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Wiggins v. FDIC

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

January 15, 2015

ROBERT L. WIGGINS, JR., et al., Plaintiffs,
FDIC, as Receiver of Superior Bank, Defendant

For Robert L Wiggins, Jr, Individually, Wolf Pup, LLC, by and through Robert L Wiggins, Jr., Plaintiffs: Dennis G Pantazis, WIGGINS CHILDS PANTAZIS FISHER & GOLDFARB LLC, Birmingham, AL; J Chris Cochran, W Lee Pittman, PITTMAN DUTTON & HELLUMS, Birmingham, AL; Rocco Calamusa, Jr, WIGGINS CHILDS QUINN & PANTAZIS LLC, Birmingham, AL.

For FDIC, as Receiver of Superior Bank, Defendant: John Dearman Herndon, LEAD ATTORNEY, HUIE FERNAMBUCQ & STEWART LLP, Birmingham, AL.



The above-captioned civil action is before the undersigned on the motion to dismiss[1] filed by defendant. (Doc. 4). Plaintiffs, Robert L. Wiggins, Jr., and Wolf Pup, LLC, by and through Robert L. Wiggins, Jr., commenced this action by filing a complaint against FDIC, as Receiver of Superior Bank (FDIC-R). (Doc. 1). In broad strokes, this case arises from a construction loan originally secured by plaintiffs and owned by Superior Bank. The loan was later assumed by Character Counts, LLC and its 99% owner, Frank P. Ellis, IV--non-parties to this lawsuit as currently pled. Plaintiffs also allege Ellis individually purchased the loan from Superior Bank, which financed the purchase.

The complaint alleges causes of action for a declaratory judgment to release a surety pursuant to Ala. Code § 8-3-13 (Count One); a declaratory judgment to discharge sureties due to unauthorized modifications and extensions of a contract (Count Two); breach of the implied duty of good faith and fair dealing (Count Three); money paid and civil conspiracy (Counts Four and Five)[2]; and conversion (Count Six).

The undersigned notes at the outset that plaintiffs have contested the previously assigned magistrate judge's conversion of the motion to dismiss to a motion for summary judgment, asserting that plaintiffs are unable to properly respond to the motion without first conducting discovery. (Doc. 9 at 5-8). In apparent agreement with plaintiffs' position regarding the conversion of the motion, FDIC-R has tailored its response by withdrawing some of the grounds asserted in its motion, reserving those arguments for a later point in the litigation. (Doc. 12).

FDIC-R's motion originally asserted five grounds for dismissal. FDIC-R has withdrawn three of its arguments without prejudice to its ability to reassert the arguments at a later date: (1) plaintiffs' claims are due to be dismissed because plaintiffs failed to present their claims to FDIC-R first in their request for administrative review; (2) federal law deprives the court of jurisdiction to grant injunctive relief against FDIC-R as Receiver, requiring Counts One and Two to be dismissed for want of subject matter jurisdiction; [3] and (3) Counts Four through Six are due to be dismissed because the alleged claim of wrongful seizure was not included in the administrative claim.

This leaves two grounds for dismissal still pending: (1) that plaintiffs failed to add necessary parties, mandating dismissal of Counts One and Two; and (2) that Alabama law does not impose a duty of good faith on commercial contracts, mandating dismissal of Count Three. The two remaining issues have been addressed by the parties without reference to any evidentiary materials. Therefore, the motion filed by defendant is now being considered as a motion to dismiss.

I. Motion to Dismiss Standard

When considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court construes the complaint in the light most favorable to the plaintiff and accepts all well-pled facts alleged in the complaint as true. Although it must accept well-pled facts as true, a court is not required to accept a plaintiff's legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (noting " the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions"). In evaluating the sufficiency of a plaintiff's pleadings, a court can make reasonable inferences in the plaintiff's favor, but is " not required to draw plaintiff's inference." Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005). Similarly, " unwarranted deductions of fact" in a complaint are not admitted as true for the purpose of testing the sufficiency of plaintiff's allegations. Id.; see also Iqbal, 556 U.S. at 681(stating conclusory allegations are " not entitled to be assumed true").

A complaint may be dismissed if the facts as pled do not state a claim for relief that is plausible on its face. See Iqbal, 556 U.S. at 679 (explaining " only a complaint that states a plausible claim for relief survives a motion to dismiss"); Bell A. Corp. v. Twombly, 550 U.S. 544, 561-62, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (retiring the prior " unless it appears beyond doubt that the plaintiff can prove no set of facts" standard). In Twombly, the Supreme Court emphasized a complaint " requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. Factual allegations in a complaint need not be detailed but " must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555 (internal citations and emphasis omitted).

In Iqbal, the Supreme Court reiterated that, although Rule 8 of the Federal Rules of Civil Procedure does not require detailed factual allegations, it does demand " more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. A complaint must state a plausible claim for relief, and " [a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The mere possibility that the defendant acted unlawfully is insufficient to survive a motion to dismiss. Id. The well-pled allegations must nudge the claim " across the line from conceivable to plausible." Twombly, 550 U.S. at 570.

II. Facts

A. Allegations in the Complaint

Plaintiffs allege Wolf Pup, LLC (" Wolf Pup"), owned a 62-unit development named Wolf Bay Landings which was financed through a loan with Superior Bank for $17, 500, 000. The loan was secured by the personal guaranties of the individual owners of Wolf Pup, which included Robert L. Wiggins, Jr. (Doc. 1 at 1). Wiggins's guaranty specifically stated his guaranty applied only to the indebtedness of Wolf Pup on the loan. (Id.).

Wolf Pup subsequently agreed to sell Wolf Bay Landings to Frank Ellis, IV, acting through Character Counts, LLC (" CCLLC"), and to allow Ellis and CCLLC to finance the purchase by assuming Wolf Pup's construction loan with Superior Bank in the approximate amount of $17, 500, 000. Ellis owns 99% of CCLLC. (Id.). CCLLC purchased Wolf Bay Landings from Wolf Pup on October 5, 2007, by executing a Loan Assumption and Modification Agreement with Superior Bank. Ellis and CCLLC acknowledged and agreed that all references to the " Borrower" under the loan documents would be deemed to refer to CCLLC. Ellis and CCLLC also executed a parallel agreement which further defined the " Borrowers" as Frank Ellis, IV, and Character Counts, LLC. (Id. at 1-2). The complaint alleges that, upon entering the Loan Assumption and Modification Agreement with Superior Bank, CCLLC became the " Borrower" and principal obligor of the loan and Wolf Pup became a secondary surety by operation of law. (Id. at 2).

Prior to CCLLC's assumption of the loan, Wiggins posted with Superior Bank a Certificate of Deposit in the amount of $1, 500, 000, plus accrued interest, as an accommodation for Wolf Pup's original loan for the construction of Wolf Bay Landings. Ellis and CCLLC executed a Repayment Agreement which required Ellis and CCLLC to " immediately repay" to Wiggins any portion of his Certificate of Deposit or accrued interest that Superior Bank might seize or apply to Ellis's and CCLLC's indebtedness for the purchase of Wolf Bay Landings. (Id. at 2).

Wolf Pup provided an interest reserve in an amount exceeding $560, 000 as further collateral for Wolf Pup's original loan for the construction of Wolf Bay Landings. As part of the Repayment Agreement, Ellis and CCLLC also agreed to immediately repay any portion of the interest reserve seized by Superior Bank or applied to Ellis's and CCLLC's indebtedness for the purchase of Wolf Bay Landings. (Id. at 2).

Wolf Pup claims it never executed a guaranty for any aspect of the loan[4] or Loan Assumption and Modification Agreement. It alleges that, to the extent Wolf Pup may have become a surety by operation of law, it has never entered into any agreement with any person or entity that would waive Wolf Pup's rights to be protected from impairment of its interest as a surety or to be discharged from liability in the event that the time or manner of payment of the loan assumed by CCLLC was altered without Wolf Pup's knowledge or consent. (Id. at 2-3).

On December 23, 2010, Superior Bank seized the Certificate of Deposit and interest reserve account and applied the funds to reduce the principal indebtedness of Ellis and CCLLC to Superior Bank pursuant to the Loan Assumption and Modification Agreement. Simultaneously, via a Loan Sale Agreement signed by Ellis in his individual capacity, Superior Bank sold Ellis the loan CCLLC had assumed. Ellis, the 99% owner of CCLLC, thereby became the creditor of CCLLC on that loan. To finance the purchase of CCLLC's loan with Superior Bank, Ellis borrowed $16, 046, 575.20 from Superior Bank in his individual name pursuant to the Loan Sale Agreement. This agreement split the original debt between a recourse " Note A" in the amount of $10, 700, 000.00 and a non-recourse " Note B" in the amount of $5, 346, 575.20, for which Ellis is apparently not personally liable. (Id. at 4-5). Wiggins and Wolf Pup claim they did not know about or consent to the Loan Sale Agreement between Ellis and Superior Bank. (Id. at 3). Plaintiffs were first notified that Ellis had bought Superior Bank's loan to CCLLC on January 28, 2011. (Id.).

Superior Bank and Superior Bank, N.A.[5] were served with a written demand by the sureties (Wiggins and Wolf Pup), pursuant to ALA. CODE § 8-3-13, that an action be brought against the principal debtor, CCLLC, for repayment of CCLLC's loan. (Id. at 3). On October 18, 2011, Superior Bank, N.A. responded to the demand by stating: " Any claims or demands you may have concerning the Wolf Pup Loan should be made directly to Mr. Frank P. Ellis, IV, the owner of such loan." Superior Bank N.A. also stated:

As you are aware, the Wolf Pup Loan was sold by Superior Bank, federal savings bank, to Frank P. Ellis, IV, on December 23, 2010. Also, and as you are aware, Superior Bank financed the purchase of such Loan by Frank P. Ellis, IV (the " Ellis Loan") and, in connection with the Ellis Loan, took back a security ...

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