Elmore v. Shadow Ridge Farms, LLC
| Decision Date | 16 March 2020 |
| Docket Number | Civil No. 1:18cv379-HSO-JCG |
| Parties | BILLY E. ELMORE and ELIZABETH A. ELMORE PLAINTIFF v. SHADOW RIDGE FARMS, LLC, et al. DEFENDANTS |
| Court | U.S. District Court — Southern District of Mississippi |
BEFORE THE COURT are Defendants Brian Morris and Martin Kalin's Motion [32] for Summary Judgment and Defendant Shadow Ridge Farms, LLC's Motion [34] for Partial Summary Judgment. This suit arises out of the foreclosure on real property owned by Defendant Shadow Ridge Farms, LLC, for which Defendants Brian Morris and Martin Kalin and Plaintiffs Billy E. Elmore and Elizabeth A. Elmore were secured creditors. Plaintiffs accuse Defendants of fraud and assert that Plaintiffs' deed of trust to the land should have priority over Defendants Brian Morris and Martin Kalin's deed of trust.
Defendants Brian Morris and Martin Kalin have filed a Motion [32] for Summary Judgment asking the Court to dismiss Plaintiffs' suit in its entirety. Defendant Shadow Ridge Farms, LLC, has filed a Motion [34] for Partial Summary Judgment requesting that the Court dismiss all but two of Plaintiffs' claims against it. Having considered the parties' submissions, the record, and relevant legal authority, the Court is of the opinion that Defendants Brian Morris and Martin Kalin's Motion [32] for Summary Judgment and Defendant Shadow Ridge Farm, LLC's, Motion [34] for Partial Summary Judgment should both be granted. All of Plaintiffs' claims against Defendants Brian Morris and Martin Kalin will be dismissed. Further, all of Plaintiffs claims against Defendant Shadow Ridge Farms, LLC, will be dismissed with the exception of the two seeking specific performance of the promissory note and attorney's fees.
On September 8, 2016, Plaintiffs Billy E. Elmore and Elizabeth A. Elmore (collectively, "the Elmores") sold certain real property they owned in Jackson County, Mississippi, to Defendant Shadow Ridge Farms, LLC ("SRF"). Compl. [2-2] at 2; Def. Ex. J [32-11] at 5. The parties agreed on a $500,000.00 purchase price, with SRF paying Plaintiffs $120,000.00 at closing. Pl. Ex. A [36-1]. For the balance remaining on the purchase price of $380,000.00, SRF executed a promissory note in favor of the Elmores which was secured by a deed of trust. Compl. [2] at 2; Pl. Ex. E [37-5] at 1. SRF obtained the $120,000.00 down payment from a $500,000.00 loan it obtained from two of SRF's members, Defendants Brian Morris ("Morris") and Martin Kalin ("Kalin"). Def. Ex. J [34-11] at 5; Def. Ex. I [34-10] at 1. In exchange for the loan to SRF, Morris and Kalin received their own deed of trust to the property. Def. Ex. I [32-10] at 1; Pl. Ex. F. [37-6] at 1. Both the Elmores' loan to SRF and Morris and Kalin's loan to SRF were listed on the closing statement signed by the Elmores. Def. Ex. J [32-11] at 5. Morris and Kalin's deed of trust was recorded on September 14, 2016, Def. Ex. F [36-6] at 1, and the Elmores' deed of trust was recorded on September 19, 2016, Def. Ex. E [36-5] at 1.
SRF later defaulted on its $380,000.00 balance owed to the Elmores. The Elmores filed suit against SRF, Morris, and Kalin for judicial foreclosure, specific performance, and attorney's fees in the Chancery Court of Jackson County, Mississippi, on April 19, 2017. Compl. [2-2]. When SRF similarly defaulted on the balance of the $500,000.00 loan it owed Defendants Morris and Kalin on August 18, 2017, they foreclosed on their deed of trust and purchased the property at public auction for $400,000.00. Def. Attach. [32-1] at 7; Def. Ex. F [34-7] at 3. The Elmores reacted by amending their state court complaint against SRF, Morris, and Kalin to include additional counts against all Defendants. See Am. Compl. [1-1].
Specifically, the Elmores alleged that Morris and Kalin's deed of trust "was executed without consideration" and should be set aside. Id at 3. The Amended Complaint also asserted that Plaintiffs were entitled to an accounting of the $500,000.00 which SRF borrowed from Morris and Kalin, id., and accused all Defendants of fraud and fraud by omission, id. at 3-4. The Elmores contend that SRF executed the deed of trust in favor of Morris and Kalin to enable them to foreclose on the property before SRF satisfied the Elmores' promissory note. Id. Plaintiffs allege separate counts against all Defendants for fraud and fraud by omission, and separate counts seeking judicial foreclosure, specific performance, attorney's fees, removal of cloud on title, setting aside of the deed of trust, and an accounting.
On December 4, 2018, Defendants removed the case to this Court pursuant to 28 U.S.C. § 1332, § 1441, and § 1446. Notice of Removal [1] at 1. Defendants filed their respective Motions [32] [34] for Summary Judgment and Partial Summary Judgment on August 2, 2019. In their jointly submitted supporting Memorandum [35], Defendants Morris and Kalin claim that they are entitled to summary judgment on all claims against them, and that Defendant SRF is entitled to partial summary judgment on all claims against it except for the two seeking specific performance and attorney's fees based upon SRF's failure to satisfy the Elmores' promissory note. Def. Mem. [35] at 2. The crux of Defendants' argument is that Morris and Kalin's deed of trust enjoys priority over Plaintiffs' under applicable Mississippi law, and that the Elmores' fraud claim is unsupported. See Def. Mem. [35]. Plaintiffs oppose the Motions [32] [34] largely on the belief that their deed of trust constitutes a purchase money security lien which enjoys priority over Morris and Kalin's deed.1 See Pl. Resp. [36]
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). If the movant carries this burden, "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
To rebut a properly supported motion for summary judgment, the opposing party must show, with "significant probative evidence," that there exists a genuine issue of material fact. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th Cir. 2000). "A genuine dispute of material fact means that evidence is such that a reasonable jury could return a verdict for the nonmoving party." Royal v. CCC&R Tres Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir. 2013) (quotation omitted). If the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Cutting Underwater Techs. USA, Inc. v. ENI U.S. Operating Co., 671 F.3d 512, 517 (5th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). In deciding whether summary judgment is appropriate, the Court views facts and inferences in the light most favorable to the nonmoving party. RSR Corp. v. Int'l Ins. Co., 612 F.3d 851, 857 (5th Cir. 2010).
The Elmores request that the Court judicially foreclose on SRF's property. All Defendants assert, and the Court agrees, that they are entitled to summary judgment on this claim on grounds that the Elmores' request for relief is moot, as Morris and Kalin have already foreclosed on the property and their deed of trust has priority over the Elmores' deed of trust. Thus, the Court will dismiss the claim for judicial foreclosure.
Each party has argued that different provisions of Mississippi law apply to this case. The Elmores contend that Mississippi Code Section 89-1-45 gives their deed of trust priority over Morris and Kalin's deed. Pl. Resp. [36] at 6. Morris and Kalin, on the other hand, take the position that Mississippi Code Section 89-5-5 supports their priority claim. Def. Mem. [35] at 6. The Court finds that both Code provisions are applicable to this case and, when read together, operate to give Morris and Kalin's deed of trust priority.
Mississippi Code Section 89-1-45 is titled "Mortgage for purchase money of land" and states that:
Every mortgage given at the time of the purchase of real estate to secure the payment of the purchase money, whether such mortgage be given to the seller or to a third-party lender, shall be entitled to a preference over all judgments and other debts of the mortgagor, which preference shall extend only to the land purchased.
Miss. Code. Ann. § 89-1-45 (1972). Mississippi Code Section 89-5-5, which governs the priority of recorded instruments, directs that:
Every conveyance, covenant, agreement, bond, mortgage, and deed of trust shall take effect, as to all creditors and subsequent purchasers for a valuable consideration without notice, only from the time when delivered to the clerk to be recorded . . . the priority thereof shall be governed by the priority in time of the filing of the several instruments, in the absence of actual notice.
Miss. Code Ann. § 89-5-5 (1972).
While each party claims that the other's deed of trust did not constitute a purchase money mortgage, § 89-1-45 makes clear that both deeds of trust constitute purchase money liens. See Miss. Code. Ann. § 89-1-45 (1972); 6 Jeffery Jackson et al., Encyclopedia of Mississippi Law § 51:24 (2d ed. 2019) (). The Elmores' deed secured the $380,000.00 outstanding balance on the purchase price which they essentially loaned SRF at the closing to purchase the property. Similarly, Morris and Kalin loaned SRF $500,000.00, $120,000.00 of which SRF used as a down payment on the property, in...
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