Corso Properties, LLC et al v. Branch Banking and Trust Company
Filing
14
ORDER AND ORDER granting defendant's unopposed 12 Motion to Dismiss and denying as moot defendant's first 2 Motion to Dismiss. Signed by Judge Julie E. Carnes on 9/25/13. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
CORSO PROPERTIES, LLC, and NDWC
INVESTMENT PROPERTY, INC.,
Plaintiffs,
CIVIL ACTION NO.
v.
1:12-cv-3128-JEC
BRANCH BANKING AND TRUST
COMPANY,
Defendant.
ORDER & OPINION
This matter is presently before the Court on defendant’s motion
to dismiss plaintiffs’ first amended complaint (“Def.’s Mot. To
Dismiss”) [12].1
The Court has reviewed the record and the arguments
of the parties and, for the reasons set out below, concludes that
defendant’s motion to dismiss plaintiffs’ first amended complaint
[12] should be GRANTED.
1
Also before the Court is the defendant’s previous motion to
dismiss [2].
However, with their response to that first motion,
plaintiffs amended their complaint. Subsequently, defendant moved to
dismiss this amended complaint.
(Def.’s Mot. to Dismiss [12].)
Therefore, the defendant’s first motion to dismiss [2] is DENIED as
moot.
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BACKGROUND
This
case
arises
out
of
allegedly
duplicitous
conduct
by
defendant Branch Banking and Trust (“BB&T”) during negotiations of
loan agreements with plaintiff NDWC Investment Properties (“NDWC”)
and subsequent loan assumption and modification agreements with
plaintiff Corso Properties (“Corso”).
Plaintiffs do not deny their
obligation to pay under the explicit terms of the promissory notes or
that the notes have matured.
(See Notes, attached as Exs. A & C to
Def.’s Mot. to Dismiss [12], and Assumption Agreements, attached as
Exs. E & F to Def.’s Mot. to Dismiss [12].)
Instead, they assert
claims based on oral representations made by Michael Green, vice
president of BB&T’s commercial real estate division.
(Compl. [8] at
¶ 8.)
I.
PROCEDURAL HISTORY
Plaintiffs initially filed this action in the Superior Court of
Fulton County, alleging defendant breached Georgia’s implied covenant
of good faith and fair dealing, and that BB&T was guilty of fraud in
the inducement, as well as fraud in general.
Ex. A.)
(Not. of Removal [1] at
Defendant timely removed the action and, less than a week
later, filed its first motion to dismiss.
Dismiss [2].)
(Def.’s First Mot. to
This first motion to dismiss was based primarily on
plaintiffs’ failure to allege an independent breach of contract claim
and failure to plead their fraud claims with enough specificity.
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(Id. at 11 & 19.) In response, plaintiffs filed an amended complaint
with more specific factual allegations. (Pls.’ Resp. to Def.’s First
Mot. to Dismiss [9] at 1.)
defendant
breached
an
The amended complaint added a claim that
independent
oral
contract
made
with
the
plaintiffs, maintained the fraud in the inducement claim, but no
longer alleged generic fraud.
(Compl. [8] at 13.)
Defendant responded with a second motion, again arguing that
even this amended complaint failed to state a claim upon which relief
could
be
granted.
(Def.’s
Mot.
to
Dismiss
[12].)
Although
plaintiffs responded to defendant’s first motion to dismiss, they
filed no response to this second motion.
II.
FACTUAL BACKGROUND
The agreements at issue involve six (6) properties originally
owned by plaintiff NDWC in DeKalb County, Georgia.
(Pls.’ First Am.
Verified Compl. (“Compl.”) [8] at ¶ 6.) Before refinancing the loans
with BB&T, these properties were secured by fully amortized loans,
each with a thirty-year term.
(Id. at ¶ 13.)
During initial
negotiations, BB&T stated that it could offer the plaintiffs a lower
interest rate on all six of the properties that would also allow NDWC
to complete payment on the loans ten years earlier.
10.)
(Id. at ¶¶ 9-
However, the new loan agreement would only be for a five-year
term and NDWC expressed reservations about moving from thirty-year
fixed loans to a series of five-year loans.
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(Id. at ¶¶ 11-14.)
According to plaintiffs’ amended complaint, BB&T responded to
these concerns by “assur[ing] NDWC that BB&T would refinance the
remaining balance on the loans in four successive five (5) year terms
at the prevailing market interest rate until the total remaining
balance was paid.”
(Id. at ¶ 15.)
Plaintiffs claim that, based on
these oral representations by BB&T, NDWC obtained a loan from BB&T
for three of the properties in the principal amount of $355,000 in
May 2007.
(Compl. [8] at ¶ 18.)
One year later, NDWC obtained a
second loan with approximately the same maturity date for the
remaining three properties in the principal amount of $310,000. (Id.
at ¶¶ 20-21.)
In December 2009, NDWC transferred all of its interest in the
six properties to the newly-created Corso Properties. (Id. at ¶ 25.)
BB&T approved of the loan transfer but, prior to closing, informed
Corso that the term would only be for one year since Corso was a “new
company.”
(Id. at ¶ 29.)
The complaint then asserts that the
parties orally agreed if Corso satisfied certain conditions, such as
opening a business account with BB&T and making timely monthly
payments under the loan agreement for the one-year period, then BB&T
would refinance the remaining balance on the loans in successive
five-year terms.
(Compl. [8] at ¶ 30.)
Corso asserts they assumed
the loans and obligations based on this alleged oral contract and the
fact that BB&T repeated the same assurances that they had initially
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made to NDWC regarding funding successive short-term loans.
¶¶ 28 & 31.)
(Id. at
Corso claims that even though they satisfied all the
required conditions, BB&T refused to renew the loans after they
matured in December 2011.
(Id. at ¶¶ 31, 33 & 41.)
Based on these facts, plaintiffs assert three claims against
defendant: breach of the oral contract, breach of Georgia’s implied
covenant of good faith and fair dealing when making contracts, and
fraud in the inducement.
(Id. at 13-16.)
Defendant argues that,
even taking the factual allegations in the amended complaint as true,
plaintiffs fail to state a claim upon which relief can be granted.
(Def.’s Mot. to Dismiss [12].)
Defendant BB&T argues that the
Georgia statute of frauds expressly prohibits the oral contract that
plaintiffs allege to have been made.
(Id. at 11.)
Further, the
parol evidence rule bars the introduction of oral testimony to modify
the terms of the complete, written contract that was signed by the
parties.
(Id. at 13.)
Without this independent breach of contract,
defendant argues, there can be no claim that they violated a duty of
good faith and fair dealing.
(Id. at 16.)
Defendant also asserts several reasons for why the plaintiffs’
fraud in the inducement claim also fails as a matter of law.
First,
defendant argues that plaintiffs waived any claims against BB&T
through its affirmation of the loan documents. (Id. at 21.) Second,
defendant argues that, under Georgia law, parties are bound by
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written contracts unless fraud prevented them from reading the
contract.
(Def.’s Mot. to Dismiss [12] at 21.)
Finally, if all of
the plaintiffs’ claims fail, defendant argues that no damages are
justified and the case should be dismissed.
(Id. at 23.)
Although
plaintiffs responded to defendant’s first motion to dismiss and
contemporaneously
filed
an
amended
complaint
along
with
their
response, they have not filed any sort of response to defendant’s
motion to dismiss the amended complaint.
motion is deemed to be unopposed.
Accordingly, defendant’s
LR 7.1B, NDGa.
Even so, the Court
has taken the time to review and confirm the merits of defendant’s
grounds for dismissal.
DISCUSSION
I.
LEGAL STANDARD
A complaint should be dismissed under Rule 12(b)(6) only when
the facts, as alleged in the complaint, fail to state a “plausible”
claim for relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In
ruling on a motion to dismiss, the facts alleged in the complaint
must be accepted as true and must be construed in a light most
favorable to the plaintiff.
Quality Foods de Centro Am., S.A. v.
Latin Am. Agribusiness Dev. Corp., S.A., 711 F.2d 989, 994-95 (11th
Cir. 1983).
However, courts “are not bound to accept as true a legal
conclusion couched as a factual allegation” and a pleading that
offers “labels and conclusions” or “a formulaic recitation of the
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elements of a cause of action will not do.”
Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007).
II.
DEFENDANT’S MOTION TO DISMISS
Defendant moved to dismiss the plaintiffs’ complaint on the
ground that, even accepting the allegations as true, it fails to
state a claim upon which relief can be granted.
Dismiss [12].)
A.
(Def.’s Mot. to
As noted, plaintiffs have not responded.
Breach Of Oral Contract
Around the end of 2009, Corso Properties was created as a
limited liability company with the sole purpose of owning and
managing the six properties implicated in this action.
at ¶ 24.)
(Compl. [8]
Due to changes in NDWC’s ownership structure, BB&T and the
plaintiffs agreed to allow Corso to assume the loans obtained by
NDWC.
(Id. at ¶ 23.)
However, prior to closing, BB&T stated that
the initial loan term for Corso would only be for one year because
Corso was a newly-formed company.
(Id. at ¶ 29.)
The complaint
alleges that defendant BB&T orally agreed to refinance the balance
remaining on the loans at the end of the year if Corso fulfilled
certain obligations, but that BB&T subsequently failed to renew at
the end of the year even though Corso satisfied its obligations under
this oral agreement.
(Id. at ¶¶ 30 & 41.)
The Georgia statute of frauds requires that certain obligations
and contracts be made in writing to be enforceable, including “[a]ny
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commitment
to
lend
money.”
O.C.G.A.
§
13-5-30(7).
Although
plaintiffs provided no response to defendant’s motion, the Court is
aware that similarly-situated plaintiffs have unsuccessfully argued
that the Georgia statute of frauds should only apply to commitments
to lend “new” money, as opposed to oral promises to refinance an
existing debt.
See Stedry v. Summit Nat’l Bank, 227 Ga. Ap. 511,
514-15 (1998).
Georgia courts, however, have rejected this attempt
to “graft such an interpretation on O.C.G.A. § 13-5-30(7)’s clear and
unambiguous terms.”
Georgia
Id.
courts
have
also
previously
addressed
whether
an
agreement to renew a borrower’s mortgage fell under subsection 4 of
the statute, which requires that “[a]ny contract for sale of lands,
or
any
interest
in,
O.C.G.A. § 13-5-30(4).
or
concerning
lands”
also
be
in
writing.
Again, Georgia courts hold that the statute
of fraud indeed controls in this situation.
Allen v. Tucker Fed.
Bank, 236 Ga. App 245, 246 (1999). In Allen, plaintiffs alleged that
although the defendant bank had previously foreclosed on plaintiffs’
home, the bank later orally agreed to renew the mortgage.
245.
Id. at
The appellate court found that “any agreement by the [lender]
. . . to ‘reinstate or refinance’ the [] mortgage would be tantamount
to a transfer of an interest in real property subject to O.C.G.A. §
13-5-30(4).”
Id. at 246.
Plaintiffs here similarly allege that the defendant bank orally
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promised to renew and refinance the loan agreements at the end of the
Corso’s first term (Compl. [8] at ¶ 30), but that instead BB&T
foreclosed on the properties.
(Id. at ¶ 44.)
As explained above,
one or both cited subsections of the statute of frauds apply here,
meaning the alleged oral promise is unenforceable.
Therefore, even
if these promises were made by the bank, the plaintiffs’ claim here,
like the claim in Allen, “is untenable in the absence of a written
agreement.”
Id.
For these reasons, the Court concludes that the
plaintiffs’ claim for breach of an oral contract fails as a matter of
law.
B.
Breach Of Duty Of Good Faith And Fair Dealing
Plaintiffs also argue that defendant breached the implied duty
of good faith in performing its obligations under the oral contract.
(Compl. [8] at 14-16.)
However, “[u]nder Georgia law, the covenant
[of good faith and fair dealing] is not an independent contract
term.”
APA Excelsior III, L.P. v. Windley, 329 F. Supp. 2d 1329,
1365 (N.D. Ga. 2004(Story, J.)(quoting Alan’s of Atlanta, Inc. v.
Minolta
Corp.,
903
quotations omitted).
F.2d
1414,
1429
(11th
Cir.
1990)(internal
In APA Excelsior, plaintiffs similarly alleged
a breach of an explicit contractual duty as well as a breach of the
implied duty of good faith and fair dealing.
Id. at 1363.
However,
Judge Story found that the defendants did not breach any explicit
contractual duty and, for this reason, plaintiffs could not invoke
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the implied covenant of good faith and fair dealing as a separate
doctrine.
Id. at 1365.
In the Eleventh Circuit case cited by Judge Story, the appellate
court confronted the same issue.
In that case, Alan’s of Atlanta,
the circuit court rejected a party’s attempt to invoke the implied
covenant as an independent term in the contract.
903 F.2d at 1429.
specific
Alan’s of Atlanta,
Because an implied covenant must attach to a
contractual
term,
the
court
held
that
“it
is
not
an
undertaking that can be breached apart from those [explicit] terms.”
Id.
In this case, this Court has held that the statute of frauds
required
the
enforceable.
Id.
alleged
oral
contract
to
be
in
writing
to
be
There can be no breach of an unenforceable contract.
Further, plaintiffs do not allege that defendant breached any
explicit term in the promissory note or loan assumption agreements
between the parties. Thus, plaintiffs fail to allege any independent
breach of contract in which the implied duty of good faith and fair
dealing could have attached.
For this reason, plaintiffs’ claim of
a breach of the implied duty of good faith and fair dealing is not
viable, as a matter of law.
C.
Fraud In The Inducement
Plaintiffs’
final
claim
is
that,
through
the
“material
misstatements, false assurance and misrepresentation,” BB&T induced
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plaintiffs to consolidate and refinance the loans. (Compl. [8] at ¶¶
61 & 69.)
Specifically, plaintiffs assert that they relied on
defendant’s promises that the loan agreements would be renewed once
they matured.
(Id. at ¶¶ 15, 30 and 44.)
Defendant raises several
arguments for why, even accepting the complaint’s allegations as
true, this count should be dismissed.
defendant
that
Georgia
law
does
Because the Court agrees with
not
recognize
a
fraud
in
the
inducement claim under the facts as alleged by the plaintiffs,
(Def.’s Mot. to Dismiss [12] at 21), this claim must also be
dismissed under FED. R. CIV. P. 12(b)(6).
The
plaintiffs,
however,
do
not
argue
for
a
contract
modification, but instead seek damages under a theory that they were
fraudulently induced to sign the contract.
The Court agrees with
defendant that, absent a showing of a fraud that prevented plaintiffs
from reading the new agreement, which agreement clearly set out the
terms, plaintiffs cannot prevail on a theory that defendant’s oral
representations fraudulently induced plaintiffs’ written agreement.
The Georgia Court of Appeals has held:
Parties to a contract are presumed to have read their
provisions and to have understood the contents. One who
can read, must read, for he is bound by his contracts.
While a legal excuse, such as fraud, may be shown for
failing to read, the fraud must prevent the party from
reading the contract.
Wyatt v. Hertz Claim Mgmt. Corp., 236 Ga. App. 292 (1999)(internal
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quotations and citations omitted)(emphasis added).
In the present case, plaintiffs admit signing the notes, whose
explicit terms showed a maturity date of December 2011.
at ¶ 33.)
(Compl. [8]
Plaintiffs make no claim that the fraud perpetrated
prevented them from reading the contract.
See McLemore v. S.W.
Georgia Farm Credit, ACA., 230 Ga. App. 85, 88 (1998)(the only fraud
that relieves a party of its duties under a written contract is a
fraud which prevents them from ready the contract).
In short,
plaintiffs’ fraud in the inducement claim also fails.
CONCLUSION
For the above reasons, the Court finds all three of plaintiffs’
claims to be lacking and thus, GRANTS defendant’s unopposed motion to
dismiss [12] and DENIES as moot defendant’s first motion to dismiss
[2].
SO ORDERED, this 25th day of September, 2013.
/s/ Julie E. Carnes
JULIE E. CARNES
CHIEF UNITED STATES DISTRICT JUDGE
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