Cordell Funding, LLLP v. Joel Jenkins

• Court: Court of Appeals for the Eleventh Circuit
• Decided: January 12, 2018
• Docket: 15-13963
• Status: Unpublished

Opinion

Case: 15-13963 Date Filed: 01/12/2018 Page: 1 of 10

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 15-13963 Non-Argument Calendar ________________________

D.C. Docket No. 9:11-cv-80988-KLR

CORDELL FUNDING, LLLP,

Plaintiff - Counter Defendant -Appellee,

versus

JOEL JENKINS,

Defendant - Counter Claimant -Appellant,

IRWIN R. GILBERT,

Defendant - Counter Defendant.

________________________

Appeal from the United States District Court for the Southern District of Florida ________________________

(January 12, 2018) Case: 15-13963 Date Filed: 01/12/2018 Page: 2 of 10

Before WILSON, JORDAN and BLACK, Circuit Judges.

PER CURIAM:

This case began when Cordell Funding, LLLP (Cordell) brought suit against

Joel Jenkins in the Southern District of Florida, alleging he breached an agreement

to guarantee a $3.5 million loan Cordell extended to North Andros Assets, Ltd., a

Bahamian company (North Andros). Following a bench trial, the district court

found in favor of Cordell and entered judgment against Jenkins in the amount of $1

million. Jenkins appeals. He contends the district court failed to set forth its

findings of fact and conclusions of law as it was required to do under Fed. R. Civ.

P. 52(a). After review, we agree, and we remand the case to the district court to

make such findings.

I. BACKGROUND

Cordell’s amended complaint alleges the following facts. On December 16,

2005, Cordell agreed to lend $3.5 million to North Andros for the acquisition and

development of real estate in Nassau, Bahamas. The loan was secured by a

mortgage on the subject property (the Property). To provide further security, the

owners of North Andros, including Jenkins, pledged their shares in the company to

Cordell in the event of a default. In addition, the same individuals, once again

including Jenkins, personally guaranteed the loan. In August 2006, Cordell lent

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North Andros an additional $500,000, bringing the total amount borrowed to $4

million. Jenkins executed a second guaranty for the additional $500,000 loan.

According to the complaint, North Andros defaulted and ceased making

payments in December 2006. Thereafter, interest accrued on the unpaid balance at

twenty percent per annum. Cordell alleged that Jenkins refused to pay the balance

in breach of his agreement to guarantee North Andros’s loan.

Jenkins defended these allegations pro se. The case proceeded to a bench

trial held on January 27 and 28, 2014. Cordell presented, among other witnesses,

its in-house bookkeeper to testify to the amount outstanding on the loan. The

bookkeeper produced a spreadsheet showing that approximately $8 million in

interest and fees had accrued on the outstanding balance, which totaled roughly

$3.5 million after credited payments. The testimony also revealed that Cordell had

exercised its right to vote the shares of North Andros upon default, and had caused

North Andros to sell the Property on July 18, 2013, for $9 million. The sale price

was credited to North Andros’s debt, resulting in an alleged remaining balance of

$2,565,837.21 due under the loan. Cordell contended Jenkins was obligated to

guarantee that sum.

Although Jenkins spent the majority of his time arguing that he was not

liable because he had been a service member on active duty in the Air Force while

interest accrued and at the time the lawsuit commenced, Jenkins also suggested

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Cordell’s sale price was artificially low. As it turned out, the sale was not an arms-

length transaction; Cordell sold the Property to a related entity known as The Palm

at West Bay Limited (The Palm). Cordell’s managing partner testified that $9

million “was the highest value we could envision on this property,” apparently, in

part, because the Property had been vandalized. Little more was made of the

valuation issue, however, and Jenkins continued to focus on his former status as an

active duty service member.

Towards the end of the second day of the proceedings, Jenkins interrupted

his own cross examination of one of Cordell’s witnesses to ask the court if he

could be represented by an attorney by the name of Gerald Richman. Curiously,

there was some question as to whether Richman, who was present at the

proceeding, had a conflict of interest resulting from another suit against Jenkins

that Richman had filed on behalf of another client. The court indicated its concern

and stated it would not allow the representation, but permitted Richman to be heard

on the matter. Richman indicated that if the court would allow him to represent

Jenkins, he would show there was no deficiency because Cordell had not proven

the fair market value of the property at the time of the sale was less than the

outstanding debt. In other words, the price set between North Andros (after

default, controlled by Cordell) and The Palm (related to Cordell) was arbitrary.

While a $9 million sale price resulted in a deficiency under the loan, a $20 million

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sale price, for example, would have resulted in a substantial surplus, leaving

nothing for Jenkins to guarantee. The court indicated it was unwilling to “go down

that road” because the evidence was already closed. Instead, it instructed Richman

to sit down and the parties gave their closing arguments.

Nevertheless, Richman’s momentary appearance was not without effect.

The court interrupted Cordell’s closing argument to inquire about the value of the

property. The court asked Cordell to produce an appraisal from the relevant time

period showing the Property justified a $9 million dollar price. The court

recognized such a request was “rather bizarre,” but given that Jenkins had been

representing himself throughout the proceeding, it would accommodate him.

The bench trial was completed on January 28, 2014. Cordell submitted an

appraisal in accordance with the court’s instructions. However, the appraisal was

purportedly delivered orally at the time it was made in 2013, but was not reduced

to writing until January 2014, only a few weeks before trial. About a month later,

the court held a hearing in which it expressed concern about the appraisal date and

the appraiser’s qualifications. At the hearing, Jenkins moved for reconsideration of

the court’s decision to deny his request for Richman to represent him. The court

granted the motion and decided the trial should begin again “from scratch.”

Proceedings resumed on November 21, 2014. Jenkins, now represented by

Richman, asked the court to open the evidence further and look at the value of the

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property in 2010, not just on the date of the sale in 2013. If Cordell had control of

the property and the ability to sell it in 2010, Jenkins argued, then its decision to

wait until 2013 to sell it while interest accumulated at twenty percent created the

deficiency where there was none to begin with. The court, over Cordell’s

objection, decided to “open [the case] up further because we have a pro se

defendant who didn’t know how to defend this case,” and because questions of

Bahamian law could pertain to the question of whether Cordell had control of the

Property. Accordingly, the court decided to rehear the evidence and look at each

of the issues it now determined could be relevant: the date the default occurred;

when the right to sell was triggered; and what the value of the Property was at that

time. The trial proceeded accordingly for the remainder of the day and again on

December 10, 2014, the final day of trial.

However, it appears these newly discovered issues were lost amidst the

continuing chaos of the proceedings, which were, in the district court’s understated

description, “very unorthodox.” Instead, the court began to focus on an issue

seemingly of its own creation, namely, whether the debt was extinguished by a de

facto merger of Cordell and North Andros when Cordell took control of North

Andros’s shares. By the end of two days of trial, punctuated by legal arguments,

numerous objections, and disputed evidentiary admissions, the district court

determined the case boiled down to that single issue of law, framed as follows:

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[T]his really isn’t an issue of fact that I have. If, if the plaintiff is correct, and I’ve looked at their spreadsheet, and if this is what they received, there is a total owed before expenses of 2,565,000-some-odd dollars, and if there are no offsets or problems to that, you’d be entitled to what he’s asking for, a million dollars,1 against Mr. Jenkins. On the other hand, if there’s some legal significance to pledging stock and voting it, and if that would cause a merger between the, the lender and the owner, then it would have to compute what the balance would be due then, and I think everybody agrees it was less than 9 million, then I would say there’s no deficiency. So, the only thing I’m interested in is a question of law . . . .

Accordingly, the court ordered supplemental briefing on four issues of

Florida law:

[1] Who has the authority to vote shares that are held in trust? [2] Does the lender’s holding the borrower’s shares in trust constitute a merger of interests so as to extinguish the debt? [3] Does the lender’s holding the shares in trust and then voting the shares constitute a merger of interests between the lender and borrower so as to extinguish the debt? [4] What is the effect of Cordell holding itself out on real estate listings as the owner?

Following briefing, the district court entered a “Post-Trial Order on Issue of

Merger.” The order made findings of fact specific to the issue of whether a de

facto merger occurred between North Andros and Cordell when Cordell took

control of North Andros’s shares upon default. It found that Cordell and North

Andros had not merged, and thus, that the debt had not been extinguished. The

1 Cordell apparently restricted its claim against Jenkins to $1 million due to considerations of Bahamian law, though its amended complaint makes no mention of such a limitation.

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court then summarily entered judgment against Jenkins in the amount of $1

million.

Jenkins moved for reconsideration, asserting the district court should have

made findings of fact and conclusions of law in accordance with Fed. R. Civ. P.

52(a) on the other matters relevant to Jenkins’s liability, such as whether Jenkins

breached the guaranty agreement or whether Cordell suffered actual damages. The

court denied the motion, stating that it had “considered all the evidence presented

at trial in reaching its conclusion that the merger issue was dispositive, and the

[prior] order provides a thorough analysis of the facts and law relating thereto.”

The court denied reconsideration and declined to amend the judgment, and Jenkins

filed this appeal. 2

2 Jenkins raises the possibility that the district court did not have subject matter jurisdiction because the parties were not completely diverse, but we find no merit in his contention. The district court found that Cordell was a citizen of Virginia, New York, New Jersey, and the Cook Islands by virtue of the citizenship of its partners. It was also possibly a citizen of Florida, but the court found it unnecessary to inquire any further because Jenkins was a Georgia citizen. Jenkins contends this was error and that he was actually a citizen of Florida because he was allegedly in the process of beginning a new life there when the case was filed. For an individual, citizenship is determined by domicile, and it is well established that “[a] person’s domicile is the place of his true, fixed, and permanent home and principal establishment, and to which he has the intention of returning whenever he is absent therefrom.” Sunseri v. Macro Cellular Partners, 412 F.3d 1247, 1249 (11th Cir. 2005) (quotation omitted). The evidence showed that at the time of the suit, Jenkins lived in Georgia, where he owned a home, voted, and paid property taxes. Whatever his intentions at that time, his “true, fixed, and permanent home and principal establishment” was Georgia, not Florida. The district court did not clearly err in so finding. See McCormick v. Aderholt, 293 F.3d 1254, 1257 (11th Cir. 2002) (“This Court reviews the district court’s findings regarding domicile under a clearly erroneous standard.”). Hence there was complete diversity, regardless of whether Cordell was a Florida citizen or not. 8 Case: 15-13963 Date Filed: 01/12/2018 Page: 9 of 10

II. DISCUSSION

We agree with Jenkins that the district court ought to have made more

extensive Rule 52(a) findings. The rule states that “[i]n an action tried on the facts

without a jury or with an advisory jury, the court must find the facts specially and

state its conclusions of law separately.” Fed. R. Civ. P. 52(a)(1). In a breach of

contract action under Florida law such as this one, the plaintiff must plead and

establish: “(1) the existence of a contract; (2) a material breach of that contract;

and (3) damages resulting from the breach.” Vega v. T-Mobile USA, Inc., 564 F.3d

1256, 1272 (11th Cir. 2009) (citing Friedman v. N.Y. Life Ins. Co., 985 So. 2d 56,

58 (Fla. 4th DCA 2008)). The absence of any findings relevant to these elements

under Rule 52(a) sheds no light on how the district court resolved them, effectively

precluding appellate review. See Self v. Great Lakes Dredge & Dock Co., 832

F.2d 1540, 1549 (11th Cir. 1987) (“The findings must be specifically detailed to

give an appellate court a clear understanding of the analytical process by which

ultimate findings were reached and to assure us that the trial court took care in

ascertaining the facts.” (quotation and alterations omitted)); McCawley v.

Ozeanosun Compania, Mar., S.A., 505 F.2d 26, 30 n.4 (5th Cir. 1974) (noting that

the “purpose of this rule is to facilitate appellate review”).

Whether there was a de facto merger that extinguished the debt is surely

relevant to the breach of contract action, but it is not clear to us why it should have

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been dispositive on its own. That is, the district court did not make prerequisite

factual findings regarding the extent of any deficiency under the loan, and whether

and how any such deficiency affected Jenkins’s breach of the guaranty or damages

resulting therefrom. The court stated multiple times that it “considered all of the

evidence presented at trial,” and accordingly that only the merger issue was

relevant, but it did not explain the factual and legal basis for that conclusion and as

such left us without any means to review its decision. See Self, 832 F.2d at 1549

(“The findings and conclusions we review must be expressed with sufficient

particularity to allow us to determine rather than speculate that the law has been

correctly applied.” (quotation omitted)). Accordingly, we remand and instruct the

court to make findings of fact and conclusions of law in accordance with Rule

52(a). Tejada v. Dugger, 941 F.2d 1551, 1555 (11th Cir. 1991) (“[F]ailure to do so

[to make Rule 52(a) findings] usually result[s] in a vacated judgment or a case

remanded for appropriate findings . . . .”).

III. CONCLUSION

For the foregoing reasons, we REMAND this case for factual findings and

conclusions of law to be made pursuant to Rule 52(a).