Phillips et al v. Epic Aviation, LLC
Filing
159
OPINION AND ORDER dismissing Count II of the 58 Third Amended Complaint with prejudice; pursuant to a bench trial, finding in favor of Bonita B. Phillips and Jeffrey S. Phillips and against Epic Aviation, LLC as to Count I of the Third Amended Complaint in the amount of $194,830.38 for consequential damages plus $47,147.50 for attorney fees, for a total of $241,977.88. The Clerk shall enter judgment accordingly and close the file. Signed by Judge John E. Steele on 1/18/2017. (RKR)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
BONITA
B.
PHILLIPS
JEFFREY S. PHILLIPS,
and
Plaintiffs,
v.
Case No: 2:13-cv-410-FtM-29MRM
EPIC
AVIATION,
LLC,
Oregon corporation,
an
Defendant.
OPINION AND ORDER
This matter came before the Court on December 15 through 18,
2015, for a bench trial of plaintiffs’ Third Amended Complaint
(Doc. #58).
The Court heard testimony from plaintiffs Bonita B.
Phillips and Jeffrey S. Phillips; James E. Green, Jr., the Chief
Financial Officer (CFO) and Senior Vice President of defendant
Epic Aviation, LLC; Marsha Griffin Rydberg and David Boyette, two
expert witnesses; real estate attorneys Douglas A. Wood and Gary
K. Wilson; real estate agents Karen Van Arsdale and Susan M.
Weidlich; real estate appraiser Hallas Neal Scott; and United
States Trustee Diane Jensen (Trustee or the Trustee).
141-144.)
(Docs. ##
Various exhibits were admitted as evidence, and the
Court took judicial notice of certain bankruptcy and district court
cases.
(Docs. ## 103, 109.) 1
Both sides filed trial briefs (Docs.
## 139, 140), and defendant filed a Post-trial Memorandum (Doc.
#154).
The Court heard closing arguments from counsel on January
15, 2016.
(Doc. #155.)
Pursuant to the Revised Joint Pre-Trial Statement (Doc. #138,
¶ 2), plaintiffs have withdrawn the quiet title claim in Count II
because the real property at issue was sold on November 2, 2015.
Plaintiffs confirmed at the beginning of the bench trial that this
count was to be dismissed with prejudice, and defendant concurred.
Accordingly, Count II is dismissed with prejudice.
The remaining claim, Count I of the Third Amended Complaint
(Doc. #58), is an action for slander of title based upon the
wrongful filing of a lis pendens and two notices of appeal in the
Official Records of Collier County, Florida.
55.)
(Doc. #58, ¶¶ 51,
Plaintiffs assert that the Official Records filings were
intentional
and
wrongful;
that
these
documents
published
and
communicated to third parties false assertions that Epic Aviation
had some interest or rights in plaintiffs’ primary residence (the
Property) when it never had any such interest or right (id. at ¶
1The
Court has caused certain documents from the related and
judicially noticed bankruptcy and district court cases, which are
cited or were reviewed but were not otherwise admitted as a
separate exhibit by plaintiffs or defendant, to be filed in this
case. These are referred to as Court’s Exhibits A through Y.
- 2 -
54); that the filed documents impaired the vendibility of the
Property, and the false statements contained in the lis pendens
played a material and substantial part in inducing others not to
deal with plaintiffs (id. at ¶ 56); that the filed documents
thwarted plaintiffs’ ability to close the sale of the Property
under written contracts, and have further thwarted their diligent
attempts to re-contract the Property since January, 2013 (id. at
¶ 57); that Epic Aviation had actual knowledge of the wrongfulness
of its conduct and the high probability that injury or damage to
plaintiffs would result, but intentionally pursued its course of
conduct, resulting in injury or damage (id. at ¶ 58); that Epic
Aviation knew or should have known that the publication of the
falsehoods would likely result in inducing others not to deal with
plaintiffs (id.); that plaintiffs have been damaged by defendant’s
conduct and are entitled to compensatory damages, consequential
damages, punitive damages, and attorney fees (id. at ¶ 59); and
that these damages were proximately caused as a result of the
published falsehoods (id.).
Along with key factual denials, Epic Aviation raised four
affirmative defenses:
(1) the slander of title claim is barred
by the Florida litigation privilege; (2) plaintiffs have waived
the slander of title claim; (3) plaintiffs had elected a different
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remedy; and (4) the slander of title claim is barred by the Florida
appellate litigation privilege.
(Doc. #68, pp. 8-9.)
The Court makes the findings of fact and conclusions of law
set forth below.
I.
Findings of Fact
A. State of Oregon Judgment Against Jeffrey Scott Phillips
In 2004, Epic Aviation, LLC (Epic Aviation) sued Jeffrey Scott
Phillips (Scott Phillips or Mr. Phillips) individually in Oregon
state court based upon a guarantee he had signed relating to the
purchase of aviation fuel.
The Oregon state court granted Epic
Aviation’s Motion for Summary Judgment on June 24, 2004, and a
General Judgment and Money Award were filed on July 26, 2004,
awarding Epic Aviation the principal amount of $322,603.30, plus
late
charges
until
fully
paid.
Plaintiffs’
Exhibit
1.
On
September 24, 2004, Epic Aviation domesticated the Oregon state
judgment in Florida by filing a copy of the judgment in the
Official
Records
of
Collier
County,
certification and an affidavit.
Id.
Florida,
along
with
a
See Florida Enforcement of
Foreign Judgments Act, Fla. Stat. §§ 55.501-55.509.
Bonita B.
Phillips (Bonnie Phillips or Mrs. Phillips), Scott Phillips’ wife,
was not a party to the Oregon lawsuit or the resulting Judgment.
Epic Aviation’s CFO testified at trial that Mr. Phillips has never
paid anything on this judgment, and that Epic Aviation has expended
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well in excess of $100,000 in attorney fees on Mr. Phillips’
litigation file.
There is no assertion by plaintiffs that the recording of
this money judgment as part of the enforcement process was wrongful
or constituted a slander of title to any of their property.
recording
of
the
money
judgment
in
this
context
was
The
clearly
privileged, and indeed required by statute.
B. Purchase of Green Dolphin Lane Property
On February 28, 2005, Mr. and Mrs. Phillips (collectively
plaintiffs or Debtors) purchased a primary residence on .68 acres
of land located at 3060 Green Dolphin Lane, Naples Florida (the
Property) for approximately $6 million.
Exh.
A;
Defendant’s
Exhibit
91,
p.
Plaintiffs’ Exhibit 28,
9.
Plaintiffs’
financing
included a first mortgage of $1.175 million and a second mortgage
of $500,000 on the Property.
Defendant’s Exhibit 91, pp. 10-11.
Debtors proceeded to spend a little over $1 million on renovations
to the Property.
Id. at p. 9.
Plaintiffs owned the Property as
tenants by the entireties from its purchase until it was sold on
November 2, 2015.
by
the
(Doc. #138, ¶ 9(1).)
entireties,
Epic
Aviation’s
Because of its ownership
domesticated
Oregon
money
judgment against Mr. Phillips never attached to the Property.
- 5 -
C. Chapter 7 Bankruptcy Proceedings, 2007 to Early 2012
On
October
18,
2006,
Bonnie
Phillips
filed
a
Voluntary
Petition under Chapter 7 of the Bankruptcy Code in the Fort Myers
Division of the Middle District of Florida.
Case No. 9:06-bk-05685-FMD.
Court’s Exhibit A;
Epic Aviation was not a creditor of
Mrs. Phillips, and did not file a Proof of Claim in her bankruptcy
case.
On December 29, 2006, Scott Phillips filed his own Chapter 7
Voluntary
Petition
in
District of Florida.
the
Fort
Myers
Claim
based
upon
of
the
Middle
Court’s Exhibit B; Case No. 9:06-bk-07489-
FMD; Defendant’s Exhibit 127, p. 2.
of
Division
the
Epic Aviation filed a Proof
domesticated
Oregon
money
judgment,
Defendant’s Exhibit 127, p. 3, which constituted about 7% of the
claims
against
Mr.
Phillips.
Plaintiffs’
Exhibit
39,
p.
4.
According to Epic Aviation’s CFO’s trial testimony, Epic Aviation
is a company with approximately 95 employees and sales of over
$500 million in the previous year.
The
bankruptcy
cases
were
jointly
administered,
but
not
consolidated, in Bankruptcy Court (Doc. #138, ¶ 9(3)), and the
same
Trustee,
Diane
Jensen,
was
appointed
in
both
cases.
According to the Trustee, Debtors claimed about $1 million owed to
joint creditors, and each claimed a homestead exemption for the
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Property and exemption for property owned by the entireties.
Court’s Exhibits A, B.
(1)
Trustee’s Objections to Exemptions
On March 7, 2007, the Trustee filed Objections to Exemptions
as to Mrs. Phillips.
Plaintiffs’ Exhibit 28, Exh. A.
As to the
claimed homestead exemption, the Trustee objected that the acreage
exceeded the Florida constitutional limit of .5 acres; that the
exemption amount must be reduced by those improvements made within
ten years and with intent to hinder, delay or defraud creditors;
that the exemption was limited to $125,000 because the Property
was purchased within 1,215 days of the filing of the bankruptcy
petition; and that Debtor could not claim the benefits of 11 U.S.C.
§ 522(p)(2)(B) for various reasons relating to the sources of the
funds used to purchase the Property.
Id.
The Trustee also
objected to any property claimed to be exempt as property owned by
the
entireties,
objection
only
including
related
to
the
primary
joint
debts.
residence,
Id.
but
The
this
Trustee
testified at trial that a trustee may only reach a tenancy by
entireties property to the extent the Debtors’ obligations are
owed to joint creditors.
On April 16, 2007, the Trustee filed similar objections to
the claimed exemptions of Mr. Phillips.
¶ 6; Court’s Exhibit C.
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Defendant’s Exhibit 186,
(2)
2007 Mediated Settlement Agreement
In May 2007, the Trustee sought and was granted permission
from the Bankruptcy Court to mediate her objections with the
Debtors.
Court’s Exhibit D.
A two-page Mediated Settlement
Agreement between the Trustee and Debtors dated May 14, 2007 (the
Settlement
matters
Agreement),
and
including
disputes
the
exemptions.
Defendant’s
between”
Trustee’s
prior
the
Exhibit
69,
Trustee
objections
to
and
resolved
the
Debtors’
The relevant terms and conditions were:
“all
Debtors,
claimed
(1)
the
Trustee would be paid $825,000 from the sale of Debtors’ home at
3060 Green Dolphin Lane, Naples, Florida; (2) upon payment, the
Trustee and the Debtors would exchange mutual general releases;
(3) the Property would “be put on the market promptly and the
Debtors will keep the Trustee advised of the status of the sale
and of any offers received;” (4) the Trustee would be given a lien
on the Property, subordinate to two mortgages and real estate
taxes, and was given permission to file the Bankruptcy Court’s
approval order in the public records; (5) the intentional failure
of Debtors to pay the Trustee the $825,000 would constitute a
breach of the Settlement Agreement, which “shall be grounds for
revocation of the Debtors’ discharge;” and (6) the Trustee’s lien
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on the Property was the property of the estate and protected by
the automatic stay until paid in full.
Id.
The Settlement Agreement did not provide any deadlines for
the sale of the Property or the payment of the money to the Trustee,
and did not set a price at which the Property would be offered for
sale.
and
Epic Aviation was not a party to the Settlement Agreement
did
not
participate
in
its
negotiation,
although
it
was
consulted by the Trustee as to one alternative provision of the
Settlement Agreement.
The Trustee testified at trial that if Debtors breached the
Settlement Agreement, the Trustee’s best case recovery would be to
seek the $825,000 and to seek denial of the bankruptcy discharge
of
Debtors,
or
perhaps
to
seek
enforcement
objections to the claimed exemptions.
of
the
Trustee’s
In either event, there was
no way the Trustee or any other creditor could reach tenancy by
entireties property to satisfy the Epic Aviation domesticated
money judgment.
bankruptcy
Even if the Property was not exempt under the
provisions,
and
Debtors
were
denied
a
bankruptcy
discharge, the Property was still tenancy by entireties property
which could not be reached by a creditor of only one of its two
owners.
On May 24, 2007, the Debtors and the Trustee filed a Joint
Motion for Authority to Compromise Controversies Between Diane
- 9 -
Jensen, The Chapter 7 Trustee, and Bonita and Jeffrey Phillips.
Defendant’s
Exhibit
91,
pp.
Defendant’s Exhibit 186, ¶ 10.
11-12;
Defendant’s
Exhibit
178;
This joint motion summarized the
terms of the Settlement Agreement and explained why the compromise
settlement was in the best interests of the parties.
On June 18, 2007, Epic Aviation filed an Objection to the
Joint Motion for Authority to Compromise Controversies.
Exhibit E.
Court’s
Epic Aviation asserted that the value of the Property
may have been understated in the Joint Motion.
Id.
At a September 5, 2007 hearing, the Trustee and Debtors’
bankruptcy counsel 2 told the Bankruptcy Court that there was no
time limit on the sale of the home because the real estate market
was bad.
Court’s Exhibit F, p. 5.
Bankruptcy
Court
that
the
asking
The parties also told the
price
would
be
$6
million,
although they did not anticipate actually getting that much.
pp. 5-6.
Id.,
Epic Aviation withdrew its Objection to the joint motion
to compromise at the hearing.
Plaintiffs’ Exhibit 2, p. 1.
On October 9, 2007, the Bankruptcy Court issued an Order
Approving Joint Motion for Authority to Compromise Controversies
Between Diane Jensen, The Chapter 7 Trustee and Bonita and Jeffrey
2References
to “Debtors’ bankruptcy counsel” and like phrases
refer to attorney Michael Markham and the lawyers, paralegals, and
employees in his law firm.
- 10 -
Phillips. Plaintiffs’ Exhibit 2; Defendant’s Exhibit 178 (the
Settlement Agreement Approval Order).
In relevant part, the
Settlement Agreement Approval Order granted the joint motion,
approved the compromise Settlement Agreement, directed payment of
$825,000 to the Trustee from the sale of the Property, and granted
the
Trustee
a
lien
against
the
Property
to
secure
Debtors’
obligations under the Settlement Agreement, subordinate to two
specified mortgages and any real estate taxes.
Id. at ¶¶ 1-4.
The
authorized
Settlement
Agreement
Approval
Order
also
and
directed the parties to take all steps necessary to effectuate and
consummate the settlement, including that the Debtors “shall”
place the home on the market for sale and continue to make the
mortgage payments on the Property.
Id. at ¶ 5.
The Settlement
Agreement Approval Order further provided that the intentional
failure
of
Debtors
to
pay
the
Trustee
the
$825,000
“shall
constitute a breach of the compromise and shall be grounds for the
revocation of the Debtors’ discharge.”
Id. at ¶ 7.
Like the
Settlement Agreement, the Settlement Agreement Approval Order did
not set forth any restriction on the timing or price for the sale
of the home.
The validity of the Settlement Agreement and the
Settlement Agreement Approval Order has never been challenged.
As
discussed below, however, on October 12, 2012, approximately five
- 11 -
years later, Epic Aviation would attempt to resurrect the Trustee’s
objections and assert them as its own.
Plaintiffs’ Exhibit 28.
On October 25, 2007, the Trustee recorded a copy of the
Settlement Agreement Approval Order in the Official Records of
Collier County, Florida.
Plaintiffs’ Exhibit 2.
This constituted
public notice of the Trustee’s lien on the Property and of the
bankruptcy cases.
Regions Bank v. DeLuca, 97 So. 3d 879, 885
(Fla. 2d DCA 2012) (recording in Official Records constitutes
notice of both the existence of the instrument recorded and its
contents).
Mrs. Phillips obtained a discharge in her Chapter 7 bankruptcy
case on November 7, 2007.
Court’s Exhibit G; Defendant’s Exhibit
127, p. 2.
(3)
Property Fails to Sell, 2007-2010;
Aviation Writes Off Judgment
Epic
As required by the Settlement Agreement, Debtors placed the
Property on the market for sale, and kept it on the market during
this relevant time period.
Defendant’s Exhibit 69.
initial listed asking price was $6.295 million.
Exhibit 186, ¶ 11.
Debtors’
Defendant’s
From 2007 to 2015, the Property was most often
listed for sale with Karen Van Arsdale (Ms. Van Arsdale), a real
estate broker with Premier Southby’s in Naples, Florida.
- 12 -
For the
three years after the Settlement Agreement, the Property did not
sell.
In August 2009, Epic Aviation wrote off the balance of the
amount due from Jeffrey Phillips on its domesticated Oregon money
judgment.
Plaintiff’s Exhibit 43A, p. 954.
On March 25, 2010, Debtors’ bankruptcy counsel inquired of
the Trustee whether, in light of the downturn in the real estate
market and Debtors inability to sell the house, there was a
discounted cash number which would settle the matter.
Exhibit 121.
Defendant’s
The Trustee responded she was not inclined to take
a discount, and suggested the Debtors lower the asking price, then
at $4.5 million, to $3 million.
Id.
The Trustee arrived at this
proposed price based upon informal information provided by Scott
Henderson, a Naples, Florida real estate agent she had used in the
past.
Defendant’s Exhibit 117. Debtors declined to reduce the
price, and the Property remained on the market without being sold.
Ms. Van Arsdale testified that the various asking prices were set
at market price and were fair prices, and that she did everything
in her power to close contracts she obtained for Debtors.
On September 29, 2010, a frustrated Trustee filed the Chapter
7
Trustee’s
Motion
to
Compel
Compliance
with
Settlement,
Defendant’s Exhibit 186, seeking to compel Debtors to reduce the
asking
price
of
the
Property.
The
- 13 -
Trustee
argued
that
the
Settlement Agreement’s requirement to place the Property on the
market implicitly included the obligation of a realistic asking
price.
The Trustee conceded that the house had been on the market
continuously, and that the original asking price of $6.295 million
had
been
reduced
to
the
current
Defendant’s Exhibit 186, ¶ 11.
$4.5
million
asking
price.
Despite these reductions, the
Trustee asserted that Debtors “appear to be acting in bad faith in
their attempts to market and sell the Home” because the asking
price was significantly inflated.
Id. at ¶ 16.
Later, on September 29, 2010, Debtors’ bankruptcy counsel
sent an email to the Trustee’s counsel 3 noting the recent filing
of the motion to enforce.
Defendant’s Exhibit 122.
After some
brief observations about the merits, Debtors’ bankruptcy counsel
offered $150,000 to settle the case.
Id.
In an October 29, 2010, hearing before the bankruptcy judge,
the Trustee admitted that she did not have sufficient information
to determine if the asking price was inflated or achievable,
Court’s Exhibit H, p. 4, but requested an evidentiary hearing to
determine whether Debtors were marketing the Property in good
faith, id., p. 6.
On November 14, 2010, the Bankruptcy Court
3References
to “Trustee’s counsel” or similar phrases refer
to attorney Roberta A. Colton and the attorneys, paralegals, or
employees in her law firm.
- 14 -
denied the motion without prejudice to the initiation by the
Trustee of an adversary proceeding.
Defendant’s Exhibit 187.
The
Trustee did not file such an adversary proceeding because she
questioned
whether
she
could
be
successful.
The
Property
continued to be on the market at the $4.5 million asking price.
(4)
Mr. Phillips Denied Bankruptcy Discharge
In 2007, Epic Aviation filed a multi-count Complaint in an
adversary proceeding objecting to Mr. Phillips’ discharge.
9:07-ap-00181-ALP.
See
On August 10, 2009, after an evidentiary
hearing, the Bankruptcy Court published a decision denying Mr.
Phillips a Chapter 7 discharge under 11 U.S.C. § 727(a)(4)(A) for
making false oaths in connection with the official schedules and
statement of financial affairs in his bankruptcy case.
Phillips, 418 B.R. 445 (Bankr. M.D. Fla. 2009).
was entered the same day.
In re
Final Judgment
Defendant’s Exhibit 126.
Mr. Phillips filed an appeal to the District Court.
The
Bankruptcy Court’s decision was affirmed by the undersigned in a
March 29, 2011 Opinion and Order as to three of the five false
oaths found by the Bankruptcy Court.
Defendant’s Exhibit 127; In
re Phillips, NO. 2:10-cv-212-FTM-29, 2011 WL 1196427 (M.D. Fla.
Mar. 29, 2011).
While Mr. Phillips’ appeal to the Eleventh Circuit Court of
Appeals
was
pending,
an
exchange
- 15 -
of
emails
occurred
between
September 16 and 19, 2011, discussing compromise of the Settlement
Agreement.
Defendant’s
Exhibit
70.
The
Trustee
offered
to
compromise the Settlement Agreement for $650,000, the Debtors
countered at $400,000, and the Trustee stood firm at $650,000.
Id.
The decision of the Bankruptcy Court 4 was affirmed by the
Eleventh Circuit Court of Appeals on April 2, 2012, as to the three
false
statements
upheld
by
the
District
Court.
Defendant’s
Exhibit 128; In re Phillips, 476 F. App’x 813 (11th Cir. 2012).
D. 2012
Efforts
to
Sell
Property,
Compromise
Settlement Agreement, and Reach Entireties Property
By the Spring of 2012, the Property had been on the market
for almost five years without selling, the Trustee suspected
Debtors were not really trying to sell the Property, and Mr.
Phillips’ denial of a discharge in bankruptcy had been affirmed by
the Eleventh Circuit Court of Appeals.
The parties then started
to get more serious about resolving the matter, although with
conflicting
agendas.
Most
of
the
discussions
did
not
occur
between the bankruptcy principals themselves (the Trustee and the
4“When
the District Court affirms a Bankruptcy Court’s order,
as here, we consider the Bankruptcy Court’s decision directly,
reviewing the factfindings for clear error and legal conclusions
de novo.” In re NICA Holdings, Inc., 810 F.3d 781, 786 (11th Cir.
2015) (citing In re Brown, 742 F.3d 1309, 1315 (11th Cir. 2014)).
- 16 -
Debtors), but between and among multiple attorneys and their
assistants, several real estate agents, and a title company and
its employees and attorneys.
Three chronologically overlapping
themes emerge from the evidence:
Debtors’ efforts to sell the
Property; Debtors and the Trustee’s efforts to compromise the
Settlement Agreement payoff amount; and Epic Aviation’s efforts to
collect its domesticated Oregon money judgment by reaching the
Property despite its tenancy by entireties ownership.
(1)
Epic Aviation Aims For Entireties Property
From July 19, 2012, through October 31, 2014, Epic Aviation’s
Collection Manager Greg J. Gettig (Mr. Gettig) contemporaneously
prepared a series of Priority Credit Review Action List documents,
Plaintiffs’ Exhibits 43A-X, which essentially constitute a running
summary of events in connection with the Phillips “litigation
account” for Epic Aviation management.
Mr. Gettig was a credit
manager for Epic Aviation for about 15 years before his recent
retirement, and was responsible for the Phillips account file.
Mr. Gettig reported to Mr. Green and others in Epic Aviation
management on a regular basis.
that
Epic
Aviation,
buoyed
The thrust of these documents show
by
its
success
in
thwarting
Mr.
Phillips’ discharge in bankruptcy, was intent on reaching the
entireties
Property
to
satisfy
its
- 17 -
domesticated
Oregon
money
judgment despite clear law and facts precluding it from doing so
as either a judgment creditor or a bankruptcy creditor.
In the first Priority Credit Review Action List of record, on
July 19, 2012, Mr. Gettig wrote that although the balances due to
Epic Aviation were written off in 2009, Epic Aviation was “poised
. . . to initiate steps to force sale of home which is in joint
tenancy (with wife who is not part of our transaction) or direct
settlement with Phillips to avoid sale.”
at p. 954.
Plaintiffs’ Exhibit 43A
Mr. Gettig also wrote that “Epic will need to determine
if Motion to Levy on Real Property, which Epic has Judgment lien
on, and initiate foreclosure is the most cost effective method to
protect its interest depending on the results of debtor exam
findings.”
(2)
Id.
Debtors’
Undisclosed
Sales
Settlement
Agreement
Compromise
Title Issues
Contract;
Efforts;
In July 2012, Debtors’ efforts to sell the Property, as
required by the Settlement Agreement, finally bore fruit.
On July
23, 2012, James Patrick Morrissy (Mr. Morrissy) signed a Sales
Contract and Addendum, Defendant’s Exhibit 24, to purchase the
Property from Debtors for $4.325 million cash, with a deposit of
$500,000, and a scheduled closing date of August 30, 2012.
The
Sales Contract required Debtors to provide “good and marketable”
title,
and
was
contingent
upon
an
- 18 -
adequate
appraisal
and
an
engineer’s determination that the house would support a tile roof
that Mr. Morrissy wanted to install.
Id.
Mr. Morrissy was
represented by real estate attorney Gary K. Wilson and his staff
(generally referred to as Mr. Morrissy’s attorney or a similar
phrase).
Mr. Morrissy’s real estate agents were Susan Weidlich
(Ms. Weidlich) and Chris Ryker (Ms. Ryker) (generally referred to
as Mr. Morrissy’s real estate agents or other similar phrase).
The sales price which Mr. Morrissy agreed to pay was a
reasonable one, and was greater than a retrospective appraisal of
the Property performed by Epic Aviation’s appraiser.
On June 1,
2015, appraiser Halas Neal Scott prepared an Appraisal of Real
Property, Defendant’s Exhibit 64, which determined, based on the
sales comparison approach, that the Property was valued at $4.25
million as of October 12, 2012.
Not coincidentally, late in the afternoon of July 23, 2012,
Debtors’ bankruptcy counsel renewed his September 2011 offer to
the Trustee’s counsel to compromise the Settlement Agreement for
$400,000.
Defendant’s Exhibit 70.
Debtors’ bankruptcy counsel
failed to disclose the existence of the Morrissy Sales Contract to
the Trustee or her counsel.
on July 24, 2012.
Debtors signed this Sales Contract
Defendant’s Exhibit 24.
On July 25, 2012,
Debtors raised their settlement offer to the Trustee to $500,000,
Defendant’s Exhibit 70, which the Trustee accepted.
- 19 -
The Morrissy
Sales Contract was still not disclosed to the Trustee or her
attorney, and the Trustee testified at trial that she would not
have accepted this compromise if she had known about the Morrissy
Sales Contract.
Effective
July
26,
2012,
Old
Republic
National
Title
Insurance Company (Old Republic, the Fund, or the Title Company)
issued a title Commitment, Defendant’s Exhibit 1, for the Property
and Mr. Morrissy.
The Commitment contained a list of twenty
requirements to be accomplished before a title insurance policy
would issue, most of which were routine and easily accomplished.
Id., Schedule B-1.
Five of the requirements related to the pending
bankruptcy
(requirements
cases
2,
9,
10,
11,
12).
Id.
Additionally, the requirements included obtaining a release of
Epic Aviation’s domesticated 2004 Oregon judgment against Mr.
Phillips
(requirement
13).
Id.
As
will
be
seen
by
correspondence, this last requirement was based upon the Title
Company’s persistent but mistaken belief that Epic Aviation’s
domesticated money judgment attached to the Property.
For the next several months, Debtors and Mr. Morrissy’s
representatives worked on addressing title issues and closing the
Sales
Contract.
Simultaneously,
Debtors’
counsel
and
the
Trustee’s counsel worked on a compromise of the amount required by
the Settlement Agreement.
- 20 -
Having accepted Debtors’ $500,000 compromise offer, on July
31, 2012, the Trustee filed a Motion to Approve Compromise of
Controversy Between Trustee and Jeffrey S. Phillips.
Exhibit 71.
Defendant’s
The proposed compromise was the Debtors’ payment of
$500,000 to the Trustee, with $262,500 (52.5%) being allocated to
Mr.
Phillips’
bankruptcy
estate
and
$237,500
(47.5%)
being
allocated to Mrs. Phillips’ bankruptcy estate, and the Trustee’s
release
of
Agreement.
all
Debtors’
Id. at ¶ 15.
obligations
under
the
Settlement
The Trustee stated that this was in the
best interest of the bankruptcy estate because the Property had
remained
unsold
for
so
long
bankruptcy had been denied.
and
Mr.
Id. at ¶ 16.
Phillips’
discharge
in
The Trustee also stated
that the compromise would benefit the estate by eliminating the
continued time for the sale and the risk that the Property would
not be sold for an additional period of time.
Id. at ¶ 17.
Debtors had still not informed the Trustee of the signed Morrissy
Sales Contract, and the Trustee remained unaware of the Morrissy
Sales Contract.
Additionally, there is no evidence that Epic
Aviation knew of the existence of this Sales Contract.
While Bankruptcy Court approval of the proposed compromise of
the Settlement Agreement was pending, the Debtors and Mr. Morrissy
worked towards closing their Sales Contract.
counsel
for
Mr.
Morrissy
caused
- 21 -
the
title
On August 8, 2012,
Commitment
to
be
forwarded to Debtors’ real estate counsel 5 so he could work on the
various B-1 requirements.
Defendant’s Exhibit 132.
On August
10, 2012, Mr. Morrissy’s counsel requested a summary and timetable
of the steps Debtors’ counsel would be taking with regard to the
Commitment
requirements.
Defendant’s
Exhibit
134.
Debtors’
bankruptcy counsel promptly responded that the Property was both
TBE (tenancies by entireties) and homesteaded, and was not part of
the bankruptcy cases, except that the Trustee had been granted a
lien which would be released pursuant to a compromise.
Debtors’
bankruptcy
counsel
further
stated
that
“[t]he
Id.
Epic
judgment does not attach to the property as it is both TBE and
homestead.”
the
payoff
Id.
Debtors’ real estate attorney worked on getting
amounts
for
the
first
and
second
mortgages.
Defendant’s Exhibit 3.
Also on August 10, 2012, Epic Aviation’s Priority Credit
Review Action List, Plaintiffs’ Exhibit 43B, repeated that Epic
Aviation was “poised . . . to initiate steps to force sale of home
which is in joint tenancy (with wife who is not part of our
transaction) or direct settlement with Phillips to avoid sale.”
Id., p. 982.
Mr. Gettig also repeated that “Epic will need to
5 References
to Debtors’ real estate counsel and similar
phrases refer to attorney Douglas A. Wood and the attorneys,
paralegals, and employees in his law office.
- 22 -
determine if Motion to Levy on Real Property, which Epic has
Judgment
lien
on,
and
initiate
foreclosure
is
the
most
cost
effective method to protect its interest depending on the results
of debtor exam findings.”
Id.
There was no indication that Epic
Aviation knew of the pending Morrissy Sales Contract at the time.
Despite the clearly correct proposition that Epic Aviation’s
domesticated money judgment did not attach to the Property, the
Title Company had its own ideas of what it wanted in order to issue
a title insurance policy.
On August 14, 2012, Mr. Morrissy’s
counsel responded to Debtors’ bankruptcy counsel that the Title
Company’s attorney wanted, among other things, an order from the
bankruptcy court confirming that the Epic Aviation money judgment
does not attach to the Property.
Defendant’s Exhibits 134, 136.
On August 16, 2012, work continued on the title requirements, with
Debtors’
bankruptcy
counsel
Defendant’s Exhibit 138.
handling
some
of
the
items.
There was an emphasis on the bankruptcy
matters and the Epic Aviation judgment, which were viewed by Mr.
Morrissy’s attorney as title defects.
(3)
Back
Defendant’s Exhibit 139.
Epic Aviation Objects To Proposed Settlement
Agreement Compromise, Makes a Counter-Offer,
and Re-Records Its Money Judgment
in
the
Bankruptcy
Court,
on
August
21,
2012,
Epic
Aviation became the only creditor to file an Objection To Motion
to Approve Compromise of Controversy Between Trustee and Jeffrey
- 23 -
S. Phillips.
Court’s Exhibit I.
Epic Aviation asserted that
Debtors had failed to sell the Property for five years and had
consistently priced it above fair market value in order to thwart
their obligations under the Settlement Agreement.
Based upon past
misconduct
denial
by
Mr.
Phillips,
which
led
to
the
of
his
bankruptcy discharge, Epic Aviation asserted that the Trustee
should not discount the Settlement Agreement amount but should
file
an
adversary
Phillips,
and
exemptions.
complaint
raise
to
other
revoke
the
discharge
to
Debtors’
challenges
of
Mrs.
claimed
Id. at ¶ 10.
On August 23, 2012, at 10:24 a.m., Epic Aviation re-recorded
the General Judgment and Money Award in the Public Records of
Collier County, Florida.
Plaintiffs’ Exhibit 3.
While the reason
for the re-recording is not in the trial record, bankruptcy counsel
for Epic Aviation informed the Court during closing arguments, in
response to a question from the Court, that he had caused the rerecording because he had concerns over the legal sufficiency of
the original recorded judgment.
In
attorney
an
August
23,
emailed
2012,
Mr.
discussions
that
Defendant’s
Exhibit
Morrissy’s
morning
161.
5:05
with
The
p.m.
email,
realtor
Debtors’
email
Mr.
Morrissy’s
summarizing
bankruptcy
provided
that
his
counsel.
Debtors’
bankruptcy counsel had stated that Epic Aviation filed a motion at
- 24 -
the last minute opposing the compromise settlement worked out with
the Trustee; that Epic Aviation held a large judgment against Mr.
Phillips; and that unless [Mr.] Phillips could work out a deal
with Epic Aviation, there was a bankruptcy hearing scheduled for
September 11, 2012. 6
Id.
Mr. Morrissy’s attorney stated that the
appeal period for any resulting order was 14 days, and the earliest
the closing could occur would be the end of September.
Id.
Morrissy’s
Debtors’
counsel
further
stated
that
he
had
told
Mr.
bankruptcy counsel that Mr. Morrissy was unlikely to grant an
extension of the closing date, so it would be in the Debtors’ best
interest to resolve the matter with Epic Aviation at the earliest
possible date.
Id.
Mr. Morrissy’s counsel stated “[a]s an aside,
we now believe the judgment does not attach to the property, since
it is only against Scott Phillips and the property is owned by
Scott and his wife as an estate by the entirety.”
(4)
Debtors
Vacate
Property;
Contract Terminated
Morrissy
Id.
Sales
Effective August 25, 2012, plaintiffs signed a two year lease
to move into a residence on Silverleaf Lane, Naples, Florida.
Defendant’s Exhibit 89.
Plaintiffs moved out of the Property and
into the new residence shortly thereafter.
6The
2012.
Mr. Phillips testified
actual date of the bankruptcy hearing was September 18,
Court’s Exhibit J.
- 25 -
at trial that he and his wife were going to move out of the Property
whether it sold to Mr. Morrissy or not.
On August 29 and 30, 2012, Mr. Phillips, Mrs. Phillips, and
Mr. Morrissy signed a Termination of Sales Contract and Deposit
Release and Directive.
Defendant’s Exhibits 5, 142.
The Sales
Contract for the purchase of the Property was terminated and the
deposit was directed to be returned.
Defendant’s Exhibit 5.
The
signed Termination was emailed to Debtors’ real estate agent on
August 30, 2012.
Defendant’s Exhibit 4.
Mr. Morrissy terminated
the Sales Contract because he was not willing to wait for the
bankruptcy case(s) to conclude, and felt he could not otherwise
obtain marketable title and title insurance.
(5)
Epic
Aviation’s
Continued
Opposition
to
Compromise
of
Settlement
Agreement
and
Continued Sights On Entireties Property
Although the Morrissy Sales Contract had now been terminated,
there was still the matter of the Trustee’s proposed compromise of
the Settlement Agreement pending in the Bankruptcy Court.
On
September 13, 2012, Epic Aviation’s bankruptcy counsel took Mr.
Phillips’ deposition in connection with the Trustee’s Motion to
Approve Compromise of Controversy Between Trustee and Jeffrey S.
Phillips.
Defendant’s Exhibit 91.
When asked if he had “received
any offers on the property?” Mr. Phillips replied “None.
Nothing”
except
for
“goofy”,
- 26 -
“would-you-takes”
No.
offers.
Defendant’s
executed
Exhibit
Morrissy
91,
Sales
18:12-19.
Contract,
In
light
this
of
was
the
clearly
formerly
a
false
representation intended, in the Court’s view, to further Debtors’
effort
to
compromise
the
$825,000
Settlement
Agreement
for
$500,000 without full disclosure to the Trustee.
On September 14, 2012, Mr. Gettig wrote in his Priority Credit
Review
Action
List
that
Mr.
Phillips
had
testified
at
the
deposition to the effect that “all assets owned are either in wife
Bonnie name (not Epic customer) or by Tenants in the Entirety.”
Plaintiffs’ Exhibit 43C, p. 1071.
Epic Aviation’s counsel was
directed to initiate garnishment on accounts belonging to Scott
Phillips.
Id.
Mr. Gettig also wrote that Epic Aviation, counsel
for Mr. Phillips, the Trustee, and the Trustee’s counsel were
having discussions “to consider Epic purchasing Trustee’s rights
in the bankruptcy estate for an amount not determined as of this
publication.
The basis for Epic proceeding forward on purchasing
Trustee’s interest in [sic] based on Epic’s success in blocking
Scott Phillips’ discharge as well as based on the estimated equity
in real property of $2MM in Naples, Florida.”
(6)
Id.
Proposed Compromise Morphs Into Auction
On September 18, 2012, the Bankruptcy Court held a hearing on
the Trustee’s motion to approve the proposed compromise of the
Settlement Agreement.
Court’s Exhibit J.
- 27 -
Epic Aviation offered
to pay the Trustee $525,000 for the Trustee’s rights under the
Settlement
Agreement,
and
the
Trustee
orally
requested
a
continuance of the hearing in order to allow the parties to reach
a compromise agreement or have a public auction of the Trustee’s
rights under the Settlement Agreement.
Epic Aviation and Debtors
agreed to the request.
Later that day, with the consent of the Debtors, the Trustee
filed a Report and Notice of Intention to Sell Property of the
Estate at Public Sale, Court’s Exhibit K, stating an intent to
hold a public sale of all the Trustee’s rights and interests in
and to the Settlement Agreement.
This Notice stated that the
“Price” was “Highest Bid” and the sale would be to the “Highest
Bidder.”
The “Terms” of the auction were:
(1)
The minimum bid
would be $525,000.00, with 10% down and the balance to be paid
within 48 hours of the conclusion of the telephonic auction; (2)
all qualifying bids were to be received by the Trustee by 5 p.m.
on
September
27,
2012;
(3)
the
telephonic
auction
would
be
conducted on September 28, 2012 at 2 p.m., if at least two
qualifying written bids and deposits were received; (4) the balance
of the high bid was due within 48 hours of the conclusion of the
auction; (5) if the highest bidder failed to fulfill the auction
terms, the Trustee “will sell the rights to the next highest bidder
at the last bid price;” and (6) auction bids were to be in $25,000
- 28 -
increments, subject to the increments being lowered by the Trustee
during the auction.
(7)
Id.
Debtors’ Continued Efforts to Sell Property to
Morrissy and Continued Title Company Issues
With an auction of the Trustee’s rights under the Settlement
Agreement on the near horizon, the Debtors continued their efforts
to sell the Property.
While the Morrissy Sales Contract had been
terminated, there were still efforts to obtain a new contract and
consummate a sale to Mr. Morrissy.
A series of pre-auction emails
in mid-September 2012, show continued interest in selling the
Property to Mr. Morrissy and continued Title Company issues based
on the bankruptcy cases and the Epic Aviation money judgment.
In a September 18, 2012 email, Defendant’s Exhibit 144, the
Morrissy’s real estate agent reported that a hearing had taken
place and all except one item had been settled, which would be
resolved by September 28, 2012.
It was also indicated that the
Debtors may re-enter into a purchase contract effective September
29, 2012, with a closing date of October 15, 2012.
Mr. Morrissy
wanted some concession for the delays and additional legal fees,
and for Debtors to “make [him] an offer”, but the Debtors were
“adamant” that they would not entertain any contract except on the
previously agreed terms.
- 29 -
In a September 25, 2012, 12:40 p.m. email, the Title Company’s
underwriting counsel (Sun Mi Shin) advised Mr. Morrissy’s attorney
that she had reviewed the Bankruptcy Court pleadings and docket,
and the Title Company could not make any requirements or decisions
until after the anticipated September 28 auction of the Trustee’s
rights and interest under the Settlement Agreement.
Exhibit 147, p. 4.
Defendant’s
Underwriting counsel also noted that there was
a hearing set for October 28 that could impact the Title Company’s
ability
to
make
any
requirements
on
the
commitment.
Id.
Underwriting counsel further stated that it was unclear why the
seller believed other matters could be resolved by October 15,
unless based on information not available through the Bankruptcy
Court’s docket.
Underwriting counsel requested any available
additional information, noting “[a]s an aside, this is a complex,
contentious and unusual BR case so we need to be cautious.”
Id.
In a September 25, 2012, 2:48 p.m. email, Mr. Morrissy’s
attorney responded to the Title Company’s underwriting counsel
with questions about the purpose of the October 28 hearing, whether
the Epic Aviation judgment had been dealt with, and whether the
Title Company would accept an affidavit of continuous marriage.
Id., p. 3.
In a September 25, 2012, 2:55 p.m. email, Mr. Morrissy’s
attorney emailed the Debtors’ real estate attorney and their
- 30 -
bankruptcy attorney, Defendant’s Exhibit 6, stating that the Title
Company
had
the
bankruptcy cases:
following
concerns
about
the
title
and
the
The Title Company would not make any decisions
until after September 28, the date set for the auction of the
Trustee’s rights and interest under the 2007 Settlement Agreement;
there was a bankruptcy hearing set for October 28 for which the
Title Company may have to wait; and October 15 had been mentioned
as a proposed closing date, but the Title Company was unclear why
this was possible given the Bankruptcy Court’s calendar.
Id.
Mr.
Morrissy’s
and
the
attorney
requested
additional
status of the Epic Aviation judgment.
information,
Id.
Underwriting counsel responded in a September 25, 2012, 3:09
p.m. email to Mr. Morrissy’s attorney that the October 28 hearing
was
on
Epic
Aviation’s
objection
to
the
Trustee’s
motion
to
compromise the Settlement Agreement; that this may become moot
depending on the September 28 auction bid; and that the Epic
Aviation judgment had not been dealt with, but “[i]t is still a
requirement and we won’t rely upon a continuous marriage affidavit
for that as we do not believe that it protection [sic] under the
Federal BR rules.”
Defendant’s Exhibit 147, p. 3.
On September 27, 2012, at 2:04 p.m., Mr. Morrissy’s counsel
emailed both Debtors’ bankruptcy counsel and their real estate
counsel, stating that the Epic Aviation judgment was still an issue
- 31 -
according to the Title Company’s underwriting counsel, who had
stated:
“We believe that the BR court does not recognize T/E for
purposes of avoiding judgments and therefore will not rely upon it
for the Epic judgment.
However, if the BR attorney can provide
us with the legal basis to do so, we will review.”
Exhibits 6, p. 1; 73, p. 4.
Defendant’s
Debtors’ real estate attorney
responded the same day, expressing confusion:
“I am confused,
even if the bankruptcy court does not recognize T/E for purposes
of avoiding judgment, that would only mean that the judgment is
not discharged through bankruptcy.
Even if that is the case, the
judgment would still not attach to T/E property pursuant to Florida
law.
Am I missing something?
counsel?”
May I speak with your underwriting
Defendant’s Exhibit 6, p. 1.
Various
emails
indicate
that
the
various
real
estate
professionals were confused about whether, and when, a sale would
occur.
(8)
Defendant’s Exhibits 6, 147, 148, 149.
The September 28, 2012 Auction
The telephonic auction was conducted on September 28, 2012.
Court’s
Exhibit
L.
The
bidding
eventually Debtors bid $750,000.
then bid $825,000.
Id., p. 7.
commenced
at
Id., pp. 3-4, 6.
$525,000,
and
Epic Aviation
Rather than exceed this bid,
Debtors said they would stop bidding and just pay off the full
original Settlement Agreement amount of $825,000. Id., p. 8.
- 32 -
After some discussion off the record, the Trustee stated that if
Mr. Phillips was willing to pay the $825,000 (less his previous
deposit) within 48 hours, the Trustee would not sell her rights
under the Settlement Agreement, but would accept Debtors’ full
payoff of the Settlement Agreement.
Epic Aviation objected,
stating that Debtors no longer had a right to pay the Settlement
Agreement amount after participating in the auction, and that
Debtors did not win the auction because they were not the highest
bidder.
The Trustee gave Mr. Phillips until October 2, 2012, to
put the money into the Trustee’s trust account, where it would
remain pending a hearing in the Bankruptcy Court to address Epic
Aviation’s objection.
Id., p. 14.
Mr. Green testified he believed that, at the time of the
auction, Epic Aviation knew Debtors had an interested purchaser 7,
and knew Debtors’ equity in the Property was in excess of $1
million.
Mr. Green testified that Epic Aviation would not have
tried to purchase the Trustee’s rights without that equity in the
Property, but also stated that Epic Aviation believed there was
other
potential
rights.
value
in
the
Trustee’s
Settlement
Agreement
Mr. Green testified that Epic Aviation’s interest in
7From
the documents in the record, it seems unlikely that Epic
Aviation actually knew about the interest of Mr. Morrissy or any
specific individual as of the auction date.
- 33 -
trying to acquire the Trustee’s rights and responsibilities under
the Settlement Agreement was twofold:
(1) To investigate further
challenges that the Trustee had outlined for her objection to the
homestead exemption; and (2) to continue to seek opportunities for
payments of amounts owed under the domesticated Oregon money
judgment.
Mr. Green testified that Epic Aviation believed there
may have been an intentional failure to pay under the Settlement
Agreement, which may have constituted a breach, and could result
in
a
revocation
of
Mrs.
Phillips’
discharge,
affording
Epic
Aviation an opportunity to re-examine the homestead exemptions
which were the foundation of the Settlement Agreement.
Mr. Green
testified that while the $825,000 lien on the Property was worth
$825,000, the issue of the homestead exemptions were, in Epic
Aviation’s view, potentially more valuable.
The Trustee testified
at trial that it was her understanding that Epic Aviation wanted
to step into the Trustee’s shoes and assume her fiduciary duties
to the other bankruptcy creditors.
Mr. Green also testified that during the auction process Epic
Aviation engaged in settlement discussions with Debtors.
He
testified that at one point there was an offer by the Debtors to
pay Epic Aviation $325,000 and to pay the Trustee $500,000, but
the Trustee would not agree.
without success.
Discussions went back and forth
The Court notes that the types of settlement
- 34 -
discussions referred to by Mr. Green were not for the benefit of
all creditors (despite Epic Aviation’s argument to the contrary),
but were aimed at substantial recovery for Epic Aviation at the
ultimate expense of the other creditors.
(9)
Debtors’ Post-Auction Efforts to Sell Property
After the auction, Debtors’ representatives worked towards
putting a deal together with Mr. Morrissy.
2012,
2:23
p.m.
email,
Debtors’
In a September 28,
bankruptcy
counsel
advised
Debtors’ real estate counsel and Mr. Morrissy’s counsel that the
“auction” had just concluded, and Debtors had agreed to satisfy
the $825,000 settlement amount to the Trustee, which would be
accepted by the Trustee.
bankruptcy
counsel
Defendant’s Exhibit 73, p. 3.
requested
that
an
immediate
Debtors’
closing
scheduled and a form of release be provided for the Trustee.
be
Id.
In an email later that day, Mr. Morrissy’s attorney told Mr.
Morrissy’s realtor that he would discuss the auction and the Epic
Aviation judgment with the Title Company’s underwriting attorney
the following Monday and hoped for something more definitive.
Id., pp. 1-2.
The Title Company was informed that the auction was
completed, and later on September 28, 2012, requested more detailed
information from Debtors’ attorneys.
2; 75, p. 1.
- 35 -
Defendant’s Exhibits 7, p.
On the morning of October 2, 2012, Mr. Morrissy’s attorney
sent an email to Mr. Morrissy’s real estate agent summarizing what
had transpired at the auction and noting an upcoming bankruptcy
court hearing on October 28.
Morrissy’s Counsel concluded:
Defendant’s Exhibit 148.
Mr.
“Given the contentious bankruptcy
matter, the aggressive way Epic is pursuing Phillips, and the
possibility Phillips may be unable to comply with the terms of the
auction, there are many unanswered questions at this time.
I
cannot recommend that Mr. Morrissy enter into a contract until we
get more definitive answers.”
Id., p. 2.
(10) Debtors’ Request for Extension of Trustee’s
Deadline; Debtors’ Disclosure of Interested
Purchaser
Debtors did not provide the Trustee with the funds on the
October
2,
2012,
the
deadline
established
by
the
Trustee.
Instead, the Debtors filed an Emergency Motion for Enlargement of
Time to Make Settlement Payment to the Trustee and for Order
Authorizing
the
Sale
Plaintiffs’ Exhibit 25.
of
the
Debtors’
Homestead
Property.
In the Emergency Motion, the Debtors
argued that the 48 hour payment deadline should not apply because
they were fulfilling the Settlement Agreement, not complying with
the auction terms.
The Debtors stated that they had received a
verbal offer to purchase the Property for $4.175 million, which
was sufficient to pay all mortgages and the $825,000.00 to the
- 36 -
Trustee, however “issues have arisen relating to Epic’s conduct
during the auction and Epic’s judgment against Debtor, Jeffrey S.
Phillips only.”
Id., ¶ 6.
Debtors stated that a 10% deposit had
been wired and that they were prepared to immediately wire an
additional $500,000 pending the closing of the sale, but that they
did not believe that they should have to pay the full $825,000
“due to the unknown agenda of Epic.”
Id., ¶ 8.
Debtors indicated
that the Trustee’s prior motion to compromise “has essentially
[been] withdrawn” by the Trustee, Debtors were prepared to pay the
full payoff amount in the original Settlement Agreement, and the
reasons for an auction were no longer present.
Id., ¶ 9.
Debtors
requested an unspecified amount of additional time to make full
payment and for an order authorizing sale of the Property free and
clear of any lien of Epic Aviation.
This
October
2,
2012,
motion
by
Debtors
is
the
first
disclosure to Epic Aviation, the Trustee, and the Bankruptcy Court
of any current offer to purchase the Property.
Despite the non-
disclosure, by this time the Trustee was to get all she would ever
be
entitled
$825,000.
to
receive
under
the
Settlement
Agreement
–
the
The pending sale of the Property was consistent with
the terms of the Settlement Agreement, although for significantly
more than the $3 million the Trustee had recommended in late 2010.
- 37 -
Epic Aviation filed a written Response, Court’s Exhibit M,
making a “limited objection” to the enlargement of time to make
the settlement payment.
Epic Aviation asserted that the Debtors
were essentially conceding that their bid above $500,000 at the
auction had been with money they simply did not have.
Epic
Aviation further argued that Debtors had not shown grounds for the
Bankruptcy Court to award additional time to comply with their
auction obligations.
Id., ¶¶ 16-17.
(11) Debtors’ Continued Discussions Regarding Sale
to Mr. Morrissy; Epic Aviation Requested to
State Position on Whether Its Money Judgment
Attached to the Property
While
the
motion
for
an
extension
was
pending,
Debtors
continued their efforts to clear up title issues and sell the
Property
to
Mr.
Morrissy,
despite
his
attorney’s
stated
reluctance.
In an October 3, 2012 9:55 a.m. email, Debtors’ bankruptcy
counsel told Epic Aviation’s bankruptcy counsel that he needed to
know if Epic Aviation was claiming any lien or interest in the
jointly owned homestead property.
Plaintiff’s Exhibit 49, p. 2.
If not, counsel requested confirmation that Epic Aviation would
provide a partial release of its judgment lien relating to the
jointly owned homestead property so that a prompt closing could
occur and Debtors could fully fund the settlement.
- 38 -
Id.
Epic
Aviation’s
bankruptcy
counsel
responded
later
that
morning as follows:
Releasing a lien implies that a lien has
attached. Recording a judgment lien attaches
only to interests for which the law provides
a lien.
If the title company believes the
judgment lien attaches to the property at
issue, please let us know.
As I mentioned last night, this is really a
title company issue as they drive what is, or
is not, “clear” title as it would be relevant
to any proposed sale. They should be able to
tell you that by now if you ordered a
commitment; it’s a quick process.
Id.,
pp.
1-2.
To
this
lawyerly
but
non-responsive
answer,
Debtors’ bankruptcy counsel promptly replied that they both knew
it was not quite that simple, concluding that his question was
“will Epic provide a partial release?
1.
Simple question.”
Id., p.
Epic Aviation provided no response to this simple question,
and the record does not reflect that Epic Aviation ever agreed to,
or executed, any release.
In an October 3, 2013 1:15 p.m. email, Mr. Morrissy’s real
estate agent advised the Debtors’ real estate agents that Mr.
Morrissy was “unwilling to get tangled into a financial mess that
appears to have more questions than answers.”
149, p. 2.
Defendant’s Exhibit
An October 5, 2012 10:28 a.m. email among the real
estate professionals, however, stated that Mr. Morrissy was still
interested in the Property “but will not move forward with it until
- 39 -
the seller gets his issues cleared up.”
p. 1.
Defendant’s Exhibit 149,
Reference was made to the October 28 Bankruptcy Court
hearing, and a wait-and-see attitude was expressed.
Id.
In an October 5, 2012 11:04 a.m. email, Debtor’s bankruptcy
counsel asked Mr. Morrissy’s counsel if Mr. Morrissy would provide
a written contract with an express contingency of court approval
and a hard deadline to close with no deposit. Defendant’s Exhibits
7, p. 2; 75, p. 1.
Debtors’ bankruptcy counsel said he would like
to have the information for an upcoming bankruptcy court hearing.
Id.
In an October 5, 2012 3:38 p.m. email response, Mr. Morrissy’s
counsel advised Debtors’ counsel that Mr. Morrissy would not enter
into a contract at the time.
Defendant’s Exhibit 7, p. 1.
He
further stated that “[o]nce you resolve the BR and Epic related
issues, please let me know and I will contact the Buyer to
determine [if] he has any interest in the property at that time.”
Id.
Debtors’ bankruptcy counsel responded on October 8, 2012,
that while he understood the response, he had made a representation
to the Court that the client made a verbal offer to purchase the
property, and if that was not the case he had to advise the court.
Id.
- 40 -
(12) Bankruptcy Court Hearing; Order on Deadline
Extension
Request;
Debtors’
Payment;
Trustee’s Release
On October 9, 2012, the Bankruptcy Court conducted a hearing
on Debtors’ motion requesting an extension of time to deposit their
funds.
Plaintiffs’ Exhibit 28, Exh. B.
Debtors’ bankruptcy
counsel summarized the events at the auction, and stated that
because of Epic Aviation’s objection to the way the auction was
concluded, the Trustee was not in a position to sign a release in
exchange for the $325,000 remaining payoff amount.
11.
Id., pp. 4-
Debtors’ bankruptcy counsel stated that he had the balance
of the funds in his trust account ready to be paid to the Trustee,
pending resolution of the Epic Aviation objection.
Id., pp. 12-
13, 14.
Epic Aviation’s bankruptcy counsel argued that the terms of
sale at the auction did not allow payment conditioned upon the
sale of other property, and the Notice clearly required all monies
to be paid within 48 hours.
Id., pp. 19-20.
Epic Aviation stated
that it sent $825,000 to the Trustee, and it was willing and able
to close as the highest bidder at the auction.
Id., p. 20.
Epic
Aviation further argued that the auction was noticed as going to
the highest bidder, and that the terms and conditions of the
auction were violated when the auction was terminated by the
- 41 -
Trustee’s
decision
to
allow
Debtors
to
obligation under the Settlement Agreement.
pay
their
original
Id., p. 21.
The Trustee’s position was that if the Debtors could fund the
$825,000 within 48 hours of a Bankruptcy Court ruling, she would
accept that as the highest and best offer at the auction.
If the
Debtors are unable to fund the $825,000, the Trustee would sell
her rights to Epic Aviation as the second highest and best bid.
The Trustee’s position was that she had the business judgment and
discretion to decide the auction winner.
Id., pp. 23-24.
Later on October 9, 2012, the Bankruptcy Court filed an Order
on Debtors’ Emergency Motion for Enlargement of Time to Make
Settlement Payment to the Trustee and For Order Authorizing Sale
of the Debtors’ Homestead Property.
Defendant’s Exhibit 60.
Plaintiffs’ Exhibit 26;
This Order adopted the oral findings and
determinations made at the hearing, id., p. 2, in which the
Bankruptcy Court found: Debtors’ motion was timely filed; the
Trustee was in the best position to determine the highest and best
bid at the auction; and if Epic Aviation was determined to be the
winning bid, and the $825,000 was tendered by the Debtors, Epic
Aviation would be obligated to accept the payment.
Exhibit 28, Exh. B, pp. 29-30.
Plaintiffs’
The Bankruptcy Court noted that
the Settlement Agreement did not have a deadline for payment, did
not provide for interest, and did not provide for anything other
- 42 -
than that the Debtors would list the Property for sale.
Id., pp.
33-34.
The Bankruptcy Court’s Order granted the emergency motion for
enlargement of time “only to the extent that the Debtors seek
additional time to fund the purchase price at the auction sale by
paying
$825,000
in
full
satisfaction
Plaintiffs’ Exhibit 26, p. 2.
of
the
Settlement.”
The Debtors were directed to wire
transfer the difference between the $825,000 bid and the previous
deposit to the Trustee on or before 5:00 P.M., October 11, 2012.
If the Debtors timely made this payment, (i) the Debtors would be
deemed to be the successful bidder at the auction sale; (ii) the
Settlement would be deemed paid in full, (iii) the Trustee would
provide the Debtors a release and satisfaction of the lien created
by recordation of the Settlement Order, and (iv) the Trustee would
return all monies paid by Epic Aviation, LLC, in connection with
the auction.
provided,
If the Debtors failed to pay the remaining funds as
then
(i)
Epic
Aviation,
LLC,
would
be
deemed
the
successful bidder at the auction/sale; (ii) the Trustee would
assign all of her rights under the Settlement to Epic Aviation,
LLC, and (iii) the Trustee would return the deposit paid by the
Debtors in connection with in the auction.
Id. at pp. 2-3.
Debtors timely paid the remaining balance of the $825,000.
On October 9, 2012, the Trustee executed a Satisfaction and Release
- 43 -
of Lien and Interest (Satisfaction and Release) satisfying and
releasing Debtors of any and all right, claim or interest held by
the Trustee in connection with her Objection to Exemptions, and
the Order Approving Joint Motion for Authority to Compromise
Controversies.
Plaintiffs’ Exhibit 4.
On October 10, 2012, at
10:16 a.m. Debtors recorded the Satisfaction and Release of Lien
and Interest in the Collier County, Florida Official Records.
Id.
On October 10, 2012 at 10:56 a.m., Debtors’ real estate
counsel emailed Mr. Morrissy’s realtor a copy of the Trustee’s
recorded
Satisfaction
and
Release
of
Lien
and
Interest,
and
inquired if Mr. Morrissy was ready to go back into contract and
whether there were any other outstanding issues.
Exhibits 9; 157, p. 3.
Defendant’s
Mr. Morrissy’s counsel forwarded the
Release to the Title Company’s underwriting counsel, noting that
Debtors’ real estate attorney was still taking the position that
Epic Aviation’s domesticated money judgment was not a lien on the
Property.
Defendant’s Exhibit 157, pp. 2-3.
Underwriting counsel
responded that the Title Company still had an issue with the Epic
Aviation judgment, and that its last communications related to a
partial release to be signed by Epic Aviation and a request for
some federal bankruptcy law from Debtors’ bankruptcy counsel.
Id., p. 2.
- 44 -
(13) Epic Aviation Files Notice of Appeal; PostOrder Motion to Stay and Motion to Remove
Judgment Lien
On October 10, 2012, Epic Aviation filed a Notice of Appeal
of the Order on Debtors’ Emergency Motion for Enlargement of Time
to Make Settlement Payment to the Trustee and For Order Authorizing
Sale of the Debtors’ Homestead Property (the Auction Order Appeal).
Plaintiffs’ Exhibit 5.
This was an appeal to the District Court,
sitting in an appellate capacity.
Plaintiffs do not assert that
the filing of this Notice of Appeal with the Bankruptcy Court
constituted a slander of their title (only that the subsequent
recording of the Notice of Appeal in the Official Records did so).
With
the
Bankruptcy
Court
having
upheld
the
Trustee’s
agreement to accept Debtors’ $825,000 as completion of their
obligations under the Settlement Agreement, and an appeal of that
order having been filed, the parties addressed two matters in postorder motions.
Epic Aviation wanted to stay the sale of the
Property while it pursued its appeal, and Debtors wanted to resolve
any argument that Epic Aviation’s domesticated money was a lien
which attached to the Property.
On October 10, 2012, Epic Aviation filed an Emergency Motion
for Stay Pending Appeal, Court’s Exhibit N, with the Bankruptcy
Court in order to prevent the sale of the Property.
Epic Aviation
asserted that if Debtors moved forward with their proposed sale of
- 45 -
the Property it would be deprived of the rights it purchased from
the Trustee, including its lien on Debtors’ property under the
Settlement Agreement, and its right to relief on appeal.
Id.
Epic Aviation requested a stay precluding the sale of the Property
while its appeal was pending.
assert
any
rights
to
the
Epic Aviation’s Motion did not
Property
pursuant
to
its
recorded
judgment, just rights to the Settlement Agreement Epic Aviation
asserted it had purchased from the Trustee.
Also on October 10, 2012, the Debtors filed Debtors’ Emergency
Motion to Avoid Judicial Lien of Epic Aviation, LLC, Plaintiffs’
Exhibit 27, in the Bankruptcy Court in order to clear title to the
Property so it could be sold.
The motion stated that Debtors were
in receipt of a verbal offer to purchase the Property; the Property
is exempt from Epic Aviation’s domesticated Oregon judgment both
as homesteaded property and as tenants by the entireties property;
Epic Aviation would never have any rights to the Property since
its judgment is solely against Mr. Phillips; while Epic Aviation’s
judgment lien does not attach to the Property, it impairs the
exemptions of each Debtor; and the Title Company believed that
Epic
Aviation’s
judgment
created
a
title
resolved before any sale of the Property.
an
order
avoiding
appropriate relief.
Epic
Id.
Aviation’s
issue
Id.
judgment
that
must
be
Debtors requested
lien
and
further
Debtors did not request any relief in
- 46 -
connection with the effect of the recently filed Notice of Appeal
of the Auction Order.
Additionally,
on
October
10,
2012,
Debtors’s
bankruptcy
counsel emailed Epic Aviation’ bankruptcy counsel confirming that
he had advised counsel for Epic Aviation that the Phillips believed
Epic
Aviation
was
intentionally
slandering
title
to
Bonita
Phillips’ jointly owned homestead property and was tortiously
interfering with her ability to sell the property to a third party.
Plaintiffs’ Exhibit 9.
The email further confirmed that Epic
Aviation and its counsel had actual knowledge of the potential
sale and Phillips’ view that Epic Aviation was jeopardizing that
sale; and that Epic Aviation would be held liable for damages if
the sale was thwarted.
Id.
On October 12, 2012, Epic Aviation filed a Response of Epic
Aviation LLC To Debtors’ Emergency Motion to Avoid Judicial Lien
of
Epic
Aviation,
LLC
and
Objection
Exemptions, Plaintiffs’ Exhibit 28.
To
Debtors’
Claims
of
Epic Aviation stated that in
light of Debtors’ Emergency Motion, it was objecting to “all and
each of the Debtors’ respective claims to exemption, or to any
allegedly exempt property, claimed in each of their respective
bankruptcy
cases,
to
the
fullest
Bankruptcy Code and Florida law.”
extent
available
Id. at ¶ 5.
under
the
Epic Aviation
adopted the objections filed by the Trustee in March 2007, id. at
- 47 -
¶ 6, which had been settled in 2007 by the Settlement Agreement.
Without providing any factual basis, Epic Aviation asserted that
Debtors were not entitled to claim the Property as a homestead
exemption or held as tenants by the entireties.
Id. at ¶ 7.
Thus,
the Response at least implicitly asserted that Epic Aviation’s
domesticated money judgment did attach to the Property.
On October 12, 2012, the Bankruptcy Court held a hearing on
both motions at 2:05 p.m., Court’s Exhibit O. When pressed by the
Bankruptcy
Court
judge,
Epic
Aviation’s
bankruptcy
counsel
suggested that if it was the owner of the Trustee’s rights (as
Epic Aviation asserted), it could refuse to accept the $825,000
from Debtors, seek to revoke Mrs. Phillips’ discharge, become a
joint creditor for the $825,000, and bring an action to rescind a
prior sale of the Jet 1, Inc. stock by “unwinding” that provision
of the 2007 Settlement Agreement, all of which would be further
litigated in bankruptcy court.
After hearing arguments, the Bankruptcy Court summarized the
procedural
history
of
the
case,
concluding
that
the
Trustee
essentially called off the auction and decided to allow Debtors
the
opportunity
Agreement.
to
pay
the
full
amount
under
the
Settlement
The Bankruptcy Court noted that this could be viewed
either as the Trustee determining the Debtors were the highest and
best offer at the auction, or that the Trustee determined to go
- 48 -
forward with the provisions of the Settlement Agreement.
Bankruptcy
Court
found
that
the
Trustee
had
The
determined
that
Debtors’ offer was the highest and best offer pursuant to the terms
of the auction, and gave Debtors a time limit in which to transmit
funds into the Trustee’s trust account.
The Bankruptcy Court
further found that it had the discretion to grant the extension of
time, the decision was not clearly erroneous, and the relevant
factors did not weigh in favor of granting a stay pending appeal.
(Id., pp. 53-55.)
As to Epic Aviation’s judgment lien, the Bankruptcy Court
indicated that the avoidance would be granted if a Continuous
Marriage Affidavit was filed establishing that the parties were
married when the Property was acquired and that it was acquired as
tenants
by
the
entireties.
Epic
Aviation
would
have
opportunity to seek reconsideration on a good faith basis.
pp. 65, 68.)
an
(Id.,
The Continuous Marriage Affidavit was filed, Court’s
Exhibit P, and Epic Aviation did not seek reconsideration.
The
Bankruptcy Court’s written order, discussed below, was filed on
October 17, 2012.
On October 12, 2012, Mr. Gettig wrote in his Priority Credit
Review Action List that the “short version” of the outcome of the
court hearing earlier that day was that “both of us paid the
Trustee, but the recent actions of the debtor have opened a giant
- 49 -
hole for us to stay Trustee’s right to accept their money, appeal
the judge’s decision to let the Trustee accept the debtor’s money
AND (better yet) argue against the homestead exemption and debtor
discharge.”
original).
emergency
Plaintiffs’
Exhibit
43D,
p.
517
(emphasis
in
Mr. Gettig also wrote that he attended the October 9
court
hearing
about
debtors’
claim
that
Epic
is
slandering the title to their residence and willfully interfering
with their settlement with the Trustee.
He noted that the claims
were without merit, but could result in a lawsuit.
He further
wrote “Epic will counter that it has now purchased the Trustee’s
interest and rights to the settlement so we can move to foreclose
on the home as both Trustee and judgment creditor.
Epic may
further move to have the court deny the discharge of the spouse
(like we succeeded in doing with her husband).
Such a denial
might let Epic be paid from the assets held by both husband and
wife (entireties property).”
E. Epic Aviation’s
Recordings
First
Id. at p. 517.
Two
Allegedly
Slanderous
Against this contentious litigation background, Epic Aviation
recorded three documents in the Official Records of Collier County,
Florida which Debtors assert constituted a slander to their title
in the Property.
The first two are discussed below.
- 50 -
(1)
Notice of Appeal of Auction Order
On October 12, 2012, at 11:22 a.m., Epic Aviation recorded in
the Collier County Official Records a copy of its Notice of Appeal
of
the
Auction
Order
Plaintiffs’ Exhibit 5.
to
the
United
States
District
Court.
Attached to the Notice of Appeal was a
copy of the Auction Order.
Id.
Plaintiffs assert that this
recorded Notice of Appeal constituted a slander of their title to
the Property.
(2)
Notice of Lis Pendens
Less than three hours later, on October 12, 2012, at 2:06
p.m., Epic Aviation recorded a Notice of Lis Pendens in the
Official Records of Collier County, Florida regarding the Auction
Order.
Plaintiffs’ Exhibit 6; Defendant’s Exhibit 56.
The Notice
of Lis Pendens bore the caption and case numbers of the Bankruptcy
Court proceedings, and stated that “Epic Aviation, LLC, an Oregon
limited liability company, has initiated this action to preserve
its interests and rights under its appeal of that certain Order on
Debtors’
Emergency
Motion
for
Enlargement
of
Time
to
Make
Settlement Payment to the Trustee and For Order Authorizing Sale
of the Debtors’ Homestead Property, with respect to the property
described
in
Property].”
below:
Id.
[setting
forth
legal
description
of
the
Plaintiffs assert that this recorded Lis Pendens
constituted a slander of their title to the Property.
- 51 -
According to Mr. Green, Epic Aviation authorized the filing
of
the
lis
residence,
pendens,
and
knew
knew
that
the
Mr.
Property
Phillips
interested buyer for the Property.
was
had
Debtors’
stated
primary
he
had
an
Mr. Green testified that the
filing of the lis pendens was to make sure that Epic Aviation’s
pursuit of the rights of the Trustee under the Settlement Agreement
did not become moot.
Epic Aviation did not want the Property to
be sold, which Epic Aviation believed would moot its appeal.
Mr.
Green also testified that the lis pendens was to improve Epic
Aviation’s
judgment.
chances
of
collecting
on
the
domesticated
money
To Mr. Green’s knowledge, this is the only lis pendens
Epic Aviation has ever filed in any litigation matter.
F. Resolution of Money Judgment As Lien on Property
(1)
Epic Aviation Concedes Money Judgment Does Not
Attach to Property
Before the entry of the written order on the motion to stay
and the motion for judicial relief from the money judgment, Epic
Aviation’s bankruptcy counsel conceded that its money judgment
against Mr. Phillips did not attach to the Property.
On October
16, 2012, Epic Aviation’s bankruptcy counsel sent an email to
Debtors’ bankruptcy counsel.
Defendant’s Exhibit 151, pp. 5-6.
Epic Aviation’s counsel stated in part that he saw no need for the
still-pending motion to avoid judicial lien because “[n]o one is
- 52 -
saying that a judgment lien attached to the Property; . . . I’ll
agree that the judgment lien does not attach to the Property, I
don’t see any other issues that need to be addressed.”
6.
Id., p.
Despite this concession, Epic Aviation did not withdraw its
objection to Debtors’ pending motion seeking judicial relief from
the Bankruptcy Court.
Later
on
October
16,
2012,
Debtors’
bankruptcy
counsel
emailed underwriting counsel and Mr. Morrissy’s counsel attaching
a copy of Epic Aviation’s bankruptcy counsel’s email.
Exhibits 8, p. 1; 151, p. 4.
Defendant’s
Debtors’ bankruptcy counsel observed
that Epic Aviation’s counsel “admits that the lien did not attach
to the property,” and that the senior underwriting counsel at the
Title Company “sees no issue with Epic’s judgment.”
Exhibit 8, p. 1.
Defendant’s
Debtors’ bankruptcy counsel noted that they had
recorded a continuous marriage affidavit, asked if they can move
forward with the sale of the Property, and noted that Debtors are
dangerously close to losing the sale.
Id.
Debtors’ real estate
attorney then asked Mr. Morrissy’s attorney to let him know the
status of going back into contract and closing on the Property.
Defendant’s Exhibit 151, p. 4.
Mr. Morrissy’s counsel forwarded the email to Mr. Morrissy’s
real estate agent, and asked to be informed of the status of going
back to contract and closing.
Id., p. 3.
- 53 -
Mr. Morrissy’s counsel
stated that if it is really not an issue, Epic Aviation should
sign the release he had sent the previous week.
Id.
day,
“[s]ince
underwriting
counsel
agreed,
stating
that
The next
Epic
doesn’t feel it is a lien on the property, then a release of the
property should satisfy all parties.”
Id., p. 2.
Epic Aviation
never signed any partial release.
(2)
Bankruptcy Court’s Written Orders Re: Stay and
Judicial Lien
On October 17, 2012, the Bankruptcy Court filed a written
Order Granting Debtors’ Emergency Motion To Avoid Judicial Lien of
Epic Aviation, LLC.
158.
Plaintiffs’ Exhibit 29; Defendant’s Exhibit
The Bankruptcy Court noted that Epic Aviation had questioned
whether there was record evidence supporting the tenancies by the
entireties nature of the Property, and that Debtors had filed an
Affidavit of Continuous Marriage and a copy of the Warranty Deed
to both Debtors as husband and wife.
Id.
The Bankruptcy Court
found that Epic Aviation’s domesticated money judgment was a
judicial lien that impaired an exemption to which each of the
Debtors was entitled on the Property “even though the Epic Judgment
does not actually attach to the Property (because Epic only has a
claim or judgment against Debtor Jeffrey S. Phillips).”
Bankruptcy
Property
Court
is
ordered
avoided
that
because
the
it
judicial
impairs
- 54 -
the
lien
Id.
The
against
the
tenancy
by
the
entireties exemption, and that “[t]he judicial lien of Epic, to
the extent that it may constitute a lien on the Property, is hereby
extinguished as to the Property only.”
Id.
On October 17, 2012, Debtors’ bankruptcy counsel sent a copy
of the Bankruptcy Court’s Order to underwriting counsel for the
Title Company.
Defendant’s Exhibit 158.
Underwriting counsel
responded that there was still a fourteen day appeal period.
Id.
On October 19, 2012, Mr. Gettig wrote in his Priority Credit
Review Action List that Epic Aviation was considering filing a
motion to stay the trustee from releasing the lien on the residence
while it appealed the decision of the Bankruptcy Court to accept
Debtors’
payment.
Plaintiffs’
Exhibit
43E,
p.
525.
Epic
Aviation’s $825,000 payment to the Trustee had been returned to
it.
Id.
On October 22, 2012, Mr. Morrissy’s attorney emailed Mr.
Morrissy’s real estate agents that he was trying to confirm from
the
Bankruptcy
Court
records
that
the
appeal
from
the
order
involving the Trustee was now moot since Debtors had paid the
Trustee.
Defendant’s Exhibit 153.
Counsel also wrote that he was
trying to get the Title Company’s underwriter to commit to a
closing date, but the Title Company was concerned about the appeals
period and their ability to timely determine whether an appeal had
been filed.
Id.
Counsel opined that it was unlikely that Epic
- 55 -
Aviation would appeal, but noted it had appealed “every other
order.”
Id.
Counsel raised several provisions to be included in
a sales contract for the Property, but expressed continuing concern
if Epic Aviation were to appeal the October 17, 2012 Order.
Id.
On October 23, 2012, the Bankruptcy Court entered a written
Order Denying Emergency Motion for Stay Pending Appeal of the
Auction Order for the reasons stated on the record at the October
12, 2012, hearing.
Court’s Exhibit R.
The Bankruptcy Court’s
findings are set forth supra, pp. 48-49.
On October 26, 2012, Epic Aviation filed an Emergency Motion
to Set Aside Sale and Motion for a Stay Pending Appeal with the
District Court.
Court’s Exhibit S.
Epic Aviation argued that the
Debtors and the Trustee had violated the automatic stay under
Federal Rule of Bankruptcy Procedure 6004(h) regarding the sale of
property, and based on a likelihood of prevailing on the merits.
(3)
Fallout From Lis Pendens Recording
On October 29, 2012, at 2:49 p.m., Debtors’ bankruptcy counsel
sent an email to Epic Aviation’s bankruptcy counsel requesting
that Epic Aviation immediately withdraw the lis pendens, provide
information as to applicable insurance related to the filing, and
explain why a copy was not served on him as Debtors’ counsel.
Plaintiffs’ Exhibit 10.
According to Mr. Green, Epic Aviation was
- 56 -
aware that Mr. Phillips had said he had an interested buyer at the
time and had a sale pending.
On October 29, 2012, the Trustee signed another Satisfaction
and Release of Lien and Interest.
Plaintiffs’ Exhibit 7.
On
October 30, 2012 at 3:32 p.m. Debtors recorded the second Trustee’s
Satisfaction and Release of Lien and Interest in the Official
Records of Collier County.
Plaintiffs’ Exhibit 7.
This document
again stated that the Trustee fully satisfied and releases “any
and all right, claim or interest held” by the Trustee in connection
with the Trustee’s Objections to Exemptions and Order Approving
Joint Motion for Authority to Compromise Controversies . . . and
“consents that the same shall be satisfied and released of record
in all respects.”
Id.
This second Release was filed because Epic
Aviation’s bankruptcy counsel took the position that the first
recorded Release was premature because it should not have been
filed until 14 days had expired from its signing.
Defendant’s
Exhibit 86, pp. 2-3; Plaintiffs’ Exhibit 33, p. 8.
On October 30, 2012, Debtors filed their Emergency Motion to
Dissolve Lis Pendens Filed by Epic Aviation, LLC, Plaintiffs’
Exhibit 30, asserting that the lis pendens filed against the
Property was improper and illegal under Florida Statute § 48.23.
Epic Aviation’s Response, Plaintiffs’ Exhibit 31, asserted that
the Bankruptcy Court lacked subject-matter jurisdiction over the
- 57 -
motion after the filing of a Notice of Appeal, and in any event,
the lis pendens was lawful.
The Bankruptcy Court held a hearing on the Emergency Motion
To Dissolve on November 5, 2012.
Plaintiffs’ Exhibit 33.
On
November 7, 2012, the Bankruptcy Court issued its Order Granting
Debtors’ Emergency Motion to Dissolve Lis Pendens Filed by Epic
Aviation, LLC.
Plaintiffs’ Exhibit 32.
The Bankruptcy Court
found “that there is an insufficient nexus between the Debtors’
jointly owned homestead property [ ] and the dispute asserted by
Epic relating to the appeal of this Court’s Order on Emergency
Motion for Enlargement of Time to Make Settlement Payment to the
Trustee and For Order Authorizing Sale of Debtor’s Homestead
Property”, granted the motion, and dissolved the lis pendens.
Id.
On November 7, 2012, Epic Aviation filed a Notice of Appeal
in the Bankruptcy Court, Plaintiffs’ Exhibit 8, from this Order
(the Lis Pendens Dissolution Order Appeal).
Epic Aviation’s
appeal to the District Court was assigned Case No. 2:12-cv-669FTM-29.
Debtors do not claim this filing slandered their title,
but assert that the subsequent recording of it in the Official
Records does so.
On November 9, 2012, the undersigned denied Epic Aviation’s
Emergency Motion to Set Aside Sale and Motion for a Stay Pending
Appeal in a written Opinion and Order, and noted that there was
- 58 -
nothing
to
prevent
the
sale
of
the
homestead
property.
Plaintiff’s Exhibit 38.
(4)
Renewed Efforts to Sell Property to Mr. Morrissy
On November 12, 2012 at 10:15 a.m., Debtors’ bankruptcy
counsel emailed Mr. Morrissy’s counsel attaching a copy of the
undersigned’s November 9, 2012 Opinion and Order.
Exhibit 74.
Counsel asked that the matter be discussed with Mr.
Morrissy and let him know “where we are.”
Also
on
Defendant’s
November
12,
2012,
Id.
Debtors’
bankruptcy
counsel
inquired by email of Epic Aviation’s bankruptcy counsel whether
Epic Aviation was going to withdraw the appeals and let Debtors
sell the Property.
Plaintiffs’ Exhibit 12.
Debtors’ bankruptcy
counsel asserted that Epic Aviation’s filings in the public record
and appeals were precluding the sale transaction from moving
forward, and reserved all rights, including claims for attorney
fees, compensatory damages, and punitive damages.
Id.
Mr. Green
testified that Epic Aviation was aware of Debtors’ position as
expressed to its counsel.
There is no record that Epic Aviation
or its bankruptcy counsel responded, and Epic Aviation’s appeals
were never withdrawn.
Epic Aviation’s appeals had a clear adverse effect on the
potential sale of the Property.
In a November 13, 2012 email, Mr.
Morrissy’s counsel stated that the attorney for the Title Company
- 59 -
had reviewed the Bankruptcy Court docket and found three “still
outstanding” matters:
Epic Aviation’s appeal of the dismissal of
the lis pendens; Epic Aviation’s appeal of the Trustee’s extension
of time; concern over whether Epic Aviation would appeal the recent
District Court Opinion and Order.
Defendant’s Exhibit 74.
In a November 14, 2012, 8:08 a.m. email, Debtors’ bankruptcy
counsel
told
Mr.
Morrissy’s
counsel
that
Epic
Aviation
was
considering withdrawing the appeals, and gave the date its brief
was due.
Plaintiffs’ Exhibit 13; Defendant’s Exhibit 74.
Epic
Aviation apparently did not consider the matter for long, however.
G. Third Allegedly Slanderous Recorded Document
Instead of withdrawing its two pending appeals, Epic Aviation
recorded another Notice of Appeal in the Official Records of
Collier County.
On November 14, 2012, at 8:35 a.m. Epic Aviation
recorded a copy of its November 7, 2012 Notice of Appeal of the
Lis Pendens Dissolution Order in the Official Records of Collier
County,
Florida.
Plaintiffs’
Exhibit
8.
A
copy
of
Dissolution Order was attached to the Notice of Appeal.
the
Id.
Plaintiffs assert this constituted a slander of their title to the
Property.
According to Mr. Green, Epic Aviation filed this Notice
of Appeal to preserve its rights under the auction and to collect
amounts owed by Mr. Phillips on the domesticated Oregon judgment.
- 60 -
H. Debtors’ Renewed Efforts to Sell Property
(1) Second Morrissy Contract; Epic Aviation Settlement Effort
On November 19, 2012, Mr. Morrissy signed another Sales
Contract, Plaintiffs’ Exhibit 14; Defendant’s Exhibit 76, for the
purchase of the Property.
Id.
Debtors signed on November 20, 2012.
The price was $4.315 million cash with a $25,000 deposit.
Debtors committed to obtaining a dismissal of all litigation in
the Bankruptcy Court regarding the Property, including appeals, a
discharge of all lis pendens, and resolution of the Epic Aviation
domesticated judgment.
Id. at Addendum.
By agreeing to obtain
resolution of the domesticated judgment, Debtors agreed to do more
than Epic Aviation could ever have compelled them to do in the
bankruptcy cases.
On November 20, 2012, at 10:28 a.m., Debtors’ bankruptcy
counsel emailed Mr. Morrissy’s counsel, Defendant’s Exhibit 10, a
copy of the new Morrissy contract and stated that he did not think
Epic Aviation would provide an actual “release” of its judgment.
Counsel stated that Epic Aviation’s judgment on the Property had
been expressly avoided by Order of the Bankruptcy Court and that
Order had not been appealed.
Id.
In his December 28, 2012 Priority Credit Review Action List,
Mr. Gettig summarized the litigation activities, noting that Epic
Aviation’s counsel had discussed withdrawal of the appeal in
- 61 -
federal court in return for a release of claims for legal expenses,
but Phillips and Epic Aviation were unable to reach a consensus.
Plaintiff’s Exhibit 43H, p. 626.
The next step was to “[n]egotiate
with debtor to settle all matters for $400[k] since the sale of
the residence is allegedly in process.”
Id.
Mr. Green testified
that at this point in time Epic Aviation was trying to make sure
that the sale of the Property did not moot its opportunity to show
on appeal its entitlement to the Trustee’s rights under the action.
On December 31, 2012, Epic Aviation offered to settle all matters.
Plaintiffs’ Exhibit 43J, p. 489.
In his January 4, 2013, Priority Credit Review Action List,
Mr. Gettig again summarized the litigation activities and gave a
short history of the matter.
Getting
noted
that
Debtors
may
Plaintiffs’ Exhibit 43I.
claim
that
Epic
Aviation
Mr.
is
slandering the title to their residence and willfully interfering
with their settlement with the Trustee.
Id., p. 502.
Under “Next
Steps”, Mr. Getting wrote “EPIC presented an offer to settle all
matters for $500[k] 8 on December 31 since the sale of the residence
is allegedly in process.
Response expected anytime.”
8
Id.
Mr.
Mr. Gettig incorrectly uses “m” (million) to refer to
amounts that are clearly meant to refer to thousands (k).
Therefore, the corrections are made throughout this Opinion and
Order for clarification.
- 62 -
Gettig included a slightly more detailed summary in his January
11, 2013, Priority Credit Review Action List indicating that the
offer of settlement was rejected and countered.
Plaintiffs’
Exhibit 43J, p. 489.
On January 8, 2013, Debtors’ bankruptcy counsel sent an email
to Epic Aviation’s bankruptcy counsel stating that Debtors were
contractually obligated to close in about one week, and the buyer
“will walk” if there is not a timely closing.
16.
Plaintiffs’ Exhibit
Debtors’ bankruptcy counsel stated that the only impediment
to closing was Epic Aviation’s pending appeals, and the buyer’s
counsel would not close unless the appeals are resolved or Epic
Aviation provided a limited release as to the Property.
Debtors’
bankruptcy
counsel
“implore[d]”
opposing
counsel
Id.
to
convince Epic Aviation to let the closing occur, stating the price
was extraordinary and the damages from the lost sale would be
substantial.
Id.
On January 11, 2013, Debtors’ bankruptcy
counsel sent Epic Aviation’s counsel a copy of the fully executed
November 2012 Morrissy contract.
Plaintiffs’ Exhibits 17, 18.
There is no response from Epic Aviation or its bankruptcy
counsel in the trial record, and no release or withdrawal of
appeals were ever executed by Epic Aviation.
- 63 -
(2)
Bankruptcy Court Approves Sale of Property,
Orders Escrow of Net Proceeds; Epic Aviation
Appeals
In the absence of a response from Epic Aviation, on January
11, 2013, Debtors filed an Emergency Motion For Order Approving
Sale of Debtors’ Property Free and Clear of any Interest of Epic
Aviation, LLC, Plaintiffs’ Exhibit 34, in the Bankruptcy Court.
Debtors
sought
Bankruptcy
Court
approval
of
the
sale
of
the
Property free and clear of Epic Aviation’s interests, i.e., the
interests created by the pending appeals because Epic Aviation had
no interest in the Property.
Debtors pointed out that while Epic
Aviation
pre-petition
had
Phillips,
a
Epic
$322,603.30
Aviation
would
never
judgment
have
rights
against
Mr.
against
the
Property, which was jointly owned with Mrs. Phillips as tenants by
the entirety.
(Id., ¶ 8.)
On January 15, 2013, Epic Aviation filed a Response, Court’s
Exhibit T,
stating
that
the
residence
was
claimed
as
exempt
property by Debtors, and was therefore no longer property of the
bankruptcy estate.
Therefore, Epic Aviation argued, Debtors could
not sell the property as requested.
Id.
The Bankruptcy Court
held a hearing on January 15, 2013, Court’s Exhibit U, indicating
that if Epic Aviation were to seek a stay pending appeal, it would
be denied and that it should go straight to the district court.
Id., p. 23.
- 64 -
On January 17, 2013, the Bankruptcy Court filed an Order
Granting Debtors’ Emergency Motion for Order Approving Sale of
Debtors’ Property Free and Clear of Any Interest of Epic Aviation,
LLC.
Plaintiffs’ Exhibit 35.
The Bankruptcy Court found that
it had the power and authority to grant the request pursuant to
Section 105 of the Bankruptcy Code, and in furtherance of its prior
October 9, 2007 order approving the Settlement Agreement, the
October 9, 2012 order enlarging time to make settlement payment,
its October 17, 2012 order to avoid judicial lien, and its November
7, 2012, order dissolving lis pendens.
Id. at ¶ B.
The Order
authorized Debtors to sell the Property free and clear of any
interest of the Chapter 7 Trustee and/or Epic Aviation, including
any interest arising out of Epic Aviation’s appeals.
Id. at ¶ 3.
As a condition of the sale, however, Debtors were required to
escrow the net proceeds of the sale.
Any interest of the Trustee
or Epic Aviation in the Property was to attach exclusively to the
net proceeds and not follow the property transferred to the buyer,
so that marketable title would pass to the buyer.
Id. at ¶ 4.
On January 17, 2013, Epic Aviation filed a Notice of Appeal,
Plaintiffs’ Exhibit 36 (the Sale Order Appeal), and an Emergency
Motion For A Stay Pending Appeal, Court’s Exhibit V, to which
Debtors filed a Response in Opposition, Court’s Exhibit W.
- 65 -
In his
January 18, 2013, Priority Credit Review Action List, Mr. Gettig
stated that Epic Aviation would
[c]ontine the appeal efforts filed Jan 17 in
US Bankruptcy Court to delay sale of Phillips’
primary residence, expected to close Jan 21.
Phillip’s response is due within 20 days.
This filing preserves the main asset involved
in EPIC’s appeal in Federal District Court of
the bankruptcy Judge’s decision to accept
debtor’s
payment
of
$825[k]
mediated
settlement instead of recognizing EPIC’s
winning bid in the action of trustee’s rights.
Plaintiffs’ Exhibit 43K, p. 493.
Mr. Gettig also wrote that “[i]f
the sale of the residence fails, we expect a slander of title to
be filed by Phillips.
Our counsel is adamant that we have not
slandered title and will prevail on challenge.”
Id.
In his January 25, 2013, Priority Credit Review Action List,
Mr. Gettig repeated that Epic Aviation would “[c]ontinue the appeal
efforts filed Jan 17 in US Bankruptcy Court to delay sale of
Phillips’ primary residence, expected to close Jan 21” which
“preserves the main assert involved in EPIC’s appeal. . . .”
Plaintiff’s Exhibit 43L, p. 497.
activities, Mr. Gettig wrote:
After summarizing the litigation
“Jan 18-Phillips offers $100[k] to
settle globally all matters, to include release judgment and
appeal.
A
EPIC declined.”
HUD
Settlement
Id., p. 498.
Statement,
Plaintiffs’
Exhibit
15;
Defendant’s Exhibit 45, showed the distribution of funds from Mr.
- 66 -
Morrissy if the sale had closed.
Both the first and second
mortgages would be paid off, $825,000 would be allotted for the
Trustee, and net proceeds of $1,602,871.34 would be placed in
escrow for satisfaction of the Epic Aviation judgment.
Id.
Thus,
had the closing taken place, Epic Aviation would have had a $1.6
million fund available from which to satisfy its judgment, which
was estimated to be approximately $800,000 with late fees and
interest.
Or, if indeed it was to act in the shoes of the Trustee,
it would have had this sum available for the other creditors.
Mr. Gettig’s February 1, 2013, Priority Credit Review Action
List summarized the activities in the case.
43M.
Plaintiff’s Exhibit
It noted that on December 31, 2012, Epic Aviation offered
to settle all matters for $500,000 since the sale of the residence
was allegedly in process.
Id., p. 656.
Mr. Gettig noted that
Phillips rejected this offer, and countered at $50,000 and possibly
as high as $100,000.
Id.
Under “Next Steps” Mr. Gettig wrote:
“Continue the appeal efforts filed Jan 17 in US Bankruptcy Court
to delay sale of Phillips’ primary residence, which was expected
to close Jan 21.”
(3)
A
Debtors’ Continued Efforts To Sell Property
series
Debtors’
Id., p. 655.
real
of
emails
estate
between
attorney
Defendant’s Exhibit 160.
Mr.
Morrissy’s
addressed
the
attorney
title
and
issues.
On February 1, 2013, Mr. Morrissy’s
- 67 -
attorney informed Debtors’ real estate attorney that the Title
Company was not willing to close the sale of the Property in escrow
while the appeals were still pending.
Id., p. 5.
Debtors’ real
estate attorney responded by asking whether Mr. Morrissy would be
willing to let him find a title company.
Id.
On February 4,
2013, Mr. Morrissy’s attorney stated that after the District Court
ruled
on
the
appeal
he
would
present
the
matter
underwriter and take it back to the Title Company.
to
another
Id., p. 4.
Debtors’ real estate attorney responded that Debtors would be
willing to rent the Property until title was cleared, subject to
certain conditions.
attorney
responded
Id.
that
On February 5, 2013, Mr. Morrissy’s
Mr.
Morrissy
wanted
to
wait
for
the
District Court order, and upon receipt either revisit the escrow
closing concept with the Title Company or another underwriter.
This would also put him in a better position to determine if
renting made more sense.
Id., p. 1.
These early February, 2013 efforts of the attorneys to salvage
the deal were to no avail.
Defendant’s Exhibit 160.
On February
13, 2013, Mr. Morrissy signed a Termination of Sales Contract and
Deposit
Release
and
Directive
in
contract to purchase the Property.
154.
Mr.
Morrissy
terminated
connection
with
his
second
Defendant’s Exhibits 11, 44,
the
contract
pursuant
to
the
Addendum because of the ongoing litigation in the Bankruptcy Court.
- 68 -
Defendant’s Exhibit 44.
On February 18, 2013, Debtors’ relator
emailed the executed Termination of Sales Contract back to Mr.
Morrissy’s
real
estate
agent
with
Debtors’
signatures.
Defendant’s Exhibit 154, p. 1.
Mr. Gettig’s March 1, 2013 Priority Credit Review Action List
noted that, as of February 28, there was no record of the sale of
Debtors’
primary
residence
filed
in
Florida
court
records.
Plaintiff’s Exhibit 43N, p. 478.
(4)
District Court Decision on Three Appeals
On March 5, 2013, the undersigned heard oral argument in the
related appeals of three Bankruptcy Court orders:
(1) the Order
on Debtors’ Emergency Motion for Enlargement of Time to Make
Settlement Payment to the Trustee and For Order Authorizing Sale
of the Debtors’ Homestead Property issued on October 9, 2012; (2)
the Order Granting Debtors’ Emergency Motion to Dissolve Lis
Pendens Filed by Epic Aviation, LLC issued on November 7, 2012;
and (3) the Order Granting Debtors’ Emergency Motion for Order
Approving Sale of Debtors’ Property Free and Clear of Any Interest
of Epic Aviation, LLC issued on January 17, 2013.
Defendant’s
Exhibit 184, p. 6.
On March 15, 2013, Mr. Gettig wrote in the Priority Credit
Review Action List that Epic Aviation was “[a]wait[ing] overdue
appellate
ruling
in
Federal
District
- 69 -
Court
of
decision
in
bankruptcy court to permit debtor to settle with trustee for
$825[k].
Reversal could lead to challenging the discharge of
creditors by the spouse of our guarantor, thereby letting us
collect by foreclosing on the primary residence.”
Exhibit 43O, p. 692.
Mr. Gettig continued:
Plaintiff’s
“The guarantor [Mr.
Phillips] has significant seven figure equity in his primary
residence.
Our key barrier is its joint ownership with his spouse
whose obligations to creditors were discharged in bankruptcy.
guarantor’s
bankruptcy
was
denied
after
survived two appeals after many years.
our
challenge,
Our
which
Though he owes significant
amounts to many creditors, we have judgments and others have not
pursued them.”
bankruptcy
Id.
This entry was made despite Epic Aviation’s
counsel’s
prior
statement
that
the
domesticated
judgment did not attach to the Property.
On May 6, 2013, Debtors advised the District Court that while
they had stated at oral argument on the appeals that the sale had
been lost due to the pending appeals, they had obtained the
interest of another purchaser who was ready, willing, and able to
move forward with purchase contract for the home.
Court’s Exhibit
X.
On May 7, 2013, the District Court affirmed the Bankruptcy
Court’s Auction Order and Lis Pendens Order, and vacated the Sale
Order
after
being
advised
that
the
- 70 -
sales
contract
[with
Mr.
Morrissy] had been lost.
Plaintiffs’ Exhibit 39.
The undersigned
found that Epic Aviation’s appeal was not moot, id., pp. 21-22;
and that whether the Trustee’s acceptance of $825,000 from the
Debtors was viewed as having been done pursuant to the terms of
the Settlement Agreement or as a determination that Debtors were
the winning bidder at the auction, the order of the Bankruptcy
Court approving the extension of time for Debtors to pay the
$825,000 and dissolving the lis pendens were affirmed, id., pp.
22-30.
Mr. Gettig wrote in the May 10, 2013, Priority Credit Review
Action List that Epic Aviation would appeal the District Court
decision, and that “[p]revailing on appeal could lead to denial of
discharge for the spouse of our guarantor.”
43P, p. 794.
Plaintiff’s Exhibit
He also wrote that “[t]he effect of our appeal on
the trustee is not yet clear.”
Id.
On May 14, 2013, Epic Aviation filed a Notice of Appeal to
the Eleventh Circuit Court of Appeals.
(5)
Court’s Exhibit Y.
Debtors File Suit in District Court
On June 3, 2013, Debtors filed their two-count Complaint (Doc.
#1) in the current case in the U.S. District Court for the Middle
District of Florida, Fort Myers Division, alleging slander of title
and seeking to quiet title to the Property.
- 71 -
(6)
John Connors Sales Contract
On June 16 and 17, 2014, plaintiffs entered into a Sales
Contract with John M. Connors Jr. to sell the Property for $4.4
million cash, with a $10,000 deposit.
Defendant’s Exhibit 81.
Plaintiffs’ Exhibit 19;
The Addendum labeled as Schedule BII
(Schedule) to this contract required Debtors to satisfy the title
requirements set forth in a First American Title Commitment.
Id.;
Defendant’s Exhibit 15.
On June 17, 2014, Debtors’ Renewed Motion For Order Approving
Sale of Debtors’ Property Free and Clear of Any Claim or Interest
of Epic Aviation, LLC was filed.
Plaintiffs’ Exhibit 40.
Debtors
attached a copy of the signed John Connors Sales Contract and the
title insurance commitment, and sought an order authorizing the
sale of the Property, as provided in one of the Commitment’s
express requirements.
Id., ¶ 11 & Exh. A.
On June 18, 2014, an email from Debtors’ bankruptcy counsel
to Epic Aviation’s bankruptcy counsel attached a fully executed
copy of the Connor Sales Contract and title insurance Commitment,
and asked whether Epic Aviation would either stipulate to an order
approving the sale or provide a limited release of any claim
against or interest in the Property so the closing could occur.
Plaintiffs’ Exhibit 20.
The email stated that Epic Aviation’s
- 72 -
filings in the public record and pending appeals were the only
things preventing the closing.
Id.
On July 18, 2014, Mr. Gettig wrote in the Priority Credit
Review Action List that Epic Aviation was requesting the Eleventh
Circuit to reverse and remand the case back to the Bankruptcy Court
to conduct a full and fair auction “to gain control of the
Trustee’s position in the bankruptcy case.”
43R, p. 939.
Plaintiff’s Exhibit
This changed rationale occurred only after the
slander of title case was filed against Epic Aviation.
On
July
22,
2014,
Debtors’
bankruptcy
counsel
emailed
Debtors’ real estate professionals to inquire whether the contract
was still active, whether the buyer was still on board, and if
they could get an appropriate court order.
82.
Defendant’s Exhibit
On July 24, 2014, the real estate attorney for Mr. Connors
asked Debtors’ real estate counsel to provide an update concerning
Debtors’ efforts to satisfy the title Commitment requirements as
set forth in the Sales Contract Schedule.
112.
Defendant’s Exhibit
Debtors’ real estate counsel then emailed Mr. Connors’
attorney that he and Debtors’ bankruptcy attorney were working on
the title requirements.
Defendant’s Exhibit 111.
followed-up on August 19, 2014.
The parties
Defendant’s Exhibit 17.
On September 22, 2014, Mr. Gettig signed an Affidavit in
Oregon stating that the name of the Judgment debtor is J. Scott
- 73 -
Phillips, identifying the debtor’s social security number, and
stating that the Debtors last known address was 3060 Green Dolphin
Lane,
Naples,
Florida
34102.
Plaintiffs’
Exhibit
22.
This
Affidavit was recorded in the Official Records of Collier County,
Florida on September 23, 2014 at 12:16 p.m.
record
explanation
Aviation’s
for
bankruptcy
the
counsel
second
Id.
There is no
re-recording,
informed
the
Court
but
in
Epic
closing
argument that he was concerned that the second recorded judgment
was still insufficient.
(7)
Eleventh Circuit Court of Appeals Decision; Subsequent
Activity
On September 24, 2014, the Eleventh Circuit Court of Appeals
affirmed the opinions and orders of the District Court and the
Bankruptcy Court. Plaintiffs’ Exhibit 41; Defendant’s Exhibit 63.
By letter dated September 24, 2014, and emailed the same day
at 3:45 p.m., Connors’ real estate attorney notified Debtors’ real
estate counsel that Mr. Connors was electing to terminate the Sales
Contract to purchase the Property pursuant to the Due Diligence
provision of the Schedule.
Exhibits 18, 49.
Plaintiffs’ Exhibit 24; Defendant’s
By email dated September 24, 2014, 5:02 p.m.,
Epic Aviation’s bankruptcy counsel asked for a copy of Debtors’
pending Sales Contract for the Property and stated he would be
- 74 -
discussing the Eleventh Circuit’s opinion with his client the next
day.
Plaintiffs’ Exhibit 23.
In Mr. Gettig’s October 3, 2014 Priority Credit Review Action
List, he noted the Eleventh Circuit’s decision, stating that
“actions continue to support EPIC’s right to lien interests in
debtors’ residence, currently for sale.”
p. 545.
Plaintiff’s Exhibit 43V,
Mr. Gettig made reference to the fact Epic Aviation had
filed a lis pendens on the Property, and that Debtor had equity
“of multiple millions” in the Property.
Id., p. 546.
In early October 2014, efforts to resolve title questions
from Old Republic National Title Insurance Company continued.
Defendant’s Exhibit 86.
On October 25, 2014, Mr. Phillips emailed
his real estate agent indicating that renovations on the Property
had commenced and the he wished to raise the price of the house.
Defendant’s Exhibit 88.
(8)
In
2015 Sale of Property
response
to
interrogatories
in
this
case,
Mr.
Green
verified that as of March 13, 2015, Epic Aviation “had no knowledge
of
any
delay
in
the
sale
Plaintiffs’ Exhibit 42, p. 5.
of
the
Plaintiff’s
residence.”
The Court finds this statement to
be patently and knowingly false.
On May 18, 2015, Debtors’ sought a hearing and an award of
attorney’s fees incurred in connection with the motion to dissolve
- 75 -
the lis pendens and the resulting appeal.
p. 3.
Defendant’s Exhibit 62,
On July 10, 2015, after a hearing, the Bankruptcy Court
filed an Order Denying Debtors’ Motion for Attorney Fees and Costs
Against Epic Aviation, LLC, in Connection With Lis Pendens, Without
Prejudice.
Id.
On November 2, 2015, the Property was sold to Mr. and Mrs.
Tague for $4.9 million.
Defendant’s Exhibits 162, 163.
Additional facts as found by the Court will be set forth below
as necessary to address specific issues.
II.
Conclusions of Law
Florida has long recognized a cause of action for slander
of title.
Lehman v. Goldin, 36 So. 2d 259 (Fla. 1948) (adopting
Restatement (First) of Torts §§ 624-626 (1938)).
While “slander
of title” has been referred to by a number of labels, Sailboat
Key, Inc. v. Gardner, 378 So. 2d 47, 48 (Fla. 3d DCA 1980), it is
most often used interchangeably with the label “disparagement of
title”, Callaway Land & Cattle Co., Inc. v. Banyon Lakes C. Corp.,
831 So. 2d 204, 207 n.1 (Fla. 4th DCA 2002) (citations omitted).
Slander of title is generally defined in Florida as “a false
and malicious statement, oral or written, made in disparagement of
a person’s title to real or personal property, or of some right of
his, causing him special damage.”
Old Plantation Corp. v. Maule
Indus., Inc., 68 So. 2d 180, 181 (Fla. 1953).
- 76 -
See also Atkinson
v. Fundaro, 400 So. 2d 1324, 1326 (Fla. 4th DCA 1981) (“Slander of
title is the wrongful, intentional and malicious disparagement of
vendibility of title to real property”, citing Old Plantation
Corp.) The elements have been variously stated:
It is the modern view that disparagement of
one's title to real property affects its value
and marketability by reason of the impact upon
third persons; that where the conduct of the
tortfeasor
consists
solely
in
the
communication to third persons of a false idea
concerning plaintiff's ownership of property,
it is not plaintiff's interest in the property
itself that is invaded and affected so much as
its salability. Thus liability is generally
imposed upon a defendant who (a) communicates
to a third person (b) statements disparaging
the plaintiff's title, (c) which are not true
in fact, and (d) which cause the plaintiff
actual damage.
Gates v. Utsey, 177 So. 2d 486, 488 (Fla. 1st DCA 1965).
More
recently, a Florida appellate court stated:
In a disparagement action the plaintiff must
allege and prove the following elements: (1)
A falsehood (2) has been published, or
communicated to a third person (3) when the
defendant-publisher
knows
or
reasonably
should know that it will likely result in
inducing others not to deal with the plaintiff
and (4) in fact, the falsehood does play a
material and substantial part in inducing
others not to deal with the plaintiff; and (5)
special damages are proximately caused as a
result of the published falsehood.
Bothmann v. Harrington, 458 So. 2d 1163, 1168 (Fla. 3d DCA 1984).
See also McAllister v. Breakers Seville Ass’n, Inc., 981 So. 2d
- 77 -
566, 573 (Fla. 4th DCA 2008); IberiaBank v. Coconut 41, LLC, 984
F. Supp. 2d 1283, 1304 (M.D. Fla. 2013), aff'd, 589 F. App'x 479
(11th Cir. 2014).
In a slander of title cause of action, Florida courts seem to
distinguish between presumed malice and actual malice.
In an action for slander of title, ‘malice’
merely means a lack of legal justification and
is said to be ‘presumed’ if the disparagement
is false, if it caused damage, and if it is
not
privileged.
[W]hen
the
defendant
disparages
plaintiff's
title
under
circumstances supporting a privilege, the
presumption of malice is rebutted and, as in
a case of defamation, the plaintiff must then
prove actual or genuine malice in order to
recover. This means that malice, in the
ordinary sense of the term, is not important
at all except to defeat the defense of
privilege or to enhance damages.”
Gates, 177 So. 2d at 488-89.
Relying on Gates, the court in Cont’l
Dev. Corp. stated that “[w]hile malice is an element of a cause of
action for slander of title, a plaintiff sustains his burden of
proof once he establishes that a defendant has communicated untrue
statements to a third person which disparage the plaintiff's title
and cause him actual or special damage. [ ] So, malice can be
presumed to exist if a plaintiff establishes these elements of his
claim.”
Cont’l Dev. Corp. of Fla. v. Duval Title & Abstract Co.,
356
2d
So.
omitted).
925,
927
(Fla.
2d
DCA
1978)
(internal
citations
The court further noted “that while actual malice is
- 78 -
not necessary to recover compensatory damages in a slander-oftitle action, a plaintiff always must prove actual malice in order
to recover punitive damages.”
Id. at 928.
Thus, actual malice
comes into play in two ways: to rebut circumstances supporting a
privilege and/or to support the existence of punitive damages.
In
Allington, the court stated:
We recognize that malice will be presumed if
the disparagement of title to real property is
false, causes damage, and is not privileged.
[ ] The presumption of malice, however, can be
overcome by the showing of privilege. [ ] A
showing of privilege rebuts the presumption of
malice and the plaintiff must then prove
actual malice in order to recover in a slander
of title action. [ ] The affirmative defense
of good faith raises a privilege and creates
a factual issue as to the existence of malice.
Allington Towers Condo. N., Inc. v. Allington Towers N., Inc., 415
So. 2d 118, 119 (Fla. 4th DCA 1982) (internal citations omitted).
See also Residential Cmtys. of Am. v. Escondido Cmty. Ass'n, 645
So. 2d 149, 150 (Fla. 5th DCA 1994) (“If a defendant establishes
a defense of good faith, or other privilege, however, a plaintiff
must prove actual malice.”); McAllister, 981 So. 2d at 573-74
(“Even if these factors are met, if an affirmative defense of
privilege is raised, the burden shifts to the plaintiff to prove
actual malice in order to recover.)
Additional legal conclusions are discussed below in order to
resolve specific issues.
- 79 -
III. Application of Law to Facts of the Case
The parties agreed to facts which establish that the Court
has subject matter jurisdiction over this case.
1, 10(1).)
(Doc. #138, ¶¶
The Court agrees it has subject matter jurisdiction.
(Doc. #127.)
The
parties
also
agree
that
the
Court
has
personal
jurisdiction over defendant, that venue is proper in the Fort Myers
Division of the Middle District of Florida, and that Florida
substantive law applies (Doc. #138, ¶ 10(1), (2).)
The Court
agrees with all three propositions.
In Florida, the Clerk of the Circuit Court is the recorder of
all instruments that are required or authorized by law to be
recorded.
Fla. Stat. § 28.222(1).
The Clerk must record all
instruments in one general series called “Official Records.”
Stat. § 28.222(2).
Fla.
The Clerk “shall record” certain kinds of
instruments, including in relevant part:
(a) Deeds, leases, bills of sale, agreements,
mortgages, notices or claims of lien, notices
of levy, tax warrants, tax executions, and
other instruments relating to the ownership,
transfer, or encumbrance of or claims against
real or personal property or any interest in
it;
extensions,
assignments,
releases,
cancellations, or satisfactions of mortgages
and liens; and powers of attorney relating to
any of the instruments.
- 80 -
(b) Notices of lis pendens, including notices
of an action pending in a United States court
having jurisdiction in this state.
. . .
(f) Certified copies of petitions, with
schedules omitted, commencing proceedings
under the Bankruptcy Act1 of the United
States, decrees of adjudication in the
proceedings, and orders approving the bonds of
trustees appointed in the proceedings
. . .
(h)
Any
other
instruments
required
authorized by law to be recorded.
or
Fla. Stat. § 28.222.
Several relevant documents were recorded in the Official
Records of Collier County, Florida, during the relevant ten year
period
leading
up
to
the
instant
lawsuit.
The
highlighted
documents are the ones asserted by plaintiffs as having slandered
their title in the Property.
Date
Description
of
Document
Recorded
September
24, Oregon General Judgment and
2004
Money Award
October 25, 2007
Trustee’s lien on Property
resulting
from
Mediated
Settlement Agreement
August 23, 2012
General Judgment and Money
Award (re-recording)
October 10, 2012
Satisfaction of Trustee’s
Lien on Property
October 12, 2012
Notice of Appeal from Order
granting Debtors’ Emergency
Motion for Enlargement of
Time
to
Make
Settlement
- 81 -
Recorded By
Epic Aviation
Trustee
Epic Aviation
Trustee
Epic Aviation
Payment to the Trustee and
for Order Authorizing Sale
of the Debtors’ Homestead
Property (the Auction Order)
October 12, 2012
Notice
of
Lis
Pendens
(regarding Auction Order)
October 30, 2012
Satisfaction and Release of
Lien and Interest
November 14, 2012 Notice of Appeal from Order
Granting Motion to Dissolve
Lis Pendens (the Lis Pendens
Dissolution Order)
September
23, Affidavit
with
Oregon
2014
General Judgment and Money
Award (re-recording)
Epic Aviation
Trustee
Epic Aviation
Epic Aviation
The Court addresses the elements of slander of title as
they relate to each of the pertinent documents:
(1)
In
Publication To Third Party
a
slander
of
title
action
plaintiff
must
prove
that
defendant published the alleged defamatory statement to a third
party, not to an interested party.
Tishman-Speyer Equitable S.
Fla. Venture v. Knight Invs., Inc., 591 So. 2d 213, 214 (Fla. 4th
DCA 1991); Residential Cmtys. of Am. v. Escondido Cmty. Assn., 645
So. 2d at 150.
Recording a document in the county’s Official
Records means that it is “always be open to the public . . . for
the purpose of inspection thereof and of making extracts.”
Stat. § 28.222(7).
Fla.
In addition to creating a marketable title
record, one of the purposes of recording in the Official Records
is to give notice to third parties.
- 82 -
Desak v. VanLandingham, 98
So. 3d 710, 713 (Fla. 1st DCA 2002).
Additionally, the evidence
in this case shows actual notice of the recordings to actual third
parties, including potential purchasers and their professional
associates and a title company.
The Court finds that the recording of each of the three
documents
in
requirement
the
in
Official
this
case.
Records
satisfies
McAllister,
981
the
So.
publication
2d
at
574. 9
Defendant does not dispute that plaintiffs have satisfied the
publication element for each document.
recorded
the
lis
pendens
during
the
(Doc. #138, p. 4) (“Epic
course
of
a
judicial
offending
recorded
proceeding”).
(2)
Falsehood
Plaintiffs
must
establish
document was in fact false.
1200 (Fla. 5th DCA 1981).
that
the
McDonald v. McGowan, 402 So. 2d 1197,
The falsehood element requires a showing
that any alleged falsity in the recorded document was substantive
in nature, not procedural.
Thus, recording a document which is
9
Tishman-Speyer Equitable S. Florida Venture v. Knight
Investments, Inc. stated: “Nor does actionable publication occur
when a lis pendens is recorded. See Procacci v. Zacco, 402 So.
2d 425 (Fla. 4th DCA 1981).” 591 So. 2d 213, 214 (Fla. 4th DCA
1991).
This dicta is simply an overbroad statement as to the
holding of Procacci, which relied upon the affirmative defense of
litigation privilege under the facts of that case.
- 83 -
not entitled to be recorded is not alone sufficient.
Ridgewood
Utilities Corp. v. King, 426 So. 2d 49, 50 (Fla. 2d DCA 1982).
Plaintiff must still establish that the document was false.
Id.
“[A] distinction must be drawn between an improper filing in a
procedural sense, and a wrongful filing in a substantive sense.
Only
the
latter
will
support
an
action
for
disparagement
of
property because only it meets the requisite falsehood element of
the action.”
Bothmann v. Harrington, 458 So. 2d at 1168.
While
a trial court is permitted to consider such a wrongfully filed
document, Medellin v. MLA Consulting, Inc., 69 So. 3d 372, 374
(Fla. 5th DCA 2011), a statement predicated on a mistaken belief
is not necessarily false or malicious, Brown v. Kelly, 545 So. 2d
518, 520 (Fla. 5th DCA 1989).
(a)
The
Notices of Appeal Recorded in Official Records
first
document
which
plaintiffs
claim
constituted
a
slander of their title to the Property was the Notice of Appeal of
the Auction Order, recorded on October 12, 2012, which contained
a copy of the Auction Order which was the subject of the appeal.
Plaintiffs’ Exhibit 5.
The third document which plaintiffs claim
constituted slander of their title to the Property was the Notice
of
Appeal
November
of
14,
the
2012.
Lis
Pendens
Dissolution
Plaintiffs’
Exhibit
Order,
8.
A
recorded
copy
Dissolution Order was attached to this Notice of Appeal.
- 84 -
of
on
the
In general, the filing of a Notice of Appeal is the mechanism
by which a party seeks review by an appellate court of a final
decision by a lower court which appellant asserts was erroneous.
A Notice of Appeal has jurisdictional consequences on the court
receiving the notice and the court from which the appeal is taken.
In re Robinson, 640 F.2d 737, 738 (5th Cir. Unit A Mar. 1981).
The Notice of Appeal is a simple document which must identify the
parties and the order, judgment or decree being appealed, and be
accompanied by a copy of the judgment, order or decree being
appealed.
Fed. R. Bankr. P. 8003(a)(3).
A Notice of Appeal is
not required to set forth the reasons for the appeal or the
arguments
which
support
appellant’s
position.
The
only
substantive inference possible from a Notice of Appeal is that the
appealing
party
is
challenging
the
validity
of
the
order
or
judgment from which the appeal is taken.
The recorded Notices of Appeal at issue contained no false
statements.
The Notices of Appeal stated that Epic Aviation was
appealing certain orders, and attached a copy of the order being
appealed, as required by the Bankruptcy Rule.
While there was
conflicting testimony as to whether recording such notices of
appeal
in
recording
Notices
the
would
of
Official
not
Appeal
Records
alone
were
was
satisfy
literally
- 85 -
proper,
the
even
falsity
true:
Epic
an
improper
element.
Aviation
The
was
appealing
those
conclusion.
orders,
and
indeed
pursued
such
appeals
to
While Epic Aviation lost those appeals, losing does
not convert the notices into documents which contain a substantive
falsehood.
The Court finds that plaintiffs have not satisfied the
falsity element as to the first and third documents, i.e., the
recorded Notices of Appeal.
(b)
Notice of Lis Pendens Recorded in Official Records
The second document, which plaintiffs claim constituted a
slander of their title to the Property, was the Notice of Lis
Pendens regarding the Auction Order, also recorded on October 12,
2012.
Plaintiffs’ Exhibit 6; Defendant’s Exhibit 56.
The Notice
of Lis Pendens bore the caption and case numbers of the Bankruptcy
Court cases, and stated that “Epic Aviation, LLC, an Oregon limited
liability company, has initiated this action to preserve its
interests and rights under its appeal of that certain Order on
Debtors’
Emergency
Motion
for
Enlargement
of
Time
to
Make
Settlement Payment to the Trustee and For Order Authorizing Sale
of the Debtors’ Homestead Property, with respect to the property
described
in
Property].”
below:
Id.
[setting
forth
legal
description
of
the
The Court finds that this recorded document was
knowingly and intentionally false.
“The lis pendens mechanism is not designed to aid either side
in a dispute. . . .”
Centerstate Bank Cent. Fla., N.A. v. Krause,
- 86 -
87 So. 3d 25, 28 (Fla. 5th DCA 2012).
As was recently stated by
J.B.J. Inv. of S. Fla., Inc. v. Maslanka, 163 So. 3d 726, 728 (Fla.
5th DCA 2015):
The term “lis pendens” is defined as the
jurisdiction, power, or control that courts
acquire over property involved in a pending
suit. A notice of lis pendens serves two major
purposes. First, a recorded lis pendens acts
to warn future purchasers or encumbrancers
that a suit is pending that could affect title
in a given piece of property. This is because
one who purchases property subject to a lis
pendens is bound by the judgment or decree
rendered against the party from whom he makes
the purchases as much so as though he had been
a party to the judgment or decree himself.
Second, the filing of a lis pendens is
designed
to
protect
a
plaintiff
from
intervening liens that could impair or
extinguish that plaintiff's claimed property
rights. In short, a lis pendens exists as much
to warn third parties as to protect the
plaintiff.
(citations and internal punctuation omitted).
A lis pendens is a
harsh and oppressive remedy because it operates as a cloud on the
title and effectively prevents an owner from selling the property.
Avalon Assocs. of Delaware Ltd. v. Avalon Park Assocs., Inc., 760
So. 2d 1132, 1134 (Fla. 5th DCA 2000).
“Under Florida law, a lis
pendens is proper only when the required relief might specifically
affect the property in question.
There is no other justification
for burdening the alienability of property pending the outcome of
a lawsuit.”
Ross v. Breder, 528 So. 2d 64, 65 (Fla. 3d DCA 1988)
- 87 -
(quoting Beefy King Int'l, Inc. v. Veigle, 464 F.2d 1102 (5th Cir.
1972)).
The Notice of Lis Pendens contained false statements.
First,
it falsely stated that Epic Aviation “has initiated this action”
given the Bankruptcy Court case number.
Epic Aviation did not
initiate the bankruptcy action; rather the Debtors did.
While
Epic Aviation initiated the appeal, that is not what the Notice of
Lis Pendens states.
Lis Pendens
in
More importantly, by recording the Notice of
the
Official
Records
of
Collier
County,
Epic
Aviation was as a matter of law attesting that the results of its
appeal of the Auction Order might specifically affect the Property.
This was a material false statement.
The Court finds:
Epic Aviation never had an ownership or
lien interest in the Property, which was owned by the Debtors by
the entireties at all relevant times.
Epic Aviation knew this
from
litigation
the
beginning
conclusion.
of
the
bankruptcy
through
its
Epic Aviation knew the Property was not subject to
its Judgment against Scott Phillips.
Epic Aviation persistently
attempted to reach the Property to collect on its Judgment despite
knowing the Property was not subject to its Judgment against Scott
Phillips.
Epic Aviation started by seeking to compel the sale of
the Property to satisfy its Judgment, then shifted to taking
frivolous appeals intended to delay the actual sale of the Property
- 88 -
by Debtors.
Epic Aviation filed the Notice of Lis Pendens, as
well as the Notices of Appeal, in an effort to coerce the Debtors
to allow Epic Aviation to reach an asset which it had no legal
right to reach to satisfy its judgment against Scott Phillips
individually.
of
the
other
Epic Aviation never intended to act in the benefit
creditors,
and
never
did
so.
Epic
Aviation
intentionally filed the Notice of Lis Pendens not because it
believed in the merits of its inaccurate legal theory, but as a
strategy to prevent Debtors from selling the Property.
Even if
Epic Aviation would have prevailed on its appeal of the Auction
Order, Epic Aviation would not have had any interest in the
Property.
Claiming that success in its appeal would result in an
interest in the Property was knowingly false.
(3)
Knowledge of Likelihood Result of Inducing Others Not to
Deal with Plaintiffs
In a slander of title action, plaintiff must prove that the
defendant-publisher knew or reasonably should have known at the
time of publication that the publication would likely result in
inducing others not to deal with the plaintiff, and that in fact
the falsehood did play a material and substantial part in inducing
others not to deal with plaintiff.
Bothmann v. Harrington, 458
So. 2d 1163, 1168 (Fla. 3d DCA 1984).
The Court finds ample
evidence to satisfy these elements as to the Notice of Lis Pendens.
- 89 -
Even before Epic Aviation knew of an actual sales contract
for the Property, it knew that recording a document in the Official
Records was notice to the world.
Epic Aviation knew such a
recording would be a cloud on the Property’s title to reasonable
purchasers, which is exactly what Epic Aviation intended.
When
Epic Aviation learned of the sales contract for the Property by
Debtors to Mr. Morrissy, its intent to preclude a sale of the
Property became specific as to that contract.
Epic Aviation
intended to prevent the sale by Debtors to Mr. Morrissy and to Mr.
Connors.
The evidence established that both were bona fide, good
faith purchasers willing and able to purchase the Property, and
that the contracts would have closed but for the obstructive
efforts of Epic Aviation.
(4)
Material and Substantial Part in Inducing Others Not to
Deal with Plaintiffs
The Court also finds ample evidence that the recording of the
Notice of Lis Pendens was indeed a material and substantial part
of
inducing
others
not
to
purchase
the
Property.
Emails,
correspondence, and discussions by Mr. Morrissy and his real estate
professionals establish that Epic Aviation’s stubborn refusal to
let go of a frivolous legal position and its recording of the false
Notice of Lis Pendens caused the Morrissy contracts to fail to
close.
The Connors contract fell through for similar reasons.
- 90 -
(5)
Malice
Because
defendant
has
asserted
an
affirmative
privilege, plaintiffs must prove actual malice.
defense
of
The Court finds
that they have done so.
There is no doubt in the Court’s mind from the evidence that
Epic Aviation acted in bad faith and with actual malice in many of
its actions, including the recording of the Notice of Lis Pendens.
Despite the testimony and argument to the contrary, which the Court
found not to be credible, Epic Aviation was driven not by a desire
to stand in the shoes of the Trustee, or even, in the end, to act
in its own financial best interest.
Instead, Epic Aviation acted
out of spite based upon ill-will and mean-spiritedness toward Scott
Phillips
developed
litigation.
over
the
course
of
their
contentious
Its actions, including recording the Notice of Lis
Pendens and its refusal to withdraw that recording, were malicious.
(6)
Damages and Special Damages
Damages are an element of a slander of title action, Donald
M. Patterson, Inc. v. Bonda, 425 So. 2d 206 (Fla. 4th DCA 1983),
and
therefore
plaintiffs
must
prove
attributable to the Notice of Lis Pendens.
they
incurred
damages
Levin v. Lang, 994 So.
2d 445, 446 (Fla. 3d DCA 2008).
In a slander of title action, “the pecuniary loss recoverable
for the injurious falsehood is restricted to that which results
- 91 -
directly and immediately from the falsehood’s effect on the conduct
of third persons and the expenses incurred to counteract the
publication.”
Bothmann, 458 So.2d at 1170.
“[T]he proper method
of measuring damages for wrongful filing of lis pendens is the
difference between the fair market value at the time of the filing
of the lis pendens and the fair market value at [the] time of its
termination, plus any consequential damages, including attorney's
fees.” FCD Dev., LLC v. S. Fla. Sports Comm’n, Inc., 37 So. 3d
905, 909 (Fla. 4th DCA 2010) (quoting S & T Builders v. Globe
Props.,
Inc.,
909
Consequential
So.2d
damages
375,
376
include
(Fla.
expenses
4th
DCA
incurred
2005)).
in
the
ownership, preservation, and operation of the property which are
the natural consequence of the wrongful lis pendens while it is
outstanding.
Haisfield v. APC Fla. Holdings, Inc., 668 So. 2d
1049, 1050 (Fla. 4th DCA 1996).
See also Price v. Tyler, 890 So.
2d 246, 249-50 (Fla. 2004); Jenkins v. Plaza 3000, Inc., 134 So.
3d 1127, 1131 (Fla. 4th DCA 2014).
“In order to sustain a claim
for consequential damages arising out of wrongful lis pendens, a
wronged seller must show a diligent yet unsuccessful attempt to
resell the property after the buyer breached the agreement.”
Haisfield v. ACP Fla. Holdings, Inc., 629 So. 2d 963, 966 (Fla.
4th DCA 1993) (citation omitted).
The trial judge considers the
intent of the seller to sell property, the seller's efforts to
- 92 -
effect a sale, and effect of notice of lis pendens upon the
seller's resale attempts.
Haisfield, 629 So. 2d at 966.
Here, plaintiffs do not seek direct damages because the
Property eventually sold for more than its fair market value at
the time the Notice of Lis Pendens was recorded.
The Property
ultimately sold for $4.9 million, which was in excess of the fair
market
value
recorded.
when
the
Therefore,
Notice
of
plaintiffs
Lis
are
Pendens
not
was
entitled
wrongfully
to
direct
damages from the wrongful conduct of Epic Aviation.
Plaintiffs do seek consequential damages and attorney fees,
which they have listed in Plaintiffs’ Exhibits 46 and 47.
The
process for determining if such damages are available and, if so,
the amount, is set forth in Haisfield, 668 So. 2d at 1049–50 10.
The Court makes the following relevant findings:
(1)
The Notice of Lis Pendens was recorded on October 12,
2012, and was in effect until September 24, 2014, when
it was terminated by the Eleventh Circuit Court of
Appeals’ decision which upheld the District Court and
10
The Court considers whether the property declined in value
or increased in value, and if the property was being run at a net
operating gain or a net operating loss to determine consequential
damages.
- 93 -
Bankruptcy Court rulings.
Haisfield, 629 So. 2d at 966
n.1.
(2)
The fair market value of the Property at that time of
the recording of the Notice of Lis Pendens was between
$4.325 million
(the price of the Morrissy purchase
agreement signed July 23, 2012), and $4.315 million (the
price of the second Morrissy purchase agreement signed
November 19, 2012).
Given the closer time proximity,
the
that
Court
concludes
the
fair
October 12, 2012, was $4.315 million.
market
value
on
The Court rejects
the opinion of Halas Neal Scott, the expert for Epic
Aviation, who valued the Property at $4.25 million as
of
October
12,
2012,
using
the
comparable
sales
methodology.
(3)
The fair market value of the Property on September 24,
2014 when the Notice of Lis Pendens terminated was $4.4
million, the price of the Connors Sale Contract signed
on June 16-17, 2014.
(4)
The Property sold about a year later, on November 2,
2015, for $4.9 million.
Thus, the Property value increased from $4.315 million to $4.4
million, a positive difference of $85,000.
- 94 -
Since the Property increased in value while the wrongful
Notice of Lis Pendens was outstanding, the Court must determine
the amount of the consequential damages, i.e., the necessary
expenses incurred in the ownership, preservation, and operation of
the property which are the natural consequence of the wrongful lis
pendens while it is outstanding.
Under Florida law, plaintiffs
can only recover an amount of consequential damages which exceed
the $85,000 increase in the value of their Property.
Haisfield,
668 So. 2d at 1049–50.
The
diligent,
Court
but
finds
that
unsuccessful
plaintiffs
attempts
have
to
sell
shown
multiple,
the
Property,
including after Epic Aviation wrongfully recorded the Notice of
Lis Pendens.
It is clear that at least by that time plaintiffs
were motivated to sell the Property, and were making good faith
efforts to do so.
Plaintiffs through their attorneys worked
diligently to counteract the adverse effects of the wrongfully
filed Notice of Lis Pendens, which prevented the sale of the
Property.
In addressing the claimed consequential damages, the Court
follows the chart provided by plaintiffs as Plaintiffs’ Exhibit 47
(As of 10/22/2015 - Revised 12/7/2015):
(1)
Association Dues:
The Court finds that nine months of
dues for 2014 are recoverable, but not the dues which
- 95 -
post-date the termination of the Notice of Lis Pendens.
Therefore, $296.25 will be allowed.
(2)
Renovations:
All of these are capital improvements, and
are not necessary expenses incurred in the ownership,
preservation, or operation of the Property which are the
natural consequence of the wrongful lis pendens while it
is
outstanding.
The
Court
allows
none
of
these
renovations as consequential damages.
(3)
Maintenance:
category.
Plaintiffs
seek
$51,724.70
11
in
this
The Court eliminates those expenses which
pre-date the recording of the Notice of Lis Pendens
(October
12,
2012)
and
those
which
post-date
the
termination of the Notice of Lis Pendens (September 24,
2014).
The Court allows the remaining expenses, which
total $34,232.20.
(4)
Homeowner Insurance:
The Court allows the amounts for
the
the
period
outstanding.
$21,763.39,
in
which
Notice
of
Lis
Pendens
was
Thus, the Court allows the $7,380.17, the
and
six
months
of
the
Insurance Co. through September 2014.
11
QBE
Specialty
The Court does
The Court’s total of the listed invoices is $52,487.20,
after deducting $762.50 in credits.
- 96 -
not allow any of the insurance after September 24, 2014,
when the Notice of Lis Pendens terminated.
Thus, the
Court allows $39,360.28 for homeowners insurance.
(5)
Other
Insurance:
The
Court
allows
the
insurance
premiums for Hartford Insurance Co. of the Midwest and
Lutgert Insurance (FEMA) through the termination of the
Notice of Lis Pendens, which total $2,700.80 ($460.80
plus $1,387.00 plus seven months of the FEMA insurance
in the amount of $853.00).
(6)
Interest on Home Equity Line of Credit:
The Court
allows the interest on the home equity line of credit
through the termination of the Notice of Lis Pendens,
which totals $29,744.99.
(7)
Mortgage Interest:
The Court allows the interest on the
mortgage through the termination of the Notice of Lis
Pendens, which totals $132,309.80.
(8)
Pool
Service:
The
Court
allows
the
pool
service
expense, all of which occurred during the relevant time
period, and which totals $2,520.00.
(9)
Property Tax:
The Court allows property tax for 2012
and 2013, but not for 2015.
$29,834.19.
- 97 -
The amount allowed totals
(10) Utilities:
All of the requested water expenses (City
of Naples) are within the relevant time period, and total
$3,146.09.
The only gas (Balgas) invoice is for 2015,
and is disallowed.
The electricity (FPL) invoices are
all within the relevant time period and total $5,685.78.
Therefore, the total allowable utilities is $8,831.87.
(11) Other:
The Court is not convinced that the $120.00 to
hang mirrors and art is a necessary expense to maintain
or preserve the Property.
(12) Total:
It will not be allowed.
The Court finds that plaintiffs have established
that a total of $279,830.38 was expended as necessary
expenses incurred in the ownership, preservation, and
operation
of
the
property,
which
were
the
natural
consequence of the wrongful lis pendens while it was
outstanding.
The
final
step
in
the
calculation
of
the
consequential
damages is to deduct the amount of the increase in property value
from
the
necessary
expenses.
The
total
allowed
expenses
is
$279,830.38, and the amount of the property value increase is
$85,000.
This results in net recoverable expenses of $194,830.38.
Plaintiffs also request attorney fees. Plaintiffs’ Exhibit
46.
Plaintiffs seek $47,147.50 for 123.8 hours related to the
dissolution of the lis pendens and the proceedings before the
- 98 -
District Court and the Court of Appeals.
The Court rejects Epic
Aviation’s argument that appellate fees are not compensable.
The Court is deeply familiar with this litigation, and the
attorneys involved.
After reviewing Plaintiffs’ Exhibit 46 and
the record of the case, the Court is satisfied that the number of
hours expended, the total fee, and the average hourly fee are
reasonable given the nature and extent of this litigation.
Epic Aviation argues that plaintiffs should be denied their
special damages as a sanction for committing fraud on the Court.
The Court declines to do so.
There is no reason, particularly
given the facts in this case, why Epic Aviation should have the
amount of damages it owes reduced because of Scott Phillips’s
conduct towards the Court.
IV.
Affirmative Defenses
A. Florida Litigation and Appellate Litigation Privilege
Defendant
raises
the
affirmative
defense
of
privilege
pursuant to the Florida litigation privilege and the Florida
appellate litigation privilege.
The history of the litigation
privilege in Florida has been summarized as follows:
The litigation privilege was first recognized
in Florida in 1907 to provide legal immunity
for
actions
that
occur
in
judicial
proceedings.
Myers v. Hodges, 53 Fla. 197,
44 So. 357 (1907). In Levin, Middlebrooks,
Mabie, Thomas, Mayes & Mitchell, P.A. v. U.S.
Fire Ins. Co., 639 So. 2d 606, 608 (Fla. 1994),
- 99 -
the Florida Supreme Court extended the
litigation privilege, already applicable to
defamatory statements (slander and libel) and
perjury, to all other torts so long as the act
complained of occurs during and has some
relation to the proceedings, stating: [W]e
find that absolute immunity must be afforded
to any act occurring during the course of a
judicial proceeding, regardless of whether the
act involves a defamatory statement or other
tortious
behavior
such
as
the
alleged
misconduct at issue, so long as the act has
some relation to the proceeding. . . .
[P]articipants [must] be free to use their
best judgment in prosecuting or defending a
lawsuit without fear of having to defend their
actions in a subsequent civil action for
misconduct. The Levin plaintiff alleged that
the defendant law firm tortiously interfered
with the plaintiff's relationship with its
attorneys
by
listing
the
attorneys
as
witnesses in a separate case in order to
prevent them from serving as attorneys in that
case. Id. at 607. The Levin court held the
attorneys' conduct was shielded against the
plaintiff's suit by Florida's litigation
privilege. Id.
Thirteen years after Levin, the Florida
Supreme Court clarified that “[t]he litigation
privilege applies across the board to actions
in Florida, both to common-law causes of
action, those initiated pursuant to a statute,
or of some other origin,” Echevarria, McCalla,
Raymer, Barrett & Frappier v. Cole, 950 So. 2d
380, 384 (Fla. 2007), and reaffirmed that
“[a]bsolute immunity must be afforded to any
act occurring during the course of a judicial
proceeding ... so long as the act has some
relation to the proceeding.” Echevarria, 950
So. 2d at 384 (quoting Levin, 639 So. 2d at
608), see also DelMonico v. Traynor, 116 So.
3d 1205 (Fla. 2013) (clarifying that, although
not all statements made outside of the formal
judicial
process
are
protected
by
the
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litigation privilege, an absolute privilege
applies to conduct occurring during the course
of the proceedings).
Wolfe v. Foreman, 128 So. 3d 67, 68–69 (Fla. 3d DCA 2013).
Florida’s litigation privilege applies to slander of title cases.
Sailboat Key, Inc. v. Gardner, 378 So. 2d 47 (Fla. 3d DCA 1980);
Procacci v. Zacco, 402 So. 2d 425 (Fla. 4th DCA 1981).
There
are
certainly
factual
situations
notice of lis pendens is a privileged act.
when
recording
a
E.g., Procacci v.
Zacco, 402 So. 2d 425 (Fla. 4th DCA 1981); Palmer v. Shelby Plaza
Motel, Inc., 443 So. 2d 285 (Fla. 2d DCA 1983); Fernandez v. Haber
& Ganguzza, LLP, 30 So. 3d 644 (Fla. 3rd DCA 2010).
factual contexts, it is not.
In other
Atkinson v. Fundaro, 400 So. 2d
1324, 1326 (Fla. 4th DCA 1981) (“filing of the lis pendens was not
privileged since it was neither a proper notice of lis pendens nor
did it involve the property in litigation.”). In the current case,
the filing of the Notice of Lis Pends fell outside the Florida
litigation privilege.
The notice of lis pendens advising the
public of the appeal of the auction order did not relate to
property which would have been affected by a reversal of the
Auction Order.
The appeal related to the Settlement Agreement.
The Property was not at issue, and would not have been impacted,
except by future litigation asserting frivolous arguments.
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B. Waiver of Claim By Plaintiffs
Epic Aviation claims that plaintiffs have waived their claim
of slander of title by failing to pursue the statutory remedy of
asking the court to require the posting of a bond pursuant to Fla.
Stat.
§
48.23(3).
(Doc.
#68,
Second
Affirmative
Defense).
Florida does not require that a plaintiff request a bond as a precondition for bringing a slander of title suit, and the evidence
amply establishes that plaintiffs did not waive their right to
bring suit.
C. Election of Remedies
Epic Aviation asserts that plaintiffs cannot bring a claim
for slander of title because they elected to file a motion to
dissolve the lis pendens but failed to seek the posting of a
statutory bond pursuant to Fla. Stat. § 48.23(3).
Epic Aviation
asserts that damages are not available in the absence of a bond.
(Doc. #68, Third Affirmative Defense.)
argument.
The Court rejects this
Florida law does not condition a slander of title suit
on seeking or obtaining a bond.
Accordingly, it is hereby
ORDERED:
1. Count II of the Third Amended Complaint is dismissed with
prejudice.
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2. As to Count I of the Third Amended Complaint, pursuant to
a bench trial, judgment is entered in favor of Bonita B.
Phillips and Jeffrey S. Phillips and against Epic Aviation,
LLC, an Oregon corporation, in the amount of $194,830.38
for consequential damages plus $47,147.50 for attorney
fees, for a total of $241,977.88.
Judgment shall enter
accordingly.
3. The Clerk shall close the case.
DONE and ORDERED at Fort Myers, Florida, this
of January, 2017.
Copies:
Counsel of Record
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18th
day
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