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Wiggins v. FDIC

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

September 30, 2019

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



         This case is before the court on defendant Cadence Bank’s (“Cadence”) motion for summary judgment as to Plaintiffs’ claim of tortious interference with a protected business relationship. (Doc. 243). Cadence moves this court to enter an order dismissing this last remaining claim against it pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Id.). The motion is fully briefed and ripe for review. (Docs. 243, 268, 284). After careful consideration of the parties’ briefing and for the reasons discussed below, the court finds Cadence’s motion for summary judgment is due to be granted.


         Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party asking for summary judgment always bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings or filings which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323. Once the moving party has met its burden, Rule 56(e) requires the non-moving party to go beyond the pleadings and by his own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing there is a genuine issue for trial. See Id . at 324.

         The substantive law identifies which facts are material and which are irrelevant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the non-movant. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. See id. at 249.


         This action arises from a long series of loans and real estate transactions between the parties. To summarize, these are the essential facts: Plaintiffs, Robert L. Wiggins, Jr. (“Wiggins”), and Wolf Pup, LLC (“Wolf Pup”), (collectively, “Plaintiffs”), financed the purchase and construction of a real estate development in Baldwin County, Alabama through a loan with Superior Bank (“Superior”). Plaintiffs then sold the property to defendant Character Counts, LLC (“CCLLC”), a single asset entity owned primarily by defendant Frank P. Ellis, IV (“Ellis”). Plaintiffs allowed CCLLC to purchase the property by assuming their loan with Superior. Superior later sold the loan to Ellis, who financed his purchase of the loan 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 Wiggins and Wolf Pup. Superior Bank failed, and defendant Federal Deposit Insurance Corporation (“FDIC”) was named as its receiver. After Superior failed, Cadence acquired Ellis’s personal loan from Superior, and Cadence eventually reached a settlement agreement with Ellis regarding payment of his personal loan. Eventually, Ellis foreclosed on the original loan and sold the property to defendant Trinity Retreat, LLC (“Trinity Retreat”), a single asset entity owned by Ellis’s wife, defendant Mihyon Ellis (“Mihyon”). Trinity Retreat financed its purchase of the property with a loan from defendant Bryant Bank (“Bryant”).

         A. Wolf Pup’s Loan from Superior Bank in 2005

         Wiggins is a member of Wolf Pup, a limited liability company organized under the laws of the State of Alabama. (Doc. 94 at ¶ 1; Doc. 112 at 3). Wolf Pup owned a 62-unit real estate development named Wolf Bay Landings located in Baldwin County, Alabama (the “Property”), which was financed through a loan with Superior Bank. (Id.). Wolf Pup’s loan with Superior involved several transactions.

         First, Wolf Pup borrowed $6 million from Superior in September 2005 to purchase the land for the development. (Doc. 90-5 at 1). In connection with this loan, Wolf Pup executed two promissory notes in September 2005, one note in the amount of $4.5 million and a second note in the amount of $1.5 million. (Doc. 90-5 at 1). Both promissory notes were secured by a Future Advance Mortgage, Assignment of Rents and Leases and Security Agreement dated September 30, 2005, which was recorded in the Probate Court of Baldwin County on October 10, 2005, as Instrument Number 928514 (the “Mortgage”). (Doc. 106 at 89-107). The Mortgage explicitly states it secures the entire $6 million loan, as evidenced by the two promissory notes in the amount of $4.5 million and $1.5 million. (Doc. 106 at 90). Additionally, the loan was also secured by a continuing guaranty from Wiggins. (Doc. 90-5 at 1). Finally, the terms of the Mortgage provide that the Mortgage is not satisfied until Wolf Pup’s entire indebtedness is paid. (See Doc. 106 at 92).

         Approximately three months later, Wolf Pup borrowed an additional $11.5 million from Superior Bank to construct a condominium development on the land, which brought Wolf Pup’s entire indebtedness to approximately $17.5 million. (Doc. 94 at ¶ 1; Doc. 90-5 at 1). Wolf Pup’s loan with Superior Bank, including both the original $6 million borrowed in September 2005 and the additional $11.5 million borrowed in December 2005, is referred to as “the Loan.”

         In connection with the additional amount borrowed, Wolf Pup executed a $15.9 million promissory note dated December 22, 2005, which amended, restated, and replaced the $4.5 million note. (Doc. 90-5 at 1). Further, the Mortgage was amended to account for and secure the additional loan amount, and Wolf Pup executed a first amendment to the Future Advance Mortgage, Assignment of Rents and Leases and Security Agreement on December 22, 2005 (the “First Amendment”). (See id.; Doc. 121-2). The First Amendment was recorded on January 20, 2006, in the Probate Court of Baldwin County as Instrument Number 950888. (Doc. 121-2 at 5). The First Amendment states Wolf Pup and Superior “intend for the Mortgage to secure, in addition to the $1.5 [million] Note, the Restated [$15.9 million] Note. . . .” (Id. at 2). The recorded amendment then explicitly states again “[i]t is the intent hereof that the Mortgage shall secure both the Restated [$15.9 million] Note and the $1.5 [million] Note.” (Id. at 3). Finally, the First Amendment provides that “[e]xcept as modified herein, all other terms and conditions of the Mortgage shall remain in full force and effect.” (Doc. 121-2 at 3).

         B. CCLLC’s Purchase of the Property and Assumption of the Loan

         In 2007, Wolf Pup sold the Property to CCLLC, an entity owned by Ellis and Joseph Scott Raley (“Raley”). (Doc. 94 at ¶ 2; Doc. 90-2). Wolf Pup allowed Ellis and CCLLC to finance the purchase of the Property by assuming the Loan. (Doc. 94 at ¶ 2; Doc. 90-5). In connection with the sale of the Property, Wolf Pup, CCLLC, and Superior Bank executed a Loan Assumption and Modification Agreement (the “Modification Agreement”), which was dated October 5, 2007. (Doc. 94 at ¶ 3; Doc. 90-5).

         Under the terms of the Modification Agreement, CCLLC obtained title to the Property, subject to the Mortgage, and CCLLC agreed to be bound by and perform all of the obligations of the Borrower under the loan documents.[2] (Doc. 90-5 at 2-3). Ellis was added as a guarantor when CCLLC assumed the Loan, but Wiggins remained a guarantor of the Loan. (Id. at 4-5, 17-18). Additionally, even though CCLLC assumed the Loan, Wolf Pup remained liable under the promissory notes and loan documents. (Id. at ¶ 5(c)).

         The Modification Agreement recognized that CCLLC delivered a promissory note to Wolf Pup to finance the sale of the Property (the “Purchase Note”) but stated the Purchase Note was not secured by any interest in the Property. (Id. at ¶ 5(g)). In addition, the agreement provided that nothing contained in it or done pursuant to it “shall affect or be construed to affect the encumbrance of, or warranty of title in, or conveyance effected by, the Mortgage, or priority thereof over other liens . . . .” (Id. at ¶ 1).

         The Modification Agreement required Wolf Pup to establish an interest reserve account at Superior in an amount not less than $560, 000 (the “Interest Reserve Account”) and gave Superior the right to debit the Account to make monthly interest payments on the Loan. (Id. at 6). The Modification Agreement also required that a $1.5 million certificate of deposit funded by Wiggins (the “Wiggins CD”) would continue to secure the Loan. (Id.). Under the agreement, Superior had the right to apply funds from the Wiggins CD towards the Loan in the event of a default that had not been cured within thirty days after notice of the default to CCLLC and Wolf Pup. (Id.).

         Ellis, Raley, and Wolf Pup also entered into a membership interest pledge agreement (the “Pledge Agreement”) in connection with CCLLC’s purchase of the Property and assumption of the Loan. (Doc. 90-2 at 1). In the Pledge Agreement, Ellis and Raley pledged their 100% membership interest in CCLLC to Wolf Pup as security for their obligations under the loan documents, and Ellis granted Wolf Pup a security interest in the membership interest in CCLLC. (Id. at ¶ 1). The Pledge Agreement provided that Ellis and Raley “shall be deemed to have executed a due and timely proxy in favor of [Wolf Pup] to be effective upon any [default by Ellis, Raley, or CCLLC under the Pledge Agreement or loan documents].” (Id. at ¶ 3). Also under the Pledge Agreement, Wolf Pup “shall have all rights and remedies of a secured party under the [UCC] . . . [and] additionally shall have the express right to sell the [membership interest in CCLLC], or any part thereof, and the express right to sell any condominium units at Wolf Bay Landing Condominiums owned by CCLLC.” (Id. at ¶ 6). Wolf Pup filed a UCC Financing Statement with the Alabama Secretary of State on October 25, 2007, reflecting Ellis’s pledge of his membership interest in CCLLC to Wolf Pup. (Id. at 6).

         Finally, Ellis, CCLLC, and Wolf Pup executed a repayment agreement dated October 5, 2007, in connection with CCLLC’s purchase of the Property and assumption of the Loan. (Doc. 90-3). Under the terms of this agreement, Ellis and CCLLC agreed to immediately repay Wolf Pup for any portion of the Interest Reserve Account or the Wiggins CD drawn upon by Superior and applied to the indebtedness under the Loan. (Id. at ¶¶ 2-3).

         C. Ellis’s Purchase of the Loan in 2010

         After CCLLC assumed the Loan, Superior and CCLLC extended the Loan’s maturity date on several occasions. (Doc. 94 at ¶ 17). Then, on December 23, 2010, Superior sold the Loan to Ellis and assigned the loan documents, including the Mortgage and First Amendment, to Ellis without notifying Wolf Pup or Wiggins. (Id. at ¶ 18; Doc. 106 at 127-141). Ellis financed his purchase of the Loan with a personal loan from Superior in his individual name (the “Ellis Loan”). (Doc. 94 at ¶¶ 18 & 21). As part of Ellis’s purchase of the Loan, Superior seized the funds from the Interest Reserve Account and ...

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