United States District Court, W.D. Arkansas, Hot Springs Division
DAVID STEWART, THE ESTATE OF NORMA STEWART (DOD 10/26/2006), and CHARLES O. HENDRIX, Plaintiffs,
STEPHEN L. DEMOTT, GARLAND COUNTY TITLE COMPANY, LLC, CAROL SIKORSKI, REGGIE A. GIBSON, R.A. GIBSON, INC., FIESTA BAY, LLC, MALVERN NATIONAL BANK and STEPHEN MOORE, Defendants.
SUSAN O. HICKEY, District Judge.
Before the Court is a Motion for Summary Judgment filed by Separate Defendants Malvern National Bank and Stephen Moore. ECF No. 46. Also before the Court is a Summary Judgment filed by Separate Defendants Garland County Title Company, LLC, and Carol Sikorski (ECF No. 49), which has been adopted by Separate Defendants Reggie A. Gibson, R.A.; Gibson, Inc.; Fiesta Bay, LLC; Malvern National Bank; and Stephen Moore. Separate Defendant Stephen L. Demott has adopted both summary judgment motions. Plaintiffs David Stewart and The Estate of Norma Stewart have responded to both summary judgment motions. ECF Nos. 58 and 64. Plaintiff Charles O. Hendrix has also responded to both summary judgment motions. ECF Nos. 61 and 68. Some Defendants have filed replies. ECF Nos. 67 and 74. The matter is ripe for the Court's consideration.
The specific facts of this lawsuit are difficult for the Court to ascertain given the voluminous content of the fact section of Plaintiffs' complaint and the unusual style in which it is written. However, the Court is able to discern that this lawsuit is based on Plaintiffs seeking to recover damages related to their alleged interests in certain real property located in Hot Springs, Arkansas.
In 2004, Separate Defendant Reggie A. Gibson began building condominiums on certain real property known as Fiesta Bay and Grand Isle in Hot Springs. At some point during the construction of these condominiums, Gibson approached Separate Defendant Malvern National Bank ("the Bank"), seeking a loan to finish the first of the units. This loan would be secured by a mortgage on the property. Malvern National Bank was aware that Plaintiff David Stewart and his then-living wife, Norma, had an interest in the property, and the Bank refused to make the loan to Gibson unless the Stewarts executed a subordination agreement. Malvern National Bank tasked Garland County Title Company with obtaining the documents required for the Bank to obtain title insurance in connection with the loan, including the subordination agreements. The Stewarts executed a subordination agreement on October 6, 2005,  and, following Norma Stewart's death, David Stewart executed another subordination agreement on July 31, 2006. The subordination agreements made Malvern National Bank's interest that of first position and the Stewarts' interest became second.
Unbeknownst to Stewart, Plaintiff Charles O. Hendrix also claimed to have an interest in the property as a result of Hendrix having loaned $875, 000 to Gibson for use in his development projects. That loan was allegedly collateralized by an unrecorded contract between Hendrix and Gibson for sale of the same property that the Stewarts also claimed an interest in. Garland Title Company, having knowledge of Hendrix's unrecorded contract for sale, obtained a subordination agreement from Hendrix on October 6, 2005, and July 31, 2006. These agreements made Malvern National Bank's interest that of first priority.
Following the loan from Malvern National Bank, the Fiesta Bay condominiums were completed and marketed. Gibson then made plans to build up the hill from Fiesta Bay on property known as Grand Isle. Unfortunately, in 2008, sales of the units ceased or slowed to a crawl, and Gibson defaulted on his loan. On December 23, 2008, Malvern National Bank filed a lawsuit in state court, alleging that Gibson had defaulted on a promissory note that was secured by a recorded mortgage on the property. Hendrix and David Stewart were named as defendants in the state court foreclosure action. Hendrix filed a counterclaim against Malvern National Bank, alleging that he held a pre-existing unrecorded interest in the property that was superior to the Bank's interest and that the Bank had assumed a duty to protect his prior unrecorded interest in the property by requiring him to execute a subordination agreement. On April 26, 2010, a judgment and decree of foreclosure was entered in favor of Malvern National Bank. The Court also ruled in favor of the Bank on Hendrix's counterclaim. No party appealed the judgment.
The crux of Plaintiffs' complaint is that Defendants allegedly conspired together to deprive Plaintiffs of their security interests in the property by tricking them into subordinating their security interests in the property to a mortgage in favor of Malvern National Bank. Plaintiffs have sued for violations of the anti-tying provisions of the Bank Holding Act, 12 U.S.C. § 1972; violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq.; various state tort claims; and violations of the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-101 et seq. Plaintiffs have also sued Defendant Stephen L. Demott for legal malpractice. Defendants argue that all of Plaintiffs' claims are barred by the applicable statutes of limitations.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(c) states that summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Under this standard, the inquiry is not whether the evidence favors one side or the other, but "whether a fair minded jury could return a verdict for the plaintiff on the evidence presented." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). When considering a summary judgment motion, the Court "must view the evidence in the light most favorable to the nonmoving party.'" Sappington v. Skyjack, Inc., 512 F.3d 440, 445 (8th Cir. 2008) (quoting F.D.I.C. v. Bell, 106 F.3d 258, 263 (8th Cir. 1997)). To defeat a motion for summary judgment, however, the non-moving party must "make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The "nonmovant must present more than a scintilla of evidence and must advance specific facts to create a genuine issue of material fact for trial." Bell, 106 F.3d at 263 (8th Cir. 1997). "In order to survive a motion for summary judgment, the non-moving party must be able to show sufficient probative evidence that would permit a finding in his favor on more than mere speculation, conjecture, or fantasy." Binkley v. Entergy Operations, Inc., 602 F.3d 928, 931 (8th Cir. 2010).
Plaintiffs allege two federal claims against Defendants: (1) that Defendants participated in an illegal tying arrangement in violation of 12 U.S.C. § 1972; and (2) that Defendants engaged in a racketeering enterprise in violation of 18 U.S.C. §§ 1961 et seq. Defendants argue that both of these claims, as well as all the state claims, are barred by the applicable statutes of limitation.
A. Illegal Tying Claim
Civil actions brought based on alleged violations of 12 U.S.C. § 1972 "shall be forever barred unless commenced within four years after the cause of action accrued." 12 U.S.C. § 1977(1). A cause of action based on this statute accrues when the bank commits the unlawful conduct. Information Exchange Systems, Inc. v. First Bank Nat. Ass'n, 994 F.2d 478, 486 (8th Cir. 1993). Here, the import of Plaintiffs' claim is that Malvern National Bank committed acts prohibited by the federal banking statutes by requiring Plaintiffs to subordinate their security interests in certain property to a mortgage in favor of the Bank. All of the Bank's acts in that regard had to have occurred on or before July 31, 2006, when Plaintiffs signed the most recent subordination ...