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Brennan Chase Beaty and Bobby M. Beaty, Jr., As Co-Personal v. Mounir K. Counsul

December 2, 2011

BRENNAN CHASE BEATY AND BOBBY M. BEATY, JR., AS CO-PERSONAL REPRESENTATIVES OF THE ESTATE OF BOBBY M. BEATY, DECEASED, PLAINTIFFS,
v.
MOUNIR K. COUNSUL, DEFENDANT.
BRENNAN CHASE BEATY AND BOBBY M. BEATY, JR., AS CO-PERSONAL REPRESENTATIVES OF THE ESTATE OF BOBBY M. BEATY, DECEASED, PLAINTIFFS,
v.
CENTURY BANK, DEFENDANT.
CENTURY BANK, THIRD-PARTY PLAINTIFF,
v.
WACHOVIA BANK, N.A., MOUNIR K. CONSUL, TRAVELERS EXPRESS COMPANY, INC., AND US BANK, THIRD-PARTY DEFENDANTS.



ORDER

This cause comes before the Court on Defendant FDIC's Motion for Summary Judgment as to the Second Amended Complaint of Plaintiffs (Doc. # 62) and Defendant Travelers Express Company, Inc.'s Motion for Summary Judgment as to Amended Third Party Complaint of the FDIC (Doc. # 65). Plaintiffs oppose the FDIC's motion (Doc. # 72), and the FDIC opposes Travelers' motion (Doc. # 66). As explained below, the FDIC's motion is denied as to Counts I and II and granted as to Count III, and Travelers' motion is denied.

I. Background

In August 2003, Plaintiffs' predecessor-in-interest, Bobby M. Beaty, Mounir Consul & Associates ("Consul"), and Darryl Phillips, who is not a party to this action, entered into an agreement to construct a new residence (the "Project") on 605 Kingfisher Lane, Longboat Key, Florida. Shimmell Aff. at ¶ 12, Ex. D; Second Am. Compl. at ¶ 9.*fn1 Beaty, owner of the property, retained Consul to act as his agent with regard to the Project and Phillips to act as the contractor for the Project. Id. Phillips retained attorney David D. Bone as counsel with regard to the Project. Shimmell Aff. at ¶ 12.

Beaty obtained funding for the Project through a construction loan (the "Loan") from the FDIC's predecessor-in-interest, Century Bank, FSB ("Century Bank").*fn2 The terms of the Loan are memorialized by a construction loan agreement dated September 26, 2003 between Beaty and Century Bank (the "Loan Agreement"). Shimmell Aff. at ¶ 6, Ex. A; Second Am. Compl. at ¶ 5, Ex. A. The Loan was secured by a note and mortgage from Beaty to Century Bank. Second Am. Compl. at ¶ 4.

The Loan Agreement provides, in relevant part, as follows:

2.(f) [Century Bank] shall have no obligation either express or implied, to [Beaty], to [Phillips] or to any third parties, to verify that advances made pursuant to this [Loan] Agreement are actually used to pay for labor or materials furnished in connection with the [Project]. [Beaty] agrees to assume all risks in the event [Phillips] fails to pay for any labor or materials so furnished. ...

5. [Beaty] agrees to advise [Century Bank] in writing, prior to the first disbursement, of where the disbursements are to be made.... Nothing contained in this [Loan] Agreement, the Note of Mortgage executed concomitant herewith, shall impose upon [Century Bank] any obligation to see the proper application of any disbursements made pursuant to this loan, and the sole obligation of [Century Bank] shall be to disburse funds as set forth herein, provided there exists no default under this [Loan] Agreement, or the Note of the Mortgage executed simultaneously herewith.

Doc. # 72-1, Ex. A.

Between April and July 2004, Century Bank made three disbursements (the "Loan Disbursements") from the Loan in response to three draw requests (the "Draw Requests"). Shimmell Aff. at ¶ 14, Ex. G-1. Each Loan Disbursement was funded by an "agent check" issued pursuant to an Agent Check Agreement between Century Bank and Travelers,*fn3 which identified Third-Party Defendant Travelers Express Company, Inc. ("Travelers") as the "drawer," and U.S. Bank as the "drawee"*fn4 (the "Loan Disbursement Checks"). Shimmell Aff. at ¶ 8-9, Exs. B & C. Each Loan Disbursement was paid with Travelers' funds on deposit with U.S. Bank. Id.

The first draw request received by Century Bank was dated April 22, 2004 ("First Draw Request"). Shimmell Aff. at ¶ 14, Ex. G-1. The First Draw Request was signed by both Consul and Phillips and sought a disbursement in the amount of $74,410.40. Id. In response to a request by Century Bank, on April 29, 2004, Bone's office faxed to Century Bank a copy of Beaty's September 26, 2003, authorization, which instructed Bone to make a payment related to the Project payable to either Consul solely or Consul and Phillips jointly. Shimmell Aff. at ¶ 14, Ex. H. Beaty directed Century Bank to make all disbursements under the Loan to Consul and Phillips. Id. at ¶ 14.

Century Bank issued a Loan Disbursement Check made payable to Consul and Phillips in the amount of $74,410.40. The $74,410.40 Loan Disbursement Check was subsequently endorsed by both Consul and Phillips and deposited into Consul's bank account at Wachovia Bank ("Wachovia") numbered ******3568 ("Consul's Wachovia Account") on April 30, 2004. Shimmell Aff. at ¶ 15, Ex. I-2. This Loan Disbursement Check is not at issue in this case. Id. at ¶ 16.

On or about May 4, 2004, Consul made a second draw request on the Loan in the amount of $25,202.00 ("Second Draw Request"). Shimmell Aff. at ¶ 14; Second Am. Compl. at ¶ 11. In response to the Second Draw Request, Century Bank issued the $25,202.00 Loan Disbursement Check. Shimmell Aff. at ¶ 8, Ex. C-2. The $25,202.00 Loan Disbursement Check was endorsed by Consul only and was deposited in Consul's Wachovia Account. Shimmell Aff. at ¶¶ 8 & 15, Ex. C-2 & I-3.

The third draw request was dated July 2, 2004 ("Third Draw Request"). Shimmell Aff. at ¶ 14, Ex. G-2. Century Bank issued the $182,622.88 Loan Disbursement Check. Shimmell Aff. at ¶ 8, Ex. C-3-4. The $182,622.88 Loan Disbursement Check was deposited in Consul's Wachovia Account. Shimmell Aff. at ¶¶ 8 & 15, Ex. C-3-4 & I-4.

Over a month after the last Loan Disbursement Check was deposited in Consul's Wachovia Account, Phillips alleged that Consul improperly negotiated two of the three Loan Disbursement Checks. Specifically, Phillips claimed that Consul deposited the Loan Disbursement Check in the amount of $25,202.00 (the "$25,202.00 Disbursement Check") without Phillips' signature, and the Loan Disbursement Check in the amount of $182,622.88 (the "$182,622.88 Disbursement Check," collectively, the "Disputed Disbursement Checks") with a forgery of Phillips' signature. Plaintiffs claim Consul subsequently converted the proceeds of the Disputed Disbursement Checks and failed to provide an accounting of the proceeds. Second Am. Compl. at ¶¶ 12, 15. Specifically, Plaintiffs allege that Consul deposited the proceeds of the Disputed Disbursement Checks in his personal bank account and used them for a down payment on the purchase of a home and for other projects. Id. at ¶ 19. Consul denies any wrongdoing. Shimmell Aff. at ¶ 12, Ex. E.

Phillips executed two affidavits of alteration dated August 24, 2004, describing the missing and forged endorsements relating to the Disputed Disbursement Checks. Shimmell Aff. at ¶ 16, Ex. J. On August 24, 2004, Melody Shimmell, Vice President, Risk Management/Fraud, Century Bank, wrote Travelers regarding the $25,202.00 Disbursement Check that was negotiated without Phillips' endorsement and asked Travelers to contact her regarding the collection status of this item from Wachovia. Doc. # 72-1, Ex. B. Travelers returned the $25,202.00 Disbursement Check to Wachovia for reimbursement, but Wachovia refused to reimburse Travelers, and Century Bank refused to credit Beaty's loan account (the "Loan Account"). Second Am. Compl. at ¶ 23. Similarly, Shimmell wrote Travelers on August 24, 2004, regarding the $182,622.88 Disbursement Check that was negotiated with a forged endorsement and asked Travelers to contact her regarding the collection status of this item from Wachovia. Doc. # 72-1, Ex. D. Travelers returned the $182,622.88 Disbursement Check to Wachovia for reimbursement, but Wachovia refused to reimburse Travelers, and Century Bank refused to credit Beaty's Loan Account. Second Am. Compl. at ¶ 23. Wachovia sent a response directly to Shimmell at Century Bank denying the requested reimbursement. Doc. # 72-1, Ex.

D.

On August 25, 2004, Nancy L. Dost, Vice President, Construction Administration, with Century Bank wrote to Beaty as follows:

Please be advised that Mr. Darryl Phillips has reported that he was unaware of the request for and negotiation of the check issued for the 2nd draw on the above referenced construction loan. He also stated that he had not received any portion of that draw. Due to the questionable endorsement on Check #58912462884 issued in the amount of $182,622.88, we have requested Wachovia Bank to return the funds to Century Bank.

Doc. # 72-1, Ex. E.

The Loan was timely satisfied in July 2005. Shimmell Aff. at ¶ 17, Ex. K; Second Am. Compl. at ¶ 25, Ex. E.

In 2005, after Beaty passed away, Plaintiffs brought suit against Consul to recover the proceeds of the Disputed Disbursement Checks in state court. On or about March 2006, Plaintiffs filed a separate action in state court against Century Bank seeking to recover the proceeds of the Disputed Disbursement Checks in the aggregate amount of $207,824.88 plus attorney fees pursuant to the Loan Agreement and § 57.105(7), Fla. Stat. Century Bank filed a Third Party Complaint against Wachovia and Travelers for breach of warranty, indemnification and other causes of action. In 2008, the state court consolidated Plaintiffs' lawsuit against Consul with Plaintiffs' lawsuit against Century Bank. In November of 2009, Century Bank failed and the FDIC, as a result of its appointment as receiver, succeeded to "all rights, titles, powers, and privileges" of Century Bank. 12 U.S.C. § 1821(d)(2)(A)(i); Shimmell Aff. at ¶

3. The FDIC participated in the state court action and substituted itself as the party Defendant in place of Century Bank, obtaining a court order on substitution on or about April 14, 2010.

On or about June 30, 2010, the FDIC removed the action to federal court. See Doc. # 1. Subsequently, the FDIC dismissed Wachovia from the action.

II. Standard of Review

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A factual dispute alone is not enough to defeat a properly pled motion for summary judgment; only the existence of a genuine issue of material fact will preclude a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

An issue is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (citing Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 919 (11th Cir. 1993)). A fact is material if it may affect the outcome of the suit under the governing law. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997).

The moving party bears the initial burden of showing the court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial. Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). "When a moving party has discharged its burden, the non-moving party must then 'go beyond the pleadings,' and by its own affidavits, or by 'depositions, answers to interrogatories, and admissions on file,' designate specific facts showing that ...


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