P.B. Surf, Ltd. v. Savage (In re Alamo Title Co.)

• Decision Date: 17 May 2013
• Docket Number: 1111541.
• Citation: 128 So.3d 700
• Parties: EX PARTE ALAMO TITLE COMPANY. (In re P.B. Surf, Ltd. v. Guy A. Savage et al.).
• Court: Alabama Supreme Court

128 So.3d 700

EX PARTE ALAMO TITLE COMPANY.(In re P.B. Surf, Ltd.

v.Guy A. Savage et al.).

1111541.

Supreme Court of Alabama.

March 15, 2013.

Rehearing Denied May 17, 2013.

John F. DeBuys, Jr., William J. Long, and Benjamin B. Coulter of Burr & Forman, LLP, Birmingham, for petitioner.

Rudy Hill of Bradley Arant Boult Cummings LLP, Montgomery; Scott Burnett Smith of Bradley Arant Boult Cummings LLP, Huntsville; and Ethan T. Tidmore of Bradley Arant Boult Cummings LLP, Birmingham, for respondent.

MAIN, Justice.

Alamo Title Company(“Alamo”), a Texas corporation, petitions this Court for a writ of mandamus directing the Jefferson Circuit Court to vacate its order denying Alamo's motion to dismiss an action filed against it by P.B. Surf, Ltd.(“P.B. Surf”), a Florida limited partnership, and to enter an order dismissing the action for lack of personal jurisdiction.We grant the petition and issue the writ.

I.Factual Background and Procedural History

This dispute concerns the disbursement of proceeds from the sale of the San Paloma apartment complex in Houston, Texas.According to P.B. Surf, at the time the San Paloma sale was scheduled to close in late October 2011, a dispute arose over who was entitled to the net proceeds of the sale and where the net proceeds were to be deposited after the closing.On October 28, 2011, after the closing, Alamo wired a portion of the net proceeds from the San Paloma sale to a Birmingham Wells Fargo bank account pursuant to instructions from several of the sellers.

P.B. Surf filed a verified complaint against Alamo, as the escrow agent, and several other defendants, alleging, among other things, conspiracy.Alamo moved the trial court, pursuant to Rule 12(b)(2), Ala. R. Civ. P., to dismiss P.B. Surf's claims against it for lack of personal jurisdiction, attaching to its motion the affidavit of David Pitschmann, the senior vice president and co-general counsel for Alamo.Before the trial court ruled on Alamo's motion to dismiss, P.B. Surf filed an amended complaint, which was not verified, alleging various claims against Alamo, as the escrow agent, and several other defendants, including Guy A. Savage, and G.J. Willem Noltes, who both had an ownership interest in one of the companies that was involved in the sale of the San Paloma apartment complex, alleging that there was a conspiracy among the defendants in the wiring of funds from Alamo to the Birmingham Wells Fargo bank account.In its amended complaint, P.B. Surf alleged that Alamo was partially responsible for what it alleged was the improper distribution of the proceeds among Savage, Noltes, and P.B. Surf.The amended complaint contains the following factual averments:

“15. P.B. Surf is a limited partnership operated by David A. Brannen and other partners.

“16.Investment Realty Holdings, LLC is jointly owned by Savage and Noltes, each owning a fifty percent (50%) interest in the entity.

“17. P.B. Surf and Investment Realty Holdings, LLC are the only members of Investment Realty Series II, LLC(‘IRS–II’).P.B. Surf owns a sixty-percent (60%) interest in IRS–II, and Investment Realty Holdings, LLC owns the remaining forty-percent (40%) interest in IRS–II.P.B. Surf provided the only capital used to create the entity, investing approximately $5,900,000.00 in cash.Investment Realty Holdings, LLC, Savage and Noltes did not provide any equity contribution to IRS–II.

“18.In February 2007, P.B. Surf and Investment Realty Holdings, LLC entered into an Operating Agreement to govern the operation of IRS–II.That agreement controls and governs the parties' relationship with respect to all business matters as it relates to the operation of the San Paloma property, the sale of which forms the basis of the present dispute between the parties.

“19.The IRS–II Operating Agreement provides that P.B. Surf made the only cash contribution to the entity.Further, the Operating Agreement provides that, upon the sale of the San Paloma property, which is considered a ‘Capital Transaction’, all monies are to be distributed as follows: first, an 11% return on its approximate $5.9 million investment was to be paid to P.B. Surf; second, P.B. Surf was entitled to a full repayment of its approximate $5.9 million investment; third, only after P.B. Surf had been paid both of these sums, any remaining funds were to be allocated between P.B. Surf and [Investment Realty Holdings, LLC,] according to their respective interests in IRS–II, such that P.B. Surf would receive 60% and [Investment Realty Holdings, LLC,] would receive 40% of any remaining amount.

“20.IRS–II then entered into a contract with WCSE San Paloma, LLC whereby they created San Paloma Investments, LLC.Each entity held a fifty-percent (50%) interest in San Paloma Investments, LLC.

“21.San Paloma Investments, LLC then entered into a partnership agreement with Paloma General Partner, LLC, creating San Paloma Partners, L.P.San Paloma Investments, LLC was a ninety-nine percent (99%) limited partner in the entity, with Paloma General Partner, LLC acting as a one percent (1%) general partner.

“22.San Paloma Partners, L.P. was created to, and did in fact, purchase, own, and operate certain real property located in Texas referred to by the parties as ‘San Paloma.’The sale of this property in October 2011 and the subsequent distribution of the sales proceeds are the subject of this lawsuit.

“ The Closing of San Paloma

“23.The San Paloma deal resulted in substantial financial loss to P.B. Surf, which had contributed the entire capital amount (approximately $5.9 million) used to purchase San Paloma.

“24.On or about July 27, 2011, San Paloma Partners entered into a purchase and sale agreement with ISBI San Paloma, LLC, successor-by-assignment to Francis Property Management, Inc.(‘ISBI’), whereby San Paloma Partners agreed to sell the San Paloma property to ISBI (the ‘San Paloma Sale’).P.B. Surf's consent was required to sell the San Paloma property, as provided for in the IRS–II Operating Agreement.

“25.As a result of the San Paloma Sale, P.B. Surf stood to realize a loss of more than $5 million.

“26.On October 27, 2011, the San Paloma Sale was scheduled to close.Over the course of the day, due to Defendant Noltes, a dispute arose over who was entitled to the net proceeds of the sale and where the net proceeds were to be deposited after the sale closed.

“27.During the afternoon of October 27, 2011, P.B. Surf and Savage, through their attorney Patrick Hayes, consistently maintained that P.B. Surf was entitled to receive the entire net proceeds from the San Paloma Sale based on the relevant operating agreements, as provided above.The sale resulted in approximately $3.8 million in net proceeds, held in two portions: (1) $1,561,704.80 was held by Grandbridge Real Estate Capital, LLC, and is not the subject of this lawsuit, and (2) $2,277,057.08 was held in escrow by Alamo Title and is the subject of this lawsuit.Pursuant to the operating agreement, P.B. Surf was entitled to 100% of both sums of money.

“28.As a result of a dispute created by DefendantG.J. Willem Noltes during the closing on October 27, 2011, P.B. Surf, Savage, and Noltes, all acting through their counsel, agreed that, instead of wiring the Net Proceeds to a particular person or entity, DefendantAlamo Title Company(the company that held approximately $2.3 million of the net proceeds from the sale) would interplead the Net Proceeds in Court in Texas so that the proper distribution of the net proceeds could be determined by a judge.Given the dispute over the distribution of the Net Proceeds, this agreement was required in order to close the sale of San Paloma.Absent this agreement, the sale would not have closed.

“29.All parties to the present dispute were in agreement with this proposed course of conduct and, as of the close of business on October 27, 2011, P.B. Surf had been informed and believed that the contemplated Texas interpleader would occur based on the parties' agreement and written confirmation delivered to Alamo Title Company, coupled with Alamo's consent to this arrangement and planned interpleader action.

“30.Unbeknownst to P.B. Surf, however, Savage and Noltes began immediately conspiring to seize control of the Net Proceeds before Alamo could interplead the funds into a Texas court.Savage and Noltes both admitted, under oath, that on the afternoon and evening of October 27, 2011, Savage and Noltes discussed ways by which they could obtain the Net Proceeds from Alamo and prevent P.B. Surf from obtaining any of the Net Proceeds.Savage and Noltes agreed to meet in Birmingham, Alabama on the following morning, October, 28, 2011, to determine how they could instruct Alamo to wire the funds to an account controlled by Savage.

“ October 28, 2011

“31.On the morning of October 28, 2011, without the knowledge or participation of P.B. Surf, Savage and Noltes accomplished their plan.On that morning, Noltes and Savage called Alamo, purporting to act on behalf of San Paloma Partners.Noltes and Savage first called Alamo by telephone and instructed Alamo to wire the funds into a Wells Fargo account in Birmingham, Alabama, which was in the name of San Paloma Partners, L.P.At that time, Savage was the only signatory on the bank account, but Noltes insisted later that morning at the Wells Fargo bank branch that Savage add him as a signatory that day, which Savage did.Noltes and Savage confirmed their verbal instruction to Alamo in writing, via email, that same morning.

“32.Neither P.B. Surf, David Brannen, nor Patrick Hayes(attorney for both P.B. Surf and Savage) were copied on these October 28, 2011 correspondences from Savage and Noltes to Alamo, nor otherwise informed of the instructions given to Alamo.Savage and Noltes purposefully and admittedly concealed their actions from P.B. Surf, Brannen, and Hayes.

“33.That same morning, without consulting or notifying P.B. Surf, David Brannen or...