San Francisco Residence Club, Inc. v. 7027 Old Madison Pike, LLC

Citations: 583 F.3d 750; 2009 U.S. App. LEXIS 21108; 2009 WL 2998935Docket: 09-11059

Court: Court of Appeals for the Eleventh Circuit; September 22, 2009; Federal Appellate Court

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An appeal was filed regarding the disbursement of funds that were voluntarily deposited into a court registry by 7027 Old Madison Pike, a minority owner in a tenancy-in-common arrangement with San Francisco Residence Club, which holds majority ownership. The appeal raises the question of whether it is moot since the funds have already been disbursed to Triad Properties, a nonparty and judgment debtor of San Francisco Residence Club. The funds were released following a district court order after San Francisco Residence Club withdrew a motion for a preliminary injunction. 

7027 Old Madison Pike contested the disbursement after the fact, but the district court denied its motion to vacate or modify the order. The Circuit Court concluded that no further action could alter the already executed disbursement, leading to the dismissal of the appeal as moot. Additionally, the attempt by 7027 Old Madison Pike to amend its motion in the district court was denied.

The background reveals that the parties are co-owners of a revenue-generating property under a Tenants-In-Common Agreement. McDermott, the manager of 7027 Old Madison Pike, was terminated but continued to manage property funds improperly. The property was refinanced, which helped to settle many debts, but left an outstanding obligation to Triad Properties for a real estate commission, secured by a promissory note that made all owners jointly liable.

Triad filed a lawsuit against San Francisco Residence Club on August 1, 2008, for non-payment of a note, resulting in a judgment for $383,429.74, plus interest and costs. Triad, who acted as the real estate agent for two properties—100 Quality Circle and 7027 Old Madison Pike—was accused by 7027 Old Madison Pike of making misrepresentations in the agreements for purchasing and financing the properties, which allegedly caused significant financial losses. Despite these allegations, 7027 Old Madison Pike did not intervene in Triad's action against San Francisco Residence Club, who was jointly and severally liable for the note.

On August 29, 2008, San Francisco Residence Club filed a complaint against 7027 Old Madison Pike and McDermott, seeking a declaration of ownership rights and injunctive relief, alleging mismanagement of property revenues and refusal of McDermott to relinquish management duties and records. San Francisco Residence Club initially moved for a preliminary injunction but withdrew it at a hearing on September 10, 2008, leading to an agreement that required McDermott and 7027 Old Madison Pike to pay $350,000 into the court registry in two installments.

On October 3, 2008, San Francisco Residence Club amended its complaint to include Highlands Management Company, LLC, and sought distribution of the deposited funds to satisfy creditors, including Triad. Both McDermott and 7027 Old Madison Pike requested arbitration and moved to dismiss or stay the action. San Francisco Residence Club opposed these motions and sought to prevent interference with property management.

On November 6, 2008, the district court granted the motion to compel arbitration, closing the case but retaining jurisdiction over the fund disbursement. Neither party appealed this decision. Subsequently, on December 19, 2008, San Francisco Residence Club moved to condemn the funds in the court registry for distribution to Triad, and on December 22, the court granted this motion, ordering the $350,000 plus interest to be paid to Triad before 7027 Old Madison Pike or McDermott could respond.

On December 29, 2008, McDermott, 7027 Old Madison Pike, and Highlands Management filed a motion to alter, amend, or vacate a previous court order condemning certain funds. They contended that the court's ruling from December 22 should be set aside and requested that the district court direct the return of any funds paid from the clerk to the court's registry until arbitration is complete. San Francisco Residence Club responded, leading to the district court's denial of the motion. 7027 Old Madison Pike subsequently appealed.

The standard of review for jurisdiction is de novo, and appeals may become moot if no action can reverse prior decisions. The court emphasized that federal courts cannot address issues that do not affect the rights of the current litigants. An appeal will be dismissed as moot when the action taken based on a lower court's decree cannot be undone, as occurred when the clerk disbursed the funds to a third-party creditor, Triad Properties Corporation. The order issued was not a continuing injunction but directed a specific act that has already been completed, meaning the appellate court cannot grant the relief sought by 7027 Old Madison Pike.

The court noted that while appeals against the appellee are permissible, any relief that seeks to cancel rights granted to a third party becomes moot. Since Triad is a third party beyond the district court's jurisdiction, the court cannot order Triad to return the disbursed funds. 7027 Old Madison Pike argued that the district court could order Triad or San Francisco Residence Club to restore the funds, but the latter asserted that such claims must be made directly against Triad Properties or San Francisco Residence Club in the district court, which has jurisdiction over the ongoing dispute. 7027 Old Madison Pike failed to request this specific relief from the district court, focusing instead on vacating the earlier order.

7027 Old Madison Pike's request for the district court to require San Francisco Residence Club to deposit $351,243.84 into the court registry is not considered on appeal because it was not raised at the trial level. The court emphasizes that trial judges must first address issues before appellate review. After oral arguments, 7027 Old Madison Pike sought to amend its previous motion to alter or vacate an order disbursing funds to Triad, claiming the amendment was to correct defective jurisdictional allegations. However, the court denied this motion, stating that 28 U.S.C. § 1653 permits only the amendment of existing jurisdictional allegations, not the introduction of new relief requests. The court reiterated that it cannot entertain issues not raised or previously considered by the district court and pointed out that an attempt to create jurisdiction through amendment is not permissible. Consequently, the appeal was dismissed as moot, and the motion to amend was denied.