Vision Bank v. Lanza et al
ORDER granting 30 Motion for partial Summary Judgment filed by Vision Bank. Signed by Judge Kristi K. DuBose on 11/1/2011. copies to parties. (sdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
LOUIS J. LANZA, III and
C.J. MINOR, a/k/a Calvin J. Minor,
) CIVIL ACTION NO. 10-00628-KD-M
This matter is before the Court on Plaintiff/Counterclaim-Defendant Vision Bank’s Motion
for Partial Summary Judgment and brief and evidentiary material in support (Docs. 30 and 30-1 to
30-3), Defendants/Counterclaim-Plaintiffs’ Response thereto and evidentiary material in support
(Docs. 37-1 and 37-2 to 37-4), and Vision Bank’s Reply (Doc. 38). Upon consideration, and for the
reasons set forth herein, Vision Bank’s motion for partial summary judgment is due to be
On November 12, 2010, Plaintiff/Counterclaim-Defendant Vision Bank commenced this
action by filing a complaint against Defendants/Counterclaim-Plaintiffs Louis J. Lanza, III
(“Lanza”) and C.J. Minor (“Minor”) (collectively, “Defendants”) alleging causes of action for
breach of contract (Count One) and accounting and inspection (Count Two). (Doc. 1). Lanza
answered the complaint on December 20, 2010 (Doc. 6), and Minor answered on March 11, 2011
(Doc. 19). On April 5, 2011, Defendants asserted counterclaims against Vision Bank for breach of
fiduciary duty (Count One) and fraud (Count Two). (Doc. 23). Vision Bank filed its Motion for
Partial Summary Judgment on Count One of its complaint and on both of Defendants’ counterclaim
on August 19, 2011. (Doc. 30). Defendants’ response (Doc. 37-1) and Vision Bank’s reply (Doc.
38) have been timely filed, and the motion is now ripe for consideration.
Standard of Review
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). Rule 56(c) governs procedures and provides as follows:
(1) Supporting Factual Positions. A party asserting that a fact cannot be or is
genuinely disputed must support the assertion by:
(A) citing to particular parts of materials in the record, including
depositions, documents, electronically stored information, affidavits or
declarations, stipulations (including those made for purposes of the
motion only), admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or
presence of a genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact.
(2) Objection That a Fact Is Not Supported by Admissible Evidence. A party may
object that the material cited to support or dispute a fact cannot be presented in a
form that would be admissible in evidence.
(3) Materials Not Cited. The court need consider only the cited materials, but it may
consider other materials in the record.
(4) Affidavits or Declarations. An affidavit or declaration used to support or oppose
a motion must be made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant or declarant is competent to
testify on the matters stated.
Fed. R. Civ. P. 56(c).
Vision Bank, as the party seeking summary judgment, bears the initial responsibility of
informing the district court of the basis for its motion, and identifying those portions of the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.
Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) (quoting Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986)). If the non-moving party fails to make a sufficient showing on an
essential element of its case with respect to which it has the burden of proof, the moving party is
entitled to summary judgment. Celotex, 477 U.S. at 323. In reviewing whether the non-moving
party has met its burden, the court must stop short of weighing the evidence and making credibility
determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed,
and all justifiable inferences are to be drawn in its favor. Tipton v. Bergrohr GMBH-Siegen, 965
F.2d 994, 998-99 (11th Cir. 1992) (internal citations and quotations omitted).
On November 29, 2008, Plaintiff/Counterclaim-Defendant Vision Bank loaned
$1,114,615.22 to Defendants/Counterclaim-Plaintiffs Lanza and Minor. (Doc. 1-1 at 2). The
November 2008 loan was secured by mortgages to a property on Ono Island in Baldwin County,
Alabama (the “Ono Island property”) that had previously secured other loans Vision Bank made to
Lanza and Minor. (Id.; Doc. 23-1; Doc. 23-2). In connection with the November 2008 loan, Lanza
and Minor executed a Multipurpose Note and Security Agreement (the “Note”) and agreed to make
scheduled payments to Vision Bank until the Note was paid off. (Doc. 1-1 at 2). Lanza and Minor
subsequently defaulted on their obligations, and Vision Bank demanded payment in full. (Doc. 30-2
at 2, ¶ 4). On November 12, 2010, after Lanza and Minor failed to pay, Vision Bank brought the
instant suit seeking 1) a judgment holding the Defendants jointly and severally liable for all sums
owed under the Note (plus attorneys’ fees and court costs); 2) an accounting of all loan proceeds;
and 3) an inspection of Defendants’ books and records, financial statements, tax returns, and other
financial information. (Doc. 1 at 2-3, ¶¶ 6-10).
A month after commencing this action, Vision Bank foreclosed on the Ono Island property.
(Doc. 23 at 1-2, ¶¶ 3-4; Doc. 30-2 at 2, ¶ 5). Vision Bank claims, and Defendants do not dispute,
that the foreclosure proceeds of $555,000 were insufficient to satisfy Defendants’ debt. On March
25, 2011 Vision Bank sold the Ono Island property to SE Property Holdings, LLC for $595,000 and
gave Defendants credit for the $40,000 difference in sale price. (Doc. 30-2 at 2, ¶ 5). On June 7,
2011, the property was resold for $650,000, and Defendants received an additional credit of
$13,651.43 for a total credit of $53,651.43 against the balance due under the Note at that time. (Id.).
As of August 18, 2011, the date upon which Vision Bank made its motion for partial
summary judgment, the balance owed under the Note was $570,041.45, consisting of $502,151.67 of
principal, $59,689.82 in accrued interest, and $8,199.96 for other charges/fees. (Id.). Interest
continues to accrue at the rate of $97.64 per diem. (Id.).
Before addressing the parties’ substantive contentions, the Court must first decide which
state’s law governs the claims and counterclaims in this diversity action between a Florida
corporation and two Louisiana residents. “[A] federal court in a diversity case is required to apply
the laws, including principles of conflict of laws, of the state in which the federal court sits.”
Manuel v. Convergys Corp., 430 F.3d 1132, 1139 (11th Cir. 2005) (citing Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Alabama courts follow the traditional conflict-of-law
principles of lex loci contractus and lex loci delicti. Lifestar Response of Ala., Inc. v. Admiral Ins.
Co., 17 So. 3d 200, 213 (Ala. 2009). Accordingly, in Alabama, contract claims are governed by the
laws of the state where the contract was made, unless the contracting parties chose a particular
state’s laws to govern their agreement, Cherry, Bekaert & Holland v. Brown, 582 So. 2d 502, 506
(Ala. 1991), and the substantive rights of tort claimants are determined according to the laws of the
state where their alleged injuries occurred. Fitts v. Minn. Mining & Mfg. Co., 581 So. 2d 819 (Ala.
1991). In this case, the Note expressly declares that it “shall be governed by the laws of the State of
Alabama,” (Doc. 1-1 at 3, ¶ 13), so the Court will apply Alabama law to Vision Bank’s contractbased claim. The Court will also apply Alabama law to Defendants’ tort-based counterclaims,
because Defendants’ alleged injuries resulted from the sale of property “in front of the Baldwin
County Courthouse door in Bay Minette, Alabama.” (Doc. 37-2 at 1).
Vision Bank’s Breach of Contract Claim
Under Alabama law, the essential elements of a cause of action for breach of contract are the
existence of a valid contract binding the parties; plaintiff’s performance under the contract;
defendant’s nonperformance; and damages. See, e.g., Jones v. Alfa Mut. Ins. Co., 875 So. 2d 1189,
1195 (Ala. 2003). Defendants challenge none of these four elements, and the Court finds that the
record establishes Vision Bank’s entitlement to summary judgment. Specifically, the Court finds
that the Note was a valid contract, that Vision Bank performed under the contract by loaning funds
to Defendants, that Defendants breached the contract by failing to make scheduled payments under
the Note, and that Vision Bank sustained damages as a result of Defendants’ breach. Accordingly,
Vision Bank’s motion for partial summary judgment will be GRANTED as to Count One of its
Defendants’ Fiduciary Duty and Fraud Counterclaims
Both of Defendants’ counterclaims seek to set aside Vision Bank’s foreclosure of the Ono
Island property. (Doc. 23 at 1-3, ¶¶ 2-12). Specifically, Defendants allege that Vision Bank sold the
property at a price so low and unreasonable that it violated Vision Bank’s fiduciary duty to
Defendants and raises a presumption of fraud. (Id.). The Court disagrees.
As a preliminary matter, it does not appear that Vision Bank owed any fiduciary duties to
Defendants. Under Alabama law, the relationship of a lender to a borrower generally does not
impose a fiduciary duty on the lender. K & C Dev. Corp. v. AmSouth Bank, N.A., 597 So. 2d 671,
675 (Ala. 1992) (“Courts have traditionally viewed the relationship between a bank and its customer
as a creditor-debtor relationship that does not impose a fiduciary duty on the bank.”). This general
rule also applies to the relationship between a mortgagee and mortgagor. See, e.g., Brabham v. Am.
Nat’l Bank of Union Springs, 689 So. 2d 82 (Ala. Civ. App. 1996). However, “when a mortgagee
forecloses a mortgage pursuant to a power, the mortgagee becomes a trustee of the
debtor/mortgagor, and is bound to act in good faith and adopt all reasonable modes of proceeding in
order to render the sale most beneficial to the mortgagor.” Wood River Dev., Inc. v. Armbrester,
547 So. 2d 844, 847 (Ala. 1989). A foreclosing mortgagee owes that duty because “the mortgagee is
selling the property, and his interest is diametrically opposed to the interest of the mortgagor,
especially if he is the purchaser of the property at the foreclosure sale.” Id. But the duty to act in
good faith is not a general fiduciary duty. Brabham, 689 So. 2d at 88. Whereas Vision Bank cannot
be liable for breaching a duty that it did not have, Defendants’ first counterclaim must be dismissed.
However, even if the Court were to liberally construe Defendants’ first counterclaim as
alleging a cause of action for either wrongful foreclosure or breach of a mortgagee’s duty of good
faith, dismissal would still be warranted. As both parties acknowledge, a foreclosure will not be set
aside on account of mere inadequacy in the price bid unless that price is so “grossly inadequate” as
to shock the conscience of the court. See Hayden v. Smith, 113 So. 293, 295 (Ala. 1927).
Though “each case must be judged by its own circumstances” to determine whether a bid is
grossly inadequate, id., a number of state and federal cases provide guidance. For example, in Mt.
Carmel Estates, Inc. v. Regions Bank, 853 So. 2d 160 (Ala. 2002), the Alabama Supreme Court held
that a mortgagee’s bid at a foreclosure sale was not grossly inadequate where the bid was equal to
81% of the value assigned to the property by a post-foreclosure appraisal that contemplated a long-
term development and subdivision marketing plan. Id. at 171. More recently, the Court of Appeals
for Eleventh Circuit affirmed the judgment of a trial judge who concluded that a foreclosure sale
price equal to 20%, 30% or 66% of a property’s fair market value was not so inadequate as to shock
the judicial conscience. CS Assets, LLC v. W. Beach, LLC, 370 F. App’x 45, 46 (11th Cir. 2010)
(per curiam). Here, Vision Bank’s bid of $555,000 was equal to 72% of what Defendants claim to
be the Ono Island property’s fair market value as of December 10, 2010.1 (Doc. 23 at 2, ¶ 6).
Assuming without deciding that Defendants’ valuation is fair, a reasonable factfinder could not find
that the foreclosure price in this case was shockingly inadequate. Accordingly, Defendants’ claim
that Vision Bank’s foreclosure of the Ono Island property was wrongful and breached the duty that
Vision Bank owed to Defendants is not supported by sufficient evidence.2 Summary judgment will
be GRANTED to Vision Bank on Count One of Defendant’s counterclaims.
The Court’s finding that, as a matter of law, Vision Bank’s foreclosure bid was not grossly
inadequate is also fatal to Defendants’ counterclaim for fraud, which rests on the allegation that
Vision Bank’s bid was “so low as to raise a presumption of fraudulent conduct.” (Doc. 23 at 3,
Relying on an appraisal report drafted by Donald S. Holyfield of The Holyfield Company,
Defendants claim that the Ono Island property was worth $770,000 as of the date of the foreclosure
sale. (Doc. 37-3 at 3). The appraiser’s certification indicates that his appraisal was prepared after
the foreclosure and at the request of Defendants’ attorneys weeks before Defendants asserted their
counterclaims. (Id. at 14). Given these facts, it is not clear that Mr. Holyfield’s appraisal is
admissible evidence that may be properly considered on summary judgment, see Macuba v. Deboer,
193 F.3d 1316, 1322-23 (11th Cir. 1999); Fed. R. Civ. P. 56(c)(4), but the Court need not reach that
issue — which the parties have not addressed — given its finding that Vision Bank’s bid of
$550,000 would not be grossly inadequate even if the Ono Island property was worth what
Defendants and Mr. Holyfield claim it was worth.
In their brief, Defendants also argue that they did not receive sufficient credit for the two postforeclosure sales of the Ono Island property. (Doc. 37-1 at 3-5). However, Defendants’
counterclaims are silent as to the post-foreclosure sales and seek relief on the sole ground that the
foreclosure price was inadequate. (Doc. 23 at 2, ¶ 8; id. at 3, ¶ 11). Because Defendants’ arguments
as to the sufficiency of the credit do not bear on Defendants’ counterclaims, they are disregarded as
¶ 11). Furthermore, Defendants have neither pled nor proven the essential elements of actual fraud.
See Southland Bank v. A & A Drywall Supply Co., 21 So. 3d 1196, 1210 (Ala. 2008) (“The
elements of fraud are (1) a false representation (2) of a material existing fact (3) reasonably relied
upon by the plaintiff (4) who suffered damage as a proximate consequence of the
misrepresentation.” (citation and quotation marks omitted)). Vision Bank is therefore entitled to
summary judgment on Count Two of Defendants’ counterclaims.
Accordingly, it is ORDERED that Vision Bank’s Motion for Partial Summary Judgment
(Doc. 30) is GRANTED.3
DONE and ORDERED this the 1st day of November 2011.
/s/ Kristi K. DuBose
KRISTI K. DuBOSE
UNITED STATES DISTRICT JUDGE
A final determination of Count Two of Vision Bank’s complaint (asserting a cause of action for
accounting and inspection) remains pending, as no party has moved for judgment on or dismissal of
that claim. Accordingly, the Court declines Vision Bank’s invitation to enter final judgment at this
time pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. See Doc. 30-1 at 7.
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