Middlegate Dev. LLP v. Beede

MIDDLEGATE DEVELOPMENT, LLP, Plaintiff,

v.HOWARD BEEDE, et al., Defendants.

CIVIL ACTION 10-0565-WS-C

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

Dated: August 9, 2011

ORDER

This matter comes before the Court on defendant Central Illinois Land Title Company's Motion for Summary Judgment (doc. 25), defendants Howard and Nancy Beede's Motion for Summary Judgment (doc. 28), and Motions to Strike (docs. 32, 35) filed by both Central Illinois and the Beedes. All of these Motions have been briefed and are ripe for disposition.

I. Nature of the Case.

This action, like so many that have occupied courts throughout the Gulf Coast region in recent years, arises from a beach condominium deal gone sour. The agreed-upon sales transaction never closed, leaving buyer and sellers to quarrel over their respective rights and obligations, including the proper ownership of considerable amassed escrowed funds. Here, the escrow agent disbursed the funds to the sellers pursuant to a forfeiture clause in the contract. As a reward for this decision, the escrow agent was sued by the buyer too. In an atypical wrinkle, the sellers have brought counterclaims against the buyer, alleging that the buyer razed the subject condominium unit before the purchase was consummated, then backed out of the deal, leaving the sellers with no condo and no sales proceeds.

II. Relevant Facts.¹

The underlying material facts in this dispute are straightforward and largely undisputed. At all relevant times, defendants Howard and Nancy Beede were the owners in fee simple of Unit A-206 (the "Unit") of the Beach House Condominium complex in Gulf Shores, Alabama. In late 2004, plaintiff, Middlegate Development, LLP, negotiated an agreement with the Beedes to purchase the Unit for $525,231.00.² Middlegate's then-counsel drafted a purchase agreement (the "Purchase Agreement") outlining the terms of the sale. (Doc. 25, Exh. D, Answer to Interrog. #4; Doc. 25, Exh. B, ¶ 4.)

The first several paragraphs of the Purchase Agreement enumerated various acknowledgments by the parties.³ In Paragraph 1, Middlegate and the Beedes "acknowledge that the proposed redevelopment of the property contemplates demolition and removal of the existing improvements." (Doc. 25, Exh. A, ¶ 1.) Paragraph 4 states that "[t]he parties acknowledge that closing of the sale of Seller's Unit will be held once construction financing has been obtained by [Casa Del Mar, the developer] for the proposed new development, and a sufficient number of Units have been pre-sold ... so that [Casa Del Mar] and the construction lender approve theclosing." (Id., ¶ 4.) And in Paragraph 5, Middlegate and the Beedes "acknowledge that Beach House Condominium was damaged during Hurricane Ivan" and that "Buyer agrees to purchase Seller's Unit 'As Is.'" (Id., ¶ 5.)

In addition to those acknowledgements, the Purchase Agreement drafted by Middlegate set forth the following substantive terms of the transaction: (i) Middlegate had the right to cancel on or before December 15, 2004, in which case the agreement would be null and void; (ii) Middlegate was to pay $5,000 toward the purchase price as earnest money with the execution of the agreement; (iii) the earnest money was to be held in trust by defendant Central Illinois Title Company "subject to the terms and conditions of this Agreement"; (iv) if Middlegate elected not to void the agreement by December 15, 2004, "the earnest money shall be paid to [the Beedes] by [Central Illinois] and shall be non-refundable"; (v) the balance of $520,231 was due at closing; (vi) closing was to "take place on or before June 30, 2005, and no later than the closing of the construction financing by [Casa Del Mar] for the redevelopment project"; and (vii) if the closing did not occur on or before June 30, 2005, "then, at the option of the [Beedes], this Agreement may be cancelled by [the Beedes], and there will be no further obligations between the parties hereunder." (Id., ¶¶ 3, 6-8, 11.) The Beedes and Middlegate executed the Agreement in November 2004.⁴

Middlegate did not exercise its right to cancel the Purchase Agreement by December 15, 2004; therefore, by the plain language of that Agreement, the $5,000 earnest money paid by Middlegate now belongs to the Beedes.⁵ Just two days before the June 30, 2005 closing deadlineestablished in the Purchase Agreement, the parties agreed to extend that deadline via amendment, which was memorialized in writing. (Doc. 25, Exh. C.) The amendment reflected that the parties had agreed to postpone the closing "from June 30, 2005 until October 30, 2005 for the consideration of an additional $10,400 to the purchase price payable in 4 monthly installments" by Middlegate. (Doc. 28, Exh. A.)⁶

During the next 20 months, there followed a series of four more amendments to the Purchase Agreement, each sequentially extending the closing date for the Unit in exchange for further consideration being paid/deposited by Middlegate. (Doc. 25, Exh. B, ¶ 5.) Middlegate's counsel drafted all of these written amendments. (Doc. 25, Exh. D, Answer to Interrog. #5; doc. 25, Exh. B, ¶ 4.) Each of the Second through the Fifth Amendments followed a similar format, to-wit: (i) the parties agreed to extend the closing deadline for a fixed additional period of time; (ii) in consideration for the Beedes agreeing to delay the closing, Middlegate agreed to make certain additional payments (with some of them designated as being made toward the existing purchase price and others specified as being additional to the purchase price), with such funds payable to Central Illinois as escrow agent; (iii) language that if Middlegate did not close on or before the specified date, "the money held in escrow at Central Illinois Land Title shall be forfeited to the Sellers, Nancy and Howard Beede"; and (iv) a statement that "[a]ll other provisions of the purchase agreement shall remain the same." (Doc. 25, Exh. C.)

Pursuant to these five amendments to the Purchase Agreement, Middlegate deposited a grand total of $175,746.56 in payments (over and above the initial $5,000 earnest money deposit from November 2004) with Central Illinois between July 23, 2005 and February 5, 2007. (Doc. 25, Exh. B, ¶ 5 & Exh. A.) Central Illinois held all such funds subject to the terms and conditions of Middlegate's agreement with the Beedes. (Doc. 25, Exh. B., ¶ 4.) By the express terms of the amendments, Middlegate and the Beedes designated $125,000 of those funds asgoing toward the original purchase price, with the remaining $50,746.56 being added to that original purchase price.⁷

Although it is unnecessary to recite the contents of each amendment in detail (given that they all follow the above general format), the Fifth Amendment to the Purchase Agreement is of central importance to this case. In that early 2007 amendment, Middlegate and the Beedes agreed "to further extend the closing of Unit A-206 ... from June 30, 2005 until no later than December 31, 2007, for the consideration of $1976.15 payable monthly as part of the purchase price, retroactive to November 1, 2006 until unit is closed or December 31, 2007, which ever is sooner, payable to the Central Illinois Title Company by Buyer." (Doc. 25, Exh. C.) The Fifth Amendment further specified as follows: "In the event the Buyer does not close on or before December 31, 2007, the money held in escrow at Central Illinois Land Title shall be forfeited to the Sellers, Nancy and Howard Beede." (Id.) Finally, the document stated that "[a]ll other provisions of the purchase agreement shall remain the same." (Id.) The Beedes executed the Fifth Amendment on January 19, 2007, with Middlegate signing it on February 6, 2007.⁸

Middlegate did not satisfy its obligations under the Fifth Amendment. In fact, the only funds that Middlegate transmitted to Central Illinois pursuant to that agreement were a single payment of $3,952.29 (equaling two months' worth of agreed-upon installments) on February 5, 2007. (Doc. 25, Exh. B, ¶ 6.) Middlegate made no further monthly payments to Central Illinois,despite promising to do so in the Fifth Amendment. (Id.)⁹ Likewise, Middlegate never closed on the Unit, either before or after December 31, 2007. No subsequent amendments to the Purchase Agreement were negotiated or agreed upon by Middlegate and the Beedes.

The record reflects that, on an unspecified date after February 5, 2007, Central Illinois released the escrowed funds to the Beedes. (Doc. 25, Exh. B, ¶ 7.) Thus, Central Illinois turned over to the Beedes the entire $180,746.56 paid into escrow by Middlegate pursuant to the Purchase Agreement and its various amendments.¹⁰

Ultimately, Middlegate filed suit against the Beedes and Central Illinois concerning the funds paid into escrow pursuant to the Purchase Agreement and its various amendments. In particular, Middlegate brought claims against Central Illinois for professional negligence, wantonness and breach of fiduciary duty (all predicated on the theory that Central Illinois wrongfully released the escrowed funds to the Beedes with neither notice to Middlegate nor the legal right to disburse the money in that manner); against the Beedes for conversion (rooted in the theory that the Beedes wrongfully took possession of funds belonging to Middlegate); and against all defendants for declaratory judgment, breach of contract and conspiracy. (See doc. 1.) For their part, the Beedes interposed counterclaims against Middlegate sounding in declaratory judgment, specific performance, intentional trespass, and conversion. (See doc. 14, at 5.) The Beedes' claims stem from allegations that Middlegate demolished the condominium unit without closing the sale and without any ownership interest in the property, thereby "leaving the Beedes in a position where they received only a portion of the money due them for the purchase of their Unit, yet were left with no Unit which they can use." (Id., ¶ 59.) The...