Opinion ID: 175882
Heading Depth: 1
Heading Rank: 4

Heading: Acklin Defaults

Text: In 2000, Acklin defaulted on his bridge loan, and KFI initiated foreclosure proceedings on Rest in Peace. Delays in grave digging at Rest in Peace prompted its Board to place Rest in Peace in receivership. Relying upon the substitution of collateral provision in the Estoppel Certificate, Shelton initially did not exercise his own foreclosure rights as first-priority mortgagee. [6] Shelton believed the $675,000 escrow account afforded him security and, for financial reasons, preferred not to foreclose on the Mortgage. Shelton did not verify the creation of the $675,000 escrow account and, for many years, did not inquire about its status. When KFI initiated foreclosure proceedings, Shelton assumed KFI would be coming to settle off the Mortgage, but Shelton never heard from KFI. When Shelton mentioned the escrow account to KFI's local counsel, Garland Binns, counsel assured Shelton at a Board meeting that Shelton would get all of [Shelton's] money, plus interest, plus attorney's fees. In July 2001, Acklin defaulted on the Note. In March 2002, Shelton asked KFI for an update on the status of the $675,000 escrow account and indicated he would accept the $675,000 (plus interest) in return for the satisfaction of the [Mortgage]. KFI notified Shelton that KFI had not placed $675,000 in an escrow account, but rather, in purported accordance with the Acklin-KFI loan agreement, the reserve was not established and [Acklin's] obligations . . . were reduced. KFI refused to pay Shelton the $675,000.
In September 2002, Shelton filed a two-count complaint against KFI in Arkansas state court. In Count I, Shelton claimed breach of contract. Shelton alleged the Estoppel Certificate embodied a contract. In Count II, Shelton claimed fraud or constructive fraud. Shelton asserted KFI occupied a position of superior knowledge and . . . had a duty to speak or to otherwise inform [Shelton] of the fact the `escrow' had not been funded and knew [Shelton] relied on affirmative representations to the effect the escrow was set up and allowed [Shelton] to continue such reliance to his detriment. In October 2002, KFI removed the case to federal court. See 28 U.S.C. §§ 1332, 1441 and 1446. Shelton is a citizen of Arkansas, KFI is a citizen of New Jersey, and the amount in controversy exceeds $75,000, exclusive of interest and costs. In March 2009, after nearly seven years of wrangling, [7] the district court held a five-day jury trial on Shelton's complaint. The jury returned verdicts in Shelton's favor for (1) breach of contract, (2) fraud, and (3) constructive fraud. The jury awarded Shelton $675,000 in compensatory damages and $1 million in punitive damages. The district court entered judgment in accordance with the jury's verdicts and ordered Shelton to assign [a]ll of his right, title, and interest in Rest in Peace to KFI upon payment of the judgment. At the close of Shelton's case in chief, at the close of all of the evidence, and after trial, KFI moved for judgment as a matter of law or, in the alternative, for a new trial. See Fed.R.Civ.P. 50 and 59. The district court summarily denied all of KFI's motions, and KFI now appeals.