JOHN E. STEELE, SENIOR UNITED STATES DISTRICT JUDGE.
This matter came before the Court on December 15 through 18, 2015, for a bench trial of plaintiffs' Third Amended Complaint (Doc. # 58). The Court heard testimony from plaintiffs Bonita B. Phillips and Jeffrey S. Phillips; James E. Green, Jr., the Chief Financial Officer (CFO) and Senior Vice President of defendant Epic Aviation, LLC; Marsha Griffin Rydberg and David Boyette, two expert witnesses; real estate attorneys Douglas A. Wood and Gary K. Wilson; real estate agents Karen Van Arsdale and Susan M. Weidlich; real estate appraiser Hallas Neal Scott; and United States Trustee Diane Jensen (Trustee or the Trustee). (Docs. ## 141-144.) Various exhibits were admitted as evidence, and the Court took judicial notice of certain bankruptcy and district court cases. (Docs. ## 103, 109.)
Pursuant to the Revised Joint Pre-Trial Statement (Doc. # 138, ¶ 2), plaintiffs have withdrawn the quiet title claim in Count II because the real property at issue was sold on November 2, 2015. Plaintiffs confirmed at the beginning of the bench trial that this count was to be dismissed with prejudice, and defendant concurred. Accordingly, Count II is dismissed with prejudice.
The remaining claim, Count I of the Third Amended Complaint (Doc. # 58), is an action for slander of title based upon the wrongful filing of a lis pendens and
Along with key factual denials, Epic Aviation raised four affirmative defenses: (1) the slander of title claim is barred by the Florida litigation privilege; (2) plaintiffs have waived the slander of title claim; (3) plaintiffs had elected a different remedy; and (4) the slander of title claim is barred by the Florida appellate litigation privilege. (Doc. # 68, pp. 8-9.)
The Court makes the findings of fact and conclusions of law set forth below.
In 2004, Epic Aviation, LLC (Epic Aviation) sued Jeffrey Scott Phillips (Scott Phillips or Mr. Phillips) individually in Oregon state court based upon a guarantee he had signed relating to the purchase of aviation fuel. The Oregon state court granted Epic Aviation's Motion for Summary Judgment on June 24, 2004, and a General Judgment and Money Award were filed on July 26, 2004, awarding Epic Aviation the principal amount of $322,603.30, plus late charges until fully paid. Plaintiffs' Exhibit 1. On September 24, 2004, Epic Aviation domesticated the Oregon state judgment in Florida by filing a copy of the judgment in the Official Records of Collier County, Florida, along with a certification and an affidavit.
There is no assertion by plaintiffs that the recording of this money judgment as part of the enforcement process was wrongful or constituted a slander of title to any of their property. The recording of the money judgment in this context was clearly privileged, and indeed required by statute.
On February 28, 2005, Mr. and Mrs. Phillips (collectively plaintiffs or Debtors)
On October 18, 2006, Bonnie Phillips filed a Voluntary Petition under Chapter 7 of the Bankruptcy Code in the Fort Myers Division of the Middle District of Florida. Court's Exhibit A; Case No. 9:06-bk-05685-FMD. Epic Aviation was not a creditor of Mrs. Phillips, and did not file a Proof of Claim in her bankruptcy case.
On December 29, 2006, Scott Phillips filed his own Chapter 7 Voluntary Petition in the Fort Myers Division of the Middle District of Florida. Court's Exhibit B; Case No. 9:06-bk-07489-FMD; Defendant's Exhibit 127, p. 2. Epic Aviation filed a Proof of Claim based upon the domesticated Oregon money judgment, Defendant's Exhibit 127, p. 3, which constituted about 7% of the claims against Mr. Phillips. Plaintiffs' Exhibit 39, p. 4. According to Epic Aviation's CFO's trial testimony, Epic Aviation is a company with approximately 95 employees and sales of over $500 million in the previous year.
The bankruptcy cases were jointly administered, but not consolidated, in Bankruptcy Court (Doc. # 138, ¶ 9(3)), and the same Trustee, Diane Jensen, was appointed in both cases. According to the Trustee, Debtors claimed about $1 million owed to joint creditors, and each claimed a homestead exemption for the Property and exemption for property owned by the entireties. Court's Exhibits A, B.
On March 7, 2007, the Trustee filed Objections to Exemptions as to Mrs. Phillips. Plaintiffs' Exhibit 28, Exh. A. As to the claimed homestead exemption, the Trustee objected that the acreage exceeded the Florida constitutional limit of .5 acres; that the exemption amount must be reduced by those improvements made within ten years and with intent to hinder, delay or defraud creditors; that the exemption was limited to $125,000 because the Property was purchased within 1,215 days of the filing of the bankruptcy petition; and that Debtor could not claim the benefits of 11 U.S.C. § 522(p)(2)(B) for various reasons relating to the sources of the funds used to purchase the Property.
On April 16, 2007, the Trustee filed similar objections to the claimed exemptions of Mr. Phillips. Defendant's Exhibit 186, ¶ 6; Court's Exhibit C.
In May 2007, the Trustee sought and was granted permission from the Bankruptcy Court to mediate her objections
The Settlement Agreement did not provide any deadlines for the sale of the Property or the payment of the money to the Trustee, and did not set a price at which the Property would be offered for sale. Epic Aviation was not a party to the Settlement Agreement and did not participate in its negotiation, although it was consulted by the Trustee as to one alternative provision of the Settlement Agreement.
The Trustee testified at trial that if Debtors breached the Settlement Agreement, the Trustee's best case recovery would be to seek the $825,000 and to seek denial of the bankruptcy discharge of Debtors, or perhaps to seek enforcement of the Trustee's objections to the claimed exemptions. In either event, there was no way the Trustee or any other creditor could reach tenancy by entireties property to satisfy the Epic Aviation domesticated money judgment. Even if the Property was not exempt under the bankruptcy provisions, and Debtors were denied a bankruptcy discharge, the Property was still tenancy by entireties property which could not be reached by a creditor of only one of its two owners.
On May 24, 2007, the Debtors and the Trustee filed a Joint Motion for Authority to Compromise Controversies Between Diane Jensen, The Chapter 7 Trustee, and Bonita and Jeffrey Phillips. Defendant's Exhibit 91, pp. 11-12; Defendant's Exhibit 178; Defendant's Exhibit 186, ¶ 10. This joint motion summarized the terms of the Settlement Agreement and explained why the compromise settlement was in the best interests of the parties.
On June 18, 2007, Epic Aviation filed an Objection to the Joint Motion for Authority to Compromise Controversies. Court's Exhibit E. Epic Aviation asserted that the value of the Property may have been understated in the Joint Motion.
At a September 5, 2007 hearing, the Trustee and Debtors' bankruptcy counsel
On October 9, 2007, the Bankruptcy Court issued an Order Approving Joint Motion for Authority to Compromise Controversies Between Diane Jensen, The Chapter 7 Trustee and Bonita and Jeffrey Phillips. Plaintiffs' Exhibit 2; Defendant's Exhibit 178 (the Settlement Agreement Approval Order). In relevant part, the Settlement Agreement Approval Order granted the joint motion, approved the compromise Settlement Agreement, directed payment of $825,000 to the Trustee from the sale of the Property, and granted the Trustee a lien against the Property to secure Debtors' obligations under the Settlement Agreement, subordinate to two specified mortgages and any real estate taxes.
On October 25, 2007, the Trustee recorded a copy of the Settlement Agreement Approval Order in the Official Records of Collier County, Florida. Plaintiffs' Exhibit 2. This constituted public notice of the Trustee's lien on the Property and of the bankruptcy cases.
Mrs. Phillips obtained a discharge in her Chapter 7 bankruptcy case on November 7, 2007. Court's Exhibit G; Defendant's Exhibit 127, p. 2.
As required by the Settlement Agreement, Debtors placed the Property on the market for sale, and kept it on the market during this relevant time period. Defendant's Exhibit 69. Debtors' initial listed asking price was $6.295 million. Defendant's Exhibit 186, ¶ 11. From 2007 to 2015, the Property was most often listed for sale with Karen Van Arsdale (Ms. Van Arsdale), a real estate broker with Premier Southby's in Naples, Florida. For the three years after the Settlement Agreement, the Property did not sell.
In August 2009, Epic Aviation wrote off the balance of the amount due from Jeffrey Phillips on its domesticated Oregon money judgment. Plaintiff's Exhibit 43A, p. 954.
On March 25, 2010, Debtors' bankruptcy counsel inquired of the Trustee whether, in light of the downturn in the real estate market and Debtors inability to sell the house, there was a discounted cash number which would settle the matter. Defendant's Exhibit 121. The Trustee responded she was not inclined to take a discount, and suggested the Debtors lower the asking
On September 29, 2010, a frustrated Trustee filed the Chapter 7 Trustee's Motion to Compel Compliance with Settlement, Defendant's Exhibit 186, seeking to compel Debtors to reduce the asking price of the Property. The Trustee argued that the Settlement Agreement's requirement to place the Property on the market implicitly included the obligation of a realistic asking price. The Trustee conceded that the house had been on the market continuously, and that the original asking price of $6.295 million had been reduced to the current $4.5 million asking price. Defendant's Exhibit 186, ¶ 11. Despite these reductions, the Trustee asserted that Debtors "appear to be acting in bad faith in their attempts to market and sell the Home" because the asking price was significantly inflated.
Later, on September 29, 2010, Debtors' bankruptcy counsel sent an email to the Trustee's counsel
In an October 29, 2010, hearing before the bankruptcy judge, the Trustee admitted that she did not have sufficient information to determine if the asking price was inflated or achievable, Court's Exhibit H, p. 4, but requested an evidentiary hearing to determine whether Debtors were marketing the Property in good faith,
In 2007, Epic Aviation filed a multi-count Complaint in an adversary proceeding objecting to Mr. Phillips' discharge.
Mr. Phillips filed an appeal to the District Court. The Bankruptcy Court's decision was affirmed by the undersigned in a March 29, 2011 Opinion and Order as to three of the five false oaths found by the Bankruptcy Court. Defendant's Exhibit 127;
While Mr. Phillips' appeal to the Eleventh Circuit Court of Appeals was pending, an exchange of emails occurred
The decision of the Bankruptcy Court
By the Spring of 2012, the Property had been on the market for almost five years without selling, the Trustee suspected Debtors were not really trying to sell the Property, and Mr. Phillips' denial of a discharge in bankruptcy had been affirmed by the Eleventh Circuit Court of Appeals. The parties then started to get more serious about resolving the matter, although with conflicting agendas. Most of the discussions did not occur between the bankruptcy principals themselves (the Trustee and the Debtors), but between and among multiple attorneys and their assistants, several real estate agents, and a title company and its employees and attorneys. Three chronologically overlapping themes emerge from the evidence: Debtors' efforts to sell the Property; Debtors and the Trustee's efforts to compromise the Settlement Agreement payoff amount; and Epic Aviation's efforts to collect its domesticated Oregon money judgment by reaching the Property despite its tenancy by entireties ownership.
From July 19, 2012, through October 31, 2014, Epic Aviation's Collection Manager Greg J. Gettig (Mr. Gettig) contemporaneously prepared a series of Priority Credit Review Action List documents, Plaintiffs' Exhibits 43A-X, which essentially constitute a running summary of events in connection with the Phillips "litigation account" for Epic Aviation management. Mr. Gettig was a credit manager for Epic Aviation for about 15 years before his recent retirement, and was responsible for the Phillips account file. Mr. Gettig reported to Mr. Green and others in Epic Aviation management on a regular basis. The thrust of these documents show that Epic Aviation, buoyed by its success in thwarting Mr. Phillips' discharge in bankruptcy, was intent on reaching the entireties Property to satisfy its domesticated Oregon money judgment despite clear law and facts precluding it from doing so as either a judgment creditor or a bankruptcy creditor.
In the first Priority Credit Review Action List of record, on July 19, 2012, Mr. Gettig wrote that although the balances due to Epic Aviation were written off in 2009, Epic Aviation was "poised ...to initiate steps to force sale of home which is in joint tenancy (with wife who is not part of our transaction) or direct settlement with Phillips to avoid sale." Plaintiffs' Exhibit 43A at p. 954. Mr. Gettig also wrote that "Epic will need to determine if Motion to Levy on Real Property, which Epic has Judgment lien on, and initiate foreclosure is the most cost effective method to protect its interest depending on the results of debtor exam findings."
In July 2012, Debtors' efforts to sell the Property, as required by the Settlement Agreement, finally bore fruit. On July 23, 2012, James Patrick Morrissy (Mr. Morrissy) signed a Sales Contract and Addendum, Defendant's Exhibit 24, to purchase the Property from Debtors for $4.325 million cash, with a deposit of $500,000, and a scheduled closing date of August 30, 2012. The Sales Contract required Debtors to provide "good and marketable" title, and was contingent upon an adequate appraisal and an engineer's determination that the house would support a tile roof that Mr. Morrissy wanted to install.
The sales price which Mr. Morrissy agreed to pay was a reasonable one, and was greater than a retrospective appraisal of the Property performed by Epic Aviation's appraiser. On June 1, 2015, appraiser Halas Neal Scott prepared an Appraisal of Real Property, Defendant's Exhibit 64, which determined, based on the sales comparison approach, that the Property was valued at $4.25 million as of October 12, 2012.
Not coincidentally, late in the afternoon of July 23, 2012, Debtors' bankruptcy counsel renewed his September 2011 offer to the Trustee's counsel to compromise the Settlement Agreement for $400,000. Defendant's Exhibit 70. Debtors' bankruptcy counsel failed to disclose the existence of the Morrissy Sales Contract to the Trustee or her counsel. Debtors signed this Sales Contract on July 24, 2012. Defendant's Exhibit 24. On July 25, 2012, Debtors raised their settlement offer to the Trustee to $500,000, Defendant's Exhibit 70, which the Trustee accepted. The Morrissy Sales Contract was still not disclosed to the Trustee or her attorney, and the Trustee testified at trial that she would not have accepted this compromise if she had known about the Morrissy Sales Contract.
Effective July 26, 2012, Old Republic National Title Insurance Company (Old Republic, the Fund, or the Title Company) issued a title Commitment, Defendant's Exhibit 1, for the Property and Mr. Morrissy. The Commitment contained a list of twenty requirements to be accomplished before a title insurance policy would issue, most of which were routine and easily accomplished.
For the next several months, Debtors and Mr. Morrissy's representatives worked on addressing title issues and closing the Sales Contract. Simultaneously, Debtors' counsel and the Trustee's counsel worked on a compromise of the amount required by the Settlement Agreement.
Having accepted Debtors' $500,000 compromise offer, on July 31, 2012, the Trustee filed a Motion to Approve Compromise of Controversy Between Trustee and Jeffrey S. Phillips. Defendant's Exhibit 71. The proposed compromise was the Debtors' payment of $500,000 to the Trustee, with $262,500 (52.5%) being allocated to Mr. Phillips' bankruptcy estate and
While Bankruptcy Court approval of the proposed compromise of the Settlement Agreement was pending, the Debtors and Mr. Morrissy worked towards closing their Sales Contract. On August 8, 2012, counsel for Mr. Morrissy caused the title Commitment to be forwarded to Debtors' real estate counsel
Also on August 10, 2012, Epic Aviation's Priority Credit Review Action List, Plaintiffs' Exhibit 43B, repeated that Epic Aviation was "poised ... to initiate steps to force sale of home which is in joint tenancy (with wife who is not part of our transaction) or direct settlement with Phillips to avoid sale."
Despite the clearly correct proposition that Epic Aviation's domesticated money judgment did not attach to the Property, the Title Company had its own ideas of what it wanted in order to issue a title insurance policy. On August 14, 2012, Mr. Morrissy's counsel responded to Debtors' bankruptcy counsel that the Title Company's attorney wanted, among other things, an order from the bankruptcy court confirming that the Epic Aviation money judgment does not attach to the Property. Defendant's Exhibits 134, 136. On August 16, 2012, work continued on the title requirements, with Debtors' bankruptcy counsel handling some of the items. Defendant's Exhibit 138. There was an emphasis on the bankruptcy matters and the Epic Aviation judgment, which were viewed by Mr. Morrissy's attorney as title defects. Defendant's Exhibit 139.
Back in the Bankruptcy Court, on August 21, 2012, Epic Aviation became the only creditor to file an Objection To Motion to Approve Compromise of Controversy Between Trustee and Jeffrey S. Phillips. Court's Exhibit I. Epic Aviation asserted that Debtors had failed to sell the Property for five years and had consistently priced it above fair market value in order to thwart their obligations under the Settlement Agreement. Based upon past misconduct by Mr. Phillips, which led to the denial of his bankruptcy discharge, Epic Aviation asserted that the Trustee should not discount the Settlement Agreement amount but should file an adversary complaint to revoke the discharge of Mrs. Phillips, and raise other challenges to Debtors' claimed exemptions.
On August 23, 2012, at 10:24 a.m., Epic Aviation re-recorded the General Judgment and Money Award in the Public Records of Collier County, Florida. Plaintiffs' Exhibit 3. While the reason for the re-recording is not in the trial record, bankruptcy counsel for Epic Aviation informed the Court during closing arguments, in response to a question from the Court, that he had caused the re-recording because he had concerns over the legal sufficiency of the original recorded judgment.
In an August 23, 2012, 5:05 p.m. email, Mr. Morrissy's attorney emailed Mr. Morrissy's realtor summarizing his discussions that morning with Debtors' bankruptcy counsel. Defendant's Exhibit 161. The email provided that Debtors' bankruptcy counsel had stated that Epic Aviation filed a motion at the last minute opposing the compromise settlement worked out with the Trustee; that Epic Aviation held a large judgment against Mr. Phillips; and that unless [Mr.] Phillips could work out a deal with Epic Aviation, there was a bankruptcy hearing scheduled for September 11, 2012.
Effective August 25, 2012, plaintiffs signed a two year lease to move into a residence on Silverleaf Lane, Naples, Florida. Defendant's Exhibit 89. Plaintiffs moved out of the Property and into the new residence shortly thereafter. Mr. Phillips testified at trial that he and his wife were going to move out of the Property whether it sold to Mr. Morrissy or not.
On August 29 and 30, 2012, Mr. Phillips, Mrs. Phillips, and Mr. Morrissy signed a Termination of Sales Contract and Deposit Release and Directive. Defendant's Exhibits 5, 142. The Sales Contract for the purchase of the Property was terminated and the deposit was directed to be returned. Defendant's Exhibit 5. The signed Termination was emailed to Debtors' real estate agent on August 30, 2012. Defendant's Exhibit 4. Mr. Morrissy terminated the Sales
Although the Morrissy Sales Contract had now been terminated, there was still the matter of the Trustee's proposed compromise of the Settlement Agreement pending in the Bankruptcy Court. On September 13, 2012, Epic Aviation's bankruptcy counsel took Mr. Phillips' deposition in connection with the Trustee's Motion to Approve Compromise of Controversy Between Trustee and Jeffrey S. Phillips. Defendant's Exhibit 91. When asked if he had "received any offers on the property?" Mr. Phillips replied "None. No. Nothing" except for "goofy", "would-you-takes" offers. Defendant's Exhibit 91, 18:12-19. In light of the formerly executed Morrissy Sales Contract, this was clearly a false representation intended, in the Court's view, to further Debtors' effort to compromise the $825,000 Settlement Agreement for $500,000 without full disclosure to the Trustee.
On September 14, 2012, Mr. Gettig wrote in his Priority Credit Review Action List that Mr. Phillips had testified at the deposition to the effect that "all assets owned are either in wife Bonnie name (not Epic customer) or by Tenants in the Entirety." Plaintiffs' Exhibit 43C, p. 1071. Epic Aviation's counsel was directed to initiate garnishment on accounts belonging to Scott Phillips.
On September 18, 2012, the Bankruptcy Court held a hearing on the Trustee's motion to approve the proposed compromise of the Settlement Agreement. Court's Exhibit J. Epic Aviation offered to pay the Trustee $525,000 for the Trustee's rights under the Settlement Agreement, and the Trustee orally requested a continuance of the hearing in order to allow the parties to reach a compromise agreement or have a public auction of the Trustee's rights under the Settlement Agreement. Epic Aviation and Debtors agreed to the request.
Later that day, with the consent of the Debtors, the Trustee filed a Report and Notice of Intention to Sell Property of the Estate at Public Sale, Court's Exhibit K, stating an intent to hold a public sale of all the Trustee's rights and interests in and to the Settlement Agreement. This Notice stated that the "Price" was "Highest Bid" and the sale would be to the "Highest Bidder." The "Terms" of the auction were: (1) The minimum bid would be $525,000.00, with 10% down and the balance to be paid within 48 hours of the conclusion of the telephonic auction; (2) all qualifying bids were to be received by the Trustee by 5 p.m. on September 27, 2012; (3) the telephonic auction would be conducted on September 28, 2012 at 2 p.m., if at least two qualifying written bids and deposits were received; (4) the balance of the high bid was due within 48 hours of the conclusion of the auction; (5) if the highest bidder failed to fulfill the auction terms, the Trustee "will sell the rights to the next highest bidder at the last bid price;" and (6) auction
With an auction of the Trustee's rights under the Settlement Agreement on the near horizon, the Debtors continued their efforts to sell the Property. While the Morrissy Sales Contract had been terminated, there were still efforts to obtain a new contract and consummate a sale to Mr. Morrissy. A series of pre-auction emails in mid-September 2012, show continued interest in selling the Property to Mr. Morrissy and continued Title Company issues based on the bankruptcy cases and the Epic Aviation money judgment.
In a September 18, 2012 email, Defendant's Exhibit 144, the Morrissy's real estate agent reported that a hearing had taken place and all except one item had been settled, which would be resolved by September 28, 2012. It was also indicated that the Debtors may re-enter into a purchase contract effective September 29, 2012, with a closing date of October 15, 2012. Mr. Morrissy wanted some concession for the delays and additional legal fees, and for Debtors to "make [him] an offer", but the Debtors were "adamant" that they would not entertain any contract except on the previously agreed terms.
In a September 25, 2012, 12:40 p.m. email, the Title Company's underwriting counsel (Sun Mi Shin) advised Mr. Morrissy's attorney that she had reviewed the Bankruptcy Court pleadings and docket, and the Title Company could not make any requirements or decisions until after the anticipated September 28 auction of the Trustee's rights and interest under the Settlement Agreement. Defendant's Exhibit 147, p. 4. Underwriting counsel also noted that there was a hearing set for October 28 that could impact the Title Company's ability to make any requirements on the commitment.
In a September 25, 2012, 2:48 p.m. email, Mr. Morrissy's attorney responded to the Title Company's underwriting counsel with questions about the purpose of the October 28 hearing, whether the Epic Aviation judgment had been dealt with, and whether the Title Company would accept an affidavit of continuous marriage.
In a September 25, 2012, 2:55 p.m. email, Mr. Morrissy's attorney emailed the Debtors' real estate attorney and their bankruptcy attorney, Defendant's Exhibit 6, stating that the Title Company had the following concerns about the title and the bankruptcy cases: The Title Company would not make any decisions until after September 28, the date set for the auction of the Trustee's rights and interest under the 2007 Settlement Agreement; there was a bankruptcy hearing set for October 28 for which the Title Company may have to wait; and October 15 had been mentioned as a proposed closing date, but the Title Company was unclear why this was possible given the Bankruptcy Court's calendar.
Underwriting counsel responded in a September 25, 2012, 3:09 p.m. email to Mr. Morrissy's attorney that the October 28 hearing was on Epic Aviation's objection to the Trustee's motion to compromise the
On September 27, 2012, at 2:04 p.m., Mr. Morrissy's counsel emailed both Debtors' bankruptcy counsel and their real estate counsel, stating that the Epic Aviation judgment was still an issue according to the Title Company's underwriting counsel, who had stated: "We believe that the BR court does not recognize T/E for purposes of avoiding judgments and therefore will not rely upon it for the Epic judgment. However, if the BR attorney can provide us with the legal basis to do so, we will review." Defendant's Exhibits 6, p. 1; 73, p. 4. Debtors' real estate attorney responded the same day, expressing confusion: "I am confused, even if the bankruptcy court does not recognize T/E for purposes of avoiding judgment, that would only mean that the judgment is not discharged through bankruptcy. Even if that is the case, the judgment would still not attach to T/E property pursuant to Florida law. Am I missing something? May I speak with your underwriting counsel?" Defendant's Exhibit 6, p. 1.
Various emails indicate that the various real estate professionals were confused about whether, and when, a sale would occur. Defendant's Exhibits 6, 147, 148, 149.
The telephonic auction was conducted on September 28, 2012. Court's Exhibit L. The bidding commenced at $525,000, and eventually Debtors bid $750,000.
Mr. Green testified he believed that, at the time of the auction, Epic Aviation knew Debtors had an interested purchaser
Mr. Green also testified that during the auction process Epic Aviation engaged in settlement discussions with Debtors. He testified that at one point there was an offer by the Debtors to pay Epic Aviation $325,000 and to pay the Trustee $500,000, but the Trustee would not agree. Discussions went back and forth without success. The Court notes that the types of settlement discussions referred to by Mr. Green were not for the benefit of all creditors (despite Epic Aviation's argument to the contrary), but were aimed at substantial recovery for Epic Aviation at the ultimate expense of the other creditors.
After the auction, Debtors' representatives worked towards putting a deal together with Mr. Morrissy. In a September 28, 2012, 2:23 p.m. email, Debtors' bankruptcy counsel advised Debtors' real estate counsel and Mr. Morrissy's counsel that the "auction" had just concluded, and Debtors had agreed to satisfy the $825,000 settlement amount to the Trustee, which would be accepted by the Trustee. Defendant's Exhibit 73, p. 3. Debtors' bankruptcy counsel requested that an immediate closing be scheduled and a form of release be provided for the Trustee.
In an email later that day, Mr. Morrissy's attorney told Mr. Morrissy's realtor that he would discuss the auction and the Epic Aviation judgment with the Title Company's underwriting attorney the following Monday and hoped for something more definitive.
On the morning of October 2, 2012, Mr. Morrissy's attorney sent an email to Mr. Morrissy's real estate agent summarizing what had transpired at the auction and noting an upcoming bankruptcy court hearing on October 28. Defendant's Exhibit 148. Mr. Morrissy's Counsel concluded: "Given the contentious bankruptcy matter, the aggressive way Epic is pursuing Phillips, and the possibility Phillips may be unable to comply with the terms of the auction, there are many unanswered questions at this time. I cannot recommend that Mr. Morrissy enter into a contract until we get more definitive answers."
Debtors did not provide the Trustee with the funds on the October 2, 2012, the deadline established by the Trustee. Instead, the Debtors filed an Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and for Order Authorizing the Sale of the Debtors' Homestead Property. Plaintiffs' Exhibit 25. In the Emergency Motion, the Debtors argued that the 48 hour payment deadline should not apply because they
This October 2, 2012, motion by Debtors is the first disclosure to Epic Aviation, the Trustee, and the Bankruptcy Court of any current offer to purchase the Property. Despite the non-disclosure, by this time the Trustee was to get all she would ever be entitled to receive under the Settlement Agreement — the $825,000. The pending sale of the Property was consistent with the terms of the Settlement Agreement, although for significantly more than the $3 million the Trustee had recommended in late 2010.
Epic Aviation filed a written Response, Court's Exhibit M, making a "limited objection" to the enlargement of time to make the settlement payment. Epic Aviation asserted that the Debtors were essentially conceding that their bid above $500,000 at the auction had been with money they simply did not have. Epic Aviation further argued that Debtors had not shown grounds for the Bankruptcy Court to award additional time to comply with their auction obligations.
While the motion for an extension was pending, Debtors continued their efforts to clear up title issues and sell the Property to Mr. Morrissy, despite his attorney's stated reluctance.
In an October 3, 2012 9:55 a.m. email, Debtors' bankruptcy counsel told Epic Aviation's bankruptcy counsel that he needed to know if Epic Aviation was claiming any lien or interest in the jointly owned homestead property. Plaintiff's Exhibit 49, p. 2. If not, counsel requested confirmation that Epic Aviation would provide a partial release of its judgment lien relating to the jointly owned homestead property so that a prompt closing could occur and Debtors could fully fund the settlement.
Epic Aviation's bankruptcy counsel responded later that morning as follows:
In an October 3, 2013 1:15 p.m. email, Mr. Morrissy's real estate agent advised the Debtors' real estate agents that Mr. Morrissy was "unwilling to get tangled into a financial mess that appears to have more questions than answers." Defendant's Exhibit 149, p. 2. An October 5, 2012 10:28 a.m. email among the real estate professionals, however, stated that Mr. Morrissy was still interested in the Property "but will not move forward with it until the seller gets his issues cleared up." Defendant's Exhibit 149, p. 1. Reference was made to the October 28 Bankruptcy Court hearing, and a wait-and-see attitude was expressed.
In an October 5, 2012 11:04 a.m. email, Debtor's bankruptcy counsel asked Mr. Morrissy's counsel if Mr. Morrissy would provide a written contract with an express contingency of court approval and a hard deadline to close with no deposit. Defendant's Exhibits 7, p. 2; 75, p. 1. Debtors' bankruptcy counsel said he would like to have the information for an upcoming bankruptcy court hearing.
In an October 5, 2012 3:38 p.m. email response, Mr. Morrissy's counsel advised Debtors' counsel that Mr. Morrissy would not enter into a contract at the time. Defendant's Exhibit 7, p. 1. He further stated that "[o]nce you resolve the BR and Epic related issues, please let me know and I will contact the Buyer to determine [if] he has any interest in the property at that time."
On October 9, 2012, the Bankruptcy Court conducted a hearing on Debtors' motion requesting an extension of time to deposit their funds. Plaintiffs' Exhibit 28, Exh. B. Debtors' bankruptcy counsel summarized the events at the auction, and stated that because of Epic Aviation's objection to the way the auction was concluded, the Trustee was not in a position to sign a release in exchange for the $325,000 remaining payoff amount.
Epic Aviation's bankruptcy counsel argued that the terms of sale at the auction did not allow payment conditioned upon the sale of other property, and the Notice clearly required all monies to be paid within 48 hours.
The Trustee's position was that if the Debtors could fund the $825,000 within 48 hours of a Bankruptcy Court ruling, she
Later on October 9, 2012, the Bankruptcy Court filed an Order on Debtors' Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and For Order Authorizing Sale of the Debtors' Homestead Property. Plaintiffs' Exhibit 26; Defendant's Exhibit 60. This Order adopted the oral findings and determinations made at the hearing,
The Bankruptcy Court's Order granted the emergency motion for enlargement of time "only to the extent that the Debtors seek additional time to fund the purchase price at the auction sale by paying $825,000 in full satisfaction of the Settlement." Plaintiffs' Exhibit 26, p. 2. The Debtors were directed to wire transfer the difference between the $825,000 bid and the previous deposit to the Trustee on or before 5:00 P.M., October 11, 2012. If the Debtors timely made this payment, (i) the Debtors would be deemed to be the successful bidder at the auction sale; (ii) the Settlement would be deemed paid in full, (iii) the Trustee would provide the Debtors a release and satisfaction of the lien created by recordation of the Settlement Order, and (iv) the Trustee would return all monies paid by Epic Aviation, LLC, in connection with the auction. If the Debtors failed to pay the remaining funds as provided, then (i) Epic Aviation, LLC, would be deemed the successful bidder at the auction/sale; (ii) the Trustee would assign all of her rights under the Settlement to Epic Aviation, LLC, and (iii) the Trustee would return the deposit paid by the Debtors in connection with in the auction.
Debtors timely paid the remaining balance of the $825,000. On October 9, 2012, the Trustee executed a Satisfaction and Release of Lien and Interest (Satisfaction and Release) satisfying and releasing Debtors of any and all right, claim or interest held by the Trustee in connection with her Objection to Exemptions, and the Order Approving Joint Motion for Authority to Compromise Controversies. Plaintiffs' Exhibit 4. On October 10, 2012, at 10:16 a.m. Debtors recorded the Satisfaction and Release of Lien and Interest in the Collier County, Florida Official Records.
On October 10, 2012 at 10:56 a.m., Debtors' real estate counsel emailed Mr. Morrissy's realtor a copy of the Trustee's recorded Satisfaction and Release of Lien and Interest, and inquired if Mr. Morrissy was ready to go back into contract and whether there were any other outstanding issues. Defendant's Exhibits 9; 157, p. 3. Mr. Morrissy's counsel forwarded the Release to the Title Company's underwriting counsel, noting that Debtors' real estate attorney was still taking the position that Epic Aviation's domesticated money judgment was not a lien on the Property. Defendant's Exhibit 157, pp. 2-3. Underwriting counsel responded that
On October 10, 2012, Epic Aviation filed a Notice of Appeal of the Order on Debtors' Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and For Order Authorizing Sale of the Debtors' Homestead Property (the Auction Order Appeal). Plaintiffs' Exhibit 5. This was an appeal to the District Court, sitting in an appellate capacity. Plaintiffs do not assert that the filing of this Notice of Appeal with the Bankruptcy Court constituted a slander of their title (only that the subsequent recording of the Notice of Appeal in the Official Records did so).
With the Bankruptcy Court having upheld the Trustee's agreement to accept Debtors' $825,000 as completion of their obligations under the Settlement Agreement, and an appeal of that order having been filed, the parties addressed two matters in post-order motions. Epic Aviation wanted to stay the sale of the Property while it pursued its appeal, and Debtors wanted to resolve any argument that Epic Aviation's domesticated money was a lien which attached to the Property.
On October 10, 2012, Epic Aviation filed an Emergency Motion for Stay Pending Appeal, Court's Exhibit N, with the Bankruptcy Court in order to prevent the sale of the Property. Epic Aviation asserted that if Debtors moved forward with their proposed sale of the Property it would be deprived of the rights it purchased from the Trustee, including its lien on Debtors' property under the Settlement Agreement, and its right to relief on appeal.
Also on October 10, 2012, the Debtors filed Debtors' Emergency Motion to Avoid Judicial Lien of Epic Aviation, LLC, Plaintiffs' Exhibit 27, in the Bankruptcy Court in order to clear title to the Property so it could be sold. The motion stated that Debtors were in receipt of a verbal offer to purchase the Property; the Property is exempt from Epic Aviation's domesticated Oregon judgment both as homesteaded property and as tenants by the entireties property; Epic Aviation would never have any rights to the Property since its judgment is solely against Mr. Phillips; while Epic Aviation's judgment lien does not attach to the Property, it impairs the exemptions of each Debtor; and the Title Company believed that Epic Aviation's judgment created a title issue that must be resolved before any sale of the Property.
Additionally, on October 10, 2012, Debtors's bankruptcy counsel emailed Epic Aviation' bankruptcy counsel confirming that he had advised counsel for Epic Aviation that the Phillips believed Epic Aviation was intentionally slandering title to Bonita Phillips' jointly owned homestead property and was tortiously interfering with her ability to sell the property to a third party. Plaintiffs' Exhibit 9. The email further confirmed that Epic Aviation and its counsel
On October 12, 2012, Epic Aviation filed a Response of Epic Aviation LLC To Debtors' Emergency Motion to Avoid Judicial Lien of Epic Aviation, LLC and Objection To Debtors' Claims of Exemptions, Plaintiffs' Exhibit 28. Epic Aviation stated that in light of Debtors' Emergency Motion, it was objecting to "all and each of the Debtors' respective claims to exemption, or to any allegedly exempt property, claimed in each of their respective bankruptcy cases, to the fullest extent available under the Bankruptcy Code and Florida law."
On October 12, 2012, the Bankruptcy Court held a hearing on both motions at 2:05 p.m., Court's Exhibit O. When pressed by the Bankruptcy Court judge, Epic Aviation's bankruptcy counsel suggested that if it was the owner of the Trustee's rights (as Epic Aviation asserted), it could refuse to accept the $825,000 from Debtors, seek to revoke Mrs. Phillips' discharge, become a joint creditor for the $825,000, and bring an action to rescind a prior sale of the Jet 1, Inc. stock by "unwinding" that provision of the 2007 Settlement Agreement, all of which would be further litigated in bankruptcy court.
After hearing arguments, the Bankruptcy Court summarized the procedural history of the case, concluding that the Trustee essentially called off the auction and decided to allow Debtors the opportunity to pay the full amount under the Settlement Agreement. The Bankruptcy Court noted that this could be viewed either as the Trustee determining the Debtors were the highest and best offer at the auction, or that the Trustee determined to go forward with the provisions of the Settlement Agreement. The Bankruptcy Court found that the Trustee had determined that Debtors' offer was the highest and best offer pursuant to the terms of the auction, and gave Debtors a time limit in which to transmit funds into the Trustee's trust account. The Bankruptcy Court further found that it had the discretion to grant the extension of time, the decision was not clearly erroneous, and the relevant factors did not weigh in favor of granting a stay pending appeal. (
As to Epic Aviation's judgment lien, the Bankruptcy Court indicated that the avoidance would be granted if a Continuous Marriage Affidavit was filed establishing that the parties were married when the Property was acquired and that it was acquired as tenants by the entireties. Epic Aviation would have an opportunity to seek reconsideration on a good faith basis. (
On October 12, 2012, Mr. Gettig wrote in his Priority Credit Review Action List that the "short version" of the outcome of the court hearing earlier that day was that "both of us paid the Trustee, but the recent actions of the debtor have opened a giant hole for us to stay Trustee's right to accept their money, appeal the judge's decision to let the Trustee accept the debtor's
Against this contentious litigation background, Epic Aviation recorded three documents in the Official Records of Collier County, Florida which Debtors assert constituted a slander to their title in the Property. The first two are discussed below.
On October 12, 2012, at 11:22 a.m., Epic Aviation recorded in the Collier County Official Records a copy of its Notice of Appeal of the Auction Order to the United States District Court. Plaintiffs' Exhibit 5. Attached to the Notice of Appeal was a copy of the Auction Order.
Less than three hours later, on October 12, 2012, at 2:06 p.m., Epic Aviation recorded a Notice of Lis Pendens in the Official Records of Collier County, Florida regarding the Auction Order. Plaintiffs' Exhibit 6; Defendant's Exhibit 56. The Notice of Lis Pendens bore the caption and case numbers of the Bankruptcy Court proceedings, and stated that "Epic Aviation, LLC, an Oregon limited liability company, has initiated this action to preserve its interests and rights under its appeal of that certain Order on Debtors' Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and For Order Authorizing Sale of the Debtors' Homestead Property, with respect to the property described in below: [setting forth legal description of the Property]."
According to Mr. Green, Epic Aviation authorized the filing of the lis pendens, knew the Property was Debtors' primary residence, and knew that Mr. Phillips had stated he had an interested buyer for the Property. Mr. Green testified that the filing of the lis pendens was to make sure that Epic Aviation's pursuit of the rights of the Trustee under the Settlement Agreement did not become moot. Epic Aviation did not want the Property to be sold, which Epic Aviation believed would moot its appeal. Mr. Green also testified that the lis pendens was to improve Epic Aviation's chances of collecting on the domesticated money judgment. To Mr. Green's knowledge, this is the only lis pendens Epic Aviation has ever filed in any litigation matter.
Before the entry of the written order on the motion to stay and the motion for
Later on October 16, 2012, Debtors' bankruptcy counsel emailed underwriting counsel and Mr. Morrissy's counsel attaching a copy of Epic Aviation's bankruptcy counsel's email. Defendant's Exhibits 8, p. 1; 151, p. 4. Debtors' bankruptcy counsel observed that Epic Aviation's counsel "admits that the lien did not attach to the property," and that the senior underwriting counsel at the Title Company "sees no issue with Epic's judgment." Defendant's Exhibit 8, p. 1. Debtors' bankruptcy counsel noted that they had recorded a continuous marriage affidavit, asked if they can move forward with the sale of the Property, and noted that Debtors are dangerously close to losing the sale.
Mr. Morrissy's counsel forwarded the email to Mr. Morrissy's real estate agent, and asked to be informed of the status of going back to contract and closing.
On October 17, 2012, the Bankruptcy Court filed a written Order Granting Debtors' Emergency Motion To Avoid Judicial Lien of Epic Aviation, LLC. Plaintiffs' Exhibit 29; Defendant's Exhibit 158. The Bankruptcy Court noted that Epic Aviation had questioned whether there was record evidence supporting the tenancies by the entireties nature of the Property, and that Debtors had filed an Affidavit of Continuous Marriage and a copy of the Warranty Deed to both Debtors as husband and wife.
On October 17, 2012, Debtors' bankruptcy counsel sent a copy of the Bankruptcy Court's Order to underwriting counsel for the Title Company. Defendant's Exhibit 158. Underwriting counsel responded that there was still a fourteen day appeal period.
On October 19, 2012, Mr. Gettig wrote in his Priority Credit Review Action List that
On October 22, 2012, Mr. Morrissy's attorney emailed Mr. Morrissy's real estate agents that he was trying to confirm from the Bankruptcy Court records that the appeal from the order involving the Trustee was now moot since Debtors had paid the Trustee. Defendant's Exhibit 153. Counsel also wrote that he was trying to get the Title Company's underwriter to commit to a closing date, but the Title Company was concerned about the appeals period and their ability to timely determine whether an appeal had been filed.
On October 23, 2012, the Bankruptcy Court entered a written Order Denying Emergency Motion for Stay Pending Appeal of the Auction Order for the reasons stated on the record at the October 12, 2012, hearing. Court's Exhibit R. The Bankruptcy Court's findings are set forth
On October 26, 2012, Epic Aviation filed an Emergency Motion to Set Aside Sale and Motion for a Stay Pending Appeal with the District Court. Court's Exhibit S. Epic Aviation argued that the Debtors and the Trustee had violated the automatic stay under Federal Rule of Bankruptcy Procedure 6004(h) regarding the sale of property, and based on a likelihood of prevailing on the merits.
On October 29, 2012, at 2:49 p.m., Debtors' bankruptcy counsel sent an email to Epic Aviation's bankruptcy counsel requesting that Epic Aviation immediately withdraw the lis pendens, provide information as to applicable insurance related to the filing, and explain why a copy was not served on him as Debtors' counsel. Plaintiffs' Exhibit 10. According to Mr. Green, Epic Aviation was aware that Mr. Phillips had said he had an interested buyer at the time and had a sale pending.
On October 29, 2012, the Trustee signed another Satisfaction and Release of Lien and Interest. Plaintiffs' Exhibit 7. On October 30, 2012 at 3:32 p.m. Debtors recorded the second Trustee's Satisfaction and Release of Lien and Interest in the Official Records of Collier County. Plaintiffs' Exhibit 7. This document again stated that the Trustee fully satisfied and releases "any and all right, claim or interest held" by the Trustee in connection with the Trustee's Objections to Exemptions and Order Approving Joint Motion for Authority to Compromise Controversies...and "consents that the same shall be satisfied and released of record in all respects."
On October 30, 2012, Debtors filed their Emergency Motion to Dissolve Lis Pendens Filed by Epic Aviation, LLC, Plaintiffs' Exhibit 30, asserting that the lis pendens filed against the Property was improper and illegal under Florida Statute § 48.23. Epic Aviation's Response, Plaintiffs' Exhibit 31, asserted that the Bankruptcy Court lacked subject-matter
The Bankruptcy Court held a hearing on the Emergency Motion To Dissolve on November 5, 2012. Plaintiffs' Exhibit 33. On November 7, 2012, the Bankruptcy Court issued its Order Granting Debtors' Emergency Motion to Dissolve Lis Pendens Filed by Epic Aviation, LLC. Plaintiffs' Exhibit 32. The Bankruptcy Court found "that there is an insufficient nexus between the Debtors' jointly owned homestead property [ ] and the dispute asserted by Epic relating to the appeal of this Court's Order on Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and For Order Authorizing Sale of Debtor's Homestead Property", granted the motion, and dissolved the lis pendens.
On November 7, 2012, Epic Aviation filed a Notice of Appeal in the Bankruptcy Court, Plaintiffs' Exhibit 8, from this Order (the Lis Pendens Dissolution Order Appeal). Epic Aviation's appeal to the District Court was assigned Case No. 2:12-cv-669-FTM-29. Debtors do not claim this filing slandered their title, but assert that the subsequent recording of it in the Official Records does so.
On November 9, 2012, the undersigned denied Epic Aviation's Emergency Motion to Set Aside Sale and Motion for a Stay Pending Appeal in a written Opinion and Order, and noted that there was nothing to prevent the sale of the homestead property. Plaintiff's Exhibit 38.
On November 12, 2012 at 10:15 a.m., Debtors' bankruptcy counsel emailed Mr. Morrissy's counsel attaching a copy of the undersigned's November 9, 2012 Opinion and Order. Defendant's Exhibit 74. Counsel asked that the matter be discussed with Mr. Morrissy and let him know "where we are."
Also on November 12, 2012, Debtors' bankruptcy counsel inquired by email of Epic Aviation's bankruptcy counsel whether Epic Aviation was going to withdraw the appeals and let Debtors sell the Property. Plaintiffs' Exhibit 12. Debtors' bankruptcy counsel asserted that Epic Aviation's filings in the public record and appeals were precluding the sale transaction from moving forward, and reserved all rights, including claims for attorney fees, compensatory damages, and punitive damages.
Epic Aviation's appeals had a clear adverse effect on the potential sale of the Property. In a November 13, 2012 email, Mr. Morrissy's counsel stated that the attorney for the Title Company had reviewed the Bankruptcy Court docket and found three "still outstanding" matters: Epic Aviation's appeal of the dismissal of the lis pendens; Epic Aviation's appeal of the Trustee's extension of time; concern over whether Epic Aviation would appeal the recent District Court Opinion and Order. Defendant's Exhibit 74.
In a November 14, 2012, 8:08 a.m. email, Debtors' bankruptcy counsel told Mr. Morrissy's counsel that Epic Aviation was considering withdrawing the appeals, and gave the date its brief was due. Plaintiffs' Exhibit 13; Defendant's Exhibit 74. Epic Aviation apparently did not consider the matter for long, however.
Instead of withdrawing its two pending appeals, Epic Aviation recorded another
On November 19, 2012, Mr. Morrissy signed another Sales Contract, Plaintiffs' Exhibit 14; Defendant's Exhibit 76, for the purchase of the Property. Debtors signed on November 20, 2012.
On November 20, 2012, at 10:28 a.m., Debtors' bankruptcy counsel emailed Mr. Morrissy's counsel, Defendant's Exhibit 10, a copy of the new Morrissy contract and stated that he did not think Epic Aviation would provide an actual "release" of its judgment. Counsel stated that Epic Aviation's judgment on the Property had been expressly avoided by Order of the Bankruptcy Court and that Order had not been appealed.
In his December 28, 2012 Priority Credit Review Action List, Mr. Gettig summarized the litigation activities, noting that Epic Aviation's counsel had discussed withdrawal of the appeal in federal court in return for a release of claims for legal expenses, but Phillips and Epic Aviation were unable to reach a consensus. Plaintiff's Exhibit 43H, p. 626. The next step was to "[n]egotiate with debtor to settle all matters for $400[k] since the sale of the residence is allegedly in process."
In his January 4, 2013, Priority Credit Review Action List, Mr. Gettig again summarized the litigation activities and gave a short history of the matter. Plaintiffs' Exhibit 43I. Mr. Getting noted that Debtors may claim that Epic Aviation is slandering the title to their residence and willfully interfering with their settlement with the Trustee.
There is no response from Epic Aviation or its bankruptcy counsel in the trial record, and no release or withdrawal of appeals were ever executed by Epic Aviation.
In the absence of a response from Epic Aviation, on January 11, 2013, Debtors filed an Emergency Motion For Order Approving Sale of Debtors' Property Free and Clear of any Interest of Epic Aviation, LLC, Plaintiffs' Exhibit 34, in the Bankruptcy Court. Debtors sought Bankruptcy Court approval of the sale of the Property free and clear of Epic Aviation's interests, i.e., the interests created by the pending appeals because Epic Aviation had no interest in the Property. Debtors pointed out that while Epic Aviation had a $322,603.30 pre-petition judgment against Mr. Phillips, Epic Aviation would never have rights against the Property, which was jointly owned with Mrs. Phillips as tenants by the entirety. (
On January 15, 2013, Epic Aviation filed a Response, Court's Exhibit T, stating that the residence was claimed as exempt property by Debtors, and was therefore no longer property of the bankruptcy estate. Therefore, Epic Aviation argued, Debtors could not sell the property as requested.
On January 17, 2013, the Bankruptcy Court filed an Order Granting Debtors' Emergency Motion for Order Approving Sale of Debtors' Property Free and Clear of Any Interest of Epic Aviation, LLC. Plaintiffs' Exhibit 35. The Bankruptcy Court found that it had the power and authority to grant the request pursuant to Section 105 of the Bankruptcy Code, and in furtherance of its prior October 9, 2007 order approving the Settlement Agreement, the October 9, 2012 order enlarging time to make settlement payment, its October 17, 2012 order to avoid judicial lien, and its November 7, 2012, order dissolving lis pendens.
On January 17, 2013, Epic Aviation filed a Notice of Appeal, Plaintiffs' Exhibit 36
Plaintiffs' Exhibit 43K, p. 493. Mr. Gettig also wrote that "[i]f the sale of the residence fails, we expect a slander of title to be filed by Phillips. Our counsel is adamant that we have not slandered title and will prevail on challenge."
In his January 25, 2013, Priority Credit Review Action List, Mr. Gettig repeated that Epic Aviation would "[c]ontinue the appeal efforts filed Jan 17 in US Bankruptcy Court to delay sale of Phillips' primary residence, expected to close Jan 21" which "preserves the main assert involved in EPIC's appeal...." Plaintiff's Exhibit 43L, p. 497. After summarizing the litigation activities, Mr. Gettig wrote: "Jan 18-Phillips offers $100[k] to settle globally all matters, to include release judgment and appeal. EPIC declined."
A HUD Settlement Statement, Plaintiffs' Exhibit 15; Defendant's Exhibit 45, showed the distribution of funds from Mr. Morrissy if the sale had closed. Both the first and second mortgages would be paid off, $825,000 would be allotted for the Trustee, and net proceeds of $1,602,871.34 would be placed in escrow for satisfaction of the Epic Aviation judgment.
Mr. Gettig's February 1, 2013, Priority Credit Review Action List summarized the activities in the case. Plaintiff's Exhibit 43M. It noted that on December 31, 2012, Epic Aviation offered to settle all matters for $500,000 since the sale of the residence was allegedly in process.
A series of emails between Mr. Morrissy's attorney and Debtors' real estate attorney addressed the title issues. Defendant's Exhibit 160. On February 1, 2013, Mr. Morrissy's attorney informed Debtors' real estate attorney that the Title Company was not willing to close the sale of the Property in escrow while the appeals were still pending.
These early February, 2013 efforts of the attorneys to salvage the deal were to no avail. Defendant's Exhibit 160. On February 13, 2013, Mr. Morrissy signed a Termination of Sales Contract and Deposit Release and Directive in connection with his second contract to purchase the Property. Defendant's Exhibits 11, 44, 154. Mr. Morrissy terminated the contract pursuant to the Addendum because of the ongoing litigation in the Bankruptcy Court. Defendant's Exhibit 44. On February 18, 2013, Debtors' relator emailed the executed Termination of Sales Contract back to Mr. Morrissy's real estate agent with Debtors' signatures. Defendant's Exhibit 154, p. 1.
Mr. Gettig's March 1, 2013 Priority Credit Review Action List noted that, as of February 28, there was no record of the sale of Debtors' primary residence filed in Florida court records. Plaintiff's Exhibit 43N, p. 478.
On March 5, 2013, the undersigned heard oral argument in the related appeals of three Bankruptcy Court orders: (1) the Order on Debtors' Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and For Order Authorizing Sale of the Debtors' Homestead Property issued on October 9, 2012; (2) the Order Granting Debtors' Emergency Motion to Dissolve Lis Pendens Filed by Epic Aviation, LLC issued on November 7, 2012; and (3) the Order Granting Debtors' Emergency Motion for Order Approving Sale of Debtors' Property Free and Clear of Any Interest of Epic Aviation, LLC issued on January 17, 2013. Defendant's Exhibit 184, p. 6.
On March 15, 2013, Mr. Gettig wrote in the Priority Credit Review Action List that Epic Aviation was "[a]wait[ing] overdue appellate ruling in Federal District Court of decision in bankruptcy court to permit debtor to settle with trustee for $825[k]. Reversal could lead to challenging the discharge of creditors by the spouse of our guarantor, thereby letting us collect by foreclosing on the primary residence." Plaintiff's Exhibit 43O, p. 692. Mr. Gettig continued: "The guarantor [Mr. Phillips] has significant seven figure equity in his primary residence. Our key barrier is its joint ownership with his spouse whose obligations to creditors were discharged in bankruptcy. Our guarantor's bankruptcy was denied after our challenge, which survived two appeals after many years. Though he owes significant amounts to many creditors, we have judgments and others have not pursued them."
On May 6, 2013, Debtors advised the District Court that while they had stated at oral argument on the appeals that the sale had been lost due to the pending appeals, they had obtained the interest of another purchaser who was ready, willing, and able to move forward with purchase contract for the home. Court's Exhibit X.
On May 7, 2013, the District Court affirmed the Bankruptcy Court's Auction Order and Lis Pendens Order, and vacated the Sale Order after being advised that the sales contract [with Mr. Morrissy] had been lost. Plaintiffs' Exhibit 39. The undersigned found that Epic Aviation's appeal was not moot,
Mr. Gettig wrote in the May 10, 2013, Priority Credit Review Action List that Epic Aviation would appeal the District Court decision, and that "[p]revailing on appeal could lead to denial of discharge for the spouse of our guarantor." Plaintiff's Exhibit 43P, p. 794. He also wrote that "[t]he effect of our appeal on the trustee is not yet clear."
On May 14, 2013, Epic Aviation filed a Notice of Appeal to the Eleventh Circuit Court of Appeals. Court's Exhibit Y.
On June 3, 2013, Debtors filed their two-count Complaint (Doc. # 1) in the current case in the U.S. District Court for the Middle District of Florida, Fort Myers Division, alleging slander of title and seeking to quiet title to the Property.
On June 16 and 17, 2014, plaintiffs entered into a Sales Contract with John M. Connors Jr. to sell the Property for $4.4 million cash, with a $10,000 deposit. Plaintiffs' Exhibit 19; Defendant's Exhibit 81. The Addendum labeled as Schedule BII (Schedule) to this contract required Debtors to satisfy the title requirements set forth in a First American Title Commitment.
On June 17, 2014, Debtors' Renewed Motion For Order Approving Sale of Debtors' Property Free and Clear of Any Claim or Interest of Epic Aviation, LLC was filed. Plaintiffs' Exhibit 40. Debtors attached a copy of the signed John Connors Sales Contract and the title insurance commitment, and sought an order authorizing the sale of the Property, as provided in one of the Commitment's express requirements.
On June 18, 2014, an email from Debtors' bankruptcy counsel to Epic Aviation's bankruptcy counsel attached a fully executed copy of the Connor Sales Contract and title insurance Commitment, and asked whether Epic Aviation would either stipulate to an order approving the sale or provide a limited release of any claim against or interest in the Property so the closing could occur. Plaintiffs' Exhibit 20. The email stated that Epic Aviation's filings in the public record and pending appeals were the only things preventing the closing.
On July 18, 2014, Mr. Gettig wrote in the Priority Credit Review Action List that Epic Aviation was requesting the Eleventh Circuit to reverse and remand the case back to the Bankruptcy Court to conduct a full and fair auction "to gain control of the Trustee's position in the bankruptcy case." Plaintiff's Exhibit 43R, p. 939. This changed rationale occurred only after the slander of title case was filed against Epic Aviation.
On July 22, 2014, Debtors' bankruptcy counsel emailed Debtors' real estate professionals to inquire whether the contract was still active, whether the buyer was still on board, and if they could get an appropriate court order. Defendant's Exhibit 82. On July 24, 2014, the real estate attorney for Mr. Connors asked Debtors' real estate counsel to provide an update concerning Debtors' efforts to satisfy the title Commitment requirements as set forth in the Sales Contract Schedule. Defendant's Exhibit 112. Debtors' real estate counsel then emailed Mr. Connors' attorney that he and Debtors' bankruptcy attorney were working on the title requirements. Defendant's
On September 22, 2014, Mr. Gettig signed an Affidavit in Oregon stating that the name of the Judgment debtor is J. Scott Phillips, identifying the debtor's social security number, and stating that the Debtors last known address was 3060 Green Dolphin Lane, Naples, Florida 34102. Plaintiffs' Exhibit 22. This Affidavit was recorded in the Official Records of Collier County, Florida on September 23, 2014 at 12:16 p.m.
On September 24, 2014, the Eleventh Circuit Court of Appeals affirmed the opinions and orders of the District Court and the Bankruptcy Court. Plaintiffs' Exhibit 41; Defendant's Exhibit 63.
By letter dated September 24, 2014, and emailed the same day at 3:45 p.m., Connors' real estate attorney notified Debtors' real estate counsel that Mr. Connors was electing to terminate the Sales Contract to purchase the Property pursuant to the Due Diligence provision of the Schedule. Plaintiffs' Exhibit 24; Defendant's Exhibits 18, 49. By email dated September 24, 2014, 5:02 p.m., Epic Aviation's bankruptcy counsel asked for a copy of Debtors' pending Sales Contract for the Property and stated he would be discussing the Eleventh Circuit's opinion with his client the next day. Plaintiffs' Exhibit 23.
In Mr. Gettig's October 3, 2014 Priority Credit Review Action List, he noted the Eleventh Circuit's decision, stating that "actions continue to support EPIC's right to lien interests in debtors' residence, currently for sale." Plaintiff's Exhibit 43V, p. 545. Mr. Gettig made reference to the fact Epic Aviation had filed a lis pendens on the Property, and that Debtor had equity "of multiple millions" in the Property.
In early October 2014, efforts to resolve title questions from Old Republic National Title Insurance Company continued. Defendant's Exhibit 86. On October 25, 2014, Mr. Phillips emailed his real estate agent indicating that renovations on the Property had commenced and the he wished to raise the price of the house. Defendant's Exhibit 88.
In response to interrogatories in this case, Mr. Green verified that as of March 13, 2015, Epic Aviation "had no knowledge of any delay in the sale of the Plaintiff's residence." Plaintiffs' Exhibit 42, p. 5. The Court finds this statement to be patently and knowingly false.
On May 18, 2015, Debtors' sought a hearing and an award of attorney's fees incurred in connection with the motion to dissolve the lis pendens and the resulting appeal. Defendant's Exhibit 62, p. 3. On July 10, 2015, after a hearing, the Bankruptcy Court filed an Order Denying Debtors' Motion for Attorney Fees and Costs Against Epic Aviation, LLC, in Connection With Lis Pendens, Without Prejudice.
On November 2, 2015, the Property was sold to Mr. and Mrs. Tague for $4.9 million. Defendant's Exhibits 162, 163.
Additional facts as found by the Court will be set forth below as necessary to address specific issues.
Florida has long recognized a cause of action for slander of title.
Slander of title is generally defined in Florida as "a false and malicious statement, oral or written, made in disparagement of a person's title to real or personal property, or of some right of his, causing him special damage."
In a slander of title cause of action, Florida courts seem to distinguish between presumed malice and actual malice.
Additional legal conclusions are discussed below in order to resolve specific issues.
The parties agreed to facts which establish that the Court has subject matter jurisdiction over this case. (Doc. # 138, ¶¶ 1, 10(1).) The Court agrees it has subject matter jurisdiction. (Doc. # 127.)
The parties also agree that the Court has personal jurisdiction over defendant, that venue is proper in the Fort Myers Division of the Middle District of Florida, and that Florida substantive law applies (Doc. # 138, ¶ 10(1), (2).) The Court agrees with all three propositions.
In Florida, the Clerk of the Circuit Court is the recorder of all instruments that are required or authorized by law to be recorded. Fla. Stat. § 28.222(1). The Clerk must record all instruments in one general series called "Official Records." Fla. Stat. § 28.222(2). The Clerk "shall record" certain kinds of instruments, including in relevant part:
Fla. Stat. § 28.222.
Several relevant documents were recorded in the Official Records of Collier
Date Description of Document Recorded By Recorded September 24, Oregon General Judgment and Epic Aviation 2004 Money Award October 25, 2007 Trustee's lien on Property Trustee resulting from Mediated Settlement Agreement August 23, 2012 General Judgment and Money Epic Aviation Award (re-recording) October 10, 2012 Satisfaction of Trustee's Trustee Lien on PropertyOctober 12, 2012 Notice of Appeal from Order Epic Aviation granting Debtors' Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and for Order Authorizing Sale of the Debtors' Homestead Property (the Auction Order) October 12, 2012 Notice of Lis Pendens Epic Aviation (regarding Auction Order) October 30, 2012 Satisfaction and Release of Trustee Lien and InterestNovember 14, 2012 Notice of Appeal from Order Epic Aviation Granting Motion to Dissolve Lis Pendens (the Lis Pendens Dissolution Order) September 23, Affidavit with Oregon Epic Aviation 2014 General Judgment and Money Award (re-recording)
The Court addresses the elements of slander of title as they relate to each of the pertinent documents:
In a slander of title action plaintiff must prove that defendant published the alleged defamatory statement to a third party, not to an interested party.
The Court finds that the recording of each of the three documents in the Official Records satisfies the publication
Plaintiffs must establish that the offending recorded document was in fact false.
The first document which plaintiffs claim constituted a slander of their title to the Property was the Notice of Appeal of the Auction Order, recorded on October 12, 2012, which contained a copy of the Auction Order which was the subject of the appeal. Plaintiffs' Exhibit 5. The third document which plaintiffs claim constituted slander of their title to the Property was the Notice of Appeal of the Lis Pendens Dissolution Order, recorded on November 14, 2012. Plaintiffs' Exhibit 8. A copy of the Dissolution Order was attached to this Notice of Appeal.
In general, the
The recorded Notices of Appeal at issue contained no false statements. The Notices of Appeal stated that Epic Aviation was appealing certain orders, and attached a copy of the order being appealed, as required by the Bankruptcy Rule. While there was conflicting testimony as to whether recording such notices of appeal
The second document, which plaintiffs claim constituted a slander of their title to the Property, was the Notice of Lis Pendens regarding the Auction Order, also recorded on October 12, 2012. Plaintiffs' Exhibit 6; Defendant's Exhibit 56. The Notice of Lis Pendens bore the caption and case numbers of the Bankruptcy Court cases, and stated that "Epic Aviation, LLC, an Oregon limited liability company, has initiated this action to preserve its interests and rights under its appeal of that certain Order on Debtors' Emergency Motion for Enlargement of Time to Make Settlement Payment to the Trustee and For Order Authorizing Sale of the Debtors' Homestead Property, with respect to the property described in below: [setting forth legal description of the Property]."
"The lis pendens mechanism is not designed to aid either side in a dispute...."
(citations and internal punctuation omitted). A lis pendens is a harsh and oppressive remedy because it operates as a cloud on the title and effectively prevents an owner from selling the property.
The Notice of Lis Pendens contained false statements. First, it falsely stated that Epic Aviation "has initiated this action" given the Bankruptcy Court case number. Epic Aviation did not initiate the bankruptcy action; rather the Debtors did. While Epic Aviation initiated the appeal, that is not what the Notice of Lis Pendens states. More importantly, by recording the Notice of Lis Pendens in the
The Court finds: Epic Aviation never had an ownership or lien interest in the Property, which was owned by the Debtors by the entireties at all relevant times. Epic Aviation knew this from the beginning of the bankruptcy litigation through its conclusion. Epic Aviation knew the Property was not subject to its Judgment against Scott Phillips. Epic Aviation persistently attempted to reach the Property to collect on its Judgment despite knowing the Property was not subject to its Judgment against Scott Phillips. Epic Aviation started by seeking to compel the sale of the Property to satisfy its Judgment, then shifted to taking frivolous appeals intended to delay the actual sale of the Property by Debtors. Epic Aviation filed the Notice of Lis Pendens, as well as the Notices of Appeal, in an effort to coerce the Debtors to allow Epic Aviation to reach an asset which it had no legal right to reach to satisfy its judgment against Scott Phillips individually. Epic Aviation never intended to act in the benefit of the other creditors, and never did so. Epic Aviation intentionally filed the Notice of Lis Pendens not because it believed in the merits of its inaccurate legal theory, but as a strategy to prevent Debtors from selling the Property. Even if Epic Aviation would have prevailed on its appeal of the Auction Order, Epic Aviation would not have had any interest in the Property. Claiming that success in its appeal would result in an interest in the Property was knowingly false.
In a slander of title action, plaintiff must prove that the defendant-publisher knew or reasonably should have known at the time of publication that the publication would likely result in inducing others not to deal with the plaintiff, and that in fact the falsehood did play a material and substantial part in inducing others not to deal with plaintiff.
Even before Epic Aviation knew of an actual sales contract for the Property, it knew that recording a document in the Official Records was notice to the world. Epic Aviation knew such a recording would be a cloud on the Property's title to reasonable purchasers, which is exactly what Epic Aviation intended. When Epic Aviation learned of the sales contract for the Property by Debtors to Mr. Morrissy, its intent to preclude a sale of the Property became specific as to that contract. Epic Aviation intended to prevent the sale by Debtors to Mr. Morrissy and to Mr. Connors. The evidence established that both were bona fide, good faith purchasers willing and able to purchase the Property, and that the contracts would have closed but for the obstructive efforts of Epic Aviation.
The Court also finds ample evidence that the recording of the Notice of Lis Pendens was indeed a material and substantial part of inducing others not to purchase the Property. Emails, correspondence, and discussions by Mr. Morrissy and his real estate professionals establish that Epic Aviation's stubborn refusal to let go of a frivolous legal position and its recording of the false Notice of Lis Pendens caused the Morrissy contracts to fail
Because defendant has asserted an affirmative defense of privilege, plaintiffs must prove actual malice. The Court finds that they have done so.
There is no doubt in the Court's mind from the evidence that Epic Aviation acted in bad faith and with actual malice in many of its actions, including the recording of the Notice of Lis Pendens. Despite the testimony and argument to the contrary, which the Court found not to be credible, Epic Aviation was driven not by a desire to stand in the shoes of the Trustee, or even, in the end, to act in its own financial best interest. Instead, Epic Aviation acted out of spite based upon ill-will and mean-spiritedness toward Scott Phillips developed over the course of their contentious litigation. Its actions, including recording the Notice of Lis Pendens and its refusal to withdraw that recording, were malicious.
Damages are an element of a slander of title action,
In a slander of title action, "the pecuniary loss recoverable for the injurious falsehood is restricted to that which results directly and immediately from the falsehood's effect on the conduct of third persons and the expenses incurred to counteract the publication."
Consequential damages include expenses incurred in the ownership, preservation, and operation of the property which are the natural consequence of the wrongful lis pendens while it is outstanding.
Here, plaintiffs do not seek direct damages because the Property eventually sold for more than its fair market value at the time the Notice of Lis Pendens was recorded. The Property ultimately sold for $4.9 million, which was in excess of the fair market value when the Notice of Lis Pendens was wrongfully recorded. Therefore, plaintiffs are not entitled to direct damages from the wrongful conduct of Epic Aviation.
Plaintiffs do seek consequential damages and attorney fees, which they have listed in Plaintiffs' Exhibits 46 and 47. The process for determining if such damages are
The Court makes the following relevant findings:
Thus, the Property value increased from $4.315 million to $4.4 million, a positive difference of
Since the Property increased in value while the wrongful Notice of Lis Pendens was outstanding, the Court must determine the amount of the consequential damages, i.e., the necessary expenses incurred in the ownership, preservation, and operation of the property which are the natural consequence of the wrongful lis pendens while it is outstanding. Under Florida law, plaintiffs can only recover an amount of consequential damages which exceed the $85,000 increase in the value of their Property.
The Court finds that plaintiffs have shown multiple, diligent, but unsuccessful attempts to sell the Property, including after Epic Aviation wrongfully recorded the Notice of Lis Pendens. It is clear that at least by that time plaintiffs were motivated to sell the Property, and were making good faith efforts to do so. Plaintiffs through their attorneys worked diligently to counteract the adverse effects of the wrongfully filed Notice of Lis Pendens, which prevented the sale of the Property.
In addressing the claimed consequential damages, the Court follows the chart provided by plaintiffs as Plaintiffs' Exhibit 47 (As of 10/22/2015 — Revised 12/7/2015):
The final step in the calculation of the consequential damages is to deduct the amount of the increase in property value from the necessary expenses. The total allowed expenses is $279,830.38, and the
Plaintiffs also request attorney fees. Plaintiffs' Exhibit 46. Plaintiffs seek
The Court is deeply familiar with this litigation, and the attorneys involved. After reviewing Plaintiffs' Exhibit 46 and the record of the case, the Court is satisfied that the number of hours expended, the total fee, and the average hourly fee are reasonable given the nature and extent of this litigation.
Epic Aviation argues that plaintiffs should be denied their special damages as a sanction for committing fraud on the Court. The Court declines to do so. There is no reason, particularly given the facts in this case, why Epic Aviation should have the amount of damages it owes reduced because of Scott Phillips's conduct towards the Court.
Defendant raises the affirmative defense of privilege pursuant to the Florida litigation privilege and the Florida appellate litigation privilege. The history of the litigation privilege in Florida has been summarized as follows:
There are certainly factual situations when recording a notice of lis pendens is a privileged act.
Epic Aviation claims that plaintiffs have waived their claim of slander of title by failing to pursue the statutory remedy of asking the court to require the posting of a bond pursuant to Fla. Stat. § 48.23(3). (Doc. # 68, Second Affirmative Defense). Florida does not require that a plaintiff request a bond as a pre-condition for bringing a slander of title suit, and the evidence amply establishes that plaintiffs did not waive their right to bring suit.
Epic Aviation asserts that plaintiffs cannot bring a claim for slander of title because they elected to file a motion to dissolve the lis pendens but failed to seek the posting of a statutory bond pursuant to Fla. Stat. § 48.23(3). Epic Aviation asserts that damages are not available in the absence of a bond. (Doc. # 68, Third Affirmative Defense.) The Court rejects this argument. Florida law does not condition a slander of title suit on seeking or obtaining a bond.
Accordingly, it is hereby
