United States District Court, S.D. Georgia, Dublin Division
IN RE: WILLIAM M. FOSTER, JR., Chapter 11 proceedings, Debtor.
WILLIAM M. FOSTER, JR., Appellee. WILMINGTON PLANTATION, LLC, Appellant, Bankruptcy No. 11-30021.
DuDLEY H. BOWEN, Jr., District Judge.
This bankruptcy appeal arises out of the Bankruptcy Court's Order following trial, which sustained the debtor's, William M. Foster, Jr. ("Foster"), objection to a proof of claim by the Appellant Wilmington Plantation, LLC ("Wilmington"). Following denial of cross motions for summary judgment and a trial on the merits of Foster's defenses to Wilmington's claim, the Bankruptcy Court concluded that Wilmington's claim was barred on the bases of res judicata and judicial estoppel. (See Order of September 24, 2013, hereinafter referred to as the "Post-Trial Order".) Wilmington now seeks reversal of the Bankruptcy Court's Order and remand with instruction to allow its claim, subject to a determination of damages. Foster seeks affirmance of the Order; alternatively, through his cross-appeal, Foster seeks affirmance based upon four additional defenses he had raised below. The Court held oral argument in the matter on July 31, 2014. For the reasons set forth below, this Court AFFIRMS the Bankruptcy Court's Post-Trial Order.
I. JURISDICTION AND STANDARD OF REVIEW
This Court has appellate jurisdiction pursuant to 28 U.S.C. § 158(a) and Bankruptcy Rules 8001 et seq. In reviewing a bankruptcy court's decision, the Court must accept the bankruptcy court's findings of fact, which "shall not be set aside unless clearly erroneous." Fed.R.Bankr.P. 8013; see also Club Assocs. v. Consol. Capital Realty Investors (In re Club Assocs.) , 951 F.2d 1223, 1228 (11th Cir. 1992). "The bankruptcy court's findings of fact are not clearly erroneous unless, in light of all the evidence, [the court is] left with the definite and firm conviction that a mistake has been made." Westgate Vacation Villas, Ltd. v. Tabas (In re Int'l Pharmacy & Disc. II, Inc.) , 443 F.3d 767 (11th Cir. 2005). In contrast, the Court reviews legal conclusions by the bankruptcy court de novo. In re Club Assocs. , 951 F.2d at 1228.
In 1998, Foster purchased 19.846 acres of land on Wilmington Island, Georgia, upon which existed a preexisting structure known as the Oglethorpe Hotel. Foster intended to develop the site into a 265-unit condominium development, of which 45 units would be located within the old hotel and an additional 220 units would be located in nine yet-to-be built mid-rise buildings located on the property. Foster's attorney prepared a Declaration of Condominium for recordation in Chatham County. The Declaration, however, failed to properly reserve the nine proposed building pads as "additional property" for future development because there were no metes and bounds legal descriptions for the building pads. As a consequence, the entire 19.846 acre tract was submitted to the condominium development.
This omission became apparent when several of the purchasers of the condominium units in the old hotel brought a quiet title action against Foster in the Superior Court of Chatham County ("the Sheffer Quiet Title Action"). The condominium owners claimed that they owned an undivided joint interest in the "common areas" of the 19.846-acre tract. At this time, Foster had contracted to sell the nine building pads to Wilmington through a Purchase and Sale Agreement ("PSA").
Under the PSA, executed on August 16, 2004, Foster agreed to sell "[a]ll that certain lot, tract or parcel of real estate.... more particularly described in Exhibit A' attached hereto, consisting of nine (9) condominium pad sites for a two hundred twenty unit (220) expansion of Wilmington Plantation...." Foster also agreed to convey "good and marketable fee simple title in and to the Property." A critical dispute in this case is whether Wilmington intended to purchase the entire 19.846-acre tract (less and except the old hotel) or only the nine building pads. The purchase price was $13.2 million.
The Sheffer Quiet Title Action was an impediment to the sale of the property; however, in June 2005 Foster and the Sheffer Quiet Title Action plaintiffs entered into a Settlement Agreement whereby the plaintiffs agreed to cancel the filed lis pendens notice and execute quitclaim deeds to Foster that would convey any interest of the unit owners necessary to allow completion of the development of the property. On August 2, 2005, Wilmington and Foster closed on the PSA, both believing in good faith that any title problems had been resolved. Foster executed a general warranty deed. Also, two title insurance policies were issued to Wilmington - an owner's policy and a loan policy.
In November 2005, the Sheffer Quiet Title Action plaintiffs filed a motion to enforce settlement, arguing that Foster had failed to honor repair and construction warranties. Wilmington moved to intervene in the lawsuit to protect its interests. Also, another condominium owner filed a quiet title lawsuit against Wilmington (the "Radinick Quiet Title Action"), which was virtually identical to the suit filed in the Sheffer Quiet Title Action. Two additional lawsuits were filed against Wilmington in the Superior Court of Chatham County by Wilmington Plantation Owner's Association, Inc., the condominium owners' association of the old hotel building (the "Homeowners' Association"). The first sought relief relating to the Homeowner's Association's board of directors. The second sought injunctive and declaratory relief to block the construction of the additional buildings on the site.
The Superior Court consolidated the four pending lawsuits, and in July 2006, the court conducted a three-day mediation, announcing the purpose of the mediation was to resolve all outstanding issues to include the "cloud on the title involving the development of the associated sites on that property." At the conclusion of the hearing, the parties jointly read into the record a settlement announcement. Counsel for homeowner Radinick stated:
We have also worked up a proposed first amendment to the declaration that reflects that removal of these nine pads from the area in the declaration so as to effectuate their being a reformation of the original declaration.... [T]here's an agreement that [Wilmington] is obligated under any circumstances to submit any of this property that's defined in two of the terms of the declaration of covenants, but they have seven years from [July 19, 2006] to do that, to bring that property in and to submit it to the declaration for the terms of the covenant and declaration. It's my understanding also, and this applies to all of the pending actions, that the parties have relinquished their rights to pursue the recovery of attorney's fees against the other, and we anticipate that the parties will execute a global or mutual release of any and all liability other than as agreed hereto today.
On September 20, 2006, a "Consent Order" was entered, memorializing the terms of the settlement announcement. Critically, the Consent Order contained the following provisos relative to title:
The Declaration would be reformed prospectively (taking effect on July 19, 2006) by an Amended Declaration which defined nine new building sites on the 19.846-acre tract as ...