Wiggins v. Ellis, Case No. 2:12-cv-02705-SGC
| Decision Date | 12 February 2021 |
| Docket Number | Case No. 2:12-cv-02705-SGC |
| Parties | ROBERT L. WIGGINS, JR., et al., Plaintiffs, v. FRANK ELLIS, IV, et al., Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
"For want of a nail the shoe was lost." Thus begins the proverb describing a cascading series of increasingly catastrophic events—ultimately leading to the loss of a kingdom—precipitated by a seemingly insignificant failure of a horseshoe nail. If some misguided soul were inspired to distill the story of this confounding lawsuit to a proverb, it would begin: "For want of a valid condominium declaration . . . ." While the defective condominium declaration in this case has not yet led to the loss of a kingdom, it has spawned numerous lawsuits in both state and federal courts in Alabama spanning more than a decade. This memorandum opinion does not bring this matter to its merciful end, but it does cull the herd of claims and counterclaims to the core of the dispute: the consequences flowing from want of a valid condominium declaration.
The original complaint filed in this district more than eight years ago—asserting only claims arising under state law—did not specify the basis for federal jurisdiction; nor did it include any jurisdictional allegations. (Doc. 1). Subsequent iterations of the complaint were likewise silent as to federal subject matter jurisdiction. (Docs. 22, 94).2 Because every version the complaint named as a defendant Federal Deposit Insurance Corporation ("FDIC"), the lack of jurisdictional allegations was proper under the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), 12 U.S.C. § 1819.
Under FIRREA, civil suits in which FDIC is a party "in any capacity" are deemed to arise under the laws of the United States. § 1819(b)(2)(A). This provision overrides the general "well-pleaded complaint rule," which requires the basis for federal-question jurisdiction to appear on the face of the complaint. See Lindley v. Fed. Deposit Ins. Corp., 733 F.3d 1043, 1050-51 (11th Cir. 2013). The Eleventh Circuit has noted § 1819 "evince[s] a clear congressional intent to provide a federal forum when the FDIC is made a party." Castleberry v. Goldome Credit Corp., 408 F.3d 773, 788 (11th Cir. 2005); see Fed. Deposit Ins. Corp. v. N. Savannah Props., LLC, 686 F.3d 1254, 1258 (11th Cir. 2012) (). Indeed, where FDIC is a party, the party challenging federal jurisdiction has the burden of overcoming the presumption of its existence. See Lindley, 733 F.3d at 1050-51; Bishop v. Darby Bank & Trust Co., No. 10-0295, 2011 WL 4499575 *1 (S.D. Ga. Sept. 27, 2011).3 The court has previously noted the existence of federal jurisdiction. (Doc. 16 at 16, adopted in relevant part by Docs. 20, 21) (acknowledging Plaintiffs could have brought this claim in state court, but FDIC would likely have removed it under 12 U.S.C. § 1819); (Doc. 156 at 15 adopted by Docs. 178, 179) (recognizing 12 U.S.C. § 1821(d)(6) provides federal jurisdiction for administratively exhausted claims against FDIC).4
By virtue of the court's memorandum opinion granting summary judgment as to the claims against it, FDIC is no longer a party to this lawsuit. (Doc. 308).However, the Eleventh Circuit has held a district court retains original jurisdiction over pendent claims under state law against non-FDIC parties, even after FDIC is dismissed. See, e.g., Lindley, 733 F.3d at 1058. ( trial court's dismissal of state law claims against non-FDIC defendants under 28 U.S.C. § 1367(c)(3)). Accordingly, the court has subject matter jurisdiction over the remaining claims in this lawsuit.
This action arises from a long series of loans related to real estate transactions between the parties. Plaintiffs, Robert L. Wiggins, Jr. ("Wiggins"), and Wolf Pup, LLC ("Wolf Pup"), (collectively, "Plaintiffs"), financed the purchase and construction of Wolf Bay Landing, a real estate development in Baldwin County, Alabama, through a loan (the "Loan") with Superior Bank ("Superior") in 2005. In 2007, Plaintiffs sold the property (the "2007 Transaction") to Defendant Character Counts, LLC ("CCLLC"), a single asset entity owned by Defendant Frank P. Ellis, IV ("Ellis"), and Joseph Scott Raley ("Raley"). CCLLC purchased the property by assuming Plaintiffs' Loan with Superior.
In 2010, Superior sold the Loan to Ellis, who financed the purchase with a personal loan from Superior. In connection with selling the original Loan to Ellis, Superior paid down the outstanding balance on the Loan by seizing money from accounts funded by Plaintiffs during the 2007 Transaction.6 In 2014, Ellis foreclosed on the original Loan and sold the property to Trinity Retreat, LLC ("Trinity Retreat"), a single asset entity owned by Ellis's wife, Mihyon Ellis. Ellis subsequently became a member of Trinity Retreat, which still owns Wolf Bay Landing. Having provided this overview, the following pages discuss the facts of this case in more detail.
Wiggins is a member of one of the entity-members of Wolf Pup; Raley is also a member. (E.g. Doc. 257 at 12; Doc. 255-1 at 18). Wolf Pup built and owned Wolf Bay Landing, a 62-unit real estate development, which was financed through Superior. (Doc. 257 at 1). The Loan with Superior involved several transactions in September and December 2005, and Wolf Pup's entire indebtedness to Superior was approximately $17.5 million. (Id. at 1-2).
The Loan was secured by a mortgage on the Property and also by continuing guaranties (the "Guaranties") from Wiggins and others associated with Wolf BayLanding. (Doc. 244-2; see, e.g., Doc. 257 at 2).7 Under the Guaranties, Wiggins and the other guarantors "jointly and severally unconditionally guarantee and promise to pay the Bank" the indebtedness under the Loan. (Doc. 244-2 at 14). The Guaranties further provide in part:
Construction of Wolf Bay Landing was completed in late 2006 or early 2007, and Wolf Pup had secured a number of pre-construction sales contracts for condominium units. (Doc. 239 at 5; Doc. 241 at 5). Meanwhile, the Gulf Coast condo market deteriorated in 2007, and the buyers refused to close on their sales contracts. (Doc. 250-2 at 8-9; Doc. 255-2 at 8-9; see, e.g., Doc. 239 at 6).8 Wolf Pup initiated litigation (the "Bowles Litigation")9 in February 2007 in Baldwin Count Circuit Court, seeking the buyers' specific performance of the sales contracts. (See Doc. 239 at 6).
On April 17, 2007, Wolf Pup recorded a Declaration of Condominium (the "Condo Declaration"), purporting to establish Wolf Bay Landing as a condominium under Alabama law. (Doc. 244-10). Peacock drafted and filed the Condo Declaration. (Id. at 2). By the summer of 2007, facing past-due notices from Superior regarding interest payments under the Loan, Wolf Pup was looking to sell Wolf Bay Landing. (See Doc. 239 at 8).10
In late July or early August 2007, Wolf Pup began communicating with Ellis regarding the possibility of purchasing Wolf Bay Landing. (Doc. 239 at 9).11 Ellis was under the impression the Condo Declaration was valid under Alabama law and testified he did not know the "full nature" of the Bowles Litigation. (Id. at 10). Ellis did not investigate the Bowles litigation and never performed due diligence on Wolf Bay Landing; he testified he had no reason to look behind the curtain because he trusted the people with whom he was dealing. (See Doc. 276 at 5). Ellis also testified he never inquired about the status of the Condo Declaration and that no one with Wolf Pup ever told him it was valid under Alabama law. (Doc. 255-1 at 18-19; see Doc. 276 at 6).12 Ellis further testified he had no direct contact with Wiggins in 2007. (Doc. 257 at 3). However, Ellis assumed he was negotiating with Wiggins because many of the documents they exchanged bore Wiggins's signature. (Id.).
During their negotiations, the parties at one time contemplated Ellis's outright purchase of Wolf Bay Landing. (See Doc. 277 at 15-16). In preparationfor that plan, the parties drafted and circulated a Real Estate Purchase Agreement in August 2007. (Doc. 259-1 SEALED).13 Indeed, both Wolf Pup and Ellis signed the Real Estate Purchase Agreement on August 9, 2007. (Id. at 7 SEALED). However, the legal effect of the Real Estate Purchase Agreement is unclear. (See ...
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