Regions Bank v. Commonwealth Land Title Ins. Co.
| Decision Date | 18 September 2013 |
| Docket Number | Case No. 11–23257–Civ. |
| Citation | 977 F.Supp.2d 1237 |
| Court | U.S. District Court — Southern District of Florida |
| Parties | REGIONS BANK, Plaintiff, v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant. |
OPINION TEXT STARTS HERE
Brian P. Yates, David Stuart Garbett, Joseph David Perkins, Gary Thomas Stiphany, Garbett, Stiphany, Allen & Roza, P.A., Miami, FL, for Plaintiff.
Jeffrey Clark Schneider, Stuart Isaac Grossman, Levine Kellogg Lehman Schneider & Grossman LLP, Jezabel Llorente, Jezabel Llorente, P.A., Miami, FL, for Defendant.
VERDICT AND ORDER FOLLOWING NON–JURY TRIAL ON DEFENDANT'S REFORMATION CLAIM
This case arises out of a failed plan to develop residential housing on a tract of land in Fort Myers, Florida during the height of the real estate boom in 2006. When the real estate market crashed prior to the development of the land, the mortgage on the property went into default and Plaintiff Regions Bank (“Regions”), mortgagee, brought a foreclosure action in state court in Lee County, Florida. See Regions Bank v. Prime Enters., LLC, et al., Case No. 10–CA–057197 (Fla. 20th Cir.Ct.2010) Defendant Commonwealth Title Insurance Company (“Commonwealth”) had issued a title policy (“Policy”) insuring Regions's interest in the property. When a dispute arose with a defendant in the state court litigation, Regions asked Commonwealth to defend it in the case and to indemnify it against any losses. Commonwealth disputed its duty to defend and indemnify so Regions brought this declaratory judgment action seeking a determination of its rights under the Policy. Endorsement 5 of the Policy, as written, is unequivocal and would require that Commonwealth defend and indemnify Regions. However, Commonwealth claims that there was a mutual mistake in the preparation of Endorsement 5 and, as part of its counterclaim in this case, Commonwealth seeks reformation of the terms of Endorsement 5.
The Court held a non jury trial on the reformation claim. The parties subsequently submitted proposed findings of fact and conclusions of law which the Court has carefully reviewed.
After considering the credible testimony and evidence and the applicable law, the Court finds that Commonwealth has failed to meet its burden of proof; Commonwealth has failed to establish a mutual mistake by clear and convincing evidence. Therefore, for the reasons more fully set forth below, the Court finds in favor of Regions and against Commonwealth on the reformation claim.
The facts of this case have to be viewed through the lens of the players in the real estate market bubble of the mid–2000's. Property prices were skyrocketing; interest rates were at all-time lows; developers were scrambling to snatch up parcels of land before their competitors got them; banks were loaning huge sums of money in a haphazard way, certain that their interest in the property would be protected by the continued rise in real estate prices. It was in this atmosphere of “irrational exuberance” that multi-million dollar real estate transactions were taking place quickly and without appropriate oversight and caution and care. It is against this backdrop that the actions of the parties in this case must be viewed. While one might think and hope that participants in a $36.3 million transaction would exercise the same level of care as a member of the bomb squad defusing a bomb, such was not the case here. And, just like a careless bomb technician, the results of carelessness can be devastating.
It is obvious to the Court that both Regions's attorney and Commonwealth's agent were careless, one might say even reckless, in the way they communicated with each other and reviewed each other's communications, perhaps in their haste to get the deal done. Each sent emails that set forth positions that were diametrically opposed to other positions that they were taking at virtually the same time. Each agreed with propositions set forth in the other's emails that were diametrically opposed to other positions they were taking at virtually the same time. The Court's job to discern the true intent of the parties in light of these contradictory emails is quite difficult. But, at the end of the day, the Court finds that the documents presented to Regions at the time of the closing of the loan unequivocally support Regions's position in this case: the Policy and its Endorsements accurately reflect the understanding and agreement of the parties at the time of the transaction. And, alternatively, if any mistake was ultimately made, it was a unilateral mistake by Commonwealth's agent whose zeal to close the deal, attempts to hide or obfuscate the impact of the density agreement from lenders (or lack of understanding of its true impact on the title to the land), and inattention to detail led to the wording of the Policy and its endorsements, including Endorsement 5. All of these issues were made more likely to arise because of the agent's divided loyalties based upon by his dual roles as attorney for the developer and agent for Commonwealth.
Prime Homes of Portofino Vineyards, Ltd. (“Portofino”) is the owner of the Property. Portofino funded its purchase of the Property by receiving a loan from an affiliated entity, Prime Homebuilders, Inc. (“PHI”), to which it gave a mortgage on the Property.
Larry Abbo (“Abbo”) is the general partner and a principal of Portofino, the vice president of Prime Homes, Inc. (“Prime Homes”), the manager of Prime Enterprises, LLC (“Prime Enterprises”), and the vice president of PHI.
Portofino, PHI, Prime Homes, and Prime Enterprises are collectively referred to as The Prime Entitles.Steven B. Greenfield: attorney, title insurance agent and closing agent
Attorney Steven B. Greenfield (“Greenfield”) represented Abbo and The Prime Entities at all relevant times. Abbo has been Greenfield's client for approximately 18–19 years and is also one of his personal friends.
Greenfield is also a title agent for Commonwealth and wrote the Policy at issue in this case. At all material times, Steven B. Greenfield, Esq. acted as: (1) the principal of Steven B. Greenfield, P.A. (collectively, Greenfield, Esq. and Greenfield, P.A. hereinafter referred to as “Greenfield”), (2) the policy-issuing agent for Commonwealth; (3) counsel to the Prime Entities, and Abbo; and (4) the closing agent for the March 30, 2006 closing of Regions's loan.
Prior to purchasing the Property, Portofino's related entity, Prime Homes, entered into a Purchase and Sale Contract for Density Units (the “Density Agreement”) with the master developer of the Property, Paul H. Freeman (“Freeman.”). The purpose of the Density Agreement was to obtain the right, from Freeman, to build an additional 392 units on the Property. Without Freeman's development rights, only 432 units could be developed on the Property pursuant to a Covenant dated December 14, 2004 between Villages of Cypress Islands, LLP and Freeman.
Greenfield and Freeman negotiated and drafted the Density Agreement. Regions was not a party to the Density Agreement.
Greenfield was also the escrow agent under the Density Agreement.
Abbo signed the Density Agreement on behalf of Prime Homes. Prime Homes then assigned its rights under the Density Agreement to Portofino. Because the Density Agreement gave Portofino the ability to purchase additional density for the Property, it increased the Property's value ( i.e., if more homes could be built on the Property, the Property could generate more revenue).
The Density Agreement provides that on its effective date, December 10, 2005, the Purchaser was obligated to pay a $100,000 initial deposit to Greenfield as escrow agent; and, within 5 days after issuance of a Development Order on the Property, the Purchaser was obligated to pay a $250,000 second deposit to Greenfield as Escrow Agent. Inexplicably, neither deposit was ever paid.
The Density Agreement also provides that simultaneously with the purchase of the Property, a Memorandum of the Density Agreement would be recorded in the Lee County, Florida Public Records, and that the Memorandum would create a lien on the Property to secure the Purchaser's obligation to pay for excess density utilized by Purchaser following issuance of the Development Order by Lee County approving excess density.
The Density Agreement provides that upon the sale of the first 250 Extra Density Units, Freeman would receive $23,000 per unit and would receive $18,000 per unit upon the sale of the next 200 Excess Density Units.
Timeline of relevant events2004
A covenant limiting density on the Property is entered. Each tract of land has a limited number of units that may be built on it.
Portofino enters into an agreement to purchase the Property with a closing date of February 14, 2006.
In an email to Jane Rankin, Esq., counsel for the then-proposed lender Bank of America (the “Rankin Email”), Greenfield explained his understanding of the Density Agreement and the effect of the Memorandum once recorded and relative priorities between the lender's mortgage and Freeman's interest in the Property, as follows:
Please note that this memorandum will only secure the “additional density.” I am seeking bank approval for the mechanism as it will mean the bank's mortgage will be in a second position to the memorandum as to the additional units; the bank will be in a first position for the land which is identified in the actual purchase and sale contract. (emphasis added)
Greenfield's explanation was predicated on ¶ 11(A) of the Density Agreement, which reads:
Prior to the recording of the Memorandum provided for herein above, Purchaser shall diligently use all reasonable efforts to obtain approval from its lender (Bank of America) as to the priority of the Memorandum over the lender's mortgage (Lender's Approval), as that priority relates to the Excess Density.
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