Revised Organic Act was subsequently replaced by the more
comprehensive Revised Organic Act of 1954. The Revised
Organic Act acts as the constitution of the Virgin Islands
and as such defines the jurisdictional boundaries of the
Virgin Islands courts. 

of the 1954 Revised Organic Act confers
upon the District Court of the Virgin Islands federal
question jurisdiction as well as original jurisdiction over
questions of local law subject to the exclusive jurisdiction of
local courts over civil actions where the amount in
controversy is less than $500. Revised Organic Act of July
22, 1954, ch. 558, SS 22-23, 68 Stat. 506 (1955) (amended
1978, 1984); 

. In addition, section
1613 of the 1954 Revised Organic Act provides that local
courts shall share concurrent jurisdiction over all actions
conferred upon them by local law. Revised Organic Act of
July 22, 1954, ch. 558, S 23, 68 Stat. 506 (1955) (amended
1978, 1984); 

n.2.

In 1984, Congress amended the Revised Organic Act and
effectively eliminated the District Court of the Virgin
Islands' original jurisdiction over local matters. Congress
amended section 1612(b) by granting the district court only
original jurisdiction over federal questions, diversity actions
and any local matters "the jurisdiction over which is not
then vested by local law in the local courts of the Virgin
Islands." 48 U.S.C. S 1612(b)(1994). In addition, Congress
amended section 1611(b) to permit the Virgin Islands
legislature to vest jurisdiction in the local courts over all
matters in which any court established by the United
States does not have exclusive jurisdiction. 

1611(b).
We have interpreted section 1611 as amended as
empowering the Virgin Islands legislature to completely
divest the district court of its original jurisdiction over local
actions. Estate of Thomas Mall, Inc. v. Territorial Court of
Virgin Islands, 

, 262-64 (3d Cir. 1991).

                               12
In 1990, the Virgin Islands legislature exercised this
power and divested the district court of its jurisdiction over
all local civil matters effective October 1, 1991. V.I. Code
Ann. tit. 4, S 76(a) (1997). We have held that this 1990
enactment not only stripped the district court of its original
jurisdiction over local matters when a complaint is filed in
the district court, but also divested the district court of its
jurisdiction to determine writs of review appealing local
administrative determinations. Moravian Sch. Advisory Bd.
of St. Thomas V.I. v. Rawlins, 

, 273 (3d Cir.
1995). Specifically, we held that the Virgin Islands
legislature implicitly repealed the general Virgin Islands
provision which establishes writs of review as civil actions,
V.I. Code Ann. tit. 5, S1421, to the extent that provision
confers writ of review jurisdiction upon the district court
over local matters. 

district court examined TRA's constitutional claims
in its appellate capacity based on the premise that TRA
could have brought those claims via a writ of review in the
district court pursuant to V.I. Code Ann. tit. 12,
S 913(d)(1982). Section 913(d) is a provision of the CZMA
which provides that a petition for writ of review may be filed
in the district court pursuant to the general Virgin Islands
writ of review provisions by any person aggrieved by the
denial of an application for a coastal zone permit. V.I. Code
Ann. tit. 12, S 913(d). Under the rationale of Moravian and
because the general Virgin Islands writ of review provisions
have been implicitly repealed as they apply to the district
court's jurisdiction to decide writs of review over local
matters, section 913 of the CZMA is similarly invalid as it
applies to the district court's former writ of review
jurisdiction. TRA therefore could not have brought a writ of
review in the district court under section 913(d) of the
CZMA. Accordingly, the district court erred in reviewing
TRA's constitutional claims in its appellate capacity.

At oral argument, the Government stated that it was
unopposed to our remanding TRA's constitutional claims.
Because the district court should examine TRA's
constitutional claims under its original jurisdiction in the

                               13
first instance, we will remand for the district court to
determine whether there are any genuine issues of material
fact relating to these claims that would preclude summary
judgment.5

IV.

We conclude that because the Agreement unambiguously
grants TRA the use of Hans Lollik Island for commercial
purposes but does not grant TRA unlimited discretion in
development, the Government did not breach the
Agreement by applying CZMA restrictions to TRA. We will
therefore affirm that portion of the district court's order
that granted summary judgment on Count I. We alsofind
that the district court erred in examining Counts II, III, and
IV under its former writ of review jurisdiction, and therefore
remand for further proceedings consistent with this
opinion.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit
_________________________________________________________________

5. As previously noted, TRA has asserted on appeal that the CZMA by its
own terms does not apply to TRA because the Agreement granted TRA a
vested right in development prior to the effective date of the CZMA. The
district court interpreted this claim as a writ of review challenge to the
CZMC's decision to deny TRA a CZMA permit. While we hold that the
district court does not have original jurisdiction over writs of review,
on
remand the district court should determine whether it would be
appropriate to exercise supplemental jurisdiction over any writ of review
claims fairly made by TRA. See City of Chicago v. International College of
Surgeons, ___ S. Ct. ___, ___ 

, *7 (1997)(holding that
district court had supplemental jurisdiction over claims challenging
administrative decision once case was properly removed based on
original jurisdiction arising from constitutional claims).

                                14