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Abrams v. First Tennessee Bank National Association

March 5, 2007


The opinion of the court was delivered by: Thomas W. Phillips United States District Judge



Defendants, First Tennessee Bank National Association, First Tennessee National Corporation, and First Horizon Home Loan Corporation (collectively, the "First Tennessee defendants") have jointly moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure [Doc. 336] with respect to the single remaining claim asserted against them based on their alleged violation of the Racketeering Influenced and Corrupt Organization Act ("RICO" or the "Act"). Defendant Dale Martin joins in First Tennessee defendants' dispositive motion [Doc. 339].*fn1 In their motion, the First Tennessee defendants argue that the plaintiffs cannot support key elements of their RICO claim. Plaintiffs have responded in opposition, and the First Tennessee defendants have replied, as well as submitted supplemental memorandum. For the reasons that follow, defendants' motions for summary judgments [Docs. 336 and 339] are GRANTED. Further, the summary judgment motion of First Tennessee Bank National Association and First Horizon Home Loan Corporation [Doc. 459] as well as plaintiffs' motion to strike statement of material facts [Doc. 463] are DENIED, as moot.

I. Summary of the Facts

As the law requires, all disputed facts and inferences are resolved most favorably for the plaintiffs. The Court merely provides an abridged summary of facts for the purposes of this opinion.

Plaintiffs' claims arise from their purchase of real estate "vacation homes" from Deer Path Vacations, L.P. ("Deer Path"). Generally stated, developer Dan Stetson ("Stetson") had a "vision" to provide ministers a vacation resort; to furnish retirement homes to these clergy men and women; and to provide income to the ministers. It appears that Stetson represented that he planned to achieve this by allowing ministers to purchase cabins in the Deer Path development, with little or no money being paid by the ministers, and then lease the cabins from the ministers as overnight rentals to the public. The proceeds from the cabin rentals would be used to pay all costs and expenses associated with the ministers' ownership of the cabins. Further, it appears that Stetson stated that the cash flow would ultimately pay off the mortgages on the cabins. Stetson estimated and represented to the plaintiffs that the cabins would be paid off in approximately seven years. Then, the unencumbered cabins would belong to the ministers, who could either continue to rent them for a profit or move into them. All of the plaintiffs in the instant matter purchased cabins.

Although plaintiffs' deposition testimony varies, the process of purchasing the lots and cabins involved the plaintiffs discussing their cabin purchase(s) with friends and family; participating in sales meetings given by Deer Path; taking tours of the Deer Path development with Deer Path employees; and/or meeting with Deer Path employees to discuss options, i.e. selecting cabins with furnishings and discussing the purchase price. Ultimately, all of the plaintiff purchasers would meet with J.W. Compton ("Compton"), who was First Tennessee defendants' loan officer on site at the Deer Path development. Compton would assist the cabin purchasers in obtaining loans to purchase their lots and cabins. Plaintiffs allege that Compton gave them certain representations that were favorable to developer Stetson, the Deer Path development, and conditions of the purchases.

Deposition testimony varies as to the process of the loan application; however, generally, a hand written loan application was completed to the extent possible. Once all of the information was obtained, a completed typed application was prepared. The typed application was signed by each plaintiff. It appears that, since the plaintiffs did not reside near the development, some or all of the plaintiffs executed written Limited Powers of Attorney empowering a Deer Path employee to execute the loan documents necessary to secure their cabins. Many of the interactions between plaintiffs and Compton regarding the status and completion of the loans were though mailing and/or by phone conversations.

Plaintiffs did not raise any issues or otherwise complain about the loan process, loan application, and/or construction or permanent loans before or at the closing.

Initially, Deer Path was able to uphold its obligation. It would appear that enough cash flow was generated to pay plaintiffs' mortgage payments, property taxes, insurance, utilities, and other costs associated with ownership of the cabins. However, in the summer of 2002, Deer Path began to experience extreme financial difficulties. As a result, Deer Path could not satisfy its obligations under the lease agreements. Indeed, Deer Path discontinued mortgage payments. In late fall of 2002, Deer Path filed for bankruptcy. Its efforts to reorganize were unsuccessful, and Deer Path ceased operations in December of 2002. The plaintiffs, unable to pay their mortgage and loan obligations, had their cabins foreclosed by various lenders thereafter.

Plaintiffs filed suit against the First Tennessee defendants based on various legal grounds. All of plaintiffs' claims have been previously remanded to Jefferson County Circuit Court with the exception of plaintiffs' claims based upon alleged RICO violations.*fn2

Plaintiffs essentially allege that the RICO defendant "persons" are liable because (1) the properties purchased were worth substantially less than what the plaintiffs obligated themselves for financially; (2) Deer Path was not able to honor the leases entered into with plaintiffs, which would cover plaintiffs' financial obligations, and (3) the First Tennessee defendants were aware of facts that, if made known to the plaintiffs, would have caused them not to purchase lots, build cabins, and make loans for which they may be obligated.*fn3 Plaintiffs claim that the First Tennessee defendants, and the other RICO defendants, together committed criminal violations of the mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343. Although disputed by defendants, plaintiffs claim that they relied upon the representations made by the First Tennessee defendants; that they are subject to having had adverse credit reported; and that they are vulnerable to large deficiency judgments.

In response, the First Tennessee defendants argue that the plaintiffs do not have evidence to support standing under § 1964(c) and that, even if this Court were to find standing under § 1964(c), the facts and evidence do not support a violation of § 1962. The First Tennessee defendants assert that simply conspiring to commit fraud, in the absence of an organization that would allow the defendants to function as a racketeering organization for other purposes, is not enough to establish an "enterprise." Also, the First Tennessee defendants assert that to sustain a RICO claim under the law, plaintiffs must show that they relied upon defendants' representations. In this respect, the First Tennessee defendants contend that no false representations were made by them, nor did the First Tennessee defendants have any knowledge that the representations were false at the time they were made. The First Tennessee defendants contend that statements made were either opinions, puffing, and/or were accurate. Also, the First Tennessee defendants assert that every statement made by Compton was previously stated ...

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