Kennedy v. Boles Investments Inc.

• Decision Date: 25 June 2010
• Docket Number: 1080607.
• Citation: 71 UCC Rep.Serv.2d 597,53 So.3d 60
• Parties: J. Gregory KENNEDYv.BOLES INVESTMENTS, INC., and Ian Boles.
• Court: Alabama Supreme Court

53 So.3d 60

71 UCC Rep.Serv.2d 597

J. Gregory KENNEDY

v.BOLES INVESTMENTS, INC., and Ian Boles.

1080607.

Supreme Court of Alabama.

March 12, 2010.Opinion Overruling Rehearing June 25, 2010.

Joseph D. Steadman of Dodson & Steadman, P.C., Mobile; and P. Bradley Murray of Davis & Fields, PC, Daphne, for appellant.Walter M. Cook, Jr., William E. Shreve, Jr., and Bradley W. Sanders of Lyons, Pipes & Cook, P.C., Mobile; and Taylor D. Wilkins, Jr., of Wilkins, Bankester, Biles & Wynn, Bay Minette, for appellees.SMITH, Justice.

J. Gregory Kennedy appeals from a judgment in favor of Boles Investments, Inc. (“BI”), and Ian Boles (“Boles”) in an action stemming from the sale of real property in Baldwin County. We affirm.

I. Facts and Procedural History

Kennedy owned a 1.55–acre parcel of beachfront property in Orange Beach (“the property”). In April 2004, Boles and Kennedy entered into a contract for Boles to purchase the property (“the purchase agreement”). Before the closing, on July 2, 2004, Boles assigned the contract to BI, a Delaware corporation he solely owned.

The purchase price of the property was $3.7 million. BI paid Kennedy $370,000 as an initial down payment, and BI executed a promissory note in favor of Kennedy for $3.33 million. The terms of the note required a monthly interest payment of $16,650 for five years and then a balloon payment of the principal, $3.33 million, would be due on July 2, 2009. Relevant to this appeal, the promissory note contains a prepayment provision, which states: “[BI] may prepay this Note, in its entirety, including all interest and principal then due, upon payment of a penalty equal to five percent (5.0%) of the amount being prepaid.”

On the day of the closing, BI was not qualified to do business within the State of Alabama. In light of this fact, Kennedy and BI also entered into a “post-closing agreement,” on July 2, 2004, pursuant to which BI agreed to qualify to do business in the State of Alabama by July 31, 2004. The post-closing agreement provides that “as a material inducement” for Kennedy to close the loan, “[Kennedy] has required that this Agreement be executed and delivered to [him].” The agreement further provides that BI's failure to qualify to do business in the State of Alabama by July 31, 2004, “shall constitute a default under the Loan.” BI and Boles assert that as the result of a mistake of their counsel, BI did not qualify to do business in the State of Alabama until July 5, 2005.

Under the terms of the purchase agreement, Kennedy deeded the property to BI but reserved a vendor's lien deed for the property until the note was paid off. Kennedy testified that as part of the sale of the property Boles also orally agreed to give Kennedy a right of first refusal to repurchase the property. Boles denies that he gave Kennedy a right of first refusal.

In April 2005, an individual named Rex Hall contracted with BI to purchase the property for nearly $16 million. BI and Boles assert that Hall sought to assemble purchase contracts on several adjoining properties for the development of condominiums and that the purchase price of $16 million was consistent with the appraised value of the property under a multifamily-zoning classification (at that time the property was classified as “RS–1”). The agreement provided Hall with a 45–day due-diligence period in which he could terminate the agreement in his absolute discretion. During this 45–day period Boles told Kennedy that BI had entered into an agreement to sell the property and that BI planned to prepay the promissory note in the near future. Boles testified that when he told Kennedy of the agreement to sell the property, Kennedy became agitated and stated that he needed “to make some more money out of that deal.” Boles further testified that Kennedy requested a copy of the agreement between BI and Hall “so that he could go to ... the purchasers, to get the money out of them,” and said that “if that doesn't happen or if you don't pay me, then I'm going to have to get my lawyers involved.”

A former employee of Wachovia Bank, Michael Tarlton, testified that the bank had approved Boles for a loan to pay off the note on the property. Tarlton testified that “[t]he credit underwriter notified me that the loan was approved, and I then notified Mr. Boles that the loan was approved.” Tarlton further testified that the credit underwriter notified Boles's counsel that the bank had approved the loan and that “[t]he bank was ready to wire the money [on June 28 or 29, 2005].”

Counsel for BI and Boles faxed and mailed a letter dated June 29, 2005, to Kennedy's counsel stating, among other things, that BI and Boles had “secured alternate financing and will pay off Mr. Kennedy.” The letter further states:

“Per our calculations, the total amount of principal and interest due to your client as of July 2, 2005, is $3,346,500.00 plus the 5% penalty of $166,500.00 ¹ for a total payoff of $3,515,000.00. Further, there will be a per diem interest charge of $555.00. Please confirm that the above payoff is correct and forward me wiring instructions for your client (or to your trust account, if we are to make payment to you on behalf of your client) as soon as possible so that the total funds can be paid to your client.”

The next day, June 30, 2005, counsel for BI and Boles faxed and mailed another letter to Kennedy's counsel's stating:

“We have recalculated the payoff, and note that there was a small mathematical error. As of July 2, 2005, the total payoff to your client is $3,513,150.00. Please confirm, in writing, that this revised payoff is correct and notify me immediately with wiring instructions so that there will be no delay in paying your client off. If I have not heard from you, with respect to the payoff and wiring instructions, by 5:00 E.D.T. today, I will assume that the above payoff is correct and I will wire the proceeds to [our local counsel's] trust account, and he will deliver a payoff check to you tomorrow.”

Presumably in response to this letter, Kennedy's counsel faxed counsel for BI and Boles a note on June 30, 2005, stating:

“As of 4:00 p.m. E.D.T. Mr. Kennedy has filed a Complaint in the Circuit Court of Baldwin County, Alabama. Until the issues addressed in the complaint are resolved, Mr. Kennedy will not accept any funds tendered to pay off the Promissory Note securing the Property at issue in the complaint.”

Boles never closed the loan with Wachovia or sent the prepayment tender to Kennedy.

The complaint Kennedy filed against BI and Boles in the Baldwin Circuit Court contained three counts. The first count alleged that BI had breached the post-closing agreement by failing to qualify to do business in the State of Alabama by July 31, 2004. The second count alleged that BI fraudulently induced Kennedy to enter into the purchase agreement by providing him an oral right of first refusal to repurchase the property. The third count alleged that BI had defaulted on “the security documents” and the post-closing agreement by failing to keep the property in good repair and condition. The same day, June 30, 2005, Kennedy filed in the Baldwin Probate Court a notice of lis pendens as to the property. See § 35–4–131(a), Ala.Code 1975.

BI and Boles filed nine counterclaims against Kennedy on July 8, 2005. The first counterclaim sought a “preliminary and/or permanent injunction” requesting that the trial court order BI to pay off the balance of the note, order Kennedy to accept the prepayment of the note, and order Kennedy or the clerk of court to release all “security instrument documents” related to the property. BI and Boles also asserted the following counterclaims against Kennedy: slander of title, breach of contract, tortious breach of contract, negligence, wantonness, tortious interference with business relations, extortion, and violation of the Alabama Litigation Accountability Act (“ALAA”). They sought compensatory and punitive damages under the counterclaims for tortious breach of contract, wantonness, tortious interference with business relations, and extortion; they sought compensatory damages under the counterclaims for slander of title, breach of contract, negligence, and violation of the ALAA.

Kennedy's counsel mailed and faxed a letter dated July 28, 2005, to counsel for BI and Boles stating, “Mr. Kennedy requests that all future payments or actual tenders made by your client be held in escrow in the Registry of the Court ... until the voidability issue can be addressed by the Court.” The record indicates that BI and Boles did not comply with this request. BI made monthly interest payments to Kennedy from July 2004 to January 2006 via wire transfer or check. In January 2006, BI and Boles moved the trial court to order that the monthly interest payments be deposited with the clerk of court. The trial court granted the motion, and from February 2006 until the fall of 2006, BI made monthly interest payments into the court. As referenced above, neither BI nor Boles tendered the principal due under the note into the court.

BI's sale of the property to Hall ultimately fell through. BI and Boles assert that the sale fell through because the lis pendens disparaged BI's title to the property. After the sale to Hall was unsuccessful, BI transferred the property to Boles.

Boles and an entity known as WCI Communities, Inc. (“WCI”), executed a letter of intent on November 15, 2005, in which WCI indicated its intent to purchase the property for $16.5 million. An agreement was prepared that provided that Boles would convey clear title to the property. Boles testified that his counsel advised him not to sign the agreement “due to the title issue.” The sale to WCI never took place. A former employee of WCI, Cameron Price, testified that he believed “WCI made the decision to walk away from the deal because of the cloud due to the lis pendens on Ian Boles's property and his—his verbal direction that he was not...