Jeanes-Kemp, LLC v. Johnson Controls, Inc. et al

Filing 323

ORDER finding as moot 227 Motion for Summary Judgment; finding as moot 229 Motion for Partial Summary Judgment; finding as moot 243 Motion to Strike ; finding as moot 243 Motion for Sanctions; finding as moot 266 Motion for Leave to File; f inding as moot 270 Motion in Limine; finding as moot 272 Motion in Limine; finding as moot 274 Motion in Limine; finding as moot 276 Motion in Limine; finding as moot 278 Motion in Limine Signed by Honorable David C. Bramlette, III on 2/24/2012 (ECW)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
JEANES-KEMP, LLC

PLAINTIFF

VS.

CIVIL ACTION NO. 1:09-cv-723(DCB)(JMR)

JOHNSON CONTROLS, INC.

DEFENDANT

MEMORANDUM OPINION AND ORDER
This cause is before the Court on the Amended Complaint for
Declaratory Judgment, Removal of Clouds on Title and Damages filed
by Jeanes-Kemp, LLC, and on the defendant Johnson Controls, Inc.’s
Answer to the Amended Complaint.

The case was reassigned to the

undersigned judge on August 18, 2011.

A Pretrial Order was filed

on September 9, 2011, and a bench trial on the Amended Complaint
and Answer, as further amended by the Pretrial Order, was held on
September 19-21, 2011. During the three day trial, the Court heard
live testimony from nine witnesses and viewed excerpts from the
videotaped deposition of Stephen Planchard.

By agreement of the

parties, additional deposition testimony by Steven Christensen,
Michael Lindsey, Henry Martinez, Hugh Nungusser, Don Ogden, Stephen
Planchard and John Sposato, Sr., was received into evidence by the
Court in lieu of live testimony.

Having considered the testimony,

the pleadings, all matters presented at trial, and all matters
subsequently submitted, the Court now makes its findings of fact
and conclusions of law in accordance with Federal Rule of Civil
Procedure 52(a)(1).

FINDINGS OF FACT
Jeanes-Kemp owned, in fee simple, a certain parcel of land
located in Pass Christian, Mississippi.

On July 16, 2007, Jeanes-

Kemp conveyed the property to Harbor Town Development Group, LLC
(“Harbor Town”).

In securing the property, Harbor Town executed a

promissory note for $2.72 million, the balance of the purchase
price, in favor of Jeanes-Kemp.

The note was secured by a first

deed of trust held for the benefit of Jeanes-Kemp.

The promissory

note and deed of trust were recorded on August 8, 2007.

The note

and deed of trust required Harbor Town to pay the principal balance
in 18 months and required interest to be paid on the outstanding
principal every 90 days.
Harbor Town was owned by Stephen Planchard, Louie Negrotto,
and David, Jerome and Michael Sachs.

Harbor Town planned to

develop the property as a planned community of town homes and
retail

spaces.

Mr.

Planchard

and

Mr.

Negrotto

experience in real estate development on this scale.
contemplated

six

low-rise,

multi-floor

mixed-use

had

little

The project
buildings,

including first floor retail shops and condominiums on the upper
floors.

Mr. Planchard had convinced the Sachs family, prominent

New York real estate investors, to provide the financing since
neither Planchard nor Negrotto had the requisite resources.

The

Sachs family insisted that Johnson Controls be brought in to act as
2

construction manager for the project.
On February 22, 2008, Johnson Controls entered into a contract
with Harbor Town to serve as construction manager of the Harbor
Town project.

Harbor Town and Johnson Controls then contracted

with GM&R Construction Company, Inc., and Preferred Systems, Inc.,
to provide certain services and/or materials for the project. GM&R
was

hired

to

perform

foundation

and

Preferred was to supply the steel.

structural

steel

work.

As construction manager,

Johnson Controls was responsible for overall supervision of the
project, and stationed personnel on-site during construction.
After Harbor Town began construction of the development, the
Sachs family backed out. On October 17, 2008, Harbor Town provided
notice to Johnson Controls that Harbor Town was exercising its
right to immediately terminate for convenience its contract with
Johnson Controls. Harbor Town instructed Johnson Controls to cease
all

operations

and

to

terminate

subcontracts for the project.

all

purchase

orders

and

At the time construction stopped,

foundation work had been completed and a substantial steel frame
had been erected.
On October 22, 2008, GM&R filed a notice of construction lien
on the property in the amount of $580,980.00.

Preferred Systems

also filed a notice of construction lien, on November 18, 2008, in
the

amount

of

$457,854.79,

for
3

furnishing

structural

steel,

miscellaneous steel, roof and floor deck, anchor bolts, base
plates, stairs and miscellaneous materials.
Harbor Town had also become delinquent in its payments to
Jeanes-Kemp.

In November of 2008, Jeanes-Kemp began foreclosure

proceedings and set November 21, 2008, as the date of foreclosure
sale, properly posting the foreclosure notice and publishing it in
the local paper. However, Planchard and Negrotto convinced JeanesKemp to postpone foreclosure while they attempted to acquire
financing.
When Harbor Town instructed Johnson Controls to stop work on
the project, Johnson Controls was owed $982,257.58 under the
contract for its services. This amount had been invoiced to Harbor
Town; however, as of the date of trial none of the money owed by
Harbor Town had been paid. Johnson Controls’ invoices were made up
of five components: (1) Project Management, (2) Site Supervision,
(3) Support, (4) General Conditions, and (5) Overhead and Profit on
the amounts earned.

These invoices were based upon the terms of

Johnson Controls’ contract with Harbor Town, which required Johnson
Controls to provide general materials and equipment for support of
the construction site.

These included a trailer, internet access,

dumpsters, portable bathroom facilities, utilities, and additional
support for both the site and management of the project, all of
which was invested at the beginning of the project.
4

In addition,

Johnson Controls had one individual on the site full-time and two
part-time.

Although Johnson Controls’ work was largely front-

loaded, and it had expended considerable effort before the project
even began, the payments were spaced evenly over the projected
completion time of the project.

In the event the project should

take longer, there was no guarantee of additional compensation to
Johnson Controls.

In the event Harbor Town elected to terminate

the contract for convenience and not cause, Johnson Controls was
entitled to a contractual termination fee.
Johnson Controls verified the amount owed on its invoices,
then turned the matter over to the Construction Services Group at
NCS Credit, which holds itself out as “the construction credit
industry’s national leader in the filing and notices of liens in
the U.S. and Canada.”

NCS advertised that its clients need only

supply “basic project information,” and NCS is responsible to
“evaluate it, assess furnishing dates and retain legal counsel
local to your project.”

In this case, NCS retained Alabama

attorney Michael Lindsey on Johnson Controls’ behalf.
received

the

information

provided

by

Johnson

Mr. Lindsey

Controls

and

determined that it was appropriate to prepare and file a lien in
the amount of $982,257.58.

Mr. Lindsey prepared and forwarded the

lien to NCS for signing by Johnson Controls.
executed the lien on December 4, 2008.
5

Johnson Controls

On December 18, 2008, the

lien was filed and recorded in the Construction Lien Book of the
Chancery

Clerk’s

Office,

First

Judicial

District

of

Harrison

County.
Harbor Town eventually secured some financing from Phoenix
Financial Group, Inc.

As security for this funding, Phoenix

received a deed of trust from Harbor Town in the amount of
$750,000, which was filed as a second deed of trust and recorded
with the Chancery Clerk’s Office on March 2, 2009.
Harbor Town was unable to obtain other financing, and failed
to make timely interest payments to Jeanes-Kemp.

On March 16,

2009, Jeanes-Kemp’s counsel declared Harbor Town in default and
demanded immediate payment of all principal and interest.

Jeanes-

Kemp’s counsel, Otis Johnson, Jr., commissioned a title examination
of the property that apparently overlooked Johnson Controls’ lien.
As a result, Jeanes-Kemp failed to notify Johnson Controls of its
intent to foreclose, although it did notify other lien-holders.
Jeanes-Kemp duly published the Trustee’s Notice of Sale announcing
Jeanes-Kemp’s intent to foreclose on the property and sell it on
April 22, 2009.
for $1.8 million.

At the sale, Jeanes-Kemp purchased the property
The trustee executed a Trustee’s Deed in favor

of Jeanes-Kemp.
On June 15, 2009, Jeanes-Kemp entered into a Contract of
Purchase and Sale of the property with an entity named Harbor
6

Vieux, which was set up by Stephen Planchard, one of the owners of
Harbor Town.

Mr. Planchard paid $27,720.00 from his own funds as

earnest money. The contract set a purchase price of $2.72 million,
with $1.9 million to be paid at the closing on July 16, 2009.
On July 22, 2009, Harbor Vieux’s attorney, Eric Wooten, sent
a letter to Michael Lindsey, who had filed Johnson Controls’ lien,
asking Johnson Controls to release the lien.

On July 27, 2009,

Amie

responded

LaBahn,

counsel

for

Johnson

Controls,

to

Mr.

Wooten’s letter and declined to execute a release, based on her
experience in other jurisdictions that require actual notice to all
lienholders for a foreclosure to be valid.

In response to Ms.

LaBahn’s letter, Otis Johnson, on behalf of Jeanes-Kemp, wrote to
Ms. LaBahn and Mr. Lindsey on July 29, 2009, informing them that
while it is customary to provide notice, Mississippi law does not
require notice to junior lienholders for the foreclosure to be
effective.

Otis Johnson again asked Johnson Controls to release

its lien.

He stated that Jeanes-Kemp was attempting to sell the

property, and that Johnson Controls’ construction lien constituted
a cloud on the title that could prevent a sale.

He informed

Johnson Controls that, under Mississippi law, its lien was cut off
as a result of the foreclosure.

He also stated that Jeanes-Kemp

had suffered damages as a result of the lien, and that if Johnson
Controls continued to claim a lien, “[i]t will be necessary for
7

Jeanes-Kemp, LLC, to institute suit to cancel any purported claim
to a construction lien and seek actual and punitive damages
together with all costs and attorney’s fees.”
On July 30, 2009, Rob Remington, another attorney for Johnson
Controls, responded to Otis Johnson’s letter, stating that his
client did not understand Jeanes-Kemp’s position that Johnson
Controls’ lien slandered Jeanes-Kemp’s title: “If any claim to a
lien was ‘cut off’ by the foreclosure (as your letter contends),
then a release seems unnecessary at this time.”

He also stated

that he was willing to discuss the matter with Otis Johnson.
On September 10, 2009, Otis Johnson, on behalf of Jeanes-Kemp,
wrote to Mr. Wooten, Harbor Vieux’s counsel, stating that the
purchase

contract

between

Jeanes-Kemp

and

Harbor

Vieux

had

terminated “as title objections could not be cured and resolved as
therein called for.”
On September 14, 2009, Jeanes-Kemp filed its Complaint for
Declaratory Judgment, Removal of Clouds on Title and Damages in the
Chancery Court of Harrison County, First Judicial District.

The

Complaint sought the following relief as to Johnson Controls: (1)
a judgment establishing that Johnson Controls’ lien was terminated
and extinguished by the foreclosure; (2) cancellation of Johnson
Controls’ lien as a cloud on the title of Jeanes-Kemp; (3) damages
in the amount of $2,720,000, together with interest “from July 24,
8

2009, the date the closing of the sale to Harbor Vieux Development
Group, LLC was to occur to the date of judgment together with all
costs,

expenses,

and

attorney’s

fees

incurred

by

Jeanes-Kemp

because of the loss of said sale”; (4) punitive damages, attorney’s
fees, costs, and general relief.

Following removal to this Court

on the basis of federal diversity of citizenship jurisdiction,
Johnson Controls filed an Answer on October 19,2009, admitting that
it had filed and not released a construction lien, but denying any
wrongdoing on its part. It also asserted that it was not obligated
to release a lien that had been extinguished through foreclosure.
The Complaint also included claims against Phoenix Financial
Group, Inc., and Perre Cabell, Trustee.
On February 23, 2010, Johnson Controls filed a Motion for
Judgment on the Pleadings. In support of its motion, the defendant
argued that the plaintiff’s claims are based on an alleged loss of
a sale of its property due to Johnson Controls’ unwillingness to
file a release of its construction lien, while as a matter of law
Jeanes-Kemp’s valid foreclosure of its first purchase money deed of
trust would have automatically extinguished all junior liens,
including the defendant’s construction lien.

In the alternative,

Johnson Controls moved for dismissal of Jeanes-Kemp’s claims for
punitive damages and attorney’s fees, on the basis that the
plaintiff cannot prove any malice by the defendant.
9

In response, Jeanes-Kemp contended that it “is entitled to
have a judicial determination as to whether the foreclosure of the
prior Deed of Trust cut off the construction lien and to have a
cloud on its title removed.”

In its brief, it maintained that

“Jeanes-Kemp had the absolute right to bring this suit even though
the [Johnson Controls] claim was void on its face as having been
cut off by the foreclosure.”

Jeanes-Kemp further asserted that

although Johnson Controls’ construction lien was extinguished by
the foreclosure as a matter of law, Johnson Controls’ attack on the
validity of the foreclosure created a cloud on Jeanes-Kemp’s title.
In its rebuttal brief, Johnson Controls acknowledged that JeanesKemp has the right to bring an action to quiet title, but not to
seek compensatory or punitive damages.
On April 23, 2010, Chief Judge Louis Guirola, Jr., issued an
Order

denying

Pleadings.

Johnson

Controls’

Motion

for

Judgment

on

the

The Order noted that Johnson Controls acknowledges

Jeanes-Kemp’s right to bring an action to quiet title.

As for the

plaintiff’s claims for punitive damages and attorney’s fees, the
Court found that Mississippi allows a cause of action for “slander
of title” against “‘[o]ne who falsely and maliciously publishes
matter

which

brings

in

question

or

disparages

the

title

to

property, thereby causing special damage to the owner’” (quoting
Walley v. Hunt, 54 So.2d 393, 396 (Miss. 1951)), that such an
10

action can and should be brought at the same time as an action to
quiet title, and that compensatory and punitive damages, as well as
attorney’s fees, are recoverable.
Although

Jeanes-Kemp

failed

to

expressly

state

in

its

Complaint that it was asserting a slander of title claim, the Court
found that under Fed.R.Civ.P. 8(a) the plaintiff sufficiently pled
facts that support and give notice of such a claim.
the

Complaint

alleges

that

Johnson

Specifically,

Controls

“‘without

justification, false[ly], malicious[ly], willful[ly], reckless[ly]’
and with ‘wanton disregard’ claims a lien on the property, and that
this

false

claim

to

a

lien

caused

Jeanes-Kemp

to

lose

the

contracted-for sale of its property for $2,720,000.” (quoting
Complaint,

¶¶

XIII-XIV).

Finally,

the

Court

observed

that

“[w]hether Jeanes-Kemp will be able to prove its allegations is not
pertinent to a motion for judgment on the pleadings.”
On

July

Complaint.
allegation

21,

2010,

Jeanes-Kemp

filed

its

First

Amended

Among other things, the Amended Complaint adds an
that

Johnson

Controls’

“wrongfully

filing

and/or

maintaining [its] lien despite the fact that it was aware its
alleged lien had been extinguished ... slanders the title of
Jeanes-Kemp.”

The Amended Complaint also seeks compensatory and

punitive damages allegedly resulting from slander of title.
As a result of amendments to Jeanes-Kemp’s allegations and
11

claims, the Amended Complaint seeks the following relief as to
Johnson

Controls:

(1)

a

judgment

establishing

that

Johnson

Controls’ lien was not valid and/or was terminated and extinguished
by the foreclosure; (2) cancellation of Johnson Controls’ lien as
a cloud on the title of Jeanes-Kemp; (3) damages in the amount of
$2,720,000, together with interest “from July 24, 2009, the date of
[sic] the closing of the sale to Harbor Vieux Development Group,
LLC was to occur, to the date of judgment together with all costs,
expenses, and attorney’s fees incurred by Jeanes-Kemp because of
the loss of said sale”; (4) judgment against Johnson Controls for
prejudgment interest “from September 14, 2009, the date of filing
of the original complaint, to the date of judgment with all costs,
expenses, and attorney’s fees incurred by Jeanes-Kemp because of
the loss of said sale”; (5) judgment against Johnson Controls
pursuant to Miss. Code Ann. § 85-7-201 in the amount of $982,287.58
for adversely affecting the rights of Jeanes-Kemp by filing and/or
maintaining

a

false

construction

lien;

(6)

punitive

damages,

attorney’s fees, costs, and general relief.
The Amended Complaint also included claims against Phoenix
Financial Group, Inc., and Perre Cabell, Trustee.
On August 9, 2010, Johnson Controls filed its Answer to the
Amended Complaint, again admitting that it had filed and not
released a construction lien, but denying any wrongdoing on its
12

part, and asserting that it was not obligated to release a lien
that had been extinguished through foreclosure.
Also on August 9, 2010, Johnson Controls filed a Motion to
Dismiss

for

Lack

of

Standing.

This

motion

challenges

the

plaintiff’s standing to bring any claims against the defendant for
slander of title and/or filing a false lien, with respect to the
initial filing of the lien, based on the fact that Jeanes-Kemp was
not the owner of the property at the time the lien was filed.

In

a response dated August 23, 2010, Jeanes-Kemp argues that it had
standing in that it owned an interest in the property at the time
Johnson Controls filed its construction lien. On November 1, 2010,
Judge Guirola took the motion under advisement, and on March 24,
2011, the motion was denied without prejudice, with the issues
raised therein to be decided at trial.
On

November

15,

2010,

an

Order

was

entered

dismissing

defendant Perre Cabell in his capacity as trustee of the deed of
trust in favor of Phoenix Financial Group.
On December 22, 2010, the plaintiff filed a Motion for Partial
Summary Judgment, seeking a declaration that Johnson Controls’ lien
is a cloud on the plaintiff’s title.

Jeanes-Kemp’s motion was

based on its assertion that it holds “perfect title” to the
property by virtue of its mortgage foreclosure, and that Johnson
Controls’ lien is invalid.

Jeanes-Kemp also sought an order
13

requiring Johnson Controls to remove its lien from the construction
lien records.

In a response dated January 7, 2011, Johnson

Controls asserted that its lien was extinguished by Jeanes-Kemp’s
foreclosure and therefore was not a real impediment to transferring
good title.

In addition, Johnson Controls contended that its lien

was extinguished by operation of law, pursuant to the one year
limitation period found at Miss. Code Ann. § 89-5-19 (after a
period of one year from its filing, a lien “shall cease and have no
effect”).

In rebuttal, Jeanes-Kemp argued that it was entitled to

have the lien removed as a cloud on title regardless of its
impotence to do harm to Jeanes-Kemp’s title.
On February 9, 2011, plaintiff Jeanes-Kemp and defendant
Phoenix Financial Group reached a settlement. On July 21, 2011, an
Order was entered dismissing all claims against Phoenix Financial
Group with prejudice.
On February 18, 2011, a Stipulated Order was entered.

The

Order reflects that Johnson Controls agreed to execute a release of
the lien “purely as an accommodation and courtesy to Jeanes-Kemp
and without admitting any legal obligation ever to have done so.”
In addition, the Order states that it “shall not prevent JeanesKemp from arguing that [Johnson Controls’] lien should have been
released at an earlier time, and shall not prevent Jeanes-Kemp from
presenting all of its claims with the understanding that [Johnson
14

Controls’] Release of its Lien shall not be considered an admission
of liability.”

As a result of the Stipulated Order, Jeanes-Kemp’s

Motion for Partial Summary Judgment was rendered moot.
On February 8, 2011, Johnson Controls filed a Motion for
Summary

Judgment.

In

its

motion,

the

defendant

makes

two

arguments: (1) A valid foreclosure extinguishes junior liens as a
matter of law; therefore, the junior lienholder is not obligated to
take further action to release its lien of record; and (2) JeanesKemp cannot prove the defendant’s lien (as opposed to a lack of
financing) caused the failure of the sale of the property to Harbor
Vieux, and cannot prove that the defendant acted maliciously.
Jeanes-Kemp’s response, filed February 21, 2011, argues that
Johnson Controls’ assertion of the validity of its lien following
foreclosure constituted slander of title, and that Jeanes-Kemp had
several witnesses prepared to testify that the Harbor Vieux sale
failed as a result of Johnson Controls’ lien.

Specifically, the

plaintiff cites John Sposato’s deposition testimony that (1) he had
the money to fund the sale, but chose not to do so because of both
the Johnson Controls lien and a misrepresentation by one of Harbor
Vieux’s principals, and (2) that he would have bought the property
directly from Jeanes-Kemp, outside of the Harbor Vieux deal, but
for the lien.
In

its

rebuttal,

filed

March
15

7,

2011,

Johnson

Controls

reasserts its position that a junior lienholder, whose lien is
extinguished following the foreclosure of a superior deed of trust,
is not obligated to cancel its lien of record.

It also asserts

that Jeanes-Kemp lacks standing and cannot otherwise show that it
has a claim under Miss. Code Ann. § 85-7-201.

As for the slander

of title claim, the defendant argues that the facts of this case do
not demonstrate malice on its part.

Further, it asserts that

discovery shows John Sposato did not have the money to fund the
purchase

of

the

property;

therefore,

the

element

of

special

damages, crucial to a claim for slander of title, is missing.
Johnson

Controls

filed

an

additional

Motion

for

Partial

Summary Judgment, on April 1, 2011, asserting that it did not file
its lien “falsely and knowingly” in violation of Miss. Code Ann. §
85-7-201, and did not “falsely and maliciously” file the lien so as
to constitute slander of title, relying in part on an advice of
counsel defense.

In its response of April 15, 2011, Jeanes-Kemp

challenges the defense on a number of grounds - first of all, that
Johnson Controls did not act in good faith, and that it did not
seek advice of counsel.

To the extent that any advice of counsel

was received, Jeanes-Kemp argues that Johnson Controls did not
fully disclose the relevant facts to its counsel, and that it did
not reasonably rely on advice of counsel.

Jeanes-Kemp also points

out that the ultimate issue is Johnson Controls’ good faith, and
16

advice of counsel is but one factor a fact finder may consider in
determining a defendant’s state of mind.
On April 29, 2011, Jeanes-Kemp filed a Motion to Strike
Defendant’s Advice of Counsel Defense, and for Sanctions.

As

grounds for its motion, the plaintiff claimed that Johnson Controls
had failed to respond to discovery requests on the issue, or had
belatedly responded, and had violated two court orders.

In its

response of May 13, 2011, Johnson Controls contended that the
plaintiff’s motion was itself untimely, since it was not filed by
the April 1, 2011, deadline.

The defendant also denied that it

violated any court orders, and asserted that it provided all
relevant material in discovery.
All motions not ruled on by the Court were explicitly or by
implication carried to trial, with all issues raised therein to be
decided either at trial or upon conclusion thereof
Additional findings of fact are made under the following
section, as they become pertinent to the issues of law.
CONCLUSIONS OF LAW
As an initial matter, the Court finds that the plaintiff’s
claims to quiet title and to remove a cloud on title became moot
upon the release of Johnson Controls’ lien following the February
18, 2011, Stipulated Order.

This leaves the plaintiff’s statutory

claim for the filing of a false lien and common law claim for
17

slander of title.
Mississippi’s false notice of lien statute provides:
Any person who shall falsely and knowingly file the
notice mentioned in Section 85-7-197 without just cause
shall forfeit to every party injured thereby the full
amount for which such claim was filed, to be recovered in
an action by any party so injured at any time within one
(1) year from such filing; and any person whose rights
may be adversely affected may apply, upon two (2) days’
notice, to the chancery court or to the chancellor in
vacation, or to the county court, if within its
jurisdiction, to expunge; whereupon proceedings with
reference thereto shall be forthwith had, and should it
be
found
that
the
claim
was
improperly
filed
rectification shall at once be made thereof.
Miss. Code Ann. § 85-7-201.

Mississippi’s false notice of lien

statute is a penal statute, “inasmuch as it ‘makes a wrong-doer
liable to the person wronged for a fixed sum without reference to
the

damage

Manderson

inflicted

v.

Ceco

by

Corp.,

the

commission

587

F.Supp.

of

445,

the
336

wrong....’”
(N.D.

Miss.

1984)(quoting State ex rel. Rogers v. Newton, 3 So.2d 816, 818
(Miss. 1941)).

“One seeking to recover under a penal statute must

bring his case clearly within the statute’s terms.”

Id. at 446-47

(citing W.T. Rawleigh Co. v. Hester, 200 So. 250, 253 (Miss. 1941);
70 C.J.S. Penalties § 15(e)(1)(1955)).

Thus, the plaintiff must

clearly prove that the defendant filed the construction lien
“falsely,

knowingly,

and

without

just

cause.”

Id.

at

447.

“Knowingly” in the context of a penal statute means “willfully” and
“with a bad purpose, an evil purpose, without ground for believing
18

the act to be lawful.”

Id.

As for the slander of title claim, “‘[s]lander of title’ is a
phrase commonly employed to describe words or conduct which bring
or tend to bring in question the right or title of another to
particular property, as distinguished from the disparagement of the
property itself.”

Walley v. Hunt, 54 So.2d 393, 396 (Miss. 1951).

“The slander may consist of a statement in writing, printing, or by
word of mouth ....”
statements,

Id.

disparaging

The “publication
of

plaintiff’s

of false and malicious
property

or

the

title

thereto, when followed, as a natural, reasonable and proximate
result, by special damage to the owner, are actionable.” Id. “The
false statement may consist of an assertion that ... defendant has
an interest in or lien upon the [plaintiff’s] property.”

Id.

“Whatever be the statement, however, in order for it to form the
basis of a right of action it must have been made, not only
falsely, but maliciously.”

Id.

“The malicious filing for record

of an instrument which is known to be inoperative, and which
disparages the title to land, is a false and malicious statement,
for which the damages suffered may be recovered.”

Id.

In Walley,

the Mississippi Supreme Court provided three examples of slander of
title claims:
... In Coffman v. Henderson, [9 Ala.App. 553, 63 So.
808], the court held that an action for damages for
filing, or causing to be filed, a notice of lien upon
19

plaintiff’s land and refusing to cancel the same is in
the nature of a suit for slander of title and is governed
by the rules applicable to such actions. In the case of
Greenlake Investment Company v. Swarthout, 161 S.W.2d 697
(St. Louis Court of Appeals), the court held that a
petition alleging that the defendants recorded a false
and malicious statement that they had a lien against
plaintiff’s real estate was good against general
demurrer, though special damages were not alleged and the
instrument filed by the defendants allegedly did not in
law amount to a lien.
In the case of Kelly v. First State Bank, 145 Minn.
331, 177 N.W. 347, 9 A.L.R. 929, the court held that the
utterance of false and malicious statements disparaging
the title to property in which one has an interest, if
the statements are untrue, and cause damage, constitute
slander of title; and that filing for record an
instrument known to be inoperative is a false statement
within the rule, and if done maliciously it is regarded
as slander of title. In that case the court said, “It is
clear, however, that if a man does no more than file for
record an instrument which he has a right to file, he
commits no wrong.”
Id. at 397.
Based on Walley, the Court finds that the elements of slander
of title are:
(1) That there was a false statement concerning the real
property owned by the plaintiff;
(2) That the false statement was published to others;
(3) That the false statement was published maliciously; and
(4) That publication of the false statement concerning title
to the property caused the plaintiff pecuniary loss in the form of
special damages.

20

Turning

first

to

the

statutory

claim,

the

Court

heard

extensive testimony from Bruce Graham, a project manager with
Johnson Controls, concerning the contract with Harbor Town, the
work that went into the Harbor Town project, and the method of
invoicing that Johnson Controls used pursuant to the contract. Mr.
Graham also discussed the effect the termination for convenience by
Harbor Town had on the amount owed Johnson Controls.

He was

involved in determining the outstanding invoices and the total
amount due. Mr. Graham testified that the lien was based solely on
the debt that was contracted for and owing from Harbor Town.

He

took the invoices to Shared Services, which includes members of
Johnson

Controls’

legal

department.

After

review

by

Shared

Services, the matter was turned over to the Construction Services
Group at NCS Credit. NCS retained Alabama attorney Michael Lindsey
to review the invoices and file the lien.

Johnson Controls signed

the lien on December 4, 2008, and it was recorded on December 18,
2008.

There was some discussion of whether Johnson Controls, as

construction manager, did not fit the role of contractor and thus
was not entitled to a lien.

However, the evidence shows that

Johnson Controls did in fact fill the role of contractor in a
number of respects and did work that entitled it to a lien.

Some

of the items in the invoices seem inflated; however, the Court
finds that the invoices conform to the terms of the contract
21

between Johnson Controls and Harbor Town.

As the Court previously

found at the conclusion of Mr. Graham’s testimony, the construction
lien was properly filed.

Based on the evidence presented, the

Court finds that the construction lien was filed “with just cause,”
and not with a bad or evil purpose.

The lien was filed only after

review by Johnson Controls’ legal team and by outside counsel.

As

the court in Manderson observed:
The statute obviously is intended to punish the malicious
filing of a construction lien with no basis whatsoever.
In the case at bar, [the lienholder] acted in good faith
on the advice of counsel in attempting to protect his
interests through the filing of a possible lien against
the property in issue. Any other statutory construction
would place a claimant in the untenable position of being
forced to choose between a forfeiture of his rights
through non-filing or a lawsuit if such filing proved
erroneous, no matter how honestly and sincerely done.
The court declines to accept such a construction of this
statute.
Manderson, 587 F.Supp. at 447.
The Court therefore finds that Johnson Controls is entitled to
a judgment in its favor as to Jeanes-Kemp’s statutory claim for the
filing of a false lien.

Since the lien was not filed with a bad or

evil purpose, but was instead filed “with just cause,” in other
words without malice, the Court also finds that Jeanes-Kemp cannot
recover on its slander of title claim as to the initial filing of

22

the lien.1
The Court now turns to the slander of title claim regarding
Johnson Controls’ failure to release its lien.

Jeanes Kemp

foreclosed on the property through non-judicial foreclosure on
April 22, 2009.

Johnson Controls was not notified of the sale.

On

June 15, 2009, Jeanes-Kemp entered into a Contract of Purchase and
Sale of the property with Harbor Vieux, which had been formed by
Stephen Planchard, one of the owners of Harbor Town.
On July 22, 2009, Harbor Vieux’s attorney, Eric Wooten, wrote
to Michael Lindsey, the attorney who had filed Johnson Controls’
lien, seeking a release of the lien.

(Exhibit P-26).

The letter

was forwarded to Amie LaBahn, counsel for Johnson Controls, who
declined to execute a release, based on her experience in other
jurisdictions that require actual notice to all lienholders for a
foreclosure to be valid. (Exhibit P-27: letter from Amie LaBahn to
Eric Wooten, July 27, 2009).
In response to Ms. LaBahn’s letter, Otis Johnson, on behalf of
Jeanes-Kemp, wrote to Ms. LaBahn and Mr. Lindsey on July 29, 2009,

1

Johnson Controls also raised the legal issues of whether
Jeanes-Kemp had standing to pursue the statutory claim, and
whether the statutory claim was time-barred by the one-year
statute of limitations in Miss. Code Ann. § 85-7-201. Because it
finds that Johnson Controls did not file the lien with a bad or
evil purpose, or malice, the Court does not reach either of these
legal issues.
23

informing them that while it is customary to provide notice,
Mississippi law does not require notice to junior lienholders for
the foreclosure to be effective.

(Exhibit P-30).

again asked Johnson Controls to release its lien.

Otis Johnson
He stated that

Jeanes-Kemp was attempting to sell the property, and that Johnson
Controls’ construction lien constituted a cloud on the title that
could prevent a sale.

He informed Johnson Controls that, under

Mississippi

lien

foreclosure.

law,

its

was

cut

off

as

a

result

of

the

He also stated that Jeanes-Kemp had suffered damages

as a result of the lien, and that if Johnson Controls continued to
claim a lien, “[i]t will be necessary for Jeanes-Kemp, LLC, to
institute suit to cancel any purported claim to a construction lien
and seek actual and punitive damages together with all costs and
attorney’s fees.”

(Exhibit P-30).

On July 30, 2009, Rob Remington, another attorney for Johnson
Controls, responded to Otis Johnson’s letter, stating that his
client did not understand Jeanes-Kemp’s position that Johnson
Controls’ lien slandered Jeanes-Kemp’s title: “If any claim to a
lien was ‘cut off’ by the foreclosure (as your letter contends),
then a release seems unnecessary at this time.”

He also stated

that he was willing to discuss the matter with Otis Johnson.
(Exhibit P-31).
Also, at some point after June 19, 2009, and in any event
24

before July 27, 2012, Johnson Controls had come into possession,
through Bruce Graham, of a newspaper article published in the Pass
Christian Gazebo Gazette, dated June 19-June 26-July 3 2009.

The

article, titled “Harbor Town Has New ‘Vieux,’” recounts Stephen
Planchard’s “acquisition” of the property under a new entity,
Harbor Vieux, and his plans to “build on the footprint of the old
Harbor Town,” using the foundations already in place.

(Exhibit D-

60).
The plaintiff objected to admission of the proffered newspaper
article into evidence on the grounds that it is double hearsay.
The evidence is not hearsay because the statements contained in the
article were not offered to prove the truth of the matter asserted.
See Jauch v. Corley, 830 F.2d 47, 52 (5th Cir. 1987); Kalma v. City
of

Socorro,

Texas,

2008

WL

954165,

*9

(W.D.

Tex.

March

17,

2008)(newspaper article admissible as non-hearsay when used to show
the effect on the hearer); U.S. v. Martin, 897 F.2d 1368, 1371 (6th
Cir. 1990)(“The hearsay rule does not apply to statements offered
merely to show that they were made or had some effect on the
hearer.”).

The plaintiff’s claim for slander of title requires

proof of malice, which in turn requires an inquiry into the
defendant’s subjective state of mind.

The statements in the

newspaper article are therefore relevant to show the subjective
state of mind of the defendant, and the article is admissible. Mr.
25

Graham testified that after seeing the article he was highly
suspicious of the developments concerning the sale by Jeanes-Kemp
to Harbor Vieux, and Mr. Planchard’s utilization of the work which
had been done but for which Mr. Planchard’s former company had not
paid.
The Court also heard evidence concerning a Verified Petition
to Perpetuate Testimony filed June 24, 2009, by GM&R Construction
and Preferred Systems in the Chancery Court of Harrison County,
seeking to take the depositions of Mr. Planchard and Mr. Negrotto,
principals of Harbor Vieux. (Exhibit D-11). The Verified Petition
was later amended to add another principal in Harbor Vieux, Richard
Anthony.

(Exhibit D-58).

Although Johnson Controls did not know

of the Verified Petition until after this lawsuit was filed, this
evidence was offered by Johnson Controls to support the objective
reasonableness of its reluctance to release its lien, given that
GM&R and Preferred had similar concerns regarding the potential
invalidity of the foreclosure.
Like Johnson Controls, GM&R and Preferred held liens on the
property.

Lee Watt, an attorney representing the petitioners,

testified that he filed the Verified Petition because (1) his
clients had not been paid by Harbor Town, (2) Jeanes-Kemp had
foreclosed

on

the

property

through

non-judicial

foreclosure,

“ostensibly wiping out those construction liens,” and (3) Jeanes26

Kemp “turned right around and conveyed the property through a
similar transaction ... to what we believe may be an alter ego of
Harbor Town ... because it was owned by the same person, Mr.
Planchard.”
Paragraph 16 of the Verified Petition, titled “Fraudulent
Transfer,” states:
GM&R and Preferred believe the foreclosure of the
Property was precipitated by a plan to defraud them of
their respective lawful rights to collect money owed them
by Harbor Town. GM&R and Preferred further believe that
Harbor Vieux’s plan to purchase the Property in its muchimproved condition is a continuation of a plan to defraud
them by preventing them from exercising their rights as
construction and materialmen lienholders.
(Exhibit D-11, ¶ 16).
Mr. Watt testified that the purpose of the petition was to
investigate and do due diligence prior to bringing any allegations
of fraud.

Although Mr. Watt admitted that no depositions of

Jeanes-Kemp were sought by the petition, he stated this was “simply
because they were not my first line of fire.”

He further stated:

I did not know what I would learn from the deponents
such as Mr. Planchard and whether he would provide
testimony which indicated that this was something he
simply did on his own, i.e. the rolling over into a new
company, or whether he had discussed ahead of time with
Mr. Kemp that that was going to be done. I just didn’t
know. So to be fair to the Kemp entity, they were a
secondary line of target that would be vetted during the
depositions of Mr. Planchard and the others.
The Court is not concerned with the truth or falsity of these

27

allegations.

Nor is notice to Johnson Controls an issue.

Johnson

Controls admits that it did not learn of the Verified Petition
until October 28, 2009, well after this lawsuit was filed.

The

Court, however, finds the evidence admissible solely on the issue
of the reasonableness of Johnson Controls’ suspicions.

Since both

GM&R and Preferred Systems, lienholders who stood in positions
similar to that of Johnson Controls, formed similar suspicions
independently

of

Johnson

Controls,

the

Court

finds

that

the

evidence supports the good faith of Johnson Controls’ suspicions.
The

Court

examination

of

also

notes

that

during

Mr.

Jeanes,

the

witness

Mr.
was

Michalski’s

cross

questioned

about

conversations he had with Mr. Planchard regarding the possibility
that Mr. Planchard might form a new entity and purchase the
property after foreclosure.

Mr. Jeanes was asked if any such

discussions took place before the foreclosure, and he said no. Mr.
Michalski then read from Mr. Jeanes’ deposition testimony, in which
the witness stated that he could not deny any such discussions took
place before the foreclosure because he could not remember.

The

witness was then shown an exhibit containing an email exchange,
which was introduced into evidence.

(Exhibit D-43).

The first

email was from Mr. Jeanes to Mr. Planchard, dated June 2, 2009.

It

indicates that Mr. Jeanes was worried that Jon Wagner (apparently
another potential buyer) “might seek an injunction or otherwise try
28

to

impede

the

sale”

to

Mr.

Planchard,

and

that

recommended closing the sale as soon as possible.

Mr.

Jeanes

The response,

from Mr. Planchard to Mr. Jeanes and Mr. Kemp, is dated June 3,
2009, and states:
I appreciate your thoughts and I have had a preliminary
discussion with my attorney (Donald Rafferty). He feels
that I don’t have any exposure under the circumstances.
If we all think about it - Jon is trying to do the exact
same thing by offering to purchase the property from you.
Jon owns a small percentage of Harbor Town and his
exposure is relative to mine in moving forward with a
purchase under a new company name. I am meeting with
Donald this week to go over everything in great detail.
It may be easiest if he feels I have any possible
exposure that would impact the sale to simply keep my
name off of things for now.
I would appreciate your
allowing me to get our final legal opinion on this
matter.
With that said - It is still our intent,
regardless of Jon - to move forward as fast as possible.
. . .
Jon has called both me and Richard [Anthony] several
times. I plan to speak with him today and get him to
sign a release of any liability associated with a new
purchase.
There are several reasons why he would be
agreeable to this which I can explain later. He has some
exposure regarding his breech of contract with you guys
as it related to me and the assistance I was offering Jon
at the time. I will let you know how that turns out.
(Exhibit D-43).
The Court was presented no evidence of any discussions between
Jeanes-Kemp and Mr. Planchard prior to the foreclosure regarding a
subsequent sale to Mr. Planchard.
shortly

after

the

foreclosure

29

are

However, their discussions
further

evidence

of

the

reasonableness and good faith of Johnson Controls’ concerns and
suspicions regarding Mr. Planchard’s ownership in both Harbor Town
and Harbor Vieux and possible involvement of Jeanes-Kemp relative
to its foreclosure.
Mr. Watt, attorney for GM&R and Preferred, also testified
about conversations he had with Eric Wooten, attorney for Harbor
Vieux, concerning the release of GM&R and Preferred’s liens.

Mr.

Watt took the position that since there was a foreclosure which
extinguished all junior liens under Mississippi law, a further
release

by

Mr.

Watt’s

clients

would

not

be

necessary.

He

testified:
My conversation with Mr. Wooten - there was more than one
- two, maybe three - was to the effect of his complaining
about the fact that GM&R and Preferred Systems had liens
on the project. And he wanted to explore the release of
those liens. And we bantered back and forth about rights
and responsibilities and the effect of foreclosure as to
whether it did or did not release those liens. But going
to your question about anything that would have kept the
sale from going through, Mr. - it was Mr. Wooten
expressing to me verbally and in writing that he thought
standing liens of GM&R and Preferred Systems could
jeopardize the sale. And my response was there was the
foreclosure. And it either wiped it out or it didn’t.
... and I essentially told him he should take that up
with Otis Johnson [Jeanes-Kemp’s attorney] and file a
suit to remove a cloud on title or do whatever he needed
to do.
Again, the Court finds evidence of these other lienholders taking
a position similar to that of Johnson Controls, which, in the
Court’s opinion, lends support to a finding that Johnson Controls’
30

refusal to release its lien was made in good faith.
John Underwood was proferred by the defendant as an expert in
the field of real estate law, specifically as to foreclosure
proceedings in Mississippi and the impact of such proceedings on
junior liens.

The plaintiff did not object to the witness’s

qualifications as an expert, and the portions of his testimony
cited below were received without objection. The plaintiff did not
present any expert testimony of its own on these issues.
Mr. Underwood has practiced real estate law for more than
thirty-five years, with foreclosures being a significant portion of
his practice.

He stated:

As I understand it, the issue is whether or not the
construction lien that was filed by Johnson Controls
somehow imposed a cloud on the title that prevented a
subsequent loan closing from going forward.
And my
opinion in essence is that the construction lien was
terminated as a lien since it was cut off by the
foreclosure of the Jeanes-Kemp deed of trust which was a
prior lien.
Asked if Johnson Controls would have been required to file a formal
release of its lien in July of 2009, Mr. Underwood replied, “...
there are no statutes that require it.

There is no case law that

I’m aware of that requires such a release and there is no contract
that would have required it.

So the answer is no.”

He also

testified that if he prepared a title report, the construction lien
would not even be shown as an exception, and it would not have been

31

an impediment to issuing a title insurance policy.
Mr. Underwood later stated that a junior lien extinguished by
a valid foreclosure would not constitute a cloud on title.

The

Court asked Mr. Underwood if his opinion would change if the
purchaser at the foreclosure sale requested a pre-foreclosure
lienholder to release its lien and the lienholder refused.

He

replied that it would not be unusual for a lienholder to refuse,
because the lienholder “may have lost his in rem lien against the
property, but he would still have certain in personam rights to try
to recover, and he might not want to do anything to take away or
detract from his ability absent the lien.”

He also stated that a

question could arise concerning the validity of the foreclosure,
and the lienholder might be held to have waived his right to object
to the foreclosure if he had voluntarily released his lien.
Johnson Controls has argued throughout these proceedings that
Jeanes-Kemp’s slander of title claim fails because, as a matter of
Mississippi law, a junior lienholder has no legal obligation to
file a release of lien after a valid foreclosure.

The court does

not reach this issue, however, because the evidence shows that
Johnson Controls lacked malice. Mr. Underwood’s testimony supports
the reasonableness and good faith of the defendant’s position in
not cancelling its lien when requested to do so by the plaintiff.
For all the above reasons, the Court finds that Jeanes-Kemp
32

has failed to meet its burden of proving malice under its slander
of title claim, and that judgment should therefore be rendered in
favor of Johnson Controls.
The

final

element

of

a

slander

of

title

claim

is

that

publication of a false statement concerning title to the property
must cause the plaintiff pecuniary loss in the form of special
damages.

The Court alternatively holds that the plaintiff has

failed to meet its burden of proving special damages caused by the
defendant’s conduct.

In order to prove damages from a lost sale,

the plaintiff must first prove the amount of money it would have
received if not for a lost sale caused by the defendants conduct.
The plaintiff must then prove the present value of the property in
order to show that a decline in value has resulted in damages.
On June 16, 2009, Jeanes-Kemp and Harbor Vieux entered into a
Contract of Purchase and Sale of the property which was to close on
July 16, 2009, for a purchase price of $2.72 million.
16).

(Exhibit P-

The contract called for the payment of $1.9 million at the

closing, with the remaining $820,000 to be financed by the seller.
Payment of $27,200 as earnest money was made by the buyer upon
execution of the contract.

The contract provided:

The Earnest Money shall be deposited in Holder’s trust
account upon receipt.
The earnest money is nonrefundable under any circumstances except in the event
Seller is unable to furnish title called for herein in
which case the earnest money shall be refunded to
33

Purchaser.
(Exhibit P-16, ¶ 2).
The title to be conveyed to Purchaser shall be a good and
marketable title in fee simple, and one which a title
insurance company qualified to do business in the State
of Mississippi will insure at regular rates, subject to
Permitted Exceptions and to any survey exception. Within
fifteen (15) days following the date of this Contract,
Purchaser will cause the title to the Property to be
examined and title Certificate or commitment for title
insurance issued. A copy of the Title Certificate or
Commitment shall be furnished to Seller together with a
copy of each document listed as an exception to the title
or which creates a lien on the property. A copy of the
most recent ad valorem tax receipt or receipts shall be
furnished to the Seller. If there are Title Exceptions
which may be cured, Seller agrees to take reasonable
steps to cause the Title Exceptions to be removed. If
Seller is unable to obtain removal of the Title
Exceptions within thirty (30) days after receipt of a
copy of the Title Certificate or Commitment for Title
Insurance and related documents this Contract shall
terminate. If title curative work is necessary, Closing
shall be extended for up to thirty (30) days from the
date specified for Closing.
(Exhibit P-16, ¶ 7).
Jeanes-Kemp ultimately terminated the contract on September
10, 2009.

Mr. Jeanes testified that between July 16, 2009, and

September 10, 2009, Mr. Planchard repeatedly assured him that Mr.
Sposato would be sending the money, but no money ever arrived.

On

September 10, 2009, Otis Johnson, on behalf of Jeanes-Kemp, wrote
to Mr. Wooten, Harbor Vieux’s counsel, stating that the purchase
contract between Jeanes-Kemp and Harbor Vieux had terminated “as
title objections could not be cured and resolved as therein called
34

for.”

(Exhibit P-35).

During his testimony on cross examination,

Mr. Jeanes admitted that prior to September 10, 2009, he never
considered going to court to have the validity of Johnson Controls’
lien determined.
Mr. Jeanes also testified that Mr. Planchard paid the $27,200
in earnest money from his own personal funds at the time the
contract for sale was executed.

Although Jeanes-Kemp claimed the

closing was unable to take place because of title problems, JeanesKemp did not return the earnest money to Harbor Vieux or Mr.
Planchard on September 10, 2009.

In fact, not until December of

2009, after this lawsuit was filed, did Jeanes-Kemp return any of
the money to Harbor Vieux, and then it was only half, $13,600,
drawn on a personal account on behalf of Jeanes-Kemp.

Mr. Jeanes

stated that he also paid Mr. Planchard $2,500 out of his own
personal funds.

While not dispositive, this evidence does support

this Court’s finding that title problems were not the reason the
sale to Harbor Vieux did not take place.
Mr. Jeanes also testified about a proposed Amendment to
Contract of Purchase and Sale which was drafted and signed by Mr.
Planchard on July 15, 2009.

This document (Exhibit D-33) extended

the closing date to July 24, 2009, but it was never signed by Mr.
Jeanes or Mr. Kemp.

As consideration for the extension, the

purchaser was to deposit an additional $100,000 as earnest money,
35

to be wire-transferred on or before July 16, 2009.

The proposed

amendment also provided:
Purchaser has arranged for the loan of all or a
portion of the Purchase Price set forth in the Contract.
Purchaser agrees to cause its Lender to notify JeanesKemp, LLC ... that Lender is obligated to loan the money
for the purchase of the property subject to said
Contract.
(Exhibit D-33, ¶ 4).

The $100,000 was to come from Mr. Sposato.

Mr. Jeanes testified that Mr. Sposato, on July 18, 2009, assured
him that he had the money.

When asked if he did not sign the

proposed Amendment because the $100,000 from Mr. Sposato never
showed, Mr. Jeanes answered no.
it, he said he did not know.

But when asked why he did not sign

When questioned about extending the

closing date, he replied, “I hardly see anything sinister in that.
When you’re trying to close a deal, we would have waited until
December for nothing if we thought there was a reasonable chance of
getting the money.”
Mr. Planchard testified by deposition that he was counting on
Mr. Sposato to fund Harbor Vieux’s acquisition of the property,
that Mr. Sposato was to fund the entire purchase price, and that
the only way the purchase was going to take place was if Mr.
Sposato provided the funding.
2010, pp. 25-26).
where

Mr.

Sposato

(Planchard Deposition of Sept. 13,

When asked if he could point to any document
indicated

an

36

unwillingness

to

fund

the

transaction because of a lien on the property, Mr. Planchard
replied that he had an email, as well as phone conferences with Mr.
Sposato, but he could not find the email.
13-10, p. 152).

(Planchard Depo. of 9-

Nor did Mr. Planchard provide any evidence of the

phone conferences.
Neither Mr. Planchard nor Mr. Sposato appeared voluntarily at
trial, and despite counsel’s efforts, neither of them could be
located for purposes of compelling their attendance at trial.

The

parties therefore agreed to submit their depositions in lieu of
live

testimony.

The

Court

weighed

the

credibility

of

the

witnesses, and gave their testimonies such weight as they deserved.
Of particular importance in weighing Mr. Sposato’s testimony was
the fact that he has had several felony convictions based upon acts
of dishonesty or false statements.
Mr. Sposato testified by deposition that his funding was to
come from a bank in Liechtenstein, but he could not recall the name
of the corporation that held the account.

He stated that he was an

investor in the corporation and had authority to direct money from
the account; however, he had no idea what portion of the account he
had authority to withdraw.
$4.5 million.

Later, he stated that he had access to

(Sposato Deposition of Oct. 26, 2010, pp. 30-39).

Still later, he testified that he only had the money to make an
initial investment, and that he “would have probably had investors
37

come in.”

(Sposato Depo., p. 39).

Mr. Sposato testified that he had been told about the lien on
the property, but he also stated that he had been lied to by Mr.
Planchard concerning the number of units that had been sold or
rented.

(Sposato Depo., pp. 47, 94).

He stated that even if there

was no lien on the property, he would never have funded the
purchase by Harbor Vieux.

Nevertheless, he insisted that he

probably would have purchased the property himself.

(Sposato

Depo., pp. 50-51, 94). When asked where the money would come from,
he replied, “One of my companies,” and mentioned $4.8 million in a
Liechtenstein bank available at his discretion. (Sposato Depo., p.
74).
On July 12, 2011, Magistrate Judge Robert H. Walker entered an
Order granting in part a motion for contempt filed by Johnson
Controls.
duces

The defendant had served Mr. Sposato with a subpoena

tecum

seeking

all

financial

records

relating

to

his

creditworthiness or ability to provide the $3,000,000 for the
purchase of the property.

During his deposition, Mr. Sposato had

indicated that he had access to several million dollars in a bank
account

in

Liechtenstein,

and

that

he

statement within a week as verification.

could

provide

a

bank

He also testified that

his attorney, Stephen Christensen, was holding $200,000 in escrow
from Pegasus Investment to use as a down payment on the Harbor
38

Vieux purchase.

Mr. Christensen, however, testified that he did

not hold any money in escrow for Mr. Sposato nor any of his
entities during the relevant time period.

Johnson Controls filed

two motions to compel discovery responses, both of which were
granted by Magistrate Judge Walker, but Mr. Sposato did not fully
comply with either of the orders. In response to Johnson Controls’
motion for contempt, Mr. Sposato replied “that he does not now, and
has never had, personally, the funds to purchase the subject
property,” and asserted that Pegasus Investment, not John Sposato,
was the entity engaged in negotiations for the purchase of the
property.

Johnson Controls produced public records from the State

of Louisiana showing that Mr. Sposato is the registered agent and
only listed officer for Pegasus Investment.
Walker

found

that

Mr.

Sposato

had

been

Magistrate Judge

evasive,

vague,

and

inconsistent in his discovery responses, and ordered him to either
reply to the discovery requests or face contempt charges.
On July 25, 2011, Mr. Sposato provided an affidavit in which
he states that neither he nor Pegasus Investment, nor any other
corporate entity of which he had control, ever had the funds
sufficient to purchase the plaintiff’s property.
266, Exh. A).

(docket entry

At trial, during cross examination of Mr. Jeanes,

the defendant sought to have the affidavit admitted into evidence.
The plaintiff objected on the basis that it is hearsay.
39

The Court

agrees with the plaintiff.
testify

at

trial

under

Mr. Sposato was not available to

oath

and

was

not

subject

to

cross-

examination; therefore, his affidavit shall not be admitted in
evidence.
The plaintiff, however, has failed to meet its burden as to
damages and causation.

Mr. Jeanes testified that he never saw any

bank statements or other proof of Mr. Sposato’s financial worth.
Mr. Planchard, despite his assurances to Mr. Jeanes that Mr.
Sposato would come up with the money, also did not have any proof
that Mr. Sposato had any money.

Both Mr. Jeanes and Mr. Planchard

testified that the only source of funding for the sale of the
property was Mr. Sposato.
deposition

that

the

Finally, Mr. Sposato testified at his

reason

he

backed

misrepresentations by Mr. Planchard.

out

of

the

deal

was

The Court does not find

credible Mr. Sposato’s testimony that he had funding available.
The Court also finds that even if Johnson Controls had cancelled
its lien, the sale of the property, being dependent on funding from
Mr. Sposato, would not have taken place.

Therefore, the plaintiff

has failed to prove both damages and causation.
The Court finds that the plaintiff has failed to prove any of
its claims, and final judgment shall therefore be entered for the
defendant.

Accordingly,

IT IS HEREBY ORDERED that the defendant is entitled to a final
40

judgment in its favor, and a separate Final Judgment shall be
entered of even date herewith;
FURTHER ORDERED that, based on rulings at trial and in this
Memorandum Opinion and Order, the following motions are deemed to
be moot:
Motion for summary judgment by Johnson Controls (docket entry
227);
Motion for partial summary judgment by Jeanes-Kemp (docket
entry 229);
Motion to strike defendant’s answer and advice of counsel
defense, motion for sanctions for failure to comply with court’s
order by Jeanes-Kemp (docket entry 243);
Motion for leave to file supplemental memorandum in support of
motion for summary judgment by Johnson Controls (docket entry 266);
Motion in limine to exclude evidence of reliance on advice of
counsel defense by Jeanes-Kemp (docket entry 270);
Motion in limine re property valuation by Johnson Controls
(docket entry 272);
Motion in limine re Sposato funding by Johnson Controls
(docket entry 274);
Motion in limine re reference to other potential sales by
Johnson Controls (docket entry 276);
Motion in limine re post 12-18-08 conduct by Johnson Controls
41

(docket entry 278).
SO ORDERED, this the 23rd day of February, 2012.

/s/ David Bramlette
UNITED STATES DISTRICT JUDGE

42