Wiggins et al v. FDIC

Filing 328

MEMORANDUM OPINION AND ORDER- Defendants' motion for summary judgment regarding their counterclaims is DENIED (Doc. 240 ). Plaintiffs' motions for summary judgment regarding Defendants' counterclaims are GRANTED (Docs. 249 , 252 ). Defendants have no surviving counterclaim. The remaining motions for summary judgment are GRANTED IN PART and DENIED IN PART (Docs. 238 , 247 , 252 ). The parties are ORDERED to mediate this matter with the Honorable John E. Ott by no later than March 19, 2021. The parties are instructed to provide mutually agreeable mediation dates by February 17, 2021, via an email to [e-mail]. Signed by Magistrate Judge Staci G Cornelius on 2/12/21. (MRR, )

FILED
2021 Feb-12 PM 03:56
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ROBERT L. WIGGINS, JR., et al.,
Plaintiffs,
v.
FRANK ELLIS, IV, et al.,
Defendants.

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) Case No. 2:12-cv-02705-SGC
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MEMORANDUM OPINION AND ORDER1
“For want of a nail the shoe was lost.” Thus begins the proverb describing a
cascading series of increasingly catastrophic events—ultimately leading to the loss
of a kingdom—precipitated by a seemingly insignificant failure of a horseshoe
nail. If some misguided soul were inspired to distill the story of this confounding
lawsuit to a proverb, it would begin: “For want of a valid condominium declaration
. . . .” While the defective condominium declaration in this case has not yet led to
the loss of a kingdom, it has spawned numerous lawsuits in both state and federal
courts in Alabama spanning more than a decade. This memorandum opinion does
not bring this matter to its merciful end, but it does cull the herd of claims and
counterclaims to the core of the dispute: the consequences flowing from want of a
valid condominium declaration.
1

The parties have unanimously consented to magistrate judge jurisdiction pursuant to 28 U.S.C.
§ 636(c). (Doc. 193).

I.

JURISDICTION
The original complaint filed in this district more than eight years ago—

asserting only claims arising under state law—did not specify the basis for federal
jurisdiction; nor did it include any jurisdictional allegations. (Doc. 1). Subsequent
iterations of the complaint were likewise silent as to federal subject matter
jurisdiction. (Docs. 22, 94). 2 Because every version the complaint named as a
defendant Federal Deposit Insurance Corporation (“FDIC”), the lack of
jurisdictional allegations was proper under the Financial Institutions Reform,
Recovery, and Enforcement Act (“FIRREA”), 12 U.S.C. § 1819.
Under FIRREA, civil suits in which FDIC is a party “in any capacity” are
deemed to arise under the laws of the United States. § 1819(b)(2)(A). This
provision overrides the general “well-pleaded complaint rule,” which requires the
basis for federal-question jurisdiction to appear on the face of the complaint. See
Lindley v. Fed. Deposit Ins. Corp., 733 F.3d 1043, 1050-51 (11th Cir. 2013). The
Eleventh Circuit has noted § 1819 “evince[s] a clear congressional intent to
provide a federal forum when the FDIC is made a party.” Castleberry v. Goldome
Credit Corp., 408 F.3d 773, 788 (11th Cir. 2005); see Fed. Deposit Ins. Corp. v. N.
Savannah Props., LLC, 686 F.3d 1254, 1258 (11th Cir. 2012) (“Federal-question

2

While Defendants’ operative counterclaim complaint purports to allege the citizenship of the
parties, it does not allege the citizenship of either party-limited liability company’s respective
members. (Doc. 112 at 3-4).
2

jurisdiction generally exists whenever the FDIC is a party to litigation.”). Indeed,
where FDIC is a party, the party challenging federal jurisdiction has the burden of
overcoming the presumption of its existence. See Lindley, 733 F.3d at 1050-51;
Bishop v. Darby Bank & Trust Co., No. 10-0295, 2011 WL 4499575 *1 (S.D. Ga.
Sept. 27, 2011).3
jurisdiction.

The court has previously noted the existence of federal

(Doc. 16 at 16, adopted in relevant part by Docs. 20, 21)

(acknowledging Plaintiffs could have brought this claim in state court, but FDIC
would likely have removed it under 12 U.S.C. § 1819); (Doc. 156 at 15 adopted by
Docs. 178, 179) (recognizing 12 U.S.C. § 1821(d)(6) provides federal jurisdiction
for administratively exhausted claims against FDIC).4
By virtue of the court’s memorandum opinion granting summary judgment
as to the claims against it, FDIC is no longer a party to this lawsuit. (Doc. 308).

3

FDIC did attack subject matter jurisdiction at the motion to dismiss stage. (Docs. 5, 28, 100).
However, FDIC’s challenges were premised on 12 U.S.C. § 1821, based on: (1) Plaintiffs’
failure to include their claims in an administrative proof of claim they submitted; and (2) the
unavailability of declaratory relief.
4

FIRREA does provide a narrow exception to the creation of federal jurisdiction by virtue of
FDIC’s involvement where: (1) the FDIC is acting “as receiver of a State insured depository
institution by the exclusive appointment by State authorities, [and] is a party other than a
plaintiff”; (2) the action “involves only the preclosing rights against the State insured depository
institution, or obligations owing to, depositors, creditors, or stockholders by the State insured
depository institution”; and (3) only the interpretation of state law is necessary to resolve the
claims. 12 U.S.C. § 1819(b)(2)(D)(i-iii). All three conditions are required to preclude federal
question jurisdiction. See, e.g., Castleberry, 408 F.3d at 785. Even if the court were required to
consider this exception sua sponte, it would not apply because—as discussed at length below—
this matter challenges more than “only the preclosing rights against the State insured depository
institution, or obligations owing to, depositors, creditors, or stockholders by the State insured
depository institution.”
3

However, the Eleventh Circuit has held a district court retains original jurisdiction
over pendent claims under state law against non-FDIC parties, even after FDIC is
dismissed. See, e.g., Lindley, 733 F.3d at 1058. (reversing trial court’s dismissal
of state law claims against non-FDIC defendants under 28 U.S.C. § 1367(c)(3)).
Accordingly, the court has subject matter jurisdiction over the remaining claims in
this lawsuit.
II.

RELEVANT FACTUAL BACKGROUND5
This action arises from a long series of loans related to real estate

transactions between the parties. Plaintiffs, Robert L. Wiggins, Jr. (“Wiggins”),
and Wolf Pup, LLC (“Wolf Pup”), (collectively, “Plaintiffs”), financed the
purchase and construction of Wolf Bay Landing, a real estate development in
Baldwin County, Alabama, through a loan (the “Loan”) with Superior Bank
(“Superior”) in 2005.

In 2007, Plaintiffs sold the property (the “2007

Transaction”) to Defendant Character Counts, LLC (“CCLLC”), a single asset
entity owned by Defendant Frank P. Ellis, IV (“Ellis”), and Joseph Scott Raley
(“Raley”). CCLLC purchased the property by assuming Plaintiffs’ Loan with
Superior.
5

To be sure, the 655 pages of briefing concerning Plaintiffs’ and Defendants’ motions for
summary judgment—not including their motions to strike—present myriad facts not reflected in
the instant opinion. (Docs. 239, 241, 248, 253, 256-57, 276-79, 282-83, 292-94, 298-99). In the
interest of judicial economy, the court has omitted recitation of facts that are unnecessary and/or
irrelevant to resolution of the pending motions. In addition to the extensive paper record, the
court heard lengthy oral arguments on November 17, 2020.
4

In 2010, Superior sold the Loan to Ellis, who financed the purchase with a
personal loan from Superior. In connection with selling the original Loan to Ellis,
Superior paid down the outstanding balance on the Loan by seizing money from
accounts funded by Plaintiffs during the 2007 Transaction. 6

In 2014, Ellis

foreclosed on the original Loan and sold the property to Trinity Retreat, LLC
(“Trinity Retreat”), a single asset entity owned by Ellis’s wife, Mihyon Ellis. Ellis
subsequently became a member of Trinity Retreat, which still owns Wolf Bay
Landing. Having provided this overview, the following pages discuss the facts of
this case in more detail.
A.

2005: Superior’s Loan to Wolf Pup and the Guaranties

Wiggins is a member of one of the entity-members of Wolf Pup; Raley is
also a member. (E.g. Doc. 257 at 12; Doc. 255-1 at 18). Wolf Pup built and
owned Wolf Bay Landing, a 62-unit real estate development, which was financed
through Superior. (Doc. 257 at 1). The Loan with Superior involved several
transactions in September and December 2005, and Wolf Pup’s entire indebtedness
to Superior was approximately $17.5 million. (Id. at 1-2).
The Loan was secured by a mortgage on the Property and also by continuing
guaranties (the “Guaranties”) from Wiggins and others associated with Wolf Bay

6

Superior Bank later failed, and FDIC was named as its receiver. After Superior failed, Cadence
Bank (“Cadence”) acquired Ellis’s personal loan from Superior, and Cadence eventually reached
a settlement agreement with Ellis regarding payment of his personal loan.
5

Landing. (Doc. 244-2; see, e.g., Doc. 257 at 2). 7 Under the Guaranties, Wiggins
and the other guarantors “jointly and severally unconditionally guarantee and
promise to pay the Bank” the indebtedness under the Loan. (Doc. 244-2 at 14).
The Guaranties further provide in part:
[T]his Guaranty may not be revoked or terminated, other than with the
prior written consent of the Bank, except upon strict compliance with
the conditions and requirements heretofore set forth in this Section
(2), and this Guaranty will not be revoked or terminated by any action,
event or circumstance, including payment in full of all of the
indebtedness. . . .
The obligations of the Guarantors hereunder are joint and several, and
independent of the obligations of Borrowers, and a separate action or
actions may be brought and prosecuted against any one or more of the
Guarantors whether action is brought against Borrowers or any other
Guarantor . . . .
It is the intent hereof that this obligation of Guarantors shall be and
remain unaffected, (a) by the existence or non-existence, validity or
invalidity, of any pledge, assignment or conveyance given as security;
or (b) by any understanding or agreement that any other person, firm
or corporation was or is to execute this or any other guaranty, . . . or
any other document or instrument or was or is to provide collateral for
any indebtedness . . . .
....
No right or power of Bank hereunder shall be deemed to have been
waived by any act or conduct or failure or delay to act on the part of
the Bank . . . . Bank may without notice assign this Guaranty in
whole or in part and each reference herein to Bank shall be deemed to
include its successors and assigns.
(Doc. 244-2 at 14-16).

7

The other guarantors were Third-Party Defendant Linda Peacock, as well as Kelly Schuck and
Raley. (Doc. 244-2 at 4, 8, 12).
6

B.

2007: CCLC Purchased Wolf Bay Landing

Construction of Wolf Bay Landing was completed in late 2006 or early
2007, and Wolf Pup had secured a number of pre-construction sales contracts for
condominium units. (Doc. 239 at 5; Doc. 241 at 5). Meanwhile, the Gulf Coast
condo market deteriorated in 2007, and the buyers refused to close on their sales
contracts. (Doc. 250-2 at 8-9; Doc. 255-2 at 8-9; see, e.g., Doc. 239 at 6).8 Wolf
Pup initiated litigation (the “Bowles Litigation”) 9 in February 2007 in Baldwin
Count Circuit Court, seeking the buyers’ specific performance of the sales
contracts. (See Doc. 239 at 6).
On April 17, 2007, Wolf Pup recorded a Declaration of Condominium (the
“Condo Declaration”), purporting to establish Wolf Bay Landing as a
condominium under Alabama law. (Doc. 244-10). Peacock drafted and filed the
Condo Declaration. (Id. at 2). By the summer of 2007, facing past-due notices
from Superior regarding interest payments under the Loan, Wolf Pup was looking
to sell Wolf Bay Landing. (See Doc. 239 at 8).10

8

Ellis testified adverse conditions in the condo market did not recover until sometime after 2010.
(See Doc. 255-1 at 87).
9

The Bowles Litigation is discussed in more detail, infra.

10

On July 27, 2007, Plaintiffs entered a tolling agreement with Peacock, Schuck, and several
entities, tolling the statute of limitations for claims between the parties in state court, including
claims relating to the Condo Declaration. (Doc. 158 at 24, n.21).
7

In late July or early August 2007, Wolf Pup began communicating with Ellis
regarding the possibility of purchasing Wolf Bay Landing. (Doc. 239 at 9). 11 Ellis
was under the impression the Condo Declaration was valid under Alabama law and
testified he did not know the “full nature” of the Bowles Litigation. (Id. at 10).
Ellis did not investigate the Bowles litigation and never performed due diligence on
Wolf Bay Landing; he testified he had no reason to look behind the curtain because
he trusted the people with whom he was dealing. (See Doc. 276 at 5). Ellis also
testified he never inquired about the status of the Condo Declaration and that no
one with Wolf Pup ever told him it was valid under Alabama law. (Doc. 255-1 at
18-19; see Doc. 276 at 6).12 Ellis further testified he had no direct contact with
Wiggins in 2007. (Doc. 257 at 3). However, Ellis assumed he was negotiating
with Wiggins because many of the documents they exchanged bore Wiggins’s
signature. (Id.).
During their negotiations, the parties at one time contemplated Ellis’s
outright purchase of Wolf Bay Landing. (See Doc. 277 at 15-16). In preparation
11

Ellis has been in the real estate business since 1975. (Doc. 255-1 at 5-6). After starting in
residential sales, Ellis eventually became a developer and entrepreneur who has turned around
several “hopeless situations,” including troubled condominium developments (Id.). Ellis owns
multiple businesses in at least five states, as well as four condominium developments other than
Wolf Bay Landing; three of these other condominium developments are located in Alabama, and
one is in Maryland. (Doc. 257 at 16-17). Ellis hired attorneys to prepare condominium
declarations for his other developments. (Id.).
12

As discussed in greater detail infra, Ellis interpreted the words “condominium” and “unit”
appearing in different documents and contracts as representing the validity of the Condo
Declaration. (Doc. 276 at 6).
8

for that plan, the parties drafted and circulated a Real Estate Purchase Agreement
in August 2007. (Doc. 259-1 SEALED).13 Indeed, both Wolf Pup and Ellis signed
the Real Estate Purchase Agreement on August 9, 2007. (Id. at 7 SEALED).
However, the legal effect of the Real Estate Purchase Agreement is unclear. (See
Doc. 276 at 29). In any event, rather than pursue Ellis’s outright purchase, the
parties opted for CCLLC—formed by Raley and Ellis on October 5, 2007—to
assume the Loan under the Loan Assumption and Modification Agreement (the
“Modification Agreement”) (see Doc. 276 at 3-4; Doc. 257 at 4-5); during the
same time period, the interested parties executed a number of other agreements.
These agreements, all of which effectuated the 2007 Transaction, are described in
more detail below. (See Doc. 257 at 3; see also Doc. 276 at 3-4; Doc. 255-1 at 22).
1.

Modification Agreement

Under the Modification Agreement—dated as effective on October 5,
2007 14—Wolf Pup conveyed Wolf Bay Landing to CCLLC; CCLLC assumed
13

The Real Estate Purchase Agreement specifically cites the Bowles litigation in two places,
listing the case number and name. (Doc. 259-1 at 4, 7 SEALED). The second reference to
Bowles appears immediately above the signature blocks Ellis and Wolf Pup signed. (Id. at 7
SEALED). Although Peacock had already drafted and filed the Condo Declaration at the time
the parties were negotiating the Real Estate Purchase Agreement, it describes Wolf Bay Landing
on a metes and bounds basis and did not refer to it as a condominium. (Id. at 14 SEALED).
14

On October 20, 2007 Ellis signed: (1) the Modification Agreement in his capacity as CCLLC’s
manager; and (2) the consent and joinder to the Modification Agreement in his personal capacity
as a guarantor. (Doc. 246-1 at 14, 19). Superior Bank executed the Modification Agreement on
November 27, 2007. (Id. at 12). Wiggins signed the Modification Agreement on behalf of Wolf
Pup on October 5, 2007, the same day he signed his individual consent and joinder as a
guarantor. (Id. at 13, 18). The remaining guarantors signed their consent and joinder forms on
9

Wolf Pup’s obligations to Superior under the $17.5 million Loan. (See Doc. 276 at
3). However, Wolf Pup remained liable under the Loan:
It is the intent of this instrument, and [Wolf Pup], [Superior,] and
CCLLC agree, that [Wolf Pup] shall remain liable under the Note and
the other Loan Documents, and upon the occurrence of an Event of
Default by CCLLC under the Note or the other Loan Documents, and
in addition to [Superior]’s right to enforce the Loan Documents and
pursue its remedies against CCLLC, [Superior] may enforce the terms
of the Note against and collect the indebtedness evidenced by the
Note from [Wolf Pup], all to the same extent as if this instrument had
never been executed.
(Doc. 246-1 at 5). The Modification Agreement required Ellis to execute an
unlimited continuing guaranty to secure the loan and specified the Guaranties
executed by Wiggins and the other guarantors “shall continue in full force and
effect and shall continue to secure the Loan . . . .” (Id. at 10).
The Modification Agreement also required Wolf Pup to establish an account
with Superior with a minimum balance of $560,000, from which Superior could
withdraw monthly interest payments on the Loan (the “Interest Reserve Account”).
(Doc. 246-1 at 7). When Superior withdrew interest payments from the Interest
Reserve Account, CCLLC was required to restore the minimum balance. (Id.).
Accordingly, Defendants were responsible for assuming the interest payments to

October 16 and 17, 2007. (Id. at 15-17). It is undisputed that, as of November 27, 2007, CCLLC
owned Wolf Bay Landing. (Doc. 276 at 8-9). Plaintiffs contend CCLLC owned Wolf Bay
Landing as of October 26, 2007, when the Assumption Warranty Deed was filed. (E.g. Doc. 257
at 5). Defendants disagree, arguing the 2007 Transaction was not complete until Superior signed
on November 27, 2007. (E.g. Doc. 276 at 9).
10

Superior under the Loan. (See Doc. 257 at 6). The Interest Reserve Account also
secured the Loan. (Doc. 246-1 at 7). 15
Similarly, the Modification Agreement provided Superior would continue to
hold a $1.5 million certificate of deposit funded by Wiggins to secure the Loan (the
“Wiggins C.D.”). (Doc. 246-1 at 7). The Modification Agreement provided
Superior could apply the Wiggins C.D. to the Loan in the event of a default that
Plaintiffs did not cure within thirty (30) days of notice.

(Id.).

The instant

memorandum opinion refers to the Interest Reserve Account and the Wiggins C.D.
together as the “Pledged Collateral.”
2.

Side Agreements

As previously mentioned, the parties signed other agreements in conjunction
with the 2007 Transaction. The relevant agreements are discussed in turn.
a.

Repayment Agreement

On October 5, 2007, Wolf Pup, Ellis, and CCLLC executed a document
entitled

“Agreement”

(the

“Repayment

15

Agreement”).

(Doc.

246-5).16

It is not clear how much of the $560,000 minimum balance Wolf Pup deposited into the
Interest Reserve Account. Tim Hamner, a banker with Cadence who later handled the account,
testified the account never held the minimum balance. (Doc. 250-11 at 42; see Doc. 246-13;
Doc. 243-29 at 117-62). Hamner further testified the initial deposit into the account in
September 2007 was $269,875; by November 2007 the account held $461,620.95. (Doc. 250-11
at 42; Doc. 246-13). However, a November 21, 2008 Fourth Amendment to Loan Documents
signed by Ellis, Superior, and CCLLC, reflects the establishment of the $560,000 Interest
Reserve Account. (Doc. 255-35 at 3). In any event, it appears the sale of Unit A301 to Ellis
provided at least some of the initial proceeds Wolf Pup deposited into the Interest Reserve
Account. (Doc. 243-5 at 148; 243-8 at 106, 133-34; see Doc. 246-13; see generally Doc. 239 at
18-19; Doc. 241 at 9).
11

Defendants—collectively defined in the contract as the “Borrower”—executed the
Repayment Agreement in favor of Wolf Pup and its members with regard to the
Pledged Collateral and liability under the Loan.

(Id.).

As relevant here,

Defendants promised to: (1) repay Wolf Pup and its members any portion of their
Pledged Collateral, plus interest, in the event Superior seized it; and (2) refrain
from selling Wolf Bay Landing in its entirety without paying off the Loan and
returning any seized Pledged Collateral with interest. (Id.). Specifically, the
Repayment Agreement provides:
2.
Interest Reserve. Borrower agrees to immediately repay to
Wolf Pup any portion of the $560,000.00 interest reserve posted by
Wolf Pup to Superior Bank to secure the Indebtedness (defined in the
Superior Bank Loan Assumption and Modification Agreement
executed by Borrower), together with interest thereon at the default
rate defined in the Superior Bank documents, to the extent same is
seized or drawn upon by Superior Bank or otherwise applied to such
Indebtedness.
3.
$1,500,000.00 Pledged Collateral. Borrower agrees to
immediately repay to Wiggins any portion of the $1,500,000.00
collateral and interest accrued thereon posted by Wiggins to Superior
Bank to secure the Indebtedness, together with interest thereon at the
default rate defined in the Superior Bank documents, to the extent
same is seized or drawn upon by Superior Bank or otherwise applied
to such Indebtedness.
....
16

While the parties did not date their signatures, the line immediately above the signature block
states it was “executed as of the day and year first above written.” (Doc. 246-5 at 3). That date
is October 5, 2007. (Id. at 2). Accordingly, Defendants’ contention that no evidence supports
that the Repayment Agreement was signed on October 5, 2007, is devoid of colorable merit and
does not create a factual dispute. (See Doc. 276 at 20).
12

6.

Sale of Project or Units

a.
Borrower agrees that the Wolf Bay Landing Condominium
project contemporaneously herewith deeded to Borrower by Wolf Pup
shall not be sold in its entirety absent payment in full of the existing
Superior Bank indebtedness by Borrower and return in full of the
interest reserve and pledged collateral, and any accrued interest
thereon.
(Doc. 246-5 at 2).17
b.

Pledge Agreement

Also on October 5, 2007, Ellis, Raley, and Wolf Pup executed the
Membership Interest Pledge Agreement (the “Pledge Agreement”). (Doc. 2462). 18

Under the Pledge Agreement, Ellis and Raley pledged their 100%

membership interest in CCLLC to Wolf Pup as security for their obligations under
the Loan Documents. (Id. at 2). The Pledge Agreement also reserved certain
specified remedies for Wolf Pup in the event of a default and provided for
attorney’s fees. (Id. at 3-5). Finally, paragraph 12 of the Pledge Agreement
provided:
All indebtedness to Superior Bank shall be refinanced, or otherwise
paid in full, on or before one (1) year from the date hereof, and the
current guarantors thereof released, or the Borrowers shall be
considered in default, and in default of the Loan Documents.
17

Peacock and another guarantor also entered a November 13, 2007 agreement with Wiggins to
repay the Wiggins C.D. in the event Superior seized it. (See Doc. 239 at 18).
18

The parties’ signatures are not dated. (Doc. 246-2 at 6). However, as with the Repayment
Agreement, the line preceding the signature blocks states the document was executed “as of the
date first written above:” October 5, 2007. (Id. at 2, 6).
13

(Doc. 246-2 at 6). Ellis testified that, at the time the parties executed the Pledge
Agreement, they all intended that Ellis would pay off or refinance the Loan within
one year, releasing the guarantors—including Wiggins. (See Doc. 255-1 at 24, 82).
c.

Other Relevant Agreements

The parties also executed other documents in connection with the 2007
Transaction, including another document dated October 5, 2007, entitled
“Agreement” (the “Specific Performance Agreement”). 19

The Specific

Performance Agreement, signed by Wolf Pup, CCLLC, and Ellis, concerned the
units which were the subject of the Bowles Litigation; among other terms, it
provided Wolf Pup the option to purchase certain units in the event it prevailed
against the buyers in that lawsuit. (Doc. 246-3).

Likewise, the title insurance

binder CCLLC procured referenced the Bowles Litigation, and Ellis was aware the
title insurer initially wanted to except coverage from issues arising from that
lawsuit. (See Doc. 257 at 13, 15).
Also included among the agreements effectuating the 2007 Transaction was
a “Release Schedule,” dated October 5, 2007, and executed by Superior, CCLLC,20
and Wolf Pup. (Doc. 244-19 at 3-5). The Release Schedule provided pricing for
individual condominium units. Finally, Wiggins conveyed Unit A301 to Ellis via
19

The signatures are undated, but the document states it was “entered into effective 10/5/07.”
(Doc. 246-3 ).
20

Ellis signed the Release Schedule on behalf of CCLLC on October 20, 2007. (Doc. 244-19 at
5). Superior signed the document on October 27, 2007. (Id. at 3).
14

a November 13, 2007 Warranty Deed. (Doc. 246-11). Again, it appears Plaintiffs
used the proceeds from this sale to fund the Interest Reserve Account. (See, e.g.,
Doc. 241 at 9).
d.

Assumption Warranty Deed

On October 26, 2007, Wolf Pup executed and filed in Baldwin County
Probate Court an Assumption Warranty Deed. (Doc. 246-6). The Assumption
Warranty Deed incorporated the Condo Declaration and provided Wolf Pup did
“grant, bargain, sell, and convey” to CCLLC “in fee simple,” sixty units at Wolf
Bay Landing, described by their unit numbers. (Id.).21 As to express covenants of
title, the Assumption Warranty Deed provides:
AND GRANTOR [Wolf Pup] DOES FOR ITSELF, and for its
successors and assigns covenant with the said grantee [CCLLC], and
with grantee’s successors and assigns, that grantor is lawfully seized
in fee simple of the said premises; that they are free from all
encumbrances, except as otherwise noted above; that it has a good
right to sell and convey the same as aforesaid; and that it will and its
successors and assigns shall warrant and defend the same unto the
said grantee, and unto grantee’s successors and assigns, forever,
against the lawful claims of all persons.
(Id. at 4).

21

The parties uniformly refer to the Assumption Warranty Deed as conveying sixty units to
CCLLC. It is worth noting the document actually lists sixty-one units. (Doc. 246-6 at 2). This
appears to be a typo in the Assumption Warranty Deed, particularly because Units A301 and
A110 are not listed in the instrument.
15

3.

The Bowles Litigation and Issues Surrounding Unit A301

Meanwhile, Wolf Pup had previously initiated the Bowles Litigation in the
Circuit Court of Baldwin County in February 2007, seeking specific performance
of pre-construction sales contracts with buyers. (Doc. 244-5). On May 7, 2007,
the purchaser-defendants in the Bowles Litigation filed counterclaims against Wolf
Pup, asserting breach of contract, suppression, fraud, and deceit.

The

counterclaims focused on Wolf Pup’s failure to properly construct and permit
deeded boat slips.

(Doc. 127-1).

The purchaser-defendants in the Bowles

Litigation also asserted affirmative defenses, including unclean hands due to
violations of numerous portions of the Alabama Condominium Act, including §
35-8A-205 (concerning declaration and recordation) and § 35-8A-209 (subsection
(g) concerns the certificate of substantial completion). Wolf Pup v. Bowles, No.
07-900084 (Baldwin Cty. Cir. Ct.), Doc. 111. 22 Wiggins entered a notice of
appearance in that case on June 4, 2007. (Doc. 244-8). Ellis testified he was
unaware of the nature of the Bowles Litigation or the purchaser-defendants’
counterclaims, which he never investigated. (See Doc. 276 at 19-20; Doc. 257 at
14).
Prior to the conveyance of Unit A301 to Ellis via the Assumption Warranty
Deed, Wolf Pup had an August 31, 2007 contract to sell the unit to a different
22

These are two of the many code sections cited by the Baldwin County Circuit Court more than
three years later, when it held the Condo Declaration was invalid. (Doc. 127-2).
16

purchaser. (See Doc. 239 at 11-12).23 This purchaser was not a party to the
Bowles Litigation; he was represented by Gregory Leatherbury, who averred the
purchaser was willing and able to close but had been unable to obtain title
insurance. (See id. at 12). Among the evidence of record is an affidavit from
Leatherbury describing an October 24, 2007 telephone conversation with Peacock.
(Doc. 244-23). Leatherbury avers he told Peacock the Condo Declaration was
defective and failed to create a valid condominium. (Id. at 4).24 Attached to the
affidavit is a November 2, 2007 letter Leatherbury sent Peacock. (Doc. 244-23 at
18-20).

The letter primarily addresses concerns with the deeded boat slips.

However, it also states, “[T]he condominium documents are not valid as filed” and
memorializes Leatherbury’s understanding that Peacock was taking “curative
efforts.” (Id. at 20). On November 9, 2007, Wolf Pup and the guarantors entered a
confidential settlement agreement and mutual release with the previous purchasers
of Unit A301. (Doc. 239 at 17). Defendants were never made aware of these
events. (Id.).

23

Wolf Pup conveyed Unit A110 to Raley’s company via Warranty Deed on September 13,
2007. (Doc. 244-22).
24

Thus, the conversation took place after many of the documents surrounding the 2007
Transaction had been executed. Additionally, the call occurred just two days before Wolf Pup
filed the Assumption Warranty Deed (Doc. 246-6), twenty days before Unit A301 was conveyed
to Ellis (Doc. 246-11), and thirty-four days before Superior signed off on the Loan Assumption
Agreement—which the other parties had already executed. (Doc. 246-1).
17

More than three years later, on December 9, 2010, the Baldwin County
Circuit Court granted the purchaser-defendants’ motion for summary judgment in
the Bowles Litigation. (Doc. 127-2). The court concluded the Condo Declaration
was invalid because it failed to create separable, transferrable condominium units.
(Id.). Thus, the court entered judgment in favor of the purchaser-defendants,
holding Wolf Pup was not entitled to specific performance of the sales contracts.
The parties dispute when Ellis became aware of the judgment in the Bowles
Litigation. (See Doc. 276 at 9, 16).
4.

Other Litigation

As briefly alluded to in the opening paragraph of this opinion, the invalid
Condo Declaration has spawned other litigation. Among these lawsuits is one filed
by Wolf Pup and other parties-plaintiff against Peacock and her law firm for legal
malpractice with regard to Peacock’s drafting and filing of the defective Condo
Declaration. Galapagos, LLC v. Peacock, No. CV-2009-1219 (Jefferson Cty. Cir.
Ct. filed April 16, 2009); (see Doc. 246-19). A search of Alabama’s online case
management system reflects this lawsuit (the “Malpractice Litigation”) remains
pending.
5.

CCLLC Operated Wolf Bay Landing

On November 20, 2007—a week before Superior executed the Loan
Modification Agreement but after all of the other parties had signed—Raley
18

received a letter stating the construction at Wolf Bay Landing was substantially
complete. (Doc. 245-25 at 2; see Doc. 239 at 19). Accompanying the letter was a
partial set of drawings (the “As-Builts”) of Wolf Bay Landing. (Doc. 245-25 at 38). One of Raley’s employees filed the As-Builts in Baldwin County Probate
Court on December 21, 2007, after the 2007 Transaction was complete. (Id. at 3;
see Doc. 239 at 19). The parties dispute whether Raley directed his employee to
file the As-Builts in his role as a member of CCLLC or as a member of Wolf Pup.
(Doc. 257 at 8; Doc. 276 at 13-14).
Following the 2007 Transaction, CCLLC furnished twelve condo units and
placed them into service as rentals in 2007 in order to receive accelerated
depreciation under the Gulf Opportunity Zone Act of 2005. (Doc. 276 at 11-12).
These so-called “GO Zone” depreciation credits passed through CCLLC to Ellis’s
(80%) and Raley’s (20%) personal tax returns. (Id.). Ellis initially attempted to
use the GO Zone credits to attract buyers for the unfurnished units. (Id. at 12).
When no buyers appeared, Ellis placed the remaining units in service as rentals in
2008. (Id.). Over $6.75 million in GO Zone credits passed through CCLLC in
2007 and 2008. (Id.; Doc. 257 at 7). If a unit subsequently sold, CCLLC would
have had to return to the IRS the pro rata share of depreciation received. (Doc. 257
at 7; Doc. 276 at 12; see Doc. 297-19). Ultimately, CCLLC did not sell any units
while it owned Wolf Bay Landing. (Doc. 257 at 8; see Doc. 276 at 13).
19

C.

2010: Ellis Purchased Loan & Superior Seized Pledged Collateral

After Superior and CCLLC repeatedly extended the Loan’s maturity date,
Superior declared the Loan in default and demanded payment from the obligors
and guarantors on May 19, 2010. (Doc. 239 at 22). On the same day, Superior
inquired whether any of the guarantors, including Ellis, were interested in
purchasing the Loan. (Id.). The only guarantor to express interest in purchasing
the Loan was Ellis. (Doc. 239 at 23).25
On December 23, 2010, Ellis personally entered a Loan Sale Agreement
with Superior; under it, Ellis acquired the Loan and related documents, including
the Guaranties. (Doc. 246-22). Ellis financed his purchase of the Loan with
approximately $16 million in personal loans from Superior Bank. (Doc. 257 at 8).
Superior simultaneously seized the Pledged Collateral from its accounts and
applied it to the principal indebtedness under the Loan. (See Doc. 239 at 24; Doc.
257 at 9; see Doc. 276 at 15). Ellis and Superior completed this transaction
without Plaintiffs’ knowledge or consent. (Doc. 257 at 10; e.g. Doc. 266-8 at 3).
It is undisputed that Superior maintained exclusive control over the accounts
holding the Pledged Collateral from the consummation of the 2007 Transaction
25

Plaintiffs contend Superior began conspiring with Defendants, timing its seizure of the
Pledged Collateral to ensure Plaintiffs would be unable to exercise their rights to declare a
default and remove Ellis as the manager of Wolf Bay Landing. (Doc. 282 at 48-53). There is
evidence to support this contention—at least with regard to Superior. (See Doc. 259 SEALED).
However, in light of the following discussion, it is not necessary to recite the facts—primarily
gleaned from emails amongst Superior personnel—in support of this theory.
20

until Superior seized them on December 23, 2010. (See Doc. 255-1 at 28-29; see
also Doc. 250-12 at 29). Superior seized a total of $2,077,408.49, consisting of:
(1) $1,742,126.70 on the Wiggins C.D., including accrued interest; and (2) the
$335,281.79 balance in the Interest Reserve Account. (Doc. 259-2 at 3).
While CCLLC did not sell any units while it owned Wolf Bay Landing, Ellis
and his wife did buy Unit A110 from individuals who had acquired it at a
foreclosure sale. (Doc. 276 at 23-34).26 The Ellises purchased the unit on March
31, 2011, months after the judgment in the Bowles Litigation, which concluded the
Condo Declaration was invalid. (Id.). 27 Unit A110 was conveyed via a deed
which identified it as a condominium and referred to the Condo Declaration. (Id.).
The Ellises received title insurance on Unit A110. (Id.).
D.

2014: Wolf Bay Landing Sold to Trinity Retreat

After the Loan Sale Agreement, Superior failed and was taken over by FDIC
as receiver. (See Doc. 257 at 11). FDIC subsequently assigned Superior’s rights in
Ellis’s personal loan to an entity that merged with Cadence Bank on November 11,
2011. Accordingly, Cadence became the holder of Ellis’s Loan. (See Doc. 138 at
11). Ellis and Cadence eventually reached a “Second Settlement Agreement”
26

Raley owned Unit A110 at some point prior to foreclosure. (Doc. 244-22; see Doc. 244-23 at
4). Although the parties’ statements of fact refer to this unit as A101, the deposition testimony
confirms it was unit A110. (Doc. 255-1 at 63).

27

Defendants assert there is no evidence Ellis knew about the judgment in the Bowles Litigation
as of March 31, 2011. (Doc. 276 at 24). Ellis testified he did not know when he learned the
Condo Declaration had been declared invalid. (See id.).
21

regarding Ellis’s personal loan. (Doc. 255-21). Under the terms of the Second
Settlement Agreement, Wolf Bay Landing was to be sold to a third-party by June
30, 2014, and Cadence was to receive a $5.75 million payment from the sale. (Id.
at 10). In turn, Cadence would release Ellis from his personal loan. (Id. at 12).
On June 25, 2014, Defendants’ counsel in the instant case conducted a
foreclosure sale of Wolf Bay Landing on a metes and bounds basis. (Doc. 255 at
2-3). Mihyon Ellis’s limited liability company, Trinity Retreat, made the highest
bid: $5.75 million. (Id.). Trinity Retreat financed the purchase with a loan from
Bryant Bank. (See Doc. 138 at 12). Upon receipt of the foreclosure sale proceeds,
Cadence released Ellis from his personal loan on June 26, 2014. (Doc. 255-31; see
Doc. 255-21 at 12; Doc. 276 at 18; Doc. 277 at 12; Doc. 279 at 14).
The day after the foreclosure sale, Ellis’s attorney filed a new declaration of
condominium. (See Doc. 255-1 at 45; Doc. 299 at 10). Ellis testified he could
have cured the defects in the Condo Declaration earlier but chose not to because he
was “flat broke” and having a valid declaration was not a priority in 2010 and
2011. (Doc. 255-1 at 45; see id. at 87). Defendants have not repaid Plaintiffs for
the Pledged Collateral Superior seized in 2010, nor have they released the
guarantors. (Doc. 257 at 12; see Doc. 276 at 19).

22

III.

PROCEDURAL HISTORY AND POSTURE
This case, filed in 2012, was already a year-and-a-half-old when it was

reassigned to this court’s docket; it greeted the undersigned on her first day on the
bench. (Doc. 14). At that time, the only parties were Plaintiffs and FDIC. Nearly
a year later, on the court’s order, Plaintiffs amended their complaint, adding Ellis
and CCLLC as defendants. (Doc. 22). Nearly another year later, on February 22,
2016, Plaintiffs filed the Second Amended Complaint—the operative complaint in
this matter. (Doc. 94).
The Second Amended Complaint named seven defendants; in addition to
Ellis, CCLLC, and FDIC, it named Mihyon Ellis, Trinity Retreat, Bryant Bank,
and Cadence Bank. (Doc. 94). At the motion to dismiss stage, all claims against
Mihyon Ellis, Trinity Retreat, and Bryant Bank were dismissed; as to Cadence, the
claim for tortious interference survived.

(Doc. 155, adopting Report &

Recommendation (“R&R”) at Doc. 138). This remaining claim against Cadence
was dismissed on summary judgment. (Doc. 309). The only claim against FDIC
that survived its motion to dismiss alleged conspiracy. (Doc. 179, adopting R&R
at Doc. 156).

The conspiracy claim against FDIC did not survive summary

judgment. (Doc. 308).
As to Ellis and CCLLC, the only remaining defendants, the Second
Amended Complaint asserts thirteen claims.
23

(Doc. 94).

In response to

Defendants’ pending motions for summary judgment, Plaintiffs have conceded five
claims: (1) two counts for breach of the implied duty of good faith and fair dealing
(Counts IV and VI); (2) breach of fiduciary duty (Count VII); (3) tortious
interference (Count XI); and (4) declaratory judgment concerning the Pledged
Collateral (Doc. XII). (Doc. 282 at 58). Accordingly, there are eight claims
remaining against Defendants: (1) declaratory judgment under § 8-3-13 of the
Alabama Code (Count I); (2) declaratory judgment regarding exoneration (Count
II); (3) breach of contract (Count III); (4) money paid (Count V); (5) conversion
(Count VIII); (6) conspiracy (Count IX); (7) unjust enrichment (Count X); and (8)
promissory estoppel and fraud (Count XIII). Defendants seek defensive summary
judgment as to all of these claims. (Doc. 238). Plaintiffs seek offensive summary
judgment as to their Counts I, II, and III. (Docs. 247, 252). 28
Defendants also asserted counterclaims against Plaintiffs. The operative
counterclaim complaint 29 asserted five claims: (1) fraudulent misrepresentation
(Count I); (2) breach of contract (Count II); (3) breach of guaranties (Count III);
28

Plaintiffs have three pending motions for summary judgment. The first seeks offensive
summary judgment on Plaintiffs’ Count III. (Doc. 247). Also pending is Plaintiffs’ motion for
defensive summary judgment; the primary focus of this motion is Defendants’ fraud
counterclaim, but it touches on all pending counterclaims. (Doc. 249). Finally, Plaintiffs have
filed an offensive/defensive hybrid motion. (Doc. 252). Defensively, it focuses on the
counterclaim for breach of guaranty, but it also touches on the breach of contract counterclaim;
offensively, it seeks judgment in Wiggins’ favor on his Counts I and II—seeking declaratory
relief from liability on the Guaranties. (Id.).
29

Defendants asserted fraudulent misrepresentation by way of a counterclaim-in-reply, after the
court dismissed their previous counterclaims for fraudulent suppression and misrepresentation.
(Doc. 187; see Docs. 158, 181).
24

(4) unjust enrichment (Count IV); and (5) breach of warranty deed (Count V).
(Docs. 112; 187; see Doc. 214). Except for Count IV, these claims survived
motions to dismiss. (Doc. 181; see Doc. 158). Plaintiffs seek defensive summary
judgment as to all of the remaining counterclaims. (Docs. 249, 252). Defendants
seek offensive summary judgment as to their counterclaims for breach of contract
(Count II), breach of guaranties (Count III), and breach of warranty deed (Count
V); they do not seek offensive summary judgment as to the counterclaim for
fraudulent misrepresentation (Count I). (Doc. 240).
IV.

MOTIONS TO STRIKE
Contemporaneously with the summary judgment briefing, Plaintiffs and

Defendants filed motions to strike. (Docs. 260, 274, 302, 303). The court termed
those motions, construing them as objections to admissibility under Rule 56(c)(2).
(Doc. 310).

However, the court has not yet addressed the substance of the

motions, which are fully briefed and ripe—or overripe—for review. (Docs. 261,
301, 305-07; see Doc. 318). Defendants filed three of the four motions to strike;
the first of these motions contends Plaintiffs’ summary judgment briefing exceeds
the applicable page limitations. (Doc. 260). Defendants’ remaining motions, as
well as Plaintiffs’ motion, present substantive challenges to the admissibility of
certain statements offered in their opponents’ respective declarations. (Docs. 274,
302-03). The motions are addressed in turn.
25

On the parties’ joint motion, the court set a 60-page limit for initial briefs.
(Doc. 223). Plaintiffs’ initial briefs in support of their three pending motions for
summary judgment are 28 pages (Doc. 248), 59 pages (Doc. 256), and 40 pages
(Doc. 253) respectively, inclusive of signature pages. Additionally, Plaintiffs took
the unusual—although not explicitly forbidden—step of filing a separate, standalone, 20-page statement of facts applicable to all three of their principal briefs.
(Doc. 257). Accordingly, not one of Plaintiffs’ briefs, standing alone, exceeds the
court’s page limitations. Defendants acknowledge this technical compliance; their
motion is premised on Plaintiffs’ briefs’ incorporation of portions of their other
briefs. (Doc. 260 at 3-7).
The briefing in this case is less than ideal; however, Defendants have had the
opportunity to respond to all of the arguments presented by Plaintiffs.

This

includes extensive paper briefing and oral argument. To the extent the court has
considered arguments Plaintiffs have incorporated by reference, it has also
considered the associated defenses asserted by Defendants. The circular nature of
the arguments is probably unavoidable to some extent, reflecting the confounding
and convoluted facts of this case. To the extent Defendants object to Plaintiffs’
incorporation of a stand-alone statement of facts, they likewise have not shown
prejudice. Indeed, Defendants responded with their own, stand-alone, 43-page

26

response. (Doc. 276). Accordingly, the objections posed in Defendants’ first
motion to strike are OVERRULED. (Doc. 260).30
The substantive objections appear in: (1) Plaintiffs’ motion (Doc. 274) to
strike portions of Ellis’s Declaration (Doc. 244-18); (2) Defendants’ motion (Doc.
303) to strike portions of Wiggins’s Second Supplemental Declaration (Doc. 2811); and (3) Defendants’ motion (Doc. 302) to strike portions of Wiggins’s Third
Supplemental Declaration (Doc. 297-1). Together, the parties’ objections concern
33 paragraphs of the respective declarations. Many of the objections relate to facts
that are unnecessary to the court’s adjudication of the pending motions for
summary judgment, infra. Regarding any relevant, challenged statements in the
declarations, the court’s foregoing statement of facts has omitted the parties’ legal
conclusions and, where necessary, deferred to specific testimony and documentary
evidence. Accordingly, the parties’ objections are OVERRULED as MOOT,
obviating the need for the court to address the arguments presented in the
combined 137 pages of briefing on the substantive motions to strike. (Docs. 274,
301-03, 305-07).

30

To the extent Defendants’ objections are aimed at Peacock’s principal brief, it is
OVERRULED nunc pro tunc on the same basis. (Doc. 260 at 6-7). Furthermore, the separate
memorandum opinion addressing the motions pertaining to Peacock do not rely on arguments
presented by Plaintiffs.
27

V.

MOTIONS FOR SUMMARY JUDGMENT
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary

judgment is proper “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The party asking for summary judgment always bears the initial responsibility of
informing the court of the basis for its motion and identifying those portions of the
pleadings or filings which it believes demonstrate the absence of a genuine issue of
material fact. Id. at 323. Once the moving party has met its burden, Rule 56(e)
requires the non-moving party to go beyond the pleadings and by his own
affidavits, or by the depositions, answers to interrogatories, and admissions on file,
designate specific facts showing there is a genuine issue for trial. See id. at 324.
The substantive law identifies which facts are material and which are
irrelevant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All
reasonable doubts about the facts and all justifiable inferences are resolved in favor
of the non-movant. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.
1993). A dispute is genuine “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. If the

28

evidence is merely colorable, or is not significantly probative, summary judgment
may be granted. See id. at 249.
A.

Defendants’ Counterclaim Count I: Fraud

Defendants’ amended counterclaim complaint against Plaintiffs included
fraud counterclaims based on both suppression and misrepresentation. (Doc. 112
at 91-0). The claim for fraudulent suppression was dismissed, and Defendants’
counterclaim for fraudulent misrepresentation is the subject of Plaintiffs’ defensive
motion for summary judgment. (Doc. 249; see Doc. 256).31 Defendants do not
seek offensive summary judgment on this counterclaim in their motion. (Doc. 240;
see Doc. 241).
A party alleging misrepresentation must show: “(1) a false representation (2)
of a material existing fact (3) reasonably relied upon by the [party] (4) who
suffered damage as a proximate consequence of the misrepresentation.” Exxon
Mobil Corp. v. Ala. Dep’t of Cons. and Nat. Res., 986 So. 2d 1093, 1114 (Ala.
2007) (quotation and emphasis omitted). As explained below, Defendants cannot
show Plaintiffs made a misrepresentation. Additionally, even setting aside the
failure to show a misrepresentation, Defendants cannot show reasonable reliance.

31

While the title page and introductory paragraph of the brief in support of this motion states it is
filed on behalf of Wolf Pup only (Doc. 256), the motion itself and the body of the brief make
clear it is filed on behalf of both plaintiffs. (Doc. 249; see also Doc. 292 at 1, n.1).
29

Accordingly, Plaintiffs’ defensive motion for summary judgment is due to be
granted as to the counterclaim for fraudulent misrepresentation. (Doc. 249).
1.

Defendants Cannot Show a Misrepresentation

The counterclaim for fraud concerns Defendants’ allegations that Plaintiffs
falsely stated Wolf Bay Landing was a condominium development. (Doc. 278 at
7-10). Defendants’ briefing and oral argument clarify that the misrepresentations
on which this claim relies consist of various written representations in documents
surrounding and effectuating the 2007 Transaction—signed between October 5,
2007, and November 13, 2007. (Doc. 278 at 7-10). Specifically, Defendants rely
on the following writings containing the words “condominium” and/or “unit”: (1)
the November 13, 2007 Warranty Deed conveying Unit A301 from Wiggins to
Ellis (Doc. 246-11); (2) the October 26, 2007 Assumption Warranty Deed
conveying sixty units from Wolf Pup to CCLLC (Doc. 246-6); (3) the October 5,
2007 Specific Performance Agreement, referring to sale of “condominium units”
(Doc. 246-3); (4) the October 5, 2007 Repayment Agreement (Doc. 246-5); (5) the
October 5, 2007 Pledge Agreement (Doc. 246-2); and (6) the October 5, 2007
Release Schedule (Doc. 244-19). (Doc. 278 at 7-8).
As Defendants would have it, each of these written references to
“condominiums” and/or “units” constitute Plaintiffs’ representations that Wolf Bay
Landing was a legally created condominium development, consisting of separable
30

condominium units ready for individual sale. (Doc. 278 at 7-10). This contradicts
the ultimate finding in the Bowles Litigation, that the Condo Declaration filed in
Baldwin County Probate Court on April 17, 2007, failed to create a valid
condominium project. Defendants do not point to any explicit representation—
either written, verbal, or otherwise—by Plaintiffs that Wolf Bay Landing consisted
of legally created, ready-to-sell condominium units or that the Condo Declaration
was valid.
“Misrepresentation may take many forms, a verbal misrepresentation being
just one form.” Utah Foam Prods., Inc. v. Polytec, Inc., 584 So. 2d 1345, 1351
(Ala. 1991). A fraudulent misrepresentation claim may be based on conduct or
misrepresentations contained within a written document. See id. (“The statements
and conduct of the parties must be viewed in their entirety to adequately resolve
the question of whether a misrepresentation has occurred.”). However, “an alleged
written misrepresentation in a contract, without more, cannot be actionable as fraud
in Alabama.” Pearson’s Pharmacy, Inc. v. Express Scripts, Inc., 505 F. Supp. 2d
1272, 1275 (M.D. Ala. 2007). Furthermore, “[u]nder Alabama law, the plaintiffs
must aver that there were either oral or written misrepresentations made before the
signing of the contract or during the performance of the contract.” Id. at 1276.
For example, in Goggans v. Realty Sales & Mortg., 675 So. 2d 441, 443
(Ala. Civ. App. 1996), a case cited in Defendants’ opposition (Doc. 278 at 15-16),
31

the court addressed a real estate contract for a home. Under the deal, the buyers
assumed the sellers’ mortgage. Documents exchanged during closing indicated the
note was a twenty-five-year mortgage. During closing, a buyer asked a seller and
the sellers’ agent if the mortgage matured in twenty-five years; both answered
affirmatively. In reality, the mortgage matured in twenty-nine years. The trial
court granted summary judgment on the buyers’ fraudulent misrepresentation
claim because they had already signed the contracts at the time of the defendants’
representation, and thus did not rely on them. In reversing, the Court of Civil
Appeals held the incorrect maturity date on the loan assumption documents, when
combined with the defendants’ verbal statements regarding the incorrect maturity
date, constituted a false representation. 32 Id. at 443-44.
Here, while Defendants point to a number of documents referring to Wolf
Bay Landing as a “condominium” consisting of “units,” they do not present
evidence of: (1) any explicit representation that the Condo Declaration was valid
under Alabama law; or (2) any additional misrepresentation by Plaintiffs (like the
32

To support their argument that the inclusion in documents of the words condominium and unit
constituted misrepresentations, Defendants also rely on Fern Street Inv., LLC v. K&F Rest.
Partners, LLC, No. 13-1935-MHH, 2015 WL 1013167, at *4 (N.D. Ala. Mar. 9, 2015). (Doc.
278 at 16, n.10). There, on a motion to dismiss, a court sitting in this district held statements in a
franchise disclosure agreement were sufficient to state a claim for fraudulent misrepresentation.
Aside from the different procedural posture—the decision in Fern Street was issued at the
motion to dismiss stage—the statements in that franchise disclosure agreement appear to have
been more specific and explicit than the use of the words “condo” or “unit” here. Id. (“the
franchise disclosure document misrepresented the actual state of the franchise business model,”
and the defendants affirmatively understated: (1) the amount of the initial investment by 20%;
and (2) the amount of working capital needed for the first six months).
32

verbal misrepresentation in Goggans).

It is true that not all of the writings on

which Defendants rely are contracts. However, each of these documents is a piece
in the mosaic of agreements which effectuated the 2007 Transaction. None of the
documents make any representations regarding the validity of the Condo
Declaration.
Additionally—to the extent use of the words condo or unit in transactional
documents could be interpreted as stating Wolf Bay Landing consisted of validly
created, ready-to-sell condominium units—any statements regarding the validity of
the Condo Declaration would be no more than an opinion, at least prior to the 2010
ruling in the Bowles Litigation. As Plaintiffs’ note, opinions or predictions are not
misrepresentations upon which Defendants can reasonably rely. See McCutchen
Co. v. Media Gen., Inc., 988 So. 2d 998, 1002 (Ala. 2008) (“A mere statement of
opinion or prediction as to events to occur in the future is not a statement of a
‘material fact’ upon which individuals have the right to rely and, therefore, it will
not support a fraud claim.”) (quoting Crowne Invs., Inc. v. Bryant, 638 So. 2d 873,
877 (Ala. 1994)). (See Doc. 256 at 3).
Next, simple chronology undermines Defendants’ fraud counterclaim.

As

suggested by the briefing—and as explicitly stated during the November 17, 2020
hearing—Defendants’ theory is that, having referred to condos and units in the
documents surrounding the 2007 Transaction, Plaintiffs’ had a duty to correct
33

those misrepresentations when they learned of problems with the Condo
Declaration. (See, e.g., Doc. 278 at 9, 17). 33 To succeed under this reasoning,
Defendants must show Plaintiffs knew of the deficiencies in the Condo Declaration
at some point before the consummation of the 2007 Transaction.
Unsurprisingly, the parties disagree regarding the date on which the 2007
Transaction closed. It occurred in either October or November 2007. The relevant
dates are: (1) October 5, 2007, when Wolf Pup, Ellis, CCLLC, and others executed
the Specific Performance Agreement (Doc. 246-3), Repayment Agreement (Doc.
246-5), and Pledge Agreement (Doc. 246-2); (2) October 27, 2007, when the
Release Schedule was executed (Doc. 244-19); (3) October 26, 2007, when Wolf
Pup conveyed the sixty Wolf Bay Landing units to CCLLC via the Assumption
Warranty Deed (Doc. 246-6); (4) November 13, 2007, when Wiggins conveyed
Unit A301 to Ellis via Warranty Deed (Doc. 246-11); and (5) November 27, 2007,
when Superior—the final signatory—executed the Modification Agreement34
(Doc. 246-1 at 12). Plaintiffs contend the 2007 Transaction closed on October 26,
2007, when the Assumption Warranty Deed conveyed the units to CCLLC. (E.g.
Doc. 257 at 5). Meanwhile, Defendants argue the 2007 transaction did not close
until Superior signed off on the Loan Assumption Agreement on November 27,
33

During the hearing, Defendants specifically disavowed any reliance on a theory of fraudulent
suppression, consistent with the court’s dismissal of suppression counterclaims years ago.
34
Ellis signed the Modification Agreement on October 20, 2007. (Doc. 246-1 at 14).
34

2007. (E.g. Doc. 276 at 9). Based on the following discussion, Defendants’ fraud
counterclaim fails regardless of the date on which the 2007 Transaction closed.
Defendants rely on five documents to show Plaintiffs’ knowledge of defects
in the Condo Declaration. (Doc. 278 at 9). Several of these documents are
temporally irrelevant, even under the Rule 56 standard: (1) a February 14, 2007
letter35 to Peacock from counsel for a purchaser in the Bowles Litigation (Doc.
244-4); (2) a September 1, 2019 affidavit Wiggins submitted in the Malpractice
Litigation (Doc. 244-7 at 6-7); 36 and (3) the April 16, 2009 complaint in the
Malpractice Litigation (Doc. 246-19). 37 Defendants also rely on a July 27, 2007
tolling agreement (Doc. 244-17) between Wiggins, Wolf Pup, Peacock, and others,
regarding any claims arising out of Wolf Bay Landing, including problems with
the Condo Declaration.

However, this release does not impute any specific

knowledge of particular problems with the Condo Declaration, much less that it
failed to create condominiums under Alabama law; neither does it lead to an
inference of knowledge.
35

This letter predates the April 17, 2007 Condo Declaration and thus is not probative of
Plaintiffs’ knowledge of any defects in the to-be-filed document. (Doc. 244-10). Likewise, the
letter does not point to any problems leading to the summary judgment in the Bowles Litigation.

36

This affidavit was executed and filed nearly two years after the 2007 Transaction was
complete. (Doc. 244-7 at 6-7). While the affidavit includes Wiggins’s averment that the Condo
Declaration was invalid, it does not state when he reached this conclusion, much less that he
knew it at any point in 2007.

37

This complaint, filed more than a year after the 2007 Loan Assumption, does not shed light on
when Wiggins learned of problems with the Condo Declaration.
35

Defendants’ strongest evidence suggesting Plaintiffs knew of defects in the
Condo Declaration is an affidavit from Gregory Leatherbury, an attorney for the
original purchaser of Unit A301. (Doc. 244-23). The affidavit describes the
October 24, 2007 telephone conversation with Peacock during which Leatherbury
told her the Condo Declaration was defective and did not create a valid
condominium. (Id. at 4). Attached to the affidavit is a November 2, 2007 letter
Leatherbury sent Peacock. (Id. at 18-20). The letter primarily addresses concerns
with the deeded boat slips. However, it also states “the condominium documents
are not valid as filed” and memorializes Leatherbury’s understanding that Peacock
was taking “curative efforts.” (Id. at 20).
The October 24, 2007 telephone conversation described by Leatherbury
occurred after the parties here had already executed the Repayment Agreement,
Specific Performance Agreement, Pledge Agreement, Release Schedule, and Loan
Modification. Thus, at the time Leatherbury told Peacock about problems with the
Condo Declaration, the timeline for the events remaining to complete the 2007
Transaction were: (1) two days later—October 26, 2007—Wolf Pup conveyed
sixty units to CCLLC via the Assumption Warranty Deed (Doc. 246-6); (2) twenty
days later—November 13, 2007—Wiggins conveyed Unit A301 to Ellis via
Warranty Deed (Doc. 246-11); and (3) thirty-four days later—November 27,

36

2007—Superior signed off on the Modification Agreement, which the other parties
had already executed. (Doc. 246-1).
While Peacock’s conversation with Leatherbury occurred prior to the
completion of the 2007 Transaction, this conversation does not show Plaintiffs’
knowledge of defects that would lead the Baldwin County Circuit Court to declare
the Condo Declaration invalid more than three years later, on December 9, 2010.
(Doc. 127-2).

An opinion expressed by opposing counsel in an adversarial

proceeding is simply insufficient to impute knowledge of the Condo Declaration’s
invalidity here. Cf. McCutchen, 988 So. 2d at 1002.
For the foregoing reasons, Defendants cannot show a misrepresentation to
sustain the counterclaim for fraudulent misrepresentation.
2.

Defendants Cannot Show Reasonable Reliance

As noted by the Alabama Supreme Court, “a party's failure to exercise some
measure of precaution to safeguard his own interest precludes an action for fraud.”
Potomac Leasing Co. v. Bulger, 531 So. 2d 307, 312 (Ala. 1988). “The right of
reliance comes with a concomitant duty on the part of the plaintiffs to exercise
some measure of precaution to safeguard their interests. In order to recover for
misrepresentation, the plaintiffs' reliance must, therefore, have been reasonable
under the circumstances.” Sandoz, Inc. v. State, 100 So. 3d 514, 527 (Ala. 2012)
(alteration incorporated) (quotation marks omitted).
37

A party claiming fraud

“cannot be said to have reasonably relied on alleged misrepresentations when they
have been presented with information that would either alert them to any alleged
fraud or would provoke inquiry that would uncover such alleged fraud.” Id.
Here, the question of reliance is tied to the Bowles Litigation, which
concluded in December 2010, when the Circuit Court of Baldwin County held the
Condo Declaration failed to create separable, transferrable condominium units.
Wolf Pup initiated the Bowles Litigation in February 2007, seeking specific
performance of previously executed, pre-construction sales contracts with buyers.
On May 7, 2007, the purchaser-defendants in Bowles filed counterclaims against
Wolf Pup, asserting breach of contract, suppression, fraud, and deceit.

The

counterclaims focused on Wolf Pup’s failure to properly construct and permit
deeded boat slips.

(Doc. 127-1).

The purchaser-defendants also asserted

affirmative defenses, including unclean hands due to violations of numerous
portions of the Alabama Condominium Act, including two statutory provisions the
court ultimately relied upon.
Here, Plaintiffs contend Defendants cannot show reasonable reliance
because they were aware of the Bowles Litigation but did not investigate the nature
of the lawsuit or the status of the Condo Declaration. (Doc. 256 at 20-23). Indeed,
the Bowles Litigation was referenced in the Real Estate Purchase Agreement, the
Specific Performance Agreement, and the title insurance binder CCLLC procured.
38

(See id.; Doc. 259-1 SEALED at 4, 7; Doc. 246-3; see also Doc. 257 at 13, 15).38
The Specific Performance Agreement explicitly contemplated that Wolf Pup might
prevail in the Bowles Litigation, implicitly acknowledging Wolf Pup might not
prevail. (Doc. 24-6 at 3 at 2) (providing rights “in the event Wolf Pup succeeds in
its litigation seeking specific performance”).

Additionally, both the Bowles

Litigation and the Condo Declaration were matters of public record to which
Defendants had access.
Defendants contend they were not required to investigate public records to
ascertain the validity of the Condo Declaration. (Doc. 278 at 19-20) (quoting
Dickinson v. Moore, 468 So. 2d 136, 138 (Ala. 1985), for the proposition that “one
acquiring real property is under no affirmative duty to examine the public records
in order to ascertain the true state of the title.”). In Dickinson, the purchaser of

38

While the parties disagree about the legal impact of the Real Estate Purchase Agreement—
they ultimately executed and proceeded under the Modification Agreement—this dispute is not
material to resolution of the instant motions. It is undisputed that the parties negotiated and
signed the Real Estate Purchase Agreement on August 7, 2007. The Real Estate Purchase
Agreement specifically referenced the Bowles Litigation twice, including in the final paragraph,
immediately above Ellis’s signature. (Doc. 259-1 SEALED at 7). That paragraph states:
Seller shall indemnify Purchaser against any and all court ordered damages
actually incurred by Purchaser in connection with any claim arising out of the
litigation currently pending in Baldwin County, Alabama, styled as Wolf Pup,
LLC v. Linton D. Bowles, et al., CV-20070900084, and or any future claims
which cover any actions of the Seller prior to Closing.
(Id.). Additionally, Ellis was aware the title insurer initially wanted to except coverage from
issues arising from the Bowles Litigation. (See Doc. 257 at 13, 15). Ellis also testified he
discussed the Bowles Litigation with Raley; Raley reassured him it was nothing to worry about.
(See Doc. 278 at 22).
39

real property repeatedly inquired—during both negotiations and closing—about
the state of his title in the property. Each time, the seller responded he owned the
property “lock, stock, and barrel” and would convey full title. Id. at 137. After
purchasing the property, the buyer discovered the seller’s son had retained an
interest in it. The jury found in favor of the plaintiff/purchaser on his claim for
fraudulent misrepresentation. On appeal, the Alabama Supreme Court affirmed,
finding the seller’s repeated reassurances that he was conveying fee simple title
rendered the purchaser’s reliance reasonable. Dickinson, 468 So. 2d at 138 (“we []
cannot allow a seller of land to induce the purchase by misrepresenting facts he
knew to be false”). In affirming, the court quoted an earlier decision in which it
held:
A party asserting facts cannot complain that the other took him at his
word. “Positive representation of a fact cannot be counteracted by the
implication that the party might have ascertained to the contrary;
under such circumstances he need not institute an independent
investigation.”
Id. (quoting Shahan v. Brown, 52 So. 737, 738 (Ala. 1910)).
The facts of this case do not line up with those presented in Dickinson.
There, the plaintiff repeatedly and specifically asked whether he was purchasing
the property in fee simple.

Each time, the defendant explicitly answered

affirmatively. Here, Defendants never inquired about the status of the Condo
Declaration. Indeed, the only representations Ellis relied upon were inclusions of
40

the words “condominium” and “unit” in the various documents he executed to
complete the 2007 Transaction.

From the use of these words, Ellis assumed the

Condo Declaration created separable, ready-to-sell condominiums; he never asked
about the Condo Declaration, and no one ever told him it complied with Alabama
law.
Additionally, at least one other case suggests purchasers of real estate do
have a duty to investigate publicly available information. In Morris v. Strickling,
579 So. 2d 609 (Ala. 1991), the plaintiffs were purchasers of a subdivision lot
developed by the defendants. The plaintiffs constructed a home on the lot without:
(1) inquiring about the lot’s suitability for construction; or (2) conducting any subsurface soil testing.

After the house was constructed, the plaintiffs noticed

excessive foundation cracking and discovered all manner of garbage near the base
of the house; they later discovered the lot previously had been used as a trash
dump.

The plaintiffs sued, asserting breach of implied warranty, fraudulent

suppression, fraudulent misrepresentation, and other claims.

The trial court

granted summary judgment on all claims in favor of the defendants, applying the
doctrine of caveat emptor. Id. at 610. The Alabama Supreme Court affirmed. Id.
at 611. With regard to the fraud-based claims, the Alabama Supreme Court held
they failed due to: (1) the plaintiffs’ failure to inquire regarding the suitability of
the lot; and (2) the publicly available subdivision plans, which revealed the lot’s
41

past use as a dump. Id. While the court’s discussion of the fraud claims was not
couched in terms of reasonable reliance, it clearly implicates the principle.
Here, following the rationale of Morris, Defendants’ counterclaims for
fraudulent misrepresentation fail. Just as the plaintiffs in Morris did not inquire
regarding the suitability of the lot, Defendants here did not inquire about the status
of the Condo Declaration. Likewise, just as the subdivision plans were public
records available to the plaintiffs in Morris, here, both the Bowles Litigation—
including the purchasers’ eventually-successful affirmative defenses—and the
Condo Declaration were matters of public record which were available to
Defendants. Ellis was a sophisticated party with formidable experience in real
estate transactions and condominium projects. For a reasonable person with Ellis’s
experience conducting a multi-million-dollar transaction, discovery of the Bowles
Litigation—concerning buyers backing out of sales contracts—“should have
provoked inquiry or a simple investigation of the facts.” Sandoz, Inc., 100 So. 3d
at 527-28 (quoting AmerUs Life Ins. Co. v. Smith, 5 So. 3d 1200, 1216 (Ala.
2008)).39 Ellis is “charged with knowledge of all the information that the inquiry
would have produced.” Id. at 528.
39

Faced with similar scenarios in the context of fraudulent suppression, Alabama courts have
held that information available in public records foreclosed the claims. Gewin v. TCF Asset
Mgmt. Corp., 668 So. 2d 523, 529 (Ala. 1995) (“The existence of the litigation was a matter of
public record. . . . Thus, experienced real estate investors, like [plaintiffs], could have discovered
it by the exercise of due diligence.”) (citation omitted); Auburn’s Gameday Ctr. at Magnolia
Corner Owners Assoc. Inc. v. Murray, 138 So. 3d 317, 331 (Ala. Civ. App. 2013) (affirming
42

Defendants cannot establish the reasonable reliance required to sustain the
counterclaim for fraudulent misrepresentation.
independently-sufficient

reason

that

For this reason—and for the

Defendants

cannot

show

a

misrepresentation—there are no genuine issues of material fact, and Plaintiffs are
entitled to judgment as a matter of law as to Defendants’ counterclaim for
fraudulent misrepresentation.
B.

Claims and Counterclaims Concerning the Guaranties and Loan

The parties each have two claims arising under the Loan and Guaranties: (1)
Plaintiffs’ Count I (statutory exoneration under § 8-3-13); (2) Plaintiffs’ Count II
(release of guaranty); (3) Defendants’ Counterclaim II (breach of contract for
default on the Loan); and (4) Defendants’ Counterclaim III (breach of guaranty).
Plaintiffs’ Count I and Count II are subject to Defendants’ defensive motion for
summary judgment (Doc. 238) and Plaintiffs’ offensive motion for summary
judgment (Doc. 252).

Defendants’ Counterclaims II and III are subject to

Defendants’ offensive motion for summary judgment (Doc. 240) and Plaintiffs’
defensive motions for summary judgment (Docs. 249, 252).

judgment in favor of condominium complex owners, noting the buyers “were placed on notice of
the existence of the publicly recorded declaration and amendment” and were “familiar with and
had experience in the workings of condominiums”). Here, in addition to Ellis’s testimony
regarding his extensive background in real estate and condominium projects, he further stated he
did not ask any questions about the validity of the Condo Declaration and that he was aware of
the lawsuit—which was public record—but did not investigate.
43

Among the arguments presented in Plaintiffs’ briefing of the pending
motions regarding their Count II is that the Pledge Agreement estops Defendants
from enforcing the Guaranties. (See, e.g. Doc. 253 at 28-30; Doc. 256 at 51-52;
Doc. 283 at 31-32). Specifically, Plaintiffs rely on paragraph 12 of the Pledge
Agreement—between Ellis and Raley (as the “Pledgors”) and Wolf Pup—which
provides:
All indebtedness to Superior Bank shall be refinanced, or otherwise
paid in full, on or before one (1) year from the date hereof, and the
current guarantors thereof released, or the Borrowers shall be
considered in default, and in default of the Loan Documents.
(Doc. 246-2 at 6).
The court concludes the rationale expressed by the Fifth Circuit in In re
Pirani, 824 F.3d 483 (5th Cir. 2016), although not briefed by the parties, supports
Plaintiffs’ argument regarding the Pledge Agreement’s impact on the Guaranties.
It is undisputed that, at the time the parties executed the Pledge Agreement, they
all intended Ellis would pay off or refinance the Loan within one year, releasing
the guarantors—including Wiggins. (See Doc. 255-1 at 24, 82). For the same
reasons explained in the accompanying memorandum opinion and order on
reconsideration of Defendants’ and Peacock’s cross-motions for summary
judgment, Ellis cannot enforce the Guaranties in light of the Pledge Agreement.
Rather than unnecessarily lengthen the instant tome, the court incorporates
the accompanying memorandum opinion’s discussion of the Pledge Agreement
44

and its impact on the Guaranties.

Any arguments Defendants assert against

Plaintiffs’ reliance on the Pledge Agreement that are not addressed in the
accompanying memorandum opinion concerning Peacock’s and Defendants’ crossmotions are addressed in the instant opinion.

However, because Defendants’

arguments concerning the Pledge Agreement overlap with similar arguments
regarding the Repayment Agreement, they are discussed in the following section,
concerning Plaintiffs’ Count III.

Before turning to this discussion, Plaintiffs’

request for attorney’s fees under the Pledge Agreement will be addressed.
1.

Plaintiffs’ Request for Attorneys’ Fees

Plaintiffs also seek attorneys’ fees and expenses under the Pledge
Agreement. (Doc. 248 at 15, n.13). The Pledge Agreement provides:
In the event that it becomes necessary for Pledgee [i.e., Wolf Pup] to
initiate litigation for the purpose of enforcing any of its rights
hereunder or for the purpose of seeking damages for any violation
hereof, then, in addition to all other judicial remedies that may be
granted, Pledgee shall be entitled to recover reasonable attorneys’ fees
and all other cost that may be sustained by it in connection with such
litigation.
(Doc. 246-2 at 5). Defendants contend Plaintiffs are not entitled to relief under
this provision because they have not presented any evidence regarding the amount
of fees or costs incurred. (Doc. 277 at 18). In reply, Plaintiffs contend they seek
leave to prove their attorney’s fees at trial. (Doc. 299 at 23-24).

45

In support of their contention that Plaintiffs have missed their opportunity to
prove attorney’s fees, Defendants cite three cases: Bus. Loan Ctr., LLC v. M/V
CAPE FLORIDA, No. 17-0555, 2018 WL 1881262, at *4 (S.D. Ala. Apr. 19,
2018); RBC Bank (USA) v. Glass, 773 F. Supp. 2d 1245, 1247 (N.D. Ala. 2011);
and Koninklijke Ahold, N.V. v. Millbrook Commons, LLC, No. 10-1060, 2013 WL
4045072, at *3 (M.D. Ala. Aug. 8, 2013). (Doc. 277 at 18). However, these
opinions issued when there was nothing left for the respective courts to decide. In
Glass, the movant had prevailed on summary judgment, and no claims remained
for trial. 773 F. Supp. 2d at 1247 (denying post-judgment motion for attorney’s
fees). Similarly, in Koninklijke the court conducted a bench trial, after which the
prevailing party moved for attorney’s fees via post-judgment motion. 2013 WL
4045072, at *3 (denying post-judgment motion for fees because the movant had
not presented any evidence at trial).

The third case Defendants cite is also

inapposite; there the court entered default judgment, but excluded attorney’s fees
from the award because the movant had not presented any evidence regarding fees
incurred—despite the court’s invitation to remedy the shortcoming. M/V Cape
Florida, 2018 WL 1881262 at *4. In each of these cases, the proceedings had
concluded and there was nothing left to prove.
There remains a matter for trial in the instant case: the amount of damages
Plaintiffs suffered from Superior’s seizure of—and Defendants’ refusal to repay—
46

funds Plaintiffs deposited into the Interest Reserve Account. Rule 54 provides a
“claim for attorney's fees and related nontaxable expenses must be made by motion
unless the substantive law requires those fees to be proved at trial as an element of
damages.” FED. R. CIV. P. 54(d)(2)(A) (emphasis added). Here, damages are an
integral part of Plaintiffs’ breach of contract claim to be proven at trial. See
Koninklijke, 2013 WL 4045072, at *2 (“the claim for attorneys' fees may be
waived if not properly presented at trial”); Glass, 773 F. Supp. 2d at 1247 (If, in
the instant case, the court had denied RBC's motion for summary judgment, and
the case had been tried to the jury demanded by the Glasses, and if the Glasses had
not agreed to bifurcate or postpone the attorney's fee question for adjudication by
the court, RBC would have been required to prove its attorney's fees as part of its
case-in-chief.”). For the foregoing reasons, Plaintiffs can prove their attorneys’
fees and expenses at trial.
2.

Conclusion Regarding Claims Under Guaranties and Loan

In light of the foregoing discussion—including its incorporation of the
rationale from the accompanying memorandum opinion concerning Peacock’s and
Defendants’ cross-motions—there are no genuine issues of material fact with
regard to Plaintiffs’ Count II; Plaintiffs are entitled to judgment as a matter of

47

law. 40 Accordingly, Plaintiffs’ offensive motion for summary judgment (Doc. 252)
will be granted; Defendants’ defensive motion for summary judgment necessarily
will be denied as to these claims (Doc. 238). Defendants’ offensive motion for
summary judgment with regard to their Counterclaims II (breach of the Loan) and
III (breach of Guaranties) will be denied for the same reasons. (Doc. 240).
C.

Plaintiffs’ Claims Under the Repayment Agreement41

Four of Plaintiffs’ other claims seek relief under—or related to—the
Repayment Agreement: (1) Count III, asserting breach of contract; (2) Count V,
asserting a claim for money paid; and (3) Count VIII, asserting conversion as to
Wiggins’s Pledged Collateral; and (4) Count X, asserting a claim for unjust
enrichment with regard to Wiggins’s Pledged Collateral, in the alternative to
breach of contract. (See Doc. 282 at 56-57). Defendants’ defensive motion for
summary judgment is aimed at each of these claims. (Doc. 238). Plaintiffs seek
offensive summary judgment on their claim for breach of contract in Count III.
(Doc. 247).
Defendants—collectively

defined

as

the

“Borrower”—executed

the

Repayment Agreement in favor of Wolf Pup, its members, and its members’
40

This decision pretermits discussion of Plaintiffs’ Count I, which seeks the same relief—release
of the Guaranties—under an entirely different rationale. In light of the relief granted here, Count
I will be dismissed as duplicative.
41

As mentioned above, Defendants’ defenses to Plaintiffs’ claims under the Pledge
Agreement—which overlap with their defenses to Plaintiffs’ claims under the Repayment
Agreement—are also discussed in this section.
48

owners.

(Doc. 246-5).

As a reminder, the Repayment Agreement required

Defendants to repay any portion of the Pledged Collateral seized by Superior; it
also provided Defendants would not sell Wolf Bay Landing in its entirety absent
payment in full of the Loan and repayment of any Pledged Collateral Superior
seized. (Id. at 2). Meanwhile, the Pledge Agreement—executed on the same
day—included the already-discussed provision requiring Ellis to repay or refinance
the Loan within one year, releasing the guarantors. (Doc. 246-2 at 6).
1.

Defendants’ Defensive Motion for Summary Judgment

Defendants’ fraud allegations—premised on the invalidity of the Condo
Declaration—are not merely grounds for their fraudulent misrepresentation
counterclaim; Defendants also employ these allegations as their principal defense
to Plaintiffs’ claims under the Pledge Agreement and Repayment Agreement.
(Doc. 239 at 42-48). For the same reasons Defendants’ allegations concerning the
defective Condo Declaration cannot sustain their counterclaim for fraud, they also
are insufficient to show fraud as a defense to Plaintiffs’ claims under the
Repayment and/or Pledge Agreements.
Defendants assert several additional defenses to Plaintiffs’ claims under the
Repayment and/or Pledge Agreements. First, Defendants contend Wiggins cannot
assert claims under these agreements because he was not a party to them. (E.g.
Doc. 239 at 29, 37, n.18; Doc. 293 at 9-11). The remainder of Defendants’
49

defenses arise from the deficiencies in the Condo Declaration: (1) failure of
consideration; (2) Plaintiffs’ own breach; (3) failure of a condition precedent; (4)
impossibility and frustration of purpose; and (5) unclean hands. (Doc. 239 at 3750). The court will first address Wiggins’s third-party beneficiary status before
turning to the defenses premised on the invalidity of the Condo Declaration.
a.

Wiggins’s Third-Party Beneficiary Status

The parties to the Pledge Agreement were Ellis, Raley, and Wolf Pup. (Doc.
246-2). While Wiggins signed the Pledge Agreement, he did so as Wolf Pup’s
authorized representative, not in his personal capacity. (Id. at 6). Similarly,
Wiggins signed the Repayment Agreement as Wolf Pup’s authorized
representative. (Doc. 246-5 at 3). The other signatory was Ellis, who signed both
individually and as CCLLC’s managing member. (Id.). Accordingly, Wiggins
was not a party to these agreements in his personal capacity. On these facts,
Defendants contend Wiggins cannot assert claims under these agreements because
he did not plead third-party beneficiary status. (Doc. 279 at 13, 22, 25, 27). In
support, Defendants quote Fuller v. Winn-Dixie Montgomery, LLC, No. 16-363,
2017 WL 3098104 (S.D. Ala. July 19, 2017). (Doc. 279 at 13, n.8) (“For the thirdparty beneficiary claim . . . , Fuller cannot raise new claims on summary judgment
and is limited to the allegations of the operative complaint, which did not include
this claim.”) (footnote omitted).
50

“A party claiming to be a third-party beneficiary, ‘must establish that the
contracting parties intended, at the time the contract was created, to bestow a direct
benefit upon the third party.’” Walker v. Allstate Prop. & Cas. Ins. Co., No. 190701-RDP, 2020 WL 1235626, at *7 (N.D. Ala. Mar. 10, 2020) (quoting Airlines
Rep. Corp. v. Higginbotham, 643 So. 2d 952, 954 (Ala. 1994)).

A plaintiff

asserting a breach of contract claim as a third-party beneficiary “must allege ‘facts
in the complaint suggesting that either party to the contract intended it to directly
benefit him at the time they executed the contract.’” Id. (alterations incorporated)
(quoting Thomas v. Am.'s Serv. Co., No. 15-0019-AKK, 2015 WL 4729792, at *2
(N.D. Ala. Aug. 10, 2015)).
Here, Wiggins personally stood to benefit under both the Pledge Agreement
and the Repayment Agreement. The Repayment Agreement provided, in the event
any of the Pledged Collateral was seized, Defendants would “immediately repay to
Wiggins any portion of the $1,500,000 collateral and interest accrued thereon
posted by Wiggins.” (Doc. 246-5 at 2). Likewise, Wolf Bay Landing could not be
sold without payment of the Loan in full. (Id.). Similarly, the Pledge Agreement
provided Ellis would repay or refinance the Loan within one year, releasing the
guarantors—including Wiggins. (Doc. 246-2 at 6). Clearly, the signatories to
these agreements intended Wiggins to benefit directly at the time of their

51

execution. Moreover, Plaintiffs alleged these facts prominently in the Second
Amended Complaint. (Doc. 94 at 2-6). See Walker, 2020 WL 1235626, at *7.
To the extent Defendants challenge Plaintiffs’ allegations concerning
Wiggins’s capacity to sue as a third-party beneficiary, a party is not required to
allege their authority or capacity to sue under Rule 9(a) of the Federal Rules of
Civil Procedure. Instead, Rule 9(a)(2) places the burden to prove lack of capacity
on the party challenging it. See James v. City of Huntsville, No. 14-2267-AKK
(N.D. Ala. Mar. 4, 2015), Doc. 10, R&R adopted May 26, 2015. 42 Defendants do
not dispute Wiggins is in fact a third-party beneficiary; instead they merely
challenge the allegations of this status in the Second Amended Complaint. As
shown above, Wiggins’s status as a third-party beneficiary is obvious from the face
of the operative complaint. Additionally, the only case cited by Defendants in
support of this argument—Fuller—also addressed the failure to plead the
underlying claim, not merely to failure to plead capacity. (See Doc. 279 at 13, n.8,
42

Presented with a motion to dismiss for failure to specifically plead personal representative
capacity with regard to a wrongful death claim under §1983, this court held:
Rule 9(a)(1)(B) of the Federal Rules of Civil Procedure provides that a pleading
need not allege a party’s authority to sue in a representative capacity unless
required to show the court has jurisdiction. See Fed. R. Civ. P. 9(a)(1)(B); see
also 5A C. Wright & A. Miller, Federal Practice and Procedure § 1292 (3d ed.).
“The rationale behind this rule is that the nature of the plaintiff’s cause of action
can be determined from the body of the complaint.” Colorado Springs
Cablevision, Inc. v. Lively, 579 F. Supp. 252, 255 (D. Colo. 1984). A defendant
must challenge a plaintiff’s authority to sue in a representative capacity by a
specific denial. Fed. R. Civ. P. 9(a)(2).
James, No. 14-2267, Doc. 10 at 4-5.
52

22). Accordingly, Defendants are not entitled to summary judgment on the basis
of their arguments regarding Wiggins’s third-party beneficiary status.
b.

Defenses Based on Invalid Condo Declaration

Defendants’ remaining defenses to Plaintiffs’ claims under the Repayment
and Pledge Agreements all rely on deficiencies in the Condo Declaration. Each of
these arguments implicitly rests on the theory that the validity of the Condo
Declaration—creating ready-to-sell condominium units—was the cornerstone of
the entire 2007 Transaction. However, none of the documents effectuating the
2007 Transaction is explicitly premised on the validity of the Condo Declaration.
Indeed, the evidence shows a valid Condo Declaration was not material to the 2007
Transaction, Ellis’s post hoc testimony notwithstanding.
The Gulf Coast condo market had declined by the time the parties completed
the 2007 Transaction. These adverse conditions in the condo market persisted and
did not recover until sometime after 2010. (See Doc. 255-1 at 87). Ellis testified
CCLLC never received an acceptable offer for a unit at Wolf Bay Landing before
selling the development to Trinity Retreat in 2014. (Id.). During that time, the
offers which did come in were for approximately forty percent of the values
reflected in the Release Schedule. (Id.). Accordingly, Ellis testified that, even if
the Condo Declaration had been valid, CCLLC would not have sold any units
through 2010. (Id.).
53

Other evidence supports Ellis’s testimony in this regard. In a December 11,
2009 email to Wiggins, Ellis noted his ultimate goal was to “sell out of the project
once the market returns.” (Doc. 281-127). In a March 23, 2010 email exchange,
Wiggins expressed his interest in “expedit[ing] sales as soon as possible.” (Doc.
297-19 at 3). In response, Ellis stated sales were not his “most immediate goal,
until the market returns to cover the full release fee due to Superior Bank, plus
make a profit on the sale. Also, I do not want to have to recapture the stepped up
deprec[i]ation that has been taken via the Go Zone credit for these units.” (Id.).
To the extent Defendants contend the failure of the Condo Declaration affected the
sales contracts existing at the time of the 2007 Transaction, the Bowles litigation
was already under way at that time and was referenced in agreements Defendants
signed. Indeed, as previously mentioned, the Specific Performance Agreement
implicitly recognized the purchaser-defendants might prevail in the Bowles
Litigation. (Doc. 246-3).
Further belying the materiality of the status of the Condo Declaration is that
Ellis’s attorney cured the defect simply by filing a new declaration of
condominium on June 25, 2014, the day after the foreclosure sale. (See Doc. 255-1
at 45; Doc. 299 at 10). Ellis testified he could have cured the defects in the Condo
Declaration earlier but chose not to because he was “flat broke” and having a valid
declaration was not a priority in 2010 and 2011. (Doc. 255-1 at 45, 87). Neither
54

did Ellis ever make a claim on the title insurance policy. (Id. at 45). Similarly, the
Real Estate Purchase Agreement, which the parties negotiated and signed after the
Condo Declaration was filed, described Wolf Bay Landing on a metes and bounds
basis. (Doc. 259-1 SEALED at 14). Accordingly, the facts presented here do not
support Defendants’ contention that the validity of the Condo Declaration was a
material factor during the 2007 Transaction.
Regardless, “a plaintiff cannot simultaneously claim the benefits of a
contract and repudiate its burdens and conditions.” Lyles v. Pioneer Hous. Sys.,
Inc., 858 So. 2d 226, 229 (Ala. 2003) (quoting S. Energy Homes, Inc. v. Ard, 772
So. 2d 1131, 1134 (Ala. 2000) (alteration incorporated; quotation marks omitted).
There is a factual dispute regarding precisely when Defendants knew of the
problems with the Condo Declaration. Ellis testified he learned of the defects a
“short” time after the December 2010 ruling in the Bowles litigation. (Doc. 255-1
at 33). Whether Ellis learned of the defective Condo Declaration shortly after the
Bowles Litigation concluded—or as strongly suggested by the evidence, sometime
during the preceding year43—does not affect the legal consequences of
Defendants’ subsequent actions.
43

Other evidence suggests Ellis was aware of problems with the Condo Declaration at least as
early as 2009. (Doc. 297-10) (November 18, 2009 email from Superior Bank’s Bill McKinnon
to Ellis, attaching Wiggins’s state court complaint against Peacock—which alleged problems
with the Condo Declaration). There were also communications in 2010—prior to the judgment
in Bowles—suggesting Ellis was aware of problems with the Condo Declaration. (See Doc. 281147 (April 1, 2010 email from Balch & Bingham’s Randolph Lanier to Ellis, Wiggins, and
55

Rather than taking action upon learning of the defective Condo Declaration,
Defendants continued to benefit from ownership of Wolf Bay Landing, including
exercising exclusive dominion over the property, collecting rents, and retaining the
benefit of accelerated GO Zone depreciation. Defendants also retained the benefit
of Wiggins’s Pledged Collateral, which Superior seized and applied against the
principal of the Loan. In June 2014, Defendants exercised the ultimate benefit of
ownership when they sold Wolf Bay Landing to Trinity Retreat, extinguishing
Ellis’s personal debt for a fraction of the amount he owed. Having reaped these
benefits of ownership, even after learning of the Condo Declaration’s defects—
shortly after December 2010, at the very latest—Defendants cannot seek to avoid
the burdens of their agreements with Plaintiffs. Lyles, 858 So. 3d at 229.
Defendants’ contract defenses, which fail for independently sufficient
reasons, are addressed in turn.

others, attaching As-Built drawings and stating: “Wolf Pup and Character Counts need to get a
good condo lawyer to file an appropriate amendment to the Declaration of condominium to get
this fixed.”); Doc. 281-151 (April 5, 2010 email from Lanier to Ellis, recommending lawyers in
Baldwin County “for condominium work”); Doc. 281-141 at 3 (August 7, 2010 memo from
Frank Ellis accompanying the documents from the 2007 Transaction, stating: “I know that I have
a couple of ‘Achilles heel’ documents, at the same time, my performance was limited due to the
misrepresentation by Wolf Pup LLC that I was purchasing a fully approved condominium
project that could be sold and financed by third party purchasers, which is even currently not the
case, based on Wiggins’ own suit against . . . Linda Peacock . . . . I should have for you
tomorrow the law suit number against the local realtor and then the counter claim by him and
other contract purchasers stating this flaw in the condo formation . . . . The plot thickens.”)).
This chronology, especially when combined with his March 31, 2011 purchase of Unit A110,
suggests the status of the Condo Declaration was immaterial to Ellis.
56

i.

Failure of Consideration

“Consideration must be present when the contract is made.” Fant v.
Champion Aviation, Inc., 689 So. 2d 32, 37 (Ala. 1997). “The requirement of
consideration means that a gratuitous promise is not enforceable.” Id. “Under
Alabama law, failure of consideration is an affirmative defense to enforcement of a
contract.” Hardy v. Jim Walter Homes, Inc., No. 06-0687, 2008 WL 906455, at *6
(S.D. Ala. April 1, 2008). As the Alabama Supreme Court has held:
The failure of consideration is “‘the neglect, refusal and failure of one
of the contracting parties to do, perform, or furnish, after making and
entering into the contract, the consideration in substance and in fact
agreed on.’” Lemaster v. Dutton, 694 So. 2d 1360, 1366 (Ala. Civ.
App. 1996) (quoting 17 C.J.S. Contracts § 129 (1963)). Additionally,
a failure of consideration is “‘predicated on the happening of events
which materially change the rights of the parties, which events were
not within their contemplation at the time of the execution of the
contract.’” Lemaster, 694 So. 2d at 1366.
Self v. Slaughter, 16 So. 3d 781, 787 (Ala. 2008). As a court sitting in the
Southern District of Alabama has explained, failure of consideration and lack of
consideration are two distinct theories. Hardy, 2008 WL 906455, at *7. In Hardy,
a case cited by Defendants, the court discussed:
the distinct doctrines of lack of consideration (a contract formation
issue which goes to the existence of a contract in the first instance)
and failure of consideration (a contract performance issue under
which an otherwise valid contract may be voided by one party after
the fact for the other party's failure to perform). Compare Lemaster v.
Dutton, 694 So. 2d 1360, 1366 (Ala. Civ. App. 1996) (“Typically, a
total failure of consideration is used as an excuse for nonperformance
57

of a contract.”) with Marcrum v. Embry, 282 So. 2d 49, 51 (Ala.
1973) (valid contract requires “valuable consideration moving from
one side to the other” or “binding promises on the part of each party to
the other”); see generally Belew v. Rector, 202 S.W. 3d 849, 854 n. 4
(Tex. App.-Eastland 2006) (explaining that “lack of consideration”
and “failure of consideration” represent different defenses, and that
“lack of consideration exists, if at all, immediately after the execution
of a contract while failure of consideration arises because of
subsequent events”).
Id.; (see Doc. 239 at 37; Doc. 293 at 11).
Here, Defendants contend the flaws in the Condo Declaration constitute a
failure of consideration, excusing them from performing under the Pledge
Agreement and the Repayment Agreement. (E.g. Doc. 239 at 37-38; E.g. Doc. 279
at 25, 27).44 However, the chronology of events in this case does not support a
failure of consideration defense.

Even if the defective Condo Declaration

constituted a breach, it was present at the time the parties consummated the deal.
While the failure of Condo Declaration was not definitively announced until the
conclusion of the Bowles Litigation in 2010, the underlying defects were present
prior to, during, and after the execution of the 2007 Wolf Bay Landing transaction;
no “subsequent event” affected the validity of the Condo Declaration. Hardy,

44

Defendants also contend there was no consideration as to Ellis under either the Pledge or
Repayment Agreements. (Doc. 239 at 39).
58

2008 WL 906455, at *7. Accordingly, failure of consideration does not apply to
the facts of this case. See id.45
Neither does a total lack of consideration apply to the extent asserted on
behalf of Ellis. The failure of the Condo Declaration notwithstanding, the parties
exchanged a number of rights in exchange for Defendants’ assumption of the Loan,
including transfer of the entire property to Defendants’ exclusive possession in
2007. Additionally, Defendants benefitted from continued use of the Plaintiffs’
Pledged Collateral to secure the Loan and from Wiggins’s agreement to consent to
the Modification Agreement as a guarantor. The foregoing benefits to Defendants,
including Ellis, were the valuable consideration exchanged for Defendants’
execution of the Pledge and Repayment Agreements. These two agreements were
among the documents that effectuated the 2007 Transaction; they operated to
induce Plaintiffs to enter into the deal and accept the risks embodied in the other
agreements. (Doc. 246-2 at 2) (Pledge Agreement intended “to induce [Wolf Pup]
to enter into and accept the Loan Documents” and was made “in consideration of
45

Defendants citation of Kelso v. Int’l Wood Prods, Inc., 588 So. 2d 877, 878 (Ala. 1991), hints
at this deficiency. (See Doc. 239 at 39). Kelso concerned the plaintiff’s attempt to enforce a
gratuitous promise—a promise for which no consideration was ever exchanged—which created
“no legally enforceable contract right.” Id. Also inapposite is Local 798 Realty Corp. v. 152 W.
Condo., 37 A.D. 3d 239, 240 (2007), another case cited by Defendants. (See Doc. 239 at 38,
n.19). There the court, applying New York law, dismissed a lawsuit seeking specific
performance of a contract purporting to convey three non-existent condominium units; the court
held the purchasers had the right to cancel the contract under its express terms. Local 798, 37
A.D. 3d at 240. Tellingly, the plaintiffs in Kelso sought recission, seeking to undo the void
contract. Defendants here have explicitly and repeatedly foresworn recission. (Doc. 278 at 12;
Doc. 293 at 13).
59

the premises and mutual covenants contained in the Loan Agreements”); (Doc.
246-5 at 2) (Repayment Agreement signed “in consideration of the
contemporaneously executed documents”).

Clearly, the parties exchanged

consideration with respect to the 2007 Transaction.
For the foregoing reasons, Defendants are not entitled to defensive summary
judgment for failure of consideration.
ii.

Plaintiffs’ Breach

Next, Defendants contend the defective Condo Declaration constituted
Plaintiffs’ breach of the parties’ contracts, preventing Plaintiffs from suing
Defendants for subsequent breaches. (Doc. 239 at 39-40). In addition to the
problems discussed above, occasioned by Defendants’ acceptance of the benefits
of owning—and eventually selling—Wolf Bay Landing, this argument fails
because Defendants have not established the defective Condo Declaration
constitutes a breach of any of the parties’ agreements, including the Pledge
Agreement or the Repayment Agreement.
The Repayment Agreement refers to “Wolf Bay Landing Condominiums”
three times: (1) in the opening paragraph, noting the purchase price; (2) in
paragraph 6a, providing Defendants would not sell the “Wolf Bay Landing
Condominium project” in its entirety absent payment in full of the Loan and return
of the Pledged Collateral; and (3) in paragraph 6b, providing that certain proceeds
60

from the sale of any unit would be placed in escrow until the Pledged Collateral
was returned to Wiggins. (Doc. 246-5 at 2-3). Similarly, paragraphs six and seven
of the Pledge Agreement provide for the sale of units and the allocation of sales
proceeds. (Doc. 246-2 at 3-4). While it is clear that no individual condominium
units could be sold absent a valid condominium declaration, the Repayment
Agreement and Pledge Agreement are entirely silent regarding the existence—
much less the validity—of the Condo Declaration or the party responsible for
creating and filing it. The same is true regarding the other agreements surrounding
the 2007 Transaction.

Accordingly, the defective Condo Declaration did not

constitute a breach of any contract by Plaintiffs.
Finally, once the 2007 Transaction was complete, Defendants had exclusive
ownership and control of Wolf Bay Landing. Ellis testified he could have cured
the defects in the Condo Declaration earlier but chose not to do so. (Doc. 255-1 at
45, 87).

As noted in one of the cases quoted by Defendants, the law does not

allow a contracting party “to take advantage of an obstacle to performance which .
. . lies within his power to remove.” (Doc. 239 at 40) (quoting Gulf, Mobile &
Ohio R.R. Co. v. Ill. Cent. R.R. Co., 128 F. Supp. 311, 324 (N.D. Ala. 1954)).
For the foregoing reasons, Defendants are not entitled to defensive summary
judgment due to any breach by Plaintiffs.

61

iii.

Condition Precedent

Defendants also contend the validity of the Condo Declaration was a
condition precedent. (Doc. 239 at 40-41). A condition precedent is an act or event
which must occur before a contractual duty to perform arises. CAM Invs., LLC v.
Totty, 128 So. 3d 749, 753 (Ala. Civ. App. 2013). Defendants posit the “entire
purpose of the transactions at issue in this case surround a conveyance of Wolf Bay
Landing as condominium units to CCLLC.” (Doc. 239 at 41). In support of this
contention, Defendants rely on the same arguments advanced with regard to their
counterclaim for fraud: the appearance of the words “condominium” and “unit” in
the various documents effectuating the 2007 Transaction. (Id. at 41). For the same
reasons explained in the foregoing pages, this argument fails.
For the foregoing reasons, Defendants are not entitled to defensive summary
judgment for failure of a condition precedent.
iv.

Impossibility and Frustration of Purpose

Next, Defendants assert the failure of the Condo Declaration rendered their
performance impossible or frustrated the purpose of the 2007 Transaction. (Doc.
239 at 48-49). The rationale explained in the foregoing subsection applies equally
to these theories. Additionally, as discussed in more detail, supra, with regard to
Defendants’ counterclaim for fraud, Defendants were on notice of the Bowles
Litigation. Therefore, they could have foreseen the problems with the Condo
62

Declaration, foreclosing their impossibility defense. See Mayo v. Andress, 373 So.
2d 620, 624 (Ala. 1979).
For the foregoing reasons, Defendants are not entitled to defensive summary
judgment under the doctrines of impossibility and/or frustration of purpose.
v.

Unclean Hands

Finally, Defendants argue the invalid Condo Declaration precludes
Plaintiffs’ claims under the Repayment Agreement and the Pledge Agreement on
the theory of unclean hands. (Doc. 239 at 49-50). A party asserting an unclean
hands defense must show “specific acts of willful misconduct which is morally
reprehensible as to known facts.” Retail Devs. of Ala., LLC v. E. Gadsden Golf
Club, Inc., 985 So. 2d 924, 932 (Ala. 2007) (citing Sterling Oil of Okla., Inc. v.
Pack, 287 So. 2d 847, 864 (Ala. 1973)). “Unclean hands is an equitable defense
that is akin to fraud; its purpose is to discourage unlawful activity.” Branch
Banking & Tr. Co. v. S & S Dev., Inc., 620 F. App'x 698, 701 (11th Cir. 2015)
(alteration incorporated); see Pace v. Wainwright, 10 So. 2d 755, 756 (Ala. 1942)
(unclean hands barred relief to party who participated in fraud scheme).
The cases on which Defendants rely with regard to their unclean hands
defense all involve illegal or fraudulent conduct. See J & M Bail Bonding Co. v.
Hayes, 748 So. 2d 198, 199 (Ala. 1999) (bail bonding company conspired with
corrections officer to block calls to inmates from competitor bondsmen); In re
63

Kingsley, 518 F.3d 874, 878 (11th Cir. 2008) (fraudulent transfer by debtor in
bankruptcy); HealthSouth Corp. v. Jefferson Cty. Tax Assessor, 978 So. 2d
737,745 (Ala. Civ. App. 2006) (HealthSouth precluded from recovering taxes paid
on fictitious property created in scheme to overstate fixed assets). Here, the court
has already found Defendants’ fraud counterclaim based on the Condo Declaration
fails as a matter of law. Neither do the undisputed facts surrounding the Condo
Declaration show Plaintiffs’ actions were “morally reprehensible.” See Retail
Devs. of Ala., 985 So. 2d at 932.
For the foregoing reasons, Defendants are not entitled to defensive summary
judgment as to Plaintiffs’ claims under a theory of unclean hands. Moreover, as
discussed in the foregoing sections, Defendants are not entitled to summary
judgment on any theories they advance with regard to Plaintiffs’ claims under the
Repayment Agreement and the Pledge Agreement.
2.

Plaintiffs’ Offensive Motion on Count III

Of their claims under the Repayment Agreement, Plaintiffs move for
offensive summary judgment only on Count III (Breach of Contract). (Doc. 247).
A party asserting breach of contract must show: “(1) the existence of a valid
contract binding the parties in the action, (2) his own performance under the
contract, (3) the defendant’s nonperformance, and (4) damages.” McCutchen, 988
So. 2d. 998, 1004 (Ala. 2008).
64

Plaintiffs contend Defendants have breached the Repayment Agreement by
failing to repay the Pledged Collateral seized by Superior in 2010. (Doc. 248 at 713). Plaintiffs also contend Defendants breached the Repayment Agreement and
the Pledge Agreement by failing to mark the Loan as paid in full. (Id. at 13-16).
Finally, Plaintiffs contend Defendants breached the Real Estate Purchase
Agreement and Repayment Agreement by failing to pay the agreed price for Wolf
Bay Landing. (Id. at 16-18).
In response to Plaintiffs’ motion, Defendants present several arguments
already rejected above with respect to their defensive motion for summary
judgment, as well as Plaintiffs’ defensive motion for summary judgment regarding
Defendants’ counterclaim for fraud: (1) Wiggins does not have an individual claim
and is not a third-party beneficiary; (2) the Repayment Agreement is not supported
by consideration; (3) Plaintiffs’ failure to disclose the failure of the Condo
Declaration constituted fraud; and (4) the contract defenses based on the failure of
the Condo Declaration. (Doc. 277 at 7-9, 19-21). The court need not address these
arguments again, as the undisputed facts, even when viewed in the light most
favorable to Defendants, show: (1) Wiggins has asserted viable claims as a thirdparty beneficiary; (2) the Repayment Agreement was supported by consideration;
(3) the non-disclosure of the status of the Condo Declaration did not constitute
fraud; and (4) the failure of the Condo Declaration does not support the contract
65

defenses asserted by Defendants. These conclusions also establish Plaintiffs have
satisfied the first two elements of their breach of contract claim: Plaintiffs’
performance of a binding contract with Defendants. See McCutchen Co., 988 So.
2d. at 1004.
This opinion has not yet addressed the following arguments Defendants’
assert in response to Plaintiffs’ offensive motion for summary judgment: (1) as to
the claims concerning the Interest Reserve Account, Plaintiffs have failed to prove
damages; (2) Defendants have not breached any promise to pay off the Loan or
release the guarantors; (3) Plaintiffs have failed to show damages regarding any
failure to release the Guaranties or satisfy the Loan; and (4) Plaintiffs cannot
recover under the Real Estate Purchase Agreement. (Doc. 277 at 9-18). These
arguments primarily are aimed at the third and fourth requirements for breach of
contract: Defendants’ breach and Plaintiffs’ damages. McCutchen Co., 988 So. 2d.
at 1004. Defendants’ remaining arguments are addressed in turn, although not as
delineated.
a.

Promise to Pay or Release and Damages

Paragraph six of the Repayment Agreement provides Defendants would not
sell Wolf Bay Landing in its entirety unless the Loan was paid in full and the
Pledged Collateral was returned to Plaintiffs with interest. (Doc. 246-5 at 2).
Defendants argue they are not liable under this provision of the Repayment
66

Agreement for both procedural and substantive reasons. Procedurally, Defendants
contend the operative complaint does not allege violations of this provision of the
Repayment Agreement. (Doc. 277 at 11-12). On the merits, Defendants assert: (1)
the June 2014 foreclosure on Wolf Bay Landing was not a “sale” for purposes of
the Repayment Agreement; and (2) Plaintiffs have not shown any damages from
the supposed breach. (Id. at 12-14). Each argument is addressed in turn.
Procedurally, the operative complaint includes allegations to support a
claim for breach of contract under paragraph six of the Repayment Agreement due
to the sale of Wolf Bay Landing absent payment in full of the Loan. (Doc. 94 at 36). Count III alleges Defendants breached their obligation to repay the Loan. (Id.
at 37). While Count III quotes the release language from the Pledge Agreement, it
also incorporates the one-and-a-half-page Repayment Agreement. (Id.; see Doc.
98-2). Accordingly, a fair reading of the complaint reveals Count III includes a
claim under the “payment in full” provision of paragraph six of the Repayment
Agreement.
On the merits, Defendants contend the June 2014 foreclosure on Wolf Bay
Landing was not a “sale” for purposes of the Repayment Agreement and thus did
not constitute a breach.

(Doc. 277 at 12-14).

Rather, Ellis contends the

foreclosure on a metes and bounds basis was necessary to cure the defective Condo
Declaration and was in accord with his rights as the lender. (Doc. 277 at 12; Doc.
67

279 at 14, 23). Trinity Retreat (solely owned at the time by his wife—Ellis later
became a member too) was the successful bidder, paying Ellis $5,750,000. Ellis
paid the proceeds to Cadence, which applied it to fully satisfy Ellis’s personal
loans with Superior. (Doc. 277 at 12; Doc. 279 at 14). On these facts, Defendants
contend “Ellis foreclosed upon, but did not ‘sell’ Wolf Bay Landing.” (Doc. 277 at
13; Doc. 279 at 14). Perhaps unsurprisingly, Defendants do not cite any law to
support this theory.
Plaintiffs point to numerous documents referring to the foreclosure as a sale:
(1) the mortgage foreclosure deed refers to a “foreclosure sale,” and states Ellis
offered Wolf Bay Landing for “sale and did sell” it and that it was “sold” to Trinity
Retreat.

(Doc. 255-5); (2) the Second Settlement Agreement with Cadence

provides Wolf Bay Landing shall be “sold to a third party” and $5.75 million must
be paid to Cadence (Doc. 255-21 at 10); and (3) a previous R&R noting the
property was sold to Trinity Retreat (Doc. 138 at 12). (Doc. 298 at 14-17). To be
fair, Plaintiffs also do not cite much law on this point, nor do they need to. The
record shows Trinity Retreat paid $5,750,000 in exchange for title to Wolf Bay
Landing. To call this anything other than a sale is silly. Accordingly, Defendants’

68

June 2014 foreclosure sale breached paragraph 6 of the Repayment Agreement in
that the Loan was not paid in full contemporaneously with the sale.46
Finally, Defendants contend—even if they breached the payment in full
promise—Plaintiffs have not shown the measure of damages flowing from this
breach. (Doc. 277 at 14). “As a general rule, damages in a breach-of-contract
action are that sum which would place the injured party in the same condition he
would have occupied if the contract had not been breached.” Goolesby v. Koch
Farms, LLC, 955 So. 2d 422, 427 (Ala. 2006) (quotation marks omitted).
Accordingly, the damages here are measured by the value of Defendants’ marking
the Loan as paid in full when they sold Wolf Bay Landing. This is also the relief
Plaintiffs request. (See Doc. 299 at 19-21). 47 In the context of Plaintiffs’ Counts I
and II, it is clear they seek damages in the form of a release. That this relief has

46

Defendants assert the foregoing conclusion runs afoul of prior rulings in this case. (Doc. 277
at 14). Specifically, Defendants point to portions of the December 20, 2016 R&R concerning
Plaintiffs’ and Peacock’s motions to dismiss Defendants’ counterclaims and third-party claims
for breach of guaranty. (Id. (citing Doc. 158 at 17-20)). The R&R, which analyzed the claims
under the Rule 12(b) standard at the motion to dismiss stage, concluded Wiggins and Peacock
had not shown Defendants “cannot recover under the Guaranties as a matter of law.” (Doc. 158
at 20, R&R adopted by Doc. 181). Contrary to Defendants’ assertion, the instant conclusion
regarding Defendants’ breach does not conflict with the undersigned’s prior report, which
addressed a different claim under a different legal standard. See also the accompanying
memorandum opinion and order on reconsideration of Peacock’s and Defendants’ motions.
47

Defendants have placed a dollar value on Plaintiffs’ supposed default on the Loan: the amount
due under the Loan, plus interest.
Conveniently, this is the amount they seek—$
16,319,271.23—via counterclaim Count II, alleging breach of contract for default on the Loan.
(Doc. 241 at 17-18).
69

already been granted, supra, does not render Defendants’ breach of the Repayment
Agreement any less of a breach.
b.

Damages Regarding Interest Reserve Account

Defendants argue Plaintiffs’ motion is deficient with regard to their breach
of contract claim concerning the Interest Reserve Account because the motion does
not specify or offer evidence regarding the amount Superior seized from the
Interest Reserve Account. (Doc. 277 at 9). However, Plaintiffs explain they seek
partial summary judgment as to the Interest Reserve Account, with leave to prove
damages at trial. (See Doc. 299 at 23). This is permissible under Rule 56.
Next, Defendants contend Plaintiffs did not contribute any funds to the
Interest Reserve Account.

(Doc. 277 at 10).

The Loan Assumption and

Modification Agreement required Wolf Pup to establish the Interest Reserve
Account at Superior in the minimum amount of $560,000. (Doc. 246-1 at 7).
Once established, CCLLC was responsible for maintaining the minimum balance
in the account. (Id.). However, Tim Hamner, a banker with Cadence who handled
the account, testified the account never held the minimum balance. (Doc. 250-11
at 42; see Doc. 246-13; Doc. 243-29 at 117-62). Hamner further testified the initial
deposit into the account in September 2007 was $269,875; by November the
account held $461,620.95. (Doc. 250-11 at 42; see Doc. 246-13). Defendants
have produced evidence suggesting Plaintiffs’ sale of Unit A301 was the source of
70

the proceeds Plaintiffs initially deposited in the Interest Reserve Account. (Doc.
243-5 at 148; 243-8 at 106, 133-34). 48
In response, Plaintiffs contend Ellis bought Unit A301 and paid Wolf Pup,
not Superior. (Doc. 299 at 24). This portion of Plaintiffs’ reply repeatedly cites to
a declaration by Wiggins which is not subject to a motion to strike. (Doc. 266-8).
However, this document does not state how much Plaintiffs deposited into the
Interest Reserve Account. (Id.). The declaration cites to stipulations included in
the November 21, 2008 Fourth Amendment to Loan Documents, reflecting that the
$560,000 Interest Reserve Account was established. (Doc. 255-35 at 3). Ellis,
Superior, and CCLLC signed that stipulation. (Id. at 7-14).
Plaintiffs have presented evidence that they funded at least part of the
required minimum balance in the Interest Reserve Account.

To the extent

Defendants contend the Interest Reserve Account was funded with proceeds from
the sale of Unit A301 to Ellis, this does not show that Plaintiffs paid no money into
the account. Even if Defendants are correct as to the genesis of at least some of the
48

Defendants also note that, although the October 2, 2007 Purchase Agreement for Unit A301
was between Wolf Pup and Ellis, Wiggins owned the unit when he conveyed it to Ellis on
November 13, 2007. (See Doc. 246-11; Doc. 277 at 10-11 (citing Doc. 243-22 at 49-52)).
Rather, Wolf Pup conveyed the unit to Wiggins for ten dollars on October 26, 2007. (Doc. 2557). Accordingly, Defendants contend the funds initially deposited into the Interest Reserve
Account did not belong to Wolf Pup. (Doc. 277 at 11). Although the thrust of this argument is
not entirely clear, it appears to be resolved by the conclusion that Wiggins has claims under the
Repayment Agreement as a third-party beneficiary. Defendants also contend that, because Unit
A301 was not actually a legally created condominium unit—due to the defective Condo
Declaration—they cannot be held liable for repayment of the Interest Reserve Account. (Doc.
277 at 11). This argument fails for the same reasons already discussed with regard to
Defendants’ contract defenses premised on deficiencies in the Condo Declaration.
71

amount deposited into the Interest Reserve Account, it still represents sale
proceeds rightfully belonging to Plaintiffs. It is uncontested that Defendants did
not repay Plaintiffs any funds seized from the Interest Reserve Account.
Accordingly, Plaintiffs have established damages for purposes of their motion for
partial summary judgment as to their breach of contract claim concerning the
failure to repay the Interest Reserve Account.

The precise measure of those

damages can be determined at trial. See 10B WRIGHT, MILLER & KANE, FED.
PRAC. & PROC. CIV. § 2737 (4th ed.) (“When Rule 56 was extensively rewritten in
2010, the material on partial summary adjudication was moved to other portions of
the rule. Thus, amended Rule 56(a), which contains the general standard for
obtaining summary judgment, now also includes express authority for judgment on
less than the entire case, denominating such judgments in its title as a ‘Partial
Summary Judgment.’”).
c.

Recovery Under Real Estate Purchase Agreement

Defendants also challenge Plaintiffs’ claims to the extent they are based on
the Real Estate Purchase Agreement. (Doc. 277 at 15-17). While the legal impact
of the Real Estate Purchase Agreement is unclear, it is not necessary to explore the
question; the Second Amended Complaint does not even mention the Real Estate
Purchases Agreement. (Doc. 94). Accordingly, Plaintiffs cannot recover for its
breach. The remainder of the briefing on this issue focuses on whether Plaintiffs
72

can show breach of contract via Defendants’ failure to pay for Wolf Bay Landing.
(See Doc. 277 at 16-17). Given the foregoing conclusions regarding release of the
Guaranties and the failure of Defendants’ counterclaim for breach of the Loan, it is
not necessary to address these arguments.
3.

Conclusion re Repayment Agreement: Plaintiffs’ Count III

Based on the foregoing discussion, the undisputed facts show the Repayment
Agreement was a binding, valid contract which Plaintiffs performed and
Defendants breached, damaging Plaintiffs. 49

Accordingly, Defendants are not

entitled to judgment as a matter of law on Plaintiffs’ Count III, asserting breach of
contract; Defendants’ defensive motion for summary judgment on this claim will
be denied. (Doc. 238).
For the same reasons, Plaintiffs are entitled to judgment as a matter of law
with regard to portions of Count III, and their offensive motion for summary
judgment is due to be granted in part and denied in part. (Doc. 247). Specifically,
Plaintiffs are entitled to summary judgment on their claims regarding the failure of
Defendants to repay the Wiggins C.D. and accrued interest seized by Superior on
December 23, 2010.

49

The undisputed facts show Superior seized a total of

The same is true with regard to the Pledge Agreement.
73

$1,742,126.70,50 representing the value of the Wiggins C.D. and accrued interest;
Defendants are liable to Plaintiffs in this amount under the Repayment Agreement.
(Doc. 259-2 SEALED at 3). Likewise, Plaintiffs are entitled to judgment as a
matter of law under the Repayment Agreement with regard to Defendants’ June
2014 sale of Wolf Bay Landing without paying the Loan in full. The relief for that
breach has already been granted in the form a release from the Guaranties.
With respect to the Interest Reserve Account, there is a genuine issue of
material fact regarding the amount of damages. While Plaintiffs have proved their
claim for breach of contract with regard to the Interest Reserve Account, including
that they were damaged, the exact amount of their damages is uncertain; Plaintiffs
may prove their damages at trial. Finally, Plaintiffs’ motion will be denied as to
any contract claim asserted under the Real Estate Purchase Agreement.
D.

Consequences of Determination Regarding Plaintiffs’ Count III

As explained below, the foregoing conclusion requires the dismissal two of
Plaintiffs’ claims: Count V (money paid) and Count X (unjust enrichment).
Likewise, it offers an independent basis on which to dismiss whatever remains of
Defendants’ Count II (breach of contract regarding the Loan).

50

The evidence shows Superior seized $1,742,126.70 from the Wiggins C.D. (Doc. 259-2
SEALED at 3). Immediately after correctly noting the amount seized from the Wiggins C.D.
(Doc. 248 at 10, n.8), Plaintiffs’ brief inexplicably requests judgment in the amount of
$1,734,244.76 (Id. at 11). The court assumes this is a typo and will defer to the undisputed
evidence regarding the amount seized form the Wiggins C.D.
74

1.

Plaintiffs’ Count X: Unjust Enrichment

Plaintiffs’ unjust enrichment claim concerns Defendants’ failure to repay the
Pledged Collateral seized by Superior. (See Doc. 282 at 56-57).

In response to

Defendants’ defensive motion for summary judgment, Plaintiffs’ explain they pled
unjust enrichment as an alternative to their claims under the Repayment
Agreement. (Id.). Plaintiffs assert this was particularly appropriate here, where
Defendants challenged the validity of the contracts between the parties. (Id.).
Having determined Plaintiffs are entitled to relief under the Repayment
Agreement, the alternative remedy of unjust enrichment is inappropriate.
Vardaman v. Florence City Bd. of Educ., 544 So. 2d 962, 965 (Ala. 1989) (“the
existence of an express contract generally excludes an implied agreement relative
to the same subject matter”); Univalor Trust, SA v. Colum. Petroleum, LLC, 315
F.R.D. 374, 382 (S.D. Ala. 2016) (“existence of an express contract extinguishes
an unjust enrichment claim altogether because unjust enrichment is an equitable
remedy which issues only when there is no adequate remedy at law”).
For the foregoing reasons, there are no genuine issues of material fact, and
Defendants are entitled to judgment as a matter of law on Plaintiffs’ claim for
unjust enrichment. Defendants’ defensive motion for summary judgment will be
granted as to this claim. (Doc. 238).

75

2.

Plaintiffs’ Count V: Money Paid

This claim is also based on the Defendants’ failure to repay the Pledged
Collateral seized by Superior. For the same reasons discussed in the preceding
section regarding unjust enrichment, Plaintiffs’ recovery under Count III for breach
of contract bars this duplicative claim. “A claim of money paid by mistake
essentially restates a claim for unjust enrichment.”

Simple Helix, LLC v. Relus

Techs., LLC, No. 20-453-HNJ, 2020 WL 5984024, at *17 (N.D. Ala. Oct. 8, 2020).
For the foregoing reasons, there are no genuine issues of material fact, and
Defendants are entitled to judgment as a matter of law on Plaintiffs’ claim for
money paid. Defendants’ defensive motion for summary judgment will be granted
as to this claim. (Doc. 238).
3.

Defendants’ Count II: Breach of Contract re the Loan

To the extent anything remains of Defendants’ Count II for breach of the
Loan, it is doomed by the conclusion, supra, that the Repayment Agreement is
enforceable. (See Doc. 253 at 13-16). Under the Repayment Agreement, Wolf
Bay Landing could not be sold in its entirety unless: (1) the Pledged Collateral was
returned to Wiggins; and (2) the Loan was paid in full. (Doc. 246-5 at 2). By the
time Defendants sold Wolf Bay Landing to Trinity Retreat via foreclosure in 2014,
Ellis held the note and was the only person or entity capable of fulfilling this
promise.
76

In response to Plaintiffs’ arguments regarding the “payment in full”
provision, Defendants assert several arguments already rejected above: (1)
Wiggins was not a party to the Repayment Agreement and did not have standing as
a third-party beneficiary; (2) failure of consideration due to the deficient Condo
Declaration; and (3) the 2014 foreclosure did not represent a sale of Wolf Bay
Landing.

(Doc. 279 at 13-15). As previously discussed, these arguments are

devoid of colorable merit. 51
The remaining argument relevant to the import of the Repayment Agreement
is that “Ellis denies individual liability on any of the side agreements to the Loan
Assumption.” (Doc. 279 at 13-14). In support of this argument, Defendants cite
portions of Ellis’s deposition in which he testified that he signed certain side
agreements on behalf of CCLLC only, not in his individual capacity. (See Doc.
255-1 at 21-22). Specifically, Ellis testified whether he signed in his individual
capacity was a “legal interpretation” which he would “leave to the courts.” (Id. at
22). The parties to the Repayment Agreement were Ellis, CCLLC, and Wolf Pup.
51

Defendants’ arguments in this regard only explicitly refer to the Pledge Agreement. However,
it is clear that Defendants’ arguments are also aimed at the Repayment Agreement, because they
repeat arguments regarding the sale of Wolf Bay Landing. (See Doc. 279 at 13-14). The
obligation to pay off or refinance the Loan under the Pledge Agreement was triggered by the
passage of time, not the sale of Wolf Bay Landing. (Doc. 246-2 at 6). The Repayment
Agreement was the only contract creating a “payment in full” obligation in the event Wolf Bay
Landing was sold. (Doc. 246-5 at 2). Additionally, Defendants’ opposition incorporates
portions of their brief in support of their defensive motion for summary judgment asserting these
arguments as to both the Pledge and Repayment Agreements. (Doc. 279 at 14) (citing Doc. 239
at 34-36). It appears Defendants’ citation refers to the page numbers assigned by their word
processing software. (Id.). Using the CM/ECF-assigned page numbers, the arguments the
Defendants assert via incorporation appear at pages 37-39. (Doc. 239 at 37-39).
77

(Doc. 246-5 at 2). At the end of the Repayment Agreement, there were two
signature blocks: (1) one for CCLLC, which Ellis signed as its managing member;
and (2) one for “Frank P. Ellis, IV” which Ellis also signed. 52 (Id. at 3). The only
plausible “legal interpretation” of the foregoing facts is that Ellis is personally
bound by the Repayment Agreement.53
In light of the failure of all of Defendants’ arguments in response to
Plaintiffs’ defensive motion for summary judgment, there are no genuine issues of
material fact with regard to Defendants’ Counterclaim II (breach of the Loan), and
Plaintiffs are entitled to judgment as a matter of law as to this counterclaim; their
motion will be granted in this regard.

(Doc. 238).

For the same reasons,

Defendants’ offensive motion as to Counterclaim II will necessarily be denied.
(Doc. 240). Because the debt on the Loan was extinguished under the terms of the
Repayment Agreement, Defendants’ Count III (breach of guaranty) fails for
alternative reasons that are independently sufficient to those explained in section
V.B., supra. This same conclusion dictates that Plaintiffs are entitled to judgment
as a matter of law as to their Count I on this independent basis.

52

The Repayment Agreement did not have a pre-printed signature block for Wolf Pup; Wiggins
wrote that portion by hand and signed as Wolf Pup’s representative. (Doc. 246-5 at 3).
53

To the extent Ellis contends he is not personally bound by the Pledge Agreement, the same
conclusion applies. The parties to the Pledge Agreement were Wolf Pup, Raley, and Ellis. (Doc.
246-2 at 2). Ellis signed the Pledge Agreement without reference to CCLLC. (Id. at 6).
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E.

Plaintiffs’ Count XIII: Promissory Estoppel/Fraud

Defendants’ defensive motion for summary judgment presents three
arguments regarding Plaintiffs’ claim for Promissory Estoppel/Fraud: (1)
inadequate pleading under Rule 9(b); (2) any such claim is time-barred; and (3) the
claim is an attempt to attach fraud liability to a breach of contract. (Doc. 239 at
58-61). Defendants rightly note the allegations asserted in Count XIII of the
Second Amended Complaint are all aimed at promises Defendants made with
respect to the 2007 Transaction and their failure to fulfill those promises within a
year. (Id.; see Doc. 94 at 56-58). Count XIII further alleges Defendants knew the
“representations and promises were false when made and that they did not intend
to perform . . . .” (Doc. 94 at 58). Count XIII seeks a declaratory judgment that
Defendants are precluded—on promissory estoppel grounds—from

pursuing

Plaintiffs under the Loan and from failing to repay the Pledged Collateral. (Id.).
This claim for relief is moot in light of the relief already granted under the parties’
contracts.
What remains of Count XIII is Plaintiffs’ claim for fraudulent
misrepresentation. Among Defendants’ arguments with regard to Count XIII is its
untimeliness under Alabama’s applicable two-year statute of limitations. (Doc.
239 at 59-60).

This argument rests on the fact that all of the misrepresentations

alleged in Count XIII occurred during the negotiation of the 2007 Transaction.
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(Id.). In response, Plaintiffs contend their fraud claim is also supported by the
allegations concerning Defendants’ conduct from 2010-2014—during the alleged
conspiracies with Superior to seize the Pledged Collateral and with Cadence to
orchestrate the foreclosure sale. (Doc. 282 at 41-42, 46-54). Plaintiffs’ response
leads

to

the

inescapable

conclusion

that

their

claim

for

fraudulent

misrepresentation is time-barred.
First, the conduct alleged in Count XIII all occurred in 2007. In response to
Defendants’ arguments, Plaintiffs do not contend the discovery rule saves these
otherwise time-barred misrepresentations.

Plaintiffs also do not contend their

fraud claim, asserted for the first time in February 2016, relates back to any
previous iteration of the complaint. (See Doc. 282 at 41-42). Accordingly, Count
XIII is time-barred to the extent it is based on Defendants’ 2007 conduct.
Turning to Plaintiffs’ arguments in response—that the fraud claim is also
based on Defendants’ conduct from 2010-2014—any such claim would also be
time-barred, even considering these unpled allegations.54

After the 2007

misrepresentations, the remaining conduct upon which Plaintiffs rely concerns

54

Although not argued by any party, it appears Count XIII is better understood as asserting
promissory fraud. “A claim of promissory fraud is ‘one based upon a promise to act or not to act
in the future.’” Ex parte Michelin N. Am., Inc., 795 So. 2d 674, 678 (Ala. 2001) (quoting Padgett
v. Hughes, 535 So. 2d 140, 142 (Ala.1988)). In addition to the four elements required to show
fraudulent misrepresentation, a plaintiff alleging promissory fraud must prove: “at the time of the
misrepresentation, the defendant had the intention not to perform the act promised, and [] that the
defendant had an intent to deceive.’” Id. at 678-79 (quoting Padgett, 535 So. 2d at 142); see
Southland Bank v. A & A Drywall Supply Co., 21 So. 3d 1196, 1209-12 (Ala. 2008).
80

Defendants’ contractual duties. As far as the undersigned can tell, Plaintiffs’ fraud
claim—as articulated in their response—rests on Defendants’ failure to tell
Plaintiffs from 2010 through 2014 that they were going to breach the contracts.
This is insufficient to state a claim for fraudulent misrepresentation. See Southland
Bank, 21 So. 3d at 1209-12 (in promissory fraud case, plaintiff cannot meet burden
of showing intent to deceive “merely by showing that the alleged promise
ultimately was not kept; otherwise, any breach of contract would constitute a
fraud”). The only misrepresentations actually alleged in Count XIII were made in
2007.

Thus, Plaintiffs’ claim for fraudulent misrepresentation is time-barred;

Defendants are entitled to judgement as a matter of law as to this claim.
F.

Plaintiffs’ Count VIII: Conversion

To succeed on a conversion claim, a plaintiff must show “proof of a
wrongful taking, an illegal assumption of ownership, an illegal use or misuse of
another’s property, or a wrongful detention or interference with another’s
property.” SouthTrust Bank v. Donely, 925 So. 2d 934, 939 (Ala. 2005) (emphasis
omitted). A plaintiff asserting conversion must show a defendant “exerted control”
over the converted property. Watson v. Thomas, 646 So. 2d 84, 86 (Ala. Civ. App.
1994); see McGee v. McGee, 91 So. 3d 659, 667 (Ala. 2012) (“The elements of
conversion include a wrongful taking of specific property and an assumption of

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ownership or dominion over the separate and identifiable property of another.”)
(quotation marks omitted).
Here, the primary focus of Plaintiffs’ arguments regarding their conversion
claim is Superior’s seizure of the Pledged Collateral and its efforts, acting in
concert with Defendants. (Doc. 282 at 54-56). Plaintiffs’ briefing largely relies on
the same allegations underlying their conspiracy claim.

(Id.).

However, the

undisputed facts show Superior maintained exclusive control over the Pledged
Collateral accounts from deposit to seizure. Accordingly, to the extent Plaintiffs
rely on the Pledged Collateral to show conversion, their claim fails.
Plaintiffs also contend the facts show an effort to “take, misuse, and interfere
with Plaintiffs’ . . . contractual rights (the automatic proxy to vote and control
CCLLC and right to sell WBL units).” (Doc. 282 at 54). 55 In support of this
argument, Plaintiffs cite a number of exhibits and portions of Ellis’s deposition.
(Id. at 54-55). Most of this evidence consists of Superior’s internal emails and
documents from late 2009 through 2010, discussing the problems with the Loan
and possible solutions. (See Doc. 259 SEALED). Ellis was a party to other
emails, but none of these show he interfered with or exerted control over Plaintiffs’
membership and voting rights under the Pledge Agreement. (E.g. Docs. 266-1,
266-2, 266-3). Neither do the cited portions of Ellis’s deposition. (Doc. 250-7 at
55

The court has already concluded the Pledge Agreement did not create a security interest in the
Wolf Bay Landing property in favor of the Plaintiffs. (Doc. 138 at 21-24).
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48-49, 57-58). Finally, Plaintiffs cite to portions of Wiggins’s declaration and
supplemental declaration.

The most relevant portion of the supplemental

declaration includes Wiggins’s averment that “Cadence interfered with such
contractual rights and remedies.” (Doc. 267-1 at 4). While the original Wiggins
declaration includes a number of averments regarding Superior’s actions, they all
relate to the seizure of the Pledged Collateral. (Doc. 266-8). As already noted,
Defendants did not exert control over the Pledged Collateral Superior seized.
Likewise, none of the cited evidence shows Defendants took, assumed, used,
detained, or interfered with Plaintiffs’ membership or voting rights under the
Pledge Agreement.
For the foregoing reasons, Plaintiffs cannot sustain Count VIII (conversion),
and Defendants are entitled to judgment as a matter of law as to this claim.
Accordingly, Defendants’ motion for summary judgment will be granted as to this
claim.
G.

Plaintiffs’ Count IX: Conspiracy

The foregoing conclusions mean, as Defendants contend, there is no
underlying wrong to sustain Plaintiffs’ conspiracy claim. (Doc. 239 at 53-54).
While Plaintiffs have proven their breach of contract claim, a breach of contract is
insufficient to sustain a conspiracy claim. See Barber v. Stephenson, 69 So. 2d
251, 255 (1953) (“an action for conspiring with another to induce the latter to
83

break his contract cannot be maintained, the remedy being to sue on it”).
Accordingly, Defendants’ defensive motion for summary judgment will be granted
as to Plaintiff’s Count IX.
H.

Defendants’ Counterclaim Count V: Breach of Warranty Deed

Defendants’ Counterclaim V is the subject of Defendants’ offensive motion
for summary judgment (Doc. 240) and Plaintiffs’ defensive motion for summary
judgment (Doc. 249).

This claim is based on Wolf Pup’s execution of the

Assumption Warranty Deed purporting to convey sixty Wolf Bay Landing units to
CCLLC on October 26, 2007. (Doc. 241 at 18; see Doc. 246-6). Defendants
contend, however, the deed breached the warranty of good and marketable title
because the Condo Declaration was invalid. (Doc. 241 at 19). 56 Defendants seek
$36,218,284.85 on this claim, consisting of: (1) $19,675,000.00 in damages,
measured by the difference of Wolf Bay Landing’s value as a condominium as
opposed to an apartment building; (2) $13,131,055.00 in accrued interest; and (3)
$3,412,229.85 in interest payments. (Id.; Doc. 240 at 3).
The Assumption Warranty Deed Wolf Pup executed provides Wolf Pup
“does hereby grant, bargain, sell, and convey” to CCLLC “in fee simple,” the sixty
units at Wolf Bay Landing, described by their unit numbers and by incorporation

56

Defendants also assert the transfer was premature because Superior had not yet executed the
Loan Assumption Agreement. (Doc. 241 at 19).
84

of the Condo Declaration. (Doc. 246-2 at 2). The Assumption Warranty Deed also
includes the following express covenants of title:
AND GRANTOR [Wolf Pup] DOES FOR ITSELF, and for its
successors and assigns covenant with the said grantee [CCLLC], and
with grantee’s successors and assigns, that grantor is lawfully seized
in fee simple of the said premises; that they are free from all
encumbrances, except as otherwise noted above; that it has a good
right to sell and convey the same as aforesaid; and that it will and its
successors and assigns shall warrant and defend the same unto the
said grantee, and unto grantee’s successors and assigns, forever,
against the lawful claims of all persons.
(Id. at 3). The Assumption Warranty Deed does not include any other express
covenants.
Plaintiffs contend the inclusion of the words “grant, bargain, sell, and
convey” renders the Assumption Warranty Deed a statutory warranty deed under §
35-4-271 of the Alabama Code. (Doc. 283 at 37). Where a deed includes no
express covenants, Alabama law imposes the following “more limited,” implied
covenants on statutory warranty deeds: (1) a covenant of seizin; (2) a covenant
against encumbrances; and (3) a covenant of quiet enjoyment. ALA. CODE § 35-4271; see St. Paul Title Ins. Corp. v. Owen, 452 So. 2d 482, 484-85 (Ala. 1984).
Because the Assumption Warranty Deed here does include express covenants, it is
not a statutory warranty deed. Cousins v. McNeel, 96 So. 3d 846, 858 (Ala. Civ.
App. 2012) (“a statutory warranty deed does not contain express warranties”). In
addition to the covenants implied under § 35-4-271—covenants of seizin, quiet
85

enjoyment, and against encumbrances—the Assumption Warranty Deed included
express covenants that Wolf Pup: (1) had the right to convey the property
described; and (2) would defend the title against the claims of other persons. (Doc.
199-2 at 2); see Cousins, 96 So. at 857-58 (interpreting similar language in a deed
as providing these additional covenants). The inclusion of these five covenants
renders the Assumption Warranty Deed a “general warranty deed” under Alabama
law. See Colonial Cap. Corp. v. Smith, 367 So. 2d 490, 491 (Ala. Civ. App. 1979);
In re Health Sci. Prod., Inc., 183 B.R. 903, 931 (Bankr. N.D. Ala. 1995).
Here, Defendants contend Plaintiffs breached their covenants of seizin and
the right to convey by way of the defective Condo Declaration. (E.g. Doc. 278 at
40). These two covenants are “basically the same and mean that the grantor owns
the estate which he proposes to convey.” Smith, 367 So. 2d at 491. “These
covenants are broken at the time of conveyance if the grantor does not have good
title.” Smith, 367 So. 2d at 491. It is undisputed that Wolf Pup owned Wolf Bay
Landing in fee simple. It is further undisputed that Wolf Pup conveyed all of its
interest in Wolf Bay Landing during the 2007 Transaction. Accordingly, as a
matter of Alabama law, Wolf Pup did not breach the covenants of seizin or the
right to convey. Smith, 367 So. 2d at 491 (covenants of seizin and right to convey
were not implicated where grantor owned the property in fee simple and conveyed
all of his interests to the grantee).

For these reasons, as to Defendants’
86

Counterclaim V: (1) Defendants’ offensive motion for summary judgment will be
denied (Doc. 240); and (2) Plaintiffs’ defensive motion for summary judgment will
be granted (Doc. 249).
VI.

CONCLUSION
Defendants’ offensive motion for summary judgment regarding their

counterclaims is DENIED in its entirety. (Doc. 240) (Count V breach of warranty
deed). Plaintiffs’ defensive motions for summary judgment regarding Defendants’
counterclaims are GRANTED in their entirety. (Docs. 249, 252). As a result,
Defendants have no surviving counterclaims.
The remaining motions for summary judgment are GRANTED IN PART
and DENIED IN PART.

(Docs. 238, 247, 252).

Plaintiffs are entitled to

judgment as a matter of law with regard to their Count II (release of the
Guaranties) and portions of Count III (breach of contract). Plaintiffs may prove
their attorneys’ fees at trial. As to Count III, Plaintiffs have shown: (1) Defendants
breached the Repayment Agreement with regard to the Wiggins C.D., and
Plaintiffs are entitled to damages in the amount of $1,742,126.70; (2) Defendants
breached the Repayment Agreement with regard to the Interest Reserve Account,
with damages to be proven at trial. Defendants are entitled to judgment as a matter
of law on all of Plaintiffs’ other claims.

87

The parties are ORDERED to mediate this matter with the Honorable John
E. Ott by no later than March 19, 2021. The parties are instructed to provide
mutually agreeable mediation dates by February 17, 2021, via an email to
[e-mail].
DONE this 12th day of February, 2021.

______________________________
STACI G. CORNELIUS
U.S. MAGISTRATE JUDGE

88