Adr1assist, LLC v. Lima One Capital, LLC

Filing 29

OPINION AND ORDER granting in part and denying in part 21 Motion to Dismiss for Failure to State a Claim. Adr1assist's claims for breach of the HUD-1 disbursement date, for breach of the implied covenant of good faith and fair dealing, and for violating O.C.G.A. § 44-14-13 are DISMISSED WITHOUT PREJUDICE. Adr1assist may proceed with its claim that Lima One failed to deliver the loan proceeds within a reasonable time. Signed by Judge Steven D. Grimberg on 01/10/2022. (jkb)

Case 1:20-cv-05184-SDG Document 29 Filed 01/10/22 Page 1 of 17

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ADR1ASSIST, LLC,
Plaintiff,
v.
LIMA ONE CAPITAL, LLC,

Civil Action No.
1:20-cv-05184-SDG

Defendant.
OPINION AND ORDER
This matter is before the Court on Defendant Lima One Capital, LLC’s (Lima
One) motion to dismiss [ECF 21]. After careful consideration of the parties’
briefing, the Court GRANTS IN PART and DENIES IN PART Lima One’s
motion.
I.

BACKGROUND
The Court accepts the following well-pled allegations as true for purposes

of this Order.1 Plaintiff Adr1assist, LLC (Adr1assist), on behalf of itself and others
similarly situated, brings claims against Lima One for delaying delivery of loan
funds and charging interest on the funds prior to delivery.2 Adr1assist alleges that

1

Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1274 n.1 (11th Cir. 1999) (“At the
motion to dismiss stage, all well-pleaded facts are accepted as true, and the
reasonable inferences therefrom are construed in the light most favorable to
the plaintiff.”).

2

ECF 15, at ¶¶ 1, 10–12, 14.

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it entered into an Interest Only Balloon Note (the Note) with Lima One on Friday,
December 23, 2016, but did not receive the loan funds until the following Tuesday,
December 27, 2016.3 Despite this delay, Lima One began charging interest on the
loan on December 23.4 Adr1assist claims that by delaying delivery of the funds for
four days, Lima One breached the loan agreement,5 breached the implied covenant
of good faith and fair dealing,6 and violated O.C.G.A. § 44-14-13.7
Lima One has moved to dismiss Adr1assist’s Amended Complaint for
failure to state a claim upon which relief can be granted.8 Adr1assist filed a
response in opposition to Lima One’s motion,9 to which Lima One replied.10 Lima
One’s motion is fully briefed and ripe for consideration.11

3

Id. ¶¶ 10–12.

4

Id. ¶ 13.

5

Id. ¶¶ 25–34.

6

Id. ¶¶ 35–45.

7

Id. ¶¶ 46–51.

8

ECF 21.

9

ECF 26.

10

ECF 27.

11

On December 16, 2021, in response to the Court’s Order to show cause,
Adr1assist demonstrated the citizenship of each named party so that the Court
could evaluate diversity. After review of Adr1assist’s response, the Court finds
that it has subject matter jurisdiction over this action under 28 U.S.C. §
1332(d)(2).

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II.

LEGAL STANDARD
To withstand a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), a complaint must “contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Am. Dental Ass’n v. Cigna Corp.,
605 F.3d 1283, 1289 (11th Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). A complaint is plausible on its face when a plaintiff pleads sufficient
factual content for the court to draw the reasonable inference that the defendant is
liable for the conduct alleged. Id. “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a
defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
A complaint must also present sufficient facts to “‘raise a reasonable
expectation that discovery will reveal evidence’ of the claim.” Am. Dental Ass’n,
605 F.3d at 1289 (quoting Twombly, 550 U.S. at 556). At the motion to dismiss stage,
“all well-pleaded facts are accepted as true, and the reasonable inferences
therefrom are construed in the light most favorable to the plaintiff.” FindWhat Inv’r
Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011) (quoting Garfield v. NDC
Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006)). This principle, however, does
not apply to legal conclusions. Iqbal, 556 U.S. at 678.

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III.

DISCUSSION
A.

Documents Considered on a Motion to Dismiss

The parties dispute what documents the Court can consider in ruling on
Lima One’s motion. Lima One’s motion cites the Amended Complaint and the
exhibits thereto, including the Note and the HUD-1 settlement statement.12
Adr1assist attached to its response a declaration and several documents related to
the loan.13 Lima One objects to the Court’s consideration of these documents,
arguing that the Court is limited to the facts contained in the pleadings and
attached exhibits and that Adr1assist seeks to amend its pleading through its
opposition brief.14 The Court agrees with Lima One.
On a motion to dismiss, the Court is limited to the facts contained in the
complaint and any exhibits attached thereto. Griffin Indus., Inc. v. Irvin, 496 F.3d
1189, 1199 (11th Cir. 2007). Generally, if the Court considers materials outside of
the complaint on a motion to dismiss it must convert the motion into one for
summary judgment. Fed. R. Civ. P. 12(d); Day v. Taylor, 400 F.3d 1272, 1275–76
(11th Cir. 2005). The Court can consider documents attached to a motion to dismiss

12

ECF 15-1 and ECF 15-2.

13

ECF 26–1; ECF 26-2; ECF 26-3; ECF 26-4; ECF 26-5.

14

ECF 27, at 8–12.

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without conversion if the documents are (1) central to the plaintiff’s claim; and (2)
undisputed. Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002); Hi-Tech Pharm.,
Inc. v. HBS Int’l Corp., 910 F.3d 1186, 1189 (11th Cir. 2018) (“Under the doctrine of
incorporation by reference, we may also consider documents attached to the
motion to dismiss if they are referred to in the complaint, central to the plaintiff’s
claim, and of undisputed authenticity.”).
The Court may not, however, consider new documents that are attached to
a response in opposition to a motion to dismiss, particularly when the documents
or their substance are not referenced in the complaint. Pulmonary Assocs. of
Charleston PLLC v. Greenway Health, LLC, 508 F. Supp. 3d 1268, 1274 (N.D. Ga. 2020)
(declining to consider documents attached to a response to a motion to dismiss).
Doing so would effectively allow the party to amend its pleading through its
response, which is improper. Jallali v. Nova Se. Univ., Inc., 486 F. App’x 765, 767
(11th Cir. 2012). Accordingly, the Court will limit its consideration to the Amended
Complaint and the two attachments to the Amended Complaint.
B.

Breach of Contract

Adr1assist alleges that Lima One breached the loan agreement by failing to
fund the loan on December 23, 2016 and by charging interest on the loan starting

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on December 23.15 Lima One moved to dismiss Adr1assist’s claim for breach of
contract because no provision in the Note required it to deliver funds on the
closing date and because Adr1assist agreed to the interest accruing on December
23. 16 Adr1assist responds that the HUD-1 settlement statement of the loan listed
the disbursement date as December 23, and that Lima One breached the “time is
of the essence” provision in the Note.17 With regard to the interest accrual date,
Adr1assist argues that the Note clearly states that interest is paid in return for “a
loan received,” and so interest must only accrue after delivery, and that Lima
One’s interpretation of the Note violates Georgia public policy.18
1.

The Settlement Statement (HUD-1)

Lima One is correct that the Amended Complaint fails to allege what
contract provision required Lima One to deliver the funds on December 23, 2016.
This alone is grounds for dismissal. Est. of Bass v. Regions Bank, Inc., 947 F.3d 1352,
1358 (11th Cir. 2020) (plaintiff failed to state a claim because it failed to “allege[ ]
any general or specific provision of any contract that [the defendant] might have

15

ECF 15, ¶ 28.

16

ECF 21-1, at 12–14.

17

ECF 26, at 15–16, 20–21.

18

Id. at 18–20, 23–25.

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breached”). Adr1assist now argues that the HUD-1 settlement statement, a
government required disclosure form reflecting details of the loan, states that the
disbursement date was December 23, 2016, and that this is enforceable.19
The Court is not persuaded that Lima One is contractually bound by the
disbursement date listed on the HUD-1 settlement statement, which appears to be
for informational purposes, is not referenced in the Note, contains no promises,
and does not appear to be assented to by either party. O.C.G.A. § 13-3-1 (describing
the essentials of a contract under Georgia law); see Villanueva v. First Am. Title Ins.
Co., 313 Ga. App. 164, 166 (2011) (declining to decide whether HUD-1 settlement
statements were part of the contract but citing authority questioning or rejecting
this proposition). In fact, in arguing that blanks on the HUD-1 form cannot
evidence the nature of the loan, Adr1assist recognizes that the form is not part of
and cannot contradict the loan agreement.20 At most, the HUD-1 settlement
statement constitutes parol evidence of the parties’ intent, which the Court cannot
consider unless the written agreement is ambiguous. Moore v. Lovein Funeral Home,
Inc., 358 Ga. App. 10, 13 (2020).

19

Id. at 15.

20

Id. at 13–14.

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The cases cited by Adr1assist in support of its position are distinguishable.
In Primary Capital Advisors, LC v. My Title Professionals, Inc., the parties did not
dispute whether distributing the loan proceeds “in the manner set forth on the
final HUD-1 Settlement Agreement” was a breach of contract, and so the court did
not address the issue. No. 1:10-CV-02745-JOF, 2012 WL 13001930, at *5 (N.D. Ga.
May 8, 2012). Similarly, in Golden v. Ameriquest Mortgage Co., the defendant did not
dispute that it entered into a contract with the plaintiff that contained the same
disbursement terms as the HUD-1 form. No. 406CV036, 2006 WL 8434067, at *4–5
(S.D. Ga. July 19, 2006). Thus, the court did not decide whether the HUD-1 form
itself was a contract. Id.
As the disbursement date listed on the HUD-1 form is neither an enforceable
agreement on its own nor a term of the loan agreement, Adr1assist has failed to
state a claim that Lima One breached an express provision of its contract with
Adr1assist by delivering the funds on December 27 as opposed to December 23.
2.

The “Time is of the Essence” Provision

Adr1assist also argues that Lima One breached the “time is of the essence”
provision of the contract by delaying delivery of the loan proceeds for four days

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after the Note was executed.21 Lima One claims that delivering the funds on
Tuesday, December 27 was reasonable because the funds were delivered the first
business day after the closing.22
“When a contract is missing a term indicating the time for performance, a
reasonable time for performance will be implied. This is so even if the contract has
a time-is-of-the-essence provision. . . . Generally, what is reasonable time is a
question of fact for the jury.” IH Riverdale, LLC v. McChesney Cap. Partners, LLC, 280
Ga. App. 9, 13–14 (2006) (citations omitted). Here, the Note is silent on the date for
delivery of the loan proceeds, and therefore Lima One’s delivery on December 27
must have been reasonable under the circumstances in order to avoid breaching
the contract. The Court cannot decide as a matter of law that the delay in delivery
was reasonable, particularly given the Georgia legislature’s expressed interest, at
least for purchase money and refinance loans, in having lenders deliver funds on
or before closing, O.C.G.A. § 14-4-13(d), and that Lima One charged interest on the
loan before delivery. Adr1assist has therefore stated a claim for breach of contract
related to the time of performance.

21

Id. at 20.

22

ECF 21-1, at 20–21.

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3.

Georgia Law on Interest Accrual

Lime One moved to dismiss Adr1assist’s breach of contract claim related to
interest accrual because the Note provides that interest would start to accrue on
December 23, 2016.23 Adr1assist responds that, under the terms of the Note and
Georgia law, interest could not accrue on the loan until after the proceeds were
delivered.24 Adr1assist also argues, generally, that allowing interest to accrue prior
to delivery of the loan proceeds violates Georgia public policy. The Court
interprets this latter point as an argument that, to the extent the Note does require
accrual of interest prior to delivery, that provision is void.25
Adr1assist cites the provision in the Note that states “[i]n return for a loan
received, Adr1assist LLC . . . promises to pay [the principal] in United States
Dollars, plus Interest (as defined below).”26 The Note later defines interest as
“accru[ing] daily from and after the date hereof on the unpaid Principal.”27 The
Court must construe the two provisions harmoniously. Arnsdorff v. Papermill Plaza,
LLC, 326 Ga. App. 438, 440 (2014) (“The court must consider the contract as a

23

ECF 21-1, at 22.

24

ECF 26, at 16–20.

25

Id. at 23.

26

ECF 15, at 12 (Section 1).

27

Id. (Section 2).

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whole, give effect to each provision, and interpret each provision to harmonize
with each other.”) (citation and punctuation omitted). Adr1assist argues that
because it promised to pay interest “in return for a loan received” its interest
obligation was not triggered until the loan was actually received.28 However,
Adr1assist expressly promised, in exchange for the loan, that it would pay the
principal and interest as defined in the Note.29 The Note defined interest to “accrue
daily from and after the date hereof.”30 “The date hereof” was December 23, 2016.31
Under these terms, even if Adr1assist’s obligation to pay was not triggered until
delivery of the loan proceeds, it agreed to pay the interest as defined by the Note,
which started accruing on December 23, 2016.
The Court is similarly unpersuaded by Adr1assist’s argument that the
agreement for interest to accrue on December 23, 2016 is unenforceable as a matter
of law. Adr1assist cites several cases in which a loan was found to be usurious
because the lender calculated interest on amounts not actually borrowed. Bank of
Lumpkin v. Farmers’ State Bank, 161 Ga. 801 (1926) (loan was usurious for charging

28

ECF 26, at 16.

29

ECF 15, at 12 (Section 1).

30

Id. (Section 2).

31

Id.

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interest on amount kept with lender on deposit); Williams v. Powell, 214 Ga. App.
216, 218 (1994) (calculating interest on fictitious amount was usurious); Price v.
Guardian Mortg. Corp., 137 Ga. App. 519, 520 (1976) (note with acceleration
provision requiring payment of unearned interest could be usurious). These cases
are inapplicable because Adr1assist has not alleged that the loan was usurious and
because the entire loan amount on which the interest was calculated was intended
to be, and in fact was, paid to Adr1assist as a lump sum.
By the express terms of the Note, the parties intended for interest on the
principal of the loan to accrue on the date the Note was executed and, therefore,
Adr1assist fails to state a claim that Lima One breached its contract with
Adr1assist by calculating interest beginning on that date.
4.

Other Contract Claims

Adr1assist also attempts to assert two new breach of contract claims in its
opposition brief. First, Adr1assist claims that Lima One breached Section 3(A) of
the Note by failing to apply prepayments either to the principal or accrued
interest.32 It also claims that Lima One is actively violating its ongoing contractual
duty, under Section 5 of the Note, to refund unlawful charges.33 The Eleventh

32

ECF 26, at 21–22.

33

Id. at 22.

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Circuit has “repeatedly [ ] held that plaintiffs cannot amend their complaint
through a response to a motion to dismiss.” Burgess v. Religious Tech. Ctr., Inc., 600
F. App’x 657, 665 (11th Cir. 2015). As neither of these claims was asserted in the
Amended Complaint, the Court will not consider them.
5.

Breach of Implied Covenant of Good Faith and Fair Dealing

Lima One has moved to dismiss Adr1assist’s claim for breach of the implied
covenant of good faith and fair dealing, arguing that Adr1assist has not adequately
pled breach of an express term of the contract, which is required to state a claim
for breach of the implied covenant.34 Adr1assist argues in response that Georgia
courts permit independent claims for breaches of the implied covenant of good
faith and fair dealing.35
Adr1assist is incorrect. Under Georgia law, though “[e]very contract implies
a covenant of good faith and fair dealing in the contract’s performance and
enforcement,” this covenant “is not an independent contract term.” Centennial
Vill., LLC v. Fulton Cnty. Sch. Dist., 369 Ga. App. 616, 616 (2021) (citations omitted).
The implied covenant “modifies the meaning of all explicit terms in a contract,
preventing a breach of those explicit terms de facto when performance is

34

ECF 21-1, at 23.

35

ECF 26, at 26–29.

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maintained de jure.” Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1429
(11th Cir. 1990). In other words, the “implied promise becomes a part of the
provisions of the contract, but the covenant cannot be breached apart from the
contract provisions that it modifies and therefore cannot provide an independent
basis for liability.” Tims v. LGE Cmty. Credit Union, 935 F.3d 1228, 1243 (11th Cir.
2019) (citations and punctuation omitted). Accordingly, “[a] plaintiff ‘must set
forth facts showing a breach of an actual term of an agreement’ to state a claim for
breach of the implied duty of good faith and fair dealing.” Id. (citations omitted).
As the Court has found that Adr1assist failed to adequately allege that Lima
One breached an express provision of the contract, its claim for breach of the
implied covenant of good faith and fair dealing claim also fails. This is true despite
the Court’s ruling that Adr1assist stated a claim for breach of contract related to
the reasonable time for performance, which, like the implied covenant of good
faith and fair dealing, is an implied duty. Georgia law requires an alleged breach
of an actual, express contract term to state a claim for breach of the implied duty
of good faith, which Adr1assist has not done.
C.

O.C.G.A. § 44-14-13

Finally, Lima One moved to dismiss Adr1assist’s claim under O.C.G.A. § 4414-13 because Adr1assist did not allege that the loan was a purchase money loan

Case 1:20-cv-05184-SDG Document 29 Filed 01/10/22 Page 15 of 17

or a refinance loan.36 Adr1assist asserts that the loan at issue is a refinance loan,37
though it also suggests that the terms of the loan agreement apply to either a
purchase money loan or a refinancing loan.38 The loan cannot be both, and so the
Court will limit its consideration to whether the Amended Complaint adequately
alleges that the loan was a refinance loan.
O.C.G.A. § 44-14-13(d) requires lenders to deliver loan funds to the
settlement agent “at or before the loan closing.” This requirement only applies to
“purchase money loans made by a lender, or refinance loans made by the current
or a new lender,” which are secured by deeds or mortgages. O.C.G.A. § 44-1413(b). Neither type of loan is defined by the statute. But the meaning of “refinance
loan” is plain. It refers to exchanging “an old debt for a new debt.” Refinancing,
BLACK’S LAW DICTIONARY (11th ed. 2019).
Nothing in the Amended Complaint or the attached exhibits present facts
that, if accepted as true, would support a finding that the loan is a refinancing loan.
The Amended Complaint refers to the loan only as an “Interest Only Balloon

36

ECF 21-1, at 13–20.

37

ECF 26, at 11–13.

38

Id. at 12–13.

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Note,”39 and though the Note refers to a certain secured property, nothing in the
Note refers to the loan at issue being a refinancing loan. Further, Lima One is
correct that the settlement statement fails to reflect that Adr1assist had an existing
loan that it intended to refinance.40 Adr1assist’s argument relies on the documents
attached to its response in opposition,41 which the Court has excluded from its
consideration. The Amended Complaint therefore fails to allege that the loan at
issue was either a purchase money loan or a refinance loan, and Adr1assist’s claim
for violation of O.C.G.A. § 44-14-13 must be dismissed.

39

ECF 15, ¶ 7.

40

ECF 15, at 18 (lines 503, 504, and 505).

41

ECF 26, at 12–13.

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IV.

CONCLUSION
Lima One’s motion to dismiss [ECF 21] is GRANTED IN PART and

DENIED IN PART. Adr1assist’s claims for breach of the HUD-1 disbursement
date, for breach of the implied covenant of good faith and fair dealing, and for
violating O.C.G.A. § 44-14-13 are DISMISSED WITHOUT PREJUDICE.
Adr1assist may proceed with its claim that Lima One failed to deliver the loan
proceeds within a reasonable time.
SO ORDERED this 10th day of January, 2022.

Steven D. Grimberg
United States District Court Judge