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Beatley v. Ayers

United States District Court, E.D. Virginia, Richmond Division

June 25, 2019

J. IRVIN BEATLEY, Plaintiff,
CHARLES E. AYERS, JR., et al., Defendants.


          John A. Gibney, Jr., United States District Judge

         In this case, the plaintiff has sued three former business colleagues for breach of contract, conspiracy to breach a contract, fraud, and conspiracy to commit fraud. The Court finds that the defendants breached their contract with the plaintiff, and awards damages, jointly and severally against each defendant, in the amount of $157, 195. In addition, the Court finds that one defendant, Charles E. Ayers, Jr., committed fraud, resulting in damages to the plaintiff in the amount of $157, 195. The Court also awards punitive damages against Ayers in the amount of $25, 000. The Court finds for the defendants on the other claims. The following Opinion states the reasons for the Court's decision.

         I. FACTS

         A. The Parties

         This case arises from an unsuccessful attempt to create a waterfront project called Anchor Point in Hopewell, Virginia. The plaintiff, J. Irvin Beatley, teamed up with the defendants, Charles E. Ayers, Jr., Ralph L. Costen, Jr., and Jesse L. Barber, to develop a community with condominiums, single-family homes, a marina, and other facilities along the Appomattox River. A fifth person, John Woodfin, Sr., also took part in the project, apparently primarily as a financial backer. Woodfin died before this case began. His son, John Woodfin, Jr., took over his role in the project. For ease of identification in this Opinion, the Court will refer to the Woodfins as Woodfin Sr. and Woodfin Jr. Neither Woodfin is a party to this case.

         The parties presented almost all their evidence in documentary form. Plaintiff Beatley has suffered a stroke that renders him unable to testify. Defendant Barber did not testify or even appear. Defendant Costen testified by deposition; he did not show up at trial. Defendant Ayers appeared in person and testified. The Court observed Ayers' testimony, and found him largely incredible. In fact, his business partner, Costen, testified that Ayers has a bad reputation for truthfulness in the community.

         The Court does not have an official copy of the transcript of the trial, but has a rough copy of the transcript upon which it has relied to supplement its memory of the incidents of trial.

         B. The Anchor Point Development

         Anchor Point never got off the ground, and it lost a great deal of money-much of which the parties had borrowed. Not surprisingly, the developers wound up fighting each other in a lawsuit. Beatley sued Ayers, Costen, and Barber in the Circuit Court of the City of Richmond. In state court, Beatley alleged that he had put millions of his own dollars into Anchor Point, that he had borrowed a great deal of additional money for the project, and that Ayers, Costen, and Barber had agreed to shoulder a proportionate share of the financing. Beatley claimed that the defendants did not pay their share and left him holding the bag. (Pl's Ex. 2.)

         The state court litigation resulted in a settlement that would allow Beatley to recoup part of his loss from his colleagues. Unfortunately, history repeated itself: Beatley's co-developers did not perform the settlement as agreed, leading to this litigation.

         C. Anchor Point's Financing

         Before discussing the settlement agreement and the defendants' performance, the Court must describe the outstanding debt from the project. The outstanding loans are important in this case because the defendants say that they figured in their performance of the settlement agreement.

         The financing of Anchor Point was complicated and confusing. Of the myriad loans related to Anchor Point, two are especially important to this case. Both came from Resource Bank, which later became Fulton Bank. First, Beatley, Ayers, Costen, and Barber each personally signed notes to get loans of $157, 195 to help finance the project. (Pl's Ex. 21.) Woodfin Sr. guaranteed the loans. (Pl's Ex. 39.) Woodfin Sr. also posted a certificate of deposit as collateral to cover all four $157, 195 notes. Ayers falsely testified that he did not know about Woodfin's collateral. At trial, Ayers testified, "I didn't know at the time that John Woodfin had made a deposit at the bank which facilitated [the $157, 195 loans]." (Trial Tr. 120:9-12.) A June 29, 2017, letter to Fulton Bank, however, shows that Ayers' testimony is false. In the letter, Ayers said, "I realize that the Woodfins have provided collateral for [the $157, 195] loan." (Pl's Ex. 8.) The collateral later proved important to the defendants' defense of this case.

         In the second important loan, MPD Ventures, LLC, [1] borrowed approximately $1.8 million dollars for the project. The parties and Woodfin Sr. guaranteed the MPD loan. Apparently the MPD loan went into default, or was called by the Bank for other reasons. The Woodfins stepped in and bought the MPD loan through a company they owned called Grove & Libbie Service Co. LLC. At the times relevant to this suit, Grove & Libbie held the MPD loan, with a balance of $885, 522, 57. (Pl's Ex. 35.)

         D. The Settlement Agreement for the State Suit

         In the state court litigation, Beatley wanted to recover as damages the money that Ayers, Costen, and Barber should have paid to carry their share of the financing. On June 16, 2017, the parties mediated the case. All four parties to this case attended the mediation. So did Kevin Walsh, a representative of the Woodfins' interests. By the time of the mediation, Woodfin Sr. had died, and Woodfin Jr. served as administrator of his estate. Although the Woodfins were not parties to the state court litigation, Woodfin Jr. sent Walsh to the mediation. Walsh serves as a financial monitor or advisor of Woodfin Jr.'s many business affairs. Although he attended the mediation, he did not sign the settlement agreement.

         The settlement agreement contained two provisions pertinent to this litigation. They state as follows:

2. Defendants [Ayers, Costen, and Barber] shall pay plaintiff [Beatley] $134, 000 on or before July 17, 2017.
3. Defendants agree to assume all of plaintiff s obligations on the loan from Fulton Bank to plaintiff in the original principal amount of $157, 000. Defendants agree to use all best efforts to obtain Fulton Bank's consent to their assumption of the loan and the release of plaintiff from all obligations relating to the laon. Defendants further agree that their responsibility under this paragraph includes the payment of the monthly interest charge due on or about July 1, 2017.

         The agreement also provided that Beatley would release a deed of trust he held on the planned site of planned condominiums. (Pl's Ex. 3.)

         In sum, the agreement would result in a cash payment of $134, 000 to Beatley, due 31 days after the mediation. The defendants would also use their best efforts to get the Bank to release Beatley from his $157, 195 loan. The agreement recognizes that the Bank might not agree to take Beatley off the note, so it also provides that the defendants would pay ongoing interest on the note and would eventually assume Beatley's duty to pay the note off.

         E. Performance of the Settlement Agreement

         The defendants did not perform the settlement as agreed. They did not pay $134, 000 on time. They used, at best, minimal efforts to get the Bank to release Beatley from the $157, 195 note. They did not pay the $157, 195 note when due. But they offer a number of excuses for their failure to perform.

         1. Payment of $134, 000

         Almost immediately after signing the settlement agreement, Ayers took the lead in the defendants' attempts to get out of the deal. His efforts to evade making the $134, 000 payment illuminate his intent to perform the entire agreement.

         Ayers tried to use Woodfin Jr. to put pressure on Beatley so that the defendants would not have to make the $134, 000 payment due on July 17, 2017. Three business days after the settlement, Ayers emailed Woodfin Jr. to tell him that, as part of the settlement, "[w]e did get the release of [Beatley's] deed of trust on the condominium." (Pl. Ex. 6.) As to the rest of the settlement, Ayers told the vacationing Woodfin Jr., "I have a strategy and we can discuss it when you get back." (Id.)

         After Woodfin Jr. returned from his vacation, Ayers tried to implement his "strategy." On Wednesday, July 12, 2017, Ayers emailed Woodfin Jr. to ask him to have Kevin Walsh contact Beatley's lawyer and demand $100, 000 of the $134, 000 due in a matter of days. Ayers asked Woodfin Jr. to "pursue that vigorously because Friday will be here before you know it." (Pl's Ex. 9.) Friday was the last business day before the due date of the $134, 000 payment. Costen knew about Ayers' scheme, as demonstrated by his email to Ayers on July 13 asking whether he had heard from Woodfin Jr. Id.

         July 17 came, and the defendants did not pay the money. On August 1, Ayers again tried to get Woodfin Jr. to turn up the heat on Beatley. Ayers said in an email, [2] "I really need to talk to you about Irv Beatley and put together some plan to finalize that settlement." (Pl's Ex. 12.) By using the words "finalize that settlement," Ayers could only have meant to get out of paying the money to Beatley: the agreement was already in final form, and nothing remained except the defendants' performance. Ayers ratcheted up his efforts to get Woodfin Jr. to pressure Beatley to give up trying to collect the money. Ayers offered to write a demand letter to Beatley for Woodfin Jr.'s signature. As an incentive for Woodfin to sign the letter, Ayers said Beatley would otherwise "get the money" and "do something with it before you can get to it." (Id.) Whatever his motives toward Woodfin Jr., Ayers clearly did not want Beatley to get the money due to him.

         Eventually, Ayers got Woodfin Jr. to move, albeit in halting and inconsistent steps. On August 4, 2017, Woodfin Jr. wrote to Beatley ostensibly on behalf of Grove & Libbie, the Woodfin-controlled company that now held the MPD loan guaranteed by Beatley, Woodfin Sr., and all three defendants. Grove & Libbie demanded payment of $100, 000 from the money in the mediation-the precise amount suggested by Ayers in his July 12 email. (Pl's Ex. 15.)

         Then, on August 17, 2017, Woodfin Jr. sent a second demand letter on behalf of Grove & Libbie. This second letter went to Beatley, Ayers, Costen, and Barber, and demanded that they pay the entire MPD note. Specifically related to the $134, 000, however, the letter said any amount to be paid through the mediation should go immediately to Grove & Libbie. Of course, the only amount due through the mediation was the $134, 000 due to Beatley. (Pl's Ex. 17.) Ayers, Costen, and Barber never replied to the August 14 demand, and never paid any money to Grove & Libbie. From these facts, the Court concludes that the two demand letters existed only as a way to dissuade Beatley from pursuing the money from the defendants.

         At around this time, what Ayers considered a fortuitous event occurred. Beatley's lawyer left his firm and went out on his own. Beatley's former firm sent the defendants' lawyer a notice of attorneys' fees lien for unpaid fees and costs. (Pl's Ex. 14.) The defendants' lawyer referred to the lien in a status conference held to discuss the defendants' failure to pay the settlement amount. The lawyer claimed that the assertion of the lien played a role in the failure to pay the $134, 000 because it caused "confusion" among the defendants. (Pl's Ex. 13, at 5.) Unfortunately for the defendants, their "confusion" could not have existed at the time payment was due, because the letter asserting the lien did not go out until a month after the due date.

         Although the defendants said in the status conference that they intended to pay the $134, 000, (Pl's Ex.13, at 11), nothing happened.

         On August 25, 2017, Ayers tried a new tactic to get Woodfin Jr. to move more aggressively against Beatley. First, Ayers said that a letter from Fulton Bank needed to go out. This apparently referred to a demand from Fulton to pay the $157, 195 notes. Somehow, Ayers seems to have believed that Woodfin could get the Bank to demand payment. (Pl's Ex. 18.) It took a while, but on February 9, 2018, the Bank finally did demand payment. (Pl's Ex. 21.)

         More importantly, Ayers came up with a plan to get Barber and Costen out of the project, leaving Ayers and Woodfin Jr. as the sole principals. Ayers said that Barber would drop out of the project if Fulton Bank would forgive the $157, 195 note, and if Barber could get out of paying for two lots on the project. With respect to Costen, Ayers said that Costen would give up his position if Woodfin Jr. would take over the loans from Fulton Bank and accept $100, 000 of the $134, 000 due to Beatley. (Pl's Ex. 18.)

         Then, "shifting to Irv Beatley," Ayers begged Woodfin Jr. to sue Beatley. (Id.) He suggested that Woodfin Jr. might even have a confession of judgment note against Beatley. (Id.) This bait, however, did ...

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