Lovell et al v. Selene Finance LP et al
Filing
29
MEMORANDUM OPINION Signed by Chief Judge Karon O Bowdre on 4/3/18. (SAC )
FILED
2018 Apr-03 PM 01:23
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
RICHARD LOVELL, et al.
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Plaintiffs,
v.
SELENE FINANCE, L.P., et al.
Defendants.
Case No. 1:17-cv-00850-KOB
MEMORANDUM OPINION
This matter comes before the court on Defendant Selene Finance’s motion to dismiss the
amended complaint. (Doc. 19).
Plaintiffs allege that they made the winning bid at an auction at which Selene was selling
real estate with a home located in Ragland, Alabama. (Doc. 17 at 2–3). They assert that, despite
having signed a purchase agreement with them, Selene has refused to close on the sale of the
home and real estate, claiming that the home was not included in the sale. (Id. at 3). Plaintiffs
seek specific performance and compensatory damages for breach of contract; negligent, wanton,
and/or reckless misrepresentation and concealment of material facts; and negligence. (Id. at 4–
7). Selene counterclaims for ejectment. (Doc. 26).
Selene moves to dismiss the amended complaint for failure to state a claim. (Doc. 19;
Doc. 20 at 3–7). The court WILL GRANT IN PART AND DENY IN PART the motion to
dismiss. The court WIILL DENY the motion to dismiss Plaintiffs’ breach of contract claim
because the Selene accepted Plaintiffs’ bid by signing the addendum to the purchase agreement.
The court WILL DISMISS WITHOUT PREJUDICE Plaintiffs’ misrepresentation claim because
Plaintiffs failed to plead it with particularity. Finally, the court WILL DENY the motion to
dismiss Plaintiffs’ negligence claim because the amended complaint appears to claim that Selene
negligently advertised and conducted the auction, not that it negligently failed to perform its
obligations under the contract.
I.
BACKGROUND
At this stage, the court must accept as true the factual allegations in the complaint and
construe them in the light most favorable to the plaintiffs. Butler v. Sheriff of Palm Beach Cty.,
685 F.3d 1261, 1265 (11th Cir. 2012). “Although analysis of a . . . motion [to dismiss] is limited
primarily to the face of the complaint and attachments thereto, a court may consider documents
attached to the motion to dismiss if they are referred to in the complaint and are central to the
plaintiff’s claim.” Starship Enters. of Atlanta, Inc. v. Coweta Cty., Ga., 708 F.3d 1243, 1253
n.13 (11th Cir. 2013). Because Selene attaches documents that meet those requirements, and
because Plaintiffs do not contest the authenticity of the attached documents, the court will
describe those documents and consider them in ruling on Selene Finance’s motion to dismiss.
On March 8, 2017, Selene’s agent conducted an auction of a property located in Ragland,
Alabama. (Doc. 17 at 2). The auction notice advertised a “Renovation Ready Auction” of a
four-bedroom, two-bathroom, 1,976-square-foot home situated on approximately 3.4 acres of
land, which would be conveyed “as is.” (Id.).
Plaintiffs were the highest bidders at the auction with a bid of $56,000. (Doc. 17 at 3).
On March 13, 2017, they tendered an earnest money deposit of $2,800, and they initialed a
“purchase agreement” with Selene on the same day. (Id.; Doc. 20 at 11).
The purchase agreement states:
Buyer acknowledges and agrees that its bid and purchase is subject to, and
contingent upon, Seller approving the bid and purchase, which approval shall be
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given or denied at Seller’s sole and absolute discretion in accordance with the
terms of this Purchase Agreement and Real Estate Purchase Addendum—
CWCOT Occupied Property.
(Doc. 20 at 11).
On March 17, 2017, Plaintiffs signed an addendum to the purchase agreement, and on
March 23, 2017, Selene’s agent signed the same addendum. (Id. at 16). The addendum states:
The Closing of the sale between Seller and Buyer shall be ON OR BEFORE the
date that is fifteen (15) calendar days after the date of Seller’s execution of this
Agreement for cash transactions or forty-five (45) calendar days after the date of
Seller’s execution of this Agreement for transactions being financed . . . .
(Id. at 12). But it does not indicate when or how Selene had to approve or deny the bid. (Id. at
12–16).
On April 18, 2017, Plaintiffs paid $274.93 toward the closing costs, but Selene refuses to
close on the purchase, claiming that the auction sold only the real estate, and did not include the
home located on that real estate. (Doc. 17 at 3–4).
Plaintiffs assert the following claims: (1) breach of the contract to sell real estate;
(2) misrepresentation of Selene’s willingness to close the sale; and (3) negligence for failing to
conduct the auction as advertised. 1 (Id. at 4–7).
II.
DISCUSSION
Selene moves to dismiss the amended complaint for failure to state a claim. A motion to
dismiss attacks the legal sufficiency of the complaint. Generally, the Federal Rules of Civil
Procedure require only that the complaint provide “‘a short and plain statement of the claim’ that
will give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it
rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting Fed. R. Civ. P. 8(a)). Rule 8 does not
1
This court has jurisdiction under 28 U.S.C. § 1332(a) because the parties are diverse and
Plaintiffs “asserted various causes of action and claimed damages that, in the aggregate, were
greater than $75,000.” Giovanno v. Fabec, 804 F.3d 1361, 1365 (11th Cir. 2015).
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require “detailed factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley, 355 U.S. at 47), but it does “demand[ ] more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal 556 U.S. 662, 678 (2009). But “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b).
1. Breach of Contract
Selene contends that Plaintiffs fail to state a breach of contract claim because the
purchase agreement provided that Selene could reject the purchase price at its sole discretion.
(Doc. 20 at 4–5). The court disagrees and concludes that Selene’s agent signing the addendum
showed Selene’s acceptance of Plaintiffs’ bid. As a result, the court finds that Plaintiffs state a
claim for breach of contract.
Under Alabama law, “[t]he elements of a breach-of-contract claim . . . are (1) a valid
contract binding the parties; (2) the plaintiffs’ performance under the contract; (3) the
defendant’s nonperformance; and (4) resulting damages.” Reynolds Metals Co. v. Hill, 825
So. 2d 100, 105 (Ala. 2002). A valid contract requires “an offer and an acceptance,
consideration, and mutual assent to terms essential to the formation of a contract.” Hardy Corp.
v. Rayco Indus., 143 So. 3d 172, 180 (Ala. 2013) (quotation marks omitted).
The purchase agreement, which the parties initialed on March 13, 2017—the day of the
auction—states: “Buyer acknowledges and agrees that its bid and purchase is subject to, and
contingent upon, Seller approving the bid and purchase, which approval shall be given or denied
at Seller’s sole and absolute discretion . . . .” (Doc. 20 at 11). That language suggests that the
purchase agreement is merely an offer by Plaintiffs to purchase the land for $56,000, and it gives
no indication that Selene has accepted or rejected that offer—indeed, it affirmatively reserves
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Selene’s right to approve the offer. (Id.). The purchase agreement standing alone does not
create a valid contract because it lacks the essential element of the seller’s acceptance of the
offer. See Hardy, 143 So. 3d at 180.
But the addendum cures the deficiency in the purchase agreement. Selene’s agent signed
the addendum on March 23, 2017, ten days after the auction, the parties’ initialing of the
purchase agreement, and Plaintiffs’ tendering the earnest money deposit. (Doc. 20 at 11, 16). In
addition, the execution of the addendum starts the countdown to the date for the closing—either
fifteen days after execution of the addendum if the buyers are paying with cash, or forty-five
days after execution of the addendum if the buyers are financing the purchase. (Id. at 12). At
this stage, the court must conclude that Selene’s execution of the addendum indicated its
acceptance of Plaintiffs’ offer of $56,000 for the property, and its agent’s signing of the
addendum triggered Selene’s obligation to close on the property. See Dixon v. Hill, 456 So. 2d
313, 315 (Ala. Civ. App. 1984) (stating that if “seller had accepted plaintiff’s offer to buy,” seller
“could not later reject [plaintiff’s] bid”). If the purchase agreement and addendum failed to set
out a price on which the parties had agreed, it would not constitute a contract in the first place
because it would be too indefinite to enforce. See White Sands Grp. v. PRS II, 998 So. 2d 1042,
1051 (Ala. 2008) (holding an alleged contract invalid for indefiniteness, and stating that “[a] lack
of definiteness in an agreement may concern . . . the price to be paid . . . .”) (quotation marks
omitted); see also Nihon Rufuto Co. v. Nidek Med. Prods., 437 F. App’x 782, 788–89 (11th Cir.
2011) (holding that an alleged contract was too indefinite to enforce in part because “[t]he
documents reflect that many of the engineering and design details . . . were contingent upon
Nihon Rufuto’s later approval”).
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In its reply, Selene contends, for the first time, that Plaintiffs fail to state a breach of
contract claim because they have not performed their obligation to either pay the full purchase
price or obtain financing. (Doc. 24 at 2–3). Typically, the court “does not consider issues or
arguments raised for the first in a reply, for to do so deprives the non-movant of a fair
opportunity to respond.” Butler v. Cleburne Cty. Comm’n, 2012 WL 2357740, at *6 (N.D.Ala.
Jan. 17, 2012). But even if the court did consider that argument, the court would reject it
because at this stage, the court must accept as true Plaintiffs’ allegations, and Plaintiffs allege
that they “are ready, willing and able, and have been ready, willing and able to close on the
purchase.” (Doc. 17 at 3). The court cannot and will not credit Selene’s contradictory allegation
that Plaintiffs were not willing or able to close on the purchase.
Because the purchase agreement and addendum formed a valid contract, Selene’s defense
that it retained the ability to refuse the sale at any time must fail. See Dixon, 456 So. 2d at 315.
By accepting Plaintiffs’ offer and then refusing to close on the purchase despite Plaintiffs’
readiness to perform their part, Selene failed to perform its obligations under the contract. As a
result, Plaintiffs state a claim for breach of contract, and the court WILL DENY Selene’s motion
to dismiss the breach of contract claim. 2
2. Misrepresentation
Selene contends that Plaintiffs fail to state a misrepresentation claim because, among
other things, Plaintiffs fail to plead this claim with the particularity required by Federal Rule of
Civil Procedure 9(b). (Doc. 20 at 6). Plaintiffs respond that they do not have to plead their claim
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In its motion to dismiss, Selene points out that the contract contains a clause providing
that mobile homes located on the real estate are not included in the sale, and states that the home
located on the property was a mobile home. (Doc. 20 at 2). But Selene does not argue that
Plaintiffs fail to state a claim because the contract does not cover the home located on the
property, so the court will not address that issue at this time. (See generally Doc. 20).
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with particularity because it is for “negligent, wanton and/or reckless misrepresentation.” (Doc.
22 at 3).
The Eleventh Circuit has not addressed whether a plaintiff raising a negligent or reckless
misrepresentation claim under Alabama law must plead the claim with particularity under
Rule 9(b). But Alabama law provides that all misrepresentation claims, whether intentional,
negligent, or innocent, are claims of “legal fraud.” Ala. Code § 6-5-101 (“Misrepresentations of
a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the
opposite party, or if made by mistake and innocently and acted on by the opposite party,
constitute legal fraud.”). And Rule 9(b), by its plain language, requires a plaintiff to plead with
particularity fraud or mistake, indicating that whether the defendant’s action was intentional,
negligent, or innocent is irrelevant to the applicability of the requirement for heightened
pleading. See Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”). As a result, the court holds that a
plaintiff raising a misrepresentation claim under Alabama law must plead it with particularity.
See McGee v. JP Morgan Chase Bank, NA, 520 F. App’x 829 (11th Cir. 2013) (“[B]ecause
negligent misrepresentation [under Florida law] sounds in fraud, the facts surrounding the claim
must be pled with particularity.”).
To plead a claim with particularity, the complaint must
set forth (1) precisely what statements or omissions were made in which
documents or oral representations; (2) the time and place of each such statement
and the person responsible for making (or, in the case of omissions, not making)
them; (3) the content of such statements and the manner in which they misled the
plaintiff; and (4) what the defendant obtained as a consequence of the fraud.
FindWhat Inv’r Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011).
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The amended complaint states that Selene’s agent advertised the auction as a
“Renovation Ready Auction” of a four-bedroom, two-bathroom, 1,976-square-foot home situated
on approximately 3.4 acres of real estate. (Doc. 17 at 2). It further states that after Plaintiffs
made the winning bid and the parties entered into the purchase agreement, Selene refused to
close on the sale because the home located on the land was not included in the sale. (Id. at 3).
The complaint also makes clear that Plaintiffs believed that they were bidding on the real
property and the home. (See generally Doc. 17).
But the complaint does not set out the time and place of those statements or the person
who made them. Nor does it set out what Selene obtained as a consequence of the fraud. In
addition, the count raising the misrepresentation cause of action expressly mentions only
Selene’s alleged representations about its willingness to accept the highest bid at the auction.
(Id. at 5–6). The court cannot determine the basis for the misrepresentation claim. As a result,
the court finds that Plaintiffs failed to plead the claim with particularity. The court WILL
DISMISS WITHOUT PREJUDICE Plaintiffs’ misrepresentation claim.
3. Negligence
Plaintiffs allege that Selene acted negligently by failing to conduct the auction in the
manner it was advertised “and as agreed in the Purchase Agreement.” (Doc. 17 at 7). Selene
contends that Plaintiffs fail to state a negligence claim because (1) Alabama law does not
recognize a cause of action for negligence based on breach of a duty created by a contract, and
(2) the amended complaint fails to show how Selene breached a duty to Plaintiffs. (Doc. 20 at
7).
The Middle District of Alabama has held that “Alabama does not recognize a tort-like
cause of action for the breach of a duty created by contract.” Blake v. Bank of Am., N.A., 2845
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F. Supp. 2d 1206, 1210 (M.D. Ala. 2012). Indeed, the Alabama Supreme Court has held that
“negligent failure to perform a contract express or implied . . . is but a breach of the contract.”
Vines v. Crescent Transit Co., 85 So. 2d 436, 440 (Ala. 1955).
The factual basis for Plaintiffs’ negligence claim is not entirely clear, but the amended
complaint appears to assert that Selene negligently advertised and conducted the auction—not
only that Selene breached a duty created by the contract or that Selene negligently failed to
perform on the contract. (See Doc. 17 at 7). Because negligently advertising and conducting the
auction is not a cause of action based on a breach of contract, the court will not dismiss it on that
basis.
Selene mentions in passing that the amended complaint “is devoid of any facts showing
how the Defendant[ ] breached a duty, if one even existed, relating to the auction.” (Doc. 20 at
7). The court agrees. But Selene does not cite to any legal authority addressing whether a duty
exists as to advertising or conducting an auction; nor does it even cite any authority addressing
how to determine the existence of a legal duty under Alabama law. (See id.). “[T]he [c]ourt
generally will not give consideration to arguments that are not fully developed or bolstered with
legal authority.” Fenn v. Hulsey, 2009 WL 10687829, *2 n.5 (N.D. Ala. Sept. 18, 2009)
(collecting cases).
Because Selene fails to support its argument with any legal authority, the court declines
to dismiss this claim on that basis. The court WILL DENY the motion to dismiss Plaintiffs’
negligence claim.
III.
CONCLUSION
The court WILL GRANT IN PART AND DENY IN PART Selene’s motion to dismiss
the amended complaint. The court WILL DENY the motion to dismiss Plaintiffs’ breach of
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contract and negligence claims, but the court WILL DISMISS WITHOUT PREJUDICE
Plaintiffs’ misrepresentation claim for failure to plead fraud with particularity.
DONE and ORDERED this 3rd day of April, 2018.
____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE
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