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Se Property Holdings, LLC v. Parks

United States District Court, S.D. Alabama, Southern Division

July 24, 2014

SE PROPERTY HOLDINGS, LLC, Plaintiff,
v.
WILLIAM PARKS; REGINA PARKS; PARKS FAMILY, LLC; and 1307, LLC, Defendants.

ORDER

KRISTI K. DuBOSE, District Judge.

This action is before the Court on defendants William and Regina Parks' motion to stay proceeding pending resolution of Baldwin County Circuit Court actions (doc. 25) and the response in opposition filed by plaintiff SE Property Holdings, LLC (SEPH) (doc. 29). Upon consideration and for the reasons set forth herein, the motion is GRANTED.

I. Background

In 2006, along with thirty-five other investors, William and Regina Parks executed Continuing Unlimited Guaranty Agreements to guarantee Water's Edge, LLC's two loans with Vision Bank, SEPH's predecessor, for the development of a marina in Fort Morgan, Alabama. In 2008, the Parks executed an Acknowledgment, Ratification and Consent to reaffirm this obligation and an increase in the loans. Water's Edge defaulted on its loans. In June 2010 Vision Bank demanded payment from the Parks and the other guarantors pursuant to their guarantee agreements. (Doc. 21; Doc. 21-7; Doc. 21-8) In 2010, Vision Bank filed suit on the loan and the guarantee agreements in the Circuit Court of Baldwin County, Alabama. See Vision Bank v. Water's Edge, et al., Civil Action No. 2010-901862.

In 2007, along with ten other investors, the Parks executed Continuing Guaranty Agreements to guarantee Riverfront LLC's loan with Vision Bank for the development of a condominium at Orange Beach, Alabama. Riverfront defaulted on its loan. In August 2010, Vision Bank demanded payment from the Parks and the other guarantors pursuant to their guarantees. (Doc. 21; Doc. 21-11) In 2010, Vision Bank filed suit on the loan and the guarantee agreements in the Circuit Court of Baldwin County Alabama. See Vision Bank v. Riverfront, LLC, et al., Civil Action No. 2010-902197.

In September 2009, the Parks formed Parks Family, LLC and they were the sole members. In February 2010, they transferred six parcels of real property to this LLC. In March 2010, the Parks formed 1307 LLC and they were the sole members. That same month, they transferred one parcel of real property to this LLC.

In February 2014, SEPH filed this action pursuant to the Alabama Uniform Fraudulent Transfer Act, Ala. Code. ยง 8-9A-1, (AUFTA) to avoid and set aside conveyances of real property in Baldwin County, Alabama. (Doc. 21, amended complaint) SEPH alleges that the transfers to the LLCs were fraudulently made to place these parcels of real property beyond reach because the Parks owe SEPH an amount in excess of $20, 000, 000.00 for the Waters Edge and Riverfront loans and owe Wells Fargo an amount of about $195, 000.00. SEPH seeks a judgment avoiding the transfers of real property. The Parks now move the Court to stay this action pending resolution of the two underlying actions in the Baldwin County Circuit Court. (Doc. 25) SEPH opposes the motion. (Doc. 29)

II. Analysis

The Parks argue that SEPH's fraudulent transfer claims depend on whether they owe SEPH on the Water's Edge and Riverfront guarantee agreements. The Parks assert that these same debts are the subject of two actions pending in the Baldwin County Circuit Court.

The Parks state that the Water's Edge action is set for trial in September 2014, following extensive litigation beginning in 2010. In that action, the Parks challenge the validity of the same guarantee agreements that form the basis of SEPH's claims of fraudulent transfer in this action. The Parks have asserted affirmative defenses and counterclaims, including a counterclaim to rescind or cancel the guarantees and for release from the obligation. They also seek declaratory judgment that the guarantees are unenforceable and that SEPH is prohibited from any action based on the guarantees.

The Parks also state that the Riverfront action is set for trial in March 2015 and has been subject to similar extensive litigation beginning in 2010. SEPH seeks to enforce the Parks' guarantee agreements. The Parks asserted the same or similar affirmative defenses and counterclaims and added seven counterclaims which if successful would result in a rescission or cancellation of the guarantee agreements..

The Parks argue that their liability for the guarantee agreements that form the basis of this fraudulent transfer action is contingent on the Baldwin County Circuit Court's decisions in Waters Edge and Riverfront. They argue that in the interest of judicial economy under the doctrine of abstention established in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), the action in this Court should be stayed pending the decisions.

Colorado River authorizes a federal court to dismiss or stay an action where there is an ongoing parallel action in state court, but only under "exceptional circumstances" because the general rule is that "the pendency of an action in the state court is no bar to proceedings concerning the same matter" in federal court and federal courts have a "virtually unflagging obligation to exercise their jurisdiction." Jackson-Platts v. General Elec. Capital Corp., 727 F.3d 1127, 1140 (11th Cir. 2013); Moorer v. Demopolis Waterworks and Sewer Bd., 374 F.3d 994, 997 (11th Cir. 2004); Ambrosia Coal & Constr. Co. v. Pages Morales, 368 F.3d 1320, 1328 (11th Cir. 2004). Abstention under the Colorado River doctrine is an "extraordinary and narrow exception to the duty of a District Court to adjudicate a controversyproperly before it." Colorado River, 424 U.S. at 813. The principles of abstention in Colorado River "rest on considerations of [w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'" Colorado River, 424 U.S. at 817 (citation omitted). Overall, applying Colorado River to stay a federal action "in deference to parallel state proceedings is an extraordinary step that should not be taken absent a danger of a serious waste of judicial resources." Noonan South, Inc. v. Volusia County, 841 F.2d 380, 383 (11th Cir.1988).

A parallel state action involves "substantially the same parties and substantially the same issues." Ambrosia Coal, 368 F.3d at 1330. "There is no clear test for deciding whether two cases contain substantially similar parties and issues. But... the balance... begins titled heavily in favor of the exercise of the [federal] court's jurisdiction... if there is any substantial doubt about whether two cases are parallel the court should not abstain." Acosta v. James A. Gustino, P.A., 478 Fed.Appx. 620, 622 (11th Cir. 2012). In this circuit, "a stay, not a dismissal, is the proper procedural ...


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