Cynergy, LLC v. First American Title Insurance Company

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-10495
________________________
D.C. Docket No. 1:10-cv-00068-JRH-WLB
CYNERGY, LLC,
as successor in interest to Farmers State Bank,
Plaintiff - Appellant,
versus
FIRST AMERICAN TITLE INSURANCE COMPANY,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Georgia
________________________
(January 28, 2013)
Before MARCUS and PRYOR, Circuit Judges, and FRIEDMAN,* District Judge.
FRIEDMAN, District Judge:
In this appeal, we are asked to review the district court’s interpretation of an
exclusion in a title insurance policy issued by the appellee, First American Title
*
Honorable Paul L. Friedman, United States District Judge for the District of Columbia,
sitting by designation.
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Insurance Company, to a Georgia bank, Farmers State Bank, and the district
court’s decision that First American was entitled to summary judgment based on
that exclusion. We affirm the district court in all respects.
I. BACKGROUND
A. Factual Background
This dispute arises from a land development project that failed to go
according to plan. The essential facts are as follows. A group of real estate
investors formed a company — the Retreat at Lake Thurmond, LLC — to
purchase an undeveloped parcel of land in Lincoln County, Georgia, and turn it
into a residential subdivision. The Retreat took out a short-term purchase loan
from a local institution, Farmers State Bank, to finance only the acquisition of the
land; the costs of development were to be funded later from a separate source.
The Bank, to protect itself from risks associated with the loan it was extending,
also obtained personal guarantees from two of the Retreat’s principal investors,
Tommy Lee and Dean Antonakos, and secured debt on real property owned by
individual Retreat investors as additional collateral for the loan. It also took out a
title insurance policy with First American Title Insurance Company. Such policies
insure “owners of real property or others having an interest in such real property
. . . against loss by encumbrance, defective titles, invalidity, adverse claim to title,
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or unmarketability of title by reason of encumbrance or defects not excepted in the
insurance contract.” Ga. Code Ann. § 33-7-8.
Using the funds it borrowed from the Bank, the Retreat purchased the parcel
of land in September 2006. Although it promptly commenced preliminary
construction operations, clearing and grading the property, its development plans
did not proceed as anticipated. Among the issues with which the Retreat
contended was that the property did not abut a public road and lacked dedicated
access to any public road. The previous owner, Emily Hester, had accessed the
property through a neighboring lot with the permission of its owners. Permissive
access was also available via a gravel road situated on adjacent land owned by the
United States Army Corps of Engineers, but the property had no legally
enforceable right of access. Although the Retreat was aware of this condition
before it purchased the property and had intended to obtain an easement across the
Army Corps of Engineers land, it abandoned this plan after deeming it too
expensive.
The title insurance policy that First American issued to the Bank covered,
among other things, loss or damage incurred due to a “lack of a right of access to
and from the land.” A year after the Retreat purchased the property, it sent a letter
to First American purporting to file a claim under this provision of the insurance
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policy. First American denied the claim because the Bank, not the Retreat, was
the insured party.
The Retreat attempted to solve its dedicated access problem by purchasing
an adjoining tract of land in 2008 that contained a road leading to the highway.
Progress continued to lag, however, due to the Retreat’s inability to secure funding
for development. Meanwhile, interest on the Retreat’s purchase loan from the
Bank continued to accrue, while the loan’s maturity date approached. In an
attempt to reach a mutually beneficial resolution to the Retreat’s difficulty in
paying back the purchase loan to Farmers State Bank, the Bank and the Retreat
began to negotiate about a possible extension of the loan with modified terms. In
October 2008, a principal investor behind the Retreat, Dean Antonakos, sent a
letter to the Bank acknowledging that while the Retreat originally planned to fund
the development of the property through other sources, “due to the financial
climate of the over all economy, especially in the banking sector, those original
development sources have dried up.” Antonakos suggested, among other options,
that the Retreat could complete preliminary improvements of the property in
tandem with work on the newly purchased adjacent property, with the aim of
selling the two together as a single subdivision that could be developed later — an
endeavor that would require additional funding from the Bank.
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Antonakos wrote to the Bank again the next month, acknowledging an
“impasse” in their discussions and suggesting some alternative courses of action.
In this letter, Antonakos drew the Bank’s attention to its title insurance policy with
First American and encouraged the Bank to file a claim under the provision that
offered coverage for losses incurred due to the lack of a right of access to and from
the land.
In March 2009, the Bank’s executive vice president, J. Bruce Turner, wrote
to Antonakos, declining Antonakos’ invitation to make a claim against First
American for the insurance proceeds and proposing two options for extending and
modifying the loan. In this letter, Turner also stated: “When we originally made
this loan, we knew that there was no designated access to the property, but it was
in your plans to create one” from the nearby highway.
No agreement was reached with respect to extending the loan. Once the
loan went into default, the Bank indicated that it might seek to recover on the
personal guarantees that were made at the time of the loan by Antonakos and
another Retreat investor, Tommy Lee. To extricate the Retreat from its debt to the
Bank, Antonakos, Lee, and others formed a new company — Cynergy, LLC, the
appellant here — to raise additional funds from third parties and purchase the
Retreat’s promissory note from the Bank. This newly formed company acquired
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the note at full price in May 2009, essentially purchasing the Bank’s loan.
Through this transaction, Cynergy became the successor in interest to the Bank
under the insurance policy.1
Four days after acquiring the Retreat note, Cynergy submitted to First
American an insurance claim premised on the Retreat property’s lack of dedicated
access. First American retained counsel who conducted an investigation into the
matter, after the completion of which First American denied the claim. It based
this denial on one of the exclusions in the policy, a provision excluding coverage
for matters “assumed or agreed to” by the insured. First American explained in its
denial letter that, according to the results of its investigation, the Bank extended
the loan with full awareness that the land had no dedicated right of access.
Therefore, in First American’s view, the property’s lack of dedicated access was a
condition “assumed or agreed to” by the Bank.
After First American refused a subsequent demand for payment, Cynergy
filed suit in state court, seeking damages for breach of contract along with bad-
faith penalties. First American removed the case to federal court, and the parties
1
We pause to note that Antonakos and Lee therefore appear in this narrative in two
different roles. Acting on behalf of the Retreat, they initially secured the loan from the Bank and
negotiated the purchase of the land. After that loan went into default, acting on behalf of
Cynergy they acquired the loan, stepping into the Bank’s shoes.
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filed cross-motions for summary judgment on the issue of First American’s
liability under the policy.
B. The District Court’s Decision
The district court granted summary judgment to First American. The court
first agreed with Cynergy’s interpretation of the term “right of access” in the title
insurance policy, concluding that the policy covers losses resulting from the lack
of a dedicated, legally enforceable right of access to the property. It rejected First
American’s argument that the scope of the policy is limited to situations in which
the claimant also lacks permissive access. Applying the established principle
under Georgia law that ambiguity in insurance contracts should be resolved in
favor of coverage, the court construed the phrase “lack of a right of access to and
from the land” to mean the lack of legally enforceable access rights, even where,
as here, the property owner has never lacked permissive access to the land. The
court further found that the Retreat property did not have a legally enforceable
right of access. The court therefore determined that Cynergy’s claim fell within
the scope of the insurance policy.
The court then turned to the next question: whether coverage nevertheless
was defeated by the policy exclusion negating coverage for losses arising from
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“defects, liens, encumbrances, adverse claims or other matters” that were “created,
suffered, assumed or agreed to by the insured claimant.”
Drawing on common definitions of the word “assume,” along with the
meaning that the word has been given in title insurance policies and in the
analogous tort context of assumption of risk, the court concluded that the word, as
used in the policy, “means that the Bank must have had actual, subjective
knowledge of the access issue and appreciated its effect.” No party before us
disagrees with that definition.
Applying this standard, the district court found that “the evidence and
undisputed facts show that the lack of dedicated access was indeed an ‘assumed’
condition.” In reaching this conclusion, the court relied primarily on the sworn
affidavit of George C. Leverett III, the Bank’s former president and the officer
who personally handled the Retreat loan. In his affidavit, Leverett states that at
the time of the loan application, “I was aware that the tract appeared to be
landlocked, but I was told by Tommy Lee of Retreat LLC that he was pursuing
and expected to obtain an access easement to Highway 378 for their future
development plans.” The affidavit further explains that because the Bank was not
financing the planned development of the property, but was only issuing a short-
term loan for the purchase of the land, “obtaining adequate collateral on the loan
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was more important to [the Bank] than the issue of how the property would be
accessed for purposes of Retreat LLC’s planned development.”
The district court determined that Leverett’s affidavit, along with a number
of corroborating circumstances lending credence to his statements, demonstrated
both the Bank’s knowledge of the lack of access and its appreciation of the
significance of that condition. It was precisely because the Bank knew that the
property lacked dedicated access, Leverett attests, that the Bank “required
additional collateral” for the loan beyond the security deed to the property itself,
including personal guarantees from Antonakos and Lee as well as security deeds
to properties owned by individual Retreat members. The court further observed
that the Bank itself never filed an insurance claim with First American based on
the property’s lack of access, even when pressed to do so by Antonakos — an
additional circumstance indicating that the Bank knowingly acquiesced to the lack
of dedicated access when it issued the loan. Based on the evidence, the court
found, the “only reasonable inference available” was that the Bank “assumed” the
Retreat property’s lack of dedicated access when it financed the purchase of the
property and that “Leverett understood the implications of the issue and accounted
for it by securing ample collateral.” And Cynergy, the district court stated,
presented “no evidence” to rebut this testimony and evidence.
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Instead, Cynergy presented two legal arguments. First, Cynergy took issue
with the interpretation of the insurance policy and its exclusions summarized
above. In Cynergy’s view, reading the policy to exclude conditions, like a lack of
dedicated access, that were “assumed” by the insured party would “eviscerate”
coverage under the policy. The district court quicky dispensed with this argument,
which Cynergy revives before this Court and which is discussed below. Second,
Cynergy contended that George Leverett’s affidavit was inadmissible as hearsay
and barred from consideration by Rule 56(c)(4) of the Federal Rules of Civil
Procedure. The district court, acknowledging the dispositive effect of the affidavit
on its ruling, engaged in a lengthy analysis of this point, finding the affidavit to be
admissible under Rule 807 of the Federal Rules of Evidence and, contrary to
Cynergy’s arguments, in no way barred from consideration by Rule 56(c)(4).
Having rejected these legal arguments, and finding no genuine issues of material
fact in dispute, the court granted summary judgment to First American.
II. JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. This
Court reviews a district court’s grant of summary judgment de novo. Kernel
Records Oy v. Mosley, 694 F.3d 1294, 1300 (11th Cir. 2012). Summary judgment
is appropriate “if the movant shows that there is no genuine dispute as to any
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material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A genuine factual dispute exists only if a reasonable factfinder
“could find by a preponderance of the evidence that the plaintiff is entitled to a
verdict.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505
(1986). “Once the movant adequately supports its motion, the burden shifts to the
nonmoving party to show that specific facts exist that raise a genuine issue for
trial.” Dietz v. Smithkline Beecham Corp., 598 F.3d 812, 815 (11th Cir. 2010).
The district court’s evidentiary rulings are reviewed for abuse of discretion
and will be reversed only “if an erroneous ruling resulted in ‘substantial
prejudice.’” Conroy v. Abraham Chevrolet-Tampa, Inc., 375 F.3d 1228, 1232
(11th Cir. 2004) (quoting Piamba Cortes v. Am. Airlines, Inc., 177 F.3d 1272,
1305 (11th Cir. 1999)). This Court will affirm such rulings “unless the district
court has made a ‘clear error of judgment’ or has applied an ‘incorrect legal
standard.’” Id. (quoting Piamba Cortes, 177 F.3d at 1306).
III. DISCUSSION
A. Interpretation of the Insurance Policy
Cynergy maintains that the district court’s interpretation of the policy
exclusion under which it granted summary judgment to First American is unduly
broad and inconsistent with Georgia law. As Cynergy reads it, the insurance
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policy guarantees coverage without exception for losses incurred due to a
property’s lack of dedicated access. Any knowledge that the Bank may have had
about the Retreat property’s lack of access is therefore irrelevant in Cynergy’s
view. We find no merit to Cynergy’s arguments.
The title insurance policy covers, among other matters, “loss or damage . . .
sustained or incurred . . . by reason of . . . lack of a right of access to and from the
land.” Among the losses and damages excluded from coverage, however, are
those arising from “defects, liens, encumbrances, adverse claims or other matters
. . . created, suffered, assumed or agreed to by the insured claimant” (emphasis
added). As discussed above, the district court construed these provisions as
excluding coverage if the insured “assumed” the lack of a right of access, which
the court interpreted to mean that the insured was aware of the lack of access when
the policy was issued and appreciated its effect. The district court’s assumption of
risk analogy, quoting Vaughn v. Pleasent, 471 S.E.2d 866, 868 (Ga. 1996)
(emphasis in original), is to the same effect: “In its simplest and primary sense,
assumption of the risk means that the plaintiff, in advance, has given his consent
to relieve the defendant of an obligation of conduct toward him, and to take his
chance of injury from a known risk arising from what the defendant is to do or
leave undone.” Cynergy argues that, properly read, the policy does not actually
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exclude coverage under this scenario — or, in the alternative, that any such
purported exclusion is impermissible under Georgia law.
In support of its position, Cynergy first maintains as a matter of textual
interpretation that the phrase “other matters” cannot include the lack of a right of
access, because the policy fails to list that specific condition alongside “defects,
liens, encumbrances, [and] adverse claims.” As Cynergy puts it: “Had First
American wanted to list an additional exclusion for lack of access that is assumed,
it could have written the policy differently to include that event among those
specifically enumerated.” But of course, the phrase “other matters” would have no
meaning if it did not refer to anything beyond the four examples that precede it.
Cynergy’s reading of this provision, which would limit the matters covered by the
exclusion to the four enumerated examples, therefore is untenable. The plain
language of the policy is clear: losses of any type arising from matters that have
been “assumed” by the insured claimant are not covered. While these matters
include defects, liens, encumbrances, and adverse claims, they are not limited to
those examples.
Cynergy next objects that under the district court’s interpretation of the
exclusion, as Cynergy sees it, the policy purports to cover losses caused by the
lack of dedicated access while simultaneously negating coverage for those same
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losses under the “other matters” exclusion. But that is the nature of an exclusion
— to exclude things that otherwise would be covered, when certain conditions are
met. The policy does not exclude all losses stemming from a lack of dedicated
access, merely those that were assumed by the insured. The exclusion therefore
does not “eviscerate” coverage under the policy, as Cynergy asserts, and this case
is unlike the decisions that Cynergy cites in which exclusions were found to
impermissibly subsume a policy’s affirmative grant of coverage. Those decisions
simply recognize that, under Georgia law, an insurance policy may not purport to
offer coverage that inevitably will be defeated by one of the policy’s exclusions —
in other words, the policy may not offer coverage that is chimerical. See Hooters
of Augusta, Inc. v. Am. Global Ins. Co., 272 F. Supp. 2d 1365, 1378 (S.D. Ga.
2003) (“Read fairly, the Endorsement completely abrogates the coverage provided
in the same document because every advertisement would be excluded by it. . . .
When an exclusion completely nullifies the coverage provided in a policy, that
exclusion has no effect[.]” (citing Isdoll v. Scottsdale Ins. Co., 466 S.E.2d 48, 50
(Ga. Ct. App. 1995))) (emphasis added); Transp. Ins. Co. v. Piedmont Const.
Group, LLC., 686 S.E.2d 824, 828 (Ga. Ct. App. 2009) (“Transportation’s
proposed interpretation of the business-risk exclusion ‘would make coverage for
such actions merely illusory, despite the fact that such coverage is expressly
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provided for in the policy.’” (quoting Isdoll, 466 S.E.2d at 50)) (emphasis added).
In contrast to the provisions addressed in those cases, this dispute involves a
policy exclusion that exempts certain claims from coverage — no more and no
less. Cynergy’s unhappiness that the exclusion is triggered by the undisputed facts
underlying this particular case does not transform the provision into anything else.
Taking a different tack, Cynergy next argues that contrary to the district
court’s reasoning, the Bank’s knowledge and appreciation of the access issue is
“irrelevant” to the coverage question, “because First American gave written
assurances there was access.” What Cynergy appears to mean by this is that First
American, when issuing the policy, was obliged to comply with a Georgia statute
providing that title insurance contracts “shall be written only upon evidence or
opinion of title obtained and preserved by the insurer.” Ga. Code Ann. § 33-7-8.
First American satisfied that obligation, however, by relying on evidence of title
supplied by its issuing agent, James Roberts, and the validity of title has never
been an issue in this case. Contrary to Cynergy’s suggestion, Section 33-7-8 of
the Georgia Code speaks only to evidence of title and imposes no requirements
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regarding the accuracy of an insurer’s understanding about a property’s dedicated
access, easements, and other such matters.2
Further to its argument under the Georgia Code, Cynergy analogizes this
case to a Georgia decision, Fid. Nat. Title Ins. Co. v. Matrix Fin. Servs. Corp., 567
S.E.2d 96 (Ga. Ct. App. 2002), in which an identical policy exclusion was held
inapplicable. The analogy fails. In Matrix, a lender sought to recover on a title
insurance policy after defects in the title of the property came to light. Id. at 99.
Among the insurer’s many unavailing arguments against coverage was its
contention that the lender “assumed, or agreed to” the loss that it incurred. Id. at
100. Specifically, the insurer argued that if the lender had “properly investigated”
and “performed an adequate property title search,” it would have discovered the
defects in the title before it closed the loan. Id. at 101. According to the insurer,
the lender “should never have closed” the loan, and “by doing so, it created its
own loss.” Id. In sum, the insurer contended that the lender “negligently created
2
Cynergy complains that an authorization request form completed by Roberts’s
firm for First American erroneously indicated that the Retreat property had dedicated access. But
Cynergy has not explained how the mistake made by Roberts’s firm has any bearing on the
validity or interpretation of the exclusions in the title insurance policy. It was not illogical for
First American to have issued this policy while knowing that the property lacked dedicated
access, so long as the title was valid. Nor has Cynergy pointed to any rule prohibiting First
American from doing so.
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its own title problems and cannot legally or equitably seek coverage under the
policy.” Id.
The Court of Appeals of Georgia rejected this argument. It stated that the
insurer was simply second-guessing the wisdom of the lender’s business decisions,
and that, regardless of what circumstances may have existed at the time of the loan
to raise the lender’s suspicions about the title, these circumstances did not affect
the insurer’s promise to insure the lender’s interest in the property. Fid. Nat. Title
Ins. Co., 567 S.E.2d at 101. The court went on to note that under Section 33-7-8
of the Georgia Code, the insurer, not the lender, “was responsible for obtaining the
evidence to support its title opinion.” Id. The lender’s “failure to discover” the
evidence of a title defect before closing therefore had no bearing on the insurer’s
obligations. Id.
Here, by contrast, First American does not allege that the Bank, with proper
diligence, would have discovered the property’s lack of dedicated access before
extending the loan or that the Bank was obligated to undertake such an
investigation. Instead, it alleges (and furnishes evidence) that the Bank actually
knew about the lack of access and fully understood the effect of this fact on the
property’s value before it made the loan. Although Section § 33-7-8 puts the onus
on insurers to obtain evidence of the validity of title before issuing a policy,
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Cynergy identifies no similar obligation requiring First American to obtain
evidence that the land did or did not have a dedicated right of access, or anything
prohibiting First American from issuing the policy unless such access existed.
The district court correctly interpreted the terms of the title insurance
contract. Accordingly, we move on to the question of whether genuine issues of
material fact preclude summary judgment in First American’s favor.
B. Summary Judgment
As the preceding discussion establishes, First American is not liable under
the terms of the title insurance policy if Farmers State Bank was aware of the
Retreat property’s lack of a dedicated right of access and appreciated its effect
when the Bank extended the loan and took out the insurance policy. The district
court found that the evidence conclusively demonstrated that the Bank indeed had
such knowledge and understood its significance. There being no genuine disputes
of fact about this, the court concluded that summary judgment for First American
was appropriate. Having reviewed the matter de novo, we agree.
1. Admissibility of the Leverett Affidavit
In the district court’s reckoning, as in ours, the critical piece of evidence
demonstrating that the Bank “assumed” the Retreat property’s lack of dedicated
access is the affidavit of George C. Leverett III, the Bank’s former president and
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the officer who originated the Retreat loan. Given the significance of the affidavit
to the outcome of this case, we must address Cynergy’s contention that the
affidavit would have been inadmissible at trial and therefore should not have been
considered by the district court at summary judgment. As an evidentiary ruling,
the district court’s determination is reviewed for abuse of discretion and should be
affirmed unless the court made a “clear error of judgment” or applied an “incorrect
legal standard.” Conroy, 375 F.3d at 1232 (quoting Piamba, 177 F.3d at 1306).
Leverett’s affidavit, which was executed at First American’s request, was
signed on October 1, 2009, at which point First American was investigating
Cynergy’s policy claim but had not yet denied it. At the time, Leverett was still
the Bank’s president, but he was undergoing treatment for cancer. He died in
early April 2010, before the affidavit was ever produced in discovery for this
lawsuit. Cynergy argued to the district court that the affidavit constituted
inadmissible hearsay. The court disagreed, concluding after careful analysis that
the affidavit was admissible under Rule 807 of the Federal Rules of Evidence.
This “catch-all exception to the hearsay rule” permits admission of a hearsay
statement “if it is particularly trustworthy; it bears on a material fact; it is the most
probative evidence addressing that fact; its admission is consistent with the rules
of evidence and advances the interests of justice; and its proffer follows adequate
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notice to the adverse party.” United States v. Rodriguez, 218 F.3d 1243, 1246
(11th Cir. 2000); see Fed. R. Evid. 807.
Cynergy does not challenge any part of the district court’s Rule 807
analysis. Instead, Cynergy argues that the court failed to make one of the findings
that it was required to make under the Rule — that the affidavit “is more probative
on the point for which it is offered than any other evidence that the proponent can
obtain through reasonable efforts.” Fed. R. Evid. 807(a)(3). This contention is
belied by the district court’s discussion of the affidavit, during which the court
separately addressed each prong of Rule 807(a) and stated that the affidavit speaks
“directly and comprehensively” to “a key issue for which very little alternative
evidence exists,” further observing that “the need for the statements is great
because the Bank’s knowledge is the fulcrum upon which liability turns, but
evidence on this point is scant.” We conclude that the district court made the
necessary finding under Rule 807(a)(3), and we agree that the criterion established
by that provision is satisfied here.
Cynergy also maintains that the district court’s consideration of the Leverett
affidavit violated Rule 807(b), which permits a hearsay statement to be admitted
“only if, before the trial or hearing, the proponent gives an adverse party
reasonable notice of the intent to offer the statement and its particulars, including
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the declarant’s name and address, so that the party has a fair opportunity to meet
it.” Fed. R. Evid. 807(b). According to Cynergy, it was impermissible for the
district court to consider the affidavit because First American did not provide
notice to Cynergy before Leverett’s death of its intent to offer the affidavit.3
First American disputes Cynergy’s interpretation of Rule 807(b), arguing
that it supplied notice of its intent to rely on the affidavit well before any “trial or
hearing,” as required by the Rule, and that First American had no obligation to
ensure that such notice was provided before Leverett passed away. Indeed, First
American scarcely could have done so, because Leverett was already deceased by
the time that Cynergy filed this lawsuit in late April 2010. Cynergy offers no
authority (and we are aware of none) precluding the district court’s consideration
of the affidavit for the purposes of summary judgment based on a lack of notice
under these circumstances. Cynergy was provided with the affidavit months
before briefing on the dispositive motions took place.4 The notice requirement “is
3
First American maintains that Cynergy waived this argument by failing to raise it
in the district court. But it was not until First American’s reply brief in support of its motion for
summary judgment that it first suggested, in response to Cynergy’s hearsay objection, that the
affidavit could be admitted under Rule 807. No hearing was held on the motion for summary
judgment during which Cynergy could have countered with its notice argument. We therefore do
not regard the argument as waived.
4
The affidavit was used as an exhibit during the depositions of Antonakos and Lee
six months before First American moved for summary judgment.
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intended to afford the party against whom the statement is offered sufficient
opportunity to determine its trustworthiness in order to provide a fair opportunity
to meet the statement.” United States v. Evans, 572 F.2d 455, 489 (5th Cir. 1978)
(discussing predecessor Rule 803(24)); see also United States v. Munoz, 16 F.3d
1116, 1122 (11th Cir. 1994). It does not create a categorical ban on the admission
of statements made by deceased persons. Nor does it impose what in this case
would be the functional equivalent: a requirement that a defendant supply notice
of its intent to offer a statement at trial before the plaintiff has even filed suit.
The district court’s conclusion that the affidavit would be admissible at trial
was not an abuse of discretion.
2. Genuine Issues of Material Fact
The evidence demonstrates that Farmers State Bank was fully aware of the
Retreat property’s lack of dedicated access when it extended the purchase loan and
took out the insurance policy from First American. No reasonable factfinder could
conclude otherwise. Because there are no genuine issues of material fact in
dispute, and because First American is entitled to judgment as a matter of law,
summary judgment was appropriate.
The sworn affidavit of former Bank president George Leverett leaves no
doubt that the Bank understood the Retreat property to lack a dedicated right of
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access and appreciated the impact of this condition on the land’s marketability.
The statements made in Leverett’s affidavit are supported by attendant
circumstances surrounding the loan — most notably that the Bank required
additional collateral for the loan, beyond the deed to the property itself, to offset
the potentially diminished resale value of the land. Leverett’s statements derive
further credence from overwhelming evidence showing that the principal investors
in the Retreat were aware of the lack of access before purchasing the land but —
just as Leverett attests — had planned on surmounting this obstacle by obtaining
an easement over adjacent property. Leverett’s affidavit, supported by these
indicia of reliability, is uncontradicted by any other evidence.
The key portion of Leverett’s affidavit reads as follows:
At the application stage of this land acquisition loan, Mr. Tommy Lee
made a presentation to me about his future property development plans.
At that time I was aware that the tract appeared to be landlocked, but I
was told by Tommy Lee of Retreat LLC that he was pursuing and
expected to obtain an access easement to Highway 378 for their future
development plans.
Cynergy depicts this passage as “vague and equivocal” because it states only that
the tract “appeared to be landlocked,” but we do not accept this characterization.
As the affidavit’s next paragraph makes clear, a conclusive determination about
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the property’s access was unnecessary to the Bank, as it was extending only a
short-term purchase loan for the land, not for its development:
FSB was not financing the planned development on the Property; the
FSB loan was strictly for the acquisition of the Property. Thus, obtaining
adequate collateral on the loan was more important to FSB than the
issue of how the property would be accessed for purposes of Retreat
LLC’s planned development.
What mattered to the Bank, in other words, was not whether or not the property
truly lacked dedicated access, as it appeared, but that the Bank obtain adequate
security for its loan.
That is exactly what the Bank did. Not satisfied with a promissory note and
a deed to the property itself, the Bank required additional security as collateral
from the principal investors in the Retreat: personal guarantees from Antonakos
and Lee, along with deeds to a residential property owned by Lee and a
commercial property owned by other Retreat members. As the district court
observed, the Bank’s insistence on these terms is an attendant circumstance
indicating that the Bank knowingly acquiesced to the property’s lack of dedicated
access and took the precautions necessary to safeguard its interests in light of this
consideration.
Were there any doubt about how to interpret the statements made in
Leverett’s affidavit, it would be dispelled by notes that the Bank’s vice president,
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Maria Bradford, took to memorialize a telephone conversation she had with
Leverett two months before the affidavit was executed. At the time of this
conversation, First American was conducting its investigation into Cynergy’s
policy claim; Leverett, although still the Bank’s president, was not coming into the
office every day because of his illness, and so Bradford acted as a “messenger” to
relay to him the inquiries that were being made about the Retreat loan. Bradford’s
notes of her conversation with Leverett — which were taken for her own future
reference — describe Leverett as saying, in substance, that “since we had other
collateral securing this loan and this loan was to be a short term 6 month
acquisition loan only, the final outcome of public access to the property was not
our primary concern.”
In her deposition, Bradford explained why the Bank would have been
willing to extend the loan despite the property’s lack of access: the Bank had “our
major collateral . . . the collateral was Tommy’s home, a second mortgage on
Tommy Lee’s home and acreage. We had other collateral.” As the closing
attorney for the sale, James Roberts, stated in his own deposition, such an
arrangement to secure a loan for land that lacked dedicated access was hardly
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noteworthy, because banks issue such loans “if they feel that they have adequate
collateral.”5
Further support for Leverett’s attestations comes from evidence showing
that the investors behind the Retreat — or at least Tommy Lee, who was tasked
with responsibility over the matter — were well aware of the property’s lack of a
right of access before their purchase. Although the knowledge held by the Bank,
not the Retreat, is the dispositive issue under the insurance policy, the Retreat’s
undeniable knowledge lends credence to Leverett’s account of having been
apprised by Lee both of the access problem and how the Retreat was planning to
solve that problem through an easement.
The previous owner of the Retreat property, Emily Hester, has attested to
the fact that the primary reason she sold the property was because it lacked a
dedicated right of access. She further stated that this issue was discussed among
5
Additional documentary support for the account set forth in Leverett’s affidavit
can, perhaps, be found in a letter written under his supervision in March 2009 to Dean
Antonakos. In this letter, the Bank’s executive vice president, J. Bruce Turner, told Antonakos:
“When we originally made this loan, we knew that there was no designated access to the
property, but it was in your plans to create one from Highway 378.” Cynergy points out,
however, that portions of Turner’s deposition suggest that Turner was referring here not to the
Bank’s knowledge about the legal question of whether the property had a dedicated right of
access, but rather to the logistical matter of creating a usable entrance to the property, which was
being discussed by the Bank and the Retreat as they negotiated an extension of the loan. Because
Turner’s letter is — at most — simply one additional piece of corroborating evidence confirming
the account set forth in Leverett’s affidavit, our conclusion would be the same even if we gave no
weight to Turner’s March 2009 letter.
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the parties prior to the sale, that the Retreat used this fact during negotiations to
obtain a lower purchase price, and that an agent of the Retreat told her before the
closing that the lack of access was not an issue because the Retreat could get an
easement across the Army Corps of Engineers’ adjacent land. The seller’s real
estate agent, Irma Conrad, likewise testified that she discussed the lack of access
with the Retreat’s real estate agent, Clay Turner; that the lowered purchase price
reflected the property’s lack of access; and that the Retreat was not concerned due
to its plans to obtain an easement. Clay Turner himself has attested: “I was aware
that the Property was landlocked with no road frontage or easement access and
discussed this fact with Mr. Lee and Mr. Antonakos when they were considering
purchasing the property.” Confirming these accounts, Mr. Turner wrote a letter to
the seller listing several “obstacles that have to be considered with the purchase of
this property” which, according to the letter, justified the price and terms offered
by the Retreat. The first of the “concerns” listed in Turner’s letter is that “the
property is currently land locked with no right of way for access. This is an issue
that we feel confident that we could resolve given an appropriate option period of
180 days for which we have asked.”
Indeed, Tommy Lee has admitted that he was told by Clay Turner about the
property’s lack of access and that although he had heard “rumors” of an existing
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easement, no one from the Retreat ever determined before the sale whether or not
these rumors were true. Upon being informed by Turner that the property
appeared to lack access, however, Lee, in his own words, “told him to use that to
try to get the price reduced.” This evidence firmly supports Leverett’s account of
his own understanding, before the loan was made, about the property’s lack of
dedicated access and of his discussions with Lee about the matter.
All of the evidence in this case tells a consistent story, and in light of this
evidence, no reasonable factfinder could doubt that the Bank was aware of the
Retreat property’s lack of dedicated access and appreciated its significance. The
Bank therefore “assumed” that condition, within the meaning of the title insurance
policy, and First American is entitled to summary judgment. Because we affirm
the district court on the same grounds upon which it relied, we have no need to
address First American’s many alternative arguments for affirmance.
AFFIRMED.
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