ECP Financial II LLC v. Ivey

Filing 23

MEMORANDUM OPINION. Signed by Judge L Scott Coogler on 12/5/2013. (MSN)

FILED
2013 Dec-05 AM 10:15
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
JASPER DIVISION
ECP FINANCIAL II LLC,
Plaintiff;
vs.
GERALD WAYNE IVEY,
Defendant.

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6:13-cv-00920-LSC

MEMORANDUM OF OPINION
Before the Court is Plaintiff ECP Financial II LLC’s motion to dismiss
Defendant Gerald Wayne Ivey’s counterclaims for failure to state a claim based on
Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 13.) The issues have been
fully briefed by the parties and are ripe for decision. For the reasons stated herein,
Plaintiff’s motion is due to be granted in part and denied in part.
I.

Background1
Counter-Plaintiff Gerald Wayne Ivey (“Ivey”) is the chief executive officer of

1

In a 12(b)(6) motion, as discussed in more detail infra, the Court must read a counterclaim
like a complaint. Thus, the Court must accept the factual allegations as true and construe them in
favor of the non-moving party. Chepstow, Ltd. v. Hunt, 381 F.3d 1077, 1080 (11th Cir. 2004).
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J&E Land Company, Inc (“J&E”).2 Ivey was also associated with another business,
Eagle Storage, Inc (“Eagle”). J&E is the successor by merger to Eagle.
Approximately ten years ago, J&E and Eagle entered into loan agreements with
Regions Bank (“the loans”).3 Ivey guaranteed the loans. In 2012, J&E and Ivey
notified Regions Bank that they intended to refinance the loans through the United
States Department of Agriculture (“USDA”). In December 2012, Regions Bank
assigned the loans to ECP South, LLC (“ECP South”). In February and March 2013,
J&E made payments to Regions Bank based on an agreement to avoid default while
J&E and Ivey sought refinancing through the USDA. On March 25, 2013, ECP South
assigned the loans to ECP Financial II LLC (“ECP”), the Counter-Defendant for
purposes of this motion. While ECP never notified J&E or Ivey of the assignment,
they learned of the assignment to ECP South on March 26, 2013.
On March 26, 2013, certain unnamed individuals representing ECP South
entered J&E’s premises and provided written documents to J&E’s tenants instructing

2

Ivey does not actually plead his relationship to J&E or Eagle in the counterclaim itself.
However, he does plead that he was the chief executive officer elsewhere in his answer. In this one
instance the Court considers other portions of Ivey’s answer in his favor to establish his relationship
with the businesses in this action.
3

The facts alleged in the counterclaim reference two loans, one made to Eagle and one made
to J&E. Actions relating to both loans form the basis of the counterclaims in this action. The Court
refers to these as the Eagle and J&E loans, but Ivey claims that J&E is the injured business in these
counterclaims.
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them to make payments to a different person or entity. Then, on April 10, 2013, the
Daily Mountain Eagle newspaper published foreclosure sale notices on the loans. J&E
received a letter on April 24, 2013, notifying it of the future foreclosure sales based on
the loans executed by J&E and Eagle. J&E and Ivey sued to enjoin the foreclosure.In
this action, ECP has sued Ivey as the guarantor on the loans made to J&E and Eagle,
and Ivey has counterclaimed based on theories of wrongful interference with business
relations, wrongful foreclosure, and breach of contract.
II.

Standard of Review
Rule 8(a) of the Federal Rules of Civil Procedure requires “[a] pleading that

states a claim for relief,” which includes a counterclaim, to contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). A counterclaim is treated like a complaint for purposes of a motion to dismiss.
Prepmore Apparel, Inc. v. Amalgamated Clothing Workers of Am., AFL-CIO, 431 F.2d
1004, 1006 (5th Cir. 1970) (analyzing a counterclaim under the same rules of notice
pleading as a complaint)4 ; Whitney Info. Network, Inc. v. Gagnon, 353 F. Supp. 2d 1208,
1210 (M.D. Fla. 2005).

4

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh
Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to
October 1, 1982.
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“Rule 8 marks a notable and generous departure from the hyper-technical,
code-pleading regime of a prior era, but it does not unlock the doors of discovery for
a [party] armed with nothing more than conclusions.” Ascroft v. Iqbal, 556 U.S. 662,
678-679, 129 S. Ct. 1937, 1950 (2009). In order to survive a motion to dismiss, the
counterclaim “must contain sufficient factual matter, accepted as true, to state a claim
for relief that is plausible on its face.” Id. at 678, 129 S. Ct. at 1949 (internal quotations
omitted). Iqbal establishes a two-step process for evaluating pleadings on a Rule
12(b)(6) motion. First, the Court must “begin by identifying pleadings that, because
they are no more than conclusions, are not entitled to the assumption of truth.” Id. at
679, 129 S. Ct. at 1950. Second, “[w]hen there are well-pleaded factual allegations, a
court should assume their veracity and then determine whether they plausibly give rise
to an entitlement to relief.” Id. Factual allegations in a counterclaim need not be
detailed, but they “must be enough to raise a right to relief above the speculative
level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964-1965
(2007).
A party need not specifically plead each element in his or her cause of action,
but the pleading must contain “enough information regarding the material elements
of a cause of action to support recovery under some viable legal theory.” Am. Fed’n

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of Labor & Cong. of Indus. Orgs. v. City of Miami, Fla., 637 F.3d 1178, 1186 (11th Cir.
2011). Ultimately, the Court must be able to draw a reasonable inference from the
facts that the other party is liable. Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678
F.3d 1211, 1215 (11th Cir. 2012). The Court must construe pleadings broadly and
resolve inferences in that party’s favor. Levine v. World Fin. Network Nat’l Bank, 437
F.3d 1118, 1120 (11th Cir. 2006).
III.

Analysis5
ECP moves to dismiss each of Ivey’s counterclaims. The Court examines each

in turn.
A.

Wrongful Interference with Business Relations

To prove wrongful interference with a business relationship, the plaintiff must
show: “(1) the existence of a protectible business relationship; (2) of which the
defendant knew; (3) to which the defendant was a stranger; (4) with which the

5

In its analysis, the Court considers solely the content of Ivey’s counterclaim and does not
consult any other documents. Both parties reference documents that are attached to the original
complaint filed by ECP. However, the Court’s analysis on a 12(b)(6) motion is generally limited to
the face of the pleading and any documents attached to it. See Brooks v. BlueCross & BlueShield of
Fla., Inc., 116 F.3d 1364, 1368 (11th Cir. 1997). ECP, in responding, has not attached the guaranty
agreements or other loan documents, although they are attached to the complaint. See Starship
Enterprises of Atlanta, Inc. v. Coweta County, Ga., 708 F.3d 1243, 1253 n. 13 (11th Cir. 2013) (noting
that a court may review “documents attached to the motion to dismiss if they are referred to in the
complaint and are central to the plaintiff’s claim”). Given the extent of the documents attached to
the complaint, the Court determines that even if it could consider these documents, this should be
done at the summary judgment stage after the parties have had opportunities for full discovery.
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defendant intentionally interfered; and (5) damage.” White Sands Group, L.L.C. v.
PRS II, LLC, 32 So.3d 5, 14 (Ala. 2009).
Ivey pleaded the prima facie elements of the tort by relying on a protected
relationship between J&E and its tenants. He contends that ECP interfered with this
relationship in two ways—by publishing foreclosure notices in the Daily Mountain
Eagle that suggested J&E was in default and by appearing on J&E’s premises and
instructing tenants to pay rent to a person or entity besides J&E. Ivey pleaded that he
was damaged because he must now face potential liability under the guaranties. Since
he pleaded that ECP South provided written documentation to the tenants instructing
them on where to make payments it is plausible to infer that ECP was aware of the
relationship between J&E and its tenants.
Additionally, “a plaintiff asserting a tortious-interference claim bears the
burden of proving that the defendant is a ‘third party’ or ‘stranger’ to the contract or
business relationship with which the defendant allegedly interfered.” Wadell & Reed,
Inc. v. United Investors Life Ins. Co., 875 So. 2d 1143, 1154 (Ala. 2003). An entity is not
a stranger if it is a “participant” in a relationship. Id. at 1157. A participant is one
involved “in a business relationship arising from interwoven contractual arrangements
that include the contract.” Id. Here, Ivey has arguably pleaded that ECP is a stranger

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to the relationship based on his assertion that the loans were not properly assigned to
ECP. While it may be unlikely that Ivey will ultimately show that ECP was an invalid
assignee, the claim can proceed at this time.
Ivey has pleaded that the harms to J&E impact him as guarantor on the loans.
Selma Foundry & Supply Co. v. Peoples Bank & Trust Co., 598 So.2d 844, 849 (Ala.
1992). Although Ivey does not have standing to pursue J&E’s rights as a shareholder
or executive, he can survive a motion to dismiss by arguing that the interference with
J&E has caused damage to him as a guarantor. Id. Ivey has pleaded sufficient facts to
draw the inference that the interference with J&E’s tenants caused J&E to default and
has made Ivey liable under the guaranty agreements. ECP may raise provisions
contained in the guaranty agreements as a defense, but such will need to be weighed
at the summary judgment stage.
Thus, the motion to dismiss the wrongful interference with business relations
claim is due to be denied.
B.

Wrongful Foreclosure and Breach of Contract

Ivey also contends that ECP’s actions “were an attempt to wrongfully foreclose
on J&E and Counter-Plaintiff’s properties, and that such actions are a breach of the
agreement of the parties.” (Doc. 7 at 16.) Since Ivey attempts to state causes of action

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for both wrongful foreclosure and breach of contract, the Court must consider the
prima facie elements of each cause of action to determine whether Ivey has pleaded
sufficient facts to state a plausible claim for relief.
i.

Wrongful Foreclosure

“A mortgagor has a wrongful foreclosure action whenever a mortgagee uses the
power of sale given under a mortgage for a purpose other than to secure the debt owed
by the mortgagor.” Reeves Cedarhurst Dev. Corp. v. First Am. Fed. Sav. & Loan Assoc.,
607 So.2d 180, 182 (Ala. 1992). The Court notes that Ivey has abandoned this claim
by failing to respond to ECP’s arguments on the wrongful foreclosure claim in his
brief. See Coal. for the Abolition of Marijuana Prohibition v. City of Atlanta, 219 F.3d
1301, 1326 (11th Cir. 2000) (“[F]ailure to brief and argue [an] issue during the
proceedings before the district court is grounds for finding that the issue has been
abandoned.”) When Ivey addressed this count, he only addressed the breach of
contract claim, which the Court considers below. He failed to rebut ECP’s
contentions that (1) no foreclosure sale has taken place; and (2) that Alabama law
requires a foreclosure sale to take place in order to state a viable claim of wrongful
foreclosure.
Even had this claim not been abandoned, Ivey has failed to state a wrongful

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foreclosure claim. The plain reading of the terms “uses the power of sale” in the
wrongful foreclosure claim establishes that there must be an actual foreclosure sale.
See Buckentin v. SunTrust Mortgage Corp., 928 F. Supp. 2d 1273, 1282 (N.D. Ala.
2013). Ivey has not pleaded any facts to suggest that a foreclosure sale has actually
taken place. He actually contends just the opposite–that both J&E and Ivey filed suit
in state court to promptly prevent the “attempted foreclosure” of J&E’s property.
(Doc. 7 at 13.) Although he pleaded that the suit was later dismissed by the parties, he
never pleads any subsequent facts to suggest that a foreclosure sale occurred.
He relies solely on two notices of future foreclosure sales published in a
newspaper as the basis for his claim. From the face of Ivey’s complaint, it appears that
the advertised sales never occurred. Since Ivey did not plead that a foreclosure sale
has taken place, he cannot state a plausible claim that ECP actually abused its exercise
or use of the power of sale. The wrongful foreclosure claim is due to be dismissed.
ii.

Breach of Contract

To prove breach of contract under Alabama law, a party must show: “(1) a valid
contract binding the parties; (2) the plaintiffs’ performance under the contract; (3) the
defendant’s nonperformance; and (4) resulting damages.” Reynolds Metals Co. v. Hill,
825 So.2d 100, 105 (Ala. 2002). As a threshold matter, “‘one not a party to, or in

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privity with a contract, cannot sue for its breach.’” Dunning v. New England Life Ins.
Co., 890 So.2d 92, 97 (Ala. 2003) (quoting Twine v. Liberty Nat’l Life Ins. Co., 311
So.2d 299, 305 (Ala. 1975)). Third party beneficiaries may also be able to sue under
a contract. Russell v. Birmingham Oxygen Serv., Inc., 408 So.2d 90, 93 (Ala. 1981).
Ivey pleaded facts that suggest a plausible claim for breach of contract. First,
he pleaded facts to suggest that both the guaranties with Ivey and the loans to J&E and
Eagle are binding contracts. Although Ivey argued that the assignment to ECP was
invalid, the Court reads the complaint to contend alternatively that ECP violated the
terms of the guaranties and the loans when they were assigned to ECP. Ivey pleaded
that J&E performed under the loans by making payments as due and that ECP failed
to perform the appropriate procedures to inform a party that it was in default. Finally,
Ivey has pleaded potential damages because he may be liable on the guaranties as a
result of J&E’s default.
Claims and defenses of the borrower are not available in cases of an
unconditional guaranty. Gov’t St. Lumber Co. v. Blacksher, 553 So.2d 68, 79 (Ala.
1989). However, at the pleading stage Ivey has made a plausible claim that he is
invoking his own rights under the guaranties and not solely the rights of J&E. Ivey
contends that by breaching its agreement with J&E, ECP forced J&E into a default,

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and Ivey is now liable under the guaranties. Thus, at this stage Ivey has pleaded a
plausible claim. Although ECP invokes the language of the guaranties to suggest that
they are unconditional and bar Ivey’s claims, the effect of this language will be fully
considered if properly raised in a motion for summary judgment.
For purposes of a motion to dismiss, there is a reasonable inference that Ivey
can sue for breach of contract based on the loans and guaranties. A guarantor has
standing at the motion to dismiss stage to argue that wrongful acts to a corporation
caused harm under their guaranty agreements. Selma Foundry & Supply Co., 598 So.2d
at 849. Even if it is unlikely that Ivey will ultimately succeed, he has pleaded enough
factual matter to survive a motion to dismiss.
IV.

Conclusion

For the reasons discussed above, ECP’s motion to dismiss (Doc. 13) is due to
be granted as to the wrongful foreclosure claim and denied as to the breach of contract
and tortious interference claims.
A separate order will be entered.
Done this 5th day of December 2013.

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L. SCOTT COOGLER
UNITED STATES DISTRICT JUDGE
174256

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