Opinion ID: 2544308
Heading Depth: 1
Heading Rank: 2

Heading: Facts as Alleged in the Third Amended Complaint

Text: In their brief on appeal, the investors expressly waive any appeal from the trial court's dismissal of their claims against Fruitticher and Seaside and from the trial court's dismissal of their claims alleging conversion and unjust enrichment against the Hindses. The investors' fraudulent-transfer claim against the Hindses remains pending before the trial court. Accordingly, the only claims before us are the investors' claim seeking an accounting and dissolution of Bon Harbor and their claims alleging fraudulent misrepresentation, fraudulent suppression, securities fraud, shareholder oppression, breach of fiduciary duty, negligence, and conspiracy against Gulf Stream, Kirkland, Decatur, Michael Hinds (Hinds), and Jacobsen. In their third amended complaint the investors allege the following facts relevant to those claims. Hinds and Kirkland, through other entities, own Decatur and Gulf Stream. In early 2005, Decatur and Gulf Stream formed Bon Harbor to purchase and develop real property in Baldwin County. At about the same time, Hinds and Kirkland asked Herrick, Katz, and Vance to invest in the development. Herrick, Katz, and Vance agreed, and in June 2005, their company, DGB, purchased a 40% interest in Bon Harbor for $2,000,000. Bon Harbor, therefore, is owned by Decatur, Gulf Stream, and DGB. Hinds and Kirkland acted as managers of Bon Harbor. The investors allege that they entrusted Hinds and Kirkland to negotiate and execute land transactions on behalf of Bon Harbor because of their purported expertise and their respective roles as Managing Members having authority to make managerial decisions. The investors also allege that, as managers and, through Decatur and Gulf Stream, as alleged majority members of Bon Harbor, Hinds and Kirkland owed them fiduciary obligations to protect the legitimate investment expectations of the [investors] and to disclose material facts surrounding Bon Harbor's business activities, including facts surrounding the purchase of real property by Bon Harbor. Bon Harbor purchased 14.36 acres of real property in Baldwin County (the property) on July 6, 2005 (the July 2005 transaction). [1] Hinds and Kirkland represented to the investors that the purchase price for the property was $10,000,000. At Hinds and Kirkland's request, Fruitticher appraised the property at approximately $14,000,000. Although the investors' allegations of this fact are unclear, it appears that Seaside acted as closing agent for the transaction. The investors contributed $2,500,000 toward the purchase price; the third amended complaint does not specify whether this contribution was made through DGB or by Herrick, Katz, and Vance directly. The remaining $7,500,000 was financed through a loan from United Bank, which Herrick, Katz, and Vance personally guaranteed. Hinds and Kirkland did not contribute any funds to the July 2005 transaction, and it is unclear whether they guaranteed the loan from United Bank. Bon Harbor purchased the property from Jacobsen. Unknown to the investors, just days before Bon Harbor purchased the property for $10,000,000, Jacobsen had purchased the property for $5,000,000. The third amended complaint does not state from whom Jacobsen purchased the property. The investors allege that Hinds and Kirkland, and through them Decatur and Gulf Stream, knew that Jacobsen had purchased the property for one-half what Bon Harbor paid for it but concealed that fact from the investors, before, during, and after the July 2005 transaction. The investors allege that the information concealed was entirely under the control of Hinds and Kirkland and that the investors did not have access to it. The investors also allege that Hinds, Kirkland, Decatur, and Gulf Stream had fiduciary duties to disclose facts material to the July 2005 transactionincluding Jacobsen's purchase priceto them but failed to do so. The investors also allege that before Jacobsen purchased the property, he obtained funds from Bon Harbor and that Hinds and Kirkland used Bon Harbor assets to obtain options on and to develop their own properties adjacent to the property purchased by Bon Harbor. The investors allege that Hinds and Kirkland concealed all of this information from them. The investors allege that they relied on the defendants' silence by forgoing independent initiatives to obtain the property records for themselves to learn whether their fiduciaries were committing a fraud. They also allege that they did not have actual knowledge of the concealed facts until 2007 when they were deposed in separate litigation initiated by United Bank related to the transaction (the United Bank litigation) and that they could not have had constructive knowledge of the facts concealed until February 6, 2006, when Hinds and Kirkland sent them tax documents related to the July 2005 transaction.