Branch Banking and Trust Company v. EBR Investments LLC et al

Filing 34

MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 1/16/15. (SAC )

FILED
2015 Jan-16 PM 04:15
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
BRANCH BANKING AND TRUST
COMPANY,

}
}
}
Plaintiff and
}
Counterclaim-Defendant, }
}
v.
}
}
EBR INVESTMENTS LLC, et al., }
}
Defendants and
}
Counterclaim-Plaintiffs. }

CIVIL ACTION NO.
2:14-CV-01578-WMA

MEMORANDUM OPINION
Before the court are various motions relating to the answer
and counterclaim filed on October 17, 2014 by defendants EBR
Investments,

LLC

(“EBR”),

Stewart

Dudley

(“Dudley”),

and

SRD

Assurance Corporation (“SRD”) (Doc. 13). It is undisputed by the
parties that EBR executed and delivered to plaintiff
Banking

and

Trust

Company

(“BB&T”)

a

promissory

note

Branch
with

guarantees by Dudley and SRD. (Doc. 1 at 4-6; Doc. 13 at 2-3).
Defendants allege in their counterclaim that the loan at issue was
obtained for the purchase of eighteen condominiums in a real estate
development project by EBR that soured with the deterioration of
the real estate market in Fall of 2006. (Doc. 13 at 11). Defendants
allege that Colonial Bank, the predecessor to plaintiff, orally
agreed that the loan would be extended and renewed until the
purchased condominiums were sold. (Doc. 13 at 12). Defendants
further allege that the subsequent actions of Colonial Bank and
1

BB&T, actually

extending

and

renewing

the

loan

in

the

years

following, evidences the parties’ oral agreement. (Doc. 13 at 1213).
On November 11, 2014, BB&T moved to dismiss defendants’
counterclaim (Doc. 20), moved to strike defendants’ jury demand
(Doc.

21),

interposed

and
by

moved

to

defendants

strike

certain

(Doc.

22).

On

affirmative
November

defenses

14,

2014,

defendants moved to strike BB&T’s motion to dismiss (Doc. 24).
For the reasons stated below, defendants’ motion to strike
BB&T’s motion to dismiss will be denied, BB&T’s motion to dismiss
defendants’ counterclaim will be granted, BB&T’s motion to strike
defendants’ jury demand will be granted, and BB&T’s motion to
strike certain of defendants’ affirmative defenses will be denied.
I.

Defendants’ motion to strike plaintiff’s motion to dismiss
Defendants move to strike BB&T’s motion to dismiss their

counterclaim pursuant to Federal Rule of Civil Procedure 12(f),
arguing that plaintiff cannot pursue discovery and a motion to
dismiss without either the motion to dismiss being deemed withdrawn
or the discovery stayed (Doc. 24 at 3).
While judicial economy may at times warrant otherwise, a
federal district court is capable of simultaneously considering a
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) and managing discovery. Chudasama v. Mazda Motor Corp.,
123 F.3d 1353, 1368 (11th Cir. 1997). Specifically, Rule 12(i)

2

merely requires that a Rule 12(b)(6) motion “must be heard and
decided before trial unless the court orders a deferral until
trial.” Fed. R. Civ. Proc. 12. While the better practice may be to
obtain a ruling on a motion to dismiss before discovery begins,
there “is no requirement that this be done.” United States v.
Marion, 562 F.3d 1330, 1342 (11th Cir. 2009). Furthermore, Federal
Rule of Civil Procedure 8 “expressly permits the pleading of both
alternative and inconsistent claims.” United Technologies Corp. v.
Mazer, 556 F.3d 1260, 1273 (11th Cir. 2009).
Plaintiff’s discovery requests do not constitute a waiver of
its motion to dismiss. And defendants have not provided any reason
why discovery should be stayed beyond their errant construction of
the Federal Rules of Civil Procedure.
II.

BB&T’s motion to dismiss
BB&T moves to dismiss defendants’ counterclaim pursuant to

Federal Rule of Civil Procedure 12(b)(6). “A motion to dismiss a
counterclaim under Rule 12(b)(6) is treated the same as a motion to
dismiss a complaint” Masterbuilt Mfg., Inc. v. Bruce Foods Corp.,
2013 WL 5328367, at *1 (N.D. Ala. Sept. 20, 2013) (quoting
Fabricant v. Sears Roebuck, 202 F.R.D. 306, 308 (S.D.Fla.2001)).
“To

survive

a

motion

to

dismiss,

a

complaint

must

contain

sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009).
3

A.

Statute of Frauds
This case involves an alleged oral agreement(Doc. 13 at 12-

13). The parties agree1 that subsection (7) of the Alabama statute
of frauds is the applicable statute, which extends the general
writing and subscription requirements to “[e]very agreement or
commitment to lend money, delay or forebear repayment thereof or to
modify the provisions of such an agreement or commitment except for
consumer
$25,000.”2

loans

with

a

principal

amount

financed

less

than

Ala. Code § 8-9-2(7). Defendants argue however, that

the alleged oral agreement is not void because it falls within a
“part performance” exception to the statute of frauds. (Doc. 31 at
2-4).
Although

Alabama

courts

have

long

recognized

a

“part

performance” exception to the statute of frauds under Ala. Code §
8-9-2(5) for oral agreements to buy or sell land, Darby v. Johnson,
477 So. 2d 322, 326 (Ala. 1985), Alabama courts have declined to
expand3 the exception beyond subsection (5). Mantiply v. Mantiply,
1

Under Alabama law, the statute of frauds is an affirmative
defense and the party “invoking it bears the burden of proving
that the contract meets the stated criteria of the statute.” Ex
parte Ramsay, 829 So. 2d 146, 154 (Ala. 2002).
2

None of the parties dispute that the principal amount
financed in this case exceeds $25,000. (Doc. 1 at 4; Doc. 13 at
2).
3

See Durham v. Harbin, 530 So. 2d 208, 212 (Ala. 1988) (“We
are not wholly deaf to the strong arguments by the commentators
favoring a judicial admission exception to the Statute [of
Frauds], and, in a proper case, might be inclined to consider
4

951 So. 2d 638, 652-53 (Ala. 2006). The alleged contract at issue
here squarely falls within the domain of Ala. Code § 8-9-2(7), a
subsection with no recognized “part-performance” exception. Even
though the agreement incidentally relates to the sale of eighteen
condominiums,

it

is

not

a

land

sale

contract

within

the

contemplation of Ala. Code § 8-9-2(5), nor does it even satisfy
that subsection’s two payment or possession requirements necessary
for the “part-performance” exception to apply.4 Further, this case
is

not

the

proper

one

for

expanding

the

“part-performance”

exception to the Alabama statute of frauds. See Ed Peters Jewelry
Co. v. C & J Jewelry Co., 124 F.3d 252, 262-63 (1st Cir. 1997)
(noting that a federal forum is not the place for “trailblazing”
novel theories of state law).
Therefore, the statute of frauds bars defendants’ counterclaim

whether the legislative intent behind the Statute of Frauds
favors such a construction. This case, however, is not the case
in which to do so.”); Rentz v. Grant, 934 So. 2d 368, 373 (Ala.
2006) (“There is, however, one exception—the “partial
performance” exception—that will withdraw oral agreements for the
sale of land from applicability of the Statute of Frauds.”);
Fausak's Tire Ctr., Inc. v. Blanchard, 959 So. 2d 1132, 1143
(Ala. Civ. App. 2006)(“We conclude, however, that the two
admissions . . . do not make this the “proper case” in which to
adopt a judicial-admission exception to the Statute of Frauds . .
. [because] the intent behind our legislature's amending § 8–9–2
to add subsection (8) cannot support the adoption of a
judicial-admission exception to that subsection.”).
4

Ala. Code § 8-9-2(5) provides that “[e]very contract for
the sale of lands, tenements, or hereditaments, or of any
interest therein, except leases for a term not longer than one
year, unless the purchase money, or a portion thereof is paid and
the purchaser is put in possession of the land by the seller.”
5

insofar as it relies on an alleged oral agreement.
Specifically, counts I, III, IV, V, VI, and VII of defendants’
counterclaim rely on the alleged oral agreement and therefore must
be dismissed pursuant to Rule 12(b)(6). Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-56 (2007). Count I fails to state a claim for
declaratory

judgment

because

the

declaration

requested

by

defendants requires the existence of the oral contract barred under
the statute of frauds. (Doc. 13 at 1). Count II fails to state a
claim

for

misrepresentation/promissory

fraud/fraud

in

the

inducement because since the “oral promise . . . is void by
operation of the Statute of Frauds [it] will not support an action
against the promisor [sic] for promissory fraud.” Deutsche Bank
Trust Co. Americas v. Garst, 989 F. Supp. 2d 1194, 1204 (N.D. Ala.
2013) (quoting Bruce v. Cole, 854 So.2d 47, 58 (Ala.2003)). Count
IV fails to state a claim for breach of contract because it
requires the existence of an underlying contract and the statute of
frauds destroys the only alleged contract, which is oral.(Doc. 13
at 15-16; Doc. 31 at 7). Count V fails to state a proper claim for
promissory estoppel (Doc. 13 at 16-17) “because the “agreement”
[defendants] depend[] upon does not meet the requirements set forth
in Alabama's Statute of Frauds.” Deutsche Bank Trust Co. Americas
at 1205. Count VI fails to state a justiciable claim for equitable
estoppel (Doc. 13 at 17-18) because “a party may not avoid the
effect of the Statute of Frauds by framing the claim as one

6

alleging

promissory

fraud-in-the-inception

fraud

or

exception

by

invoking

to

the

the

Statute

historical
of

Frauds.”

DeFriece v. McCorquodale, 998 So. 2d 465, 471 (Ala. 2008). Count
VII fails to state a claim for conspiracy because the underlying
torts relied upon in counts III, IV, V, and VI (Doc. 13 at 18) are
themselves all barred by the Alabama statute of frauds. Goolesby v.
Koch Farms, LLC, 955 So. 2d 422, 430 (Ala. 2006) (“[a] civil
conspiracy cannot exist in the absence of an underlying tort.”).
Therefore, counts I, III, IV, V, VI, and VII of defendants’
counterclaim must be dismissed for failing “to contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’” Iqbal at 678 (quoting Twombly at 570).
B.

Fraudulent suppression
The first element of a fraudulent suppression claim requires

the showing of a duty to disclose. Bama Budweiser of Montgomery,
Inc. v. Anheuser-Busch, Inc., 611 So. 2d 238, 245 (Ala. 1992). “In
the absence of special circumstances, Alabama law considers the
lender-borrower relationship to be arms-length and does not place
a duty of disclosure on the lender.” Buckentin v. SunTrust Mortgage
Corp., 928 F. Supp. 2d 1273, 1285 (N.D. Ala. 2013) (citing Bank of
Red Bay v. King, 482 So.2d 274, 285 (Ala.1985)). “When both parties
are intelligent and fully capable of taking care of themselves and
dealing at arm's length, with no confidential relations, no duty to
disclose exists when information is not requested, and mere silence
7

is then not a fraud.” Bank of Red Bay at 285.
In this case, the parties were not under any special duty to
disclose. While defendants allege certain informational asymmetries
(Doc. 31 at 5-6), “[t]here was no weakness of age, no lack of
mental strength, and no absence of business intelligence.” Baylor
v. Jordan, 445 So. 2d 254, 256 (Ala. 1984). Rather, defendants and
plaintiff are all sophisticated parties engaged in a lending
transaction

related

to

a

commercial

real

estate

development

project, without any special duty to disclose.
Therefore, count II must be dismissed because defendants have
failed to plead the first element of a proper claim for fraudulent
suppression.
C.

Negligent and wanton mortgage servicing
Numerous

federal

courts,

including

the

undersigned,

have

concluded that “Alabama law ‘does not recognize a cause of action
for negligent or wanton mortgage servicing.’” Duke v. JPMorgan
Chase Bank Nat. Ass'n, 2014 WL 5770583, at *4 (N.D. Ala. Nov. 5,
2014) (quoting Blake v. Bank of America, N.A., 845 F.Supp.2d 1206,
1210 (M.D.Ala.2012)); see Deutsche Bank Trust Co. Americas at 1205.
Specifically, under Alabama law, “negligent failure to perform a
contract . . . is but a breach of the contract.” Vines v. Crescent
Transit Co., 264 Ala. 114, 85 So.2d 436, 440 (1956). Furthermore,
“damages for mortgage servicing are typically economic, while tort
liability more appropriately seeks compensation for personal injury
8

and property damage.” Deutsche Bank Trust Co. Americas at 1205.
Because no cause of action for negligent and wanton mortgage
servicing exists under Alabama law, count VIII must be dismissed
for failing to state a claim for relief.
D.

Breach of implied duty of good faith
“Although every contract contains either an express or an

implied covenant that the parties will act in good faith in
performing the contract, in Alabama only insurance contracts give
rise to a duty imposed by law on which a tort claim for bad faith
performance can be based.” Grant v. Butler, 590 So. 2d 254, 256
(Ala. 1991). “[T]here is no contractual cause of action for breach
of an implied duty of good faith that nebulously hovers over the
contracting parties, free from the specific terms of the contract.”
Lake Martin/Alabama Power Licensee Ass'n, Inc. v. Alabama Power
Co., 601 So. 2d 942, 945 (Ala. 1992).
The contract at issue is not an insurance contract, nor do
defendants allege any specific term of the contract or other basis
in law for breach of an express or implied duty of good faith and
fair dealing. Therefore, Count IX fails to state a claim upon which
relief can be granted.5
5

The court is aware that defendants did not specifically
respond to plaintiff’s Rule 12(b)(6) motion on count IX, however
unlike summary judgment, this court is persuaded that failure
does not automatically constitute a concession entitling
plaintiff to dismissal. Gadson v. Alabama Dep't of Corr., 2013 WL
5230241, at *2 (N.D. Ala. Sept. 17, 2013) (“the Court will review
the merits of the [movant]'s position and, if it is clearly
9

E.

Jury trial
Because defendants have unequivocally waived their right to

trial by jury, plaintiff’s motion to strike defendants’ request for
a jury trial will be granted. (Doc. 1 at 26, 19, 25).
III.

BB&T’s motion to strike certain affirmative defenses
In

its

motion

to

strike

affirmative

defenses

filed

by

defendants pursuant to Federal Rule of Civil Procedure 12(f),
plaintiff argues that defendants’ affirmative defenses 36 and 37
contained in their answer must be stricken as legally insufficient
under

Alabama

law.(Doc.

22

¶¶

3-4).

For

the

reasons

below,

defendants’ said motion to strike will be denied.
“The court may strike from a pleading an insufficient defense
or any other redundant, immaterial, impertinent, or scandalous
matter.” Fed. R. Civ. Pro. 12(f). “[I]t is well established that
the action of striking a pleading should be sparingly used by the
courts [and] is a drastic remedy to be resorted to only when
required for the purposes of justice.” Augustus v. Bd. of Pub.
Instruction of Escambia Cnty., Fla., 306 F.2d 862, 868 (5th Cir.
1962); see Bonner v. Prichard, 661 F.2d 1206, 1209 (5th Cir. 1981).
In this case, plaintiff correctly states the Alabama law to be
that a mortgagee is not required to foreclose the mortgage first

incorrect or inadequate to satisfy the [movant]'s initial burden,
will deny the motion despite the [nonmovant]'s failure to
respond.”) (quoting Branch Banking and Trust Co. v. Howard, 2013
WL 172903, *1 (S.D .Ala. Jan. 16, 2013)).
10

before pursuing other collection efforts. Triple J Cattle, Inc. v.
Chambers, 551 So. 2d 280, 282 (Ala. 1989). “A mortgagee, absent an
agreement to the contrary, may proceed on all of his remedies at
once, or may use those of his remedies that will give him the
easiest recovery against the mortgagor.” Triple J Cattle, Inc. at
282. Here, defendants allege that plaintiff and its predecessor
made certain representations to the contrary (Doc. 30 at 2), albeit
such representations appear to be oral (Doc. 30 at 3) and contrary
to the parties’ express written agreements (Doc. 1 at 17, 23; Doc.
22 at 3-4). While discovery may reveal that affirmative defenses 36
and 37 are factually unsupported, at this stage in the litigation
the affirmative defenses are sufficient for purposes of Rule 12(f)
and therefore defendants’ motion to strike will be denied.
CONCLUSION
For the reasons detailed above, the court will by separate
order deny defendants’ motion to strike plaintiff’s motion to
dismiss,

grant

plaintiff’s

motion

to

dismiss

defendants’

counterclaim, grant plaintiff’s motion to strike defendants’ jury
demand,

and

deny

plaintiff’s

motion

to

strike

certain

of

defendants’ affirmative defenses. The parties shall proceed to
fulfill their obligations under Federal Rule of Civil Procedure 26.

11

DONE this 16th day of January, 2015.

_____________________________
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE

12