Grandbridge Real Estate Capital LLC v. San Paloma Partners, L.P. et al

Filing 75

MEMORANDUM OPINION. Signed by Judge L Scott Coogler on 11/9/12. (ASL)

FILED
2012 Nov-09 PM 01:18
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

P.B. SURF, LTD., et al.,
Plaintiffs,
vs.
SAN PALOMA PARTNERS, L.P.,
et al.,
Defendants.

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Civil Action Number
2:11-cv-3925-LSC

MEMORANDUM OPINION
I.

Introduction
Before the Court is American Fidelity Life Insurance Company’s (“American

Fidelity”) Motion to Intervene. (Doc. 50.) The Motion is fully briefed and ripe for
adjudication. (Docs. 66, 67, & 69.) Upon consideration of the submissions of the
parties and the relevant law, American Fidelity’s Motion to Intervene is due to be
DENIED.
II.

Background
The Court begins by setting forth the relevant facts. Plaintiff David Brannen

and a company he partially owned, Poydras Holdings, LLC (“Poydras Holdings”),
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executed a promissory note in favor of American Fidelity in Florida in December
2006. (Doc. 50 at 3.) Plaintiff P.B. Surf, Ltd. (“P.B. Surf”) secured the debt by
pledging property it owned in Biloxi, Mississippi. (Id.) When Brannen and Poydras
Holdings failed to pay the indebtedness due upon maturity of the promissory note,
American Fidelity filed suit in the Circuit Court of Escambia County, Florida, to
recover the money owed to it. (Id. at 4.) The Florida court granted summary
judgment to American Fidelity upon its motion and entered a final judgment against
Brannen and Poydras Holdings in the amount of $7,230,376.93. (Id.) American
Fidelity recorded the judgment and sold P.B. Surf’s property, crediting the amount to
Brannen and Poydras Holdings. (Id. at 5.)
Following entry of the judgment in the Florida case, American Fidelity filed two
motions seeking charging orders to intercept any proceeds due to Brannen from his
companies, which the Florida court granted. (Id.) Under the charging orders,
American Fidelity has a lien on Brannen’s interest in nineteen Florida companies, not
including P.B. Surf; American Fidelity is to receive “any and all proceeds,
distributions, dividends and other payments due” to Brannen as a member of any of
the listed companies; and none of the companies listed are to grant or extend any loans
to Brannen. (Id. at 5–6.) The orders do not include P.B. Surf, but some companies

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referenced in the orders have an ownership interest in P.B. Surf. (Id. at 6.)
Later, P.B. Surf contributed the entire capital amount that San Paloma Partners,
L.P. (“San Paloma”) used to purchase a Texas apartment complex (the “San Paloma
property”). (Doc. 67 at 2.) Grandbridge Real Estate Capital, LLC (“Grandbridge”),
a real estate service firm, then serviced a loan (the “San Paloma loan”) by JP Morgan
Chase Bank to San Paloma, which was secured by the San Paloma property. (Doc. 1
¶ 11.) In October 2011, San Paloma closed the sale of the San Paloma property, which
resulted in approximately $3.8 million in net proceeds. (Doc. 67 at 1.) Grandbridge
held $1,561,704.80 of these proceeds, the interpleaded funds which are the subject of
this lawsuit, in escrow and reserve funds for the benefit of San Paloma pursuant to the
terms of the San Paloma loan documents. (Id. at 1–2; Doc. 1 ¶ 13.)
Pursuant to Rule 22 of the Federal Rules of Civil Procedure, Grandbridge filed
the present interpleader action against San Paloma, P.B. Surf, WCHYP II Lender,
LLC (“WCHYP”), Guy Savage, William Noltes, and Brannen. (Doc. 1.) San Paloma
was included based upon its interest in the San Paloma property and the San Paloma
loan. (Id.) Noltes and Savage were included based on their status as principals and
representatives of San Paloma, as well as on a letter they sent directing Grandbridge
to wire the escrow funds to a bank account owned by San Paloma. (Id.) Brannen and

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P.B. Surf were included based on an e-mail Brannen sent informing Grandbridge that
Brannen was the proper owner of the funds. (Id.) Brannen and P.B. Surf’s position has
since been clarified. They now contend that upon sale of the San Paloma property,
P.B. Surf, not Brannen,“was contractually entitled to its initial investment [of $5.9
million] plus interest before anyone else received a capital distribution.” (Doc. 67 at
2.) P.B. Surf asserts that because the proceeds from the sale were less than its initial
contribution, it was entitled to the entire amount. (Id.) WCHYP was included based
on a letter it sent advising Grandbridge that charging orders had been granted
regarding a judgment WCHYP held against Savage, Noltes, and Brannen (the
“WCHYP judgment”). (Doc. 1.) The charging orders prohibited Grandbridge “from
making or allowing any transfer or other disposition of, or interfering with, any
property not exempt from execution or garnishment belonging to the judgment
debtors.” (Doc. 1 at 19, 28, 37.) Fredric Levin was later substituted for WCHYP
because WCHYP assigned all of its rights and interest in the WCHYP judgment to
Levin for a substantial sum of money. (Doc. 60 at 2; Doc. 64.) Savage has since been
dismissed after withdrawing any claim to the interpled funds. (Doc. 65.)
American Fidelity, however, now claims an interest in the interpleaded funds,
as well, based on its Florida judgment against Brannen and Poydras Holdings. (Doc.

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50 at 8.) American Fidelity seeks to intervene as a matter of right under Federal Rule
of Civil Procedure 24(a) or alternatively as a permissive intervention under Federal
Rule of Civil Procedure 24(b). (Id. at 10–11.)
III.

Discussion
A.

Intervention as of Right

“To intervene of right under Rule 24(a)(2), a party must establish that ‘(1) his
application to intervene is timely; (2) he has an interest relating to the property or
transaction which is the subject of the action; (3) he is so situated that disposition of
the action, as a practical matter, may impede or impair his ability to protect that
interest; and (4) his interest is represented inadequately by the existing parties to the
suit.’” Fox v. Tyson Foods, Inc., 519 F.3d 1298, 1302–03 (11th Cir. 2008) (quoting
Chiles v. Thornburgh, 865 F.2d 1197, 1213 (11th Cir. 1989)); FED. R. CIV. P. 24(a). Davis
v. Butts, 290 F.3d 1297, 1300 (11th Cir. 2002). American Fidelity has failed to establish
that it meets these requirements for two reasons.
First, American Fidelity has failed to establish an adequate interest in the
property that is the subject of this suit. In the Eleventh Circuit, a party’s interest in
the subject matter of the litigation must be “direct, substantial and legally
protectable.” Georgia v. U.S. Army Corps of Eng’rs, 302 F.3d 1242, 1249 (11th Cir.

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2002). Although American Fidelity has a judgment against Brannen, it does not have
a judgment against any party claiming an interest in the interpleaded funds. American
Fidelity only has an interest in the funds if they end up in Brannen’s possession;
however, this is purely speculative. There is no possibility that Brannen will directly
receive funds by judgment of this Court, and the possibility that Brannen will receive
any portion of the funds from P.B. Surf is too remote to provide support for American
Fidelity’s right to intervene. Thus, American Fidelity has no direct interest in the
interpleaded funds, and it cannot intervene as of right.
Second, American Fidelity has also failed to establish that disposition of this
action will impair or impeded its ability to protect its interests. American Fidelity has
a judgment from the Florida court against Brannen. It also has charging orders from
that court that prohibit Brennan from receiving funds from companies affiliated with
him, not including P.B. Surf. Disposition of this action will not directly result in
Brannen receiving funds, nor will it result in any of the companies in the charging
orders paying money to Brannen. In the event that Brannen later receives funds from
any party in this action, American Fidelity can protect its interests by asserting the
Florida judgment against him at that time. Thus, disposition of this action will not
impair or impede American Fidelity’s ability to protect its interests, and it cannot

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intervene in this action as of right.
B.

Permissive Intervention

Federal Rule of Civil Procedure 24(b) allows for permissive intervention (1) if
the application to intervene is timely; (2) if the intervenor’s claim or defense and the
main action have a common question of law or fact; and (3) if the intervention will not
unduly prejudice or delay the adjudication of the rights of the original parties. Georgia
v. U.S. Army Corps of Eng’rs, 302 F.3d at 1249–50. This Court has discretion to deny
intervention even if the requirements are met. Chiles, 865 F.2d at 1213.
American Fidelity has failed to establish that its intervention will not unduly
delay the adjudication of the rights of the original parties. In filing this motion,
American Fidelity seeks to claim an interest in the interpleaded funds based on the
Florida judgment against Brannen and the charging order listing nineteen companies,
not including P.B. Surf. The parties claiming rightful ownership of the funds are P.B.
Surf and Levin. Brannen does not claim an interest in the interpleaded funds;
therefore, the determination of the rightful owner of the interpleaded funds will have
no effect on American Fidelity’s judgment against Brannen. Allowing American
Fidelity to intervene in this matter will delay the adjudication of P.B. Surf and Levin’s
rights to the interpleaded funds, but American Fidelity will ultimately be dismissed for

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failure to state a claim. Because granting the motion will unduly delay the adjudication
of P.B. Surf and Levin’s rights, American Fidelity cannot permissively intervene in
this action.
Additionally, this may be an appropriate situation for the Court to exercise its
discretion in determining whether to grant or deny the motion to intervene. In this
case, the Florida judgment against Brannen will have no effect on the determination
of the rightful owner of the interpleaded funds since P.B. Surf is not listed in the
charging order and Brannen has no claim to the funds. Thus, even if American Fidelity
met the requirements for permissive intervention, this is an appropriate situation for
the Court to exercise its discretion and deny American Fidelity’s motion to intervene.
IV.

Conclusion
American Fidelity does not have a legally protectable interest in the

interpleaded funds that are the subject of this suit, and disposition of this action will
not impair or impede its ability to protect its interests, making intervention as of right
inappropriate. Further, allowing American Fidelity to intervene would unduly delay
the adjudication of the rights of P.B. Surf and Levin, making permissive intervention
inappropriate. For the foregoing reasons, American Fidelity’s Motion to Intervene
(Doc. 50) is due to be DENIED. A separate order will be entered consistent with this

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Opinion.
Done this 9th day of November 2012.

L. SCOTT COOGLER
UNITED STATES DISTRICT JUDGE
171032

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