Penmont, LLC et al v. Blue Ridge Piedmont, LLC et al, No. 2:2008cv00093 - Document 101 (M.D. Ala. 2009)
Court Description: OPINION AND ORDER that 50 motion for summary judgment on behalf of defendants Blue Ridge Piedmont, LLC, Blue Ridge Capital, LLC, Fritz McPhail, and Eric Wilensky is denied on (a) plaintiff Penman Group, LLC's claims for fraudulent misrepresent ation, breach of contract, and promissory fraud and (b) defendant Blue Ridge Piedmont, LLC's counterclaim for breach of contract; that these claims will go to trial; that said motion is granted in all other respects. Signed by Honorable Myron H. Thompson on 4/8/2009. (Attachments: # 1 Civil Appeals Checklist)(cc, )
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IN THE DISTRICT COURT OF THE UNITED STATES FOR THE MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION PENMONT, LLC and PENMAN GROUP, LLC, Plaintiffs, v. BLUE RIDGE PIEDMONT, LLC, BLUE RIDGE CAPITAL, LLC, FRITZ MCPHAIL, and ERIC WILENKSY, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NO. 2:08cv93-MHT (WO) OPINION AND ORDER Plaintiffs Penmont, LLC and Penman Group, LLC bring this lawsuit against defendants Blue Ridge Piedmont, LLC, Blue Ridge Capital, LLC, Fritz McPhail, and Eric Wilensky, claiming state-law fraud, breach of contract, and unlawful practice of real-estate brokerage, all arising out of a single aborted commercial real-estate transaction.1 Blue Ridge Piedmont has filed a breach- 1. Although the complaint includes a fourth count for breach of agency, counsel clarified in pretrial conference that this was not a separate claim. of-contract counterclaim against Penman Group for fees it paid to third parties on plaintiffs behalf. The case is before the court on defendants motion for summary judgment on all counterclaim, in their favor. claims, including the The motion is granted in part and denied in part for the reasons that follow. I. SUMMARY-JUDGMENT STANDARD Summary judgment is appropriate 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 a judgment as a matter of law. role at the Fed. R. Civ. P. 56(c). summary-judgment stage is The court's to view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Matsushita Elec. Indus. Radio Corp., 475 U.S. 574, 587 (1986). 2 Co. v. Zenith II. BACKGROUND In the spring of 2007, defendants approached Penman Group with a prospective real-estate deal in which Blue Ridge Piedmont would sell Penman Group a portion of the Montgomery Mall in Montgomery, Alabama. The tenant of the property was a franchise known as Steve & Barry s. Defendants did not own the property, but had an option to purchase the property from the owner, Haywood Whichard, with relationship. property at whom defendants had a longstanding Whichard offered to sell defendants the a reduced price if they would put $ 50,000 non-refundable earnest-purchase money. up After negotiating the price, defendants agreed to purchase the property, on the condition they could, in turn, find a buyer willing to purchase the property. Defendants paid Whichard the $ 50,000 after they had contacted potential buyers and plaintiffs expressed interest in the property. Defendants, who had done prior business with plaintiffs managers, sent plaintiffs materials about 3 the property and the Steve & Barry s franchise. materials were issued under the name of Blue The Ridge Capital, LLC, which employed Wilensky and McPhail. During a conference call shortly thereafter, defendants indicated they would assist plaintiffs in conducting due diligence and further indicated that any fees for these services would be included in the agreed-upon transaction price. Around this time, defendants also informed plaintiffs that they had lined up a lender who could provide financing and that this lender was familiar and comfortable with the franchise. Plaintiffs indicated a desire to find Group and their own financing. On Piedmont outlined April 6, 2007, executed how the a Penman Purchase transaction Blue Ridge Agreement, would which proceed. First, Blue Ridge Piedmont would acquire the property from its current owner. It would property to Penman Group. then immediately sell the The agreement also provided that Penman Group would pay $ 50,000 in earnest money 4 to Blue Ridge Piedmont and that this money would be retained by Blue Ridge Piedmont as liquidated damages if the transaction were not completed. A merger clause provided that the written agreement was the complete and final agreement of the parties, and another clause stated that the property was being purchased as-is. Also around this time, defendants told plaintiffs that, regardless of the language in the purchase agreement, defendants would return the earnest money if the deal fell through. The parties dispute the exact terms of this agreement. After the purchase agreement was signed, the parties continued to work to complete the transaction. At some point, defendants agreed to obtain certain reports for plaintiffs with the understanding that they would be reimbursed; the precise terms of this agreement are disputed. Meanwhile, plaintiffs applied for a loan from Bank Independent, and were refused. that Bank Independent would 5 When it became apparent not issue a loan, defendants broker put and plaintiffs sent in plaintiffs touch a with proposed a mortgage agreement to compensate defendants for their assistance in securing financing. Plaintiffs never signed the agreement, but maintain that the parties agreed that they would work out compensation at a later time if the financing came through. Plaintiffs claim that they were not able to obtain financing conference from defendants call regarding lender the because, loan during a application, Wilensky stated that the Steve & Barry s franchise was in a hostile tenant relationship with the landlord, and this statement caused the bank to refuse to finance the transaction on favorable terms. making any defendants such misled statement. them Wilensky denies Plaintiffs regarding the contend quality of that the franchise as a tenant. A short time later, Penman Group indicated that it was not willing to move forward with the transaction. The deal fell apart, and Blue Ridge Piedmont retained 6 the purchase money. Plaintiffs then filed this lawsuit to recover the money and other expenses associated with the transaction. Blue Ridge Piedmont filed a counterclaim for $ 19,428.75 against Penman Group for breach of an oral contract providing, according to Blue Ridge Piedmont, that Penman Group would reimburse it for certain third-party reports. III. A. DISCUSSION Penmont s claims Defendants challenge whether Penmont may bring any claims, on the ground that it was not a party to the purchase agreement transaction. or otherwise a part of the The complaint alleges that Penmont was the putative assignee of Penman Group for the purpose of this transaction. did not argue it Compl. ¶ 2. was Penman s However, Penmont assignee in its opposition to defendants motion for summary judgment.2 2. Nor is there any evidence before the court that Penmont was the assignee of Penman Group. 7 Because opposition Penmont to did not defendants argument is deemed abandoned. raise motion the to argument dismiss, in the See Brasseler, U.S.A I, L.P. v. Stryker Sales Corp. 182 F.3d 888, 892 (11th Cir. 1999) (district court need not consider assertions made in pleadings but not in opposition to a motion for summary judgment); Road Sprinkler Fitters Local Union No. 669 v. Indep. Sprinkler Corp., 10 F.3d 1563, 1568 (11th Cir. 1994) (claim not raised in cross motions for summary judgment was properly treated as abandoned). Penmont having abandoned any argument that it was the assignee of Penman, the court must conclude that there is no evidence, or even argument, that Penmont was a party to the disputed transaction. Thus, summary judgment will be granted on all of Penmont s claims. 8 B. Penman s claims 1. Unlawful-practice-ofreal-estate-brokerage claim Penman contends that the purchase agreement is void because defendants estate brokers § 34-27-30 Penman of counter entered that (the in Steve that they as profit & unlicensed of 1975 into the defendants exchange the acting violation they argues transaction) sale in when consideration were they for their Barry s were not Ala. valuable make property. on the closing work acting Code transaction. sought would real- the Defendants as real-estate brokers and that, in any case, they fell within an owner-seller exception to the statute because the purchase agreement identified Blue Ridge Piedmont as the seller. (exempting See [a]ny 1975 owner Ala. in the Code § 34-27-2(b)(1) managing of, or in consummating a real-estate transaction involving, his or her own real estate or the real estate of his or her spouse or child or parent from licensing requirement). 9 Contrary to defendants assertions, the evidence reflects that none of the defendants owned the property when they approached agreement was signed. Penman or when the purchase Defendants plan was to purchase the property only if they could find another buyer, and defendants never did purchase the property. However, the court need not resolve the question of ownership, for even if defendants were acting as unlicensed real-estate brokers, the purchase agreement would not be void on that basis. every contract estate broker, entered but into rather by only The law does not void an unlicensed those compensation of the unlicensed broker. Watson real- providing for See Knight v. 127 So. 841, 842 (Ala. 1930) (contracts of unlicensed real-estate brokers are illegal, void, and unenforceable in actions for the recovery of compensation and the like ); Faulkner v. Stapleton Ins. & Realty Corp., 266 Ala. 437, 438, 96 So.2d 761, 762 (Ala. 1957) enforce (unlicensed contract for real-estate broker commission); 10 may not Dillard v. Pan-American Investments, (Ala. 1977) (same). Inc., 347 So.2d 990, 991 Thus, even if Penman were able to show that defendants had violated the statute, it would only be able to void an agreement for compensation. Penman cannot plausibly contend that the purchase agreement was a contract creating a brokerage agreement or that the $ 50,000 earnest-purchase money was paid as compensation for brokerage services. Accordingly, summary judgment will be granted on Penman Group s claim for unlawful practice of real- estate brokerage. 2. Penman asserts Fraud claims that defendants engaged in fraudulent misrepresentation and fraudulent suppression of facts regarding Barry s and landlord of the the the financial franchise s property and health of relationship that these Steve with & the fraudulent assertions or omissions induced Penman to enter into the purchase agreement. Defendants deny making such 11 representations or suppressing any information, and further contend that the as-is clause in the purchase agreement precludes either fraud claim. Defendants contention regarding the as-is clause is unavailing because Penman s fraud claims arise out of representations regarding Steve & Barry s, not the property. The as-is clause provides: Purchaser acknowledges that the Property is being sold AS-IS without representation or warranty except as expressly set forth added). herein. Def. Exh. B at 5 (emphasis The plain language of the clause refers to only the property itself; it does not refer to Steve & Barry s or any other tenant. Thus, the as-is clause cannot properly be read to defeat Penman s fraud claim arising Barry s. out of representations regarding Steve & The court therefore turns to the merits of the fraud claims. 12 a. Fraudulent misrepresentation To make out misrepresentation, representation material representation, from that claim Penman was fact, a must show: (2) that it relied false, (3) and that (4) reliance. for that Consol. actual fraudulent (1) it that concerned on the injury Constr. the Co. a false resulted v. Metal Bldg. Components, L.P., 961 So. 2d 820, 825 (Ala. 2007) (quoting Boswell v. Liberty Nat'l Life Ins. Co., 643 So. 2d 580, 581 (Ala. 1994)). Penman contends that defendants represented that Steve & Barry s was in good financial condition and a good tenant; that these representations were false; that Penman relied on these representations in entering into the transaction; and that Penman lost the earnest money and lender s fee, as well as other expenses, as a result. Defendants deny making such representations and argue further that any statements they made were 13 statements of opinion that cannot support a fraud claim. Penman has put forward sufficient evidence for this claim to proceed. The financial well-being and quality of the Steve & Barry s franchise as a tenant would plainly be a material fact upon which Penman might rely in making the decision to enter into the transaction, and it is beyond dispute that, in trying to close the transaction, Penman otherwise have spent. parties (as to spent money that it would not The conflicting testimony of the whether defendants made the disputed representations, the content of such representations, whether the representations Penman relied on any were such false, and whether representations) precludes summary judgment on this claim. thus For the same reason, defendants argument that their statements were statements of opinion cannot be decided at this stage. Although statements of opinion will not support a fraud claim, Fincher v. Robinson Bros. Lincoln-Mercury, Inc., 14 583 So. 2d 256, 259 (Ala. 1991), whether a particular statement is opinion depends upon all the circumstances of the particular case, such as the form and subject matter of the representation and the knowledge, intelligence and relation of the respective parties. The mere form of the representation as one of opinion or fact is not in itself conclusive, and in cases of doubt the question should be left to the jury. Harrell v. Dodson, 398 So. 2d 272, 274-75 (Ala. 1981) (citations omitted). Because there are significant factual disputes in this case about what was said and when, this argument belongs before the jury. Summary judgment Group s will therefore be denied on Penman fraudlent-misrepresentation claim. b. Fraudulent suppression Penman also asserts a fraudulent-suppression claim against defendants. A plaintiff making such a claim must demonstrate: (1) that the defendant had a duty to disclose material facts; 15 (2) that the defendant concealed or failed to disclose those facts; (3) that the concealment or failure to disclose induced the plaintiff to act [or to refrain from acting]; and (4) that the defendant's action resulted in harm to the plaintiff. (Ala. 1999) Bethel v. Thorn, 757 So. 2d 1154, 1162 (quoting Booker v. United American Ins. Co., 700 So. 2d 1333, 1339 n. 10 (Ala. 1997)). Penman contends that defendants acted as Penman s agents, which gave rise to a duty to disclose that Steve & Barry s was in poor financial health and had a poor relationship with the landlord; defendants never made such disclosures. and that Penman further contends that, had it known this information, it would not have signed the purchase agreement and incurred expenses associated with this transaction. Whether defendants question of law. had a duty to disclose may be relations[hip] a Barnett v. Funding Plus of America, Inc., 740 So. 2d 1069, 1074 (Ala. 1999). disclose is created between either the 16 by a parties, A duty to confidential or from the particular circumstances of the case. 6-5-102. 1975 Ala. Code Penman asserts that, in this case, the duty arose from a confidential relationship; it asserts that defendants acted as Penman s agents in the transaction. An agency relationship, which may be implied, arises from the consent Plantation, Consent from Inc., may the be of the 772 So. implied other parties. 2d by facts and 455, Fisher 466 deductions v. (Ala. or circumstances Comer 2000). inferences of the particular case, including the words and conduct of the parties. Penman has not produced sufficient evidence to infer consent. parties worked At most, Penman has shown that the together to try to transaction under a pressing deadline. complete the Penman makes much of defendants assistance in seeking financing, as well as defendants proposal that they be compensated for this assistance. However, this assistance was provided after the purchase agreement was signed and thus is not evidence of the parties relationship (and corresponding duty to disclose) prior to the signing of 17 the purchase agreement. Thus, no agency relationship was created. Without an agency relationship, Penman s claim that defendants had a duty to disclose must fail. Alabama s bright-line rule is that, in commercial transactions involving parties to arm's length negotiations[,] ... [t]he parties have no general obligation to disclose absent specific and direct party. Freightliner, Carriers, L.L.C., 932 questions L.L.C. So. 2d v. 883, (quotations and citations omitted). from the Whatley 892 other Contract (Ala. 2005) Penman does not assert that it made specific inquiries that gave rise to a duty to disclose, nor has it shown anything else that would remove the transaction from the purview of the bright-line rule. Because Penman cannot show that defendants were under any obligation to disclose, it cannot make out a claim for fraudulent suppression. judgment will be granted suppression claim. 18 on Accordingly, summary Penman s fraudulent- 3. Breach-of-contract and fraudulent-promise claims Penman also contends that defendants breached an oral agreement to return the $ 50,000 earnest money if the transaction that defendants money. was not completed fraudulently and promised alternatively to return the Defendants concede that they promised to return the earnest money, but contend that the promise was conditioned on closing the deal with another party. a. Breach of contract To make out a breach-of-contract claim, Penman must show (1) a valid contract binding the parties, (2) its own performance under the contract, (3) nonperformance of the defendants, and (4) damages. the See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 303 (Ala. 1999). Penman has produced evidence that it agreed to enter into the purchase agreement in exchange for a promise that the earnest money would be returned if the deal did not close; 19 it signed the purchase agreement; defendants failed to return the purchase money; and Penman lost the value of the purchase money. Defendants defeated by agreement. contract contend the complete, merger Although creates represents that an "a oral clause a merger of that the agreement in the clause presumption integrated, agreement the that is, parties," purchase in a the the Ex is valid writing final parte and Palm Harbor Homes, Inc., 798 So. 2d 656, 660 (Ala. 2001), in this case induced Penman into contends entering that the contains the merger clause. it was written fraudulently contract that Until the jury resolves whether Penman was fraudulently induced into entering that contract and thus whether the contract is void in all or part, defendants cannot rely on the merger clause to defeat Penman s claim that the oral contract was breached.3 3. Because there remains a dispute as to when the promise was made and under what conditions, the court does not reach defendants argument that, if the promise to return the money was made after the agreement was (continued...) 20 Thus, summary judgment will be denied on Penman s breach-of-contract claim. b. Promissory fraud Penman claims, alternatively, that the defendants fraudulently promised to return the earnest money if the transaction were not completed. A claim for promissory fraud arises out defendant s promise to act or not to act. of a Ex parte Michelin North America, Inc., 795 So. 2d 674, 678 (Ala. 2001). Here, that promise is defendants allegedly unconditional promise to return the $50,000 if the deal did not go through. fraud, a plaintiff representation reasonably suffered To make out a claim for promissory (2) relied damage as of must a upon a show: material by the proximate (1) a false existing fact (3) plaintiff (4) who of the consequence (...continued) signed, Penman provided no consideration in exchange for the promise and it is unenforceable. 21 misrepresentation. S.B. v. St. James Sch., 959 So. 2d 72, 101 (Ala. 2006) (quotations and citations omitted). In addition, the plaintiff must show that, at the time of the misrepresentation, the defendant had the intention not to perform the act promised, and ... that the defendant had an intent to deceive. Such Id. intent to deceive may be proven through circumstantial evidence. Byrd v. Lamar, 846 So. 2d 334, 343 (Ala. 2002). Penman has put forth testimonial and documentary evidence from which a reasonable juror could conclude that defendants promised to return the purchase money unconditionally; that Penman relied on such promise in entering into the purchase agreement; that defendants did not intend to return the money if the deal fell through; and that defendants acted with the intent to deceive because they promised to return the money unconditionally but did not intend to return it unless they recovered the $ 50,000 original seller. 22 that they paid to the Accordingly, summary judgment will be denied on Penman s promissory-fraud claim. C. Blue Ridge Piedmont s counterclaim Defendants Ridge also Piedmont s seek summary counterclaim breach of contract. for judgment $ on Blue 19,428.75, for Blue Ridge Piedmont asserts that the parties agreed that it would obtain certain thirdparty reports and be reimbursed by Penman; that it obtained such reports; and that Penman has failed to pay the cost of the reports. such agreement was Penman contends that any conditioned on the transaction closing. To make out their claim, defendants must show (1) a valid contract binding the parties, (2) their own performance under the contract, (3) the nonperformance of the [other party], and (4) damages. See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 303 (Ala. 1999). This claim cannot 23 be resolved on summary judgment, for the parties dispute the terms of any such oral agreement. Summary judgment will therefore be denied on Blue Ridge Piedmont s counterclaim. **** For the foregoing reasons, it is ORDERED as follows: (1) The motion for summary judgment on behalf of defendants Blue Ridge Piedmont, LLC, Blue Ridge Capital, LLC, Fritz McPhail, and Eric Wilensky (Doc. No. 50) is denied on (a) plaintiff Penman Group, LLC s claims for fraudulent misrepresentation, breach of contract, and promissory fraud and (b) defendant Blue Ridge Piedmont, contract. LLC s counterclaim for breach These claims will go to trial. (2) Said motion is granted in all other respects. DONE, this the 8th day of April, 2009. /s/ Myron H. Thompson UNITED STATES DISTRICT JUDGE of
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